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Funds Flow Statements of Lanco Industries ltd., Srikalahasti

INDUSTRY PROFILE

About the industry

India, in 1994 has become the 4th largest producer of cement in the

world. This impressive record owes its origin to the progressive policies of the

government since late 70s and enabled on assured 12% post tax return on net

worth (70). It economy refers of July 91 gave a further fillip by abolishing the

licensing system for setting up cement plants. Since then, innumerable

technological development look place in cement production enabling cost

reduction and mass production. The kilns of the late 70,s were replaced by dry

kilns which reduced the fuel cost by 30%. Thermal efficiency, was improved

by instilling pre-heaters, followed by the addition of pre-calcinatory. Optimal

usage of fuel and power we achieved through computerization and quality

control or raw materials.

In a developing country like India, the requirement of housing andinfrastructure is high and so the demand elasticity of the cement with respect to

G.D.P of 1.6% is also high.

Plants under the Group

The pig iron and Lanco Cement are two plant are two plants, which are

presently under the name of M/s. Lanco Industries Limited and Lanco

Construction Limited is the sister of concern of it.

Lanco Pig-iron Division

It is located at Rachagunneri. The Pig-iron is commissioned in a record

time of eleven months, drawing on the groups expertise in civil engineering

and industrial construction.

YOGANANDA INSTITUTE OF TECHNOLOGY & SCIENCE, Tirupati 4




Highlights

State of art mini blast furnace.

Strategic location with easy access.

One of the few plants with its own railway siding.

High quality ore from the neighboring Donimalai deposits,

Access to best grade coke from China.

90,000 tpa capacity.

Proximity to end-users.

Manufacturing all grades of pig iron with the highest rating

quality.

Cement Division

Lanco Industries limited has setup a Portland slag cement plant of

70,000 TPA capacities at Rachagunneri. The cement plant utilizing as a raw

materials-slag, coke breeze& iron are time being generated by the pig iron

plants as by product & waster. By this cement plant LANCO INDUSTRIES

LIMITED adding values to by -products /waste generated from pig iron, in

addition to solving the problem of storing slag in the plant promises.

The main plant & machinery installed is lime stone crusher , raw mill

system for blending and grinding iron ore, clay, limestone& coke breeze, a

vertical shift kiln, a cement mill for grinding slag, clinker &gypsum & slag

drying system.

Cement Industry Highlights

The India cement industry has return on investment. There exist a large

markets which are not yet been completely taped. With the existing levels of

supply and growing demand the prices tend to rise. But, the industry being a

fast growing one, many players are attracted. Every year new capacities are

added raising the supply levels, price stability is thus maintained and the high

profits are observed by new entrants.





The per capita consumption of manufacture commodities like steel,

power and cement are indicators of the economic state of a country. Of the total

output nearly 95% is accounted for by the private sector. However, in terms of

usage, the private sector, accounts for only 90% while the government sector

accounts for 10%. The housing activity accounts for 55% of total consumption.

Nearly 47% of the total costs, most of which are administrated prices are

beyond the control of cement units. The cost elements include limestone, coal,

transport, freight, power consumption and excise duty.

Production and Consumption Pattern Of Cement

In the case of cement production regional imbalance continue. Cement

plants are generally put up where limestone is available. This is because, to

produce I ton of cement 1 Vi tones limestone is required. Also it is easier to

transport cement than limestone.

Cement is mainly produced in the western and southern regions. Hence,

only half of the cement produced is consumed within the region. Cement is

usually transported from south to west, north no east and from west to north

and east. North are the most deficit regions, while west is the most surplus

region which are close to the consumption and excise duty. The destination of

cement transport is mainly dependent on mode of transport available and the

transportation cost incurred.

Cement Manufacturing Process

In wet process, limestone is crushed and grounded and mixed with water

to from slurry which is fed in to the kiln. The slurry has water content of 30-

40%. Before the mineralogical process commences, the water content in the

slurry has to be evaporated. This process consumes high energy and power.

On the other hand, the dry process is more energy efficient. The raw

materials are dried in a combined drying and grinding plant to reduce the





moisture content to less than 1%.

Due to regular shifts from wet and dry process nearly 89% of the total

industries kiln capacity is at dry process. Of the remaining, 9% wet process and

2%is coal consumption. The energy costs reduce by 30-40% and the kiln

output also increases for a given size kiln, the output for dry process is 250-

3007- as compared to 130-1507- for semi dry and 100% for wet process. The

capacity utilization is also higher for dry process plants.

Cement Branding

Cement has emerged as a commodity product .brand play and impotent

role especially in metres like Delhi, Mumbai, Calcutta, Chennai etc, where the

established brands surprise the success of small brands. In order to build up

their brand loyalty, companies have tie-ups with real estate agents and

construction companies. Some manufactures also organize workshops, training

and seminars to educate the consumers on the maximum use of cement.





COMPANY PROFILE

The name Lanco has been derived from the promoter of the Group Shri.

Lagadapati Amarappa Naidu. The Lanco group is a diversified multi faced

conglomerate with the business interests in Pig Iron, Cement, Power, Graded

Castings, Spun Pipes, Information Technology and Infrastructure

Development. Young technocrats with exceptional entrepreneur skills promote

the Lanco Group with a mission and a great vision and the top agenda to put

the group on the global corporate may be during the next 10 years.

"Economy builds the nation and industry builds the economy"

LANCO industries limited are one of the best mini-blast furnace pig

iron manufacturing units in our country and it was 5th plant under TATA -

KORE technology. The company was incorporated on 1st November 1991

under company's act-1956, in the name of LANCO FERROLTD.,

THE COMPANY starred construction work in august 1993. The entire

construction work was completed in a record time of 12 months. This was

achieved by teamwork of LANCO collective and the best efforts of the

contractors. With this achievement the company started commercial

productions in September 1994.

The name LANCO Ferro limited was changed to LANCO

INDUSTRIES L1MITDED ON JULY 6th, 1994.

LANCO INDUSTRIES LIMITED is located in between Tirupathi and

Srikalahasti with an access of about 30kms from Tirupati and about

Rachagunneri village, Srikalahasti Mandal of Chittoor district Andhra Pradesh

is as follows:





Cheap availability of required land.

There is more water resource.

The distance between the harbor and present work spot is less.

Proximity to raw materials.

Proximity to marketing.

To have financial subsidy.

Nearer to the railway sidings.

Well connected to the road, rail and port.

Availability of labour.

LANCO industries are importing coke from china, Japan and Australia

because; there is scarcity of prime cooking coal, which is the raw material for

producing coke. The coke, which is imported, comes to Chennai port.

Which is approximately 100km away from the site. And from there is

brought to site, and also fluxes. Which are required to produce pig iron like

Limestone, Dolomite, Quartzite and Manganese, are available in near bydistricts.

Plants under the group

The pig iron plant and LANCO cement plant are two plants, which are

presently under of m/s, LANCO industries limited and LANCO Construction

limited is the sister of concern of it.

Administration:

The general administration of the company is carried out by managing

director, and general managers of finance, commercial, operations, materials,

purchase, human resource and administration.

The chairman and managing director are holding Overall control on

administration in all aspects, with the help of Vice-President and-other General

Managers. The board consists of five member's directors, Vice-Chairman, a





Managing Director and a Company Secretary.

Lanco industries limited

Established in the year of 1993. An ISO 9002 Company, it had setup a

state of the art integrated manufacturing facility for Pig Iron through mini-blast

furnace route conforming to the latest international technology with initial

capacity of 1,00,000 TPA.

Its quality products of S G-Grade pig iron are being supplied to

foundries in the south. As a forward integration, it has utilized the slag

produced in the Pig Iron are being supplied to foundries in the south.

As a forward integration, it has utilized the slag produced in the Pig Iron

manufacturing process to install the cement plant is being met through a 2.5

mw co-generation power plant. Due to severe completion and survival,

company has increased the production capacity from 90,000 TPA to 1, 50,000

TPA from 2003.

Location

A Lanco industry limited is a rural based factory sprawling over many

areas of land with deep resources and congenial soil. It is located in

Rachagunneri village near Tirupati. Nearly 50% of the consumption of

electrical power is supplied by APSES, Government of Andhra Pradesh and

other 50% of power is maintained by the company owned Dg sets and power

plants.

Since it is a rural area labour potential is available and also company is

enjoying the subsides from state government, the Lanco group is a diversified

multifaceted onglo merale, with business interests I n Pig Iron, Cement, Power

Graded Castings, Spun Pipes, Real Estate Development, Information

Technology a past from infrastructure use development promoted by

entrepreneurial skills and the agenda to put the group on the global corporate





map during the next 10 years

Lanco Kalahasti Castings Limited:

Merged with Lanco Industries Limited:

Established in 1997 and strategically located in close proximity to the

mini-blast furnace of the Pig Iron Plant, it has a clear economic mileage over

other casting sites.

The molten metal from the blast furnace is directly used as a basic raw

material to produce graded castings, cast iron pipes and Ductile iron spun pipes

with a capacity of 60,000 TPA, which will be gradually expanded for the to

meet the surging demand of the products.

The ups to the pipe plant will be met through 10 MW captive power

plants. To emerge to enhance the necessities and the self-sufficiency, it was

decided to enhance the production capacity from 60,000 TPA to 90,000 TPA

from 2003.

Brief History of Lil Since Incorporation Till Date

Lanco Industries Limited (LIL) was incorporated on 1st November 1991

by Lanco Group of Companies to manufacture Pig Iron using Korf (German)

technology and Cement. The unit is located at Rachagunneri Village on

Tirupati Srikalahasti road, which is about 30 Kms from Tirupati and 10 Kms

from Srikalahasti. The installed capacity of Pig Iron was 90,000 TPA and withsimilar capacity 90,000 TPA for cement.

Due to the poor demand and other reasons, the operations of the cement

unit of the Company was suspended and the unit was reengineered for

producing a different product mix having potential in South India.

As a measure of forward integration project for adding valueto the Pig Iron manufactured by the Company, LIL floated an another





company named Lanco Kalahasti Castings Limited (LKCL) on 4th March

1997 to manufacture iron castings and spun pipes in the same campus of

the Company with an annual capacity of 40,000 TPA and 35,700 TPA

respectively.

However, due to falling Pig Iron prices, increase additional

capacity in the industry, competition and the technical and financial

assistance, the operations of both LIL and LKCL were affected and the

Company was exploring financial and technical strategic alliance with

Indian 1st Foreign Partner.

During the same time Mrs. Electrosteel Castings Limited, was also

looking for additional capacities for producing spun pipes. Considering the

synergies involved, Lanco Industries Limited entered into a strategic alliance

partnership during December 2002, with Mis. Electrosteel Castings Limited

(ECL), Kolkatta a. leading manufacturer of CI, Pipes and DI pipes. This was

win-win situation for both LIL and ECL.

After takeover, a financial re-engineering and re-structuring of LIL was

undertaken by ECL by implementing the following:

Immediately after take over an amount of RS.2200 lakhs was infused as

share capital of the Company by Mis ECL to strengthen the equity base

of the company.

During 2002, the capacity of Pig Iron was increased from 90,000 TPAto

150,000 TPA.

With effect from 1st April, 2002 LKCL was merged with the company

to take advantage of the close synergy in the business of the two

companies, since a large part of Molten Iron/Pig Iron is consumed by

LKCL for manufacture of 01 Pipes.

After the merger, the shctre capital of LIL, the paid up share value of

RS.101- was reduced to RS.2.50 per share and accordingly one share of





RS.101- each fully paid up in LIL was issued to all the existing

shareholders for every 4 shares held by them.

During 2003, the capacity of the 01 pipes was increased to 90,000 TPA.

During 2004, the company took the step of backward integration by

setting up 150,000 TPA coke oven plant in the same complex, which

was commissioned in June 2005.

During 2005, the company started setting up of a Captive Power

Plant of 12 MW by using the waste heat recovered from the coke

oven plant which is expected to be commissioned by March

2006.

An additional amount of RS.25 crores is being spent on other capital

works like revamping of bitumen coatings machine, balancing

equipment and facilities for production of higher diameter DI pipes etc.

to increase the capacity of 01 pipes.

The above has resulted in the company witnessing a profitable years

after a gap of 8 years during the years ended 31st March, 2003, 2004 and 2005

and a dividend of 10% was declared for the years ended 31 st March 2004 and

2005 to the shareholders.

Step-by-Step Company's Growth

1991 - Incorporation of Lanco

1994 - Setting up of Mini Blast Furnance with 90,000 TPA capacity

1995 - Setting up a 250 TPO Mini cement Plant

1997 - Setting up of LKCL for manufacture of 40,000 TPA castings and

35,000 TPA 01 pipes.

2002 - Infusion of Rs. 2200 lakhs to the equity and inancial restructing

2003 - Merger of LKCL with LIL for synergy

2004 - Capacity of Pig Iron was increased to 90,000 TPA to 150000

TPA

2005 - Capacity of 01 pipes iron was increased to 90,000 TPA





2006 - Commissioning of 150,000 TPA coke oven plant.

2007 - Setting up of Captive power plant of 12 MW by using the waste

heat

Recovered from the coke oven plant.

2008 - Merger of LKCL with LIL for synergy.





Committee of LANCO Executive and Directors (COLEAD)

COLEAD is the apex review and decision – making body of LANCO Group.

Pradip Kumar Khait Chairman, LANCO Group of Companies

G. Bhaskar Rao Vice Chairman, LANCO Group of CompaniesL.Sridhar Director, LANCO Group

G. Venkatesh Babu Joint Managing Director, LANCO Group

J.Suresh Kumar Chief Financial Officer, LANCO Group

P.Panduranga Rao Director and Chief Executive Officer, LANCO

Kondapalli Power Private Limited and ABAN Power

Company Limited.

D.V.Rao Director and Chief Executive Officer, LANCO Green

Power Private Limited

K. Raja Gopal Director and Chief Executive Officer, LANCO

Amarkantak Power Private Limited

D.N.Reddy Director Operations, LANCO Infratech Limited

K.K.V. Nagaprasad Director and Chief Executive Officer, Rithwik Energy

Systems Limited and Clarion Power Corporation

Limited.

V. Sreenivas Director – Corporate Affairs LANCO Group Limited.

M.N.Srinvas Executive Director LANCO Electric Utility Limited





Competitors of Lanco cements; -

In the cement industry the Lanco industries are facing the competition

from the following cement industries:

Sagar cements limited,

Ambuja cements limited,

Bheema cements limited,

Sri Chakra cements limited,

Priya cements limited,

K C P cements limited,

Ultratek cements limited,

Ambuj a cements limited,

Maha cements limited,

Raasi cements limited,

Vishnu cements limited,

Nagarjuna cements limited.

Bharati cements limited.





PRODUCT PROFILE

GROUP COMPANIES

POWER PROJECTS

With operational experience in gas, wind and biomass; based power

projects and a strong foothols in coal and hydropower generation, LANCO is

emerging as a key player in the Indian power sector.

INFORMATON TECHNOLOGY

LGS is a strategic initiative to provide world-class Information

Technology solutions to global customers, delivering them maximum business

value through continuous innovation.





CIVIL CONSTRUCTION

Power projects, industrial structures, institutional facilities, mass

housing, water supply projects, flyovers and bridges such varied operations

serve to explicate the diversification roadmap of LANCO.

PROPERTY DEVELOPMENT

Being a Pioneer in Civil Construction and Infrastructure

Development, LANCO is venturing into property Development with the

winning of the bid for IT Parks-cum-Commercial and residential complex in

Hyderabad and Visakhapatnam of Andhra Pradesh.





MANUFACTURING

Being one of the largest integrated foundried in India with Ductile Iron

Spun Pipes, Metallurgical Coke, Pig Iron and Slag cement as products,

LANCO has a towering presence in the Indian manufacturing sector.





STATEMENT OF THE PROBLEM

Funds flow statements are major tools in the hands of the finance

management and analyzing the existing data. Funds flow statements are

calculated for finding the trend in liquidity position, marginal solvency and

utilization of funds and inventory maintenance over a period of time. This

study mainly focuses in above said area by using financial ratios.





OBJECTIVES OF THE STUDY

The major objective of the study is to assess the inflow and outflow of the funds in the LANCO INDUSTRIES LIMITED.

The specific objectives of the study are:

To assess the financial position of the LANCO INDUSTRIES LTD., To

study and analyze the changes those have taken place in the

financial position of the company.

To analyze the funds flow operations.

To identify sources and applications of the funds.

To find out operating efficiency of the organization.

To examine the working capital position of the company

To suggest some measures to improve the performance of the company.





SCOPE OF THE STUDY

The scope of the study covers the previous five -years financial

reports of the company.

An extensive study is done on the investment made by LANCO

INDUSTRY; on its funds flow statements and its adequacy, and the

factors determining that investment.

The study concentrates on the liquidity position of the firm and the brief

study.

The technique used by the firm of the management of its current assets

and sources though which the finance of the funds flow statement in

availed for the firm.

The study covers all the financial information of the firm.





NEED OF THE STUDY

The main need of the study is to study the sources and applications of

funds in the company and methods to evaluate the financial performance of the

company.

With the help of funds flow statements to evaluate the pattern of the

firm.

The funds flow reveals clearly the causes for the financial difficulties

of the company.

To know about the need of the funds for the growth of the firm.

To know the working capital position of the company.

With the help of the funds flow statements we can estimate the cash

balance of the company.

To find out the out flow and inflow of the funds.





LIMITATIONS OF THE STUDY

The funds flow analysis of the organization fully depends upon the

secondary data. The primary data were used only to throw light on the

company's history and growth. Thus the following are the main limitations of

the

study.

These statements were over all reports (2005-06 to 2010-11). Hence it is

a postmortem analysis of the financial statement.

The figures taken from the financial statement like profits and loss

Accounts and balance sheets were historical in nature.

Time value of money is not being considered.





REVIEW OF LITERATURE

In our present day economy, finance is defined as the provision of

money at any time when it is required. Every enterprise, whether big, medium

and small, needs finance to carry out its operations and to achieve its targets.

In fact, finance is so indispensable today that it is rightly said that it is the

lifeblood of an enterprise. Without adequate finance, no enterprise can

possibly accomplish its objectives.

Finance may be defined as the provision of money at the time when it is

required. Finance refers to the management of flows of money through an

organization. It concerns with the application of skills ion the manipulation

uses and control of money divestment authorities have interpreted the term

finance differently.

Finance is concerned with the task of providing funds to the Enterprises

on the term that is most favorable towards the attainment of the Organizational

goal's objects.

The function of finance is not merely Furnishing funds to the

organization. Finance has a broader meaning and it covers financial planning,

forecasting of cash receipts and disbursements, rising of funds, use and

allocation of funds and financial control. The area of operation of finance

manager is vague from one compact to another and industry - to - industry etc.

There are many definitions of finance of all the best was of Howard and

Upton. "That administrative area of set of administrative area of organization

will have the means to carry out as objectives to satisfactorily as possible and at

the same time meet its obligations as they become due".





The fundamental principle of finance:

A business proposal - regardless of whether it is a new investment or

acquisition of another company or restructuring initiative - raises the value of

the firm, only if the present value of the future stream of net cash benefits

expected from the proposal is greater than the initial cash outlay required to

implement the proposal.

The difference between the present value of future cash benefits and the

initial outlay represents the net present value of NPV of the proposal.

Significance of financial management;

Financial management is the managerial activity, which is concerned

with planning and controlling of the firms financial resources.

The subject of financial management is of immense interest both to the

academicians and the practicing managers. The practicing managers all

interested in this subjects become the most crucial decisions of the firm all

those which results to the finance, and on understanding of the theory of

financial management provides them with conceptual and analytical insights to

make these decisions skillfully.

As a separate activity as discipline it is of recent origin. It was a branch

of economic till 1890, today financial management is recognized as the most

important branch of business administration.

According to Howard, and Upton, financial management involves the

application of general management principals to particular financial operation.

N.G. Wright financial management is intimately itself woven into the


Net present value =

Present value of future cash benefits — initial cash outlay




fabric of the management itself its central role is concerned with the same

objectives as these of the management which the way in which the way in

which the resources of the management in to three main areas.

Decision on the capital structure.

Allocation of available funds to specific uses.

Analysis and appraised of problems.

Financial management includes planning of finance cash budgets and

source of finance. Era sloman and John prigle insists that financial management

must attend to investment decision because if these decisions.

The Balance sheet:

The balance sheet shows the financial conditions or the state of affairs of

the firm at a particular point of time. More specifically the balance sheet

conditions detailed information of the firm's assets and liabilities. Assets

represents economic resources possessed by the firm while the liabilities are

the amounts payable by the firm. The balance sheet gives concise summery of the firm resources and obligations and measures the firms liquidity and

solvency.

Profit and loss account:

The profit and loss account shows the profitability of the firm by giving

the details about income and expenses. It is simply income and expenditure

account. Revenues are benefits, which customers contribute to the firm in

exchange of goods and services. The cost of economics resources used in

providing goods and services to the customer are called expenses.

Profit and loss account provides a concise summary of firm's revenues

and expenses during the period of time and measures its profitability.

The above two statements provide useful information regarding the

operations of the firm.





They fail to explain the financial data required for financing and

investing decisions by the management i.e. causes for changes in assets and

liabilities and owner's equities. They do not indicate the movement of funds

between sources and uses from the end of the period to the end of next periods.

It is therefore; necessary to prepare an additional statement called funds flow

statements to overcome the above difficulties.

Funds flow statement;

The funds flow statement is a statement, which shows the movement of

funds and is a report the financial operations of the business undertaking. It

indicates various means by which funds were obtained during a particular

period and the ways in which these find were employed.

In simple, the funds flow statement is a statement of sources and

application of funds. In short, it is a technical device designed to high light the

change in the financial condition of a business enterprise between tow Balance'

Sheets.

According to Robert Anthony “The funds flow analysis describes the

sources fro which additional funds were derived and the uses to which

these funds were put."

According to Fouke, "A Statement of sources and Applications of

funds is a technical device designed to analyze the changes in the financialposition of a business enterprise between two periods."

Funds flow statement is widely used by the financial analyst and credit

granting institution and financial managers in performance of their jobs. It has

become a useful tool in their analytical kit. This is because the financial

statement like income statement and- balance sheet have limited role to





perform.

Income statement measures flows restricted to transaction that pertain to

rendering of good and services to customers. The balance sheet is merely a

static statement's these statements do not sharply focus those major financial

transactions, which have behind the n\balance sheet changes.

However financial analyst must know the purpose for which the loan

was unitized and the sources from which it has rises. This will help him in

making a better estimate about the company's financial position and polices.

Uses, significance and importance of funds flow statement;

Analysis of financial operations: -

A funds flow statement shows bow the resources have beer obtained and the

uses to which they are put.

The funds flow statements determining the financial consequences of

business operation. It also useful in guiding whether tne firm has expanded at

too fast rate and whether financing is strained, it also point out to the

effectiveness with which the management has handled working during the

period under review.

Evaluation of the firms: -

This statement can consist the financial manager in planning

intermediate and long-term finance for obtaining sources in the further and

determining how they are to be used. That is analysis of the major sources of

funds in the past reveals what positions of the firms growth was financed

internally and what position externally.

Comparison with the budget: -

The statement defines the past flow of funds and gives insight in to the

evolution of the present situation. It provides certain useful information about

the firms. Financial policies to the outside world like bankers, government, etc;





Funds flow statement is becoming popular with the management

because it helps to explain why in spite of earning sizable amount of profits,

the company is experiencing difficulty in making payments to creditors, the

rate of dividend on equity; shares can not be increased and the bank balance is

getting thinner. The funds flow statements has an analytical value and is an

important planning tool. It helps in guiding the destiny of the business by

enabling the executives to visualize the movements of funds that constantly

takes place. This statement also helps in working capital requirements. It

highlights and future need for funds and provides sample time to work out

suitable arrangements. The funds flow statement shows what portion

externally. The analysis of funds flow statement for the future is externally

available to the executive in planning.

General Rule:

The flow of funds occurs vhen a transaction changes on the one hand a

non-current account and vice versa. A current asset and a fixed asset.

A fixed asset and a current liability.

A current asset and a fixed liability.

A fixed liability and a current liability.





Uses-of Funds Flow Analysis:

It helps in the analysis of financial operations.

It throws light on many perplexing question of general interest.

It helps in the formation of a realistic dividend policy.

It helps in the proper allocation of resources.

It acts as a future guide. .

Limitations of funds Flow Analysis;

It is essentially historic in nature and projected funds flow statement

cannot

be prepared with much accuracy.

It cannot be reveal continues changes.

It is not an original statement but simply a re - arrangement of data

given in the financial statements.

Different names of funds Flow Statement:

A statement of sources and Uses of funds.

A statement of Sources and Application of funds.

Where got and where gone Statement.

Inflow and out flow of funds statement.

Main purpose of funds Flow Statement:

To help to understand the changes in assets and which are not evident

Financial statements or I the income statement.

To inform on to how the loans to the business has been used.

To point out the financial strengths and weakness of the business.

To help in planning sound dividend policy.





Procedure for preparing a Funds Flow Statement:

The preparation of funds flow statement consists of some parts:

Statement or schedule of changes in working capital.

Statement of sources of funds.

Statement of application of funds.

Finding out the hidden transactions or changes in non-current assets and

non-current liabilities.

Statement or Schedule of changes in Working Capital;

The increase or decrease in working capital can be calculated by

preparing the schedule of changes in working capital. Working capital means

the excess of current assets over current liabilities. Statement of changes in

working capital is propose to show the changes in the working capital between

two balance sheets data. This statement is prepared with the help of current

assets and current liabilities derived from two balance sheets.

While preparing a schedule of changes in working capital, it should

be note that

Increase in Current Assets, Increases the Working Capital.

Decrease in Current assets, Decreases the Working Capital.

Increase in Current Liabilities, Decreases the working capital.

Decrease in Current Liabilities, Increases the Working Capital.

An increase in current assets and increase in current liabilities does not

affect working capital.

A decrease in current assets and decrease in current liabilities does not


Changes in fixed (non-current) assets and fixed (non-current) liabilities






The changes in all current assets and current liabilities are merged into

one figure only either an increase of decrease in working capital over the

period for which funds statements has been prepared.

If the working capital at the end of the period is more than the working

capital at the beginning the difference is expresses as "increase in working

capital". On the other hand, if the working capital at the end of the period is

less than at the commencement, the difference is called "decrease in working

capital".

Current Assets:

The expression 'current assets' denotes those assets, which are

continually on the move. Since they are constantly in motion, they are known

as the circulating capital of the business. These assets can or will be convertedinto cash during a complete operating cycle of the business.

Current assets include:

Stock-in-trade or inventories,

Debtors,

Payments in advance or prepaid expenses,

Stores,

Bills receivable,

Cash at bank,

Cash in hand and

Work-in-progress etc.


Working Capital = Current assets - Current Liabilities




Current Liabilities:

“Current Liabilities” are those liabilities, which are to be paid in the near

future, i.e., during a complete operating cycle of the business.

Current liabilities include:-

Trade creditors,

Accrued or outstanding expenses,

Bills payable,

Income tax payable,

Dividends declared and

Bank overdraft.

Note: - according to the experts opinion 'bank overdraft' has a tendency to

become more or less permanent source of financing and hence it need not be

included among “current liabilities”.





FORMATION OF STATEMENT OF CHANGES IN WORKING

CAPITAL

Particulars Previous

year

Current

year

Change in working

capitalIncrease Decrease

Current Assets (CA) - - - -

Inventories - - - -

Raw material - - - -

Consumable stores - - - -

Finished goods - - - -

Sundry debtors - - - -

Cash in hand - - - -

Balance with bank - - - -Other current assets - - - -

Deposit - - - -

Income tax - - - -

Sales tax - - - -

Total current assets - - - -

Current liabilities - - - -

Trade Creditors - - - -

Dealers deposited - - - -

Expense payable - - - -

Total current liabilities - - - -Working capital - - - -

Current assets – current

liabilities)

- - - -

Net increase / decrease - - - -

Working capital - - - -





Statement of Sources and application of funds

Funds flow statement is a statement, which indicates various sources for

which funds have been obtained during a chain period and the uses or

applications to which these funds have been put during that period.

Source of funds

Application of funds

Source of funds Amount Application of funds Amount

Funds from operations - Funds lost in operation -

Issue of shares and Debentures - Repayment of debentures -

Receipt of dividend and interest - Reduction in share capital -

Sales proceed of non-current

asset

- Interest and dividend paid -

Long – term borrowings - Payment of long term

loans

-

Decrease in working capital - Increase in working capital -





Introduction of Ratio Analysis

Accounting is the process of identifying, measuring and communicating

economic information to present informed judgments and decisions by users of

the information. It involves recording, classifying and summarizing various

business transactions.

Financial Statements

Financial statements are the sources of information on the basis of

which conclusions are drawn about the profitability and liquidity position of

the business enterprise at the financial year. The primary objective of financialstatement is to assist decision - making.

Financial statement are end products of financial accounts, prepared by

the accountant that purpose to reveal financial position of the enterprise, the

result of its resent activities and an analysis of what has been done with the

analysis.

Types of financial statement

Financial statements primarily comprise two basic statements.

The position statement (or) the balance sheet

The income (or) profit and loss account. Analysis Meaning

The term financial analysis also known as analysis and interpretation of

financial statement refers to the process of determining financial strengths and

weakness of the firm by establishing strategic relationship between the items of

balance sheet, profit and loss account of other operative data.

Classification of Ratios

The use of ratio analysis is not confined to financial manage only. There

are different parties interested in the ratio analysis for different purposes. In

view of several of ratios, there are many types of ratio's, which can be





calculated from the information given in the financial statements. The

particular purpose of the user determines the particular ratio's that might be

used for financial analysis.

Various Accounting Ratios can be classified as follows

Traditional Classification

Functional Classification

Significance Ratios

Liquidity Ratio's

Liquidity refers to the ability of a concern to meet its current obligations

as and when these become due. The short-term obligations are met by realizing

amounts from current floating (or) circulating assets. The bankers, suppliers of

goods and other short-term creditors are interested in the liquidity of the

concern. They will extend credit only if they are sure that current assets are

enough to payout the obligations.

Current Ratio

Quick or Acid Test (or) Liquid Ratio

Absolute Liquid Ratio or cash position ratio

Net working capital Ratio.

Current Ratio

Current Ratio may be defined as the relationship between current assets

and current liabilities. This ratio, also known as working capital ratio, is a

measure of general liquidity and is most widely used to make the analysis of a

short-term financial position (or) liquidity of a firm.

Current AssetsCurrent Ratio =

Current liabilites





A relatively high current ratio is an indication that the firm is liquid and

has the ability to pay its current obligations in time as and when they become

due. On the other hand a relatively low current ratio represents that the liquidity

position of a firm is not good and the firm shall not able to pay its current

liabilities in time. "Two to one ratio" is referred to as a banker's rule of thumb

(or) arbitrary standard of liquidity for a firm.

Current assets include cash and those can be easily converted into cash with

in a short period of time generally, one year such as marketable securities,

debtors,

inventories, work-in-progress etc.

Current liabilities are those obligations which are payable within a short

period of time generally one year and include outstanding expenses, bills

payable, sundry creditors, accrued expenses short term advances, income tax

etc.

Quick Ratio (or) Acid Test Ratio

Quick ratio is known as acid test ratio or liquid ratio is a more rigorous

test of liquidity then the current ratio. The term liquidity raffs to the ability of a

firm to pay its short-term obligations as and when they become due. The two

determinants of current ratio as a measure of liabilities.

Quick ratio may be current or liquid liabilities. Inventories cannot be

termed to be liquid asset because they cannot be converted into cash

immediately without a sufficient loss of value. The quick ratio can be

calculated by dividing the total of the quick assets by total current liabilities. As

a rule of thumb (or) as a convention quick ratio of 1 1 is considered

satisfactory.

Current (or) Liquid AssetsQuick /Liquid (or) Acid Test Ratio =

Current liabilites





Absolute Liquid Ratio

Although receivables, debtors and bills receivables are generally more

liquid than inventories, yet there may be doubts regarding their realization into

cash immediately (or) in time. Absolute liquid assets include cash in hand and

at bank and marketable securities or temporary investment. The acceptable

norm for this ratio is 50% (or) 0.5 (or) 12.

AbsoluteLiquid AssetsAbsoulte Liquid Ratio =

Current liabilites

One of the value aids to the financial manager or the creditor is funds

flow statement, with which evaluate how a firm uses funds and determine how

these uses are financed. In addition to studying the past flow, the analyst can

evaluate the future flows by means of the funds statement based on forecasts.

Such as statement provides an efficient method for the financial

manager to assess the growth of the firm and its resulting financial needs as

well as to determined the best way in which those needs may be financed. In

particular, funds statements are very useful in planning intermediate and long -

term financing.

Net working capital Ratio.

The difference between the current assets and the current liabilities

excluding short-term bank borrowings is called net working capital. It is some

times used as a measure of a firm's liquidity.

It is considered that between two firms, the one having the larger

networking capital has greater ability to meet its current obligations.

This is no necessary so; the measure of liquidity is a relationship, rather

than the difference between Current Assets and Current Liabilities.

Net working capitalNet working Capital Ratio =

Net Assets

Net working capital = current assets - current liabilities





Funds flow statement (report from)

Sources of Funds

1 Funds from Operations

2 Issue of share capital ..........

3 Issue of debentures ..........

4 long term loans ...........

5 sale of fixed assets ..........

6 non-trading receipts ...........

Eg, dividend,rent, interest on donation

7 decrease in working capital (as per ...........

Schedule of changes in working capital)





RESEARCH METHODOLOGY

Sources:

The data have been collected from both the primary and secondary

sources. The data was collected from the officials of the organization.

The data collected related to the study was from the two sources.

Primary data

Secondary data

Primary Data

For the study most of the data were collected from the primary data i.e.

Income statements, financial reports etc. Consulting financial manager and

accounting assistance gathered income statements of the company.

Secondary data:

The information collected to the company profile from the company past

records and websites are secondary data. However, the entire study was based

on the primary data and secondary, which are collected from the books,

records, journal, newspaper, survey and profiles of the organization.





DATA ANALYSIS AND INTERPRETATION

LANCO INDUSTRIES LIMITED BALANCE SHEET FOR THE YEAR

2005-06

Source of funds 2005 2006

Share holder funds

A) Share Capital 5191.23 5191.23

B)Reserve and Surplus 385.97 385.97

Loan Funds :

A) Secured Loans 2855.27 3691.52

B )Unsecured Loans 1826.19 2004.22

Total 9908.69 11272.94


Fixed AssetsA ) Gross Block 7069.46 7.39.98

B) Less : Depreciation 2718.85 2373.82

Net Block 4350.61 4666.16

Capital work in progress 719.09

Investment 235.54 57.7

Current Assets, Loans and Advances

A) Inventories 1193.26 2752.56

B )Sundry Debtors 2011.67 2619.99

C) Cash and Bank Balance 629.03 1669.89

D) Loans and Advances 338.81 332.21Less: Current liabilities and Provisions

A) Current Liabilities 2828.57 3536.64

B) Provisions 66.55 40.39

Net Current Assets 1277.65 3797.62

Miscellaneous expenditure 11.14 20.58

LANCO INDUSTRIES LIMITED BALANCE SHEET FOR THE YEAR 2006-2007


Share holder funds



Loan Funds :

A) Secured Loans 10723.23 2855.27


Total 22264.36 9908.69Application of funds





Fixed Assets

A ) Gross Block 17884.47 7069.46


Net Block 13236.37 4350.61

Capital work in progress 2652.95 719.09Investment 235.54





D) Loans and Advances 1462.76 338.81

Less: Current liabilities and Provisions



Net Current Assets 5677.67 1277.65Differed Tax Assets 683.48







2007-2008


Share holder funds



A) Secured Loans 10886.36 10723.23


Differed tax liability 424.17

Total 28680.37 22264.36


Fixed Assets

A ) Gross Block 2002136 17884.47

B) Less : Depreciation 5417.03 4648.10 Net Block 14604.33 13236.37

Capital work in progress 6015.09 2652.95

Investment 589.83







A) Current Liabilities 8090.45 5052.57B) Provisions 586.14 572.72


Differed Tax Assets 683.48



2008-2009


Share holder funds



A) Secured Loans 9244.82 10886.36


Deferred tax liability 618.06 424.17

Total 32901.40 28680.37


Fixed AssetsA ) Gross Block 25035.39 2002316






Net Block 18525.70 14604.33

Capital work in progress 5604.02 6015.09

Investment - 589.83

Current Assets, Loans and AdvancesA) Inventories 9194.04 7075.18








Differed Tax Assets - -



2009-2010


Share holder funds


B)Reserve and Surplus 7179.70 3993.06A) Secured Loans 17832.33 9244.82


Deferred tax liability 2576.95 618.06

Total 43836.66 32.91.40


Fixed Assets

A ) Gross Block 35516.23 25035.39


Net Block 26388.35 18525.70Capital work in progress 862.01 5604.02

Investment - -


A) Inventories 12092.91 9194.04






B) Provisions 711.30 3545.42 Net Current Assets 16586.30 8765.23





Differed Tax Assets - -

Miscellaneous expenditure - 6.45





STATEMENT OF CHANGES IN WORKING CAPITAL(Rupees in Lakhs)

Particulars 2003-04 2004-05 Changes in working capital

Increase Decrease

Current Assets (I)

Inventories 2752.55 1193.25 - 1559.29

Sundry debtors 2619.99 2011.67 - 608.32

Cash and bank balances 1669.88 629.03 - 1040.85

Loans and advances 332.21 338.81 6.59 -

Total current assets 7374.65 4172.77 - -

Current liabilities (II)

Current Liabilities 3536.64 2828.57 708.07 -

Provisions 40.39 66.55 - 26.15Total current liabilities 3577.04 2879.51 - -

Working capital (I-II) 3979.61 1277.65 - -

Net working capital 2519.95 2519.95 -

TOTAL 3797.62 3797.62 3234.63 3234.63

Net decrease in working capital 2519.95

Interpretation

From the above table is observed that the networking capital of the company

shows decreasing trend. The total current assets of the company have decreased

from 2003-04 to Rs. 7374.65. in 2004-05 to Rs. 4172.77 in 2006-07.

But the bank balance decreased from Rs. 1699.86 to Rs. 629.03 i.e, 1040.81.

The total current liabilities increased from Rs. 3577.04 to Rs. 2879.51. The

networking capital decrease Rs. 2519.96.



Increase DecreaseCurrent Assets (I)





Inventories 1193.26 5294.05 4100.79 -

Sundry debtors 2011.67 4098.66 2086.99 -



Total current assets 4172.78 113.02.96 - -Current liabilities (II)

Current Liabilities 2828.58 5052.57 - 2223.99

Provisions 66.55 572.72 - 506.17

Total current liabilities 2985.13 5625.29 - -


Net working capital 4400.02 - - 4400.02

TOTAL 5677.67 5677.67 7311.73 7311.73


Interpretation



from Rs. 4172.78. in 2004-05 to Rs.11302.96 in 2005-06

But the bank balance decreased from Rs. 629.04 to Rs. 447.49 i.e, 181.55. The

total current liabilities increased from Rs. 2828.58 to Rs. 5052.57. The




Increase Decrease

Current Assets (I)

Inventories 5294.05 7075.18 1781.13 -

Sundry debtors 4098.66 7197.89 3099.23 -










Provisions 572.72 586.14 - 13.42



Net working capital 1783.28 - - 1783.28TOTAL 7460.95 7460.95 5034.35 5034.5


Interpretation



from2005-06 Rs. 11302.96. in 2006-07 to Rs. 16137.54 in 2008-09.






Increase Decrease

Current Assets (I)

Inventories 7075.18 9194.08 2118.9 -

Sundry debtors 7197.89 6706.59 - 491.3Cash and bank balances 247.72 350.67 102.95 -





Provisions 586.14 354.42 231.72 -




TOTAL 8765.23 8765.23 2907.24 2907.24






Interpretation



from 2006-2007 Rs. 16137.54. in 2007-08 to Rs. 18321.76 in 2009-10.






Increase DecreaseCurrent Assets (I)

Inventories 9194.08 12092.91 2898.83 -

Sundry debtors 6706.59 8814.31 2107.72 -

Cash and bank balances 350.67 420.10 69.43 -





Provisions 354.42 711.03 - 356.61Total current liabilities 9556.53 10030.68 - -



TOTAL 16586.30 16586.30 8295.22 8295.22


Interpretation







from 2007 -08 Rs. 18321.76. in 2008-09 to Rs. 26616.98 in 2007-08 But the

bank balance decreased from Rs. 350.67 to Rs. 420.10 i.e, 69.43. The total

current liabilities increased from Rs. 9556.53 to Rs. 10030.68. The networking

capital decrease Rs. 7821.34.





The statement showing the working capital from 2003-04 to 2008-09

Year Increase Decrease2005-06 - 2519.95

2006-07 4400.02 -

2007-08 1783.28 -

2008-09 1304.48 -

2009-10 7821.34 -





-2519.

4400.

1783.1304.

7821.

-4000

-2000

0

2000

4000

6000

8000

10000

2005-06 2006-07 2007-08 2008-09 2009-10

Interpretation

The above diagram clearly shows that the net working capital of the LIL

showing an increase with a decreasing trend. As the net working capital for the

year 2005-06 is -2519.95 it is decrease in the net working capital but for the

year after 2006-07 the net working capital of the firm was increasing at a

decreasing rate i.e., 4400.02, 1783.28, 1304.48 and 7821.34 respectively for the

years 2006-07, 2007-08, 2008-09, 2009-10 and 2009-10 and 8534.21.





Statement of Sources and Applications of Funds for the year ending at 31st

March 2005.

Sources Rs Applications Rs

Decreasein working Purchase of fixed assets 29.49

Capital 2519.96 Capital W-in-Progress 719.09

Secured loan paid 836.25

Unsecured loans paid 178.02

Purchase of investments 178.49

Funds lost in operation 578.62

2519.96 2519.96

Interpretation

It is evident from the above table the total funds during the period from 2004-

2005 amounts to Rs. 2519.95

In the application side we can see the 15% of funds were utilized for purchase

fo fixed assets, 33% of funds were utilized to pay secured loans and 8% to

unsecured loans. Funds lost in operation are of 44%






March 2007.


Secured loans 163.13 Purchase of fixed assets 2136.89

Unsecured loans 4184.15 Capital W-in-P 3362.14

Funds from operation 3524.86 Purchase of investments 589.83

Increase in working

capital

1783.28

7872.14 7872.14

Interpretation

It is evident from the above table that the total flow during the period from

2006-07 amount R.s 7872.14 lakhs. In the total funds 3% of funds were

received through secured loans, 87% of funds received through the unsecured

loans and the remaining 10% of funds received from funds from operation.

Regarding application of the funds the 63% were invested in fixed assets i.e.

purchase of fixed assets and remaining 37% of funds were utilized for working

capital.






March 2008.

Sources Amount Applications Amount

Unsecured loans 5480.37 Investment 5014.63

Capital W-in-P 411.07 Purchase of fixed assets 1641.55

Sale of investment 589.83 Increase in working

capital

1304.28

Funds from

Operation 1478.19

7960.46 7960.46

Interpretation

It is evident from the above table that the total flow during the period from

2007-08 amount Rs. 7960.46 laksh. In the total funds 3% of funds were

received through secured loans, 87% of funds received through the unsecured

loans and the remaining 10% of funds received from funds from operation.

Regarding application of the funds the 63% were invested in fixed assets i.e.

purchase of fixed assets and remaining 37% of funds were utilized for working

capital.






March 2009.


Secured loan 1449.41 Purchase of fixed assets 2230.27

Capital W-in-Progress 107.56

Unsecured loans paid 1462.33

Increase in working

Funds from

operations

10172.09 Capital 7821.34

11621.50 11621.50

Interpretation


2009 amounts to Rs. 11621.50.

In the application side we can see the 19.19% of funds were utilized for

purchase of fixed assets, and 12.58% to unsecured loans. Funds from

operations are of 87.53%.






March 2010.


Secured loan 4813.21 Purchase of fixed assets 1851.63

Unsecured loans 3189.14 Capital w-in-progress

increasing working

capital

436.64

Funds from

operations

2820.13 8534.21

10822.48 10822.48

Interpretation


2010 amounts to Rs. 10822.48.

In the application side we can see the 17.52% of funds were utilized for

purchase of fixed assets, and 26.58% to unsecured loans. Funds from

operations are of 25.51%.





RATIO ANALYSIS

Current Ratio:

Year Current Assets Current

Liabilities

Current Ratio

2005-06 4,172.78 2,895.13 1.44

2006-07 11,302.96 5,625.29 2.01

2007-08 16,137.54 8,676.29 1.86

2008-09 18,321.76 9,556.63 1.92

2009-10 26,616.98 10,030.68 2.65

Source: Collected from the annual Report of Lanco Industries Ltd, Tirupati.





C urrent R

1.

2.01.8 1.9

2.6

0

0.51

1.5

2

2.5

3

2005-062006-072007-082008-092009-10

Year

R

a t i o s

Inference

The above table shows that the current ratio’s of the company from 2005-06

to2009-10. From the current ratio table it is clear that the current ratio of the

year 2005-06 is satisfactory because it satisfies the rule of thumb ratio i.e., 2:1

ratio.

But the current ratio of the remaining two years i.e., 2005-06 and 2006-

07 is not satisfactory 2007-08, 2008-09 and 2009-10 is satisfactory. For better

performance the company should hold optimum current assets to meet the

current liabilities.





Quick Ratio (or) Acid Test (or) Liquid Ratio


Liabilities

Current Ratio

2005-06 2,979.52 2,985.13 1.032006-07 6,008.91 5,625.29 1.07

2007-08 9,062.36 8,676.59 1.04

2008-09 12,062.26 9,556.53 1.08

2009-10 14,120.10 10,030.68 1.45


Qu ick R atio (or) Ac id T est (or) LRati

1.0 1.0 1.0 1.0

1.4

0

0.5

1

1.5

2

2005-06 2006-07 2007-08 2008-09 2009-10

Year

R a t i o s

Inference:

From the above table shows indicates Acid test ratio the Company. Acid

test ratio from 2005-06 to 2009-10 is more than the normal standard of 1:1.

Liquid Assets are quite sufficient to provide a cover to the current liabilities.





Net working Capital:


Liabilities

Current Ratio

2005-06 3797.62 9908.69 0.132006-07 5677.67 22264.36 0.26

2007-08 7460.95 28680.37 0.26

2008-09 8765.23 32901.40 0.27

2009-10 16586.30 43836.66 0.38


Net W orking C apita

0.1

0.2 0.2 0.2

0.3

0

0.1

0.2

0.3

0.4

2005-062006-072007-082008-092009-10

Year

R a t i o s

Interpretation

The net working capital ratio shows the relationship between the net current

assets and the net total assets. The above diagram shows the firm is having an

increasing net working capital.





Lanco industries balance sheet as on 2005-10

Particulars 2005-06 2006-07 2007-08 2008-09 2009-10

I. Sources of Funds (In Lacs) (In Lacs) (In Lacs) (In Lacs) (In Lacs)

1. Share holders funda) Share Capital 3976.36 3976.36 3976.36 3976.36 3976.36

b) Reserves and Surplus 2610.18 3804.74 3993.06 7179.70 8549.77

2. Loan Fund

a) Secured Loans 10723.23 10886.36 6244.81 17832.33 22645.54

b) Unsecured Loan s 5404.59 9588.74 15069.11 12271.32 15460.46

3. Differed Tax Liability 424.17 618.06 2576.95 3123.73

TOTAL 22264.36 28680.37 32901.40 43836.66 53755.86

II. Application of funds

1. Fixed Assets

a) Gross-Block 17884.47 20021.36 25035.99 35516.23 38974.86

b) (-) Depreciation 4648.10 5417.03 6510.29 9127.88 10734.88

c) Net Block 13236.37 14604.33 18525.70 26388.35 28239.98

d) Capital Work-in-Progress 862.01 425.37

2. Investment 589.83 - -

3. Current Assets Loans and

Advances

a) Inventories 5294.05 7075.18 9194.08 12092.91 14436.48

b) Sundry Debtors 4098.66 7197.89 6706.59 8814.31 11966.16c) Cash & Bank balances 447.49 247.72 350.67 420.10 3463.66

c) Loans and Advances 1462.76 1616.75 2070.42 5289.66 6107.54

Total

Less: Current Liabilities &

Provisions

11302.96 16137.54 18321.76 26616.98 35973.84

a) Current Liabilities 5052.57 8090.45 9202.11 9319.38 10108.38

b) Provision

Net Current Assets

572.72

5677.67

586.14

7460.95

354.42

8765.23

711.30

16586.30

774.95

25120.51

4. Differed tax asset

5. Miscellaneous Expenditure 13.83 10.17 6.45 - 25090.51

Profit and Loss account - - - -

TOTAL 22264.36 28680.37 32901.40 43836.66 53755.86





FINDINGS

In 2005-06 financial year 34% of funds generated through trading

activity and if we observe at application side the share capital was

reduced by 7% purchase of fixed assets is by 67% and not increase in

working capital is of 26%.

In 2006-07 financial year 10% of funds generated through trading

activity and another 90% through secured loans and unsecured loan. In

applications the 63% of.funds were utilized to purchase fixed assets.

In 2007-08 financial year 7% of funds generated through trading activity

and another 93% through secured loans and unsecured loan. In

applications the 42% of funds were utilized to purchase fixed assets.

Current ratio of the company is in below the standard norms. Quick

ratio;: is in standard norm position. This means current liabilities are

very high than compare with the current assets.

In 2009-10 financial year 19.19% of funds utilized for purchase of fixed

assets, and 12.58% to unsecured loans. Funds from operations are of

87.53%

In current ratio’s of the company from 2004-05 to 2009-10 from the

current ratio of the year 2005-06 is satisfactory. But the current ratio of

the remaining two years i.e., 2004-05 and 2005-06 is not satisfactory.

For better performance the company should hold optimum current assets

to meet the current liabilities.

The quick ratio (or) Acid test (or) liquid ratio the company acid test ratio

from 2005-06 to 2009-10 is more than normal standard at 1:1 liquid

assets are quite sufficient to provide a cover the current liabilities.





CONCLUSION

The following conclusions are arrived at based on the observations made

on the present study –

Except of the first year the study period it is observed that the fund for

operations is on loss. It generated the funds in application of total funds.

Except of the first year of the study of period, funds were utilized

for financing the working capital requirements.

The study revealed a mixed trend of application and sources of funds in

respect of secured and unsecured loans.





BIBLIOGRAPHY

James C.Vann Home Financial Management, 9th edition Prentice -Hall

of India Private Limited, New Delhi, 1994.

Khan M.Y. & Jain P.K. Financial Management, 2nd Edition Tata Me.

Graw-Hill Publishing Co. Ltd., New Delhi.

Pandey I.M., Financial Management, 7th Edition, Vikas Publishing

House Pvt. Ltd., New Delhi, 1995.

Kothari C.R. Research Methodology, 2nd Edition, Wishwa Prakasham,

New Delhi, 1990.

Maheswari S.N., Financial Management, 4th Edition, Sultan Chand &

Sons, New Delhi. 1997.

Man Mohan & Goyal S.N., Principles of Management Accountings 6th

Edition, Sathiya Bhavan, Agra, 1998.

Prasanna Chandra, Financial Management, 3rd Edition, Tata

Mc.Graw-Hill Publishing Co., Ltd., New delhi, 1984.

Website : www.lancoindustries.com

sankar pro22

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