REPORT

ON

Analysis of Balance Sheet of 2007 and 2008

BySaurabh Jain

R.K. MARBLE PRIVATE LIMITEDKISHANGARH, DIST. AJMER

A

REPORT

ON

Analysis of Balance Sheet of 2007 and 2008

BySaurabh Jain

A Report submitted in partial fulfillment ofThe requirements of

MBA Program ofGovernment Engineering College, Ajmer

R.K. MARBLE PRIVATE LIMITED

KISHANGARH, DIST. AJMERGovernment Engineering College, Ajmer

(An Autonomous Institution of Government of Rajasthan)

Preface;-

Engineering College Aimer was established in the year 1997

under the aegis of Govt. of Rajasthan whose faculty members

have had consummate experience in the fields of education,

Industry, Engineering and Technology over the years.

The College is affiliated to the RAJASTHAN TEHNICAL

UNIVERSITY, KOTA and is approved by the All India Council

of Technical Education, New Delhi.

The College is located at Makhupura, 5 Kilometers from Ajmer

on the National Highway no 14, providing the right industrial

ambience for the budding engineers.

No Stone is left unturned to maintain exalted standards in imparting

academic and practical skills to the students, so that they become

well-rounded engineers with professional expertise and personal

integrity when they complete their courses.

Engineering College Ajmer has been established with the noble

intention of imparting quality technical and management education

to the aspiring youth of today, also extending its support to the

students of financially challenged background. The Institution will

provide opportunity to its students to develop into disciplined and

knowledgeable citizens of tomorrow.

ACKNOWLEDGMENTS

I acknowledge with thanks the valuable advice and immense

guidance rendered to me by my company guide, Mr. Subhash C.

Agarwal, Vice President (Fin. & Tax.) of R.K. Marble Private

Limited. In spite of his busy schedule, he spared and spent time to

help me execute this project. An authority in finance matters and

company affairs, his wholehearted help would always remain an

unfading light in my thoughts and actions. Mr. Devendra Sharma,

Company Secretary of R.K. Marble Private Limited, provided me

various information and data in compiling this project, to whom I

express my grateful thanks.

My grateful thanks are also due to the staff members of R.K. Marble Pvt. Ltd. sincere, cordial and unstinted guidance and support throughout the course of this project. “Analysis of Balance Sheet of 2007

and 2008 ”.

Saurabh Jain

MBA Part – 2

Government Engineering College,

Ajmer

TABLE OF CONTENTS

1. ABSTRACT

2. INTRODUCTION OF THE ORGANISATION

3. FINANCIAL PERFORMANCE

4. INTRODUCTION OF PROJECT

5.FINANCIAL STATEMENTS

6BALANCE SHEET OF 2007 AND 2008

7.FACTS AND FINDINGS

8.REFERENCES

9.APPENDICES

1. ABSTRACT:

The SIP Project is being conducted at R.K. Marble Private Limited. The

project concentrates on the last two years financial statement analysis of the

organization.

The project is all about analysis of the company’s last two years financial

statements. The project demands for a thorough study of various tools and

techniques involved in analysis of financial statements, understanding of

the various financial statements. The project also includes interpretation of

the financial results to derive meaningful information from the statements.

The project involves some secondary activities such as being a part of the

Internal Audit team to understand the working process of the audit team. The

other activity included a short assignment on BIFR (Board of Industrial and

Financial Reconstruction).

As per the schedule mentioned in the project proposal the report will contain

following stages:

Stage 1: Collection of the company’s last two years financial statements.

Stage 2: Understanding the Financial statements.

Stage 3: Understanding the various tools and techniques used in analysis of

financial statements.

Stage 4: Analysis of Balance Sheet

2. Introduction of the Company

R. K. Marble Group was established in 1989 by Patni group to help serve

increasing national and international demand for Indian marble. Since then we

have enjoyed exponential growth and export to many markets worldwide. The

Company dedicated to bringing the finest marble to the world. For over twenty

years, the name is synonymous with grandeur, finesse and quality that can only

be expected from the most superior class of marble. An ISO 9001:2000 certified

company, R.K. Marble has set benchmarks in the mining, processing and

finishing of marble. An annual production of over 1.5 Million Tones (equivalent to

more than 60,000 sq. meters per day) has earned the company a place in the

Guinness Book of World Records as the largest producer of marble in the world,

the group is now geared up to scale newer heights and achieve the impossible.

"The seagull who sees farther, flies higher" living up to the immortal words of

Johan than Swift, Mr. Ashok Patni established the first processing unit at

Rajasthan (with an installed capacity of one lakh cu. ft. marble slabs Per Annum)

and never looked back. The company now has 14 Gang saw machines. In

November 1993 was the time, when state government took a step forward to allot

a virgin marble mine on lease to R. K. Marble at Morwad, Distt. Rajsamand in

Rajasthan. By the touch of sheer hard work, guts, burning inner desire to reach

unprecedented heights and fulfilling their dreams "the trio" converted these

marble mines to gold mines. Morwad from which the stone takes its name is a

remote village in the eastern part of Rajasthan, India.

Today the name Morwad Marble from R. K. Marble group has become almost

generic for a whole range of white and semi-white types of marble, which are

extracted from these locations.

The popularity of this range of marble continues to grow at an astonishing rate

and it is marketed in large quantities. The white background with light gray veins

corresponds with nearly everyone's perception of the most beautiful marble and

architects for many of the India's important buildings suggest it.

Zoom into the corner stone of Majoli, In Madhya Pradesh , India to scale the

magnetic fascination of an ISO 9001 : 2000 adorned Guinness Record Holder,

engaged as the largest producer of marble in the world. Bedecked with most

sought after gadgets, the exotic Majoli mine is the most coveted breeding ground

of world's choicest Wonder Marble that's wondrous and splendid in myriad hues.

Wonder Marble's colour panorama and innate design makes it the right choice for

flamboyant users. Our fascinating range can be floored to encompass living

rooms, drawing arrangements, dining spaces, hotel lobby's, pool sites, wall

claddings, special lounges and many more. Among its endless usages left for

creative imagination, some could be - artifacts and decorative objects

Products

Dealing in Products like Marble, Flooring Patterns, Marble Stone , Marble Stone

Figure, White marble, Marble Flooring, Marble Tiles.

Wonder Marble

The WONDER MARBLE produced at the R.K. Majoli mines comes to you in

heart warming shades of deep and dark red, brown to rose patches in creamy

base coupled with abrasion resistant fine grained form, lustre and reflective gloss

which makes it truly a masterpiece for a lifetime.

Wonder Marble is available in 4 exotic colours:

· Milky Opal: Creamy base: Shades of beige & mauve

· Pink Pearl: Ecstatic pink & brown tones

· Garnet Rush: Reddish

· Jasper Jazz: Chocolate, red & brown

White Marble

Famous from antiquity, for the high quality the incomparable clearness and

resistance, the Morwad Marble from R. K. Marble Private Limited have

constituted the base of many big monuments and works of art in India. R.K.

Milky Coral is a captivating splendor with generous splashes of green and grey

on milky white marble, giving it an exotic look.

Marble Patterns & Fixing

R K Marble Private Limited offers decorative flooring patterns, stone inlaid

borders and marble inlaid items. The most popular choice with architects and

interior designers for flooring and wall cladding.

Mines

World famous Morwad Mines of R.K.Marble Private Limited are situated 15km

from Rajnagar on Udaipur – Rajnagar - Ajmer National Highway No.8. connected

by well-maintained by metalled road from Rajnagar.The nearest Airport at Dabok

which is 68 Kms. from mines and 19 Kms from udaipur. Nearest Railway station

at Kankroli, is 20 Kms. from mines.Electrical power line of 11KV from State

Viduyat Nigam is extended up to mines. Captive Power generation to the tune of

2500 KVA is stand by.

Four Captive Diesel Dispensing pumps with 120 KL storage capacity and

Explosive magazine with 500 kg storage capacity are maintained at mines.

An over head tank of 1.5 lac liters capacity along with a filter plant is maintained

for meeting the requirement of drinking water and domestic use. The quality of

water is potable.

Requirement of water for industrial use is met with the help of water tanks filled

from tube wells from the nearby areas.

The Safety Management is given utmost importance pit Safety Committee

meetings are organized regularly for tacking stock of safety preparation, accident

analysis, and suggestions for remedial measures for achieving ZERO accident

status. The personal protective equipment and safety gadgets are provided to

employees and all out efforts are made to inculcate the habit of their regular use.

Facilities of Modern store and well equipped workshops for repair and

maintenance of HEMM and other field machinery are available at mines.

Technology, the core aspect at R. K. Marble Private Limited can be seen at

mining campus where all means of communication are available which hooks this

remote site to the rest of the world and make them feel a part of larger

community of R. K. Group.Eight telephone connections, with a fax connection

and two hot line between Mines to Udaipur and Kishnagarh office are available at

mines site. Base mobile and walki-talki sets are well maintained for smooth

communications amongst the staff/workers/officers.

A four-bed hospital with para medical staff and Doctor along with an ambulance

is available at mines.

A well-equipped Group Vocational Training Center is established at site to

provide initial training to new entrants and refresher and special training to

existing employees OEMS and other service agencies, training programmes

were conducted periodically.

Factory

Our factory is located about 26 KM from the holy city of Ajmer and about 107 KM

from Jaipur, the state capital of Rajasthan, along the famous Makarana road. We

have exclusively used our own marble in combination with other stone to give a

fascinating look at our factory site. Our managing director Mr. Suresh Patni looks

after the factory and is known for his motto, "Customer Satisfaction".

The RK Marble Processing Centre houses 14 Gangsaw machines. Two Resin

treatment plants, an edge-cutting unit and 18 head-polishing unit from Breton. It

has the most modern layout with completely automatic plant to recycle water for

marble cutting.

Latest gadgets like wireless, hotlines, modems, computerised MIS and costing

systems are being used in order to accelerate quality control and production,

hence contributing to cost effectivity.

Quality Assurance

R. K. Marble Group has always stood for quality without compromise. It believes

in long-term business relations and works hand to hand with the customers to

ensure that it gets the best value of money. Stringent in-house quality control

measures are in place and yet it is always willing for third party quality checks.

The Company has adopted quality policy to standardize its systems, procedures

and processes with adequate documentation. R. K. Marble Private Limited is an

ISO 9001 : 2000 certification for its various activities at mines and factory and

ISO 14001 certification for Environment Management System.

People

Highly motivated team of professionals is dedicated to work. The team created

the records of completing large projects before given time frame. Needless to

say, the growth of R. K. Marble Group has been spurred by the spirit of the

individuals who work at various levels to keep ahead of the rest and constantly

rise to the challenges that beckon them at the frontiers of technology.

Strengths

The endeavor of the company is to provide quality products by imbibing the latest

international mining technology. This can be gauged from the fact that the entire

mine operations are carried out with the help of latest equipment for marble

extraction. Sophisticated software developed internally on RDBMS platform

tracks and evaluates all possible functions, cost areas and productivity of the

mining operations. It is also the first marble mining company, which has very high

level of mechanization with highly skilled and trained workmen.

The company has made an extensive use of wireless communication to

synergies all activities from drilling to loading of the end product. The optimum

utilization of the country's natural resources can be seen here. Due to the latest

technologies used, the recovery ratio of marble blocks is amongst the highest.

The records of "The Director of Mines & Geology, Udaipur", reveal that the yield

from company's mines is the highest per hectare amongst all marble mines.

Awards:

AWARD NAME AWARDED BY YEAR

Guinness World Records Guinness World Records1998,

2000, 2001

Appeared in Guinness World Record Books Guinness World Records 2003

ISO 9001 : 2000 BVQI, USA 2003

ISO 14001 BVQI, USA 2003

Entry in Limca Books of World Records Limca Books of World Records 1998, 1999

Model Marble Quarry award - Best Mechanised

Quarry- First Prize

Federation of Indian Mineral

Industry (FIMI) & All India Granite

& Stone Association (AIGSA)

2003

The Best Stall for Stone & Stone Products (Outdoor)Centre for Development of Stones

(CDOS)2003

Udyog Patra AwardInstitute of trade and Industrial

Development, New Delhi2001

State Level Bhamashah Award Education Deptt., Bikaner 2001

Highest Income tax payer Award (Individually to

Syt. Ashok Patni, Syt. Suresh Patni, Syt.Vimal

Patni)

Income Tax Deptt., Ajmer 2000

Best Annual Report Award for Rajasthan Based

Companies

Institute of Chartered Accountants

of India, Jaipur2001

Indira Priyadarshini Award National Publication, New Delhi 2001

Samman Patra Income Tax Deptt., Udaipur 1998

Padm DivakarShree Digamber Jain Atishaya

Kshetra, Padampura, Jaipur1999

Social Welfare & Development Lions Club, Udaipur 2001

Jain GauravAll India Digamber Jain Samaj,

Sikar1998

Corporate Governance Award Rajasthan Chamber of Commerce

& Industry 2004

3. FINANCIAL PERFORMANCE IN THE YEAR 2007-08

PARTICULARSMarch 2007 March 2008

Net Sales 1716898385 1908959105

Exports 0 0

PBT 345849010 604901946

PBT/Net Sales(%) 20.15 31.68

PAT 223702429 389872858

Table 1. Sales and Profits

Net Sales of the Company during the year 2007-08 were Rs. 1908959105

crores compared to Rs. 1716898385 crores in 2006-07 due to higher volumes

as well as realization. This is mainly due to favorable market conditions in view

of emphasis on infrastructure and housing resulting into good demand of

marble.

As may be observed, there is a continuous increase in profitability (PBDT) which

has been analyzed and explained in the table below:

Particulars 2007 2008

(Rs. In crores)

Profit after Tax 223702429 389872858

Add: provision for tax

Wealth Tax

Fringe Benefit Tax

Deferred tax

Less: Income Tax

306000

3500000

17159419

135500000

350000

3500000

43220912

255000000

Profit before tax 345849010 604901946

Add: Depreciation 163834840 116704749

PBDT 509683850 721606695

In the year 2007-08, PAT has increased from Rs. 223702429 crores to Rs.

389872858 crores Profit for the year is higher by the same amount. Therefore we

see PBDT has increased in 2007-08 as compared to 2006-07 by 41.57%.

4. INTRODUCTION OF THE PROJECT:

4.1 Objective and Scope of the Study

Main aim of the project is to study and analysis the complete process of Ratio

Analysis. The objective of the present study is limited to mere understanding of

the procedure of Balance Sheet and does not extend to evaluate the efficiency

of the process followed at R.K. Marble Private Limited or in any way

commenting on them.

SCOPE :

At R.K. Marble Private Limited the entire exercise of Ratio Analysis either for

getting any new sanction or reviewing the existing borrowing limits is carried out

during the start of the financial year. With this project I was able to get a first

hand experience of all the documentation and fulfillment of other formalities laid

under the bank norms for getting the funds sanctioned.

In my study of the process of anlaysing the balance sheet of R.K. Marble

Private Limited, the following things have been covered:

Complete Analysis of the two year(2007 and 2008) performance and critical

review of the fixed assets ,current assets , debtors, creditors and other important

factors that are covered in the balance sheets.

o Analysis of balance sheet and requirements for year 2007 and 2008 and

analysis of increase or decrease in their magnitude .

o Preparing CMA and other supporting documents,

o Application to Consortium of Banks,

o Clearance of any objections raised by the member Banks, and

o Creation of Security.

Financial statements :-

There are four basic financial statements:

1. Balance Sheet - also referred to as statement of financial

condition, reports on a company’s assets, liabilities and net equity

as of a given point in time.

2. Income Statement - also referred to as Profit or loss statement,

reports on a company’s results of operations over a period of time.

3. Cash Flow Statement - reports on a company’s cash flow

activities, particularly its operating, investing and financing

activities.

4. Statement of Retained Earnings - explains the changes in a

company’s retained earnings over the reporting period.

Because these statements are often complex, an extensive set of Notes to the

Financial Statements and management discussion and analysis is usually

included. The notes will typically describe each item on the Balance sheet,

Income Statement and Cash Flow Statement in further details. Notes to

Financial Statements are considered an integral part of the Financial

Statements.

Users of Financial Statements:

Financial statements are used by a diverse group of parties, both inside and

outside a business. Generally, these users are:

1. Internal Users : are owners, managers, employees and other parties who

are directly connected with a company.

Owners and managers require financial statements to make

important business decisions that affect its continued operations.

Financial analysis are then performed on these statements to

provide management with a more detailed understanding of the

figures.These statements are also used as part of management’s

report to its stockholders, as it form part of its Annual Report.

2. External Users: are potential investors, banks, government agencies

and other parties who are outside the business but need financial

information about the business for a diverse number of reasons.

Prospective investors make use of financial statements to assess the

viability of investing in a business. Financial analysis are often used by

investors and is prepared by professionals (Financial Analysts), thus

providing them with the basis in making investment decisions.

Financial institutions (banks and other lending companies) use them to

decide whether to grant a company with fresh working capital or extend

debt securities to finance expansion and other significant expenditures.

Government entities (Tax Authorities) need financial statements to

ascertain the propriety and accuracy of taxes and other duties declared

and paid by a company.

Media and the general public are also interested in financial statements

for a variety of reasons.

Limitations of Financial Statement:

Certain assets and liabilities are not discussed in the balance sheet such

as management people, their quality and high degree of skill, the most

tangible asset.

Balance sheet pertains to a point of time relating to past, and thus may

not be very helpful for the investors concerned about the present and

future analysis.

Provision for depreciation, stock valuation and amounts to be set aside

for bad debts are based on personal judgments and, therefore, are not

free from bias.

Financial Statements do not record and reveal any fact, which cannot be

expressed in terms of money. General health conditions of the chairman,

working conditions, sales policy, quality of the product, etc., cannot be

included in financial statements.

Financial Statements are based on accounting policies, which vary from

enterprise to enterprise both within a single country and among countries.

Thus the users of financial statements cannot make reliable judgments

unless the accounting policies are not disclosed.

Balance sheet does not disclose information relating to change in

management, loss of markets, and cessation of agreements, which have

a vital bearing on the earning of the company.

Understanding the Various tools and techniques used in

analysis of Financial Statements:

A financial statement analysis consists of the application of analytical

tools and techniques to the data in financial statements in order to derive

from them measurements and relationships that are significant and useful

for decision making. The process of financial statement analysis can be

described in various ways, depending on the objectives to be obtained. Financial

analysis can be used as preliminary screening tool in the selection of stocks in

the secondary market. It can be used as a forecasting tool of future financial

conditions and results.

It may be used as a process of evaluation and diagnosis of managerial,

operating, or other problem areas. Above all, financial analysis reduces reliance

on intuition, guesses and thus narrows the areas of uncertainty that is present in

all decision-making processes. Financial analysis does not lessen the need for

judgment but rather establishes a sound and systematic basis for its rational

judgment. In analysis of company’s financial position , we can do the

interpretation of the assets, loans , advancea and capital as shown by the

balance sheet of the two years under comparison .

Balance Sheet:

A balance sheet is often described as a “snapshot” of the company’s

financial condition on a given date. It does not show the flows into and out of

the accounts during the period. A balance sheet provides detailed information

about a company’s assets, liabilities and shareholders’ equity.

Assets are things that a company owns and can either be sold or used by the

company to make products or provide services. Assets include physical

property, such as plants, trucks, equipment and inventory; things that can’t be

touched, such as trademarks and patents. And cash itself is an asset. So are

investments a company makes.

Liabilities are amounts of money that a company owes to others. This can

include all kinds of obligations, like money borrowed from a bank, rent for use of

a building, money owed to suppliers for materials, payroll a company owes to its

employees, environmental cleanup costs, or taxes owed to the government.

Liabilities also include obligations to provide goods or services to customers in

the future.

Shareholders’ equity is part of the company’s liabilities: they are funds

“owing” to shareholders (after payment of all other liabilities). In other

words, it is the money that would be left if a company sold all of its assets and

paid off all of its liabilities. This leftover money belongs to the shareholders, or

the owners, of the company.

The following formula summarizes what a balance sheet shows:

ASSETS = LIABILITIES + SHAREHOLDERS’ EQUITY

A company’s assets have to equal, or “balance,” the sum of its liabilities and

shareholders’ equity.

The requirement of company’s last two year Balance Sheet As follows:

R.K. MARBLE PREVATE LIMITED

BALANCE SHEET AS AT 31ST MARCH, 2008

PARTICULARS 2008

Rs.

2007

Rs.

(A) SOURCES OF FUNDS:

Shareholder’s Fund:

a. Share Capital 63,15,57,00

0

21,05,19,00

0

b. Reserves & Surplus (including profit) 72,62,18,35

1

75,71,78,31

9

1,35,77,75,35

1

96,76,97,31

9

Loan Funds:

a. Secured Loans 46,52,86,67

2

17,77,34,22

2

b. Unsecured Loans Nil 10,05,84

6

46,52,86,67

2

17,87,40,06

8

Current Liabilities & Provisions:

a. Current Liabilities 2,03,30,41

6

4,03,70,67

9

b. Provisions 40,99,44,57

5

23,25,27,39

2

43,02,74,99

1

27,28,98,07

1

TOTAL 2,25,33,37,014 1,41,93,35,458

APPLICATION OF FUNDS :

Fixed Assets:-

Gross Block 1,28,88,19,047 1,51,53,17,426

Less : Depreciation (83,99,19,465) (92,12,24,640)

Net Block 44,88,99,582 59,40,92,786

Capital work In Progress 62,12,633 67,73,177

Investments 6,31,17,050 3,27,43,750

Current Assets, Loans & Advances:

a. Inventories 5,95,25,304 8,00,72,275

b. Sundry Debtors 12,89,15,638 16,08,08,613

c. Cash & Bank Balance 8,89,99,018 7,10,41,834

d. Other Current Assets 16,80,502 9,50,825

e. Loans & Advances 1,40,37,02,208 46,37,88,031

Deferred Tax Assets 5,22,85,079 90,64,167

TOTAL 2,25,33,37,014 1,41,93,35,458

Facts and findings :-

When people form a company, they decide whether to limit the members' liability

by shares. The memorandum of association (a document required in the

company’s formation) must state:

the amount of share capital the company will have; and

the division of the share capital into shares of a fixed amount.

On registration of the company at Companies House, members of the company

(the ‘shareholders’) must agree to take some, or all, of the shares. The

memorandum of association must show the names of the people who have

agreed to take shares and the number of shares each will take. These people are

the subscribers

Funds raised by issuing shares in return for cash or other considerations. The

amount of share capital a company has can change over time because each time

a business sells new shares to the public in exchange for cash, the amount of

share capital will increase. Share capital can be composed of both common and

preferred shares.

Also known as "equity financing".

Share Capital is created when a company is formed. The people forming the

company decide whether its member’s liability will be limited by shares. Decided

then is the amount of share capital the company will have and the division of it

into shares of a fixed amount. This is stated in the memorandum of association

and An increase of the share capital may be effected by cash payment as well as

in other ways. The increase may be effected without regard to the pre-emption

rights granted to existing shareholders provided that the shares are offered for

subscription at market price or as consideration for the Company’s takeover of an

existing undertaking or certain assets at a value corresponding to the value of the

shares issued. In all cases other than those set out in the previous sentence, the

Company’s existing shareholders shall be entitled to subscribe for the new

shares on a pro rata basis in proportion to their shareholding.

Equity which cannot otherwise be classified as capital stock or retained earnings.

It's usually created from a stock issued at a premium over par value.

The balance sheet suggests a decrease in reserve and surplus so the situation is

good ..

A company's debts or obligations that are due within one year. Current liabilities

appear on the company's balance sheet and include short term debt, accounts

payable, accrued liabilities and other debts. Normally, companies withdraw or

cash current assets in order to pay their current liabilities. The decrease in the

balace sheet suggests that the company has cleared its liabilities in 2008 ., so

the net amout of current liabilities has gone down .

Inventories include raw materials, component parts, work in process, finished

goods, packing and packaging materials, and general supplies. The control of

inventories, vital to the financial strength of a firm, in general involves deciding at

what points in the production system stocks shall be held and what their form and

size are to be. As some unit costs increase with inventory size—including

storage, obsolescence, deterioration, insurance, investment—and other unit

costs decrease with inventory size—including setup or preparation costs, delays

because of shortages, and so forth—a good part of inventory management

consists of determining optimal purchase or production lot sizes and base stock

levels that will balance the opposing cost influences. Decrease in the general

inventory decides the levels (reorder points) at which orders for replenishment of

inventories are to be initiated.

So there is a urgent need to replenish it .

Debtors in American parlance are referred to as accounts receivable and they

show the amount of money owed to the firm at the accounting date by people

who have purchased the products or services of the firm but have yet to pay. In

this case there are £80 outstanding because of sales made by the firm on credit.

As this hypothetical balance sheet is based on a retailer selling mainly for cash,

this debtors figure is relatively low.

     The firm would expect to be paid by the people or organisations represented

by this debtors figure at the appointed time in the future. The figures for debtors

should not contain those debts which have become too doubtful for repayment to

be reasonably expected. These should be written off and the debtors figure

correspondingly reduced. As this writing off will reduce assets, the liability side of

the balance sheet has to be reduced by the same amount in order to maintain

the required equality. As it is the shareholders of the company that will have to

face the loss of selling to people who did not pay, the reduction will made in the

equity section. An increase in debtors is not good from companys point of view

because the money stands still and cannot be included in taking investment

decisions.

This figure total assets less current liabilitie also shows the size of the firm's

assets which have been financed by long-term funds, that is all money obtained

by the firm other than the short-term current liabilities. The larger this number the

safer the firm, all other things being equal.So the position of this firm is good from

this point of view .

The capital and reserves section of the balance sheet gives the breakdown of the

shareholders' funds. Shareholders are, of course, the owners of the firm and as

such are entitled to any of the money which the firm earns after the various

creditors have been paid. Shareholders elect the directors of the firm.. the

decrease in capital and reserves is beneficial from shareholders point of view .

The cash and bank balance of this firm has increased from 2007to 2008 . this

condition suggests that the firm would be able to make more future investiments

and is on the safer side .

The increase in value of fixed assets because of revaluation of fixed assets is

credited to ‘Revaluation Reserve’, and is not available for distribution as dividend.

Revaluation Reserve is treated as a Capital Reserve

The increase in depreciation arising out of revaluation of fixed assets is debited

to depreciation expense. Fixed assets are held by an enterprise for the purpose

of producing goods or rendering services, as opposed to being held for resale in

the normal course of business. For example, machines, buildings, patents or

licences can be fixed assets of a business.there is a decrease in fixed assets that

is not satisfactory from companys point of view .

Secured Loans -Many types of loans are available in the Us for

companies and small businesses. For instance companies can avail of

secured loans, that is, against a collateral such as real estate or fixed

deposits. Secured loans have two advantages over unsecured ones.

Firstly, secured loans are easier to obtain as the lender is exposed to

less risk. Secured loans are also cheaper than unsecured loans, that is,

they charge a lower rate of interest. This increase is very good from

the company point of view and so increases its goodwill

Unsecured loans can be obtained based on the credit history of the

company as well as its balance sheet. Such loans are, however, costly

compared to secured loans and are available only to those companies .

that already have a strong credit history. To build a credit history first,

the company must first go in for a secured loan. Nill balance in 2008

for this company suggests that company has cleared all its risk of loans

. moreover these are more costly and their clearance is essential . the

firm has done so

Capital work in progress, sometimes at the end of the financial

year, there is some construction or installation going on in the

company, which is not complete, such installation is recorded in the

books as capital work in progress because it is asset for the business.

This is usually recorded as an asset on the balance sheet. Work in progress

indicates any good that is not considered to be a final product, but must still be

accounted for because funds have been invested toward its production. An

increase in wip is good from the management point of view because these are

assets and these will contribute to in increase in working capital .

REFERENCES:

o Guidance from faculty and corporate guide.

o Reference to company’s financial statements.

o Reference to R.K. Marble Private limited website.

o Reference to various websites like;

o www.google.com

o www.indiainfoline.com

o www.wikepedia.com

o www.cmaindia.org

Reference to various magazines

o Books (Financial Management and Management Accounting)

Appendices:

o Appendix- A: Balance Sheets for R.K. Marble Private Limited (2006-

07 to 2007- 08)

o Appendix- B: Profit & Loss Accounts for R.K. Marble Private Limited (2006-07 to 2007-08)