CHAPTERS CONTENTS PAGE NO

Chapter -I INTRODUCTION 2-21

NEED
SCOPE
OBJECTIVES
METHODOLOGY
LIMITATIONS

Chapter - II INDUSTRIAL PROFILE 22-31

Chapter –III COMPANY PROFILE 32-50

Chapter – IV THEORETICAL 51-68

FRAMEWORK

Chapter – V ANALYSIS OF STUDY 68-80

Chapter – VI SUMMARY
FINDINGS
SUGGESTIONS
CONCLUSION
BIBLIOGRAPHY

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 CHAPTER-1

 INTRODUCTION
 NEED
 SCOPE
 OBJECTIVES
 METHODOLOGY
 LIMITATIONS

2
 INTRODUCTION

In the modern world, all the activities are concerned with the economic activities are
very particular to earning profit through any venture or activities. The entire business
activities are directly related with making profit, a business concern needs finance to meet
all the requirements in economic world. Any kind of business activity depends on the
finance. Hence it is regarded as “The life blood of business enterprise”. It is the backbone of
every business employed in all business activities.
Financial management is the managerial activity which is concerned with the
planning and controlling and of the firm’s financial resources. The subject of financial
management is of immense interest to both academicians and practicing managers. It is of
great interest to academicians because the subject is still developing, and there are still
certain areas where controversies exist for which no unanimous solutions have been reached
as yet. Practicing managers are interested in this subject because among the most crucial
decisions of the firm are those which relate to finance, and an understanding of the theory
of financial management provides them with conceptual and analytical insights to make
those decisions skillfully.
The modern thinking in financial management accords a far greater. Importance to
management in decision-making and formulation of policy financial management
occupies key position in top management and plays a dynamic role in solving complex
management problems. They are now responsible for shaping the fortunes of the enterprise
and are involved in allocation of capital.

Definition of capital budgeting

Financial management is an integral part of overall management. It is concerned
withthe duties of financial managers in the business firm.
The term financial management has been defined by Solomon, “It is concern with
theefficient use of an important economic resource namely capital funds”.
The most popular and acceptable definition given by S.C.Kuchal is that “Financial
management is deals with procurement of funds and their effective utilization of resources”.

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Nature of financial management
Financial management is that managerial activity which is concerned with the
planning and controlling of the financial resources. Though it was a branch of economics till
1890, as a separate activity or discipline it is of recent origin still, it has no unique body of
knowledge of his own and draws heavily on economics for its theoretical concept even
today. Business finance may further sub-divide into various categories personal finance,
partnership finance and corporation or company finance as separate activity or discipline it
is of recent origin.
Financial in the modern world is the life of the business economy. We cannot imagine a
business without finance because it is actual point of all business activities.
Finance function has not unique body it is part of economics, accounting
marketing, production and quantitative methods.

Key activates of financial management

The three broad activities of financial management are

 Financial analysis, planning and control
 Management of the firm’s asset structure
 Management of the firm’s financial structure

Financial analysis, planning and control

 Financial analysis, planning and control are concerned with Assessing
thefinance performance and conciliation of the firm.
 Forecasting and planning the finance future of the firm.
 Estimating the financing needs of the firm.
 Instituting appropriate systems and control to ensure that the actions of the firm.

Management of the firm’s asset structure

Management of the firm’s asset structure involves

 Determining the capital budget.
 Managing the liquid resources.
 Establishing the credit policy.

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Management of the firm’s financial structure

Management of the firm’s financial structure involves

 Establishing the debt-equity ratio or financial leverage.
 Determining the dividend policy.
 Choosing the specific instruments of financing.
 Negotiating and developing relationship with various suppliers of capital.
Approaches of the financial management
The approach of the scope and the functions of the financial management is
dividedfor purpose of exposition into two categories
 The traditional approach.
 The modern approach.

Traditional approach
The traditional approach of the scope of the financial management refers to its
subjects matter. The scope of the finance function was treated by the traditional approach
in the narrow sense of procurement of funds by corporate enterprise to meet their
financing needs are as follows.
The institutional agreement is in the form of financial institution. Which comprise
the organization of the capital market? The financial instruments are through which the
funds are raised from the capital market and the related aspects of practices and the
procedural aspects of capital markets. The legal and accounting relationship is between a
firm and its sources of funds. The coverage of corporations, finance was therefore
conceived to describe the rapidly evolving complex of capital markets institutions
instruments and practices. The first argument against the traditional approach was based
on its emphasis on issues relating to the procedural of funds by corporate enterprises. The
second ground of criticism of the traditional treatment was that the focus was on financing
problem of corporate enterprises.

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Modern approach
The modern approach views the term financial management in a broad sense and
provides a conceptual and analytical framework for financial decision making.

According to it, the finance function covers both acquisitions of fund as well as their
allocations. Thus apart from the issues involved in acquiring external funds, the main concern
of financial management is the efficient and wise allocation of funds to various as an defined
in a broad sense, it is viewed as an integral part of overall management.

The financial experts today are of the view that finance is an integral part of the
overall management rather than mere mobilization of the funds. The finance manager,
under this concept, has to see that the company maintains sufficient funds to carry out the
plans. At the same time, he has also to ensure a wise application of funds in the productive
purposes. Thus the present day finance manager is required to consider all the financial
activities of planning, organizing, raising, allocating and controlling of funds.
The modern approach view the term financial management in a broad sense
and provides a conceptual and analytical framework for financial decision making. According
to it, the financefunction covers both acquisitions of funds as well as their allocation.

Objectives of the financial management

Financial management is concerned with the procurement and use of funds. Its main
is aim is to use business funds in such a way that the firm’s value earnings are maximized.
There are various alternatives available for using business funds. Each alternative course has
to be valued in detail.
The decisions will have to take in to consideration the commercial strategy of the
business. Financial management provides a framework for selecting a course of action and
deciding available commercial strategy. The main objective of a business is to maximize the
owner’s economic welfare.
This objective can be achieved by

 Profit maximization
 Wealth maximization

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Profit maximization
The main objective of any business enterprise is maximization of profits. Each
company raises its finance by way of issue of shares to public. Investors purchase these
shares in the hope of getting maximum profits from the company as dividend. It is possible
only where the company’s goal to earn “profit” can beyond in two senses.

 As an owner-oriented concept.
 Operational concept.

As owner – oriented concept it refers to the amount and share of national which is
paid to the owners of business I.e., those who supply capital. It is an operational concept and
signifies economic efficiency.
Higher profits are the parameters of its efficiency on all fronts that is production,
salesand management. A few replace the concept of profit maximization to fair profits means
general
rate of profit earned by similar is to safeguard the economic interest of persons who directly
or indirectly connected with the company that is shareholders, creditors and employees the all
such interested parties must get the maximum return for their contributions. That is
possible only when the company earns higher profits or sufficient profits to discharge its
obligations to them. Therefore, the goal of maximization of profits said to be the best criteria
of the decision-making.
Thus, the retinal behind maximization of profits is simple because profits are the test
of economic efficiency. It is a measuring rod by which the economic performance of the
company can be judged.
 Profits lead to efficient allocation of resources.
 It ensures maximum social welfare
Favorable arguments for profit maximization
The following important points are in support of the profit maximization objectives of
thebusiness concern
 Main aim is earning profit.
 Profit is the parameter of the business operation.
 Profit reduces risk of the business concern.
 Profit is the main source of finance.
 Profitability meets the social needs also.
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8
Unfavorable arguments for profit maximization
The following important points are against are the objectives of profit maximization
 Profit maximization leads to exploiting workers and consumers.
 Profit maximization creates immoral practices such as corrupts practice, unfair
tradepractices, etc.
 Profit maximization objectives leads to inequalities among the stake holders
such ascustomers, suppliers, public shareholders, etc.

Wealth maximization

This is also known as “Value Maximization” of “Net Present worth Maximization”,

Wealth maximization is universally accepted as appropriate operational decision criteria for
financial decision-making. The value of an asset should be viewed in terms of benefits it can
produce.

The worth of a course of action can similarly be judged in terms of the value of the
benefits it produces less the cost of undertakings.
The wealth maximization objective is consistent with the objectives of maximization
of owner’s economic welfare that is their welfare the wealth of owners of company is
reflected by the market value of company shares. Thus the fundamental principle of the
company is to maximize the value of its shares on the basis of day to day fluctuations of the
market price.

Scope of finance function

Firms create manufacturing capacities for production for goods; some provide services
to customers. They sell their goods or services to earn profits. They raise funds to acquire
manufacturing and other facilities. Thus, the three most important activities of a business firm
are:
 Production.
 Marketing.

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Favorable arguments for wealth maximization
 Wealth maximization is superior to the maximization because the main aim of
thebusiness concern is to improve the value or wealth off the share holders.
 Wealth maximization considers the comparison of the value to cost associated
withbusiness operation. It provides extract value of the business concern.
 Wealth maximization considers both time and risk of the business concern.
 Wealth maximization provides efficient allocation of resources.
 It ensures the economic interest of the society.

Unfavorable arguments for wealth maximization

 Wealth maximization leads to prescriptive idea of the business concern but it may
not besuitable to present day business activities.
 Wealth maximization is nothing, it is also profit maximization, and it is the indirect
nameof the profit maximization.
 Wealth maximization can be activated only with the help of profitable position of
thebusiness concern.

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Major areas of finance functions
A firm performs finance functions simultaneously and continuously in the normal
course of the presences. They do not occur in sequence. Finance functions call for skillful
planning, control and executors of a firm’s activity.

1. Investment Decision

It relates to the allocation of capital are involve to decision to commit funds to long-
term assets which would yield benefits in future. It is one very significant aspect is the task of
measuring the prospective profitability of new investments future benefits are difficult to
measure and cannot be predicted with continuity because of the uncertain future capital
budgeting involves risk

2. Financing decision

Broadly a finance manager must declare when, where and how to acquire funds to
meet the firms investments needs. The finance manager must strive to obtain the best
financing mix or optimum capital structure of this firm. The use of debt affects the return and
rise of shareholders.It may increase the return of the equity funds. A proper balance will have
to be struck between rises and retain.

3. Dividend decision

The finance manager must decide whether the firm should distribute all profits or
certain term or distribute a portion and retain the balance.
The dividend policy should be determined in terms of its impact on the market
value of the firms share. Thus, shareholders are indifferent to the firm’s dividend policy the
finance manager must decide to the optimum dividend payout ratio.

4. Liquidity decision

Along with terms of funds current assets should also be managed efficiently for
safeguarding the firm against the dangerous of ill liquidity and insolvency. An investment in
current assets affects the firm profitability, liquidity and risk. In order to ensure that neither
insufficient nor unnecessary funds are invested finance manager develops some techniques of
managing current assets.

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 NEED FOR THE STUDY

Capital Budgeting decisions are those decisions that involve current out lays in
return for a stream of benefits in the future years .The capital budgeting decision are often
said to be the most important part of the corporate financial management. Any decision that
requires the use of recourses is a capital budgeting decision; thus the capital budgeting
decision effect the profitability of a firms for long period, therefore the importance of these
decisions is obliviously. Even single wrong decision by firm may endanger the existence of
the firms as profitable firms.

The most important features if capital budgeting decisions and which makes the
capital budgeting so significant is that these decisions have long term effect on the risk
and return composition of the firm. These designs effete the future position of the firms to a
considerable extent as capital budgeting have long term implication and consequences.

The capital budgeting decision effect the capacity and strength of firms of face
the competition .a firm may lose competitiveness if decision to modernize is delayed or not
rightly taken.

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 SCOPE OF THE STUDY

The scope of study of BHARATHI CEMENT CORPORATION PVT.LTD to

collecting financial data published in annual reports of the company with reference to the
objectives stated above and an analysis of data with a view to understand the solutions by
applying various Appraisal Methods in Capital Budgeting. The study covers the calculation
of Payback period, Net present value, Internal Rate of Return methods used for different
budgets titles. Also the study includes the decisions as to be made for investment process.

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 OBJECTIVES OF THE STUDY

 To know the techniques adopted by the organization while investing a capital

on aparticular project.

 To know the present & previous position of the organization before implementing
theproject.

 To determine capital projects those are feasible

 To estimate the expenditure involved.

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 METHODOLOGY OF THE STUDY

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 and Secondary data

a. Primary Data:

Primary data is the information collected directly without any references. In this study
it was mainly through interviews with concerned officers and staffs either individually or
collectively some of the information had been verified or supplemented with personal
observations.

The data includes

While conducting the personal interviews with the officers of the financials
department, the Guidelines and necessary information were taken from my guide. By using
primary methods collected the primary information or data.

 Observation method
 Survey method
 Interview method.

b. Secondary Data:

It was collected from already published sources. This includes magazines and other
internal records.

The data includes:

 By referring to the books in the company.

 By collecting data from the websites.

 By collecting data from company annual reports.

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 LIMITATIONS OF THE STUDY

 The data mostly consists of secondary information.

 Study is concentrated only on financial aspects of the company.

 Study is limited only to micro level.

 The capital budgeting decisions are irreversible in most cases. this is because
it isvery difficult to find a maker for capital assets.

 The capital budgeting decision requires assessment of future event, which

areuncertain.

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 CHAPTER-2
INDUSTRY PROFILE.

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 INDUSTRY PROFILE
In the most general sense of the word, cement is a binder, a substance that sets and
hardens independently, and can bind other materials together. The word "cement" traces to
the Romans, who used the term opus caementicium to describe masonry resembling modern
concrete that was made from crushed rock with burnt lime as binder. The volcanic ash and
pulverized brick additives that were added to the burnt lime to obtain a hydraulic binder were
later referred to as cementum, cimentum,
cäment and cement.Cement used in construction is characterized as hydraulic or non-hydraulic.
Hydraulic cements (e.g., Portland cement) harden because of hydration, chemical
reactions that occur independently of the mixture's water content. They can harden even
underwater or when constantly exposed to wet weather. The chemical reaction that results
when the anhydrous cement powder is mixed with water produces hydrates that are not water-
soluble.
Non-hydraulic cements (e.g., lime and gypsum plaster) must be kept dry in order to
retain their strength.

History of the origin of cement

It is uncertain where it was first discovered that a combination of hydrated non-
hydraulic lime and a pozzolan produces a hydraulic mixture ,but concrete made from such
mixtures was first used by the Ancient Macedonians and three centuries later on a large scale
by Roman engineers. They used both natural pozzolans (trass or pumice) and artificial
pozzolans (ground brick or pottery) in these concretes. Many excellent examples of structures
made from these concretes are still standing, notably the huge monolithic dome of the
Pantheon in Rome and the massive Baths of Caracalla. The vast system of Roman aqueducts
also made extensive use of hydraulic cement.
Although any preservation of this knowledge in literary sources from the Middle Ages
is unknown, medieval masons and some military engineers maintained an active tradition of
using hydraulic cement in structures such as canals, fortresses, harbors, and shipbuilding
facilities. The technical knowledge of making hydraulic cement was later formalized by
French and British engineers in the 18th century.

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CEMENT INDUSTRY IN INDIA
Introduction
Cement is a key infrastructure industry. It has been decontrolled from price and
distribution on 1st March, 1989 and deli censed on 25th July, 1991. However, the
performance of the industry and prices of cement are monitored regularly. The constraints
faced by the industry are reviewed in the Infrastructure Coordination Committee meetings
held in the Cabinet Secretariat under the Chairmanship of Secretary (Coordination). Its
performance is also reviewed by the Cabinet Committee on Infrastructure.
India, being the second largest cement producer in the world after China.With the
government of India giving boost to various infrastructure projects, housing facilities and
road networks, the cement industry in India is currently growing at an enviable pace. More
growth in the Indian cement industry is expected in the coming years. It is also predicted that
the cement production in India would rise to 236.16 MT in FY11. It's also expected to rise to
262.61 MT in FY12.

Industry Background
The history of the cement industry in India dates back to the 1889 when a Kolkata-
based company started manufacturing cement from Argillaceous. But the industry started
getting the organized shape in the early 1900s. In 1914, India Cement Company Ltd was
established in Porbandar with a capacity of 10,000 tons and production of 1000 installed. The
World War I gave the first initial thrust to the cement industry in India and the industry
started growing at a fast rate in terms of production, manufacturing units, and installed
capacity. This stage was referred to as the Nascent Stage of Indian Cement Company. In
1927, Concrete Association of India was set up to create public awareness on the utility of
cement as well as to propagate cement consumption.
The cement industry in India saw the price and distribution control system in the year
1956, established to ensure fair price model for consumers as well as manufacturers. Later in
1977, government authorized new manufacturing units (as well as existing units going for
capacity enhancement) to put a higher price tag for their products. A couple of years later,
government introduced a three-tier pricing system with different pricing on cement produced
in high, medium and low cost plants

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Major Players in Indian Cement Industry
There are a number of players prevailing in the cement industry in India. However,
there are around 20 big names that account for more than 70% of the total cement production
in India. The total installed capacity is distributed over around 129 plants, owned by 54 major
companies across the nation.
Following are some of the major names in the Indian cement industry:
Company Production Installed Capacity
ACC 17,902 18,640
Gujarat Ambuja 15,094 14,860
Ultratech 13,707 17,000
Grasim 14,649 14,115
India Cements 8,434 8,810
JK Group 6,174 6,680
Jaypee Group 6,316 6,531
Century 6,636 6,300
Madras Cements 4,550 5,470

Technology Up-gradation
Cement industry in India is currently going through a technological change as a lot of
up gradation and assimilation is taking place. Currently, almost 93% of the total capacity is
based entirely on the modern dry process, which is considered as more environment-friendly.
Only the rest 7% uses old wet and semi-dry process technology. There is also a huge scope of
waste heat recovery in the cement plants, which lead to reduction in the emission level and
hence improves the environment.

Total production
Major players in cement production are Ambuja cement, Aditya Cement, J K Cement
and L & T cement. India’s cement industry has witnessed tremendous growth on the back of
continuously rising demand from the housing sector, increased activity in infrastructure, and

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construction boom, according to RNCOS’ latest research report titled, ‘Indian Cement
IndustryForecast to 2012’.
The country’s cement production is projected to grow at a compound annual growth
rate (CAGR) of around 12 per cent during 2020-21 - 2021-22 to reach 303 million metric
tonnes (MMT), as per the RNCOS research report.
India is the second largest cement producing country with 137 large and 365 mini
cement plants. The large plants employ 120,000 people, according to a recent report on
the Indian cement industry published by Cement Manufacturers Association (CMA). Cement
production in the country is expected to increase to 315-320 million tonne (MT) by end of
this financial year from the current 300 MT.
The cement production touched 14.50 MT, while the cement dispatches’ quantity was
registered at 14.28 MT during April 2011, as per provisional data released by Cement
Manufacturer’s Association (CMA).
Government Initiatives
The cement industry is pushing for increased use of cement in highway and road
construction. The Ministry of Road Transport and Highways has planned to invest US$ 354
billion in road infrastructure by 2012.
Housing, infrastructure projects and the nascent trend of concrete roads would
continue to accelerate the consumption of cement.
Increased infrastructure spending has been a key focus area. Finance Minister Pranab
Mukherjee has proposed to earmark US$ 47 billion for infrastructure development during
2011- 12.
The infrastructure sector has received an impetus in the form of increased funds and
tax related incentives offered to attract investors for tapping the infrastructure opportunities
around the country. Introduction of tax free bonds, creation of infrastructure debt funds,
formulating a comprehensive policy for developing public private partnership projects are
some announcements which will give a fillip to the infrastructure sector which is the
backbone of any economy.
New Investments
After exceeding the projected cement production of 290 MT, the Cement
Manufacturers Association (CMA) is targeting a production increase up to 320 MT by the
year end.

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• Holcim Group, has increased its stake from 46.44 per cent to 50 per cent stake in
Ambuja Cement through the creeping acquisition route. It has also increased its stake in
ACC to reach
50.1 per cent.
• The Builders Association of India (BAI) plans to set up a cement manufacturing
plant at a cost of US$ 677.97 million at Anantpur in Andhra Pradesh. The plant would have a
production capacity of 10 MTPA and is expected to be ready in two years.
• Shree Cement plans to set up a two MT clinkerisation unit near Raipur,
Chhattisgarh,with an investment of US$ 225.12 million.
• BK Birla Group outfit, Kesoram Industries, is setting up a 2,000 tonne a day
packaging unit in Medak district of Andhra Pradesh at a cost of US$ 1.76 million, according
to a filing by the company to the stock exchanges. The proposed unit would cater to the
packing needs of its cement manufacturing unit at Sedam in Karnataka.
• Birla Corporation, the flagship company of the M P Birla Group, is planning to set up
a one MT cement plant in Assam at an investment of around US$ 99 million. The company
has signed a memorandum of understanding (MoU) with the Assam Mineral Development
Corporation to this effect.
• Giving further push to industrial development in the State, the Government of Orissa
through its single level window clearance committee has approved four major projects
involving an investment of US$ 274.02 million.
• The Hyderabad-based Sagar Cements Ltd and Vicat Group of France’s US$ 563.82
million worth joint venture (JV) plant is likely to commence operations next year.
• My Home Industries Limited (MHI), a 50:50 joint venture (JV) between the
Hyderabad- based My Home Group and Ireland's building material major CRH Plc, plans to
scale up its cement production capacity from the existing five MTPA to 15 MTPA by 2016.
The company would undertake this capacity expansion at a cost of US$ 1 billion.
• Rain Commodities Ltd, which manufactures Priya Cement, has acquired Birla Cement
and Industries Ltd from Yash Birla Group for an undisclosed sum. Cement and gypsum
products have received cumulative foreign direct investment (FDI) of US$ 2,316.27 million
between April 2000 and February 2011, according to the Department of Industrial Policy and
Promotion(DIPP).

22
CHAPTER-3
COMPANY PROFILE

23
 COMPANY PROFILE

Bharathi Cement Corporation Limited (BCCPL) is a subsidiary of Vicat Group. The

Vicat Group manufactures Cement, Ready-Mixed Concrete, Concrete Product (Precast) and
Aggregates. In 1817 Louis Vicat discovered artificial cement. His son, Joseph, created Vicat
Company in 1853. The Group continues expanding under the President Jacques Merceron-
Vicat and is present in 11 countries (France, US, Turkey, Senegal, Switzerland, Egypt, Italy,
Mali, Kazakhstan, Mauretannia and India). The Vicat Group has 6,700 employees and
generates sales of Euros 2 billion.
Bharathi was founded by the promoters of Sakshi Telugu Daily & Sakshi TV, under the
chairmanship of Smt. Y.S. Bharathi Reddy and managing director Markus Oberle from
Vicat.And senior professionals with vast experience in Power, Cement, Infrastructure, Ready-
Mixed Concrete, Aggregates and Waste Management.
Before vicat, Bharathi Cement is a company that has been promoted by the Sakshi
Group, which has interests in media and power. It is controlled by Y.S. Jagan Mohan Reddy,
the Member of Parliament (MP) from Kadapa and son of former Andhra Pradesh chief
minister Y.S.Rajasekhara Reddy.
Apart from the Sakshi group, Bharathi Cement has been co-promoted by India Cements Ltd.,
Dalmia Cement (Bharat) Ltd. and N. Prasad, vice-chairman and founder of Matrix
Laboratories Ltd.
The Sakshi group bought Raghuram Cements in 2007 and renamed it Bharathi
Cement. Bharathi expects to have a capacity to produce 5 million tonnes (mt) of cement by
the end of 2010. so the company makes a deal with vicat for global partner both for
technology and gettinga pan-India footprint”.
Bharathi in October commissioned a 2.5 mt capacity plant in Andhra Pradesh Kadapa
district with an investment of Rs700 crore. The second phase of the plant expansion, with an
additional investment of Rs720 crore for another 2.5 mt capacity, would be completed by
December.
In India, Vicat already has a 51:49 joint venture with Sagar Cements Ltd to build a
5.5 mt, $625 million cement plant at Gulbarga in Karnataka.

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 An analyst tracking the cement industry for an Indian brokerage said Vicat will have a
10 mt cement-making capacity in south India, making it the fastest capacity ramp-up from a
low base by any cement manufacturer in India.

Mission Statement
To partner our customers in building the best, by delivering superior quality cement
that’s produced with best-in-class technology. To grow by building lasting relationships with
business associates and contribute to the well-being of society
Careers
We value the human resources - a vital asset. People are always the strength of
'Bharathi Cement'. Recognizing this, the Company gives great importance to provide
Professional Management, a work culture that allows its members a space to learn, innovate
and grow. It gives its people the freedom to think differently, and work as a team to achieve
organizational goals

STRENGTHS
• State of the art plant
Bharathi cement corporation Limited has set up most modern cement plant with state
of the art technology at Nallalingayapalli, Kamalapuram mandal, Kadapa district of Andhra
Pradesh.
This area is known for its superior quality Narzi lime stone deposits , possessing high
lime content that gives high early strength and ultimate long term strength. Another
characteristic feature of this lime stone is low alkali, magnesia and low chloride contents
which are highly desirable parameters for concrete durability.
The state of the art technology adopted at the plant consists of Vertical Roller mill of
LOESCHE, Germany for grinding of cement to achieve the optimum fineness, and controlled
particle size distribution of cement particles

• German Technology
The Bharathi Cement plant has the most advanced Vertical Roller Mill (Type 63.3)
from LOESCHE, Germany. This mill has a capacity of producing 360 tons per hour and is
equipped

25
with a 6,700 KW gear box. The mill is designed to produce a range of high quality cements
such as Ordinary Portland Cement (OPC), Portland Pozzolona Cement (PPC), Pozzolona
Slag Cement (PSC) and Ground slag at varying fineness. It has a rated capacity of 360tph
OPC at 3000 Blaine and 300tph of ground slag at 4000 Blaine
• Homogenized mining
• Online process control
• Exclusive R&D facility for continuous product improvement
VRM Cement mill-The largest in the world
Loesche vertical roller mills are the most efficient mills in the world and achieve very
high throughputs. They are extremely maintenance friendly. Service tasks can be carried out
quickly. Downtimes are reduced to a minimum.
The Loesche grinding principle combines a horizontal grinding table with large
tapered roller under hydro pneumatic loading- the best possible compromise between output
and wear. The product quality can be enhanced by altering the classifier speed. All Loesche
mills can be started with grinding rollers raised. Metal to metal contact between grinding
parts does not occur.Their quiet, smooth operation is appreciated.
In Bharathi Cement the most advanced vertical roller mill from Loesche, Germany
has been commissioned. The mill has a capacity of producing 360 MT/hour and is equipped
with 6,700 Kw gearbox. The mill is designed to produce a range of high quality cements such
as Ordinary Portland Cement, Portland Pozzolana Cement, Portland Slag cement and ground
slag at varying fineness. It has a rated capacity of 360 tph opc at 3000 Blaine and 300 tph of
Ground slag at 4000 Blaine. The high flexibility of the system enables to produce cements of
6 different types from the same mill. Switching from one product to other can be done within
minutes.

• Robotic Labs
A typical QCX/RoboLab configuration consists of a standard industrial robot placed
in the centre of a circular arrangement of sample preparation and analytical equipment.
Samples normally arrive automatically from the connected automatic sample transport
system, but may also be entered via operator sample conveyors or special input/output
magazines.
QCX/RoboLab offers a very high flexibility in terms of the number and types of
equipment handled by the robot. Supported, fully automated preparation & analysis
disciplines

26
relevant to the cement industry include powder or fused bead preparation for X-ray analysis,
particle sizing by laser or by conventional sieving, colour analysis, Carbon/Sulphur/Moisture
combustion analysis, physical testing and collection of shift/daily composites. For the typical
cement lab project a throughput capacity of 10-20 samples will apply; but higher numbers in
one robot cell are achievable.
The QCX computer integrates the system components. It identifies incoming samples,
downloads the relevant sample-handling specification and controls all intelligent devices in
the configuration. Sequence control includes priority handling, intelligent handling of
equipment failure situations and much more.
QCX/RoboLab (and QCX/Auto Prep) provides high quality in sample preparation
and analysis. Quality not only meets the performance of 'the very best lab technician', but is
highly consistent over time. Thus, there are no fluctuations from shift to shift in analytical
levels due to small differences in the practical procedures undertaken by human operators.

• Tamper-Proof Packing

When cement bags are dumped on the ground, the impact causes cement to spill out
of the bag. This causes considerable loss, considering that some projects require thousands of
bags, but you incur no such loss with Bharathi Cement.
Bharathi Cement is packed in fully imported, tamper-proof PP laminated bags, which
do not allow the minutest of cement particles to spill. This ensures accurate weight and also
eliminates any possibility of pilferage. This technique of packaging is also eco-friendly.
The cement religiously processed and produced is packed in specially designed
imported polypropylene bags which are dust proof and tamper proof. This special package
ensures full quantity (i.e. 50Kg net) cement in every bag and chances of adulteration are
totally eliminated.
Products
Bharathi Cement produces a range of cements with distinctly superior quality.
Produced with the finest raw materials, using cutting-edge German technology and packed in
tamper-proofbags, Bharathi Cements are the ultimate in quality.

• OPC 53 Grade
Ordinary Portland Cement 53 grade is manufactured by inter grinding of high grade clinker

27
(with high C3Scontent) and right quality gypsum in predetermined proportions. The
cementproduced gives high early strength and excellent ultimate strength.

• OPC 43 Grade
Ordinary Portland Cement 43 grade is manufactured by inter grinding of high
grade clinker (with optimum C3Scontent) and right quality gypsum in appropriate
proportions.

• PPC

Bharathi Portland pozzolana cement is a premium composite cement manufactured by

inter grinding of high quality clinker, carefully selected High reactive Silica (HRS)
obtainedfrom electrostatic precipitators with right quality gypsum

• PSC

Bharathi Portland Slag cement is manufactured by inter grinding high quality clinker with
carefully selected, good quality slag purchased from major steel plants and using high
qualitygypsum

TECHNICAL SUPPORT
• Mobile Construction Advisor

At Bharathi we believe in total customer satisfaction. Bharathi cement offers

laboratory testing facilities of concrete at your door step. Your concrete is tested under
standard laboratory conditions and test certificates are issued. The services of experienced
civil engineers can be availed
• Good Construction Practices

• Suggested Concrete Mix Designs

• Social Responsibility

At Bharathi Cements, our commitment to quality makes us go beyond. We at

Bharathi Cement have Mobile Construction Advisers. With a full-fledged technical team,
this service brings you best construction practices from the globe. The Mobile Construction
Adviser furtheroffers concrete lab services, concrete cube testing, training for masons and
site supervisors.

28
 Social Responsibility of Business
Bharathi cement has introduced accidental insurance scheme for masons. Each mason
is covered for an amount of Rs.1,00,000 for one year under this scheme. The premium is paid
by Bharathi Cement Corporation Limited. This is a great moral booster for masons and their
families
Technical Services Offered
• Demonstrations, Tips on good construction practices, informative lectures and onsite
videopresentations
• Onsite training for masons and site supervisors
• Advice on concrete mix proportion
• Testing of fresh and hardened concrete ensuring its superior quality
• NDT (Non Destructive Testing) facilities
Power source
Right now the co. drawing power from the state electricity grid. But, we are
planning acaptive power plant in two years. We are looking at a generation capacity of 30
MW
Aiming market share
5% market share of Indian cement industry in about 10 years.
Marketing strategy and targets
Bharathi Cement already has a strong network of 600 dealers and 1000 sub-dealers,
andis growing each day. We will strengthen the dealer network for the next phase.
Bharathi Cement would focus on Andhra Pradesh, Tamilnadu, Karnataka, Goa, Kerala and
parts of Maharashtra in the initial phase and progressively increase the footprint in other parts
of the country.

In the first three states we have already established a strong network of distributors
and inthe other three states we will be strengthening our network in the next few months.
The approximate ratios of the dispatch will be 50% by road network and 50% by rail network
Raw material sourcing
The Nallalingyapalli-Kamalapuram belt in Kadapa district of Andhra Pradesh has rich
limestone quarries. The company has also tied up with RTTP for Fly Ash and Slag will be
procured from Jindal Steel, Tornagal, and Karnataka.

29
 CHAPTER-4
THEORETICAL FRAMEWORK

30
 THEORETICAL FRAMEWORK

CAPITAL BUDGETING
Capital budgeting is a required managerial tool. One duty of a financial manager is to
choose investments with satisfactory cash flows and rates of return. Therefore, a financial
manager must be able to decide whether an investment is worth undertaking and be able to
choose intelligently between two or more alternatives. To do this, a sound procedure to
evaluate, compare, and select projects is needed. This procedure is called capital budgeting.

Capital budgeting (or investment appraisal) is the planning process used to

determine whether a firm's long term investments such as new machinery, replacement
machinery, new plants, new products, and research development projects are worth pursuing.
It is budget for major capital, or investment, expenditures.

Many formal methods are used in capital budgeting, including the techniques such as

 Net present value

 Profitability index
 Internal rate of return
 Modified Internal Rate of Return
 Equivalent annuity
These methods use the incremental cash flows from each potential investment, or project.
Techniques based on accounting earnings and accounting rules are sometimes used - though
economists consider this to be improper - such as the accounting rate of return, and "return on
investment." Simplified and hybrid methods are used as well, such as payback period

Definitions:
 According To Charles T Horngren, “capital budgeting is long – term planning for
makingand financing proposed capital outlays”.

 According To Milton H.Spencer, “capital budgeting involves the planning

of expenditures for assets, the returns from which will be realized in future time
period”.

31
OBJECTIVES OF CAPITAL BUDGETING

 It determines the capital projects which work can be started during the budget period
aftertaking into account their urgent and the expected rate of return on each project.
 It estimates the expenditure that would have to be incurred on capital, projects
approvedby the management together with the source from which the required
 Founds would be obtained.
 It restricts the capital expenditure on projects within authorized limits.

Cases of capital budgeting decisions

A business organization has to face quite the problem of capital investment decisions
capital investment refers to investment in projects whose results would be available only after
a year. The investments in these projects are a quite heavy and to be made immediately but
the returns will be available only after a period to time’s following are same of the case’s
where heavy capital investment may be necessary.

Replacements

Replacements of fixed assets may become necessary either on account of their

beingworm out or becoming outdated on account of new technology.

Expansion

A firm nay has to expand its productions capacity on account of high demand for its
products as inadequate production capacity. This will need additional capital investment.

Diversification

A business may like to reduce its risk by operating in several markets rather than in a
single market .In such an ever, capital investment may become necessary for purchase of new
machinery and facilities to handle the new products.

Research and development

Large sums of money may have to be expended for research and development in case
of those industries where technology is rapidly changing in case large sums of money are
needed for equipment .These proposals will normally be included in the capital budget.

32
Miscellaneous

A firm may have to invest money in project which do not directly helps in achieving;
profit. For example installation of pollutions control equipment many by necessary on
account oflegal requirement. Thus founds will be required for such purposes also.

Importance of capital budgeting

Capital budgeting decisions are among the most crucial and critical business
decisions; special care should be taken in making these decisions on account of the following
reasons.

Involvement of heavy fund

Capital budgeting decision require large capital outlay in is therefore absolutely

necessary that the form should carefully plan its investment programmed so thus it may get
the finance at right time and thus are put to most profitable use.

Long term implications

The firms will feel the effects capital budgeting decision over at long period and wither
fore they have a decisive influence on the rate and directions for the growth of the firm.

Irreversible decisions

In most cases capital budgeting decisions are irreversible this is because it is very
difficult to find a market for the capital assets

Most difficult to market

The capital budgeting decisions require assessment of future events, which are uncertain
.It, is really a default risk to estimate the probable future event the probable benefit and
costsaccurately in quantitative term because of economic political social and technologic
factors

Process of Capital Budgeting

The various steps involved in capital budgeting process depend upon large number of factors
such as size of the concern, nature of projects, their numbers, complexities and diversities and
so on. The following five steps are involved in the process of capital budgeting.

 Project generation
 Project evaluation

33
  Project selection
 Project execution
 Follow-up

Project Generation

A continuous generation of capital expenditure proposals like proposals expanding the

revenues and proposals reducing the cost is highly essential to make efficient and full use of
funds of the concern. If the proposals expanding the revenues relate to the proposals to add
new products and to expand the capacity in existing lines, the proposals reducing the costs
are designed to bring savings in cost in existing lines without changing the scale of
operations.

Project Evaluation

This process deals with judging the suitability of a project by applying various
criteria. Thus the process of project evaluation involves estimating the costs and benefits in
terms of cash flows, and selecting an appropriate criterion for judging the desirability of the
projects.

Project Selection

This step deals with screening and selecting the projects. Usually, projects under
consideration can be screened at various levels of management. But the final approval of
them should be given by the top management.

Project Execution

After the projects are selected, the funds are to be allocated for them. Such a formal
plan for the allocation of fund is known as capital budget. The top management or executive
committee should ensure that funds are spent as per the allocation made in the capital
budgets.

Follow-up

Follow-up deals with comparison of actual performance with the budgeted data.
Thiswill ensure better forecasting and also help in sharpening the technique of forecasting.

The basic features of Capital Budgeting are:

It is a many sides activity, it includes searching for new and more profitable
investment proposals investigating engineering and marketing considerations to predict the
consequences of accepting the investment and making economic analysis to determine the
34
profit potential of eachinvestment proposal, its basic features can be summarized as follows.

35
  Potentiality of making large anticipated profits i.e., the possibility of anticipating
futureprofits.
 Involves high degree of risk. A high degree of risk is involved since future is uncertain.
 Involves relatively long period between outlay and anticipated returns. There is a
longgap between cash out flow and future cash flows.

On the basis of the above discussion it can be concluded that capital budgeting
consists in planning the development of available capital for the purpose of maximizing the
long term profitability of the firm.

Capital budgeting is also called as capital expenditure budget. Operating budget

shows planned operations in the coming period where as capital budget deals exclusively
with major investment proposals. It assesses economies of expenditure and investment.
Need For Capital Budgeting:
 Maintaining firm’s competitive position.
 Planning for future needs of the firm.
 Coordinating.
• Cost control.
• Organizational effectiveness.
Components of Capital Budgeting:
• Cash outflow
• Cash Inflow
• Cut-off rate
• Ranking the proposals
• Risk and uncertainty
• Non-monetary aspects.
Nature of investment decisions:
The investment decisions of a firm are generally known as the capital budgeting or
capital expenditure decisions. A capital budgeting decision may be defined as the firm’s
decision to invest its current funds most effectively in the long term assets in anticipation of
an expended flow of benefits over a series of years. The long- term assets are those that affect
the firm’soperational beyond the one year period.

36
 Investment decisions generally include expansion, acquisition, modernization and
replacement of the long term assets. Decision like the change in the methods of sales
distribution, or an advertisement campaign or an research and development programme have
long –term implications for the firm’s expenditures and benefit, and therefore, they should
alsobe evaluated as investment decisions.
The following are the features of investment decisions:
 Capital budgeting decisions involve the exchange of current funds for the benefits
to beachieved in future.
 The future benefits are expected to be realized over a series of years
 The funds are invested in non-flexible and long term activities.
 They are irreversible decisions.
 A relatively high degree of risk;
 Relatively long time period between initial outlay and anticipated returns.

Importance of capital budgeting:

Capital budgeting is of paramount importance in financial decision making. Special Care
shouldbe taken in making these decisions on account of the following reasons:

 Growth: the effect of investment decisions extend into the future and have to be
endured for a longer period than the consequences of the current operating
expenditure. A wrong decision can prove disastrous for the continued survival of the
firm; unwanted or unprofitable expansion of assets will result in heavy operating costs
to the firm. On the other hand, inadequate investment in assets would make it difficult
for the firm tocompete successfully and maintain its market share.

 Risk: a long-term commitment of funds may also change the risk complexity of the
firm. If the adoption of an investment increases average gain but causes frequent
fluctuationsin its earnings, the firm will become more risky.

37
  Funding: investment decisions generally involve large amount of funds which make it
imperative for the firm to plan its investment programmes very carefully and make an
advance arrangement for procuring finances internally or externally.

 Irreversibility: most investment decisions are irreversible. It is difficult to find a

market for such capital items once they have been acquired.

 Complexity: investment decisions are among the firm’s most difficult decisions. It is
really a complex problem to correctly estimate the future cash flow of an investment.
The uncertainty in cash flow is caused by economic, political, social and technological
forces.

Types of Capital Budgeting Decisions

Capital Budgeting refers to the total process of generation evaluating, selecting and
following up on capital expenditure alternatives. The firm allocates or budgets financial
resource to new investment proposals. Basically the firms may be confronted with three types
of capital budgeting decisions.

 The accepts reject decision

 The mutual exclusive choices decision.
 The capital rationing decision.

CAPITAL BUDGETING APPRAISAL METHODS

It views of the significance of capital decision, it is absolutely necessary that the

method adopted for appraisal of capital investment proposals is a sound one.

There are several methods for evaluating and ranking the capital investment
proposals. In case of all these methods the main emphasis is on the return which will be
derived on the capital invested in the projects.

Traditional methods:

I. Payback period method:

The term pay back refers to the period in which the project will generate the necessary
cash to recoup the initial investment.

38
 Initial investment
Payback period =
Annual cash inflow

Accept or reject criteria

The payback period can be used as criteria to accept or reject an investment proposal.
A project whose actual payback period is more than what has been predetermined by the
management will be straight away rejected. While taking into account the reciprocal cost will
be the maximum acceptable payback period.

Advantages

 It is an important guide to investment policy.

 It lays a great emphasis on liquidity
 It is simple to operate and easy to understand.
 This method costs less as it requires only very little effort for its computation.
 It weighs early returns heavily and ignores distant returns.

Disadvantages

 It fails to consider the period over which an investment is likely to fetch incomes.
 It ignores the value of money.
 This method does not take into consideration the cash flows beyond the payback period.

II. Accounting/Average rate of returns (ARR)

Average rate of returns is average of the net profit after taxes over the whole of the
economic life of the project are taken. Under this method return, is expressed as percentage
of capital or investment. Accounting rate of returns may be calculated using any one of the
following formulas.

Average net profit after tax

ARR =
Average investment

The amount of average net profit after taxes and “Average Investment” are calculated as

39
 Total net profit after taxes
A. Average net profit after tax =
No. of years

Investment – Scrap value + Additional working capital

+ Scrap value
B. Average Investment =
2

Accept or reject criteria

 In case of independent projects, calculated ARR of the project will be accepted

otherwiserejected.
 While evaluating mutually exclusive projects, calculated ARR of the alternatives will
be compared to judge the profitability. The projects, which has higher rate of return,
will be accepted.

Advantages

 It is simple to calculate and easy to understand and hence it is widely used.

 It uses the entire earnings of a project in calculating rate of return.
 It facilitates the comparison of new product project with that of cost reducing
project orother projects of competitive nature.

Disadvantages

 This method is like payback period method, ignores the time value of money.
 This method cannot be applied to a situation where investment in a project is to
make inparts.

40
Discounted cash flow techniques

1. Net present value method

NPV is considered the best method or evaluating the capital investment proposals. In
case of this method cash in flow and cash out flow associated with each project are first
worked out. The manager then calculates the present values of these, cash inflow and out
flows at the rate of acceptable. This rate of return is considered as the cut off rate and is
generally determined based on cost of capital. Cash out flows represent the investment and
commitment of cash in the project at various points of time. The working capital is taken as a
cash outflow in the year the project starts commercial production. The NPV is the difference
between the total present value of future cash inflows and the total present value of future
cash out flows.

The equation for calculating NPV in case of conventional cash flows can be put as
follows.

A1 A2 A3 An
NPV = + + + .............. + C
1 2 3 n
(1+r) (1+r) (1+r) (1+r)

Where

NPV = Net present value, A1, A2, A3 ................. An = Annual cash inflows.

R = Discounting rate / cost of

capital1, 2, 3 n = no. of years

C = Cash out flows

(Or)
NPV = present value of cash inflow - present value of cash outflow.

41
Accept or reject criteria

Net present value be used as an “accepted or rejection” in case the NPV is positive,
the project should be accepted. However, if the NPV is negative the project should be
rejected. Symbolically represents

NPV > 0 Accept the

proposal NPV < 0 Reject

the proposal Advantages

 It is generally accepted by economist.

 It is superior to other methods of evaluating the economic worth of investments.
 It recognizes the time value of money.
 It recognizes all cash flows through out the life of the project.

Disadvantages

 It may not give good results while comparing project with unequal lives and investment.
 It is not easy to determine an appropriate discount rate.
 As compared to the traditional methods the net present value method is more
difficult tounderstand.

2. Profitability Index
Profitability index is one of the methods of evaluating the investment proposal. It is
also called as benefit cost ratio and measures the relationship between present values of cash
out flows and cash inflows. Thus, it can be calculated by using formula.

Present value of cash inflow

Profitability index =
Present value of cash out flow

42
Accept or reject criteria

The proposal is accepted if the profitability index is more than one and rejected in case the
profitability index is less than one. In case of mutually exclusive projects and capital
rationing situation projects are ranked in orders of their profitability index and accepted.

Advantages:

 It evaluates the worth of projects in terms of their relative magnitude. Hence,

it issuperior to P.V. Method.
 It can used to choose between mutually exclusive projects by computing in
gametalbenefit- Cost ratio.

Disadvantages

 It involves more calculations than the traditional methods and hence it is very
difficult tounderstand.
 In some cases of mutually exclusive nature, P.I is interior to N.P.V method.

3. Internal rate of returns:

Internal rate of return is that rate at which the sum of discounted cash inflows equals
thesum of discounted cash out flows.

(Or)

IRR is the rate which discounts the cash flows to zero.

So at IRR

Cash in flows
=1
Cash out flows

Relationship between Payback period& Rate of Return by using PBP we can find the IRR
.we follow “Two Methods” to find the IRR.

43
  When Fixed Annuity of Cash Inflows.
 In the case of Mixed Stream.
 We can choose the Fixed Annuity of cash flows method.

IRR=r-(PBP-DFr/DFrl-

DFrh)*rWhere

R= rate of return

PBP= Pay Back Period

DFr=Discount factor of interest

rate DFrl= Discount factor of

lower rate DFrh= Discount factor

of higher rate

(Or)

Present value at LR –cash out flow

IRR = LR + * (HR - LR)

Present value at LR – present value at HR

Where

LR = lower rate of

returns

HR = higher rate of

return

Accept or reject criteria:

Internal rate of return is the maximum rate of interest, which an organization can
afford to pay on the capital invested in a project would qualify to be accepted of IRR
exceeds the cut off rate. While evaluating two or more projects, a project giving the higher
rate of return would be preferred. This is because the higher the rate of return, the more
profitable is the investment.
44
Advantages:-

 It provides more precise information regarding profitability.

 It helps the form to choose from among different alternatives.
 It considers the profitability of the project for its entire economic life and hence
enablesevaluating of true profitability.

Disadvantages:-

 It is different to understand and is most difficult method of evaluation of

investmentproposal.
 It does not provide significant answers under all situations.

45
 CHAPTER-5
DATA ANALYSIS & INTERPRETATION

46
 DATA ANALYSIS AND INTERPRETATION

PARTICULARS FOR CALCULATION OF EVALUATING TECHNIQUES FOR

THEONGOING PROJECT

Particulars Project A Project B Project C Project D

Cost of investment 25,00,000 27,50,000 30,00,000 47,00,000
Life of the project 5 years 5 years 5 years 5 years
Rate of depreciation 7% 5% 9% 10%
Tax rate 20% 25% 27% 30%
Rate of cost of capital 18% 10% 12% 15%

PROJECTS HAVE BEEN PROPOSED BY THE COMPANY WITH THE

FOLLOWINGINFORMATION
particulars Project A Project B Project C Project D
2017-2018 7,50,000 6,00,000 9,50,000 15,00,000
2018-2019 10,50,000 9,50,000 13,50,000 19,50,000
2019-2020 15,50,000 15,00,000 18,00,000 25,00,000
2020-2021 16,00,000 18,00,000 19,50,000 27,50,000
2021-2022 16,00,000 19,00,000 20,00,000 28,00,000

47
 CALCULATION OF PAY BACK PERIOD

For project A

Year Cash Flows Depreciation. CFAD. Tax 20% CFADT CFBDAT Cumulative

@7% Cash Flows

2017-18 7,50,000 52,500 6,97,500 1,39,500 5,58,000 6,10,500 6,10,500

2018-19 10,50,000 73,500 9,76,500 1,95,300 7,81,200 8,54,700 14,65,200

2019-20 15,50,000 1,08,500 14,41,500 2,88,300 11,53,200 12,61,700 27,26,900

2020-21 16,00,000 1,12,000 14,88,000 2,97,600 11,90,400 13,02,400 40,29,300

2021-22 16,00,000 1,12,000 14,88,000 2,97,600 11,90,400 13,02,400 53,31,700

Where

CFAD = cash flow after depreciation.

CFADT = cash flow after depreciation and tax.

CFBDAT = cash flow after tax and before

depreciation.
Initial investment
Payback period =
Total cash
inflows(Or)
Original investment – recovery investment
= year before recovery+ ---------------------------------------------------- × difference in year
Cash flow during next year

= 2 + [(25,00,000-14,65,200)/12,61,700] × 1

48
 =2 + [10,34,800/12,61,700] × 1
= 2 + 0.82
=2.9 years
=2 years 9months

For project B

Year Project B Depreciation CFAD tax@25% CFADT CFBDAT Cumulative

@5% Cash flows

2017-18 6,00,000 30,000 5,70,000 1,42,500 4,27,500 4,57,500 4,57,500

2018-19 9,50,000 47,500 9,02,500 2,25,625 6,76,875 7,24,375 11,81,875

2019-20 15,00,000 75,000 14,25,000 3,56,250 10,68,750 11,43,750 23,25,625

2020-21 18,00,000 90,000 17,10,000 4,27,500 12,82,500 13,72,500 36,98,125

2021-22 19,00,000 95,000 18,05,000 4,51,250 13,53,750 14,48,750 51,46,875

Original investment – recovery investment

= year before recovery+ --------------------------------------------------- × difference in year
Cash flow during next year

= 3 + [27,50,000-2,32,525/13,72,500] × 1
= 3 + [4,24,375/13,72,500] × 1
= 3 + 0.309
= 3.4 years
= 3years 4months

49
For project C

Year Project C Depreciation CFAD tax@27% CFADT CFBDAT Cumulative

@9% Cash flows

2017-18 9,50,000 85,500 8,64,500 2,33,415 6,31,085 7,16,585 7,16,585

2018-19 13,50,000 1,21,500 12,28,500 3,31,695 8,96,805 10,18,305 17,34,890

2019-20 18,00,000 1,62,000 16,38,000 4,42,260 11,95,740 13,57,740 30,92,630

2020-21 19,50,000 1,75,500 17,74,500 4,79,115 12,95,385 14,70,885 45,63,515

2021-22 20,00,000 1,80,000 18,20,000 4,91,400 13,28,600 15,08,600 60,72,115

Original investment – recovery investment

= year before recovery+ --------------------------------------------------- × difference in year
Cash flow during next year

= 2 + [30,00,000-17,34,890/13,57,740] × 1
= 3 + [12,65,110/13,57,740] × 1
= 3 + 0.932
= 3.11years
= 3years 11months

50
For project D

Year Project D Depreciation CFAD tax@30% CFADT CFBDAT Cumulative

@10% Cash flows

2017-18 15,00,000 1,50,000 13,50,000 4,05,000 9,45,000 10,95,000 10,95,000

2018-19 19,50,000 1,95,000 17,55,000 5,26,500 12,28,500 14,23,500 25,18,500

2019-20 25,00,000 2,50,000 22,50,000 6,75,000 15,75,000 18,25,000 43,43,500

2020-21 27,50,000 2,75,000 24,75,000 7,42,500 17,32,500 20,07,500 63,51,000

2021-22 28,00,000 2,80,000 25,20,000 7,56,000 17,64,000 20,44,000 83,95,000

Original investment – recovery investment

= year before recovery+ --------------------------------------------------- × difference in year
Cash flow during next year

= 3 + [47,00,000-43,43,500/20,07,500] × 1
= 3 + [3,56,500/20,07,500] × 1
= 3 + 0.178
= 3.2 years
= 3years 2month

PROJECTS WERE RANKED ON THE BASIS OF LEAST PAY BACK PERIOD

Initial investment Payback period Rank

Project A 25,00,000 2 years 9 months 1

Project B 27,50,000 3 years 4months 3

Project C 30,00,000 3 years 11 months 4

Project D 47,00,000 3 years 2 months 2

51
GRAPH SHOWING RANK OF THE PROJECTS ON THE BASIS OF PAY BACK PERIOD

4,5

3,5

2,5
payback period
ranks

1,5

0,5

project A project B project C project D

INTERPRETATION

The payback period can be used as criteria to accept or reject an investment proposal. A
project whose actual payback period is more than what has been predetermined by the
management willbe straight away rejected. While taking into account the reciprocal cost will
be the maximum acceptable payback period

DECISION

The least payback period is preferable therefore we accept the projects on the
priority basis as shown in ranks. For project A payback period is 2years 9 months which
is preferablecompared with all projects

52
CALCULATION OF AVERAGE RATE OF RETURN (ARR)

For all projects

Years Net profit after Net profit after Net profit after Net profit after
tax of project A tax of project B tax of project C tax of project D

2017-18 5,58,000 4,27,500 6,31,085 9,45,000

2018-19 7,81,200 6,76,875 8,96,805 12,28,500

2019-20 11,53,200 10,68,750 11,95,740 15,75,000

2020-21 11,90,400 12,82,500 12,95,385 17,32,500

2021-22 11,90,400 13,53,750 13,28,600 17,64,000

Total net profit 48,73,200 48,09,375 53,47,615 72,45,000

after tax

Average net 9,74,640 9,61,875 10,69,523 14,49,000

profit after tax

Investment – Scrap value + Additional working capital + scrap value

Average investment =
2

Average net profit after tax

Average rate of return =

Average investment

53
For project A

25,00,000

Average investment = ------------------

= 12,50,000

9,74,640

Average rate of return = ----------------

12,50,000

=0.7797

=78%

For project B

27,50,000

Average investment = ------------------

= 13,75,000

9,61,875

Average rate of return = ----------------

13,75,000

= 0.6995

= 70%

54
For project C

30,00,000

Average investment = ------------------

= 15,00,000

10,69,523

Average rate of return = ----------------

15,00,000

=0.7130

=71%

For project D

47,00,000

Average investment = ------------------

= 23,50,000

14,49,000

Average rate of return = ----------------

23,50,000

=0.6165

=62%

55
 PROJECTS WERE RANKED ON THE BASIS OF AVERAGE RATE OF RETURN

Initial investment ARR Rank

Project A 25,00,000 78% 1

Project B 27,50,000 70% 3

Project C 30,00,000 71% 2

Project D 47,00,000 62% 4

4,5

3,5

2,5
Average rate of return
rank

1,5

0,5

project A project B project C project D

GRAPH SHOWING RANK OF THE PROJECTS ON THE BASIS OF

ARR INTERPRETATION
In case of independent projects, calculated ARR of the project will be accepted otherwise
rejected. While evaluating mutually exclusive projects, calculated ARR of the alternatives will be
compared to judge the profitability.

DECISION
The higher rate of average rate of return is preferable therefore on the basis of ranking
project A is preferable compared with all projects which having 78% of average rate of return.

56
CALCUATION OF NET PRESENT VALUE

For project A

Year Cash flow after tax PV@18% PV cash flows

before dep.

2017-18 5,58,000 0.847 4,72,626

2018-19 7,81,200 0.718 5,60,902

2019-20 11,53,200 0.609 7,02,298

2020-21 11,90,400 0.516 6,14,246

2021-22 11,90,400 0.437 5,20,204

present value of cash inflows 28,70,276

NPV= present value of cash inflow - present value of cash outflow

= 28,70,276 – 25,00,000
= 3,70,27

For project B

Years Cash inflow PV annuity Present value of cash

factor@10% inflow

2017-18 4,27,500 0.909 3,88,597

2018-19 6,76,875 0.826 5,59,099

2019-20 10,68,750 0.751 8,02,631

2020-21 12,82,500 0.683 8,75,947

57
 2021-22 13,53,750 0.621 8,40,679

Net present value of cash inflows 34,66,953

NPV= net present value of cash inflow - net present value of cash outflows
= 34,66,953-27,50,000

= 7,16,953.

For project C

Year Cash flow after tax PV@12% PV cash flows

before dep.

2017-18 6,31,085 0.892 5,62,928

2018-19 8,96,805 0.797 6,93,235

2019-20 11,95,740 0.711 8,50,711

2020-21 12,95,385 0.635 8,22,569

2021-22 13,28,600 0.567 7,23,316

present value of cash inflows 36,52,759

NPV= present value of cash inflow - present value of cash outflow

= 36,52,316 – 30,00,000
= 6,52,316

For project D

Year Cash flow after tax PV@15% PV cash flows

before dep.

2017-18 9,45,000 0.869 8,21,205

2018-19 12,28,500 0.756 9,28,746

2019-20 15,75,000 0.657 10,34,775

2020-21 17,32,500 0.572 9,90,990

2021-22 17,64,000 0.497 8,76,708

present value of cash inflows 46,52,424

NPV= present value of cash inflow - present value of cash outflow

58
= 46,52,424 – 47,00,000
= -(47,576)

59
PROJECTS WERE RANKED ON THE BASIS OF NET PRSENT VALUE

Initial investment NPV Rank

Project A 25,00,000 3,70,276 3

Project B 27,50,000 7,16,953 1

Project C 30,00,000 6,52,316 2

Project D 47,00,000 -(47,576) 4

GRAPH SHOWING RANK OF THE PROJECTS BASED ON THE NPV

800000

700000

600000

500000

400000
net present value

300000 rank

project A project B project C project D

-100000

INTERPRETATION
Net present value be used as an “accepted or rejection” in case the NPV is positive,
theproject should be accepted. However, if the NPV is negative the project should be
rejected.
DECISION
The project having higher net present value is preferable therefore compared with all the
projects, for project B net present value is 7,16,953 and which is preferable.
The project D having negative net present value therefore it is rejected.

60
CALCULATION OF PROFITABILITYT INDEX

Years Present value of cash inflows

Project A Project B Project C Project D

2017-18 6,10,500 4,57,500 7,16,585 10,95,000

2018-19 8,54,700 7,24,375 10,18,305 14,23,500

2019-20 12,61,700 11,43,750 13,57,740 18,25,000

2020-21 13,02,400 13,72,500 14,70,885 20,07,500

2021-22 13,02,400 14,48,750 15,08,600 20,44,000

Total 48,73,200 48,09,375 53,47,615 72,45,000

Present value of cash inflow

Profitability index =

Present value of cash outflow

For project A

Present value of cash outflow = 25,00,000

48,73,200
Profitability index = -----------
----
25,00,000
= 1.95

For project B

Present value of cash outflow = 27,50,000

48,09,375
Profitability index = -----------
----
27,50,000
= 1.75

61
For project C

Present value of cash outflow = 30,00,000

53,47,615
Profitability index = -----------
----
30,00,000
= 1.78

For project D

Present value of cash outflow = 47,00,000

72,45,000
Profitability index = -----------
----
47,00,000
= 1.54

PROJECTS WERE RANKED ON THE BASIS OF PROFITABILITY INDEX

Initial investment Profitability index Rank

Project A 25,00,000 1.95 1

Project B 27,50,000 1.75 3

Project C 30,00,000 1.78 2

Project D 47,00,000 1.54 4

62
GRAPH SHOWING RANK OF THE PROJECTS BASED ON PROFITABILITY INDEX

4,5

3,5

2,5
profitability index
rank

1,5

0,5

project A project B project C project D

INTERPRETATION
The proposal is accepted if the profitability index is more than one and rejected in
case the profitability index is less than one. In case of mutually exclusive projects and capital
rationing situation projects are ranked in orders of their profitability index and accepted.

DECISION

The project having high value of profitability index will be preferable therefore
project Aof 1.95 profitability index will be preferable.

63
CALCULATION OF INTERNAL RATE OF RETURN

For project A

Years Cash inflow @18% @18% @24% @24%

PV factor PV of cash flows PV factor PV of cash inflow

2017-18 5,58,000 0.847 4,72,626 0.809 4,49,748

2018-19 7,81,200 0.718 5,60,902 0.650 5,07,780

2019-20 11,53,200 0.609 7,02,298 0.524 6,04,277

2020-21 11,90,400 0.516 6,14,246 0.423 5,03,539

2021-22 11,90,400 0.437 5,20,204 0.341 4,05,926

Total 28,70,276 24,71,270

Present value at LR –cash out flow

IRR = LR * (HR - LR)

Present value at LR – present value at HR

48,73,200 – 25,00,000

= 18% + * (24-18)

48,73,200 – 24,71,270

= 18% + ( 23,73,200 / 24,01,930) * 6

= 23.93%

64
For project B

Years Cash inflow @10% @10% @20% @20%

PV factor PV of cash flows PV factor PV of cash inflow

2017-18 4,27,500 0.909 3,88,597 0.833 3,56,107

2018-19 6,76,875 0.826 5,59,099 0.694 4,69,751

2019-20 10,68,750 0.751 8,02,631 0.579 6,18,806

2020-21 12,82,500 0.683 8,75,947 0.482 6,18,165

2021-22 13,53,750 0.621 8,40,679 0.402 544,208

Total 34,66,953 26,07,037

Present value at LR –cash out flow

IRR = LR * (HR - LR)

Present value at LR – present value at HR

34,66,953 – 27,50,000

= 10% + * (20-10)

34,66,953 – 26,07,037

= 10% + (7,16,953 / 8,59,916) * 10

= 18.37%

65
For project C

Years Cash inflow @12% @12% @20% @20%

PV factor PV of cash flows PV factor PV of cash inflow

2017-18 6,31,085 0.893 5,63,559 0.833 5,25,694

2018-19 8,96,805 0.797 7,14,753 0.694 6,22,383

2019-20 11,95,740 0.712 8,51,367 0.579 6,92,333

2020-21 12,95,385 0.635 8,22,569 0.482 6,24,376

2021-22 13,28,600 0.537 7,53,316 0.402 5,34,097

Total 37,05,564 29,98,882

Present value at LR –cash out flow

IRR = LR * (HR - LR)

Present value at LR – present value at HR

37, 05,564– 30,00,000

= 12% + * (20-12)

37,05,564 – 29,98,882

= 12% + ( 7,05,564 / 7,06,682) * 8

= 19.98%

66
For project D

Years Cash inflow @12% @12% @15% @15%

PV factor PV of cash flows PV factor PV of cash inflow

2017-18 9,45,000 0.893 8,43,885 0.869 8,21,205

2018-19 12,28,500 0.797 9,79,114 0.756 9,28,746

2019-20 15,75,000 0.712 11,21,400 0.657 10,34,775

2020-21 17,32,500 0.635 11,00,137 0.572 9,90,990

2021-22 17,64,000 0.567 10,00,188 0.497 8,76,708

Total 50,44,724 46,52,424

Present value at LR –cash out flow

IRR = LR * (HR - LR)

Present value at LR – present value at HR

50,44,724 – 47,00,000

= 12% + * (15-12)

50,44,724 – 46,52,424

= 12% + ( 3,44,724 / 3,92,300) * 3

= 14.64%

67
 PROJECTS WERE RANKED ON THE BASIS OF INTERNAL RATE OF RETURN

Initial investment Payback period Rank

Project A 25,00,000 23.93 1

Project B 27,50,000 18.37 3

Project C 30,00,000 19.98 2

Project D 47,00,000 14.64 4

GRAPH SHOWING RANK OF TH PROJECT ON THE BASIS OF IRR

30

25

20

15 internal rate of return

rank

10

project A project B project C project D

INTERPRETATION

Internal rate of return is the maximum rate of interest, which an organization can
afford to pay on the capital invested in a project would qualify to be accepted of IRR
exceeds the cutoff rate.

DECISION

The project having high internal rate of return will be preferable therefore project A

68
having 23.93% of internal rate of return will be preferable.

69
COMPARISON AND OVER ALL EVALUATION OF PROJECTS

Project A Project B Project C Project D

Payback period 2.9 years 3.4 years 3.11 years 3.2 years

Average rate of return 78% 70% 71% 62%

Net present value 3,70,276 7,16,953 6,52,316 -(47,576)

Profitability index 1.95 1.75 1.78 1.54

Internal rate of return 25.93% 18.37% 19.98% 14.68%

RANKS OF THE ALL PROJECTS

Project A Project B Project C Project D

Payback period 1 3 4 2

Average rate of return 1 3 2 4

Net present value 3 1 2 4

Profitability index 1 3 2 4

Internal rate of return 1 3 2 4

70
GRAPH SHOWING RANK OF THE PROJECT ON OVERALL BASIS

4,5

3,5

payback period
2,5 average rate of return
net present value
profitability index
1,5
internal rate of return

0,5

project A project B project C project D

DECISION
By considering all the methods of capital budgeting for all the
projects,Project A is preferable in all aspects.
Project B and C are preferable in secondary.
Whereas project D is rejected because of it get negative value of NPV and over ally it get
leastpriority.

71
BALANCE SHEET OF BHARATHI CEMENT CO.PVT LTD AS ON 2017-18

Sources of funds 2017 2018

Share holders fund
A) Share capital 3976.36 3976.36
B) Reserves and Surplus 3993.06 3804.74
A) Secured Loans 9244.82 10886.36
B) Unsecured Loans 15069.11 9588.74
Deferred Tax Liability 618.06 424.17
Total 32901.40 28680.37
Application of funds
A) Gross Block of fixed assets 25035.99 20021.36
B) Less Depreciation 6510.29 5417.03
Net Block of fixed assets 18525.70 14604.33
Capital Work In Progress 5604.02 6015.09
Investment - 589.83
Current Assets, Loans and Advances
A) Inventories 9194.04 7075.18
B) Sundry Debtors 6706.59 7197.89
C) Cash and Bank Balance 350.67 247.72

D) Loans and Advances 2070.42 1616.75

18,321.76 16,137.54
Less current Liabilities and Provisions
A) Current Liabilities 9202.11 8090.45

B) Provisions 354.42 586.14

9556.53 8676.59
Net Current Assets 8765.23 7460.95
Differed Tax Assets - -
Miscellaneous Expenditure 6.45 10.17
Total 32,901.40 28,680.37

72
BALANCE SHEET OF BHARATHI CEMENT CO. PVT LTD AS ON 2018-19

Sources of funds 2018 2019

Share holders fund
A) Share capital 3976.36 3976.36
B) Reserves and Surplus 5,108.64 3993.06
A) Secured Loans 16,382.92 9244.82
B) Unsecured Loans 13,733.65 15069.11
Deferred Tax Liability 1,184.79 618.06
Total 40,386.36 32901.40
Application of funds
A) Gross Block of fixed assets 31,824.32 25035.99
B) Less Depreciation 7,666.24 6510.29
Net Block of fixed assets 24,158.08 18525.70
Capital Work In Progress 754.45 5604.02
Investment - -
Current Assets, Loans and Advances
A) Inventories 10,636.86 9194.04
B) Sundry Debtors 7,667.92 6706.59
C) Cash and Bank Balance 2,650.37 350.67
D) Loans and Advances 5,241.68 2070.42
26,196.83 18,321.76
Less current Liabilities and Provisions
A) Current Liabilities 10,188.34 9202.11
B) Provisions 538.25 354.42
10,726.59 9556.53
Net Current Assets 15,470.24 8765.23
Differed Tax Assets - -

Miscellaneous Expenditure 3.59 6.45

Total 40,386.36 32,901.40

73
BALANCE SHEET OF BHARATHI CEMENT CO. PVT LTD AS ON 2019-20

Sources of funds 2019 2020

Share holders fund

A) Share capital 3976.36 3976.36

B) Reserves and Surplus 7179.70 5,108.64
A) Secured Loans 17832.33 16,382.92
B) Unsecured Loans 12271.32 13,733.65
Deferred Tax Liability 2576.95 1,184.79
Total 43836.66 40,386.36
Application of funds
A) Gross Block of fixed assets 35516.23 31,824.32
B) Less Depreciation 9127.88 7,666.24
Net Block of fixed assets 26388.35 24,158.08
Capital Work In Progress 862.01 754.45
Investment - -
Current Assets, Loans and Advances
A) Inventories 12092.91 10,636.86
B) Sundry Debtors 8814.31 7,667.92
C) Cash and Bank Balance 420.10 2,650.37

D) Loans and Advances 5289.66 5,241.68

26,616.98 26,196.83
Less current Liabilities and Provisions
A) Current Liabilities 9319.38 10,188.34

B) Provisions 711.30 538.25

10,030.68 10,726.59
Net Current Assets 16586.30 15,470.24
Differed Tax Assets - -
Miscellaneous Expenditure - 3.59
Total 43,836.66 40,386.36

74
BALANCE SHEET OF BHARATHI CEMENT CO. PVT LTD AS ON 2020-21

Sources of funds 2020 2021

Share holders fund

A) Share capital 3976.36 3976.36

B) Reserves and Surplus 8549.77 7179.70
A) Secured Loans 22645.54 17832.33
B) Unsecured Loans 15460.46 12271.32
Deferred Tax Liability 3123.73 2576.95
Total 53755.86 43836.66
Application of funds
A) Gross Block of fixed assets 38974.86 35516.23
B) Less Depreciation 10734.88 9127.88
Net Block of fixed assets 28239.98 26388.35
Capital Work In Progress 425.37 862.01
Investment - -
Current Assets, Loans and Advances
A) Inventories 14436.48 12092.91
B) Sundry Debtors 11966.16 8814.31
C) Cash and Bank Balance 3463.66 420.10

D) Loans and Advances 6107.54 5289.66

35,973.84 26,616.98
Less current Liabilities and Provisions
A) Current Liabilities 10108.38 9319.38

B) Provisions 774.95 711.30

10,883.33 10,030.68
Net Current Assets 25090.51 16586.30
Differed Tax Assets - -
Miscellaneous Expenditure - -
Total 53,755.86 43,836.66

75
BALANCE SHEET OF BHARATHI CEMENT CO. PVT LTD AS ON 2021-22

Sources of funds 2021 2022

Share holders fund

A) Share capital 3,976.36 3976.36

B) Reserves and Surplus 13,713.91 8549.77
A) Secured Loans 26,486.50 22645.54
B) Unsecured Loans 6,130.29 15460.46
Deferred Tax Liability 3,435.74 3123.73
Total 53,742.80 53755.86
Application of funds
A) Gross Block of fixed assets 40,286.29 3,8974.86
B) Less Depreciation 12,527.20 10,734.88
Net Block of fixed assets 27,759.09 28,239.98
Capital Work In Progress 3,441.21 425.37
Investment - -
Current Assets, Loans and Advances
A) Inventories 11,519.49 14,436.48
B) Sundry Debtors 11,845.80 11,966.16
C) Cash and Bank Balance 1,516.42 3,463.66

D) Loans and Advances 5,581.47 6,107.54

30,463.18 35,973.84
Less current Liabilities and Provisions
A) Current Liabilities 6,853.94 10,108.38
B) Provisions 1,066.74 774.95
7,920.68 10,883.33
Net Current Assets 22,542.50 25,090.51
Differed Tax Assets - -
Miscellaneous Expenditure - -
Total 53,742.80 53,755.86

76
STATEMENT SHOWING CHANGES IN WORKING CAPITAL AS ON 2017-18

Changes in working capital

Particulars 2017 2018
Increase Decrease
Current assets (CA)
Inventories 7075.18 9194.08 2118.9 -

Sundry debtors 7197.89 6706.59 - 491.3

Cash and bank balances 247.72 350.67 102.95 -

Loans and advances 1616.75 2070.42 453.67 -

Total Current Assets 16137.54 18321.76 - -

Current liabilities (CL)

Current liabilities 8090.45 9202.11 - 1111.66

Provisions 586.14 354.42 231.72 -

Total current liabilities 8676.59 9556.53 - -

Net Working capital (CA-

7460.95 8765.23 - -
CL)

Increase in Net working

1304.48 - 1304.48
capital

8765.23 8765.23 2907.24 2907.24

Net increase in the working capital is 1304.48

77
STATEMENT SHOWING CHANGES IN WORKING CAPITAL AS ON 2018 – 19

Changes in working capital

Particulars 2018 2019
Increase Decrease
Current assets (CA)

Inventories 9194.08 10,636.86 1442.78 -

Sundry debtors 6706.59 7667.92 961.33 -

Cash and bank balances 350.67 2650.37 2299.70 -

Loans and advances 2070.42 5241.68 3171.26 -

Total Current Assets 18321.76 26196.83 - -

Current liabilities (CL)

Current liabilities 9202.11 10188.34 - 986.23

Provisions 354.42 538.25 - 183.83

Total current liabilities 9556.53 10726.59 - -

Net Working capital (CA-

8765.23 15470.24 - -
CL)

Increase in Net working

6705.01 - - 6705.01
capital

15470.24 15470.24 7875.07 7875.07

Net increase in the working capital is 6705.01

78
STATEMENT SHOWING CHANGES IN WORKING CAPITAL AS ON 2019-20

Changes in working capital

Particulars 2019 2020
Increase Decrease
Current assets (CA)
Inventories 10,636.86 12092.91 1456.05 -
Sundry debtors 7667.92 8814.31 1146.39 -
Cash and bank balances 2650.37 420.10 - 2230.27
Loans and advances 5241.68 5289.66 47.98 -
Total Current Assets 26196.83 26616.98 - -
Current liabilities (CL)
Current liabilities 10188.34 9319.38 868.96 -
Provisions 538.25 711.03 - 173.05
Total current liabilities 10726.59 10030.68 - -
Net Working capital
15470.24 16586.30 - -
(CA-CL)
Increase in Net working
1116.06 - - 1116.06
capital
16586.30 16586.30 3519.38 3519.38

Net increase in the working capital is 1116.06

79
STATEMENT SHOWING CHANGES IN WORKING CAPITAL AS ON 2020-21

Particulars Changes in working capital

2021
2020
Increase Decrease
Current assets (CA)
Inventories 12092.91 14436.48 2343.57 -

Sundry debtors 8814.31 11966.16 3151.85 -

Cash and bank balances 420.10 3463.66 3043.56 -
Loans and advances 5289.66 6107.54 817.88 -
Total Current Assets 26616.98 35973.84 - -
Current liabilities (CL)
Current liabilities 9319.38 10108.38 - 789.00
Provisions 711.03 774.95 - 63.65
Total current liabilities 10030.68 10883.33 - -
Net Working capital (CA-CL) 16586.30 25090.51 - -
Increase in Net working capital 8504.21 - - 8504.21
25090.51 25090.51 9356.86 9356.86

Net increase in the working capital is 8504.21

80
STATEMENT SHOWING CHANGES IN WORKING CAPITAL ASON 2021-22

Changes in working capital

Particulars 2021 2022
Increase Decrease
Current assts (CA)
Inventories 14436.48 11519.49 - 2916.99
Sundry debtors 11966.16 11845.80 - 120.36
Cash and bank balances 3463.66 1516.42 - 1947.24
Loans and advances 6107.54 5581.47 - 526.07
Total Current Assets 35973.84 30463.18
Current liabilities (CL)
Current liabilities 10108.38 6853.94 3254.44 -
Provisions 774.95 1066.74 - 291.79
Total current liabilities 10883.33 7920.68 - -
Net Working capital (CA-CL) 25090.51 22542.50 - -
Decrease in Net working capital - 2548.01 2548.01 -
25090.51 25090.51 5802.45 5802.45

Net Decrease in the working capital is 2548.01

81
CHAPTER-6
 FINDINGS

 SUGGESSIONS

 CONCLUSION

82
 FINDINGS

 In 2017-18 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

assetsis 67% and net increase in working capital is of 26%.

 In 2018-19 financial year 10% of funds generated through trading activity and another

90% through secured loans and unsecured loans. In applications the 63% 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 the current

assets. The quick ratio of the company is more than normal standard from 2017-2018

to 2018-2019.

 In 2019-20 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 2020-21 financial year 17.52% of funds utilized for purchase of fixed assets, and

26.58% to unsecured loans. Funds from operations are of 25.61%.

 In 2021-22 financial year 22.35% of funds utilized for purchase of fixed assets, and

16% to unsecured loans. Funds from operations are of 15%.

 In current ratios of the company from 2020-21 to 2021-22 from the current ratio of

the year 2019-20 is satisfactory, but the current ratio of the remaining two years i.e.,

2021-22 and 2017-18 is not satisfactory. For better performance the company should

hold optimum current assets to meet the current liabilities.

83
 SUGGESTIONS

 Sales should be increased to get more returns.

 In the financial senses acquiring the share capital will makes profitable than

borrowingthe loans thorough secured and unsecured.

 Trading activity should be operated effectively to generate more funds.

 The company should take and maintain some position the current assets by keeping

move with liquidity.

 The company should allocate some more funds to the assets by increasing the capital.

So that adequate working capital should be maintained and could take the firm should

become financial storing.

 The company did not utilize more debt hence it was suggested that the company

shouldutilize the source of debt in order to take in advantage of tax payment.

84
 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.

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 BIBLIOGRAPH

 Khan M.Y. & Jain P.K. Financial Management, 2nd Edition Tata Mc. Graw-
Hill Publishing Co. Ltd., New Delhi.

 Pandey I.M., Financial Management, 7th Edition, Vikas Publishing House Pvt. Ltd.,
NewDelhi, 1995.

 Kothari C.R. Research Methodology, 2nd Edition, WishwaPrakasham, New Delhi, 1990.

 Maheswari S.N., Financial Management, 4th Edition, Sultan Chand & Sons, New
Delhi.1997.

 Prasanna Chandra, Financial Management, 3rd Edition, Tata Mc.Graw-Hill

PublishingCo., Ltd., New Delhi, 1984.

WEBSITE

 www.Bharathicement.org

 www.google.com

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