DECLARATION

I, Mayank Agarwal hereby declare that the project entitled “Financial Analysis & Inventory Management in WIMCO” is my original work, done by me.

Now it is an asset of K.C.M.T Bareilly. All the rights for using this project lie with the institute.

Unauthorized copying, hiring, broadcasting or rental of this project without permission from the institution will be considered illegal.

Mayank Agarwal M.B.A -1Ith SEM. Roll no-0814270044

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ACKNOWLEDGEMENT

The extensive endeavor, bliss and euphoria that accompany the successful completion of any task would not be complete without the expression of gratitude to the people who made it possible. I take this opportunity to acknowledge all those people whose guidance and encouragement has helped me in winding up this project.

I am really grateful to Mr. Sunil Agarwal (DGM F&A) & Mr. Shayam Shunder Saxena for guiding and providing me with necessary help throughout the project. Without his critical and timely suggestion, this project would never have been possible.

I wish to express my special thanks and regard to Dr. Tahir beg & other faculty of KCMT who was my guide in charge of project work, who had me the necessary tips and supervision to carry out my project and to prepare the report.

Unfortunately, the list of expression of thank, no matter how extensive is incomplete and inadequate. Last but not the least, I would like to extend my heartiest gratitude to all those who had directly or indirectly responsible for the successful completion of the project.

Mayank Agarwal M.B.A -1Ith sem. Roll no-0814270044

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P R E F A C E

A comprehensive study of “Financial Analysis” is a supplement to the theoretical classroom

knowledge. It helps to understand the subject more precisely and practical implications of

various concepts.

This report tries to outline idea of professional world and helps in understanding the

pragmatic aspect of management function. Own observations are significant towards the

contribution in learning the subject. The report is therefore designed as a reference of

organization functioning rather than copy down instrument.

The purpose of project is to make me familiar with day to day functioning of business. The

present report is an effort in this direction.

My humble endeavor and motive in presenting the project report is to impart a balanced

introduction and knowledge of Financial Analysis, which is an important integral part of

financial management.

It is hoped that this project will serve as supportive document to research worker as efforts

has been tired to make this report an informative, stimulating, and self-explanatory.

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INDEX

Declaration

Acknowledgement

Preface

1. INTRODUCTION

a) About WIMCO

b) Organization chart

c) Overview of Financial Analysis

2. OBJECTIVE OF STUDY

3. RESEARCH METHODOLOGY

4. INTERPRETATION & ANALYSIS

a) Data at a glance

b) Data Interpretation and analysis

5. INVENTORY MANAGEMENT & CONTROL

6. FINDINGS

7. RECOMMENDATIONS

8. CONCLUSION

BIBLIOGRAPHY

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INTRODUCTION

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A Birds eye view of WIMCO

In 1918, the Swedish match companies setup its office in India with objective of

manufacturing & selling matches in India.

WIMCO LTD Company the oldest INDO-SWEDISH venture in the India was launched

as a private limited company on 7th September, 1923 under the name of the Western

Indian Match Corporation Limited.

Within start duration of the seven years, five manufacturing factories were setup in India.

They were situated at Calcutta (now Kolkatta), Madras (now Chennai), Ambernath,

Dhubri (now closed) and Bareilly (U.P). A separate unit was setup in the Andman Island

in 1928 (now closed). The company become a public company on the 19 th July 1929, the

company was changed to its present name and fresh certificate of incorporation due to

change of name was issued by additional Registrar of companies, Mumbai of 5 th Dec,

1975.

With the passage of time file Company had engaged itself in the production and sale of

safety matches at it’s also engaged presently in forestry operation.

The total match manufacturing process in WIMCO LTD is mechanized and at present

WIMCO market share to nearly 10 to 15% of total country’s requirements. The medium

and small scale unit meets the rest.

Wimco is the single largest safety matches manufacturer in India and is widely present in

the Indian market through various brands of matches like- Ship, Homelites, Tekka,

Horsehead, Three Mangoes, Cheeta Fight, Kapas and Arrow, to name a few. It is the first

company in India, to introduce 'Karborised' safety matches, which leave no 'after-glow'.

We are synonymous with superior quality, safe, and consumer friendly goods. Having a

wide distribution network, Wimco Limited has in recent time’s undertaken distribution of

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products of other companies, which deal in Shampoos, Throat Drops, and Chewing

Gumlets. We also export our safety matches to various countries around the world. The

company's export markets include UK, Singapore, Malaysia, UAE, Tanzania, Myanmar,

Syria, Jordan, Sri Lanka, Nepan, and Iran.

Wimco also has an Engineering Division and an Agro Forestry business - "Wimco

Seedlings Ltd."

At WIMCO, the printing is done on the highly sophisticated Chambers machine the type

which is only 8 in the world and WIMCO have three machines.

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Match Manufacturing in India

Today India is one of the leading match manufactures in the world. Consumption of

matches in India is very low as compared to other country but there has been a notable

5% consumption annually in the recent past.

In 1910 few JAPANESE SETTLE IN Calcutta producing matches. They transferred their

simple technique of match manufacturing to the residents, however they could not get

any success in the important competition and were soon out of manufacturing.

There are very sort of match manufacturing factories in India. In WIMCO is one of the

biggest having five centers all over the country?

Match factories of WIMCO in India

MAHARASHTRA -------------------------------------- AMBERNATH

TAMIL NADU -------------------------------------- CHENNAI

WEST BENGAL -------------------------------------- KOLKATTA

UTTER PRADESH ------------------------------------- BAREILLY

Registered office

Indian Mercantile Chambers

Ramji Bhai, Kamani Marg

Ballad Estate Mumbai 400038

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History of WIMCO Company

Introduction to common Matches

The common matches box that is a part of each and almost every household in the

modern day work it was invented by a chemist “ Johny Walker” of Stockton on trees,

England all by accident, while conducting an experiment. He had been using a stick to

stir a mixture of potash (Potassium Carbonate and Antimony) when he scrapped. It

against the stone floor to get rid off the blob, which had formed on the stick. It rapidly

burst into flames.

Matches were first made out of the strips of cardboard and were being sold in the boxes

of 100 since there burnt so easily. Walker soon changed his idea for flat wooden splints

of wood.

John Lund storm of Sweden invented the safety, match in 1855. This safety matches can

only catch fire by rubbed against a special surface because a part of necessary chemicals

are on the match head and other on the striking board. Production of there begin in the

very same year in Sweden and by from pry and May in the England. Book matches were

devised by an American Jouhua Pusey in 1892 and were first manufactured in 1896.

“Necessity is the mother of invention”

Although technological innovations are reaching at heights, new and new concepts are

emerging everyday, even than match boxes can be found in any of the house in present

time also.

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Company profile

Business Type Public Company

Year of Establishment 1929

No of Production Lines: 4 factories of Match & 1 Factory for Engineering products

Export Markets: Worldwide

Production type Automatic

Monthly Production Capacity: 36 crore match boxes per month and 11 machines per month engineering division

Product Range Cardboard matches 40 matchsticks of 42mm/matchbox 50 matchsticks of 42mm/matchbox 50 matchsticks of 47mm/matchbox 240 matchsticks of

47mm/matchbox

Veneer matches 50 matchsticks of 42mm/matchbox

o Matchbox with Veneer Inners

o Matchbox with Cardboard Inners

40 matchsticks of 38mm/matchbox o Matchbox with Veneer

Inners

Wax matches 40 matchsticks of 29mm/matchbox. 40 matchsticks of 32mm/matchbox. 50 matchsticks of 32mm/matchbox. 35 matchsticks of 27mm/matchbox.

2. WIMCO Engineering:

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WIMCO Engineering manufactures Tube Filling Machines, Jar Filling Machines,

Cartooning Machines and Power Filling Machines. It is also the sole selling agent in

India for ARENCO (which is a part of the Swedish Match Group), Shrinkwrapping

Machines, Strechwrapping Machines, Carryline Conveyors and pillow pack

machines.

WIMCO Clients

WIMCO clientele in India includes the following well known companies:

Hindustan Lever

Dabur

Balsara

Glaxo Smithkline

Johnson & Johnson

Glenmark Pharmaceuticals

Pidilite

Emami

Cavinkare

J L Morrison.

Export Markets

The company’s export markets include:

UK

Singapore

Malaysia

UAE

Tanzania

Myanmar

Syria

Jordan

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Sri Lanka

Nepal

Iran

3. Agro Farm Forestry:

The raw materials for the safety matches, Wimco’s Agro Farm Forestry. Operation

makes sufficient contribution to the nation’s a forestation effort in each of last 4 years

over the million popular trees have been planted through WIMCO NABARD scheme.

WIMCO

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Core Value & Principles

Communication: A commitment to seek active open and honest dialogue.

Principles- Talk with people rather than about there seek listen to the opinions of others

speak you mind in a constructive way ensure that the decision making process is visible.

Team Work: To develop better solutions by working together using collective

experiences.

Principles- Delegates authority to the appropriate level retains responsibility for

delegated work meet the expectation of your role honor agreement.

Innovation: Create an environment that encourages new idea in all aspects and a

willingness to implement.

Principles- Accept mistake and learn from them regard all ideas as good ideas. Look

beyond the horizon.

Recognition: Show continuous interest in people and there performance both actual &

potential.

Principles- Celebrate success. Show genuine interest in people and give timely and

constructive comments on people performance both actual and potential.

Growth: Commitment to the development of our people to improve WIMCO.

Principles- Give and accept challenges encourage learning.

Quality Policy

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We are committed to-

1. Delight our customers by providing world-class Quality Safety Matches.

2. Enhance competency through appropriate training and development programs.

3. Develop a proactive working atmosphere to facilitate continual improvement and creativity.

4. Provide safe and healthy environment for all those who work for and on behalf of the organization and adhere to pollution control norms.

5. Identity, nurture, develops and reward suppliers to align with the changing requirements on quality, delivery and cost.

6. Enhance the image and dignity of the organization and reward all stakeholders.

WIMCO LTD Bareilly

Light Up the Future

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The WIMCO LTD located at the Cluter Buck Ganj, in Bareilly district Utter Pradesh.

It was established in April 1929.

The annual production of this unit is approx 175000 cases (1 case = 7200 matches).

In this total 991 persons are employed.

Production of this unit cause the whole northern India consisting Rajasthan, Madhya

Pradesh, J&K and some other states. The unit has its own commitment toward social

and environment needs from time to time and had been upgrading the facility to

remain in the hard prescribed safety, health, and environmental standards.

WIMCO strongly believes that resource conservation and pollution, preventing go

hand to hand. It has been constant endeavor unit to upgrade the production process by

carrying out the maximum utilization to waste from the plant so that minimum

pollutants are generated which could be treated effectively.

The unit has established Effluents Treatment inside the factory in accordance with the

pollution status. Very good greenery is maintained in the factory and residential

colony by plantation.

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Production and production process

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The company produces about 700 cases per day and the annual production is around

175000 cases. The production target is being achieved with the corporation of the entire

departments and workers.

Production process- There is nine sections in the production department.

1. Log yard- Wood received from the forest and other sources and stocking woods on

platforms and in the tanks is done here.

2. Peeling- The wood is peeled in the layers and used for manufacture of splints.

3. Dipping- The splint heads are dipped in the fire producing chemicals and match

sticks are produced.

4. Chambon- The manufacturing and printing of outer box labels in the four-side

friction is done on the Chambon machine.

5. Slitting and rewinding- Cutting of outer box, paper board and inner box along

with slitting and rewinding is done in this unit.

6. Card Board Line- This produce the outer and inner box and closes them.

7. Box Filling- Matchsticks are filled in the matchboxes and the excise stamps are

affixed here.

8. Packaging- Boxes are packed in 10’s and 600 boxes in a container.

9. H.H.Line- It is a separate department producing the matchboxes of 300 sticks

under the name of WIMCO Homelites.

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DAILY PRODUCTION

700 C/S PERDAY

1 C/S =7200 BOXES

SO,

700*7200 BOXES =5040000 BOXES PERDAY

WORKERS -1400 Workers

Three Shifts

Summer

SHIFT TIME NO.OF WORKERSI 7:00am-3:30pm 500-600

II 3:30pm-12:00am 450-500

III 12:00am-7:00am 450-500

Winter

SHIFT TIME NO.OF WORKERI 7:00am-3:00pm 500-600

II 3:00pm-11:00pm 450-500

III 11:00pm-7:00am 450-500

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Financial Statement Analysis

Financial statement analysis is the process of examining relationships among financial statement elements and making comparisons with relevant information. It is a valuable tool used by investors and creditors, financial analysts, and others in their decision making processes related to stocks, bonds, and other financial instruments. The goal in analyzing financial statements is to assess past performance of a company. Investors who buy stock are primarily interested in a company’s profitability and their prospects for earning a return on their investment by receiving dividends and / or increasing the market value of their stock holdings. Creditors and investors who buy debt securities, such as bonds, are more interested in liquidity and solvency: the company’s short-and long-run ability to pay its debts. Financial analysts, who frequently specialize in following certain industries, routinely assess the profitability, liquidity, and solvency of companies in order to make recommendation about the purchase or sale of securities, such as stocks and bonds.

Analysts can obtain useful information by comparing a company’s most recent financial statements with its results in previous years and with the results of other companies in the same industry. Three primary types of financial statement analysis are commonly known as horizontal analysis, vertical analysis, and rind ratio analysis.

Horizontal Analysis

When an analyst compares financial information for two or more years for a single company, the process is referred to as horizontal analysis, since the analyst is reading across the page to compare any single line item, such a sales revenues. In addition to comparing dollar amounts, the analyst computes percentage changes from year to year for all financial statement balances, such as cash and inventory. Alternatively, in comparing financial statements for a number of years, the analyst may prefer to us a variation of horizontal analysis called trend analysis. Trend analysis involves calculating each year’s financial statement balances as percentages of the first year, also known as the base year. When expressed as percentages, the base year figures are always 100 percent, and percentages changes from the base year can be determined.

Vertical Analysis:

When using vertical analysis, the analyst calculates each item on a single financial statement as a percentage of a total. The term vertical analysis applies because each year’s figures are listed vertical on a financial statement. The total used by the analyst on the income statement is nit sales revenue, while on the balance sheet it is total assets. This approach to financial statement analysis, also known as component percentages, produces common-size financial statements. Common-size balance sheets and income statements can be more easily compared, whether across the years for a single company or across different companies for the same year.

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Ratio Analysis:

Ratio analysis enables the analyst to compare items on a single financial statement or to examine the relationships between items on Iwo financial statements. After calculating ratios for each year’s financial data, the analyst can then examine trends for the company across years. Since ratios adjust for size, using this analytical tool facilitates intercompany as well as intra company comparisons. Ratios are often classified using the following terms: Profitability ratios (also known as operating ratios), Liquidity ratios, and Solvency ratios, Profitability ratios are measures of the short-term ability of the company to pay its debts when they come due and to meet unexpected needs for cash. Solvency ratios indicates the ability of the company to meet its long-term obligations on a continuing basis and thus to survive over a long period of time. In judging how well on a company is doing, analysts typically compare a company’s ratios to industry statistics as well as to its own past performance.

Mostly Two Statements Used In Financial Analysis:

Income Statement

A Financial statement that measure a company’s financial performance over a specific accounting period. Financial performance is assessed by giving a summary of how the business incurs its revenues and expenses through both operating and non-operating activities. It also shows the net profit of loss incurred over a specific accounting period, typically over a fiscal quarter of year. It’s also known as the “Profit and Loss Statement” or “Statement of Revenues and Expenses”.The income statement is the one of the three major financial statements. The other two are the balance sheet and the statement of cash flows. The income statement is divided into two parts the operating and non-operating sections.

The portion of the income statcmei4 that deals with operating items is interesting to investors and analysis alike because this section discloses information about revenues and expenses that are a direct result of the regular business operations. For example, if a business creates sports equipment, then the operation items sections would talk about the revenues and expenses involved with the production of sports equipment.

The non-operation items section discloses revenues and expense information about activities that are not tied directly to a company’s regular operations. For example, if the spurt equipment company sold a factory and some old plant equipment, then this information would be in the non- operating items section.

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Purpose of the Income Statement

The primary purpose of the income statement is to report a company’s earnings to investors over a specific period of time. Year ago, tie income statement was referred to as the Profit and Loss (or P&L) statement, and has since evolved into the most well-known and widely used financial report on wall street. Many times, investors make decisions based entirely on the reported earnings from the income statement without consulting the balance sheet or cash flow statements (which, while a mistake, is a testament to how influential it is).

Using Income Statement Analysis to Calculate Expenses,Earning, Financial Ratio and Profit Margins

To an enterprising investor, income statement analysis reveals much more than a company’s earnings. It provides important insights into how effectively management is controlling expenses, the amount of interest income and expense, and the taxes paid. Investors can use income statement analysis to calculate financial ratios that will reveal the rate of return the business is earning on the shareholder’s retained earnings and assets; they can also compare a company’s profits to its competitors by examining various profit margins such as the gross profit margin, operating profit, margin, and net margin.

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PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH, 2008

A WHOLE (Rs. In Lacs)

Income: Schedule 2007-08 2006-07Sales and Service 13 19,842.53 17,426.53Other Income 14 690.91 131.27 20,533.44 17,557.80Expenditure:Cost of Trading Products 319.13 426.61Cost of Seeds 3.19 -Raw Materials Consumed 12,166.46 9,550.56(Increase)Decrease in Stock 15 (631.21) 172.25Employee Costs 16 3,253.51 2,776.74Other Costs 17 4,294.55 3,638.78Interest 18 13.46 107.36Depreciation 4 385.13 244.01 19,804.22 16,914.31Less: Debited to Capital and other accounts 4.04 82.38 19,800.18 16,831.93

Profit before Taxation 733.26 725.87Income Tax Expenses: 75.00 23.00Fringe Benefit Tax 24.62 99.62 15.50 38.50Profit after Taxation 633.64 687.37Profit and Loss Account Deficit Brought Forward (1,701.74) (2,384.74)Add: Transfer from Reserve on Amalgamation 1,015.25 - (See Note 1 (III) (b) of schedule 19)Add: Transfer from Revaluation Reserve 686.49 - (See Note 1(III) (c) of Schedule 19) Less: Gratuity Transitional Liability - - 4.37Balance Carried to Balance Sheet 633.64 (1,701.74)Earnings per share (Rs) - Basic and Diluted 0.46 1.32 (See note 14 of Schedule 19)Face Value (Rs) 1.00 1.00

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Profit & Loss Account of Wimco Ltd, BareillyFor the Year 31, 2008

Schedu1e 2007-08 2006-07Income:Sales and Services AInternal Sales Raw MaterialInternal Sales Finished Goods DomesticInter Unit Margin (Sales) 48,018,631External Sales inch Lease Ink & Tech Fees 663,701,934 622,886,354Total Sales 663,701,934 670,904,985Other Income B 4,452,734 3,084,818Total Income 668,154,668 673,989,803Increase/Decrease in Stocks C 20,808,915 2,345,433Expenditure:Raw Material Consumed: 419,362,001 299,304,356Purchased 419,362,001 298,407,059Inter-Unit Written Off 31,411Raw Material Consumed Slurry 114,966Raw Materials Consumed Carburization 750,920Inter Unit purchases of prdts- Domestic 103,175,920Inter Company PurchaseInter Unit Margin (Purchase)Cost of Trading Products 492,000 1,324,675PurchasesEmployee costs D 86,791,055 81,104,965Other Costs E 116,323,985 113,445,744Excise DutySales TaxInterest F 400,000 5,000,000Depreciation 9, 00,000Inter-Unit Service (income)Inter-Unit ChargesCorporate Overheads 22,500,000Sub-Total 623,369,041 634,855,642Less: Debited to Capital & other a/c 359,641 3,499,618 Total- Expenses 623,099,400 631,356,024 Profit before Exceptional items & taxation 65,954,183 44,979,212Exceptional item - -Provision for Taxation 65,954,183 44,979,212Provision for Wealth Tax - -

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Provision for Current Taxation - -Provision for Deferred Taxation - -

Profit after Taxation 65,954,183 44,979,212Transfer from investment Allowance Reserve - -Profit & Loss A/c. surplus b/f - -TOTAL 65,954,183 44,979,212

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Ba1ance Sheet

A financial statement that summarizes a company’s assets liabilities and shareholder’s equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders.

The balance sheet must follow the following formula:

Assets = Liabilities + Shareholder’s Equity

Each of the three segments of the balance sheet will have many accounts within it that document the value of each. Accounts such as cash, inventory and property are on the asset side of the balance sheet, while on the liability side there are accounts such as accounts payable or long- term debt. The exact accounts on a balance sheet will differ by company and by industry, as there is no one set template that accurately accommodates for the differences between different types of business

It’s called a balance sheet because the two sides balance out. This makes sense: A company has to pay for all the things it has (assets) by either borrowing money (liabilities) or getting it from shareholders (shareholder’s equity).

The balance sheet is one of the most important pieces of financial information issued by a company. It is a snapshot of what a company owns and owes at that point in time. The income statement, on the other hand, shows how much revenues and profit a company has generated over a certain period. Neither statement is better than the other rather, the financial statements are built to be used together to preset a complete picture of a company’s finances between the amount purchased and the amount paid is added to net income if preparing the cash flow statement using the indirect method. Cash payments for land, building, and equipment purchases, repayments of loans, purchases of treasury stock, and payment of dividends may be found by performing similar analysis on the appropriate accounts.

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Technique of Analysis and Interpretation

In present mostly uses these techniques in analysis-1. Cash flow analysis2. Fund flow analysis3. Ratio analysis4. Preparation of comparative statements

Cash flow

Cash flow is essentially the movement of money into and out of your business; it’s the cycle of cash inflows and cash outflows that determine your business’ solvency.

Cash flow analysis is the study of tie cycle of your business’ cash inflows and outflows, with the purpose of maintaining an adequate cash flow for your business, and to provide the basis for cash flow management.

Cash flow analysis involves examining the components of your business that affect cash flow, such as accounts receivable, inventory, accounts payable, and credit terms. By performing a cash flow analysis on these separate components, you’ll be able to more easily identify cash flow problems and find ways to improve your cash flow.

A quick and easy way to perform a cash flow analysis is to compare the total unpaid purchases to the total sales due at the end of each month. If the total unpaid purchases are greater than the total sales du, you’ll need to spend more cash than you receive the next month, indicating a potential cash flow problem.

Fund flow

It is a statement showing changes in financial position, in sources (fund received) and application (usage of fund) manner with following basis:

1) Working capital base.2) Cash flow (cash budget) base.3) All resources base.

 

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CASH FLOW FROM INVESTING ACTIVITING ACTIVITIES:

Net Cash flow from in investing activities (1,100.31) (1,003.77)

CASH FLOW FROM FINANCING ACTIVITIES

:

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Objectives of the study

Objectives of the study

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To analyze the financial position of the company (WIMCO).

To compare the financial position of subsidiary company (WIMCO) with

its holding company (ITC).

To check the physical items available in general store.

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Research Methodology

Research Methodology

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1. Liquidity Ratiosa. Current ratiob. Quick ratio or Acid test ratio

2. Solvency Ratiosa. Debt – Equity ratiob. Debt ratio

3. Turnover Ratiosa. Inventory turnoverb. Debtors turnover ratioc. Days of inventory holdingd. Collection periode. Current Assets Turnoverf. Net current Assets Turnoverg. Fixed Asset Turnover ratio

4. Profitability Ratios a. Profit Marginb. Net Marginc. Return on Equity

5. Equity related Ratios a. Earning per share (EPS): b. Dividends per share (DPS): c. Pay out Ratiod. Return on Capital Employed (ROCE)

Used Data- For my detail financial analysis I used secondary data available.

Source of Data- sources of data are as follows:

Annual Report of Wimco Ltd.

Annual Report of ITC Ltd.

Internet.

Financial Statement Analysis

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1. Liquidity Ratios

Year 2008

a. Current ratio: current assets/current Liabilities

The ratio is an indication of a company’s ability to meet short term debt obligations, the higher the ratio, the more liquid the company is.

The current ratio of 1.37 times (Wimco) & 1.58 times (ITC) is in relatively

ITC WIMCO

I. Current assets, loans & advances 701927 7773.84

II. Current liabilities & Provisions 443230 5673.62

( I/II ) 1.58 1.37

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good short-term financial standings. But in comparison to WIMCO liquidity of ITC is better.

Current Ratio

1. Liquidity Ratios

Year 2008

b. Quick ratio or Acid test ratio : (current assets – inventories)/ Current Liabilities

ITC WIMCOI. Current assets, loans & advances

701927 7773.84

Less: II. Inventories 405052 507.30296875 7268.54

III. Current liabilities & Provisions

443230 5673.62

( I – II )/( III ) 0.67 1.28

The small ‘quick ratio’ of WIMCO i.e 1.28 times says that the company’s financial strength is not so strong in comparison to ITC i.e 0.67 times.

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In general a quick ratio of 1 or more is accepted by most creditors; however, quick ratios vary greatly from industry to industry.

According to this Wimco has to utilized its cash effectively & efficiently o that they can earn more profit.

Quick Ratio

ITC WIMCOI. Loan Funds 21443 380.14II. Shareholders funds 1205767 14656.06( I/II ) 0.018 0.02

The Debt to Equity ratio offers one of the best pictures of a company’s leverage. The higher the figure, the higher its leverage the company enjoys.

In Wimco & ITC debt-equity ratio is approximately same i.e. 0.02 & 0.018 times, which means that the company has not been aggressive in financing its growth with debt. Thus its earnings are stable. The companies have better support from the shareholders.

2. Solvency Ratios

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Year 2008

a. Debt – Equity ratio: Long term debt/equity (net worth)

Debt-Equity ratio

ITC WIMCO

I. Loan Funds 21443 380.14II. Shareholders funds 1205767 14656.06III. 1227210 15036.20( I/III ) 0.018 0.02

The ratio of 0.02 & 0.018 times signify that the companies have employed more capital over debts.

Thus the companies are efficiently utilizing its loans funds.

Debt Ratio

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2. Solvency Ratios

Year 2008

b. Debt ratio : debt(long term)/debt(long term + equity)

2. Solvency Ratios

3. Turnover Ratios

Year 2008

a. Inventory turnover: Cost of goods sold or net sales/Average (or closing) inventory.

The ratio 4.68 times of Wimco & 3.44 times of ITC

ITC WIMCOI. Net Sales 1394753 19842.53II. Inventories 405052 4234.91( I/II ) 3.44 4.68

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signifies that the Wimco is less efficient in selling its stock than ITCs.

Inventory turnover

3. Turnover Ratios

Year 2008

b. Debtors turnover ratio: Credit sales or net Sales/Average (or closing) Debtors

ITC WIMCOI. Net sales 1394753 19842.53II. Sundry Debtors 73693 507.30( I/II ) 18.93 39.11

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Ratios signify that in ITC debtors are more than in WIMCO or the credit period is longer than WIMCO.

It should be minimized. But it also signifies that the ITC is getting good returns and has no visible risk but benefits out of its debtors.

Debtors Turnover

3. Turnover Ratios

Year 2008

c. Days of inventory holding: Number of days in the year (say 365)/Inventory turnover ratio

ITC WIMCOI. No. of days in a year 365 365II. Inventories turnover ratios 3.44 37.11(I/II) 106.10 77.88

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Inventory holding period is short in Wimco in comparison to ITC i.e 78 days only. It is quit efficient for the liquidation.

3. Turnover Ratios

Year 2008

d. Collection period: No of days in the year (say 365)/Debtors turnover

WIMCO is more efficient in getting back its dues than ITC.

3. Turnover Ratios

Year 2008

e. Current Assets Turnover: Net Sales/Current Assets

The ratio i.e. 3.15 times of ITC & 2.55 times of Wimco signifies that Wimco is more efficient in making sales revenue in comparison to ITC because in ITC inventories are more.

Current Assets Turnover

ITC WIMCOI. No of days in the year 365 365II. Debtors turnover 18.93 39.11(I/II) 19 9

ITC WIMCOI. Net Sales 13947.53 19842.53II. Current assets, loans & advances 4432.30 7773.84

3.15 2.55

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3. Turnover Ratios

Year 2008

f. Net current Assets Turnover: Net Sales/ Net Current Assets

Net Current Assets ratio signifies the utilization of net current assets in generating sales revenue.Thus ITC is highly efficient in utilizing its net current assets in generating sales revenue

3. Turnover Ratios

Year 2008

g. Fixed Asset Turnover ratio: Net Sales/Net Fixed Assets

The ratio shows that WIMCO is more efficient in utilizing its fixed assets in generating sales revenue than ITC.

Fixed Asset Turnover ratio

ITC WIMCOI. Net Sales 1394753 19842.53II. Net Current Assets 258697 2100.22(I/II) 5.39 9.45

ITC WIMCOI. Net Sales 1394753 19842.53II. Net Fixed Assets 729565 12112.74(I/II) 1.91 0.97

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4. Profitability Ratios

Year 2008

a. Profit Margin: (Profit before interest & tax (PBIT)/Net sales)*100

The ratio between the profit before interest and taxes (equal to operating income, in our case) to that of the sales for the given period during which the profit has been earned is a measure of the profitability of the company for that period. Profit margin of ITC is more than WIMCO. The reason behind this is accumulated profit of ITC.

ITC WIMCOI. Profit before taxation &

Exceptional items457177 733.26

II. Net Sales 13947s53 19842.53( I/II )*100 32.78 3.68

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Profit Margin

4. Profitability Ratios

Year 2008

b. Net Margin: Profit after tax(PAT) * 100 / Net Sales

I. Profit after Taxation 3120.1 633.64II. Net Sales 13947.53 19842.53(I/II)*100 22.4 3.19

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PAT or Profit after taxation is directly correlated with the profit before tax the interest component is the sole parameter that can differentiate the trend followed by the ratio above and this one.

Profit margin of ITC is more than WIMCO. The reason behind this is higher margin in ITC product like cigarettes etc.

Net Margin

4. Profitability Ratios

Year 2008

c. Return on Equity: (PAT/Equity(net worth))*100

I. Profit after Taxation 312010 633.64II. Shareholders funds 1205767 14656.06(I/II)*100 25.88 4.32

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The ratio of net income after taxes to total end of the year net worth of the company is called the RONW for that company. This ratio indicatesThe return on stockholder’s total equity that is invested in the business.

It shows that ITC is More efficient in utilizing its shareholder’s funds.

Return on Equity

5. Equity related Ratios

Year 2008

a. Earning per share (EPS): PAT/No. of ordinary share

ITC WIMCOI. Profit after Taxation 312010 633.64II. No. of shares 3741.67486 942.30( I/II ) 8.28 0.67

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EPS, as it is called, are a company’s profit after tax (PAT) divided by its outstanding (equity) shares. It is therefore measured as the portion of a company’s profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company’s profitability.

In comparison to the face value of Re. 1/share the EPS for WIMCO is 0.67 is very less than ITC.

Earning per share (EPS)

5. Equity related Ratios

Year 2008

b. Dividends per share (DPS): Proposed dividend/No. of ordinary share

ITC WIMCOI. Proposed Dividend 131901 NilII. No. of shares 37641.67486 942.30( I/II ) 3.5o Nil

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Dividend per share is a simple and intuited number. It is the amount of the dividend that shareholders have (or will) receive, over a year, for each share they own.

Financial condition of Wimco is not so that Wimco can provide dividend.

5. Equity related Ratios

Year 2008

c. Pay out Ratio: DPS/EPS or Dividends/PAT

It shows that Wimco primarily focuses on retaining its whole earnings.

5. Equity related Ratios

Year 2008

d. Return on Capital Employed (ROCE): (EBIT/Capital employed)*100

The return on Capital employed is another measure of the returns that the

ITC WIMCOI. DPS 3.5o NilII. EPS 8.28 0.67 (I/II) 0.42 Nil

ITC WIMCOI. Profit before taxation &

Exceptional items457177 733.26

II. Sources of Funds 1281717 15036.20( I/II )*100 35.67 4.87

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business generates. This is expressed as the ratio between the profit before interest and taxes to the capital employed in the business.

The ROCE of 4.87% signifies that the WIMCO is getting low returns out of its investment in comparison to ITC

Return on Capital Employed (ROCE)

COMPARATIVE BALANCE SHEET OF

ITC WIMCO % of WIMCO ON ITC

(I) SOURCES OF FUNDS

(1) Shareholders Funds

(a) Capital 37686 6942.30 18.42

(b) Reserve & Surplus 1168081 7713.76 0.66

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1205767 14656.06 1.215

(2) Loans funds

(a) Secured Loans 557 57.30 10.28

(b) Unsecured Loans 20886 322.84 1.545

21443 380.14 1.772

(3) Deferred Tax-Net 54507 Nil

TOTAL 1281717 15036.20 1.17

(II) APPLICATION OF FUNDS(1) Fixed Assets 729565 12112.74 1.66

(2) Investments 293455 599.10 0.20

(3) Current Assets, Loans & Advances

701927 7773.84 1.10

(4) Plantation WIP Nil 224.14

(5) Current Liabilities & Provisions

443230 5673.62 1.28

Net Current Assets 2586457 2100.22 0.81

TOTAL 1281717 15036.20 1.17

ITC & WIMCO

(Rs. In Lacs)

COMPARATIVE PROFIT & LOSS A/c OF

ITC & WIMCOITC WIMCO % of

WIMCO ON ITC

(I) INCOME

Sales & Services 1394753 19842.53 1.42

Other Income 61090 221.72 0.36

1455843 20533.44 1.43

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(II) EXPENDITURE 998666 19800.18 1.98

(III) PROFIT BEFOR TAXATION

457177 733.26 0.16

(IV) PROFIT AFTERTAXATION

312010 633.64 0.20

(Rs. In Lacs)

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Inventory Management

Inventory Management & Control

Inventory is a list for goods and materials, or those goods and materials themselves, held available in stock by a business. In accounting inventory is considered an asset. Inventory is a major part of working capital thus its management is very necessary.

Inventory Management refers to the process of managing the stocks of finished products, semi-finished products and raw materials by a firm. Inventory management, if done properly, can bring down costs and increase the revenue of a firm.

How much one should invest in inventory management? The answer to this question depends on the volume and value of inventory as a percentage of the total assets of a

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firm. The importance of inventory management varies according to industries. For example, an automobile dealer has very high inventories, sometimes as high as 50 per cent of the total assets, whereas in the hotel industry it may be as low as 2 to 5 per cent.

Aspects of Inventory ManagementAspects of inventory management are as follows:

1. Requisition: This document is prepared by store department work. In which they provide information about the reorder level n lead time of the items to the purchase department so that they can make quotation for purchase.

ROL = Lead time * consumption

2. Economic Order Quantity: EOQ is a quantity at which all the cost are minimum i.e procurement cost, storage cost etc. This quantity is also calculated by store department.

3. Quotation: it is prepared by purchase department and it contains all the information regarding quantity and quality of the items.

4. Purchase Department: After analyzing the quotations presented by the various supplier purchase department make the purchase for the items. Documents of purchase should always be in written.

5. Receiving & Inspection: it is store department’s responsibility to receive & inspect the item at the time of receiving.

6. Storage: it is store department’s work to keep the inventory in the right manner.

7. Store ledger: accounting department make the store ledger so that inventory can be manage effectively. In store ledger location (bin numbers) of every item is specified.

8. Physical Verification: It refers to check the inventory available in store ledger and store. External auditors do physical verification with the help of store and account department.

In Wimco SAP is used for inventory management. To know the correct position of inventory we did physical verification of few items which are as follows:

MATERIAL MATERIAL DESCRIPTION

CLOSING STOCK

PHYSICAL Bin

PHYSICAL AVALABILITY

GBE22290BALL BEARING NP25(UC205) 151 6 NOS 145

GBE50010 BEARING SBE 40 42 35 NOS 7GBE50030 C.I.FIRE BAR 1230 684 KG. 546GBE50050 BALL BEARING 23024K 4 1 NOS 3

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GBE50070 V. BELT D-144 39 3 NOS 36GBE50080 M.S.TROLLY 3 2 NOS 1GBE50140 BALL BEARING SLEEVES 145 145 NOS 0GBE50240 NEW GUNNY BAGS 606 560 NOS 46GBE50250 C.I.CASTED BEAM 580 580 KG. 0GBE50260 CEMENT 74 65 BAG 9GBE50350 SALWOOD 21 29 NOS -8GBE50370 FIRE BRICKS 800 500 N0S 300GBE50420 C.I. PULLY 3 9 NOS -6GBE50430 P.P. IMPLER 21 4 NOS 17GBE50440 GEAR BOX 1 NIL NOS #VALUE!GBE50580 M.S.BLACK IRON SHEET 48 26 NOS 22GBE50740 BALL BEARING RLS 13 5 5 NOS 0GBE50970 M.S.CHANNL 3"*1.5" 207.5 8L KG. #VALUE!GBE50980 G.I.PLAIN SHEET 1.6 MM 5 21 NOS -16GBE51090 BALL BEARING 51114 8 8 NOS 0GBE51120 BALL BEARING51224 1 2 NOS -1

GBE51200 L&T HRC FUSE 363 AMP 8 NIL NOS #VALUE!

GBE51310BALL BEARING 1509 E (1209K) 7 7 NOS 0

GBE51330 M.S. ANGLE 75*75*8 M 158.5 6L KG. #VALUE!GBE51350 G.I.PIPE 1/2'',15MM 111.24 18 M 93.24GBE51380 G.I.PIPE 1/4'' 40 NIL M #VALUE!GBE51390 BRASS SHEET 6''*2''*1'' 41.15 NIL KG. #VALUE!GBE51430 RADIOS HOSE PIPE 2.5'' 1 1 NOS 0GBE51470 BELT LACING NO 25&27 24 13 PAC 11GBE51480 PACKING MATCH PALLETE 2 13 NOS -11GBE51500 V. BELT C-128,C-130 13 14 NOS -1GBE51510 BEARING 35 UU 12 6 NOS 6

GBE51540FLAT FILE ROUSH BLASTERD 45 71 NOS -26

GBE51570HALF ROUND FILE ROUGH 10 17 35 NOS -18

GBE51650 FLAT FILE SMOOTER 12'',4'' 25 22 NOS 3GBE51660 H.S.TAPER PIN REAMER 7 5 NOS 2

GBE50100 SIEMENE BIMENTAL RELAY 16 NO DESCRIPTION

NOS #VALUE!GBE51670 TELE H/R BASELAND 6'' 40 NOS 40

Inventory Control is a process itself, with the help of which, the demand of items, scheduling, purchase receiving, inspection, storage and dispatch are arranged in such a manner that at minimum cost at minimum time, the goods can be dispatched to production department. Inventory control makes use of available capital in a most effective way and ensures adequate supply of goods for production.

Technique of Inventory Control where there are a large number of item in the inventory, it becomes essential to have an efficient control over all items of stores. However comparatively, greater care should be given to items of higher value. The movements of certain manufacturing may consist of a small number of items representing a major portion of inventory value and a large number of items may

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represent a minor portion of inventory value. In such cases, a selective approach should be followed.

The most modern technique for controlling the inventory is a value analysis popularly known as ABC analysis which attempts to relate, how the inventory value is concentrated among the individual item.

In Wimco ltd ABC analysis is used for inventory control. Steps in ABC analysis

Following procedure can be followed for classification of inventory in A, B & C category:

1. First, the quality of each material expected to be used in a given period should be estimated.

2. Secondly, the money value of the items of materials, s chosen should be calculated by multiplying the quantity of each item wit price.

3. Thirdly, the items should be rearranged in the descending order of their value irrespective to their quantity.

4. Fourthly, a running total of all the values and items will then be taken and then the figure so obtain should be converted into percentage of the gross total.

5. Fifthly and lastly, it will be found that a small number of a first few items may amount to a large percentage of the total value of the items. The management, then, will have to take a decision as to percentage of the total value or the total number of items which have to be converted by A, B & C categories.

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Findings

Findings

Based on the above financial analysis it is clear that Quick ratio of Wimco

is more than 1 i.e 1.28.

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Debt-equity ratio of Wimco is very less i.e 0.02 which means that Wimco

has not been aggressive in financing its growth with debt. The company has

better support from the shareholders.

In Wimco collection period is very quick i.e 9days.

During my visit I observed that there is wastage of raw material (wood)

which increase direct production cost.

Inventory management in Wimco is not effective & efficient.

Based on above analysis it is clear that Wimco is a very small part in ITC

like a drop in to an Ocean.

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Recommendation

Recommendation

Based on the above financial analysis it is clear that Wimco needs to focus

on cost reduction to improve its profitability.

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Based on the above financial analysis it is clear that the company should

utilize its cash in more operating activities so that they can earn more profit.

Wimco should use more debt capital in its capital structure to get benefit of

financial leverage.

During our visit we observe that there is scope of wastage reduction to

reduce the cost.

We also observed that there is scope of reducing inventory to improve the

liquidity of the company.

We observe that for proper inventory management there should be proper

bin and specified bin number for each item in stores.

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Conclusion

Conclusion

According to my analysis after acquisition by ITC company has improved its

position from some years. In 2005-06 company had a loss of Rs 2384.74 lacs

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where as in 2006-07 company got the profit of Rs 687.3 lacs and in current year

2007-08 company got 633.64 lacs of profit. This shows company is improving its

condition and covering the losses. So still company need to get more profit by

which as soon as possible company cover-up its losses and pay dividend to its

shareholders. For this company has to reduce its wastage, to increase its

production and sales in high volume.

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Bibliography

Bibliography

Financial Management : Khan & Jain

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Annual Report (Wimco ltd)

Annual Report (ITC ltd)

Websites

www.wimco.com

www.wimco-nv.com

www.google.com

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