FINANCIAL MANAGEMENT

Finance is the life of any business. No business can run properly unless it maintains its cash. Blood is essential for human being alive. In case of business finance take the position of blood. Now the question arises what is finance. Simply finance is known as cash and monetary terms but finance means more of it. Finance means measure the financial requirement and allocate cash in different heads for proper working of each department. The word management refers to manage-men-t. It means manage the men tactfully. Here the word men mean all those person who are working in the organization. Financial management is that managerial activity which is concerned with the planning and controlling of the firms financial resources According to Howard & Upton Financial Management is the application of planning and controlling function to the finance function. Thus financial management means manage the financial activity of the company. There are different approaches regarding financial management. Traditional Approach Under this approach financial management refers to rising of funds through various sources according to current need of the company. This approach is mainly concentrate on rising of fund. Through different sector in this approach the main thing is raising of capital. Transactional Approach Under this approach financial management refers to inflow and outflow of cash in operating activity. Operating activity means purchase and sale of material. Modern Approach Modern approach is rising of funds through different sources and utilizes them effectively. Capital budgeting and cost of capital must be kept in mind while raising the funds. Capital budgeting means the investment in capital goods in such a way so that we can get back our invested money easily and quickly. Cost of capital means what is the cost of raising capital. The return demanded by preference shareholders, the interest rates demanded by debenture holders, dividend requirement of equity capital holders is considered as cost of capital. Utilization of funds means effective utilization of funds in inflow-outflow; allocate the cash to different department in such a way so that business can run successfully. Thus financial management means rising of funds through different sources and utilizes them effectively.

SIGNIFICANT ACCOUNTING POLICIES

1. Basis of Preparation of Financial Statements The Financial statements have been prepared under the historical cost convention, in accordance with applicable Accounting Standards and provisions of the companies Act, 1956 as adopted consistently by the Company. 2. Recognition of Income/Expenditure All incomes & expenditures having a material bearing on the financial statement are accounted for on an accrual basis and provision is made fore all known losses and liabilities. 3. Fixed Assets Fixed assets are stated at cost, net of Modvat/Cenvat/Vat, less accumulated depreciation. Cost of fixed assets comprises purchase price, duties, levies borrowing cost, net charges on forward exchange contracts and exchange rate variations and any directly attributable cost of bringing the assets to its working condition for the intended use. Machinery spares that can be used only in connection with an item of fixed asset and their use is expected to be irregular are capitalized. Replacement of such spares is charged to revenue. Intangible assets acquired on or after 1st April 2003 satisfying the qualifying conditions prescribed under Accounting Standard 26- Intangible assets, issued by Institute of Chartered Accountants of India are capitalized.

4. Capital Work in Progress Advance paid towards acquisition of fixed assets and the cost of assets not ready to put to use before the year end, are disclosed under capital work in progress. 5. Impairment of Assets Carrying amount of cash generating units/assets is reviewed for impairments, Impairment, if any, is recognized where the carrying amount exceeds the recoverable amount being the higher of net realizable price and value in use.

6. Inventories Inventories are valued at lower of cost and net realizable value. The cost of raw material is determined by using First-In-First Out (FIFO) method. However, scrap is valued at Net realizable value. Cost of finished goods and work in progress includes cost of conversion and other cost incurred in brining the inventories to their present location and condition.

7. Sales Sales are recognized on dispatch of goods from the factory and are net of discounts but exclude sales tax. 8. Depreciation Depreciation on fixed assets is provided on written down value basis at the rate and in the manner prescribed in schedule XIV to the Companies Act, 1956. Depreciation is charged on pro-rata basis for assets purchased/sold during the year. Individual assets costing Rs. 5000 or less is depreciated in full in the year of purchase. Depreciation on incremental cost arising on account of translation of foreign currency liabilities for acquisition of fixed assets is provided as aforesaid over the residual life of the respective assets. Costs of intangible assets are amortized over five years. 9. Foreign Exchange Transactions Transactions denominated in foreign currencies are normally recorded at the exchange rate prevailing at the time of transaction. Monetary items denominated in foreign currencies outstanding at the year-end are translated at exchange rate applicable as on that date. Nonmonetary items denominated in foreign currency are valued at the exchange rate prevailing on the date of transaction. Any income or expenses on account of exchange difference either on settlement r on translation is recognized in the profit and loss account except in cases where these relate to the acquisition of fixed assets. 10. Borrowing Cost Borrowing Cost that is attributable to the acquisition or construction of qualifying Assets is capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready fore intended use. All other borrowing costs are charged to revenue. 11. Claims Claims receivable are accounted for on the certainty of receipt & claims payable are accounted at the time of acceptance. 12. Excise Duty Excise duty is accounted on the basis of both payments made in respect of goods cleared as also provision made for goods lying in bonded warehouse. Cenvat claimed on Capital goods is credited to capital Assets/capital work in process. Cenvat claimed on purchase of raw and other materials are deducted from cost of such material 13. Retirements Benefits Contribution to Provident fund are made to the Employees Provident fund schemes administered through Provident fund Commissioner and companys contributions is charged to revenue. The Gratuity is funded through payment to Life Insurance Corporation of India. Companys contribution paid/payable to said fund is charged to Profit & Loss Account. Provision is made for the value of unutilized leave due to employees as at the year on the basis of actuarial valuation.

14. Miscellaneous Expenditure Preliminary Expenses are amortized over a period of ten years. 15. Dividend Provision is made in the financial statements of dividend proposed for approval at the subsequent Annual General meeting. 16. Income Tax Provision for current Income Tax is made after taking credit for allowances and exemptions. In case of matters under appeal, due to disallowance or otherwise, the same is considered for provision when company accepts the said liabilities. In accordance with Accounting Standard 22- Accounting for Taxes on Income, issued by the Institute of Chartered Accountants of India, the deferred tax for timing differences between the book and tax profits for the year is accounted for using the tax rates and the tax laws that have been enacted or subsequently enacted as of the date of balance sheet. Deferred tax assets arising from temporary timing differences are recognized to the extent there is virtual certainty that the sufficient future taxable income will be available against which such deferred tax assets can be realized and are reviewed at each balance sheet date to reassure the realization.