BRS Final Copy

PREPARED BY: BHUMIT SHAH Page 1

A

SUMMER TRAINING REPORT

ON

FINANCIAL PERFORMANCE REVIEW

AT

RUBAMIN LIMITED

Submitted By: Guided By:

BHUMIT SHAH MRS. KOMAL PATEL

MBA- II ASST. PROFESSOR

ACADEMIC YEAR

2010-2012

SUBMITTED TO:

K.N.V. INSTITUTE OF BUSINESS MANAGEMENT

RAJKOT

AFFILIATED TO:

GUJARAT TECHNOLOGICAL UNIVERSITY

AHMEDABAD


K.N.V INSTITUTE OF BUSINESS MANAGEMENT

B/H KHIRASARA POLICE STATION

KALAVAD ROAD, METODA

RAJKOT

CERTIFICATE

I hereby certify that Mr/Ms BHUMIT SHAH student of MBA Sem - III has completed project

work entitled at RUBAMIN LIMITED under my guidance.

As per my knowledge this is his original work based on available data and for partial

fulfilment of MBA programme.

Date: - Name: - MRS. KOMAL PATEL

(Project Guide Name)

Signature: -


DECLARATION

I undersigned BHUMIT SHAH a student of MBA 3rd semester declare that I have prepared

this project report on “FINANCIAL PERFORMANCE REVIEW" at “RUBAMIN LIMITED”

under Mr/Ms (Name of person who guided you at company) and by Mr (Name of faculty) of

KNV Institute of Business Management - Rajkot

I also declare that this project report is my own preparation and not copied from anywhere

else.

This is in accordance with syllabus & guidelines of GTU.

(Signature)

___________

Student's Name: BHUMIT SHAH

Roll No.:2053

Date:


ACKNOWLEDGEMENT:

Now, a day’s getting a practical knowledge is an important thing but more important

is the support, guidance and motivation provided by the different persons of different status

and section.

The successful completion of any task would be incomplete without acknowledging

people who helped me make it possible. I take this opportunity to express my appreciation

and gratitude to all these who helped me in completing this project.

I would like to heartily thankful Our Dean Mr. M. K Sharma Sir who has providing

opportunity and constant encouragement to prepare this project report.

I would like to thankful Mrs. Komal Patel for providing guidance to prepare this

project report.

I would like to thankful Mr. Rajesh Palkar Sir (Head of HR Department) for

permitting me for Sumer Internship Programme.

I would like to thankful Mr. Nilesh Mistry (Head of Finance Department) and Mr.

Ajay Upadhaya, for helping in the field work.

I would like to thankful Mr. Milind Thakkar (Head of Taxation Dept.), Mr. Sanjay

Shah and Mr. Kamlesh Ajmeri for giving us the Knowledge for the Company Profile.

Lastly, I would like to thankful Mr. Ruchir Patel for providing constant support and

guidance for making this report successful.

BHUMIT SHAH

MBA – II


INDEX

SR NO.

PARTICULARS PAGE

1 Executive Summary

2 Introduction

(a) Overview of Industry

(b) Company Details

3 Organizational Study

� Marketing Department study

� Purchase Department

� Operations Department Study

� Human Resource Department Study

� Finance department

4 Chapter Based on Topic

� Ratio Analysis

� House Property

� Working Capital

5 Recommendation / Suggestion

6 Conclusion

7 Bibliography

8 Certificate



EXECUTIVE SUMMARY:

The Summary includes concise but complete description of the market, market

need how we propose to satisfy that need and the projected financial rewards.

Mission statement:

The Enterprise:

The Rubamin is a closely held Private limited company the company commenced

operation in 1988 with manufacture of Zinc Oxide and has over the years, diversified in

cobalt and copper metals in 1988.we have been profitable in each of our first two years of

operation and have established a strong relationship with numerous distributors

throughout the south and India. We have established work ethic and pride in providing

high quality product at very competitive price. We have been quite successful at this by

concentrating on a relatively small number of components type. Financial result of the last

two years is as follows:

Financial History 2010 2011

Revenue 22197.31 27623.89

Profit Before Tax 85.26 902.10

PBT % 0.38% 3.27%

Net Profit 85.26 756.35

Rubamin is one of the Leading Producers of Zinc Oxide and Cobalt compounds in

the country with its product having wide application across varied user industries. The

company's management is well qualified and experienced and has developed strong

research and development team to continuously improve its process efficiency. Despite

established track record in the business, rubamin has little control on realization due to

commoditized nature of products.

Rubamin Limited has a two decade old successful track record of producing

metallurgical product. It has successfully serviced customers in India and across the globe

over this long period of time. A key success of the organisation has been its ability to

anticipate market needs and invest accordingly. At all times the quality and delivery of the

company has been continuously good, earning it the loyalty of large and important

customer.


Inter National Operation: (UAE and Democratic republic of Congo):

• Rubaco SPRL, DR Congo and Rubamin SPRL are the wholly owned subsidiaries

of Rubamin FZC, UAE (trading unit) which in turn is a subsidiary of Rubamin

Limited. Rubaco SPRL, DR Congo, Rubamin SPRL are head quarter in

Lubumbashi, which is the capital of the Katanga province.

• Rubaco SPRL formed in the year 2004 is involved in Mineral exploration and

Mining of Minerals.

• Rubamin SPRL is the manufacturing company primarily focused on the

manufacturing operation based on pyrometallurgy technique.

• The group has strength of over 150 employees in DR Congo including Geologist,

Mining / Mechanical / Civil Engineers, Metallurgists, Scientist, Chemicals,

Surveyors, Accountants and others.

Share Holding Pattern as on 31.01.2011:

Name of the Share holder % holding

Shri Atul Dalmioa and Relatives 50.09%

Shri Anil R Patel and Relatives 33.42%

India Advantage Fund (ICICI Venture) 15.40%

Employees and others 0.73%

Associates companies 0.36%

TOTAL 100.00%



NAME OF THE COMPANY:

Rubamin Private Limited

TYPE OF THE BUSINESS:

Manufacturing/Exporter

CORPORATE OFFICE:

2nd Floor Synergy House,

N/R, Genda Circle,

Subhanpura,

Baroda-390 023

GUJARAT (INDIA)

PHONE:

91 265 22 82 078 / 079 / 080 / 081 / 082

FAX:

91 265 22 82 077

E-MAIL:

[email protected]

BOARD OF DIRECTOR:

Mr. Atul Dalmia....... Chairman

Mr. Anil Patel.......... Managing Director

Mr. Ajit Kapadia...... Independent Director

Dr. Radhanath Prasad...Independent Director

Mr. Naren Aneja....... Independent Director


BANKERS:

HDFC Bank

State Bank of India

Bank of Baroda

Standard Charted Bank

AUDITORS:

Deloitte Haskins and sells,

Chartered Accountant,

31, Nutan Bharat Society,

Alkapuri, Vadodara – 390007

MISION:

We shall strive to become a global player in our chosen fields of operations and shall aim at

total customer satisfaction”.

VISION:

To be internationally Competitive in Cobalt, select non-ferrous metals & compounds.

OBJECTIVE:

“To manufacture World class Tyre Industry”.

POLICY:

To meet customer expectations of high quality products, in the stipulated time

frame and as per their satisfaction.


HISTORY

Rubamin is a rapidly growing organization having operations in India and D. R.

Congo. Its operations include Mineral Exploration, Metal Extraction as well as Metal

Compounds manufacturing. Going into the year 2008-2009, Rubamin will foray into

Recycling of Spent Catalyst to produce non-ferrous metals such as Copper, Cobalt, Nickel,

Molybdenum, Manganese, Vanadium and Tungsten as well as Recycling of Zinc bearing

secondary material. The businesses are grouped as under:

Rubamin Limited:

• Cobalt Metal & salts

• Zinc Oxide

• Recycling

• Mineral Exploration

• Copper Manufacturing

It has 5 manufacturing sites in India

and over 5000 Sq. Kms of different mineral

concessions in D. R. Congo, most of which

are located in mineral rich Katanga

province.

Rubamin has commenced the commercial production of Copper Blister at its

Greenfield manufacturing facility at Likasi, D. R. Congo in May 2008.

It is the largest manufacturer of Zinc Oxide in India and is one of the only two

manufacturers of Cobalt metal in India.

Rubamin has appointed Chemlock Metals Corp. as its global distributor for Cobalt

Metal and compounds, Zinc Oxide and Zinc compounds, Molybdenum compounds, and

Cadmium compound.

The three businesses of Rubamin group are run as separate Strategic Business

Units and Profit centres. These are supported by centralised corporate functions like H.R.,

Projects, MIS as well as Finance & Accounts.


ICICI Ventures, one of the leading Private Equity companies in India has taken a

strategic stake in Rubamin in July 2007.

Rubamin is committed to excellence in all its endeavours, with an unwavering focus

on Customer Delight.

EHS:

Rubamin is committed to excellence in Environment, Health and Safety (EHS)

through continual improvement of our awareness, understanding and performance. Our

goal is to protect the environment and the health & safety of all employees and community

where we operate.

It is our endeavour that there should be no adverse environmental impact from our

operations and business practices and that we strictly control work related injuries &

illness.

All employees are imparted safety training at induction as well as periodically

thereafter. Regular medical checkups for employees are also carried out. A system of work

permits, job safety analysis, and independent third-party safety audits ensures that we

employ the best practices available for conducting our operations safely.

CORE PURPOSE AND CORE VALUES:

Core Purpose:

The Joy of Creating an Institution

Core Values:

Growth, Dynamism and Speed

Learning Organization that Supports Individual

Growth.

Winning - Never Giving Up


COBALT OPERATION:

We are the leading producer of Cobalt metal and Cobalt salts in India. Our core

activity comprises of processing and recovery of Cobalt Metal, Cobalt salts, Nickel Metal,

Nickel Salts, Copper Metal and Copper Sulphate from Cobalt bearing ores, concentrates

and other Cobalt-Nickel-Copper containing recyclable materials.

QUALITY ASSURANCE:

• We are an ISO 9001 (2000) accredited manufacture of zinc Oxide, Cobalt, Nickel

and copper.

• We have well defined and stringent checks for raw material, work in process and

finished goods.

• We have a world class Quality Assurance Laboratory with competent staff equipped

with latest Analytical Instruments, some of them are:

1. Inductive Coupled Plasma (ICP)

2. Atomic Absorption

3. Spectrophotometers

4. Flame Photometer

5. UV-Visible Spectrophotometer

6. Surface Area Analyzer

7. Auto Titrator


RESEARCH AND DEVELOPMENT:

The corporate technology centre of the company - has a modern laboratory, and a

team of well qualified personnel. It develops new processes and new products, carries out

process engineering, and trouble shoots various technical problems of the company. As a

part of its responsibility, the centre also examines various environmental issues, and

recommends solution.

The centre focuses on unit operations and processes for leaching, purification, solid

- liquid separation, solvent extraction, electro-winning and environmental remediation in

the field of hydrometallurgy. It has also started activities in the area of pyrometallurgy and

geology, catering to the need of the company in India and in Democratic Republic of

Congo.

The centre is recognized by Department of Scientific & Industrial Research, Ministry

of Science & Technology, Government of India, New Delhi. It is also recognized by MS

University, Vadodara, India as centre of Excellence for students working for doctorate

degree.

We also have a pilot plant replicating with the processing plant to conduct trial runs

before implementing them on a commercial scale.


ZINC OXIDE OPERATION:

Rubamin Limited is the leading manufacturer and exporter of Zinc Oxide in India.

We have five manufacturing facilities offering almost all grades of Zinc Oxide.

HALOL:

This facility uses Calcinations Process for manufacturing Zinc Oxide. It is situated at Halol,

an industrial town in Gujarat, located 32 km north-east of Vadodara.

DAMAN UNIT I AND II:

We have two separate French Process units in the Union Territory of Daman & Diu.

Situated on the west coast of India, they are three hours drive from Mumbai and 13 Kms

from the nearest Railway Station of Vapi.

NANDESARI UNIT I:

This unique chemical process zinc oxide unit has been commissioned at Nandesari,

Gujarat in January 2009. The unit is an extension of Rubamin's Hydrometallurgy

capabilities and delivers value added products through finer process controls. The

complete process know-how and technology has been developed in-house at Rubamin.

.

NANDESARI UNIT II:

This unit has been recently commissioned in February 2009 at Nandesari Gujarat for

production of zinc oxide for use as Nutritional Additive in Feed Premixes.


GRADE AND APPLICATIONS:

Rubamin is the largest Zinc Oxide producer in India. We make over 20,000 tons

annually and continue to expand rapidly. We also produce other zinc based chemicals

such as Zinc Carbonate and Zinc Sulphate.

We are also one of the most versatile Zinc Oxide manufacturers in the world and

make almost all the grades commonly used, which are as follows:

Zinc Oxide – 99.5% or 99.7% - White Seal

Also known as – Red Seal, French Process, Rubber Grade, etc.

White Seal is produced by using Zinc Dross in a process known as the French process. It

is widely used in the rubber industry especially the tyre industry. Our products are used by

Global Majors such as Bridgestone and almost or major tyre manufactures.

Zinc Oxide – 99.9% - Gold Seal

Also known as – Pharma Grade, Metal Grade, IP/USP/BP Grade

Gold Seal is the purest form of Zinc Oxide made from pure Zinc Metal. Unlike many other

manufacturers we make our Zinc Oxide from Special High Grade Zinc Metal. This ensures

very low impurities. This grade is widely used in the Pharma industry and all other

applications where you need the best quality of Zinc Oxide.


Zinc Oxide – 99% - Yellow Seal

Also known as – Calcined Grade, Hydroxide Grade, Wet Process, etc.

Yellow Seal Zinc Oxide is made from Calcining Zinc Hydroxide. This provides low heavy

metal content and is widely used in the tyre, rubber and ceramic industry.

Zinc Oxide – Active

Also known as – High Surface Area (HSA) Zinc Oxide

Zinc Oxide – Active has a fine particle size, good dispersion characteristics and a slow

settling rate. It is used in Latex compounding, for goods manufactured with translucent and

transparent rubber.

Zinc Carbonate (Precipitation Route)

Made from chemical precipitation our zinc carbonate is superior due to product

morphology, uniform precipitates and finer particle size. Our Zinc Carbonate finds usage in

Catalyst and Rubber applications.

Zinc Oxide – 72% / 75% - Feed Grade

This is used as Nutritional Additive in Feed Premixes and for our European customers; we

can certify the product in line with the various European Commission Directives.

We shall be pleased to furnish detailed specifications of various Grades upon

receiving request from our valued customers.


RUBAMIN AT GLOBAL LEVEL:

CONGO OPERATION:

To be an Indo-Congolese company, that plays an important role in the development

of the Congolese economy by creating wealth for all its stake holders.

Rubaco SPRL, D.R. Congo and Rubamin SPRL, D.R. Congo are the wholly

owned subsidiaries of Rubamin FZC, U.A.E., which in turn is a subsidiary of Rubamin

Limited, India. Rubaco SPRL, D.R. Congo and Rubamin SPRL, D.R. Congo is head-

quartered in Lubumbashi, which is the Capital of the Katanga province.

Rubaco SPRL, formed in the year 2004, is involved in mineral exploration and

mining of minerals.

Rubamin SPRL is the manufacturing company, primarily focused on the

manufacturing operations based on Pyrometallurgy technique.

The group has strength of over 150 employees in D. R. Congo including Geologists,

Mining / Mechanical / Civil Engineers, Metallurgists, Scientists, Chemists, Surveyors,

Accountants and others.


MANUFACTURING:

Rubamin SPRL is the manufacturing company in Likasi, Katanga Province, D.R.

Congo, primarily focused on the manufacturing operations based on Pyrometallurgy.

Products:

• Cobalt Concentrate 1000MT per annum on

100% cobalt basis.

• Copper Blister 7500MT per annum on 90%

copper basis.

A state-of-the-art green field manufacturing facility has been commissioned at

Likasi, Katanga Province. The first phase commercial production has commenced from

May 2008. The company is planning a phase-wise capacity expansion of upto 20,000MT

of copper and 2,000MT of cobalt.

MINERAL EXPLORATION AND MINING:

Rubaco SPRL has 20 exploration mineral concessions.

Rubaco SPRL, formed in the year 2004, is involved in mineral exploration and

mining of minerals. The company has Permissions for Research (PRs) for over 2500 sq

kms of mineral concessions most of which are in Katanga Province of D.R. Congo. These

mining concessions are rich in copper, cobalt, gold, diamond, iron and other minerals.

Please see attached file for details of 20 PRs.

Rubaco SPRL has charted an aggressive exploration program on these

concessions in next three years.

We are looking for Joint Venture partners having expertise in exploration and mining

for joint exploration and mining of select concessions.


OUR BUSINESS INTEREST:

• Strategic partnership for mineral concessions in D.R. Congo

• Private equity funding for exploration, exploitation and manufacturing

activities at D.R. Congo

• Supply of mining equipments and machineries for our operations in D.R. Congo

• Orders for execution of excavation, over burden removal and mining work on

contract basis

• Buying Copper Blister

• Supplying Copper Ore in D.R. Congo (Malachite with min. 20 % Cu)

• Supplying Cobalt Ore in D.R. Congo (Heterogeneity with min. 3 % Co)


OVERALL ORGANIZATION CHART:


SWOT ANALYSIS:

A SWOT analysis generates information that is helpful in matching an organization’s

or a group’s goals, programs, and capacities to the social environment in which they

operate. It is an instrument within strategic planning. When combined with a dialogue, it is

a participatory process.


Strength:

• Largest presence in Congo.

• Powerful leader in India in Zinc Oxide and Cobalt.

• Strong Entries Barriers.

• Use of Latest Technology.

• Availability of Trained Man Power.

• Zinc Oxide is itself a specific Brand name.

• We make all grades of Zinc using all kind of Raw Material.

Weakness:

• Location not Ideal for Chemical Plant.

• India is not right place for this type Product.

• The size of the Market is not large.

• Sometimes there is difficult to collect the raw material.

Opportunity:

• We have Exploration area in Cobalt and copper in Congo.

• Our Product are move into Value Added Product e.g. Battery Material.

• Indian Market is not matured.

Threats:

• Availability of Cobalt is biggest Threat for our Company.

• Availability of Skilled Man Power and Attribution

• The growth of China is also great threat

• Price of Copper and Cobalt are sometimes creating threat for us.

• Environmental issues are also creating threat for us.



ORGANISATION CHART OF MARKETING DEPARTMENT:

Chief Operating Officer

(COO)

Manager

(Sourcing)

Commercial Sourcing

Officer

Manager

(Export)

Sr. Officer

(Export)

Business Development

Manager

Commercial Officer


PRODUCT AND APPLICATION:

We offer a number of Cobalt, Copper, Nickel, Manganese and Molybdenum

Products with wide applications. We can also offer customized products to meet the

specific requirements of our customers.

No. Products Specification Applications

1

Ammonium

Molybdate

Min 56% Mo

·Dyes

·Pigments

·Catalysts

·Smoke

Suppresant

2

Cobalt

Carbonate

Min 46% Co

· Animal Feed

· Ceramics &

Pigments

3

Cobalt Cathode

Min. 99.8% Co

· Super Alloys,

HSS

· Investment

Casting

· Paints as drier

· Cobalt Salts

· Catalyst

· Magnets

4

Cobalt Oxide

Min 71% Co

· Pigments &

Colours

· Glass

· Battery

5

Cobalt Sulphate

Heptahydrate

Min. 21% Co

· Animal Feed as

micronutrient

· Dyes

· Anodising

· Copper

Electrowinning

· Paint Drier


6

Copper Metal

99.95% purity

· Electrical

· Chemical

· Alloys

7

Copper Sulphate

Min. 24.5% Cu

· Animal Feed

· Fertilizers

· Dyes

· Paint Drier

· Fine Chemicals

8

Manganese

Sulphate

min 31% Mn

· Animal Feed

· Paint Driers

· Micro Nutrients

· Agrochemcials

9

Manganese

Sulphate

Solution

Min.27%

MnSO4 + B83

· Agreochemicals

Intermediate

10

Nickel Metal

99.8% purity

· Steel

· Casting

· Catalysts

· Chemicals

· Electroplating

11

Sodium Sulphate

98.5% purity

· Paper

· Dyes

· Detergents

· Glass


Competitors List:

The Rubamin Limited Manufacturing Industry in India is fragmented and has many small

Players. Most of the incumbents do not have facilities approved by stable long term

customers. High working capital requirement is a barrier to entry in this business. The main

competitors of the Rubamin Limited are as Follows:

Sr. No. Competitor’ s Name

(Zinc Oxide)

Approximate Capacity

(MTp.a)

1 Nav Bharat Metalic Oxide 6000

2 Transpek 6000

3 Pondy Oxide And Chemicals 4800

4 Upper India Chemicals 4800

5 Mittal Pigments Pvt. Ltd. 3600

6 Liuzhou Zinc (Chinese Player) 5000

7 Umicore Group (Europe) 5000

8 U.S. Zinc (U.S. Market) 5200

Sr. No. Competitor’ s Name

(Cobalt and copper)

Approximate Capacity

(MTp.a)

1 OM Group 8170

2 Falconbridge 5021

3 Norilsk 4748

4 Chambishi 3648

5 International Cobalt Compant Inc. 3391

6 OM Group (Finland) 4798

7 Sherritt International Corporation (Canada) 5000

8 BHP Billiton (Australia) 5000

9 Jinchuan (China) 15000

10 Sterlite Copper Industry 4900

11 Hindalco 5000

12 SWIL 4897

13 Hindustan Copper 4500


Customers Profile:

About the 40% of the product of Rubamin Limited is used for the Production of the Tyres

and Rubber Industries and the balance is consumed by Ceramics, Paints and other

Industries. For Rubamin Automobiles, Tyres and the Rubber Industry account for about

30% of its production at Daman and around 90% of its production at Halol. The main

customers of Rubamin Limited are as follows:

Sr. No. Customer’s Name

(Zinc Oxide)

Industry

1 MRF Limited Tyre Manufacturing

2 Bridgestone India Pvt. Ltd. Tyre Manufacturing

3 Apollo Tyres Limited Tyre Manufacturing

4 CEAT Limited Tyre Manufacturing

5 Videocon Glass Industries Limited Glass Manufacturing

6 Explorer SRL (Italy) Minerals and Compounds (Ceramics)

7 RAK Ceramics (Dubai) Ceramics Manufacturing

8 Star Chemicals (Australia) Chemicals Manufacturing

9 CEAT (Sri Lanka) Tyre Manufacturing

10 Jasol (New Zealand) Plastic Manufacturing

Sr. No. Customer’s Name

(Cobalt and Copper)

Industry

1 Sandvik Group Tolling

2 Lona Industries Pigments and Dye stuff

3 Laxminarayan Traders Trading

4 Narayan Industries Dyes and Intermediaries

5 Parswanath Industries Dyes and Intermediaries

6 Codelco (Chile) Copper Manufacturing

7 Phelps Dodge (USA) Copper Manufacturing

8 LA Chemicals Chemicals

9 Patcham Ltd. Paints and Adhesives

10 Kosheri Trader catering to Batteries, Alloy &

Chemicals industries


Mode of Entry:

Different modes are used by Rubamin Limited which are as follows:

• Meeting Customer

• Launching New Products

• Advertisements

• Trade Fare Attending

• Floating information to trade organization

• By Phone calling to customer for the Interview

• Fax, E-mail and Internet

Customer Relationship System:

Customers are the key and one of the most important factors of any business because

without the Customer the business cannot run successfully. That’s why the

Customer is called “KING” of the Market.

The various aspects covered under the customer relationship system by Rubamin

Limited for Example:

• Price

• Quality

• Packaging

• Delivery on time

• Attending Complains

Pricing:

There are mainly two method of pricing which the Rubamin Limited basically used. They

are Formula Based and Spot Based.

Formula based pricing used for the regular customer (repeated order). In this

method the price for domestic product are charged according to HZL (Hindustan Zinc

Limited). Price for international product are charged according to LME (London Metal

Exchange).

Spot based pricing used for the small customer who gives ordered frequently. Here

the prices are charged on the bases of the current price which are available in the market.


Distribution Channel:

Distribution Channel is the thing through which the product is available for their users and

customers. The Distribution Channel of the Rubamin Limited is as follows:

Manufacturer -------------------> Agent ----------------------> Customer.

Distribution Network:

The Distribution Network is the network where the Agent are distribute the products to their

customer directly. Rubamin Limited has Distribution Network in the Places like Bombay,

Banglore, Delhi, Daman, and Puna.



ORGANIZATION CHART OF PURCHASE DEPARTMENT:


BASIC OVERVIEW FOR PURCHASE:

There are Five Categories of Purchases being handled by Purchase dept. The same are

as follows:

� Project Purchases

� Capital Purchases

� Revenue Purchases

� Job Work

� Service orders

Present Purchase Procedure:

Purchase Order:

In case of Raw Material, CSP and Packing Material items are covered under Approved

suppliers List. Appproved Supplier list for process Chemicals, packing materials and major

CSP items is updated periodically.

Purchase orders are authorized as per authorization level defined in system.

Manager level - Upto Rs. 10,000/-

� DGM Level - Up to Rs. 100,000/- ,

� G.M-Commercial - Upto Rs. 5 Lacs

� Managing Director – > 5 Lac to Rs.10 Lac

� CFO & MD – More than Rs. 10 Lacs

Purchase Order and Amendment:

Once purchase order is prepared and authorized in the system, purchase order

amendment is possible in the system. Purchase order amendment can be carried out by

the generator of the purchase order. In case of purchase order amendment approval, level

wise financial limit of authorization is inbuilt in the SAP System which is same as that of

P.O authorization.


Purchase Procedure:

Company has a centralized purchase department at Baroda. All the purchases are made

from the Baroda for other locations.

� The following system is adopted for inviting quotations:

� - Basic value upto Rs.1000 : Cash Purchase or P.O

� - Basic value Rs.1001 to Rs.5000 : One quotation

� - Basic value Rs.5001 to Rs.30,000 : Two quotations

� - Basic value >Rs.30,000 : Three quotations

Exceptions to above system:

- Public sector undertaking suppliers like oil companies etc.

- OEM suppliers of spares

- Authorised Dealer

- Proprietory item

- Single source due to scarcity of material/ Emergency Purchases

- Office equipment

Purchase of process Chemicals:

Chemicals are purchased from the approved suppliers normally. Considering the

requirement of the chemicals company is entering into periodic Rate Contract wherever

feasible. Orders are placed on the basis of material availability and rates.

Purchase of Packing Material:

Packing material is purchased from the regular suppliers at the same rates or different rate

based on fluctuation in raw material prices.

Purchase of CSP Material:

CSP materials are procured by preparing purchase order based on Auto Purchase

Requisition generated in the system or individual P.R’S. Considering the value of the

purchase of CSP material, decision is taken whether to float the enquiries or to purchase it

on repeat order basis .


Purchase of Material for CONGO:

Material purchased for CONGO is based on the purchase requisitions provided to the

purchase department from CONGO. On the basis of the PR, inquiries are floated to the

various suppliers. Cost comparative statement is prepared on the basis of quotations

received. Further negotiations are made for the discounts or other terms. Purchase orders

are prepared on the basis of the final negotiated terms. Direct purchase orders are also

prepared on the basis of previous purchase. All the purchases are treated as revenue

purchase.

Purchase System encompasses the following functions:

Purchase Requisition Generation (PR):

Purchase Requisition is an internal document raised by the different users / departments to

the Purchase Department. It specifies their needs and the Schedule Dates by which they

require the materials. Purchase Requisition can be either entered by the user, or

automatically generated on the basis of the re-order level of an item.

User Initiated Purchase Requisitions

User initiated Purchase Requisition is based on the user needs. User can raise the

Purchase Requisitions for an item at any time.

Automatic Generation of Purchase Requisition

Purchase Requisition will be generated automatically based on the stock available in the

inventory. Whenever the stock goes below re-order level for an item, List Purchase

Requisition will be generated for that item. User can select items to generate Purchase

Requisition.


Closing of Purchase Requisition

Closing of Purchase Requisition will be done in two cases. In the first case, Purchase

Requisition will be treated as closed when total quantity in Purchase Requisition has been

ordered. Such closing will be done automatically by the system. Second case will be of

short closing of the Purchase Requisition. Short closing will be required when the total

quantity has not been order and the user does not require the remaining quantity to be

ordered. Short closing has to be done by the user.

Service Contract:

Service Contract is the agreement between Contractor and Buyer. It contains the Item

Definition and Rate, Taxes, Transportation and other charges and all the commercial terms

and conditions. Rate Contract can be for the quantity and / or for a period of time. Rate

Contract can be renewed after the expiry of the contract.

Renewal of Service Contract

The Service Contract can be renewed after the expiry date. In this case based on the

original Service Contract new contract will be prepared.

Termination of Service Contract

Service Contract can be terminated. No further Order can be raised against the contract

after the termination.

Service Contract Amendment

In case, a Service Contract with a Vendor requires any changes due to any reasons like

change in taxes or terms and conditions, then a new Service Contract is required to be

prepared. This type of amendments can be handled through this option, which provides

previous Service Contract information to relate with amended Service Contract.


Purchase Order (PO):

Purchase Order is the most important document of the Purchase System. It is generated

by the Purchase Department and sent to the vendor. Purchase Order basically provides

the information about the quantity of goods required to be supplied according to

specifications and specified terms and conditions. Modification of Purchase Order will be

allowed. However, modification can not be done after the Purchase Order has been

authorized.

Preparation of Purchase Order:

Following types of Purchase Order can be prepared:

Purchase Order through Purchase Requisition

This is used to prepare Purchase Order based on the Purchase Requisitions. This is

useful to keep track of the Purchases made against the requirements raised by the user.

Modification of Purchase Order will be allowed. However, modification can not be done

after the Purchase Order has been authorized.

Direct Purchase Order

This order can be made without a Purchase Requisition

Service Order

This facility is provided to keep account and record of services.

Closing of Purchase Order

This Process will take place automatically when it is completely satisfied i.e. for all items of

the Purchase Order is received. Order can be short closed if total quantity is not received

because of any dispute or the pending quantity is not required.

Cancellation of Purchase Order

Purchase Order can be cancelled if no material has been received against that Purchase

Order. Cancelled Purchase Order can be reopened.


VENDOR REGISTRATION AND SELECTION

1. Scope:

Vendors of raw materials, consumables and service contractors.

2. Responsibility

Chief Business Manager - Main Raw Material

DGM Commercial - Process Chemicals, Packing Material, Spares, Consumables and

Others.

3. Description:

1.1 Vendors shall be evaluated on their competency primarily by way of

correspondence, references, company profile and personal discussions if required.

Initially, 2-3 trial orders are placed to assess the suppliers competency and

reliability. If found suitable then a vendor registration form (as per enclosed format)

is sent for registration of vendor.

1.2 Vendor Registration: Following information is sought from the vendor for

registration.

a) Facilities like Plant & Machinery, Quality Control Systems, Storage & Delivery

Systems, Tool room facilities, Material handling systems.

b) Product & Service offered.

c) Professional and Technical skills available.

d) Commercial and Credit Terms.

1.3 If the vendor is approved, he is included in the approved vendor list. The approved

vendor list is updated as and when new vendor is added.


4. Records:

- Vendor Registration Records

- Approved Vendor List

Selecting capable vendors is one of the most important responsibilities of the purchase

department. If a right supplier is selected, then competitive pricing reliable quality, on time

delivery, good technical service and other goals of purchasing are easily achieved.

All potential vendors are required to apply on the specified “Vendor Registration

Application” be prepared category wise. After careful scrutiny of the details submitted by

Vendors, a visit to the premises of the details submitted by vendors, a visit to the premises

of the vendor if felt necessary is made. The trial orders can be placed with prior approval

of the section Head/HOD (Purchase).



ORGANIZATION CHART OF PRODUCTION DEPARTMENT:


COBALT PROCESS:


The process is based on hydrometallurgy having the following process steps:

• Reduction Leaching.

• Filtration to separate insoluble’s from dissolved metallic’s.

• Solvent extraction to separate associated metallic (Nickel & Copper) from Cobalt.

• Electro winning of pure Cobalt sulphate solution to produce electrolytic grade Cobalt

metal of min. 99.80 % purity.

• Electro winning of pure Nickel sulphate solution to produce electrolytic grade Nickel

Metal of 99.8% purity.

• Evaporation / precipitation of pure Cobalt sulphate solution to produce Cobalt salts.

Tolls Used for Material Handling:

Rubamin Limited Used Following tools for the transferring the material from one place to

another place for their production purpose they are as follows:

• Hand Pallet Truck

• Crain

• Hoist

• Lifts

• Forclip

Storage of Material:

Whenever the material are coming from outside, first of all the person who ordered the

material will take the gate pass and then after the material are store in the factory at

storage room. After that the material are goes for the inspection and then after they are

registered in the GRN (Goods Received Note). Finally the material are goes in the custody

of the users.



ORGANISATION CHART OF HR DEPARTMENT:

DGM (HR)

Halol Manager

HR (P & A)

Executive Officer

Daman Executive

Officer

Assistant

VP

AGM (P & A)

Nandesari Plant N1, N2

Executive

Officer

Assistant

DGM (HR) Admin Officer

Corporate (Payroll)

Assistant

Manager


HUMAN RESOURCE DEPARTMENT:

Auto Attendance System:

• P & A Department shall issue punching card to new joining employees.

• All the Employees required flashing their identity card at the time of Entry and Exit.

• Employees are required to show his Identity card once to installed machine.

• It will take your attendance in system and will give beep sound and employees

name and card no. will appear on screen of equipment for individual employee’s

attendance.

• In case of lost of card, new card will provided by company on chargeable basis.

Lunch and Tiffin Facilities:

• On chargeable basis employees can get their Tiffin/Lunch through Receptionist.

• Company is providing Lunch/Dinner through main security gate in case of when

employees perform over time duty in 1st shift or 2nd shift. In such cases individual

employees has to book their Tiffin at Receptionist.

Festivals and Holidays:

• The Festivals and Holidays declared by the company shall be made applicable to all

class of employees including staff, workman and Executive.

• The trainees appointed by the company weather in terms of management trainee

under statutory provision of Apprentice Act 1961 shall also be entitled to avail

benefit of festival holiday.

Late Coming Norms:

• Late Coming of more than 10 minutes after schedule duty hours will be treated as

Half Leave.

• Maximum 10 minutes late coming in thrice in a month is allowed.


Early Going Norms:

• Employees are allowed two and Half hours early going once in a month.

• More than one time early going shall be considered as a half day leave for each

early going.

• For claiming short leave employees need to fill up personal Gate Pass (Green

Card) and it should be signed by recommending Authority.

• In case of early going for official work outside the factory premises, employees need

to fill up official Gate Pass (Yellow Card) and it should be signed by recommending

Authority.

Overtime:

• If employees performs their minimum 2 hours duty after their schedule working

hours for any productive purpose he shall be eligible for claiming overtime payment

as per company prescribed guideline.

Leave Without Pay:

• When an employee exhaust his leave or is not entitled to enjoy any leave for

whatever reason, he can apply for LWP which the management can absolute grant.

Labour Relation:

• The company possesses various labour relation activities. It doesn’t have any

union, it also possesses harmony, and the company gives all statutory payments

scale and other benefits.

Labour Welfare:

• Insurance Policy for labour, personal Accident, Mediclaim and Life Insurance.

• Group Gratuity Policy.

• Statutory Payments like PF, ESI, Bonus, and LTA.

• Uniform and Safety related items.

• Transport related facility from plant to head office and same as, in also shift.

• Loan policy is allotted, but only for genuine reason.

• Gift for a self marriage Rupees 2500.


Recruitment Process:

There are basically three types of process through which the company recruits the

employees. They are as follows:

• Walking Interview

• Campus Interview

• Employment Exchange

Other process for the recruitment is through Directors approval for new Position. (Fresh

Requirement) For Replacement no Director approval is required. Only Vice President,

Chief Business Manager has authority for replacement. Medical fitness is must required

before joining. Cross reference checking if required. After completion of interview offer

letter to be issued. At the time of joining Appointment letter is to be issued.

Recruitment Sources:

There are mainly three types of recruitment sources which the Rubamin Limited used are

as follows:

• Internal Sources

• External Sources

• Modern Sources

Promotion:

In Rubamin Limited the Promotion is based on the retirement of employees or the vacant

position is available in the organization. But the main criteria of promotion are:

• Retirement of Employees

• Depends on Working ability

• Growth of the Company


Safety Measures:

There are many safety measures which the company possesses during work:

• Personal protective Equipments

• Work Permit

• Suitable Fire Extenuation

• Assembly Point to main Gate

• Centre safety committee meetings, Research and action

• Safety Shoes

• Helmet

• Glows

• Mask

• Glass for Eyes

Applicability of Laws:

• Factories Act 1948

• Employment State Insurance Act 1948

• Minimum Wages Act 1948

• Payment of wages Act 1936

• Employees Provision Fund Act 1952

• Payment of Bonus Act 1956

• Employment Exchange Act 1959

• Apprentice Act 1961

• Payment of Gratuity Act 1972

• Equal Remuneration Act 1976



ORGANIZATION CHART OF FINANCE DEPARTMENT:


FINANCE DEPARTMENT:

When it comes to the overall scope and duties of a finance department, there are

many functions to be fulfilled. For the most part, the duties include all things related to

budgeting. From appropriations to control of expenditure and auditing duties, the finance

department of any given company has an array of duties.

Evolution of the Finance Department:

With each passing year a finance company evolves into an entity that is responsible for

increasing the company (and shareholder’s value). This is done by the implementation of

strategy. If you are looking for additional information on the roles and responsibilities of a

finance department then you might consider doing an Internet search on a specific

company’s finance department or do a simple Internet search on the traditional versus the

modern duties of a finance department. You can also go to your local community college

and speak with a business professor.

Functions of a Finance Department:

A finance department basically has three main functions:

• To provide strategic financial support regarding operational and general business

planning

• To provide daily financial services functions

• To meet and surpass the internal and external needs and financial reporting

requirements of the company at large

The finance department generally focuses on providing relevant information necessary

for upper level management. Such information is crucial in determining how a company

can make better financial decisions.

When it comes to reviewing a company’s overall practices and efforts, the finance

department is key. A finance department will work cohesively with the company to build a

corporate environment that will be able to use the financial resources of the company in

order to ensure that the desired level of customer satisfaction is met.


MAIN FUNCTION OF FINANCE DEPARTMENT:

• Preparation of budget, appropriation of accounts, re-appropriations, surrender and

savings.

• Control of expenditure and ways & means position.

• Audit

• Treasury administration

• Administration of Taxes i.e. Sales Tax, Entertainment Tax, Luxury Tax and Entry Tax

etc.

• Service Conditions including Freedom Fighters Pensions.

• Resource mobilization through loans, Institutional Finance, Small Savings, Credit

and Investment and public debt.

• Financial concurrence and advice.

• Compilation of Codes, Rules and procedures concerning financial transactions and

having bearing on State finance and their implementation.

• Safety and investment of funds from consolidated funds, contingency fund and

public account.

• Contract, recovery and refund of revenue etc.


RATIO ANALYSIS:

Meaning:

Relationship between various related items in the financial statements are established, they

can provide useful clue to gauge accurately the financial health and ability of business to

make profit. This relationship between the two related items of financial statement is known

as ratios. It is a mathematical yardstick that measures the relationship between two figures.

Ratio analysis is process of comparison of one figure with another and the

interpretation of the ratios to know the strengths and weakness if the firm’s operations and of

its financial position. Ratio analysis helps various interested parties like prospective investors,

creditors, banks, and employees etc. to draw useful classification of accounting ratio.

Utility of the ratio analysis:

The use of the ratio was started by banks for ascertaining the liquidity and profitability of

companies business for the purpose of advancing loans to them. It gradually became popular

and other creditors began to use them profitably. Now even the investors calculate ratios from

the published accounts of the company in order to have an idea about the solvency and

profitability of the company before investing their savings. The ratio analysis provides useful

data to the management, which would help them in taking important policy decisions. Diverse

groups of people make use or ratios, to determine a p\particular aspect of the financial

position of the company, in which they are interested.

(1) profitability:

Useful information about the trend of profitability is available from profitability ratios. The gross

profit ratio, net profit ratio and ratio of return on investment give a good idea of the profitability

of business. On the basis of these ratios, investors get an idea about the overall efficiency of

business, the management gets an idea about the efficiency of managers and bank as well as

other creditors draw useful conclusions about repaying capacity if the borrowers.


(2) Liquidity:

In fact, the use of ratios was made initially to ascertain the liquidity of business. The current

ratio, liquid ratio, and acid test ratio will tell whether the business will be able to meet its

current liability as and when they mature. Bank and other lenders will be able to conclude

from these ratios whether the firm will be able to pay regularly the interest and loan

instalments.

(3) Efficiency:

The turnover ratios are excellent guides to measure the efficiency of managers. E.g. the stock

turnover will indicate how efficiently the sale is being made, the debtor’s turnover will indicate

the efficiency of collection department and assets turnover shows the efficiency with which the

assets are used in business. All such ratios related to sales present a good picture of the

success or otherwise of the business.

(4) Inter-firm comparison:

The absolute ratio of the firm is not of much use, unless they are compared with similar ratios

of other firms belonging to the same industry. This is inter-firm comparison, which shows the

strength and weakness of the firm as compared to other firms and will indicate corrective

measures.

(5) Indicate trend:

The ratio of the last three to five years will indicate the trend in the respective fields. For

example, the current ratio of a firm is lower than the industry average, but if the ratios of last

five years show an improving trend, it is an encouraging trade. Reverse may also be true. A

particular ratio of a company for one year may compare favourably with industry average but,

if its trend shows a deteriorating position, it is not desirable. Only ratio analysis will provide

this information.

(6) Useful for budgetary control:

Regular budgetary reports are prepared in a business where the system of budgetary control

is in use. If various ratios are presented in these reports, it will give a fairly good idea about

various aspects of financial position.


(7) Useful for decision – making:

Ratio guides the management in making some of the important decisions. Suppose the

liquidity ratios show liquid funds. Even for capital expenditure decisions, the ratio of return

on investment will guide the management. The efficiency of various departments can be

judged on the basis of their profitability ratios and efficiency of each department can thus

be determined.

Advantages of Ratio Analysis:

Ratio analysis is very important and useful tool for financial analysis. It serves many

purposes and is helpful not only for internal management but also for prospective

investors, creditors, and other outsiders. The following are the important uses of Ratio

Analysis:

• It is an important and useful tool to check upon the efficiency with which the

working capital is being used in a business enterprise. Efficient Management of

Working Capital.

• It helps the management of business concern in evaluating its financial position

and efficiency of performance.

• It serves as assort of health test of a business firm, because with the help of this

analysis financial managers can determine weather the firm is financially healthy

or not.

• A ratio analysis covering a number of past accounting periods clearly has shown

the trend of changes in the business position. The progress or downfall of a

business concern is clearly indicated by this analysis. Use to measure the trend

of the business.

• It helps in making financial estimate for the future. It helps the task of managerial

control to a great extent.

• It helps the credit suppliers and investors in evaluating a business firm as a

desirable debtor or as a potential investment outlet.

• It serves as an instrument for testing management efficiency.

• It provides a useful tool for decision on certain policy matters.


Limitations of Ratio Analysis:

• Single year’s ratios have limited utility because the utility of ratios computed

from the financial statements of one year only is obviously limited. They must be

compared with the past results of the company as also with the results of other

business firms in the same industry.

• The use of one ratio misleading because one ratio used without reference to

other ratios may be misleading. If some conclusions are to be drawn, then the

combined effect of a few related ratios must be considered.

• There is a practically no standard ratio against which the actual performance

can be compared. The satisfactory level of various ratios may differ from one

industry to another only because circumstances differ from industry to industry

and even from firm to firm.

• In ratio analysis other numbers of factors such as general economic conditions

and competition, local factors and the policy adopted by the management are

also important. Hence, before giving any opinion all factors must be kept in

mind.

• It must be remembered that accounting ratios are only a preliminary step in

investigation. Hence, before taking any action on the basis of accounting ratios

based on these figures would give misleading results.

• If in the use of ratios, the manager remains rigid and stocks to them, it will lead

to dangerous situation.


TYPES OF RATIO:

[A] Profitability Ratios:

• Gross Profit Ratio

• Net Profit Ratio

[B] Liquidity Ratios:

• Current Ratio

• Quick Ratio

[C] Activity Ratios:

• Assets Turnover Ratio

1. net asset turnover ratio

2. total asset turnover ratio

3. fixed asset turnover ratio

• Inventory Turnover Ratio

• Debtors Turnover Ratio


SU0MMARY OF RATIO:

Sr. No Ratio 2011 2010

1 Gross Profit Ratio 12.47 10.10

2 Net Profit Ratio 2.74 0.39

3 Current Ratio 1.41 1.59

4 Quick Ratio 1.03 1.18

5 Inventory Ratio 5.41 4.11

6 Interest Coverage (Expenses) Ratio 2.48 1.69

7 Fixed Asset Turnover Ratio 4.6 3.21

8 Debt Equity Ratio 1.39 1.65

9 Debtor turnover Ratio 5.13 (70 Days) 5.38 (67 Days)


[A] Gross Profit Ratio:

It is a ratio expressing relationship between Gross Profits earned to Net Sales. It is a

useful indication of the profitability of business. i.e., If Net sales are Rs.4, 00,000 and

Gross Profit is Rs. 1, 00,000 then the Gross Profit ratio is 25%.

GPR = GROSS PROFIT x 100

SALES

This ratio is usually expressed as a percentage. A ratio of 25% shows that for sales of

every Rs.100, a margin of 25 rupees is available from which operating expenses of

business are to be recovered. The ratio shows whether the mark-up obtained on cost

of production is sufficient. There is no standard showing reasonableness of gross profit

ratio. However, it must be enough to cover its operating expenses. In many industries,

there are more or less recognized gross profit ratios and the business should strive to

maintain this standard.

If this ratio is low, it is indicates that the cost of sales is high or that the purchasing is

inefficient. Alternatively, it may also mean that due to depression, the selling price is

reduced but there may be no corresponding reduction in cost of sales. In such a case,

the management must investigate the causes and try to bring up this ratio.

YEAR G.P / SALES *100 GPR

2010-11 3443.78 / 27623.89 *100 12.47%

2009-10 2206 / 21839.71 *100 10.10%


Interpretation:

The Gross Profit ratio reflects the efficiency with the firms produces or purchases the

goods. Given the constant level of selling price, cost price & raw material the gross

profit is generally increasing it means the selling price is high as compare to the cost

price. In year 2010-11 gross profit ratio is 12.47% which is nearly same as in previous

year, so this high ratio of gross profit to sales is a sign of good management as it

implies that the cost of production.

[B] Net Profit Ratio:

The ratio is valuable for the purpose of ascertaining the over-all profitability of business

and shows the efficiency or otherwise of operating the business. It is the reverse of the

operating ratio. It is calculated as follows.

NPR = NET PROFIT x 100

SLAES

Suppose the net profit of the business after taxes is Rs.80, 000 and sales are Rs. 5,

00,000 then the Net Profit Ratio will be:

Net Profit Ratio =80,000/500,000*100=16%


Generally, the ratio is computed on the basis of net profit earned from operation of

business and non-operating expenses and incomes are excluded. i.e. income from

investment of surplus funds of business is non-operating income and so it is to be

excluded. Loss on sale of asset (furniture) is non-trading loss and it is not taken into

account. Generally, tax is deducted from profit while calculating this ratio.

This ratio indicates what portion of sales revenue is left to the proprietors after all

operating expenses are met. The higher this ratio, the better will be the profitability. In

order to have a better idea of profitability, the gross profit ratio and net profit ratio may

be simultaneously considered. If the Gross Profit is increasing over last five years, but

the net profit is declining, it indicates that administrative expenses are slowly rising.

YEAR NET PROFIT / SALES *100 NPR

2010-11 756.35 / 27623.89 *100 2.74%

2009-10 85.25 / 21839.71 *100 0.39%

Interpretation:

This ratio shows that the valuable for the purpose of ascertaining the overall profitability

of the firm & business. But in the year 2010-11 the Net Profit is high as compare to

last year because variable & fixed expenses is less as compared of the other income.

In year net profit ratio is 2.74:1 which is high as compared to last year ratio which was

0.39. So this shows result that this year net profit margin got increased.


[C] Current Ratio:

This most widely used ratio shows the proportion of current assets to current liabilities.

It is also known as ‘Working Capital Ratio’ as it is a measure of working capital

available at a particular time. The ratio is obtained by dividing current assets by the

current liabilities. It is a measure of short-term financial strength of the business and

shows whether the business will be able to meet its current liabilities, as and when they

mature. A liability which will mature within a period of 12 months is a current liability. It

is generally belief that 2:1 ratio shows a comfortable working capital position.

CURRENT RATIO = CURRENT ASSET

CURRENT LIABILITY

Suppose, the current assets are worth Rs.2,00,000 and current liabilities are

Rs.1,00,000,then the current ratio will be as under:

Current Ratio = 2, 00,000 / 1, 00,000 = 2 or 2:1

It means that for every Rs.1 of current liability, there is available Rs. 2 in current assets

to meet the current liabilities.

Current Assets =Cash &Bank balance + Stock + Debtors + B/R + Prepaid

Expenses +Investments+ readily convertible into cash+ Loan & Advances.

Current assets are in the form of cash or can be readily converted into cash within a

short time.

Current Liabilities =Creditors + B/P + Bank O/D + Unclaimed dividend +

Outstanding expenses + Provision for taxation + Proposed dividend.

YEAR CA / CL C.R

2010-11 18961.17 / 13415.96 1.41

2009-10 20543.93 / 12923.82 1.59


Interpretation:

As in year 2010-11 Curent Ratio Is 1.41 wich Is considère satisfactory but as compare to

last year i.e., 2009-10 It has 1.59. So 2010-11 Curent ratio Is showing slight less ability to

met its Curent obligation as compare to last year. This ratio is increasing last year but it is

not ideal. But is able to meet its obligation on time.

[D] Quick Ratio or Acid-Test Ratio:

The measure of absolute liquidity may be obtained by comparing only cash and bank

Balance as well as readily marketable securities with liquid liabilities. This is a very

Exacting standard of liquidity and it is satisfactory if the ratio is 0.5: 1.It is computed By

dividing the value of quick assets by liquid liabilities. Quick assets do not include Both

stock and debtors, because payments from debtors would not generally be Received

Immediately when liquid liabilities are to be paid. Thus the quick assets Comprise only

Cash balance, bank balance & readily marketable securities only. Some Writers call this

ratio as Absolute Liquidity Ratio, (or Absolute Cash Ratio)

. CURRENT ASSETS – STOCK

QUICK RATIO = --------------------------------------------------------------------

CURRENT LIABILITIES

OR

ACID TEST RATIO = QUICK ASSETS

LIQUID LIABILITY


Suppose the company has cash on hand Rs.10,000,Bank balance Rs.45,000 and

readily marketable securities Rs.25,000.It means that its quick assets are worth

Rs.80,000.If the liquid liabilities are Rs.1,20,000 then the acid-test ratio will be:

Acid-test Ratio = 80,000/1, 20,000 =2/3 =0.67:1

It means that quick Assets are 2/3rd of Quick Liabilities.

YEAR CA – STOCK / CL Q. R

2010-11 18961.17 – 5105.80 / 13415.96 1.03

2009-10 20543.93 – 5310.86 / 12923.82 1.18

Interpretation: -

Quick ratio of year 2010-11 is 1.03:1, which is less than quick ratio of last year i.e., 1.18:1.

Which represent that company having less liquidity and can’t pay out their current liabilities

and also not paying debt. Quick Ratio of 1.03:1 is not considered to be a satisfactory ratio.

However, this traditional rule should not be used Bindley since the firm having quick ratio is

more than 1. So, It means to quick ratio is very near to the ideal one.


[E] Fixed Asset Turnover Ratio:

Fixed Assets turnover indicates the efficiency with which firm uses all its assets to

generate sales.

CURRENT ASSETS – STOCK

FIXED ASEET TURNOVER RATIO = --------------------------------------------------------------

CURRENT LIABILITIES

YEAR Sales / NFA FAR

2010-11 27623 / 6806 4.06

2009-10 21839 / 6793.22 3.21

Interpretation:

In Assets Turnover Ratio of 09-10 is 4.06 indicates that is producing of rupees of

sales for one rupee of capital employed in Net Assets & this ratio is generally increase

which a good sign for the company.


[F] Inventory (Stock) Turnover Ratio:

The number of times the average stock is turned over during the year is known as

Stock Turnover or Inventory Turnover. It is computed by dividing the cost of goods sold

by the average stock in the business. Average Stock is the average of opening and

closing stock of the year. If however, the monthly figures of the stocks are available, the

average monthly stock will give a better turnover ratio.

SALES

INVENTORY TURNOVER RATIO = --------------------------------------

INVENTORY

Suppose, Opening stock is Rs.70,000 and Closing Stock is Rs.80,000,Cost of Sales

Rs.3,00,000,Sales Rs.5,00,000 and Gross Profit Rs.2,00,000. Then this ratio will be

computed as under.

Therefore, Average Stock =70,000+80,000/2 = 1, 50,000/2 = 7500 and Cost of Goods Sold

=5, 00,000(Sales) – 2, 00,000(G.P) = 3, 00,000

Stock Turnover Ratio = 3, 00,000 / 75,000 = 4 times.

This ratio signifies that the average stock is turned over four times during the year. If

figures for cost of goods sold are not available, then the ratio may be calculated on the

basis of the sales. The ratio is very important in judging the ability of management with

which it can move the stock. The higher the turnover ratio, the more profitable the

business would be. The firm in such a case will be able to trade on a smaller margin of

gross profit. A low turnover indicates accumulation of slow-moving, absolute and

low-quality goods, which is a danger signal to the management. Turnover is computed

by dividing the cost of goods sold

by the average inventory. The cost of goods sold means sales minus gross profit. The

ratio indicates how fast inventory is sold.


YEAR SALES / INVENTORY ITR.

2010-11 27623.89 / 5105.80 5.41

2009-10 21839.71 / 5310 4.11

Interprétation :

In year 2010-11 the ratio is 5.41:1 which is more as compared to last year which is 4.11:1.

So it is considered that this time company has high inventories in store which signify that

inventory of this year sells slight frequently and efficiently as compared to last year.

[G] Debtor Turnover Ratio:

Debtor turnover ratio the analysais of This ratio suppléments the information Regarding

the liquidity of one item of Current assets of the firm. The ratios masures How rapidly

recevables are collected.

The ratio shows the number of days taken to collect the dues of credit sales. The firm

sells goods for cash & credit. Debtors are convertible into cash over long periods which

include current assets.


The debtors’ turnover suggests the number of times the amount of credit sale is

collected during the year, while debtors ratio indicates the number of days during which

the dues for credit sales are collected. Suppose the debtors ratio is 60 days, it means

that debtors pay their dues for credit sales after 60 days of making the sales. It means

that during the year the collection for credit sales is made 6 times during the year (360

days /60 days) = 6.

SALES

DEBTOR TURNOVER RATIO = --------------------------------------

DEBTOR

Where Average Debtors = Opening Debtors + Closing Debtors / 2.

YEAR SALES / CD * DAYS DTR

2010-11 29190.75 / 5688.45 * 360 70 Days

2009-10 21839.71 / 4057.31 * 360 67 Days


Interpretation:

In this ratio indicates the quality of debtors & the credit collection effort or the

experience. It indicates the speed which the debtors are converted into cash in a each

year. In the ratio is decrease so collection of money for debtors easily. In 2010-11

Debtor turnover ratio Is 70 Days per year which Is High as Compare to last year i.e., 67

Days per year. So Current year Debtor Turnover Is indicative of shorter time-lag

between credit sales and cash collection as compared to last year.


INCOME FROM HOUSE PROPERTY:

From this we can understand the income which falls under the head Income from

the house Property”. The scope of the income charged under this head is defined by the

section 22 of the Income tax Act and the computation of income falling under this head is

governed by section 23 to 27.

Three conditions are to be satisfied for the property income to be taxable under this

head.

• The property should consist of building or land appurtenant thereto.

• The assesses should be the owner of the company.

• The property should not be used by the owner for the purpose of any business or

profession carried on by him, the profits of which are chargeable to income tax.

PROPERTY INCOME EXEMPT FROM TAX:

Some income form house properties are exempt tax. They are neither taxable nor

included in the total income of the assesses for the rate purpose. These are:

• Income from a farm house [ section 2(1A ) (C) and section 10 (1) ]

• Annual value of the place in the occupation of an ex-ruler [ section 10 (19 A)

• Property income of the local authority. [ section 10 (20) ]

• Property income of an approved scientific research association [ section 10 (21) ]

• Property income of an education institution and hospital [ section 10 (23 C) ]

• Property income of registered trade union. [ section 10 (24) ]

• Income from property held for charitable purpose. [ section 11 ]

• Property income of political party. [ section 13 A ]

• Income from property used for own business profession. [section 22 ]

• Annual value of self occupied property.


1. Statement of Income from Let-out Property for any purpose.

Particular Rs.

Amount

(Rs.)

Step-1

Expected rent xxxx

Whichever is higher > Standard rent

(i) Municipal Value xxx

(ii) Fair rent xxx

Step-2

Actual rent received xxxx

Annual rent received xxx

Less: (i) Unrealized rent xxx

(ii) Vacancy loss xxx

Note: 1 If step-2 > step-1

Gross Annual value - Step-2

Note: 2 If step-2 < step-1

Step No 3 is applicable

Step-3

Expected rent xxx

Less: Vacancy loss xxx xxxx

Gross annual value xxxx

Less: Municipal tax paid by owner xxxx

Net Annual value xxxx

Less: Deduction under section 24

(i) Standard Deduction xxxx

( 30% of NAV )

(ii) Interest on Housing Loan [ No Limit ] xxxx

Income from Let-out Property xxxx

[ Answer nil, (-)ve, (+)ve. ]


2. Statement of Income from Self Occupied Property for Own Residence.

Particular

Amount

(Rs.)

Net Annual value Nil

Less: Deduction Under section 24

Less: Interest on Housing loan xxx

Income from Self Occupied Property xxx

[ Answer nil, or Negative ]

INTEREST ON HOUSING LOAN:

• If Loan is taken before 1-04-99, Maximum Deduction = 30000

• If Loan is taken on or after 1-0499

o If loan is taken for purchase, Maximum Deduction =150000

o If Loan is taken for Repair, Renewal or Reconstruction, Maximum

Deduction = 30000

o If Loan is taken for construction and construction is completed within 3 years

from the date of Borrowing, Maximum Deduction = 150000 but if construction

is not completed within 3 years, Maximum deduction is 30000.


3. Income from Deemed to be Let-out Property.

When assesses has more than one house for own Residence, one house is to be

considered as a Self Occupied and remaining house considered as deemed to be Let out

property.

Particular

Rs. Amount

(Rs.)

Expected rent xxxx

Whichever is Higher > Standard rent

(i) Municipal Value xxx

(ii) fair rent xxx

Gross Annual Value xxxx

Less: Municipal tax paid by Owner xxx

Net Annual Value xxxx


(i) standard Deduction Xxx

[ 30% of NAV ]

(ii) interest on Housing Loan Xxx

[ No Limit ]

Income from Deemed to be Let Out Property. xxxx


4. Statement of income from partly let-out and partly self occupied property.

( one house is self occupied for few month and let-out for remaining period )

Particular

Rs Amount

(Rs)

Step 1

Expected Rent xxxx

Whichever is Higher > Standard rent

(i) Municipal value xxx

(ii) fair rent xxx xxxx

Step-2

Actual rent Received xxxx

Rent receivable excluding SOP xxx

Less: (i) Unrealized rent xxx

(ii) Vacancy Loss xxx

Note: 1 If Step-2 > Step-1

Gross Annual value is Step-2

Note: 2 If step-2 < Step-1

Step No 3 is applicable.

Step-3

Expected rent xxx

Less: Vacancy Loss xxx xxx

Gross Annual Value xxxx

Less: Municipal Tax paid by Owner xxx

Net Annual Value xxxx


(i) Standard Deduction xxx

[ 30% of NAV ]

(ii) Interest on Housing Loan xxx

[ No Limit ]

Income from Partly LOP and Partly SOP xxxx


Interest on loan:

Interest for pre-Construction Period:

[A] Interest for Current year:

• If Loan is repaid in Last year Current year Interest is not applicable.

• If Loan is repaid in next year full current year interest is Applicable.

• If Loan is repaid in current previous year Interest for current year from 1-04-2008 to

date of repayment.

• If Loan is still outstanding full current year Interest is Applicable.

[B] Interest for Pre-Construction period:

When date of Borrowing, Amount of Borrowing, Rate of Interest and loan is taken for

construction of House.

• Date of Borrowing

• Date of Repayment

• Date of completion of construction

• 31-03 Prior

Pre-Construction period:

Date of Borrowing to Date of Repayment

Or

31-03 Prior

[Whichever is earlier]

Note: Deduction will be available in 5 year from the previous year in which Construction is

completed.


EXAMPLE:

During the financial year 2011-2012 Mrs. Dalmia received sum of Rs. 25000 per month by

letting out the Premises at 29, Charotar Society, Office: Old Padra road Baroda.

CALCULATION OF INCOME FROM HOUSE PROPERTY:

Particular Amount (Rs.)

Rent received @25000 p.m 300000

Less: House Tax 4808

Annual Value 295192

Less: Deduction under section 24 88558

Net Taxable Property 206634

EXAMPLE:

Vishnu has two houses both of which are Self occupied Property. The particulars of the

house for the P.Y 2010-11 are as under.

Particular House-I House-II

M.V Per Annum 400000 600000

F.R Per Annum 300000 700000

S.R Per Annum 360000 740000

Date of Completion 31-03-05 31-03-08

Municipal tax paid 10% 9%

Interest on borrowed money 175000 250000

Compute Vishnu’s income from House Property for A.Y 2011-12 and suggest which house

should be opted by Vishnu to be assessed as SOP so that his tax liability is minimum.


ANSWER:

Computation of Income from House Property of Vishnu for the A.Y 2011-12

Let us first calculate the income from each house property assuming that they are deemed

to be let out.

Particular House-I House-II

Step-1. M.V or F.R Whichever is Higher 400000 700000

Step-2. I or S.R Whichever is Lower 360000 700000

Step-3. II is GAV 360000 700000

Less: Municipal Tax Paid by Owner 40000 54000

Net Annual Value 320000 646000

Deduction:

30% of NAV 96000 193800

Int. on Borrowed Money 175000 250000

Income from House Property 49000 202200

Option-I (House-I is SOP and House-II is DLOP):

If House-I is opted as SOP, the income from House Property should be:

Particulars Amounts in Rs.

House-I SOP (Loss representing interest on

borrowed capital restricted to 150000)

(150000)

House-II DLOP 202200

Income from House Property 52200

Option-II (House-I is DLOP and House-II is SOP):

If House-II is opted as SOP, the income from House Property should be:

Particulars Amount in Rs.

House-I DLOP 49000

House-II SOP (Loss representing interest on

borrowed capital restricted to 150000)

(150000)

Income from House Property 101000


Since Option-II is more beneficial, Vishnu should opt to treat House-II as a SOP and

House-I is DLOP. His Loss for house property would be Rs. 101000 for the A.Y 2011-12.

This Loss can be carried to the next year for set off against income from house property

for that year.

EXAMPLE:

Rajesh own a house in Hyderabad during the P.Y 2010-11. 3/4th portion of the property is

SOP and 1/4th portion was LOP for residential purpose at a rent of Rs. 12000 p.m. the

tenant vacated the property on February 28th, 2011. The property was vacant during

March, 2011 could not be realized in spite of the owner effort. All the condition prescribed

under the rule 4 is satisfied.

Municipal value of the property is Rs. 400000 p.a. Fair rent is Rs. 440000 p.a. and

standard rent is Rs. 480000. He paid Municipal tax @ 10% of M.V. during the year. A loan

of Rs. 3000000 was taken by him during the year 2005 for acquiring the property. Interest

on loan paid during the previous year 2010-111 was Rs. 148000. Compute Rajesh’s

income from House property for the A.Y 2011-12.

ANSWER:

There are two units of the house. Unit-1 with 3/4th area is used by Rajesh for SOP

throughout the year and no benefit is derived from that unit. Hence it will be treated as

SOP and its value is nil. Unit-2 with 1/4th area is LOP during the previous year and its

annual value has to be determined as per section 23 (1).


Computation of Income from house property of Mr. Rajesh for the A.Y 2011-12

Particular Unit-1 (3/4th) SOP Amount in Rs.

Net annual Value NIL

Less: Deduction u/s 24

3/4th of 148000 111000

Income from Unit-1 (111000)

Particular Unit-II (1/4th) LOP Amount in Rs.

Step-1 M.V and F.R Whichever is higher 110000

Step-2 1 and S.R Whichever is Lower 110000

Step-3 Actual rent received

(12000 x 9)

108000

GAV: (Step-3 is lower than Step-2) 108000

Less: Municipal tax paid by owner

1/4th of (10% 400000)

10000

Net Annual Value 98000

Less: Deduction

30% of the NAV 29400

Interest on Loan 3700

Income from Unit-2 31600


WORKING CAPITAL:

INTRODUCTION:

The term working capital is commonly used for the capital required for day-to-day working

in a business concern, such as for purchasing raw material, for meeting day-to-day

expenditure on salaries, wages, rents rates, advertising etc. But there is much

disagreement among various financial authorities (Financiers, accountants, businessmen

and economists) as to the exact meaning of the term working capital.

DEFINITION AND CLASSIFICATION OF WORKING CAPITAL:

Working capital refers to the circulating capital required to meet the day to day operations

of a business firm. Working capital may be defined by various authors as follows:

• According to Weston & Brigham - “Working capital refers to a firm’s investment in

short term assets, such as cash amounts receivables, inventories etc.

• Working capital means current assets. —Mead, Baker and Malott

• “The sum of the current assets is the working capital of the business” —J.S.Mill

Working capital is defined as “the excess of current assets over current liabilities and

provisions”. But as per accounting terminology, it is difference between the inflow and

outflow of funds. In the Annual Survey of Industries (1961), working capital is defined to

include “Stocks of materials, fuels, semi-finished goods including work-in-progress and

finished goods and by-products; cash in hand and bank and the algebraic sum of sundry

creditors as represented by (a) outstanding factory payments e.g. rent, wages, interest and

dividend; b) purchase of goods and services; c) short-term loans and advances and

sundry debtors comprising amounts due to the factory on account of sale of goods and

services and advances towards tax payments”.


The term “working capital” is often referred to “circulating capital” which is frequently used

to denote those assets which are changed with relative speed from one form to another

i.e., starting from cash, changing to raw materials, converting into work-in-progress and

finished products, sale of finished products and ending with realization of cash from

debtors.

DETERMINANTS OF WORKING CAPITAL:

The factors influencing the working capital decisions of a firm may be classified as two

groups, such as internal factors and external factors.

The internal factors includes, nature of business size of business, firm’s product

policy, credit policy, dividend policy, and access to money and capital markets, growth and

expansion of business etc.

The external factors include business fluctuations, changes in the technology,

infrastructural facilities, import policy and the taxation policy etc. These factors are

discussed in brief in the following lines.

I. Internal Factors:

1. Nature and size of the business:

The working capital requirements of a firm are basically influenced by the nature and size

of the business. Size may be measured in terms of the scale of operations. A firm with

larger scale of operations will need more working capital than a small firm. Similarly, the

nature of the business - influence the working capital decisions. Trading and financial firms

have less investment in fixed assets. But require a large sum of money to be invested in

working capital. Retail stores, business units require larger amount of working capital,

whereas, public utilities need less working capital and more funds to invest in fixed assets.


2. Firm’s production policy:

The firm’s production policy (manufacturing cycle) is an important factor to decide the

working capital requirement of a firm. The production cycle starts with the purchase and

use of raw material and completes with the production of finished goods. On the other

hand production policy is uniform production policy or seasonal production policy etc., also

influences the working capital decisions. Larger the manufacturing cycle and uniform

production policy – larger will be the requirement of working capital. The working capital

requirement will be higher with varying production schedules in accordance with the

changing demand.

3. Firm’s credit policy:

The credit policy of a firm influences credit policy of working capital. A firm following liberal

credit policy to all customers requires funds. On the other hand, the firm adopting strict

credit policy and grant credit facilities to few potential customers will require less amount of

working capital.

4. Availability of credit:

The working capital requirements of a firm are also affected by credit terms granted by its

suppliers – i.e. creditors. A firm will need less working capital if liberal credit terms are

available to it. Similarly, the availability of credit from banks also influences the working

capital needs of the firm. A firm, which can get bank credit easily on favourable conditions,

will be operated with less working capital than a firm without such a facility.

5. Growth and expansion of business:

Working capital requirement of a business firm tend to increase in correspondence with

growth in sales volume and fixed assets. A growing firm may need funds to invest in fixed

assets in order to sustain its growing production and sales. This will, in turn, increase

investment in current assets to support increased scale of operations. Thus, a growing firm

needs additional funds continuously.


6. Profit margin and dividend policy:

The magnitude of working capital in a firm is dependent upon its profit margin and dividend

policy. A high net profit margin contributes towards the working capital pool. To the extent

the net profit has been earned in cash, it becomes a source of working capital. This

depends upon the dividend policy of the firm. Distribution of high proportion of profits in the

form of cash dividends results in a drain on cash resources and thus reduces company’s

working capital to that extent. The working capital position of the firm is strengthened if the

management follows conservative dividend policy and vice versa.

7. Operating efficiency of the firm:

Operating efficiency means the optimum utilization of a firm’s resources at minimum cost.

If a firm successfully controls operating cost, it will be able to improve net profit margin

which, will, in turn, release greater funds for working capital purposes.

8. Coordinating activities in firm:

The working capital requirements of a firm are depend upon the co-ordination between

production and distribution activities. The greater and effective the co-ordinations, the

pressure on the working capital will be minimized. In the absence of co-ordination, demand

for working capital is reduced.

II. External Factors:

1. Business fluctuations:

Most firms experience fluctuations in demand for their products and services. These

business variations affect the working capital requirements. When there is an upward

swing in the economy, sales will increase, correspondingly, the firm’s investment in

inventories and book debts will also increase. Under boom, additional investment in fixed

assets may be made by some firms to increase their productive capacity. This act of the

firm will require additional funds. On the other hand when, there is a decline in economy,

sales will come down and consequently the conditions, the firm try to reduce their short-

term borrowings. Similarly the seasonal fluctuations may also affect the requirement of

working capital of a firm.


2. Changes in the technology:

The technological changes and developments in the area of production can have

immediate effects on the need for working capital. If the firm wish to install a new machine

in the place of old system, the new system can utilize less expensive raw materials, the

inventory needs may be reduced there by working capital needs.

3. Import policy:

Import policy of the Government may also effect the levels of working capital of a firm

since they have to arrange funds for importing goods at specified times.

4. Infrastructural facilities:

The firms may require additional funds to maintain the levels of inventory and other current

assets, when there are good infrastructural facilities in the company like transportation and

communications

.

5. Taxation policy:

The tax policies of the Government will influence the working capital decisions. If the

Government follows regressive taxation policy, i.e. imposing heavy tax burdens on

business firms, they are left with very little profits for distribution and retention purpose.

Consequently the firm has to borrow additional funds to meet their increased working

capital needs. When there is a liberalized tax policy, the pressure on working capital

requirement is minimized.

Thus the working capital requirements of a firm are influenced by the internal and

external factors.


STATEMENT OF WORKING CAPITAL:

PARTICULAR

Rs Amt.

(In Lacs)

CURRENT ASSETS:

Stock of Raw Material:

(For month’s consumption)

Xxx

Stock of work-in-progress:


Xxx

Raw material xx

Wages xx

Overhead xx

Stock of Finished Goods:


Xxx

Raw material xx

Wages xx

Overhead xx

Debtors:

(For month’s sales)

Xxx

Raw material xx

Wages xx

Overhead xx

Prepaid Expenses Xxx

Cash Xxx

Other Current Assets Xxx

TOTAL CURRENT ASSETS XXX

LESS CURRENT LIABILITIES:

Creditors

(For the purchase of raw material)

xx

Outstanding expenses xx

Bills payable xx

Bank Overdraft xx

TOTAL CURRENT LIABILITIES XXX

NET WORKING CAPITAL XXX


STATEMENT SHOWING WORKING CAPITAL:

PARTICULAR 2010-11

(In Lacs)

2009-10

(In Lacs)

CURRENT ASSETS:

Inventories 5105.80 5310.86

Debtors 5688.44 4057.31

Cash and Bank 1787.79 4488.46

Loans and Advances 6379.12 6687.30

TOTAL CURRENT ASSETS 18961.15 20543.93

LESS CURRENT LIABILITIES:

Current Liabilities 2439.83 2064.64

TOTAL WORKING CAPITAL 16521.32 18479.29

NOTES:

INVENTORIES:

PARTICULAR 2010-11

(In Lacs)

2009-10

(In Lacs)

Raw Material 1588.25 1911.66

Work-In-Progress 2396.89 2152.02

Finished Goods 833.96 1120.80

Consumables Stores 286.70 126.39

TOTAL INVENTORY 5105.80 5310.86

2. CURRENT LIABILITIES:

PARTICULAR 2010-11

(In Lacs)

2009-10

(In Lacs)

Due to MSMED Units 0.89 1.89

Others 1584.74 1452.82

Subsidiary Companies NIL NIL

Advance from Customers 351.47 53.92

Others Liabilities 502.74 556.02

TOTAL CURRENT LIABILITIES 2439.83 2064.64


Comments on Working Capital:

Raw Material:

The basic raw material required by RL are zinc Dross, Zinc Hydroxide and cobalt ore.

The former is easily available in domestic as well as international market while the later is

being completely imported by the company. Presently, RL procures Zinc Dross from Saan

Scrap Trading Co. ltd., Indian Steel Corporation limited and Rahul Enterprise. As far as

Cobalt Ore is concerned the company procures it from the International market mainly

from its subsidiary rubamin FZC, UAE and Glencode Inds AG. The suppliers of the

company are reliable and the company is dealing them for the past 4 to 5 years.

During F.Y’10 the company maintained holding levels at 1.30 months for imported RM and

1.59 months for indigenously procured RM, which may be considered acceptable. During

F.Y’11, higher sales towards year end resulted into lower inventory levels.

For the year 2011- 12 with increased level of activity and for smooth functioning company

is estimating to maintain holding levels for imported raw material at 1.50 months and for

raw material procured indigenously at about 1.25.

Stock in Process:

The SIP level was at 1.00 months which is considered normal; the same is estimated /

projected to continue at 1.00 month. Considering the stage of manufacturing the average

SIP holding estimated at 1.00 month is considered reasonable and acceptable.

Finished Goods:

Finished goods level was at 0.34 month as on 31. 03. 2011 but for our assessment we has

considered at level of 0.50 month as company is about to open their depots warehouse at

chilli, Baltimore (USA) and Rotterdam. Thus the estimated levels are acceptable.


Receivables:

The receivables level has been assumed 2.00 months for export receivables and 2.75

months for domestic receivables. The company proposed to give 2.50 months time to

attract buyers for the same. Higher receivables level has become norm of the business,

which is intended by the unit to stay in competition. In view of these receivables holding

levels has been estimated at 2.00 months in lien with its business trends.

During the year 2011-12 the company has estimated export and domestic receivables at

2.00 months and 2.75 months level respectively which is acceptable in consideration with

past trends.

Sundry Creditors:

As per the past trends, the company gets 0.70 to 0.80 months time to make payment to its

suppliers. Earlier the company was producing RM through usance LC. However, since

2008-09 it has started procuring raw material through sight LCs. It may be mentioned that

approximately 50% of the total raw material requires is imported. Out of the imported RM

portion, 85-90% is proposed to be procured under sight LC. As far as the domestic RM

procurement is concerned the company either has to furnish advance payment or procure

it on cash basis. Hence, the average sundry creditors holding level has been estimated

projected at 0.75 month, which is considered reasonable.


SIGNIFICANCE OF ACCONTING POLICY:

Basis of Accounting:

The financial statement has been prepared under the historical cost convention on accrual

basis of accounting and in accordance with Generally Accepted Accounting Principal in

India (GAAP) and the provision of the Companies Act, 1956.

Revenue Recognition:

Revenue is recognized when it is earned and no significant uncertainty exists as to its

realization or collection.

Gross Sales are inclusive of income from Job work and excise duty, net of trade discount

and value added tax. Excise duty is presented as a reduction from Gross Sales in the

Profit & Loss Account.

Fixed Asset:

Fixed asset are stated at cost net of CENVET credit if any after reducing accumulated

depreciation until the date of the Balance Sheet. Direct cost are capitalized until the assets

are ready for use and include financing costs relating to any borrowing attributable to

acquisition. Capital work in progress include the cost of fixed asset that are not yet ready

for the intended use, advances paid to acquire fixed assets and the cost of assets not put

to use before the balance sheet date.

Inventories:

Inventories are valued at cost or net realizable value, whichever is lower. The basis of

determining cost for various categories of inventories is as follows:


1 Raw Material At cost on Moving Average Price basis

2 Other Raw Material, Fuel

and Packing Material

At cost on Moving Average Price basis

3 Material in transit Actual Cost

4 Work in Progress At cost on Moving Average Price basis, Cost

include material cost plus appropriate share

of labor and manufacturing overheads

5 Finished Goods At cost on Moving Average Price basis, Cost

include material cost plus appropriate share

of labor and manufacturing overheads and

excise duty

6 Consumables, Store and

spares

At cost on Moving Average Price basis

Investments:

Investments are classified as long term or current in accordance with Accounting Standard

13 on Accounting for Investments. Long term Investments are shown at cost. However,

when there is decline other than temporary in the value of a long term investments the

carrying amounts is reduced to recognize the decline.

Borrowing Cost:

Borrowing cost that is the acquisition, construction or production of qualifying assets is

capitalized as part of such assets. A qualifying asset is an asset that necessarily takes a

substantial period of time to get ready for its intended use.

Foreign Exchange Transaction:

Transaction in foreign currencies is accounted at the prevailing rate of exchange on the

date of the transaction.

Monetary items denomination in foreign currencies is restated at the prevailing rate of

exchange at the balance sheet date. All gain and Loss arising out of fluctuation in

exchange rates are accounted for in the Profit and Loss Accounts.


Employee Benefit:

Short term employee benefit (which are payable within twelve month) are measured at

cost.

Long term employee benefit (After the end of Twelve month) and post employment benefit

(payable after the completion of the employment) are measured on a discounted basis by

the Projected Unit Credit Method on the basis of annual third party actuarial valuation.

Contribution to the Provident Fund are made in accordance with the rule of the

government Provident fund as required by statutes

Taxes on Income:

Income taxes are accounted for in accordance with Accounting Standard AS-22 on

Accounting for taxes on income. Income taxes comprise both current and deferred tax

.

Current taxes is measured at the amount expected to be paid to/recovered from the

revenue authorities, using applicable tax rates and laws.

The carrying amount of deferred tax assets at each balance sheet date is reduced to the

extent that it is no longer reasonably certain that sufficient future taxable income will be

available against which the deferred tax assets can be realized.

Provision and contingent Liabilities:

The company recognizes a provision when there is a present obligation as a result of a

past event that probably requires an outflow of resources and a reliable estimate can be

made of the amount of the obligation. A disclosure for a contingent liability is made when

there is a possible obligation or a present obligation that may but probably will not require

an outflow of resources. Where there is possible obligation or a present obligation that the

likelihood of outflow of resources is remote, no provision or disclosure is made.

Government Grant:

Central and State Subsidy and Laboratory Subsidy received for setting up unit in the

specified backward area is credited to Capital Reserve Account.


Prior Period Adjustments:

All identifiable items of income and expenditure pertaining to prior period are accounted

through “Prior Period Adjustments Account”.

Impairment of Assets:

The company assesses at each Balance Sheet date whether there is any indication that

an assets may be impaired. If any such indication exists, the company estimates the

recoverable amount of the assets. If such recoverable amount of the assets or the

recoverable amount of cash generating unit to which the asset belongs is less than its

carrying amount, the carrying amount is reduced to its recoverable amount. The reduction

is treated as an impairment loss and is recognized in the Profit and Loss Account. If at the

Balance Sheet date, there is an indication that if a previously assessed impairment loss no

longer exists, the recoverable amounts are reassessed and the assets is reflected at the

recoverable amount.



RECOMMENDATIONS / SUGGETIONS:

The Major expenses of the company were manufacturing experiences which includes Consumption of raw material, freight and duties and repairs and Maintenance. Out of this costs Repair and Maintenance is one of the controllable cost which can be reduced by the company. By proper utilization of its Plant and Machineries it can not only reduce its cost but also avoid shutdowns.

Many types of machinery were put down as an idle. They can be utilized by giving it to other companies on rent or other consideration. By this way company can earn some more amount of profit.

• Should try to reduce raw materials and finished goods period by reducing inventory level. Should try having to collect debtors quickly.

• Control the inventory level. It should increase CA and decreases the level of CL, because the quick ratio taking too much time. Organization should examine the quick ratio because it is more than 1:1.

• Should concentrate more on inventory or we can say that stock, because in the CA, inventory's demand has higher position.



CONCLUSION:

� It was great experience for me to have training at the company like RUBAMIN

LIMITED. I learned those skills, which are needed in any management student.

� Management of RUBAMIN LIMITED is good and having capable employees to make it

number one Cobalt and Zinc oxide manufacturing company in India.

� All the departments are doing their work in a professional manner and all the

employees are of cooperative in nature. I have not faced any difficulties in getting any

data. They are always ready to help you.

� At this stage, now I am having clear picture of what are the activities of the different

departments.

� During my training period I have visited the Different Departments of the Company but

the Survey Completed on Finance Department.

� Lastly, it was the great experience for me. I learned many things during this training

period, which I might not learn if I was not at RUBAMIN LIMITED.



WEBSITE:

www.rubamin.com

OTHER SOURCES:

• Company Broacher

• Annual Reports

• Past Reports




Documents

BRS Final Copy