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CONTENTS OF REPORT
1. Introduction
Company History
Quality Practice
ISO Approval
Organizational Objectives
Policies & Procedures
Competitors
Products Offered
List of Key Persons
Administration
Structure and Functions of Finance Department
2. Research Methodology
Objectives of Study
Sample Size
Data Source
Technique
3. Financial Performance Analysis of FMI Limited
Ratio Analysis
Financial Statement Analysis
4. Summary & Conclusion
5. Recommendations
6. Limitations of Study
7. Bibliography
1
COMPANY HISTORY
Ludhiana is the one of the biggest centre for production of Hosiery and Cycle Parts. Large,
Medium and Small Scale Industry flourish here out of which FMI Limited is one of the
Medium Scale Industry. Mr.M.M.Nayar who is the Chairman and Managing Director of the
Company established this company in 1950. Mr.Nayar initiated the manufacture of Metal
Wired Tape in First time in the Country. The company continues its pursuit for innovation
with the introduction of product research, Spirit Level, Measuring Wheel, Telescope
Measures for the First time in the country. The company was previously partnership concern
but with the increasing scale and remarkable progress the company became a Public Limited
Company.
The Authorized Capital of the Company is 10 Lac Equity Shares of Rs.10\- each. FMI
Limited with their brand FREEMANS is the largest manufactures and Exporters of
Measuring Tapes. FREEMANS is the only Indian Company offering a comprehensive range
of comprising various model designs in steel tape measure, Tape Rules, Fiber Glass Tapes,
Metal Wired Measures, and FREEMANS also engaged in trading of Hand Tools.
In 1962 Fiberglass Tape was introduced and Steel Tape Measure and Tape Rule were
introduced in 1966 with American Technical know-how. Due to efficient marketing system
and increasing sales the company has achieved over 70% of Indian Market Shares. Its sale
for the Financial Year ending 31.03.2009 is Rs.2547 Lac.
FREEMANS have both Steel and Plastic Division. Establishing a steel division gave
Freemans an edge over competitors with better quality control over raw material. Freemans
also has a Plastic Division with over 15 injection moulding machines manufacturing plastic
components.
After entering into International Market EURO FREEMANS was established in Spain in
1988. Now it has export in over 60 countries like Spain, Germany, U.K., Australia, Iran,
Mexico, New Zealand, Dubai, South Africa, Argentina etc. which includes European
Companies to get ECC (European Economic Countries) which is a testimony to the fact that
its Products are the best comparable to the International Quality Standards.
2
The exports are continuous increasing by past eight years and company achieved the Exports
Excellence Award by Engineering Export Promotion Council for very good performance
and contribution in Exports. But in the last financial year (2009-10) company’s export to
Total Sale ratio decreased a little bit due to International Market Slump. During recession
period by last three years, many Companies engaged in Exports lost their entity but due to
very efficient Goodwill of its products FMI Limited has a very low effect on their Exports
comparable to other companies of India.
FMI Limited is the one company which is approved by ISO 2001:2008 certified company.
Their Quality Control systems are being religiously followed to ensure Consumer
Satisfaction. Precision, quality and a firm belief in perfection resulted in constant up
gradation of technology.
3
QUALITY PRACTICE
Concept of Quality in Products:
According to the concept of quality in products, these are identified and traced properly. The
purpose of this is to provide the whole system for identification and traceality of products
through different stages of receipts, storage processing, verification, packaging and delivery.
The scope of identifying and tracing the product is at the stage of incoming, in process and at
the final stage when the goods are ready.
The responsibility for identifying and tracing the goods is of the Manager Production. The
method of identifying and tracing the goods is that all the raw material components, customer
supplied goods and bought out items are physically checked and identified by suitable means
during the stages of receipt, storage, processing, packing and delivery. Traceability of
products to the extent is possible and can be ensured through unique identification of critical
items or batch identification for general components, related parts etc. This is how concept of
quality of products is considered.
Concept of Quality in Processes
According to the concept of quality in process, it is done to carry out the processing
operations under controlled conditions so as to ensure quality product. The scope of checking
the process is during the manufacturing of all the products and also during the supply of
measuring instruments.
The responsibility of controlling the process is of Manager Production. The method of
controlling the process starts when the delivery of products is governed by periodic planning,
suitable plant machinery, support services and safe working environment. The process
control parameters and products characters are mentioned closely to assure quality of
deliverable goods.
4
To provide facility to the workers during the manufacturing process quality plans, flow
sheets etc. are displayed and working instructions are provided for the process where in the
absences of same adversely affect the quality. Records of process control, periodic
maintenance and safety are properly maintained.
Concept of Quality in Management and Services
The purpose of quality in management and services is to identify the need for upgradation of
skills and knowledge of employee and to organize the training for imparting it. The scope of
training is that all employees who are directly contributing towards function are affecting the
quality. Training of personnel at various levels in the organization affects the quality in
management.
The responsibility of identifying the training needs and its recommendation is done by the
respective departmental heads. Planning, organizing and coordinating training programmers
and the maintenance of training records all is done by the Management Representative.
Training needs of the employee are identified by the concerned departmental heads based on
the need of the organization and function performed. Also it is organized on the basic of the
recommendation or approval given. A list of in house faculty members, training moulds is
maintained. Also the records of training programs are maintained. Evaluation of
effectiveness of training imparted may be through training certificates or on the basis on the
job performance. People carrying out specific assigned task like calibration internal quality
audits etc. shall be selected on the basis of training imparted to them.
5
ISO APPROVAL
FMI Ltd has got ISO-9001:2008 approval as their products are fulfilling al the causes to get
the ISO approval. They got the ISO approval on 14th July 1999.
The clauses to be fulfilled by an organization to get the ISO approval are:
1. Management Responsibility.
2. Quality system.
3. Contract review.
4. Design control.
5. Document control.
6. Purchasing
7. Control of customer supplied products.
8. Product identification and traceability.
9. Process control.
10. Inspection and testing.
11. Control of inspection measuring and test equipments.
12. Inspection and test status.
13. Control of non conforming products.
14. Corrective and preventive actions.
15. Handling, packing, storage, preservation and delivery.
16. Control of quality records like identification, collection, indexing, filing storage,
maintenance and disposition of goods.
17. Internal quality audits.
18. Training
19. Servicing
20. Statistical techniques.
6
Total Quality Management (TQM)
Total quality management means the programs designed to constantly improve the
quality of products, services and marketing process.
The TQM of FMI Limited covers all the following aspects:
Adequacy of resources.
Result of internal audits.
Corrective question and complaints.
Effectiveness of quality system.
The steering Committee periodically reviews the adequacy of the staffing and resources
for the various Quality Assurance Activities. The result of the internal quality audits, the
progress on corrective actions taken by the concerned section and failure if any are
communicated to the notice of Joint Managing Director or Executive Director by the
Management Representative. The progress report on the investigation carried out on the
customers complaint is furnished to the Steering Committee by the Management
Representative. Addition, deletion and modification if any in the various documents of
the Quality System results as the outcome of the Management Review Meeting is
recorded by Management Representative. Responsibility for the implementation of the
decision taken in the meeting rest with Steering Committee.
7
ORGANIZATIONAL OBJECTIVES
The organization I working on the following objectives laid down by it. These objectives
help in the working of the organization. The objectives of the organization are:
To manufacture, buy, sell and deal in all kinds of precision tools and implements.
To buy and sell raw material for machinery for the manufacture of precision tools
and machinery.
To acquire agencies for the sale of any article or commodities of local
manufacturer or imported goods.
To purchase and acquire patents, trademarks, manufacturing formula and secret
information.
To maintain the implement ISO-9002 quality system approval.
To minimize rejection and work towards zero defect.
To promote team – work and participative culture.
To get the Higher Consumer Satisfaction by best products and services.
8
POLICIES AND PROCEDURES
Policies:
Organization basically works on their policy that:
“Commitment to perfection through quality and customer satisfaction.”
Organization policy includes objectives for quality and their commitment to quality. This
organization policy is relevant to the mission and goals and also to expectation to the
customers. Training is imparted continuously to understand, implement and maintain the
policy of the organization.
Procedures:
The procedures on which the organization works are:
Management Review Meeting shall be organized once in three months or earlier if
the need arises.
Management Review Meeting shall be convened by the Management
Representative Agenda for the meeting shall be given well in advance duly
approved by the Joint Managing Director or Executive Director.
I. The meeting shall be chaired by the Joint Managing Director or Executive Director
and attended by Steering Committee members and Management Representative.
II. The result of internal quality audit, the progress on the corrective actions taken by
the concerned section and the failures if any shall be communicated to the notice of
the Joint Managing Director or Executive Director by the Management
Representative periodically or as and when felt necessary without waiting for the
convening of the Management Review Meeting.
III. The progress report on the investigations carried out on the customers complaint
shall be furnished to the Steering Committee by the Management Representative.9
Management Representative shall maintain the records of the Management
Review Meeting.
Minutes of the meeting shall also be issued to all concerned.
Responsibilities for the implementation of the decision taken in the meeting shall
rest with the Steering Committee Members.
10
COMPETITORS
FMI Limited is the only industry in the country. As mentioned in the Company profile that
70% shares of the Indian market are with the company which is a proof that it does not have
any competitor. It is the only leading monopolistic company in the field. However, as per the
information revealed from the company office bearers that there is company in China who is
manufacturing products competing to it but till date their products are not as per ISO
standard.
11
PRODUCTS OFFERED
The unit is the production house of Different type of measuring tapes. The company
currently is engaged in manufacturing of following three types of measuring tapes:
1. Metal Wired Tapes
2. Fiber Glass Tapes
3. Steel Tapes
A wide range of professional long tapes model especially designed for use in building,
surveying, civil engineering and allied industries.
1. Steel Tapes
Steel tapes are manufactured from tampered high quality carbon steel blade,
phosphated and coated with special enamel to withstand corrosion and rust. The
printing is protected with wear resistant lacquer for long life. These Long Steel Tapes
are available in different cases with different names and rates. The different types of
steel tape measures are:
(i) Steel Open Reel
It consists of tough heavy duty tapes for professional on – site measuring work. Its
open frame allows easy maintenance and cleaning of tapes. Its long sturdy winder
with easy grip knob facilitates quick rewinding.
(ii) Steel SN and SW Series
It consists of heavy duty viny leatherette covered steel case to withstand continual
usage in difficult conditions. It has designed winding handle for smooth winding
action. It is an ideal tape for high precision professional jobs. That’s why it has its
own impact on Market and eyes of the consumer.
12
(iii) Steel ON and OW Series
It is an idle tape for contractors and surveyors where high accuracy is required. These
tapes are usually used by high professionals and in special cases.
(iv) Steel Dip Tapes
These are DC and DS series. These tapes are manufactured by two types of Blades
first is Carbon Steel Blade and other is Stainless Steel. Both are used for measuring
depth of oil-water or soil etc. These tapes are not often used, these are the tapes for
only depth measuring purpose and having very low demand in market.
2. Fibreglass Tapes:
These tapes measures are made of fibre Glass yarn coated with tough plastic PVC.
Unlike conventional woven or steel tape measures these are flexible yet strong and
durable. These tapes have heat sealed marketing which ensure long life. In the recent
few years it has observed that company is moving into Fibre glass tapes from Metal
Wired Tapes and demand of the same tapes is rising continuously. The different types
of glass tapes are:
(i) Fibre Glass FN and FW Series-
These tapes are made of tough viny leatherette covered steel case to withstand
difficult conditions. It is a durable tape with winding mechanism which
ensures long trouble free usage.
(ii) Fibra FB Series-
It is a tape with tough yet light weight ABS case ribs for easy handling and
strong grip. It is used for heavy duty winding mechanism.
(iii) Topline FT Series
It is a tape with tough yet weight ABS case reinforced with metal for extra
strength. It is used for heavy duty winding mechanism.
13
(iv) Fibre Glass Open Reel
This tape is of FO Series. It is an ideal deal tape for contractors and surveyors.
Its design allows an easy cleaning of tape. It is a long winder with easy grip
facilitates quick rewinding. Its protruding market at the bottom of the case
allows easy measurement of land.
(3) Metal Wired Tapes:
It is a general purpose tape woven to width with copper wires lengthwise for
additional strength coated with special paints for protection against moisture, wear
and tear. This tape needs most care and time to manufacture and need more
manpower than any others. It has also low demand in the market than of other
manufactured. Different types of metal wired tapes are:-
(i) Metal Wired
This tape is of MW Series. It has impact resistant viny leatherette covered
case for use in taxing condition. It needs very care while production.
(ii) Top Line
It is a tough yet weight ABS case reinforced with metal for extra strength. It is
used for heavy duty winding mechanism.
(4) Pocket Tapes
This tape is of Steel series but in the steel series but in this category tapes are
available into only 1 meter to 10 meters (1, 2, 3, 5, 10 meters). 3 Meter Pocket tapes
are manufactured in large quantity. These tapes are manufactured in various cases and
are given different names like Centigraff, Basik, Levo, Zeon, and recently introduced
IKON and STAREX, available with Lock and Clip. Lock works as stopper on the
tape and Clip is to hang it with the belt for convenience of the user. Pocket tapes have
more demand in the national market than of International.
The Company is also manufacturing the following items:
14
1. Stainless Steel Rules
2. Cutters
3. Torpedo Levels
4. Trapezoidal Levels
5. Measuring Wheels
Besides this all above The Company is also trading of many kinds of Hand Tools.
These Hand Tools are also for the measuring instruments or components for the same.
Trading of tools is mainly done with the other countries.
The company is making continue efforts to improve the existing quality and to
introduce new products which are required in Global Market. In this connection this
is also worthy here to explain here that 2 types of Pocket tapes are also registered
under trade mark during this financial year.
15
LIST OF KEY PERSONS
BOARD OF DIRECTORS:
Sr. Name of Director Designations No.
1. Mr. M.M.Nayar Chairman & Managing Director
2. Mr. Rakesh Nayar Joint Managing Director
3. Mr. Ajay Nayar Executive Director
4. Mrs. Ravinder Nayar Director
5. Mrs. Cherene Nayar Director
SHAREHOLDERS:
Sr. Name of Shareholder Percentage of No. Holdings
1. Mr.M.M.Nayar 29.91%
2. Mr.M.M.Nayar(HUF) 00.06%
3. Mr.Rakesh Nayar 25.90%
4. Mr.Ajay Nayar 30.89%
5. Mrs.Ravinder Nayar 00.13%
6. Mrs.Cherene Nayar 04.44%
7. Mrs.Gauri Nayar 03.20%
8. Mr.Sahil Nayar 04.27%
9. Mr.Shashi Pal Jain 01.21%
16
LIST OF TOP EXECUTIVES:
Sr. Name of Executive Designation No.
1. Mr. Shashi Pal Jain General Manager
2. Mr. Jatinder Chugh Finance Manager
3. Mr. Shakti Raj Jain Production Manager
4. Mr. Shiv Jindal Export Manager
5. Mr. Yash Pal Marwaha Import Manager
6. Mr. Amar Singh Rana Quality Assurance /Control Manager
17
HEADS OF DIFFERENT DEPARTMENTS:
Departments Name of H.O.D.
1. Accounts Mr. Parveen KapoorMr. Rajesh Verma
2. Exports Mr. Jarnail SinghMr. Om Parkash Chaudhary
3. Store (Raw Material) Mr. Ashwani SharmaMr. Pawan
4. Store (Packing & Own Mr.MadanManufacture Components) Mr. Rashpal
5. Personnel Mr. Rakesh Nanda
6. Security Mr. Devi Ram
18
FMI LIMITED
ADMINISTRATION DEPARTMENT
Chairman & Managing Director
Joint Managing Director
Executive Director
General Manager
Manager Manager Manager Manager ManagemnetFinance Production Exports Quality Representative
19
FUNCTIONING OF ADMINISTRATIVE
Administration Department is controlled by the Chairman and Managing Director.
Authorities and responsibilities of all the heads of the different departments and
individual are made by this department. The authorities and responsibilities are as
follow:-
Chairman and Managing Director
1. Overall supervision and control of all operation of the company.
2. Implementation of the quality system.
3. To ensure availability of resources in terms of machines, manpower and capital.
4. Defining responsibilities and authorities of all directors.
5. Appointment of Management Representative.
6. Market development of the product.
7. To maintain discipline, reduce absenteeism, to ensure smooth and congenial
atmosphere in the organization as a whole.
8. Human resources development and general administration.
9. Decision making at Top Level.
Joint Managing Director
1. Implementation of Quality System.
2. To assist the CMD in production related activities.
3. Top level negotiation with Bank and financial institution.
4. To look after imports as well as exports.
5. To deal with all legal matters.
6. To assist the CMD in general administration.
20
7. To approve quality manual and procedure manual.
8. To assist CMD in identifying further investment opportunity.
9. To maintain optimum inventory levels.
10. To take corrective and preventive action on non- conforming products.
11. Identifying training needs of personnel and organizing training of personnel I
consultation of Management Representative.
Executive Director
1. To look after International Markets and develop new markets globally.
2. To arrange and monitor review of contracts.
3. To ensure proper progress and completion of all projects.
4. To look into new products development.
5. To look after all purchase related activities.
6. To look after sales promotion.
7. Implementation of Quality System Standards.
8. Issuing authority for Quality Manual and Procedure Manual.
9. To ensure availability of raw material.
10. To ensure quality of finished products as per customer specifications.
11. Defining the responsibilities and authorities of all managers.
12. Ensuring implementation of corrective and preventive action decisions.
General Manager
1. To look after all taxation related matters.
2. To assist the CMD with regards to financing pattern and location of projects.
3. To look after all accounts related matters.
4. To assist the CMD in general administration.
5. To assist the Directors in overall operations.
6. Implementation of Quality System.
7. To maintain quality records in this area.
8. To look after legal matters with all legal departments.
9. To look after all banking transactions.
21
Manager Finance
1. To arrange finance for the company.
2. To look after the accounting matters, income and excise matters.
3. To deal with bank, income tax, excise and sales tax department.
4. To assist Management Representative in implanting relating to ISO 9002 and
maintenance and updation of records.
Manager Production
1. To look after all the production related activities.
2. To ensure proper testing of raw material in process inspection at various stages of
production and final inspection.
3. To ensure quality of finished products as per customer satisfaction.
4. To ensure proper maintenance of all machines and equipments.
5. To assist the Executive Director in production planning.
6. To assist the JMD in maintaining optimum inventory levels.
7. To ensure maintenance of quality records.
8. To make continuous efforts for the betterment of production process.
Manager Export
1. To assist the Directors in export planning.
2. To assist the Directors in export promotion.
3. To maintain quality records in his area.
4. To assist the Directors in making export delivery schedules.
5. To maintain all export related documents.
Manager Quality Approval
22
1. To ensure proper inspection and testing of material at all stages.
2. To ensure proper maintenance of inspection records.
3. To approve deviation.
4. To make efforts to improve and maintain quality of products.
Management Representative
Executive director has been appointed as Management Representative. In addition to his
regular responsibilities the MR shall have to do as follows:
1. Initiate and implement Internal and External Audits.
2. Conduct Management Review Meeting periodically.
3. To make sure Quality Manual including amendments.
4. Co-ordination with Certification Body.
5. Reporting on the performance of the Quality Assurance System to the
Management for review and subsequent improvement of the quality system.
23
FUNCTIONS OF FINANCE DEPARTMENT
The Finance Department of the FMI Limited has its own strength. It consists of very
mindful and intelligent and educated persons on the Top level and very hard working
employees on the middle and low level. Mr.Shashi Pal Jain is the Head of the Department
as he has full control over Finance and all matters related to finance of the company.
Finance Department of the company can be defined as under:
General Manager
Finance Manager
Senior Accounts Officers Senior Accounts Officer Senior Billing Officer
1. Assistant Accounts Officer
2. Assistant Accounts Officer
3. Assistant Accounts Officer
24
Functions of the Department
General Manager:-
a. He looks after all the taxation related matters.
b. He assists CMD with regards to financing pattern and location of projects.
c. He looks after all accounts related matters.
d. He assists the CMD in general administration.
e. He also looks into the company law matters.
f. He deals with all the Banks and other Financial Institutions.
g. He deals with all Corporate Law Obligations.
Finance Manager:-
a. He assists the General Manager in taxation related matters.
b. He assists the General Manager in all accounts related activities.
c. He assists General Manager in fulfilling company law matters.
d. He looks after the Finalization of the Balance Sheet and Audit Reports etc as
mandatory by Company Law.
Accounts Officers and Billing Officer:-
a. He looks after the sales tax matters and deals with the sales tax department.
b. He looks after the excise obligation and deals with the excise department.
c. He deals with daily Routine accounting as per accounting standards prepared by
Chartered Accountants.
d. Ledger Scrutiny is another function of the Him.
25
e. Preparing and keeping record of Sale Invoices and deals with Customers.
f. Deals with Customers and have control over Customer ledger for payments purpose.
Assistant Accounts Officers:-
a. He handles cash and assist senior accounts officer in account related activities.
b. He assists senior accounts officers in fulfilling excise obligation and account
related activities.
c. He Assist the Finance Manager in Finalizing Balance Sheet.
d. He does the book Keeping and recording all the transactions.
e. He assists the Accounts Officers for maintaining the records and fulfilling the
obligations forced by various legal departments likewise Weights & Measure Act,
Income Tax Act, and Indirect Taxation etc.
26
RESEARCH METHODOLOGY
Objective of Study: The main purpose of the study is the fulfillment of the
requirement of the syllabus of Post Graduation Degree of Master of Commerce.
Under the training we have to get the knowledge about the practical aspect of
accounting.
This Report is the Result of my Five week of Summer Training in FMI
LIMITED Industry, Doraha. Summer training is the integral part of MBA
course and efficient utilization of material, time and resource are very much
important for successful completion of any task. FMI Limited provide different
concerns with FMI Limited help me to create confidence regarding approval of
Subject matter.
In my research I was to study about the Financial Position and Procedures of
FMI Limited. To carry on the study the student have been deputed in leading
corporate unit to be in touch with practical aspect and to apply the theoretical
knowledge imparted in real life situation.
This Project Report will give a vide coverage of practical experience of
training.
Sample Size: We have considered only one firm so sample size is very small.
This entire project is based on the information available of FMI Limited.
27
Data Source: Data is collected and arranged in the prescribed manner from the
Financial Statements of the concern. Some old reports of the same unit were
also a little bit helpful for this task. All other information required to complete
the project was collected verbally from the Senior Authorities likewise General
Manager and Finance Manager of the Concern.
Technique: We have used composites of many techniques to rearrange the data
collected into the productive figures. That all are defined as under:
1. Ratio Analysis
2. Bar Diagrams
3. Charts of Comparison
28
Financial Performance of FMI Limited
Meaning and Importance of Ratio Analysis:
Before going through the Ratio analysis of the Company to know the actual position of
Financial Condition and efficiency in the affairs of the concern we should first of all consider
the meaning and importance of the Ratio and Ratio Analysis. So we are firstly going through
the meaning and importance of Ratio which helps us to make us able to study and understand
the condition of concern.
A ratio is the arithmetic expression of the relationship of one number to another. It may be
defined as the indicated quotient of two mathematical expressions. According to accountant
handbook by wixon a ratio is an expression of the quantitative relationship between two
numbers. According to Kohler a ratio is the relation of the amount, A to another, B express of
the ratio A to B.
In simple language ration is the one number express in the term of other and can be worked
out by dividing one number into the other. For example the Current Assets of the Firm are
Rs.5 Lac and Current Liabilities are Rs.2.5 Lac. The ratio of Current assets to current
liabilities is 2. Such type of ratio is called Simple Ratio. A Financial Ratio is the relationship
between two accounting figures expressed mathematically. A ratio can also be expressed as
percentage by simply multiplying the ratio by 100. As in the above ratio example the ratio is
2 x 100 or 200% or says Current Assets are 200% of the Current Liabilities.
The Ratio Analysis is also very important tool of financial analysis of the company. It is used
as Device to analysis and interpret he financial health of enterprises. Just like a doctor
examining his patient by recording his body temperature, blood pressure etc before making
29
conclusion regarding the illness and before giving his treatment. A financial analyst analyses
the financial data with various tools of analysis before commenting upon the financial health
of an enterprise. The ratio is known as a symptom like blood pressure, the pulse rate,
temperature of an individual.
1. Decision Making: Financial Statements are prepared for decision making. Ratio
analysis help in making decision from the information provided in these financial
statements.
2. Financial Forecasting: Ratio analysis is of much help in financial forecasting
and planning. Planning is looking ahead and a ratio calculated for a number of
years work as a guide for the future.
3. Communication: The financial strength and weakness of a firm are
communicated in a more easy and understandable manner by the use of Ratios.
4. Co-Ordination: Ratio even helps in co ordination which is almost important in
effective business management.
5. Control: Ratio analysis helps in making effective control of the business.
Standard Ratio can be based upon financial statements and variance if any can be
found by comparing actual with standard. So as to take a corrective at the right
time.
6. For Shareholders: Investors in the company will like to assess the position of the
concern where he is going to invest.
7. For Creditors: A creditor extends short term credit to the concern. They are
interested to know whether financial position of the concern warrants their
payment at a specified time or not. Current and Acid Test Ratio will give an idea
about the current position of the concern.
8. Employees: The employees are interested in the financial position of the concern
specially profitability. The wages increases and amount fringe benefit are related
to the volume of profit earned by the concern. The employees make use of
information available in financial statements.
9. Utility to Government: Government is interested o know the overall strength of
the industry. Various financial statements published by the industrial units are
used to calculate the ratio for determining short term and long term and overall
financial position of the concern. Government may base future policy on the basis
30
of industrial information available from various units. The ratio may be as a
indicator of overall financial strength of the public and private sector also.
10. Tax Audit Requirements: Section 44 AB was inserted in the income tax by the
finance act,1984. Under this section every assessee engaged in any business have
turnover exceeding 40 Lac is required to get the account Audit by the Chartered
Accountants and submit the tax report to the income tax department. According to
the Clause 32 of the income tax require that following accounting ratio should be
given:
(i) Gross Turnover Ratio
(ii) Net Profit Ratio
(iii) Stock in Trade Turnover Ratio
(iv) Material Consumed Ratio
Further it is also advisable to compare the accounting ratio for the current year with the
earlier two years. So that the auditors can make necessary enquiry, if there is any major
variation in accounting ratio.
So from the above all discussion it is made sure that a company’s financial position can be
well judged by the ratio analysis. So going through the Financial Statements of FMI Limited
I have prepared a brief summary of the financial condition of the Concern. Ratio analysis of
the concern is made with the help of the senior staff and executives engaged in the finance
and the accounts of the concern. The ratio analysis of the FMI Limited is done very carefully
and summarized as under:
Ratio Analysis
Balance Sheet Ratio Profit & Loss Ratio Mixed Ratio
1) Current Ratio 1) Gross Profit Ratio 1) Debtor Turnover Ratio
2) Quick Ratio 2) Operating Ratio 2) Payable t/o Ratio
3) Absolute Ratio 3) Net Profit Ratio 3) F.Assests t/o Ratio
4) Debt Equity Ratio 4) Cash Profit Ratio 4) Ret/on Equity Ratio
5) Proprietary Ratio 5) Expense Ratio 5) Ret/on S/hlder Fund
31
6) Capital Gearing Ratio 6) Capital t/o Ratio
7) Inventory Turnover Ratio 7) W/Capital t/o Ratio
8) Ratio of Current Assets 8) Return on T/Assets
to Fixed Assets Ratio
Balance Sheet Ratio: Balance sheet ratios are that ratios that are determined from the
balance sheet of the company. As we all know Balance Sheet is the financial statement of
company that tells us about the financial condition of the concern on a specific date.
Financial Statements are the end product of the accounting transaction. So many ratios are
calculated from the balance sheet figures that tells the financial strength and weakness of the
concern. As I gone through the Balance Sheet figures of FMI Limited for the financial year
ending 31.03.2010, I reached on the following results by the ratios analysis.
1) Current Ratio: The current ratio represents the current financial position of the concern,
means it is the ratio that tells us about the short term financial condition of the concern. It is
calculated by applying the following formula:
Current Assets
Current Ratio = --------------------
Current Liabilities
74703922
= ----------------
50201102
= 1.49 Times
So from the above calculation it is clear that FMI Limited has very good command over its
current assets over current liabilities. It is required to maintain this Ratio above than 1.00
times minimum for the effective management of the current affairs of the company. So
Company has a very good control on the Current position of its affairs.
32
Note: The Company is constructing a Multiplex Mall (Silver Arc Mall), It is added in
Inventories Head in the Current Assets Group in the Balance Sheet. In the same manner
Company has got advance against the Lease Holders and Purchasers of Space in the same
Mall, all this amount is grouped under Current Liabilities. Both the figures are subtracted
from Total as per Balance Sheet to get Actual Condition of FMI Limited.
2) Quick Acid Test Ratio: The Quick Acid Test Ratio represents the current very liquid
financial position of the concern. It is calculated by applying the following formula:
Current Quick Assets
Quick ACID Test Ratio = --------------------------
Current Liabilities
32860208
= --------------
50201102
= 0.65 Times
So as above calculated ACID Test Ratio shows that FMI Limited has 65% very Quick Liquid
Current Assets of the Total Current Liabilities. So it is clear that FMI has good collection of
Very Quick Liquid Assets that can are convertible into Cash in very short period. So
Liquidity Position of the Concern is very Strong.
33
3) Cash Ratio: Cash Ratio of the concern represents the cash balances available in the
company’s hand for the fulfillment of the Current Liabilities due to Company. It is calculated
from the following formula:
Cash & Bank Balances
Current Ratio = -----------------------------
Current Liabilities
2511288
= -------------
50201102
= 0.05 Times
So from the above it is cleared that company maintains very short cash balance in hand and
at Bank. Company has very low cash and bank balance in hand to repay the current
liabilities. The company is having the mostly current assets in the form of Debtors and Loans
& Advances other than Cash. That’s why Company has very low Cash Ratio to the Current
Liabilities.
34
4) Debt Equity Ratio: Debt equity ratio is the ratio of Outsider liabilities to the
Shareholder fund. It tells to the how much extent Company depends on the outsider fund.
The Ratio is calculated as under:
Outsider Funds
Debt Equity Ratio = ----------------------
Shareholder Funds
141189158
= --------------
87972390
= 1.60 Times
It can be noted from the above Ratio that Company has maintained the outside loans
including secured or unsecured both too much comparable to the Shareholders Fund invested
into the company. Company has maintained very low Paid up capital to maintain the hold of
management and to get the decision making powers in less hands.
35
5) Proprietary Ratio: Proprietary ratio is used to get the knowledge about the
Shareholders fund to Net Total Assets. Total Assets invested are checked by his ratio that in
how much extent investment is done by the shareholder fund. It is calculated as under:
Shareholder Fund
Proprietary Ratio = ----------------------
Net Total Asset
87972390
= -------------
386223306
= 0.23 Times
So it is very much cleared from the above ratio that company has a very strong and brave
management that has obtained most of the funds from out sources. Management has mostly
dependent on the out sources of finance. Management keep a very low risk on the
shareholders funds. It is done for the two main reasons- First is company does not want to
share the holding of command with others as management will be in less hands, and the
second is to minimize the risk of investment. But it is also seen that company has very
effective management over its finance and a proper control over out sources of finance.
36
6) Inventory Turnover Ratio: Inventory turnover Ratio represents the time period of
movement of inventory into finished products for Sale. In other words it can be said that in
how much times of sales value the company keeps a Average stock of Raw Material. It can
be calculated by applying the following formula:
Net Sales
1.) Inventory Turnover Ratio = --------------------
Average Inventory
307952009
= ----------------
30360574
= 10.14 Times
Total Days in Year
2.) Inventory Conversion Period = -------------------------
Inventory T/o Ratio
365
= --------
10.14
= 36 Days
37
So from the above it is calculated that the company maintains the 10% of average stock (Raw
Material) in stock of total Net Sales Value. In the other words it can be said that the company
keeps average 36 day’s raw material consumption as stock at every time. So company is
much conscious about the stock balancing. I got the answer after asking to management that
the finished products e.g. Measuring Tapes requires many type of small components, so
company has to stock every component for some spare time. Second factor is that the Main
Raw Material e.g. Carbon Steel Strip is imported, So Company has to maintain stock more
than the Critical level. Even after going through the Inventory Study in depth I came at the
conclusion that Company holds very efficient control over its Inventories.
Note: Average inventory is calculated by two ways- First by dividing the month ending
inventory value with number of months of the period for which the calculations are being
done, and the second is to add Opening and Closing inventory stock and then divide with 2.
In the Balance sheet we can not have the month end inventory so that I am using the second
method e.g.:
Opening Inventory + Closing Inventory
Average Inventory = ------------------------------------------------
2
38
7) Ratio to Current Assets to Fixed Assets: This ratio is calculated to know the current
liquidity percentage over the long term liquidity or assets. It is calculated as under:
Current Assets
Ratio to C/A to F/A = --------------------
Fixed Assets
747403922
= ---------------
108290304
= 0.69 Times
So current assets of the company are also having a very good percentage over long term
assets. It can be said that the company have very sufficient current position of finance.
Company is maintaining the long term fixed assets as well as the short term current assets
into very efficient manner so that the production and operations can not be interrupt at any
stage by any reason.
39
Profit and Loss Ratios: Profit & Loss ratios are calculated from the profit and loss
account of the company. Like Balance Sheet Profit and Loss Account is also Financial
Statement of the concern. The profit and loss account tells the financial profitability or loss of
the affairs of the company for a specific period of time, generally a financial year. Profit and
loss ratios are the ratios that deals with the mostly profitability of the concern o know the
results. These ratios are having very effect on the mind of the third parties. Many persons are
interested in the Profitability ratios of the company likewise- Employees, Management,
Taxation Departments, Government, Investors, Shareholders, Creditors etc. By going through
the Profitability of the FMI Limited I got the following ratios:
1) Gross Profit Ratio: Total Direct Expenses that are directly related to the production
and manufacturing are deducted from the Gross total incomes of the concern to obtain the
Gross Profit of the concern. This Gross Profit is divided by the Total Sales of the concern to
get the Gross Profit Ratio. The calculation is done as under:
Gross Profit of concern
Gross Profit Ratio = ------------------------------ X 100
Net total Sales
114866100
= ---------------- X 100
307952009
= 37.30%
So from the above it can be said that the company has very good Gross Profit Ratio over its
Sales Value. It is due to the Firstly Efficient Management and second factor is the monopoly
over measuring tapes manufacturing. The company enjoys the benefits of monopoly market.
No hard competition is faced by company.
40
2) Net Profit Ratio: All the left Indirect Expenses are also deducted from the Gross
Profit and all the Indirect Incomes are added to the Gross Profit to obtain the Net Profit. All
the expenses that are deducted should be deductible under Companies Act and Income Tax
Act. Net Profit is then divided by the total sales to get the Net Profit Ratio. The Calculation is
done as under:
Net Profit/Loss
Net Profit/Loss Ratio = ------------------- X 100
Net Sales
22816658
Net Profit Ratio = --------------- X 100
307952009
Net Profit Ratio = 7.41 %
Net Profit if the concern is not very high. This is due to the unexpected demand of Legal
Metrology Department of Punjab under Weights & Measure Charges of Measuring Tapes
paid. Aforesaid department of Punjab in 2008-09 for Rs.573 Lac out of which Rs.300 Lac
was paid in the same year and balances 273 Lac is paid in the year 2009-10. That is why after
adjusting the same company’s actual profit decreased.
41
3) Cash Profit Ratio: Net profit is calculated by accrual basis of every expense even
after deducting the Depreciation, Expenses to the extent not written off, Preliminary
Expenses not written off, Pre-Operative Expenses not written off, But These Expenses are
not actual expense that a concern has to pay to anybody. It is the amount by which the assets
are deducted by its Original value. So Net Cash Profit is calculated by adding these expenses
that company has not paid in cash in the relevant year. These expenses are being paid in the
previous years but are claimed as expenditure in the subsequent financial years as per the
provisions of Company Act, 1956 into the Net Profit and deduct these from the Net Loss.
Cash Profit is also divided by the Net Sales of the concern. Calculation is as under for the
Cash Profit Ratio:
Cash Profit/Loss
Cash Profit/Loss Ratio = --------------------- X 100
Net Sales
30362610
Net Cash Profit Ratio = --------------- X 100
307952009
Net Cash Profit Ratio = 9.86 %
So from the above ratio it is clear that the company is having great amount of its Fixed
Assets on which Depreciation is claimed and Pre-Operative and Preliminary Expenses
adjusted in the profit. Here is difference between Net Profit and Cash Profit that comes to the
financial figure of Rs.75,45,952/-
42
4) Expense Ratio: Every company engaged in any business have to bear some kind of
expenses. Expenses are the main part of the Cost of goods sold or services rendered. Nature
of expenses are different at every different kind of business. Expense ratio of the concern is
calculated by dividing all the expenses incurred by the concern by Sales amount. Calculation
for he same ratio is as under:
All Expenses
Expense Ratio = ----------------- X 100
Net Sales
137622653
= --------------- X 100
307952009
= 44.69 %
So from the above ratio it is clear that FMI Limited has to bear a huge amount on the
expenses other than Raw Material Consumed. Except Raw Material Consumed Expenses
incurred by FMI Limited are at very high rate. 44.69% Share of the total sales is expense on
the expenses other than of Raw Material.
Mix Ratios: Mix ratios are the ratios that are abstract from both Balance Sheet and Profit and
Loss Account. These ratios are for the fulfillment of the need of Management. Internal
Management needs these ratios for decision making at various levels. There are many kinds
of ratios that are grouped under this head. But most common used ratios are calculated as
under:
43
1) Debtor Turnover Ratio: This ratio tells us about the proportion of Debtors in the
Net Sales of the concern. This ratio is calculated to help the internal management to taking
various decisions at Top and Middle level. This is calculated as under:
Net Sales
1.) Debtor Turnover Ratio = -----------------
Avg. Debtors
307952009
= ----------------
22581550
= 13.64 Times
Total Days in Year
2.) Debtor Conversion Period = -------------------------
Debtor T/o Ratio
365
= --------
13.64
= 40 Days
So from the above it is made very clear that company has very good period of recovery of
debt from Debtors e.g. 40 days. Total revenue of FMI also includes the Export Sale to very
much extent as well as the Home country sale. So foreign and local debtors are recovered at
an average period of 40 days against sale made to them, which is very good and efficient
thing. As per the current strategy company is getting advance payment against sales from
home country dealers and customers. So average 40 days to recover the debt are reasonable
and this is also expected to decrease this conversion period in near future.
44
2) Fixed Assets Turnover Ratio: This ratio tells us about the Money of Shareholders is
in how much extent invested in the Fixed Assets of the Company. This ratio is the calculation
that provides the figure of percentage of shareholders investment in Fixed or can say Long
Term Investment by Company. This ratio is calculated to take the decision if the
management of the company thinks that long term fixed assets should be introduced and
company has no resources for this investment and Share Capital is still not issued to the
extent of Authorized Limit. Then in this condition if company has low Fixed Asset Turnover
Ration then it may make issue of Capital or make an call to existing shareholders if Capital is
still not fully paid up. This is calculated as under:
Fixed Assets
Fixed Assets Turnover Ratio = ----------------------
Shareholder Fund
108290304
= ---------------
87972390
= 1.23 Times
Shareholder’s fund includes the Reserve and Surplus amount earned by company in the past
years. So 1.23 Times of Fixed Assets Turnover Ratio is very good for a company. It tells that
the company has very sound out sources of funds instead of shareholders fund. Company’s
Authorised Capital is very huge comparable to Called up and paid up capital. So in future if
there seems the emergency need of funds for expansion company can raise the requisite
amount by issue the share capital. So in short company is maintaining good Fixed Asset
Turnover Ratio.
45
3) Funded Debt to Capitalization Ratio: This ratio tells us about the proportion of
Long Term Debt to the total Capitalization by company. This ratio tells the dependability of
out sources on the total capitalization of the company. The calculation is done as under:
Long Term Debt
Funded Debt to Capitalization Ratio = ------------------------- X 100
Total Capitalization
141189158
= --------------- X 100
243298768
= 58.03 %
This is also to test the dependability or participation of out sources of finance in the total
capitalization of the company. So the key figure tells that the company depends more than
58% of total wealth is owe to the out sources of finance. So company has great goodwill in
the books of financial institutions/ Banks. So company’s management is very conscious
about the wealth and sources of finance of the company. So Company’s funded Debt to total
Capitalization ratio is also in the favour of company and company’s management.
46
Financial Statement Analysis for the year ending 31.03.2010:
Financial Statements are the end product and the result of the affairs of the
company for a specific period. Financial Statements are very important for
every concern to know the results of the affairs of company for a specific period
e.g. one financial year generally. Financial Statements are needed at every level
of financial operations and dealing of concern. Importance of financial
Statements can be judged from the users of it. The main users of Financial
Statements are as under:
1. Government
2. Legal Departments
3. Financial Institutions/Banks
4. Money Suppliers
5. Management
6. Employees
7. Suppliers and Debtors
8. Research Centers etc.
By making analysis of the financial statements we can judge the profitability
and stability of the company’s financial and growing conditions. It is done
mostly at internal level of management. So we are here going through the
Financial Statements of the FMI Limited e.g. Balance Sheet and Profit and Loss
account for the year ending 31.03.2010 to know the actual financial position of
FMI Limited.
47
1. Profit and Loss Account Analysis
Profit and loss account of FMI Limited shows that company is getting very
good profit over its sales. Company’s Sales for the year 2009-10 is Rs.3080 Lac
(App.) which is more than of last year by Rs.533 Lac and the profit and loss
account shows that company earned a profit of Rs.228 Lac(PAD) and Rs.155
Lac(PAT) in the same year though there was a unexpected demand from Legal
Metrology Department of Punjab against Weights & Measure Charges of
Measuring Tapes Manufactured during the period of 2003-04 to 2005-06 of
Rs.573 Lac out of which Company had to pay Rs.300 Lac in the same financial
year e.g. 2008-09 UNDER PROTEST as the first installment and remaining
Rs.273 Lac is paid in this financial year e.g. 2009-10. The Legal Metrology
Department of Punjab Government demanded the same amount against the year
2003-04 to 2006-07 as per Weights and Measure Act,1986 for Stamping fee of
Measuring Tapes manufactured and supplied by the companies into Punjab and
other states of India. Company has challenged the same demand and the Case is
lying against the Secretary of Punjab. The department forced the company to
pay the amount of demand. Even manufacturing License of Measuring Tapes
was suspended for a short period. So the company had to arrange the amount
demanded by department as Under Protest payment. Company has to accept
Corporate Loan for the same amount e.g. Rs.300 Lac in 2008-09.
That’s why the Amount of Administrative Charges is Rs.413 Lac that was
Rs.428 Lac in the previous year. This amount includes the Payment of Rs.273
Lac of the same nature. This amount is fully deductible under Income Tax Laws
because department mentioned the purpose of the fees as Stamping Fee of
Tapes. Other all Expenses are almost same in proportion as in the previous
48
year. The company had to face the loss in 2008-09 only due to the Under
Protest Payment to Legal Metrology Department against the same demand.
Comparative Profit & Loss Account for last three years
Particulars 2009-10
(In Lac)
2008-09
(In Lac)
2007-08
(In Lac)
Total Sales & Other Incomes 3099.44 2646.30 2179.94
Raw Material Consumed
All Expenses
1419.59
1451.69
1332.92
1414.34
1137.75
971.88
Total Expenses 2871.28 2747.26 2109.63
Net Profit\Loss 228.16 -100.96 70.31
Taxation Provisions 72.68 4.21 21.65
Net Profit for Appropriation 155.48 -105.17 48.66
The above figures can also be expressed in the Chart. With the help of charts
we can clearly compare the figures in a very easy way. So here below is the
chart of the above comparison:
49
Comparison of Sales & Breakup of Expenses into Raw Material and Oher All Expenses
0500
100015002000250030003500
2009-10 2008-09 2007-08
Financial Years
Valu
es in
Lac
Total Sales & OtherIncomes
Raw Material Consumed
All Expenses
From the study of the financial reports of the company for many previous years
it is clear that the company is getting a very good profit over the last many
financial years. The sale of the company is continuous increasing. Company is
going through various kinds of Cost Cutting programs by internal management
and as a result company could manage to decrease its raw material cost
percentage over its sales. Company put a check on the unnecessary expenses
and avoid/eliminate/reduce the expenses without of such expenses process can
be run smoothly. That is why the company is getting sales at high degree but
expenses are not rise in the proportion of sales these are less than of in the
previous years.
50
Raw Material Cost: Raw Material Cost is reduced because of the
consciousness of the internal management and various process of
manufacturing have been changed or modified. Demand for Product has also
increased as Quality is the main goal of FMI Limited. So Production is
increasing but cost of production is increasing in the less proportion of total
cost. This can be seen from the following comparison of total production/ raw
material cost to total sales:
Raw Material Cost
Raw Material Proportion = -----------------------
Net Sales
In 2009-10 In 2008-09 In 2007-08
1419.59 1332.92 1137.75
= ----------- = ------------ = ------------
3099.44 2646.30 2179.94
Raw Material Cost over = 45.80% = 50.37% = 52.19%
Sales Value
So it is clear from the above that the Raw Material Cost is going down and this
resulted to get higher profit over its sales and operations. Every manufacturing
unit can only be surviving if the production cost is in control of management.
So FMI Limited is taking full control over its production cost from last some
years and it is also the aim of management to get it lower than of present 51
without having any effect on quality of product manufactured. So it is also
estimated that company will be in great profit in near future if the cost of raw
material/production cost of tapes will be lower.
All Expenses Cost: All expenses are done to run the production, distribution of
finished goods smoothly. All expenses include the Manufacturing Expenses,
Administration Expenses, Legal Expenses, Financial Expenses, Selling
Expenses and Depreciation on Fixed Assets charged. So these are the expenses
that every company has to pay to run the production process smoothly and all
expenses figure of FMI Limited shows that these expenses are also reduced
from recent some years. In fact the sales have been increased of company but
the expenses proportion is decreasing. This is also done with the same efforts of
Management. Wastages have been eliminated in manufacturing processes and
unnecessary expenses are being avoided. Expenses can be clearly understood
with following ratio analysis of three years:
All Expenses Cost
All Expenses Proportion = -----------------------
Net Sales
52
In 2009-10 In 2008-09 In 2007-08
1451.69 1414.34 971.88
= ----------- = ------------ = ------------
3099.44 2646.30 2179.94
Raw Material Cost over = 46.84% = 53.45% = 44.58%
Sales Value
Profitability Comparison: Profitability of the concern is very efficient from
last some years. Figures shows that Company earned Rs.70.31 Lac in 2007-08,
incurred a loss of Rs.100.96 Lac in 2008-09, Rs.228.16 Lac in 2009-10 and
gained Rs.228.16 Lac in 2009-10 as net profit. Very actual condition of the
concern tells that company is in a very good position and earning a continue
increasing profits. But the demand of Legal Metrology Department pushed FMI
Limited to face loss in 2008-09 but however company managed to get rid off
the effect of loss in 2009-10 after making payment of 273 Lac against the same
mentioned demand. So it can be judged from the profitability of the concern
that company is getting very good profits over its sales from last some years
and as per management of company profits will be increased in future by
increasing sales and decreasing cost of material and other expenses. Profit chart
is shown as below:
53
Profitability Comparison of FMI Limited
-150
-100
-50
0
50
100
150
200
250
2009-10 2008-09 2007-08
Financial Year
Pro
fit/L
oss
in L
ac
Net Profit & Loss
So from the above it is clear that the net results of the affairs of company is very
satisfactory from last some years. It is also expected that company will give
more effective results in coming years with the efficient management control
over its all operations.
54
2. Balance Sheet Analysis
Comparative Balance Sheet for last three years
Particulars 2009-10
(In Lac)
2008-09
(In Lac)
2007-08
(In Lac)
Shareholder’s Fund
--Paid Up Capital
--Reserves & Surplus
Loan Funds
--Secured Loans
--Unsecured Loans
Deferred Tax Liability(Net)
18.05
861.67
1143.89
268.01
141.37
18.05
733.66
1105.97
246.67
124.23
18.05
839.74
717.50
241.32
124.26
2432.99 2228.59 1940.86
Net Fixed Assets
Investments
Current Assets
--Inventories
--Sundry Debtors
--Cash & Bank Balances
--Loans & Advances
Less : Current Liabilities
--Liabilities
--Provisions
1082.90
3.48
2332.30
236.19
25.11
182.25
-1299.48
-129.76
1096.36
1.85
1777.72
215.45
15.74
201.12
-968.43
-111.22
1097.33
1.85
1019.75
340.85
21.95
79.64
-591.89
-33.12
2432.99 1940.86 1891.24
55
Balance Sheet of the FMI Limited shows that company is in a good financial
position so that company has earned a Reserves and Surplus amount of
Rs.861.67 Lac that is huge. The Paid up Capital of Company is 18.05 Lac only
so it can be judged that company is managing out sources fund most for its
operations of long term as well as short term. Secured Loans are the term loans
for constructing the Multiplex at Ferozepore Road, Ludhiana and also a
corporate loan of Rs.240 Lac which was accepted for the payment of demand of
Legal Metrology Department in 2008-09. No additional any loan is accepted
during the year. In unsecured loans no any loan is accepted in the financial year
2009-10. Net fixed assets are almost like same as were in last year. Additions to
Fixed Assets are almost equivalent to the Depreciation amount claimed by
company on the gross block of company. Investments are increased by 1.68 Lac
which represents the purchase of Gold coins as investment for the future.
Debtors, Bank Balances and Cash are the assets that are always having
fluctuations but there are not too much up and downs noted in the last three
comparable financial years.
So from the above comparison it is clear that FMI Limited is at good position in
its Finance. Company is earning good profit and having very good command
over its assets and liabilities. Management of the company is very strong and
effective.
56
SUMMARY AND CONCLUSIONS
After I have gone through the data of the FMI Limited in the prescribed manner
to reach at the result about the financial condition of the concern I have realized
from my analysis that the company is having very strong policies about the
finance of the company. Company is having very good control over its financial
affairs. Financial Strategies are prepared by Mr.Shashi Pal Jain (General
Manager) who deals with all banking of the concern.
Company is gaining very good profit over its sales. Company is getting very
good return by recent three financial years. The Loss incurred in the financial
year 2008-09 is only due to the unexpected demand by the Legal Metrology
Department of Punjab of Rs.573 Lac that the company had to pay to the extent
of Rs.300 Lac in the financial year 2008-09 and left amount of Rs.273 Lac in
the next financial year e.g. 2010-11. Except this case company is very good at
its financial condition.
If we talking about transactions of company with vendors and customers then it
is noted that company is exporting the Measuring Tapes manufactured to more
than 60 countries of the word and total Export Sales Ratio in the total Sales is
Approximate % in 2008-09 and % in 2009-10 and the Import Ratio in the total
Raw Material Consumed is Approximate to 37.74% in 2008-09 and 29.31% in
2009-10 to its total consumption. So it is clear that the company is hugely
contributing towards the globalization. Management of the company is very
mindful and strong that’s why the company is having very good Gross Profit
and Net Profit Ratio on its Sales. Cost reduction techniques are followed to
prevent the unnecessary wastages. Company is having full attention towards the
Quality of the products manufactured. Efforts are being done at every stage of
57
manufacturing to increase the quality of the products and to maintain the
standard of the products.
Generally talking about the future plan from management it is expected that
FMI Limited is planning to increase its current sales by 20% in the next
financial year. It can be said in another words that company is stepping towards
the growth and efficiency. Very Effective plans for growth and progress are
being followed by Company which is very needy to survive in the today’s age
of pure competitions.
So after all the above facts and discussions it is clear that Company is very good
at its financial position and affairs. Company is not very efficient only at its
finance but also its import, export quality and other resources and procedures.
So it can be said that FMI is the one of the most biggest and efficient companies
of Punjab and even India in near Future.
58
RECOMMENDATIONS
From the above conclusion it is made very clear that the company is having
very strong position at every aspect but I want to suggest company and to give
some recommendations which may be followed for the betterment of FMI Ltd
Ludhiana.
More efforts should put on the Cost Cutting techniques to reduce the cost
of product manufactured.
The company should keep in touch with their agents properly & when
ever they find the channel unfit they must go for a change.
More concentration should be given on the Promotion of Sale of
Products.
Management should seek more professionally educated persons in their
respective areas or Proper training programs should be there to educate
the personnel in their fields to gain the smoothness in work and to
increase efficiency.
Due importance should be given to advertisements of the products.
The quantity & quality of the finished product should be improved
Accountability for each task should be fixed strictly. This is very
important point but lack of accountability is noted in the many processes
of manufacturing and officials.
Motivational programs should be introduced to motivate the employees
to work hard and to make Team Efforts to achieve the Organizational
Objectives.
59
Avoid idle running of Plant & Machinery.
Employees should be given adequate Remuneration according to their
contribution so that their concentration be only on the betterment of the
Organization, as we all know
“A Good and Concentrated Team of Personnel is more valuable for
the Organization even than of Money in Hand”
Wastage should be tried to minimize to the maximum extent possible.
60
LIMITATIONS OF REPORT
As I have gone through every aspect of the tasks performed by the FMI Limited
employees and their policies and procedures to fulfillment the requirements at
different levels, I found some Limitations in the Project Report prepared by me.
These all are non controllable errors that can not be avoided by me. I would like
to discuss here all these
As this report is the result of my Practical training at FMI Limited for
Five weeks, but still I found that there was shortage of time to get the full
fledge knowledge of the tasks performed in corrective manners.
There was very busy schedule of Account department due to Auditing of
Accounts of the Concern.
61
BIBLIOGRAPHY
Research Methodology, C.R.Kothari
Management Accounting, Shashi K Gupta & R.K.Sharma
Mathematics and Statistics, R.L.Aggarwal
Old Reports of FMI Limited
Financial Statements of FMI Limited
Other Documents as Catalogue, Products Chart, Flow Chart of
Manufacturing etc
62
63
