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A Study On
FINANCIAL STATEMENT ANALYSIS
With reference to
JK Paper Mills
A project report submitted to Andhra University, Visakhapatnam
in partial fulfillment of the requirement for the award of thedegree of
MASTER OF BUSINESS ADMINISTRATION
Submitted by
P.KUMAR RAJU
(Regd No: 110250402066)
Under the guidance of
Mr. Siva Rama Kiran
Assistant Professor
MAHARAJA`S POST GRADUATE COLLEGE
(Accredited with `A` Grade by NAAC)
(Affiliated to Andhra University, Visakhapatnam, recognized by AICTE, New Delhi)
Phool Baugh, Vizianagaram
2010-2012
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ACKNOWLEDGMENT
I am thankful to project guide Mr.Siva Rmam Kiran (faculty), department
of management studies, M.R.P.G College, Vizianagaram for guiding and helping me
in the completion of this project.
I sincerely thank Shri.C.A.Sunil Das Section Officer (Finance) and Staff of
the Accounts Department & Mr.Santeeb Kumar Samal Officer (HRD)of M/s JKPaper Mills for their interactive sessions giving guidance and support despite their
work schedule.
I also thank to the training department of M/s JK Paper Mills for permitted
me to complete my industrial training work at JK Paper Mills.
I express my profound sense of gratitude to Prof.P. SRINVAS SUBBA
RAO Head of the department, who had extended his valuable time and guidance to
me in structuring of the report.
I am grateful to K. HANUMANTH RAO garu of MAHARAJA`S POST
GRAUATE college, Vizainagaram for his endower and co-operation in doing the
project study.
Place:
Date:
(P.KUMAR RAJU)
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CERTIFICATE
This is to certify that the project entitled A study on
FINANCIAL STATEMENT ANALYSIS in JK Paper Limited,
Rayagada is a bonafide work done by Pulapa Kumar Rajuunder my guidance and supervision during 2nd May to July 2nd
submitted in partial fulfilment for the award of degree of Master
Of Business Administration (MBA), Sri Maharajah Post
Graduation Institution of Management Studies , Vizianagaram,
Andhra Pradesh.
C.A.Sunil Das
Sr.Manager (Accounts)
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DECLARATION
I hereby declare that this project entitled FINANCIALSTATEMENT ANALYSIS carried in JK Paper LTD,
Rayagada has been successfully completed and prepare by
me during the period of 2nd May to July 2nd in partial
fulfilment of degree of MBA.
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INTRODUCTION
In our present day economy, finance is defined as the provision of
money at the time when it is required. Finance may be defined as the art and
sciences of managing money. Finance holds key to all human activity. No
business activity can ever be pursued without financial support.
Finance is the only common decision/ denominator for a vast range of corporate
objectives. The major part of any corporate plan must be expressed in financial
terms.
Financial management is the managerial activity, which is concerned with the
planning and controlling of the firms financial resources though it was a branch
of economics till1890 as a separate discipline it is of recent origin. Still it has no
unique body of knowledge of its theoretical concepts even today.
Of great interest to academicians because the subject is still developing and
there are still developing and there are still certain areas where controversies
exit for which no unanimous solutions have been reached as yet. Practicing
managers are interested in this subject because among the crucial decisions of
the firm are those which relate to finance and on understanding of theory of
financial management provides them with conceptual and analytical incites to
make those decisions skillfully.
the area of financial management has undergone far-reaching changes over a
time. The finance function assumes a lot of significance in the modern days in
the view of increased size of business operations and growing complexities
associate there to.
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A firm performs finance functions simultaneously and continuously in
the normal course in the business. They do not necessarily occur in a sequence.
Finance function call for skillful planning, control and execution of business
activities.The financial statements provide a summarized view of the financial position
and operation of the organization. Therefore much can be learnt about the
organization by a careful examination of its financial statements or they are the
invaluable documents regarding the financial performance of an organization.
this analysis of financial statements is an important id to financial analysis. the
focus on key figures in the analysis of financial statements is a process off
evaluating relationships between components parts of financial statements to
obtain a better understanding of the financial position and performance.
Managements of the organization are confronted with taking decision
about source of finance its capital structure and credit policy its application of
funds. In order to take strategic decision the management needs to asses the
progress and performance of the organization. Ratio analysis funds flow
analysis is the some of the tools.
Financial statement analysis can be undertaken either by the
management of the organization or by outside parties, viz., creditors investors
and public. The nature of analysis differs depending upon the purpose of
analysis.
The analysis and interpretation of financial statements is an importantaccounting activity. The end users of financial statement will get further insight
about financial strengths and weakness of the firm. Management will be
particularly interested in knowing financial strengths of the firm to make their
best use to be able to spot out financial weakness to take suitable corrective
actions. Also the further plans of the firm should be laid down in view of firms
financial strengths and weakness.
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A proper financial analysis must be used to analyze a firm past
performance and asses its present financial strengths for making the better
future plans. The financial resources of every organization are always scarce
and therefore require proper planning and control in order to achieve the bestout of funds available.
The financial information of companies consists of three basic financial
statements like balance sheet, trading and profit & loss appropriation account.
These statements are very useful for evaluating the financial position and
performance of a firm through financial analysis.
The information given in the basic financial statements serves no useful
purpose unless it is interpreted and analyzed in some comparable terms. So the
ratio analysis is one of the tools in the hands of those who want to know
something more from the financial statements.
The relationship between two accounting figures expressed
mathematically is knows as financial ratio. The relationship can be expressed as
percentages, fractions and proportions of numbers. Ratio helps to summarize the
large quantities of financial data and to make qualitative judgment about the
firms financial performance. Ratios may be compared with its own past records
and similar firms for efficient financial management. So the ratio analysis
reveals the relationship in more meaningful way so as to enable one to draw
conclusions from them.
The parties interested in financial analysis are short and long term creditors
owners and management. These people use ratios to determine those financial
characteristics of the firm in which they are interested are:
The financial condition and the ability of the firm to meet its current
obligations.
The extent to which the firm has used its long-term solvency by
borrowing funds.
The efficiency with which the firm is utilizing its assets in generating
sale revenue. The overall operating efficiency and performance.
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Thus one can understand that the financial management is the key to the
successful business operations and without proper administration of finance no
business operations. And without proper administration of finance no business
enterprise can utilize its full potential for growth and success.
NEED FOR THE STUDY
Financial analysis of identifying the financial strengths and weakness of
the firm by properly establishing relationship between the items of the balance
sheet and the profit & loss account. Management of the firm can under take
financial analysis or by parties outside the firm that is owners, creditors,
investors and others. The nature of analysis will differ depending purpose of the
analyst.
To enable the students to acquire the skills and abilities for identifying
studying, analyzing and solving any managerial and business related problems.
Thus moulding students in to decision- makers.
To fill the gap between theory and practices of business operations.
To analyze the financial performance of the J.K. Paper Ltd
The present work is undertaken to put forth the effect for appraising the
financial performance of J.K. Paper Ltd by adopting Ratio analysis.
The study concentrates on the financial state of affairs of the
company. It helps to present broader picture of the financial position of the
company through ratios. This helps the companys success in making its
requirements and production of paper.
J.K. Paper Ltd is one of the profitable organizations in India,
rendering useful services to the society and has been playing a vital role in
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generating income to the country as well as in promoting industrial
development.
J.K. Paper Ltd is huge; so the effective management of the capital is
required. For which continuous monitoring of the various operations is needed
for the organization. So in order to achieve its objective the organization with
the help of evaluation of ratios should implement the best course of action.
Besides studying the financial position one can study the various
aspects relating to organizational financial analysis which covers every aspects
of management. This is probably one of the main reasons that evoked the
interest and need for the study.
OBJECTIVES OF THE STUDY
The present study in J.K. Paper Limited Rayagada has been undertaken
to evaluate the overall performance by applying theoretical concepts to a
particular situation in J.K. Paper Ltd and to compare and correlate the actual
achievements with the theoretical conclusion.
The main objectives of the study are:
To review the paper Industry in India with reference to JK PAPER Ltd.
To describe the significance of financial statement analysis for measuring financial
Performance.
To compare the financial performance of JK PAPER Ltd. over the years
by using Different financial statements analysis techniques.
To summarize and to suggest strategies for the better financial
performance of JK PAPER Ltd.
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METHODOLOGY
Methodology is a systematic procedure of collecting information in order toanalyze and verify a phenomenon.
The present study is based on data collected from primary and secondary
sources.
Primary Data:
It is the information collected directly without any references. Primary
data consists of information obtained from interaction and discussion with
concerned official of the organization to elicit their opinions on various relevant
matters. In the process of interaction with officials it is planned to confirm
through secondary sources.
The data collection includes:-
Conducting personnel interviews with the concerned officers of finance
department of J.K. Paper accounts department.
Secondary Data:
Secondary source of data includes collection of data through study of
official records, journals, annual reports, administration reports and various
magazines related to J.K. Paper Limited.
The data collection includes:-
Collection of required data from annual reports of J.K. Paper Limited.
References from textbooks and journals relating to financial
management.
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The information so collected from both the sources will be subjected to
statistical treatment to make the study a useful one. Application of statistical
techniques helps to draw useful conclusions and to enable to give appropriate
suggestion to improve the efficiencies off the organization.
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LIMITATIONS OF THE STUDY
Though the project is completed successfully a few limitations can be observed
in the study.
The time allotted for the project study is too short, to depict a clear
and real picture of the company and its operations.
Reliability on usage of secondary data.
The study was conducted with the data available, and the analysis
was made accordingly.
Some aspects of financial information were not available because of
the confidentiality of the J.K. Paper Limited.
Interpretations are based on the validity of the data collected.
During the period of analysis the companys current financial
information is not available.
This work is confined to the published data available.
Due to the busy schedule of the executives. It was very difficult to
get valuable information about the organization.
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PAPER INDUSTRY IN INDIA
WHAT IS PAPER?
Paper has played a vital role in the development of mankind since times
immemorial, as a means of communication as the most versatile material for
packing of goods as a medium of preserving knowledge for progeny.
Paper is defined as A MAT OF CELLULOSE FIBERS ARRANGED
IN CRISES CROSS FASHION WITH HYDROGEN BOND AND OTHER
FORCES.
Paper is derived from the word PAPYRUS. Today paper includes a
wide range of products with very different applications: Communication,
Cultural, Educational Artistic Hygienic Sanitary as well as storage and transport
of all kinds of goods. Its almost impossible to imagine a life without paper.
There is degree of consensus that the art of making paper was first
discovered in china and its origin in that country is traced back to second
century. In about AD 105 Tsailun, an official attached to imperial court of
china, created a sheet of paper using mulberry and other baste fibers along with
fishnets, old rags and hemp waste.
Chinese considered paper a key invention and kept this a closely
guarded secret for five centuries until the technology slowly made it way west
ward. The Arab captured chine city containing a paper mill in the early 700s
and from this stated their own paper making industry (Early 700s). Invention of
printing in 1450s brought a vastly increased demand for paper.
Paper was first made in England in 1496. The first US Mill was built in
1690, the rittent house mill, German town, Pennsylvania.
Paper has been found to have necessary use besides being a stationary
and it may use besides being a stationary and it may perhaps be true that
equipped with this powerful art craftsmans has been for the centuries
discovering new usage and benefits paper has been found to be the most
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essential product as a writing aid over which our attention is focused at the
movement, it has much to talk about. Indeed it involves itself in a wide range of
activities from WHITE HOUSE OFFICALS releases to kinder garnet copy
writing from toilet issue paper to the currency notes and many more.
Another big example of use of paper is none other than my project work
without which this would which this would not have happened.
In spite of good achievement to its credit in the development of the
economy, India is record is dismal in the scripts on leaves and metals later on
which the development of the paper sheets, it becomes possible for everything
known to us in the form of books, records and reports.
Long back people used to writ on walls, wooden plants, leaves of palm
etc, but then paper was invented in china and was called PAPYRUS. Since
then the world has got as excellent media for writing printing and several other
purposes. A material that has been playing such an important role in our day to
day life initiated the research of this project to take up this product paper is
playing a vital role in day to day life of every individual. Though the computers
have existed and many programs have been done to do paperless job works. But
it is not possible to go out of paper or to not need it any instance of time. This is
the reason why ht researcher chose paper as the product.
From economic point of view paper industry in all over the world is
facing problems of hardwood and bamboo being prime raw materials for the
industry need cutting of the forest. Along with cutting, plantations of the trees
are to be carried out. But it takes time for growing of trees factories are facing
raw material problem. They are leading to closure of the company only few
companies are doing well. For this substitute raw materials are being constantly
being worked for. The company which is fittest able to survive and cope with
the conditions and among them in India is JK PAPER.
ORGANIZATIONAL PROFILE OF JK PAPER LTD
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JK Organization was founded over 100 years ago and ranks, among the
largest private sector groups in India in terms of assets and sales. J.K
organization has a distinguished record of having pioneered several new
products and processes in India. The group has multi-business, multi productand multi location operations.
JK owes its name, to the two great visionaries- Late Lala Juggilal
Singhania and his son Late Lala Kamlapat Singhania as they conceived an
industrial entity. A dynamic personality with a broad vision, inspired by the
cause of the Swadeshi movement of Mahatma Gandhi, and driven by the zeal to
set up an Indian enterprise, Lala Kamlapat Singhania founded J.K. Organization
in the 19th century with its headquarters at Kanpur (U.P.) ushering in a new
industrial era in India.
Equipped with tenacity of purpose, perseverance, and foresightedness,
he achieved success in his mission and in a short span of time, between 1921
and 1937, a series of Industries with diversified interests were set up by him
Kamla Ice Factory, JK Jute Mills Co. Ltd, JK Cotton Manufacturers, JK Iron
and Steel Co. Ltd. against the tough opposition of British Industrialization and
an alien Government.
He died at an early age of 53 on 31st May 1937 and left the legacy of his spirit of
patriotism, swadeshism and the aptitude for planning and social service to his
three illustrious sons- Sir Padampatiji, Lala Kailashpatiji and Lala
Lakshmipatiji, who along with other family members have contributed the best
of their services to the growth of the organization, in a team spirit.
JK ORGANIZATION has been a forerunner in the economic and
social advancement of India. It has always aimed at creating job opportunities
for a multitude of countrymen and to provide high quality products. It has
strived to make India self-reliant by pioneering the production of a number of
industrial and consumer products, by adopting the latest technology its own
know-how. Besides serving the nation, it has also undertaken industrial ventures
in several other countries.
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JK ORGANIZATION is an association of industrial and commercial
companies, employing nearly 50,000 persons engaged in the manufacture of a
variety of products and in diverse field of commerce. JK Organization
comprising more than 50 in number, the groups companies are mostly publiclimited, where it has controlling interest ranging from 35% to 80% and the
number of public shareholders aggregate over 7, 00,000.
JK ORGANIZATION is headed by Shri Hari Shankar Singhania, an
eminent Industrialist who enjoys reputation of a high order in the country, as
well as abroad. He was the President of the International Chamber of
Commerce, Paris for 1993 & 1994. Apart from heading apex bodies of Commerce and
Industry, he is holding top positions in the premier Professional Bodies in India and abroad.
In honor of his contribution to the society, Government of India has bestowed the
prestigious National PADMA BHUSHAN award to Shri Hari Shankar
Singhania on 26-01-2003. He has been honored with the nations third highest
civilian award for distinguished service of high order in trade and industry.
JK ORGANIZATION has made many forays into several fields such as:
Paper and Boards, Cement, Automotive Tyres and Tubes, Pharmaceuticals,Paper and Boards, Cement, Automotive Tyres and Tubes, Pharmaceuticals,
Agrochemical, Hybrid seeds, Cosmetics, Audio Magnetic Tapes, V.Belts,Agrochemical, Hybrid seeds, Cosmetics, Audio Magnetic Tapes, V.Belts,
Conveyor Belting, Automotive Belts, Material Handling Systems, Sugar, DairyConveyor Belting, Automotive Belts, Material Handling Systems, Sugar, Dairy
& Food Products.& Food Products.
JK ORGANIZATION has achieved a number of important
technological break-through and has an impressive record ofFIRSTS in India,
prominent among them being:
1994- First in India to produce Aluminum Virgin Metal from
Indian Bauxite. (The company was nationalized in 1973)
1949- First in India to manufacture Steel Engineering Files.
1962- First Indian Paper Mill to receive ISO-9001 certification.
1969- First in India to set up continuous Rayon plant.
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1977- First in India to produce Steel Belted Radical Tyres for
Passenger cars, trucks and buses.
1980- First in the world to make Steel Radical Tyres for 3
wheelers.
1984- First to produce White Cement in India using dry process
technology.
1989- First in India to produce magnetic tapes with cobalt
technology.
1994- First Tyre industry in world to receive ISO-9001
Certification for entire operation.
JK PAPER LIMITED VISION
To set benchmarks in the Indian Paper Industry in Quality of Products,
Services, People, Profitability, Growth, Innovation and Environmental
Management to contribute to the Development of the nation.
CORPORATE MISSION
To achieve growth and leadership through the JK brand equity, customer
obsession, technological innovation and cost leadership, with a clear focus on
environment, while continuously enhancing shareholder value.
QUALITY POLICY:
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To provide Customer Delight both internal and external through our
products and services at Lowest Cost by Continuous Improvement in processes,
productivity, quality and management systems.
ENVIRONMENTAL POLICY:
We, at JK Paper Mills, Rayagada, Orissa (India) are committed to:
Comply with applicable Environmental Legislations
Prevention of Pollution
Continual improvement in environmental performances
We shall improveour Environmental Performance by:
A forestation through social and farm
forestry supported by clonal technology
Cleaner technologies and processes
Reducing pollutants in discharged water
Reducing particulate emissions
Solid waste management
Conservation of resources
SAFETY AND HEALTH POLICY
We are committed to:
Adhere legislation and government regulations related to safety and health
in manufacturing activity.
Foster safety and health awareness among its employees through
preventable measures, continuous development, awareness and
improvement in the work environment.
Give top priority to proactive steps like:
Safety audits
Work permit systems
Health check
Engineering and process up gradation
Improved work practices
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ENERGY CONSERVATION POLICY:
We are committed to reduce the energy consumption and cost by:
Optimization of plant and equipment efficiency
Elimination and prevention of all types of losses such as water, power,
steam, coal, compressed air
Maximizing condensate recovery &use, process heat recovery, waste
minimization
Increasing the co-generation of steam and power
Improved utilization of natural resources leading to environmental benefits
Energy conservation through total emploee involvement.
ENERGY SAVED IS PROFIT EARNED
CORE VALUES OF JK ORGANIZATION
Caring for people
Integrity including intellectual honesty, openness, fairness and trust
Commitment to excellence.
PROFILE OF JK PAPER LTD.
JK Paper is an independent company of the JK Organization, a leading
Indian conglomerate with diversified business interest. JK Paper was among the
first in India to set up integrated manufacturing facilities of internationalstandards. And recorded a turnover of Rs 6,255 million in 2001-2002. The
Companys world class pulp mill is the largest in the country and occupies a
place of pride in the Indian Pulp & Paper Industry.
The companys commitment to continuously raise quality
benchmarks resulted in JK Paper Mills becoming the first integrated pulp and
paper plant in India to receive the ISO 9001 certification & is now aiming at
attaining the TPM Award.
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Currently, the group ranks amongst Indias top Industrial
Houses with assets in excess of Rs 50 billion. The Group has diverse business
operations in India and abroad, automotive tyres and tubes, cement, sugar, audio
magnetic tapes, dairy and other agri-products. It employs nearly 17,000 peopleand has over 2, 90,000 public shareholders across its major public limited
companies.
J.K. Paper has one of the strongest distribution networks in the
paper industry and has a national wide reach through its 4 regional offices, 13
warehouses, 95 wholesalers and over 1600 dealers. The company exports paper
to several countries including, Srilanka, Bangladesh and several West Asian
nations. Branded copier paper accounts for nearly 50% of the exports.
PLANT LOCATION JAYKAYPUR
Jaykaypur is located on the slopes of the Eastern Ghat Plateau in the Southern
part of Orissa bordering the state of Andhra Pradesh and its geographical position 83-25
East longitude and 19 10 North Latitude. Its average height above the mean sea level is
758 feet.
The township has a population of about 25,000 and has a self-sufficient
marketing complex, including Employees Multi purpose Co-operative Society, a sub-
post & Telegraph Office, a Branch Post Office, a Police Out post and has two Banks viz.,
state Bank of India and Indian Overseas Bank. The Township has two Schools and
places of worship of al major faiths. Singapore Road Railway Station (SPRD) on the
raipur- Waltair Section of south eastern Railway Station and is at a distance of 2 KM
from the Mills and all passenger and Express trains halt here.
JAYKAYPUR 765 017, DIST.RAYAGADA, ORISSA (INDIA)
The nearest town in Rayagada, which is the district headquarters and is located at
distance of about 10 KM from the Mills.
Rayagada District has a predominance of tribal population. Therefore, the villages in
and around the Mills are inhabited mostly by the adivasis, who too are assimilating the
industrial culture and are thus coming into the national mainstream.
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HISTORY OF JK PAPER LTD
Incorporated in the year 1938, JK Corp Limited, started its operation with a board
mill at Bhopal for manufacture of straw board. Since then the activities of the company
have been diversified from time to time. In the year 1962, JK Corp Ltd. set up this
integrated Pulp and Paper Mill in the backward district of Rayagada in Orissa. In 1982,
the activities of JK Corp Ltd. were further diversified when it set up a most modern
cement plant by the name Lakshmi Cement.
In 2001 JK Paper Ltd. was formed by amalgamating the JK Paper Mills at
Rayagada and the Central Pulp Mills at Songadh, Gujarat, to become Indias 2 nd largest
producer of quality paper with a turnover exceeding Rs. 650 crores. It is the first Indian
Paper Mill to receive the Sword of Honour from British Safety Council and ISO 9001
Certification by DNV Norwegian agency.
The company is conscious of the need to constantly update technology of
existing plants and machineries and in this direction there are regular schemes of
modernization and renovation from time to time.
The companys strategy continues to be to offer more and more value added
products, continuously modernize and upgrade its plants for achieving better efficiencies,
improved quality of products and internationally recognized environmental standards.
Towards this end, the company is implementing an Offline Coated Paper Project with a
capacity of 46,000 TPA at JKPM Unit. This plant will utilize contemporary blade
coating technology and coupled with the companys high quality base paper, will be able
to offer the product in the upper segment of the market. The company would thus
become the second largest coated paper producer in India.
The company is also commissioning a modern Recovery Boiler at its CPM Unit,
which would result in higher chemical recovery and increased pulp production.
These projects along with other modernization programs would cost around Rs.
100 crores and would result in reduced cost and higher production. The projects are
scheduled for commissioning during the financial year 2004-05.
J.K. Paper Mill was expanded in phases and at present has 5 paper machines with an
installed capacity of 1,00,000 TPA with plans to expand the capacity further to 1.6
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lakhs TPA during the next five years. Besides the new paper machine, imported cutter
for automatic cutting and packaging of paper was commissioned during the year 1994-
1995.
The Mill manufactures quality writing, printing and business communication
papers and paperboards using primarily hardwood and bamboo procured locally found
in and around Orissa.The mill undertook a massive modernization Program during
1997-98 with an investment of Rs.300 crores. J.K.Paper Mills have continuously
upgraded the technology by modernizing and renovating the plant, machinery and
equipment to face the present day challenges of Eco-friendly manufacture.
The state-of-the-art blade coating plant is expected to be commissioned during
the year.
The Central Pulp Mill, a unit of JK Paper Ltd. is one of the largest integrated Pulp
and Paper Mill in Western India. The mill was incorporated in 1960 with its registered
office at Pune. The mill began commercial production on April 01, 1968 with an
installed capacity of 30,000 tones per annum for production of pulp. The capacity of
mill was enhanced to 40,000 tones per annum by undertaking balancing scheme. Due to
heavy investments and unfavorable market conditions CPM faced financial problems
and was referred to BIFR in 1987 as having negative worth.
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JK PRODUCTION CAPACITIES
CENTRAL PULP
MILLSJK PAPER MILLS
Installed capacity
(paper) 47,000 Tons per annum 90,000 Tons per annum
Actual production achieved
in the year 2002-2003
51,740 Tons 1,06,521 Tons
Pulp production
Capacity 44,000 tons per annum 1 Lakh tons per annum
Market pulp production
Capacity
(ADMT)
Actual Production:2002-03
(ADMT)
15,290 tons per annum
13,617 tons per annum
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PHASES AT JKPM
OPERATIONAL EXCELLENCE
J.K. Paper has undertaken an integrated operational improvement Program named
Operational Excellence with the objective of improving the profitability of the organization.
This program is driven by a team of J.K. Paper executives and is supported by consultants from
McKinsey & Company.
operational excellence encompasses streams of manufacturing, purchasing and
marketing. this program aims to achieve an accelerated pace of development by identifying
improvement opportunities in various streams as part of a concerted and focused effort. as a
result, it aims to build capabilities within the organization to be able to maintain this rapid pace
of continuous improvement in future also.
In Phase 1, the team has generated about a thousand ideas through brainstorming,
interaction with experts around the world, research on the internet and reading technical
journals. It has then evaluated each of these ideas rigorously in a fact-based manner and is
currently in the process of implementing 110 ideas. Excepting 7/8 ideas, all other ideas have
been successfully implemented as on today.
In Phase 2, the team has about 450 ideas and evaluated. After short listing and
evaluation, final syndication has been done and finally 64 ideas were accepted for
implementation. All these ideas are in the final stage implementation.
In Phase 3, ideas were taken up from the CPM unit and 39 ideas were finally accepted
for implementation.
Currently, Phase 4 is in progress at JKPM. This phase is still under ideas generation stage.
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EMPLOYMENT, MANPOWER AND CATEGORIES OF EMPLOYEES
JK Paper Mills provide direct employment to about 1400 persons. In addition, about
1000 persons on an average are engaged intermittently for material handling, waste disposal
and other additional jobs at the Mills.
The various categories of employees working in the Mills are as follows;
1. Officers
2. Supervisory Staff
3. Workman (Staff)
4. Sub-ordinate Staff
5. Workman (Operatives)
Apart from permanent employees, for casual and extra jobs there is a pool of casual
mazdoors. Various jobs like loading and unloading and civil construction works are done
through contract labour. To have a trained, developed and educated manpower for future needs
and requirements, there are various categories of Trainees like Management Trainees,
Executive Trainees, Staff Apprentices, Trade Apprentices and Craftsman Trainees.
CLASSIFICATION OF JOBS OF WORKMEN (OPERATIVES)
The jobs of Workman (Operatives) are classified into 7 grades A to G Different trades
of Workmen (Operatives) is distributed into these 7 grades. A and B grades represent
unskilled workers; C, D and E grades represent semi-skilled workers and F and G
grades represent skilled and highly skilled workers.
Except the workers working in Finishing House and Feeding jobs, stitching and stacking of
paper Reams and Reels, who are paid on piece rate basis, all other workers are time rated wage
earners on daily basis. Wages are distributed monthly.
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SHIFT TIMINGS:
The Mills runs in 3 Shifts and General Shift m the timings of which are as follows:
A Shift 6.00 am to 2.00 pm
B Shift 2.00 pm to 10.00 pm
C Shift 10.00 pm to 6.00 am
GENERAL SHIFT
7.00 am to 11.30 am
1.30 pm to 5.00 pm
Commencement and finish of shift period is indicated through blowing of siren and siren also
blows 30 minutes before the commencement of each shift.
ATTENDANCE:
The names of all regular employees are borne on the muster roll. All employees, except
workmen, are expected to mark their attendance by entering the attendance-recording card
inside the Card Reader at the beginning and end of the Shifts. Workers attendance is marked
on the basis of the token system.
HOLIDAYS AND LEAVE:
Weekly off day is given as per provisions of the factories Act. Generally, for those working in
General Shift, Sunday is the Weekly off day.
The Mills observes Festival and National Holidays as follows:
Pongal Republic Day
Maha Shivaratri Holi
Utkal Divas May Day
Ratha Jatra Independence Day
Gandhi Jayanti DasaraDiwali.
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PAYMENT DAYS:
Payment of salaries and wages for the month to Mills employees is as given below:
For Officers, Staff, Sub-ordinate - 5th Day of the following month
For workers - 10th Day of the following month
Withdrawal of salaries and wages through Bank is encouraged.
Wages to Contractors employees is disbursed by the respective Contractors on 7th Day of the
month. In case scheduled days fall on Sunday or Holiday, Salaries /Wages are paid on the day
proceeding such Sunday/Holiday.
DEPARTMENTS ATJKPM
PULP MILL
STOCK PREPARATION
PAPER MACHINE
PAPER FINISHING
PLANT FINISHING HOUSE
SODA RECOVERY
QUALITY CONTROL
CENTRAL LABORATORY
PULP AND PAPER LABORATORY
WATER SERVICE
ENVIRONMENTAL AND POLLUTION CONTROL
MECHANICAL ENGINEERING
ELECTRICAL ENGINEERING
INSTRUMENTATION
PLANNING AND DESIGNING
POWER HOUSE
CIVIL DEPARTMENT
TECHNOLOGICAL DEVELOPMENT
HRD AND PERSONAL
TOWNSHIP AND TRANSPORT
WORKS OFFICE
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ACCOUNTS
STORES AND YARD
SALES AND STOCK
SECURITY
DISPENSARY
SAFETY AND MANAGEMENT SERVICES
SOCIAL FORESTRY BY JK:
The member unit of JK Organization has been planting trees and saplings for increasing
the Green Cover. JK Paper Mills alone plants more than 1.5 lakh trees per year. Seedlings are
distributed every year by JK Paper Mills to the farmers who are willing to green their land with
trees.
The company has helped farmers with plantation in about 50,000 acres of
degraded wastelands in Orissa and Andhra Pradesh. This plantation program has seen the
development of fast growing, high yielding Eucalyptus clones involving an area of 17431hectares, benefiting 13666 farmers and generating 90,00,000. Man days of employment for
tribal.
Similarly CPM also continued to contribute towards the socio-economic development
of the rural population in the backward districts of Gujarat by providing free seedlings to the
local farmers and imparting direct and indirect employment opportunities to the local
community.
Until now social forestry scheme of CPM has benefited 14381 farmers in 196 villages
of five districts of Gujarat and Maharashtra with 87 lakhs plants in 2620 hectares. Besides, it
also gives job opportunity of 1500 man days to raise one lakh seedlings and 450 man days to
plant 1 hectare. CPM has introduced high yielding JK super clones under Social Forestry
Program.
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Others
1. The mills provided approach roads for the villagers.
2. JK Paper contributed a sum of Rs 57,000 in the year 1997 to the Lions Club of
Rayagada for the construction of Multipurpose Community Hall at Rayagada.
3. For the construction of Lord Sri Jagannath Temple at Rayagada, the mills have
contributed Rs 7.5 lakhs for the pletion of the construction work of the temple.
we believe generating revenue is not the ultimate end of business for us, creation of wealth is
more appropriate objective. the wealth of social infrastructure. the wealth of support and
caring for people around us.
ACHIEVEMENTS
The various achievements of J.K. Paper Mills:
Only integrated mill in India to achieve less than 100 meter cube
of water consumption per ton of paper.
Highest chemical recovery (more than 95%).
Excellent fiber recovery system (more than 95%)
Absorbable Organic Halide (AOX) level 0.5 to 1 kg per ton
of paper, so far the best in the country and comparable with
international levels.
Highly efficient Electro Static Precipitators (ESP) in all
boilers.
Pioneer in Social and Farm Forestry. Supplied in excess of 90 million samplings and
covered over 27,000 hectares under plantation.
Stood 2nd
all over India and was awarded 3 leaves Award by CSE
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Awarded outstanding Performance by State Safety Council, Govt. of Orissa for Safety,
Health, and Hygiene & Environment Management.
JK Paper in leadership through quality. It has been setting quality bench marks from its
inception, and continues to do so. Its major brands include JK Copier, JK Easy Copier, JK
Evervite, JK Excel Bond, JK Bond, JK SHB Map litho, CPM Parchment and JK MICR. Its
marketing volume is to the tune of 1, 60,000 MT per annum. J K Paper has one of the largest
distribution networks in the paper industry. With close to 100 wholesalers, over 1700 dealers,
10 warehouses and 4 regional offices spread across country, it has achieved unparalleled
service levels.
JK Paper has also been consistently exporting its products to markets such as Sri Lanka,
Bangladesh and several West Asian Countries. Nearly 50% of the exports are of branded
products.
OVERVIEW OF J K ORGANIGATION :
During the later half of the 18th
century, Shri Binodia Ram Singhania of village Singhana,which lies in the shekavatiregion of Rajasthan, migrated to uttarpradesh. The family settled
down in Kanpur and slowly spread its roots there. JK organization was born under the
leadership of Lala Kamlapatji and his father Lala Juggilalji. Hence the name-JK
The foundation of JK organization was laid when the nation was passing through turbulent
times. It was the time when Indians were discriminated against, in their own home land. Born
on 7th November, 1884, Lala Kamalapatji, the worthy son of Lala Juggilal Singhania, had the
determination to fight against this discrimination and a vision to make Indian Business self
reliant.
With this inspiration, he setup the 1st cotton in Northern India i.e., JK Cotton Spinning Mill in
1921, exclusively using Indian capital, management and labour. After this may other
enterprises were started by him. JK Jute Mills Co. Ltd., JK Iron & steel Co. Ltd., JK Oil Mills,
JK Cotton Manufacturers, JK Hosiery, Kamapat Motiala Sugar Mills, Kamla Ice Factory- an
empire was being created.
Keeping alive the script of entrepreneurship, the three sons of Lala Kailashpat Singhania and
Lala Lakshmipat Singhania established a number of industries across India and further
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consolidated the existing business. They were the pioneers in sitting up a mini steel plant in
1924, and first Indian Jute Mill in Uttar Pradesh in 1929.
Moving ahead, 1938 saw the inception of a mill in Bhopal, converting wheat straw in tostraw boards, with later became the foundation of JK Paper Ltd., Producing top quality paper
and boards. 1944 witnerrsed the beginning of the first plant in India, manufacturing Aluminium
from India Bauxite and a variety of end products, including aluminium extrusion foils and
ACSR products. In 1952, JK Steel pioneered the manufacture of Jute Bailing hoops, Steel wires
& wire ropes, Electric hoists and material handling equipment etc.
Venturing into other areas, JK acquired Raymond Woollen Mills in 1944 and turned it
around. Today the be=rand Raymond is well known in the country and the world over as a
hallmark for impeccable quality and styling. It diversified into manufacture of readymade
garments and steel engineers files, as the second largest manufacturer in the world.
1977 was yet another landmark year for JK Organization as the conglomerate entered
into business of producing tyres, which was till then the domain of multi-nationals. JK Tyres
commenced production in its ultra modern manufacturing unit in Kankroli, Rajasthan, in
technical collaboration with General Tyre Company of USA and pioneered the launching of
steel belted radial car tyres for the first time in India. Today, JKs radial is the cutting edge
technology in the industry.
Under the visionary leadership of Shri Hari Shankar Singhania, President, JK
Organization, ably supported by his brothers, the Organization has shown continuous andexemplary growth in diversified fields of industry. The group had achieved a lead position in
major business over the years.
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SIGNIFICANCE OF THE EMBLEM
The Hand and Hammer of JK Organization came into use in the beginning of 1943.
This symbol was chosen by Lala Lakshmipat Singhania, third son of Late Kamlapt
Singhania, the founder of JK Organization.
The circle denotes industry. 24 teeth in the circle symbolizes round -the- clock activity.
The hand and hammer signify labour and tool. The hard grip of the hand stands for the
employee strength and workmanship.
This emblem signifies the strong belief of the organization in the capability of its
employees.
The Group employs over 1200 Managers, 3000 Engineers besides a large contingent of
workmen with various skills
All the plants work at high efficiency and productivity levels using latest state of the art
technologies and equipment procured from India & abroad. The success of the
companies is based on innovative ideas and techniques, continuous Research &
Development, as also on its wide and effective marketing network of over 150
distributors and retailers and 3000 dealers and service Centers , operating pan India
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SOCIAL CONSCIOUSNESS & CORPORATE SOCIAL
RESPONSIBILITY
The JK Organization believes in taking the Nation forward by improving the quality of life of
its citizens by continuously working in sphere of education, health care, religious upliftment,
sports etc.
JKs contribution to society has been carried forward as an abiding commitment. Identifying
with social issues and contributing to the society has been a philosophy, which has been carried
on from the founding fathers. Various institutions set up by the group throughout India in
diverse fields of social welfare stand testimony to this philosophy.
CONCERN FOR ENVIRONMENT
In the pursuit of maintaining the environment and ecology, the group had already taken steps
to reduce carbon-di-oxide emissions by replacing fossil fuel biomass.
Group has a total commitment the environment of more than five decades of planning trees and
creating green factories by installing state-of art equipment for preventing pollution and
controlling harmful emissions.
CORE VALUES OF JK ORGANIZATION
1. Caring for people
2. Inegrity including intellectual honesty, openness fairness and trust.
3. Commitment to excellence.
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FINANCIAL STATEMENT ANALYSIS
Accounting process involved recording, classifying and summarizing various business
transactions. The aim of maintaining various records is to determine profitability of the
enterprise from operation of the business and also to find out is financial position. Financial
statements are in term reports, presented annually and reflect a division of the life of an
enterprise in to more or less arbitrary accounting period more frequently a year.
DEFINITIONS:
According to john n.myer the financial statements provide a summary of the accounts
of a business enterprise, the balance sheet reflecting the assets, liabilities, and capital as on a
certain date and the income statement showing the results of operations during a certain
period.
the term financial statement generally refers to following basic statements:
The income statement.
The balance sheet.
A statement of retained earring.
A statement of changes in financial position.
.
FINANCIAL
STATEMENT
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INCOME STATEMENT
The income statement (also termed as profit and loss account) is generally considered to
be the most useful of all financial statements. It explains what has happened to a balance sheet
dates. The nature of the income which is the focus of the income statement can be well
understood if a business is taken as an organization that uses inputs to produce output.
BALANCE SHEET
It is a statement of financial position of a business at a specified moment of time. It
represents all assets owned by the business at a particular moment of time and the claims of the
owners and outsiders against those assets at that time. The important distinction between as
income statement is for a period while balance sheet is on a particular date.
STATEMENT OF RETAINED EARNINGS
The term retained earnings means the accumulated excess earnings over losses and
dividends. The balance shown by the income statement is transferred to the balance sheet
through this statement after making necessary appropriations.
it is fundamentally a display of things that have caused the beginning of the period
retained earnings balance to be changed in to the one show in the end-or-the-period balance
sheet.
STATEMENT OF CHANGES IN FINANCIAL POSITION
the balance sheet shows the financial condition of the business at a particular moment
of time while the income statement discloses the results of operations of business over a period
of time for a better understanding of the affairs of the business, it is essential to identify the
movement of working capital or cash in the statement of changes in financial position.
INCOME
STATEMENT
BALANCE
SHEET
STATEMENT
OF RETAINED
EARNINGS
STATEMENT OF
CHANGES IN
FINANCIAL
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NATURE OF FINANCIAL STATEMENTS
The financial statements are prepared on the basis of recorded facts. The recorded facts
are those which can be expressed in monetary terms. The statements are prepared for a
particular period, generally one year. The transactions are recorded in a chronological order as
and when the events happen. The financial statements by nature are summaries of the items
recorded in the business and there statements are prepared periodically generally for the
accounting period.
THE FOLLOWING POINTS EXPLAIN THE NATURE OF FINANCIAL
STATEMENTS
1. RECORDED FACTS
The term recorded facts; refers to the data taken out from the accounting records. The
records are maintained on the basis of actual cost data. The figures of various accounts such as
cash in hand, cash at bank, bills receivables, sundry debtors, fixed assets are taken as per the
figure recorded in the accounting books. As the recorded facts are not based on replacement
costs the financial statements do not show current financial condition of the concern.2. ACCOUNTING CONVERSIONS:
Certain accounting converters are followed while preparing financial statements. The
conversion of valuating inventory at cost or market price, whichever is lower, is followed. The
valuing of assets at cost less depreciation principle for balance sheet purposes statements
comparable, simple and realistic.
3. POSTULATES:
The accountants make certain assumption while making accounting records. One of
these assumptions is that the enterprise is treated as a going concern. The other alternative to
this postulate is that the concern is to be liquidated the concern. So the assets are shows on a
going concern basis. Another important assumption is to presume that the value of money will
remain in the same in different periods.
4. PERSONAL JUDGMENTS:
Even though certain standard accounting conversions are followed in preparing
financial statement but still personal judgment of the accountant plays on important part.
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CHARACTERISTICS OF FINANCIAL STATEMENT
The financial statements are prepared with a view to depict financial position of a
concern. The financial statements should be prepared in such a way that they are able to give a
clear and orderly picture of the concern. The ideal financial statement has the following
characteristics.
1. DEPICT TRUE FINANCIAL POSITION
The Information Contained In The Financial Statements Should Be Such That A True
And Correct Idea Is Taken About The Financial Position Of The Concern.
2. ATTRACTIVE:
The Financial Statements Should Be Prepared In Such A Way That Important
Information Is Underlined So That It Attracts The Eye Of The Reader.
3. COMPARABILITY:
The results of financial analysis should be comparable. The financial statements should
be presented in such a way that they can be compared to the previous years statements.
Previous years figures in the balance sheet.
4. BRIEF:
If possible, the financial statements must be prepared in brief. The reader will be
able to form as idea about the figures.
IMPORTANCE OF FINANCIAL STATEMENTS
Financial Statements Contain A Lot Of Useful And Valuable Information Regarding
Profitability Financial Position And Future Prospective Of Business Concern.
THE UTILITY OF FINANCIAL STATEMENT TO DIFFERENT PARTIES MAY BE
SUMMARIZED AS FOLLOWS:
1. Management
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the financial statements are useful for assessing the efficiency of different cost centers.
The management is able to decide the course of action to be adopted in future.
2. Creditors
the trade creditors are to be paid in a short period. The crs will be interested in current
solvency of the concerns. The calculations of current ratio and liquid ratio will enable the
creditors to assess the current financial position of the concerns in relation to their debts.
3. Investors
the investors include both short-term and long term investors. They are interested in the
security of the principal amounts of loan and regular payments by the concern. The investors
will not only analyze the parent financial position but will also study the future prospectus and
expansion plans of the concern.
4. Government:
the financial statements are used assess tax liability of business enterprises. The
government studies economic situation of the country from these statements. These statements
enable the government to find out whether business is following various rules and regulations
or not.
5. Trade associations:
these associations provide service and protection to the members. They may analyze
the financial statements for the purpose of providing facilities to these members. They may
develop standard ratios and design uniform system of accounts.
6. Stock exchange
the stock exchange deal in purchase and sale of securities of different companies. The
financial statements enable the stock broker to judge the financial position of different
concerns.
LIMITATIONS OF FINANCIAL STATEMENTS
financial statements are relevant and useful for the concern, still they do not present a
final picture of the concern, and otherwise misleading conclusions may be drawn. The financial
statements suffer from following limitation:
1. Ignoring of non-monetary aspects:
These statements are prepared with the help of accounting information which mainly
consider monetary aspects only. The value of business depends both on qualitative and
quantitative factors.
2. Historical cost:
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The statements are prepared on the basis of historical cost. The values of fixed assets
are at there original cost less depreciation. The balance sheet value are not shown the value of
assets may be sold more over they do not reflect the market value which is as important factor
in determining the solvency of an enterprise
3. Personal judgment:
in preparing financial statements certain items are left to the personal judgment of the
accountant. If any accountant is not following accounting principles correctly his judgment
will give wrong picture.
4. Conversion of conservation:
due to conversion of conservation the income statement may not disclose true income
of the business. This is due to ignorance of probable incomes and accounting probable losses.
FINANCIAL ANALYSIS
financial analysis is the process of identifying the financial strength and
weakness of the firm by properly establishing between the items of the balance sheet and profit
and loss account.
There are various methods or techniques used in analysis financial statements such as
comparative statements, trend analysis, common size statements, schedule of changes in
working capital, funds flow and cash flow analysis cost volume profit analysis and ratio
analysis.
Meaning and concept of financial analysis
the terms financial analysis also known as analysis and interpretation of
financial statements refers to the process of determining financial strength and weaknesses of
the firm by establishing strategic relationship between the items of the balance sheet, profit
and loss account and other operative data.
Types of financial analysis
financial analysis can be classified in to different categories depending up on:
On the basis of material used.
On the basis of modules operandi
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[1] IN THE BASIS OF MATERIAL USED
ACCORDING TO THE BASIS, FINANCIAL ANALYSIS CAN BE OF TWO
TYPES:
EXTERNAL ANALYSIS
This analysis is done by those who are outsiders for the business. These persons mainly
depend up on the published financial statements. Their analysis serves only a limited purpose.
INTERNAL ANALYSIS
This analysis is done by persons who have access to the books of account and at other
information related to the business. Such as analysis can be done by executives and employees
of the organization.
The analysis is done depending up on the objective to be achieved through this analysis.
[2] ON THE BASIS OF MODULES OPERANDI
According to this financial analysis can also be of two types:
Horizontal Analysis
Types ofFinancial Analysis
Analysis
On the basisof material
Used
On the basis ofmodulesOperandi
VerticalAnalysis
HorizontalAnalysis
ExternalAnalysis
InternalAnalysis
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In case of this type of analysis, financial statements for a number of years are reviewed
and analyzed the current years figures are compared with the standard or base year.
The analysis statement usually contains figures for two or more year and the change are
shown regarding each item from the base year usually in the form of percentage. Since this type of
analysis based on the data from year to year rather than on date, it is also termed as Dynamic
Analysis
Vertical Analysis
In case of this type of analysis a study is made of the quantitative relationship of
various items in the financial statement on a particular date. Since this analysis depends on the
data for one period, this is not very conductive to a proper analysis of the companys financial
position.
It is also called static analyses as it is frequently used for referring to ratio developed
on one date or for one accounting period.
Techniques of financial analysis:
A financial can adopt one or more of the following techniques/ tools of financial analysis:
Comparative Financial Statements
Common Size Financial Statements
Trend Percentages
Ratio analysis
Cash Flow Analysis
Funds Flow Analysis
Ratio C.V.P. Analysis
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COMPARATIVE FINANCIAL STAGEMENTS:
The statements which have been designed in a way so as to provide time perspective to
the consideration of various elements of financial position embodied in such statements figures
for two or more period side by side to facilitate comparison.
both the income statement and balance sheet can be prepared ni the form of
comparative financial statements.
The comparative financial statements contain the following items.
Absolute figures (amount in rs. /-) as given in the final accounts.
Absolute figures expressed in terms of percentages.
Increase of decrease in absolute figures in terms of money value.
Increase or decrease in terms of percentages.
Comparison expressed in ratios.
Percentages of totals.
COMPARATIVE INCOME STATEMENTS:
FinancialAnalysis
Techniques
Funds flowAnalysis
RatioAnalysis
TrendPercentages
Comparative
Financial
Statements
Cash Flow
Analysis
C.V.P.Analysis
Common SizeFinancial
Statements
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The income statement (profit & loss a/c) gives the results of the operations during a
definite period. It reveals the profit carried or loss incurred by the cancers. The comparative
study if income statement for more than 1 year may enable us to know the program of the
concern.
First two columns gibe figures of various items for two years. The third and fourth
column used to show increase or decrease in figures in absolute adopted in preparing
comparative balance sheet.
In first step, find out the changes in absolute figures i.e., increase or decrease should
be calculated.
In second step percentage of change should be calculated with the help of following
formula.
Percentage of change =AmountyearBase
AmountinChange 100
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COMPARITIVE INCOME STATEMENT
PARTICULARS PREVIOUS
YEAR
CURRENT
YEAR
INCREASE/DECREASE
AMOUNT
(Rs)
PERCENT
AGE
Net Sales **** **** **** ****(Less): Cost of goods
sold
*** *** *** ***
Gross Profit ***** ***** ***** *****
Gross Profit ***** ***** ***** *****
(Less): Operating
Expenses:-
Office & Administration
Expenses
*** *** *** ***
Selling & Distribution
Expenses
*** *** *** ***
Total Operating Expenses ***** ***** ***** *****
(Add): Operating
Incomes
**** **** **** ****
Total Operating Incomes **** **** **** ****
Operating Profit ***** ***** ***** *****
(Add): Non-Operating
Incomes:-
Income on Investment *** *** *** ***
Profit on sale of assets *** *** *** ***
Dividends received *** *** *** ***
Total Non-Operating
Incomes
***** ***** ***** *****
(Less): Non-Operating
Expenses:-
Loss on sale of Fixed
Assets
**** **** **** ****
Net Profit Before Interest
& Tax [EBIT]
***** ***** ***** *****
Net Profit Before Interest
& Tax [EBIT]
***** ***** ***** *****
(Less): Interest Paid *** *** *** ***Net Profit Before Tax **** **** **** ****
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(Less): Income Tax Paid *** *** *** ***
Net Profit After Tax ***** ***** ***** *****
GUIDELINES FOR INTERPRETATION
The increase or decrease in sales should be compared with increase or decrease in cost of
goods sold. If increase in sales is more than the cost of goods sold. It means that the
profitability of the concerns is increased.
The amounts of gross profit should be studied.
Operating profits should be studied. The express should be deducted from gross profit to
find out operating profit and then operating incomes should be added.
The next step is some of the non operating expenses are to be deducted from the operating
profits and non operating incomes should be added to get net profit
The opinion should be formed the profitability of the business concern and it should be
given at the end.
COMPARATIVE BALANCE SHEET
The balance sheet prepared on a particular date reveals the financial position of the
concern on the date to study the trends of business over a period of time comparative balance
sheet reveals the cause for changes in the financial position on amount of various transactions.
The comparative studies throw light on financial policies adopted by management. The
comparative balance sheet consists of two columns for the original data. A third column used
to show increase or decrease in various items. A south column containing the parentage of
increase or decrease may be added.
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COMPARITIVE BALANCE SHEET
PARTICULARS PREVIOUS
YEAR
CURRENT
YEAR
INCREASE/DECREASE
AMOUNT
(Rs)
PERCENT
AGE
ASSETS:
Current Assets: (C.L)
Cash & Bank Balances *** *** *** ***
Sundry Debtors *** *** *** ***
Bills Receivable *** *** *** ***
Stock (Inventories) *** *** *** ***
Prepaid Expenses *** *** *** ***
Marketable Securities *** *** *** ***
Temporary Investments *** *** *** ***
Accrued Incomes *** *** *** ***
Total Current Assets ***** ***** ***** *****
Investments:
Short-term loans and
advances
*** *** *** ***
Staff Advances *** *** *** ***
Other Advances *** *** *** ***
Fixed Assets: (F.A)
Good Will *** *** *** ***
Land *** *** *** ***
Buildings *** *** *** ***
Plant & Machinery *** *** *** ***
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Furniture & Fittings *** *** *** ***
Free Hold Property *** *** *** ***
Lease Hold Property *** *** *** ***
Preliminary Expenses *** *** *** ***
Patent Rights *** *** *** ***
Trade Marks *** *** *** ***
Other Deferred Expenses *** *** *** ***
Total Fixed Assets ***** ***** ***** *****
TOTAL ASSETS
[ C.L + F.A ]
****** ****** ****** ******
Current Liabilities: (C.L)
Sundry Creditors *** *** *** ***
Bills Payable *** *** *** ***
Out Standing Expenses *** *** *** ***
Bank Over Draft *** *** *** ***
Unclaimed Dividends *** *** *** ***
Propose Dividends *** *** *** ***
Provision For Tax *** *** *** ***
Accrued Expenses *** *** *** ***
Total Current Liabilities ***** ***** ***** *****
Long Term Liabilities:
(L.T.M)
Mortgage Loan *** *** *** ***
Debentures *** *** *** ***
Total Long Term
Liabilities
***** ***** ***** *****
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Share Capital & Reserves:
(CAP. & RES.)
Equity Share capital *** *** *** ***
Preference Share Capital *** *** *** ***
Share Premium *** *** *** ***
General Reserve *** *** *** ***
Appropriation of Profits *** *** *** ***
Total Capital & Reserve ***** ***** ***** *****
TOTAL LIABILITIES
[C.L + L.T.M + CAP. &
RES.]
***** ***** ***** *****
GUIDE LINES FOR INTERPRETATION OF BALANCE SHEET:
The short term financial position can be studied y comparing the working capital of both
years.
To study the liquidity position changes in liquid assets must be ascertain if there is any
increase in liquid assets. We must understand that is an improvement in the liquidity
position of the concern and vice versa.
A high increase in sundry debtors and bills receivable mean in increase in risk in collecting
the amount of dues.
A high increase in closing stock may mean that decrease in the demand.
Long term financial position of the business concern car be analysed by studying the
changes in fixed assets, long term liabilities and capital.
Fixed assets must be compared with long term loans and capital. If the increase in fixed
assets is more than the increase in long term financiers from the working capital which is
not good.
Common size statements:
The common size statements, balance sheet and income statement are shown in
analytical percentages. The figures are shown as percentages of total assets, total liabilities
and sales. The total assets are taken as 100 and different assets are expressed as percentage of
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the total. Similarly various liabilities are taken as a part of total liabilities. These statements
are also known as component parentage or 100% statements because every individual item is
stated as a percentage of the total 100 the short statements because every individual item is
stated as a percentage of the total 100 the short-comings in comparative statements and trend
percentages where changes in item could not be compared with the total have been covered up.
The common size statements may be prepared in the following way.
The totals of assets or liabilities are taken as 100.
The individual assets are expressed as a percentage of total assets i.e., 100 and different
liabilities are calculated in relation to that liability.
COMMON SIZE INCOME STATEMENT
The items in income statement can be shown as percentages of sales to show the
relation of each item to sales. A significant relationship can be established between items of
income statement and volume of sales. The increase in sales will certainly increases selling
expression and volume of sales. The increase in sales will certainly increases selling expresses
and not administrative or financial expenses. In case the volume of sale increases to a
considerable extent, administrative and financial expenses may go up. In case the sales are
declining, the selling expenses should be reduced at once. So, a relationship is establishedbetween sales and other in income statement and this relationship is helpful in evaluating
operational activities of the enterprises.
COMMON SIZE BALANCE SHEET
Statement in which balance sheet items are expressed as the ratio of each asset to total
assets and the ratio of each liability is expressed as a ratio of total liabilities is called common
size balance sheet. The common size balance sheet is a horizontal analysis. The comparison of
figures in different periods is not useful becomes total figure may be affected by a number of
factors. It is not possible to establish standard norms for various assets. The trends of year to
year may not be studied and even they may not give proper results.
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COMMON SIZE BALANCE SHEET PERFORMANCE
Particulars
Previous Year Percentage Current Year Percentage
ASSETS:
Current Assets: (C.L)
Cash & Bank Balances *** *** *** ***
Sundry Debtors *** *** *** ***
Bills Receivable *** *** *** ***
Stock (Inventories) *** *** *** ***
Prepaid Expenses *** *** *** ***
Marketable Securities *** *** *** ***
Temporary Investments *** *** *** ***
Accrued Incomes *** *** *** ***
Total Current Assets ***** ***** ***** *****Investments:
Short-term loans and
advances
*** *** *** ***
Staff Advances *** *** *** ***
Other Advances *** *** *** ***
Fixed Assets: (F.A)
Good Will *** *** *** ***
Land *** *** *** ***
Buildings *** *** *** ***
Plant & Machinery *** *** *** ***Furniture & Fittings *** *** *** ***
Free Hold Property *** *** *** ***
Lease Hold Property *** *** *** ***
Preliminary Expenses *** *** *** ***
Patent Rights *** *** *** ***
Trade Marks *** *** *** ***
Other Deferred Expenses *** *** *** ***
Total Fixed Assets ***** ***** ***** *****
TOTAL ASSETS[ C.L + F.A ]
****** ****** ****** ******
Current Liabilities: (C.L)
Sundry Creditors *** *** *** ***
Bills Payable *** *** *** ***
Out Standing Expenses *** *** *** ***
Bank Over Draft *** *** *** ***
Unclaimed Dividends *** *** *** ***
Propose Dividends *** *** *** ***Provision For Tax *** *** *** ***
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Accrued Expenses *** *** *** ***
Total Current Liabilities ***** ***** ***** *****
Long Term Liabilities:
(L.T.M)
Mortgage Loan *** *** *** ***
Debentures *** *** *** ***Total Long Term Liabilities ***** ***** ***** *****
Share Capital & Reserves:
(CAP. & RES.)
Equity Share capital *** *** *** ***
Preference Share Capital *** *** *** ***
Share Premium *** *** *** ***
General Reserve *** *** *** ***
Appropriation of Profits *** *** *** ***
Total Capital & Reserve ***** ***** ***** *****
TOTAL LIABILITIES
[C.L + L.T.M + CAP. &
RES.]
***** ***** ***** *****
TREND ANALYSIS:
Trend analysis is an important and useful technique of financial analysis. It involves
computation of index numbers of the moments of the various financial items in the financial
statements for a number of periods. It enables to know the changes in the financial position
and the operational efficiency between the period chosen.
Through trend analysis the analysis can give his opinion as to whether favorable or
unfavorable tendencies are reflected by the accounting date.
The comparative and common size balance sheets suffer from a major limitation i.e.,
absence of basic standard to indicate whether the proportion of an item is normal or analysis
values are calculated for each item in isolation but conclusions are to be drawn by studying the
related items also.
Trend analysis can be analysis in the following ways:
i. By calculating trend ratio (or) percentage.
ii. By plotting on graph paper (or) charge.
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TREND RATIO (OR) PERCENTAGE
It involves the ascertainment of arithmetical relationship which each item of
several year to the same item of base year. Any year maybe as the base year, it is usually the
earliest year.
PROCEDURE FOR CALCULATING TREND RATIO:
The following procedure maybe adopted for calculating trend ratio.
i. Select any year as base year the selected year should be normal year for the base year
the trend value is taken as 100.
ii. Trend percentage of each item should be calculated with the help of following formula.
Trend Percentage =year valueBase
year valueCurrent 100
COST-VOLUME-PROFIT ANALYSIS
Cost Volume Profit analysis is an important tool of profit planning. It studies the
relationship between cost, volume of production, sales and profit. It is not strictly a technique
used for analysis of financial statements. However, it is an important tool for the management
for decision making. Since the data is provided both cost and financial records. It tells the
volume of account of variation in output, selling price and cost, and finally, the quantity to be
produced and sold to reach the target profit level.
RATIO ANALYSIS
Financial analysis depends to very large extents of the use of ratios through there are
other equality important tools of such analysis. Thus, a direct examination of the magnitude of
two released items is somewhat enlightening but the comparison is greatly facilitated by
expressing the relationship as a ratio.
Ratio analysis of business enterprises enters on efforts to derive quantitative measures
or guides concerning the expected capacity of the firm to meet its future financial obligation or
expectations present and past data are used for the purpose and whatever extrapolations appearnecessary. They are made to provide no indication of feature performance. Alexander Walt,
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who criticized the bankers for its lap sided development owing to their decisions regarding the
grant of credit on current ratios a lone, made the presentation of an elaborate system of ratio
analysis in1919.
RATIO
Ratio is an expression of the quantitative relationship that exists between the two
numbers. The ratio is defined as the indicated quotient of two mathematical expressions the
ratio should be determined between related accounting variables to be meaningful and
effective.
CASH FLOW ANALYSIS
Cash flow analysis enables the management to plan and co-ordinate the financial
operations of the enterprise, and furnish the basis for evaluating financing policies. It provides
a barometer for ensuring the profitability of the business and makes financing problems of the
business much more manageable.
This statement is prepared to know clearly the various items of inflow and outflow of
cash. It is an essential tool for short-term financial analysis and is very helpful in the evaluation
of current liquidity of a business concern. It helps the business executives of a business in theefficient cash management and internal financial management.
A statement of changes in the Financial Position of firm on cash basis is called a cash
flow statement.
The cash flow statement is to be presented as per the AS-III of the institute of Charted
Accountants of India (ICAI). The ICAI issued AS-III in June 1981 for the first time; later in
March 1997 it is revised and standard. All the listed companies / Estates whose financial year
ends on March 1996 and thereafter will be required to give cash flow statement comes into
effect immediately i.e., on 15/02/1996.
FUNDS FLOW ANALYSIS
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The Funds Flow Statements is the statement which shows the movement of funds and is
a report of the financial operations of the business under takings. It indicates various stages by
which funds obtained during a particular period of time and the wages which these funds were
employed. In simple words it is a statement of sources and application of funds.
The term fund has been defined a number of ways. In narrow sense fund means cash
only. In broader sense the term fund refers to any current assets and liabilities. In popular sense
the term fund means Working Capital. Every firm should forecast the requirement of working
capital to estimate the working capital is the help of Funds Flow Statements.
This statement is prepared in order to reveal clearly the various sources where from the
funds are produced to finance the activities of a business concern during the accounting period
and also brings to highlight the uses to which these funds are put during the said period.
The following process is adopted for the preparation of Funds Flow Statement.
Preparation of schedule of changes in Working capital (Working Capital Statement).
i. Calculation of funds from operations with the help of Non-current assets and Non-
current liabilities ledger A/Cs.
ii. Preparation of Funds Flow Statement.
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COMMON SIZE BALANCE SHEETS FOR THE YEARS
2008-2009 AND 2009- 2010
Table - 4.1
PARTICULAR 2008-09 % 2009-10 %
CURRENT ASSETS
INVENTORY 126.89 9.45 117.11 8.56
SUNDRY DEBTORS 104.49 7.78 107.15 7.53
CASH AND BANK
BALANCES 7.87 0.58 34.22 2.5
LOAN AND ADVANCES 160.78 11.97 162.24 11.89
MISCELLANCES 0.47 0 1.47 0.1
TOTAL CURRENT ASSETS 400.3 29.78 422.19 30.85
FIXED ASSETS
GROSS BLOCK 1428.79 104.59 1413.45 103.39
LESS:DEPRECIATION 549.21 484.74 35.44
NET BLOCK 879.58 65.5 928.71 67.95
CAPITAL PROGRESS 20.8 1.54 13.96 1.02
INVESTMENT 41.94 3.12 9.75 0.2
TOTAL FIXED ASSETS 942.32 70.16 945.42 69.17
TOTAL ASSETS 1342.62 100 1367.61 100
CURRENT LIABILITIES 184.31 13.73 152.95 11.18
CURRENT LIABILITIES 184.31 13.73 152.95 11.18
TOTAL CURRENT
LIABILITES 184.31 13.73 152.95 11.18
.
FIXED LIABILITES
CAPITAL 78.35 5.83 78.56 5.74
RESERVED & SURPLUS 397.39 29.61 330.3 24.15
SECURED LOAN 392.15 29322 563.41 41.96UN SECURED LOAN 156.06 11.62 132.45 9.68
DEFFRED TAX 134.56 10.02 109.94 8.03
TOTAL FIXED LIABILITES 1158.51 86.3 1214.66 89.56
TOTAL LIABILITES 1342 100 1367.61 100
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INTERPRETATION:
Above table 4.1 reveals the common size balance sheets of JKPaper LTD for the
years 2008-09 and 2009-10.
From the above table it is evident that the Capital in the year 2008-09 is 9.45 % and
in the year 2009-10 it was decreased to 8.56% due to an decrease in reserves and surplus. The
loans and advances decreased from 11.97% in the year 2008-09 to 11.89% in the year 2009-10.
In the case of application of funds the gross block of the fixed assets is 104.59% in the
year 2008-09, it increased to 103.39% in the year 2009-10. The net block of the fixed assets is
65.5% in the year 2008-09; it increased to 67.95% in the year 2009-10, The capital work in
progress for the year 2008-09 was 1.54% and it decreased to 1.02% in the year 2009-10. There
is an increase in case of net current assets from 29.78% in the year 2008-09 to 30.85% in the
year 2009-10. This decrease is the result of an increase in current liabilities and provisions.
By over all comparison the companys financial position is satisfactory
.
COMMON SIZE BALANCE SHEETS FOR THE YEARS
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2007-2008 AND 2008-2009
Table - 4.2
INTERPRETATION:
PARTICULAR 2007-08 % 2008-09 %
CURRENT ASSETS
INVENTORY 120.34 8.72 117.11 8.56
SUNDRY DEBTORS 110.87 8.03 107.15 7.53
CASH AND BANK BALANCES 3.50 0.25 34.22 2.5
LOAN AND ADVANCES 41.70 3.02 162.24 11.89
MISCELLANCES 2.68 0.19 1.47 0.1
TOTAL CURRENT ASSETS 279.01 20.21 422.19 30.85
FIXED ASSETS
GROSS BLOCK 1367.52 99.10 1413.45 103.39
LESS:DEPRECIATION 418.06 30.29 484.74 35.44
NET BLOCK 949.46 68.81 928.71 67.95
CAPITAL PROGRESS 148 10.72 13.96 1.02
INVESTMENT 2.75 0.19 9.75 0.2
TOTAL FIXED ASSETS 968.47 79.72 945.42 69.17
TOTAL ASSETS 1379.87 100 1367.61 100
CURRENT LIABILITIES 171.09 12.40 152.95 11.18
CURRENT LIABILITIES 171.09 12.40 152.95 11.18
TOTAL CURRENT
LIABILITES 171.09 12.40 152.95 11.18
FIXED LIABILITES
CAPITAL 78.96 5.72 78.56 5.74
RESERVED & SURPLUS 313.62 22.73 330.3 24.15
SECURED LOAN 583.57 42.50 563.41 41.96
UN SECURED LOAN 137.78 9.98 132.45 9.68DEFFRED TAX 94.28 6.83 109.94 8.03
TOTAL FIXED LIABILITES 1208.21 87.56 1214.66 89.56
TOTAL LIABILITES 1379.3 100 1367.61 100
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Above table 4.2 reveals the common size balance sheets ofJK PAPER LTD for the
years 2007-08 and 2008-09.
From the above table it is evident that the Capital in the year 2007-08 is 5.72 % and
in the year 2008-09 it was increased to 5.74% due to an increase in reserves and surplus. The
loans and advances decreased from 3.02% in the year 2007-08 to 11.89% in the year 2008-09.
In the case of application of funds the gross block of the fixed assets is 99.10.% in the
year 2007-08, it increased to 103.39% in the year 2008-09. The net block of the fixed assets is
68.81% in the year 2007-08; it decreased 67.95% in the year 2008-09, The capital work in
progress for the year 2007-08 was 10.72% and it decreased to 1.02% in the year 2008-09.
There is an increase in case of net current assets from 20.21%in the year 2007-08 to 30.85% in
the year 2008-09. This decrease is the result of an increase in current liabilities and provisions.
COMMON SIZE BALANCE SHEETS FOR THE YEARS
2006-2007 AND 2007-2008
Table - 4.3
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PARTICULAR 2006-07 % 2007-08 %
CURRENT ASSETS
INVENTORY 96.41 7.11 120.34 8.72
SUNDRY DEBTORS 107.24 7.91 110.87 8.03
CASH AND BANK
BALANCES 4.83 0.35 3.50 0.25LOAN AND ADVANCES 176.83 13.04 41.70 3.02
MISCELLANCES 2.79 0.20 2.68 0.19
TOTAL CURRENT ASSETS 388.1 28.61 279.01 20.21
FIXED ASSETS
GROSS BLOCK 1071.20 79.03 1367.52 99.10
LESS:DEPRECIATION 375.17 27.68 418.06 30.29
NET BLOCK 696.03 51.35 949.46 68.81
CAPITAL PROGRESS 265.57 19.59 148 10.72
INVESTMENT 5.57 0.41 2.75 0.19
TOTAL FIXED ASSETS 967.17 71.35 968.47 79.72
TOTAL ASSETS 1355.27 100 1379.87 100
CURRENT LIABILITIES 177.65 13.10 171.09 12.40
CURRENT LIABILITIES 177.65 13.10 171.09 12.40
TOTAL CURRENT
LIABILITIES 177.65 13.10 171.09 12.40
FIXED LIABILITIESCAPITAL 78.96 5.82 78.96 5.72
RESERVED & SURPLUS 300.25 9.22 313.62 22.73
SECURED LOAN 595.49 43.93 583.57 42.50
UN SECURED LOAN 107.29 7.91 137.78 9.98
DEFFRED TAX 95.20 7.62 94.28 6.83
TOTAL FIXED
LIABILITES 1177.19 86.68 1208.21 87.56
TOTAL LIABILITES 1355.84 100 1379.3 100
INTERPRETATION:
Above table 4.3 reveals the common size balance sheets ofJK PAPER LTD for the
years 2006-07 and 2007-08.