HISTORY OF THE COMPANY

INCORPORATION

A company is an association of both natural and artificial persons incorporated under the existing law of a country. In terms of the Companies Act, a company means a company formed and registered under the companies Act, 1956 or under the previous laws relating to comprises companies [section 3(1)(i)]. In common law, a company is a “legal person” or “legal entity” separate from, and capable of surviving beyond the lives of its members.

Any seven person or more persons, or where the company to be formed will be a private company, any two or more persons, associated foe any lawful purpose by subscribing their names to memorandum of association or otherwise complying with the requirements of the companies act, 1956, in respect of registration, from an incorporated company.

INCORPORATION OF CARBORUNDUM UNIVERSAL LIMITED

CUMI was incorporated in the year 1954 as a tripaetie collaboration between Murugappa Group, the Carborundum Co., USA and the Universal Grinding Wheel Co. Ltd., U.K.It was incorporated under the Indian Companies Act, UII of 1913, and that the company is limited. The CUMI Company manufactured bonded abrasives and coated refractories and ceramics. The company commenced business in sixth day of December 1954. In the year 1974, the revenue of CUMI increases by 78 million to 337 million.

With state-of-the art facilities and strategic alliances with global partners, CUMI has achieved a reputation for quality and innovation.CUMI is one of the five manufacturers in the world with fully integrated operations that include mining, fusioning, wind and hydro power stations, manufacturing, marketing and distribution.

Almost all of CUMI's ten manufacturing facilities have received the ISO 9001:2000 accreditation for quality standards. A well connected marketing and distribution network of offices and warehouses in India and abroad ensure that

service to customers is given prime importance. CUMI's products are being exported to 43 countries spread across North America, Europe, Australia, South Africa and Asia.

OBJECTS

To carry on the business of manufactures of abrasives in all the branches To carry on the business of manufactures, dealers and importers, exporters,

merchants, distributors and stockiest of coated abrasives, bonded abrasives, Refractory materials and all materials, goods and ingredients used or that could be used in the manufacture or processing of abrasives or refractory of all kinds.

To manufacture, sell or acquire air/water purification plants/machinery of all kinds.

To manufacture systems and materials for surface treatment and coating and to use in commercial exploitation.

To carry on the business of manufacture and sale of optical and ophthalmic, ceramics and its allied products, organic and inorganic colouring agents, carbon and graphite products and to do business in these as agents, traders or otherwise.

To establish and operate electric furnaces of all kinds. To carry on the business of mining in all its branches. To carry on the business of carriers, merchants, stockiest, distributors,

importers, exporters and general and commission agents of goods and merchandise of all descriptions.

To establish any workshop, factory, plant, machinery or other equipment necessary for any of the process or business of the company.

To sell, exchange, lease, mortgage, charge, develop, dispose of or otherwise deal with the undertaking of the company or any part thereof upon such terms and for such considerations as the Company may think fit.

To employ experts to investigate and examine into the condition, prospects, value, character and circumstances of any business concerns and undertakings and generally of any asserts, property or rights.

To advance and to lend money either with or without securing and generally to such persons and upon such terms and conditions as the company may think fit.

To amalgamate with any other company or companies having objects altogether or in part similar to those of this company.

To open or keep a register or registers in any country or countries where it may be deemed advisable to do so and allocate any number of shares in the company to such registers or registers.

To draw, accept and make, and to endorse, discount and negotiate promissory notes, hundies, bills of exchange, bills of loading and to allocate any number of shares.

To improve, manage, work, develop, lease, mortgage, abandon or otherwise deal with, all or any part of the property, rights and concessions of the company.

To place, to reserve or to distribute dividends or bonus among the members, or otherwise to apply, as the company may from time to time think fit, any moneys received by way of premium on shares or debentures issued at a premium on shares and debentures.

To do all or any of the above things and all such other things as are incidental or may be thought conducive to the attainment of the above objects.

And it is hereby declared that the word ‘company’ in this clause shall be deemed to include any authority, partnership or other body of persons whether incorporated or not and whether domiciled in India or elsewhere.

SUBSIDARY COMPANIES

CUMI American Inc.

The principal business of this organization is to marketing a abrasives products in the USA. Net income improved to US $27,512 (1.4million) from US $ 10,170(0.5million).

CUMI Australia Private Limited

The company acquired a 51% stake in CAPL, a company engaged in the design, marketing and appreciation of industrial ceramicsand ceramic-lined equipment used in the coal processing industry. Since CAPL procures a significant requirement of industrial ceramics from CUMI, the investment is expected to help CUMI increase its presence in Australia. For the year ended 31st March 2004, the Company reported total revenues of AU$ 3.73 million (Rs. 123 million) and a profit after tax of AU$ 0.44 million (Rs. 20 million).

Sterling Abrasives LimitedTurnover for the year under review was Rs. 105 million (previous

year Rs. 101 million). Profit after tax improved from Rs. 13 million to Rs. 15 million through cost reduction and enhanced operating efficiencies. A dividend of 70 percent has been proposed for the year.

CUMI Canada in

The Company was set up in 2006 to focus mainly for the Canadian and North American markets. Together with CUMI America, the Company serves as a Product Availability Point (PAP) for the CUMI's products for the North and South American markets.

CUMI Middle East FZE

The Company was incorporated in Dec. 2006 in RAK Free Trade Zone, Ras Al Khaimah, UAE. It has been set up as a Product Availability Point (PAP) to serve the African, Middle East and Russian markets. The company has commenced operations in April 2006

DAO Volzhky Abrasives Works

(VAW) established in 1961 is the only  producer of silicon carbide in Russia, the largest producer of silicon carbide in Europe and the major  producer of vitrified bonded abrasive tools in Russia and CIS.

INTERNAL MANAGEMENT

Internal management means when management controlled internally by the organization. The aria of internal management is top management to lower management that means only organization’s staff are main member of that management. Outer people of the organization are not engaged in the internal management. Sic racy is one of the most important factors of internal management.

BOARD OF DIRECTORS

Mr.M.M. Murugan

Chairman

Currently- chairman of Tube Investment of India Ltd,

Director Mahindra & Mahindra Ltd,

Infotech enterprises.

Mr. Subodh Kumar Bhargav

Non executive of Tata Commmunication ltd, and

Warstile India, director of Tata steel, SRF Ltd,.

Mr. Sridhar Ganesh

Non executive Director

Director- HR, Murgappa.

Mr.shobanthalore

Non executive director

Director of Alkyl Amines Chemical Ltd.,

Mr. M. Laskshminarayan

Non executive Director,

Director of Rane(Madras) Ltd.,

Mr. Sanjay Jayavarthanavelu

Non executive Director

Managing Director of Lakshmi Machine Works Ltd.,

Mr. K. Srinivasan

Managing Director

CEO of the company since Jan 2005.

Management committee

CUMI management committee steers the organization to meet overall objectives within the boundries set by the board of director. The committee comprises of

K. SrinivasanManaging director

V Ramesh President,Abrasives.

R Sridharan Chief financial Officer

M Muthiah Senior Vice President

R Rajagopal Senior vice President- Refractories

Deepak dorairaj Senior Vice president- Abrasives

N Anathaseshan Senior Vice president- Electominerals

GROWTH AND DEVELOPMENT

1954

The company was incorporated at Chennai. The company manufacture bonded abrasives and coated abrasives, refractories, grains calcined bauxite etc.

1962

The company issued a 20000 no of Equity shares at Rs.25 each.

1974

The revenue of the CUMI increases by 78million to 337 million. In 1984-1993, CUMI started a silicon carbide plant at koratty& Refractories plant Ranipet, Hosur. In 1996, a new facility for manufacture of new generation monolithic for steel plants was being established at Vishkapatnam.

1992

The company acquires 4740 preference share and 124800 equity shares WENDT (India) and 10 lakhs unit of Unit Trust of India under the 1964 scheme.

1994

The Company commissioned a wind farm of 2 MW capacity at Perungudi and Tamilnadu

1996

The new facility for manufacture of new generation monolithic for steel plants was established at Visakhapatnam and Murugappa Morgan Thermal Ceramics Ltd. A Subsidiary in which the Company held 70% shareholding has implemented a new project for 3000 tons Spun Ceramic Fiber.

1997

The Ranipet unit manufacturing super refractories received the ISO 9002certification.

1998

The Company established a wholly owned subsidiary in the U.S.A by name CUMI America Inc. for marketing the Company's products in the American markets.

2003

The Company has acquired a 51% stake in CUMI Australia Pty Ltd

2005

Carborundum Universal Ltd sets up 100% subsidiary in Ras Al Khaimah U.A.E for marketing its products namely Abrasives Ceramics Refractories and Electrominerals in Middle East.

2006

Carborundum Universal enters into a Joint Venture with CEEB to take a 49%stake in JingriYanjiao China

PRODUCTS AND SERVICES

PRODUCTS

The company pioneered the manufacture of Coated Abrasives, Bonded Abrasives, Super Refractories, Electro minerals, Industrial Ceramics and Ceramic Fibers.

The following Pie-chart shows the percentage of products produced by CUMI.

Abrasives 70%

Ceramics18%

Electro Minerals12%

percentage

ABRASIVES (70%)

An Abrasive is a hard, tough and wear resistant substance for grinding and polishing operations. Manufactured through a complex and high technology process, are used in metal removal cutting and finishing operations in almost all industries. These can be

Coated Abrasives

Manufactured by a depositing grains over a backing materials like cloth or paper and are used in light polishing applications, auto ancillaries and white goods.

Bonded Abrasives

These are divided into vitrified, retinoid and rubber products and manufactured by mixing grains with bonding material, molding them to shape and then subjecting the output to firing or baking in high temperature and finishing the same to desired dimensions. It is mostly in the form of wheels but also in other shapes such as segment, sticks etc.,

ELECTROMINERALS (12%)

CUMI Electro minerals group offers sintered aluminum order and silicon carbide grains as the major line upon completion of acquisition in South Africa.

Electro minerals are used as basic raw material in the manufacture of abrasives and refractories. They are also used for surface preparation and in tile and paint industries.

CUMI range of electro minerals includes silicon carbide, brown aluminum oxide and white aluminum oxide. It also manufactures mullite, bubble alumina and certain other specialties in smaller quantities.

On a consolidated basis, captive sales to the abrasives and refractory units account for about 15 per cent of the output of this business. The electro minerals business operates several manufacturing facilities which have been certified for process quality and environment protection.

CERAMICS (18%)

The Ceramics product group offers products which harness the heat resistance / containment, wear resistance and insulation properties of ceramics and also corrosion resistance properties of various materials.

The products lines are

Industrial ceramics materials are non-metalic, inorganic compounds. Industrial ceramic products made mostly of high alumina. They have high melting point, low wear resistance, and wide range of electrical properties.

SERVICES

The financial services arm of the CUMI Group is spearheaded by the Cholamandalam Investment & Finance Company, a leading industry player providing holistic financial services including vehicle finance, capital market finance, mutual funds, securities broking, depository and distribution services, while Cholamandalam MS Insurance provides insurance services.

The CUMI Group's IT services arm is comprised of two companies - Net Access and Wend soft. Net Access provides quality IT infrastructure services and customized software solutions to enterprises seeking to outsource their IT requirements. Wend soft, part of Wendt India, has introduced two excise management software packages and markets two exclusive software packages.

Additionally, GMD, a business division of Parry Enterprises India Limited, forms the marketing services arm of the CUMI Group, marketing a range of food products and ingredients. It has tie-ups with various Indian and multinational companies for marketing their products, which find extensive application in end-use segments such as biscuits, dairy, bakery, processed foods and confectionery.

AWARDS

Frost and Sullivan India Manufacturing Excellence Awards (IMEA) recognizes and applauds efforts of companies towards excellent to world class manufacturing status. Based on the findings of the assessment and recommendation of the panel, CUMI site at Thiruvottiyur was chosen for a special Award for Growing through managing change. Out of the 37 companies audited, 17 companies were chosen for the award. The Award was given in a glittering function on the 8th December 2004 at Hotel TajLands end, Mumbai.

Under Cost Management 03-04, abrasives division of CUMI gets National Recognition in field of cost management from ICWAI. The award was handed over by the Hon’ble Minister of Company Affairs Mr.Prem Chand Gupta. On behalf of CUMI Abrasives, the award was received by Mr.R. Narayanan, DGM Finance.

ORGANISATION STRUCTURE

“Structure is the established pattern of relationships among the component parts of the organization. In this sense, Organization structure refers to the network of relationships among individuals and positions in an organization.

-Kast & Rosenzweing.

The term organization can be studied as a structure and also a process. In a static sense, organization is a structure. A group of people functions within the structure and try to accomplish certain objectives. Organization is a structure for the conduct of business activities efficiently. The typically hierarchical arrangement of lines of authority, communications, rights and duties of an organization. Organizational structure determines how the roles, power and responsibilities are assigned, controlled, and coordinated, and how information flows between the different levels of management.

A structure depends on the organization's objectives and strategy. In a centralized structure, the top layer of management has most of the decision making power and has tight control over departments and divisions. In a decentralized structure, the decision making power is distributed and the departments and divisions may have different degrees of independence.

IMPORTANCE

Importance of organization structure involves assisting business owners, CEOs, and entrepreneurs to conceptualize, visualize, and construct a hierarchical system to be implemented into their structure. For example, the building blocks of organizational structures include a chain of command, span of control, departmentalization, distribution of authority, and organization height. The importance of functional organizational structure is to provide order and accountability to an organization.

Chain of command

An organizational structure involves a chain of command which determines and defines: job positions, who makes the decisions, and who's accountable for various duties.

Span of Control

Span of control determines and quantifies the actual amount of employees a manager supervises.

Departmentalization

Departments within an organization structure are sections of the structure divided into functional divisions (such as the Sales Department) relevant to specific tasks. Determining what activities, tasks, and talents are to be grouped to best achieve an origination's objective is called the

departmentalization process.

Distribution of Authority

Distribution of authority determines if decision-making authority is concentrated among a few high-level figures commonly seen in bureaucratic organizations or is the authority shared and distributed throughout a variety of departments working closet to the their corresponding tasks.

Organization Height

Organization height defines how many departments, divisions, and layers there are between the highest levels and the lowest levels of an organization.

ORGANIZATION STRUCTURE

The line of authority moves directly from the top level to the lowest level in step by step manner. It is in the position of straight and vertical.

The Managing Director issues orders to General Manager. There after the general manager issues instructions to various work managers. In this manner, the order and instructions passed to the workers at the lowest level. Thus it moves downwards and step-by-step position.

The above chart explains how the organization structure maintained by the CUMI. As an organization whose products is to a number of customers and used in diverse applications and geographies, CUMI is impacted by a number of variables. The company’s various businesses are managed through a competence based structure that comprises SUBs, subsidiaries and joint-ventures. This structure facilitates the function of focused business, segment development and encouraging specialization. CUMIs successful business presence over five decades is a testimony to its business portfolio management capability and also for the good organizational structure.

OFFICE LOCATION

A location defines models a generic type of location listing the attributes whose values define a specific location of that type. Location definitions are required in order to model location, or can be used to create structure and structure definition.

IMPORTANCE

The important thing to be considered for location is its overall desirability as well as the accessibility from highways and mass transit for employees and customers

Not only does a business in the right location enjoy excellent corporate presentation that accompanies the proper address, it also benefits from the exposure afforded by neighboring business and their clients. A comprehensive review of the potential location will certainly prove time well spent.

LOCATION

665, Thiruvottiyur High road,

Post Box No: 2272,

Thiruvottiyur,

Tamilnadu-600 019

Registered office

“Parry House”

43, Moore street,

Chennai 001.

Investor service @ cumi.murugappa.com

url:http://www.cumi.murugappa.com

Bonded abrasives division

plot no:48, SIPCOT Industries Complex,

Krishnagiri,

Tamilnadu 635 126.

Coated Abrasives

TambaramVelachery road,

Pallikaranai PO,

Super refractories Division

Plot No:102-103,

SIPCOT Complex (phase 2)

Ranipet, Tamilnadu 632 403.

Electrominerals Division

KalamaseryDevelopment plot,

Kalamasery P.O,

Eranakulam District,

Kerala 683 109.

IMPORTANCE OF OFFICE LOCATION AT CARBORANDUM UNIVERSAL LIMTED

The location of Carborandum Universal limited at Thiruvottiyur is more comfortable for the employers as well as their customers to reach the office. ThiruvottiyurMunicipality is located to at a distance of 7 km north of Chennai at 13.75˚ latitude on North and 80.25˚ longitude. It is bound on the north by Kattivakkam Municipality, east by Bay of Bengal, west by Manali.

Chennai Harbour is about 7km , and Chennai Airport is about 20km also from the company which helps them to import and export their products. Big landmark to the office is that the Thiruvottiyur Bus Terminal which helps to reach the office quickly as well as without any difficulty. One more land mark to the company is HP Petroleum Bunk. These help to locate the office efficiently.

OFFICE LAYOUT

Modern business rests not only on its personnel and equipment’s but also how they arranged. Much of the efficiency of men and labor mostly depend on its layout. In the modern office internal arrangements must take place on the basis of

office system and structure of organization. The size, shape, number of rooms, corridors and other arrangements should be made on the base of departments and layouts of the office. The departments may be situated on the same floor.

The office environment is one that can affect your employees work productivity and is created by several different factors. Layout is more than just the office set up; it also encompasses the overall look of the office.

An office layout is the way in which everything from the desk to the watercolors is arranged within an office space. Office layout can have a big influence on staff morale and can influence the way in which visitors, customers, clients view the business. Different impressions of the business can create by a rearrangement of the office layout. There are many principles of office layout that can be adhered to ensure the best environment for the staff. These principles include making sure there is plenty of light, break out areas are supplied equally and workstations are comfortable and spacious. The layout of the office space should reflect the needs of employees.

IMPORTANCE

Office layout improves the efficiency of an organization, Proper office layout is crucial to efficiency of the business. Layout is

important to ensure the efficiency due to following factors:

To ensure proper utilization of work place. To facilitate supervision. To facilitate inter-communication. To ensure better use of office machines and equipments. To ensure better comfort and morale of workers. To ensure favorable impressions on customers and visitors. To ensure smooth work flow

Proper layout is vital to optimizing the business for increase productivity. Standard office system will help to organize and deploy equipment in the

most efficient.

Proper office layout helps the employees to focus better on the right things which will increase the amount of work they can get done in a amount of time.

1. Recreation club2. Football ground3. Human Resource department4. Four wheelers parking5. Two wheelers parking6. Weigh bridge7. Water cooling furnace system8. Finance department9. General Manager office10.Visitors cabin11.Marketing department12.System department13.Godown (bauxite)14.Chemical lab (quality checking)15.Employee’s rest room16.Pig yard17.Furnace18.Break yard19.Crusher20.Grain processing unit21.Shipping document22.Mechanical workshop23.Maintenance department24.Store25.Safety equipment lab26.Physical lab27.Visitors Rest room28.Time office29.Security30.Shipping department office

31.Canteen32.R&D department33.Furnace testing lab34.Electrical maintenance department35.Employees rest room.

In the entrance of the company there is a recreation club and football ground for the relaxation of the employees. There are various departments such as Human resource department, finance department, marketing department, system department maintenance department. There is also a place for parking two and four wheelers. For visitors there will be a separate restroom and cabin for their relaxation. Godown and safety equipments stores helps to store the goods and products in an efficient manner which will help organization to make goods are in a good position.

DEPARTMENTATION

Departmentation is concerned with grouping the various activities into separate administrative units. It implies grouping activities and employees into departments. Departments may thus be defined as “the process of grouping

activities into units with a view to ensuring effective management. Growth of enterprises as well the principle of specialization is the genesis of depatmentation. Span of management is a factor greatly restricting size of the enterprise and through departmentation only any organization can expand to a reasonable degree. In the same way, principle of specialization requires into separate units.

The process of departmentation takes place at all levels in the organization. It may be noticed that the chief executives reporting directly to him. The common process of grouping tasks into individual jobs, grouping units into larger units to establish the departments is carried on in the whole process of the organization.

According to knootz and O’Donnell “Departmentation is a process of dividing the large monolithic functional organization into smaller and flexible administrative units.

According toLouise and Allen"a department is a distinct area, division or branch of an enterprise over which a manager has authority for the performance of specified activities or functions of enterprise are grouped homogenously into different groups."

ADVANTAGES OF DEPARTMENTATION

Advantages of managerial specialization

Departmentaion enables to avail of advantage of managerial specialization. In fact in whatever way are department created; it is sure that each departmental head is a specialist in matter pertaining to his department. This specialization means increased efficiency of operation, leading to more profit for their enterprise.

Expansion and growth of enterprise facilitated

The device of departmentaion facilitates growth and development of an enterprise. Depending on growth requirements of business, more departments may be created in the enterprise; or within the same department, more sub-departments may be created to handle additional work load.

Decentralization facilitated

Departmentation facilitates the implementation of the policy decentralization of authority. In fact, many departmental heads may be granted full power to run their departments efficiently through systematic decentralization. Decentralization is likely to motivate departmental heads and boost their morale-all leading to higher efficiency and increased profits for the whole organization.

Fixation of responsibility facilitated

Departmentaion facilitates fixation of responsibility on departmental heads, as their roles and functions are clearly defined. Management accordingly can also introduce a system of “Responsibility Accounting” and ensure its advantages to the organization.

Performance appraisal and managerial development

On the basis at the functioning of departments, it is easier for the management to undertake performance appraisal for departmental and their subordinates. Performance appraisal findings may provide useful clues to initiating schemes of managerial development.

Facilitates intra-departmental coordination

Since people in a department perform inter-related jobs and tasks pertaining to the subject matter of that department; it could be said that departmentation facilitates intra-departmental coordination. Moreover people in the department develop better social informal relation because of frequent interaction.

Administrative control facilitated

Departmentation facilitates administrative control on the top of the management. In view of the nature and functioning of departments; top management can devise and implement broad but suitable controls over departments.

LISTS OF DEPARMENTS

PURCHASE DEPARTMENT SALES DEPARTMENT FINANCE DEPARTMENT MARKETING DEPARTMENT PERSONNEL DEPARMENT

PURCHASE DEPARTMENT

Purchasing is the process of procuring the required goods and materials, in the correct amount, at the time needed, from a reliable source, for the best price and value as possible.

Purchase Department deals with the clerical work in connection with the purchase of material, stores, plant, machinery, fuel and stationery etc., These department provides a service that is the backbone of many manufacturing, retail, military and other industrial organization. To understand better the role of purchasing department is consider some function it performs. It is a small business need to shop around to find the best vendors at the most reasonable prices for the company’s particular order.

When activities associated with each product or group of closely related product are combined relatively autonomous and integrated units within the overall framework of the company. Such an organization is described as product departmentation.

The Purchasing Department has the authority and responsibility for procuring the requirements for all materials and equipment within the County. This Department is charged with the responsibility of conducting the purchasing function in a manner which results in the most efficient, economical and effective

use of County funds. The Purchasing Department is organized to serve and facilitate the objectives of the County; to make procurement commitments in a consistent and orderly fashion; to maintain accurate and detailed records regarding purchasing; and, to foster a high standard of business relations with the Departments we support as well as our vendors and the general public.

FUNCTIONS

Preparation of suppliers order

Receipt checking and recording of supplier’sinvoices and delivery notes.

Maintenance of purchase journal and ledger.

Checking and certification for payment of supplier’s bill.

Monitor and control the use on materials for production process.

To ensure production process are carry out according to plans.

Preparation of yearly production plan based on market strategy.

Serving as an information center on the materials’ knowledge i.e. their prices, source of supply, specification and other allied matters.

SALES DEPARTMENT

Sales department is an important department in every manufacturing concern. It generally deals with forms & records relating to sale of finished goods, marketing & advertisement.

Sales are the activities involved in providing products or services in return for money or other compensation. Sales department is the division of a business that is responsible for selling products or services. Sales often form a separate grouping in a corporate structure, employing separate specialist operatives known as salesperson. Marketing department generates a potential customer list, it can be beneficial for sales. Driving more customers “through the door” gives sales department a better chance by ratio of selling their products to their customer.

FUNCTION

Receipt checking and recording of customer order. Preparation of outward invoices. Maintenance of sales journal and ledger. To find appropriate agency to carry out the sales activities. Preparation of sales statistics. To help marketing department in meeting the sale volume forecasted by

them. Collection of outstanding bills To increase the sale volume considering a particular period of time.

FINANCE DEPARTMENT

To handle the financial affairs of the company the ministry of finance is responsible for the financial functions activities of the board and managemen t of financial policy of the organization.

Finance department is the part of an organization that manager its money. The business functions of a finance department typically include planning, organizing, auditing, accounting for and controlling its company’s finances. The finance department also usually produces the company’s financial statement. Ensures adequate funds are available for resources need to help achieve organizational objective. Ensure costs are controlled and establish control profitability.

HIERARCHY

Duties of accounts assistant are cash transactions, account payable, payment and vouchers etc., Duties of the supervisor are maintaining the trial balance, capital expenditure and debt management etc., Responsibilities of the manager account are monthly report, auditing and fund management etc., Accounts General Manager has the full responsibility of accounts department.

FUNCTION

Keeping record of the purchase and sales made by a business as well as capital spending.

Prepare profit and loss Account and Balance sheet. Managers require ongoing financial information to enable them to take

better decisions. The wages section of the finance department will be responsible for

calculating the wages and salaries for employees and organizing the collection of Income Tax.

It will also be responsible for the technical details of how a business raises finance. For example through loans, and the repayment of finance.

AGM (ACCOUNTS)

2 JUNIOR Dy MANAGER

2 SUPERVISIOR

MANAGER (ACCOUNTS)

The company has a special accounting policy, which is the basis of the financial statement. It is in accordance issued by the Institute of Charted Accounts of India.

MARKETING DEPARTMENT

CUMI has a team of making executives spread all over the country to facilitate larger sales and customer services. The company has a traditional marketing wing, which looks after sales and service operation. This department also conducts market surveys and trend analysis, which helps the management to make correct and important decision. It also helps in making modifications of existing products and introduction of new products.

As a part of market research, the sales executives study the requirements of their customers, both new and existing customers. They collected information from the customer and prospective customers directly. The first 15 days of every month they do the above-mentioned activities and the rest of the days they do the payment follow up. There is a value target and based on this production is carried out.

FUNCTIONS

Identifying the customer needs. Designing product that meets the needs. Communicating information about those goods and services to prospective

buyers. To know the needs and wants of the customer and fulfill them accordingly. Communicating with customers, general public and other customers,

through some type of advertising, public relation and sales promotion. Retaining the regular customers. Identifying new needs arising in the market. Deciding on the emphasis to place, as well as approach to take on societal

issues, global marketing on the web.

PERSONNEL DEPARTMENT

Personnel department has always been one of the focus points in business strategy. Its strategy is carefully linked to the vision, mission and overall business strategy of the company. In CUMI, the Personnel department is responsible for

putting together the Human Resource plan based on corporate plan. The basic objective of this department is utilization of human resource, desirable working relationship among all employees and maximum individual development.

FUNCTIONS

Maintain close liaisonwith line organization.

Plan, organize & control personnel relation programme.

Ensure good employee moral & happy industrial relations as far as practicable in the present content of insatiable demand.

Assistline management, develop an effective appraisal system & evaluate the performation of their respective employees.

Provide a sound programme of wage & salary administration

Ensure good employee moral & happy industrial relations as far as practicable in the present content of insatiable demand.

Arranging training and development programs for the employees.Collecting data from all other factories to enable them prepare details for long term negotiation.

Collection data from all other factories to enable them prepare details for long termnegotiation.

Making daily attendance of the employees, pay and overtime, this departmental so does all correspondence relating to the ESI and PF.

SECRETARIAL DEPARTMENT

The word secretary is derived from Latin word secreteus which means a confidential officer. The basic idea behind keeping the secretary is that there should be a person who can assist authorities in carrying out the details of their works so that all matters could be handling in confidence and with utmost efficiency. A person employed to handle correspondence, keep files, and do clerical work for another person or an organization.

The Secretarial Department of a company delivering valuable services to the shareholders of the company by providing consistent, timely and adequate information and redressing their complaints in consultation with the register and transfer agents of the company.

COMPANY SCRETARY

The word "Secretary" is derived from the Latin word "Secretarius" meaning Confidential Officer. A secretary is defined by the Oxford Dictionary as "one whose office is to write for another, especially one who is employed to conduct correspondence, to keep records and to transact various other businesses for another person or for a society, corporation or public body".

Secretary means a “company secretary within the meaning of clause (c) of the subsection (1) of section 2 of the company Secretaries Act, 1980 and includes any other individual possessing the prescribed qualification and appointed to perform the duties which may be performed by a secretary under this Act or any other ministerial or administrative duties”

Therefore the Secretary is one of the principal officers of the company with the requisite qualifications to undertake secretarial work and management of the affairs of the company as per the provisions of the Act and instructions laid down by the Board of Directors. The Board, however, cannot alter the duties of the secretary as they are determined by the law.

FUNCTIONS OF SECRETARIAL DEPARTMENT

Supervision, coordination and control of clerical work Selection, appointment and assignment of office work to the staff Maintaining office discipline Supervising secretarial work relating to meetings etc..

Handling staff matters, dealing personally with outside callers. Acting as a mouth piece of the management for communicating their

decision to the staff. Maintaining public relation that is keeping the pubic informed about the

activities of the organization. To participate in formulation of the company strategy and objective

Memorandum Of Association, Articles Of Associations and other documents are to be field with registrar

The secretary helps the promoters in preparing, printing and filling of these documents.

Communicating to management the grievances of the staff, if any, or reaction of the staff to management policies

As an adviser to management, good secretaries are not only the recipient of the order but also valued adviser

To maintain minutes books, statutory register and executing instructions of the board

To deal with the matters relating to registration, transfer, transmission and disposal of shares.

To organize and provide secretarial support to full board, all board committee, and annual general meeting

To ensure effective support for public and investor relation and thus to coordinate activities of public relation.

MEETINGS

Meetings may generally defined as a gathering or assembling or getting together of number of persons for transacting any lawful business and not for entertainment or the like purpose. There must be atleast two persons to constitute meeting. In certain exceptional circumstances, even one person may constitute a meeting. Therefore, one shareholder cannot constitute a company meeting even if he holds proxies for other shareholders.

When two or more than persons come together to discuss matters of common interest, there is said to be a meeting.

It is to noted that every gathering or it is that part of uncalled capital which has been reserved by the company by passing a special resolution to be called only in the event of its liquidation. This capital cannot be called up during the existence of the company.It would be available only in the event of liquidation as an additional security to the creditors of the company assembly does not constitute a meeting. Company meeting must be convened and held in perfect compliance with the various provisions of the Companies Act, 1956 and rules framed there under.

A meeting of any kind, to be valid, must satisfy the following conditions.

It must be properly convened. That is, it should be called by the proper authority entitled to call the meeting. The proper authority to convene the meeting is Board of directors, shareholders or the company Law Board

It must be legally constituted. This means that the meeting should have a proper chairman; quorum must be presented.

It should conduct according to the provisions of the Act and Articles. It should be properly conducted.

KINDS OF MEETING

Statutory meeting Annual general meeting Board meeting Extra ordinary general meeting

STATUTORY MEETING

Statutory meeting It is the first meeting of the shareholders and this meeting is held only once in the life time of the company.

Section 165 of companies act, 1956 lays down that

“Every company limited by shares, and every company limited by guarantee and having a share capital, shall within a period of not less than one month nore more than six months from the date at which the company is entitled to commence business, hold general meeting of the members of the company, which shall be called “statutory meeting”. The provisions of 165 are not applicable to a private company.

The Board of directors shall, at least twenty-one days before the day on which the meeting is held, forward a report to every member of the company.

The meeting must be duly convened by a proper authority . Notice must be served in the prescribed manner to all the persons . A quorum must be present. A chairman must be presiding. Minutes of the proceedings of the meeting shall be kept.

This meeting provides an opportunity to members to discuss various matters relating to the contents of statutory report. They can also effect any modification to the contracts mentioned in the prospectus.

The meeting is convened to attend to the following

To afford an opportunity to the shareholders Toknow the financial position and prospectus at an early date. To know the important details of the company formation To know the success of its capital issue and To know the properties that have been acquired It provides an opportunity to members to discuss various matters relating to

the contents of statutory report To discuss the success of flotation. To approve any modification in the contracts specified in the prospectus, if

need arises.

ANNUAL GENERAL MEETING

A meeting known as the annual general meeting is required to be held by every company, public or private, limited or unlimited by shares or by guarantee, with or without share capital or unlimited every year.

Section 166(1) of the companies Act, 1956 states that every company must, in each calendar year hold an annual general meeting, so specified in the notice calling it, provided that nor more than 15 months shall elapse between two annual general meeting. However, a company may hold its first annual general meeting within 18 months from the date of its incorporation.

The section contemplates two separate and distinct requirements

Holding the meeting within 15 months Holding it in each calendar year.

In the event of any difficulty in holding an annual general meeting(except the first annual general meeting), the /registrar may, for any special reason shown,

grant an extension of time for holding the meeting by a period not exceeding three months. Application seeking extension of time should be made before the due date for holding annual general meeting.

The meeting is convened to attend to the following

To receive and consider the directors and auditors report, the account and balance sheet

To sanction the dividend (if any) recommended by the directors. Appointment of directors inplace of those retiring To appoint, or re-appoint, the auditors and fix their remuneration. Removal of a director of a company. Election of a person other than a retiring person. To review theperformance of the company. To discuss the affairs of the companyand to take steps necessary for

protecting their interests.

BOARD MEETING

The affairs of a company are managed by the board of directors. It is therefore necessary that the director should often meet or discuss various matters regarding the management and administration of the affairs of the company in the best interest of the shareholders and public interest.

Section 292 lays down that the board shall exercise the following powers on behalf of the company only by means of the resolution passed at the meetings of board.

Section 285 of the Act prescribes that in case of every company, a meeting of the board of directors shall be held at least once in every three months and atleast four such meetings shall be held in every year.

The notice of every board meeting must be given in writing to every director who is in present in India. The quorum for the board meeting shall be one third of the total strength of the board or two directors whichever is higher.

The board is entitled to exercise all such powers and to do all such acts as the company is authorized to do.

The meeting is convened to attend to the following

To make calls on shareholders in respect of unpaid money on their shares. To issue debenture. To borrow money other than a debenture. To have the power to make funds. To have the power to invest the funds of the company. To determine the polices of the company. To make transfer and transmission To be committed to serve public interested.

EXTRA ORDINAY GENERAL MEETING

All the general meetings of a company with the exception of the statutory and annual generals meeting are called extra ordinary general meeting.All business transacted at extraordinary meetings is called special business.

At extra ordinary general meeting only special business which arises between two annual general meetings are being urgent and cannot be deferred to the next annual general meeting, is transacted.

Meeting is usually called by the Board of Directors for some urgent business which cannot wait to be decided till the next AGM. Every business transacted at such a meeting is special business. The Articles of Association of a Company may contain provisions for convening an extraordinary general meeting.

An extraordinary general meeting can be called by the

Board of Directors, or By the Directors on requisition, or By the shareholders, By the requisition's themselves By the Company Law

The meeting is convened to attend to the following

The consideration of the accounts, balance sheet and report of the board of directors.

The declaration of dividend The appointment of directors in place of those retiring The appointment of and the fixing of remuneration of, the directors. Alteration to be made in memorandum of association and articles of

association. Alteration of share capital if any (or) any changes in the capital structure of

the company. To pass any resolutions (or) to decide on any matter, this could not be

delayed. Changes to the registered office.

SHARES

For carrying on its business, a company collects money from the public. The money so collected is called the capital of the company which is usually divided into different units of fixed amount. These fixed units are called the “Shares”.

The term “share” is defined as a share in the capital of accompany. An exhaustive definition of “share” is given by Justice Farewll as “ A share is the interest of a shareholder in the company measure by a sum of money for the purpose of liability and dividends in the first place, and of interest in the second; and also consisting of a series of contacts as contained in the articles of association”

In simple words a share indicate the pecuniary interest of shareholders and their rights and liabilities. In this sense it may be defined as an “existing bundle of rights and liabilities”.

According to Section 2(46) of the companies Act, a share means a share in the share capital of the company and includes stock, except where a distinction between stock and shares is express or implied. Shares indicate certain rights and liabilities.

SHARE CERTIFICATE

Share Certificate is a certificate issued by a company under its common seal signed by one or more of its directors and its secretary, specifying the number of shares held by the named member and showing the distinctive number of the shares. It is an evidence of title to the shares. It can be issued even when the shares are partly paid up. A holder of a share certificate is a member of a company enjoying all the rights of membership.

Share certificate certifies a

Nature of shares i.e equity or preference shares Members in whose names it is issued are the rightful owners of the

shares with distinctive numbers Amount paid to the company by each shareholder on each share at

various stage i.e on application, on allotment, on first call and on second and final call.

Share certificate must be issued within three months from the date of allotment of shares.

SECRETARIAL DUTIES REGARDING ISSUE OF SHARE CERTIFICATE

The resolution for allotment of share certificate will be passed at the duly convened board meeting.

To make an approve of share certificate and printing of the share certificate To ensure that, all blank forms are consecutively numbered and engraving

etc., To make an entry in register of member of the share certificate will be

delivered within a specified tome. To ensure that each share certificate is contains a seal and signature.

TRANSFER OF SHARES

Shares are movable property and transferable like any other property. Transfer of shares is one of the beneficial features of a public company. Transfer is a voluntary act of parties which results in transfer of ownership.

Under sec 82 of the companies act,1956 “the shares of any member in a company are movable property, transferable in manner provided by the articles of association”. The company shall not register the transfer of shares unless a proper instrument of transfer duly stamped and signed.

A shareholder cannot withdraw his money from the company as the amount received on shares is the permanent capital of the company. This is the reason why transferability of shares has been given importance from the very beginning of the company. A shareholder can only convert their shares into cash by transferring them to any other person either in share market or by private sales.

For an effective transfer, the ‘Transfer Deed’ which contains the particulars of transferor and transferee and is duly signed by both of them is sent to the company along with the Share Certificates. The company will examine the particulars and on getting satisfied with the particulars, company will enter the name of transferor in the ‘Register of Members’ and remove the name of transferee will be removed from the Register.

SECRETARIAL DUTIES

The secretary has to ascertain that there is adequate provision regarding transfer of shares in the Articles of Association of the company.

On receipt of proper instrument of transfer, called the 'Transfer Deed' duly stamped and executed by the transferor and the transferee together with the transfer fee, if payable, he has to see that it is accompanied by a share certificate in the name of the transferor or the transfer should be a 'certified' one and that it is submitted within the prescribed limit as required under Section 108.

It is the responsibility thereafter to scrutinize the instrument of transfer and the relevant share certificate, giving particular attention to the following points:(a) The signature of the transferor must tally with the specimen signature as recorded with the company, if the transferor is the registered holder of the

shares.(b) The details of the transferee have been correctly completed.(c) The signature and address of the witness are in order.(d) The stamp of the delivering broker and the lodging agent (if this is not the same as the delivering broker).(e) Any alteration in the 'Transfer Deed' is properly initialed by both the transferor and transferee.(f) The distinctive numbers of shares both in the Instrument of Transfer and the Share Certificate agree.(g) The consideration for the transfer as shown in the 'Transfer Deed' is reasonable.(h) Share transfer stamps have been affixed on the Transfer Deed at the rate 50 paisa for every Rs. 100 or part thereof calculated on the amount of consideration.(i) The fact that there is no restraint on transfer or that no duplicate share certificate has been issued must be checked from the Register of Members.

If the transferee is a company incorporated under the Companies Act, the secretary must confirm that the company is authorized to acquire shares by its Memorandum and Articles of Association.If everything is well after the scrutiny of 'Transfer Deed' etc., the secretary should issue 'Notices of Lodgment of Transfer' to the transferee and transferor and wait for atleast a fortnight to see whether any objections are received from them.

If no objection is received, all transfers must then be recorded in the Transfer Register.

The secretary should convene a Board meeting to pass the necessary resolution for the registration of transfers.

After the resolution is passed, the secretary must see that the name of the transferee is recorded in the Register of Members and the name of the transferor is removed therefrom. Necessary endorsement is made on the back of the share certificate(s) and the same is issued to the transferee.

TRANSMISSION OF SHARES

Transfer of shares by the operation of law is known as Transmission of Shares. Transmission of shares takes place in case of death, insolvency or insanity of members of the company. In case of transmission of shares, there is no need to fill the ‘Transfer Deed’.

On the happening of the any of the above events i.e. death, insolvency or insanity, the shares are transferred to the legal representatives of shareholders. The legal representatives may also differ depending on the existence of ‘Will’ of the deceased partner. If the deceased shareholder has left behind any ‘Will’, then the shares will be transferred to the person mentioned in it. In the absence of such ‘Will’, the transfer of shares will be made in favor of legal heir of the deceased member. ‘Official Receiver’ or ‘Official Assignee’ becomes the legal representative of insolvent member. In case of Insanity of shareholder, his guardian becomes the legal representative.

As legal representative is entitled to become the member of the company, he files an application to the company for the transmission of shares on his name. He may also choose to sell the shares instead of becoming a member of the company.

SECRETARIAL DUTIES REGARDING TRANSMISSION OF SHARES

The secretarial duties in connection with transmission are :

The secretary has to check up that the 'Letter of Request' is a proper one. Letter of Request is the request of legal representative to register his name in place of the deceased subject to the conditions on which the deceased held the shares.

He has to ensure that satisfactory proof of title has been attached to the Letter of Request. He should also see the 'Letter of Probate' if the member had died testate, i.e., leaving a 'will,' or the 'Letter of Administration' if the member has died intestate. In case of bankruptcy, his estate is vested to the Assignee appointed by the Court and in case of lunacy, his estate is vested to the Administrator appointed by the Court. The secretary must check that the Administrator has produced the documentary proof of their appointment from a competent Court.

If the legal representative has to transfer the shares, he must attach any 'Probate', 'Succession Certificate' or 'Letter of Administration' with the 'instrument of transfer.' On receipt of proper 'instrument of transfer' the duties of a secretary are as same as while in transfer of shares.

Finally, the secretary should convene a Board meeting to pass the resolution and thereafter he should introduce necessary alteration in share certificates and Register of Members. He should enter the details of the Probate, Letters of Administration, Succession Certificates in the Register of Probates.

DIVIDEND

“Dividend” means a distribution of any sums to Members out of profits or reserves available for the purpose and, in the context of this Standard, refers to Dividend recommended by the Board and declared by Members, i.e. ‘final’ Dividend.

The term dividend has been defined under Section 2(14) of the companies act, 1956. The term “Dividend” includes any interim dividend. It means the profit of a company, which is not retained in the business and is distributed among the shareholders in the proportion to the amount paid-up on the shares held by them

Dividends are usually payable for a financial year after the final accounts are ready and distribution of profits is available. Dividends for the financial year of the company can be payable only if it is declared by the company at its annual general meeting on the recommendation of two of its directors.

SECRETARIAL DUTIES

To arrange notification regarding the interest falling due: This he has to nearabout the time the interest become due. The notification must contain the following:

The date of payment The place of payment The manner of payment The closure of transfer register in case of Registered Debenture

To prepare a list of debenture holder containing the following particulars:

Name of the debenture holder

Number of debentures held Distinctive number of debentures The amount of interest due to be paid The period for which it has fallen due.

To send a copy of the list to the Bank where payment of interest is made. To open a separate account of the company with the Bank and to arrange the

transfer of requisite amount therein. To prepare interest warrant and send the same to the debenture holder in

case they are registered. To arrange for the payment and list of debentures, interest warrants, interest

coupons, together with endorsement of Bank. To verify the amount paid with the interest warrants etc., To check the entries made in the Pass book or Bank statement. To make an entry in respect of the payment made in the list.

REGISTER TO BE MAINTENED

The following are some of the registers are to be maintained under the companies act 1956. They are

Copy of every instrument creating any charge requiring registration. Register of charges. Register of members Index of members in the case of a company having more than 50 members

unless register itself is in index form. Register of debenture-holders

Index of debenture-holders in the case of a company having more than 50 debenture-holders unless register itself is in an index form.

Foreign register of members and of debenture –holders, if any Duplicate of such foreign register of members and debenture holders.

Copies of annual returns prepared under sections 159 and 160   together with copies of

Certificates and documents required to be annexed thereto under secs.160 and 161.

Minutes of board of directors and committees of the board and of proceedings of general meetings.

Books of account and other cost records. Proper books of account relating to transactions effected at branch office. Register of contracts, companies and firms in which the directors of the

company are interested. Register of directors, managing director, manager and secretary. Register of director’s shareholdings. Register of loans made to the companies under the same management. Register of investment in shares and debentures of other body corporate.

CAPITAL STRUCTURE

The term capital structure refers to the percentage of capital (money) at work in a business by type. Every business enterprise, whether big, medium or small needs capital to carry on its operations smoothly and to achieve its targets.

The Capital structure of a business enterprise is related to the long-term financial requirements of the business enterprise. It is determined by the long-term debt and equity capital used by the business enterprise. It should be ideal i.e according to the requirements of the company or organization.

Capital structure is the composition of long-term liabilities, specific short-term liabilities like bank notes, common equity, and preferred equity which makes up the funds with which a business firm finances its operations and its growth. The capital structure of a business firm is essentially the right side of its balance sheet.

DIFFERENT TYPES OF CAPITAL STRUCTURE

Authorized or Nominal Capital Issued Capital Subscribed capital

Called Up Capital Paid-up capital Reserve Capital

Authorized or Nominal Capital

It is the amount of capital specified in the capital clause of the memorandum. It is the maximum amount which the company can issue during its life time and shown on the liabilities side of the balance sheet without adding its amount in the total of the balance sheet. The total amount has to be divided into shares of various classes. This capital is also called ‘Registered Capital’. Again, as the actual issued capital of the company is usually different (i.e. less) from the authorized capital, it is also known as 'Nominal' capital.

Issued Capital

It is that part of authorized capital which is offered to the public, allotted to directors as qualification shares and issued to vendors as purchase consideration. If the whole of the authorized capital is offered to the public, the authorized and issued capital will be issued.

Subscribed Capital

It is that part of the issued capital which is subscribed by the public.Itcan not be said that the entire issued capital will be taken up or subscribed by the public. It may be subscribed in full or in part. The part of issued capital, which is subscribed by the public, is known as subscribed capital.

Called up Capital

It is that part of subscribed capital, which is called by the company to pay on shares allotted. It is not necessary for the company to call for the entire amount on shares subscribed for by shareholders. The amount, which is not called on subscribed shares, is called uncalled capital.

Paid up Capital

It is that part of called up capital, which actually paid by the shareholders. Therefore it is known as real capital of the company. Whenever a particular amount is called and a shareholder fails to pay the amount fully or partially, it is known unpaid calls or calls in arrears.

Reserve capital

A company can reserve part of its uncalled capital to be called up only at the time of winding up. A special resolution has to be passed for that purpose. This is called Reserve Capital. It is not disclosed in the company balance sheet.

It is that part of uncalled capital which has been reserved by the company by passing a special resolution to be called only in the event of its liquidation. This capital cannot be called up during the existence of the company.It would be available only in the event of liquidation as an additional security to the creditors of the company

CAPITAL STRUCTURE OF THE CARBORANDUM UNIVERSAL LIMITED

Capital structure of Carborandum Universal Limited for the current period is as follows

(in crores)

Authorized share capital 25.0

Issued capital 18.7

(in million)

PARTICULARS AS AT 31.3.2011

AS AT 31.3.2012

Authorize share capital

250000000 equity shares@ Rs. 1 each 250.00 250.00

Issued Share capital

187395562 shares @ Rs.1 each fully paid

Subscribed and Paid up share capital

93470993 shares @ Rs.2 fully paid

187.40 186.94

EQUITY SHARES HAVING VOTING RIGHTS

PARTICULARS NO OF SHARES

VALUE NO OF SHARES

VALUE

No of shares at the beginning

Add: shares issued against ESOP scheme during the year before split

Total shares before shares split

No of shares consequent to “share split”

Add: Shares issued against ESOP scheme

Total no of shares outstanding at the end of the year

93470993

156022

93627015

187254030

141532

187395562

186.94

0.32

187.26

187.26

0.14

187.40

93356232

14761

9347093

186

0.23

186.94

RATIO ANALYSIS

Ratio analysis is one of the most common tools of managerial decision making. It involves the comparison of various figures from the financial statements in order to gain information about the company’s performance. It is the interpretation, rather than the calculation, that makes financial ratio a useful tool for business managers. Ratio may serve as indicators, clues or red flags regarding noteworthy relationships between variables used to measure the firm’s performance in terms of profitability, assets utilization, liquidity, and leverage or market valuation

Ratio is relationships expressed in mathematical terms between figures which are connected with each other in some manner. Ratio is called ‘accounting ratio’ or ‘financial ratio’ is used to describe significant relationship between figures shown on a balance sheet, in a profit & loss account, in a budgetary control system or in any part of accounting organisation. In other words, accounting ratios is a quantitative relationship between two or more items of the financial statements connected with each other. Arithmetically ratio is a comparison of the numerator with the denominator.

A ratio is defined as “The indicate quotient of two mathematical expressions” and as “the relationship between two or more thing”.

Modes of expressions of ratios

Ratios may be expressed in any one or more of the following ways:

In proportion In rate or times or co-efficient In percentage

Ratio analysis is the process of determining relationships based on financial statements. It is technique of interpretation of financial statements with the help of accounting ratio derived from the balance sheet and profit and loss account. To evaluate the financial condition and the performance of a firm, the financial executive’s needs a certain yardstick, which is provided by ratio analysis, is that any one item of financial statements means little by itself. A ratio is, therefore, a symptom, such as blood pressure, pulse rate or temperature of an individual. Ratios

analysis is a useful tool device to diagnose the financial condition of the enterprise. It will indicate whether the financial position is very strong, good, questionable or poor; the use of ratio analysis has increased considerably in recent years as a financial tool. Its technique is often equivalent to the detective story investigation. The significant of individual ratio can be best known only when we study the behaviour over a period of time.

The term financial ratio is used to describe significant relationships between figures shown on a balance sheet, in a profit and loss account, in a budgetary control system or in any other part of the accounting operations.

J Batty.

Ratio analysis can be defined as “Ration analysis involves comparisons. A company’s ratio is compared with those of other firms in the some industry, that is, to industry average ratios”.

Brigham & Houston

It is defined as the systematic use of ratio to interpret the financial statements so that the strengths and weakness of a firm as well as its historical performance and current financial conditions can be determined.

IMPORTANCE

As a tool of financial management, ratios are of crucial significant.Theimportance of ratio analysis lies in the fact that it presents facts on acomparative basis & enables the drawing of interference regarding theperformance of a firm. Ratio analysis is relevant in assessing the performanceof a firm in respect of the following aspects:

Liquidity position Long-term solvency Operating efficiency Overall profitability Inter firm comparison Trend analysis.

Liquidity position

With the help of Ratio analysis conclusion can be drawn regarding theliquidity position of a firm. The liquidity position of a firm would be satisfactory if it is able to meet its current obligation when they become due. A firm can besaid to have the ability to meet its short-term liabilities if it has sufficient liquidfunds to pay the interest on its short maturing debt usually within a year as wellas to repay the principal. This ability is reflected in the liquidity ratio of a firm.The liquidity ratio are particularly useful in credit analysis by bank & other suppliers of short term loans.

Long-term solvency

Ratio analysis is equally useful for assessing the long-term financialviability of a firm. This respect of the financial position of a borrower is of concern to the long-term creditors, security analyst & the present & potentialowners of a business. The long-term solvency is measured by the leverage/capital structure & profitability ratio. Ratio analysis is that focus on earning power & operating efficiency.

Ratio analysis reveals the strength & weaknesses of a firm in thisrespect. The leverage ratios, for instance, will indicate whether a firm has areasonable proportion of various sources of finance or if it is heavily loaded withdebt in which case its solvency is exposed to serious strain. Similarly thevarious profitability ratios would reveal whether or not the firm is able to offer adequate return to its owners consistent with the risk involved.

Operating efficiency

Yet another dimension of the useful of the ratio analysis, relevant fromthe viewpoint of management, is that it throws light on the degree of efficiencyin management & utilization of its assets. The various activity ratio measuresthis kind of operational efficiency. In fact, the solvency of a firm is, in theultimate analysis, dependent upon the sales revenues generated by the use of its assets- total as well as its components.

Overall profitability

Unlike the outsides parties, which are interested in one aspect of thefinancial position of a firm, the management is constantly concerned aboutoverall

profitability of the enterprise. That is, they are concerned about theability of the firm to meets its short term as well as long term obligations to itscreditors, to ensure a reasonable return to its owners & secure optimumutilization of the assets of the firm. This is possible if an integrated view is taken& all the ratios are considered together.

Inter-firm comparison

Ratio analysis not only throws light on the financial position of firm butalso serves as a stepping-stone to remedial measures. This is made possibledue to inter firm comparison & comparison with the industry averages. A singlefigure of a particular ratio is meaningless unless it is related to some standard or norm. One of the popular techniques is to compare the ratios of a firm with industry averages. An inter-firm comparison would demonstrate the firm’s position vis-à-vis its competitors. If the results are at variable either with the industry average or with those of the competitors, the firm can seek to identify the probable reason and, in that light take remedial measures.

Trend analysis

Finally ratio analysis enables a firm to take the time dimensions into account. In other words whether the financial position of a firm is improving or deteriorating over the years. This is made possible by use of trend analysis. The significance of trend analysis of ratios lies in the fact that the analyst can know the directions of movement that is movement is favourable or unfavourable. For example, though the present level may be satisfactory but the trend may be declining one.

ADVANTAGES

Ratio analysis is one of the set of weapon that anyone wishing to understand a company and its accounts should add to their armoury-has its own particular advantages. The following are advantages of ratio analysis:

Simplicity Comparison Trends Clues to further investigation

Better financial analysis Performance analysis Forecasting

Simplicity

Ratios are simply to calculate. They are generally one num,ber divided by another, using figures that can be taken directly from the accounts. Only a few ratios cannot be immediately calculated using such figures. Also the majority of ratios have a consistent formula, with only few being subject to variation in definition people. This simplicity also makes ratios easy to calculate.

Comparison

Ratios are excellent for making comparisons between companies especially those in the same industry that could be expected to operate under the same or similar environment conditions. They may be company’s different sizes and shape, but ratio analysis is one way of looking at them in the same light. Although insome respects it can be misleading to try and compare companies operating in different industries, specific ratios can have a comprehensive application in some business areas. For example, dividend yield is a dividend yield regardless of the size, type or field of operations of the company that provides the return.

Trends

By calculating the ratios over a number of years, trends may become more apparent using ratios rather than absolute numbers. For instance, the dividend payment may be constant at per share, but if the share price si raising, there sis subsequent decline in the dividend yield.

Clues to further investigation

Ratio analysis does not provide the answers to why the results finished as they did- it is simply the messenger. But the message it conveys can indicate which areas should be investigated further.

Better financial analysis

Ratio analysis is also helpful to recluses, in addition to shareholders, debenture holders, and creditors. Besides, bankers are also able to know the

profitability of the company to find out whether they are able to pay the dividend and interest under a specific period.

Performance analysis

Ratio analysis is also helpful in analysing the performance of a company through financial analysis; companies can review their performance in the past years. This is also helpful in identifying their weakness and improving ion them.

Forecasting

At present, many companies use ratio analysis to reveal the trends in production. This provides them as opportunity for estimation of future trends and thus the foundation for budget planning so as to determine the course of action for the growth and development of the business.

CLASSIFICATION OF RATIOS

The ratios can be broadly classified into

Profitability Ratios Turnover Ratios Solvency Ratios

PROFIATABILITY RATIOS

Profitability ratios measure a company’s ability to generate earnings relative to sales, assets and equity. These ratios assess the ability of a company to generate earnings, profits and cash flow relative to relative some metric, often the amount of money invested. They highlight how effectively the profitability of company is being managed.

A common profitability ratio include

Net Profit Ratio Gross Profit Ratio Operating Profit Ratio Operating ratio Return on capital employed

Earnings per share Dividend yield ratio Dividend payout ratio Return on equity capital Return on shareholders’ investment

All of these ratios indicate how well a company is performing at generating profit or revenues relative to certain metric.Different profitability ratio provides different useful insight into the financial health and performance of a company. For most of these ratios, a higher value means that the company is doing well and it is good at generating profits, revenues and cash flows.

Profitability ratios give meaningful information only when they are analysed in comparison to competitors or compared to the ratios in previous periods. Therefore, trend analysis is required to draw meaningful conclusion about the profitability of a company.

TURNOVER RATIOS

The turnover ratio may be called efficiency ratio and also activity ratios. These ratios, thus, may be called the told of projecting the relationship between sales and assets that have been acquired by the firm in connection with the activities under discussion planned for the purpose of earning revenues. This ratio will take different shapes on the basis of considering as components of calculation. The reason behind such different appearance of ratios is that different business may be required to employ different type of assets. A few examples of such ratios are

Inventory turnover Ratio Working Capital turnover Ratio Debtor Turnover Ratio Creditor turnover Ratio Fixed Assets Turnover Ratio

SOLVENCY RATIOS

Solvency ratios ability of the business is to repay its outside liabilities. These liabilities categorised as short term liabilities and long-term liabilities.

Solvency ratio has been used to mean long term financial position of the business. It is an accepted financial truth that the company must have sufficient long-term funds to meet its long-term liabilities. Long-term funds include long-term loans and shareholders’ funds. Solvency ratio also measures the relationship between external and internal equities.

It’s important objective is to ascertain the capability to honour long-term obligation, such as repayment of loans and enters there on

Under this ratio

Debt-equity Ratio Proprietary Ratio Current ratio Liquidity Ratio

PROFITABILITY RATIOS

NET PROFIT RATIO

Net Profit ratio measure the relationship between net profit and the Sales. It shows the amount of each sale left after all expenses have been paid. Net profit is the indicator of margin available over cost of production and other operating expenses from sales revenue. Net profit ratio is a key ratio of profitability. It is very useful when comparing companies in similar industries.

Formula

Net Profit Ratio Net Profit/Net Sales * 100

Significance

Low volume of net profit points out the insatisfactory state of marginal performance. A firm with low profit margin can earn a high rate of return on investment if it has a higher inventory.

Table showing Net Profit Ratio

Particulars Years 2009-2010 2010-2011 2011-2012

Net Profit Ratio( in percentage)

7.85 13.5 13.03

Inference

The Net profit ratio is 7.85% in the year 2009-2010 and increased to 13.5% in the year 2010-2011 and the ratio marginally decreased to 13.03% in the year 2011-2012.This decline is due to increase in operational cost of the company.

OPERATING PROFIT RATIO

Operating Profit Ratio indicates the operational efficiency of the firm and is a measure of the firm’s ability to cover the total operating expenses. It also represents the amount of profit earned for each rupee of sale after dividing the net sales to net operating profit. 15% to 20% operating ratio is considered as normal standard.

Formula

Operating Profit Ratio Operating Profit/Net Sales * 100

Significance

Operating profit indicates the earning capacity of the concern on the basis of its business operation and not from earning from the other sources. It shows whether the business is able to stand in the market or not.

Table showing Operating Profit Ratio

Particulars Years 2009-2010 2010-2011 2011-2012

Operating Profit Ratio( in percentage)

19.61 24.61 22.24

Inference

In the year 2009-2010 the operating profit ratio is 19.61% and it increased to 24.61% in the year 2010-2011 and there be a decline in the ratio to 22.24% in the year 2011-2012. This decline is due to increase in operational expenses. It shows the company company’s operational efficiency.

TURNOVER RATIOS

WORKING CAPITAL TURNOVER RATIO

Working capital turnover ratio measures the efficiency with the working capital is being used by the firm. This ratio represents the liquidity position of a firm. It establishes a relationship between cost of sales and net working capital. Working capital is a common measure of company’s liquidity, efficiency and overall growth.

Formula

Working capital turnover Ratio Net sales/Working capital

Significance

Working capital turnover ratio is an index to know whether the working capital has been effectively used or not in making sales. A high working capital turnover ratio indicates either the favourable turnover of inventories and receivable and/or the inadequacy of net working capital accompanied by low turnover of inventories and receivables.

Table showing Working capital turnover Ratio

Particulars Years 2009-2010 2010-2011 2011-2012

Working Capital turnover Ratio( in times )

3.6 3.7 6.5

Inference

In the year 2009-2010 the working capital turnover ratio is 3.6 times and there is a marginal decrease to 3.7 times in the year 2010-2011 and there is a drastic increase in the ratio to 6.5 times in the year 2011-2012.This drastic increase indicates efficient use of working capital by the firm.

STOCK TURNOVER RATIO

Stock turnover ratio measures the velocity of conversion of stock into sales. This ratio can be measure by dividing cost of goods sold by average stock. Use of cost of goods sold instead using the value of sales effected may appear misleading. It discloses the relationship between the goods sold and the level of stock maintained by the business.

Formula

Stock Turnover Ratio Cost of Goods Sold/Average Stock

Significance

A high stock turnover ratio indicates efficient management of stock because more frequently the stock is sold; the lesser amount of money is required to finance the inventory. A stock turnover implies over investment in inventories, poor quality of goods.

Table showing Stock Turnover Ratio

Particulars Years 2009-2010 2010-2011 2011-2012

Stock turnover Ratio (in times) 2.63 2.75 2.67

Inference

In the year 2009-2010 the stock turnover ratio is 2.63 times and there is marginal increase in the year 2010-2011 to 2.75 times. This ratio further marginally decreased to 2.67 times in the year 2011-2012.This is because the company has larger amount of stock remaining unsold. It indicates that the company has locked up more funds in the stock.

SOLVENCY RATIOS

CURRENT RATIO

The current ratio is the ratio that subsists between the total current assets and total current liabilities. It gives the relationship between current assets and current liabilities of a concern for which the same is calculated. The ratio is very important for a firm, as it indicates the extent to which short-term creditors are safe in terms of liquidity of current assets.

Formula

Current Ratio Current Asset/Current liabilities

Significance

The higher the value of current ratio, the more liquid the firm is, and more ability it has its pay its bills. A low value of current ration means that the firm may find it difficult to meet its current obligation getting matured.

Table showing Current Ratio

Particulars Years 2009-2010 2010-2011 2011-2012

Current Ratio( in proportion)

2.63 2.70 1.63

Inference

The ideal ratio is 2.In the year 2009-2010 the current ratio is 2.63, and there is a marginal increase in the ratio 2.70 in the year 2010-2011. The ratio decreased to 1.64 in the year 2011-2012.The calculated ratio in the year 2011-2012 are less than the ideal ratio which indicate the company is trading beyond its resources and the current assets are not sufficient to meet its current liabilities. Hence the short-term solvency of the company is not satisfactory.

DEBT-EQUITY RATIO

Debt-equity ratio is a popular ratio to measure the relationship that subsists between the long-term creditorship capital (borrowed capital) and the ownership of the capital contributed to develop the capital structure. This ratio is to indicate the extent of operating profit that covers fixed interest charges. The fixed interest charges will signify the long-term solvency of the firm.

Formula

Debt-equity Ratio long-term debts/Shareholders’ funds

Significance

The significance of this ratio depends upon the financial and business policy of the company. Ratio 1:1 usually considered to be satisfactory ratio although there are cannot be rule of thumb or standard norm for all type business. Theoretically if the owner’s interest is greater than that of creditors, the financial position is high insolvent.

Table showing Debt - Equity Ratio

Particulars Years 2009-2010 2010-2011 2011-2012

Debt-equity Ratio( in proportion)

0.8 0.5 0.2

Inference

In the year 2009-2010 the debt-equity ratio is 0.8 and it decreased to 0.5 in the year 2010-2011 and further it is decreases to 0.2 in the year 2011-2012. Since the ratios of the three years are less than the ideal ratio. It indicates that the company relies more on equity rather than on debt. Hence the long-term solvency position of the company is satisfactory.

OVERALL PERFORMANCE OF THE COMPANY

A profitability ratio has been measured with the help of Net Profit Ratio and Operating profit Ratio. These ratios indicates slight fall in the operational efficiency of the company in 2011-2012 where compared to previous years.

Turnover Ratios are determined with the help of Stock and Working capital of a firm. It indicates efficient use of working capital and inefficient investment made in stock.

The solvency position has been measure with the help of Current and Debt-equity Ratios. It indicates that current assets of the company are not sufficient to meet its current liabilities. Hence short term solvency position is not satisfactory and long-term solvency position of the company is satisfactory.

Hence, overall performance of the company is not satisfactory. The company should ensure that take necessary steps in efficiency of the company.

SUMMARY AND CONCLUSION

Industrialisation is a process in which a society or country transforms itself from a primarily agriculture society into one based on the manufacturing of goods and services. It is the overall changes in circumstances accompanying a society’s movement population and resources from farm production to manufacturing production and associated services. The manufacturing industry is not only propelling the country’s growth, but is also helping the other sector like agriculture and service to enhance their capabilities. The developments made on the manufacturing canvas over the last five years have made the sector in global market.It is an innovative and high tech industry that generates many job opportunities.

Carborundum Universal Limited was incorporated in the year April 1954, under the Indian Companies Act, UII of 1913 as a tripartite collaboration between the Murugappa Group. Further, CUMI commenced its business on 6th December, 1954. The company pioneered the manufacture of coated abrasives, bonded abrasives, super refractories, electrominerals, industrial ceramics and ceramic fibres. CUMI sit at Thiruvottiyur was chosen for special Award for Growing though managing concern. It also received the ISO 9001:2000 accreditation for quality standards.The organization structure of CUMI facilitates the functions of focused business, segment development and encouraging specialization.

Departmentation is concerned with grouping the various activities into separate administrative units. The various departments of Carborundum Universal Limited are Purchase department, Sales department, Finance department, Marketing department and Personnel department. The functions of these departments are Purchase-to ensure production process are carry out according to plans, Sales- to increase the sale volume considering a particular period of time, Finance-to keep recording of the purchase and sales made by a business as well as capital spending, Marketing- To know the needs and wants of the customer and fulfil them accordingly, Personnel- to provide a sound programme of wage & salary administration. These departments help the managerial task simple. Performance appraisal findings provide useful clues to initiating schemes of managerial development.

Ratio Analysis is one of the techniques of financial analysis where ratios are used as yardstick for evaluating the financial condition and performance of a firm. A profitability ratio has been measured with the help of Net Profit Ratio and Operating profit Ratio. These ratios indicates slight fall in the operational efficiency of the company in 2011-2012 where compared to previous years.Turnover Ratios are determined with the help of Stock and Working capital of a firm. It indicates efficient use of working capital and inefficient investment made in stock.The solvency position has been measure with the help of Current and Debt-equity Ratios. It indicates that current assets of the company are notsufficient to meet its current liabilities. Hence short term solvency position is not satisfactory and long-term solvency position of the company is satisfactory. Hence, overall performance of the company is not satisfactory. The company should ensure that take necessary steps in efficiency of the company.

Future prospects

Manufacturing exports from India could increase from US $ 40 billion in 2002 to about US $ 300 billion by 2015, according to reported titled, “Made in India – the nest big Manufacturing Export Story”, jointly prepared by CII and Mc Kinsey. The report assesses that such an expansion would make. There is also hope that with the growth of developing economies, more companies in other industries are able to expand or upgrade their facilities and other capital investments, or even construct more facilities. This is good news for the industry that supplies with the necessary industrial products and machinery.India garners a share of approximately 3.5 percent in the world manufacturing trade. Chennai based Carborundum Universal Limited part of the $ 31 billion Murugappa Group, is planning to expand its production capacity and create new products with an investment of Rs. 150 core. The company is planning to form two joint ventures, said srinivasan, and would attract investment of around Rs. 50 core. CUMI brings to the Isithebe business, along with capital and echonoligist, its brands, market areas, applications engineering expertise and global management practices.“This will enable the Isthibe plant- to be renamed as Thugela Refractories, Isthibe (TRI) - to grow its electro-minerals and refractories business“.

BIBLIOGRAPHY

Books

Battacharya Sisirkumar & Kumar Roy Sujit., “Management Accounting”.

New Delhi, Sultan Chand &sons.

Gupta, C.B., “ Business Management”

New Delhi, Sultan Chand&sons.

Khan & Jain., “ Management Accounting”.

New Delhi, Tata McGraw- Hill Publishers Ltd.

Kumar Arun& Sharma Rachan., “ Secretarial Practice and Company Law”.

New Delhi, Atlantic Publishers and distributors.

Kumar Ashok., “ Company law & Secretarial Practice”.

New Delhi, V.K. India Enterprise.

Website

www.cumi.murugappa.com

www.google.com

www.murugappa.com