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TRAINING REPORT

ON
CASH FLOW ANALYSIS AND WORKING CAPITAL
OF YARN DIVISION

Submitted to

GAUAHATI UNIVERSITY,GUWAHATI
in partial fulfillment of the requirements
for the award of the Degree of

BECHULAR OF BUSINESS ADMINISTRATION


(INDUSTRY INTEGRATED)
(IV Semester)
Submitted By:
Name :
G.U. Registration No.:
Batch:

Pinky
100-200-17
2010-2013

ACADEMY OF TECHNOLOGY MANAGEMENT


(ELC CODE: )
BUILDING NO.12, DEEP CENTRAL MARKET,
ASHOK VIHAR, PHASE I DELHI-52

CERTIFICATE

This is to certify that PINKY, a student of the Gauhati


university,Guwahati has prepared his Training report entitled
CASH FLOW ANALYSIS AND WORKING CAPITAL OF YARN
DIVISION at SATISH KUMAR MITTAL &CO.. under my guidance.
She has fulfilled all requirements leading to award of the degree of
BBA (Industry Integrated). This report is the record of bonafide
training undertaken by his and no part of it has been submitted to
any other University or Educational Institution for award of any
other degree.
I wish his all success in life.

Prof.Shameena Gupta
Director

STUDENTS DECLARATION
I hereby declare that the Training Report conducted at
SATISH KUMAR MITTAL &CO.

Under the supervision of


MR.BRIJESH SAINI

Submitted in Partial fulfillment of the requirements for the


Degree of
BECHULAR OF BUSINESS ADMINISTRATION
(Industry Integrated)
TO
GAUHATI UNIVERSITY, GUWAHATI
Is my original work and the same has not been submitted
for the award of any other Degree/diploma/fellowship
or other similar titles or prizes.

Place:
Date:
17

Pinky
Reg. No.:100-200-

ACKNOWLEDGEMENT
Firstly, I would like to thank MR.BRIJESH SAINI (Account
Manager) and a sincere thanks to all other staff members of Satish
Kumar Mittal &Com. . who have helped me directly or indirectly in
my difficulties.
I wish to express my deepest and most sincere thanks to my
Faculty Guide,
Prof. SHAMEENA GUPTA for their invaluable
guidance & support throughout the completion of my project.
Last but not least, I am thankful to all my family for cooperating
with me at every stage of the project. They acted as a continuous
source of inspiration and motivated me throughout the duration of
the project helping me a lot in completing this project.

Pinky

CONTENTS

CHAPTER 1 INTRODUCTION
1.1

General Introduction about the sector

1.2

Industry profile
a)

Origin and development of the industry

b)

Growth and present status of the industry

c)

Future of industry

CHAPTER 2 PROFILE OF THE ORGANIZATION


2.1 Origin of the Organization
2.2Growth and development of the Organization
2.3 Present status of the Organization
2.4 Functional Departments of the Organization
Chapter 3 Discussion on Training
3.1 Student's work profile (Role and responsibilities), tools and Techniques used
3.2 Key learning's
Chapter 4 Study of Selected Research Problem
4.1 Statement of research problem
4.2 Statement of research objectives
4.3 Research design and Methodology
Chapter 5 Analys 5.1 Analysis of data
Chapter 6 Summary and Conclusion
6.1 Summary of Learning Experience
6.2 Conclusions and Recommendations
Bibliography

CHAPTER 1
INTRODUCTION

What Is A Cash Flow Statement?


Complementing the balance sheet and income statement, the cash flow
statement (CFS), a mandatory part of a company's financial reports since
1987, records the amounts of cash and cash equivalents entering and leaving a
company. The CFS allows investors to understand how a company's
operations are running, where its money is coming from, and how it is being
spent. Here you will learn how the CFS is structured and how to use it as part
of your analysis of a company
The Structure of the CFS
The cash flow statement is distinct from the income statement and balance
sheet because it does not include the amount of future incoming and outgoing
cash that has been recorded on credit. Therefore, cash is not the same as net
income, which, on the income statement and balance sheet, includes cash sales
AND

sales

made

on

credit.

Cash flow is determined by looking at three components by which cash enters


and leaves a company: core operations, investing and financing,
Operations
Measuring the cash inflows and outflows caused by core business operations,
the operations component of cash flow reflects how much cash is generated
from a company's products or services. Generally, changes made in cash,
accounts receivable, depreciation, inventory and accounts payable are
reflected in cash from operations.
Cash flow is calculated by making certain adjustments to net income by
adding or subtracting differences in revenue, expenses and credit transactions
(appearing on the balance sheet and income statement) resulting from
transactions that occur from one period to the next. These adjustments are
made because non-cash items are calculated into net income (income
statement) and total assets and liabilities (balance sheet). So, because not all
transactions involve actual cash items, many items have to be re-evaluated
when

calculating

cash

flow

from

operations.

For example, depreciation is not really a cash expense; it is an amount that is

deducted from the total value of an asset that has previously been accounted
for. That is why it is added back into U for calculating cash flow. The only
time income from an asset is accounted for in CFS calculations is when the
asset

is

sold.

Changes in accounts receivable on the balance sheet from one accounting


period to the next must also be reflected in cash flow. If accounts receivable
decreases, this implies that more cash has entered the company from
customers paying off their credit accounts - the amount by which AR has
decreased is then added to net sales. If accounts receivable increase from one
accounting period to the next, the amount of the increase must be deducted
from net sales because, although the amounts represented in AR are revenue,
they are not cash.
An increase in inventory, on the other hand, signals that a company has spent
more money to purchase more raw materials. If the inventory was paid with
cash, the increase in the value of inventory is deducted from net sales. A
decrease in inventory would be added to net sales. If inventory was purchased
on credit, an increase in accounts payable would occur on the balance sheet,
and the amount of the increase from one year to the other would be added
to net

sales.

The same logic holds true for taxes payable, salaries payable and prepaid
insurance. If something has been paid off, then the difference in the value
owed from one year to the next has to be subtracted from net income. If there
is an amount that is still owed, then any differences will have to be added to
net

earnings.

INVESTING
Changes in equipment, assets or investments relate to cash from investing.
Usually cash changes from investing are a "cash out" item, because cash is
used to buy new equipment, buildings or short-term assets such as marketable
securities. However, when a company divests of an asset, the transaction is
considered

"cash

in"

for

calculating

cash

from

investing.

FINANCING
Changes in debt, loans or dividends are accounted for in cash from financing.
Changes in cash from financing are "cash in" when capital is raised, and
they're "cash out" when dividends are paid. Thus, if a company issues a bond
to the public, the company receives cash financing; however, when interest is
paid to bondholders, the company is reducing its cash.

Analyzing

an

Example

of

CFS

Let's take a look at this CFS sample:

From this CFS, we can see that the cash flow for FY 2003 was $1,522,000.
The bulk of the positive cash flow stems from cash earned from operations,
which is a good sign for investors. It means that core operations are generating
business and that there is enough money to buy new inventory. The purchasing
of new equipment shows that the company has cash to invest in inventory for
growth. Finally, the amount of cash available to the company should ease
investors' minds regarding the notes payable, as cash is plentiful to cover that
future

loan

expense.

Of course, not all cash flow statements look this healthy, or exhibit a positive
cash flow. But a negative cash flow should not automatically raise a red flag
without some further analysis. Sometimes, a negative cash flow is a result of a
company's decision to expand its business at a certain point in time, which
would be a good thing for the future. This is why analyzing changes in cash
flow from one period to the next gives the investor a better idea of how the
company is performing, and whether or not a company may be on the brink of
bankruptcy or success.
Tying the CFS with the Balance Sheet and Income Statement
As we have already discussed, the cash flow statement is derived from the
income statement and the balance sheet. Net earnings from the income
statement is the figure from which the information on the CFS is deduced. As
for the balance sheet, the net cash flow in the CFS from one year to the next
should equal the increase or decrease of cash between the two consecutive
balance sheets that apply to the period that the cash flow statement covers.
Conclusion
A company can use a cash flow statement to predict future cash flow, which
helps with matters in budgeting. For investors, the cash flow reflects a
company's financial health: basically, the more cash available for business
operations, the better. However, this is not a hard and fast rule. Sometimes a
negative cash flow results from a company's growth strategy in the form of
expanding

its

operations.

By adjusting earnings, revenues, assets and liabilities, the investor can get a
very clear picture of what some people consider the most important aspect of a
company: how much cash it generates and, particularly, how much of that cash
stems from core operations.
CASH FLOW STATEMENT CAN BE PREPARED BY THE
FOLLOWING METHODS
a) Direct method
b) Indirect method (AS-3)

Direct method
1) Profit and loss appropriations account (format)
Date

Particulars

Amount

Date

Parti
culars

To balance b/d (last years

By balance

debit balance if any)

b/d

(last

years credit

To transfer to

balance

1. general reserve

if

any)

2. sinking fund
3. capital
redemption
reserve

By gain on
sale of fixed

4. debenture

assets

redemption
reserve
By

5. dividend
equalization
fund
to interim dividend paid
to proposed dividend
to provision for income
tax
to

bonus

to

equity

shareholders a/c
to loss on sale of fixed

FFO

(funds from
operations)

Amount

assets
to goodwill written off
to depreciation
to preliminary expenses
written off
to

LFO

(loss

from

operations)

Working ledgers required


1) Plant and machinery a/c
2) Provision for depreciation a/c
3) Provision for tax a/c
Formats of working ledgers
1) Plant and machinery a/c
Date

Particulars

amount

Date

particulars

To balance b/d

By depreciation

To

By P/L a/c (loss

P/L

a/c

( profit on sale)

on sale)
By bank a/c (sale)

amount

To

bank

By balance c/d

(purchase)

2) Provision for depreciation a/c


Date

Particulars

amount

Date

particulars

amount

To plant a/c

By balance b/d

To balance c/d

By

profit

and

loss a/c

3) Provision for tax a/c


Date

Particulars

amount

Date

To bank a/c(tax

particulars

amount

By balance b/d

paid)
To balance c/d

By

profit

loss a/c

2) Calculation of cash from operations (CFO)

and

Funds from operations


+ Decrease in current assets (except cash and bank)
+ Increase in current liability
- Increase in current assets (except cash and bank)
- Decrease in current liability
= Cash from operations

3) Cash flow statement (format)


Sources of funds

Amounts

Applications of funds

Issue of shares

Purchase of assets

Receipts of loans

Payment of loans

Sale of assets

Payment of tax

Amounts

Payment of dividend
CFO ( CASH FROM
OPERATIONS)

Purchase of goodwill
Redemption
preference shares

Indirect method (AS-3)


This includes three activities namely
1. Operating activities
2. Investment activities
3. Financing activities
Statement under this can be shown as follows:

Operating activity:
Profit after taxes
+ proposed dividend
+ provision for tax
+ goodwill written off
+ preliminary expenses written off
+ premium paid on redmption of preference shares
+ transfer to general reserve
+ depreciation

of

+ interim dividends
+ loss on sale of fixed assets
- profit on sale of fixed assets
= profit before working capital change
+ decrease in current assets
+ increase in current liability
- increase in current assets
- decrease in current liability
= operating profit
- payment of taxes
= cash flow from (used) operating activity [A]
Investment activities
Sale of fixed assets
Sale of investments
(Purchase of fixed assets)
(Purchase of investments)
= cash flow from (used) investing activity [B]
Financing activities
Issue of equity shares
(Redemption of debentures)
(Redemption of preference shares)
issue of debentures

issue of preference shares


receipt of term loans
repayment of term loans
payment of dividends
payment of interim dividends
= cash flow from (used) financing activity [C]
[A+B+C] = net increase or decrease in cash and
cash equivalents
+ opening cash and cash equivalents
= closing cash and cash equivalents

WORKING CAPITAL

INTRODUCTION TO WORKING CAPITAL


Working Capital is life blood and nerve centre of a business. Just as circulation
of blood is essential for the survival of the human being similarly working
capital is necessary for the survival of every business organization, whether it
is a small organization or a big organization.
Every business needs funds for two purposes-for the establishment and to
carry out its day to day operations. Long terms funds are required to create
production facilities through purchase of fixed assets such as plant &
machinery, land & building, furniture & fixtures etc. Investments in these
assets the present that part of the firms capital, which is blocked on a
permanent or fixed basis and is called fixed capital. Funds are also needed for

short-term purposes as for the purchase of raw material, payment of wages &
other day to day expenses etc. these funds are known as working capital.
Before discussing about the working capital management of VARDHMAN
TEXTILES LIMITED, we should know the meaning, definition and different
concepts of working capital.
MEANING OF WORKING CAPITAL
In simple words, working capital refers to that part of the firms capital which
is required for financing short term or current assets such as, cash, marketable
securities, debtors, and inventories or in other words the working capital is the
excess of current assets over current liabilities.
CLASSIFICATON OR KINDS OF WORKING CAPITAL
Working capital may be classified in two ways:
a)

On the basis of concept

b)

On the basis of time

On The Basis Of Concept


On the basis of concept, working capital is classified as gross working capital
and net working capital. This classification is important from the point of view
of the financial manager.
Gross working capital: 1. Cash in hand and Bank
2. Bill Receivables
3. Sundry Debtors
4. Short Term Loan & Advances
5. Inventory of Stock
6. Prepaid expenses
Gross Working Capital = Total Current
Assets

ON THE BASIS OF TIME, WORKING CAPITAL MAY BE CLASSIFIED


AS:

Permanent or fixed working capital

Temporary or variable working capital

PERMANENT OR FIXED WORKING CAPITAL:


TEMPORARY OR VARIABLE WORKING CAPIAL:
FACTORS DETERMINING THE WORKING CAPITAL

Nature and character of business.

Size of business\scale of operation.

Production policy.

Manufacturing process\length of production cycle.

Seasonal variation.

Working capital cycle.

Rate of stock turnover.

Credit policy

Business cycle.

Rate of growth of business.

Earning capacity and dividend policy.

Price level changes.

IMPOTANCE OF ADEQUATE WORKING CAPITAL

Working Capital is the blood and the nerve centre of business. Just as the
blood circulation is essential in the human bodies for maintaining life, working
capital is very important to maintain the running of business. No business can
run successfully without an adequate amount of working capital.
The advantages are as follows:

Solvency of the business. Adequate working capital helps in


maintaining solvency of the business by providing uninterrupted flow
of production.

Goodwill. Sufficient working capital enables a business concern to


make prompt payments.

Easy loan. A concern having adequate working capital high solvency


and good credit standing can arrange loans from banks and others on
easy terms.

Cash discounts. Adequate working capital also enables a concern to


avail cash discounts on the purchase and hence it reduces costs.

Regular payments of salaries, wages and other day to day


commitments. A company which has adequate working capital can
make regular payments of salaries, wages and other day to day
commitments with raises the morale of its employees, increases their
efficiency, reduces wastages and enhances production and profits.

Exploitation of favorable market conditions. Only concerns with


adequate working capital can exploit favorable market conditions such
as purchasing its requirement in bulk when the prices are lower and
holding its inventory for higher prices.

Ability to face crises. Adequate working capital enables the concern


face business crises in emergencies such as depression because during
such periods, generally, there is much pressure on working capital

THE NEED OF WORKING CAPITAL

working capital is needed for the following purposes:

For the purchase of raw materials, components and spares.

To pay wages and salaries.

To incur day-to-day expenses and overhead costs such as fuel, power


and office expenses etc.

To meet the selling costs as packing, advertising, etc.

To maintain the inventories of raw material, work-in-progress, stores


and spares and finish stock.

To provide credit facilities to the customers.

OPERATING CYCLE OF SATISH KUMAR MITTAL & COM.


The operating cycle refers to the length of the length of time between the firms
paying the cash for the material, entering into the production process\stock and
the inflow of cash from debtors. There is a complete cycle from cash to cash
where in cash gets converted into raw material, work-in-progress, finished
goods debtors and finally in cash. Short-term funds are required to meet the
requirements of the funds during this time period this time period depends on
the length of time within which the original cash gets converted into cash
again. The determination of working capital cycle helps in the forecast, control
and management of working capital. It indicates the total time lag and the
relative significance of constituent parts.

FINISHED GOODS

WORK-IN-PROGRES

DEBTORS

RAW MATERIAL

CASH

THE OPERATING CYCLE CONSISTS OF FOLLOWING EVENTS,


WHICH CONTINUES THROUGHOUT THE LIFE OF BUSINESS.

Conversion of cash to raw material.

Conversion of raw material to work in progress.

Conversion of work in progress into finished goods.

Conversion of finished goods into accounts receivable.

Conversion of accounts receivable into cash.

FINANCING BY THE WORKING CAPITAL REQUIRMENTS BY


BANKS
The bank credit is the primary institutional source of working capital finance.
The bank provides finance through loan agreements, overdrafts, cash credit,
purchasing of bills, and term loans. Banks have been certain norms in granting
working capital finance to companies. These norms have been greatly
influenced by the recommendation of various committee appointed by
RESERVE BANK OF INDIA from time to time.
SATISH KUMAR MITTAL& COM. finance his working capital from the
different

banks

like

ICICI

BANK,

STATE

BANK

OF INDIA,

ALLAHABAD BANK,PUNJAB NATIONAL BANK. Company finances


the amount according to its need according to its need of working capital
requirement.
NET WORKING CAPITAL
Net working capital is the difference between the current assets and the current
liabilities. Therefore it is called net working capital. When current assets
exceed current liabilities then the working capital is positive otherwise
negative. Examples of current liabilities.

Bill Payable

Sundry creditors

Outstanding expenses

Short term loans

Dividend payable

Bank overdraft

CHAPTER 2 PROFILE OF THE ORAGNIZATION

Satish kumar mittal & com is a major integrated textile producer in India. The Group was
setup in 1965 at Ludhiana, Northern India. Since then, the Group has expanded manifold and
is today, one of the largest textile conglomerates in India. The Group portfolio includes
Manufacturing and marketing of Yarns, Fabrics, Sewing Threads, Fiber and Alloy Steel. The
group started its corporate journey with an installed capacity of 6000 spindles in 1965 under
the flagship company Satish kumar mittal & com Spinning & General Mills Limited (now
known as Satish kumar mittal & com Holdings Limited and is an investment arm of the
Group) in Ludhiana. Over the years the group has expanded its spinning capacities besides
adding new businesses. The group has also diversified into yarn processing, weaving, And
Sewing Thread, fabric processing, acrylic fiber manufacturing and into special/ alloy steels.
Today, close to 20,000 people are the Organization is most important asset its human capital
The Satish kumar mittal & com. comprises of three listed and two unlisted companiesListed companies

Satish kumar mittal & com Textiles Limited (formerly Mahavir Spinning Mills
Limited)

Satish kumar mittal & com Acrylics Limited

Satish kumar mittal & com Holdings Limited1 (formerly Satish kumar mittal & com
Spinning & General Mills Limited)

Unlisted Companies
VMT Spinning Company Limited
Satish kumar mittal & com Threads Limited

LOGO OF SATISH KUMAR MITTAL & COM.


The Flame signifies growth i.e. growth of the company along with the growth of each and
every individual associated with it whether he/she is a worker , a white collar employee, a
shareholder or a customer.
The Stick symbolizes cotton that is the basic raw material of the core product of . The S
stands for the Satish kumar mittal & com

HISTORY
The industrial city of Ludhiana, located in fertile Malwa region of central Punjab is known as
the MANCHESTER OF INDIA. Within the precincts of the city is located
The corporate head quarters of Satish kumar mittal & com., A household name in northern
India. The Satish kumar mittal & com. , born in 1965 under the entrepreneurship of late Lala
Rattan Chand Oswal has today blossoms into the one of the larger textile business houses in
India .
At its inception, satish kumar mittal & comhas installed capacity of 14000 spindles. Today: its
capacity has increase multifold to over 5.5 lacs spindles. In 1982 the group enters sewing
threads market in company, which was the forward integration of business. In 1990, it
undertook yet another diversification this time into the weaving business. The grey fabric
weaving unit at Baddi, commissioned in 1990 with a capacity of 20,000 meters per day , has

already made its mark as a quality producer of grey poplin, sheeting, shirting in the domestic
as well as foreign market . This was followed by entry into fabric processing by setting up of
AURO TEXTILES at BADDI, which currently has a processing of 1,00,000 meters per day.
In the year 1999, the group has added yet another feather to its cap with a setting of SATISH
KUMAR MITTAL & COM ACRYLICS LTD in. The company also has a strong presence in
the markets of JAPAN, HONG KONG, KOREA, and UK & EUROPE in addition to the
domestic market. Adherence to systems & true dedication to quality has resulted in obtaining
the coveted ISO 9002/ISO 14002 quality awards which is the first in textileindustry.

PHILOSHOPHY

Faith in bright future of Indian textile industry & hence continues expansion areas which we
know best.

Total customer focus in all operational areas

Products to be of best available quality for premium market segments through TQM & ZERO
DEFECT implementation in all functional areas.

Global orientation targeting- at least 20% production for exports.

Integrated diversification/ product range expansion

World class manufacturing facilities with most modern R&D & process technology
Faith in individual potential respect for human values

Encouraging innovation for constant improvements to achieve excellence in all functional


areas

Appreciating our role as a responsible corporate citizen.

MISSION
SATISH KUMAR MITTAL & COMaims to be a WORLD CLASS TEXTILE organization
producing diverse range of products for the global textile market. SATISH KUMAR MITTAL &
COM seeks to achieve customer delight through excellence in manufacturing & customer
service based on creative combination of state- of the- art technology & human resources.
SATISH KUMAR MITTAL & COM is committed to be responsible corporate citizen

BOARD OF DIRECTORS

Satish kumar mittal & comTextiles Limited

SH. SHRI PAUL OSWAL Chairman & Managing Director

SMT. AMITA NARAIN (Nominee of IDBI)


SH. ARUN KUMAR PURWAR

SH. PRAFULL ANUBHAI


SH. SUBASH KHANCHAND BIJLANI
SH. ASHOK KUMAR KUNDRA
SH. DARSHAN LAL SHARMA
SH. SHRAVAN TALWAR
SH. SACHIT JAIN Executive Director
SMT. SUCHITA JAIN Executive Director
SH. NEERAJ JAIN Executive Director

CGM (FINANCE, ACCOUNTS & TAXATION)


SH. RAJEEV THAPAR
COMPANY SECRETARY

SH. VIPIN GUPTA

BANKERS
STATE BANK OF PATIALA,
ALLAHABAD BANK,
ICICI BANK LTD.,
PUNJAB NATIONAL BANK,
STATE BANK OF INDIA,
BANK OF BARODA

CORPORATION BANK,
UNION BANK OF INDIA
CANARA BANK,
STANDARD CHARTERED BANK
BANQUE NATIONALE DE PARIS

Organisational hierarchy chart


CHAIRMAN CUM-MANGING DIRECTOR

CORPORATE GENERAL MANAGERS

VICE PRESIDENT

MANAGERS (M1-M4)

EXECUTIVES (E1-E2)

OFFICERS (O1-O2)

STAFF (S1-S4)

SUBSTAFF

AWARDS AND ACHIEVEMENTS

Satish kumar mittal & com Spinning and General Mills Ltd. was the 1st textile company to be
awarded ISO-9002 and ISO-14002 certificate in 1993.

It is the largest manufacturer and exporter of cotton yarn from India.

It is the second largest producer of sewing threads in Indi

It is a larger producer of acrylic fiber and finished fabrics

Textile Export Promotion Council 2003-04


Gold trophy in EOU/EPZ for export of cotton yarn

Textile Export Promotion Council 2003-04


Bronze trophy in mill fabric exporter category

Textile Export Promotion Council 2002-03


Gold Trophy in EOU/EPZ for export of cotton yarn

Textile Export Promotion Council 1998-99


Silver Trophy

Textile Export Promotion Council 1997-98


Bronze Trophy

Textile Export Promotion Council 1996-97


Silver Trophy

Govt. of India Award 1994-5, 1995-96


Award of Merit

Textile Export Promotion Council 1993-94


(Merchant Export Category for Fabrics)
Bronze Trophy

Textile Export Promotion Council 1993-94


(Merchant Export Category for Fabrics)
Gold Trophy

BUSINESS OF VARIOUS ITEMS

BUSINESS OF SATISH KUMAR MITTAL & COM.


Satish kumar mittal & comGroup consists of 5 SBUs spread across 9 manufacturing locations

ST

Steel

Yarn

Cotton Yarn

Fabric

Spinning Business (Y)


Satish kumar mittal & comSpinning & General Mills Ludhiana, Punjab
Auro Spinning Baddi, HP
Arihant Spinning Malerkotla, Punjab
Arisht Spinning Baddi, HP
Gas Mercerised Yarn Business Hoshiarpur, Punjab

Auro Dyeing Baddi, HP


Anant Spinning Mandideep, MP
Satish kumar mittal & comSpinning & General Mills (Export Oriented Unit) Baddi, HP
VMT Baddi, HP
Satish kumar mittal & comYarns Satlapur, MP
Fabric Business (C)
Auro Weaving Baddi, HP
MSML Textiles Division Baddi, HP
Auro Textiles Baddi, HP
Satish kumar mittal & comFabrics Budhni, MP

Sewing Thread Business (ST)


ST-I Hoshiarpur, Punjab
ST-II Ludhiana, Punjab
ST-III Perundurai, TN
Satish kumar mittal & com Threads Limited Baddi, HP
Satish kumar mittal & com Special Steels (S) Ludhiana, Punjab
Satish kumar mittal & com Acrylics Limited (F) Bharuch, Gujarat

PRODUCT RANGE

Yarns
The group is one of the largest spinning group of the country with a spindlier of over
5, 50,000. The group has 12 production plants located in the states of Punjab, Himachal
Pradesh and Madhya Pradesh. In many of the yarn market segments, Satish kumar mittal &
comholds the position of market leader besides being a large and reliable supplier in the
country.
Satish kumar mittal & comis also the largest exporter of yarn from India. The group yarn
exports amount to over US$ 100 million covering the most quality conscious markets in
theworld. The total export of Cotton yarn of the group is about 6% of total export of cotton
yarn from the country.

Sewing Threads
Satish kumar mittal & comentered the Sewing thread business in 1982 as a forward
integration to its yarn business. The group had to struggle for survival being pitted against a
large multinational organization. Today with approximately 25 metric tonne/per day of sewing
thread manufacturing capacity in its plant at Hoshiarpur, Ludhiana, Baddi & Perundurai.
Satish kumar mittal & comthreads have emerged as second largest sewing thread brand in the
country.

Processed Fabric
In its quest for further value addition Satish kumar mittal & comstarted fabric processing in
1999.
Satish kumar mittal & comestablished a modern fabric process house in 1999 with a capacity
of 30 million meters per annum. This capacity has been expanded to 42 meters per annum in
FY 2005-06. A Satish kumar mittal & com fabric is dedicated to meet customer demand for
top quality finished fabric through product innovation, world class quality, state-of-art
technology and excellence in service.

Fibre
In 1999 the group set up an Acrylic staple fibre plant at Bharuch in Gujarat in collaboration
with Marubeni and Japan Exlan of Japan. The plant has annual capacity of 18500 metric
tonnes per annum.

Steel
The steel business was setup in 1973 as diversification with a capacity of 35000 million tones
per annum. Later on group acquired a steel plant from Mohta Group of Industries in 1988 and
converted this loss making unit into a profitable business in first year of operation with the
Group. Subsequently the steel mill has been modernized and expanded to a capacity of
100000 million tonnes per annum. Catering to high technology Quality conscious alloy steel
segment, the unit has a reputation of being a dependable source of supply of special and alloy
steel to Indian/International standards.

YARN

The SATISH KUMAR MITTAL & COM range of yarn was a humble beginning. Tree decades
of hard work, commitment and constant innovation have resulted in well earn trust and
goodwill of our customers across the globe.
At SATISH KUMAR MITTAL & COM we move with a notion that customer serves is a way
of life. We strive to provide our customers delight with 3P service PROMPT, POLITE
&PERSONALIZED
It today have a capacity of over half a million spindles along with two dyeing plants bearing a
capacity of more than 27 tones yarn & 22 tones fibers per day. Our goal, therefore calls for
serving our customers with multiple of products meeting the most diverse of requirement.
This, infect has position SATISH KUMAR MITTAL & COM as a SUPER MARKET of high
quality yarn.

YARN PRODUCTION CAPACITY


SATISH KUMAR MITTAL & COM. has installed capacity of more than half a million
spindles & out of it about 1,74,000 spindles are fully dedicated to exports only.
Having built GIANT capacity in term of more than half million spindles spanned over 15 units
out of 4 units are dedicated to exports only (EOU) , state of the- art technology. Dextrose
hands capable of plain rhythm with machines sourced from best available around the world
has made SATISH KUMAR MITTAL & COMa gallery of variety of world CLASS yarns.

EOU-100% dedicated to export only

NON EOU produce for domestic as well as for export market.

YARN OPERATIONS
The unique combination of man & machine, competing & supplementing each other with
continuos increase in productivity has enable SATISH KUMAR MITTAL & COMto
dexterously ripe the fruit of economies of scale & process variety of raw material required for
variety of end products to textiles. Evenness results falls in 5% to 15% of user standards
achieved through
Proper selection of raw materials
/
World class Pre spinning and Spinning Facilities
/
Techincal Know How
/

Human Skills
/
100% Quality Assurance System

ACCOUNTING PRECUDURE FOR CUSTOMER COLLECTION (YARNS)


There are three types of collections

Domestic collections

Collection under CMS

Collection through letter of credit L/C

DOMESTIC COLLECTION
Domestic collection means collection, which are collected by Ludhiana branch and corporate
centralized market yarns department. in this system they collect the cheque or demand draft
from the yarns customers and handed over it over to the centralized accounting cell for the
depositing the same in to the bank on daily basis. After receiving all cheque on a particular
day the e centralized accounting cell deposit the instruments in to the bank for clearing.
After depositing the collections into the bank, the ACR section account for the same in
respective customers accounts on basis of advise sent to bank on day -to -day basis.

CASH MANAGEMENT SERVICES


Cash management means the proper use of an entitys cash resources . it serves as a means to
keep an organization functioning by making th best use of cash or liquid resources of the
organization . at the same time the organization have the responsibility to use timely , reliable
and comprehensive financial information system .
Cash management helps the organization in:

Eliminating idle cash balances

Monitoring exposure and reducing the e risk

Ensuring timely deposit of collections

Properly timely the disbursements

COLLECTION THROUGH LETTER OF CREDIT (L/C)


A letter of credit is a document issued mostly by financial institutions which usually provides
an irrevocable payment undertaking to a beneficiary against complying documents as stated in
the credit.

Chapter 3 Discussion on Training


Students Work Profile.
My work profile is in SATISH MITTAL& COM.

. as Internal Auditor and Consultant with Corporate Account Problems.


What the an Internal Auditor can do.
With the enlarged mandate and given the scope, objectives and functions of
IAW under the CGAs organization internal audit in Government today is of
critical value for several reasons all of which are well known to us:

It is potentially of major importance as an effective internal audit

system leads to improved accountability, ethical and professional practices.

It can improve the quality of output, support decision making and

performance tracking.

It has the potential to act as an independent and objective appraisal

mechanism within the organization whose findings and recommendations can


act as a tool enabling the ministry or department within which it functions, to
take suitable corrective action with respect to service delivery and also
procedures.

It can be used to examine and evaluate activities, as a service to the

organization promoting effective control at a reasonable cost.

If internal audit can become an inherent part of management reporting

by suggesting remedies for the problem areas identified, it can truly fit into the
fundamental and critical area of financial reform which focuses on outcomes,
of objectives being achieved at a reasonable cost. It will integrate internal
auditing with the ongoing public financial management reforms.

What sets Government Audit Apart?


It is necessary to bring out the differences that exist between auditing in the
government sector, and auditing in the private sector.

The environment of the audited government organization is vastly

different from what exists in the private sector, and is a significant reason for
the difference between the two. The government audit is carried out in an
environment determined by legal rules and a great deal of importance is
attached to lawful and rightful conduct within the governments flowing from
the need for governments to act in accordance with laws and regulations laid
down by the government itself

In the public sector moreover, the auditors opinion serves the interest

of the public in general and is not confined to only providing a full and fair
view to the stakeholders as is the case with the private sector audit.

By extension therefore, the primary purpose of an auditors opinion is

to serve in the formal discharging procedure in the democratic process.


Effectively then, the stakeholders are many in case of the government audit

It is also a fact that the decision making process in government is much

more complex when compared to the private sector where decisions are
predominantly determined by technical and scientific factors concerning the
primary processes of the entity and the economically limiting conditions .

In the government arena, success cannot be translated in terms of the

bottom line of income and expenditure account but rather needs other criteria
as a measure of performance.

The auditing of the accounting system of a government organization is

important not only as a track to the financial report but also because the
accounts contain important information which is vital for the process of
decision making which in the government sector, by its very nature, has wider
implications.

Auditing in the government sector therefore has a substantive

importance. Attention for the processes like acquisition of resources

(economy), use of resources (efficiency), satisfaction of needs of society


(effectiveness) which implies that audit of financial management as such,
including compliance of laws and regulations in the rightfulness audit, is often
defined as a substantive object of audit in the audit assignment.

Financial reporting in the public sector is also different from that in the

private sector because the laws and regulations regarding financial reporting in
the public sector are different on account of the need for transparency on part
of the government regarding the governments plans and the resource
allocations. Therefore the laws and regulations on financial reporting in the
public sector start with regulating the procedure of the budgeting process and
the structure of the presentation of information in the budget documents.

Furthermore, as far as the government is concerned, its primary goal is

not to earn a profit over and above the cost of production as is the case with
private entities. Rather the goal of government is to realize the maximal
possible usefulness for society from a limited amount of resources and the
performance indicators are also different since the success of government
entities is not expressed only in financial terms.
Tools And Techniques
Journal voucher.
Ledger
Subsidiary Books (sales book, purchase book, cash book, and many

more)
Trial Balance.
Financial Statement (Trading and P&l A/c, Balance Sheet)
Ratio Analysis
Cash Flow and Fund Flow Analysis
Working Capital Statement.
Cost Analysis
Budgeting
And Many More

Key Learning:

Organizational independence.
A formal mandate.
Unrestricted access.
Sufficient funding.
Competent leadership.
Competent staff.
Stakeholder support.
Professional audit standards

CHAPTER 4 STUDY OF SELECTED RESEARCH


PROBLEM
OBJECTIVES OF THE PROJECT
To study the working of yarn division.
Efficient use of resources.
To study of inflow and outflow of cash.
What factors that considers their working capital requirement.
Working Capital Policies.
To operate the working capital cycle of the management.

RESEARCH METHODOLOGY
Research comprises of defining & redefining problems, formulating
hypothesis or suggested solutions, collecting, organizing & evaluating data,
making deductions & reaching conclusions. In research design we decide
about:

Type of data

From whom to get data

About sample size

How to analyze data

How to make report

DATA TYPE

Data collected was both Primary and Secondary in nature


SAMPLE SIZE
The sample size for the study of the project was yarn division of
VARDHMAN GROUP LTD.
RESEARCH DESIGN
STEP 1- To study the balance sheet of yarn division
STEP 2 understanding various methods used for analysis cash flow
statement to study procedure followed for cash flow statement in Vardhman
STEP 3 Data Analysis of working capital through Ratios
DATA COLLECTION
The information is collected through the PRIMARY SOURCES like:
Talking with the employees of the department.
Getting information by observations e.g. in manufacturing processes.
Discussion with the head of the department.

Data was collected from following SECONDARY SOURCES like


1. Corporate department
a) Marketing department
b) Finance department
2. ACR reports
3. MIS Department
The collected information was edited & tabulated for the purpose of analysis.

TOOLS USED FOR PROJECT


While making the project file various tools were used. These tools helped in
doing the work. These are: Microsoft Excel
Microsoft Word
Various analysis tools like Bar Graphs, Pie Graphs, tables

LIMITATIONS OF STUDY
In the due course time, the main limitation was with searching the data. The
data was not completed in the main files of SATISH MITTAL& COM. The
training period of six weeks was to short to study the organization in detail. In
some cases budgets are available but actual figures are not available for
comparison.

CHAPTER 5 ANALYSIS

1. FINANCIAL RESULTS:
The Financial Results for the year are as under :- (Rs. in Crore)
PARTICULARS

2009-2010

2008-

2009
Turnover

2,767.22

2495.38

594.63

371.37

86.73

102.34

Profit before Depreciation and Tax

507.89

269.03

Depreciation

220.87

207.32

Profit before Tax (PBT)

287.02

61.71

56.75

0.17

PBDIT
Interest and Financial expenses

Provision for Tax - Current


- Fringe Benefit Tax

- 0.91

- Deferred Tax
(Net of Adjustment)
Profit after Tax

16.51

33.28

213.76

27.35

Profit on sale of discontinued operations

Add: Debenture Redemption Reserve

Corporate Dividend Tax written back

1.95

1.25

60.85

57.34

Balance brought forward

- 113.42
-

Balance available for appropriation

276.56

199.36
Appropriations:
Proposed Dividend on:
- Equity shares

17.33

11.55

- Corporate Dividend Tax

2.88

1.96

20.21

13.51

125.00

125.00

Transfer to General Reserve

131.35

60.85

Surplus carried to Balance Sheet

276.56

199.36

- Basic

37.00

24.37

- Diluted

31.83

18.48

Dividend per share (Rs.)

3.00

2.00

Earnings per share (Rs.)

MANAGEMENT DISCUSSION AND ANALYSIS REPORT:


A) Textile Business:

World economy has shown initial indications of recovery after a severe spell
of recession. The world economy is expected to grow by 4.2 percent in 2010
and projected to maintain the growth momentum in the next 5 years. However,
the consumer confidence in major importing countries like USA and EU has
been lagging behind economic growth projections and may
take some more time before showing any convincing revival. Though some
growth has been seen in the world trade of textile and clothing especially post
Sept. 2009. The USA textile and clothing imports, which declined by 13
percent in 2009 over 2008 has increased by 1 percent during Jan-Feb 2010.
The partial
explanation of increase in textile and clothing imports may be attributed to the
pressure on retailers caused by very low inventory levels. It has resulted into
creation of demand for textile and clothing products in international market.
The domestic market is also showing some signs of improvement leading to
overall increase in textile manufacturing in the country. The industry has
attracted investment to the tune of Rs. 2 lacs crore under TUF for capacity
expansion and modernization, which has started paying yield. It is evident
from the increased textile manufacturing in the country in the form of
increased spun yarn production. The spun yarn production is expected to
increase at about 4200 mn kg in 2009-10 and expected to grow by about 8%
to 4500 mn kg in 2010-11. The domestic deliveries of spun yarn has also been
growing consistently showing increased activities in the entire textile value
chain.
B) Steel business:
Our steel business is dependent on demand for auto and other related users.
The demand in auto industry which was suppressed because of global
economic slow down has now revived since third quarter of 2009-10.
Simultaneously, their has been a steep rise in raw material cost like shredded
scrap, sponge iron etc. because of which there is more market driven

pressure on pricing of finished steel. However, the auto industry is projecting


healthy growth during 2010-11 and it is expected that the demand shall remain
firm enabling steel plants in India to utilize their installed capacity in full. The
Company is also considering to structure this business and have appointed the
external advisors to help examine various options to restructure the same.
C) Financial Analysis and Review of Operations:
PRODUCTION & SALES REVIEW:
During the year under review, your company has registered a turnover of Rs.
2,767.22 crore as compared to Rs. 2,495.38 crore showing an increase of
10.89% over the previous year turnover. The export of the Company increased
from Rs. 627.04 crore to Rs. 704.00 crore, showing an increase of 12.27%
over the previous year owing to enhanced production and better
product/market penetration. The business wise performance is as under:-

a). Yarn:
The production of Yarn increased from 115,888 MT to 126,146 MT during
2009-2010.The sales revenue of yarn increased from Rs. 1,324.72 crore to Rs.
1,476.99 crore during the year under review.
b). Steel:
During the year, the production of steel ingots/billets has been 62,110 MT
compared to 53,078 MT of the previous year and that of Rolled products has
been 56,581 MT compared to 51,471 MT of the previous year. The sales
revenue of the division has been Rs. 276.38 crore (Previous Year Rs. 321.74
crore).
c). Fabric:
During the year, the production of processed fabric increased from 51.35
million meter to 60.78 million meter, showing an increase of 18.36% over the

previous year. The sales revenue of the processed fabric also increased from
Rs. 482.17 crore to Rs. 556.52 crore showing an increase of 15.42% over the
previous year.
PROFITABILITY:
The Company earned profit before depreciation, interest and tax of Rs. 594.63
crore as against Rs. 371.37 crore in the previous year. After providing for
depreciation of Rs. 220.87 crore, (Previous year Rs. 207.32 crore), interest of
Rs. 86.73 (Previous Year 102.34 crore), provision for current tax Rs. 56.75
crore (Previous year Rs. 0.17 crore), provision for deferred tax (net of
adjustments), Rs. 16.51 crore (previous year Rs. 33.28 crore), and provision
for Fringe Benefit Tax of Rs NIL (Previous Year Rs. 0.91 crore) the net profit
from operations worked out to Rs. 213.76 crore as compared to Rs. 27.35
crore in the previous year.
RESOURCES UTILISATION:
a). Fixed Assets:
The gross fixed assets (including work-in-progress) as at 31st March, 2010
were Rs. 3,611.65 crore as compared to Rs. 3,414.27 crore in the previous
year.
b). Current Assets:
Debtors outstanding for more than six months were Rs. 13.00 crore as
compared to Rs. 22.87 crore in the previous year. The net current assets as on
31st March, 2010 were Rs. 1,769.52 crore as against Rs. 1370.30 crore in the
previous year. Inventory
level was at Rs. 1,107.46 crore as compared to the previous year level of Rs.
620.10 crore.
FINANCIAL CONDITIONS & LIQUIDITY:
The Company enjoys a rating of "AA-" with stable outlook and "P1+" from
Credit Rating Information Services of India (CRISIL) for long term and short

term borrowings respectively. Management believes that the Company's


liquidity and capital resources should be sufficient to meet its expected
working capital needs and other anticipated cash requirements.

The position of liquidity and capital resources of the Company is given


below:(Rs. in crore)
2009-2010 2008-2009
Cash and Cash equivalents:
Beginning of the year

357.21

62.70
End of the year

222.07

357.21
Net cash provided (used) by:
Operating Activities

(79.72)

447.04
Investing Activities

(97.06)

(125.53)
Financial Activities

41.64

(26.99)

Satish kumar mittal & com Yarns & Threads Limited


This subsidiary of the Company which is a Joint Venture with American &
Effird Inc. (A&E) which is second largest global player in Threads
Manufacturing and Distribution with a partnership of 51:49 is engaged in the
business of Threads Manufacturing and Distribution. During the year under

review, the gross sales of this Company were Rs. 377.16 crore and the Profit
after tax was Rs. 41.37 crore.
DIVIDEND:
The Board of Directors of your Company has recommended a dividend of Rs.
3/- per share on the Fully Paid-up Equity Shares of the Company.

LIMITATIONS
Working capital is powerful tool of determining companys strength and
weakness. But the analysis is based on the information available in the
financial statements, which are as follows:
It is only a study of interim report.
Working capital study is only based upon monetary information and
non-monetary factors are ignored.
It does not consider change in price level.
As working capital is prepared on the basis of going concern, it does
not give extract position. Thus accounting concept and conventions
causes a serious limitation to financial analysis.
Analysis is only a mean and not an end in itself. The analyst has to
make interpretation and draw his/her conclusion. Different people may
interpret the same analysis in different ways.

CHAPTER 6 SUMMARY AND CONCLUSION


CONCLUSION
The sale of SATISH KUMAR MITTAL&COM.Group is more in Ludhiana
market in comparison to other mills. The customers are giving faith in its
quality. Oswal, Malwa & Sharman respectively stand in close competition
with Vardhman. The price of Vardhman for all yarns are the highest because of
its high quality standards and their expense on extensive sales promotion. The
other factors that contribute for its maximum sales are its timely supply
without much problems and its cordial relations with dealers.
In this project we have discussed what is CASH FLOW and working capital
and help in analysis short term financial position of company
Complementing the balance sheet and income statement, the cash flow
statement (CFS), a mandatory part of a company's financial reports since
1987, records the amounts of cash and cash equivalents entering and leaving a
company. The CFS allows investors to understand how a company's
operations are running, where its money is coming from, and how it is being
spent. Here you will learn how the CFS is structured and how to use it as part
of your analysis of a company
Working Capital is the lifeline of every industry, irrespective of whether its a
manufacturing industry, services industry. Working Capital is the prime and
most important requirement for carrying out the day to day operations of the
business. Working Capital gives the much-needed liquidity to the business.
Working Capital Finance reduces the overall fund requirement, required to
build up the Current Assets, which in turn help you improve your Turn Over
Ratio.
In the end I would say that it was great working with SATISH KUMAR
MITTAL& COM.

SUGGESTIONS
The prices should be less to re-establish the market for Yarn.
Since the customer is very specific in terms of value so the company can
introduce new and alternative products whenever possible by adjusting
the raw-material mixing as a result achieve better profitability.
As far as accounting is concerned, although the entire system is
computerized, but there still involves lots of paperwork. So this should
be minimized b acquiring more advanced accounting software
Not only for yarn customers but for other product customer dealing
under letter of credit should done
L/C period should also increased
Company should put more efforts to improve its liquidity position
Company should stretch the credit period given by the suppliers.
Company should improve the inflow and outflow of cash.
Company should use the capital in efficient manner.

Strengths

Positive Attitude

Flexibility.

Hard work with smartness.

Good in Computer work.

Knowledge of Accouts and Finance.

Opportunities

Weaknesses

Emotional Behaviour.
Lake of Concentrate.
Change of place.

Threats

Growing Sector

Lake in knowledge of Finance

Learning Opportunities.

Very Big Finance Sector

Improve Knowledge of Finance.

BIBLIOGRAPHY

REFERENCE TO A BOOK

Gupta K Shashi , Sharma R.K (2 003), Management Accounting And


business Finance , Kalyani Publishers ,New Delhi

REFERENCE FOR ARTICLES


1. Bergami Robert, (2009), Will the UCP 600 Provide Solutions to
Letter of Credit Transactions? International Review of Business
Research Papers,Vol.3 No.2, June 2007, Pp. 41 - 53

2. Dolan John, (2009), THE LAW OF LETTERS OF CREDIT


The Wayne State University Law School Legal Studies Research,
Vol 1, April 2007, p149

3. Padachi Kesseven, (2008), Trends in Working Capital


Management and its Impact on Firms Performance: An Analysis
of Mauritian Small Manufacturing Firms, International Review
of Business Research PapersVol.2 No. 2. October 2006, Pp. 45
-58

4. Klien Carter, (2006), Using Letters of Credit to Secure Lease


Obligations, Law journal Newsletter ,Vol 18, No 4 , September
2005, p. 585

5. Lazaridis Dr Ioannis, Tryfonidis Dimitrios, (2006), The


relationship

between

working

capital

management

and

profitability of listed companies in the Athens Stock Exchange,


University of Macedonia ,Greece, Vol 28, No78,October ,
pp1013.

6. Schelin Johan (2005), Letter of credit and doctrine of strict


compliance, University of Uppsala, Vol. 4, No. 3,, January, pp
27 34
7. Shelton Fred (2004), Working capital and constructions
industry, journal of construction accounting and taxation,
December, pp. 45-56.

8. Weinraub Herbert, Visscher Sue (2000), Industry practices


relating to aggressive conservative working capital policies,
Journal of Financial and Strategic Decisions, Vol 11 No 2,
November, pp. 770-774.

9. Mills Geofrey (2001), The Impact of inflation on capital


budgeting and

working capital, Journal Of Financial And

Strategic Decisions, Vol 9 No 1 ,October, pp. 26-32.

WEB PAGES

www.google.com
http://en.widipedia.org/wiki/Letters_of_credit