1

About finiancial accts

Meaning of Flow of Funds :
The term Ilow` means movement and includes both inIlow` and out Ilow`. The term
Ilow oI Iunds` means transIer oI economic values Irom one asset oI equality to another. Flow oI
Iunds is said top have taken place when any transaction makes changes in the amount oI Iunds
available beIore happening oI the transaction.
MEANING AND CONCEPT OF FUNDS
Fund:
According to the dictionary meaning oI the term 'Funds implies an accumulation or
deposit oI resources Irom which supplies are may be drawn a more or less permanent store or
supply. It is also deIined as available pecuniary resources but these two meanings are abroad in
nature and apt to macro level planning and control. A number oI deIinitions oI the term Iund`
have been given. Some people call Iund` as cash`. But it is seen in practice that the current
assets are constantly circulating through cash account in business operations and many
transactions aIIect Ilow oI cash at least later or sooner.
For example, the sale oI goods on credit increases in accounts payable rather than in an
immediate cash Ilow. Similarly, certain expenses may result in a current liability since they
might not have been paid immediately. In other words, it may be said that any current assets and
current liability has its impact on working capital (as working capital is the diIIerence oI current
assets and current liabilities) rather than cash. ThereIore there is another view about meaning oI
Iund` that it means working capital`.
The term funds have been defined in a number of ways.
In a Narrow Sense:
It means cash only and a Iunds Ilow statement prepared on this is called a cash Ilow
statement. Such a statement enumerates net eIIects oI the various business transactions on cash
and takes into account receipts and disbursements oI cash.





2

In Broader sense:
The term Funds reIers to money values in whatever Irom it may exist here Funds means
all means all Iinancial resources used in business whatever in the Iirm oI men, material, money,
machinery and others.
In a Popular Sense:
The term Funds means working capital i.e., the excess oI current assets over current
liabilities. The working capital concept oI Iunds has emerged due to Iact that total resource oI a
business are invested partly in Iixed assets in the Iorm oI Iixed capital and partly kept in Iirm oI
liquid oI near liquid Iorm as working capital. In any business we cannot under estimate the Ilow
oI Iunds Irom two operations. The business runs with Iunds but the organization knows how
much important the Ilow oI Iunds is. The Funds Flow Statement is concerned with sources and
applications oI organization. Statement oI changes in working capital shows the increase or
decrease in working capital. ~Funds from Operation statement shows how much Iunds Irom
operations.

IMPORTANCE OF FUNDS FLOW ANALYSIS:
The importance oI Iunds Flow analysis and ratio analysis in all undertakings needs no
emphasis. How is it managed? What are the practices adopted? What are the problems Iaced?
This study is an attempt to answer the questions. This is considered to M/S. PENNA CEMENT
LIMITED, TADPATRI.

Funds Flow Statement, Income Statement and Balance Sheet:
Funds Flow Statement is not a substitute oI an income statement i.e., a ProIit and Loss
Account, and a Balance Sheet. The ProIit and Loss Account is a document, which indicates the
extent oI success achieved by a business in earning proIits. A balance sheet is a statement oI
Iinancial position or status oI business on given date. It is prepared at end oI accounting period.
The balance sheet depicts various resources oI an understanding and the deployment oI these
resources in various assets on a particular date. As it indicates the Iinancial condition on a
particular date, it is static in nature; while Iunds Ilow statement is a dynamic one. Funds Flow
Statement tells us many Iinancial Iacts, which a balance sheet cannot tell. Balance sheet does not
disclose the cause Ior change in the assets and liabilities between two diIIerent points oI time.


3

Again, while balance sheet is the end result oI all accounting operations Ior a period oI time? The
Iunds Ilow statement provides additional inIormation as regard changes in working capital
derived Irom Iinancial statements at two points oI time. It is a tool oI management Ior Iinancial
analysis and helps in making decisions.
. It helps in the Analysis of Financial operations:
2. It throws light on May perplex Questions of general interest:
3. It helps in the Formation of Business of Realistic Dividend Policy:
4. It helps in the proper Allocation of Resources:
5. It Acts as a Future Guide.
6. It helps in appraising the use of Working Capital:
7. It helps knowing the Overall credit Worthiness of a firm:
.
LIMITATIONS OF FUNDS FLOW STATEMENT
The Funds Flow Statement has a number oI uses: however, it has certain limitations also,
which are listed below.
It should remember that a Funds Flow Statement is not a substitute oI an income
statement or a balance sheet. It provides only some additional inIormation as regards
chances in working capital.
It cannot reveal continuous changes.
It is not an original statement but simply is arrangement oI date given in the Iinancial
statements.
It is essentially historic in nature and project Iunds Ilow statement cannot be prepared
with much accuracy.
hanges in cash are more important and relevant Ior Iinancial management than the
working capital.
Business transactions and flow of funds:
It may be noted at this stage oI analysis that Ior the purpose oI Iunds Ilow statement, the
items oI balance sheet are classiIied into two broad categories viz.,Items oI current accounts and
Items oI non-current accounts.
Current account items


4



Non-current account items

The word Iund` is to denote working capital. Funds Ilow there Iore reIers to the changes
in the Iund (i.e., working capital) by the transactions operational, Iinancial and investment,
though the eIIect oI all the transactions on the Iunds are considered, it should be remembered
here that not all the transactions cause the Ilow oI Iunds .
Transactions Affecting Flow of Funds:
Increase in current assets but not any increase in current liabilities.
ecrease in current assets but not any decrease in current liabilities.
Increase in current liabilities but not any increase in current assets.
ecrease in current liabilities but not any decrease in current assets.





3

Transactions not Affecting Flow of Funds:
(CHANGE IN WORKING APITAL)
Transactions which make conversions oI one current into another current assets.
Transactions which make conversions oI one current liability into another current
liability.
Transactions which bring increase or decrease in current assets causing a corresponding
increase or decrease in current liabilities by the same amount.
Funds Flow Statement:
The Funds Flow Statement is also known as 'FUNS FLOW ANALYSIS. There are
several names Ior this statement; some are
Statement oI sources and applications oI Iunds.
Statement oI inIlow and outIlow oI Iunds.
Statement oI Fund Supplied and Applied.
Statement oI Resources provided and Applied.
Where got and where gone Statement.
Funds Flow Statement:
The Funds Flow Statement is also known as 'FUNS FLOW ANALYSIS. There are
several names Ior this statement; some are
Statement oI sources and applications oI Iunds.
Statement oI inIlow and outIlow oI Iunds.
Statement oI Fund Supplied and Applied.
Statement oI Resources provided and Applied.
Where got and where gone Statement.
various Iactors Ior inIlow and outIlow oI working capital area shown in a statement,
particularly prepared Ior this purpose, which is known a ~Funds Flow Statement. This
statement reveals the manner in which the Iinancial resources have been generated and deployed
during the accounting period. This statement is also considered as an important one as the two
traditional Iinancial statements as it supplies important inIormation Ior the users. In brieI it may
be said that Iund statement Iocuses on the Ilow oI Iunds between the various assets and equity
items during the Accounting period and on analysis basis this statement is generally called as
'Funds Flow Analysis.


6



PROCEDURE FOR PREPARING A FUNDS FLOW STATEMENT
Funds Flow statement is a method by which we study changes in the Iinancial position oI
a business enterprise between beginning and ending Iinancial statements dates. Hence, the Iunds
Ilow statement is prepared by comparing two balance sheets and worth the help oI such other
inIormation derived Iorm the accounts as may be needed.
Broadly speaking, the preparation oI Iunds Ilow statement consists oI two parts:
Statement of Schedule of Changes in Working Capital
Statement of sources and Application of Funds
. Statement of Changes in Working Capital:
Working apital means the excess oI current assets over current liabilities. Statement oI
hanges in Working apital Is prepared to show the changes in the working capital between the
two balance sheet dates. This statement is prepared with the help oI urrent Assets and
Liabilities derived with the help oI urrent Assets and urrent Liabilities derived Irom the two
balance sheets as:
Working Capital Current Assets - Current Liabilities.
An increase in urrent Assets increase Working apital
A decrease in urrent Assets decrease Working apital
An increase in urrent Liabilities decrease Working apital
A decrease in current Liabilities increase Working apital
The changes in all current assets and liabilities are merged into one Iigure only either an
increase or decrease in working capital over the period Ior which Iunds statements has been
prepared. II the working capital at the end oI the period is more than the working capital at the
beginning thereoI, the diIIerence is expressed as Increase in working capital`. On the other
hand, iI the working capital at the end oI the period is less than that at the commencement, the
diIIerence is called ecrease in Working apital`
2. Funds Flow Statement:
Funds Ilow statement is a Iinal statement. It shows the amount used in a particular period
oI time i.e., 'Application oI Funds and the how much amount comes into the organization in a
particular period. Finally those application and sources are balanced. Funds means working


7

capital this working capital represents the diIIerence between current assets, current liabilities.
All Ilows oI Iunds pass through working capital. This means that every transaction has an eIIect
on the Iirms working capital position.
1. An example illustrates this as Iollows:-
2. An increase in proIits increases the cash balance and hence working capital,
3. An increase in long term liability or any decrease in Iixed assets increase the cash balance and
hence working capital. ThereIore the Funds Flow Statement shows the movement oI Iunds into
or out oI the current asset account oI the Iirm.
The movement oI Iunds has two aspects:-
Sources oI Iunds.
Uses oI Iunds
The Iormer supply Iunds to the working capital and enhances its position. On the other
hand, the latter consume Iunds and erode the working capital position.
SOURCES OF FUND:
Issue oI new shares
Issue oI debentures
reation oI long term liability
ProIit Irom operation
Applications of Funds:
The Iund acquired in the business may be used in the Iollowing items:
LOSS FROM OPERATION
ISHARGE OF LIABILITY
REEMPTION OF EBENTURES
REEMPTION OF PREFERENE SHARES
AITION IN ASSETS
NEED OF STUDY:
1) HelpIul in planning.
2) HelpIul in organizing.
3) HelpIul in interpreting Iinancial inIormation.
4) HelpIul in making decision
5) Report to management.


8

OB1ECTIVES
1. To study the Iinancial statements oI The Penna ement Financial Services limited Ior the 4
years.
2. To analyze how The Penna ement Financial Services is utilizing its resources.
3. To analyze the changes in assets and liabilities Irom the end oI one period oI the time to the
end oI another period oI time
4. To Iind out the sources Irom which additional Iunds were derived and the use to which their
sources were put.

SCOPE OF THE STUDY
The present study Iocuses as sources Iunds and application oI Iunds Ior a period oI time.
The study is conIirmed to Iind out the changes in the Iinancial position oI The Penna ement
Financial Services Limited between the beginning and ending Iinancial Year. It is a technical
device designed to analyze the changes in the Iinancial condition oI the business enterprises
between two dates. This Iunds Ilow statement is a statement which indicates various means by
which the Iunds have been obtained during a certain period and the ways to which these Iunds
have been used during the period.

RESEARCH METHODOLOGY
Research is a process in which the researcher wishes to Iind out the end result Ior a given
problem and thus the solution helps in the Iuture course oI action. Redman and Mory deIines
research as a 'systematized eIIort to gain new knowledge.

Research Design
A research design is the arrangement oI conditions Ior collection and analysis oI data in a
manner that aims to combine relevance to the research purpose with company in procedure. In
Iact, the research design is the conceptual structure within which research is conducted; it
constitutes the blue print Ior the collection, measurement and analysis oI data.





9

Sources of Data:
The data was collected through primary and secondary sources.

Primary Data:
First hand inIormation was collected using the direct personal interview.
Interaction with guide to understand the general & speciIic aspects regarding utilization
oI resources.

Secondary Data:
Annual reports collected Irom the M/S Penna cement Ltd., Tadpatri.

Period of study:
The analyze presented in the study are 'Annual Reports oI M/S PENNAEMENT,
TAPATRI Irom 2007-2008 to 2008-2010

LIMITATIONS

It should remember that a Iunds Ilow statement is not a substitute oI an income statement
or a balance sheet. It provides only some additional inIormation as regards changes in
working capital
The study based on the available annual reports and internal inIormation oI Pennas
cement Financial Services Ltd only.
It cannot reveal continuous changes.

st
chapter
PARTIES INTERESTED IN FINANCIAL ANALYSIS
There are diIIerent parties interested in the Iinancial analysis oI these statements. But
their aim and objective oI the analysis diIIer signiIicantly. The users oI the Iinancial statements
can be divided into two broad groups:
(a) Internal users
(b) External Users.


10

Internal Users:
Financial Executives:
Top Management:

External Users:
Investors:
Creditors:
Workers:
Customers:
Researches:
.
Significance of Financial Analysis:
Analysis oI Iinancial statement is carried out to measure the enterprise`s liquidity,
proIitability, solvency and other indicators to assess its operating eIIiciency, Iinancial position
and perIormance.
Financial analysis serves the Iollowing purpose:
To know the operational eIIiciency oI the business.
HelpIul in measuring the solvency oI the Iirm.
HelpIul in comparison oI past and present results.
Helps in measuring the proIitability.
It is more helpIul in inter-Iirm comparison.
Helps in judging the solvency oI the undertaking.
Types of analysis:
Two types oI analysis are undertaken to interpret the position oI an enterprise. They are:
Vertical Analysis
Horizontal Analysis
The ompanies Act, 1956 permit the companies to present the Iinancial statements in
vertical as well as horizontal Iorm.





11

Vertical Analysis:
It is the analysis oI relationship as between diIIerent individual components Ior a given
period oI time. omparison oI current assets to current liabilities or comparison oI debt to equity
Ior one point oI time is the examples oI vertical analysis. It can be made in the Iollowing ways.
By preparation oI common size statements oI the two similar units.
By preparing common size statement oI diIIerent years oI the same business.

Horizontal Analysis:
It is the analysis oI changes in diIIerent components the Iinancial statements over
diIIerent periods with the help oI a series oI statements. Study oI trends in debt or share capital
or their relationship over the past ten years period or study oI proIitability trends Ior a period oI
Iive years
or ten years are examples oI horizontal analysis. It comprises:
omparison oI the Iinancial statements oI diIIerent years oI the same business unit.
omparison oI Iinancial statement oI a particular year oI diIIerent business units.
Methods of Analysis:
A Iinancial analyst can adopt the Iollowing tools Ior analysis oI the Iinancial statements.
These are also termed as Methods oI Financial Analysis.
omparative Statement Analysis.
ommon-size Statement Analysis.
Trend Analysis.
Funds Ilow Analysis.
ash Ilow Analysis.
Ratio Analysis.
Comparative Statement Analysis:
omparative Iinancial statements are those statements which are designed to provide
time perspective to the consideration oI various elements oI Iinancial position embodied in such
statements. In these statements Iigures Ior two or more periods are shown side by side to
Iacilitate comparison. Both the income statement and balance sheet can be prepared in the Iorm
oI comparative Iinancial statements.



12

Common-size Statement Analysis:
ommon-size statement is a Iinancial tool oI studying key changes and trends in Iinancial
position oI a company. In common-size statement, each item is stated as percentage oI the total
oI which that item is a part, each percentage exhibits the relation oI the individual item to its
respective total. ThereIore, the common-size percentage method represents a type oI ratio
analysis. That is why this statement is also designated as 'component percentage or '100
percent statement.
Preparation oI the common-size statement involves two steps:
State the total oI the statement as 100 percent.
ompute the ratio oI each item to the total in the statement
Trend analysis depicts behavior oI the ratios over a period oI time and the trends in the operation
oI the enterprise. The trend Iigures are index Iigures giving a bird`s eye view oI the comparative
data by presenting it over a period oI time. This is horizontal analysis oI Iinancial statement,
oIten called as Pyramid Method oI Ratio Analysis a guide to yearly changes. Under this Iorm
oI analysis, generally Iinancial ratios are studied Ior a speciIied number oI years. It is a dynamic
analysis depicting the changes over a stated period. The working oI trendanalysis involves the
Iollowing three steps:
Selection oI the base year.
Assignment oI an index number oI 100 to each item oI the base year.
alculation oI percentage relationship that each item bears to the same item in the base
year
Ratio Analysis:
Ratio Analysis is powerIul tool oI Iinancial analysis. The relationship between two
accounting Iigures, expressed mathematically, it is known as a Iinancial ratio. In Iinancial
analysis, a ratio is used as a benchmark Ior evaluating Iinancial position and perIormance oI a
Iirm. Ratios help to summarize large quantities oI Iinancial data and to make qualitative
judgment about the Iirm`s Iinancial perIormance.
Several ratios, calculated Irom the accounting data, can be grouped into various classes
according to Iinancial activity or Iunction to be evaluated. In view oI the requirements oI the
various users oI ratios.



13

We may classify them into the following categories:
Liquidity Ratios.
Leverage Ratios.
Activity Ratios.
ProIitability ratios.
Financial analysis is the processes oI identiIying the Iinancial strengths and weaknesses
oI the Iirm by properly establishing relationships between the items oI Iinancial statements viz.,
Balance sheet and proIit and loss account, Iinancial analysis can be undertaken by management
oI the Iirm or by parties outside the Iirm, Viz., Owners, reditors, Investors and others.
Users of Financial Analysis:
Financial analysis is the process oI identiIying the Iinancial strengths and weakness oI the
Iirm by properly establishing relationship between the items oI the Balance Sheet and the ProIit
and Loss Account Iinancial analysis can be under taken by management oI the Iirm oI by parties
outside the Iirm viz., Owners, reditors, Investors and others. The nature oI analysis will diIIer
depending on the purposes oI the analyst.

Trade creditors:
Trade creditors are invested in Iirm`s ability to meet the climes over very short period oI
time. Their analysis thereIore, conIine to the revolution oI the Iirm`s liquidity position.
Suppliers of long term debt:
On the other hands are concerned with the Iirm`s long term solvency and survival. They
analyze the Iirm`s proIitability over time its ability to generate cash to be able to pay interest and
repay principle and the relationship between various courses oI Iunds.
Investors:
Who have invested their money in the Iirms shares are must be concerned about the
Iirm`s earnings. They restore more conIidence in those Iirms. That show study growth in
earnings as such they concentrate analyzing the Iirms present and Iuture proIitability.






14

Management:
Management oI the Iirm would be invested in every aspect oI the Iinancial analysis. It is
their overall responsibility to see that the resources oI the Iirms are used most eIIectively and
eIIiciently and that the Iirm`s Iinancial condition is sound.
Funds Flow Analysis:
SigniIicant technique oI Iinancial analysis is FUNS FLOW ANALYSIS`. It is
designed to highlight changes in the Iinancial condition oI a business concern between concerns
between two points oI time which generally conIorm to beginning and ending Iinancial statement
dates. Thus, Funds Flow Statement is a report which summarizes the events taking between the
two accounting periods. It spells out the sources Irom which Iunds were derived and the uses to
which these Iunds were put. This statement is essentially derived Irom an analysis oI which these
have occurred in assets and liabilities items between two balance sheet dates. In this statement,
only the net changes are shown so that the outcome oI a transaction upon the Iinancial condition
oI a business enterprise reIlected more sharply.

CEMENT INDUSTRY PROFILE
INTRODUCTION
ement Industry has been decontrolled Irom price and distribution on 1st March 1989
and de licensed on 25th July 1991. However, the perIormance oI the industry and prices oI
cement are monitored regularly. Being a key inIrastructure industry. The constraints Iaced by the
industry are reviewed in the InIrastructure oordination ommittee meetings held in the abinet
Secretariat under the hairmanship oI Secretary (oordination). The ommittee on
InIrastructure also reviews its perIormance. The industry is subject to quality control order issued
on 17.2.2003 to ensure quality standards.
CEMENT INDUSTRY IN INDIA
In India it came to be established during the beginning oI 20th century. In Iact the cement
era in India commenced with the establishment oI a small cement Iactory at
WASHERMANPET
In 1904 by South India industry Ltd. a company that dates to 1879. The potential capacity oI this
plant was only 10,000 metric tones per annum. This was the Iirst attempt oI manuIacturing
Portland cement with cat carious seashells as a principal raw material. There was suIIicient


13

demand Ior that product, but because oI technological deIects and inadequate supply oI raw
materials, the plant did not operate economically, a later on collapsed. India is ranked Iorth in the
world aIter hina, Japan, and USA in cement production. Yet the per-capital consumption oI
cement in India however low at 70 to 80 kgs against the world average oI around 220kgs
CEMENT INDUSTRY IN ANDHRA PRADESH
ement was Iirst manuIactured in America in the year 1875. In India, in 1914 the India
ements ompany Limited was established a cement Iactory at Portland. Andhra Pradesh is the
second largest cement production state in India, one third oI the limestone (138crore tones) is
available in A.P.I.A.P. the cement production was started in 1936 with two Iactories. OI these
two Iactories one is Andhra ement ompany Limited and another in Krishna ement Factory.
One is on the side oI Krishna ement Factory. One is on the side oI Krishna River and another is
in between Krishna and Guntur districts respectively.
In 1995, one more Iactory was established at Panyam in Kurnool ist., named as Panyam
ement and mineral industries. At the same time one more Iactory has been established at
Maacherla in Guntur district. At the end oI July 1985 the total capital invested on cement
industry was Rs.427.81 lakhs and provided employment Ior 1262 persons and 19 Iactories were
Iunctioning with a production oI 85lakh tones.
Capacity, Production and Exports
India today boasts 129 large plants and over 300 mini cement plants with a capacity oI
165 million tones and production oI 134 million tones (2004-05). It ranks second in the world
among cement producing countries, with per capita consumption at 118Kg compared to the
world avg. OI around 317. Per capita consumption is 366 Kg in Thailand, 626 Kg in hina, 606
Kg in Malaysia and 1216 Kg in South Korea. This indicates a huge potential Ior increase in
consumption.
The ement orporation oI India, which is a central public sector undertaking, has 10 units.
Besides, there are 10 large cement plants owned by various state Governments. Keeping in
view the past trends, a production target oI 133 million tons has been set Ior the year 2004 05.
uring the Tenth Plan, the Industry is expected to grow at the rate oI 10 per annum and is
expected to add capacity oI 40 52 million tons Mainly through expansion oI existing plants and
use oI more Ily ash in the production oI cement. A part Irom meeting the domestic demand, the


16

cement Industry also contributes towards exports. The export oI cement and clinker during the
last three years is as under:-
Export of Cement
(In million tons)

Overview of the performance of the Cement Sector:
The Indian ement Industry not only ranks second in the production oI cement in the
world but also produces quality cement, which meets global standards. However, the Industry
Iaces a number oI constraints in terms oI high cost oI power. High railway tariII; high incidence
oI state and central levies and duties; lack oI private and public investment in inIrastructure
projects; poor quality coal and inadequate growth oI related inIrastructure like sea and rail
transport, ports and bulk terminals. In order to utilize excess capacity available with the cement
Industry, the Government has identiIied the Iollowing thrust areas Ior increasing demand Ior
cement:
(i) Housing development programs;
(ii) Promotion oI concrete highways and roads;
(iii) Use oI ready mix concrete in large inIrastructure projects; and
(iv) onstruction oI concrete roads in rural areas under Prime Ministers Gram Sadak Yolanda.

Narrowing demand-supply gap:
The industry has a capacity oI 165 million tons and in Jan 2006, dispatches were at
almost 100. On an overall basis, the industry does not do more than 90-92 because oI
constraints such as transport and raw material. The industry has been adding capacity oI 6-7
million per annum by BrownIield expansion and de-bottlenecking which is expected to partly
cater to the requirement because it is growing by around 20 million tons per annum.




17

Challenges before the industry:
Energy costs account Ior halI oI the cost oI production oI cement. Last year saw a 15-16
increase in coal prices and then diesel prices went up pushing up transportation costs.

Freight problems
The importance oI Ireight Ior the cement industry cannot be emphasized enough. While
in the last Iew months` railways have been steadily losing Ireight to road sector they have been
conIined cement to market-is around Rs.350-400 a ton or Rs.20 and bag that could go as high a
Rs.800 Ior long leads. This would only easy the Iirst level oI sale and additional costs are
involved to take it Iurther.
High taxes
While the railways have had capacity to meet the requirement, it is expected that in
March the commencement oI peak season Ior the procurement oI Iood grains, the railways would
be constrained to provide adequate number oI wagons.
So Iright rates are up, railways cannot provide wagons and trucks are unlikely to be
viable so there could be a serious dislocation oI supplies going Iorward.According to the cement
manuIactures association total taxes and duties on cement come to around Rs.900 a ton or Rs. 45
a bag. 'So at a price oI Rs.150 a bag in the market, taxes and duties account Ior one third. Which
is high Ior such a basic product. This includes excise duty, sales tax and royalty on limestone.
The importance oI limestone can only be underscored as Ior every ton oI cement produced.
1.5tons oI limestone is required. 'For limestone, royalty is on a per ton basis at Rs. 40 whereas
Ior most minerals it is a percentage oI the pithead cost. EIIectively we are paying Rs.70 a ton Ior
limestone as royalty. VAT is at 12.5 without any justiIication and it should be in 4 category,
excise is at Rs.408 per ton when it should be around Rs.200.
Export Advantages
From a modest beginning iI 1.6 lacks tons in 1989-90, Indian exports oI cement/clinker
have grown rapidly at about 30-40 and this year exports will cross 10 million tons.






18

Major cement producers - market shares:
Acc -12.8
Abuja -10.7
Grasim-10.4
Ultra tech-9.5
India cement-6.0
Jaypee-4.1
LaIarge-3.2
Madras-3.2

Overall, the industry is in a better state today than 2 years ago. 'ement prices even
today are way below global levels. So setting up GreenIield capacities is not attractive, as prices
will not give attractive returns on investment. That is a minor reason why there is no GreenIield
capacity coming up. It has to be born in mind that one third oI the prices is accounted Ior by
taxes and duties and nearly 20-25 by the Ireight component. So what produces earn at the
Iactory gate is among the lowest in the world. This year 2008 has commenced on a good note
and in Iact, ecember was a very good month wit dispatches at 12.5 million tons and January
dispatches were in excess oI 13 million tons. 'This means capacity utilization is in the nineties
which is healthy and will actually lead to Iirming up oI prices. It looks like sales could be 137
million a ton Ior 2007-08(125 million tons in 2006-07) and so Iar growth has been 10. There
are enough reasons to believe it will sustain.












19

PENNA CEMENTS INDUSTRY LTD - INTRODUCTION

A Penna cements industry Ltd was incorporate on Oct 24th 1991, to set up a cement plant
at Tadpatri in Anantapur istrict oI Andhra Pradesh. The plant commenced commercial
production on Aug 10th 1994 as mini cement plant with initial capacity oI 0.30 million tones.
The company short period getting proIits. Later 1995 plant capacity was increased 0.4 million
tones which upgrade its state major plant Penna cement industries ltd establishing by Mr. Prathap
Reddy aged 44 began his entrepreneur career with civil engineering contracts by lunching
pioneer builders mr.prathp reddy has experiences oI two decades in cement industry .he was the
executive director oI priyadrashini cement right Irom its inception in 1984 in 1991 Mr. Pratap
Reddy incorporated his own cement company located in between Talaricheruvu and Urichintala
village. At present about 2720 tones
oI various grades oI cement is being manuIactured daily at the Iactory.
Quarry:
Major raw material Ior cement industry. The quarry has a mining lease oI 235.52 acres in
Talaricheruvu village. 440.47 acres in Urichintala village and 629.75 acres in Korumanipalli
village oI Kurnool district.
RAW MATERIALS :
Limestone:
Limestone is the major raw material Ior the cement industry. Limestone constitutes 60 to
70 percent oI the total raw material costs. Nearly 1.5 1.6 tons oI limestone is required Ior
producing one ton oI cement clinker limestone (calcium carbonate) is a rock oI either
sedimentary or metamorphic origin with calcium oxide as its main constituent. In India limestone
occurs mainly as sedimentary rocks and constitutes 30 percent oI the total sedimentary rocks in
the country. ement grade limestone is available in 21 states in the country. About 65 percent oI
the cement plants in India uses sedimentary limestone and 20 percent use metamorphic
crystalline limestone. India has 85,980 million tones oI cement grade limestone deposits, which
is enough to produce 100 million tones oI cement Ior the next 500 years.
Total reserve
No. oI years limestone reserve would last -------------------------------------



20

Avg., limestone Consumption
It is quite clear that India`s limestone reserves are adequate Ior the next several years. More over
new reserves would be discovered every year Limestone is mixed extensively in India and ranks
second in production next to coal mining. Major portion oI limestone mining portion oI
limestone mining is Ior cement industry (nearly 75 to 80) thereIore the demand supply
situation is quite comIortable. In India limestone deposits are abundantly Iound only in Siroly
(Rajasthan), Santna, Belaspur (M.P., wadi (Karnataka), Tadpatri (A.P.) and some places in
Gujarat. Units are enerally located in close proximity oI limestone deposits in Madhya Pradesh,
Andhra Pradesh, Tamil Nadu, Karnataka, Rajasthan, and Gujarat.
The quality oI required Ior the cement production should have the Iollowing composition.
Lime : 50
Silican : 3
Aluminium : 4
Iron oxide : 0.50
Magnesiam : 0.50
Loss on Ignition : 42
Total : 100
II Magnesia content exceeds 0.4-o.5 percent, the limestone is not suitable Ior cement.
Similarly, lime content is directly proportional to the clinker and cement quality and quantity.
Gypsum:
Gypsum is another important required material Ior cement manuIacturing, constitutes
about 5 percent oI the weight oI the cement. Gypsum is added in required quantity at the time oI
grinding oI clinker. The clinker and the required amount oI the Gypsum is added to control the
setting time oI the cement. India possesses resources oI gypsum. Hence its availability is not a
concern Ior the cement manuIacture.
Other Raw Materials:
A Iew other raw materials like Blast Iurnace slag and Ily ash are also required Ior the
manuIacture oI the cement. Blast Iurnace slag is a waste product obtained Irom iron smelting
Iurnace whereas Ily ash is the leIt over ash Irom thermal power station.




21

Inputs:
Although limestone is the major raw material Ior cement industry, the critical raw
material is energy. How well the company uses coal and electricity and how much it costs will
determine the success ratio Ior cement manuIacturers. Major inputs in cement manuIacturing
include coal, power and Ireight.
Coal:
In India coal I am being used as the Iuel Ior the manuIacturing oI cement. Elsewhere in
the world lignite, nature gas and oil are also used. They are not used in India as continuous
supply oI natural gas is not assured used by plants in southern plants ogI India, like almia
ement, hettinad cement etc., as a supplement to coal which compensates the storage Ior coal
in this area. Non cooking coal oI lower ash content is required by cement plants. It should be less
than 30. A useIul heat oI 4500 kilocalories per kg oI coal. oal oI lower ash enables
comparatively lower quality oI limestone.
The coal should have volatile matter and high temperature. Transport oI coal is another
big issue as many oI larger cement plants are located close to the limestone deposits, which may
not have coal deposits nearby.
Power:
Power constitutes about 10 oI the total cement production costs. About 3 percent oI the
total power generated in the country is used by cement industry. The average consumption oI
power in the dry process kilns is around 125 units per million tons oI clinker.
Freight:
Freight constitutes a very signiIicant part oI the cost structure oI cement units in India.
On an average Ireight Ior transporting Iinished product alone Iorms 13.85 oI the cost oI
production oI large cement plants.
The main areas oI Ireight coast Ior the cement industries are
i. Transporting coal Irom the coal Iields to the cement Iactories.
ii. Transporting cement Irom the plants to their markets.
Limestone transport would be even costlier than transporting coal or cement. Hence
cement plants are located in cluster near limestone deposits. Indian railway is moving up to 60
oI the total cement production.



22

SALIENT FEATURES OF PENNA CEMENT:
High strength and great durability
A very perceptible saving in costs (up to 20 to 25) due to low setting time
Superior quality oI the cement resulting in a better overall Iinest
Stronger bonding with aggregates.
Growth and Performance:
The company has enhanced its capacity Irom 600 TP to 8000 TP over the period oI 10
years. The Existing cement plant was upgraded to 5000 tones capacity per day. The proIits Ior
the year 2007-08 are Rs. 92.77 lakhs and sales oI Rs. 946.20 lakhs. The company holds the assets
oI Rs. 601.92 lakhs. The annual capacity oI the company 18,25000 tones.
Competitiveness of Cement Project:
companies Ultra tech, Andhra ement, Grasim ement, Gujarat Ambuja cement,
Parasakthi, Larsen and Tubro,oramandal cement,Priya ement, Nagarjuna cement, Sagar
cement A Suraksha cement, Zuari cement, and India cement Ltd
TECHNOLOGY ADOPTION AND INNOVATION:
The company has obtained the basic engineering designs and other technical know-how
Irom M/s. ONADA ENGINEERING and consulting company limited Japan Ior the cement
plant he technical collaborates are continuously guiding the company Ior achieving improved
productivity and beneIits such as conservation oI energy etc., besides trouble shooting a speciIic.
Man power:
Based on requirement oI individual departments, Head oI that department is asked to give
inIormation to man power planning department regarding the number oI persons required. The
departmental heads assess their requirements based on the available departmental job description
to ensure role clarity and to avoid role ambiguity. The entral Personnel ept. carries out the
recruitment process. The total employees in PENNA EMENT are 345 covering all
departments. There are nearly 500 contract labor working every day on casual basis.

Raw Materials & Requirement:
Limestone, Iron ore, Bauxite, Gypsum and oal are the basic raw materials used in the
manuIacturing process oI cement. The average consumption oI various raw materials is shown in
the table.


23

REQUIREMENT OF RAW MATERIALS


ue to change in the quality oI lime stone and coal, the consumption oI additives has
been changed accordingly.
Material Balance:
Limestone Additives Raw material
Raw material (1.46) coal alcinations clinker
linker Gypsum Ordinary Portland cement
linker Fly ash Pozzoland Portland
Note:
epending upon quality oI raw materials the above consumption may value

PRODUCT PROFILE:
Penna ement manuIactures and distributes its own main product lines oI cement. It aims
to optimize production across all the marketers, providing a completer solution Ior customer`s
needs at the lowest possible cost, an approach known as 'strategic Integration oI Activities.
ement is made Irom a mixture oI 80 percent limestone and 20 percent clay. These are crushed
and ground to provide the 'raw meal, a pale, Ilour like powder. Heated to around 1450o
(2642o F) rotating kilns, the 'meal undergoes complex chemical changes and is transIormed
into clinker. Fine grinding the clinker together with a small quality oI gypsum produces
cement. Adding other constituents at this stage produces cements Ior specialized uses.


PRESENTLY THE PLANT PRODUCES THREE TYPES OF PRODUCTS:
Presently the company is manuIacturing 43 grade, 53 grade. Ordinary portal cement port
land slag cement, soleplate Resistant with brand name oI 'PENNA


24

Penna Suraksha - 53 Grade
Penna Power - 53 Grade
Penna Super - 43 Grade
ADVANTAGES:
Here are Iive oI the many reasons why Penna 53 Grade and 43 Grade cement edges out its
ompetitors.
High compressive strength
Low heat oI hydration
Better soundness
Lesser consumption oI cement Ior M-20 oncreate Grade and above
Faster de shuttering oI Iormed work
Reduced construction time with a superior and wide range oI cement catering to every
conceivable building need, Penna ement is a Iormidable player in the cement market.
Here are just a few reasons why Penna Cement chosen by millions of India.
Ideal raw material
Low lime and magnesia content and high proportion oI silicates
Greater Iineness
Slow initial and Iast Iinal setting
Wide range oI applications
"uality customer services













23







ANALYSIS AND INTERPRETATION
Table 4. Statement of changes in working capital (2007-2008)
Particulars 2008 2007 Increase/
Decrease
Inventories 450900898 353033377 97867521
Sundry ebtors 361673209 413539323 -51866114
ash & Bank 152847103 118608237 34238866
Loan & Advances 1247830639 569839851 677990788

Total Current Assets (a) 22325849 455020788 7582306

Current Liabilities:

urrent liabilities &
Provisions
1576784340 1029032147 547752193

Total current liabilities
(b)
576784340 02903247 54775293

Working Capital (a-b) 636467509 42598864 20478868

Interpretation:
omparing the year 2007-2008 the current assets increased by 75,82,31,061 rupees
compare the current liabilities 54,77,52,193 as a result working capital Increase 21,04,78,868
rupees. ThereIore short term Iinancial position oI The Financial Services limited is good.


26









Fig4. Changes in working capital


FUNDS FLOW STATEMENT FOR THE YEAR ENDED WITH
Source Amount Rs Uses Amount Rs
Funds from operations 204011359 Incerease in working capital 210478868
Long term loans 4678458744 Purchase oI Iixed assets 7603831844
Share capital 3582831685 Purchase oI Investments 712821000
Increase in Deferred tax liability 61829924

8527372 8527372
Sources: we have taken this inIormation Irom Penna cement, Irom 2007-2008.

000
30000000000
100000000000
130000000000
200000000000
230000000000
LoLal currenL asseLs LoLal currenL
llablllLles
worklng caplLal
2008
2007


27

Interpretation:
The Financial Services limited take huge amount oI long term loans through Iunds Irom
operations and Purchase oI investment. The Financial Services limited use some oI these Iunds
to purchase Iixed assets. The Financial Services limited is also use these Iunds to increase
working capital.



STATEMENT OF CHANGES IN WORKING CAPITAL (2008-2009)
Particulars 2009 2008 Increase/
Decrease
Inventories 795932501 450900898 345031603
Sundry ebtors 425424477 361673209 63751268
ash & Bank 453810859 152847103 300963756
Loan & Advances 1383876967 1247830639 136046328

Total Current Assets (a) 3059044804 22325849 845792955

Current Liabilities:

urrent liabilities &
Provisions
2263118056 1576784340 686333716

Total current liabilities
(b)
22638056 576784340 68633376

Working Capital (a-b) 795926748 636467509 59459239

increase in Working
Capital
59459239

28

Interpretation: - omparing the year 2008-2009 the current assets increased by 84,57,92,955
rupees compare the current liabilities 68,63,33,716 as a result working capital increased
15,94,59,239 rupees. ThereIore short term Iinancial position oI The Financial Services limited is
good.



FUNDS FLOW STATEMENT FOR THE YEAR ENDED WITH
3.2.2009
Source Amount Rs Uses Amount Rs
Long term loans 6343046736 Increase in working capital 159459239
Share capital 5395240776 Purchase oI Iixed assets 10460253989
Increase in eIerred tax liability 925501725 Purchase oI Investments 1407608500
operating loss 636467509

2663789237 2663789237

Interpretation:
The Financial Services limited take huge amount oI Long term loans through Iunds Irom
operations and Purchase oI investment. The Financial Services limited use some oI these Iunds
000
30000000000
100000000000
130000000000
200000000000
230000000000
300000000000
330000000000
LoLal currenL asseLs LoLal currenL
llablllLles
worklng caplLal
2009
2008


29

to purchase Iixed assets. The Financial Services limited is also use these Iunds to ecrease
working capital.


STATEMENT OF CHANGES IN WORKING CAPITAL (2009-200)
Particulars 200 2009 Increase/
Decrease
Inventories 667903375 795932501 -128029126
Sundry ebtors 361203731 425424477 -64220746
ash & Bank 177115019 453810859 -276695840
Loan & Advances 1336452763 1383876967 -47424204

Total Current Assets (a) 2542674888 3059044804 -516369916

Current Liabilities:

urrent liabilities &
Provisions
2356406865 2263118056 93288809

Total current liabilities
(b)
2356406865 2263118056 93288809

Working Capital (a-b) 186268023 795926748 -609658725

decrease in Working
Capital
609658725

Interpretation: - omparing the year 2009-2010 the current assets decreased by 51,63,69,916
rupees where as the current liabilities increased by 9,32,88,809 as a result working capital
decreased by 60,96,58,725 rupees. ThereIore short term Iinancial position oI The Financial
Services limited is not good.


30



FUNDS FLOW STATEMENT FOR THE YEAR ENDED WITH
3.2.200
Source Amount Rs Uses Amount Rs
Long term loans 8323008040 Purchase oI Iixed assets 13369366467
Share capital 6958511052 Purchase oI Investments 2974631565
Increase in eIerred tax liability 1248746963 operating loss 795926748
ecrease in working capital 609658725

739924780 739924780

Interpretation:
The Financial Services limited take huge amount oI Long term loans through Iunds Irom
operations and Purchase oI investments. The Financial Services limited use some oI these Iunds
to purchase Iixed assets. The Financial Services limited is also use these Iunds to ecrease
working capital.




000
30000000000
100000000000
130000000000
200000000000
230000000000
300000000000
330000000000
LoLal currenL asseLs LoLal currenL
llablllLles
worklng caplLal
2009
2010


31

Key findings:

It is Iound that The Financial Services limited is holding suIIicient share capital.
It is inIerred that The Financial Services limited is maintaining a minimum ash
Balances.
In 2007-2008 the Working capital oI The Financial Services limited is increased by
21,04,78,868 rupees. In the same period the long term loans oI The Financial Services
limited is high because the company get huge amount oI Iunds Irom operations. The
Financial Services limited uses that Iund to redeem the shares and to purchase Iixed
assets.
In 2008-2009 the Working capital oI The Financial Services limited is increased
15,94,59,239 rupees. In the same period the long term loans oI The Financial Services
limited is high because the company get huge amount oI Iunds Irom operations. The
Financial Services limited uses that Iund to redeem the shares and to purchase Iixed
assets.
In 2009-2010 the Working capital oI The Financial Services limited is decreased by
60,96,58,725 but the Ilow oI Iunds is high as compared to previous year because. The
Financial Services limited get Iunds mainly Irom long term loans. The Financial Services
limited use some Iunds to purchase Iixed assets

Suggestions

It may be suggested that The Financial Services limited should utilize Limited Funds Ior
the purchase oI Iixed assets.
II The Financial Services limited spend more money on purchase oI Iixed assets &
investments it eIIects the growth oI the Penna cement company limited.
The company must maintain the suIIicient working capital in order to meet the daily
needs oI the Iirm.
It has to keep concentration on working capital, expenses, and Iixed assets.
It has to decrease its Long term loans (liabilities).



32

CONCLUSION
It can be concluded that Iunds Ilow perIormance oI the Iinancial services limited is good
because Iunds Irom operations are high in every year but increase in loans oI Iunds. The
Financial services should limitedly utilize Iunds to purchase Iixed assets every year the Iinancial
services limited do some investment activities to utilize Iunds eIIectively. The company should
maintain good levels oI working capital.

BIBLIOGRAPHY:

BOOK:
AccounLlng for managemenL by Sn MAPLSWA8l Sk MAPLSPWA8l

WEBSITE:

http://www.pennacements.in

http://www.google.co.in/Iiniance















33


BALANE SHEET FOR THE YEARS 2007-08-09-10
As aL 3103
2007
As aL 3103
2008
As aL 3103
2009
As aL 3103
2010
SCu8CLS Cl lunuS
SPA8L PCLuL8S lunu 133800000 133800000 133800000 133800000
reserves and surplus 2136313074 3449031683 3261440776 6824711032
LCAn lunuS
secured loans 1783714077 2630013878 3974829839 4774388006
un secured loans 1732388332 2028444866 2368216877 3348620034
uLlL88Lu 1Ax LlA8lLl1? 469237668 691829924 923301723 1248746963
1C1AL 62774733S1 89S31203S3 12663789237 16S302660SS
ALlCA1lCn Cl lunuS
llxLu ASSL1S
gross block 3884631393 8067393686 8300321963 13443986173
less deprlclaLlon 981221831 1180362836 1332681939 1932391942
neL 8lock 3003409362 6887032830 6947640024 11491394233
Auu caplLal worksln
progress
1983663248 716799014 3312613963 1877972234
4989072810 7603831844 140602S3989 13369366467
lnvLS1MLn1S 862411900 712821000 1407608300 2974631363
Cu88Ln1
ASSL1SLCAnSAuvAnCLS

lnvenLorles 333033377 430900898 793932301 667903373
sundry debLors 413339323 361673209 423424477 361203731
cash bank balances 118608237 132847103 433810839 177113019
loans and advances 369839831 1247830639 1383876967 1336432763
14SS020788 22132S1848 30S9044804 2S42674888
LLSScurrenL llblallLles
provlslons
1029032147 1376784340 2263118036 2336406863
42S988641 636467S09 79S926748 186268023
1C1AL 62774733S1 89S31203S3 12663789237 16S302660SS