LOVELY PROFESSIONAL UNIVERSITY DEPARTMENT OF MANAGEMENT

REPORT ON FINANCIAL STATEMENT ANALYSIS OFTHE SUKHJIT STARCH & CHEMICAL

LIMITED

Submitted to Lovely Professional University

In partial fulfillment of the Requirements for the award of

Degree of Master of Business Administration

Submitted by: Amandeep Kaur

10800146

1

DEPARTMENT OF MANAGEMENT LOVELY PROFESSIONAL UNIVERSITY

PHAGWARA 2009-2010

ACKNOWLEDGEMENT

I acknowledge the almighty God, my good shepherd who has never failed me, who

extended his helping hand whenever I was in need.

It gives me immense pleasure to express whole hearted feelings of gratitude towards my

guide Mr.Amit Dutt, lecturer, Lovely School of Education, Phagwara for his scholarly guidance,

continuous interest and valuable suggestions with which he endowed me throughout my research

work. I am grateful to his for directing me to do sincere and authentic work. I am thankful to his

for devoting his precious time and his continuous encouragement during all pleasant and tough

time.

I am highly obliged to Mr. kapoor Sukhjit Starch & Chemicals Ltd. making me familiar

with real research work and for providing conductive environment to carry out research work.

I cannot measure the contribution of my loving parents for their encouragement,

guidance, constructive and helpful criticism and constant inspiration.

I now take this opportunity to acknowledge the unbounded support, love and encouraging

inspiration of my friend, sister, brother and parents who have propped me and buoyed me with

more confidence and without whom the completion of this project would have remained a dream.

Amandeep Kaur

2

PREFACEIt has been rightly said that practical experience is far better and closer to the real world than

mere theoretical exposure. The practical experience helps the students to view the real business

world closely, which in turn widely influences their perceptions, arguments and their

understanding of the real situation.

The phenomenon of creation is a long process requiring time, energy and dedication as well as

skill and experience of those people engaged in the task, ultimately in the outcome as the final

form of embodiment of the creator’s vision.

Research work constitutes the backbone of any management education programme. A

management student has to do research work quiet frequently during his entire span.

The research work entitled “Financial Statement Analysis of the Sukhjit Starch & Chemicals Ltd.

under the supervision of Mr. Kapoor aims to study the short term and Long term financial

position of company applying Various practical financial tool such as Comparative statements

and Common size balance sheet.

MBA is the stepping-stone to management care in order to reach practical and concrete results.

3

List of ContentsSr.No. Particulars Page No.

1. Introduction of Financial Statement Analysis 6-15

2. Introduction of the Company 17-31

3. Objective of the study 32-33

4. Research Methodology 34-36

5. Financial analysis of the Company 37-63

6. Conclusion 64-65

7. Bibliography 66-67

4

Introduction of

financial statement

Analysis

5

FINANCIAL STATEMENT ANALYSISMEANING OF FINANCE:- Finance means provision of money at the time when it is required. In simple words,

finance means any value in terms of money and all financial resources covered under it. Finance

is so indispensable today that it said to be the lifeblood of an enterprise. Without finance, no

enterprise can possibly accomplish its objectives. It concerns with the application of skills in

manipulations, use and control of money. Finance function may be defined as procurement of

funds and their effective utilization.

According to Guthmann and Dougall, “finance can be broadly defined as the activity concerned

with the planning, raising, controlling and administering and disbursing funds by privately

owned business units operating in non-financial fields used in business.”

According to Wheeler, “ that business activity which is concerned with the acquisition and

conservation of capital funds in meeting the financial needs and overall objectives of business

enterprise.”

MEANING OF FINANCIAL STATEMENTSFinancial statement refers to the process of financial strength and weakness of affirm by

establishing relationship between the items of the balance sheet and P/L a/c and other operated

data. Its purpose is to convey an understanding of some financial aspects of a business firm.

Financial statements are the outcome of summarizing process of accounting.

Financial statements are used for the purpose of decision-making. A financial statement is a

collection of data organized according to logical and consistent accounting procedure.

6

Financial statements are prepared for the purpose of presenting a periodical review or report on

the progress by the management and deals with:

(a) Status of investments in the business and

(b) The results achieved during a period under review.

The preparation of financial statements is the responsibility of top management. Financial

statements are also called financial reports. The profit and loss account and balance sheet are

indicators of two significant factors profitability and financial soundness.

DEFINATION OF FINANCIAL STATEMENTSAccording to John n Myer,” The financial statements provide a summary of the business

enterprise the balance sheet reflecting the assets, liabilities and capital as on certain date and the

income statement showing the results of operation during a certain period.”

PURPOSE OF FINANCIAL STATEMENTSThe objective of financial statements 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

users in making economic decisions.

These should be understandable, relevant, reliable and comparable. Reported assets, liabilities

and equity are directly related to an organisation’s financial position. Reported income and

expenses are directly related to an organisation’s financial performance. Financial statements are

intended to be understandable by readers who have a reasonable knowledge of business and

economic activities and accounting and who are willing to study the information diligently.

FINANCIAL ANALYSISFinancial analysis refers to an assessment of the viability, stability and profitability of a business.

Financial statements analysis is an attempt to determine the significance and meaning of the

financial statement data, so that forecasting may be made of future earnings, ability to pay

interest and ability to repay debt amount. Analysis of statements means such a treatment of the

information contained in the two statements as to afford a full diagnosis of the profitability and

financial soundness of the firm concerned.

7

Financial analysis is the “process of identifying the financial strength and weakness of the firm

by profit and loss account properly establishing relationship between the items of balance sheet

and profit and loss account.”

According to Metcalf and Titard, “is a process of evaluating the relationship between component

parts of a financial statement to obtain a better understanding of a firm’s position and

performance.”

Management should be particularly interested in knowing the financial strengths of the firm to

make their best use and to be able to spot-out financial weakness of the firm to take suitable

actions.

Understanding the past is pre-requisits for anticipating the future. The analysis and

interpretations of the financial statements is the essence to bring out the mystery behind the

figures in the financial statements. Interpretation analysis has no value. Analysis and

interpretation acts as a bridge between the art of recording financial information and act of using

this information. It is performed by professionals who prepare reports using ratios that make use

of information taken from financial statements and other reports. These reports are usually

presented to top management as one of their basis in making business decisions. Based on these

reports management may:-

(a) Continue or discontinue its main operation or parts of its business.

(b) Make or purchase certain materials in the manufacturer of its product.

(c) Acquire or rent/ lease certain machineries and equipments in the production of its goods.

(d) Issue stocks or negotiate for a bank loan to increase its working capital.

GOALSFinancial analysts often assess the firm’s:

1. Profitability- its ability to earn income and sustain growth in both short-term and long-term. A

company’s degree of profitability is usually based on the income statement, which reports on the

company’s results of operations.

2. Solvency- its ability to pay its obligation to debtors and other third parties in the long-term.

3. Liquidity- its ability to maintain positive cash flow, while satisfy immediate obligations.

4. Stability- the firm’s ability to remain in business in the long run, without having to sustain

significant losses in the conduct of its business. Assessing a company’s stability requires the use

8

of both the income statement and balance sheet as well as other financial and non-financial

indicators.

IMPORTANCE OF FINANCIAL STATEMENTS ANALYSIS

Financial statements analysis is to understand and diagnose the information contained in

financial statement with a view to judge the profitability and financial soundness of the firm, and

to make forecast about future prospects of the firm. The purpose of analysis depends upon the

person interested in such analysis and his object. The following purpose of financial statements

analysis may be stated to bring out the significance of analysis:-

i) To access the earning capacity or profitability of the firm.

ii) To access the operational efficiency and managerial effectiveness.

iii) To identify the reasons for change in profitability and financial position of the firm.

iv)To access the short term as well as long term solvency position of the firm.

v) To make inter-firm comparison.

vi) To help in decision making and control.

vii) To access the progress of the firm over a period of time.

viii) To make forecasts about future prospects of the firm.

ix) To guide or determine the dividend action.

x) To provide important information for granting credit.

PROCEDURE OF FINANCIAL STATEMENTS ANALYSISBroadly speaking there are three steps involved in the analysis of financial statements. These are:

(i) selection, (ii) classification, and (iii) interpretation. The first step involves selection of

information (data) relevant to the purpose of analysis of financial statements. The second step

involved is the methodical classification of the data and the third step includes drawing of

interpretation and conclusion.

The following procedure is adopted for the analysis and interpretation of financial

statements:

(1) The analyst should acquaint himself with the principles and postulates of accounting.

He should know the plans and policies of the management so that he may be able to

find out whether these plans are properly executed or not.

9

(2) The extent of analysis should be determined so that the sphere of work may be

decided. If the aim is to find out the earning capacity of the enterprise then analysis of

income statement will be undertaken. On the other hand, if financial position is to be

studied then balance sheet analysis will be necessary.

(3) The financial data given in the statements should be re-organised and re-arranged. It

will involve the grouping of similar data under same heads, breaking down of

individual components of statements according to nature. The data is reduced to a

standard form.

(4) A relationship is established among financial statements with the help of tools and

techniques of analysis such as ratios, trends, common size, funds flow etc.

(5) The information is interpreted in a simple and understandable way. The significance

and utility of financial data is explained for helping decision taking.

(6) The conclusions drawn from interpretation are presented to the management in the

form of reports.

TYPES OF FINANCIAL ANALYSISWe can classify various types of financial analysis into different categories depending upon:-

1. On the basis of material.

(a) External analysis

(b) Internal analysis

2. on the basis of modus operandi.

(a) Horizontal analysis

(b) Vertical analysis

1. ON THE BASIS OF MATERIAL (a) External analysis- This analysis is done by the outsiders who does not have access to the

detail internal accounting records of firm. This analysis serves only a limited purpose. The recent

changes in the government regulations requiring business firms to make available more detailed

information to the public through audited published accounts have considerably improve the

position of external analysis.

(b) Internal analysis- This analysis conducted by person who has access the internal accounting

records of business firm is known as internal analysis. Such an analysis can be performed by

10

executives and employees of the organisation as well as government agencies which have

statutory powers vested in them.

2. ON THE BASIS OF MODUS OPERANDI(a) Horizontal analysis- It refers to the comparison of financial data of a company for several

years. The figures of this type of analysis are presented horizontally over a number of columns.

The figures of various years are compared with standard or base year. This type of analysis is

also called dynamic analysis, as it based on the data from year to year rather than on data of any

one year.

(b) Vertical analysis- It refers to the study of relationship of the various items in the financial

statement of one accounting period. In this type of financial analysis the figures of the years are

compared with base selected from the same year’s statement. It is also know as Static analysis.

TOOLS &TECHNIQUES OF FINANCIAL ANALYSISA financial analyst can adopt following tools for the analysis of financial statement. There are a

number of tools for studying the relationship between different statements.

Comparative statement analysis

Common- size statement analysis

Trend analysis

COMPARATIVE STATEMENT ANALYSIS Comparative statement analysis is the statement of the financial position at different periods of

time. The elements of financial position are shown in a comparative form so as to give an idea

of financial position at two or more periods.

While preparing financial statement for the purpose of financial analysis, it must always kept in

mind that the techniques , procedures and principles followed in the collection, recording and

presentation of accounting should not materially differ over the period for which the business

history is studied. Any material change in the techniques, procedures and principles will render

these statements to be useful and insignificant tool of financial analysis. The financial statement

of two or more firms can be done if these are of some age, uniform size and having the same

accounting principles. Financial analysis of two or more firms is known as inter-firm

comparison. The comparative statements may show:

11

i) Absolute figures

ii) Change in absolute figures i.e increase or decrease in absolute figures.

iii) Absolute data in form of percentages.

iv) Increase or decrease in term of percentages.

TYPES OF COMPAPATIVE STATEMENTS

The comparative statements comprises of:-

1. Comparative balance sheet

2. Comparative income statement or profit and loss account

1. COMPARATIVE BALANCE SHEET The effects of all business transactions are visible in the form of increase and decrease in the

value of various assets, liabilities and capital fund. These changes can be studied by comparing

the opening and closing balance sheets of the same enterprise. The changes in periodic balance

sheet items reflect the conduct of a business. The comparative balance sheet has two columns

for the data of original balance sheets. A third column is used to show increase in figures. The

fourth column may be added for giving percentages of increases or decreases. While interpreting

the statement, the interpreter is expected to study the following aspects:-

Current financial position

Long term financial position

Profitability of the concern

According to Prof. Foul Key, “the comparative balance sheet analysis is the study of the same

items and computed items in two or more balance sheets of same enterprise on the different

dates.”

2. COMPARATIVE INCOME STATEMENT

The income statement summaries the results of the operations of business concern transacted

during a define period of time and conveys the amount of profit/loss earned by the concern. It

shows an idea of the progress of business over a period of time. A comparative study of P/L a/c

for more than one year may enable us to have a definite knowledge about the progress of

business. The changes in absolute data in money values and percentages can be determined to

analyze the profitability of the firm. The analysis and interpretation of income statement will

involve the following steps:-

12

The increase or decrease in sales should be compared with the increase or decrease in

cost of goods sold. An increase in sales will not always mean an increase in profit. The

profitability will increase will improve if increase in sales is more than the increase in

cost of goods sold.

The second step of analysis should be the study of operational profits. The operating

expenses such as office and administrative expenses, selling and distribution expenses

should be deducted from gross profit to find out operating profits.

The increase or decrease in net profit will give an idea about the overall profitability of

concern. Non- operating expenses such as interest paid, losses from sales of assets,

writing off of deferred expenses, payment of tax etc. decrease the figure of operating

profit.

COMMON SIZE STATEMENT ANALYSISIn the common size statement analysis of financial statements, an items is used as a base value

and all other accounts on the financial statement are compared to this base value. The figures are

shown as percentages of total assets, total liabilities and total sales.

On the balance sheet, total assets equal 100% and each asset is stated as a percentage of total

assets. Similarly, total liabilities and stockholder’s equity are assigned 100% with a given

liability or equity account stated as a percentage of total liabilities and stockholder’s equity.

On the income statement, 100% is assigned to net sales, with all revenue and expense accounts

then related to it.

TYPES OF COMMON SIZE STATEMENTSThe common size statement comprises:-

1. Common size balance sheet

2. Common size income statement or profit & loss account

1. COMMON SIZE BALANCE SHEETA statement in which the balance sheet items are expressed the ratio of each liability to total

liability is called common size balance sheet. The common size balance can be prepared by

putting in the following steps:-

i) The total of assets and total of all liabilities are taken as 100.

13

ii) The individual assets are expressed as a percentage to total assets that is 100 and different

liabilities are calculated in relation to total liabilities.

The common size balance sheet can be used to compare companies of different size. The

comparison of figures in different periods is not useful because total figures may be affected by a

number of factors.

2. COMMON SIZE INCOME STATEMENTThe items in the income statement are shown as a percentage of sales to show the relation of

each item to the sales a significant relationship can be established between the items of income

statement and the volume of sales. The increase in sales will certainly increase selling expenses

and not administrative or financial expenses may go up. In case the sales are declining, the

selling expenses should be reduced at once. So, a relationship is established between sales and

other items in income statement and this relationship is helpful in evaluating operational

activities of the enterprise. The common size income statement can be prepared by putting in

the following steps:-

i) At first, total sales are taken to be 100.

ii) The individual items of the income statement for e.g. cost of sales, operating expenses, non-

operating expenses, miscellaneous income etc. are shown as a percentage of the total sales 100.

If the sales are increasing it will lead to increase it will lead to increase in selling distribution

expenses.

In simple words we can say that relationship between sales and each item of income statement is

helpful in evaluating the operational activities.

TREND ANALYSISThe financial statement may be analyzed by computing trends of series of information. This

method determines the direction upwards or downwards and involves the computation of the

percentage relationship that each bears to the same item in base year. The figures of a base year

are taken as 100 and trend ratios for other year are calculated on the basis of base year. The

analyst is able to see the trend of figures, whether upward or downward.

However, trend analysis is not calculated for all of the items in the financial statements. They are

usually calculated only for major items since the purpose is to highlight important changes.

LIMITATIONS OF FINANCIAL ANALYSIS

14

Financial analysis is a powerful mechanism of determining financial strength and weakness of

the firm. But, the analysis is based on the information available in the financial statements. The

financial analyst has also to be careful about the impact of price level changes, window-dressing

of financial statements, changes in accounting policies of a firm, accounting concepts and

conventions, and personal judgement etc. Thus the financial analysis suffers from serious which

are as follows:-

1. It is only a study of interim reports. (Reports between two balance sheet dates)

2. Financial analysis is based upon only monetary information and non- monetary factors are

ignored.

3. It does not consider changes in the price levels.

4. As the financial statements are prepared on the basis of a going concern, it does not give exact

position. Thus, accounting concepts and conventions cause a serious limitation to financial

analysis.

5. Changes in the accounting procedure by a firm may often make financial analysis misleading.

6. Analysis is only a means and not an end in itself. The analyst has to make interpretation and

draw his own conclusions. Different people may interpret the same analysis in the different

ways.

ADVANTAGES OF FINANCIAL STATEMENT ANALYSISThe various advantages of financial statements analysis are as follows:-

1. The major benefit is that the investors get enough idea about the investments of their funds in

the specific company.

2. The regulatory authorities like International Accounting Standard Board can ensure whether

the company is following accounting standards or not.

3. Financial statements analysis can help the government agencies to analyze the taxation due to

the company.

4. Company can analyze its own performance over the period of time through financial

statements analysis.

15

Introduction of

16

The Company

GROUP HISTORY

Achieving success is something, which seems to be written on the charts of The Sukhjit

Starch & Chemicals Ltd. Phagwara.

Five decades ago, two young entrepreneurs spotted the immense chemical potential, of the

humble maize. So three people namely that is Sh. B.K. SARDANA, Sh. SWADESH BHAGAT, Sh. B.D. SARADANA made plans to incorporate the company. All the three

of them were the employees of The Jagjit Sugar Mill, Phagwara. They met,

17

discussed and decided to incorporate the company under the name of The Sukhjit Starch &Chemicals Ltd.

Ideally situated in Phagwara (Punjab) The Sukhjit Starch & Chemical Ltd. has

grown in leaps & bounds by judicious & innovative utilization of its unique tradition to meet

the challenge of future.

For the year the company was working as a private limited company, than from April 1, 1944 the

company was converted into Joint Stock Company. It was a medium scale unit, having a

daily production capacity of 5 tones but now it has increased more than 30000 M.T. & it is today

conglomerate enterprise performing both at National & International levels. This group is

managed by highly skilled & capable professional person & is handed by well-experienced

board of directors. At present Sh. I.K. SARADANA, its Managing Director manages the company.

The company appears to be on the forefront of the starch industry in the country from the view

point of productivity & profitability. The company’s products are popular throughout the

country & abroad. It is leading MNC public sector unit & it provides it’s product to other well-

known companies.

A double-pronged approach using the art of technology as well as exploiting indigenous

potential is the philosophy of the organization that has served it well. Year of research & careful

co-ordination of methodology has resulted in qualitatively superior products manufactured

by cost-effective production techniques.

Beside this the company is also fulfilling social obligation by making contribution of various

public charitable institution. It runs two auspicious under the names of Kanya Maha Vidhalya Senior Secondary School & Kamala Nehru College for Woman at plahi road Phagwara & a Kamala Nehru School is yet under construction. It has financed two water schemes for two villages at Nizamabad under Rural

Development Scheme.

18

Last but not the least the company is also satisfying its shareholders & is paying

dividends for last 30 years with periodic bonus issues.

PRESENT STATUS Name of the company - The SUKHIJT STARCH &

CHEMICALS Ltd. PHAGWARA.

Established In - 1943, 15 March

19

Commencement of Business - 1943, 1 April

Installed Capacity - 41000 M.T. (Metric Tone per Year)

Present Capacity - 30000 M.T.

Annual Turnover - 212.77 Crores

Export to Countries - Australia, Nepal, Bangladesh

Sector - Public Limited Company In Private sector

Location - Sarai Road Phagwara

Group Industries - Sukhjit Group of Industries.

Branches of Company - Phagwara, Nizamabad, Malda.

Phone in Phagwara - 01824-468800

Manpower - 1 Worker - 1000

2 Managerial Staff - 10

3 Agents/ Dealers - All Over India

4 Registered Offices - Phagwara

COMPANY INTRODUCTION

Achieving success is something, which seems to be written on the charts of The Sukhjit

Starch & Chemicals Ltd. Phagwara.

20

Five decades ago, two young entrepreneurs spotted the immense chemical potential, of the

humble maize. So three people namely that is Sh. B.K. SARDANA, Sh. SWADESH BHAGAT, Sh. B.D. SARADANA made plans to incorporate the company. All the three

of them were the employees of The Jagjit Sugar Mill, Phagwara. They met,

discussed and decided to incorporate the company under the name of The Sukhjit Starch &Chemicals Ltd.

Ideally situated in Phagwara (Punjab) The Sukhjit Starch & Chemical Ltd. has

grown in leaps & bounds by judicious & innovative utilization of its unique tradition to meet

the challenge of future.

For the year the company was working as a private limited company, than from April 1, 1944 the

company was converted into Joint Stock Company. It was a medium scale unit, having a

daily production capacity of 5 tones but now it has increased more than 30000 M.T. & it is today

conglomerate enterprise performing both at National & International levels. This group is

managed by highly skilled & capable professional person & is handed by well-experienced

board of directors. At present Sh. I.K. SARADANA, its Managing Director manages the company.

The company appears to be on the forefront of the starch industry in the country from the view

point of productivity & profitability. The company’s products are popular throughout the

country & abroad. It is leading MNC public sector unit & it provides it’s product to other well-

known companies.

A double-pronged approach using the art of technology as well as exploiting indigenous

potential is the philosophy of the organization that has served it well. Year of research & careful

co-ordination of methodology has resulted in qualitatively superior products manufactured

by cost-effective production techniques.

Beside this the company is also fulfilling social obligation by making contribution of various

public charitable institution. It runs two auspicious under the names of Kanya Maha

21

Vidhalya Senior Secondary School & Kamala Nehru College for Woman at plahi road Phagwara & a Kamala Nehru School is yet under construction. It has financed two water schemes for two villages at Nizamabad under Rural

Development Scheme.

Last but not the least the company is also satisfying its shareholders & is paying

dividends for last 30 years with periodic bonus issues.

They are the manufactures of the Maize Starch, Dextrose Monohydrous, Anhydrous, and

Sorbitol 70% solution, Liquid Glucose, Thin Boiling Starching Maize Oil, Maize Oil Cake

and Corn Steep Soils & Hydrol.

Licensed Capacity

Maize Starch - 41000 M.T. per annum

Dextrose Monohydrate - 4500 M.T. per annum

High Fructose - 5000 M.T. per annum

Liquid Glucose - 4500 M.T. per annum

Malta Dextrose - 1500 M.T. per annum

Dextrose Anhydrous - 1200 M.T. per annum

The company sells its products to well known companies namely M/S Nestle India..

The company occupies a unique place & enjoys excellent credit worthiness and goodwill

amongst its creditor’s, suppliers and bankers.

The bankers have given high rating to the company and its health code has remained

number one for the past many years. It has been enjoying excellent for the last three decades

Subsidiary Companies

22

The Sukhjit Starch & Chemicals Ltd. Phagwara has three subsidiary companies which are as

follow:-

1. SCOTT INDUSTRIES Ltd. PHAGWARA This company was incorporated on October 8, 1997. It has paid up capital of Rs.1, 50, 14000 as

on march 31, 2000. Out of which Rs.1 crore capitals are of Sukhjit Starch & Chemicals Ltd.

This unit is meant for manufacturing and export of ready made garments. It has already

established export market in many countries.

2. SUKHJIT FINANCE Ltd. The company was incorporate Feb. 6, 1995 and is engaged in leasing and hire purchase

business, due to adverse impact in business. However, adverse impact in business the company

has drastically cut down its operation

3. VIJOY STEEL and GENERAL MILLSCOMPANY Ltd.

The company is engaged in manufacturing activities and its machinery for chemical and process

industries. The turnover this company was around Rs.90 Lakhs last year i.e. for the year ending

2007.

PRODUCT RANGE They are the manufactures of the

23

MAIZE STARCH

THIN BOILING STARCHES

DEXTRINS WHITE

DEXTRINS YELLOW

MODIFIED STARCHES

OXIDISED STARCHES

PREGETATINIZED STARCH

LIQUID GLUCOSE

MALTO DEXTRIN (LIQUID & POWDER)

DEXTROSE ANHYDROUS

DEXTROSE MONOHYDRATED

SORBITOL 70% SOLUTION

HIGH MALTOSE SYRUP

MAIZE GLUTEN

MAIZE HUSK

FINE MAIZE HUSK (WET)

FINE MAIZE HUSK (DRY)

MAIZE OIL

MAIZE OIL CAKE

CORN STEEP SOLIDS

HYDROL

Licensed Capacity

Maize Starch - 41000 M.T. per annum

Dextrose Monohydrate - 4500 M.T. per annum

High Fructose - 5000 M.T. per annum

Liquid Glucose - 4500 M.T. per annum

Malta Dextrose - 1500 M.T. per annum

Dextrose Anhydrous - 1200 M.T. per annum

24

The company sells its products to well known companies namely M/S Nestle India..

The company occupies a unique place & enjoys excellent credit worthiness and goodwill

amongst its creditor’s, suppliers and bankers.

The bankers have given high rating to the company and its health code has remained

number one for the past many years. It has been enjoying excellent for the last three decades

Milestones of the Company

25

1944 - Conversion into Public Company

1946 - Paid up Capital raised up to Rs. 6 Lakhs

1947 - Paid up raised up to Rs. 9 Lakhs

1965 - Modernization of Plant by Importing Equipment from U.S.A &Germany.

1969 - Set up Liquid Glucose Plant.

1972 - Capital raised up to Rs. 18 Lakhs

1976 - Capital raised up to Rs 26 Lakhs by issuing bonus shares.

1980 - Acquisition of Vijol Steel & General Mills.

1981 - Capital raised up to Rs. 48 Lakhs by issuing right shares to shareholders.

1982 - Issue of Debentures by Rs. 1 Crores.

1985 - Setup a similar unit at Nizamabad.

1987 - Setup of Dextrose Monohydrate Plant.

1993 - Setup of Sorbitol Plant.

1995 - Setup of Dextrose Anhydrate Plant.

1998 - Modernization & Expansion of Starch Plant of Phagwara.

1999 - Modernization & Expansion of Starch Plant at Nizamabad.

2002 - Got the ISO 9001-2000 certificate.

2002-03 - The Company started putting up a new unit at Malda in the state of West

Bengal. This unit Started commercial product on 5th June 2002

2005-06 - In its diversification and plans a company has started a new

Unit at village Bathu Tehsil Haroli Distt. Una. The commercial

Production of this unit in July 2007

2007 - H.P. unit started commercial production on 21st July.

2008 - Company achieved recorded turnover of around Rs. 20 Crores for this

Year 2007-08. Net profit exceeding of Rs.20 Crores for year 2007-08.

BOARD OF DIRECTORS

Sh. V.K. Sardana - Chairman

26

Sh. I.K. Sardana - Managing Director

Sh. K.K. Sardana - Joint Managing Director

Sh. S.M. Jindal - Executive Directors& Secretary

Sh. A.K. Sardana - Non Executive Director

Sh. Naresh Sardana - Non Executive Director

Sh. S.K. Anand - Independent Director

Sh. V.P. Kaparhi - Independent Director

Sh. S.C. Jindal - Independent Director

Management Management and Board of Directors control the overall work of the company. All the directors

have life long experienced and sound business background.

1. Managing Director :-Sh. I.K. SARDANA joined this company in 1965 as management trainee. After working

as management trainee officer of special duty, personnel manager, Commercial manager and

General Manager he took charge of the Managing Director in 1977. He also stayed as

president of all India Starch manufacture Association, Mumbai. He is also holding the

position of president & the managing committee. 2. Joint Managing Director:-Sh. K.K. SARDANA joined the company as a Joint Managing Director in 1971, after

working as management trainee officer on Special Duty, Personnel and Administration

manager. He looks after modernization and expansion of the company and also concerned

with the purchase of major machinery and other development activities of the company. He

is also the president of Managing Director of Arya Model School at Phagwara and the

member of board of director of Sukhjit Finance Ltd. and Scott Industry Ltd.

3. Executive Director:-Sh.S.M. JINDAL joined the company in 1960 as the board of director. He is also the

manager of managing committee of S.D. KANYA MAHA VIDYALAYA SENIOR

27

SECONDARY SCHOOL PHAGWARA. He is also a member of board of director of

Sukhjit Finance Ltd. and Scott Industry Ltd.

3. Vice President (Fin.) Sh. M.G. SHARMA joined the company in 1981 as Finance and Account officer. He is

looking after the short and long term financial management of the company. He is the

member of the board of director of Sukhjit Finance Ltd. He looks the direct and indirect taxes

of the company.

4. Vice President (P&A) (Retd) Major V.K. SURI (Admn.) (M.A. LLB & Diploma in personnel

Management and Industrial relations) joined the company in 1987 as General Manager

(Admn.) He is looking after personnel and Administration, training and development of

manpower of the company. Now he is the vice president of the personnel and administration

in the company.

MANAGEMENT DISCUSSION AND ANALYSIS

28

Business Segment- Corn processing industry in India, has shown remarkable growth

in the couple of years. The momentum is expected to sustain for some more years to come owing

to increasing and versatile use of starch and its derivatives. The Indian Starch Industry is still at a

nascent stage and deriving around 40 products from corn whereas more than 500 products of

starch and starch derivatives are being derived in the international arena. The size of the industry

is also negligible compared to the international market. However, profits may tend to fluctuate

from year to year due to erratic availability of basic raw material i.e, maize being an agricultural

produce, which suffers from natural vagaries.

Opportunities and Threats- The per capita production and consumption of

starch is still much lower as compared to other countries of the world. There is reasonably

considerable potential for the increased demand. However, raw material availability and wide

fluctuation in the prices continue impacting the profitability of the industry. Higher cost and

shortage of basic raw material may impede growth of the industry due to cheaper imports of

starch and its derivatives from the neighboring countries.

Internal control system and their adequacy- The company has an

effective internal control system commensurate with its size and nature of business. The system

duly ensures that all the transactions are properly authorized, recorded and reported correctly.

The management continuously reviews the system to carry out various operations of the

company effectively and efficiently with due protection for the company’s assets. The system

also ensures ue compliance of all the acts, laws and statutory regulations as applicable to the

company.

Company’s financial performance and analysis- The sales of the

company have increased both in the volumes and in values. The company has been assigned the

highest rating i.e PR one for its short term banks facilities by M/s Credit Analysis & Research

Ltd. A strong emphasis has been placed on the working capital management of the company with

stringent controls over funds deployment, timely collection of customer’s outstanding and

effective control over procurement of raw material. The company has enjoyed good credit rating

i.e highest health code with its bankers over the years. The working capital management, in fact,

29

derives its major strength from self generated cash flows duly supplemented with the capacity to

have easy access to the necessary credit.

Human resources development/Industrial relations- Company’s

industrial relations continued to be harmonious during the year under reference. The company

believes that the quality of employees and level of motivation largely contribute to the overall

success of business enterprise in the long-run. Company conducts regular in- house training

programmes for employees at all level with major thrust on maintaining high level of motivation

and on leadership development providing good professional environment in order to equip them

with necessary drive and skill in their respective functional areas.

30

FINANCIAL STATUS OF THE SUKHJIT STARCH & CHEMICALS LTD.

BALANCE SHEET AS AT 31.3.2009

Particulars

A. SOURCES OF FUNDS 1.SHAREHOLDERS’ FUNDS a) Share capital b) Reserves and surplus 2.LOAN FUNDS a) Secured loans b) Unsecured loans Total

B. APPLICATION OF FUNDS 1. FIXED ASSETS a) Gross block b) Less: Accumulated depreciation c) Net block d) capital work in progress 2. INVESTMENTS 3. CURRENT ASSETS,LOANS AND ADVANCES a) Inventories b) Sundry debtors c) Cash and bank balances d) Loans and advances

4. Less: CURRENT LIABILITES AND PROVISIONS Net Currents AssetsDeferred LiabilityTotal Assets ( -)

Total

C. Notes on Accounts.

Schedules

AB

CD

E F

G

HI

JK

L

As at31/03/2007

Rs.

7,37,98,20083,66,04,441

37,68,41,79118,18,93,333

1,46,91,37,765

1,149,69,99,33832,15,65,54382,54,33,795

7,08,34,546 89,62,68,34115,31,53,274

34,49,45,62919,68,76,6193,84,98,598

12,48,01,14070,51,21,98622,39,27,482

22,39,27,48248,11,94,5046,14,78,354

1,46,91,37,765

As at 31/03/2008

Rs.

7,37,98,20075,50,,87,578

44,64,93,43411,99,51,206

1,39,53,30,418

1,03,94,29,790 28,05,85,02675,88,44,7643,93,61,972

79,82,06,972 14,08,12,136

37,25,73,81020,18,66,4807,54,83,648

12,18,09,59777,17,33,53525,65,43,635

25,65,43,63551,51,89,9005,88,78,354

1,39,53,30,418

31

Objective of

The Study

32

Objective of the studyThe objective of the study is as follows:

To evaluate the financial position of the Sukhjit Starch & Chemicals ltd. of last three

years.

To measure financial performance of Sukhjit Starch & Chemicals ltd. of last three years.

33

34

Research Methodology

35

Research methodology

Basically project study is usually based on a research, which gives a concrete answer to a

problem. This research may be Problem Solving or Problem Oriented. Both types of research are

usually known as Applied Research.

Accounts is a form of Applied research which proceeds with a certain problem, specifies

alternative solutions and the possible outcomes of each alternative. It may be further named as

“Decisional Research”.

The Accounts Research methodology involves a number of interrelated activities, which overlap

and do not rigidly follow a particular sequence. An Accounts research involves the following

major steps.

FORMULATING RESEARCH PROBLEM

The first step in research is formulating research problem. It is the most important stage in

Applied Research as it rightly said “A problem well defined is half solved”.

In this Project Report I have studied the concept of Financial Statement Analysis have carried

the analysis of the same in THE SUKHJIT STARCH & CHEMICALS LIMITED.

STATISTICAL TOOLS & TECHNIQUES

The statistical techniques have been studied. These have been very useful in doing the

interpretation and analysis of the data collected through secondary sources.

36

DATA REPRESENTATION

The result have presented with the help and bar diagrams which clearly represents that the

research conducted is a Formal Research and the Research Design is a sound one.

DETERMINING THE SOURCE OF DATA

The next step is to determine the source of data to be used. The Accounting research may be

based on primary or secondary data or on both.

In this report I have used the information gathered through secondary data which include mainly

the Annual Reports of THE SUKHJIT STARCH & CHEMICALS LIMITED.

37

Financial Analysis of

Sukhjit Strach &

Chemicals Ltd.

38

Comparative Balance Sheet of The Sukhjit Starch & Chemicals Ltd. As on 31st March 2007 - 2008

Particulars 2007 2008

Increase/

Decrease in

Amt.

Increase/

Decrease in

percentage

Fixed Assets

Gross Block 725945896 1039429790 313483894 43.18

Less-Depreciation 249113832 280585026 31471194 12.63

Net block 476832064 758844764 282012700 59.14

Add-Capital work in

progress

224107428 39361972 (184745456) (82.43)

Total fixed assets 700939492 798206736 97267244 13.87

Investments 152375737 140812136 (11563601) (7.58)

Current Assets

a) Inventories 257483862 372573810 115089948 44.69

b) Sundry Debtors 186287132 201866480 15579348 8.36

c) Cash & Bank balances 82716362 75483648 (7232714) (8.74)

d) Loans & Advances 62872402 121809597 58937195 93.74

Total current assets 589359758 771733535 182373777 30.94

Total Assets 1442674987 1710752407 268077420 18.58

Shareholders Funds

a) Share Capital 73798200 73798200 _______ ______

b) Reserves & Surplus 597638252 755087578 157449326 26.34

Total shareholders funds 671436452 828885778 157449326 23.44

Loan Funds

a) Secured loans 403661436 446493434 42831998 10.61

b)Unsecured loans 122183605 119951206 (2232399) (1.82)

Total loan funds 525845041 566444640 40599599 7.72

39

Current Liabilities

a) Liabilities 132234243 191767366 59533123 45.02

b) Provisions 53165897 64776269 11610372 21.83

Total current liabilities 185400140 256543635 71143495 38.37

Deferred Tax Liability 59993354 58878354 (111500) (1.85)

Total Liabilities 1442674987 1710752407 268077420 18.58

40

Interpretation:The comparative balance sheet shows that fixed assets have increased by13.87% while long term

loans (loan funds) have increased by 7.72% which shows that fixed assets have purchased by

rising long term liability.

The current assets and current liability show increase of 30.94% and 38.37% respectively. The

shareholders funds have been increased to 23.44%. Overall position of the company is

satisfactory.

41

Comparative Balance Sheet of The Sukhjit Starch & Chemicals Ltd. As on 31st March, 2008- 2009

Particulars 2008 2009

Increase / Decrease in Amt.

Increase/ Decrease in percentage

Fixed Assets

Gross Block 1039429790 1146999338 10756954 10.34

Less-Depreciation 280585026 321565543 40980517 14.60

Net Block 758844764 825433795 66589031 8.72

Add-Capital work in

progress

39361972 70834546 31472574 79.95

Total fixed assets 798206736 896268341 98061605 12.28

Investment 140812136 153153274 12341138 8.76

Current Assets

a)Inventories 372573810 344945629 (27628181) (7.81)

b) Sundry Debtors 201866480 196876619 (4989861) (2.47)

c) Cash &Bank balances 75483643 38498598 (36985045) (48.99)

d) Loans & Advances 121809597 124801140 2991543 2.45

Total current assets 771733535 705121986 (66611549) (8.63)

Total Assets 1710752407 1754543601 43791194 (2.55)

Shareholders Funds

a) Share Capital 73798200 73798200 _________ _________

b) Reserves & Surplus 755087578 836604441 81516863 10.79

Total shareholders funds 828885778 910402641 81516863 9.83

Loan Funds

a) Secured Loans 446493434 376841791 (69651643) (15.59)

b) Unsecured Loans 119951206 181893333 61942127 51.63

Total loan funds 566444640 558735124 (7709516) (1.36)

Current Liabilities

a) Liabilities 191767366 164909486 (26857880) (14)

42

b) Provisions 64776269 59017996 (5758273) (8.88)

Total current liabilities 256543635 223927482 (32616153) (12.71)

Deferred Tax Liabilities 58878354 61478354 2600000 (4.41)

Total Liabilities 1710752407 1754543601 43791194 2.55

43

Interpretation:The comparative balance sheet shows that fixed assets have increased to 12.28% and long term

loans (loan funds) have decreased to (1.36%).

The current assets have been decreased by 771733535 to 705121986 so the difference is (8.66%)

which is much less than the past years. It shows that position of the firm is not good. The current

liabilities have decreased by (12.71%).

So it is not the healthy sign for the firm.

44

Comparative Income Statement of The Sukhjit Starch & Chemicals Ltd. As on 31st March, 2007-2008

Particular 2007 2008

Increase/

Decrease in

Amt.

Increase/

Decrease in

Percentage

Net Sales (A) 1617926445 1796203738 178277293 11.01

Cost of Goods Sold:

a) Consumption of Material 976813457 1109536351 132722894 13.58

b) Manufacturing Expenses 199910788 226863382 26952594 13.48

c) Payment to & Provisions

for Employees 74450739 93571059 19120320 25.68

Total COGS (B) 1251174984 1429970792 178795808 14.29

Gross Profit (A-B) 366751461 366232946 (518515) (0.14)

Operating Expenses (C) 63287927 70311501 7023574 11.09

Operating Profit

( Gross Profit –C) 303463534 295921445 (7542089) (2.48)

Add- Other Income 9352502 14971388 5618886 60.07

Less-Non Operating

Expenses

a) Financial Charges 33042345 47336839 14294494 43.26

b) Deprecation 29081985 36370485 7288500 25.06

Total Non Operating

Expenses 62124330 83707324 21582994 34.74

Net Profit before Tax 250691706 227185509 (23506197) (9.37)

Less-Provision for Taxation 46510000 25705000 (20805000) (44.73)

Net Profit after Tax 204181706 201480509 (2701197) (1.32)

45

Interpretation:The Comparative income statement shows the net sales have increased to 11.01% while the cost

of goods sold have increased to 14.29%. Operating Expenses has been increased to 11.09%

because of higher administration and selling expenses.

Profit after taxes have declined by 1.32%, thus overall profitability position of the firm is

satisfactory.

46

Comparative Income Statement of The Sukhjit Starch & Chemicals Ltd. As on 31st March, 2008-2009

Particular 2008 2009

Increase/

Decrease in

Amt.

Increase/

Decrease in

Percentage

Net Sales (A) 1796203738 2026162640 229958902 12.80

Cost of Goods Sold:

a) Consumption of Material 1109536351 1320678015 211141664 19.02

b) Manufacturing Expenses 226863382 283647933 56784551 25.03

c) Payment to & Provisions

for Employees 93571059 112679291 19108232 20.42

Total COGS (B) 1429970792 1717005239 287034447 20.07

Gross Profit (A-B) 366232946 309157401 (57675545) (15.58)

Operating Expenses (C) 70311501 71658170 1346669 1.91

Operating Profit

( Gross Profit –C) 295921445 237499231 (58422214)

(19.74)

Add- Other Income 14971388 10789945 (4181443) (27.92)

Less-Non Operating

Expenses

a) Financial Charges 47336839 53992709 6655870 14.06

b) Deprecation 36370485 51145890 14775405 40.62

Total Non Operating

Expenses 83707324 105138599 21431275

25.60

Net Profit before Tax 227185509 143150577 (84034932) (36.98)

Less-Provision for Taxation 25705000 26900000 1195000 4.64

Net Profit after Tax 201480509 116250577 (85229932) (42.30)

47

Interpretation:The Comparative income statement shows that the net sales have increased by 12.80%. The cost

of goods sold shows an increase of 20.07% and the gross profit has declined by 15.58%. The

operating expenses have increased to 1.91% due to increase in sales.

Profit before tax shows declined of 36.98% and profit after taxes have declined by 42.30% but

they should try to control the operating expenses and try to increase the profit of the firm.

48

Common-Size Balance Sheet of The Sukhjit Starch & Chemicals Ltd. (From 2007-2009)

Particulars

2007 Amt. %

2008

Amt. %

2009

Amt. %

Fixed Assets

Gross Block 725945896 50.31 1039429790 60.75 1146999338 6.58

Less-Depreciation 249113836 17.26 280585026 16.40 321565543 18.32

Net Block 476832064 33.05 758844764 44.35 825433795 47.04

Add-Capital work

in progress

224107428 15.53 39361972 2.30 70834546 4.03

Total Fixed

Assets

700939492 48.58 798206736 46.65 896268341 51.08

Investments 152375737 10.56 140812136 8.23 153153274 8.72

Current Assets

a) Inventories 257482862 17.84 372573810 21.77 344945629 19.66

b) Sundry Debtors 186287132 12.91 201866480 12.15 196876619 11.22

c) Cash & Bank

Balances

82716362 5.73 75483648 4.41 38498598 2.19

d) Loans &

Advances

62872402 4.35 121809597 7.12 124801140 7.11

Total Current

Assets

589359758 40.85 771733535 45.11 705121986 40.18

Total Assets 1442674987 100 1710752407 100 1754543601 100

Shareholders

Funds

a) Share Capital 73798200 5.11 73798200 4.31 73798200 4.20

b) Reserves &

Surplus

597638252 41.2 755087578 44.13 836604441 47.68

Total

Shareholders

671436452 46.54 828885778 48.45 910402641 51.88

49

Funds

Loan Funds

a) Secured Loans 403661436 27.98 446493434 26.09 376841791 21.47

b) Unsecured

Loans

122183605 8.46 119951206 7.01 181893333 10.36

Total Loan

Funds

525845041 36.44 566444640 33.11 588735124 31.84

Current

Liabilities

a) Liabilities 132234243 9.16 191767366 11.20 164909486 9.39

b) Provisions 53165897 3.68 64776269 3.78 59017996 3.36

Total Current

Liabilities

185400140 12.85 256543635 14.99 223927482 12.76

Deferred Tax

Liability

59993354 4.15 58878354 3.44 61478354 3.50

Total Liabilities 1442674987 100 1710752407 100 1754543601 100

Interpretation:

50

The common-size balance sheet shows that fixed assets is increasing in 2007 to 48.58%, it is

decreased in 2008 to 46.65% and increased in 2009 to 51.08%. The current assets are increased

in 2008 to 45.11% and are decreased in 40.18%.

The long term loans are 36.44% in 2007 and reduced 33.11% in 2008, then is declined to 31.84%

in 2009. Secured loans are more then unsecured loans.

The current liabilities show an increase of 14.99% in 2008 after that in 2009 declined 12.76%.

The current assets are more than current liabilities which shows that the liquidity position of the

company is sound.

Common-Size Income Statement of The Sukhjit Starch & Chemicals Ltd. (From 2007-2009)

2007

2008 2009

51

Particulars Amt. %

Amt. %

Amt. %

Net Sales(A) 1617926445 100 1796203738 100 2026162640 100

Cost of Goods

Sold:

a) Consumption of

Material

976813457 60.37 1109536351 61.77 1320678015 65.18

b) Manufacturing

Expenses

199910788 12.35 226863382 12.63 2883647933 13.99

c) Payment to and

Provisions for

Employees

74450739 4.60 93571059 5.20 112679291 5.56

Total COGS (B) 1251174984 77.33 1429970792 79.61 1717005239 84.74

Gross Profit (A-B) 366751461 22.66 366232946 20.38 309157401 15.25

Total Operating

Expenses

63287927 3.91 70311501 3.91 71658170 3.53

Operating Profit

(Gross Profit-C)

303463534 18.75 295921445 16.47 237499231 11.72

Add- Other

Income

9352502 0.57 14971388 0.83 10789945 0.53

Less-Non

Operating

Expenses

a) Financial

Charges

33042345 2.04 47336839 2.63 53992709 2.63

b) Depreciation 2908195 1.89 36370485 2.02 51145890 2.52

Total Non

Operating

Expenses

62124330 3.83 83707324 4.66 105138599 5.18

Net Profit before 250691706 15.49 227185509 12.64 143150577 7.06

52

Tax

Less-Provision for

Taxation

46510000 2.87 25705000 1.43 26900000 1.32

Net Profit after

Tax

204181706 12.61 201480509 11.21 116250570 5.73

Interpretation:From, the common-size income statement it revealed that the net sales are increased till the year

of 2009, it is showing that the increasing trend.

It means that the firm’s profit earning ratio is good.

53

The COGS shows an increase till the year 2009. The amount of gross profit has declined in 2008

and 2009. The overall performance of firm is satisfactory.

Trends of Sales

Years Trends Sales

2007 100 1617926445

2008 111.01 179603738

54

2009 125.23 2026162640

Interpretation:For calculating trend year 2007 was taken as base year. In year 2008, the sales increased to

111.01% and in the year 2009 the sales increased to 12.23%.Which is good indicator of sales

than that of the year 2008. Firm is utilizing its resources efficiently & effectively.

55

Trends of Current Assets

Years Amt %

2007 589359758 100

2008 771733535 130.94

56

2009 705121986 119.64

Interpretation:For calculating trend 2007 was taken as base year. In the year 2008, the current assets have

decreased and it has been decreased in the year 2009 because the cash and bank balances

decreased than the year 2008.

57

Trend of Fixed Assets

Years Amt. %

2007 700939492 100

2008 798206736 113.87

58

2009 896268341 127.86

Interpretation:For calculating trend, 2007 was taken as base year. A continuously increased in all the years up

to 2009 because capital work in progress have been increased in the year 2009.

59

Trends of Gross Profit

Years Amt. %

2007 366751461 100

2008 366232946 99.85

60

2009 309157401 84.29

Interpretation:For calculating trend 2007 was taken as base year. Gross profit shows decreasing trend till 2009

and the net sales have been increased.

61

Trends of Net Profit

Years Amt. %

2007 204181706 100

2008 201480509 98.67

62

2009 116250577 56.93

Interpretation:For calculating trend 2007 was taken as base year. Net profit shows decreasing trend till 2009.

Because there is loss and expenses are more than income.

63

64

Conclusion

ConclusionIn the end, it would be desirable to have a relook at the various aspects of this study discussed

under different chapter to be able to put together the important points by way of conclusion.

65

Financial statement identifies the financial strengths and weakness of the firm by profit and loss

account, properly establishing relationship between the items of balance sheet and profit and loss

account.

The management of The Sukhjit Starch & Chemicals Ltd. consists of the good mixture of

experienced and dynamic persons. There is proper co-ordination, co-operation & understanding

between them which makes the company highly efficient firm.

At present the company have established the many other plant in the north India. The

management plays a role in development of The Sukhjit Starch & Chemicals Ltd. in the stock

market and also get positive results in the foreign trade.

As the firm is using the technology available in the market for manufacturing of starch and

chemicals. Thus, we can say that the future of the firm is progressive.

I wish for the success of the firm.

66

Bibliography

Bibliography

67

Financial Management I.M Pandey

Financial Management S.K Gupta

Management Accounting & Financial Control S.N Maheshwary

ReportsBalance-Sheet and Profit & loss account Company’s and Manual and Brochure

provided by the company.

Web- Siteswww.sukhjitstarchchemicalsltd.com

68

69