financial forecasting

“Financial Forecasting”

SR. NO. PARICULARS PAGE

NO.

1 Executive summary 6

2 Promoters’ profile 7

3 Background 10

4 Objective of study 13

5 Research methodology 14

6 Financial forecasting 18

7 Introduction of Rice Mill 19

8 Cost of project 20

9 Means of finance 23

10 Sources of Rice Mill 25

11 Estimates of production 37

12 Cost of production 38

13 Assessment of working capital requirement 42

14 Financial statement 44

15 Projected profitability statement 45

16 Assumption of profitability statement 50

17 Projected depreciation schedule 52

18 Repayment schedule 55

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19 Projected cash flow statement 56

20 Projected balance sheet 58

21 Findings 61

22 Conclusion 62

23 Advantages 65

24 Limitations 66

25 Bibliography 67

26 Annexure A 68

27 Annexure B 70

28 Annexure C 71

29 Annexure D 73

30 Annexure E 75

31 Annexure F 76

32 Annexure G 78

33 Annexure H 80

34 Annexure I 81

35 Annexure J 83

36 Annexure K 85

37 Annexure L 87

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Executive Summery

I have completed my summer internship at Paniya Chandwani & Co , Gondia. It is chartered

accountant office , established its business in 2007.

I selected this area of work for my project since it is very much relevant in modern day business.

Today, forecasting is a challenging task. Forecasting is not just about putting some numbers in place.

Rather it is about having a believable story about the company, translated into numbers. These

numbers should reflect the strategy of the company and its position compared to its peers and

competition. I have studied about what all financial information required to carry out a project.

This project is titled as financial forecasting. To be precise it explains how the financial statements

are prepared for the project. This important forecasting is performed usually by finance professionals

in order to prepare financial or annual reports. These reports are usually presented to promoter and

bank that will finance the project, as one of their basis in making crucial business decisions.

The finance required for the firm and its engulfing factors were studied in depth. Total cost,

expenditure and the profits were forecasted for the project. As the end result of this activity, a project

report containing the relevant facts and figures (projected) of the firm has been prepared for further

appraisal. Details of every step taken in this regard are covered in this project report

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PROMOTERS’ PROFILE

01 Name of the Unit : M/s. Trimurti Rice Mill

02 Name of the Proprietor : Shri Sanjeev Tekchand Gahane

03 Factory Location : Gat No. 274/3,

Village - Futala

Tahsil – Sadak Arjuni

Dist - Gondia

04 Office Address : Shri Sanjeev Tekchand Gahane

Village Futala, Post Soundad

Tahsil Sadak Arjuni, Dist. Gondia 441806

Dist. Gondia 441806

M.No. 9422131556

05 Constitution : Proprietor

06 S.S.I. No. : PROV. 27/011/12/00168 dated 29-06-2013

08 Sales Tax : BST No. – Applied

: CST No. - Applied

09 Product : Rice

: Broken Rice

: Rice Bran

10 Installed Capacity : 4800 M.T. Paddy [4 M.T. X 8 X 300 Days ]

11 Capacity Utilisation : 50% 55% 60% 65%

12 Raw Materials : Paddy & Bardana4

13 Utilities : 345 H.P.

14 Employment : 20 Persons

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15 Cost of the Project : (Rs. in Lacs)

1. Land : Freehold

2. Mill Building : 31.68

3. Mill Machinery : 95.004. Pre-operative Expenses ; 1.005. Other Fixed Assets 0.506. Working Capital Margin : 37.00TOTAL 165.18

16 Means of Finance : (Rs. in Lacs)

1. Promoter Contribution : 50.00

2. Term Loan from Bank : 60.00

3. Family Deposits : 23.51

4. Subsidy MOFPI : 31.67

TOTAL 165.18

17 Financial Aspect Ratio

1. Debt Equity Ratio : 2:1

2. Debt Service Coverage Ratio : 2.003. Break Even Point : 28.47%

18 Loan & Their Repayment Period :

1. Term Loan : Rs. 60.00 Lacs in 60 monthly installment @ Rs. 105000X56

installments and 120000X1 installment.

2. Cash Credit Limit : Rs. 40.00 lacs renewable every year

19 Securities offered for Mortgage : Primary

1. Term Loan ( Secured against machinery )2. C. C. Limit (Secured against current assets)

Collateral

1. Plot & Residential Construction Ground and First Floor

on T. S. No. 06, Sheet No. 08, Mouja – Soundad

Grampanchyat area, Tah. – Sadak Arjuni, Dist. Gondia.

Belongs to Shri Tekchand Kusanji Gahane. Market

value of the property Rs.10502822.00

The firm derives it characters, growth pattern and stability from those person whose family into its

operations. The ensuing portions of this section are devoted to those group of person through whom the

exploitation of this modernization program of the project will be entrusted and on whose collective judgment

its future will depend.

The proposed unit M/s. Trimurti Rice Mill, Futala is promoted by Shri Sanjeev Tekchand

Gahane . The promoter is experienced enthusiastic industrialist and belongs to well known GAHANE

FAMILY of FUTALA a pioneer in Rice Mill, Bamboo Mats, Steel and Cement.

So, he has been promoter because of her family background and attainment and also potential

capacity to contribute guidance to proposed project. The promoter and his family has a fair knowledge of local

conditions and have experience of running successful ventures. So promoter have arranged most suitable

site for the Rice Mill and if a chance be given to them then they will be able to prove their caliber.

Back-Ground

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Today, in modern age, the crust of development of a progressive society is achieved by a healthy co-

operation of agrarian and industrial economies. With the basics in economics giving weightage to

unending human wants, it is natural that if the output from any thing is to be achieved the inputs

must be in accordance with it. If the same thing is to be pin pointed to the current business scenario

today, then if business house wants optimum output then it has to give in substantial input too.

For any business the output may be its sales through production or lending of services to the

society, out of which profits are earned by it. The input for all kinds of business is the money poured

in. As the saying goes, nothing is free in this world, every business house, be it a large multinational

company or a small scale factory operating in a local market, finance is the lifeblood of all the

activities. Hence every organization has to look into the matter of finance with utmost seriousness. If

finance is managed well then the business is half well done.

No business entity is self sufficient. It has to take help of external sources in an array of

different activities that it indulges in. Similar is the case for financing of business activities. Thus

businesses are financed in numerous ways.

Banks require the financial viability of any project before it lends money to the applicant

party. The details to be covered in such submission are organization profile, details of the project,

and financial details of the project, projected profitability statement (both consolidated and yearly),

projected balance sheet, and projected cash flow statement, ratio analysis, schedule for working

capital and its finance.

Before we start with the actual theory base of the concepts used in this project first we will see what

is project. Project, can be defined as an organized unit dedicated to the attainment of a goal i.e.

successful completion of a development project on time, within budget, in conformance with

predetermined programmed specification.

While project differs in size, nature, objectives and complexity, they must all take part of three basic

attributes.

1) Course of action

2) Specific objectives

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3) Definite time

The work plan must be laid down in a clear and unambiguous manner in which the predetermined

project objectives are sought to be achieved, the resources which will be consumed in this process of

achieving objectives. A project can also be considered as proposal involving capital investment for

the purpose of the basis for classification. Project financing may be defined as the raising of funds

required to finance an economically separable capital proposal in which the lenders mainly rely on

established cash flow from the project to service their loan. The financing process here differs from

conventional financing in the following aspect:

1. Cash flows from the project related assets alone are considered for assessing the

repaying capacity.

2. The creditors ensure proper utilization of funds and creation of assets as envisaged in

the project proposal. Funds are also released in stages as and when assets are created.

3. The financers are keen to watch the performance of the enterprise and suggest/ take

remedial measures as and when required to ensure that project repays the debt out of its cash

generation.

As the element of risk increase, it becomes more and more important to precisely define the scope

and nature of the project objectives and to select the best possible approach so as to minimize both

resources consumption and risks and to optimize the return or gains.

The starting point of a project analysis is the establishment of objectives to be attained. The next

stage is the pre selection stage, the advisability of having an in depth study. The analysis stage

consist mainly three factors market, technical and financial analysis.

Financial analysis is important here from the financing point of view. In this the emphasis is on

preparation of financial statement, so that the project may be evaluated in terms of different measures

of commercial profitability followed by the magnitude of financing which requires the assembly of

the market and also technical cost estimated in various proforma statements.

Fixing the cost of the project should be done with great care. It is the single most exercise on the

basis of which the subsequent exercise of ‘Means of financing’ is done. The calculation of the 8

promoters’ contribution is also done on the basis of this particular exercise. Each and every item

which can be conceived should be included at this stage. Another factor which is important is the

fixation of the time schedule or the implementation period of the project. The help of the Bar chart is

recommended which does not require any specialized knowledge like PERT or CPM.

OBJECTIVES

There are several objectives for this study, first of which is to study the steps involved in

project formulation and preparation of financial statements.

The second objective of study is to provide information about the financial position,

performance and changes in financial position of an enterprise that is useful to a wide range of

promoter in making economic decisions. Financial Statements are prepared for this purpose to

meet the common needs of most users.

To study all related aspects regarding the financing of the project through cash credit and

term loan facility.

To know, how to manage the cash for day to day requirement with the study of working

Capital Management and cash flow management.

To maintain a proper balance between the amount of current assets & the current liabilities in

such a way that a firm is always able to meet its financial obligations whenever due. This will

ensure smooth working of the unit without any production held ups due to paucity of funds.

To find out the utility of financial ratio in credit analysis & determining the financial capacity

of the firm

Through profitability ratios understand the profitability position of the firm.

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To study the steps involved in project formulation for analysis.

To manage and reduce the identified risks

To predict the future performance of the securities under study based on the analysis.

Research Methodology

Step 1: Initially I understood and analyzed the objective of my project.

Step 2: Detailed meeting with the Senior Financial consultant of the firm and promoter of

Company for determining and understanding the financial requirement of the various stages

Step 3: Collection and understanding the primary data.

Step 4: Collection of secondary data analyzing previous year’s financial report of other

companies in the same sector.

In preparation of this project report I have used the information provided by the promoter itself,

quotations received from the suppliers, observations, as well as related information is extracted from

the financial reports.

Primary Data:

- Observation, Discussion with the Manager.

- The company profile, Annual Reports, various documents submitted by the applicant

along with the loan proposal has been obtained from the Bank.

Secondary Data:

Secondary data relating to the procedure of assessment of working capital finance, old sanction

proposals, RBI guidelines etc. have been sourced from reference books.

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Research Type Analytical

Source of Data Primary and Secondary

Sample Unit Industries applying for loan

Sample Case studies

Sample Technique Allocation of Case

Analysis Tool used Financial Analysis

SAMPLING METHODOLOGY

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Sampling Technique :

Initially, a rough draft was prepared keeping in mind the objective of the research. A pilot study was

done in order to know the accuracy of the Questionnaire. The final Questionnaire was arrived only

after certain important changes were done. Thus my sampling came out to be judgmental and

convenient . The respondents who were asked to fill out questionnaires are the sampling units. These

comprise of employees of MNCs, Govt. Employees, Self Employees etc. The sample size was

restricted to only 20, which comprised of mainly peoples from different regions.

LIMITATIONS OF THE RESEARCH

1. The research is confined to a certain parts of CHENNAI (MADRAS) and does not necessarily

shows a pattern applicable to all of Country.

2. Some respondents were reluctant to divulge personal information which can affect the validity of

all responses.

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FINANCIAL FORECASTING

As an important requirement for a variety of purposes, the financial forecasting is under new focus

these days. Be it for the preparation of a project report or a business plan, a budgeting exercise,

corporate valuation and sometimes just for planning for the future, the Financial Forecasting is a

must. Business forecasting summarizes future expectations of the business strategy and the

accounting and financial analysis. It projects future expected scenario, keeping the past in view. It is

like driving a car we look at the road ahead, keeping the reflection of the road behind in our line of

sight. While we do not drive keeping our eyes on the rear-view mirror alone, we do occasionally

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look at it while proceeding ahead. The very nature of forecasting, i.e. capturing our expectation of

the uncertain future, makes the task difficult. The very process of forecasting for the firm makes one

alert to the possible consequences of actions taken or not taken, decisions made or not made. We

cannot afford to neglect planning for the future in a business environment.

It is the very uncertainty that exists that makes forecasting a challenging task. Forecasting is

not just about putting some numbers in place. Rather it is about having a believable story about the

company, translated into numbers. These numbers should reflect the strategy of the company and its

position compared to its peers and competition.

Introduction Of Rice Mill

This comprehensive project report deals with the establishment of Rice Mill At Futala

(Soundad), Tahsil - Sadak Arjuni, District - Gondia, its viability and financial aspects.

M/s. Trimurti Rice Mill, Futala is to be set up by Shri Sanjeev Tekchand Gahane under

Proprietary concern to process paddy for manufacturing of Rice and its by products for own.

This unit is provisionally registered with District Industries Centre, Gondia vide Registration

27/011/12/00168 dated 29-06-2013.

The proposed Unit has obtained feasibility certificate from M.S.E.B., M.P.C.B., Noc from

Grampanchayat Futala and also all other necessary documents.

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The promoters approached us for preparation of project report to study the economic

viability of the project and to obtain Loan. So we have prepared the report after collecting quotations

from reliable Rice Mill Suppliers, discussing with client.

COST OF PROJECT

Total cost of the project has been estimated at Rs. 165.18 Lacs. Comprising margin for working capital of Rs.

37.00 Lacs.

COST OF PROJECT Rs. In Lacs.

Mill Building 31.68

Plant & Machinery 95.00

Pre-operative Expenses 1.00

Other Fixed Assets 0.50

Working Capital Margin 37.00

165.18

A) LAND

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The promoter has freehold land admeasuring about 1500 Sq. Mt. At Gat No. 274/3A Mouza Futala,

Revenue Circle Soundad, Tah. Sadak Arjuni, Dist. Gondia.

B) FACTORY BUILDING

The cost estimate of Rice Mill Building has been prepared by Er. Suresh Piplewar, Architect,

Gondia. The copy of cost estimate and the actual map for factory building is enclosed herewith. The

total cost of the civil work has been calculated at Rs. 3167635/-. The Building Built up area 621 Sq. Mt.

include the covered area required for machines, Raw material and finished goods godown, office etc.

C) PLANT AND MACHINERY ADDITION

The cost of plant and machinery has been taken on the basis of quotations received from reputed machine

suppliers and manufacturers. The Break up of cost is as given under:

Sr.No. Particulars AMOUNT

1 Pre Cleaner, Cleaner, Length Graders, Grain Discharger

(M/s. Alpsco Garintech Private Limited, Mohali)

2157000/-

2 Seprator

(M.s. Harman Overseas, New Delhi)

1151000/-

3 Color Sorter

(M.s. Harman Overseas, New Delhi)

2600000/-

4 Sheller, Polisher, Motor, Water Pump, Magnet, Blower, Cyclone,

Bran Discharger

(M/s. Milltec Machinery Pvt. Ltd., Bangalore)

1008645/-

5 Air receiver, Refrigerated Air Dryer, Filter

(M/s. Leintz Pneumatics Pvt. Ltd., Bangalore)

435000/-

6 Bran Filter Windoews, Blower, Air lock, cyclone

(M/s. National vibro Motors, Meerut)

242500/-

7 Rice Sifter, Husk Aspirator

(M/s. Suri Engineers Private Limited, Hyderabad)

323190/-

8 Motor 129627/-

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(M/s. Ninad Enterprises, Nagpur)

9 Electric Installation 1212670/-

10 Freight, Installation & Erection 240368/-

TOTAL 9500000/-

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D) PREOPERATIVE EXPENSES

Total preoperative expenses required for the rice mill unit is Rs.1.00 Lacs. The details are

given as follows :

1. Interest during construction period 0.75

2. Legal Fees & Charges 0.25

TOTAL 1.00

E) OTHER FIXED ASSETS

Rs. 0.50 lacs provision for other fixed assets like office furniture, fire fighting instrument, etc.

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MEANS OF FINANCE

The total project cost arrived at Rs. 165.18 Lacs is proposed to be financed as per following as

per following finance mix.

MEANS OF FINANCE AMOUNT

Promoter’s Equity 50.00

Term Loan from Bank 60.00

MOFPI Subsidy 31.67

Family Deposits 23.51

TOTAL 165.18

The details about means of finance is as follows given

A) PROMOTOER'S EQUITY AND FAMILY DEPOSITS

Promoter's equity is estimated to Rs. 50.00 Lacs and family deposits Rs. 23.51 lacs which comes

about 45% of the Capital Project Cost. The promoter's can manage the funds from their own sources and

accepting the loan and deposits from the relatives and friends in their own capacity. They can also

manage the funds in terms of deposits till the reimbursement of the subsidy from state Government and

Central Government Grant.

B)TERM LOAN AND CASH CREDIT LIMIT

The promoter's has also approached to Bank for term Loan for Rs. 60.00 Lacs and Cash Credit

Limit Rs. 40.00 lacs. Term Loan secured against fixed Assets Capital Investment which comes about

51% of the fixed assets and Cash Credit Limit secured against Current Assets.

C) MOFPI GRANT

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The proposed modern rice unit is also eligible to get Rs. 31.67 Lacs from Ministry of food

Processing, Delhi for Technical Civil Work & Rice mill machinery for installing latest technology.

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Sources

of

Rice Mill

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Sources of Rice Mill

A. AVAILABILITY OF RAW MATERIAL

The main raw material for any Rice Mill Unit is paddy which is grown in almost all the states of the

country, but its cultivation is mostly concentrated in the states of Andhra Pradesh, Bihar, Orissa,

Madhya Pradesh, Punjab, Karnataka, Maharashtra and Assam which account for more than 89

percent of the total paddy produced in the country.

Although Gondia, Bhandara,Chandrapur, and Gadchiroli. District is a very much known for paddy

production. At present about 80% of paddy is processed in the District itself and balance 20% of paddy

is exported for Rice Processing to Tamil Nadu and Kerala. Sufficient paddy is available through out the

year particularly Parmel, Swarna, Massori Gurmukhi, HMT, Kranti and Taichun varieties of

paddy cultivated by agriculturists. The paddy is also available in near districts Chandrapur, Ramtek

and adjoining districts of M.P. & C.G. like Balaghat, Rajnandgaon, Durg, Raipur which are also

known as paddy growing area.

Due to increased irrigation facilities summer crop of paddy is also increased. It would be optimistic that

paddy production will be double by end of this decade. So for a full utilization of paddy production in the

area the proposed rice mill will be considered.

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B. MANUFACTURING PROCESS

Rice Milling Industry is one of the largest agro based industries in the country. In the past Rice

Milling is gone through from hand pounding, foot pounding, hulling and dehusking by emery disc sheller

etc. and now latest modern method involving dehusking by rubber roller sheller and polishing by

modern mechanical techniques.

A bucket elevator is employed for to convey paddy to paddy cleaner. Paddy cleaner cum destoner

ensures perfect cleaning of impurities i.e. straw, dust, stone etc, existing in paddy. The clean paddy fed

through elevator into husker (Modern Mill) where it is dehusked with the help of rubber roller sheller and

separated from the husk. The brown rice is next fed through elevator into huller for polishing in abrasive

polisher, their friction polishes, where polished rice and rice bran (Kukus) got separated and are collected

separately and packing in Jute Bags and are ready for Marketing.

During paddy milling rice is generally obtained 65 to 70 percent, husk is obtained 20 to 25 percent and 5

to 10 percent rice bran. The Rice Bran contains about 15 to 23 percent oil which can be obtained through

solvent extraction process.

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C. MARKETABILITY

Rice is the staple food of more that half of India population with the passage of time and even

increasing population. So requirement of rice as food for human consumption also increasing because of

rice has an important places in our diet. The Government is encouraging the Nutrition Food processing

Industries to expand in to the rural area with its nutritious ready to eat product also for to recruit the local

people for employment.

It is expected by the promoters that finished goods i.e. Rice, Broken Rice, and Rice bran can be

easily sold in open market because following reasons.

1. The production easily will be sold in free open market through existing food grains brokers.

2. The demand of rice is much more than that is manufacturing by this unit because white H.M.T.

Rice demand day by day increasing by consumers.

3. The By-products, Rice bran and Rice broken has much more demand than its production due to

bran Solvent plant established in nearby area.

Considering all the above factors. It is thus clear that no difficulty is envisaged in marketing the

product.

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D. ECONOMIC VIABILITY AND FEASIBILITY

The demand of rice is increasing in all over the country, hence Rice Mill Industry has dynamic

future in India. Moreover Gondia & Bhandara District is most Backward District in the

Maharashtra state and this District also mainly growing paddy in the state.

1.The proposed Rice Mill is situated in the middle of the paddy cultivation area so there will be

low transport cost for transporting of paddy.

2.The proposed unit will be located in rural area where there is no labor problem, as well as at

lower cost than urban area.

3.Also this proposed rice mill unit is situated at Futala (Soundad) on National Highway No. 6.

So the transportation facility easily and economically available.

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E. CAPACITY OF RICE MILL

The installed capacity of the proposed units is 16 tones per shift. Since the main raw material

i. e. paddy which is seasonable produces, so by taking this consideration its annual capacity

based on Single shift working for 300 days in year. Installed capacity will be 300 X 16 = 4800

MT. However, the unit proposed to utilize the installed capacity at 50% in first year, 55% in

second years, 60% in third year and 65% in fourth and subsequent years.

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F. PLANT UTILITIES AND SERVICES

The following utilities and services shall also be required for smooth and successful operation of

the unit.

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G. POWER

The proposed unit requires 345 H.P. Power load for Rice Mill unit. And the said load will be

sanctioned by MSEB Sadak Arjuni.

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H. FIRE FIGHTING & FIRST AIDS

A provision has been made towards the cost of fire fighting and first aids equipments in the

miscellaneous fixed assets.

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I. TRANSPORTATION

Transportation is a basic necessity for rice milling unit as well as cost of transportation is

prominent factor to any industry. The unit is well connected with other parts of the state by Road

and Railway. The site situated at Futala (Soundad). which connected with Railway and national

highway. So proposed unit situated in ideal site.

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J. PERSONNEL

The overall management of unit will be controlled by the proprietor of the unit because he knows

all the system and technique of the unit. However he will be assisted by a Accountant who will

be look after all the administrative and accounts matter. On factory side Supervisor will be

assisted by suitable numbers of skilled, semi skilled and unskilled workers.

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K. IMPLEMENTATION AND EFFECTIVE STEPS TAKEN

The promoters have taken following effective steps for the purpose of implementation of the

project:

1. Land is already acquired at Futala Soundad,

2. NOC from Grampanchyat to establish Rice Mill plant has been obtained.

3. Application made for Consent of Maharashtra Pollution Control Board.

4. M.S.E.B. Feasibility Certificate etc are obtained.

5. Rice Mill plant, electrical motors etc. Suppliers have been identified.

The breakup of various activities is given below:

S. No. Activity Commencement Completion

1. Land Existing

2. Site Development 15.09.2013 30.09.2013

3. Building & Civil Work 01.10.2013 28.02.2014

4. Machinery Order 01.02.2014 15.02.2014

5. Machinery Delivery and Installation 16.02.2014 31.03.2014

6. Trial Run 01.04.2014 05.04.2014

7. Commercial Production 06.04.2014

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ESTIMATES OF SALES AND PRODUCTION

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Typically the starting point for profitability projection is the forecast for sales revenue. In

estimating sales revenue, the following considerations should be borne in mind:

1. It is not advisable to assume a high capacity utilisation level in the first year of operation.

Even if the technology is simple and the company may not face technical problems in

achieving a high rate of capacity utilisation in the first year itself, there are likely to be

other constraints like raw material shortage, limited power supply etc. It is sensible to

assume that capacity utilisation would be somewhat low in the first year and rise

thereafter gradually to reach the maximum level in the third or fourth year of operation. A

reasonable assumption with respect to capacity utilisation is as follows- 40-50% of the

installed capacity in the first year, 50-80 % in the second year and 80-90% from the third

year onwards.

2. It is not necessary to make adjustments for stocks of finished goods. For practical

purposes, it may be assumed that production would be equal to sales.

3. The selling price considered should be the price realisable by the company net of excise

duty. It shall, however, include dealers’ commission which is shown as item of expense

(as part of sales expense).

4. Selling price used may be the present selling price- it is generally assumed that changes

in selling price will be matched by proportionate changes in cost of production. If a

portion of production is sellable at controlled price, take the controlled price for that

portion.

COST OF PRODUCTION

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Given the estimated production, the cost of sales may be worked out. The major components of

cost are:

Material cost

Labour cost

Expense

Material cost : this is the cost of commodities and material used by the firm. It can be

direct or indirect.

Direct material indicates that material which can be identified with the individual cost

centre and which becomes an integral part of finished goods. It basically consists of all

raw materials, either purchased from outside or manufactured in house.

Indirect material indicates that material which cannot be identified with the individual

cost centre. This material assists the manufacturing process and does not become integral

part of finished goods. The examples of this material may be cotton wastes, oils and

lubricants, inventory material etc.

Labour : this is the part of remuneration paid to the employees of the firm. It can be direct

or indirect.

Direct labour cost indicates that labour cost which can be identified with the individual

cost centre and is incurred for those employees who are engaged in the manufacturing

process.

Indirect labour cost indicates that labour cost which cannot be identified with the

individual cost centre and is incurred for those employees who are not engaged in the

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manufacturing process. The examples of this cost are wages paid to the

foreman/storekeeper salary of works manager accounts/personnel department salaries.

Expenses : this is the cost of services provide to the firm and notional cost of assets only.

It can be direct or indirect.

Direct expenses are those which can be identified with the individual cost centre. the

examples of this expense are hire charges of machinery/equipments required for the

particular job, cost of defective work for a particular job, etc.

Indirect expenses are those expenses which cannot be identified with individual cost

centre. The examples of these expenses are rent, telephone expenses, insurance, lighting,

etc.

The above elements of cost can be shown as below.

The aggregate of direct material cost, direct labour cost, direct expenses is termed as

‘production/prime cost’.

The aggregate of indirect material cost, indirect labour, indirect expenses is termed as

‘overheads’.

Overheads:

For the proper interpretation and presentation of cost, the term overheads may be further

classified as below

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o Factory overheads ( production/other manufacturing overhead)

o Office and administration overheads

o Selling and distribution overheads

Factory overhead: these overheads consist of all overhead costs incurred from the stage

of procurement of material till the stage of production of finished goods. They include:

Indirect material such as consumable stores, cotton wastes, oil and lubricants, etc.

Indirect labour cost such as wages paid to foreman/storekeeper, works manager

salary, etc.

Indirect expenses such as carriage inward cost, factory lighting, power expenses,

rent/insurance/repairs for factory building/machinery, depreciation on factory

building/machinery, etc.

Office and administration overhead: these overheads consist of all overheads costs

incurred for the overall administration of the firm.

They include:

Indirect material such as stationery items, office supplies, etc.

Indirect labour cost such as salaries paid to the accountants and administration

staff, directors’ remuneration, etc.

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Indirect expenses such as postage/telephone, rent/insurance/repairs/depreciation

on office building, general lighting, legal/audit charges, bank charges, etc.

Selling and distribution overheads: These overheads consist of all overheads costs incurred from

the stage of final manufacturing of finished goods till the stage of sale of goods in the market and

collection of dues from the customers.

They include:

Indirect material such as packing material, samples etc.

Indirect labour like salaries paid to sales personnel, commission pais to sales manager

etc.

Indirect expenses like carriages outwards, warehouse charges, advertisement, bad debts,

repairs and running of distribution van, discount offered to customers etc.

Projected format of cost of production as shown in Annexur J & L

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WORKING CAPITAL REQUIREMENT AND ITS FINANCING

In estimating the working capital requirement and planning for its financing, the following points

have to be borne in mind:

1. The working capital requirement consist of following:

Raw materials and components (indigenous as well as imported)

Stocks of goods-in-process (also referred to as work-in-process)

Stocks of finished goods

Debtors and

Operating expenses

2. The principal sources of working capital finance are:

Working capital advances provided by commercial banks

Trade credit

Accruals and provisions

Long term sources of financing

3. There are limits to obtaining working capital advances from commercial banks.

They are in two forms :

38

The aggregate permissible bank finance is specified as per the norms of

lending, prescribed by the Tandon committee.

Against each current asset a certain amount of margin money has to be

provided by the firm.

4. The Tandon committee has suggested three methods of determining the

maximum permissible the amount of bank finance for working capital. The

method that is generally employed now is the second method.

5. The margin requirement varies with the type of current assets. While there is no

fixed formula for determining the margin amount.

Projected table of Working capital as shown in Annexure L

39

FINANCIAL STATEMENTS

Definition:

Financial statements (or financial reports) are formal records of a business' financial activities.

These statements provide an overview of a business' profitability and financial condition in both

short and long term.

There are three basic financial statements:

Profitability projections/income statement

Cash flow statement

Balance sheet

40

Profitability projections (or income statement):-

Income statement also called a Profit and Loss Statement (P&L), is a financial statement that

reports a company's results of operations over a period of time for companies that indicates how

revenue (money received from the sale of products and services before expenses are taken out) is

transformed into net income (the result after all revenues and expenses have been accounted

for ).The purpose of the income statement is to show managers and investors whether the

company made or lost money during the period being reported.

Given the estimates of sales revenues and cost of production, the next step is to prepare the

profitability projections or estimates of working results (as they are referred to by term- lending

financial institutions in India). The estimates of working results may be prepared along the

following lines:

A- Cost of production

B- Total administrative expenses

41

C- Total sales expenses

D- Royalty and know-how payable

E- Total cost of sale (A+B+C+D)

F- Expected sales

G- Gross profit before interest

H- Total financial expenses

I- Depreciation

J- Operating profit (G-H-I)

K- Other income

L- Preliminary expenses written-off

M- Profit/loss before taxation (J+K-l)

N- Provision for taxation

O- Profit after tax (M-N)

LESS: dividend on preference capital and equity capital

P- Retained profit

Q- Net cash accrual (P+I+L)

Cost of production:

This represents cost of materials, labour, utilities, and factory overheads.

42

Total administrative expenses:

This consist of administrative salaries, remuneration to directors, professional fees, light,

postage, telegrams, and telephones, and office supplies (stationary, printing, etc.), insurance and

taxes on office property, and miscellaneous items.

Total sales expense:

The expense included under this head are ; commission payable to dealers, packing and

forwarding charges, salary of sales staff (which may be increased at 5% per annum), sales

promotion and advertising, and other miscellaneous expenses.

The selling expenses depend mainly on the nature of industry and a kind of competitive

conditions that prevail. Typically, selling expenses vary between 5-10% of sales. The experience

of similar firms in the industry may be used as a basic guideline.

Royalty and know-how payable:

Royalty and know-how payable annually may be shown here. The royalty rate is usually 2-5%

of sales. Further, royalties is payable often for a limited no. Of years, say 5-10 years.

Total cost of sales:

This is simply sum of Cost of production, Total sales expense, total sales expenses, Royalty and

know-how payable.

Expected sales:

The figure of expected sales is drawn from the estimates of sales and production prepared earlier

in the financial analysis and projection exercise.

Gross profit before interest:

This represents the difference between expected sales and cost of production.

43

Other income:

This represents income arising from transactions not part of the normal operations of the firm.

Examples of such transactions are – sale of machinery, disposal of scraps, etc. Except disposal of

scrap, which can be reasonably anticipated and estimated, the effects of other non operating

transactions can hardly be estimated. Of course, when non operating transaction result in deficit,

others income would be negative- put differently, there will be non operating loss.

Write-off of preliminary expenses:

Preliminary expenses up to 2.5% cost of the project or capital employed, whichever is higher,

can be amortised in five equal instalments.

Profit/ Loss before taxation:

This is equal to: operating profit + other income – write-off of preliminary expenses.

Provision for taxation:

To figure out the tax burden, a sound understanding of the income Tax act- a complicated

legislation- and relevant case laws is required. While calculating the Taxable income, a variety of

incentives and concession have to be taken into account. Once the taxable income, as per the

income act, is calculated, the tax burden can be figured out fairly easily by applying the

appropriate tax rates. Details pertaining to tax calculation are discussed in an appendix at the end

of the book.

Profit after Taxation:

This is simply profit/loss before taxation minus provision for taxation. A part of profit after tax is

usually paid out as dividend-dividend on preference capital and dividend on equity capital.

Retained profit:

44

The difference between profit after tax and dividend payment is referred to as retained profit. It

is also called ploughed back earnings.

Net cash accrual:

The net cash accrual from operations is equal to: retained profit + depreciation + write-off of

preliminary expenses + other non cash charges.

Projected Cash Flow Statement as shown in Annexure A

45

ASSUMPTION OF PROFITABILITY ESTIMATES

The cost of production and profitability of the project its first 5th year is calculated and is

presented in Annexure 'A'. The various assumptions made for the calculation of cost of

production and profitability are given below :

1. The unit will work for 300 days in year on Single shift basis.

2. The installed capacity of the plant is 4800 MT paddy per annum.

3. The capacity utilisation has been assumed at 50% in the first year 55% in the second

year, 60% in third year and 65% in the fourth year and onwards.

4. The promoter will utilized 100% capacity for own manufacturing.

5. The sales prices are considered at ex-factory basis based on prevailing market prices.

6. The cost of raw materials i.e. paddy has been assumed at F.O.R. Mill basis.

7. The details of man power requirement has been shown in Annexure 'J' and the

employees benefit have been @ 25% of salary & wages.

8. Every year an increase of 10% on total salary and wages of previous year has been

assumed.

46

9. Provisions for repairs and maintenance has been taken at 5% on total cost of Plant &

Machinery. In every year an increase of 10% on previous year has been assumed.

10. The interest on Bank Term Loan & Cash Credit Limit have been taken 13.00% p.a. due

to the unit is registered S.S. I. Unit.

11. Details of administrative expenses have been given in Annexure 'K' & every year 10%

increase in administrative Expenses.

12. Depreciation has been calculated on W. D. V. method.

47

Projected Depreciation:

Fixed assets are primarily held to carry on the business and as such no intention to resale it. As a

result of actual use of assets, there is fall in the value of asset; since most of the assets have

limited number of years of useful life. Depreciation is that portion of fixed assets which is

expired in earning revenue. According to carter “Depreciation is the gradual and permanent

decrease in the value of an asset from any cause”

Causes of depreciation:

Physical deterioration

Expiration of time

Obsolescence

48

Exhaustion

Methods of charging depreciation:

There are mainly two methods of charging depreciation.

1. Straight line method or fixed instalment method

2. Written down value method or reducing balance method

Straight line method:

A fixed percentage of the original cost of the asset is charged as depreciation each year during

the life of the asset. This reduces the original cost of the asset to zero or to its scrap value at the

end of its useful life.

Written down value;

In this case, rate of depreciation is fixed. Amount of depreciation is calculated by applying fixed

rate to the reduced balance (written down value) of the fixed asset except in the year of purchase

of fixed asset. It is calculated by using following formula:

WDV = original cost – total depreciation charged up to the date

This is an important item, particularly for capital intensive projects. In figuring out the

depreciation charge, the following points should be borne in mind:

1. Contingency margin and pre-operative expenses providing in estimating the cost of

project should be added to fixed assets proportionately to ascertain the value of fixed

assets for determining the depreciation charge.

2. Preliminary expenses in excess of 2.5% of the project cost (excluding working capital

margin) should be added to fixed assets proportionately to ascertain the value of fixed

assets for determining the depreciation charge.

49

3. The income tax act specifies that the written down value method should be used for tax

purposes. It further specifies the rate of depreciation applicable to different kind of assets.

The key depreciation rates under the companies act are already shown in the basis and

presumption table.

Projected Depriciation as shown in Annexure F

50

Repayment Schedule

It consist of interest on term loans, interest on bank borrowings, commitment charges on term

loans, and commission on bank guarantees.

The principal finance expenses, of course, are interest on term loans and interest on bank

borrowings. In estimating the interest on term loans, two points should be borne in mind;

o Interest on term loan is based on the present rate of interest charged by the

term lending financial institutions and commercial banks.

o Interest amount would decrease according to the repayment schedule of

term loan.

The interest on bank borrowings may be estimated as follows;

o Determine the total requirement of the working capital.

o Find out the quantum of bank borrowing that would be available against

the total working capital requirement

Calculate the interest charges on the basis of the prevailing interest rates.

51

Projected cash flow statement:-

Cash Flow statement is a statement, which measures inflows and outflows of cash on account of

any type of business activity. The cash flow statement also explain reasons for such inflows and

outflows of cash so it is a report on a company's cash flow activities, particularly its operating,

investing and financing activities.

The cash flow statement shows the movement of cash into and out of the firm and its net impact

on the cash balance with the firm. The format for preparing the cash flow statement, which is

really a cash flow budget, as prescribed by the all-India Financial Institutions is shown in the

table. While this format calls for preparing the cash flow statement on a half yearly basis for the

construction period and annual basis for the operating period (for 10 years) for the managerial

purposes, it may be helpful to prepare it on quarterly basis for the construction period and half

yearly basis for the first 2 to 3 operating years for the managerial purposes. This would facilitate

better financial planning, project evaluation and fund control. The way in which cash flow

Statement can be prepared, takes the following form.

52

Opening Cash Balance

Add: Sources of cash

Less: Applications of cash

Closing Cash Balance.

Projected Cash Flow Statement as shown in Annexure B

53

Projected Balance sheet:-

Balance sheet: also referred to as statement of financial position, it is a statement of the book

value of all of the assets and liabilities (including equity) of a business at a particular date. A

balance sheet is often described as a "snapshot" of the company's financial condition on a given

date.

The balance sheet, showing the balances in various assets and liability accounts, inflates the

financial condition of the firm at given point of time. The format of balance sheet prescribed by

the companies act is given below;

Format of Balance prescribed by the companies act

Liabilities Assets

Share capital Fixed Assets

Reserves and surplus Investments

Secured loan Current assets, loans and advances

Unsecured loans Miscellaneous expenditures and losses

Current liabilities and provision

The liabilities side of balances sheet shows the sources of finance employed by the business. A

word about its component shown on the left side of the table is in order. Share capital consists of

paid up equity and preference capital. Reserve and surplus represents mainly the accumulated

retained earnings. They are shown in different accounts like the capital reserves, the investment

54

allowance reserve, and general reserve. A secured loan represents the borrowings of the firm

against which security has been provided. The important component secured loans are

debentures, term loans from financial institutions, and loans from commercial banks. An

unsecured loan represents borrowings against which no specific security has been provided.

Important constituent are: fixed deposits from public and unsecured loans form promoters.

Current liabilities are obligations which mature in near future, usually a year. This obligation

arises mainly from items which operating cycle: payable from acquiring materials and supplies

used in production, and accrual of wages, salaries, and rentals. Provision include mainly tax

provision, provision for provident fund, provision for pension and gratuity, and provision for

dividends.

The assets side of balance sheet shows how funds have been used in the business. The

major asset components may be described briefly. Fixed assets are tangible long-lived resources

ordinarily used for producing goods and services. They are shown at original costs less

depreciation. Investment represents financial security owned by the firm. Current asset, loans

and advances consists of cash, debtors, inventories of different kinds and loans and advances

made by the firm. Miscellaneous expenditure and losses represents outlays not covered by the

previously described asset account and accumulated losses, if any.

For preparing projected balance sheet at the end of year n+1, we need information about the

following:

The balance sheet at the end of year n

The projected income statement and distribution of the earnings for the year n+1

The sources of external financing proposed to be tapped in the year n+1

55

The proposed repayment of debt capital( long term, intermediate term, and short term)

during the year n+1

The outlays and disposal of fixed asset during year n+1

The changes in the level of current assets during year n+1

The changes in other assets and certain outlays like preoperative and preliminary

expenses which are capitalised during year n+1

The cash balance at end of year n+1

Projected Balance sheet as shown in Annexure C

56

FINDINGS

After completion of this project in consideration one can easily understand the process of project

formulation, projection of profits. It is evident that the process that involves a detailed study of

the nature of the business and its other financial aspects. Other aspects such as good rapport with

banker, credibility with bank make this process faster and smoother.

This study has been taken up with main intention of preparing financial report/forecasting and

financial details of the company there after. The projected financial details of five years represent

the financial position, and profitability of the company. The brief description of the study is

given below:

A) Projected Profitability of company:

In the first financial year 2008-09 shows projected loss of Rs57000, because of high

expenses in the first year. After the first year projected increase in profitability of the

company will gradually rise up to Rs70 lacs at the end of fifth year, which is achieved by

maintaining fixed cost and increasing sales continuously.

B) Financial position:

As the cash credit facility and term loan gives the flexibility in the operations which will

smoothen the growth of the business. But in the fifth year, there is an opportunity for

expansion of the business as the total term loan liability becomes zero (which gives tax

exemption benefits).

57

CONCLUSION

The financial forecasting is one of the useful tools which are used for any new start-up. It

is utilised for the preparation of a project report or a business plan, a budgeting exercise,

corporate valuation and sometimes just for planning for the future; the Financial

Forecasting is a must.

The financial forecasting portraits the realistic picture of business enabling the

entrepreneur for future of business. Business forecasting summarizes future

expectations of the business strategy and the accounting and financial analysis.

It projects future expected scenario, keeping the past in view.

This financial forecasting gives all the financial details about project which further assist

the production department to make the production schedule plans.

There are lots of old techniques used in C.A Office which is time consuming and

people working by those techniques take more time to do their work so It is time

consuming as well as there maintenance is more and there is also wastage of money e.g.,

typewriter is used instead of computer.

On the survey it is clear that the various internal resources and human resources of the

company decrease year after year and the main important resources which is man power

resources also decreases.

58

The organization has lots of paper work which take lots of extra time and there is chance

of misuse of important papers, documents etc, so there should be reduction in paper

work.

SUGGESTION

Time consuming : every activity follow long procedure, and it take more time

so it is important to avoid such types of long procedure and adopt the short cut method.

Money wastage : office and administration require lots of paper and

administrative things, by which the money were waste so it is necessary to adopt new

types of methods and technologies.

Technology : It is important that out dated technology are not used for

administrative purpose.

Jobs have limitation some times employees take more time to do small and

same type of work therefore the employees are also bored to do the same activities

all the time and their also efficiency decreases, and the worker who is efficient in their

work do not work up to the mark. So in this types of situation such types of conditions

are made by which employee enjoy their work and not to be bore.

59

On comparing the last 7 year financial reports the loss is more as compare to

profit, so organization take some action on this.

The success of organization depend upon their internal and man power resourses

and these resourses decrease year after year so the organization take some action on this

also.

Before delegated the authority to the worker it is important to give some training

and instruction to the worker by which he complete the work in effective manner. And in

case of accounts & cost sheet their should be a advisor or a guide who guide the new or

ineffective worker to whom work is delegated.

60

ADVANTAGES

*. It helped me to increase my knowledge in management field while working within the

organisation.

*. I got the practical knowledge by doing project in the company.

*. The working pattern of the organization is understood.

*. The behavior of colleagues , workers and managers is understood.

*. It helped me to analysis the different departments of the organisation.

61

LIMITATION OF THE PROJECT

1) Raw material cost has been taken considering the last two years trend of

the market. They are expected to vary according to the market conditions.

2) Term repayment schedule has been considered as one year moratorium

and four and year’s repayment.

3) Interest rates have been considered at 13% for term loan and 15% for

working capital. As the unit is a new unit coming up in Aurangabad, it is eligible

to get subsidy on loan taken from financial institutions. The unit can avail this

benefit under the state interest subsidy scheme of Government of Maharashtra.

62

Bibliography

Project report “Financial Forecasting”- MBA 2007-2009 VIM, Pune.

Financial Management, N.M. Vechalekar.

Financial Management, Ravi M. Kishore.

Projects planning, analysis, selection, implementation and review, by Prasanna Chandra,

TATA McGraw hill.

Management Accounting, by Satish Inamdar, Everest publishing house.

Direct Taxes, by Girish Ahuja and Ravi Gupta, Bharat law house,

63

Annexure A

PROFITABILITY STATEMENT

ANNEXURE 'A'

Rs. in Lacs

PARTICULARS 2015 2016 2017 2018 2019

Year Year Year Year Year

Capacity Utilisation 50% 55% 60% 65% 65% 65%

A. SALES

(Rice, Rice Bran & Rice Broken) 424.32 511.84 568.99 628.92 628.92 628.92

TOTAL A 424.32 511.84 568.99 628.92 628.92 628.92

B. COST OF PRODUCTION

Raw Material Consumed 384.00 435.60 489.60 546.00 546.00 546.00

Power 17.37 19.11 20.85 22.59 22.59 22.59

Wages including benefits 4.50 5.00 5.50 6.00 6.50 7.00

Repairs & Maintanance 4.75 5.25 5.75 6.25 6.75 11.00

64

Depreciation 17.62 15.14 13.01 11.19 9.63 9.21

428.24 480.10 534.71 592.03 591.47 595.80

Add : Opening Stock of Finished Goods 0.00 39.00 45.00 51.00 57.00 110.00

Less : Closing Stock of Finished Goods 39.00 45.00 51.00 57.00 63.00 115.00

TOTAL B 389.24 474.10 528.71 586.03 585.47 590.80

C. Administrative Expenses 3.00 3.30 3.60 3.90 4.20 4.50

D. Selling Expenses 1% of Sales 4.24 5.12 5.69 6.29 6.29 6.29

E. Interest - Term Loan 7.39 5.82 4.18 2.54 0.91 0.00

Cash Credit Limit 4.00 4.00 4.00 4.00 4.00 4.00

Family Deposit 4.00 4.00 4.00 4.00 4.00 4.00

TOTAL ( C + D + E) 22.63 22.24 21.47 20.73 19.40 18.79

F. Grand Total (B + C + D + E) 411.87 496.34 550.18 606.76 604.87 609.59

G. Profit Before Tax (A - F) 12.45 15.50 18.81 22.16 24.05 19.33

H. Taxation 2.00 2.94 3.96 5.00 5.58 7.14

I. Profit After Tax (G - H) 10.45 12.56 14.85 17.16 18.47 12.19

65

Annexure B

CASH FLOW STATEMENT

ANNEXURE 'B'

Rs. in Lacs

PARTICULARS GESTATION PERIOD

2015 2016 2017 2018 2019


A) SOURCE OF FUND

1. Net Profit after tax but

added back depreciation 0.00 28.07 27.70 27.86 28.35 28.10 21.40

2. Increase in Capital 50.00 0.00 0.00 0.00 0.00 0.00 0.00

3. Increase in Term Loan 60.00 0.00 0.00 0.00 0.00 0.00 0.00

4. Cash Credit Limit Bank 0.00 40.00 0.00 0.00 0.00 0.00 0.00

5. Increase in Subsidy 0.00 0.00 31.67 0.00 0.00 0.00 0.00

6. Increase in Family Loan 20.00 20.00 0.00 0.00 0.00 0.00 0.00

7. Increase in Current Liabilities 0.00 3.00 0.50 0.50 0.00 0.00 0.00

TOTAL 'A' 130.00 91.07 59.87 28.36 28.35 28.10 21.40

B) DISPOSAL OF FUNDS

1. Increase in Fixed Assets 128.18 0.00 0.00 0.00 0.00 0.00 0.00

2. Increase in Investment 0.00 1.00 32.67 1.00 1.00 1.00 1.00

66

3. Increase in Debtors 0.00 9.00 2.00 2.00 2.00 2.00 5.00

4. Increase in Inventory 0.00 71.00 11.00 11.00 11.00 11.00 10.00

5. Repayment of Term Loan 0.00 9.45 12.60 12.60 12.60 12.75 0.00

6. Withdrawals 0.00 1.00 1.00 1.00 1.00 1.00 1.00

TOTAL 'B' 128.18 91.45 59.27 27.60 27.60 27.75 17.00

9. Opening Balance Nil 1.82 1.44 2.03 2.79 3.54 3.89

10. Surplus ( A - B) 1.82 -0.38 0.60 0.76 0.75 0.35 4.40

Closing Balance 1.82 1.44 2.03 2.79 3.54 3.89 8.29

Annexure C

PROJECTED BALANCE SHEET

ANNEXURE 'C'

Rs. in Lacs

PARTICULARS 2015 2016 2017 2018 2019


CAPITAL AND LIABILITIES

Promoter Capital 50.00 59.45 71.00 84.85 101.01 118.48

Add: Net Profit 10.45 12.56 14.85 17.16 18.47 12.19

60.45 72.00 85.85 102.01 119.48 130.67

Less: Withdrawals 1.00 1.00 1.00 1.00 1.00 1.00

59.45 71.00 84.85 101.01 118.48 129.67

Term Loan from Bank 50.55 37.95 25.35 12.75 0.00 0.00

Cash Credit Limit 40.00 40.00 40.00 40.00 40.00 40.00

Family Deposits 40.00 40.00 40.00 40.00 40.00 40.00

Sundry Creditors 3.00 3.50 4.00 4.00 4.00 4.00

TOTA 193.00 192.45 194.20 197.76 202.48 213.67

67

L

PROPERTIES AND ASSETS

Fixed Assets 128.18 110.56 63.75 50.74 39.55 29.92

Less: Subsidy 0.00 31.67 0.00 0.00 0.00 0.00

Depreciation 17.62 15.14 13.01 11.19 9.63 9.21

110.56 63.75 50.74 39.55 29.92 20.71

Investment 1.00 33.67 34.67 35.67 36.67 37.67

Current Assets: Stock 71.00 82.00 93.00 104.00 115.00 125.00

Debtors 9.00 11.00 13.00 15.00 17.00 22.00

Cash & Bank Balance 1.44 2.03 2.79 3.54 3.89 8.29

TOTAL

193.00 192.45 194.20 197.76 202.48 213.67

68

Annexure D

CALCULATION OF BREAK EVEN OF POINT

ANNEXURE 'D'

Rs. in Lacs

PARTICULARS 2015 2016 2017 2018 2019


Capacity Utilisation 50% 55% 60% 65% 65% 65%

A. SALES 463.32 517.84 574.99 634.92 634.92 633.92

B. VARIABLE COST :

Raw Material Consumed 384.00 435.60 489.6 546 546 546

Wages Including Benefit 4.5 5.00 5.5 6.00 4.10 4.10

Repairs & Maintanance 4.75 5.25 5.75 6.25 6.75 11.00

Power 15.37 17.11 18.85 20.59 20.59 20.59

Selling Expenses 4.24 5.12 5.69 6.29 6.29 6.29

Administrative Expenses 50% 1.50 1.65 1.80 1.95 2.10 2.25

Interest on Cash Credit Limit 8.00 8.00 8.00 8.00 8.00 8.00

Contribution 422.36 477.73 535.19 595.08 593.83 598.23

69

(B)

C. Contribution (A - B) 40.96 40.11 39.80 39.84 41.09 35.69

D. FIXED COST

Depreciation 17.62 15.14 13.01 11.19 9.63 9.21

Power 2.00 2.00 2.00 2.00 2.00 2.00

Administrative Expenses 50% 1.50 1.65 1.80 1.95 2.10 2.25

Interest on Term Loan 7.39 5.82 4.18 2.54 0.91 0.00

TOTAL 'C'

28.51 24.61 20.99 17.68 14.64 13.46

D. BREAK EVEN VALUE OF SALES

322.53 317.76 303.27 281.83 226.16 239.07

E. BREAK EVEN % OF SALE OF

PRODUCTION 34.81% 33.75% 31.65% 28.85% 23.15% 24.51%

Fixed Cost X 100

Contribution Average B. E. P. 30.44 %

70

Annexure E

CALCULATION OF D. S. C. R.

ANNEXURE 'E'

PARTICULARS 2015 2016 2017 2018 2019


Net Profit after tax and Depreciation 10.45 12.56 14.85 17.16 18.47 12.19

Depreciation 17.62 15.14 13.01 11.19 9.63 9.21


TOTAL 'A'

35.46 33.52 32.04 30.89 29.01 21.40

Repayment of Term Loan 9.45 12.60 12.60 12.60 12.75 0.00


TOTAL 'B'

16.84 18.42 16.78 15.14 13.66 0.00

D. S. C. R. (A/B) 2.11 1.82 1.91 2.04 2.12

Average D. S. C. R. 2.00

71

Annexure F

DEPRECIATION SCHEDULE WRITTEN DOWN VALUE

ANNEXURE 'F'

Rs. in Lacs

PARTICULARS RATE OF

DEP.

COST 2015 2016 2017 2018 2019


Land (Freehold) Nil 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Rice Mill Building 10% 31.68 3.17 2.85 2.57 2.31 2.08 2.79

Rice Mill Plant with Electric

15% 96.00 14.40 12.24 10.40 8.84 7.52 6.39

Installation and Pre-Operative

Expenses

Other Fixed Assets 10% 0.50 0.05 0.05 0.04 0.04 0.03 0.03

TOTAL 128.18 17.62 15.14 13.01 11.19 9.63 9.21

72

Annexure G

REPAYMENT OF TERM LOAN AND INTERESTANNEXURE 'G'

Loan : Rs. 60.00 Lacs No. of Installment : 57 monthsInterest Rate : 13.00% Moratorium Period : 3 MonthsFirst Installment : End of 4th mon- Installment Amount : Rs. 105000 * 56

th of 1st Year : Rs. 120000*1YEAR & MONTHS O/S. REPAYMEN

TINTT. REPAYMENT

& INTERESTYEAR 2014-15Aril 60.00 0.00 0.65May 60.00 0.00 0.65June 60.00 0.00 0.65July 60.00 1.05 0.65August 58.95 1.05 0.64September 57.90 1.05 0.63October 56.85 1.05 0.62November 55.80 1.05 0.60December 54.75 1.05 0.59January 53.70 1.05 0.58February 52.65 1.05 0.57March 51.60 1.05 0.56

TOTAL 9.45 7.39 16.84YEAR 2015-16Aril 50.55 1.05 0.55May 49.50 1.05 0.54June 48.45 1.05 0.52July 47.40 1.05 0.51August 46.35 1.05 0.50September 45.30 1.05 0.49October 44.25 1.05 0.48November 43.20 1.05 0.47

73

December 42.15 1.05 0.46January 41.10 1.05 0.45February 40.05 1.05 0.43March 39.00 1.05 0.42

TOTAL 12.60 5.82 18.42YEAR 2016-17Aril 37.95 1.05 0.41May 36.90 1.05 0.40June 35.85 1.05 0.39July 34.80 1.05 0.38August 33.75 1.05 0.37September 32.70 1.05 0.35October 31.65 1.05 0.34November 30.60 1.05 0.33December 29.55 1.05 0.32January 28.50 1.05 0.31February 27.45 1.05 0.30March 26.40 1.05 0.29

TOTAL 12.60 4.18 16.78

YEAR & MONTHS O/S. REPAYMENT

INTT. REPAYMENT

& INTERESTYEAR 2017-18Aril 25.35 1.05 0.27May 24.30 1.05 0.26June 23.25 1.05 0.25July 22.20 1.05 0.24August 21.15 1.05 0.23September 20.10 1.05 0.22October 19.05 1.05 0.21November 18.00 1.05 0.20December 16.95 1.05 0.18January 15.90 1.05 0.17February 14.85 1.05 0.16March 13.80 1.05 0.15

TOTAL 12.60 2.54 15.14YEAR 2018-19Aril 12.75 1.05 0.14May 11.70 1.05 0.13June 10.65 1.05 0.12July 9.60 1.05 0.10August 8.55 1.05 0.09September 7.50 1.05 0.08

74

October 6.45 1.05 0.07November 5.40 1.05 0.06December 4.35 1.05 0.05January 3.30 1.05 0.04February 2.25 1.05 0.02March 1.20 1.20 0.01

TOTAL 12.75 0.91 13.66YEAR 2019-20Aril 0.00 0.00 0.00May 0.00 0.00 0.00June 0.00 0.00 0.00July 0.00 0.00 0.00August 0.00 0.00 0.00September 0.00 0.00 0.00October 0.00 0.00 0.00November 0.00 0.00 0.00December 0.00 0.00 0.00January 0.00 0.00 0.00February 0.00 0.00 0.00March 0.00 0.00 0.00

TOTAL 0.00 0.00 0.00

75

CALCULATION OF TERM LOAN FROM BANK

ANNEXURE 'H'

PARTICULARS TOTAL COST

MARGIN BANK LOAN

RATE AMOUNT RATE AMOUNT

Rice Mill Building 31.68 53% 21.68 32% 10.00

Rice Mill Machinery 95.00 47% 45.00 53% 50.00

Pre-Operative Expenses 1.00 100% 1.00 ---- ----

Other Fixed Assets 0.50 100% 0.50 ---- ----

TOTAL 128.18 68.18 60.00

Annexure H

76

Annexure I

DETAILS OF CONSUMPTION OF PADDY AND SALE OF

RICE, RICE BROKEN AND RICE BRAN

ANNEXURE ' I '

(Quality in M. T. / Rs. in Lacs

PARTICULARS 2015 2016 2017 2018 2019


Installed Capacity 4800 4800 4800 4800 4800

Capacity Utilisation 50% 55% 60% 65% 65%

Paddy Consumed 2400 2640 2880 3120 3120

Rate of Paddy/Ton 16000 16500 17000 17500 17500

Value of Paddy Consumed 384.00 435.60 489.60 546.00 546.00

A) Rice

Production (50% of Paddy) 1200 1320 1440 1560 1560

Rate / Ton 32000 32700 33400 34000 34000

Sales Value (a) 384.00 431.64 480.96 530.40 530.40

B) Rice Broken

Produced (17% of Paddy) 408 449 490 530 530

Rate/Ton 14000 14500 14500 15000 15000

Sales Value (b) 57.12 65.08 70.99 79.56 79.56

C) Rice Bran


Rate / Ton 10000 10000 10000 10000 10000

Sales Value (c) 19.20 21.12 23.04 24.96 24.96

77

D) Husk


Rate / Ton 500 500 500 500 500

Sales Value (d) 3.00 3.30 3.60 3.90 3.90

Total Sales Value (A+B+C+D) 463.32 517.84 574.99 634.92 634.92

CALCULATION OF NET SALES

Gross value of Finished Goods 463.32 517.84 574.99 634.92 634.92

Add : Opening Stock of Finished Goods 0.00 39.00 45.00 51.00 57.00

Less : Closing Stock of Finished Goods 39.00 45.00 51.00 57.00 63.00

424.32 511.84 568.99 628.92 628.92

78

Annexure J

MAN POWER REQUIREMENT AND ESTIMATES

OF ANNUAL SALARY AND WAGES BILL

ANNEXURE ' J '

CATEGORY NO. SALARY/MONTH SALARY

ADMINISTRATIVE STAFF

Accountant 1 6000.00 72000.00

Watchman 1 4000.00 48000.00

120000.00

Add: 25% Perks & Social benefits

30000.00

150000.00

PRODUCTION STAFF

Production Manager

1 9000.00 108000.00

Machine Operator

1 6000.00 72000.00

79

Unskilled Workers

5 3000.00 180000.00

7 360000.00

Add: 25% Perks & Social benefits

90000.00

450000.00

(Rs. 0.50 Lacs increase every year in wages) Say 4.50 Lacs

80

Annexure K

ESTIMATE OF ADMINISTRATIVE EXPENSES

ANNEXURE ' K '

Rs. in Lacs

PARTICULARS

Salary 1.50

Rate & Taxes 0.10

Telephone, Telegram and Postage 0.10

Insurance 0.30

Printing & Stationery 0.05

Travelling & Conveyance 0.15

Bank Commission 0.50

Audit Fees and Legal Charges 0.15

Miscellaneous Administrative Expenses 0.15

3.00

ESTIMATE OF POWER BILL

The unit require 345 H. P. power load for Rice Mill Unit, The M. S. E. B. Feasibility Certificate obtained.

81

Total Connected Load 345 H.P.

Power required per day (1 HP = 0.746) KWH 345 X .746 X 6

1544

Annual Power Requirement (Unit) 1544 x 300 days

463200

Power Tariff Rs. 7.50

Annual Power Bill Rs. 3474000

At 100% Capacity Rs. 34.74 Lacs





82

Annexure L

CALCULATION OF WORKING CAPITAL

ANNEXURE ' L '

(Rs. in Lacs

PARTICULARS DAYS 2015 2016 2017 2018 2019


Raw Material 30 32.00 37.00 42.00 47.00 52.00

Finished Goods 30 39.00 45.00 51.00 57.00 63.00

Debtors 7 9.00 11.00 13.00 15.00 17.00

TOTAL ' A ' 80.00 93.00 106.00 119.00 132.00

Creditors B ' 3 3.00 3.50 4.00 4.50 5.00

Net Working Capital ( A - B )

77.00 89.50 102.00 114.50 127.00

Less: Bank Borrowing 40.00 40.00 40.00 40.00 40.00

Working Capital Margin 37.00 49.50 62.00 74.50 87.00

83

financial forecasting

Documents

annexure a68

annexure k85

annexure j83

annexure i81

annexure h80

annexure g78

annexure f76

annexure e75