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CONTENTS
CHAPTER I INTRODUCTION
CHAPTER II INDUSTRY PROFILE
CHAPTER III COMPANY PROFILE
CHAPTER IV THEORATICAL FRAME WORK
CHAPTER V ANALYSIS AND INTERPRETATION
CHAPTER VI SUMMARY
SUGGESTIONS
FINDINGS & CONCLUSIONS
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CHAPTER-I
Introduction
Purpose of the study
Objectives of the study
Scope of the study
Research methodology
Limitations of the study
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INTRODUCTION
Steel comprises one of the most important inputs in all sectors of the
economy. Economy of any country depends on the strong base of the
iron and steel industry. Steel is a versatile material with multitude of
useful properties making it indispensable for furthering and achieving
continuing growth of the economy-be it construction, manufacturing,
infrastructure or consumable. The level of steel consumption has long
been regarded as an index of industrialization and economic maturity
attained by country.
Keeping in view the importance of steel, the integrated steel plants with
foreign collaborations were set up in the public sector in the post
independence era.
The growth of any organization depends on the overall performance
such as production, marketing, human resource and financial
performance of the organization. The financial performance of anyorganization reflects the strengths, weakness, opportunities and threats
of the organization with respect to profits Earned, investments, sales
realization, turnover, return on investment, and net worth of capital
efficient management of financial resources and deliberate analysis
financial results are prerequisites for success of an enterprise.
In that, financial performance is one of the major and important areas offinancial management. Every organization requires study on financial
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performance about business transactions, which includes managing
current assets like cash, inventory, account receivable, loans& advances
and current liabilities like sundry creditors.
INTRODUCTION TO FINANCIAL ANALYSIS
Financial analysis is the process of identifying the financial
strength and weakness of the firm by properly establishing between the
items of the balance sheet and profit and loss account. There are
various methods or techniques used in the analysis of financialstatements such as comparative statements, trend analysis, common
size statements, schedule of changes in working capital, funds flow and
cash flow analysis, Cost Volume Profit Analysis and Ratio Anlaysis.
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NEED FOR THE STUDY
The main aim of any firm is to maximize the wealth of the profits.
Which in turn depend on successful sales activity? To generate sales,
investiment of sufficient funds in current assets is required. The need
Of current assets should be emphasized, as the sales dont cash
immediately but involved a cycle of operations, namely operating cycle.
Rashtriya Ispat Nigam limited is a multi-product steel-manufacturing
unit with varying cycle time for each product. The capital required by
each department in a large organization like RINL depends on the
product target for that year.
The study on financial performance position of which using financial
statement. It is very much essential to know the RASHTRIYA ISPAT
NIGAM LIMITED financial performance for overcome the problem of the
company. This comparative statement analysis will help us to know the
exact financial position of the VSP through the financial performance.
This company is selected as it helps us to known even the exact position
our country as steel industry is backbone of every country.
Here in this project an attempt is made by financial statements for
knowing the financial performance of the company.
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OBJECTIVES OF THE STUDY
The study is purely based on the financial performance that is been
taken into consideration i.e, Finanacial Statements and Analysis.
Expand plant capacity to 6.3 Mt. by 2011-12 with the mission to
expand further in subsequent phases as per the corporate plan.
Revamp existing Blast Furnaces to make them energy efficient to
contemporary levels and in the process increase their capacity by
1.0 Mt, thus total hot metal capacity to 7.5 Mt.
Be amongst top five lowest cost steel producers in the world.
Achieve higher levels of customer satisfaction.
Vibrant work culture in the organization.
Be proactive in conserving environment, maintaining high levels of
safety and addressing social concerns.
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SCOPE OF THE STUDY
Financial analysis depends primarily on financial statements to diagnose
financial performance there are three principle reasons.
As longer as the accounts bases remain more or less the
some overtime, meaningful mitered is can be drawn by examining
trends in raw data and financial ratios.
Since similar basis characterize various firms in the same industries,
incur firm comparisons are useful.Experience seems to suggest the financial analysis works one is
accounting basis and more adjustments for the same.
The following points explain the nature of the financial statement
analysis in steel industries. The records are maintained on the boards of
actual costs data.
Certain neither accounts nor conversions are followed while
preprimary financial statement.
Still personal judgment of the accountant phrases on important
part.
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RESEARCH METHODOLOGY
Methodology is a systematic procedure of collecting
information in order to analyze and verify a phenomenon. The data can
be collected through two principle sources.
They are as follows:-
Primary data
Secondary data
Primary data
It is the information collected directly without any
references. In this study it is gathered through interviews concerned
officers and staff either individually or collectively, sums of the
information has been verified or supplemented with personal
observation conducting personal interviews with the concerned officers
of finance department of Visakhapatnam steel plant.
Secondary data
The secondary data was collected from already published
sources such as, pamphlets of annual reports, returns and internal
records. The data collection includes:-
Collection of required data from annual records of RINL.
Reference from textbooks and journals relating to financial
performance and management.
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LIMITATIONS OF THE STUDY
The period of study that is 8 weeks as not enough to go in the
detailed aspects of the study.
The study is carried basing on the information and documents
provided by the organization and based on the Interaction with
various employees of respective departments.
Respondents may not provide accurate information due to various
reasons.
Most of the matters related to budgets were confidential so it is
not possible to gather information.
Time is a major constraint.
Budgeting process is very dynamic.
There was no scope of gathering current information as the
auditing has not been done at the time of project work
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CHAPTER - II
INTRODUCTION TO STEEL INDUSTRY IN INDIA
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STEEL INDUSTRY
Steel industry is the back bone of all industrial commercial
activities. Realizing these countries planners have been formulating and
updating annual plans for production of iron and steel. In this context a
number of steel plants were setup. The steel industry plays a vital role in
the growth of nation's economy.
Steel is such a versatile commodity that every object we see in
our day to day life has used steel either directly or indirectly in its
product To mention a few it is used for such small items as nails, pins,
needles etc., agriculture implements boilers, ship fabrication, railwaymaterials, automobile parts, etc. to have machine structure.
The great investment that has gone into the fundamental
research in iron and steel technology has helped both directly and
indirectly in many modem fields of today's science and technology. It
would have been very painful to imagine the fate of today's civilization if
steel has not been there. Steel is versatile and indispensable item. Theversatility steel has not been there. Steel is versatile and indispensable
item. The versatility steel can be traced mainly of three reasons.
It is only metallic item, which can be continently and
economically produced, in large quantities.
It has got very good strength coupled with density and
malleability.
Its properties can be changed over a wide range. It alloys
easily with many of the common element.
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INDIA'S STEEL SCENARIO
Indian steel industry has always remained isolated and protected
by government, where the steel industry was never expected to
generate profit from business, but was expected to provide employment
to the unemployed. Presently India is operating with open-hearth
furnaces. The existing equipment, energy and labor in Indian steel
industry are much low than developed countries.
Indian steel industry generates a significant amount of waste
materials, which can cause environmental problems. The four aspects of
"Waste Management"
namely- residue reprocess, recycle and recovery do not hold much
ground in the Indian steel industry. The Indian companies cannot spend
more for pollution control. The energy consumption per tone is 50-100%
higher than that of the international norms.
The Indian steel industries have developed a bit in the recent
years. The production is growing on properly. Many techniques are being
implemented in the steel industries. The country's aim is to sell quality
steel. The government is also helping the steel industries in this basis.
The apparent consumption of steel is shown below.
The development of steel industry in India should be viewed in
conjunction with the type and system of government that had been
ruling the country. The production of steel in significant quality started
after 1990. The growth of steel industry can be conveniently started by
dividing the period into pre and post independent era. In the period of
pre independence steel production was 1.5 million tones per year, which
was raised to 9.0 million tones of target by the seventies. This is the
present of the bold steps taken by the government to develop this
sector.
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WORLD'S DEMAND FOR STEEL
The total demand for steel in world is expected to grow at an annual
rate of 1.7% between 1935 and 2000 A.D. as per the study concerned by
china economists. According to their estimation total demand in advanced
industrial countries on a whole is expected to grow at 0.6% annual rate
following a 2.2% rate between 1974 to 1984. steel demand is less
developed countries on a whole is expected to grow at a 5.5% annual rate
up to 2000 following a 3.1 annual growth rate between 184-1994. Within
the controlling plant economy the Eastern Europe erstwhile USSR region
may have 0.3% annual steel demand growth. Steel demand in china. North
Korea region would grow at 4.0 annual rates up to the end of this century at
a 7.5% per annual growth during 1974-1980.
HIGHLIGHTS OF PRESENT STEEL SCENARIO
The world steel shows a low growth demand.
There is a threat to steel industry from competitive products like
plastics, aluminum, etc.
Developed countries slowly reduced the production of steel.
Developing countries like China are planning to produce steel as
much large quantity then of present output of 80 Mt. per annum.
India consciously and strategically decides to invest into steelproduction.
Preference is given to superior quality products and high value
item production.
Customer oriented approach in view of product oriented approach.
Emergence of new technology like scraps preheating.
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PRE-INDEPENDENCE
1874- James Erskin founded the Bengal iron works
1830 - Josiah, Marshall Health constructed the first manufacturing plant atplant at port Move in Madras presidency.
1899- Jamshedji Tata initiated the scheme for an integrsted steel plant.
1906- Formation of TISCO
1911- Tata iron& STEEL COMPANY STARTED PRODUCTION.
1916- TISCO was founded.
1940-45- Formation of Mysore iron & steel limited, and Bhadravati inKarnataka.
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POST-INDEPENDENCE
First five year plan: 1951-1956
No new steel plant came up. The Hindustan Steel Ltd., was born on19th January 1954 with the decision of setting up three plantseach with one million tone input steel per year in at Rourkela, Bhilaiand Durgapur, TISCO started its expansion programming.
Second five year plan: 1956-1961
A bold decision was taken up to increase the ingot steel output India
to 6 million tones per year & production at Rourkela, Bhilai andDurgapur steel plant started.
Third five year plan: 1961-1966
During the third five year plan the three steel plants under HSL,TISCO & HSCO were expand as show , in January 1964 Bokaro steelplant came into existence.
Recession period: 1966-1969
The entire expansion programme was actively executed during thisperiod.
Fourth five year plan: 1969-1974
Licenses were given for setting up of many Mini-steel plants
and rolling mills. Governments of India accepted setting up two more plants in
south. One at Visakhapatnam(Andhra Pradesh)and Hospet(Karntaka).
SAIL was formed during this period on 24th January 1973. Thetotal installed capacity from 6 integrated plants was 106Mt.
Annual plan: 1979
The erstwhile Soviet Union agreed to help in setting up theVisakhapatnam steel plant.
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Sixth five year plan: 1980-1985
Work on Visakhapatnam steel plant was started with big bang andtop priority was accorded to start the plant.
Scheme for modernization of Bhilai Steel Plant, Rourkela,Durgapur, TISCO were initiated.
Seventh five year plan: 1985-1991
Expansion work of Bhilai and Bokaro steel plants are completed.
Progress on Visakhapatnam steel plant picked up and rationalizedconcept has been introduced to commission the plant with 3.0Mt,liquid steel capacity by 1990.
Eighthfive year plan: 1991-1996
Visakhapatnam steel plant started its production modernization ofother steel plants is also duly envisaged.
Ninth five year plan: 1997-2002
Visakhapatnam steel plant had foreseen a 7% growth during theentire plan period.
Tenth five year plan: 2002-2007
Steel industry registers the growth of 9.9% Visakhapatnam steelplant high regime targets achieved the best of them.
Eleventh five year plan: 2007-2012
The eleventh plan period is going to be crucial for maintaining andalso improving the performance of the steel industry. India has thepotential to emerge as global player in steel making if its inherentadvantages of availability of quality iron ore, cheap labor, technicalmanpower and growing domestic demand are properly leverage.
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STEEL PLANTS WITH FOREIGN COLLOBORATION
S.No Plant Collaboration Capacity of
Finished Steel Products
1 Rourkela Steel Plant West Germany
2 Bhilai Steel Plant Erstwhile USSR
3 Durgapur Steel Plant Britain
4 Bokaro Steel Plant Erstwhile USSR
S.NO Plant Collaboration Capacity of Annual
Finished Steel Products Production
1 Rourkela Steel Plant West Germany 7,20,000 Tones
2 Bhilai Steel Plant Erstwhile USSR 7,70,000 Tones
3Durgapur SteelPlant
Britain 8,00,000 Tones
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Major Steel Related Companies in India
Bharat Refectories Ltd.
Hindustan steel works construction Ltd.
Jindal Steel & Power Ltd.
Kudremukh Iron Ore Company Ltd
Manganese Ore (India) Ltd.
Metal Scrap Trade Corporation Ltd.
Metallurgical Engineering Consultants India Ltd.
National MInerl Development Corporation (NMDC)
Rashtriya Ispat Nigam Ltd.
Sponge Iron India Ltd.
Steel Authority India Ltd.
Tata Iron Steel Company.
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Steel Sectors Trends
India emerged as the fifth largest crude steel producing country in the World in the year
2006 as against eighth position three years back. India is expected to become the second
largest producer of steel in the World by the year 2015.
India also maintained its lead position as the worlds largest producer of direct reduced
iron or sponge iron.
The country is likely to reach a steel production capacity of nearly 124 million tonnes
by the year 2100-2012.
194memoranda of understanding (MoUs) have been signed in various states with a total
planned capacity of around 243 million tonnes, and a total proposed investment of over
Rs. 5.15 lakh cr. Major investments plans are in state of Orissa, Jharkhand, Karnataka,
Chhattisgarh and west Bengal.
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PROBLEMS OF STEEL PLANT INDUSTRY
LACK OF RAWMATERIALS
Non-availability of good quality raw material is another problem faced
by iron and steel industry. The modem giant blast furnace needs high-grade
iron ore and good metallurgical coal.
Further the industry is unable to get good quality coke and
manganese is which the principal raw materials next to iron ore are
unfortunately most of our resources of manganese ore are of poor quality
besides the non availability of good quality raw material, regular supplies of
raw materials are very much handicapped due to the absence of good
transport facilities. Another problem faced by the steel industry related to
the difficulty in getting zinc supplies for the continuous galvanizing line.
LACK OF TECHNICAL PROBLEMS
Bhilai had to execute orders for shipment of rails to Iran. South Korea
and Malaysia.
Because of technical limitations, Rourkela plant is unable to
substitute aluminum of zinc for the production of galvanized sheet apart
from source internal technical problems; our technology in the field of steel
production is not a developed one when compared to other advanced
countries.
GOVERNMENT CONTROL AND PRICING POLICY
Since 1941, India steel and iron industry was almost completely state
regulated. Both prices and distribution of steel were under control of
government. The Govt. decided to remove statutory control over the price
and distribution of all, but a few categories with effect from 1 st march 26,
1964 the Govt. supervise the steel and iron inducted according to the
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recommendation of Raja committee. But Raj committee in fixing the steel
price didn't regulate the price of raw materials.
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CHAPTER III
PROFILE OF VISAKHAPATNAM STEEL PLANT
To meet the growing domestic needs of steel, Government of India
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decided to set up an Integrated Steel Plant at Visakhapatnam. An
agreement was signed with erstwhile USSR in 1979 for co-operation in
setting up 3.4 MT Integrated Steel Plant at Visakhapatnam. The foundation
stone for the plant was laid bv the then Prime Minister on 20th Jan, 1971.
The project was estimated to cost Rs.3897.38 Crores based on prices
as on 4th Quarter of 1981. However, on completion of construction and
commissioning of the whole plant in 1992, the cost escalated to around
8500 Crores. Unlike other Integrated Steel Plants in India, Visakhapatnam
Steel Plant is one of the most modem steel plants in the country. The plant
was dedicated to the nation on 1st August, 1992 by the then Prime Minister,
Shri P. V. Narasimha Rao.
New technology, large-scale computerization and automation etc.,
are incorporated in the Plant. To operate the plant at international levels
and attain such labour productivity, the organizational manpower has been
rationalized. The Plant has a capacity of producing 3.0 MT of liquid steel and
2.656 MT of saleable steel.
BACK GROUND
Visakhapatnam steel plant
To meet the growing domestic needs of steel, government of India
decided to set up an integrated steel plant at Visakhapatnam. An
agreement was signed with erstwhile USSR in 1979 for co-operation insetting up 3.4 Mt integrated steel plant at Visakhapatnam. The foundation
stone for the plant was laid by the then prime minister on 20th Jan '71.
The project was estimated to cost Rs. 3897.28 Crs based on prices as
on 4th quarter of 1981. However, on completion of construction and
commissioning of the whole plant in 1992, the cost escalated to around
8500 Cr. Unlike other integrated steel plants in India, Visakhapatnam Steel
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Plant is one of the most modem steel plants in the country. The plant was
dedicated to the nation on 1st August 1992 by the Prime Minister,
Sri, P.V.Narasimha Rao.
New technology, large scale computerization and automation etc.,
are incorporated in the plant. To operate the plant at international levels
and attain such labor productivity, the organizational man power has been
rationalized. The plant has a capacity of producing 3.0 Mt of liquid steel and
2.656 Mt of saleable steel.VSP is on the growth path and almost doubling
its capacity to 6.3 MT liquid steel and new units are set to come on strem
progressive from 2011-2012.
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VISION
To be a continuously growing world-class company.We shall:
Harness our growth potential and sustain profitable growth.
Deliver high quality and cost competitive products and be the firstchoice of customers.
To create an inspiring work environment to unleash the creativeenergy of people.
Achieve excellence in enterprise management.
Be a respected corporate citizen, ensure clean and greenenvironment and develop vibrant communities around.
MISSION
To attain 16 million tones liquid steel capacity through technological
up gradation, operational efficiency and expansion; augmentation of
assured supply of raw materials to produce steel at international standards
of cost of quality; and to meet the aspirations of the stakeholders.
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OBJECTIVES OF VSP
Expand plant capacity to 6.3 Mt by 2011-12 with the mission to
expand further in subsequent phases as per the corporate plan.
Towards growth-expand the plant capacity to 7Mt by 2011-12 and
10Mt By 2019-20.
Be amongst top five lowest cost steel producers in the world.
Achieve higher levels of customer satisfaction than competitors.
Towards employees-make RINL the employer of choice. Upgrade
the skills and efficiency of employees through training and
development and maintain high levels of motivation and
satisfaction.
Be recognized as an excellent business organization by 2011-12.
Instill right attitude amongst employees and facilitate them to
excel in their professional, personal and social life.
Be proactive in conserving environment, maintaining high levels of
safety and addressing social concerns. Towards technology up-gradation and productivity-continuously
upgrade tec1mology and practice benchmarking to achieve
international efficiency levels. Adopt latest developments in
information and communication technology.
Towards knowledge management-become a knowledge based and
a knowledge sharing company.
Towards safety, environment and society-continue efforts towardssafety of employees, conversation of environment and be a good
corporate citizen.
CORE VALUES
Commitment
Customer Satisfaction
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Continuous Improvement
Concern for Environment
Creativity and innovation
VSP Technology:State-of-the-Art
7meter tall coke oven batteries with coke dry quenching.
Biggest Blast Furnaces in the country.
Bell-less top charging system in Blast Furnace.
100% slag granulation at the BF cast house
Suppressed combustion - LD gas recovery system.
100% continuous casting of liquid steel.
Tempore" and "Stelmor" cooling process in LMMM & WRM.
Extensive waste heat recovery systems.
Comprehensive pollution control measures.
MAJOR SOURCES OF RAW MATERIAL
Iron Ore Lumps & Fines Bailadilla, M P
B F Lime Stone Jaggayyapeta, A P
SMS Lime Stone UAE
B F Dolomite Madharam, A P
SMS Dolomite Madharam, A P
Manganese Ore Chipurupalli, A P
Boiler Coal Talcher, Orissa
Coking Coal Australia
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Medium Coking Coal(MCC) Gidi/Swang/Rajarappa/Kargali
MAJOR UNITS AT VSP
DEPARTMENTS ANNUAL UNITS (3.0 MT STAGE)
Cap. ('OOOT)
Coke Ovens 2,261 4 Batteries each of 67 ovens & 7 MtsHeight
Sinter Plant 5,2562 Sinter machines of 312 Sq.Mtr.
grate area each
Blast Furance 3,400 2 Furnaces of 3200 cu m volume each
Steel Melt Shop 3,000 3 LD Converters each of 133 Cum.
Volume and six 4 strand bloom casters
LMMM 710 4 Strand Finishing Mill
WRM 850 2 x 10 Strand Finishing MillMMSM 850 6 Strand Finishing Mill
MAIN PRODUCTS OF VSP
Steel Products By Products
Angles Nut Coke
Billets Coke dust
Channels Coal Tar
Beams Anthracene Oil
Squares HP Naphthalene
Flats
Benzene
RoundsToluene
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Re Bars Zylene
Wire rods Wash oil
POLICIES & RULES OF RINL/VSP
VSP takes all necessary actions for the fulfillment of regulatory
requirements. In this regard VSP follows the following policies.
1. Quality Policy
Continuously improve the quality of all materials processes and
product services for customers.
2. Energy Policy
We, at Visakhapatnam Steel Plant, are committed to optimally
utilize various forms of energy in a cost-effective manner to effect
conservation of energy resources.
By adopting appropriate energy conservation technologies VSP.
Controls the consumption of various forms of energy.
Monitor closely and control consumption of various forms of energy
through an effective Energy Management System. Maximize the use of cheaper and easily available forms of energy.
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3. Environment Policy
Maintain high level of environmental consciousness amongst employees
and prevention of pollution by minimizing the emissions and discharge.
VSP will endeavor to adopt a customer-focused approach at all times
with transparency.
VSP will strive to meet more than the customer needs and
expectations pertaining to products, quality and value for money and
satisfaction.
VSP greatly values its relationship with customers and would make
efforts at strengthening these relations for mutual benefit.
4. OHAS Policy
VSP committed to occupational health and safety of employees and
contract workers.
5. HR Policy
VSP believe that their employees are the most important
resources, so it provides good working environment that makes the
employees committed and motivated for maximizing productivity.
Provide work environment that makes the employees committed and
motivated for maximizing productivity.
Establish systems for maintaining transparency, fairness and equality
in dealing with employees.
Empower employees for enhancing commitment, responsibility and
accountability.
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Encourage growth and opportunities for developing skill and
knowledge.
Ensure functioning of efficient communication channels with
employees.
A LAND MARK YEAR OF GROWTH:
The year 2010-2011 saw the company registering then best
ever sales turnover of Rs.11,517 cores a 3.6% growth over previous year.
The company stated a record net profit of Rs.658 crores and this is the third
consecutive year that the company has been earning net profit with this the
accumulated losses have bought down with this accumulated losses have
set up to out the Rs.906 crores and your company is all shortly also your
'MINI RATNA' by the government of India. It works under the following
slogan:
Let Excellence not only be our goal.
Let us make it our standard
ORGANISATIONAL STRUCTURE OF VISAKHAPATNAM STEEL PLANT
VISAKHAPATNAM STEEL PLANT has a well designed organizational
structure. It has centralized management structure. There is Chairman cum
Managing Director (CMD) as head, the main decisions are taken by him, in
accordance with steel industry (SAIL). These are 9 levels in organization
from E-O to E-9.
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LEVELS NAME
E-9 General Manager
E-8 Joint General Manager
E-7 Dy. Additional Chief Manager
E-6 Additional Chief Manager
E-5 Dy. Chief Manager
E-4 Manager
E-3 Deputy Manager
E-2 Assistant Manager
E-l Junior Manager
E-0 Assistant Executive
VISAKHAPATNAM STEEL PLANT has tall/vertical organization structure,
where the power & authority flows from top to bottom. It has four main
departments, they are - Finance Dept., Marketing Dept., Human Resource
dept, and Production Department.
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MAN POWER AT A GLANCE AS ON 31-03-2011
Works Projects Mines Others Total
Executives 3262 344 109 1492 5207Non 11358 51 257 956 12622
Executives
------------------Total Employees 17,829
----------------
MARKETING NETWORK OF VISAKHAPATNAM STEEL PLANT
VSP has a wide network of regional Officers and Branch Officers spread the
country for marketing of its products. There are 5 Regional Officers and 23
branch Officers. Stock Yards are attached to each of the Branches. These are
catering to the needs and expectations of the customers in various segments.
Region Location of regional Office
East Kolkata Bhubaneswar, Kolkata, PatnaNorth Delhi Agra, Chandigarh, Dehradun, Jaipur,
Kanpur, Ludhiana
West Mumbai Ahmedabad, Indore, Mumbai, Nagpur,
Pune
South Chennai Bangalore, Chennai, Kochi,
Coimbatore
Andhra Visakhapatnam Hyderabad,Visakhapatnam
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POLLUTION CONTROL AND ENVIRONMENTAL PROTECTION
Elaborate measures have been adapted to combat air and water
pollution in Visakhapatnam steel plant. In order to be eco friendly
Visakhapatnam steel plant has planted more than 3.4 million trees in area
of 35 square kilometers and incorporated various technologies at a cost of
Rs.460 crores and control measures.
ACHIEVEMENTS AND AWARDS OF VSP
The efforts of VSP have been recognized in various forms. Some of
the major awards received by VSP are in the area of energy conservation,
environment protection, safety, Quality, Quality circles, Rajbhasha, MOD,
sports related awards and a number of awards at the individual level.
Some of the important awards received by VSP are indicated below:
Best Labor Management Award from Government of AP.
SCOPE Award for best turnaround for 2001.
Environment Excellence Award from Greentech Foundation for energyconservation in 2002.
Best enterprise award from SCOPE, WIPS for 2001-02, besides.
Best enterprise award from SCOPE, surpassing MOU targets for 2003-
2004
National award for excellence in water management by CII in
2005,2004
Organizational Excellence award for efficient suggestion scheme
operation given by INSSAN in 2006.
Best Company to work award for inspiring trust among people,
instilling pride in them, creating an environment with in the work
place etc in 2009.
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A number of awards at local regional and national level competitionsin the area of quality circles and suggestion schemes etc.
Total quality, latest technology, sophisticated equipment, up to dateknowledge, high skills, cost consciousness, production with less costand customer satisfaction have become the hallmark of VSP.
FINANCING AND ACCOUNTING WING
In RINL main function of the finance and Accounts Department
is to look after the treasury management and to render service in financial
aspects for effectively conducting the business of the company. The finance
Department has many sub sections. It has about 275 employees consisting
of about 260 executives and 15 non executives. The entire department is
headed by the general manager. Finance and Accounting Department of
RINL is divided into several sections for administrative control and
assignment of responsibilities and fixing of accountability etc. To name a
few are:
The following are the sections of finance and Account department in
RINL.
1. Raw material Accounts
2. Stores Accounting
3. Sales Accounts
4. Pay and PF Accounts
5. Works accounts section
6. Operational Bills Accounts
7. General Accounts Section
8. Cash Section
9. Loans and Advances
10. Corporate Accounts
11. Internal Audit Section
12. Budget Section
13. Costing Section
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14. Project Accounts
15. Concurrence Sections
CAPITAL COST
Approved Cost Rs.8692 Crores (Base June 05)
Debt component Rs.4346 Crores
FE component Rs.1477 Crores
Pay back period 5 years 2 months
IRR 23%
Project cost (net of caveat) Rs.7998 Crores
SOURCES OF FUNDS
VSP raise its working capital from of 10 Bankers. The followingare the 10 banks. Where funds for finance are raised.
1. State Bank of India
2. Canara Bank
3. UCO Bank
4. Bank of Baroda
5. Andhra Bank
6. State Bank of Hyderabad
7. Allahabad Bank.
8. HSBC
9. Industrial Development Bank of India (IDBI)
10. Indian Overseas Bank (IOB)
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THE COMPANY PAYS:
1. Excise duty - 2 Crores/day
2. Sales Tax - 12 Crores/month
3. Custom duty - 12 Crores/month
4. Employee salary - 35 Crores/month
5. Iron ore - 15 Crores/month
6. Railway freight - 50 Crores/month
7. Ocean Freight - 15 Crores/month
8. Coal blast - 70 Crores/month
BOARD OF DIRECTORS
CHAIRMAN/MANAGING DIRECTOR
DIRECTOR (PERSONNEL)
DIRECTOR(FINANCE)
DIRECTOR (COMMERCIAL)
DIRECTOR (OPERATIONS)
DIRECTORS (PROJECTS)
COMPANY SECRETARY
Sri A.P.CHOUDHARY
Sri Y. R.REDDY
Sri P.MADHUSUDAN
Sri T.K.CHAND
Sri UMESH CHANDRA
Sri N.S.RAO
Sri P.MOHAN RAO
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Expansion plan
Product Capacity (MT)Present
Capacity (MT)Future
Additional
Facilities
Envisaged
Hot Metal 4.00 6.50 New BF with 3800CuM Capacity
Charge Sinter 5.26 8.50 New Sinter Plant
of 400 Sq.M. area
Liquid Steel 3.70 6.30 SMS-2 with Two
150 CuM
Converters, Two 6
Std Billet Casters
& One 6 std Round
Caster
Saleable Steel 3.34 5.72 -
Wire Rod 1.05 1.65 New WRM of 600000T/ Annum
Bars& Structural 1.95 3.40 New SBM of
750000T/ Annum
New SM of
700000T/ Annum
Seamless Pipes - 0.30 Seamless Tube
Plant of 300000T/
Annum
Special Bars
(Plains)
16mm 40mm -
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The company started its commercial production in
1990-91
And its financial results
FYGross
Sales
Operatin
g
Profit
Interes
tDepreciation
Net
Profit
90-91 245 -88 192 197 -47891-92 772 -101 437 449 -98792-93 1185 -31 198 340 -56893-94 1751 114 346 340 -57394-95 2209 416 366 415 -36495-96 3039 633 407 430 -20496-97 3135 606 430 422 -24697-98 3071 460 198 439 -17798-99 2761 15 361 111 -45799-00 2973 252 382 432 -56200-01 3436 504 351 445 -29101-02 4081 690 290 475 -7502-03 5058 1162 187 455 521
03-04 6169 2053 49 457 154704-05 8181 3271 11 1006 225405-06 8482 2336 31 416 189006-07 9151 2219 48 315 1363
07-08 10433 2994 31 471 194208-09 10411 2027 88 240 133509-1010-11
It can be seen from the above table, during the year 2002-03, the companyturned around by earning a net profit of Rs.521 Crores. In the same year, it bagged the PRIME
MINISTER TROPHY for its excellent performance in the Steel Industry. In October 2003,
RINL became a DEBT FREE COMPANY.
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GROWTH OF INCOME
3616
4234
5226
6378
84688938
9812
11337 11387
0
2000
4000
6000
8000
10000
12000
2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009
RsCrs
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GROWTH OF NET WORTH
3004
1994
40973891
3529 3316
2585
41973752
31982839 2744
3286
4852
6878
8149
9523
11481
12420
0
2000
4000
6000
8000
10000
12000
14000
1990
-199
1
1991
-199
2
1992
-199
3
1993
-199
4
1994
-199
5
1995
-199
6
1996
-199
7
1997
-199
8
1998
-199
9
1999
-200
0
2000
-200
1
2001
-200
2
2002
-200
3
2003
-200
4
2004
-200
5
2005
-200
6
2006
-200
7
2007
-200
8
2008
-200
9
RsCrs
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BREAK UP OF INCOME 2008-09
91%
7% 2% Sale of Iron & Steel & ByeProducts Rs. 10411 Crs
Interest Earned Rs. 787 Crs
Other Revenue Rs. 189 Crs
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PERFORMANCE OF RINL AT A GLANCE
PRODUCTION PERFORMANCE
Achieving new targets year after year in production has
become a part of the work culture
year Hot metal Liquid steel Saleable
steel
Labour
productivity
(tones/man
year)2006-2007 4046 3606 3290 413
2007-2008 3913 3322 3074 389
2008-2009 3546 3145 2701 359
2009-2010 3900 3399 3167 382
2010-2011 3830 3424 3077 358
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0
500
1000
1500
2000
2500
3000
3500
4000
4500
2000-20
01
2001-20
02
2002-20
03
2003-20
04
2004-20
05
2005-20
06
2006-20
07
2007-20
08
2008-20
09
Hot metal
Liquid Steel
Salable Steel
COMMERCIAL PERFORMANCE:
The commercial performance of VSP for the past four years is as follows
(In
crores)
YEAR
SALES
TURNOVER
DOMESTIC
SALES EXPORTS
2006-2007 9131 8487 424
2007-2008 10433 9878 555
2008-2009 10411 10332 782009-2010 10635 10284 351
2010-2011 11517 11095 422
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0
2000
4000
6000
8000
10000
12000
2000
-200
1
2001
-200
2
2002
-200
3
2003
-200
4
2004
-200
5
2005
-200
6
2006
-200
7
2007
-200
8
2008
-200
9
SALES
DOMESTIC
EXPORTS
FINANCIAL PERFORMANCE:
VSP had to bear the burnt of huge project cost right from the day
of its inception. This has affected the companys balance sheet due to
very high interest burden. The company, in spite of making operating
profit every year had to report net loss during all financial years. This on
the other hand had resulted in making VSP to take great care in
planning the financial resources.
The financial performance of VSP for the past five years is as follows:
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YEAR
GROSS
MARGIN
CASH
PROFIT
NET
PROFIT2006-2007 2633 2584 13632007-2008 3515 3483 1943
2008-2009 2356 2267 13362009-2010 1603 1525 7972010-2011 1412 1247 658
0
500
1000
1500
2000
2500
3000
3500
4000
2000-
2001
2001-
2002
2002-
2003
2003-
2004
2004-
2005
2005-
2006
2006-
2007
2007-
2008
2008-
2009
GROSS MARGIN
CASH PROFIT
NET PROFIT
FINANCIAL HIGHLIGHT
2006-07 2007-08 2008-09A OPERATING RESULTS (Rs
Crs)
Turn Over 9151 10433 10411Gross Income 9812 11337 11387
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Gross Expenditure 7540 8310Gross Profit 2271 3027Profit Before Tax 2222 2995 2027Net Profit After Tax 1363 1943 1336
B YEAR END FINANCIALPOSITION (Rs Crs)
Share Capital 7827 7827 7827Reserves and Surplus 1711 3654 4593Capital Employed 9427 9935Net Worth 9523 11481 12420Gross Block 8876 8901 9006Depreciation 7085 7516 7750Net Block 1790 1385 1256Inventory 1203 1761 3215
C PROFITABILITY AND OTER
RATIO
(i) Percentage Of 24.80 29.00Gross Profit to Sales 14.90 18.60Net Profit to Sales 23.80 26.40Net Profit to Net Worth 14.30 16.90Net Profit to Capital Employed 14.50 19.60Gross Profit to Share Capital 29.00 38.70Inventory Sales 13.10 16.90Sales To Capital Employed 97.10 105.00
(ii) Ratio OfCurrent Assets to Current Liabilities 3.70 3.60Quick Assets to Current Liabilities 3.30 3.10
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FINANCIAL STATEMENTS
INTRODUCTION:
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Accounting process involved recording, classifying and
summarizing various business transactions. The aim of maintaining
various records is to determine profitability of the enterprise from
operation of the business and also to find out is financial position.
Financial statements are in term reports, presented annually and reflect
a division of the life of an enterprise in to more or less arbitrary
accounting period more frequently a year. The financial statement is an
organized collection of data according to logical and consistent
accounting procedures its purpose is to convey of a business firm.
DEFINATIONS:
According to John N.Myer The financial statements
provide a summary of the accounts of a business enterprise, the balance
sheet reflecting the assets, liabilities, and capital as on a certain date
and the income statement showing the results of operations during a
certain period.
The term financial statement generally refers to following basic
statements:
1. The income Statement.
2. The Balance Sheet.
3. A Statement of Retained earring.
4. A Statement of Changes in financial position.
FINANCIAL
STATEMENT
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Income Statement
The income statement (also termed as profit and loss
account) is generally considered to be the most useful of all financial
statements. It explains what has happened to a balance sheet dates.
The nature of the income which is the focus of the income statement
can be well understood if a business is taken as an organization that
uses inputs to produce output.
Balance Sheet
It is a statement of financial position of a business at a
specified moment of time. It represents all assets owned by the
business at a particular moment of time and the claims of the owners
and outsiders against those assets at that time. The important
distinction between as income statement is for a period while balance
INCOME
STATEMENT
BALANCE
SHEET
STATEMENT
OF
RETAINED
STATEMENT
OF
CHANGES IN
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sheet is on a particular date.
Statement of Retained Earnings
The term retained earnings means the accumulated excess
earnings over losses and dividends. The balance shown by the income
statement is transferred to the balance sheet through this statement
after making necessary appropriations. It is fundamentally a display of
things that have caused the beginning of the period retained earnings
balance to be changed in to the one shows in the end-or-the-period
balance sheet.
Statement of changes in financial position
The balance sheet shows the financial condition of the
business at a particular moment of time while the income statement
discloses the results of operations of business over a period of time for a
better understanding of the affairs of the business, it is essential to
identify the movement of working capital or cash in the statement of
changes in financial position.
Nature of Financial Statements
The financial statements are prepared on the basis of
recorded facts. The recorded facts are those which can be expressed in
monetary terms. The statements are prepared for a particular period,
generally one year. The transactions are recorded in a chronological
order as and when the events happen. The financial statements by
nature are summaries of the items recorded in the business and there
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statements are prepared periodically generally for the accounting
period.
The following points explain the nature of financial
statements
1. Recorded Facts
The term Recorded facts; refers to the data taken out from
the accounting records. The records are maintained on the basis of
actual cost data. The figures of various accounts such as cash in hand,
cash at bank, bills receivables, Sundry debtors, fixed assets are taken as
per the figure recorded in the accounting books. As the recorded facts
are not based on replacement costs the financial statements do not
show current financial condition of the concern.
2. Accounting Conversions
Certain accounting converters are followed while preparing
financial statements. The conversion of valuating inventory at cost or
market price, whichever is lower, is followed. The valuing of assets at
cost less depreciation principle for balance sheet purposes statements
comparable, simple and realistic.
3. Postulates
The accountants make certain assumption while making
accounting records. One of these assumptions is that the enterprise is
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treated as a going concern. The other alternative to this postulate is
that the concern is to be liquidated the concern. So the assets are
shows on a going concern basis. An other important assumption is to
presume that the value of money will remain in the same in different
periods.
4. Personal Judgments
Even though certain standard accounting conversions are
followed in preparing financial statement but still personal judgment of
the accountant plays on important part.
Characteristics of financial statement
The financial statements are prepared with a view to depict
financial position of a concern. The financial statements should be
prepared in such a way that they are able to give a clear and orderly
picture of the concern. The ideal financial statement has the followingcharacteristics.
1. Depict true financial position
The information contained in the financial statements should
be such that a true and correct idea is taken about the financial position
of the concern.
2. Attractive
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The financial statements should be prepared in such a way
that important information is underlined so that it attracts the eye of the
reader.
3. Comparability
The results of financial analysis should be comparable. The
financial statements should be presented in such a way that they can be
compared to the previous years statements. Previous years figures in
the balance sheet.
4.Brief
If possible, the financial statements must be prepared in
brief. The reader will be able to form as idea about the figures.
Importance of financial statements
Financial statements contain a lot of useful and valuable
information regarding profitability financial position and future
prospective of business concern. The utility of financial statement to
different parties may be summarized as follows:
1. Management
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The financial statements are useful for assessing the
efficiency of$different cost centers. The management is able to decide
the course of action to be adopted in future.
2. Creditors
The trade creditors are to be paid in a short period. The CRS will
be interested in current solvency of the concerns. The calculations of
current ratio and liquid ratio will enable the creditors to assess the
current financial position of the concerns in relation to their debts.
3. Investors
The investors include both short-term and long term investors.
They are interested in the security of the principal amounts of loan and
regular payments by the concern. The investors will not only analyse
the parent financial position but will also study the future prospectus
and expansion plans of the concern.
4. Government
The financial statements are used assess tax liability of
business enterprises. The Government studies economic situation of the
country from these statements. These statements enable the
government to find out whether business is following various rules and
regulations or not.
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5. Trade Associations
These associations provide service and protection to the
members. They may analyse the financial statements for the purpose of
providing facilities to these members. They may develop standard
ratios and design uniform system of accounts.
6. Stock Exchange
The stock exchange deal in purchase and sale of securities
of different companies. The financial statements enable the stockbroker to judge the financial position of different concerns. The fixation
of prices for securities etc. is also based on the statements.
LIMITATIONS OF FINANCIAL STATEMENTS
Financial statements are relevant and useful for theconcern, still they do not present a final picture of the concern,
otherwise misleading conclusions may be drawn. The financial
statements suffer from following limitation:
1. Ignoring of non-monetary aspects
These statements are prepared with the help of accountinginformation which mainly consider monetary aspects only. The value of
business depends both on qualitative and quantitative factors.
2. Historical cost
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The statements are prepared on the basis of historical cost.
The value of fixed assets are at there original cost less depreciation.
The balance sheet value are not shown the value of assets may be sold
more over they do not reflect the market value which is as important
factor in determining the solvency of an enterprise.
3. Personal Judgment
In preparing financial statements certain items are left to
the personal Judgment of the accountant. If any accountant is not
following accounting principles correctly his judgment will give wrong
picture.
4. Conversion of Conservation
Due to conversion of conservation the income statement
may not disclose true income of the business. This is due to ignorance
of probable incomes and accounting probable losses.
FINANCIAL ANALYSIS
Financial analysis is the process of identifying the financial
strength and weakness of the firm by properly establishing between the
items of the balance sheet and profit and loss account. There are
various methods or techniques used in analysis financial statements
such as comparative statements, trend analysis, common size
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statements, schedule of changes in working capital, funds flow and
cash flow analysis Cost Volume Profit Analysis and Ratio Analysis.
Meaning and concept of financial analysis
The terms financial analysis also known as analysis and
interpretation of financial statements refers to the process of
determining financial strength and weaknesses of the firm by
establishing strategic relationship between the items of the balance
sheet, profit and loss account and other operative data.
Types of financial analysis
Financial analysis can be classified in to different categories
depending up on:
A. On the basis of material used.
B. On the basis of modules operandi
Types of
Financial
Analysis
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[A] In the basis of material used
According to the basis, financial analysis can be of two types.
External Analysis
This analysis is done by those who are outsiders for the
business. These persons mainly depend up on the published financial
statements. Their analysis serves only a limited purpose.
Internal Analysis
On the basis
of material
Used
On the basis
of modulesOperandi
VerticalHorizontal
External
Internal
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This analysis is done by persons who have access to the
books of account and at other information related to the business. Such
as analysis can be done by executives and employees of the
organization. The analysis is done depending up on the objective to be
achieved through this analysis.
[B] On the basis of modules operandi
According to this financial analysis can also be of two types:
Horizontal Analysis
In case of this type of analysis, financial statements for a
number of years are reviewed and analysed the current years figures
are compared with the standard or base year. The analysis statement
usually contains figures for two or more year and the change are shown
regarding each item from the base year usually in the form of
percentage. Since this type of analysis based on the data from year to
year rather than on date, it is also termed as Dynamic Analysis
Vertical Analysis
In case of this type of analysis a study is made of the
quantitative relationship of various items in the financial statement on a
particular date. Since this analysis depends on the data for one period,
this is not very conductive to a proper analysis of the companys
financial position. It is also called static analyses as it is frequently
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used for referring to ratio developed on one date or for one accounting
period.
Techniques of financial analysis
A financial can adopt one or more of the following
techniques/ tools of financial analysis:
COMPARATIVE FINANCIAL STATEMENTS
The statements which have been designed in a way so as toprovide time perspective to the consideration of various elements of
financial position embodied in such statements figures for two or more
period side by side to facilitate comparison.
Both the income statement and balance sheet can be
Financial
Analysis
Techniques
Funds flowAnalysis
RatioAnalysis
TrendPercentage
ComparativeFinancial
Statements
Cash FlowAnalysis
Ratio C.V.P.Analysis
Common SizeFinancial
Statements
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prepared Ni the form of comparative financial statements.
The comparative financial statements contain the following items.
i. Absolute figures (amount in Rs. /-) as given in the final
accounts.
ii. Absolute figures expressed in terms of percentages.
iii. Increase of decrease in absolute figures in terms of money
value.
iv. Increase or decrease in terms of percentages.
v. Comparison expressed in ratios.
vi. Percentages of totals.
Comparative Income Statements
The income statement (profit & loss A/c) gives the results of
the operations during a definite period. It reveals the profit carried or
loss incurred by the cancers. The comparative study if income
statement for more than 1 year may enable us to know the program of
the concern. First two columns gibe figures of various items for two
years. The third and fourth column used to show increase or decrease in
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figures in absolute adopted in preparing comparative balance sheet.
In first step, find out the changes in absolute figures i.e., increase
or decrease should be calculated.
In second step percentage of change should be calculated with the
help of following formula.
Change in amount
Percentage of change = x 100
Base year amount
COMPARITIVE INCOME STATEMENT:
PARTICULARS PREVIOSYEAR
CURRENTYEAR
INCREASE /DECREASEAMOUNT(R
s)PERCENTAGE
Net Sales **** **** **** ****(Less): Cost of goodssold
*** *** *** ***
Gross Profit ***** ***** ***** *****(Less): Operating
Expenses:-Office &AdministrationExpenses
*** *** *** ***
Selling & DistributionExpenses
*** *** *** ***
Total OperatingExpenses
***** ***** ***** *****
(Add): OperatingIncomes
**** **** **** ****
Total OperatingIncomes
**** **** **** ****
Operating Profit ***** ***** ***** *****(Add): Non-OperatingIncomes:-Income onInvestment
*** *** *** ***
Profit on sale of *** *** *** ***
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assetsDividends received *** *** *** ***Total Non-Operating Incomes
***** ***** ***** *****
(Less): Non-Operating
Expenses:-Loss on sale of FixedAssets
**** **** **** ****
Net Profit BeforeInterest & Tax[EBIT]
***** ***** ***** *****
(Less): Interest Paid *** *** *** ***Net Profit BeforeTax
**** **** **** ****
(Less): Income TaxPaid
*** *** *** ***
Net Profit After Tax ***** ***** ***** *****
Guidelines for interpretation
The increase or decrease in sales should be compared with
increase or decrease in cost of goods sold. If increase in sales is
more than the cost of goods sold. It means that the profitability of
the concerns is increased.
The amounts of gross profit should be studied.
Operating profits should be studied. The express should be
deducted from gross profit to find out operating profit and then
operating incomes should be added.
The next step is some of the non operating expenses are to be
deducted from the operating profits and non operating incomes
should be added to get net profit
The opinion should be formed the profitability of the business
concern and it should be given at the end.
Comparative balance sheet
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The balance sheet prepared on a particular date reveals the
financial position of the concern on the date to study the trends of
business over a period of time comparative balance sheet reveals the
cause for changes in the financial position on amount of various
transactions. The comparative studies throw light on financial policies
adopted by management.
The comparative balance sheet consists of two columns for
the original data. A third column used to show increase or decrease in
various items. A south column containing the parentage of increase or
decrease may be added.
COMPARITIVE BALANCE SHEET:
PARTICULARS PREVIOUSYEAR
CURRENTYEAR
INCREASE /DECREASEAMOUNT(R
s)PERCENTAG
ASSETS:Current Assets: (C.L)Cash & Bank Balances *** *** *** ***Sundry Debtors *** *** *** ***
Bills Receivable *** *** *** ***Stock (Inventories) *** *** *** ***Prepaid Expenses *** *** *** ***Marketable Securities *** *** *** ***Temporary Investments *** *** *** ***Accured Incomes *** *** *** ***Total Current Assets ***** ***** ***** *****Investments:
Short-term loans and
advances
*** *** *** ***
Staff Advances *** *** *** ***Other Advances *** *** *** ***Fixed Assets: (F.A)
Good Will *** *** *** ***Land *** *** *** ***Buildings *** *** *** ***
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Plant & Machinery *** *** *** ***Furniture & Fittings *** *** *** ***Free Hold Property *** *** *** ***Lease Hold Property *** *** *** ***
Preliminary Expenses *** *** *** ***Patent Rights *** *** *** ***Trade Marks *** *** *** ***Other DeferredExpenses
*** *** *** ***
Total Fixed Assets ***** ***** ***** *****
TOTAL ASSETS[ C.L + F.A ]
****** ****** ****** ******
Current Liabilities:(C.L)Sundry Creditors *** *** *** ***Bills Payable *** *** *** ***Out Standing Expenses *** *** *** ***Bank Over Draft *** *** *** ***Unclaimed Dividends *** *** *** ***Propose Dividends *** *** *** ***Provision For Tax *** *** *** ***Accrued Expenses *** *** *** ***Total CurrentLiabilities
***** ***** ***** *****
Long TermLiabilities: (L.T.M)Mortigage Loan *** *** *** ***Debentures *** *** *** ***Total Long TermLiabilities
***** ***** ***** *****
Share Capital &Reserves: (CAP. &
RES.)Equity Share capital *** *** *** ***Preference ShareCapital
*** *** *** ***
Share Premium *** *** *** ***General Reserve *** *** *** ***Appropriation of Profits *** *** *** ***
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Total Capital &Reserve
***** ***** ***** *****
TOTAL LIABILITIES[C.L + L.T.M + CAP. &
RES.]
***** ***** ***** *****
Guide lines for interpretation of balance sheet:
The short term financial position can be studied y comparing
the working capital of both years.
To study the liquidity position changes in liquid assets must be
ascertain if there is any increase in liquid assets. We must
understand that is an improvement in the liquidity position of
the concern and vice versa.
A high increase in sundry debtors and bills receivable mean in
increase in risk in collecting the amount of dues.
A high increase in closing stock may mean that decrease in the
demand.
Long term financial position of the business concern car be
analysed by studying the changes in fixed assets, long term
liabilities and capital. Fixed assets must be compared with long term loans and
capital. If the increase in fixed assets is more than the increase
in long term financiers from the working capital which is not
good.
1. COMMON SIZE STATEMENTS:
The common size statements, balance sheet and income
statement are shown in analytical percentages. The figures are shown
as percentages of total assets, total liabilities and sales. The total
assets are taken as 100 and different assets are expressed as
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percentage of the total. Similarly various liabilities are taken as a part
of total liabilities. These statements are also known as component
parentage or 100% statements because every individual item is stated
as a percentage of the total 100 the short statements because every
individual item is stated as a percentage of the total 100 the short-
comings in comparative statements and trend percentages where
changes in item could not be compared with the total have been
covered up.
The common size statements may be prepared in the following
way.
The totals of assets or liabilities are taken as 100.
The individual assets are expressed as a percentage of
total assets i.e., 100 and different liabilities are
calculated in relation to that liability.
Common Size Income Statement:
The items in income statement can be shown as
percentages of sales to show the relation of each item to sales. A
significant relationship can be established between items of income
statement and volume of sales. The increase in sales will certainly
increases selling expression and volume of sales. The increase in sales
will certainly increases selling expresses and not administrative or
financial expenses. In case the volume of sale increases to a
considerable extent, administrative and financial expenses may go up.
In case the sales are declining, the selling expenses should be reduced
at once. So, a relationship is established between sales and other in
income statement and this relationship is helpful in evaluating
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operational activities of the enterprises.
Common Size Balance Sheet:
Statement in which balance sheet items are expressed as
the ratio of each asset to total assets and the ratio of each liability is
expressed as a ratio of total liabilities is called common size balance
sheet. The common size balance sheet is a horizontal analysis. The
comparison of figures in different periods is not useful becomes total
figure may be affected by a number of factors. It is not possible to
establish standard norms for varios assets. The trends of year to year
may not be studied and even they may not give proper results.
2. TREND ANALYSIS :
Trend analysis is an important and useful technique of
financial analysis. It involves computation of index numbers of the
moments of the various financial items in the financial statements for a
number of periods. It enables to know the changes in the financial
position and the operational efficiency between the period chosen.
Through trend analysis the analysis can give his opinion as
to whether favorable or unfavorable tendencies are reflected by the
accounting date.
The comparative and common size balance sheets suffer
from a major limitation i.e., absence of basic standard to indicate
whether the proportion of an item is normal or analysis values are
calculated for each item in isolation but conclusions are to be drawn by
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studying the related items also.
Trend analysis can be analysis in the following ways:
i. By calculating trend ratio (or) percentage.
ii. By plotting on graph paper (or) charge.
Trend Ratio (or) Percentage:
It involves the ascertainment of arithmetical relationship
which each item of several year to the same item of base year. Any
year maybe as the base year, it is usually the earliest year.
Procedure for Calculating Trend Ratio:
The following procedure maybe adopted for calculating trend
ratio.
i. Select any year as base year the selected year should be
normal year for the base year the trend value is taken as 100.
ii. Trend percentage of each item should be calculated with the
help of following formula.
Current year value
Trend Percentage = X 100
Base year value
3. COST-VOLUME-PROFIT ANALYSIS:
Cost Volume Profit analysis is an important tool of profit
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planning. It studies the relationship between cost, volume of
production, sales and profit. It is not strictly a technique used for
analysis of financial statements. However, it is an important tool for the
management for decision making. Since the data is provided both cost
and financial records. It tells the volume of account of variation in
output, selling price and cost, and finally, the quantity to be produced
and sold to reach the target profit level.
4. RATIO ANALYSIS:
Financial analysis depends to very large extents of the use
of ratios through there are other equality important tools of such
analysis. Thus, a direct examination of the magnitude of two released
items is some what enlightening but the comparison is greatly facilitated
by expressing the relationship as a ratio.
Ratio analysis of business enterprises enters on efforts to
derive quantitative measures or guides concerning the expected
capacity of the firm to meet its future financial obligation or
expectations present and past data are used for the purpose and what
ever extrapolations appear necessary. They are made to provide no
indication of feature performance. Alexander walt, who criticized the
bankers for its lapsided development owing to their decisions regarding
the grant of credit on current ratios a lone, made the presentation of an
elaborate system of ratio analysis in1919.
Ratio:
Ratio is an expression of the quantitative relationship that
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exists between the two numbers. The ratio is defined as the indicated
quotient of two mathematical expressions the ratio should be
determined between related accounting variables to be meaningful and
effective.
5. MEANING OF CASH FLOW NATURE:
Cash plays very important role in the entire economic life of
a business. A firm needs cash to make payments to its suppliers, to
insure day-go-day expenses and to pay salaries, wages, interest and
dividends etc. In fact, what blood is to a human body, cash is to a
business enterprise It is very essential for a business to maintain an
adequate balance at cash. But many a times, a concern operates
profitability and yet it becomes very difficult to pay taxes and dividends
this movement of cash is of vital importance to the management.
A statement of changes in the Financial Position of firm on
cash basis is called a cash flow statement.
A cash flow statement summarises the causes of changes in
cash position of a business enterprise between dates of two balance
sheets. This statement is very much similar to the statement of changes
in Financial Position Prepared on working capital basis, i.e., a funds flow
statement, except that a cash flow statement focuses attention on cash
instead of working capital. It is called a cash flow statement because it
describes the Inflow (Sources) and out flow (use) of cash.
ACCOUNTING STANDARDS (ASs):
AS 1 - Disclosure of accounting policies.
AS 2 - Valuation on Inventories
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AS 3 - Cash Flow Statements
AS 4 - Contingencies and Events Occurring After the
Balance Sheet Date.
AS 5 - Net Profit or Loss for the period, Prior Period Items
and Changes in Accounting Policies.
AS 6 - Depreciation Accounting
AS 7 - Construction Contracts (Revised 2002).
AS 8 - Accounting for Research and Development
AS 9 - Revenue Recognition
AS 10 - Accounting for Fixed Assets
AS 11 - The Effects of Changes in Foreign Exchange Rates
(Revised 2003).
AS 12 - Accounting for Government Grants
AS 13 - Accounting for Investments
AS 14 - Accounting for Amalgamations
AS 15 - Employee Benefits (Revised 2005).
Limited Revision to Accounting Standard (AS) 15, Employee
Benefits (Revised 2005).
AS 16 - Borrowing Costs.
AS 17 - Segment Reporting.
AS 18 - Related Party Disclosures
AS 19 - Leases
AS 20 - Earnings per Share
AS 21 - Consolidated Financial Statements
AS 22 - Accounting for Taxes on Income
AS 23 - Accounting for Investments in Associates in
Consolidated Financial Statements
AS 24 - Discontinuing Operations
AS 25 - Interim Financial Reporting.
AS 26 - Intangible Assets.
AS 27 - Financial Reporting of Interests in Joint Ventures.
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AS 28 - Impairment of Assets.
AS 29 -Provisions, Contingent Liabilities and Contingent
Assets.
AS 30 - Financial Instruments: Recognition and Measurement
and Limited Revisions to AS 2, AS 11 (Revised 2003), AS 21,
AS 26, AS 27, AS 28 and AS 29.
AS 31 - Financial Instruments: Presentation.
ACCOUNTING STANDARD
INTERPRETATION:
ASI 1 - Substantial Period of Time (AS 16).
ASI 2 - Accounting for Machinery Spares (AS 2, Valuation
of Inventories and AS 10, Accounting for Fixed
Assets).
Revised ASI 3 Accounting for Taxes on Incomes in the situationsOf Tax Holiday under sections 80-IA and 80-IB of
the Income-tax Act, 1961 (Re.: AS22)
ASI 4 - Losses under the head Capital Gains (Re.: AS 22).
ASI 5 - Accounting for Taxes on Income in the situation
of Tax Holiday under sections 10A and 10B of
the Income tax Act, 1961 (Re.: AS 22).
ASI 6 - Accounting for Taxes on Income in the contextof Section 115JB of the Income-tax Act, 1961
(Re.: AS22).
ASI 7 - Disclosure of deferred tax assets and deferred tax
liabilities in the balance sheet of a company
(Re.: AS 22).
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ASI 8 - Interpretation of the term Near Future.
(Re.: AS 21, AS 23 and AS 27).
ASI 9 - Virtual certainty supported by convincing evidence
(Re.: AS 22).
ASI 10 - Interpretation of paragraph 4(e) of AS 16 (Re.: AS
16).
ASI 11 - Accounting for Taxes on Income in case of an
Amalgamation (Re.: AS 22).
ASI 12 - Applicability of AS 20 (Re.: AS 20).
ASI 13 - Interpretation of Paragraphs 26 and 27 of AS 18
(Re.: AS 18).
ASI 14 - Disclosure of Revenue from Sales Transactions
(Re.: AS 9).
ASI 15 - Notes to the Consolidated Financial Statements
(Re.; AS 21).
ASI 16 - Treatment of Proposed Dividend under AS 23
(Re.: As 23).
ASI 17 - Adjustments to the Carrying Amount of
Investment arising from Changes in Equity not
included in the Statement of Profit and Loss
of the Associate
(Re.: AS 23).
ASI 18 - Consideration of Potential Equity Shares for
Determining whether An Investee is an
Associate under AS 23 (Re.: AS 23).
ASI 19 - Interpretation of the term Intermediaries
(Re.: AS 18).
Revised ASI 20 Disclosure of segment information (Re.: AS 17).
ASI 21 - Non-Executive Directors on the Board whether
an Investee is an Associate under AS 23 (Re.: AS
18).
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ASI 22 - Treatment of Interest for determining
Segment Expense (Re.: AS 17).
ASI 23 - Remuneration paid to key management personnel
whether a related party transaction (Re.:
AS 17).
ASI 24 - Definition of Control (Re.: AS 21).
ASI 25 - Exclusion of a subsidiary from
Consolidation (Re.: AS 21)
ASI 26 - Accounting for taxes on income in the
consolidated financial statements (Re.: AS
21).
ASI 27 - Applicability of AS 25 to Interim Financial Results
(Re.: AS 25).
ASI 28 - Disclosure of parents / ventures shares in post-
acquisition reserves of a subsidiary / jointly
controlled entity (Re.: AS 21 and AS 27).
ASI 29 - Turnover in case of Contractors
{Re.: AS 7 (Revised 2002)}.
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COMPARITIVE BALANCE SHEET OF VSP LTD. FOR THE YEARS2009-10 and 2010-11
PARTICULARS 2009-10Rs. Crs.
2010-11
Rs. Crs.
Increase/Decrease
Rs. Crs.
Increase/Decr
Percentag
ASSETS:
Cash & Bank Balance 5415.54 1998.89 -3416.65 -63.08
Sundry Debtors 181.18 330.61 149.43
Inventories (Stock) 2451.52 3254.71 803.19
Loans & Advances 1365.02 1965.04 600.02
Other Current Assets 137.4 75.96 61.44Miscellaneous Expenditure
Profit & Loss Account
Investments 0.25 1.60 1.35
Fixed Assets 8972.30 11066.63 2094.33
Total Assets 18523.21 19053.44 530.23
LIABILITIES
Current Liabilities 2871.95 3279.43 399.48
Provisions 1435.89 1336.06 -99.83
Secured Loans 407.28 274.89 -132.39
Unsecured Loans 825.27 861.87 36.6
Deferred Tax Liability 97.82 79.97 -17.85 -1
Reserves & Surplus 5057.68 5401.90 344.22
Share Capital 7827.32 7827.32
Total Liabilities 18523 19053.44 530.23
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COMPARITIVE BALANCE SHEET OF VSP LTD. FOR THE YEARS2008-09 and 2009-10
PARTICULARS 2008-09Rs. Crs.
2009-10Rs. Crs.
Increase/DecreaseRs. Crs.
Increase/DecreasePercentage
A SSETS:
Cash & Bank
Balance
6624.17 5415.54 -1208.63 -18.24
Sundry Debtors 191.27 181.18 -10.09 -5.27
Inventories
(Stock)
3215.28 2451.52 -763.76 -23.75
Loans &
Advances
1569.69 1365.02 -204.67 -13.03
Other Current
Assets
258.91 137.4 -121.51 -46.93
Miscellaneous
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Expenditure
Profit & Loss
Account
Investments 0.05 0.25 +0.2 +4.00
Fixed Assets 5874.11 8972.30 +3098.19 +52.74
Total Assets 17733.48 18523.21 +789.73 +4.45
LIABILITIES
Current Liabilities 2560.79 2871.95 +311.16 +12.15
Provisions 1620.53 1435.89 -184.64 -11.39
Secured Loans 907.72 407.28 -500.44 -55.13
Unsecured Loans 100.04 825.27 +725.23 +724.94
Deferred Tax
Liability
124.49 97.82 -26.67 -21.42
Reserves &
Surplus
4592.59 5057.68 +465.09 +10.12
Share Capital 7827.32 7827.32
Total Liabilities 17733.48 18523 +789.73 4.45
Interpretation
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The cash and bank balance were decreased from 6624.17 (crores) to
5415.54 (crores) i.e -1208.63(crores) (-18.24%).It Indicates that the
VSP'S liquidity position decreasing.
COMPARITIVE BALANCE SHEET OF VSP LTD. FOR THE YEARS2007-08 and 2008-09
PARTICULARS 2007-08Rs. Crs.
2008-09Rs. Crs.
Increase/DecreaseRs. Crs.
Increase/DecreasePercentage
A SSETS:
Cash & Bank
Balance
7699.11 6624.17 -1074.94 -13.96
Sundry Debtors93.41 191.27 +97.86 +104.76
Inventories
(Stock)
1761.15 3215.28 +1454.13 +82.56
Loans &
Advances
1958.49 1569.69 -388.8 -19.85
Other Current
Assets
292.43 258.91 -33.52 -11.46
Miscellaneous
ExpenditureProfit & Loss
Account
Investments 0.05 0.05
Fixed Assets 3471.87 5874.11 +2402.24 +69.19
Total Assets 15276.51 17733.48 +2456.97 +16.08
LIABILITIES
Current Liabilities 1610.15 2560.79 +950.64 +59.04
Provisions 1518.47 1620.53 +39.06 +2.46
Secured Loans 332.78 907.72 +574.94 +172.76
Unsecured Loans 107.95 100.04 -7.91 -7.32
Deferred Tax
Liability
163.12 124.49 -38.63 -23.68
Reserves & 3653.72 4592.59 +938.87 +25.69
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Surplus
Share Capital 7827.32 7827.32
Total Liabilities 15276.51 17733.48 +2456.97 +16.08
Interpretation
The cash and bank balance was decreased from 7699.11(crores) to
6624.17 ((crores) i.e -1074.94 (crores) (-13.96%). It indicates that
liquidity position of the VSP decreased
The Fixed assets were increased from 3471.67(crores) to 5874.11
(crores) i.e +2402.24 (crores) (69.19%). It indicates that the VSPs
interest on long term benefits through invest on fixed assets.
Current liabilities were increased from 1610.15 (crores) to 2560.79
(crores) i.e +950.64 (crores) (+59.04%). It indicates that the working capital
position becoming critical.
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COMPARITIVE BALANCE SHEET OF VSP LTD. FOR THE YEARS2006-07 and 2007-08
PARTICULARS 2006-07
Rs. Crs.
2007-08
Rs. Crs.
Increase/Decrease
Rs. Crs.
Increase/Decrease
PercentageASSETS:
Cash & Bank
Balance
7194.68 7699.11 +504.43 +7.01
Sundry Debtors 216.80 93.41 -123.39 -56.91
Inventories
(Stock)
1203.24 1761.15 +557.91 +46.36
Loans &
Advances
1518.90 1958.49 +439.59 +28.94
Other Current
Assets
314.48 292.43 -22.05 -7.01
Miscellaneous
Expenditure
14.95 -14.95 -100
Profit & Loss
Account
____ _____ ______ _______
Investments 0.05 0.05 _____ ______
Fixed Assets 2387.65 3471.87 +1084.22 +45.40
Total Assets 12850.75 15276.51 +2425.76 +18.87
LIABILITIES
Current Liabilities 1011.53 1610.15 +598.62 +59.17
Provisions 1092.77 1518.47 +488.7 +44.72
Secured Loans 604.45 332.78 -271.67 -44.94
Unsecured Loans 312.51 107.95 -204.56 -65.45
Deferred Tax
Liability
291.29 163.12 -128.17 -44.00
Reserves &
Surplus
1710.88 3653.72 +1942.84 +113.55
Share Capital 7827.32 7827.32 _______ _____
Total Liabilities 12850.75 15276.51 +2425.76 +18.87
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Interpretation
The cash and bank balance was increased from 7194.68(crores) to
7699.11 (crores) i.e +504.43(crores) (+7.01%). It indicates that the
VSPs liquidity position was better than previous year.
The Investments are constant last two years and also the investments
are very low. It indicates the firms disinterest on invest on other
sectors.
The secured and unsecured loans were decreased from 2006-07 to
2007-08 i.e 476.23 (crores). It shows the VSPs financial position
becoming healthy
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COMMON SIZE BALANCE SHEET OF VSP LTD. FOR THE YEARS2006-07 to 2010-11 (Rs. Crs)
Source of funds
PARTICUALRS 31-03-11 31-03-10 31-03-09 31-03-08 31-03-07
Share Holders Fund
Share Capital 7827.32 7827.32 7827.32 7827.32 7827.32
Reserves & Surplus 5401.90 5057.68 4592.59 3653.72 1710.88
(A
)
13229.22 12886.00 12419.91 11481.04 9538.20
Loan Funds
Secured Loans 274.89 407.28 907.72 332.78 604.45
Unsecured Loans 861.87 825.27 100.04 107.95 312.51
(B) 1136.76 1232.55 1007.76 440.73 916.96
Current Liabilities
Liabilities 3271.43 2871.95 2560.79 1610.15 1011.53
Provisions 1336.06 1435.89 1620.53 1581.47 1092.77
(C) 4607.49 4307.84 4181.32 3191.62 2104.30
Deferred Tax
Liability(D) 79.97 97.82 124.49 163.12 291.29
Total (A+B+C+D) 19053.44 18523.21 17733.48 15276.51 12850.75
Application of funds
PARTICUALRS 31-03-11 31-03-10 31-03-09 31-03-08 31-03-07
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Fixed Assets
Gross Block 9794.60 9473.90 8971.80 8900.83 8875.62
Less: Deprecation 8264.71 8008.55 7749.74 7516.19 7085.16
Net Block 1529.89 1465.35 1222.06 1384.64 1790.46
Held for Disposal 0.03 0.05 0.05 0.04 0.00
Capital Work-in-prog. 9536.71 7506.90 4652.00 2087.19 597.19 11066.63 8972.30 5874.11 3471.87 2387.65
Investments (B) 0.58 0.25 0.05 0.05 0.05
Current Assets &
Advances
Inventories 3254.71 2451.52 3215.28 1761.15 1203.24
Sundry Debtors 330.61 181.18 191.27 93.41 216.80
Cash & Bank
Balances
1998.89 5415.54 6624.17 7699.11 7194.68
Other Assets 75.96 137.40 258.91 292.43 314.48
Loans & Advances 1965.04 1365.02 1569.69 1958.49 1518.90
(C
)
7625.21 9550.66 11859.32 11804.59 10448.10
Miscellaneous
Expenditure (D)