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1ARYANS SCHOOL OF MANAGEMENT

SUMMER TRAINING PROJECT REPORT

ONFINANCIAL ANALYSIS

OF

MANKAPUR, GONDA (UP)

SUBMITTED TO: SUBMITTED BY:

ARYANS SCHOOL OF MANAGEMENT RUPESH KAPASIA

Nepra,Chandigarh MBA 3rd

SEMESTER

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PREFACE

Summer training plays a vital role in understanding working culture and

climate of industry. This training has been misinterpreted by most of us a

platform for performing only projects. Industrial training in the true sense has

been included in the curriculum to make the students well versed with the

technical procedures, management and its practical approaches, which is very

different from theoretical aspects.

The educational institutions role aim by industrial training is to improve the

knowledge about the organization and to have a hand -on experience. Theterms and procedures which we learn are of no use until and unless we do

bring them in practical operation and start dealing with them in real life. For

becoming a good professional it is very much required that whatever the

knowledge and skills one has adopted during this training has to increase with

this knowledge and day-to-day experience from his own life.

Last but not the least this training is very much important in shaping ones

bright future and career as it provides all basic information a new professional

wants before completion of his training.

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ACKNOWLEDGEMENT

A prestigious organization for providing me an opportunity to undergo summer

training for project work as a part of my MBA

course.

It would be my privilege to express my sincere and deep sense of gratitude to

Mr. H.D. Gupta, (DFM-CF) for his able guidance, pain staking inspiration and

untiring supervision throughout the project work period.

I also wish I feel immense pleasure in expressing my gratitude to I.T.I. Limited

Mankapur, to express my sincere gratitude to Mr. G. K. Srivastava(FO-CS), Mr.

Rakesh Tiwari (AFO-PR), Mr R. K. Srivastava (AFO-Bank) and Mr. P. K. Agrawal.

I am highly thankful and indebted to Mr. S. S. Bisht (Manager -HRD) for theireffective, valuable and constant support for successful completion of the

training programme without which this project would not have seen t he light

of the day.

I am also thankful to I.T.I. Ltd. Employees who have been very supportive

either directly or indirectly and rendered their help during my stay at

Mankapur for the summer internship programme.

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CERTIFICATE

This is to certify that Vaishnav Prasad Dwivedi who is pursuing his M.B.A III

sem inA

ryans School Of Management Chandigarh has undergone training inI.T.I. Limted Mankapur for a period of Two months from 2/6/10 to 30/7/10.

He had attended all the classes and visited all the financially centred areas of

the industry regularly.

I wish him all the success in life

MR. H. D. GUPTA

DY. FINANCE MANAGER

(CENTRAL FINANCE)

I.T.T. LIMITED MANKAPUR.

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CONTENTS

PREFACE

ACKNOWLEDGEMENT

COMPANY PROFILE

y Board of Directors

y Manufacturing units

y Infrastructure

Mankapur Unit (UP)

Srinagar Unit (J&K)

Palakkad Unit (Kerela)

Raibareily Unit (UP)

Naini Unit (UP)

Bangalore Complex (Karnataka)

MISSION

OBJECTIVES

OBLIGATIONS

I T I CONTRIBUTIONS TO NATIONAL TELECOM INFRASTRUCTURE

AWARDS AND ACHIEVEMENTS

ABOUT THE MANKAPUR UNIT

y Main Division

y Product of ITI Mankapur

y Customer

y Research Methology

ERP USED IN I T I LIMITED

ISO

SIX SIGMA

FINANCIAL STATEMENTS

y Balance Sheet

y Profit & Loss Account

FINANCIAL STATEMENT ANALYSIS

y Horizontal Analysis

y Vertical Analysis

FINANCIAL ANALYSIS

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y Ratio Analysis

y Nature Of Ratio Analysis

y Standard of Comparison

y Utility of Ratio Analysis TYPES OF RATIOS

y Profitability Ratio

y Working Capital Ratio

y Growth Ratio

ACCOUNTING POLICIES

COMPARATIVE ANNUAL REPORT

OPERATING RESULTS

FINANCIAL POSITIONS PROFITABILITY RATIOS WORKING CAPITAL RATIOS

GROWTH RATIOS

WORKING CAPITAL STATEMENT

COMPARISION OF SALES AND WORKING CAPITAL

WORKING CAPITAL ANALYSIS

SALES ANALYSIS

PRODUCTABILITY OF CAPITAL

PRODUCTION ANALYSIS

COMPARISON OF SALES AGAINST PROFIT AFTER TAX

HOW MONEY WAS UTILISED

SWOT ANALYSIS

FACTS AND FINDINGS

RECOMMENDATIONS

BIBLIOGRAPHY

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COMPANY PROFILE

Industries Ltd, a department undertaking under the ministry of post and ITI

Ltd. is Indias first public sector enterprise established in 1948 as Indiantelegraph, it was envisaged as an indigenous manufacturing facility in the

beginning.

ITI limited has since emerged with its own corporate identity, as a leading

telecom company manufacturing the entire range of Telecom Company

manufacturing the entire range of telecom equipment which includes

telephones, large digital switches, transmission systems, digital microwave

fibre optics systems and satellite communications systems.

Vibrant R&D support striving for excellence in quality, cost effectiveness, in its

product & services with talented engineers and state of the art machinery.

A dedicated network system unit provides value added services such as shred

hub VSAT services and MRTS and turnkey solutions.

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ShriK.L.DhingraChairman

and Managing Director

Shri K.L. Dhingra joined ITI asChairman and Managing Director onApril 7, 2010. Shri Dhingra is a Masterin Commerce (M.Com) and Master inBusiness Administration (MBAFinance) from Faculty of Management Studies (FMS), Delhi University. Hehas acquired additional Bankingqualifications from India (CAIIB) and

UK (ACIB, London). He secured thefirst rank in three of the courses onbanking conducted by the Institute of Banking and Finance, Mumbai. Heholds the distinction of being the onlyIndian who passed A.C.I. B. (London)examination globally in July 1997.

He is also presently the Vice-Chairmanof Standing Committee on Public

Enterprises (SCOPE), an Apex body of the PSUs.

Prior to his joining ITI Ltd., he wasChairman and Managing Director,Housing & Urban Development Corporation Ltd. (HUDCO) and

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Director (Finance) in Mumbai RailwayVikas Corporation Limited (MRVC), aPSU under the Ministry of Railwaysand also in Indian Rare Earth Limited(IREL), a PSU under the Department of Atomic Energy.

Shri B P Gupta

Director (Finance) Shri B.P. Gupta was appointed asDirector Finance and a member of the Board of Directors of ITI Ltd. onDecember 31, 2007. An Honours inB.Com. he qualified as Chartered

Accountant in 1976. After severalstints in private and public sectorcompanies, Shri Gupta began his careerwith ITI as Chief Manager Finance in1989. Working in different Plants, heacquired well-rounded experience of over 33 years. Previously he held theposition of General Manager Financeat the Corporate Office of the Company.

Shri K K Khurana

Director (Human

Resources)

Shri K.K. Khurana joined ITI asManagement Trainee in 1973 soonafter obtaining a B.Sc. Engineeringdegree and Post Graduate Diploma inElectrical Engineering. In a career that spans over 35 years in the company, hehas held several important positions.His vast experience covers the diversefields of manufacturing, marketing,turnkey projects and HR. He was aProject Director for GSM-MTNLNetwork in Delhi (2002-04) and CircleProject Director for executing of BSNL-GSM Network in Gujarat Circle (2005-06). Prior to his appointment on thecompanys Board he was GeneralManager of Bangalore Plant. ShriKhurana has been Director, Human

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Resources of ITI Ltd. since April 4,2008.

Shri R K Agarwal

Director (Marketing) Shri R K Agarwal took over asDirector (Marketing) of ITI Ltd fromMarch 9, 2010. Prior to this, he wasGeneral Manager (CorporateMarketing). An industrial engineeringgraduate, Shri Agarwal joined ITI Ltdin 1976 as an assistant executiveengineer in the Companys BangalorePlant. Shri Agarwals 33 yearexperience spans areas such as

manufacturing, quality control andmarketing.

Shri K.K. Gupta

Director(Production) Shri K.K. Gupta took over as Director(Production) of ITI Limited on May 1,2010. Prior to this, he was GeneralManager, Corporate HR and GSM(South Zone). An Electronics andTelecommunication Engineer, Shri

Gupta joined ITI in 1977 as anAssistant Executive Engineer at theCompanys Naini Plant. Shri Guptas 33years of experience covers the diversefields of manufacturing - telephonesand transmission, GSM projects andhuman resources.

Shri.A.K. Srivastava

Director

Lt.Gen.P.Mohapatra

Director

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COMPANY SECRETARY

Shri K.T.Mayuranathan

Company Secretary

INDEPENDENT DIRECTORS

Shri A.K. Jain

Independent Director

ShriV.H.Ron


Shri A.S. Bansal


ShriKeshavSaran


Prof.M. Balakrishnan


ShriT.S.Narayanasamy


Dr. S.K. Chaudhury


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MANUFACTURING UNITS

Karnataka

Bangalore Hossur

U ttar Pradesh

Mankapur, Raebareli, Allahabad

Other units

Srinagar, Palakkad

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INFRASTRUCTURE

It has seven manufacturing units spread in different parts of India. Three

of them are in Uttar Pradesh.

BANGALORE COMPLEX (KARNATAKA)

Established - 1948

ISO Certification - ISO 9001

Products - Switching Product,

Defence Products,

Telephone parts

ELECTRONIC CITY UNIT (BANGALORE)

Established - 1987


Production - Digital exchange Parts

NAINI UNIT, ALLAHABAD (UP)

Established - 1968


Product - Wireless Local 100TS

RAIBAREILY UNIT (UP)

Established - 1970


Product - Electromechanical

Exchange Parts, digital

Exchanges

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PALAKKAD UNIT (KERELA)

Established - 1976ISO Certification - ISO 9002

Product - E-10 B Excanges, O. C. B

283 Exchange

SRINAGAR UNIT (JAMMU AND KASHMIR)

Established - 1982

ISO Certification - ISO 9001:2001Product - E-10 B Excanges, O. C. B

283 Exchange

MANKAPUR UNIT (UP)

Established - 1982

ISO Certification - ISO 9001:2001

ISO 14000Product - E-10 B Excanges, O. C. B

283 Exchange

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ITI HAS ELEVEN REGIONAL OFFICES:-

Bangalore Kolkatta Chennai

Delhi Lucknow Mumbai

Bhuvaneshwar Hyderabad Ahmedabad

Bhopal Kochi

The corporate office ITI limited is situated at Bangalore. The ITI product is of good quality of international standards approved by ISO. It has various sales

office within India.

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MISSION

The mission of the company is to be the leader in the domestic market and

an important global player in voice, data and image communication byproviding total solutions to the customers, to build on core competencies to

enter into new business areas.

The company manufactures entire range of telecommunication system. ITI

is involved in design, development, manufacturing and installation and

commissioning of telecommunication system to meet specific need of

customers.

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OBJECTIVES

To generate demand for telecom products through innovation.

To maintain an overall growth rate of 30% per year.

For each existing business it should match at least the industry

growth rate.

To strengthen the technology scanning capabilities to benchmark

the organization product /services against global standards, to

identify the potential partners. To achieve global quality standards

in all the products in the shortest time.

To introduce effective production planning and control systems

for achieving delivery schedule streaming production over the

whole year and better inventory control.

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OBLIGATION

TOWARDS THE CITIZENS OF INDIA:-

y Also an autonomous government company, functioning under the

Indians Companys Act and its memorandum and articles of

Association of the company subject to the entire Auditor General

of India, it is accountable to the people of India, the tax payer

through the parliament and government for running a highly

sophisticated technically oriented company, engaging in the

manufacturing of all the types of telecommunication equipmentand alike products and incidentally carry out applied research and

development to meet he need of the country as well as world

market in the field of telecommunication.

y Attracting competent technical personnel and by developing their

optimum skills and capabilities in a congenial working

environment providing employment opportunities for

advancement and other incentives.

y Developing and sustaining a favourable employee attitude and

motivation and obtaining maximum contribution by the

employees through stable and standing employment

opportunities, adequate wages keeping in view the REGION CUM

INDUSTRY basis of remunerations and commensurate with the

capacity to pay and connect with the production, good working

condition and job satisfactions.

y Establishing a system of redress of employees grievances in the

shortest possible times at various levels including the lowest level.

Providing and attaining facilities and opportunities for self

development in their current job and for advancement.

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TOWARDS CUSTOMERS:-

y To serve the post and telegraph department and other

government, quasi and semi government departments requiring

telecommunication equipment by providing prompt, courteous,

dependable and sophisticated services adopting sound business

and commercial practices.

To sell products of high quality at prices fixed and determine in

the best interest of the nation, the company and the customer,

keeping in view that the customers are charged prices comparable

to landed costs of the similar components.

TOWARDS SUPPLIERS:-

y Ensuring prompt dealings based on integrity, impartiality and

courtesy.

y Making available to them the benefits of research skills and

information in order to promote indigenous services.

TOWARDS THE COMMUNITY:-

y The company accepts its social obligation to the communication

and villages contiguous to the factory and on to whose land the

factory is located.

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ITI CONTRIBUTION TO NATIONAL TELECOM

INFRASTRUCTURE-

Switching Line (Mn.Lines)

Switching line

ITI Ltd 28 36.6%

Other 48 67.4%

Sales

ITI Ltd

t¡

er

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TRANSMISSION (LAKH ROUTE KMS.)

ITI Ltd 3.2 72%

other 1.2 28%

Sales

ITI Lt¢

other

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LONG DISTANCE TRUNK LINES (MN.LINES)

ITI Ltd 4.1 77%

other 1.2 23%

Sales

ITI Ltd

other

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FIXED PHONE (MILLION)

ITI Ltd 24 47.5%

other 26.4 52.5%

Sales

ITI Ltd

£

t¤

er

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MOBILE PHONES (MILLION)

ITI Ltd 0.6 2.1%

other 25.7 97.9%

Sales

ITI Ltd

other

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AWARDS AND ACHIEVEMENT

S afety Awards To Raebareli, Palakkad, And Bangalore

Three plants of ITI have won the national safety award for outstanding

performance in industry. Safety during the year 2004 which were presented at a

function held New Delhi recently

Raebareli & Palakkad received the award for achievement based on

longest accident free year. The turn up award based on longest accident free

year was awarded to Bangalore and Raebareli respectively.

E nergy conversation awarded to mankapur ITI mankapur plant which saved energy to the tone of 384 lakh during the

last three year has won the national energy conversations award in 2004.

First prize for best productivity in1990 by national productivity

council.

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SALIENT FEATURES OF MANKAPUR UNIT

Established --------- 1982

Start of construction --------- 31/05/1983

Start of production --------- April 1985

Annual capacity --------- 500KL (E-10B)

Capital cost of E-10B CSN --------- 500KL (CSN-DCB-283)

CSN --------- Rs. 219.00 Cr

MAK-L --------- Rs. 31.41 Cr

Land --------- Rs. 3.30 Cr

Factory covered area --------- 35 AcresAir conditioned area --------- 77,500 sq.m

FDV space in factory --------- 44,300 sq.m

Compressed air --------- 2000 sq.m

Installed capacity of power station --------- 7000 sq.m

16000 KVA from UPSEB

& 5800 Captive

Water storage capacity --------- 50 Lakhs litres

Annual capacity of component plant --------- 18,00,000 connectors

10,00,000 relays

14,00,000 C&T

15,000 MDF

Mechanical -------- Rack 3,500

Hybrids 1,80,00,000

PCBs 26,000 sq.m

ISO certification -------- 9001:2000 &

14000

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ABOUT THE MANKAPUR UNIT

Mankapur unit was established in 1982 with technical collaboration with CIT

A

LCA

TEL France to manufacture E10B type of digital switching system.

It manufactures MAX-L & MAX-XC exchange based on C-DOT technology which

replaced the E10B exchanges. The unit is also manufacturing C SN-MM racks

used in exchange.

ITI Ltd. Mankapur has made a significant place in the electronic map of India

and has earned the distinction of DIGITAL CITY OF INDIA.

ITI Ltd. Mankapur has also entered into the non-communication field with its

note counting machine, note bundling machine, inverter etc.

It is the first unit in India which got the opportunity to manufacture BTS. It

started manufacturing BTS in the year 2005.

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MORE ABOUT I.T.I

Multi-locational state-of-the-art electronic assembly & component

manufacturing facilities accredited with ISO 9001:2000

Multi-locational ISO 14001 :2004 Environmental Management

System certified plants First Indian company to manufacture BTS &

other infra products for GSM / WiMAX

Countrywide marketing and customer care centers

In-house R&D for absorption of technology, indigenous development

of products for in-house manufacturing

RESOURCES: Dedicated Network Systems Unit (Bangalore, New

Delhi, Kolkata, Bhopal, Ambala) . State-of-the-art Manufa~turing

Plants (Bangalore, Mankapur, Rae Bareli, Naini, Palakkad, Srinagar) .

R&D Centre

SMPS: Fabrication of 100 A - 150A Power Plants with 25A base

Module for GSM. Fabrication of 200A-3000A' Power Plants with 100A

base Modules for telecom installation

PRODUCTS:--CellularMobileInfrastructule-GSM,WLL-

CDMASwitching-OCB-283, ISDN EPABX, IP-TAX, SSTP. Transmission-

Satellite, Optical, Microwave, VHF /UHF. Broadband Equipment-

ADSL, WiMAX, G-PON, EDW AS. Customer Premises P-equipment-

IFWT, ADSL Modem, CLI Phones. GSM-FCT (Fixed Cellular

Telephone),; WiMAX CPE

SERVICES: Systems Integration - Telecom, IT. Shared Hub V -SAT

Services. Customer Care Service. Installation & Commissioning of

Telecom Eqpt like GSM, CDMA, MLLN, Microwave, Optical Fiber, etc.

Pre-warranty & Post-warranty maintenance sefYices for all

Products/Projects. Services for all products/projects: . Enterprise

businesses like Data Centers etc.

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MILESTONES

1948: First public sector to be set up by post-independent India, with

assembly of 25000 telephone instruments & equal number of exchange

lines in technical collaboration with automatic telephone & electric

company of England.

1950: Corporate status as joint stock company. Diversification of product

range with the product of long distance equipment.

1964: Manufacture of Crossbar automatic exchange equipment of

Bangalore in collaboration with Bell Telephone Manufacturing Company,

Belgium.

1971:Manufacture of Multiplex & Associated Transmission1 equipment

for Trunk services at Naini. Components manufactured plant at

Srinagar(J&K).

1973: Telephone Instrument Plant at Naini.

1974: Stronger Switching equipment plant at Raebareli.

1976: Manufacture of Electronic Automatic Exchange of Palakkad.

1980: Crossbar switching equipment plant at Raebareli.

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1983: Manufacture of electronic exchange of E-10B type for Mankapur in

collaboration with ALCATEL, France.Manufacture of digital trunk automatic

exchange

Equipment at Naini in collaboration of Kokusai,Japan.Agreemant with

Nippon Electric Corp. Japan for a host of Long Distance Transmission

Equipment.

1986: Established in a Net Work Unit exclusively to make care of

installation & maintenance work.

1987: Manufacture of Small & Rural Electronic Exchange of C-DOT

technology at electronic city, Bangalore. Manufacture of Digital coaxial

system at Bangalore with know-how from AT& T Net Work System,

Netherland.Manufacture of Opto-Electronic Line Equipment at Naini in

collaboration with NKT Denmark. Joint Venture company India SATCOM

Ltd.(ISL),set up with Equatorial Pacific International Company.Netherland

& Unit Trust of India, at Bangalore for manufacture of SATCOM System.

1991: Manufacture of IDR Modems at Bangalore with know-how obtained

from huge network system, USA.

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1992: Launched Joint venture company, ITI Communication pvt. ltd.at

Singapore to act as export wing of ITI products.ISO-9000 accrediction

process.

1993: OCB 283/CSM in collaboration with ALACTEL, France.Manufacture

of Electronic switching system.

1994: Manufacturing set up established at Delhi for SDH Transmission

systems through Joint Venture Company -FIBCOM & Naini Plant. The name

changed to ITI LTD.With new companies identity. Turn over crossed

RS.1500 cores (US$ 350Mn)

1996: ITI.Ltd. Entered into V-SAT services.

1997: Release of 1st 40 k lines C-DOT MAX-XL Exchange to DOT. Launching

of MRTS.

1998: ITI's turn- around after set back due to opening of economy.VLSI-

II,One Micron FAB facility inaugurated at Bangalore plant.ISO9000

accreditation process completed for all plants.

1999: ITI-ALCATEL, New Technology Agreement signed. All time high

physical production performance. Turn over crossed RS1600Cr.(US $

400Mn)

2000: Turnover crossed an all time high Rs2000 Cr.

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MAIN DIVISION

Mobile project division.

Switching exchange assembly plant

Component division

Circuit division

Central services division

PRODUCT OF ITI MANKAPUR:-

E-10B exchange

CSN-MA exchange

CSN-MM exchange

C-dot Exchange

Base transmission station

The above products are the telecom products. The non-telecom products are:-

Note counting machine Fake note detection machine

Invertors

UPS

Note bundling machines

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CUSTOMERS:-

Indian customers

Defence

Railways

Department of telecom

Oil sectors

Bank/factories/offices

GLOBAL CUSTOMERS:-

MALAYSIA AFGANISTAN

NEPAL

SWITZERLAND

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RESEARCH METHODOLOGY:

Research methodology is considered as the nerve of the project. Without a

proper well-organized research plan, it is impossible to complete the project and

reach to any conclusion. The project was based on the survey plan. The main

objective of survey was to collect appropriate data, which work as a base for

drawing conclusion and getting result.

Therefore, research methodology is the way to systematically solve the resea rch

problem. Research methodology not only talks of the methods but also logic

behind the methods used in the context of a research study and it explains why a

particular method has been used in the preference of the other methods

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RESEARCH DESIGN

Research design is important primarily because of the increased complexity in

the market as well as marketing approaches available to the researchers. In fact,

it is the key to the evolution of successful marketing strategies and

programmers. It is an important tool to study buyer¶s behavior, consumption

pattern, brand loyalty, and focus market changes. A research design specifies

the methods and procedures for conducting a particular study. According to

Kerlinger, ³Research Design is a plan, conceptual structure, and strategy of

investigation conceived as to obtain answers to research questions and to

control variance.

retailers/dealer and. However it was exclusively personal interview

DATA COLLECTION:

This report was prepared after collecting data from the retailers/ dealers and past

data was arranged from the various studies conducted in last few years and

various other records of company.

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SECONDARY DATA:

SInformation regarding the project, secondary data was also required. These

data were collected from various past studies and other sources of the company.

SAMPLING METHOD

Random Sampling method

SAMPLE SIZE

100 Dealers

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ERP USED IN ITI LIMITED

The ERP used in ITI Limited is BAAN. Some of the features of BAAN are: -

y BAA

N was founded by Jan Baan in 1978 in Netherlands.y Baan manufacturing control system was first developed by Baan

for MRPI, CAP and MRP2

y The company BAAN have become one of the worlds biggest

software group and experts to remain on fast track for the forcible

future .

y BAAN solutions are used to achieve and streamline the planning

process by integrating diverse information, ensuring smooth

planning with the help of BAAN and get better decision support.

y The version of BAAN used in ITI is BAAN IV: Version B40C72.

y BAAN was implemented in 2001 in ITI Limited.

y There are basically four modules of BAAN used in ITI:-

1. BAAN IV FINANCE

2. BAAN IV MANUFACTURING

3. BAAN IV DISTRIBUTION

4. BAAN IV SERVICES

BAAN IV FINANCE includes:-

General ledger

Account receivables

Account payable

Cash management

Tax deductions at source

Cost allocation

Financial budget system

Financial statement

Fixed assets

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Tables

Common data

Finance parameter

WHY ITI HAS GONE FOR BAAN?

S.No. BAAN SAP

1. Very strong for discrete

manufacturing industries.

Very strong for process industries

& finance companies

2. Long relation with CMC for

hardware maintenance.

CMC was implementation

partner.

3. License fee is comparatively cheap. License fee was comparatively

high.

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ISO

ISO stands for International Standards for Organisation. ISO is a world wide

federation of national standard bodies. The work of preparing international

standard is normally carried out through ISO technical committee. Each

member body interest in a subject for whom a technical committee has been

established has the rights to be represented on that committee standards, are

the levels of excellence in everything, that we can do, so it was felt that there

should be a global system of standards and hence ISO came into existence. Its

office is located in Geneva (Switzerland).

ISO STRUCTURE:-

100 or more countries.

9000 standards.

200 technical committees.

800 sub-committees.

2500 engineers.

TYPES OF ISO DOCUMENTS:-

Specifications

Guidance

Guides/tools

Technical reports.

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BENEFITS OF ISO

Customer loyalty

Repeated business and referral

Reduction in cost and cycle time

Self esteem

Recognition

Confidence of interested party

ISO:9000

ISO 9000 describes fundamental of quality management system & specifies the

terminology for quality management system.

ISO:9001

ISO 9001 specifies requirements for QMS where an organization needs to

demonstrate ita ability to provide products that meets customer and

applicable regulatory requirements and aims to enhance customer satisfaction.

ISO 14000

System efficiency

Scrap and waste reduction

Pollution prevention

Improved environment performance

Implementing government regulations. PHILIPS, Australia was the first

company in the world to take ISO 14000 certificate.

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MAJOR DIFFERENCES:-

ISO 9000:1994 ISO 2001:2000

Put stress on documentation put less stress on documentation but

more on objective clarity.

Continuous growth phenomenon Continuous growth phenomenon

More oriented to manufacturing generic nature to suit any sector

not addressing the improvement Measuring approach and objective

with strong customer focus.

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PARAMETERS OF ISO:-

Quality:-

It is the total characteristics of any thing that bears the ability to satisfy

the stated or any implied needs.

Objectives:-

Objectives of any organization represent the goals which it aims to

achieve and the priority requirements. ISO standards lay stress on

SMART objectives,

Simple

Measurable

Achievable

Realistic

Time bound

ISO 9004

The ISO 9004 provides guidelines that consider both the effectiveness and the

efficiency of the QMS.

The aim of the standard is the improvement of the performance of the

organization and satisfaction of customers and other interested parties.

ISO 19011

ISO 19011 provides guidelines on auditing quality.

ISO 14000

The growth of human civilisation is marked by rapid industrialisation. The rapid

and blind growth of industries without paying head to the envir onment can

wreck havoc on earth. ISO 14000 standards is known as environment

management system.

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Q UALITY PRINCIPES

Customer focus

Leadership

Involvement of peoples

System approach to management

Process approach

Continued improvement

Factual approach to decision making

Mutually beneficial supplier relationship

PDCA CYCLE

This is a methodology to achieve the goals set by the objectives: -

P: plan

D: do

C: check

A: act

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SIX SIGMA

SIX SIGMA is the most important training thing we ever had. Its better than

going to Harvard Business School; it teaches you to how to think differently.

Jech Welch

(in April 1999 interview)

DEFINITION:-

Six Sigma is a measure of quality that strives for near perfection. It is a rigorous

and systematic methodology that utilises information verified by facts and

statistics to measure end improve an organizations operational performances,

practice and system by identifying and preventing defects in manufacturing

and services related processes in order to anticipate and exceed expectations

of all public stakeholders to accomplish effectiveness.

Six Sigma is a process which talks about the ultimate quality.

Six Sigma can be described as the TQMS(total quality management system)

that it is a series of steps which involve statistical measurement that tells us

how good our product, services and processes really are.

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HISTORY OF SIX SIGMA

measurement standard in the product variation can be traced back to the

1920s when Walter Shewhart showed that three sigma from the mean isappoint where the process requires correction. Many measurement standards

(CPK, zero defects etc.) later came on the scene but credit for coining the term

SIX SIGMA goes to a Motorola engineer named Bill The roots of six sigma as a

standard can be traced back to Curl Fredrick Gauss (1777-1855) who

introduced the concept of normal curve. Six Sigma as a Smith(incidently SIX

SIGMA is a federally registered trademark of Motorola).

Inn the early and mid 1980s with Chairman Bob Galwin at the helm, Motorola

engineers decided that the traditional quality level in measuring defects inthousands of opportunity didnt provide enough granularity. Instead, they

wanted to measure the defects per million opportunities. Motorola develop

this new standard and created the methodology and needed cultural change

associated with it. Six Sigma helped Motorola realise powerful bottom -line

results in their organization. In fact they documented more than $16million in

savings as a results of their Six Sigma efforts.

Since then hundreds of companies around the world have adopted SIX SIGMA

as a way of doing business. This is a direct result of many of Americas leader

openly praising the benefits of SIX SIGMA, such as Larry Bossidy of Allied

Signal(new Honeywell) and Jack Welch of General Electric Company .rumor has

it that one day Larry and Jack were playing golf and Jack bet Larry that he

could implement SIX SIGMA faster and with greater results in GE than Larry did

it in Allied Signal. The results speaks for themselves.

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SIX SIGMA PHILOSPHY

Customers need product and services in time with zero defects, at the

lowest cost. To improve means we must be able to predict and prevent, not detect

and react.

By combining the mean and standard deviation, the sigma of a process

can be calculated.

The sigma of a process tells us how capable it is.

Once basic competencies ad deficiencies are known corrective measures

can be taken.

Corrective measures lead to the reduction of defects, cycle time and the

cost. The reduction of defects, cycle time and cost leads to improved

customer satisfaction.

As customer satisfaction improves, likelihood of doing good business

increases.

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SIX SIGMA SCALE

(yield to sigma conversion table)

SIGMA PPM YIELD

1 6,90,00O 30.90%

1.11 6,50,000 35.00%

1.22 6,10,000 39.00%

1.32 5,70,000 43.00%

1.40 5,40,000 46.00%

1.50 5,00,000 50.00%

1.60 4,60,000 54.00%1.70 4,20,000 58.00%

1.80 3,82,000 61.80%

1.90 3,44,000 65.60%

2.00 3,08,000 69.20%

2.20 2,42,000 75.80%

2.30 2,12,000 78.80%

2.40 1,84,000 81.60%

2.50 1,58,000 84.20%

2.60 1,35,000 86.50%2.70 1,15,000 88.50%

2.80 96,800 90.38%

3.00 66,800 93.31%

3.10 54,800 94.52%

3.20 44,600 95.54%

3.30 35,900 96.41%

3.40 28,700 97.13%

3.50 22,700 97.73%

3.60 17,800 98.22%

3.70 13,900 98.61%

3.80 10,700 98.93%

3.90 8,190 99.18%

4.00 6,210 99.38%

4.10 4,660 99.534%

4.20 3,460 99.654%

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4.30 2,550 99.746%

4.40 1,860 99.814%

4.50 1,350 99.865%

4.60 960 99.904%

4.7 680 99.932%

4.80 480 99.952%

4.90 330 99.967%

5.00 233 99.977%

5.12 150 99.985%

5.21 100 99.990%

5.31 70 99.993%

5.44 40 99.996%

5.51 30 99.997%

5.61 20 99.998%

5.76 10 99.999%

5.81 8 99.9992%

5.92 5 99.9995%

6.00 3.4 99.9997%

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TAXES &DUTIES

SERVICE TAX

Service tax is a kind of sales tax on services. It is charged from consumer of

services along with the price of the services rendered, collected by the service

provider & represented in the government treasury.

Some important points about Service tax are as follows.

The provision relating to Service tax were brought in to force with effect

from 1 July 1994. The Service brought under the tax net in the ye ar1994-

95 are as follows:

1) Telephone 2)stock broker 3)general insurance In India the introduction of tax on services ends recommended by the

chellian-committee was formed to suggest tax reforms measures in India.

It contributes more than 50% of DP in Indi a and come under indirect

taxes.

The most important article that prohibits arbitory collection of tax is

article 265, which reads as ³no tax shall be levied or collected expect by

the authority of law´.

Service tax is levied on the gross amount charged by the service provider

from the client.

India has adopted a selective approach for taxation of services.

Services mainly be divided into three list on the basis of government

responsible for collection of tax.

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1. UNION

For service this central government is responsible.

2. STATE-For service this state government is responsible.

3. CONCURRENT-

For service this both the central as well as state government is

responsible for collection of Service tax.

Jammu & Kashmir don¶t have the Service tax.

FUTURE PROPOSAL ²

The former finance minister of India, Mr. P.Chidambaram in his budget speech

has indicated the government intent of merging al taxes like Service tax, excise

& VAT into a common goods & services tax by the year 2010. To achieve this

objective the rate of central excise & Service tax will be progressively altered

and brought to a common rate. In budget presented for 2008 -09 it was

announced that all small services provider & turnover doesn¶t exceed Rs.10lacs.

Need not pay Service tax.

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OBJECTIVE OF SERVICE TAX

The basic objective of Service tax is:

Broadening the tax base.

Augmentation of revenue

Larger participation of citizen in the economic development of the nation.

Rate of Service tax

Service tax came into force w.e.f 01-07-1994 &initial rate of Service tax was

5% since then rate have changed from time to time.

Currently Service tax is levied at the rate of 12% wide charging section

66 of finance act 1994 (chapter 4) however wide Service tax notification no.

812009 dated 24-02-09 the central govt. exempts all the taxable services from

so much of the finance act, as in excess of the rate of 10% of the value taxable

Service.

Thus although charging 66 specifies rate @ 12% but effective rate of Service

tax will be 10% with effect from 24-02-09. In addition to the basic rate of 10%

education cess @ 2% & secondary & higher education cess a@1% are levied

service tax in respects of all taxable services.Thus effective rate of service tax as of now is 10.30%

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INCOME TAX

Income tax is a very important direct tax. It is an important & mostsignificant sources of revenue of the govt. income tax being a direct tax, is an

important tool to achieve balanced socio -economic growth by providing

concessions & incentives in income tax for various development purpose.

In India this tax was introduced for the first time in 1860, by sir James

Wilson in order to meet the looser sustained by the govt. on account of the

military mutiny of 1857. Thereafter, several amendments were ma de in it from

time to time. At last, in 1986, a separate Income tax act was passed. This act

remained in force up to 1917 with various amendments from time to time. In

1918, a new Income tax was replaced by another new act which has passed

1922. This act remained in force up to the assessment year 1961 -62 with

humorous amendments.

The Income tax act, 1961 has been brought in to force with effect from 1st

April 1962. It applies to the whole of India and Sikkim (including Jammu &

Kashmir).

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BASIS OF CHARGE OF INCOME TAX

The following basic principles emerge from the section:

1. Income tax is an annual tax on income.

2. Income of previous year is taxable in the next following assessment ±year

at the rile or roles applicable to that assessment - year however ,there are

exception to this rule.

3. Tax rates are fixed by the annual finance act.

4. Tax is charged on every person as defined in section &(31).

5. The tax is charged on the total income of every person computed in

accordance with provision of this act.

6. Income tax is to be deducted at the sources or paid in advance as provided

under the provision of the act.HEADS OF INCOME [SEC. 14]

As per sec. [14], income of a person is computed under the following fives

heads-

y Salaries

y Income from house properties

y Profits & gains of business & profession

y Capital gain

y Income from other sources.

The aggregate income under these heads is termed as ³gross total income´ in

other words gross total income means total income computed in accordance

with provision of the act 64 making any deduction under sec.80c to 80u.

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INCOME FROM SALARY:

Meaning of ³salary´:- [sec.17 (1)]

The term ³salary´ is defined to include the following:-

a) Wages

b) Any annuity or pension

c) Any gratuity

d) Any fees, commission, perquisites or profits in live of or in addition to

any salary or wages.

e) Any advance of salaryf) Any payment received by an employee in respect of any period of leave

not availed by him

g) The portion of the annual accretion in any previous year to the balance at

the credit of any employee, participating in a recognized providend fund

to extend it is taxable.

h) Transfer balance in a recognized providend fund to the extend it is

taxable.

i) Contribution by the central govt. to the A/C of an employee under a

pension scheme referred to in sec.80ccd.

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BASIS OF CHARGE [SEC. 15]

For the purpose of chargeability of tax, salaries consist of following.

Any salary due from an employer (or a former employer) to an assessee in

the previous yea, whether actually paid or not.

Any salary paid or allowed to him in the previous year by or on benefit of an

employer (or a former employer), though not due or before it became due.

Any arrears of salary paid or allowed to him in the previous year by or on

behalf of an employer (or a former employer), if not charged to income tax

for an earlier previous year.

Salary income is charg3eable to tax either or due to basis or on receipt basis.

Once salary has accrued, its subsequent waiver is only on application of

income & is liable to be taxed. Income is taxab le is salary under sec. [15] if an employer ±employee relationship exists between the payer & payee.

ASSESSMENT YEAR 2008-09:-

For the assessment year 2008-09 tax rate are given below:

Women¶s (who is below 65 year at any time during the previous year).

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INCOME TAX

Net incomerange Income taxrange surcharge Educationcess Secondary &higher Edu.Cess

Upto

Rs.1,45,000

Rs.1,45,000 to1,50,000

Rs.1,50,000 to2,00,000

Rs.2,00,000 to10,00,000

AboveRs.10,00,000

Nil

10% of totalincome

Nil

Nil

Nil Nil

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CUSTOM DUTY:-

A custom duty is a tariff or tax on the import or export of goods. In the

kingdom of England, custom duty duties were typically part of the customary,

revenue of the king & therefore did not need parliamentary consent to be levied,

unlike excise duty land tax or other former of tax.

The custom duty in India¶s is one of the most important tariffs. The

custom of 1962. The main purpose of custom duty in India is the presenta tion of

the illegal exports & imports of goods. The rates of custom duty levied on the

imported & exported goods are assigned in the custom act, 1962.

The main purpose of custom duty levied on the imported & exported

goods are assigned in the custom act, 1962.

TYPES OF CUSTOM DUTIES LEIVABLE:

In India, custom duties are levied on the goods at the rate specified in the

schedule to the custom tariff act, 1962.

The taxable event is import into or export from India. Export duty (2nd

schedule) are levied at present on leather, ironers & concentrates only but sweep

of import duty is very wide, almost universal, barring a fees goods like foodgrain, fertilizer life saving drugs, equipment etc.

Import duties generally consist of the following type ±

1. BASIC DUTY-

It may be at the standard rate or in the case of import from some countries at

the preferential rate [sec.2,custom tariff act,1975].

2. ADDITIONAL CUSTOM DUTY-

Additional custom duty equal to central excise duty is livable on the goods

produced or manufactured in India. Additional duties commonly referred to

as countervailing duty (CVD) Additional duty calculated on a value base of

aggregate value of the goods including landing charger &basic duty.

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3. ADDITIONAL DUTY OF CUSTOM-

ADC not exceeding 4% (1% for article of jewellery) ,was levied under section 3(V) of the CTA,1975 in the budget 2005 in order to counter balance

various internal taxes like sales tax & VAT

4. Additional duty of custom is livable at @ Rs. 2% per liter on imported

motor spirit (petrol) & high speed diesel.

5. NATIONAL CALAMITY CONTINGENT DUTY (NCCD):

it is imported at present @Rs. 50/-per m.t. or imported oil @ 1% on mobile

phone, two wheeler motor cars & multi utility vehicles.

6. ANTI DUMPING DUTY/SAFE GUARD DUTY-

With a view to protecting domestic industry from unfair injury, anti dumping

duty/safeguard duty is imposed on import of specified goods.

7. EDUCATION CESS/SECONDARY & HIGHER EDUCATION CESS:-

8. EC @ 2% & further secondary & higher education cess @1% of aggregate

duties of custom is livable.

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EXCISE DUTY

DEFINATION- An excise of duty is a type of tax charged or goods produced within the

country.

CENTRAL EXCISE DUTY- INTRODUCTION-

The general rate of basic excise duty (BOD) reduced to 8% (As per

charges made on feb24, 09) Extension of the earlier 4% cut in excise duty

beyond 31 march 09 (as per charge 24, 09) 1% less for secondary & higher

education introduced.

For small scale exemption the turnover ceiling is increased from Rs.10

million to 15 million .the valuation rule of all the goods manufactured by

worker has been introduced.

The effective rate of petrol & diesel is reduced from 8% to 6%.

The settlement of commission provision is to be amended.

The e-payment becomes mandatory in cases where the annual excise duty

payable is in excess of Rs.5 million.

The excise duty is lived in of entry 45 of the central list in government of India act, 1935 as adopted by entry 84 of list -1 of the seventh schedule of the

constitution of India, charging section is sec.3 of the central excise 4 salt, act

1944.

In order to give a broad guide as to classification of goods for the purpose

of duty liability the central board of excise custom duty (CBEC) brings out

periodically & book called the ³INDIAN CUSTOMS TARIFFS GUIDE´ which

contain various tariffs issued by the CBEC.

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IMPORTANT OF CENTRAL EXCISE DUTY

Central excise revenue is the biggest single source of revenue of the govt.

of India. The union govt. tries to achieve different socio-economic objectives by

making suitable adjustment in the scope & quantum suitable adjustments in the

scope & quantum of central excise duty. It is suitable adopted & modified to

sense different purpose of price control, sufficient supply of essential

commodities industrial growth, promotion of small industries like authority for

collecting CED. Article 265of the constitution of india has laid down that both

collection of taxes shall be under AOL.

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SALES TAX -

DEFINITION-

sales tax is a tax levied on the sale or purpose of goods. There are two kinds of

sales tax-

Central sales tax imposed by each state. Sales tax in India is imposed

under both central &the state legislation. The govt. levied sales tax principally

on intra sale `of goods. State also levies ³sales tax on transaction which are

deemed sales´ like works contracts leases.

Sales tax is an indirect form of tax, where in it is the responsibility of the

seller of the commodity to collect & recover the tax from the p urchase.

generally sale of imported item & sale by way of export are not commodities

which require payment of sales tax.

General sales tax (CST) act that falls under the directions of the central

govt. takes in to account all the intevelate states of comm odities. Thus sales tax

is to be paid by every dealer on the sale of any commodity, made by him during

interstate trade or commerce irrespective of the fact that no liability to pay tax

on the sale of goods arises under the tax of laws of the appropriate s tate. He is to

pay sales tax to the sales tax authority of the state from which the movement of

the commodities commences. However from April 1, 2005 most of the states in

India have supplemented sales tax with a view VALUE ADDED TAX (VAT)

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INTERSTATE SALE-

According to section 3, a sale or purchase shall be deemed to take place in the

course of interstate trade or commerce in the following cases -

When the sale or purchase occasions the movement of goods from one

state to another.

When the sale is effected by a transfer of document of title to the goods

during their movement from one state to another.

To make a sale as one in the course of interstate, trade these must or an

obligation to transport the goods outside the state. The obligation may be of the

seller or the buyer. It may arise by reason of statute or contract between the

parties or from mutual understanding or agreement between them or , even from

the nature of transactions.

MAIN PRINCIPLES IN STATE SALES TAX LAWS-

A sale or purchase of goods is said to take place when the transfer of property

in the existing goods or future goods take place for consideration of money .

The goods have been divided into different categories & different rates of sales

tax are charged for different categories of goods.

In most of the cases related to the sales tax on the sale or purchase of

goods is at single paint

Generally a quarter return of sales or purchase is insisted upon the assesses is

required to furnish the return in prescribed from. At the time of assessment, the

assessee has to furnish all the documentary evidence & satisfy the concerned

sales tax.

The sales tax laws of the state prescribed the procedure to be followed in

case an assessee prefer to make an appeal. Every dealer should apply for registration & obtain a registration certificate to that effect. The registration

certificate no. should be quoted all the bill.

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VALUE ADDED TAX (VAT)

INTRODUCTION-

The much awaited value added tax (VAT) has been introduced in India

taxation system from April 1st

2005, now it is a part of 130 countries which was

leaded first time in U.K in 1973. The Uttar Pradesh was the last state to

implement VAT & introduced in 1st

Jan 2008 called act 2008.

WHAT IS VAT?

Value added tax is modern & progressive form of sales tax. It is charged

& collected by the dealers the price paid by the customer. In India VAT has

been introduced in all the states for providing uniformity in tax rates.

VAT is centrally uniformity administered tax with a revenue staring

mechanism. Under the VAT system, no exemptions will be given & a tax will

be levied at each stage of manufacturing.

BENEFITS OF VAT:

y It is a simple, transparent & progressive.

y Business friendly system of taxation.

y

Simplification of tax form & procedures.y Reduction in the number of tax rates to only two main rates -4% to 12.5%

y Reduction in the effective tax rate for many goods.

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TYPES OF BUSINESS ARE LIABLE FOR VAT:

VAT applies to all types of business including.

y Imports.y Manufacturers.

y Distributers.

y Wholesalers.

y Retailers.

y Work contractors.

y Lesser.

Under the VAT, the taxes are some goods of common consumption

12.5% for all goods unless they are listed under the other rates food grains

including pulses, milk, vegetables, & books are not subject of VAT.

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IN ADDITION THERE ARE TWO OTHER RATES OF

SPECIFIC ITEMS:

p 1% for gold, silver, other precious metals precious & semi preciousstones & their jewellery

p 20% for liquor the only exception to others rates is for the sale of motor

spirit which have special tax rates based on the existing sales of motor

spirit taxation on act.1958. subject to a floor rate of 20%.

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FINANCIAL STATEMENT

The financial statement contains summarized information of the firm¶s

financial affairs, organized systematically preparation of financial statement is

the responsibility of top management. The two basic financial statements

prepared for the purpose of external reporting to owners, investors, & creditors

1. Balance sheet.

2. Profit & loss account.

The various objective of financial statement are:

y To provide reliable financial statement about economic resources &

obligation of a business enterprises.

y To provide reliable information about the changes in net resources of

enterprises that result from the profit directed activities.

y To provide financial information that assist in estimating the earning

potential of enterprise.

y To provide other needed information about changes in economic resources &

obligation.

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BALANCE SHEET

Balance sheet is one of the most significant financial statements. It

indicates the financial condition or the state of affairs of a business at a

particular moment of time. The Balance sheet communication information¶s

about assets, liabilities & owners equity for business firms as on a specific date.

ASSETS

Assets, representing economics resources, are the valuable possessions owed by

the firm assets may be classified as:

y Current assets

y Long term assets

CURRENT ASSETS-

Current assets sometimes also called liquid assets are those res ources of the firm

which are either held in the form of cash or expected to be converted in to cash

within the accounting period or the operating cycle of the business. Current

assets

Generally includes cash, marketable securities account receivable, inven tory,

loan & advances, prepaid expenses, bills receivable.

LONG TERM ASSETS-

Long term assets are held for period longer then the accounting period Long

term assets includes fixed assets Long term investment & other assets.

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LIABILITIES-

Liabilities are debt payable in future by the firms to its creditors it may be of

two types.

y Current Liabilities

y Long term Liabilities

CURRENT LIABILITIES-

These are debts payable with in accounting period. Current assets are converted

into cash to pay current liabilities includes sundry creditors bills payable, bank

borrowing, provision, expenses payable.

LONG TERM LIABILITIES-

It is also called fixed Liabilities are the obligations or debts period. It includes

debenture, bonds & secured loans from financial institutions.

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PROFIT & LOSS ACCOUNT

The earning capacity & potential of the firm are reflected by the income

statement or the Profit & loss account. The Profit & loss account presents the

summary of expenses & revenues, expenses & net income of afire for a period

of time. Thus it serves a measure of firm¶s profitability

NATURE OF REVENUES-

It can arise form:

y The sale of product to customer

y The rendering of services or the supply of firm¶s resources to others,

resulting in the receipt of rent, interest, dividend, royalty, commission,

fees etc.

y The sale of assets of the firm other than those held as stock in trade.

NATURE OF EXPENSES:

The cost of earning revenue is called the expense. Expenses occur when assets

are consumed on liabilities are increased in order to produce revenue. Cost isnot the same thing as expenses cost is an outlay incurred to acquire some asset

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FINANCIAL STATEMENT ANALYSIS

³Financial statement analysis is largely a study of relationship among the

various Financial statement of business enterprise as a disclosed by single set of

Financial statement & a study of these factors as shown in a series of

statement.´

Financial statement can be analyzed in two ways:

HORIZONTAL ANALYSIS:

Financial statement of an enterprise for a number of years is called

horizontal analysis, which may take the following two forms:

1. Comparative Financial statement2. Trend analysis

COMPARATIVE STATEMENT-

A simple method of tracing the period changes in the financial

performance of a company is to prepare Comparative statements. Comparative

financial statements will contain items at least for two periods.

TREND ANALYSIS:

In financial analysis the direction of changes over a period of yea rs is of

crucial importance. Trend analysis of ratios indicates the direction of changes

for trend analysis the use of index number is generally advocated. The

procedure followed is to assign the numbers 100 to items of other year in

relation of the base year.

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VERTICAL ANALYSIS:

It is the analysis of financial data based on relationship among item in a

single period of financial statement.

For ex: various assets can be expressed as percentages of total assets.

Statements containing such analysis are called common size statements. The

common size profit & loss account is more useful in analyzing operating results

& costs during the years it shows each element of cost as a percent of sales.

Similarly common size balance sheet shows fixed assets is expre ssed as % of

total assets.

FINANCIAL ANALYSIS-

Financial analysis is the process of identifying the financial strength &

weakness of the firms by properly establishing relationship b/w the item of the

balance sheet & the profit & loss A/C.

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RATIO ANALYSIS-

Ratio analysis is a very powerful analytical tool useful for measuring

performance of an organization. The ratio analysis helps the management to

analysis. The post performance of the firm & to make further projections. Ratio

analysis is comparison of data from one period to another and the appraisal of

the ratios to make proper analysis about the strength & weakness of financial

sub nature.

NATURE OF RATIO ANALYSIS:

A ratio is defined as the indicated quotient of two mathematical

expressions & as the relationship between two accounting figures, expressed

mathematical is known as a financial analysis. Ratio helps to summarize thelarge quantities of financial data & to make the qualitative judgment about the

firm¶s financial performance.

STANDARDS OF COMPARISON:

A single ratio in its self does not indicate favourable or unfavourable

condition. It should be compared with some standard. Standard of comparison

may consist of:

Ratio calculated from the past financial statement of the some firm .

Ratios developed using the projected financial statement of the some

firm.

Ratios of some selected firms, specially the most progressive &

successful at the same point in time.

Ratios of the industry to which the firm belong.

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UTILITOF RATIO ANALYSIS-

The ratio analysis is the most important tool of the financial analysis,

with which one can determine:

y The extent to which the firm has used its long term solvency by

borrowing funds.

y The ability of firm to meet its current obligations.

y The efficiency with which the firm is utilizing its various assets in

generation sales revenue.

y The overall operating efficiency & performance of firm.

TYPES OF RATIO:

1. Profitability ratio.

2. Working capital ratio.

3. Growth ratio.

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PROFITABILITY RATIO-

Profit is the difference between revenue & expenses over a period of time

profit is the ultimate output of the company, & it will have no future if it fails to

make sufficient profits.

The Profitability ratios are calculated to measure the operating efficiency

of the company. The purpose of studying & analyzing the Profitability ratio is to

help in assessing the adequacy of profits earned by the company & also to

discover whether the Profitability is increasing or decreasing.

Generally two major types of Profitability ratio are calculated:

y Profitability in relation to sales.

y Profitability in relation to investments.

UNDER PROFITABILITY RATIO:

y Profit before interest & taxes to capital employed.

[(Profit before tax + interest)*100] / (net fixed assets + net current assets)

y Profit before tax to sales & services % :

(Profit before tax) * 100 / sales & services

y Profit after tax to net worth:

(Profit before tax) * 100 / net worth

y Long term debt to net worth:

Long term debt / net worth

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WORKING CAPITAL RATIO-

The ratio analysis of working capital as means of checking upon the

efficiency with which working capital is being used in the enterprise working

capital ratio, which measures the liquidity of a firm & its ability to meet its

maturing short term obligation. Liquidi ty is defined as the ability to realize

value in money, the most liquid assets it refers to the ability to pay in cash the

obligation which are due.

GROWTH RATIO-

Growth ratio indicates the Growth of a company in a particular area in

comparison to previous years. Growth can be positive or negative. If the Growth

is positive then the firm is previous year & if negative then the result will bevice versa.

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ACCOUNTING POLICIES

FIXED ASSETS

y Fixed assets are recorded at cost net of MODUAT relief wherever availed

y Fixed assets are required free of cost or gifted to ITI are recorded at

market value at the time of acquisition the amount of credit to capital

reserve.

y Any capital grant-in-aid given for a specific profit by any agencies is

initially credited to grant-in-aid and this amount is adjusted to P&L

account overt the useful life of assets.

y Expenditure on development of lease hold land is capitalized as land

development expenditure and is written off over a period of 5 year.Commencing from the year in which such expenditure is incurred.

INVENTORIES

y Raw materials, components & stores purchased are valued at weighted

average rates as at the end of the year. Where the same items are both

purchased & manufactured, manufacturing costs are generally adopted

for valuation.

y Raw material & production stores with ancillaries & fabrications are

valued at the cost as the time of issue to the ancillaries & fabricators.

y Manufacturing items in stock & stock-in-trade are valued at cost

excluding charges, administration overheads & sales overhead or the

realizable value whichever is less.

WORK IN PROGRESS

y Work in progress is valued on the basis of physically verified quantities at

cost excluding interest charges, administration overheads & sales

overheads or the realizable value whichever is less.y Work in progress is valued at cost as recorded in works orders.

y Precious metals scrap is valued & brought to book at the year end.

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TOOLS AND CAUSES

y Expenditure on special purpose tools & fixtures is initially capitaliz ed for

amortization on is initially capitalized for amortization on production

based on technical assessment.

y Loose tools are charged to revenue at the time of issue.

DEFERRED REVENUE EXPENDITURE

y Expenditure on training personnel/foreign technician fees an d expenses,

pre-production expenses etc. specific to project/products is amortized

over production on technical estimates & to the extent not amortized is

came forwards.

RESEARCH & DEVELOPMENT

y Revenue expenditure on research & development is charged to the profit

& loss account in the year in which it is incurred.

y Capital expenditure on R&D is treated as addition to the fixed assets.

DEPRECIATION

y Depreciation is charged on straight line method in accordance with the

useful life of the assets as assessed by the management.y However the rates of depreciation adopted in the books are not lesser than

the specified is schedule 14th

of the company¶s act 1956.

PRIOR PERIOD ITEMS

Adjustment arising due to errors or mission in the financial statement of earlier

years are accounted under ³prior period adjustment if the amount involved in

rupees 5 lacs or more in each case.

RATE OF FOREIGN EXCHANGE

Current assets/liabilities towards imported equipments and components are

initially brought to account a exchange ruling on the date of availing the credit

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and are updated at the actual rate of exchange ruling on the date of the balance

sheet. The cons version difference at the balance is adjusted in P&L A/C. in

relation to fixed assets for any such liability the difference would be accounted

in assets account

RECOGNITION OF REVENUE

y A sale excludes sales tax & includes excise duty.

y Sales are set up based on dispatches/customer acceptance against valid

contracts.

y Where prices are not established, sales are set up provisionally at prices

likely to be realized.y Export sales are treated as sales on issue of bills of lading.

y Customers including liquidated damages for contract executed during the

year make provision separately for likely disallowance.

WARRANTY LIABILITY

y Expenses against warranty liability are accounted as and when incurred.

GOVERNMENT GRANT

Government grants relating to revenues are initially credited to grant -in-

aid thus amount is adjusted to the profit & loss account to the extent of related

costs, which they are intended to compensate.

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PROFIT & LOSS ON LONG TERM

CONSTRUCTION/TURNKEY CONTRATS

Revenue is recognized on a percentage completion method. Theaccounting of contract revenue & contract cost associated with the contract are

recognized as a revenue & expenses respectively by reference to the stage of

completion of contract activity at the reporting date. Expected loss on the

contract is fully accounted.

RETIREMENT BENEFITS

y Gratuity liability is determined annually by actuarial valuation & covers

all employees. The incremental liability of each year is remitted into a

separate trust.

y Liability towards leave salary accruals is determin3ed on the basis of

actuarial valuation.

BORROWING COST

Borrowing cost that is directly attributable to the acquisition construction

or production of qualifying assets. A qualifying asset is a fixed assets which

require a substantial period to get ready for its intended use or investors what

requires substantial period to bring them to a saleable condition.

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COMPARATIVE ANNUAL REPORT

(As on 31st

march 2009)

(Rs. In lacs)

Description 2008-09

(a)

2007-08

(b)

(a-b)

absolute

change inRs.

%

change

(%)

SOURCES OF FUNDS

Share holder¶s fund

Share capital 0.00 0.00 0.00 0.00Reserve & surplus 27,135.32 28,591.60 -1,456.28 -5.09

Grant-In-Aid 2,123.05 2,431.63 -308.58 -12.69

LOAN FUNDS

Secured loan 1,479.78 1,129.78 350 30.97

Unsecured loan 0.00 0.00 0.00 0.00

H.O & unit & Cr. balance 34,680.05 43,893.38 9,213.33 -20.99

H.O A/C profit 0.00 0.00 0.00 0.00

TOTAL 65,418.20 76046.39 -10628.19 -13.97

APPLICATION OF FUNDS

Fixed assetsGross block 57,468.29 56655.28 813.01 1.43

Less: depreciation 25,795.01 23516.64 2278.37 9.68

Net block 31,673.28 33138.64 -1465.36 -4.4

Capital work in progress 82.78 79.04 3.74 4.73

Investment 0.00 0.00 0.00 0.00

Current, assets & advance

Inventories 12,359.79 12774.10 -414.31 -3.24

Sundry debtors 89,542.61 65164.53 -55621.92 -85.35

Cash & bank balance 1,045.04 101.42 963.62 950.13

Loans & advance 12,759.71 14896.07 -2136.36 -14.34

Less: current liabilities &

provision

Current liabilities 1,52,017.88 72818.28 79199.6 108.76

Provision 4,211.22 2535.69 1675.53 66.07

Total 1,56,229.10 75353.97 80875.13 107.32

Net current assets 40,521.95 17528.15 22993.8 131.18

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H.O unit & Dr. balance 52,789.21 2952.62 49836.59 1687.87

Misc. expenditure 0.00 0.00 0.00 0.00

Head office A/C 21394.88 22293.94 -899.06 -4.03

Total 65418.20 76046.39 -10628.19 -13.97

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OPERATING RESULT

Particular 2008-09 2007-08 2006-07 2005-06 2004-05

Sales including services 51458 26626 56585 48737 3734

Accr. To stock -1834 576 -1303 -1154 -1893

Value of production 49624 27202 55282 47583 35241

Other income 481 2007 3292 5298 787

Direct materials 45532 28709 52597 43837 34954

S charge on inst. & maint.

Of exch.

2338 1777 150 34 41

Employ costs 8170 7446 6933 5021 4941

Depreciation 819 885 951 927 697

Financing expenses 5165 5268 5000 5815 3357

Other expenses 9456 3769 4958 6034 4775

Profit for the year -21375 -18645 -12015 -8787 -12737

Prior period adjustment -20 -3649 -2297 65 0

Profit before tax -21395 -22294 -14312 -8722 -12737

Provision for tax NA NA NA NA NA

Transfer for general res. NA NA NA NA NA

Profit after tax -21395 -22294 -14312 -8722 -12737

dividend - - - - -

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FINANCING POSITION

Particular 2008-09 2007-08 2006-07 2005-06 2004-05Equity

Reserve & surplus 29258 31023 32836 35158 3413

Misc. expend. Not w. Off 0 0 0 -116 -390

Net worth 29258 31023 32836 35042 3023

Bonds - - - - -

Other borrowing &

deferred charge

-38024 19777 -3622 -3568 25709

Gross block 57468 56655 56532 56390 23733

Depreciation 25795 23517 21160 18242 17335

Net block 31673 33138 35372 38148 6398Capital work in progress 83 79 142 130 114

Current assets & liabilities

Inventory 12360 12774 15244 11734 11348

Debtors 89543 65165 25676 30489 42253

Others 13804 14997 15034 13073 10547

Total 115707 92936 55954 55296 64148

Current liability &

provision

156229 75353 62254 62100 41928

Working capital -40522 17583 -6300 -6804 22220

Capital emp. By source

Net worth 29258 31023 32836 35042 3023

Borrowings -38024 19777 -3622 -3568 25709

Total funds -8766 50800 29214 31474 28732

Capital emp. By

application

Net fixed assets 31673 33138 35372 38148 6398

Working capital -40522 17583 -6300 -6804 22220

Capital work in progress 83 79 142 130 114

Investment - - - - -Total application -8766 50800 29214 31474 39832

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PROFITABILITY RATIO

(RS.IN LACS)

Particular 2008-09 2007-08 2006-07 2005-06 2004-05Profit before Int. & Tax

to capital employed

N.A N.A N.A N.A N.A

Profit before Tax to sales& services

N.A N.A N.A N.A N.A

Profit after Tax to networth

N.A N.A N.A N.A N.A

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WORKING CAPITAL RATIO

(RS.IN LACS)

Particular 2008-09 2007-08 2006-07 2005-06 2004-05

Current ratio 0.71:1 1.23:1 0.90:1 0.89:1 1.53:1

W.C in no. of months of

value of production

9.80 7.76 -1.37 -1.72 7.57

Invent. in no. of months of value of production

2.99 5.64 3.31 2.96 3.86

Debtors in terms of month of sales & services

20.88 29.37 5.45 7.51 13.65

W.C to total capitalemployed (%)

462.26% 34.61% -21.57% -21.62% 77.34%

Cost of direct material to

value of production (%)

91.75% 105.54% 95.14% 92.13% 99.19%

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GROWTH RATIO

(RS.IN LACS)

Particular 2008-09 2007-08 2006-07 2005-06 2004-05

Annual growth in value

of production (%)82.43% -50.79% 16.18% 35.02% 142.36%

Annual growth in gross block

-1.44% 0.22% 0.25% 137.60% 15.14%

Other statistics 3362 -2232 1982 3032 -385

Value added 1965 1986 2020 2078 2099

No. of employee at 31st

march

1071 -1.12 0.93 1.46 0.19

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WORKING CAPITAL STATEMENT

Particular 2008-09 2007-08 2006-07 2005-06 2004-05

Raw material & production

store

3529.33 5461.71 7075.20 4978.69 3958.92

WIP 1592.51 2801.07 3022.66 4192.75 4352.50

Finished goods 1122.53 1557.08 876.82 928.98 1852.60

Other 6115.43 2954.24 468.85 1633.55 1183.63

Total 12359.8 12774.1 15243.53 11733.97 11347.65

Value of production 49624.0 27202.0 56282.0 47583.0 35241.0Value of dispatch 51458.0 26626.0 56585.0 48737.0 37134.0

Inventory in term of months of

Value of production

2.99 5.64 3.31 2.96 3.86

Sundry debtors 89543.0 65165.0 25676.0 30489.0 42253.0

Working capital -40521.0 17583.0 -6300.0 -6804.0 22220.0

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COMPARISON OF SALES AND WORKING CAPITAL

(RS.IN LACS)

Year Sale Working capital

2004-05 37134 22220

2005-06 48737 6804

2006-07 56585 6300

2007-08 26626 17583

2008-09 51458 40522

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WORKING CAPITAL ANALYSIS

-50000

-40000

-30000

-20000

-10000

0

10000

20000

30000

2004-05 2005-06 2006-07 2007-08 2008-09

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SALES ANALYSIS

0

10000

20000

30000

40000

50000

60000

2004-05 2005-06 2006-07 2007-08 2008-09

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COMPARISON OF SALES AND WORKING CAPITAL

37134

48737

56585

26626

51458

22220

6804 6300

17583

40522

0

10000

20000

30000

40000

50000

60000

2004-05 2005-06 2006-07 2007-08 2008-09

sales

¥

¦

rki§

g ca

ital

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PROFITABILITY ANALYSIS

-25000

-20000

-15000

-10000

-5000

0

2004-05 2005-06 2006-07 2007-08 2008-09

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PRODUCTIVITY OF CAPITAL

Year Total capital

employed (in

Cr.)

PBT with cash &

non cash cost

(inCr.)

Return on capital PBT

all cash & non cash cost

(inCr.)

1997-98 304.67 134.53 44.16

1998-99 318.18 119.74 37.63

1999-00 335.43 93.67 27.93

2000-01 350.31 46.88 13.93

2001-02 397.53 52.51 13.21

2002-03 414.30 52.77 12.74

2003-04 296.00 82.82 27.982004-05 287.32 86.83 30.22

2005-06 314.74 19.80 6.29

2006-07 292.14 83.61 28.62

2007-08 508.00 161.41 31.77

2008-09 876.60 N.A N.A

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PRODUCTIVITY OF MATERIAL

Year Product value

(in cr.)

Raw material &

component (in

cr.)

Material

consumption

w.r.t production

(%)

1998-99 338.76 146.33 43

1999-00 357.65 156.92 44

2000-01 416.04 257.02 62

2001-02 497.77 348.36 70

2002-03 448.98 404.22 9 02003-04 145.41 164.35 113

2004-05 352.41 349.54 99

2005-06 475.83 438.37 92

2006-07 552.83 525.97 9 5

2007-08 272.02 287.09 105 .54

2008-09 496.24 455.32 91.75

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PRODUCTION ANALYSIS

0

10000

20000

30000

40000

50000

60000

2004-05 2005-06 2006-07 2007-08 2008-09

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HOW MONEY WAS UTILISED

VALUE IN %

Direct©

aterial

e ployee cost

financing expenses

epriciation

other expenses

profit

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SWOT ANALYSIS

STRENGTH

y Organization name.

y Dedicated & devoted employees.

y Collaboration with FRENCH company.

y Niche player in the field of electric and banking automatic in India.

WEAKNESS

y ITI has limited customers.y No advertisement.

y No promotional activities at any level.

y Delay in purchase & distribution of goods.

y Govt. rule & regulation.

y Less incentive is given to the employees

OPPORTUNITY

y It can grab the whole market of telecom.y It can enter in other area of telecom.

y Make collaboration with other international.

THREAT

y Several companies have entered into banking automation sector with

heavy sales promotional schemes.

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FACTS AND FINDING

After undergoing industrial training in ITI limited, I got a lot of knowledge &

practical experience and also I came a across some problem and their causes

which are as follows:

PROBLEMS

y Company takes a lot of time for dispatching the goods.

y Limited customers

y Limited exports

y Company doesnt possess a proper a budgeting & monitoring system

y Trading has increase whereas manufacturing has decrease which

resulted in decreased in contribution with relation to fixed assets; the

company has to incur losses.

CAUSES

y Lack of proper management of inventory i.e. inventory log period is

higher.

y Lack of proper distribution network.

y Low efficient work place.

y Obsolete technology.

y Fierce completion with global market.

y Intervention of govt. policy & norms.

y Company does not possess proper strategies, proper budgeting &

monitoring system

ECOMMENDATION

y Implementation of innovative in the company.

y Proper inventory mgmt. should be followed.

y Dedicated R&D people are needed.

y Motivational classes should be arranged for the employees. \

y Proper training process is needed.

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y Internal transfer of the employees is needed.

y Optimum utilization of existing infrastructure and resources.

y Sale of machine & scraps.

y Adopt customer retention policies.

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BIBLIOGRAPHY

y Financial management --- I M PANDEY

y Financial management ---RAVI M KISHORE

y [email protected]

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