INTRODUCTION

Finance is the study of how investors allocate their assets over time under conditions of
certainty and uncertainty. A key point in finance, which affects decisions, is the time value of
money, which states that a dollar today is worth more than a dollar tomorrow. Finance
measures the risks vs. profits and gives an indication of whether the investment is good or
not.
A project is an activity sufficiently self-contained to permit financial and commercial
analysis. In most cases projects represent expenditure of capital funds by pre-existing which
want to expand or improve their operation. In general a project is an activity in which, we
will spend money in expansion of returns in which logically seems to lead itself planning.
Financing and implementations as a unit, is a specific activity with a specific point and a
specific ending point intended to accomplish a specific objective of the study.
Capital budgeting has its going in the natural recourse and infrastructures sectors. The
current demand for infrastructures and capital investments is being fueled by deregulation in
the “FMCG” (Fast Moving Consumer Goods), Telecommunication, & Transportation sectors,
by the globalization of product markets and the needs from manufacturing scale, and by the
privatization of government owned entities in developed countries & developing.
Understanding the organization’s financial health is a fundamental aspect of responding to
today’s increasingly stringent financial reporting requirements. To avoid risks, organizations
must quickly
 Identify ascertain financial ratios and trends across in liabilities and assets.
 Analyze and adjust planned and forecasted amounts.
 Act to provide regulatory statements as needed.
Financial management is a process of identification, accumulation, analysis, preparation,
interpretation communication of financial information and communication of financial
information to plan, evaluate, and control business firms.

Financial management is the specialized function of general management, which, is

relates to the procurement of finance, and its effective utilization for the achievement of
the goal of the organization.
MEANING AND DEFINITIONS OF FINANCIAL MANAGEMENT:

MEANING

Financial Management is an organizational activity that is concerned with the

management of financial resources. In common parlance is described as providing
monetary resources at the time they are required. But financial management covers the
mobilization and effective utilization of funds.

DEFINITIONS

(1) Financial Management is defined as “that business activity which is concerned

with the acquisition and conservation of capital funds in meeting the financial
needs and overall objectives of business enterprises”
WHEELER.

(2) “Business finance can be broadly defined as the activity concerned with the
planning, raising, controlling and administrating the funds used in the business”.
-GUTHMANN AND DOUGALL.

(3) “Finance Management is concerned with the efficient use of important economic
resources, namely capital funds”.
- SOLOMON.
(4) “Financial management is an area of financial decision making
harmonizing individual motives and enterprises goals”.
-WESTON & BRIGHAN.
Financial management is concerned with the effective use of an economic resource
namely capital fund.
NATURE OF FINANCIAL MANAGEMENT

 Financial management is a branch of business management, which is associated

with future planning, Organization, co-ordination and control.
 Financial management provides a sound base to all managerial decisions.
 Production, research and development decisions based on financial management.
 Financial management is a scientific and analytical analysis.
  In the process of decision making and financial analysis modern mathematical
techniques are used. Managing a firm is both science and an art.
 An analysis of the various definitions mentioned above make it clear that financial
management is concerned with the proper management of funds keeping in view
the enterprise objectives.
 The financial manager should look after that the funds are procured in a manner
that the risk and cost consideration are properly balanced and there is optimum
utilization of funds.

Financial Functions
Initially the finance managers were considered advent of an event requiring funds. The
finance manager was given a target amount of funds to rise and was given a target
amount of funds to rise and was given the responsibility of procuring those funds. So his
function was limited to raising funds as and when the need arise. Once the funds were
procured, his function was over.

However, over a period the scope of his function has tremendously widened. His
presence is required at every moment whenever any decision having involvement of
funds is to the taken. Now it is the F.M require looking into the financial implication, of
any decision in the firm.

The functions of F.M are to manage the funds. Any act , procedures, decision relating to
funds comes under the purview of the F.M. since every activity in the business
organization, be it purchases , production .marketing or capital expenditure has a
financial implication, the finance function is interlinked with all other areas. In particular,
the F.M has to focus his attention on:

1. Procurement the required quantum of funds as and when necessary, at the lowest
cost.
2. Investing those funds in various assets in the most profitable way, and
3. Distribute returns to the shareholders in order to satisfy their expectations from the
firm.
The FM is usually faces with the following distinct scenario
1. What should be the size of a firm and how fast should it grow?
2. What are the various types of assets to be acquired? (Investment decision)
3. What should be the pattern of raising funds from various sources? (Financing
decision)
Depending upon the nature and size of the firm, the finance manager is required to
perform all or some of these functions from time to time. While performing the functions
he is required to take different decisions, which can be broadly classified into three
groups:-
1. Those relating to the resource allocation (the investment decision).
2. Those covering the financing of these investments (the financing or capital
structure decisions).
3. Those determining how much cash to be taken out and how much to be reinvested
(the dividend decision).
Financing decision
Requirement of funds at a proper time is most important. Identifying the right source and
amount that can be raised from each source and costs and other consequences involved
have to be done.
Investment decision
This relates, to investment in capital assets and current assets. Evaluating of different
capital investment proposals and selection of the best, keeping in view the overall
objectives of enterprise. Investment in current assets depends upon the credit and
inventory policy of the business. Credit policy depends upon the production, prices of
raw materials and availability of funds etc.
Dividend decision
Determining of dividend policy is an important task. The dividend decision involves what
percentage of profits to be paid to the share holders. A number of factors effecting the
dividend decision such as market price of the share, earnings, tax position etc.
IMPORTANCE OF FINANCIAL MANAGEMENT

Finance is very essential for the smooth running of the business. It has been rightly
termed as universal lubricant, which keeps the enterprise dynamic. It is indispensable in
any organization as it helps in;

1. Financial planning and successful promotion of an enterprise;

2. Acquisition of funds as and when required at the minimum possible cost;
3. Proper use and allocation of funds;
4. Taking sound financial decisions;
5. Improving the profitability through financial controls;
6. Increasing the wealth of the investors and the nation; and
7. Promoting and mobilizing individual and corporate savings.
In financial accounting, a cash flow statement, also known as statement of cash flows or
funds flow statement is a financial statement that shows how changes in balance sheet
accounts and income affect cash and cash equivalents, and breaks the analysis down to
operating, investing, and financing activities. Essentially, the cash flow statement is
concerned with the flow of cash in and cash out of the business. The statement captures
both the current operating results and the accompanying changes in the balance sheet as
an analytical tool, the statement of cash flows is useful in determining the short-term
viability of a company, particularly its ability to pay bills. International Accounting
Standard 7 (IAS 7) is the International Accounting Standard that deals with cash flow
statements.

INTRODUCTION TO FUNDSFLOW ANALYSIS

Significant technique of financial analysis is ‘Funds Flow Analysis’. It is designed to

highlight changes in the financial conditions of a business concern between two points of
time which generally conform to beginning and ending financial statement dates. Funds
flow statement is also termed as a statement of sources and applications of Funds’,
‘statement of changes in working capital, ‘statement of changes in Financial Position’,
‘statement of Funds supplied and Applied’, ‘statement of Funds Generated and
Expended’, ‘where got and where gone statement’, funds statement.
FUNDS FLOW ANALYSIS

The following are the definitions of funds flow statement.

“The funds flow statement described the sources from which additional funds were
derived and the used to which these funds are put.”

R.N.ANTONY

“A Statement of sources and application of funds in technical device designed to analyze

the charges in the financial condition of a business between two dates.”

R.N.FOULK

“It is a statement which highlights the underlying financial movements and explains the
changes of working capital from one point of time to another.”

BIERMAN

These, funds flow statement is report which summarizes the events taking place between
the two accounting periods. It spells out the sources from which funds were derived and
the use to which these funds were put. This statement in essentially derived from an
analysis of the changes that have occurred in assets and liabilities item between two
balance sheets dates. In this statement only the net changes are shown that the outcome of
a transaction on of a series of transactions upon the financial conditions of a business
enterprise in reflected more sharply.

CONCEPTS OF FUNDS

Useful In Decision Making To The term ‘funds’ have a variety of meaning. Some people
take funds synonymous to cash, and to them there is no difference between a cash flow
statement prepared on the basis and a fund flow statement. While other include
marketable securities and cash to constitute business funds. However the most common
definition of the term ‘Fund’ is ‘working capital’ or net ‘current assets’. Thus the
difference between current and current liabilities is called funds.
SIGNIFICANCE OF FUNDS FLOW STATEMENT
Funds flow statement is an important tool of financial analysis. The utility of the funds
flow statement sterns form the fact that it enable management, shareholder, investors,
creditors and other interested in the enterprise to evaluate the user of funds by the
enterprise to evaluate the user of funds by the enterprise to evaluate the user of funds by
the enterprise, and to determine how these funds are financed.
The Manager
The funds flow statement services as valuable tool of financial analysis to the finance
manager. It helps in understanding the financial stability and efficiency of financial
policies of management.
Decision relating to Financing
With the help of the funds flow statement, the analyst can evaluate the financing pattern
of the enterprise. An analysis of the major sources of funds in the part reveals what
portion of the growth was finance internally and what portion externally. The statement is
also measuring for judging whether the company has grown as too fast a rate, credit has
increased out of proportion to expansion in current assets and sales.
Decision of capitalization
The funds flow statement serves as hand maid to the financial manager in deciding the
making up of capitalization. Estimated user of funds for new fixed assets, working
capital, dividends and repayment of debt are made for each of several futures years.
Estimates are made for each of several future years. Estimate is made of the funds to be
provided by operations and the balance must be obtained by barrowing or issuance of
new securities. If the indicated amount of new funds required is greater than what the
financial Manager thinks possible to raise, then plans for new fixed assets acquisition and
the dividend policies are re-examined so that the Use of the funds can be brought into
balance with the anticipated sources of financing them. In particular funds statements are
very useful in planning intermediate and long term financing.

Uses of Funds Flow Statement

 Funds flow statement helps the financial analyst in having a more detailed analysis
and understanding of changes in the distribution of resources between two balance sheet
dates. In case such study is required regarding the future working capital position of the
company, a projected funds flow statement can be prepared. The uses are as follows.
 It explains financial consequences of balances operation
Funds flow statement provides a ready access or many conflicting Situations such
as.

 Why the liquidity position of business is becoming more and more unbalanced

 How was it possible to distribute dividends in excess of current

earnings or in the presence of net loss for the period?

 Where have the profits gone.

 How the business could have good liquid position in spite of business making
losses (or) acquisition of funds assets.

 It answers intricate queries.

The financial analyst can find out answers to a number of intricate Questions.

 What are the sources of payment of loan taken?

 What is the overall credit worthiness of the enterprise?

 How much funds are generated through normal business operation.

 What way the management has utilized the. funds in the part and,

 What are going to be likely uses of funds?

It Acts an instruments for allocation of resources A projected funds flow statement will
help the analyst in finding out how the management is going to allocate the scare
resources for meeting the productive requirements of business. The funds should be
managed in this way that the business is in a position to make payment of interest and
loan installments as per the agreed schedule.

Funds flow Statement

Flow of funds is indicated by

No flow of funds is indicated by

MEANING AND TYPES OF FINANCIAL STATEMENTS

A financial statement is an organized collection of data. According to logical and

consistent accounting procedures its purpose is to convey and understanding or some
financial aspects of business firm. It may show a position at a moment of time as, in the
case of a balance sheet or may reveal a series of activities ones a given period of time, as
in the case of an Income statement.

Financial statement analysis when used carefully can produce meaningful insights about
a company’s, financial information and its prospects .for the future. However, the analyst
must be aware of certain important considerations about financial statements and the use
of these analytical tools. For example, the dollar amounts for many types of assets and
other financial statement items are usually based on historical costs and thus do not
reflect replacement costs or inflationary adjustments. Furthermore, financial statements
contain estimates of numerous items. John Myor, “Financial Statement analysis is largely
a study of relationship among the various financial factors in a business as disclosed by
single set of statements and a study of the trend of these factors’ as shown in a series of
statements.

Thus the financial statement generally refers to, four financial statements.

 Income Statement

 Balance Sheet Of course a business may also prepare profit & loss account.

 Statement of retained earnings.

 A statement of changes in financial position.

Financial Statement

Income Balance Statement of Statement of

Statement Sheet retained earning charges

STATEMENT OF CHANGES IN FINANCIAL POSITION

The Balance Sheet shows the financial condition of the business at a particular moment
of time, while the income statement discloses the result of operating of business ones a
period of time. However for a better understanding of the affairs of the business it is
essential to identify the movement of working capital or cash in and out of the business
this information is available in the statement of changes in financial position of the
business.

 Change in working capital position in such a case the statement in termed (SCFP)
or funds flow statement.
  Change in cash position in such a case the statement in termed as SCFP (or) cash
flow statement.

 Change in overall financial position. In such a case the statement is termed as

statement of changes in financial position.

The technique of funds flow analysis is widely used by the financial analysis, credit
granting institutions and financial managers in performance of their jobs. It has become a
useful tool in their analytical kit. This is because the financial statement i.e. income
statement and the “Balance Sheet” have a limited role to perform. Income statement
measure flows restricted to transactions that pertain to rendering of goods or services to
customers. The Balance Sheet is merely a static statement. It is the statement of assets
and liabilities of business as a particular date. It does not supply focus those major
financial transactions which have been believed the Balance Sheet changes. One has to
draw inferences from the Balance sheet about major financial transactions only after
comprising the Balance sheet of two periods.

For example, if fixed assets worth Rs.3, 00,000 are purchased during he current year by
raising share capital of Rs.3, 00,000 the balance sheet simply shows a higher capital
figure and higher fixed assets figure. In case, One compares one year balance sheet with
the previous year balance Sheet then only one can draw an inference that fixed assets are
acquired by raising share capital of Rs.3,00,000 similarly, Certain important transitions
which might (Occur during the course of the accounting) not find any place in the
Balance Sheet. For example, if a loan of Rs.3, 00,000 was raised and paid in the
accounting year, the balance sheet will not depict this transaction. However, a financial
analyst must know the purpose for which loan was utilized and the source from it was
raised. This will help him in making better estimates about the company’s financial
position and policies.

FINANCIAL ANALYSIS
Financial analysis is highly essential to understand the efficiency and financial position of
the center pries.
The term ‘Analysis’ means methodical clarification of the data provided in the financial
statements. ‘Analysis’ and ‘Interpretation’ are complementary to each other Interpretation
requires analysis, while analysis is useless without interpretation. The term ‘Analysis’ to
cover the meanings of analysis and interpretation, since analysis involves interpretation.
Myers States
“Financial statement analysis is largely a study of the relationship among. The various
financial factors in a business as disclosed by a single set of a statements and a study of
the trend of these factors as shown in a series of statements”.
TYPES OF FINANCIAL ANALYSIS
We can classify various types of financial analysis in to different categories depending
upon.
 The material used.
 The method of operation fallowed in the analysis of the modus operandi of
analysis.

Types of Financial Analysis

ON THE BASIS OF MATERIAL USED

According to mate Hal used financial analysis can be classified two types.
1. External analysis
2. Internal analysis
1. External Analysis
It is the analysis by outsiders who don’t have access to the detailed internal accounting
records of the business firm; these outsiders include investors, Potential investors,
Potential creditors and government agencies, credit agencies and the general public. For
the financial analysis, the external parties to the firm depend almost entirely on the
published financial statements. External analysis only serves for limited purpose.
However the recent changes in the Government regulations requiring business firm to
make available more detailed information to the public through audited published
account have considerably improved the position of the External analysis.
2. Internal Analysis
The analysis conducted by person who has access to the financial accounting records of a
business firm is known as internal analysis. Such an analysis can therefore be performed
by executive and employee.
ON THE BASIS OF MODUS OPERATIONS:
This analysis also classification in to two types
1) Horizontal Analysis
2) Vertical Analysis
1. Horizontal Analysis
Horizontal analysis refers to the comparison of financial data of a company for several
years. The figures for this type of Analysis are presented Horizontal- over, a no of
columns. The figures of the various years are compared with standard or base year. A
base year is a year chosen as beginning point. This type of analysis is also called dynamic
as it is based on the data from year rather that a data from any one year.
Horizontal analysis means it possible to focus attention on items that have changed
significantly during the period under review comparison of an item over several periods
with a base year may show a trend development comparative statement and trend
percentage are two tools employed in Horizontal analysis.
Since this reflects changes in financial position of the company over a long period of time
it comprises:
1. Comparison of the financial statements of different years of the same business unit.
2. Comparison of financial statement .of a particular year of different business units.
2. Vertical Analysis
Vertical analysis is refers to the study of the various items in the financial statement of
one accounting period. In this type of analysis of the figure from financial statement of a
year are compared with a. base select from the same year statement. It is also known as
“Static analysis” common size financial statement and financial ratios are two tools
employed in Vertical Analysis.
Since Vertical Analysis considers data for one time period only it is very conductive to a
proper analysis of financial statement. However may be used along with horizontal
analysis to make it more effective and meaningful.
METHODS (OR) DEVICES OF FINANCIAL ANALYSIS
The analysis and interpretation of financial statement is used to determine the financial
position and result of operations as well. A number of methods (or) devices are used to
study the relationship between different statements. An effort is made to use those
devices which clearly analysis are generally used.
(i) Comparative statement
(ii) Common size statement
(iii) Trend analysis
(iv) Funds flow statement
(v) Cash flow statement
(vi) Ratio analysis
(vii) Cost volume profit analysis

FORMS OF WORKING CAPITAL

1. Gross Working Capital
2. Net Working Capital
3. Permanent Working Capital
4. Temporary Working Capital
1. Gross Working Capital
It refers to the company’s investments in current assets which can be converted into cash
within one year (or) in an accounting year. It includes cash, short term securities.
Working capital is necessary to run a business firm and to meet day-today expenses. Cash
is generated through sales which is possible with the investment in inputs such as raw
materials, consumables, labor etc hence working capital is necessary for acquiring inputs.
Gross working capital focus on two aspects of current assets management.
i. How to optimize in current assets
ii. How current assets should be financed
The financial manager should have knowledge of the sources of working capital
funds as well as investment revenue where idle funds may be temporarily invested.
2. Net Working Capital
It refers to excess of current assets over current liability i.e. difference between current
assets and current liabilities. Current liabilities are those claims of outsiders. Which are
expected to mature of payment. With in accounting expenses. Net working Capital may
be positive or negative. A present working capital will arise when current assets are
exceeding current liabilities.

A net working capital will occur wheeze current liabilities are in excess of current assets.
Net working capital is a qualitative concept of indicators the liquidity position of the
company and suggests the extent to which working capital.
3. Permanent Working Capital
It refers to the minimum level of current assets, which is continuously required by the
company to carry out the business operations. Permanent working capital is also known
as fixed working capital. It is payment in the are way as the company’s fixed assets are
depending up on the changes in production and sales. The need for working capital ones
and above permanent working capital will fluctuation.

4. Temporary Working Capital

It refers to that part of total working capital which required by business over and above
permanent working capital. The extra working capital needed to support the changing
production and sales activities. It is also called ‘Variable working capital’.
ELEMENTS OF WORKING CAPITAL
(a) Current Assets
The term current asset includes assets which are acquired with the
intention of converting them in to cash during the normal business
operation of the company. However, the definition of the current assets has been given by
Grady in the following words. For accounting purpose, the term Current assets is used to
designate cash and other assets or resources commonly identified on, those which are
reasonable expected to be realized in cash or sold or ‘consumed during the normal
operating cycle of the business.
The current assets are
Cash including fixed deposit with bank
Account receivables
Inventory
Advance receivables
(b) Prepaid expenses
It should be noted that short term investment should be included in the definition of the
term current assets while loose tools should be excluded from the category of current
assets. Of course, this is not strictly accordingly to the requirements of the companies Act
regarding presentation of financial statement where investments even though held
temporarily are to be shown separately from current assets while loose tools are shown
separately from current assets while loose tools are shown under the category of current
assets.
(c) Current Liabilities
The term Current Liabilities is used principally to designate such obligation whose
liquidation is reasonably expected to require the use of assets classified as current assets
in the same balance sheet or the operation of other current liability of those expected to
be satisfied with in a relatively a short period of time usually one year.
(I) Account payable
(ii) Outstanding expenses
(iii) Bank overdraft
(iv.) Short term loans
(v) Advance payment received by business
PROVISIONS AGAINST CURRENT ASSETS
Provision for doubtful debts, provision for loss on stock, provision for discount on
debtors etc, are treated as current liabilities. Since they reduce the amount of current
assets.
Non-Current Assets
All assets other than current assets come within the category of noncurrent assets include
goodwill, land building, machinery, furniture long term investment, Patent rights, Trader
marks, debt balance of the profit & loss account, discount on issue of debentures and
preliminary expenses etc.
Non-Current Liabilities
All liability other than current liability comes with in the category of Noncurr9nt
liabilities. They include share capital, long term loans, debentures, share premium, credit
balance in the profit & loss Account. Revenue and capital reserve, dividend equalization
fund, debentures sinking fund.
Table 3.1: LIST OF WORKING CAPITAL ACCOUNTS
Current Liabilities Current Assets

1.Bills payable 1. Cash in hand

2. Sundry creditors (or) account payable 2. Cash at bank
3. Accrued (or) outstanding expenses 3. Bills receivable
4. Dividend payable 4. Sundry Debtors
5. Bank Overdraft 5. Short term loan and Advances
6. Short term loans advances & deposits 6. Temporary marketable investor
7. Provision against Current assets 7. Inventories or stocks such as
8. Provision for taxation (a) Raw material
9. Proposed dividend (b) Work in process
(c) Stores and spares
8. Prepaid expenses

Non Current Assets Non Current Liabilities

1. Good Will 1 Equity Capital

2. Land and Buildings 2. Preference Capital
3. Plant and Machinery 3. Debentures
4. Furniture and fitting 4. Long term Liabilities
5. Trademarks 5. Credit Balance of there profit and loan
6. Patents account
7. Long-term funds 6. Capital reserve
8. Debit balance and profit and loss 7. Depreciation on Fixed Assets
account
9. Opening expenses

FLOW OF FUNDS
Preparation of funds flow statement
1. Schedule of changes in working capital
2. Funds flow statement

SCHEDULE OF CHANGES IN WORKING CAPITAL

The schedule of changes in working capital can be prepared by computing the current
asset and current liabilities of two different balance sheet dates.
Changes

Increase Decrease
Items As on As on

Current assets
Cash Balance
Bank Balance
Marketable Securities
Account receivables
Stock in trade
Prepaid expenses
Current Liabilities :-
Bank Overdraft
Outstanding expenses
Accounts payable
Net Increase (or)
Decrease in Working Capital

RULES FOR PREPARING THE SCHEDULE

i) Increase in current assets result in increase in working capital.
ii) Decrease in a current asset result in decrease in working capital.
iii) Increase in a current liability results in decrease in working capital.
iv) Decrease in a current liability results in increase in working capital.

FUNDS FLOW STATEMENT

While preparing a funds flow statement current assets and current liabilities are to be
ignored attention is to be given to change in fixed assets fixed liabilities.
The statement may be prepared in fare following form. There will be no flow of funds if
there transition involves
1. Current assets and fixed assets
Ex: Purchasing of building for cash
2. Current assets and capital
Ex: issue of shares for cash.
3. Current assets and fixed liability
Ex: Redemption of debentures in cash
4. Current liabilities and fixed liabilities
Ex: Credit paid off in debenture
5. Current liability and capital
Ex: Creditors paid off in shares
6. Current liability and fixed assets
Ex: Building transferred to creditors in satisfaction of their claim. There will .be
no flow of funds if these transactions involves.
i) Current assets and current liability
Ex. Pay to creditors
ii) Fixed assets and fixed liability
Ex. Building purchased and payment made in debentures
iii) Fixed assets and capital.
Ex. Building purchased and payment made in debentures.

MEANING OF FUNDS FLOWS

The term “Flow” means change and therefore the term “Flow of funds” means change in
“Funds” or change in “Working capital” in other words any. Increase or decrease in
working capital means “Flow of Funds”. Funds Flow statement is also called as a
“Statement of Source and Application of Funds” summary of financial operation etc.

In business several transactions take place some of the transactions increase the funds
while other decrease the funds some may not make any change in the funds position. In
case a transaction results increase of funds. It will be termed as source of funds. In case a
transactions results in decrease of funds it will be taken as an application or use of funds.

PREPARATION OF FUNDS FLOW STATEMENT

In order to prepare a Funds flow statement if it is necessary to find out the sources and
“Application” of funds.
SOURCES OF FUNDS
Sources of funds can be divided in to two types
1. Internal source
2. External source
1. Internal Source
Funds from operation is the only internal source of funds however, the following
adjustment will be required in the figure of net profit for finding our real funds from
operation.
i) Depreciation on Fixed assets
ii) Preliminary expenses and good will written / off.
iii) Contribution to debentures redemption fund transfer to general reserve.
iv) Loss on sale of fixed assets.
v) Provision for tax proposed dividend.
2.External Sources
a) Funds from long term loans
Long term loan such as debentures borrowing from financial institutions will increase the
working capital and therefore, there will be Flow of Funds. However if the debenture
have been issued in consideration of some fixed assets, there will be no flow of funds.
b) State of fixed assets
Sale of land, Building Long term investment will result in generation of funds.
c) Funds from Increase in share capital
Issue of share for cash or for my other current assets result in increase in working capital
and hence will be a flow of funds.

APPLICATION OF’FUNDS
The uses to which funds are called application of funds. Following are same of the
purpose for which funds may be used.

i. Purchase Of Fixed Assets

Purchase of fixed assets such as land, Building Plant, Machinery long term investments
etc, results in decrease of current assets. Without any decrease in current liabilities. Hence
there will be a flow of funds. But in the case of debentures are issued for acquisition of
fixed assets, there will be no Flow of funds.
ii. Payment Of Dividend
Payment of dividend result in decrease of fixed liability and therefore it affects funds
generally recommendations of directors regarding declaration of dividends is simply
taken as an appropriation of profit and not as an item effecting the working capital.
iii. Payment Of Fixed Liability
Payment of long term liability such as redemption of debentures of redemption of
redeemable preference shares results in reduction of working capital and hence it is taken
as application of fund.
iv. Payment Of Tax Liability
Provision for taxation is generally taken as an appreciation of profit and not as an
application fund. But if the tax has been paid it will be taken as an application
v. Increase In Working Capital
Working capital is increased. If current assets increase and current liability
decrease. Funds are required in both the case i.e. in order to acquire
more current assets or paying current liabilities and thus funds are said to have been
applied pr used.
STATEMENT OF SOURCES AND APPLICATION OF FUNDS FROM
OPERATIONS
It is an internal source of funds. A fund from operation is to be calculated as per this
method. Funds from operation is the only internal source of funds some adjustments are
to be made in calculating funds from operation to the net profit given in the financial
statement.
Useful As Control Device
The funds flow statement also serves as a control device in that the statement Compared
with the budgeted figures will show to what extent the funds were put to use according to
plan. This enables the financial manager to find out deviation from the planned course of
action and taken remedial steps to correct the deviation.
Useful To the External Parties
The outside parties can have a clear knowledge about the financial policies that the
company had purchased in the light of the information so supplied by the statement, the
outsider can decide whether or not to invest in the enterprise and on what terms funds
have to be invested. The funds flow statement provides an insight into the financial
operation of a business enterprise an insight immensely Valuable to the finance manager
in analyzing the past and future expansion plans of the enterprise and the impact of these
plans on its liquidity. He can debut imbalance in the use of funds and undertake remedial
actions.
STATEMENTS SHOWING OF FUNDS FROM OPERATIONS
Trading profits or the profits from operations of the business are the most important
major sources or inflow of funds in the business as they increase assets but at the same
time funds flow Out of business for expenses and cost of goods sold.
Thus the net effect of operation will be a sources of funds if inflow from sales exceeds
the outflow for expanses and cost of goods sold and vice-versa but it must be
remembered that funds from operation do not necessarily mean the profit as shown by the
profit & loss of a firm because there are many non- kind (or) Non operating items which
may have been either debited or credited to profit & loss Account. The Non-fund items
are those which may be operational expenses but they do not affect funds of the business.

METHOD OF CALCULATING FUNDS FROM OPERATION

 The first method is to prepare the Profit & loss A/c a fresh by taking in to
Consideration only funds and operational items, which involve funds, are related
to normal operation of the business. The balancing figures in this case will be
either funds generated from operations or funds in operations depending up on.
The income or audit side (or) profit & loss a/c exceeds the expenses or debit side
of profit & loss a/c or vice versa.
  The second method which is generally used to precede from figure of net profit &
loss account already prepared Funds from operations by this method can be
calculated as under.

Adjusted Profit And Loss Account

Particulars Amount Particulars Amount

To Depreciation on Fixed XXX By Opening Balance XXX

Assets
By Dividend received XXX
To Good Will written off XXX
By Profit on sale of assets
To preliminary Expenses XXX
By Funds from operations XXX

To Transfer to general reverse XXX

(Balancing Figure)
To Payment of proposed XXX

Dividend
XXX
To Provision for tax
XXX
To Loss On tale of assts
XXX
To Closing Balance
XXX

XXX

XXX

Funds Flow Statement

Sources of Funds Amount Application of Funds Amount

Issue of Shares XXX Redemption of redeemable XXX
Preference shares

Issue of Debentures XXX Payment of equity shares XXX

capital

Long term borrowing XXX Redemption of debentures XXX

Sale of fixed assets XXX Payment of other long term XXX

loan

Operating profit XXX Purchase of fixed assets XXX

Decrease in working XXX Operating loss XXX

capital

Payment of dividend and XXX

tax

Net increase in working XXX

capital

XXX XXX

TREATMENT OF ADJUSTMENTS
Sometimes the factors affecting the funds from operation may not be given in the
problem directly and there may be some hidden information as such some of the
transactions have to designed .our using the additional. Information provided as
adjustments to the balance sheet there items include,
a. Provision for tax
b. proposed dividend
c. Sale (or) Purchase of fixed assets
a) Provision for Tax
It is a current liability while preparing on funds flow statement there are two
options available.
 i) Provision for Tax may be taken as a. current liability. In such a case, where
provision for tax is made their transaction involves profit and loss appropriation Account
which is a fixed liability and provision for Tax Account. Which is a current liability it will
thus decrease the working capital on payment of tax there will be no change in working
capital because it will involve one current liability and other a current assets.
ii) Provision for tax may be taken only as on appropriation of profit. It means that.
will no change in working’ capital position when provision for tax is made since it
involves two fixed liabilities, i.e. profit and loss appropriation a/c and provision for tax,
account however what tax is paid it will be taken as application of funds because it will
when involves provisions for tax account which has been taken as a fixed liability and
bank account which is a current asset.
b) Proposed Dividend
Whatever has been said about the ‘Provision for Tax’ is also applicable to “Propose
dividends” proposed dividend can also be death with in two ways.
i) Proposed dividend may be taken as a current liability since declaration of
dividends by the share holders in simply a formality. One the dividends are declared in
the general meeting, they will have to be paid within 42 days their declaration. Income
proposed dividend is taken as a current liability, it will appear as one of the item
decreasing working capital in the schedule of change in working capital it will not be
shown as an application of funds when dividends is paid later on.

ii) Proposed dividends may simply be taken as an appropriation of profits. In such

as case proposed dividend for the current year will be added back to current year’s profit
in order to find out funds from operations if such amount of dividend has already been
charged to profits payment, of dividend will be shown as an “Application of Funds”.

c) Sale Or Purchase Of Fixed Assets

For arriving at the final figure we have to prepare the assets depreciation account
assets, sold or purchased account.
METHODOLOGY

Data collection for the study has been collected from two main sources. They are as
follows
1. Primary data
2. Secondary data
1. Primary data
The Primary data is the data gathered for the first time (first hand information) by the
researcher. It is the original data. As for the study, Primary data is gathered through a
series of detailed discussions with executives, managers of the company.
Data has been collected from financial statements and interaction with the employees
during the study for analyzing, interpreting, Finding out the problems involved and
giving suggestions if any.

2. Secondary data
Secondary data is the data collected by others, for purposes other than solution at hand.
Secondary data for the present study has been collected from magazines, journals, annual
reports; published books, reference books, websites and any other indirect source.

NEED OF THE STUDY

Fund flow & cash flow analysis is a key for interpretation of financial
statement. It is also because funds flow & cash flow help the analysis to have a deep feed
into the date in the statement. Figures in their absolute forms shown in financial
statements are neither significant nor able to be compared since they are basically dumb.
Funds flow and cash flow analysis is used to diagnose the financial health of the concern
in vital, strong, weak and good, generally funds flow and cash flow analysis represents
the figures containing the condensed report of the position, development and problems of
the concern. They are also facilitated the work of gaining the financial health of the
concern. Totally, funds flow and cash flow analysis is used as a tool for financial analysis
and interpretation.

SCOPE OF THE STUDY

 The scope of study is confined only five year i.e. from 2013-2017.
 The study took in to account the data pertaining to the entire organization.
 The ‘Funds Flow Statement’ shows the movement of Funds and it is a report of
the financial operations of the business undertaking.
  It indicates various means by which funds were obtained during a particular
period and ways in. which these Funds were employed.
 In simple words, it is a statement of sources and application of Funds.
The funds flow statements helps the financial manager in having a detailed analysis and
understanding of changes. in the distribution of funds between two balance sheet.
Funds flow statement is not a substitute of an Income Statement or a Balance Sheet. It
provides only additional information regarding the changes in the working capital. It
cannot reveal continuous changes. Changes in cash are more relevant for financial
management than the working capital.

LIMITATIONS OF THE STUDY

 Though the project work has been completed successfully, a few

limitations are observed however, proper care has been taken to overcome to
impact of limitations on the study.
  The scope for gathering data is very less. This is due to the fact that researcher is
vocational trainees.

 During the project period most of the staff members are busy with auditing and
other works. So, they could not afford give full information.

 Some of the information was not available due to the confidential nature.

 Since officials, Executives and others were busy. The study was primarily focused
on secondary data.

OBJECTIVES OF THE STUDY:-

The principal objective of the study is to assess the financial position and performance of
Sai Sathya Agri Biotech Private Limited through on analysis of Funds Flow Analysis
with a view to determine its strengths and weaknesses. The following are detailed
objectives of the study: -

 To analyze and examine the funds flow statement through Working Capital, funds
from operations and funds flow statement.

 To measure the financial strength of the firm during the period of the study (2012-
13 to 2016-17)

 To study theoretical aspect of funds flow analysis and compare with practical
Fund. Flow analysis with that of Sai Sathya Agri Biotech Private Limited.

 To determine the progress and profitability position of the Organization and to

offer appropriate suggestions for better performance of the organization.

 To suggest measures for the effective working of Sai Sathya Agri Biotech Private
Limited. Secondary data also collected from various sources.

PLAN OF THE STUDY

The present study has been developed in the following sequence:

CHAPTER-1: The 1st chapter deals with the introduction.

CHAPTER-2: Chapter 2 highlighting the objectives & methodology of the study.

CHAPTER-3: This chapter deals with industry profile and company profile.

CHAPTER-4: Chapter 4 focusing on analysis & interpretation of the study.

CHAPTER-5: Chapter 5 depicting significance findings and suggestions and

conclusion of the study.

INDUSTRY PROFILE

Every country needs a robust seed system to guarantee the sustainability of its agriculture
and to ensure that the products of modern plant breeding and local farmer ingenuity are
widely available. National seed systems usually include several elements. A commercial
seed sector is necessary to ensure efficient seed provision. This paper discusses how such
commercial seed sectors emerge and develop. In addition, the public sector has an
important role to play.
In the past there has been considerable investment in public (often parastatal) seed
production facilities. This paper contends that such investment is increasingly difficult to
justify, and that seed production and marketing should be shifted to the private sector.
However, public roles in agricultural research, source seed provision and regulatory
frameworks are crucial for the development of a national seed system.

Historically, the importance of seed has been recognized since the Vedic times for
increasing food production and quality. However organized production and supply of
quality seed at the national level stated in 1963 as a consequence of the introduction of
hybrid technology during 1961-65.

Finally, seed system performance also depends on the skills and capacities of farmers'
own seed management. Although not the focus of this paper, it must be obvious that the
commercial seed sector can only grow in response to the demands of a skilled and
discriminating farming population.

Sources of seed demand:

Just as a crop requires the proper soil in which to grow, seed enterprises will only thrive
in an appropriate environment. The primary characteristic of such an environment is the
incentive for farmers to purchase seed, at least occasionally, rather than using farm-saved
stocks. Seed saving is often presented as a backward and inefficient practice that seed
industries are meant to replace, but this inverts the logic of seed enterprise development.

Seed saving is a perfectly reasonable strategy, and it is certainly not confined to

subsistence agriculture. Seed enterprises will develop only when they can offer farmers a
clear advantage over seed saving. Such advantage can take several forms, including
convenience, access to superior germplasm, and seed quality.

It is not surprising that the earliest entry in a nation's formal seed system is often
vegetable seed. The seed of many vegetable species is time-consuming to prepare from a
farmer's own crop and in some cases seed production requires cultivating a proportion of
plants beyond their fruiting stage.
In England, the commercial vegetable seed trade developed rapidly in the seventeenth
and eighteenth centuries, as urbanization and changing diets contributed to a rising
demand for fresh vegetables. Specialist seed growers emerged and seed marketing shifted
from farmers and peddlers to established seed dealers with their own brands and
extensive catalogues advertising their wares.

The story is similar in many other countries, and even where formal seed systems are
poorly developed it is almost always possible to find a range of commercial vegetable
seed (often imported) on sale. A second example of the convenience factor is fodder
crops that are normally harvested before seed maturation. By the early 1900s, the
majority of alfalfa and forage sorghum planted in the US came from commercial sources.

A major stimulus to the seed industry has been the discovery and development of hybrid
technology. Hybrid vigour is responsible for significant yield gains and because this yield
advantage is lost in subsequent generations the farmer has a strong incentive to purchase
seed each year. The introduction of hybrid maize in the US in the 1930s led to an
explosion in seed industry development; more than 200 seed companies were established
in a single decade. Hybrid maize currently accounts for well over half the value of field
crop seed (and about one-third of the value of all commercial seed) sold in the US.
Hybrid maize has also been the basis for seed industry development in several other
countries, including Zimbabwe and Kenya.

In India, it was hybrid sorghum and pearl millet that provided a significant boost to seed
industry development after liberalization in the 1980s. There, the availability of good
germplasm (largely from public sources) gave a number of well-trained breeders and
other entrepreneurs the possibility of establishing seed companies. Although hybrid millet
and sorghum seed is expensive (relative to grain price), the low seed requirements for
these crops, the superior performance of the hybrids, and an exceptionally large domestic
market provided sufficient incentives for industry development.

The formal seed industry may also replace some farm-saved seed if output markets pay a
premium for good quality produce. A buoyant market for maize in Thailand encouraged
farmers to buy OPV seed each year, rather than attempt to select and save the seed of a
crop they did not consume themselves. A significant shift towards commercial rice seed
in Andhra Pradesh is partly due to the fact that rice markets pay premiums for particular
types of rice and many farmers have difficulty maintaining varietals purity. There are
hopes that the development of export markets for pigeon pea in southern Africa will lead
to a demand for commercial seed.

One of the most common reasons for a farmer to purchase seed is the search for a new
variety, but this factor occupies an equivocal position in the rationale of seed enterprise
development. On the one hand, farmers are often willing to pay a premium for seed of a
new variety, but unless that seed is difficult to save, or there is a fairly constant offering
of new varieties, it is not likely that a seed enterprise will be able to base its business
solely on the provision of new varieties.

This is a mistake that is sometimes made in promoting new seed enterprises. Initial
farmer demand for a variety gives the impression that sufficient commercial incentive is
available, but after several seasons, when many farmers are growing the variety (and can
get seed from their neighbors), any commercial advantage evaporates. Established seed
companies may provide a fairly steady stream of new varieties, but such a flow is often
not present at the inception of a seed industry.

Who starts seed companies?

We may have an environment that offers the incentives for seed production, but we need
a source of entrepreurship (the 'seed' in our production analogy). Where do seed
companies come from? There are no strict rules, and the development of a successful
seed enterprise requires a combination of technical and entrepreneurial skills and
resources. Nevertheless, a few persistent patterns seem to emerge. Those who have
started seed companies in the past have tended to be farmers, merchants, or agricultural
scientists; in some cases farm co-operatives have also played a role.

Traditionally the major external source of seed was other farmers, so it is not surprising
that there have been cases where farmers with reputations as good seed producers have
gone on to establish their own seed enterprises. The history of US seed enterprise
development in the early twentieth century is replete with examples of farmers
establishing their own seed businesses. Some of them were large commercial farmers
who were involved in other businesses, whilst others were of more modest means but had
particular talent and tenacity.

In India, there are examples of seed companies run by well-connected farmers who began
as contract growers for other companies, learned the techniques and the requirements of
the business, and then established their own enterprises. In other cases in India, larger
farmers who have good relations with local research stations have begun by multiplying
and distributing seed of new public varieties and then used this as a springboard to
establish an enterprise.

Some seed enterprises have begun from the marketing rather than the seed production
side of the business. Grain merchants played a role in the dissemination of new varieties
and seed marketing for wheat in Britain in the eighteenth and nineteenth centuries. The
founder of India's largest seed company began as an itinerant merchant of vegetable seed,
and there are a number of cases in India of input merchants expanding into seed
production.

Another source of initiative for the establishment of seed enterprises comes from public
sector agricultural scientists who are familiar with plant breeding and crop production
and who take advantage of a liberalised seed sector to take their talents to the private
sector. This has certainly been the case in India in the past two decades, where a number
of seed companies have drawn on talent previously resident in universities or research
institutes.

Co-operatives have also played a role in seed system development in countries as diverse
as France and Zimbabwe. The possibility of initiating commercial seed production
through a farmer co-operative is attractive, but it must be recognized that the majority of
instances of successful commercial seed production by co-operatives are those that were
already established for other purposes and could take advantage of their experience and
facilities to enter the seed business.

For instance, a number of co-operatives in Andhra Pradesh produce and sell rice seed, but
all of these began as output and/or input marketing enterprises and were then able to use
their market contacts, warehouses, and farmer organization to enter the seed business . In
most developing countries it is unlikely that seed production offers sufficient incentives
for the formation of a co-operative amongst farmers with no previous commercial
experience.

How do we nurture young seed enterprises?

If appropriate demand and the right skills and resources are seen as the soil and planting
material for seed enterprises to grow, the issue of the organization and distribution of
these enterprises might be compared to planting density and fertilization. How should
seed enterprises be located and how do we help them expand and develop?

One of the first things to recognize about seed provision is that it entails a series of quite
distinct operations and responsibilities. These include plant breeding; source seed
production; seed multiplication; quality control; conditioning and storage; and marketing.
Large, modern commercial seed companies take responsibility for all of these operations
in an integrated firm.

But such firms often grow from these constituent parts, and the early development of the
seed industry often entails relations and contracts amongst several specialist enterprises.
The best example is probably plant breeding; many successful seed companies still
depend on public universities or research institutes to provide germplasm, and sometimes
source seed. Many of the small seed companies that were launched in the US in the 1930s
got their varieties (and source seed) from public universities or private "foundation seed
companies" that specialized in providing material to smaller enterprises.

A contemporary example comes from the rice seed industry of Andhra Pradesh. Almost
half the rice seed sold in Andhra Pradesh is produced by private companies, even though
all of the varieties are publicly developed. (The other producers are the state seed
corporation and several co-operatives.) Some enterprises specialize in only certain
aspects of seed provision.

For instance, there are individuals who can organize and supervise seed multiplication by
farmers in villages, and they contract their services to seed companies that do not have a
presence in the seed multiplication zone. Other individuals own seed cleaning and storage
facilities that they contract out. The availability of such specialized services allows
medium-size enterprises to fill in gaps in their capacities.

A company may process and market rice seed, but contract out the earlier stages of
the process. The state agricultural university system has a transparent procedure for
selling breeder seed to private companies, and larger companies produce and sell
foundation seed to smaller ones. The largest seed companies have an integrated operation
in which they take responsibility for foundation seed production, the supervision of
growers, processing and marketing.

Part of the reason that the Andhra Pradesh private rice seed industry is successful is
that it is based in an area of hybrid millet and sorghum seed production, which played a
large role in the expansion of the private seed industry in India. The same area has very
suitable agronomic conditions for rice seed production. Much of the infrastructure and
experience for seed production are already available. Rice seed production enterprises are
not all concentrated in one area, and the costs of transport of this bulky input argue for
siting seed production as close to the potential seed market as possible.

Several areas of the state have agronomic conditions that are suitable for rice seed
production, but a significant clustering pattern still emerges. This is partly the product of
industry expansion, as success attracts more entrants in the same area. But it also follows
other experiences in industrial development where clusters of enterprises reduce
transaction costs by establishing networks that share information and technology, allocate
spare resources, and act as a magnet for potential clients.

The Andhra Pradesh case also illustrates another principle of seed enterprise
development. The absence of significant economies of scale in seed production allows
small firms to compete, but seed production does offer economies of scope. Once a seed
company has experience with a few seed products it is fairly straightforward to expand its
portfolio. In most cases, the initial seed products will be high value, but adding on lower-
value seed helps develop a loyal clientele and makes better use of equipment and
resources.
 It is very unlikely that the rice seed industry in Andhra Pradesh would have grown
so rapidly without the initial impetus from higher value sorghum and millet hybrids. Such
economies of scope can be exploited by using established seed enterprises to produce and
market small packs of seed of the so-called 'orphan crops' that are less likely to attract
initial commercial attention. An experiment in Zimbabwe showed that a large seed
company (whose major product was hybrid maize) was able to produce and sell small
packs of new (public) varieties of millet, sorghum, groundnut and sunflower (Rohr Bach
and Malusalila). Advances in packaging technology and the trend towards smaller seed
packs in many developing countries makes this strategy increasingly feasible.

A further lesson from the Andhra Pradesh rice case is the importance of a well-
organized system of source seed distribution. In the India case, breeder seed of the public
rice varieties produced by the state universities is available to any legitimate seed
producer on payment of an advance. A recent review of seed policy in sub-Saharan Africa
showed that inadequate source seed production of public varieties is one of the major
bottlenecks for the diffusion of new varieties .

Public research institutes often have no consistent system for managing the
production, storage, promotion or sale of source seed of their varieties. When source seed
is available, various donor projects or NGOs acquire it on an ad-hoc basis. If there is any
hope of stimulating commercial seed production of these crops, or even of promoting
extensive farmer-to-farmer diffusion, national research institutes must have a sustainable
strategy for source seed management.

What role can donor seed projects play?

Seed system development requires support and funding, and many countries may
be able to take advantage of donor projects in the seed sector. Unfortunately, much of
donor activity to date has not been supportive of sustainable seed sector development.
Indeed, if we need an analogy from crop production, a strategy towards donor projects
might be compared to weed control.
 One of the principal problems is 'emergency' seed distribution. The impulse to
distribute free seed to farmers is very strong among national governments and donors. It
appears to meet a need, promotes political ambitions and donor images, and is seen as
basically a logistic exercise that does not require great technical expertise. Unfortunately,
the majority of experience has been negative. Poor quality seed of inappropriate varieties
is the norm rather than the exception, further discrediting formal sector seed in farmers'
eyes. Moreover, in the majority of cases the seed is simply not needed.

Even in fairly major disasters (such as a severe drought) grain appropriate for seed
is available with some farmers or traders, and the donor should seek to stimulate local
trade; the concept of seed fairs is one recent innovation. The lesson is that donors need to
look very carefully at the local seed system before responding to calls for emergency seed
provision.

A further example of donor interference in seed system development is found in the

strategy of promoting community-based seed enterprises. In theory, if a number of
farmers from a village can make contact with public research for source seed of new
varieties, get basic training in seed production techniques, and learn some simple
marketing techniques, they can become a commercially viable and low-cost source of
seed for their neighbors. Several variants of this strategy have been an important part of
agricultural development assistance and NGO activity for the past 15 years. The
argument is attractive, but after scores of attempts in various parts of the world, there are
virtually no success stories to be told.

The lack of sustainable community seed enterprises, despite considerable

investment, can be attributed to several factors. First, a number of transaction costs are
not taken into account. Key elements of a successful enterprise of this nature include
regular contact with the supplier of source seed, clear procedures for quality control
(including relations with any regulatory authority), and contacts with customers. It is
often the donor project or NGO that pay these costs, including arranging for source seed,
paying for inspections, and often helping provide a market for the seed. When the project
finishes, the farmers are left with nowhere to turn. Second, the size of the local market is
usually not sufficient; seed enterprises can be of a modest scale, but there is certainly a
lower limit.

Although a project often provides access to transport, local farmers are unlikely to
be able to move their seed once project resources are no longer available. Finally, and
perhaps most important, such seed producer groups are usually totally unprepared for all
of the marketing responsibilities (storage, inventorying, wholesaling, promotion) that any
seed enterprise entails.

The conclusion is not that farmers should be discouraged from producing seed. The
point to be emphasized is that telling a group of farmers with very little land, often in
marginal growing conditions, and with no commercial experience that (with a project's
help) they can be transformed into a viable commercial enterprise is unfair and
misleading. This conclusion is based on considerable empirical evidence, but exceptions
may exist.

The major exceptions to date are those that prove the rule. For instance, there are
farmer groups in Nepal that are successful producers of vegetable seed. They farm in
environments that are agronomic ally ideal for this type of seed production, and the high-
value, low-volume nature of their product is appropriate for the poor transport
infrastructure that limits many other production possibilities. One key to their success is
that they are linked to seed traders who contract with them for their production, and a
trader organization takes responsibility for providing source seed to the groups.

Farmers regularly buy seed from their neighbors and whatever can be done to
improve the quality and reliability of such seed is all to the good. Often the seed is sold
for the same price as grain. In some instances certain farmers (often with above average
resources) establish a reputation as seed providers and are able to charge a small premium
above grain price for their seed. But there is a significant gap between these prices and
the minimum price necessary to sustain a commercial enterprise.

It is difficult to see how a seed enterprise, even at the local level, could charge less than
twice grain price for their seed, if they have to pay for all of the costs of maintaining
contacts with source seed suppliers, quality control, storage, marketing, etc. Unless
farmers are convinced that this seed is of exceptionally high quality, they will likely
prefer to go to their neighbors, rather than to the local enterprise. This skeptical
assessment of local seed enterprises should not be interpreted as discouraging many other
community-level seed-related projects.

A great deal of useful activity is going on in areas such as local variety testing, the
organization of farmer experimentation, participatory plant breeding, multiplication of
new varieties, organization of crop marketing, etc. Such activities strengthen farmers'
capacities to recognize and demand good quality germplasm and establish better links
with markets. If some of this eventually leads to some type of local seed enterprise, so
much the better, but experience to date indicates this is a false trail to follow. Resources
are better spent strengthening the local seed system so that new varieties are known and
seed is at least available from other farmers. The development of this type of demand is
the necessary first step to the emergence of formal seed enterprises, local or otherwise.

The role of regulation:

The development of a seed industry requires consideration of appropriate regulatory

frameworks. The seed enterprises that we are cultivating need protection from
unscrupulous or incompetent companies that can discourage farmers from buying seed
and throw the entire industry into disrepute. (If we need a crop production analogy for
seed regulation, it might be pest control.)

Regulation is best seen as a response to insufficient information in a market, which may

limit transactions. In these cases a third party, often a government regulatory agency,
helps ensure that adequate information is available to guide market transactions or to
enforce standards of public safety. The primary examples in seed regulation are related to
variety registration or approval (to ensure that varieties offered for sale are useful and
safe) and seed certification and quality control (to ensure that seed is of a specified
variety and that its physical quality is adequate).

The development of some type of regulatory system is predicated on the fact that any
inadequacies in purchased seed are difficult or impossible for the farmer to recognize
until after planting, or at times until harvest; and the fact that any inadequacies detected
may be difficult to ascribe (e.g., was the germination poor because of inadequate land
preparation by the farmer, improper seed storage by the merchant, or poor seed
production standards of the company?).

Although it is easy to understand the motivations for a seed regulatory system, it is also
easy to mistake strict regulation as a prerequisite for seed system development. A review
of the history of seed systems in industrialized countries shows that, for the most part,
seed industries began to develop before any regulatory system was in place . The initial
regulatory systems usually responded to concerns from farmers about the confusing
nomenclature of varieties offered for sale or problems with seed quality.

Regulatory mechanisms were established by agricultural associations, universities, or

public agencies. In many developing countries, the situation is reversed; a regulatory
system is in place with virtually no private industry to regulate. Whilst it is foolish to
argue that the seed industry should be allowed to develop with no guidance and that
regulation should only be considered when farmers raise many complaints, it is equally
unwise to think that a rigid regulatory framework (often borrowed from other countries)
provides the proper enabling environment to encourage seed system development.

One example is seed certification and quality control. Many sub-Saharan African
countries insist that seed of all field crops must be certified. In many cases, the public
regulatory agency does not have the resources to do this properly, especially if new seed
enterprises emerge. In addition, the insistence on formal certification is a serious
disincentive to many potential seed production initiatives. A more flexible quality control
system is required. Zambia has recently instituted a Quality Declared Seed (QDS) system
in which participants agree to follow reasonable standards and sub-samples of fields and
seed lots are inspected each year. In India, seed may be sold as 'truthfully labeled' the
seed company.
GROWTH:
The release of high yield dwarf varieties of wheat and rice by the mid 1960s gave further
impetus to the growth of seed industry. This period also saw the constitution of the seed
review team, enhancement of seeds act.1996 for regulating the quality of seed and
formation of the National Commission of agriculture. This was the period in which the
private sector took significant steps into the seed business.
The 1980s witnessed two more important developments viz., granting of permission to
MRTP/ FERA companies for investment in the seed sector in 1987 and the introduction
of “NEW POLICY” on seed development in 1988. The new policy on seed development
while helping liberalize import of vegetable and flowers seeds in general and seeds of
others crops in a restricted manner encouraged global seeds companies to enter the seed
business of India.

CURRENT STATUS:

To supply the seeds necessary for the five hundred thousand Indian villages is a big
problem. Storage, transportation and timely distribution of pure seed from village to
village calls for careful organization with in the state department of agriculture and the
willing co-operation of farmers.

Indian’s seed industry has grown in size and level of performance over the past four
decades. It represents a blend of private and public sector companies/ corporations. The
private sector comprises approximately 140 seed companies, which includes national,
global, regional and other seed producing and/ or selling companies. The industry has
made impressive strides from modest beginning in 1962-63 to over 5 lakh hectares in
seed production in 1995-96. The quantum of seed distributed also grew from 14 lakh
quintals during this period. On the inputs supply the certified quality seeds distribution
touched a new high of one million tons during the year 2006-2007. It was 0.91 million
tons the previous year.

CHALLENGES:

Implementing of new techniques requires dissemination and training for their beneficial
use. To achieve this goal radical change will be required in the existing extension system.
In many cases entirely new approaches for dissemination of knowledge will be required.
These will have to be constant learning an up gradation of skills to enable transmission of
knowledge to the user.

To realization of the prospects of the industry will also changes in the government policy,
which would facilitate the development of the Indian agriculture and seed industry. The
policy must aim at governing greater self-discipline and removing controls and
restrictions, which inhibit growth and development.

ROLE OF THE GOVERNMENT

To achieve self-sufficiency in the production through planned programmes, the

distribution of quality seed was rightly considered as a key factor by the government. The
far-sighted and liberal policies of government of India has always laid emphasis to build
a sound seed industry in the country and has supported both public and private sector
organizations to develop and to meet the increasing seed demand and also to produce
surplus stocks require for export.

To support expanded activities the “National seed programme” was launched with the
financial assistance of the “world bank” (International Bank for Reconstruction and
Development). In order to make available the right quality of seed to the Indian farmers
in adequate quantities and at reasonable price in time.

The government of India took various steps including promulgation of “Seed Act”
during 1996, which became operative throughout the country from October 1969. The
main objective of the act is to produce quality seed of different crop varieties under a
system of seed certification and testing is voluntary but the farmers have recognized the
importance of quality seed to get higher production with limited resources available at
their end.

High yielding varieties are being released for cultivation in quick succession by various
agricultural universities and ICRA institutions through massive research project and
screening of planning materials. Steps have been taken during early 1984 to bring seed
within the purview of the essential commodities Act to strengthen the regulation of seed
quality and to economies production at derived levels.
PROBLEMS:
The seed industries and farmers from many years are facing many problems. A number of
multi-national corporations have stepped into our agricultural country to gain control
over the seeds and their distribution. Recently, a new variety of seeds have entered the
country. This created many new problems for the seed industry and farmers.
Generally, a seed may be used either as a food material or as a seed for another crop. But
now, the life in the seed is being taken out for making it to be used only as a food
material and not as a seed for another crop. These types of seeds are called genetic
change or genetic engineering seeds. For example, BT Cotton seed. The farmers are made
to purchase those seeds, which are manufactured by the corporation for their crops. Once
the farmers or industry have used these types of seeds, they face many problems. They
have to use only those pesticides, which are produced by that association for protecting
their crops from the pests, diseases etc. these types would use by the wide associations.
SEED INDUSTRY IN GLOBAL PERSPECTIVE:

The population has been growing at a faster rate in the country. To increase the
production accordingly an “All India Co-ordinate organization has been established in
1951 with the assistance of “Rockefeller Foundation” which belongs to America. As a
part of this project, it produced new seeds of maize in 1961 and cotton seeds in 1971.

With a view that the state governments are unable to meet the demand for seeds correctly,
two associations have been established with the help of Rockefeller Foundation. They
are “National Seed Association” 1963 and “State Farm Corporation of India”, 1969. Due
to the “Development Programme” which came into existence in 1988, many
multinational corporations have stepped into the seed industry. At present there are more
than 700 multinational corporations in India organizing seed business directly or industry.
Nineteen multinational companies have been made an agreement with the Indian seed
industries and have been enjoying the leadership in the seed market. Monsanto, an
American multinational corporation, has acquired one-fourth part of the MICO seeds
industry, one of the biggest seed industries in India. The acquisition value given by the
Monsanto Corporation is more than 17 times to the real value.
SEED INDUSTRY IN INDIA:
Indian seeds industry has grown in size and level of performance over the past four
decades. India stands in the 8th position all over the world in the production of different
variety of crops. Again in each crop there are thousand of varieties. To co-ordinate the
seeds research centers and a private organization in the country and to support the
expanded activities, the “National seed Program” was launched in 1967 with the financial
assistance of the World Bank. In 1960 many private organizations have participated in the
production of seeds. Many seed industries have laid a strong foundation in the country.
Following are some of the major seed industries in India.
MICO seeds private Limited, Mumbai.
Monsanto holdings private Limited, Mumbai.
Namdhari Seed Corporation limited, Bangalore.
National Seeds Corporation limited. New Delhi.
Rallies India limited, New Delhi.
Sungro seeds limited, Delhi.
Cargill hybrids private limited, New Delhi.
Pioneer India limited, Kolkata.
Proagro seeds private limited, Chennai.
Sasys seeds private limited, Bangalore.
Sinjent India limited, pune.
Nunhams seeds private limited, Gurgaon.

SEED INDUSTRY IN ANDHRA PRADESH:

In Andhra Pradesh the seed industries are many in number. Though Andhra Pradesh is
one among the states in India who have been producing different varieties of crops. It
does not have the major seed industries in it when compared to other states. Many seed
have formed recently in the state. Also the state is growing industrially and there is
sample scope and potential for the entry and success of new industries.

The crop producing seasons are different for different states. In Andhra Pradesh the crop
producing seasons starts from June and ends with the month of September. Generally the
rain fed crop in situated in the irrigated crop may not have better results when compared.
The stock to be sold by the seed industries is kept ready during the starting of years as the
period during which the demand will be more fall between march and august. The
industries in the state market with other states, which form the boundaries of it. The
selling period of those states will vary. The following are some of the seed industries in
Andhra Pradesh.
Indo American hybrid seeds (India) Pvt. Ltd, Hyderabad.
Seed works India limited, Hyderabad.
Mourya agri-tech., Hyderabad.
Sriram Bioseed genetics India limited., Hyderabad.
Nath seeds limited, Hyderabad.
Jk seeds limited, Secunderabad.
Nugeveedu seeds limited, Hyderabad.
Sathya Seeds Private limited, Guntur.
Venus crane seeds Pvt. Ltd, Guntur.
Tammareaddy seeds, Vijayawada.
Gopikrishna seeds, Mahaboobnagar.

COMPANY PROFILE

Sri Sathya Agri Biotech Private Limited. Has been established in the year 2004, at
Guntur, Andhra Pradesh. It is being managed by Mr. K. Ramakoteswara Rao. He is
having vast experience in Agriculture Industry. He started a seed company to produce and
distribute high quality seeds to the forming community, who in turn gets better profits.
Mr. K. Ramakoteswara Rao, who is having a vast field experience of about 25 years. He
has been driven by continuous innovation in every field of activity like research,
production, quality and marketing. This has resulted in establishment of a strong trust and
brand equity of “Sri Sathya Agri Biotech Private Limited" amongst the customers,
channel members, suppliers and others. He guides the key wings of the company like
R&D, Production, Processing, Packing, Marketing and Administration. He has close
observation on all the departments. The employees of the organization are motivated in
goal achieving manner by him. His outstanding efforts made the company extended to
Andhra Pradesh, Karnataka, Tamilnadu, Maharastra, Orissa, Madhya Pradesh, Gujarat,
Punjab, Rajastan and Haryana etc., states. The seed material of various crop hybrids of
this company is being well received by the farmers of those states since their performance
is good
Vision
To be one of the premier seed companies by producing and supplying of quality seeds to
the farming community at affordable prices at right time.
Mission
To be perceived as a technology driven seed company that offers superior products and
exceed customer expectations and ensure that the developed procedures meet all the
statutory & regulatory requirements and achieve the supply of quality seeds in right time
at an affordable prices.
We are committed to encourage the spirit of leadership amongst our dedicated team by
creating a healthy environment for continuous growth and prosperity of the organization.

Research & Development

The company has 50 Acres of its own Research and Development farm located at Jonam
Chunduru village, Chowdavaram panchayat, Guntur rural mandal, Guntur District. The
R&D farm is having with full infrastructural facilities like irrigation and latest and
imported equipment for quality controls such as biotechnology and Seed Testing
laboratories and Green Houses supported by well qualified & experienced breeders and
technicians. Our In-House R&D has been recognized by Govt. of India, Dept. of
Scientific & Industrial Research, Ministry of Science & Technology.
Focus on Research:

The core focus of the company is a farmer preference oriented research programme.
Customer requirements gathered from market by internal field force coupled with
external surveys conducted at farmer level regularly provide the basic platform to fine
tune breeding and marketing activities. The facilities are fully geared with advanced
equipments, viz. Green/Net housed for breeding, Pest or Disease screening facility,
Drought and Salinity screening facility besides Foundation seed storage. Germplasm is
well collected, optimally maintained and immaculately catalogued.
We changes in the technology taking place everyday no company can keep themselves
away from the field of Research. Company therefore understands the importance of
research in the field of seed industry; it proposes to undertake research and high value
and low volume crops like Hybrids in Cotton and Sun Flower in the first phase.
Simultaneously apart from research in new variety company also proposes to conduct
continuous purification of available parent material, collection of Germplasm from
various sources so as to strengthen the research base for evolution of new hybrids which
would phase better price in the market for our research products.
Objective: Constant up gradation of product portfolio, offerings and packages. which is
very much essential due to the changing needs of customers, developments in technology
and expected competition in the market place.
Policy's:

1. Seed is the basic and most critical input for agriculture. Hence, founders of ‘Sri
Sathya Agri Biotech Private Limited.,’ committed to offer superior quality hybrid
seeds which are best in class with wider adaptability to completely satisfy the
customers.
2. Collection of germplasm across the world to fuel the breeding programs.
 3. Continual genetic improvement to develop hybrids which can offer higher returns
to farmers by adapting to changing environment.
4. Adoption of new technologies, innovative methodologies and best practices to
keep up the pace in research and development division.
Biotechnology Lab

The Biotechnology Laboratory is equipped with excellent infrastructure to carry out

cutting-edge research. With a distinguished team of scientists and technical personnel
having vast experience in the field of molecular biology, the Department engages in
genetic transformation of crops and marker assisted breeding. Its well-equipped lab
facilities can carry out molecular diagnostics of transgenic plants and ELISA.
Quality Assurance

Sri Sathya Agri Biotech Pvt Ltd believes that quality is never an accident and is a result
of innovation and proper management. Keeping total quality management in view, Sri
Sathya Agri Biotech Pvt Ltd products are passed through three major quality assessment
testes .i.e. Bt protein test, Germination test and Grow Out Test. In our seed testing
laboratory seed samples are tested for the quality parameter such as moisture content,
physical purity, germination, vigor, luster and size of the seed etc., so as to ensure better
performance in farmer's field.
The Laboratory has been equipped with the infrastructure as per the specifications of
International seed testing Association (ISTA). Before releasing to market, each and every
seed sample is tested as per ISTA standards.
GOT is Grow out test. The genetic purity of the sample is assured through Grow out test
(GOT). The tests are conducted under technical supervision of the company's qualified
production staff. The Genetic purity of the crop (sample) is confirmed by comparing its
morphological character with the check sample. Sample should meet the standards
specified in the minimum seed certificate standards. The Quality seed after passing all the
tests is considered as marketable material and sent for further processing & packing.

DATA ANALYSIS AND INTERPRETATION

Finance is the study of how investors allocate their assets over time under conditions of
certainty and uncertainty. A key point in finance, which affects decisions, is the time value of
money, which states that a dollar today is worth more than a dollar tomorrow. Finance
measures the risks vs. profits and gives an indication of whether the investment is good or
not.
A project is an activity sufficiently self-contained to permit financial and commercial
analysis. In most cases projects represent expenditure of capital funds by pre-existing which
want to expand or improve their operation. In general a project is an activity in which, we
will spend money in expansion of returns in which logically seems to lead itself planning.
Financing and implementations as a unit, is a specific activity with a specific point and a
specific ending point intended to accomplish a specific objective of the study.
Funds flow has its going in the natural recourse and infrastructures sectors. The current
demand for infrastructures and capital investments is being fueled by deregulation in the
“FMCG” (Fast Moving Consumer Goods), Telecommunication, & Transportation sectors, by
the globalization of product markets and the needs from manufacturing scale, and by the
privatization of government owned entities in developed countries & developing.
Understanding the organization’s financial health is a fundamental aspect of responding to
today’s increasingly stringent financial reporting requirements.
Significant technique of financial analysis is ‘Funds Flow Analysis’. It is designed to
highlight changes in the financial conditions of a business concern between two points of
time which generally conform to beginning and ending financial statement dates. Funds flow
statement is also termed as a statement of sources and applications of Funds’, ‘statement of
changes in working capital, ‘statement of changes in Financial Position’, ‘statement of Funds
supplied and Applied’, ‘statement of Funds Generated and Expended’, ‘where got and where
gone statement’, funds statement.
These, funds flow statement is report which summarizes the events taking place between the
two accounting periods. It spells out the sources from which funds were derived and the use
to which these funds were put. This statement in essentially derived from an analysis of the
changes that have occurred in assets and liabilities item between two balance sheets dates. In
this statement only the net changes are shown that the outcome of a transaction on of a series
of transactions upon the financial conditions of a business enterprise in reflected more
sharply.
Useful In Decision Making To The term ‘funds’ have a variety of meaning. Some people
take funds synonymous to cash, and to them there is no difference between a cash flow
statement prepared on the basis and a fund flow statement. While other include
marketable securities and cash to constitute business funds. However the most common
definition of the term ‘Fund’ is ‘working capital’ or net ‘current assets’. Thus the
difference between current and current liabilities is called funds.
SIGNIFICANCE OF FUNDS FLOW STATEMENT
Funds flow statement is an important tool of financial analysis. The utility of the funds
flow statement sterns form the fact that it enable management, shareholder, investors,
creditors and other interested in the enterprise to evaluate the user of funds by the
enterprise to evaluate the user of funds by the enterprise to evaluate the user of funds by
the enterprise, and to determine how these funds are financed.

Table: 4.1 Statement Showing Change in Working Capital during the period
2012-2013
Particulars 2012 2013 Changes in working capital

(Rs) (Rs) Increase Decrease

Current assets:
Inventories 135,29,84,499 143,18,24,825 7,88,40,326 ---
Sundry debtors 12,48,86,536 11,21,33,122 --- 1,27,53,414
Cash and bank balances 5,52,57,959 5,02,62,789 --- 49,95,170
Other current assets 6,52,331 10,21,849 3,69,518 ---
Loans and advances 6,04,77,777 38,99,83,272 32,95,05,495 ---

Total Current Assets 159,42,59,102 198,52,25,857

Current liabilities and

provisions:
Sundry creditors 73,50,00,018 98,06,42,659 --- 24,56,42,641

Unclaimed liabilities 1,32,78,884 1,59,00,940 --- 26,22,056

Advances received against
sales 47,48,503 17,03,313 30,45,190 ---
Trade Deposits 75,500 75,500 --- ---
Staff security Deposits 1,65,000 1,45,000 20,000 ---
Interest assumed but not
due on loans 2,03,04,519 1,80,81,254 22,23,265 ---

Provisions 4,92,10,370 33,54,02,259 --- 28,61,91,889

Total Current liabilities

& provisions 82,27,82,794 135,19,50,925

Net working capital

(C.A-C.L) 77,14,76,308 63,32,74,932

Decrease in working
capital --- 13,82,01,376 13,82,01,376

Total 77,14,76,308 77,14,76,308 55,22,05,170 55,22,05,170

INTERPRETATION:

The change in working capital in this year has been decreased by Rs.13,82,01,376/- .
there has been increased by inventories Rs.7,88,40,326/-.loans and advances by
Rs.32,95,05,495/-.The sundry creditors have been increased by Rs.24,56,42,641/- and
provision byRs.28,61,91,889/-.
 ADJUSTED PROFIT AND LOSS ACCOUNT

(For the year 2012-2013)

Amount Amount

Particulars In Rs Particulars in Rs

To Depreciation of Fixed
Assets 5,68,70,347 By Opening balance 13,53,68,023
To Provision for Tax 24,33,62,888 By Gain on Sale of Fixed Assets ---
To Proposed Dividend 8,50,38,787 By Gain on Sale of Investments ---
By Over provision for Taxation
To Goodwill written off --- written off(back) ---
To Loss on Sale of Fixed
Assets ---
To Transfer to General
Reserve 28,16,68,973
To Transfer to Sinking Fund ---
To Discount on Issue of
Shares & Debentures ---
To Other Provisions ---
To Closing Balance 13,11,31,433
By funds from Business Operations 66,27,04,405

Total 79,80,72,428 79,80,72,428

INTERPRETATION:

 The main source of fund is income/profit from business operations i.e. Rs.
66,27,04,405.
 FUNDS FLOW STATEMENT

(For the year 2012-2013)

(Statement of Sources & Applications of Funds)

Amount Amount

Sources in Rs Applications in Rs

Funds from Business Redemption of Shares at

Operations 66,27,04,405 Par(Discount/ Premium) ---
Issue of Share Capital at
par(Discount/ Premium) --- Redemption of Debentures ---
Payment of Secured Loans 38,02,35,486
Issue of Debentures
(Discount / Premium) ---
Purchase of Fixed Assets:

Increasing Unsecured loans 5,58,62,000 Purchase of buildings 11,90,967

Sale of Plant and Machinery 6,20,49,447 Purchase of land 3,30,84,733
Sale of other Fixed Assets 4,75,297 Investment 31,66,39,172
Sale of Computers& Furniture 68,736 Vehicles 54,63,038
Other income received 3,90,55,806 Taxes paid 13,67,64,884
Decrease in working capital 13,82,01,376 Dividend Paid 8,50,38,787

95,84,17,067 95,84,17,067

INTERPRETATION:

 There has been increased in unsecured loans by Rs. 5,58,62,000 and the company
other income received by Rs. 3,90,55,806 and it is used for paying differed tax
 liability. The main use of the funds is purchase of fixed assets Rs. 35,63,77,910
and the company pay its secured loans by Rs. 38,02,35,486.

Table:4.2 Statement Showing Change in Working Capital during the period

2013-2014
Particulars 2013 2014 changes in working capital
 (Rs) (Rs) Increase Decrease

Current assets:
Inventories 21,95,88,087.40 26,68,60,982.68 4,72,72,895.28 ---
Sundry debtors 22,05,70,852.64 43,37,15,019.73 21,31,44,167.09 ---
99,05,112.
Cash and bank balances 28,50,972.06 12756084.79 ------ 73
Deposits and advances 24,46,006.00 24,12,8,575.00 --- 2,16,82,569
Prepaid expenses 35,90,934.00 45,63,419.50 9,72,485.5 ------

Total Current Assets 44,90,46,852.10 74,20,24,081.70

Current liabilities and

provisions:
1,81,03,550
Sundry creditors 4,83,51,627.05 6,64,55,177.19 .14 ---

Sundry creditors for expenses 4,15,98,765.10 2,95,13,450.53 ---- 1,20,85,314.57

Advances received against
sales 28,57,74,216.43 51,52,20,060.32 22,94,45,843.89 ---
Trade Deposits ------ ------ --- ---
Deposits received from
distributors 3,049,966.00 49,65,000.00 19,15,034 ---
Rent deposit received 10,000.00 ------ 10,000.00 ---

Provisions 40,77,198.56 21,6,80,725.23 --- 1,76,03,526.67

Total Current liabilities &

provisions 38,28,61,773.14 637834413.27
Net working capital

(C.A-C.L) 6,61,85,078.96 10,41,89,668.43 --- ---

3,80,04,58
Increase in working capital 3,80,04,589.47 --- --- 9.47

Total 10,40,89,668.43 10,40,89,668.43 51,08,63,975.9 51,08,63,975.9

INTERPRETATION:

 During the year there has been increase in working capital by Rs. 3,80,04,589.47.
This has been due to increase in inventories by Rs. 47272895.28 and there has
been also increased in sundry debtors Rs. 213144167.09 crores. The current
liabilities and provisions have been decreased by Rs.1,76,03,526.67
 ADJUSTED PROFIT AND LOSS ACCOUNT
(For the year 2013-2014)

Amount Amount

Particulars in Rs Particulars in Rs

To Depreciation of Fixed Assets 51,02,09,628.25 By Opening balance 14,07,36,047.90

To Provision for Tax 27,9,73,251.00 By Gain on Sale of Fixed Assets ---
To Proposed Dividend --- By Gain on Sale of Investments ---
By Over provision for Taxation
To Goodwill written off --- written off(back) ---
To Loss on Sale of Fixed Assets 32,692
To Transfer to General Reserve ---
To Transfer to Sinking Fund ---
To Discount on Issue of Shares &
Debentures ---
To Other Provisions ---
To Closing Balance 10,40,02,991.27
By Funds from Business
Operations 14,82,514.62

14.22.18.562.52 14.22.18.562.52

INTERPRETATION:

The main source of fund is from income/ profit from business operation of
Rs.14,82,514.62.
 FUNDS FLOW STATEMENT
(For the year 2013-2014)
(Statement of Sources & Applications of Funds)

Amount Amount

Sources in Rs Applications in Rs

Funds from Business

Operations 14,82,514.62
Issue of Share Capital at Redemption of Shares at
par(Discount/ Premium) --- Par(Discount/ Premium) ---
Issue of
Debentures(Discount/
Premium) --- Redemption of Debentures ---
Payment of Secured Loans 13,14,30,609.93

Sale of Buildings 23,88,584.31 Unsecured loans 5,72,698.92

Sale of Other Fixed Assets 69,391.63 Purchase of Fixed Assets:

Sale of Computers &
Furniture’s 5,00,713.13 Lands ---
Sale of Vehicles 47,75,149.70 Taxes Paid ----
Non-trading income 15,94,00,386.88 Dividend Paid ---
Increasing in working
Sale of Plant & Machinery 13,91,158.05 capital 3,80,04,589.47

17,00,07,898.32 17,00,07,898.32
 INTERPRETATION:

 There has been the sale of plant and machinery Rs.13,91,158.05 and non-trading
income Rs. 15,94,00,386.88. The main applications of a firm is sale of buildings
Rs.23,88,584.31.

Table:4.3 Statement Showing Change in Working Capital during the period

2014-2015
Particulars 2014 2015 changes in working capital
 (Rs) (Rs) Increase Decrease

Current assets:
Inventories 26,68,60,982.68 43,07,87,633.20 16,39,26,650.52 ----
Sundry debtors 43,37,15,019.73 89,63,10,138.16 46,25,95,118.43 ---
Cash and bank balances 1,27,56,084.79 17,28,258.98 1,10,27,825.81 ----
Deposits and advances 2,41,28,575.00 24,79,487,00 21,6,49,088 ----
19,96,683
Prepaid expenses 45,63,419.50 25,66,736.00 ---- .5

Total Current Assets 74,20,24,081.7 133,38,72,253.34

Current liabilities and

provisions:
Sundry creditors 6,64,55,177.19 25,42,91,110.96 ---- 187835933.77

Sundry creditors for expenses 2,95,13,450.53 8,42,21,148.75 5,47,07,698.22 ----

Advances received against
sales 51,52,20,060.32 60,90,40,543.41 9,38,20,483.09 ---
Trade Deposits ------ ------ --- ---
Deposits received from
distributors 49,65,000.00 75,,19,224.00 1,24,84,224 ---

Rent deposit received ---- 10,000.00 10,000.00 ---

Provisions 63,78,34,413.27 100,07,37,270.75 362902857.48 ---

Total Current liabilities &

provisions 125,39,88,101.31 195,58,19,297.87

Net working capital 51,19,64,019.61 62,19,47,044.53 --- ---

(C.A-C.L)
10,99,83,024. 10,99,83,0
Increase in working capital 92 --- --- 24.92

Total 62,19,47,044.53 62,19,47,044.53 29,78,18,958.69 29,78,18,958.69

INTERPRETATION:

 During the year 2014-15 it shows that there has been increase in working capital
Rs. 10,99,83,024.92. This is mainly due to increase in inventories to
Rs.16,39,26,650.52 and sundry debtors Rs. 46,25,95,118.43.And increase in
current liabilities and provisions by Rs. 36,29,02,857.48. This indicates the
financial position is in weaker position.
 ADJUSTED PROFIT AND LOSS ACCOUNT
(For the year 2014-2015)
Amount Amount

Particulars in Rs Particulars in Rs

To Depreciation of Fixed Assets1,34,01,282.92 By Opening balance 17,72,10,982.90

To Provision for Tax 3,34,29,825 By Gain on Sale of Fixed Assets ---
To Proposed Dividend 1,44,00,000.00 By Gain on Sale of Investments ---
By Over provision for Taxation
To Goodwill written off --- written off(back) --
To Loss on Sale of Fixed Assets 10,428
To Transfer to General Reserve ---
To Transfer to Sinking Fund ---
To Discount on Issue of Shares
& Debentures ---
To Other Provisions ---
To Closing Balance 12,82,90,927.98
By Funds from Business
Operations 1,23,21,481

18,95,32,463.9 18,95,32,463.9

INTERPRETATION:

 The main source of fund is from income profit from business operation of
Rs.1,23,21,481.
 FUNDS FLOW STATEMENT
(For the year 2014-2015) (Statement of Sources & Applications of Funds)
Amount Amount

Sources in Rs Applications in Rs

Funds from Business

Operations 1,23,21,481
Issue of Share Capital at Redemption of Shares at
par(Discount/ Premium) --- Par(Discount/ Premium) ---
Issue of
Debentures(Discount/
Premium) --- Redemption of Debentures ---
21,60,59,754.16
Payment of Secured Loans
Sale of Buildings 22,49,402.77 Unsecured loans 9,10,16,557.00
Sale of Other Fixed Assets 64,666.18 Purchase of Fixed Assets:
Sale of Computers &
Furniture’s 6,21,813.7 Lands ---
Sale of Vehicles 55,08,755.85 Taxes Paid ----
Non-trading income 39,35,14,743.61 Dividend Paid ---
Sale of Plant & Machinery 27,78,472.97 Increasing in working capital 10,99,83,024.92

41,70,59,336.08 41,70,59,336.08

INTERPRETATION:

 The main use of the fund is for payment of unsecured loans by Rs.9,10,16,557
and secured loans Rs.21,60,59,754.16 and sale of plant and machinery
Rs.27,78,472.97.
 Table:4.4 Statement Showing Change in Working Capital during the period
2015-2016
Particulars 2015 2016 changes in working capital

(Rs) (Rs) Increase Decrease

Current assets:
Inventories 43,07,87,633.20 34,78,70,307 ---- 82,9,17,326.2
Sundry debtors 89,63,10,138.16 104,15,95,752.84 14,52,85,614.68 ---
19,47,75,861.
Cash and bank balances 17,28,258.98 46 19,30,47,602.48 ---
14,71,58
Deposits and advances 24,79,487.00 10,07,902.00 ---- 4
Prepaid expenses 25,66,736.00 46,43,011.00 20,76,275 ----

Total Current Assets 133,38,72,253.34 15,89,8,92,835.3

Current liabilities and

provisions:
Sundry creditors
25,42,91,110.96 103045699.75 ---- 151245411.21
Sundry creditors for
expenses 8,42,21,148.75 46586295.91 ---- 37634852.84
Advances received against
sales 60,90,40,543.41 871061097.65 262020554.24 ---
Trade Deposits ------ ------ ---- ---
Deposits received from
distributors 7519224.00 8634224.00 1115000 ---
Rent deposit received 10000.00 62483.00 52483 ---

Provisions 1000737270.75 1051204671.78 50467401.03 ---

Total Current liabilities &

provisions 1955819297.87 2080594472.09
Net working capital

(C.A-C.L) 62,19,47,044.53 49,07,01,636.79 --- ---

Decrease in working capital --- 13,12,45,407.74 13,12,45,407.74 ---

Total 62,19,47,044.53 62,19,47,044.53 734842937.14 734842937.14

INTERPRETATION:

 During the year 2015-16 it shows that there has been decrease in working capital
Rs. 13,12,45,407.74. This is mainly due to decrease in inventories to
Rs.8,29,17,326.2.the current assets like debtors and cash balance have been
increased by Rs.33,83,32,217.16. This indicates the financial position is
satisfactory.
 ADJUSTED PROFIT AND LOSS ACCOUNT
(For the year 2015-2016)
Amount Amount

Particulars in Rs Particulars in Rs

To Depreciation of Fixed
Assets 1,58,07,551.00 By Opening balance 19,58,31,201.90
To Provision for Tax 4,91,30,046.00 By Gain on Sale of Fixed Assets ---
To Proposed Dividend 1,44,00,000.00 By Gain on Sale of Investments ---
By Over provision for Taxation
To Goodwill written off --- written off(back) ---
To Loss on Sale of Fixed
Assets 20,780.00
To Transfer to General
Reserve ---
To Transfer to Sinking Fund ---
To Discount on Issue of
Shares & Debentures ---
To Other Provisions ---
To Closing Balance 13,39,46,314.50
By Funds from Business
Operations 44,73,489.6

20,03,04,691.5 20,03,04,691.5

INTERPRETATION:

 The main source of fund is from income/profit from business operation of

Rs.44,73,489.6.
 FUNDS FLOW STATEMENT
(For the year 2015-2016) (Statement of Sources & Applications of Funds)
Amount Amount

Sources in Rs Applications in Rs

Funds from Business

Operations
Redemption of Shares at
44,73,489.6 Par(Discount/ Premium) ---
Issue of Share Capital at Redemption of
par(Discount/ Premium) --- Debentures ---
Payment of Secured
Issue of
Loans 31,79,52,020.43
Debentures(Discount/
Premium) --- Unsecured Loans 16,41,38,009.00
Purchase of Fixed
Assets:

Non-trading income 74,51,56,210.94 Purchase of building 44,20,637.80

Decrease in working
capital 13,12,45,407.74 Plant and machinery 29,49,561.83
Computers& Furniture 6,15,169.77
Vehicles 59,20,898.44
Other fixed assets 56,494.51
Dividend paid 33,58,22,316.5
Investments 4,90,00,000

88,08,75,108.28 88,08,75,108.28

INTERPRETATION:
  The main use of the fund is for payment of unsecured loans by Rs.16,41,38,009
and secured loans Rs.31,79,52,020.43 and purchase of plant and machinery
Rs.29,49,561.83.

Table:4.5 Statement Showing Change in Working Capital during the period

2016-2017
Particulars 2016 2017 changes in working capital

(Rs) (Rs) Increase Decrease

Current assets:
7,92,27,3
Inventories 34,78,70,307.00 26,86,42,921.50 ---- 85.5
Sundry debtors 104,15,95,752.84 132,36,15,071.38 28,20,19,318.54 ---
19,2,15, 17,55,6
Cash and bank balances 19,47,75,861.46 800.65 --- 0,060.81
Deposits and advances 10,07,903.00 87,2,85,817.00 8,62,77,814 ----
Prepaid expenses 46,43,011.00 12,05,8,981.03 74,15,970.5 ----

Total Current Assets 158,98,92,835.3 171,08,18,592.03

Current liabilities and

provisions:
Sundry creditors 10,30,45,699.75 81763744.78 ---- 2,12,81,954.97

Sundry creditors for expenses 46,5,86,295.91 63753981.65 1,71,67,685.74 ----

Advances received against sales 87,10,61,097.65 916210625.52 4,51,49,527.87 ---
Trade Deposits ------ ------ --- ---
Deposits received from
distributors 86,34,224.00 10334113.00 16,99,889 ---
Rent deposit received 62,483.00 ---- 62,483.00 ---

Provisions 2,18,14,871.47 42786295.30 2,09,71,423.83 ---

Total Current liabilities &

provisions 105,12,04,671.78 130,11,48,760.25

Net working capital

(C.A-C.L) 53,86,88,163.52 40,96,69,831.78 --- ---

Decrease in working capital ----- 12,90,18,331.74 12,90,18,331.74 ----

Total 53,86,88,163.52 53,86,88,163.52 58,97,82,444.22 58,97,82,444.22

INTERPRETATION:

 During the year 2016-17 it shows that there has been decrease in working capital
Rs. 12,90,18,331.74. This is mainly due to decrease in inventories to
Rs.7,92,27,385.5 and increase in sundry debtors Rs.28,20,19,318.54.Lloa. This
indicates the financial position is satisfactory.
 ADJUSTED PROFIT AND LOSS ACCOUNT
(For the year 2016-2017)

Amount Amount

Particulars in Rs Particulars in Rs

To Depreciation of Fixed Assets 1,65,46,573.06 By Opening balance 34,78,70,307.00

To Provision for Tax 5,15,32,001.00 By Gain on Sale of Fixed Assets ---
To Proposed Dividend 1,44,00,000.00 By Gain on Sale of Investments ---
By Over provision for Taxation
To Goodwill written off --- written off(back) ---
To Loss on Sale of Fixed Assets 64,340.00
To Transfer to General Reserve ---
To Transfer to Sinking Fund ---
To Discount on Issue of Shares &
Debentures ---
To Other Provisions ---
To Closing Balance 26,86,42,921.50
By Funds from Business
Operations 19857629.81

36,77,27,936.81 36,77,27,936.81

INTERPRETATION:

 The main source of fund is from income/profit from business operation of

Rs.1,98,57,629.81.
 FUNDS FLOW STATEMENT
(For the year 2016-2017)
(Statement of Sources & Applications of Funds)
Amount Amount

Sources in Rs Applications in Rs

Funds from Business

Operations 1,98,57,629.81
Issue of Share Capital at Redemption of Shares at
par(Discount/ Premium) --- Par(Discount/ Premium) ---
Issue of Debentures(Discount/
Premium) --- Redemption of Debentures ---

Payment of Secured Loans 29,24,91,063.75

Sale of Buildings 40,77,653.84

Sale of Other Fixed Assets 48,636.13 Purchase of Fixed Assets:

Sale of Computers &
Furniture’s 8,03,344.78 Lands ---
Sale of Vehicles 73,58,669.15 Taxes Paid ----
Non-trading income 3,78,69,386.4 Dividend Paid ---
Sale of Plant & Machinery 26,70,939.90

Unsecured loans 9,07,86,472

Decrease in working capita 12,90,18,331.74

29,24,91,063.75 29,24,91,063.75
INTERPRETATION:

 There has been increased in unsecured loans by Rs.9,07,86,472.The main use of

the fund is sale of fixed assets Rs.48,636.13 and the company pay its secured
loans by Rs.29,24,91,063.75.

COMPARATIVE STUDY

CHANGES IN WORKING CAPITAL DURING THE PERIOD

2012-13 TO 2016-17
Table 4.1
Years Changes in Working Capital Amount in lakhs

2012-13 Decrease 1382.01

2013-14 Increase 380.04

2014-15 Increase 1099.83

2015-16 Decrease 1312.45

 2016-17 Decrease 1290.18

Graph 4.1

Amount in lakhs
1600
1400
1200
1000
800
1382.01 1312.45 1290.18
600 1099.83
400
200 380.04
0
2012-13 2013-14 2014-15 2015-16 2016-17

INTERPRETATION:

In the year i.e., 2012-13 working capital decreases to 1382.01lakhs. The next year 2013-
14 working capital increased to Rs 380.04lakhs. The next year 2014-15 Working capitals
have decreased it indicates the current assets are increased and the current liabilities are
decreased.

The working capital is increased it indicates the current assets are decreased and the
current liabilities are increased. The year 2014-15 the working capital is 1099.83lakhs
and the financial year 2015-16 the working capital is decreased. That means the current
assets like inventories are decreased Rs. 792.27lakhs and the sundry debtors increased
Rs. 2820.19lakhs.
 ADJUSTED PROFIT& LOSS ACCOUNT DURING THE PERIOD

2012-13 TO 2016-17

Table 4.2
Years Adjusted Profit &Loss a/c Amount in Lakhs

2012-13 Profit from business operation 6627.04

2013-14 Profit from business operation 1482.51

2014-15 Profit from business operation 1232.14

2015-16 Profit from business operation 4473.48

2016-17 Profit from business operation 1985.76

Graph 4.2

Amount in Lakhs
7000 6627.04

6000

5000
4473.48

4000 Amount in Lakhs

3000

1985.76
2000
1482.51
1232.14
1000

INTERPRETATION:
The Financial position in Tualsi Seeds Pvt. Ltd., in 2012-13 is in good condition, profit
from business operation by Rs. 6627.04 lakhs. In 2013-14 it is decreased Rs. 1482.51
lakhs. In the year 2014-15 the profit from business operations decreased Rs1232.14.
lakhs. The company leads to better position in the y 2015-16 financial year. The year
2016-17 the profit has decreased to Rs. 1985.76 lakhs

.
 FUNDS FLOW STATEMENT DURING THE PERIOD

2012-13 TO 2016-17

Table 4.3
Funds Flow Statement

Years (Rs in lakhs)

2012-13 9584.17

2013-14 1700.07

2014-15 4170.59

2015-16 8808.75

2016-17 2924.91

Graph 4.3
 Funds Flow Statement (Rs in lakhs)
12000

10000

8000

6000

9584.17
8808.75
4000

2000 4170.59
2924.91
1700.07
0
2010-11 2011-12 2012-13 2013-14 2014-15

INTERPRETATION:

During the year from 2012-13 to 2016-17 the company has various sources of funds and
the uses of the funds are done for purchasing of fixed assets and increasing in the current
assets.

FINDINGS
 The SAI SATHYA AGRI BIOTECH PRIVATE LIMITED net working capital is
satisfactory between the years 20013-14 since it shows decreasing trend ; but
after that it is in declining position.

 The current ratio of SAI SATHYA AGRI BIOTECH PRIVATE LIMITED is

satisfactory during the period of study 2013- to 2014. It is increased but after that
it is declining.

 Fixed assets turnover ratio of SAI SATHYA AGRI BIOTECH PRIVATE

LIMITED increased. The company has to maintain this.

 Inventory turnover ratio SAI SATHYA AGRI BIOTECH PRIVATE LIMITED is

also increased gradually, without any fit falls up to 2013-14. But in the year 2012-
13it is declined, and again it has increased in the year 2013-14. Good inventory
management is good sign for efficient management

 Return on investment is not satisfactory. This indicates that the company’s funds
are not being utilized in a better way.

SUGGESTIONS
 Net working capital is very low; it is suggested to maintain sufficient net working
capital.
Effective inventory management is needed in the company

 The firm should increase investment in current assets to create sufficient securities
for the current liabilities

 For the improving the financial performance of the company the following
suggestions are made.

 In order to reduce the outside borrowings in the company has to acquire. The
capital from equity sources. Keeping in view the debt equity the proportion as
normal.

 The liquidity of the company should be improved by maintaining the optimum

current assets and liquid assets according to standard norms.

CONCLUSION
 The SAI SATHYA AGRI BIOTECH PRIVATE LIMITED net working capital is
satisfactory between the years since it shows increasing trend; but after that it is in
declining position Profit Margin of SAI SATHYA AGRI BIOTECH PRIVATE
LIMITED is decreasing and showing negative profit because there is increase in the
price of copper The SAI SATHYA AGRI BIOTECH PRIVATE LIMITED Net
Working Capital Ratio is satisfactory.

The Operating Ratio of SAI SATHYA AGRI BIOTECH PRIVATE LIMITED isn’t
satisfactory. Due to increase in cost of production, this ratio is decreasing. So the has
to reduce its office administration expenses Improve position funds should be utilized
properly. Better Awareness to increase the sales is suggested. Cost cut down
mechanics can be employed. Better production technique can be employed.

BIBLIOGRAPHY
BOOK NAME AUTHOR PUBLICATION YEAR

FINANCIAL MANAGEMENT IM pandey 9/e, Vikas Publishing 2004

Fundamentals of Financial
Prasanna Chandra Tata McGraw Hill, New Delhi. 2003
Management

Financial Management-Text
M.Y Khan, P K Jain Tata McGraw Hill, New Delhi. 2003
and Problems

Maheshwari S N, Vikas Publishing House Private

Financial Accounting 2009
Mahehwari S K Limited, New Delhi

Financial Management and

James C.VanHorne Pearson Education 2004
Policy

WEB SITES

WWW.WIKIPEDIA.COM

WWW.SATHYASEEDS.COM