Professional Documents
Culture Documents
I I-15
INTRODUCTION
BIBLIOGRAPHY
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INTRODUCTION
Financial statement analysis (or financial analysis) is the process of reviewing and
analyzing a company's financial statements to make better economic decisions. These
statements include the income statement, balance sheet, statement of cash flows, and a
statement of retained earnings. Financial statement analysis is a method or process
involving specific techniques for evaluating risks, performance, financial health, and future
prospects of an organization.[1]
It is used by a variety of stakeholders, such as credit and equity investors, the government,
the public, and decision-makers within the organization. These stakeholders have different
interests and apply a variety of different techniques to meet their needs. For example,
equity investors are interested in the long-term earnings power of the organization and
perhaps the sustainability and growth of dividend payments. Creditors want to ensure the
interest and principal is paid on the organizations debt securities (e.g., bonds) when due.
HISTORY
Benjamin Graham and David Dodd first published their influential book "Security Analysis"
in 1934.[2] [3] A central premise of their book is that the market's pricing mechanism for
financial securities such as stocks and bonds is based upon faulty and irrational analytical
processes performed by many market participants. This results in the market price of a
security only occasionally coinciding with the intrinsic value around which the price tends
to fluctuate.[4] Investor Warren Buffett is a well-known supporter of Graham and Dodd's
philosophy.
The Graham and Dodd approach is referred to as Fundamental analysis and includes: 1)
Economic analysis; 2) Industry analysis; and 3) Company analysis. The latter is the primary
realm of financial statement analysis. On the basis of these three analyses the intrinsic
value of the security is determined.[4]
Horizontal analysis compares financial information over time, typically from past quarters
or years. Horizontal analysis is performed by comparing financial data from a past
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statement, such as the income statement. When comparing this past information one will
want to look for variations such as higher or lower earnings.[5]
Vertical analysis is a proportional analysis of financial statements. Each line item listed in
the financial statement is listed as the percentage of another line item. For example, on an
income statement each line item will be listed as a percentage of gross sales. This technique
is also referred to as normalization[6] or common-sizing.[7]
Financial ratios are very powerful tools to perform some quick analysis of financial
statements. There are four main categories of ratios: liquidity ratios, profitability ratios,
activity ratios and leverage ratios. These are typically analyzed over time and across
competitors in an industry.
Liquidity ratios are used to determine how quickly a company can turn its assets into
cash if it experiences financial difficulties or bankruptcy. It essentially is a measure of a
company's ability to remain in business. A few common liquidity ratios are the current
ratio and the liquidity index. The current ratio is current assets/current liabilities and
measures how much liquidity is available to pay for liabilities. The liquidity index shows
how quickly a company can turn assets into cash and is calculated by: (Trade receivables
x Days to liquidate) + (Inventory x Days to liquidate)/Trade Receivables + Inventory.
Profitability ratios are ratios that demonstrate how profitable a company is. A few
popular profitability ratios are the breakeven point and gross profit ratio. The breakeven
point calculates how much cash a company must generate to break even with their start
up costs. The gross profit ratio is equal to (revenue - the cost of goods sold)/revenue.
This ratio shows a quick snapshot of expected revenue.
Activity ratios are meant to show how well management is managing the company's
resources. Two common activity ratios are accounts payable turnover and accounts
receivable turnover. These ratios demonstrate how long it takes for a company to pay off
its accounts payable and how long it takes for a company to receive payments,
respectively.
Leverage ratios depict how much a company relies upon its debt to fund operations. A
very common leverage ratio used for financial statement analysis is the debt-to-equity
ratio. This ratio shows the extent to which management is willing to use debt in order to
fund operations. This ratio is calculated as: (Long-term debt + Short-term debt +
Leases)/ Equity.[8]
DuPont analysis uses several financial ratios that multiplied together equal return on
equity, a measure of how much income the firm earns divided by the amount of funds
invested (equity).
A Dividend discount model (DDM) may also be used to value a company's stock price based
on the theory that its stock is worth the sum of all of its future dividend payments,
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discounted back to their present value.[9] In other words, it is used to value stocks based on
the net present value of the future dividends.
RESEARCH METHODOLOGY:
The research methodology deals with how the study was carried out. This
consists of several stages where in the process proceeds through various stages to
finally attain the objective of the study. Hence, for any project the objective of the
objective or aim of the project is to be known and the objective of the project is to
be set.
The organization in which the project is to be carried out is to be selected.
The profile of the organization is collected from various journals, monthly
magazines, from the employees and widely
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The essential features of a budget are
Financial and quantitative statement of the 3 action plan
Lay down period to the budget period during which I followed.
Prepared for specified objectives.
Based on management’s policy.
In the CIMA terminology, a budget is defined as follows. "Budget is a financial
and/ or quantitative statement, prepared and approved prior to a defined [period
of time, of the policy to be pursued during that period for the purpose of attaining
a given objective,, The term budgetary control and budgeting are often used
interchangeably to refer to a system of managerial control.
BUDGETARY CONTROL:
Budgetary control implies the use of a comprehensive system of budgeting bid
management in carrying out its functions like planning, coordination and control.
It is system, which uses budgets for planning and controlling different activities
of business.
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In the Charted Institute of Management Accountants (CIMA), London
terminology:
"Budgetary control is the establishment of budgets relating to
responsibilities of executives to the requirement of a policy ,and the continuous
comparison of actual with budgeted results ,either to secure by individual action
the objective of that the policy or to provide a basis for version."
Budgeting is a way of managing business and industry, it emphasizes that
management should anticipate problems and difficulties.
Advance decision should be taken for the course of activities during the
fourth coming budget period. Budgetary control denotes a formal system based
on the concept of budgeting.
A budget prepared on the forecast made for the budget period and thus a
forecast is not all that a budget is. A forecast can be made just by anybody
competent to make judgment.
Budget are always made with the objects of planning, continues ever after
budget preparation. A forecast includes projection of variables either
controllable or non-controllable that are used in development of budges.
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OBJECTIVES OF BUDGETARY CONTROL:
PLANNING: Planning is an important managerial function. It helps to decide in
advance, what to do, how to do, when to do and who has to do it. Planning thus
helps the managers to anticipate eventualities, prepare for contingencies for
achieving the ultimate goals; budget preparation drives the managers to plan
ahead. Managers express their operational plans for anticipating business
conditions. Without a procedure of budgetary control, many operating managers
will not fine the time to plan ahead. Thus budgeting is an important planning
device.
COMMUNICATION: The employees of an organization should know
organizational aims, objectives of subunits (budgets centers) and effectively
communicate this information to employees. Besides, budgets keep different
section of the organization informed about the contribution of different subunits
in the attainment of over all organizational objective.
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performance, thus, the inbuilt mechanism of the routine of budgetary control is
bound to precipitate to an operational control.
APPROVED PLAN: A master budget provides an approved summary of results
to be expected from proposed plan of operations. It concerns all functions of
organization and serves as a guide to executives and departmental heads
responsible for various departmental objectives.
The organizational goal should be quantified and clearly stated, these goals
should be within the framework of organizations strategic and long-rang
plans.
The budget should be realistic. It should represent that goals that are
reasonable attainable.
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Clear-cut organizational lines should be established with appropriate
delegation of responsible for effective budget implementation.
All functional heads are compelled to make plans in harmony with the
plans of other departments.
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LIMITATIONS OF BUDGETARY CONTROL:
Estimates are used as basis for budget plan and estimates are based mostly
on available facts and best managerial judgment Since a lot of human
element is involved in exercising managerial judgment, it is but natural to
give some allowance in interpretation and utilization of estimated results;
Budgeting based on inaccurate forecasts is useless as a yardstick for
measuring the actual performance.
The use of budget may lead to restricted use of resources. Budgets are often
taken as limits. Efforts may, therefore, not be made to exceed the
performance beyond the budgeted targets, even though it may be
physically possible.
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Establishment of budget committee
BUDGET PERIOD
Charted Institute of Management Accountants (CIMA) defines budget period as
"the period for which a budget is prepared and used, which may then be sub
divided into control periods." Budgets having short durations are very costly,
because revision of budget is an exercise requiring substantial expenditure and
labor.
Whether a budget is to be a long-termed or a short-term budget is to be decided
primarily with reference to the fallowing two factors:
Types of business and
Amount of control required.
KEY FACTOR
It is also referred to as “limiting factor”, 'governing factor' and .principal factor'.
Key factor is a factor whose influence must be first ascertained to ensure that
functional budgets are reasonably capable of fulfillment.
Usually this limiting factor is sales. A concern may not be able to sell as
much as it can produce. But sometimes a concern can sell all it produces but
limited due to the shortage of material, labor, plant capacity or capital.
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Decision packages are evaluated by systematic analysis.
Under this approach there exists a frank relationship between superior and
subordinates. Management agrees to fund for a specified service and
manager of the decision unit clearly accept to deliver the service.
Decision packages are linked with corporate objectives, which are clearly
laid down.
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ABBREVATIONS USED:
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COMPANY PROFILE
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INTRODUCTION TO
AUTOMOBILE INDUSTRY
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COMPANY’S PRODUCTS
MARUTI 800
MARUTI
OMNI
GYPSY
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ALTO SWIFT
A-STAR
DZIRE
SWIFT WagonR
SX4 VERSA
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LATEST LAUNCHES
RITZ
GRAND
VITARA
NEW ZEN
ESTILO
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MARUTI FINANCE
21
AGAIN THE COMPANY ENTERED INTO A
STRATEGIC PARTNERSHIP WITH SBI IN
MARCH 2003 SINCE MARCH 2003, MARUTI
HAS SOLD OVER 12,000 VEHICLES
THROUGH SBI-MARUTI FINANCE.
Maruti insurance
IT
IS LAUNCHED IN 2002 MARUTI PROVIDES
VEHICLE INSURANCE TO ITS CUSTOMERS
WITH THE HELP OF THE NATIONAL
INSURANCE COMPANY, BAJAJ ALLIANZ,
NEW INDIA ASSURANCE AND . SUNDARAM.
THE SERVICE WAS SET UP THE COMPANY
WITH THE INCEPTION OF TWO
SUBSIDIARIES MARUTI INSURANCE
DISTRIBUTORS SERVICES PVT. LTD AND
MARUTI INSURANCE BROKERS PVT.
LIMITED .
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MARUTI TRUE VALUE
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FINANCIAL PERFORMANCE
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PROFIT VOLUMES OF A
COMPANY.
ACHIEVEMENTS OF A
COMPANY
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FINANCIAL ANALYSIS IN MARUTI SUZUKI
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BUDGET AND BUDGETARY SYSTEM
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To control budgets with reference to standards of performance ascertain
various of actual expenditure over budget provision and analyses the
reasons.
The budget period or annual budgets should correspond with the financial year.
In October every year, the budget should be drawn up for the ensuring financial
year in the form of budget estimates financial year in the form of Revised
Estimates (R.E.)..In addition , the budgets are to be revised on monthly basis by
project review teams, in the light of actual expenditure and projections in the
budget period. Budgets should indicate monthly phasing of expenditure and
targets for the first and quarterly phasing for the second half of the year. At the
time of review of the budget estimates to frame revised estimates, the quarterly
phasing should be broken up into monthly phasing.
While drawing up the annual budget in October every year, the long term
capital budget for ongoing and new schemes should be formulated as a part of
exercise for preparation of annual plan. The long term capital budget should
indicate for a period of six years following the budget period project wise annual
phasing of the capital expenditure and physical schedules resource based
networks, internal generate on of resources and net budgetary support from
government.
BUDGET HEADS:
For uniform accounting, it is essential that costs are collected for each system of
the station though this may involve splitting up payments against contracts which
embrace more than one system. Allocation of the cost as system wise afsuzukis a
sound basis for cost accounting, inter-firm comparisons and provides valuable
inputs to datamotor. Budget provisions are related to project estimates and
monitoring of actual expenditure. Power and control cables belong to electrical
system where as control cables for part control and instrumentation system.
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Station piping, includes pipelines, for ash water mains, compressed air system
and civil works piping. There are auxiliary pumps for water treatment plant and
civil works system. If there are any contracts not covered in the budget heads
provision for such contracts should be shown against the appropriate system
head by adding code number.
Technical consultancy
Incidental expenditure during construction
Employee cost
Preliminary expenses
Miscellaneous brought-out assets
Cash budget
Township budget
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Brief explanation to the nature of expenditure included in each budget is
indicated below:
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(PRT), who should record reasons for major variations and action proposed for
expending works in the minutes of the meetings, reasons for any variations in the
case of budget heads exceeding 10% of the budget estimates/revised estimates or
whichever is lower Rs.5lakhs should be analyzed and reported upon.
QUARTERLY REVIEW:
PRT should conduct a quarterly budget review with a view to projecting
anticipated expenditure during the year against approved budget
estimates/revised estimates. As time in essence of such review, only a quick
estimate of anticipated expenditure for individual budget heads involving
provisions exceeding Rs.50 lakhs in each case should be made and reported upon
in minutes of PRT. For this purpose, Project budget should furnish all the
relevant data to general manager (project) and planning and systems by the 10 th
of the month following the quarter project budget committee should review the
actual expenditure and access anticipated expenditure contract co-
ordination/engineers-in-charge. The assessments of anticipated expenditure
should be furnished by the project budget committee to general Manager
(project) by the 30th of the month following the quarter under review.
BUDGET OF SERVICE DIVISION/CORPORATE BUDGETS:
Corporate budget committee should conduct a review of budgets of service and
corporate divisions at quarterly intervals. For this purpose, corporate accounts
should report actual expenditure up to the end of the quarter by 10th of the month
following quarter to corporate budget and budget coordination of the remaining
period of the year. Corporate budget should be sent to corporate budget
committee (CBC), which should put up a consolidated report division wise and
project wise by the 15th of May, August, November and February every year.
The current budgetary control system – operating phase has been compiled to
achieve the following objectives.
To control actual performance with reference, to standards / norms adopted in
the budget, ascertain the deviations analyze and establish the reasons.
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To identify constrains in generation and timely action for estimation of
constraints.
To monitor the generation of internal resources so as to ensure availability
of adequate funds.
To prepare revenue budget so as to forecasting the periodical profitability
of the organization.
To develop standards / norms of performance in the various areas of
operation and maintenance based on the experience.
To involve managers at various in the process of developing performance
budget so as to introduce the concept of responsibility accounting and
participate management.
To ensure effective co-ordinate planning of all activities so that all the
inputs and services necessary for achieving the physical targets are
available at appropriate time.
To create cost consciousness among the managers responsible for decision
making.
To provide data regarding operational norms and costs for the purpose of
formulating tariff.
To provide data a basis for assessment of working capital requirements.
To control the working capital particularly book debts, spares and other
items of inventory.
To improve profitability and internal resources generation.
The current budgetary control system operation phase envisages generation and
transmission line projects as independent investment centers. It becomes
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applicable to a project in the year in which it plans to commercialize its first
generation unit. However, the budgeting for expenses (net of revenue) from the
date of synchronization to the date of commercial generation (i.e. during trail run
) are to be taken in case of capital budget of the respective project. Similarly, in
the case of transmission line project, the system becomes applicable from the
year in which it plans to commission its first line along with the sub-station or the
date commercial generation of the first unit of generating project, with which line
is associated, whichever is later. For subsequent lines, O&M will be prepared
from the date of energization.
The system envisages the preparation of operation and maintenance budget
for each of the cost centers as per the requirements of costing systems (i.e.
operation, maintenance and services cast center).
The sum total budgets of the cost centers will be the budget for the
investment center. However, the budget of the profit center will be worked out by
apportioning the revenue and cost of various cost centers to individual’s profit
centers based on specific norms.
The performance budget operation will consists of the following budgets along
with the supporting schedules:
Cash budget.
In addition, separate budget for revenue activities other than operation for
research and development consultancy contracts etc.
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To facilitate management control the system also envisages, phasing of these
budget into monthly/quarterly targets. The actual performance then will be
reason for variation and it will be analyzed and established for taking corrective
actions. The scope also includes projection of internal resources for a period
ranging from 5 to 15 years and updating of 5 years plan as well as perspective
plan of the company.
The system provides for two stage formulation for “performance budget
operation”, the stages are given below:
INITIAL PROPOSAL:
In the initial proposal, the project is required to indicate yearly targets. In the
addition, to furnishing basic information like synchronization and commercial
generation dates.
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The final proposal, after approval by board, will become the basis of
monitoring performance for cost centers and investment centers.
If the new units are included in the scope of budgeting, the dates for
commercial generation will also need to be indicated operation should not be
more than three months for a 200MW unit and four months in case of 500MW
unit. If more time is provided between the date commissioning and commercial
generation, justification will need to be furnished.
NET GENERATION:
The sales value will be determined from quantum of net generation (i.e. gross
generation-auxiliary consumption).
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AUXILIARY CONSUMPTION/CONSUMPTION BY UTILITIES:
The power consumption by each of the cost centers for individuals unit
auxiliaries, station auxiliaries as well as transformer losses are to be estimated
separately based on designed specifications and added in order to workout total
auxiliary consumption rather than fixing a overall percentage. Similarly,
consumption by utilities will also need to be indicated by cost
centers/departments like township and construction (Electrical erection)
departments. This will be valued at cost net generation to arrive the sales values
for own consumption.
If a new station is entering O&M phase during the budget period, tariff rate
will be provided by corporate commercial divisions.
Similarly, sales revenue for transmission charges will be worked on the basis
of either to be indicated along with a brief note on the nature of contract, terms of
payments, time schedule and progress of work etc.
HEAT RATE:
Fixation of heat rate target of the budget period will be very crucial decision
as far as the profitability of generating station is concerned. The definition of heat
rate will be same as given in the operation performance monitoring system
(OMS) issued by corporate.
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Heat rate is dependent on MW load, quality of inputs, makes up water
consumption, combustion performance of condenser & mulls and temperature
and pressure at various points in the system. Therefore, all these factors must be
considered before fixing targets for heat rate.
For budgeting purposes “Station Heat Rate” will be as sum total of heat per
unit rate or fixed charge per month depending upon the terms of tariff
agreement.
ELECTRICITY DUTY:
The payment of electricity duty is to be worked out from gross generation/ net
generation/ energy sent out as applicable to individual stations and states. The
same amount should be shown as recovery from electricity boards on the revenue
side.
OTHER REVENUES:
Normally, investment centers will not have any income from consultancy
because revenue for all major consultancy contracts etc is to be reckoned against
corporate center as per separate profit and loss account based on instructions.
However, if any consultancy jobs are under taken by investment centers, the
income from such contracts will need from coal (Kcal/kg) or oil (Kcal/Kg) or
(Kcal/Kg) to generate one unit of electrical to energy. The heat rate input of coal
for this purpose should be calculated after including handling loss in the coal
consumption. The “unit heat rate” calculation will not include handling loss of
coal.
FUEL CONSUMPTION:
The sum total of coal and oil consumption is treated as fuel consumption for
budgeting.
The specific oil consumption factor will be fixed based on past performance of
each unit since station heat rate is a derivative of specific coal and oil
consumption already fixed.
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The specific coal consumption factor can be worked out as under:
Coal consumption
= specific coal consumption ( kg/ KWH) *Gross Generation.
The handling loss of the coal is to be restricted to 1.5% as per recommendation
of the committee for this purpose. This handling loss from the point of receipt in
the tract hopper up to gravis/ metric feeders will be added to coal consumption as
indicated above to arrive at gross coal consumption.
CHEMICAL CONSUMPTION:
The chemicals are used by many cost centers for treatment of water. The
consumption of chemicals will be correlated with volume of water treated and
certain norms will have to be developed for different type of chemicals and
different types of treatment.
Based on these norms, each of the cost centers will indicate consumption of
chemicals in quantitative as well as financial terms. The valuation of chemicals
will be done at current prices only.
EMPLOYEE COST:
The basis of employee cost will be the approved manpower budget effective for
respective years of budget period. The estimation of employee cost is to be done
for each grade considering mid-point of the scale as basic pay and after adding
various allowances like D.A., H.R.A., C.C.A., project allowance etc., as admissible
in respective graders. This is to be worked out for each of the budget period based
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on existing strength (at the time of estimation) in each grade and additions
during each quarter (taking 70% satisfaction for additions.
The provisions for medical reimbursement, PF and other welfare expenses is
to be made based on trend of expenses in previous year and taking into account
the policy changes, if any. The details of welfare expenses like liveries and
uniforms, safety expenses, accident compensation, games & sports, canteen
subsidy etc., are to be listed out as per the chart of account. The provisions for
incentives, bonus and payment of one time nature are to be shown separately
based on total employee cost for executives, supervisors and non-supervisors and
total manpower in these categories, separate rates of cost per employee will be
worked out for each of these categories as under
Welfare expenses.
The cost center of employees cost will be worked out based on these rates
separately for executives, supervisors and non-supervisors. This will again be
consolidated separately for operations, maintenance and common (service)
function. The employee cost of common function will be appropriated between
construction and O & M budgets in the ratio of capital expenditure and sales
during the respective years.
Major overhaul
Preventive maintenance
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Normally, budgeting will be done for the former two under each activity separate
estimates will be prepared for consumption of materials and maintenance jobs.
This will be done at each of the sub cost center wise details are required to be
mentioned.
The consumption material for repairs and maintenance will be classified into
spares, lubricants, loose tools and plants, consumables and others.
The cost center wise totals are done separately for three activities which will be
added to arrive at summary of material consumption and maintenance jobs
which will be reflected in the profit & loss account.
The material consumption, especially of spares, can be estimated based on the
expected life of various components/spares in the installed equipment the
frequency of breakdowns in the past and the requirement for preventive
maintenance and major overhauls. The actual life of components may be
different from that indicated in the manufacturer’s specifications. Therefore, it is
very difficult to estimate requirements of spare. But this estimation will become
gradually accurate as more experience is gained. For new stations it will be
advisable to collect such information from old stations that have gained
experience in this field.
Normally, maintenance of equipment through contractors should be avoided.
But in certain areas, if the expertise and in house capability or sufficient
manpower is not available, maintenance jobs can be done through contractors.
Such contracts will need to be listed out separately. If any owner supply items are
covered in such contracts the costs of these items will be included in the material
costs.
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DEPRECIATION:
This is to be charged as per ES act from the year following the year in which
assets have been capitalized. This will be done separately by each of the cost
centers on the basis of capitalized value and rates of depreciation furnished by
the site finance and account for different categories of assets. Cost center-wise
depreciation will be added to arrive at total depreciation for the investment
center.
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DATA ANALYSIS
AND INTERPRETATION
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DATA ANALYSIS AND INTERPRETATION
PROFITABILITY INDEX
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Pv of cash inflows 659714
PI= ----------------------- = --------------------------
Initial cash outlays 660000
= 0.99%
Interpretation:
a) The profitability index of present value of cash inflows and cash outflows
is fluctuation from year to year in the year 1997-1998 the present value of
cash inflows is 18180 where as in the year 2009-2010 has been increased
with 14763 millions.
b) The highest cash inflows has been recorded in 2005-2006 as 65420 and
lowest has been recorded as 16120 in the year 2002-2003.
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PAY BACK
45
Initial investments 40000
PAY BACK PERIOD = ----------------------- = -------------------
Annual cash inflows 8000
= 5 years
INTERPRETATION:
a) In the pay back method the investment period and the cash inflows are
fluctuating from year to year where as in the year 1998-99 it is 40000 and
in the year 2010-11 is 52300.
b) Cash inflows are in the order decreasing to increasing from 2008-09 to
2009-2010.
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TABLE 1.1
PHYSICAL PARAMETERS 2006-2007
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TABLE 1.2
PHYSICAL PARAMETERS 2010-11
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TABLE 1.3
PHYSICAL PARAMETERS 2011-12
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TABLE 1.4
PHYSICAL PARAMETERS
50
Table-2.1
BUDGET Vs ACTUAL
51
REVENUE
(2011-12)
SALES
52
REVENUE
Sales
53
OPERATIONAL EXPENDITURE BUDGET
1 Variable Cost
Oil
2 Operations and
maintenance cost
54
expenses
4 Finance charges
55
OPERATIONAL EXPENDITURE BUDGET
1 VARIABLE COST
Oil
2 OPERATIONS &
MAINTENANCE
COST
56
Share of C.C 3770 1.76 3757 1.90
expenses
4 FINANCE
CHARGES
57
OPERATIONAL EXPENDITURE BUDGET
1 VARIABLE COST
Oil
2 OPERATIONS &
MAINTENANCE
COST
58
TOTAL OF 2 23,029 1.22 22,340 11.35
4 FINANCE
CHARGES
59
OPERATIONAL EXPENDITURE BUDGET
1 VARIABLE COST
Oil
2 OPERATIONS &
MAINTENANCE
COST
60
expenses
4 FINANCE
CHARGES
61
OPERATIONAL EXPENDITURE BUDGET
1 VARIABLE COST
Oil
2 OPERATIONS &
MAINTENANCE
COST
62
TOTAL OF 2 23,063 11.73 26,298 12.67
4 FINANCE
CHARGES
63
PURCHASE BUDGET
(REVISED ESTIMATES)
64
PURCHASE BUDGET
(BUDGETED ESTIMATES)
65
EXPLANATION TO THE ABOVE TABLES
The installed capacity of MARUTI SUZUKI-RSTPS is 2600 MW.
1000 MW=1 MU
2600 MW=2.6 MU
Budget Generation
PLF (MU) = ---------------------- * 100
Installed capacity
20985MUs
= -------------
66 *100 = 92.13%
22776 MUs
Actual generation
PLF (ACTUAL) = Actual generation
------------------------------ *100
F (ACTUAL) = ------------------------------
Installed capacity *100
Installed capacity
21272.604
=21272.604
-------------- *100 =93.39%
= --------------
22776MUs *100 =93.39%
22776MUs
Therefore, Plant Load Factor (PLF) shows the percentage of power generation to
the maximum capability.
We know that,
1 MU =1000 MW
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ANALYSIS AND INTERPRETATION
PV of cash inflows
PI = ------------------------
Initial cash outlay
Acceptance rule:
Accept if PI > 1
Reject if PI < 1
May accept if PI = 1
PI is a relative measures of projects profitability
PAY BACK:
It is defined as the number of years required to recover the
original cash outlay in a project.
If project generates constant annual cash inflows, the pay back
period is completed as follows.
Initial Investment
PAY BACK= --------------------
Annual cash inflow
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In case of unequal cash inflows, the payback period can be found out by adding
up the cash inflows until the total is equal to initial cash outlay.
Acceptance Rule:
Accept if calculated value is less than standard fixed by the management
otherwise reject it.
In case of ranking method, accept the lowest rank.
Table 1.1 shows the physical parameters (both budgeted and actual) for the year
2006-2007. From the table it can be seen that in the year 2006-2007, actual
generation is more than the budgeted generation due to more scheduling by the
beneficiaries. As a result, other physical parameters have also come down. The
PLF has increased by 1.40 in comparison with the budgeted PLF. Auxiliary
consumption was less than the budgeted having a variance of -52.997. Similarly
actual of coal increased and oil got decreased.
Table 1.2 shows the physical parameters (both budgeted and actual) for the year
2010-11. From this table it can be seen that actual generation is less than the
budgeted and PLF was decreased by 3.55% in comparison with budgeted PLF.
Auxiliary consumption has been constrained to 6.40 as against the budgeted
figure of 6.60 as against the budgeted figure of 6.60% making a reduction of
0.20% which is favorable. The savings in auxiliary power consumption (APC)
yields revenue.
Table 1.3 shows the physical parameters (both budgeted and actual) for the year
2011-12. From this table it can be seen that the actual generation is more than the
budgeted generation having a variance of 262.702 and PLF has been increased by
1.15% in comparison to budgeted PLF. Inspite of more generation, the Auxiliary
power consumption has been constrained to 6.21% as against the budgeted figure
of 6.40% making a reduction of 0.19% which is favorable.
Table1. 4 for the year (2009-2010) shows the actual generation is more than the
budgeted generation having a variance of 565.PLF has been increased by 0.59 in
comparison the budgeted PLF .The auxiliary power consumption has been
constrained to 7.21% as compared to budgeted figure of 7.60% making a
reduction of 0.39%.For the financial year 2009-2010 the budgeted power
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generation is 19690 MU but the actual power generation is 20255 MU.565 more
than the expected, there by increasing PLF by 0.59%.
TABLE2.1
BUDGET VS ACTUAL:
Shows that in the year 2010-11 actual of the employee cost is more than the
budgeted estimates. Similarly in the year 2011-12 the actual cost increased to
8,666 than the previous year 2010-11. In the year 2009-2010 the actual employee
cost is increased to 9876 in comparison to budgeted 8765. Repairs& maintenance
and station overheads. The total of actual increased when compared to budget
estimates. Employee cost and repairs & maintenance per KWH have increased
considerably where as there is control in station & General expenses in
comparison to budgeted figure. Variance is the difference between the actual and
budget figures. In case of expenditure, negative variance is favorable to the
company and incase of income, positive variance is favorable to the company.
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ANALYSIS AND COMPARISON OF ACTUAL FIGURE FOR
THE YEARS 2011-12 AND 2009-2010.
As station runs continuously and as units are over 20 years old in an average,
it warrants more maintenance. Interest depends upon the loan amount and loan
repayment. In case of foreign currency loan, exchange rate variation also
influences the interest.
Various components of Revenues:
Incentive
Miscellaneous income
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PURCHASE BUDGET revised estimates for the year 2011-12 and Purchase
budget, budget estimates for the year 2009-2010 shows that every year
operations and maintenance budget is prepared. Budget estimate is done for the
next year and revised estimate is done for the current year. Periodically, actual
expenses are compared with budget figures and variations if any is analyzed to
bring the cost into control.
Initial Investment
PAY BACK= ---------------------
Annual cash inflow
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In case of unequal cash inflows, the payback period can be found out by
adding up the cash inflows until the total is equal to initial cash outlay.
Acceptance Rule:
Accept if calculated value is less than standard fixed by the
management otherwise reject it.
In case of ranking method, accept the lowest rank.
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CONCLUSIONS AND SUGGESTIONS
CONCLUSIONS:
In spite of a good financial plan, the desired results may not be
achieved if there is no effective control to ensure its implementation. The budget
represents a set of yardsticks or guidelines for the use in controlling internal
operations of an organization. The management through budget, can evaluate the
performance at every level of an organization.
Budget is an important tool for planning and control. No system of
planning can be successful without having an effective and efficient system
control. Budgeting is closely connected with control. Budgetary control is an
important device for making the organization more efficient on all fronts. It is an
important tool for controlling costs and achieving the overall objectives.
A careful analysis and continuous comparison of actual with budgeted
results will definitely improve the overall performance.
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SUGGESTIONS:
Every organization has predetermined set of objectives and goals, but for
accomplishing the objectives and reaching goals, proper planning and economic
execution of plans are at-most requirements.
In real life, every activity has scope for improvement; similarly, the activities of
power station, which are complex in nature, have also scope for improvement.
EMPLOYEE COST:
In the area of stiff competition, cost reduction and quality improvement are the
only way to sustain in the market. When revenues are fixed, the only way to earn
more profit is to reduce the cost. In MARUTI SUZUKI, Ramagundam power
station the man: MW ratio is approx 0.65.by bringing the man: MW ratio down
to optimum level, there can be a saving in employee cost. Since MARUTI SUZUKI
is a good paymaster, a small increase in manpower may cost crores of rupees. So,
employee cost is one area where sizeable reduction is possible. Effective
rationalization of existing manpower could help in avoiding increase in power.
MATERIAL COST:
Periodical preventive and routine maintenance avoid break down
maintenance there by reducing repairs and maintenance
expenditure and increasing the profit. Necessary control shall be
exercised to reduce the repairs and maintenance cost.
HEAT RATE:
A measurement used in the energy industry to calculate how
efficiently a generator uses heat energy. Heat rate is a measure of power plant
thermal efficiency. Heat rate is the Kcal required to generate one KWH of
electrical energy. The determinants of Heat Rate are quality of coal and oil;
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make up water consumption, combustion performance of condenser & mills and
temperature and pressure of various points in the system. When the
determinants are maintained well and efficient and proper up keep is done then
the heat rate will be low. As result fuel consumption will be low and profit will be
more.
FINANCE CHARGES:
Loans with lower rate of interest should be resorted to and loans having
higher rate of interest should be replaced with the loan having lower rate of
interest by way of loan swapping. This will reduce the in interest and will increase
the profit.
STATION OVERHEADS:
Efforts should be made to made to reduce the station overheads such as
communication expenses, traveling expenses, etc.
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Bibliography
2. Shekher K C & Shekher Lekshmy , Motoring theory and practice 19th Edition,
Kalyani publishers,2006 .
WEBSITES
www.Maruti Suzukimotor.com
www.motornetindia.com
www.mymotorersmotor.com
http://www.rbi.org.in
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