Chapter

Fixed Assets Management
CONTROLS AND SCHEMATIC S LIMITED
CHAPTER - I
INTRODUCTION
A.Sai Kiran MBA (Finance)
GENERAL INTRODUCTION:
Finance may be defined as the provision of money at the time where, it is required. Finance refers to the management flews of money through an organization. It concerns with the application of skills in the manipulation, use and control of money. Different authorities have interpreted the term Finance differently. However there are approaches to finance.
1. The first approach views finance as to providing of funds needed by a business on most suitable terms this approach confines finances to the raising of funds and to the study of financial institutions and instruments from where funds can be procured. 2. The second approach relates finance to cash. 3. The third approach views finance is being concerned with rising of funds and their effective utilization.
Definition of Financial Management:
Financial Management as practice by corporate firms can be called corporation finance or business finance, Financial Management refers to that part of the management activity which is concerned with the planning and controlling of firms financial resources. It deals with finding out various sources for raising funds for the firm. The sources must be suitable and economical for the needs of the business. The most appropriate use of such funds also forms a part of Financial. Financial Management provides a framework for selecting a proper cause if action and deciding a viable commercial strategy. Investment management is the professional management of various securities (shares, bonds, etc) and other assets (e.g. real estate), to meet specified investment goals for the benefit of the investors.
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Objectives of Financial Management:Financial management is concerned with procurement and use of funds. Its main aim is to use business funds in such a way that the firms value/earnings are maximized there are various alternatives available for using business funds. The pros & cons of various decisions have to look into before making a final selection. Financial Management provides a framework for selecting a proper cause if action and deciding a viable commercial strategy. The main objective of a business is to maximize the owner economic welfare. These objectives can be achieved by: 1. Profit maximization and 2. Wealth maximization.
Management of Fixed Assets:The selection of various Fixed Assets Required creating the desired production facilities and the decisions regards determinations of levels of fixed assets is primarily the task at the production/technical people. The decisions Relating to fixed assets involve huge funds for a long period of time and generally of irreversible nature affecting long term profitability of a concern, an unsound invest decision may prove to be fatal to the very existence of the organization. Thus, management of fixed asset is of vital importance to any organization. The process of fixed asset management involves: 1. Selection of most worthy projects or alternatives of fixed assets. 2. Arranging the requisite funds/capital for the same. The first important consideration to be acquire only that much amount of fixed assets which will be just sufficient to ensure smooth and efficient running of business. In some cases it may be economical to buy certain assets in a lot size. Another important consideration to be kept in mind is possible increase in demand of the firms product necessarily expansion of its activities. Hence the firm should have that much amount of fixed assets which could adjust to increase demand. The third aspect of fixed assets management is that the firm must ensure buffer stocks of certain essential equipments/services to ensure uninterrupted production in this event of
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emergencies. Sometime, there may be a breakdown in some equipments or services affecting the entire production. It is always better to have some alternative arrangements to deal with such situations. But at the same time the cost of carrying each buffer stock should also be evaluated. Efforts should also be made to minimize the level of buffer stock of fixed assets be encouraging their maximum utilization during lean period, transferring a part of peak period and living additional capacity.
RESEARCH METHODOLOGY:Need for Study: -
Fixed Assets plays very important role in relating companys objectives the firms to which capital investment vested on Fixed Assets. These fixed assets are not convertible or not liquid able over a period of time the total owner funds and long term liabilities are invested in fixed assets. Since fixed assets playing a dominant role in total business the firms has realized the effective utilization of fixed assets. So ration contributes very much in analyzing and utilized properly it effects long term sustainability of the firms which may effect liquidity, solvency and profitability positions of the company. The idle of fixed assets lead a tremendous in financial cost and intangible cost associate to it. So there is need for the companies to evaluate fixed assets performance analysis time to time by comparing with previous performance. Comparison with similar company and comparison with industry standards. So chose a study to conduct on fixed assets analysis of CONTROLS AND SCHEMATICS LIMITED using ratio in comparison with previous year performance. The title of the project is analysis on Fixed Assets management.
Scope:The project is covered of Fixed Assets of CONTROLS AND SCHEMATICS LIMITED drawn from the Annual Reports of the company. The fixed assets considered in the project are which cannot be converted in cash within one year. Ratio Analysis is used for evaluating fixed assets performance of CONTROLS AND SCHEMATICS LIMITED.
Methodology:-
The data used for analysis and interpretation from annual reports of the company that is the secondary form of data Ratio analysis is used for calculation on purpose. The project is presented by tables, graphs and interpretations. No survey is undertaken or observation study is conducted in evaluating Fixed Assets performance of CONTROLS AND SCHEMATICS LIMITED.
Objectives of study: -
The study is conducted to evaluate the fixed asset turnover of CONTROLS AND SCHEMATICS LIMITED. The study is made to know the amount of capital expenditure made by company during study period.
The study is conducted to know the amount of finance made by long termliabilities and owner funds towards fixed assets. Study is conducted to evaluate that if fixed assets are liquated, what is the proportion of fixed assets amount will contribute for payment of owner funds and long term liabilities.
y y
The study is conducted to evaluate the Trend analysis of fixed assets. The fixed assets performance is shown in terms of ratio analysis.
Sources of data:-
The data gathering method is adopted purely from secondary sources. The theoretical content is gathered from eminent texts books, references and library at CONTROLS AND SCHEMATICS LIMITED. The financial data and information is gathered from annual reports of the company internal records. Interpretation, conclusion and Suggestions are purely based on my opinion and suggestions provided by project guide.
LIMITATIONS OF STUDY: Lack of time is another imitating factor, i.e., the schedule period is for 8 weeks is not sufficient to make the study independently regarding the fixed assets analysis in CONTROLS AND SCHEMATICS LIMITED. The busy schedule of the officials in CONTROLS AND SCHEMATICS LIMITED IS another limiting factor. Due to the busy schedule the officers restricted me to collect the complete records of the organization. Non-availability of confidential financial data.
CHAPTER II
REVIEW OF LITERATURE
MANAGEMENT OF FIXED ASSETS: The selection of various fixed assets required for creating the desired production facilities and decision regarding the determination of level of fixed assets in the capital structure is an important decision for the company to take for the smooth running of the business. The decisions relating to fixed assets involves huge funds of long period of time and are generally of irreversible nature affecting the long profitability of the business. Thus, management of fixed assets is of vital importance to any of the organization. The process of fixed asset management involves: 1. Selection of most worthy projects from different alternatives of fixed assets. 2. Arranging the requisite funds/capital for the same. The first important consideration to be acquire only that much amount of fixed assets which will be just sufficient to ensure smooth and efficient running of business. In some cases it may be economical to buy certain assets in a lot size. Another important consideration to be kept in mind is possible increase in demand of the firms product necessarily expansion of its activities. Hence the firm should have that much amount of fixed assets which could adjust to increase demand. The aspect of fixed assets management is that the firm must ensure buffer stocks of certain essential equipments/services to ensure uninterrupted production in this event of emergencies. Sometime, there may be a breakdown in some equipments or services affecting the entire production. It is always better to have some alternative arrangements to deal with such situations. But at the same time the cost of carrying each buffer stock should also be evaluated. Efforts should also be made to minimize the level of buffer stock of fixed assets be encouraging their maximum utilization during lean period. Fixed assets management is an accounting process that seeks to track fixed assets for the purpose of financial accounting, preventive, maintenance and theft deterrence. Many organizations face a significant challenge to track the location, quantity, condition and maintenance and depreciation status of their fixed assets. A popular to tracking fixed assets utilizes serial numbered Asset Tags, often with bar codes for easy and accurate reading. Periodically, the owner of the assets can take inventory with a mobile barcode reader and then produce a report. Off-the-shelf software packages for fixed asset management are marked to businesses small and large. Some Enterprise Resource Planning systems are available with fixed assets modules.
Investment management is the professional management of various securities (shares, bonds, etc) and other assets (e.g. real estate), to meet specified investment goals for the benefit of the investors. Investors may be institutions (insurance company, pension funds, etc.) or private investors (both directly via investment contracts and more commonly via collective investment schemes e.g. mutual funds). The term asset management is often used to refer to the investment management of collective investments, while the more generic fund management may refer to all forms of institutional investment as well as investment management of for private investors. Investment managers who specialize in advisory or discretionary management on behalf of private investors may often refer to their service as wealth.
Management or portfolio management often within the context of so-called private banking. The provision of investment management services include elements of financial analysis, asset selection, stock selection, plan implementation and ongoing monitoring of investments. Investment management is a large and important global industry in its own right responsible for caretaking of trillions of dollars, euros, pounds and yen. Coming under the remit of financial services many of the worlds largest companies are at least in part investment managers and employ millions of staff and create billions in revenue. Fund manager (or investment advisor in the U.S) refers to both a firm that provides investment management services and an individual(s) who directs fund management decision .
Fixed Assets:
Fixed asset, also know as property, plant, and equipment (PP&E), is a term used in accountancy for assets and property which cannot easily be converted into cash, this can be compared with current assets such as cash or bank accounts, which are described as liquid assets. In most cases, only tangible assets are referred to as fixed. Fixed assets normally include items such as land and building, motor vehicles, furniture, office equipment, computers, fixtures and fittings, and plant and machinery. These often receive favorable tax treatment (depreciation allowance) over short-term assets because they depreciate over time.
Assets Characteristics:
Assets have three essential characteristics:
y
They embody a future benefits that involve a capacity, singly or in combination with other assets, in the case of profit oriented enterprises, to contribute directly or indirectly to future net cash flows, and, in the case of not-for-profit organization, to provide services;
y y
The entity can control assess to the benefit; and, The transaction or event giving rise to the entitys right to, or control of, the benefit has already occurred. It is not necessary; in the financial accounting sense of the term, of the term, for control of
access to the benefits to be legally enforceable for a resource to be an asset, provide the entity can control its use by other means. It is important to understand that in an accounting sense an asset is not the same as ownership. In accounting, ownership is described by the term equity, (see the related term shareholders equity). Assets are equal to equity plus liabilities. The accounting equation relates assets, liabilities, and owners equity:
Assets = Liabilities + Owners Equity,

The accounting equation is the mathematical structure of the balance sheet. Assets are usually listed on the balance sheet. It has a normal balance, or usual balance, of debit (i.e., Asset account amounts appear on the left side of a ledger). Similarly, in economics an asset is any form in which wealth can be held. Probably the most accepted accounting definition of asset is the one used by International Accounting Standards Board. The following is a quotation from the IFRS Framework: An asset is a resource controlled by the enterprise as a result of past events and from which future economics benefits are expected to flow to the enterprise. Assets are formally controlled and managed within larger organizations via the use of asset tracking tools. These monitor purchasing, upgrading, servicing, licensing, disposal etc., of both physical and non physical assets. The assets in the balance sheet are listed either in order of liquidity promptness with which they are expected to be converted into cash or in reverse order, that is fixity or listing of
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the least liquid (fixed) first followed by others. All assets are grouped into categories, that is, assets with similar characteristics are put in one category. The assets included in one category are different from those in other categories. The standard classification of assets divides them into (1) Fixed assets, (2) Current assets, (3) investments, and (4) other assets. Tangible fixed assets are those, which have physical existence and generate goods and services. Included in this category are land, building, plants, machinery, furniture, and so on. They are shown in the balance sheet, in accordance with the cost concept, at their cost to the firm at the time they were purchased. Their cost is allocated to / charged against /spread over their useful life. The yearly charged is referred to as depreciation. As a result, the amount of such assets shown in the balance sheet every year declines to the extent of the amount of depreciation charge in that year and by the end of the useful life of the asset it equals the salvage value, if any. Salvage value signifies the amount realized by the sale of the discarded asset at the end of its useful life. Intangible assets do not generate goods and services directly. In a way, they reflect the right of the firm. This category of assets comprises patent, copyrights, trade marks and goodwill. They confer certain exclusive rights to their owners patent conger exclusive rights to use an invention, copyrights relate to production and sale of literary, musical and artistic work, trade marks represent exclusive rights to use certain names, symbols, labels, designs, and so on intangible fixed assets are also written-off over a period of time. Intangible assets lack physical substance and arise from a right granted by the government or another company. Intangibles may be acquired or developed internally. Examples of rights granted by the government are patents, copyrights and trademarks, while am example of a privilege granted by another company is a franchise. Other types of intangibles include organization costs, leasehold improvements and goodwill. Organization costs are the expenditures incurred in starting a new company; an example would be legal fees. Leasehold improvements are expenditures made by a tenant to his or her leased property, such as the cost of putting up new paneling. Goodwill represents the amount paid for another business in excess of the fair market value of its tangible net assets. For example, if company a paid $100,000 for company Bs net assets having affair market value of $84,000, the amount paid for goodwill is $26,000. Goodwill can be recorded only when a company purchases another business. The amount paid for the goodwill of the business may be based upon the acquired firms excess earnings over other companies in the industry. Internally developed goodwill (e.g. good customer relations) is not recorded in the accounts.
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ACCOUNTING FOR INTANGIBLE ASSETS:

APB Opinion 17 specifies the requirements for accounting for intangible assets. Intangibles that have been acquired, such as goodwill, should be reflected at either the fair market value of the consideration given or the fair market value of the right received, whichever is more clearly evident. Intangibles should not be arbitrarily written off if they still have value. When identifiable intangibles are internally developed e.g. patents), they should be recorded as assets and reflected at costs. If they are not identifiable, they should be expensed. Intangible assets must be amortized over the period benefited not to exceed 40 years. Amortization is a term used to describe the systematic write-off to expense of an intangible assets cost over its economic life. The straight-line-method of amortization is used. The amortization entry is Amortization expense Intangible asset The credit is made directly to the given intangible asset account. However, it would not be incorrect to credit an accumulated amortization account, if desired. Some intangibles have a legal life. An example is patents, which have a legal life of 17 years.
DEFERRED CHARGES:-
Deferred charges are of along-term, nonrecurring nature. They are allocated to a number of future periods. Examples are start- up costs and plant rearrangement costs. Deferred charges are customarily li8sted as the last asset category in the balance sheet since their dollar value is usually insignificant relative to total assets.
OTHER ASSETS:When non-current assets cannot be properly placed into the asset classifications already discussed, they may be inclined in the Other Assets category. Placement of a term in this
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classification depends upon its nature and dollar magnitude. However, this classification should be used as a last resort.
LIABILITIES:-
The second major content of the balance sheet is liabilities defined as the claims of outsiders that is, other than owners. The assets have to be financed by different sources. One of source of funds is borrowing long-term as well as short-term. The firms can borrow on a longterm basis from financial institutions/banks or through bonds/mortgages/debentures, and so on. The short-term borrowing may be in the form of purchase of goods and services on credit. These outside sources from which a firm can borrow are termed as liabilities. Since they finance the assets, they are, in a sense, claims against the assets. The amount shown against the liability items is on the basis of the amount owned, not the amount payable. Depending upon the periodicity of the funds, liabilities can be classified into: (1) Long-term liabilities and (2) Current liabilities. Long term liabilities: They are so called because the sources of funds included in them are available for periods exceeding one year. In other words, such liabilities represent obligations of a firm payable after the accounting period. i. Debentures or bonds are issued by a firm to the public to raise debt. A debenture or a bond is a general obligation of the firm to pay interest and return the principal sum as per the agreement. Loan rose through Issue of debentures or bonds may be secured or unsecured. ii. Secured loans are the long-term borrowings with fixed assets pledged as security. Term loans from financial institutions and commercial banks are secured against the assets of the firm. They have to be repaid / redeemed either in the lump sum at the maturity of the loan / debenture or in installments over the life of the loan. Long-term liabilities are shown in the balance sheet net of redemption/ repayment.
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Current liabilities: In contrast, the long-term liabilities, such liabilities are obligations to outsiders repayable in a short period, usually within the accounting period or the operating cycle of the firm. It can be said to be the counterpart of the current assets. Conventionally, they are paid; out of the current assets; in some cases, however existing current liabilities can be liquidated through the creation of additional current liabilities. i. Sundry creditors or accounts payable represent the current liability towards suppliers from whom the firm has purchased raw material on credit. This liability is shown in the balance sheet till the payment has been made to the creditors. ii. Bill payables are the promises made in writing by the firm to make the payment of specified sum to creditors at some specific data. Bills are written by creditors over the firm and become bill payable once they are accepted by the firm. Bills payable have a life of less than a year; therefore, they are shown as current liabilities in the balance sheet. iii. Bank borrowings from a substantial part of current liabilities of a large number of companies in India. Commercial banks advance short-term credit to firms or financing their current assets. Such loans will be grouped under long-term liabilities. In India, it is a common practice to include both short and long-term borrowings under loan funds. iv. Provisions are other types of current liabilities. They include provision for taxes or provision for dividends. Every business has to pay taxes on its income. Usually, it takes some time to finalize the amount of tax with tax authorities. Therefore, the amount of tax is estimated and shown as provision for taxes or tax liability in the balance sheet. Similarly, provision for paying dividends to shareholders may be created and shown as current liability. v. Expenses payable or outstanding expenses are also current liabilities. The firm may owe payments to its employees and others at the end of the accounting period for the services received in the current tear. These payments are payable within a very short period. Examples of outstanding expenses are wages payable, rent payable and commission payable. vi. Income received in advance is yet another example of current liability. A firm can sometimes receive income for goods or services to be supplied in the future. As goods or services have to be provided within the accounting period, such receipts are shown as current liabilities in the balance sheet, vii. Installments of long-term loans are payable periodically. That portion of long-term loan which is payable in the current year will be for the part of current liabilities.
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viii.
Deposits from public may be raised by a firm for financing its current assets. These may therefore classify under current liabilities. It may be noted that public deposits may be raised for duration of one year to thee years.
How should the changing value of a fixed asset be reflected in companys account?
The benefits that a business obtains from fixed asset extend over several years. For example, a company uses a same piece of production machinery for many years, where as a company-owned motor car used by a sales probably has a shorter useful life. By accepting that the life of he fixed asset is limited, the accounts of a business need to recognize the benefits of the fixed asset as it is consumed over several years. This consumption of fixed asset is referred as depreciation.
Definition of Depreciation:Financial Reporting standard 15 (covering the accounting for tangible fixed assets) defines depreciation as follows: the wearing out , using up, or other reduction in the useful economic life of a tangible fixed asset whether arising from use, efflux ion of time or obsolesce through either changes in technology or demand for goods and services produced by an asset . A portion of benefits of fixed asset will use up or consumed in each accounting period of its life in order to generate revenue. To calculate profit for a period, it is necessary to match expenses with revenue they help earn. In determining the expenses of the period, it is therefore important to an amount to represent the consumption of fixed assets during that period (i.e. depreciation). In essence, depreciation involves allocating the cost the fixed asset (less any residual value) over its useful life. To calculate the depreciation charge for an accounting period, the following factors is relevant.
y y y
The cost of fixed asset; The (estimated) useful life of the asset; The (estimated) residual value of the asset.
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What is the relevant cost of a fixed asset?
The cost of a fixed asset includes all amounts incurred to acquire the asset and any amounts that can be directly attributable to bringing the asset into working condition.
y y y y y
Directly attributable costs may include: Delivery costs; Costs associated with acquiring such as stamp duty and import duties; Cost of preparing the sites for installation of the asset; Professional fees, such as legal fees and architects fees. Note that general overhead costs or administration costs would not costs of a fixed asset
(e.ge the factory building in which the asset is kept, or the cost of the maintenance team who keep the asset in good working condition). The cost of subsequent expenditure on a fixed asset will be added to the cost of the asset provided this expenditure enhances the benefits if the asset restores any benefits consumed. This means that major improvement or a major overhaul may be capitalized and included as part of the cost of the asset in the accounts. However, the costs of repairs or overhauls that are carried out simply to maintain existing performance will be treated as expenses of the accounting period in which the work is done and charged in full as an expenses in that period.
DEPRECIATON AND SALVAGE VALUE :Although the useful life of equipment (a fixed asset) may be long, it is nonetheless limited. Eventually the equipment will lose all productive worth and will possess only salvage value (scrap value). Accounting demands a period-by-period matching of costs against income. Hence, the cost of a fixed asset (over and above its salvage value) is distributed over the assets estimated lifetime. This spreading of the cost over the periods which receive benefits is known as depreciation.
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The depreciable amount of a fixed asset i.e., cost minus salvage value-may written off in different ways. For example, the amount may be spread evenly over the years affected, as in the straight-line method. The units of production method bases depreciation for each period on the amount of output. Two accelerated methods, the double declining balance method and the sum of-the years-digits method, provide for greater amounts of depreciation in the earlier years.
DEPRECIATION METHODS:
1. STRAIGHT-LINE-METHOD
This is the simplest and most widely used depreciation method. Under this method an equal portion of cost (above the salvage value) of the asset is allocated to each period of years. The periodic depreciation charge is expressed as:
Cost Salvage Value Depreciation = -----------------------------Estimated life
. WRITTEN DOWN VALUE METHOD OR DIMINISHING

BALANCE METHOD
In this method, the depreciation charge is calculated multiplying the book value of the asset (acquisition cost less accumulated depreciation) at the start of such period by a fixed rate. The estimated salvage value is not subtracted from the cost in making the depreciation calculation, as is the case with other depreciation methods. Because the net book value declines from period to period, the result is a declining periodic charge for depreciation throughout the life of the asset. Under this method it is impossible to reduce asset value to zero because there is always some balance to reduce asset even further. When the asset is sold or retired or abandoned, the written down value appearing in books in written off as depreciation for the final period.
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Under t e declining balance met d, as strictl applied t e fi ed depreciati n rate used is one t at will charge the cost less sal age value of the over its service life. The formula for computing the rate is:
r=1-n /C r=rate of depreciation n=number of years of asset s life =salvage value C=cost of the asset If the residual or scrape value of an asset is zero, the rate of depreciation cannot be determined using the above formula.
3. UNIT
UCTION MET OD
Where the use of equipment varies substantially from year to year, the units-ofproduction method is appropriate for determining the depreciation. For example, in some years logging operations may be carried on for 200days, in other year for 230days, in still s other years for only 160days, depending on weather conditions. Under this method, depreciation is computed for the appropriate unit of output or production (such as hours, miles or pounds) by the following formula:
Cost - alvage = Unit Depreciation Estimated units if production during lifetime The total number of units used in a year is then multiplied by the depreciation to arrive depreciation amount for that year. We can express this as
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" !
F e
sse s
e e

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Unit depreciation x usage = depreciation Cost alvage X Usage = depreciation Estimated life (in units) This method has the advantage of relating depreciation cost directly to income .
4. DOUBLE DECLINE B L NCE MET OD

The double declining balance method produces the highest amount of depreciation in the earlier years. It does not recognize salvage or scrap value. Instead, the book value of the asset remaining at the end of the depreciation period becomes the salvage or scrap value. Under this method, the straight-line rate is doubled and applied to the declining book balance each year. Many companies prefer the double declining balance method because of the greater write-off in the earlier years a time when the asset contributes most to the business and when the expenditure was actually made. The procedure is to apply a fixed rate to the declining book value of the asset each year. As the book value declines, the depreciation becomes smaller. 100% X 2 = depreciation rate Estimate life in years
5. SUM-OF-T E-DIGITS MET OD

With this method, the years of asset s lifetime are labeled 1, 2, and 3 so on, the depreciation amounts are based on a series of fraction that have the sum of the years digit as their common denominator. The greatest digit assigned to a year is used as the numerator for the first year, the greatest digit for the second year, and so forth.
2 12 %
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0 21G%F %1
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3 12 10
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765 8
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TREND ANALYSIS:
In Financial analysis the direction of changes over a period of years is of initial importance. Time series or trend analysis of ratios indicators the direction of change. This kind of analysis is particularly applicable to the items of profit and loss account. It is advisable that trends of sales and net income may be studies in the light of two factors. The rate of fixed expansion or secular trend in the growth of the business and the general price level. It might be found in practice that a number of firms would be shown a persistent growth over period of years. But to get a true trend of growth, the sales figure should be adjusted by a suitable index of general prices. In other words, sales figures should be deflated for rising price level. Another method of securing trend of growth and one which can be used instead of the adjusted sales figure or as check on them is to tabulate and plot the output or physical volume of the sales expressed in suitable units of measure. If the general price level is not considered while analyzing trend of growth, it can be mislead management they may become unduly optimistic in period of prosperity and pessimistic in dual periods.
For trend analysis, the use of index number is generally advocated the procedure followed is to assign the numbers 100 to items of the base year and at calculate percentage change in each item of other years in relation to the base year. The procedure may be called as fixed percentage method. But to get a true trend of growth, the sales figure should be adjusted by a suitable index of general prices. This margin determines the direction of upward or downward and involves the implementation of the percentage relationship of the each statement item beans to the same in the base year. Generally the final year is taken as the base year. The figure of the base year is taken as 100 and trend ratio of the other year is calculated on the basis of one year. Here an attempt is made to known the growth total investment and fixed assets of CONTROLS AND SCHEMATIS LIMITED for Four years that is 2006-2007 to 2009-2010.
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RATIO ANALYSIS:
Ratio Analysis is a powerful tool of financial analysis. A ratio is defined as The indicated quotient of two mathematical expression and as The relationship between for evaluating the financial position and performance of a firm. The absolute accounting figure reported in financial statement do not private a meaningful understanding of the performance and financial position of a firm. An accounting figure conveys meaning when it is related to some other relevant information. Ratios help to summarize large quantities of financial data and to make qualitative judgment about the firms financial performance.
1. Fixed Assets to Net Worth Ratio:
This ratio establishes the relationship between Fixed Assets and Net worth
Net Worth = Share Capital + Reserve & Surplus Retained Earning intangible Assets. Fixed Assets Fixed Assets to Net worth Ratio = ---------------------- X 100 Net Worth This ratio of Fixed Assets to Net Worth indicates the extent to which shareholder funds are sunk into the fixed assets. Generally, the purchase of assets should be financed by shareholder, equity including reserves and surpluses and retained earnings. If the ratio is less than 100% it implies that owners funds are more than total fixed assets and a part of the working capital is provided by the shareholders. When the ratio is more than 100% it implies that owners funds are not sufficient to finance the fixed assets and the finance has to depend
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upon outsiders to finance the fixed assets. There is no rule to thumb to interpret this ratio but 60% to 65% is considered to be satisfactory ratio in case of industrial undertaking.
2. Fixed assets to capital employed ratio:
This explains whether the firm has raised adequate long term funds to meet its fixed assets requirements and is calculated as under: Capital Employed = Net Worth + working capital
Fixed Assets (After depreciation) Fixed Assets to Net Worth = ----------------------------------------------------Capital Employed
This ratio gives an idea as to what part of the capital employed has been used in purchasing the Fixed Assets for the concern. If the ratio is less than one it is good for the concern.
3. Fixed Assets as a percentage to Current Liabilities:
The ratio measures the relationship between fixed assets and the current liabilities. The ratio can be calculated as below: Fixed assets Fixed assets as a percentage to current liabilities = -----------------------Current liabilities 4. Total Investment Turnover Ratio:
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This ratio is calculated by dividing the net sales by the value of total assets. A high ratio is an indicator of over trading of total assets while a low ratio reveals idle capacity. The traditional standard for the ratio in two times. Net Sales Investment Turnover ratio = -------------------------------Total Investment 5. Fixed Assets turnover Ratio:
This Ratio express the number of times fixed assets are being turned- over is a state period. It is calculated as under: Sales Fixed assets Turnover Ratio = -----------------------------------------------------------------Net Fixed Assets (After depreciation)
This ratio shows how well the fixed assets are being use in the business. The ratio is important in case of manufacturing concern because sales are produced not only by use of Current Assets but also by amount invested in fixed Assets the higher ratio, the better is the performance. On the other hand a low ratio indicates that fixed assets are not being efficiently utilized.
6. Gross Capital Employed:
The term Gross Capital Employed usually comprises the total assets, i.e. fixed as well as current assets used in a business. Gross Capital Employed = Fixed Assets + Current Assets
7. Return on Fixed Assets:
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This ratio is calculated to measure the profit after tax against the amount invested in total assets to ascertain whether assets are being utilized properly or not. The higher the ratio the better it is for the concern. Profit after tax Return on fixed Assets = ----------------------------- X 100 Fixed assets
8. Return on Gross Capital Employed:
The profit for the purpose of calculation on capital employed should be computed according to the concept of capital employed used. The profits taken must be the profit earned on the capital employed in the business. Gross Capital Employed = Fixed Assets + Current Assets
Profit after tax Return on Gross Capital Employed = -------------------------------------- X 100 Gross Capital Employed
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CHAPTER-III
INDUSTRY PROFILE
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Introduction:
This generally consists of large number of motor starters and some Switch Fuse Units, which are accommodated in individual compartments in standard vertical sections. Most of the accessories of our Switch Boards like Bus Bar supports, Control Bus supports, Power Contacts and their supports, Self Isolating Control Contacts, Hinges, Gaskets, Door locks, etc., are designed and manufactured by providing the best product and service.Switch Boards are basically have the capacity to undertake total turnkey orders of Low Tension Switchgear like MCC/ PCC/ DB/ Bus Ducts/ Push Button Stations for power and process industries are used in day to day life in industries. A major industry of Government Organizations, State Electricity Boards and other utility organizations uses the major parts of the Operation. MCC and PCC many of the Design parameters like Height of Panel, Width of Cable alley, Size of Base Frames, Type of Bus duct/ Cable entry, Makes of equipments, Paint shade, sheet thickness, sizes of Power and Control cables, Bus material and cross section, etc., can be provided as per customer requirement. The major products of the industry are: 1. Motor Control Centre, 2. Power Control Centre, 3. Distribution Boards, 4. Bus Ducts and 5. Push Button Station.
Motor Control Centre:Motor Control Centre is one of the major products we manufacture. This generally consists of large number of motor starters and some Switch Fuse Units, which are accommodated in individual compartments in standard vertical sections. Numbers of vertical sections are bolted together to form an MCC, so that all the required starters and Switch Fuse Units are accommodated. The size of Compartment for each feeder (Starter or SFU) has to be decided depending on the equipment to be accommodated. The compartment sizes shall be in multiples of 50. Our MCCs are Type Tested at CPRI for
26
1. Short Circuit Test (50KA amps with 105 KA peak) 2. Temperature Rise Test 3. Degree of Protection 4. Type 2 Co-ordination We specialize in Boiler MCC, Turbine MCC, Valve & Damper MCC, Soot Blower MCC and Water treatment plant MCC and Wagon tippler MCC.
Power Control Centre:-
Power Control Centre consists of number of ACB Panels and also may have few MCC sections. The Incomer supply of PCC is from 11kV/415V Transformer. The PCC shall have few Outgoing ACB feeders to feed MCC or Distribution Boards. Our Breaker Panels are made suitable for all makes of ACB and they match with all our MCC designs for ease of Coupling. The height of top Bus bar chamber can be 250mm, 420mm or 506mm depending on the HBB rating and the type of MCC with which they have to be coupled. The Incomer ACB Panels of PCC are suitable for Bus Duct connection from Top, Side or Bottom as required depending on the site layout. They can also be with Cable connections. We can also provide outgoing ACBs in a one tier or two tier the Bus bar ratings of our PCCs can be up to 4000A. The makes of equipment and the paint shade in our PCCs/ PMCCs shall be as per Customer requirement. Our PCCs with various makes/ ratings of ACBs are Type Tested at CPRI for
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27
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1. Short Circuit Test (50KA amps with 105 KA peak), 2. Temperature Rise Test, 3. Degree of Protection. Some of the PCCs we have supplied to various thermal Power Stations are Station PCC, Unit PCC, ESP Switchgear, Coal Handling Switchboard and Ash Handling Switchboard.
Di tri
tion Boards:-
There are various types of Distribution Boards such as A.C. DB, D.C. DB, Fuse DB, etc. The Incomer shall be Switch fuse, MCCB or MCB. The outgoing are generally Switch Fuse units, MCCB, MCB or Fuses. The DB is generally non draw-out. The outgoings can be compartmentalized or otherwise.
The DB with compartmentalized outgoing feeders is generally in standard MCC Panels. However, if the number of feeders is few, the same can be given in Wall Mounting DB also - Non Compartmental DB is normally Wall Mounting type. The dimension and arrangement of Wall Mounting DB is decided based on the requirement.
B s Ducts:-
We manufacture Low Tension Bus Ducts (TP or TPN) in Phase segregated or Non-Phase segregated designs. The Bus bars are generally Aluminum flats. However Aluminum Channel Bus bars also can be given if required. The enclosure of the Bus Ducts can be sheet steel or
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28
x
F e Asse s Manage ent

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Aluminum as per the customer requirement. The Bus Ducts of 2500A and above are normally given with aluminum enclosure.
Push Button Station:-
The Local Push Button Stations are required for switching off or some times to switch on and switch off the motors and are installed near the motor. They are generally suitable for outdoor installation with Degree of Protection IP 55. P.B. Station may be with cast Aluminum or sheet steel enclosure.
The off push buttons are generally with mushroom head and stay put type. The PB actuator may be lockable or non-lockable as per the customer requirement. The P.B Stations are also provided with a flap to cover the P.B Actuators to prevent accidental operation.
Manufacture flow chart:The design and manufacture the vertical sections. Skilled labor, usage of jigs and fixtures enables quality fabrication of the standardized vertical sections with the sheet metal. Yet the design of the vertical can be customized according to the customers requirement . The Concern have a complete powder coating facility in-house and all our products are only powder coated according to the customer specs. We follow the seven-tank process and then the process of phosphate coating to make components ready for powder coating. The components are allowed to dry and taken for powder coating and then baked or heated in the oven, specially designed to complete the powder coating process. After Powder coating process, the fabricated items are taken for assembly to the Main Assembly shop and Modules to the Module Assembly shop. Bus Bars are prepared and assembled into the vertical sec tions.
29
i
A.Sai Kiran MBA (Finance
Modules are prepared by assembling the sub assembled items and mounting angles to mount the equipment, wire bunches are assembled, terminated. These modules are inspected and tested for mechanical & electrical accuracy. They are inserted into the vertical sections. Simultaneously, vertical sections are prepared for the insertion. Panel wiring and bus bar assembly is done in the final assembly shop, where the components are assembled in the panel, termination and final inspection takes place. The Panel is thoroughly inspected by the quality inspectors and the customers are called for inspection. Only after receiving the dispatch clearance from the customer is the panel packed and dispatched. Quality checks are carried out according to our Quality Assurance Plan approved by the customer ensuring zero deviation in the claimed performance of the products at site. For achieving the zero defect stage, Controls employs arrays of testing and measuring instr ments u periodically calibrated in addition to the various inspection and alignment gauges. Testing of Panels is done at two stages:
1. During the design stage, the panel is tested at CPRI labs, where the Type Tests are conducted as per IS: 8623 part 1. The following type tests are to be carried out for a FBA (Factory Built Assembly). They are carried out to validate the designs by an outside laboratory. i) Verification of Temperature rise limits (clause 8.2.1) ii) Verification of Di-electric properties (clause 8.2.2) iii) Verification of short circuit strength (clause 8.2.3) iv) Verification of continuity of protective circuit (clause 8.2.4) v) Verification of Clearance and creep age distances (clause 8.2.5) vi) Verification of Mechanical operation (clause 8.2.6) vii) Verification of degree of protection (clause 8.2.7). Apart from the above, we conduct Type 2 Coordination test (verification of performance under short circuit condition) on DOL starters as per clause 8.3.4 of IS: 13947 part 4 at CPRI. This test is conducted against specific requirement of the customer. 2. After the assembly is complete, the panel is tested as per the Routine Tests procedure mentioned in IS: 8623 part 1. These tests are also witnessed by the customer or the third party inspection appointed by the customer.
30
Process of Manufacturing:There are several processes involved in manufacturing MCC/ PCC/ DB/ Bus Ducts/ Push Button Stations. Many of the Design parameters like Height of Panel, Width of Cable alley, Size of Base Frames, Type of Bus duct/ Cable entry, Makes of equipments, Paint shade, sheet thickness, sizes of Power and Control cables, Bus material and cross section, etc. Some of them are as follows: i. ii. iii. iv. v. vi. vii. viii. ix. Welding of the Vertical Sections Paint Shop: Pre-treatment tanks Powder Coating Booth & Baking oven Vertical Section for Assembly Bus Bar Arrangement Module Assembly of the Panel Bus bar Arrangement in the Panel Final Assembled Product
31
CHAPTER - IV
COMPANY PROFILE
32
History:Founders: Controls & Schematics started as a partnership firm in September of 1971, in Mumbai (then called Bombay), with Mr.P.P.Reddy, Mr. A.A.Raje and Mr. A.M. Bendry along with Mr. K.S. Reddy, Mrs. Lalitha Rajmal Davda and Mrs. Vimal Deshmukh. It started with supply of motor starter panels for irrigation pumps. It was also supplying process control panels and motor control centers for pharmaceutical industries (one being Pfizer), bottling plants and other process industries.
Growth of the Company:y
Started as a partnership firm in a rented premise of 250sft at Santacruz, Bombay in 1971. Shifted to another rented premises of 3100sft at Sahara Road, Andheri East, Bombay. In 1973, built a factory in the owed premises of 12500sft in MDC Marol, Andheri East, and Bombay.
In 1978, built another factory of 8000sft at Gandipet, Hyderabad. Expanded at Bombay and Hyderabad over a period of time of fifteen years from its start to a level of 20,000sft and 24,000sft respectively in 1986.
In 1992 - 1999, shifted base to Hyderabad and stopped manufacturing activities in Bombay to expand the shop floor space at Bidar, Karnataka.
At present, Controls & Schematics Limited has 230 people working as a family and a capacity to assemble 180 panels per month and has a turnover of INR 300 Million.
33
Milestones:-
In the year 1973, it became a private limited company. Controls & Schematics Private Limited, now, manufactured and supplied Distributions Boards, Feeder Pillars and Control Panels to Various Industries. Controls & Schematics English Electric, or GEF entered into the business of Low Tension Switchgear for power stations in India along with L&T and Siemens. First Major order came in from Parle Bottling manufacturing company. In April 1974, we executed and entered the vendors list of the state electricity boards. It started with an order from MSEB (Maharashtra State Electricity Board) to supply Distribution Boards to Various Sub stations in Maharashtra. In April 1975 -76, Controls & Schematics executed an order for the Low Tension Switchgear Equipment for Korba and Amarkantak Thermal Power Stations from Madhya Pradesh Electricity Board. The strength of the company was only 50 during this period. Low Tension Switchgear order (for one MCC for Ash handling Plant) for Kothagudam Power Station in 1975 was awarded to us by APSEB, with an undertaking by us to establish a factory in Andhra Pradesh. Thus, the existence of the Controls & Schematics Private Limited factory in Andhra Pradesh. The first Draw-out MCC was designed and manufactured without any collaboration for KTPS, APSEB. Started and developed business relations with BHEL Trichurapalli in 1976 with supply of SBMCC which we continue even today. Received orders from Uttar Pradesh State Electricity Board (UPSEB) for Local Control Panels and Distribution Boards for Harduagunj Power Station and Relay and control Panels, lighting Boards for Obra Thermal Power Station which were executed by us in 1977. In this year 1978 - 79, we have executed an order for Design, Manufacturing, Supply, Erection & Commissioning of total L.T.Switchgear package for Vijayawada T.P.S StageI. Thus our journey began into the World of thermal Power Stations and we continued our
y y
supplies to Power Stations like Chandrapur, Suratgarh, Rihand, Parli, Paras, Birsinghpur, Raichur, Kothagudam, Ramagundam, etc.
34
Plants Setup:-
Started as a partnership firm in 1971, with supply of Motor Starter Panels. Today, Controls & Schematics Limited has come a long way and has the capacity to undertake total turnkey orders of Low Tension Switchgear like MCC/ PCC/ DB/ Bus Ducts/ Push Button Stations for power and process industries. The turnkey orders include Design, Engineering, Manufacturing, Supply, Erection and Commissioning. We currently undertake orders worth up to 400 million per annum. Being an ISO - 9001 company, we comply with the standards and Customer Satisfaction is our Company Philosophy. Switch Boards are basically a tailor-made product to suit the exact customer requirements. We have made all our designs flexible to achieve this. In our MCC and PCC many of the Design parameters like Height of Panel, Width of Cable alley, Size of Base Frames, Type of Bus duct/ Cable entry, Makes of equipments, Paint shade, sheet thickness, sizes of Power and Control cables, Bus material and cross section, etc., can be provided as per customer requirement. Our customers can select the makes of equipments and also many of the design parameters of their choice, which naturally enhances Customer Satisfaction. Most of the accessories of our Switch Boards like Bus Bar supports, Control Bus supports, Power Contacts and their supports, Self Isolating Control Contacts, Hinges, Gaskets, Door locks, etc., are designed and manufactured by us. Our dedicated staff tirelessly works on providing the best product and service to all our customers. Our major customers are Government Organizations, State Electricity Boards and other utility organizations. We undertake Design, Engineering, Manufacturing, Supply, Erection and commission of total Low Tension switch gear packages for Thermal power stations we also extend our services to IT, textile, Pharmaceutical and other process industries.
Product Profile:-
CONTROLS AND SCHEMATICS LTD.s MCC and PCC many of the Design parameters like Height of Panel, Width of Cable alley, Size of Base Frames, Type of Bus duct/ Cable entry, Makes of equipments, Paint shade, sheet thickness, sizes of Power and Control cables, Bus material and cross section, etc., can be provided as per customer requirement.
35
The major products of the Controls and schematics limited are:

y y y y y
Motor Control Centre, Power Control Centre, Distribution Boards, Bus Ducts and Push Button Station.
Quality Assurance & Testing:-
Controls & Schematics is accredited with ISO certification hence follows all the quality standards and procedures to the satisfaction of customers. Quality checks are carried out according to our Quality Assurance Plan approved by the customer ensuring zero deviation in the claimed performance of the products at site. For achieving the zero defect stage, Controls employs arrays of testing and measuring instr uments periodically calibrated in addition to the various inspection and alignment gauges. Testing of Panels is done at two stages. During the design stage, the panel is tested at CPRI labs, where the Type Tests are conducted as per IS: 8623 part 1. The following type tests are to be carried out for a FBA (Factory Built Assembly). They are carried out to validate the designs by an outside laboratory. i) Verification of Temperature rise limits (clause 8.2.1) ii) Verification of Di-electric properties (clause 8.2.2) iii) Verification of short circuit strength (clause 8.2.3) iv) Verification of continuity of protective circuit(clause 8.2.4) v) Verification of Clearance and creep age distances (clause 8.2.5) vi) Verification of Mechanical operation (clause 8.2.6) vii) Verification of degree of protection (clause 8.2.7)
36
Apart from the above, we conduct Type 2 Coordination test (verification of performance under short circuit condition) on DOL starters as per clause 8.3.4 of IS: 13947 part 4 at CPRI. This test is conducted against specific requirement of the customer.
After the assembly is complete, the panel is tested as per the Routine Tests procedure mentioned in IS: 8623 part 1. These tests are also witnessed by the customer or the third party inspection appointed by the customer.
In-house facilities are available for conducting heat run tests on the panels up to rating of 4000A on the horizontal bus bars and 600A on vertical bus bars.
Human Resources:The plant has qualified, highly motivated manpower of 649 on it roles. Employees were nominated for various external courses and seminars of relevance. Employees were trained within house and nominated to various seminars to update the knowledge.
Safety:The plant maintains high standards of safety and good housekeeping methods in line with 5S techniques. The separate team will regularly monitor and maintain the said equipment.
37
CHAPTER V
DATA ANALYSIS
38
Fixe Assets Manage ent

k j
ANAL SIS AND INTE PRETATIONS:

The analysis return on fixed assets of CONTROLS AND SCHEMATICS LIMITED is studied with the help of following techniques: y y Trend Analysis Ratio Analysis
TREND ANAL SIS:

Table - I
YEAR 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 INVESTMENT (Rs.) 7,21,92,620 6,36,07,203 7,43,29,867 8,27,38,063 9,08,98,642 PERCENTAGE (%) 100 88.11 102.96 114.61 125.91
Graph:
TREND PERCENTAGE
5 4
3
2 1
20
40
60
80
100
120
140
39
Interpretation:
a. The Investment Fund is fluctuating from year to year. In the year 2005-2006 the investment is taken as 100%. Investment for year 2009-2010 is acquired at 125.91. b. The average of investment is Rs. 76753163 . c. The highest is recorded in the year 2009-2010 with 125.91 and lowest recorded in the year 2006-2007 is 88.11. d. The shareholders funds are investing in company are gradually increasing.
GROWTH OF FIXED ASSETS:
Table - II
YEAR FIXED ASSETS (Rs.) 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 38635508 40875672 43230380 61331455 61399120 100 105.79 111.89 158.74 158.91 PERCENTAGE
40

n m
Graph:
PERCENTAGE
180
160
140
120
100
80
60 100 105.79
158.74 111.89
158.91
40
20
0
1 2 3 4 5
Interpretation:
Growth rate of fixed assets, the examination of the above table reveals analysis and interpretation: a. During the year 2005-2006, the assets invested was recorded at Rs. 3,86,35,508 and is increased to Rs. 6,13,99,120 in the year 2009-2010. The fixed assets invested are quite satisfactory. b. The trend percentage in the year 2005-2006 is taken as the base year as 100% as it was increased to 158.91 in the year 2009-2010. c. The trend percentage has been fluctuating. So the company has to concentrate on this fluctuating. d. In the final year the growth rate is satisfactory. It was recorded as highest growth rate.
41
o

q p
RATIO ANAL SIS:
Fi ed Assets to Net- orth:

Fixed Assets Fixed assets to Net Worth = ------------------------------------Net Worth
Table III
YEAR
NETWORTH (Rs.)
GROSS FIXED ASSETS (Rs.) 38635508 40875672 43230380 61331455 61399120
RATIO (%) 127.02 114.23 117.68 160.51 152.72
2005-2006 2006-2007 2007-2008 2008-2009 2009-2010
30414554 35779419 36734573 38209176 40203173
Graph:
RATI
200 150 100
IN %
50 0
1 2 3 4 5
42
r
Interpretation:
e. The Fixed assets to Net worth Ratio is fluctuating from year to year. In the year 20052006 the fixed asset to net worth ratio is 127.02. The fixed asset to Net worth ratio comes to year 2009-2010 is acquired at 152.72. f. The average of net worth is Rs.36268179 and that of the fixed assets is Rs.49094427 with an aggregate ratio of fixed assets to Net worth ratio is 135.36. g. The highest is recorded in the year 2008-2009 with 160.51 and lowest recorded in the year 2006-2007 is 114.23. h. The shareholders funds are investing in fixed assets are gradually increasing.
Fixed Assets to Capital Employed:

Fixed Assets Fixed Assets to capital Employed = --------------------------------- X 100 Capital Employed
Table - IV
YEAR
FIXED ASSETS (Rs.)
CAPITAL EMPLOYED(Rs.) 82950611 82113136 93095509 87047270 101895323
PERCENTAGE (%) 46.57 49.77 46.43 70.45 60.25
2005-2006 2006-2007 2007-2008 2008-2009 2009-2010
38635508 40875672 43230380 61331455 61399120
43

t s
Graph:
PERCENTAGE
0
60 40 20
0
w
Interpretation:
a. The fixed assets as a % of long term liabilities the ratio is fluctuating from year to year. The fixed assets as a percentage of capital employed is recorded at 46.57% in the year 2005-2006 and it is recorded at 60.25% in the year 2009-20010. b. The highest ratio is recorded at 70.45% in the year 2008-2009 and the lowest in the year 2007-2008 i.e. 46.43%. c. Fixed assets to long term funds were increasing. It was recorded lower rate when compared to the year 2005-2006. d. The company has to maintain good relationship b etween fixed assets to long term funds. e. The fixed assets to current liabilities have been increased. The company has to keep concentrate on this ratio
44

y x
Fi ed Assets to Current Liabilities:

Fixed Assets Fixed assets as a percentage to current liabilities = ------------------------------------Current Liabilities
Table V
YEAR 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010
FIXED ASSETS (Rs.) 38635508 40875672 43230380 61331455 61399120
CURRENT LIABILITIES (Rs.) 66954639 26880720 75212401 47058281 55965113
RATIOS 0.55 1.52 0.57 1.30 1.09
Graph:
RATIOS
2 1.5 1 0.5
0
}
Series1
0.5
1.3
1 0.55
2 1.52
5 1.09
45
Interpretation:
a. The Fixed assets to Current Liabilities ratio showing fluctuating trend percentage in review period. b. From the above table it is observe that the ratio was recorded at 0.55 times in the year 2005-2006 and it is gradually changed to 1.09 times in the year 2009-2010 which indicates that the current funds are used in fixed assets which is quite satisfactory. c. The highest ratio was recorded at 1.3 times in the year 2008-2009 which is higher than the average ratio. d. The average ratio is shown as 0.896 times. e. The lowest ratio was recorded at 0.55 times. f. The fixed assets to current liabilities have been increased. g. The company has to keep concentrate on this ratio.
Total Investment Turnover Ratio:

Sales Total Investment Turnover Ratio = ------------------------------Total Investment
46
Table VI
YEAR 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010
SALES 195080826 297977750 161143781 242686754 228737035
INVESTMENT 72192620 63607203 74329867 82738063 90898642
RATIOS 2.70 4.68 2.16 2.93 2.51
Interpretations:
a. The investment assets turnover ratio is the fluctuating trend during the review period of time. In the year 2005-2006 the sales were Rs.195080826 and the sales for the year 2009-2010 is acquired at Rs.228737035 is quite increased. b. The average of sales is Rs.225125229.2 and that of the investment assets is Rs.76753163 with an aggregate ratio of investment assets turnover is 2.93 times. c. The highest is recorded in the year 2006-2007 with 4.68 times and lowest recorded in the year 2007-2008 is 2.16 times. d. The company has to concentrate on increasing the sales.
47

~
Fi ed assets Turnover Ratio:
Sales Fixed Assets Turnover Ratio = -----------------------------Total Fixed Assets
Table - VII
YEAR 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 SALES 195080826 297977750 161143781 242686754 228737035 FIXED ASSETS 38635508 40875672 43230380 61331455 61399120 RATIOS 5.04 7.28 3.72 3.95 3.72
Graph:
RATIOS
7.28
5.04 3.72 3.95 3.72
48
Interpretations:
e. The fixed assets turnover ratio is the fluctuating trend during the review period of time. In the year 2005-2006 the sales were Rs.195080826 and the sales for the year 2009-2010 is acquired at Rs.228737035 is quite increased. f. The average of sales is Rs.225125229.2 and that of the fixed assets is Rs.49094427 with an aggregate ratio of fixed assets turnover is 4.58 times. g. The highest is recorded in the year 2007-2008 with 7.28 times and lowest recorded in the year 2009-2010 is 3.72 times. h. The company has to concentrate on increasing the sales.
Fixed assets to Total assets Ratio:

Fixed Assets Fixed Assets to Total Assets = ------------------------------------- X 100 Total Assets
Table - VIII
YEAR FIXED ASSETS (Rs.) 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 38635508 40875672 43230380 61331455 61399120 TOTAL ASSETS (Rs.) 158126204 114090109 174803717 157227830 179056383 24.43 35.82 24.73 39.00 34.29 PERCENTAGE
49

Graph:
PERCENTAGE
45 40
35
30
25
20
15 10
5
0
Interpretation:
a. The Fixed assets to Total Assets ratio showing fluctuating trend percentage in review period. b. From the above table it is observe that the ratio was recorded at 24.43% in the year 2005-2006 and it is gradually changed to 34.29% in the year 2009-2010 which indicates that the Total Assets are used in fixed assets which is not much satisfactory. c. The highest ratio was recorded at 39.00% in the year 2008-2009 which is higher than the average ratio. d. The average ratio is shown as 31.654%. e. The lowest ratio was recorded at 24.43% in the year 2005-2006. f. The fixed assets to Total Assets have been increased. g. The company has to keep concentrate on this ratio.
50

Return on Capital E ployed:

Capital Employed = Fixed Assets +Current Assets Profit after Tax Return on Capital Employed = ------------------------------------- X 100 Capital Employed
Table - IX
YEAR 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010
PROFIT AFTER TAX (Rs.) 8366972 9617749 1225720 1369303 2627942
CAPTAL EMPLOYED (Rs.) 82950611 82113136 93095509 87047270 10189532
PERCENTAGE 10.08 11.70 1.31 1.57 2.57
Graph:
PERCENTAGE
12
10
4
2
0
1 2 3 4 5
51
Interpretation:
a. The Return to Capital Employed ratio is fluctuating from year to year. The Return to Capital Employed is recorded at 10.08% in the year 2005-2006 and it is recorded at 2.57% in the year 2009-2010. b. The highest ratio is recorded at 11.70% in the year 2006-2007 and the lowest in the year 2007-2008 i.e. 1.31%. c. Profits after Tax were increasing. It was recorded lower rate when compared to the year 2005-2006. d. In the final year it is recorded poor profits when compared to 2005-2006. The company has to under remedies to overcome operating cost. e. Fixed Assets to Capital Employed has been decreasing .The company has to keep concentrate on this ratio.
Return on Fixed Assets:

Profit after Tax Return on Fixed Assets = ------------------------------------ X 100 Fixed Assets
52
Table - X
YEAR 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010
Graph:
70000000 60000000
50000000 40000000
30000000 20000000 10000000

0
PROFIT AFTER TAX (Rs.) 8366972 9617749 1225720 1369303 2627942
FIXED ASSETS(Rs.) 38635508 40875672 43230380 61331455 61399120
PERCENTAGE 21.65 23.51 2.83 2.23 4.28
FIXED ASSETS
53
Interpretation:
a. The Return on Fixed assets ratio showing fluctuating trend percentage in review period. b. From the above table it is observe that the ratio was recorded at 21.65% in the year 2005-2006 and it is gradually changed to 4.28 % in the year 2009-2010 which indicates the return on fixed assets is decreasing and recorded the poor performance. c. The highest ratio was recorded at 23.51% in the year 2006-2007 which is higher than the average ratio. d. The average ratio is shown as 10.91%. e. The lowest ratio was recorded at 2.23% in the year 2008-2009. f. The company has to keep concentrate on this ratio.
54
CHAPTER VI
FINDINGS AND SUGGESTIONS OF PROJECT
55
FINDINGS:
After analyzing the financial position of the CONTROLS AND SCHEMATICS LIMITED and evaluating its Fixed Assets Management in respect of component analysis. Trend Analysis and Ratio Analysis. The following conclusions are drawn from the project preparation. The financial position of the CONTROLS AND SCHEMATICS LIMITED regarding the investment had been increased. Regarding the fixed assets to Net worth it has been observed that it has been increased. The CONTROLS AND SCHEMATICS LIMITED fixed assets shows the increasing trend. Regarding the long term funds or capital employed to fixed assets is showing an increasing trend year after year, but not satisfactory. The fixed assets to current liabilities are showing increasing figures period by period. Regarding the total investment turnover ratio it is observed that it has been fluctuated and constant over the year considerably. Regarding the fixed assts turnover ratio it is observed that it has been fluctuated and constant over the year considerably at 3.52 times. The profit to capital employed ratio it can be observed that it has been decreasing year after year. From the above study it can be said that the CONTROLS AND SCHEMATICS LIMITED financial position on fixed assets is quite satisfactory.
56
SUGGESTIONS:
The CONTROLS AND SCHEMATICS LIMITED should analyze and measure a list of projects of evaluation. The ratio of return on fixed assets is poor. The financial department (manager of CONTROLS AND SCHEMATICS LIMITED) should take remedial measures to improve the position. The profit after tax of CONTROLS AND SCHEMATICS LIMITED must to be improved. The CONTROLS AND SCHEMATICS LIMITED fixed management policies should be achieved in the new forth coming year. The CONTROLS AND SCHEMATICS LIMITED should improve the utilized capacity.
57
CHAPTER VII
BIBLIOGRAPHY
58
BIBLIOGRAPHY:
Authors Name: I.M.Pandey Prassna Chandra R.K.Sharma & S.K.Gupta S.P.Jain & K.L.Narang -Title of the Books, Publishers and Editions -Financial Management, Vikas Publisher, 8th Edition -Financial Management, Tata McGrawhill, 5th Edition -Management Accounting, Kalyan Publishers, 8th Edition -Financial Accounting and Analysis, Kalyan Publishers, 8th Edition
WEBSITES:
www.google.co.in www.yahoofinance.com www.controls and schematics limited.com www.wekipedia.com
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Fixed Assets Management

CONTROLS AND SCHEMATIC S LIMITED

A.Sai Kiran MBA (Finance)

Fixed Assets Management

CONTROLS AND SCHEMATIC S LIMITED

Definition of Financial Management:

A.Sai Kiran MBA (Finance)

Fixed Assets Management

CONTROLS AND SCHEMATIC S LIMITED

A.Sai Kiran MBA (Finance)

Fixed Assets Management

CONTROLS AND SCHEMATIC S LIMITED

RESEARCH METHODOLOGY:Need for Study: -

A.Sai Kiran MBA (Finance)

Fixed Assets Management

CONTROLS AND SCHEMATIC S LIMITED

A.Sai Kiran MBA (Finance)

Fixed Assets Management

CONTROLS AND SCHEMATIC S LIMITED

A.Sai Kiran MBA (Finance)

Fixed Assets Management

CONTROLS AND SCHEMATIC S LIMITED

A.Sai Kiran MBA (Finance)

Fixed Assets Management

CONTROLS AND SCHEMATIC S LIMITED

A.Sai Kiran MBA (Finance)

Fixed Assets Management

CONTROLS AND SCHEMATIC S LIMITED

A.Sai Kiran MBA (Finance)

Fixed Assets Management

CONTROLS AND SCHEMATIC S LIMITED

Assets = Liabilities + Owners Equity,

A.Sai Kiran MBA (Finance)

Fixed Assets Management

CONTROLS AND SCHEMATIC S LIMITED

A.Sai Kiran MBA (Finance)

Fixed Assets Management

CONTROLS AND SCHEMATIC S LIMITED

ACCOUNTING FOR INTANGIBLE ASSETS:

A.Sai Kiran MBA (Finance)

Fixed Assets Management

CONTROLS AND SCHEMATIC S LIMITED

A.Sai Kiran MBA (Finance)

Fixed Assets Management

CONTROLS AND SCHEMATIC S LIMITED

A.Sai Kiran MBA (Finance)

Fixed Assets Management

CONTROLS AND SCHEMATIC S LIMITED

A.Sai Kiran MBA (Finance)

Fixed Assets Management

CONTROLS AND SCHEMATIC S LIMITED

What is the relevant cost of a fixed asset?

A.Sai Kiran MBA (Finance)

Fixed Assets Management

CONTROLS AND SCHEMATIC S LIMITED

Cost Salvage Value Depreciation = -----------------------------Estimated life

. WRITTEN DOWN VALUE METHOD OR DIMINISHING

A.Sai Kiran MBA (Finance)

4. DOUBLE DECLINE B L NCE MET OD

5. SUM-OF-T E-DIGITS MET OD

Fixed Assets Management

CONTROLS AND SCHEMATIC S LIMITED

A.Sai Kiran MBA (Finance)