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A STUDY ON FUNDS FLOW MANAGEMENT AT ZUARI CEMENT LTD...

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A STUDY ON FUNDS FLOW MANAGEMENT AT ZUARI CEMENT LTD

ABSTRACT A funds flow statement is a technical device designed to analyze, the changes in the financial condition of a business. It is also called as a ‘statement of sources and applications of funds. The funds flow statement is becoming popular with the management because it not only helps them in analyzing financial operations, providing basis for comparison with budgets, and serving as a tool of communication, but also explains the financial consequences of such operations such as the reason why the company is experiencing difficulty in making payments to creditors or why the bank balance is getting thinner. There is a general recognition in industry and business and among professional accounting bodies that financial statements should provide relevant information which sub serves the multiple objectives of shareholders, investors, creditors, customers and the public and which enable them to arrive at rational economic decisions. Normally what the shareholders look for in these statements is an account of the stewardship of the firm and the amount which may be expected as dividend. Potential investors look upon funds flow statements as the source of their realistic view of the value of a company’s shares in terms of an expected futures stream of distribution and judge the efficiency of the management accordingly.

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INDEX

CHAPTER I

PAGE NO

3

INTRODUCTION NEED OF THE STUDY SCOPE OF THE STUDY OBJECTIVES OF THE STUDY RESEARCH METHODOLOGY LIMITATIONS OF THE STUDY CHAPTER II

19

REVIEW OF LITERATURE CHAPTER III

27

INDUSTRY & COMPANY PROFILE CHAPTER IV

37

DATA ANALYSIS & INTERPRETATION CHAPTER V FINDINGS SUGGESTIONS CONCLUSION BIBLIOGRAPHY

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66

CHAPTER-I INTRODUCTION

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INTRODUCTION Every business establishment usually prepares the balance sheet at the end of the fiscal year which highlights the financial position of the yester years It is subject to change in the volume of the business not only illustrates the financial structure but also expresses the value of the applications in the liabilities side and assets side respectively. Normally, Balance sheet reveals the status of the firm only at the end of the year, not at the beginning of the year. It never discloses the changes in between the value position of the firm at two different time periods/dates. The method of portraying the changes on the volume of financial position is the statement fund flow statement. To put them in nutshell, fund between two different time periods. It is further illustrated that the changes in the financial position or the movement or flow of fund. MEANING & OBJECTIVES OF FUND FLOW STATEMENT ANALYSIS A report on the movement of funds or working capital. In a narrow sense the term fund means funds and the fund flow statement depicts the funds receipts and funds disbursements/ payments. It highlights the changes in the funds receipts and payments as a funds flow statement in addition to the funds balances i.e., opening funds balance and closing funds balance. Contrary to the earlier, the fund means working capital i.e., the differences between the current assets and current liabilities. The term flow denotes the change. Flow of funds means the change in funds or in working capital. The change on the working capital leads to the net changes taken place on the working capital i.e., especially due to either increase or decrease in the working capital. The change in the volume of the working capital due to numerous transactions. Some of the transactions may lead to increase or decrease the volume of working capital. Some other transactions neither registers an increase nor decrease in the volume of working capital. According Foulke “A statement of source and application of funds is a technical device designed to analyse the changes to the financial condition of a business enterprise in between two dates”

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Various Facets of Fund flow statement are as follows: Statement of sources and application of funds Statement changes in financial position Analysis of working capital changes and Movement of funds statement

METHODS OF PREPARING FUND FLOW STATEMENT Steps in the preparation of Fund Flow Statement: First and for most method is to prepare the statement of changes in working capital i.e., to identify the flow of fund / movement of fund through the detection of changes in the volume of working capital. Second step is the preparation of Non- Current A/c items-Changes in the volume of Noncurrent a/c s have to be prepared only in order to quantify the flow fund i-e either sources or application of fund. Third step is the preparation Adjusted Profit& Loss A/c, which already elaborately discussed in the early part of the chapter. Last step is the preparation of fund flow statement. SCHEDULE OF CHANGES IN WORKING CAPITAL The ultimate purpose of preparing the schedule of changes in the working capital is to illustrates the changes in the volume of net working capital which envisages either sources or application of fund. The schedule of changes are focused as follows

ADVANTAGES OF PREPARING FUND FLOW STATEMENT Structured analysis on the Working capital of a firm: It is the only statement to study the changes in the working capital in between two different periods from the balance sheet of a firm through structured analysis on the basis of working capital position.

ILLUSTRATIVE STATEMENT OF FINANCING It is a statement which highlights the role of various kinds of financing not only in the dimension of project development and expansion but also growth rate of the organization

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Cement industry has been decontrolled from price and distribution on 1st march and delicensed on 25th July 1991. However, the performance of the industry, the constraints faced by the industry are interviewed in the infrastructure co-ordination committee meeting held in the cabinet secretariat under the chairmanship of secretary. The committee on infrastructure also reviews its performance. The industry is subject to equality order issued on 19-02-2003 to ensure quality standards.

CEMENT INDUSTRY HISTORICAL PERSPECTIVE Cement industry is one of the major and oldest established manufacturing industries in the modern sector of Indian economy. It is an indigenous industry in which the company is well endowed with the necessary raw materials, skilled manpower and equipment & machinery technology.

Firms, bridges, buildings, water supply projects, dams, roads, hydroelectric power projects, seaports, airports, and irrigation schemes require cement. It is thus a vital industry, which assumes a crucial part in the economic development of the country, thus it regards as major nation building industry whose importance in a developing economy never be over emphasized. The Greek civilizations use some of mortar but Romans has developed it. When one speaks about the cement industry, it invariably refers to Portland cement, which has its origin in England, but until the 19th century a mixture of limestone with Pozzoland of volcanic earth was known as cement. The first cement factory was established around 1990 in both Canada and Australia, while it was invented in 1984 in New Zealand.

The Cement industry occupies a position of predominance not only an infrastructure for development but also it is 8th largest in the world, which directly employs about millions of persons.

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CEMENT INDUSTRY IN INDIA In India it came to be establishing during the beginning of 20 th century. In fact the cement era in India commenced with the establishment of a small cement factory at WASHERMANPET in 1904 by south India industry Ltd, a company that dates to 1979. There was sufficient demand for that product, but because of technological defects and inadequate supply of raw materials, the plant did not operate economically, a later on collapsed. India is ranked 4th in the world after China, Japan and USA in cement production. Yet the per-capital consumption of cement in India however low at 70 to 80 kgs against the world average of around 220 kgs. Cement industry in India is 8th decades old. However, the growth has not kept pace with period of its existence. Decades of the government control have restricted the growth of the industry. The real foundation stone of the present industry was laid in the year 1942, when a small factory was established Porbandar in Kaythiwar by India cement Limited. This factory commenced its production in 1916 at the rate of 199 metric tones per day. This company adopted “dry process”. This plant had easy access of lime stone quarries of Porbandar. The initial attempt could cause the attempt of two or more factories. One at Kanthi (MP) another at Lakhier (Rajastan). The government control was lifted immediately after the world war and the boom period of the industry started. The demand for cement increased very steadily as the cement was used was used not only for housing but also for dams, roads, bridges and other developed activities. INDIAN CEMENT SECTOR The boom in the housing market has given birth a higher demand in India cement. The present initiatives under taken by the Government for infrastructure development has also raised the demand for cement in the country. The cement companies such as Ultratech, ACC, GACL and Grasim have grown in the country.

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The planned capacities of production of Indian Cement Companies are as follows: CAPACITIES OF PRODUCTION BY COMPANIES

Company Name Location (By State)

Additional Capacities (In Commissioning Date mn tones)

JP Associates

Himachal Preadesh

4.55

Dec, 2019

Grasim

Kothputali, Rajasthan 4.08

FY 18 Q1

JP Associates

Uttar Pradesh

3.34

FY 2019

Ultra Cement

Andhra Pradesh

3.19

Q1 FY 2019

OCL

Orissa

3.04

Q1 FY 2019

JK Cement

Karnataka

3.00

Sept 2019

Binani Cement

Rajsthan

2.57

Dec 2019

JP Associates

Madhya Pradesh

2.00

Q3 FY 2016

Zuari Cement

Andhra Pradesh

1.98

H1 FY 2019

Penna Cement

Andhra Pradesh

1.63

H1 FY 2019

ACC

Lakheri Rajsthan

0.94

Dec 2019

Madras Cements

Tamil Nadu

1.84

H1 FY 2019

Tech

TYPES OF CEMENT IN INDIA The types of cement in India have increased over the years with the advancement in research, development, and technology. The Indian cement industry is witnessing a boom as a result of which the production of different kinds of cement in India has also increased. 8|Page

By a fair estimate, there are around 12 different types of cement that are being produced in India. The production of all these cement varieties is according to the specifications of the BIS. 1.6 Some of the various types of cement produced in India are: 

Clinker Cement



Ordinary Portland Cement



Portland Blast Furnace Slag Cement



Portland Pozzolana Cement



Rapid Hardening Portland Cement



Oil Well Cement



White Cement



Sulphate Resisting Portland Cement

NEED OF THE STUDY

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(1) It pinpoints the mobilization of resources and the further utilization of resources (2) It highlights the financing of the general expansion of the business firms (3) It exemplifies the utilization of debt finance in the structure of financing (4) It portrays the relationship between the financing, investment, liquidity and dividend decision of the firm during the given point of time.

SCOPE OF THE STUDY 10 | P a g e



Financial analysis consists of funds flow analysis.



To know funds flow from one to one, as the time available is very limited and study is continued to overall financial condition of a firm.



The study to know working capital increase or decrease, funds from operation, source and application of funds



To highlights the financing of the general expansion of the business firms



To exemplifies the utilization of debt finance in the structure of financing

OBJECTIVES OF THE STUDY



To Provide employment to the local employees

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

To supply best cement at economical prices



To get the optimum utilization of the raw materials available of their own mines.



It exemplifies the utilization of debt finance in the structure of financing



It portrays the relationship between the financing, investment, liquidity and dividend

decision of the firm during the given point of time. 

Manufacturing quality cement and to stand as a market leader in south India.

RESEARCH METHODOLOGY:

Research Design:

Analytical Study

Data Sources

Secondary Data

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:

THE DATA COLLECTION INCLUDES:



Data collected from annual reports of Zuari Cement Limited.,



Reference form textbooks relating to financial management.



Secondary Data



The secondary data was collected form already published sources such as annual reports, returns and internal records

TOOLS OF ANALYSIS Various statistical tools such as percentages averages were used to process the date, of effectiveness of funds flow in organization & management in ZUARI CEMENT LIMITED. SECONDARY SOURCES: Published annual reports of the company for the year 2016-19

PRIMARY SOURCES: Detailed discussions with Vice-President. Discussions with the Finance manager and other members of the Finance department.

DATA ANALYSIS The collected data has been processed using the tools of 

Ratio analysis



Graphical analysis



Year-year analysis 13 | P a g e

These tools access in the interpretation and understanding of the Existing scenario of the Capital Structure. 

The primary data was gathered through personal interaction with the director of the company.



The secondary data was collected from company’s annual reports from 2016-17 to 201819, various books and Internet.

LIMITATIONS OF THE STUDY The funds flow management has a number of uses, however, it has certain limitations also, which are listed below.

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1. It should be remembered that a funds flow management is not a substitute of an income statement or a balance sheet. It provides only some additions information as regards charges in working capital. 2. Cannot reveal continuous changes. 3. It is not an original statement but simply is arrangement of data given in financial statements. 4.

It is essentially historic in nature and projected funds flow management cannot be prepared with much accuracy.

5. Change in funds is more important & relevant for financial management than the working capital.

RESEARCH TOOLS: FUNDS FLOW MANAGEMENT - SHARE CAPITAL OF ZUARI CEMENT LIMITED

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31st March 2019 (Amalgamated) 1. Share Capital Authorized 27,00,00,000 (Previous period : 27,00,00,000) equity shares of 27,000.00 Rs.10 each 19,00,00,000 (previous period : 19,00,00,000) 9% redeemable non- 19,000.00 convertible cumulative preference shares of Rs. 10 each Issued, subscribed and fully paid up 25,79,61,400 (previous period : 25,79,61,400) equity shares of 25,796.16 Rs.10 each [refer to note (a) and note (b) below] 19,00,00,000 (previous period : 19,00,00,000) 9% redeemable non- 19,000.00 convertible cumulative preference shares of Rs. 10 each 42,796.16

TAX ASSET / LIABILITY AT THE BALANCE SHEET OF ZUARI CEMENT LIMITED

31st March 2019 (Amalgamated) Deferred tax liability Excess of depreciation allowable under Income-Tax Act, 1961 over depreciation provided in accounts.

6,449.72

Total

6,449.72

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Deferred tax asset Unabsorbed losses and depreciation (to the extent of virtual certainty) [refer Note I below)

--

Provision for leave enfundsment

197.37

Voluntary retirement expenditure allowable under Income-Tax Act 1961.

42.25

Disallowance under Section 43B

154.08

Provision for doubtful debts and advances

50.93

Provision for stores and spares

209.01

Others

190.72

Total (B)

790.36

Net Deferred tax liability (A – B)

5,659.36

Deferred tax liability taken over on amalgamation

320.00

Deferred tax charge for the year

5,339.36

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CHAPTER-II LITERATURE REVIEW

The basic financial statements i.e., the Balance Sheet and Profit & Loss A/c or Income Statement of business reveals the net effect of various transactions on operational and financial position of the company. The balance sheet gives a summary of the assets & liabilities of an undertaking at a particular point of time. There are many transactions that take place in an undertaking and which do not operate Profit & Loss A/c. Thus another statement has to be prepared to show the change in Assets & Liabilities from the end of one period of time to the end of another period of time. The statement is called a statement of changes in financial position or a Funds Flow Management.

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The Funds Flow Management is a statement which shown the movement of funds and is a report of financial operations of business undertaking. In simple words it is a statement of source and application of funds. MEANING & CONCEPT OF FUNDS The term “Fund” has been defined and interpreted differing by different experts. Broadly the term fund refers to all the financial resource of the company on the other extreme fund has been understood as funds only. The most acceptance meaning of the “fund” is “working capital”. Working Capital is excess of current assents over current liability. The term fund has a variety of meaning. A) FUNDS FUND OR NARROW SENSE In a narrow sense, funds mean only funds. ‘Funds Flow Management portrays net effect of various business transactions funds into account receipts & disbursement of funds. The concept of preparing funds from statement is not accepted, as there are many such transactions that do not affect funds but represent the flow of fund. For Ex: Purchase of furniture on credit does not affect funds but there is flow of fund. B) CAPITAL FUND (or) BROADER SENSE Here funds means all financial resources used in business, whether in the form of men, money, material, machine & others. C). NET WORKING CAPITAL (or) POPULAR SENSE Networking capital means differences between current assets & liabilities. A fund generally refers to funds or funds equipment or to working capital.

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MEANING & CONCEPT OF FLOW OF FUNDS: The term flow means movement...