A SUMMER TRAINING PROJECT REPORT

ON

“CASH MANAGEMENT ON DAYAL”

In partial fulfillment of requirements for the award of

Master of Business Administration Degree
By
ATUL CHAUDHARY
Roll Number: 1468670018
MBA

Under the guidance of

Prof. Mrs. Sunita Singhal

ACCURATE INSTITUTE OF ADVANCED MANAGEMENT

49, Knowledge Park-III, Greater Noida – 201306

1
 TABLE OF CONTENTS

1. EXECUTIVE SUMMARY

2. PREFACE

3. ACKNOWLEDGE

4. DECLARATION

5. 6. OBJECTIVE OF THE STUDY

7. RESEARCH METHODOLOGY

I. METHOD OF DATA COLLECTION

II. SOURCE OF DATA

III. TOOLS AND TECHNIQUES OF ANALYSIS

8. COMPANY

I.PROFILE

II.PLANTS

III.COMMITMENT

IV.CLIENTELES

V .PRODUCT

9. POLICIES ADOPTED BY COMPANY

10. PROJECT PROFILE

CASH MANAGEMENT

11. THEORITICAL ASPECTS

2
 I.OBJECTIVE AND SCOPE OF CMS

II.CASH MANAGEMENT SERVICE OF DAYAL FETILIZER

III.ADVANTAGES OF CMS

IV.LIMITATIONS OF CMS

V.HOW DOES CMS WORK

12. DATA ANALYSIS AND INTERPRITATION

I. FINANCIAL STATEMENTS

II.POSITION STATEMENT

III.INCOME STATEMENT

IV.CASH FLOW STATEMENT

V.PURPOSE OF FINANCIAL STATEMENTS

VI.COLLECTION CHARGES OF BANK

13. S.W.O.T.ANALYSIS

14. CONCLUSION

15. RECOMMENDATION

16. KEY FINDING

17. BIBLIOGRAPHY

3
 PREFACE

For any Management Course Summer training is an essential part of curriculum

of MBA. It is an exposure to corporate environment and helps MBA aspirants to

get acquainted with organizational norms, procedures, practices, ethics and

culture. It also gives an insight of actual functioning of the organization. It helps

the students to understand and coirelate theoretical aspects with practical reality.

It was a great experience to work with DAYAL FETILIZER during my summer

project which has help me to improve my communication and interpersonal

skills and also give me the better understanding on the subject CASH

MANAGEMENT SYSTEM.

4
 ACKNOWLEDGEMENT

On the successful completion of this project I would like to express my

gratitude to all the people who have helped me & encouraged me throughout the

project.

My sincere thanks are also due to Mr. Himanshu (GM DAYAL FETILIZER,

Meerut), for their significant help extended for the successful completion of the

project. I highly the help I got from them in providing me and lot of information

regarding the functioning of this organization.

ATUL CHAUDHARY

Roll No. - 1468670018

5
 DECLARATION

I, ATUL CHAUDHARY, a student of ACCURATE INSTITUTE OF

ADVANCE MANAGEMENT,GR.NOIDA hereby declare that this project is
the record of authentic work carried out by me during the academic year 2009-
2011 and has not been submitted to any other university or Institute towards the
award of any degree.
An attempt has been made by me to provide all relevant and important details

regarding the topic to support the theoretical edifice with concrete research

evidence.

This will be helpful to clean the fog surrounding the various aspect of the topic.

I hope that this project will be beneficial for the Organization.

ATUL CHAUDHARY

MBA

Roll No. - 1468670018

6
 INTRODUCTION

This summer training is very practical approach for me being a student. All

students learn theoretical subjects in their classroom, but as we are the

management students, apart from theoretical studies we need to get a deeper

insight into the practical aspects of those theories by working as a part of

organization during our summer training. Training is a period in which a student

can apply his theoretical knowledge in practical field. Basically practical

knowledge and theoretical knowledge have a very broad difference.

So this training has high importance as to know how both the aspects are

applied together.

The study of management acquires most crucial position in the business

administration. In order to be successful, it is necessary to give priority to the

management in an organization. But it can’t be denied that the study of

management would be more educational, materialistic and even more

interesting, if it is to be paired with the work in organization as an employee.

The training session helps to get details about the working process in the

organization. It has helped me to know about the organizational management

and discipline, which has its own importance. The training is going to be a life

long experience.

7
Background of the study

Dayal Fertilizer have been using two techniques for managing cash inflow –

Cash Management Services (CMS) provided by ICICI CORPRATION.

HDFC HSBC & UTI bank and Short term financing through Letter Of Credit

(LC). The first Technique is used to manage the funds through cash sales and

the other is used in case of sale on credit.

In case of Cash Sales the company had to wait for 4-5 days before it could

realize the cash (in case the customer paid through draft. In case of payments

through cheques the lag as even larger) as the customers are based in different

locations in India. So the basic aim of the project is to evaluate the cost benefit

to after adopting CMS. The project stress on the ways to further lower down

the cost of procuring funds through cash sales by doing a comparative analysis

of the banks providing this facility to the corporate.

Letter of Credit also is important means of procuring funds as the corporate can

realize the payment against sale made on credit terms. The project intends to

study various terms and conditions involved in realizing payments through LC.

It also throws light on the procedures to be followed to realize payments as if

any of the terms and conditions of an LC remains unfulfilled the bank is under

no obligations to make payment. The transactions in the steel industry are

usually of high value that runs into lakhs and crores. Also, LC insures the

credibility of buyer and seller as the transactions are through banks. Thus, the

8
Study becomes very crucial in the era of globalization where the trade could be

between buyer and seller in two different countries.

9
 OBJECTIVE OF THE STUDY

Main Objective

To meet Cash disbursement as per payment schedule & minimize the

amount locked up as cash balance.

1.Meeting Payment Schedule :- The main objective of cash management is

to meet the payment schedule. In other words, the company should have

sufficient cash to meet the various requirements of the company at

different times. The company has to make payment for purchase of raw

materials, purchase of plant-machinery parts & tools, wages, taxes etc.

2.Minimize the amount lock up as cash balance :- Other main objective of

cash management of the company is to minimize cash balance. For

minimizing the cash balance, the company’s financial manager always

focuses to have an optimum amount of cash balance keeping in mind

that a high level of cash balance will result in a large balance of cash

remaining idle because cash is a non earning asset. On the other hand, a

low level of cash balance will result in the failure of meeting the

payment schedule.

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Specific Objective

To achieve the main objectives, the company will have to do Sthe following:-

1. Cash Planning & Control: - Company should hold adequate cash balance.

Cash planning serves as a useful device for maintaining optimum level of

cash. Cash planning includes cash control, the process to assure that cash

receipts & payments are in accordance with the cash planning. The

various tools of cash planning & control as under:-

(a). Cash Budget : It is an important tool of cash planning. A cash

budget is a statement which shows the various estimated sources of cash

receipts & various applications of cash. Company, by preparing the cash

budget may predict whether at any point of time, there is likely to be

excess or shortage of cash.

(b). Cash Flow Statement : The statement depicting change in cash

position from one period to another period. It may be prepared on the

basis of actual or estimated data.

11
(c). Cash Management Models : With the help of cash management

models, an optimum level of cash can be ascertained to facilitate control

& planning.

(d). Ratio Analysis: Cash ratios are also important tool of cash control.

Various ratios are acid test ratio, cash ratio, receivable turnover ratio etc.

2. Managing the Cash Flows :- To achieve the main objective, managing

the cash flow is an very important factor. Cash flow includes both cash

inflows & cash outflows.

(a). Cash Inflow : It is closely related with managing the cash efficiency

which, by & large, is the concern of collection department under the

finance manager.

Thus, an important problem for the financial manger is to manage the

cash inflow. He has to face the problem of speedy & timely recoveries

of receivables. In order to make quicker collection, the finance manager

can adopt two ways- one to motivate the debtors for prompt payments

and another to convert the payment received from debtors into cash as

early as possible. Methods of improving cash collections are as under :

12
(i). Prompt payments by Customers : For this purpose, prompt billing

policy must be adopted & customers should be promptly informed about

the amount payable. Another method in this regard is to allow cash

discount to its customers.

(ii). Establishment of Cash Collections : Company must establish the

collection centers in different parts of the country to save the postal

delays. This is known as

concentration banking. Under this system, the collection centers themselves

collect payments from customers & deposit them in local bank account.

The concentration banking results in saving of time of collection & hence

result in better cash management.

(iii). Lock-Box : Under this system, the company hires a post-office box at

important collection centers. The local bankers of the company are

authorized to pick up the cheques from the lock-box. The bank informs

the company about the details of cheques received & credited. This

system helps to reduce the overhead expenses.

(b). Cash Outflows : Company must manage the cash outflow in order to

reduce the cash requirements. The financial manager should try to slow

13
disbursements as much as possible but goodwill & credit rating of the

company shouldn’t be affected. Payments to creditors need not be delayed.

The credit facilities allowed by the creditors should be fully utilized. The

discount offered by the creditors for prompt payment must be evaluated

properly. Balance lying in the bank a/c should also be managed properly

to take maximum advantage out of it. There may not be balance in the

bank a/c when a cheque is issued but there must be sufficient balance

when the cheque is expected to be presented for payment. The Company

should follow centralized system for disbursement. Under this system , all

payments are made from a single control account

3. Determining the Optimum Cash Level :- The problem of determining

the optimum cash balance for an organization, in fact implies a trade off

between risk and return of maintaining cash balance. In case the cash

balance is less than the requirements, the company have to borrow from

outside sources and the transaction cost will have to be born. If the

company has surplus cash, it causes the loss of interest or profit from

investment

4.Investing Surplus or Idle Cash :- Cash in excess of the company’s

normal cash requirement is surplus cash. It may be temporary or may

14
exist more or less on permanent basis. There are, sometimes, surplus

funds with the company which are required after sometime. These funds

can be employed in liquid & risk free securities to earn some income.

Finance manager of the company is required to consider the minimum

cash balance to avoid the cost of running out of funds. Such minimum

level is called as safety level for cash. For this purpose , the finance manager

must consider both normal & peak periods. If the finance manager is

anticipating cash shortage in any particular month, then he should arrange

additional funds from some reliable source. These requirements of funds

are generally for short term. Company must avail bank loan etc. If the

shortage is on regular basis, long term sources of funds may be used. If

cash is surplus , the finance manager must decide the channels of

investment. For this purpose, the finance manager must consider the security,

liquidity, yield & maturity factors before investingthesurplesfund.

15
 RESEARCH METHODOLOGY

Methodology is the bone of a project. It has also an important place as

regards to cash management system project. A person who is going to

prepare a project, he should be very aware in connection with collection

& analysis of data. I have gone very deeply in preparing the project & I

devoted my full attention to get the accurate & real data collection. For

this purpose I became in close contact with sources of data collection by

personally & through Internet.

The Methodology contains the following things:-

 Methods of Data Collection :- For the project report, methods of

data collection also has an important role in connection with

accuracy & exact information. So, I adopted both the methods

primary as well as secondary method of data collection.

(A) Primary Data : Throughout the preparation of the project

report, I was in the contact of DGM(Finance) & other staff

of finance department of Dayal Fetilizers to get the

information in connection with the practical working of

transaction between the company & banks.

(B) Secondary Data: I have also collected the information, figures

& data in connection with the preparation of project report

from Balance-sheet & annual report of Bhushan Steel from

16
 annual report of Jindal Steel Ltd for comparative analysis,

from the Internet in connection with the whereabouts of the

Steel Industry. I have also collected the information about cash

management services & Latter of Credit provided by the bank to

the company.

 Sources of Data :- Sources of collection of data for a

project report has a very important role. So, the sources

must be very reliable. For this purpose, I did my best

efforts to get proper & correct information.

(A) I have taken the figures, information & data in connection with

Profit & Loss A/c, Balance Sheet, Cash Flow Statement from the

annual report of

the company & through website of the company which are

most important for cash management system.

(B) I have also got the figures, data & information in connection

with Jindal Steel From the website of the Jindal steel for the

purpose of comparative analysis like Balance Sheet & Ratio

analysis with Bhushan Steel

(C) With the help of Internet, I have got the information, data &

figures about the steel industry, beginning of steel industry in

India, Recent Developments of steel industry, history of the

steel industry, global & Indian scenario of the steel industry.

17
 (D) I have collected the information from the website of HSBC,

Corporation & UTI Banks, HDFC regarding services provided by

the banks to the company in connection with day to day

transactions like payment & receivable etc.

(E) I have collected the data, information & figures from the

printed annual report of Bhushan Steel (DAYAL FETILIZER)

for the purpose of preparing of charts of Gross Sales, Net

Profit, Exports, EPS, Cash Accruals etc.

 I have also got the figures, information & data from the

DGM(Finance) & other staff of the company with the discussion

personally regarding working of the company with banks.

 Instrument Used :- The use of reliable, necessary & authentic

instrument are the most important for cash management.

Instrument must be used according to the requirement of the

company. A finance manager of the company must be very

careful in this matter. Vouchers, daybook, main cashbook,

petty cashbook, cheque book, Bank Pay-in-slip, Bank Draft,

Bankers Cheque, Bank Statements of Ledger, Bank

Reconciliation Statement, Bank Book are being used by the

company.

 Tools and Techniques of Analysis :- The relevant tools &

proper techniques must be used in connection with analysis.

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  Tools:- In preparing the project report , I have used the

Profit & Loss A/c, Balance-sheet, Cash Flow & annual

report of Dayal Fetilizer Balance-sheet of Jindal Steel Ltd

is also used in the project report.

 Techniques:- As a technique of analysis,I have prepared

comparative Profit & Loss A/c and Balance Sheet,Ratio

analysis statement & cash

Flow Statement of Dayal Fetilizer for the financial year 2005-06 & 2006-07

19
 COMPANY PROFILE

Welcome to Dayal Fertilizer

Dayal Group offers a comprehensive range of inputs from fertilizers, seeds,

bio-products to animal feed and supplements.

 In accordance to our mission of bringing a smile to every farmer’s face, it

is our consistent effort to provide the rural community with quality

products from time to time. We have developed a wide range of products in

micronutrients, secondary nutrients, bio-fertilizers, animal feed and

supplement, seeds, natural organic fertilizers, water soluble fertilizers and

natural plant growth promoters. The group is widely associated with

quality, reliability and better service since 1979.

Our staff strength is drawn primarily from the agricultural colleges and

universities around India. Our corporate members have degrees in

engineering & agriculture with specialization in various fields. To

complement their formal education, they are trained in fields such as

agronomy, soil science, plant pathology, entomology, horticulture,

economics and extension education. In addition, they are also given hands

on experience and educated in matters related to farm visits, farm

demonstrations, field day, dealer visits, dealer meetings, sales and technical

conferences.

20
Our Group Companies

NAME PRODUCTS - SERVICES

DAYAL
Micronutrients, secondary nutrients & water
FERTILIZERS (P)
soluble fertilizers.
LTD.

DAYAL BIOTECH Natural organic manures, bio-fertilizers, bio-

(P) LTD pesticides, natural plant growth promoters.

DAYAL
Animal feeds & supplements.
INDUSTRIES LTD.

DAYAL SEEDS (P) Seeds of food crops, oil seed, vegetables and

LTD. fodders.

Vision

To remain the most respected name in rural world by providing quality

products, reliability and better service to the rural consumers, every

time.

Mission

To bring a smile on every farmer's face

Through our quality products and constant support, we strive to

improve the yield and productivity of the farmer, and help him get

better price for his produce and improve the standard of life for himself

and his family. 

21
Quality Policy

 We are committed to provide quality products with total reliability and

excellent services for customer’s   delight. In all our endeavors

continuous progress, sincerity, ethics and long-term relationships are of

paramount importance.

22
Our Facilities

The production units of Dayal Group are located in Meerut and Lucknow.

While the Micro & Macro Nutrients Unit, Microbiology, Bio Unit and Seed

Processing Unit are located at Meerut, the Animal Feed & Supplements Unit

is located in Lucknow.

Dayal Group has a laboratory with facility for soil testing a research farm for

testing of  seeds, fertilizers and other products is also operated.

Micro & Macro Nutrients Lab

23
Microbiology Lab

 Animal Feed & Supplements Plant

 Seed Processing Plant

24
Extension Services

We operate in most parts of India, with major presence in Uttar Pradesh,

Uttarakhand and Bihar. Our products are also available through our dealer

network in Rajasthan, Maharashtra, Madhya Pradesh, Jharkhand, West Bengal,

Punjab, Haryana, Himachal Pradesh and Assam.

Our network includes around 500 distributors, 10000 dealers throughout the

country. Besides, Dayal aggressively pursues the formation of exclusive Dayal

Group retail outlets known as ‘Dayal Bandhu Kendra’, where all quality Dayal

products are available to the farmers at one point. We are continuously involved

in advising the farmers about integrated plant nutrient management, integrated

pest management, soil testing and crop cultivation. With the mission of putting

a smile on every farmer’s face, our sales representatives constantly work

amongst the farmer community to make them aware of the latest crop

management techniques and solving their problem.

25
 

26
Social Responsibility

The spirit of corporate social responsibility is imbibed deep into the culture of

Dayal Group. With the noble mission of putting a smile on every farmer’s face,

Dayal takes utmost care that only quality products leave its production units,

and if any problem is faced by the farmer it is earnestly looked into.

Besides, Dayal Group operates a school, ‘Gyanodya Vatika’ where children,

like rag-pickers, etc. who cannot afford a school, are given free education;

evening classes are also organized for imparting vocation training like sewing

and basic computer know-how

Dayal Group also operates a full time hospital for poor, at the Meerut

headquarter

All these efforts are beyond the numerous camps and missions, like the camp

for physically challenged, orphanages, etc. We sincerely believe in complete

welfare of the people involved with Dayal. Thus, evening classes are organized

in factory premises, where staff members educate production labor in the basics

of reading and writing

27
Products

Micronutrients ( Zn, Fe, Cu, B, Mn, Mo)

Every micronutrient has specific roles to play in the plants. Their

presence in optimum concentration is a must for the plant to complete

its life cycle that ends with maturity and harvesting of the economic

produce. Micronutrients are essential plant mineral nutrients taken up

and utilized by crops in very small quantities. Traditionally, we have

relied on what was present naturally in the soil together with amounts

added as impurities in fertilizers and pesticides as the source of

micronutrients for crop growth. In recent years however, deficiencies of

micronutrients have been diagnosed more frequently; and many farmers

are beginning to take a closer look at their general availability.

It is extremely important to be able to recognize and correct

micronutrient deficiencies. When micro-nutrients become a limiting

factor water, fertilizer and other high-energy production inputs may be

wasted, since a plant will only grow and develop to the extent that its

most limiting growth factor will allow.

Zinc It is required by several enzyme systems, auxins and in protein synthesis;

in seed production and rate of maturity.

Common symptoms of Zn-deficiency are stunted plant growth, poor tillering,

development of light green, yellowish, bleached spots; poor tillering,

28
development of light green, yellowish, bleached spots; chlorotic bands on either

side of the midrib in maize, brown rusty spots on leaves in some crops which in

acute Zn deficiency as in rice may cover the lower leaves; in fruit trees the

leaves may bunch together at the tip in rosette type cluster. Little leaf condition

is also a common symptom. To avoid deficiency of zinc use the following

micronutrients fertilizers in soil and/or foliar spray; never use the zinc fertilizers

with phosphatic fertilizers

1. Zinc Sulphate Heptahydrate-

Premium quality white crystalline (ZnSo 4.7H2O) - 21% Zn Min w/w ;

Due to hygroscopic in nature it is difficult to use the with urea suitable

for alkaline and saline soil.

2. Mono Zinc –

(Zinc Sulphate Mono Hydrate) – Powder (ZnSo 4.H2O) -   33%   Zn Min. 

w/w : Powder form of Mono Zinc (33% Zn) is  compatible  with urea it

also increases the efficiency of  urea  by chelating the urea pills as a

29
 coating agent. Shelf life and  storage is very good than zinc sulphate

heptahydrate (21%   Zn)

3. Chelated Zinc - Used in very small quantity for foliar application

compatible  with phosphate fertilizers also .

4. Super Action Mono Zinc - (Partially Chelated Zinc) - Powder - 12%

Zn - EDTA Min. In acute deficiency of zinc, spraying of partially chelated

zinc is very effective even in very small quantity.

Iron:- Its plays an important role in the synthesis of chlorophyll. Fe deficiency

lead to failure in chlorophyll production, ferrous sulphate is best to cure the iron

deficiency in all type of soil & crops.

5. Ferrous Sulphate - Crystal/Powder (FeSo4.H2O) 19% Fe Min. w/w

6. Copper Sulphate - Crystal/Powder (CuSo4.5H2O) - 24% Cu Min.

w/w

7. Manganese Sulphate - Powder (MnSo4.H2O) - 30.5% Mn. w/w

30
8. Anmol Micro - Mixture of Micronutrients powder and liquid Soil 

& Crop (Sugarcane, Potato, Menthe & Cereal special ) Specific,

Customized, compatible with all type of fertilizers except

phosphate.            

9. Anmol Micro Super Action - (Partially Chelated Micro Nutrient)

Powder For any unidentified micronutrient deficiency symptoms on

the plant spraying of partially chelated micro nutrients is very

effective even in very small quantity.

10. Chelated Micronutrients - Used in very small quantity for foliar

application compatible with phosphate fertilizers also.

11. Safal - micronutrient mixture fully suitable for foliar spray to

cure the any micro nutrient deficiency symptoms

12. Microbars - A small amount of boron is essential for all type of

crops. It's play an important role in fertilization of flowers and

prevent the tubers, roots and fruits from cracking. microbar contains

100% water soluble, readily available boron.

Secondary Nutrients   (CA, Mg & S)

Calcium (CA), magnesium (Mg) and sulphur (S) are the three

secondary nutrients required by plants. They are less likely to be

added as fertilizer than the macronutrients (N-P-K). Most soils in

India, adequately supply these nutrients for plant growth.

31
Magnesium sulphate –

Crystalline (MgSo4.7H2O) – 9.6% Mg Min w/w.

Calcium sulphate –

Gypsum powder (CaSo4.2H2O) - 23% CA, 18% S Min. w/w

SULPHUR

Sulphur is an essential plant nutrient required for the production of

amino acids which in turn make a proteins.

Oil content and quality of oil crops directly affected by sulphur. In

pulses and cereals lower sulphur levels lead to lower protein and

given this affects the quality of the flour, the price received for this

produce will be reduced yield losses also occur in low sulphur

situations.

Ideally, plants will take up sulphur at the same levels as phosphorus.

SULFORICHÔ –

90% Sulphur in powder as well as pustules. It is essential for

protein formation & for proper growth of the plants. In mustard,

Onion, Garlic plants it provides the characteristics odour & is

connected with the formation of chlorophyll.

32
 Water Soluble Fertilizers

N:P:K:- 19:19:19, 00:52:34, 00:00:50, 12:61:00

Manufactured from world’s leading company in field of

water soluble (100 %) fertilizers which contains

nitrogen, phosphorous & potash used for foliar spray

and  drip fertigation for all the crops.

1. Anmol 19:19:19 : Foliar spray of small quantity

gives excellent result in all the crops due to its

efficiency (100 % absorbance) even in very short 

period. 

2. Anmol 0:52:34 : In acute phosphorous  and

potash deficiency it gives quick effective response in

foliar spray also very useful in drip fustigation.

33
 PROJECT PROFILE

CASH MANAGEMENT CYCLE

CASH
COLLECTIONS
BUSINESS
OPERATIONS

DEFICIT BORROW

SURPLUS INVEST

INFORMATION
&
CONTROL

CASH PAYMENTS

Dayal fertilizer (DAYAL FETILIZER) have been using two techniques for

managing cash inflow- Cash management service (CMS) provided by ICICI

Bank, UTI, HDFC and Corporation Bank and short term financing through

Letter of credit .

34
In case of Cash Sales the company had to wait for 4-5 days before it could

realize the Cash (in case the customer paid through draft. In case of payments

through cheques the iag as even larger) as the customers are based in different

locations in India. So the basic aim of project is to evaluate the cost benefit to

DAYAL FETILIZER after adopting CMS. The project stress on the ways to

further lower down the cost of procuring funds through cash sales by doing a

comparative analysis of the banks providing this facility to the corporates.

TYPICAL CASH FLOW

Realization of
Sales in Cash
Payment

Payment by Draft
or Cheque
Locking time 3-7
days

35
 CASH FLOW UNDER CMS

Realization on
day 1 or day 2
Sales in Cash

Collection by
banker locking
period 1-2days

36
 THEORITICAL ASPECTS

CASH MANAGEMENT SYSTEM

The Cash Management System manages the transfer of funds between your

cash accounts, cash management investment accounts, asset based revolving

line of credit accounts and line of credit accounts, according to the rules you set

up for them. For each account, you must establish minimum and maximum

balances and determine the relative priority for applying cash to the account, or

using cash from the account.

The Cash Management System applies these rules automatically throughout the

Plan Period, using the Other/Miscellaneous cash account as a balancing

account. The balance in the Other/Miscellaneous cash account will be

calculated as containing whatever cash is available after all of the Cash

Management System rules have been applied for the other accounts in the Cash

Management System. If there is inadequate cash in the system, this will result in

Other/Miscellaneous cash having a negative balance.

Applying Extra Cash to the Cash Management Accounts - Cash is first

applied to put enough cash in each of the Cash Management accounts so that

their minimum balance requirements are met. This will occur even if it leaves

the Other/Misc Cash account with a negative balance.If additional cash exists

37
after the minimum balance requirements are met for all of the Cash

Management Accounts, then cash is first applied to 'fill up' the Priority 1

account until it reaches its maximum allowed balance. If additional cash exists,

it is next applied to the Priority 2 account, and so on until all Cash Management

accounts have been filled to their maximum allowed balance, or the Other/Misc

Cash account has run out of cash to apply. If the system runs out of extra cash to

apply, the disbursement ends, leaving the Other/Misc Cash account with a zero

balance. If all of the Cash Management accounts are filled to their maximum

allowed balance, or the Other/Misc Cash account has run out of cash to apply. If

the system runs out of extra cash to apply, the disbursement ends, leaving the

Other/Misc Cash account with a zero balance. If all of the Cash Management

accounts are filled to their maximum limits, then all remaining cash will be left

in the Other/Misc. Cash account.

38
Using Needed Cash from the Cash Management Accounts - If the

Other/Misc. Cash account has a positive balance, cash is first used from it until

it is reduced to a zero balance. If more cash is required, it is then taken from the

Priority 1 account, until it is reduced to the minimum amount, or no more cash

is required. Next, cash is used from the Priority 2 account, and so on in similar

fashion, until no more cash is needed or until all Cash Management Accounts

have been reduced to their minimum amounts and more cash is required, then

cash is removed from the Other/Misc. Account even if this results in a negative

balance.

39
 CASH MANAGEMENT SERVICES GENERALLY OFFERED

Cash Management offers a variety of services to its customers and its not

necessary that one must choose all the services offered under Cash Management

for its company .Its compltely on the discretion of the company whether to avail

all the services or as per the requirement .The following is a list of services

generally offered by banks and utilised by larger businesses and corporations.

1. Account Reconcilement Services: Balancing a checkbook can be a difficult

process for a very large business, since it issues so many checks it can take a

lot of human monitoring to understand which checks have not cleared and

therefore what the

2. Company’s true balance is. To get around this, banks have developed a

system which allows companies to upload a list of all the checks that they

issue on a daily basis, so that at the end of the month the bank statement will

show not only which checks have cleared, but also which have not. More

recently, banks have used this system to prevent checks from being

fraudulently cashed if they are not on the list, a process known as positive

pay.

3. Advanced Web Services: Most banks have an Internet-based system which

is more advanced than the one available to consumers. This enables

managers to create and authorize special internal

40
4. Logon credentials, allowing employees to send wires and access other cash

management features normally not found on the consumer web site.

5. Armored Car Services: Large retailers who collect a great deal of cash may

have the bank pick this cash up via an armored car company, instead of

employees depositing the cash.

6. Automated Clearing House: services are usually offered by the cash

management division of a bank. The Automated Clearing House is an

electronic system used to transfer funds between banks. Companies use this

to pay others, especially employees (this is how direct deposit works).

Certain companies also use it to collect funds from

7. Customers (this is generally how automatic payment plans work). This

system is the subject of the ire of some consumer groups, because under this

system all banks assume that the company initiating the debit is correct until

proven otherwise.

8. Balance Reporting Services: Corporate clients who actively manage their

cash balances usually subscribe to secure web-based reporting of their

account and transaction information at their lead bank. These sophisticated

compilations of banking activity may include balances in foreign currencies,

as well as those at other banks.

9. Wire Transfer: A wire transfer is an electronic transfer of funds. Wire

transfers can be done by a simple bank account transfer, or by a transfer of

cash at a cash office. Bank wire transfers are often the most expedient

41
 method for transferring funds between bank accounts. A bank wire transfer

is a message to the receiving bank requesting them to effect payment in

accordance with the instructions given. The message also includes settlement

instructions. The actual wire transfer itself is virtually instantaneous,

requiring no longer for transmission than a telephone call.

10.Controlled Disbursement: This is another product offered by banks under

Cash Management Services. The bank provides a daily report, typically early

in the day, that provides the amount of disbursements that would be charged

to the customers account. This early knowledge of daily funds requirement

allows the customer to invest any surplus in intraday investment

opportunities, typically money market. This is different from delayed

disbursements, where payments are issued through a remote branch of a

bank and customer is able to delay the payment due to increased float time.

Location Days Rate

Agra 2 0.18
Aligarh 2 0.18
Allahabad 2 0.18
Banglore 2 0.18
Bareilly 2 0.18
Belgaum 1 0.18
Bhopal 2 0.05
Coimbatore 2 0.18
Deharadun 2 0.18
Dindigul 2 0.18
Ernakulam 2 0.18
Gorakhput 2 0.18
Guwahati 2 0.18
Hubli 2 0.18

42
 Jammu 2 0.18
Jamshedpur 2 0.18
Jodhpur 2 0.18
Kanpur 2 0.05
Lucknow 1 0.18
Madhurai 2 0.18
Muzf. Nagar 2 0.18
Pondicherry 2 0.18
Rewari 2 0.18
Rohtak 2 0.18
Saharanpur 2 0.18
Salem 2 0.18
Tirchirapally 2 0.18
Tirupati 2 0.18
Tumkur 1 0.18
Varanasi 2 0.18

In the past, other services have been offered the usefulness of which has

diminished with the rise of the Internet. For example, companies could have

daily faxes of their most recent transactions or be sent CD-ROMs of images of

their cashed checks.

These services can be costly but usually the cost to a company is outweighed by

the benefits: cost savings, accuracy, efficiencies etc.

Banks having CMS account are:

HDFC

ICICI

HSBC

Corporation bank

43
UTI Bank

Axis Bank etc

Sales are of two types

OEM- original equipment manufacturer – These are the major customers of

Dayal Fertilizer like TATA, Maruti, Hyundai, and Godrej etc.

These are the buyers who purchase the remaining production of products

produced by Dayal Fertilizer As the order of fixed units cannot be produced,

excess or deficit will always remain same. This excess is sold to Traders at

reasonable rate. They sell the small quantity of steels which is left over.

in order to manage the cash, we have to calculate opportunity cost of receiving

90 days before date of receiving cash.

44
OBJECTIVE AND SCOPE OF CMS

DAYAL FETILIZER has saved huge amount of cost after adopting CMS. Had

DAYAL FETILIZER not adopted this system of collection it would have

received the amount in not less than 4-5 days. And for the same period it would

have to avail the Cash Credit (CC) facilities granted to it by various banks. But

in order to use the funds available through CC account it had to pay an interest

of 9-10% and in some cases up to 12%. Use of CMS has brought down the cost

considerably and DAYAL FETILIZER has been able to save the interest

amount because now it receives the fund within 24-48 hrs. For calculating the

cost saving for DAYAL FETILIZER the data set for the two month of Fist

quarter end (Mar 08, April 08-) is considered for Dayal Fertilizer.

The cost incurred by DAYAL FETILIZER would include the draft charges,

Postage charges and interest forgone. While calculating the draft charges it has

been assumed that DAYAL FETILIZER bears the cost of draft sent by

customers all the time, this might not hold true in all cases but for its major

customers it would have to do so because of the competition in the industry. If

DAYAL FETILIZER received cash in 4 days it had to avail the CC limit and

paid interest for the same period that would also add to the cost incurred by

DAYAL FETILIZER. DAYAL FETILIZER also would have to bear courier

charge which is assumed to be Rs 35 per day per location which is equal to what

charges. Interest is calculated @ 11% p.a.

Interest Forgone = Total cash in a week * .11/365*(4- days taken in CMS)

45
Where 4 are the days taken by the draft to reach Delhi & gets realized i.e. 2

days in transit & 2 days clearing.

The Objective was to gather information about the collection charges charged

by different banks at different locations for the given period and find out which

Bank provides better services at minimum cost.

The scope of research is spread over the comparison of the collection charges

under the Cash Management System availed by Dayal Fertilizer through the

above stated Banks.

46
CASH MANAGEMENT SERVICES OF DAYAL FETILIZER

Cash Management is the stewardship or proper use of an entity’s cash

resources. It serves as the means to keep an organization functioning by making

the best use of cash or liquid resources of the organization. At the same time the

organizations have the responsibility to use timely, reliable and comprehensive

financial information systems.

Cash Management helps the organization in:

Eliminating idle cash balances.

Monitoring exposure and reducing risks.

Ensuring timely deposit of collections.

Properly timing the disbursements.

Cash Management Services (CMS) is one of our thrust areas. Today, we have

large number of satisfied CMS customers, many of whom are in the top

segment of the Indian Corporate and Public Sectors. This has been a result of a

robust, end to end cash management product which offers innovative and

reliable solutions by combining an efficient collections and disbursements

product, backed by state of the art systems to ensure customized delivery. The

Bank has constructed a wide range of CMS products covering collections and

disbursements of operating flows, as well as specialized cash flow streams such

as rights/public issue collections, dividends, interest/principal repayments,

excise and sales tax payments etc. We operate out of a large and expanding
network of over 175 outlets across the country. This is the largest network of

online, electronically linked branches in the country. This provides us with a

clear competitive advantage, which naturally translates into a lower cost and

faster credit to corporates. In addition to our network, we have an extensive

correspondent banking arrangement, which allows us to offer you Cash

Management Services over 1100 locations covered for collections and over 650

locations for Payments.

Benefits to Corporates

If your organization is multi-locational, managing outstation funds collections

and payments can often be time consuming and expensive. Delays of days or

even weeks in realizing outstation cherub, constant tracking and follow-up to

transfer funds from outstation collection accounts, uncertainty and delays

regarding information on the fate of cheques etc., are common.

At Dayal Fertilizer we offer a comprehensive range of Collections and

Payments solutions under our Cash Management Services (CMS) umbrella to

meet your needs and put you in control of your cash position.

Dayal Fertilizer’s Cash Management Services will enable you to:

Lower Interest Costs

Our collection services enable you to receive funds in your main concentration)

account with the bank with a minimum transit time thereby reducing interest

costs.

Improve Liquidity

Saving on transit time enables you to realize cheques and use funds earlier and

therefore gives you enhanced liquidity.

Better Accounting and Reconciliations

Detailed information on cheques deposited are made available on a daily /

weekly basis/periodically thus simplifying accounting, reconciliation and query

resolution. Dayal Fertilizer can also provide customized MIS as per your

requirements.

Achieve Overall Operational Convenience

Dayal Fertilizer’s Collection Services enable you to derive convenience in

banking operations thereby facilitating management of cash positions through a

central treasury. Also, the same may be used for improved control over different

business segments. The advantages of our collection products can also be

availed without opening a current account with Dayal Fertilizer.

 Transfer Cheque Collections

This product provides quick realization of local/outstation cheques drawn on

any branch of Dayal Fertilizer This product is available at all locations of Dayal

Fertilizer ("HDFCTRF") locations.

Clean Collections

Cheques drawn on any locations, which are not covered, by Dayal Fertilizer or

our correspondent bank are also collected at any of our locations and proceeds

credited to your account as soon as credit is received by Dayal fertilizer.

Dayal Fertilizer’s comprehensive MIS includes:

Daily report of deposits made at various locations.

Location wise report

Credit Forecast report

Monthly cumulative report - date wise / location wise

Monthly charging statement

Monthly cheque return statement

Customized reports as per mutual agreement.

IMPORTANCE OF CMS FOR A COMPANY

Cash is the ready money in the bank or in the business. It is not

inventory, it is not accounts receivable (what you are owed), and it is not

property. These might be converted into cash at some point in time, but

it takes cash in hand or at the bank to pay suppliers, to pay the rent, to

pay wages & to make day by day payments.

Cash Budget

By preparing cash budget company planned the sources & application of

funds in the manner of cash.

Operating Cash Flow

Operating cash flow, often referred to as working capital, is the cash flow

generated from internal operations. It is the cash generated from sales of the

product or service of company’s business. It is the real lifeblood of your

business, and because it is generated internally, it is under a finance

manager’s control.

Since it is easy to control the Operating Cash Flow the companies these days

are adopting Cash Management Services. This service reduces the time taken in

realization of cash considerably and at a much lower cost.

Investing Cash Flow

Investing cash flow is generated internally from non-operating activities.

This component would include investments in plant and equipment or

other fixed assets, non recurring gains or losses, or other sources and

uses of cash outside of normal operations.

Financing Cash Flow

Financing cash flow is the cash to and from external sources, such as

lenders, investors and shareholders. A new loan, the repayment of a loan,

the insurance of stock and the payment of dividend are some of the

activities that would be included in this section of the cash flow

statement.
ADVANTAGES OF CMS:

1. Saves a huge amount in form of DD commission and clearing charges.

2. All high value cheques get cleared and credit is given the same day.

3. We desired the desired liquidity in form of cash very quickly. This means

there is a saving of interest on the amount that would have remained

blocked under the normal course of clearing and credit by banks.

4. Even if the cheque gets dishonored we can use the amount till the banks

get to know it. During this time we can use this money.

5. When credit is given same day, we have our cash position by evening we

can accordingly plan our investment and expenditures accordingly for

coming days.

6. We can have an accurate figure of what were our collections from which

place.

LIMITATIONS OF CMS:

1. Collection would have meant collection either through outstation cheque

or through DD.

2. DD’s worth cores of rupees would have brought substantial amount of

DD charges to the company’s P/L account.

The outstation cheque would take days to reach to the company’s account s

department and some more days to get cleared with deduction of some bank

charges from the cheque amount.

Advantages to the Buyer

 The buyer is assured that his/her bank will refuse payment to the seller

unless

 the seller’s documents comply with the terms and conditions of the Letter

of Credit

 If the seller is willing to grant extended terms to the buyer, the buyer may

arrange for a Letter of Credit which is payable at a future date (i.e. 60 or

90 days after presentation of complying documents).

 Through the use of Banker’s Acceptances, a buyer who has purchased

goods under a Letter of Credit may finance the goods until they are

marketed.

 By the documents called for, the Buyer can seek to minimize the risks in

not receiving the goods ordered. The Buyer may also impose conditions

on the manner and dates in which the goods are to be shipped.

Risk to the Buyer

 In Letters of Credit, banks deal only with documents, not with goods.

 The merchandise may not be as it is represented in the documents.

Advantages to the Seller

 The seller may rely on a bank’s credit worthiness rather than the buyers.

The seller is more confident when he has a bank’s commitment to pay

upon presentation of complying documents.

The seller can reduce the risk that payment for the goods might be delayed or

otherwise jeopardized by political or foreign exchange problems in the

buyer’s country.

 The seller may be able to obtain financing for the purchase or

manufacture of goods that will be shipped under the Letter of Credit.

 Under Banker’s Acceptance financing the seller may receive funds

shortly after shipment despite having granted credit terms to the buyer, or

the seller may receive funds prior to export. The decision is typically

based on the seller’s cash flow position.

 Risk to the Seller

 The seller’s documents must comply strictly with the terms and

conditions of the Letter of Credit to entitle the seller to payment.

 The seller is exposed to the commercial risk that the bank providing its

undertaking is willing and able to perform.

 The seller assumes any political and foreign exchange risk affecting the

issuing bank’s obligation.

DATA ANALYSIS AND INTERPRITAION

FINANCIAL STATEMENTS

Financial statements (or financial reports) are formal records of business

financial activities. Financial statements paint a picture of the transactions that

flow through a business. Each transaction or exchange - for example, the sale of

a product or the use of a rented a building block – contributes to the whole

picture.

Let's approach the financial statements by following a flow of cash-based

transactions. In the illustration below, we have numbered four major steps:

Shareholders and lenders supply capital (funds) to the company.

The capital suppliers have claims on the company assets. The balance sheet is

an updated record of the capital invested in the business as on date. On the Left-

hand side of the balance sheet, lenders hold liabilities and shareholders hold

equity. The equity claim is "residual", which means shareholders own whatever

assets remain after deducting liabilities. The capital is used to buy assets, which

are itemized on the Right-

hand side of the balance sheet. The assets are or long-term, such as a land, plant

& machinery, furniture/fixtures, and short term or current assets, such as

inventory, debtors, investments, liquid funds (cash & bank balances).

The assets are deployed to create fund flow in the current year (cash inflows are

shown in green, outflows shown in red). Selling equity and issuing debt start the

process by raising cash. The company then "puts the cash to use" by purchasing

assets (long term & short term) in order to create (build or buy) inventory. The

inventory helps the company make sales (generate revenue), and most of the

revenue is used to pay operating costs, which include salaries.

After paying costs (and taxes), the company can do three things with its profits.

One, it can (or probably must) pay interest on its debt. Two, it can pay

dividends to shareholders at its discretion. And three, it can retain or re-invest

the remaining profits. The retained profits increase the shareholders' equity

account (retained earnings). In theory, these reinvested funds are held for the

shareholders' benefit and reflected in a highershareprice.

This basic flow of funds through the business introduces two financial

statements: the balance sheet and profit /loss account. The other statements are

fund flow and cash flow statements. It is often said that the balance sheet is a

static financial snapshot taken at any given moment of time in a year. The

Profit/Loss statement on the other hand always covers a period of time.

POSITION STATEMENT

In financial accounting, a balance sheet or statement of financial position is a

summary of a person's or organization's balances. Assets, liabilities and

ownership equity are listed as of a specific date, such as the end of its financial

year. A balance sheet is often described as a snapshot of a company's financial

condition. The only statement, which applies to a single point in time.

A company balance sheet has three parts: assets, liabilities and shareholders'

equity. The main categories of assets are usually listed first and are followed by

the liabilities. The difference between the assets and the liabilities is known as

equity or the net assets or the net worth of the company; according to the

accounting equation, net worth must equal assets minus liabilities

Another way to look at the same equation is that assets equal liabilities plus net

worth. This is how a balance sheet is presented, with assets in one section and

liabilities and net worth in the other section. The sum of these two sections must

be equal; they must "balance".

Records of the values of each account or line in the balance sheet are usually

maintained using a system of accounting known as the double-entry

bookkeeping system.

A business operating entirely in cash can measure its profits by withdrawing the

entire bank balance at the end of the period, plus any cash in hand. However,
real businesses are not paid immediately; they build up inventories of goods and

they acquire buildings

and equipment. In other words: businesses have assets and so they can not, even

if they want to, immediately turn these into cash at the end of each period. Real

businesses owe money to suppliers and to tax authorities, and the proprietors do

not withdraw all their original capital and profits at the end of each period. In

other words businesses also have liabilities.

BALANCE SHEET OF DAYAL FETILIZER (Rs. In Lacs)

Schedule

SOURCES OF FUNDS: : 2005-06 2006-07 2007-08

Shareholders' funds:        
Share capital 1 4047.17 4127.17 4247.17
Reserves and surplus 2 69011.88 84839.55 117203.29
    73059.05 88966.72 121450.46
Advances for share warrant

money received   _ 360 _

Loan funds:  
108979.0

Secured loans 3 8 165091.22 241283.74

Unsecured loans 4 22768.07 38526.59 82913.96
131747.1

Total   5 203617.81 324197.7

Deferred tax liability (net)   7487.52 6631.24 12374.12
(Refer note No. 11 of schedule

17)        
212293.7

Total   2 299575.77 458022.28

APPLICATIONS OF FUNDS        
Fixed assets:- 5      
165781.2

Gross block   9 179590.57 269372.64

Less: Depreciation   61080.68 77582.98 97027
104700.6

Net block   1 102007.59 172345.64

Capital work in progress   38570.2 129522.49 189211.25
143270.8

Total   1 231530.08 361556.89

Investments 6 1899.01 1916.57 2085.39
Current Assets, Loans and        
Advances
Inventories 7 58167.25 47478.46 75634.14
Sundry debtors 8 33943.53 40447.72 53889.61
Cash & Bank balances 9 1738.94 8151.64 10013.68
Loans & Advances 10 12976.33 24114.2 36737.48
106826.0

Total   5 120192.02 176274.91

Current Liabilities &

Provisions        
Current Liabilities 11 38891.16 52658.74 80115.57
Provisions 12 810.99 1404.16 1779.34
Total   39702.15 54062.9 81894.91

Net Current Assets   67123.9 66129.12 94380

Miscellaneous Expenditure   _ _ _
212293.7

Total   2 299575.77 458022.28

INCOME STATEMENT

An Income Statement, also called a Profit and Loss Statement (P&L), is a

financial statement for companies that indicates how Revenue (money received

from the sale of products and services before expenses are taken out, also

known as the "top line") is transformed into net income (the result after all

revenues and expenses have been accounted for, also known as the "bottom

line"). The purpose of the income statement is to show managers and investors

whether the company made or lost money during the period being reported.

The important thing to remember about an income statement is that it represents

a period of time. This contrasts the balance sheet, which represents a single

moment in time.

Charitable organizations that are required to publish financial statements do not

produce an income statement. Instead, they produce a similar statement that

reflects funding sources compared against program expenses, administrative

costs, and other operating commitments.

A financial statement that measures a company's financial performance over a

specific accounting period. Giving a summary of how the business incurs its

revenues and expenses through both operating and non-operating activities

assesses financial performance. It also shows the net profit or loss incurred over

a specific accounting period, typically over a fiscal quarter or year.

Also known as the "profit and loss statement" or "statement of revenue and

expense". The income statement is divided into two parts: the operating and

non-operating sections.

The portion of the income statement that deals with operating items is

interesting to investors and analysts alike because this section discloses

information about revenues and expenses that are a direct result of the regular

business operations. For example, if a business creates sports equipment, then

the operating items section would talk about the revenues and expenses

involved with the production of sports equipment.

The non-operating items section discloses revenue and expense information

about activities that are not tied directly to a company's regular operations. For

example, if the sport equipment company sold a factory and some old plant

equipment, then this information would be in the non-operating items section.

PROFIT AND LOSS ACCOUNT OF DAYAL FETILIZER (Rs. In Lacs)

PARTICULARS    2005-06 2006-07 2007-08

Income        
Sales of products   282921.52 299259.23 417925.85
Less: Excise duty   18577.55 27763.81 36432.5
Net sales   264343.97 271495.42 381493.55
Export Incentives 13 3868.56 7778.56 2279.45
Other Income   681.12 1240.8 3043.35
Total Income   4549.68 280514.78 386816.15
Expenditure 14      
Manufacturing & Other

expenses   227772.94 239670.11 320962.37

Profit before Interest,

Depreciation and Tax 15 41120.71 40844.67 65853.78

Interest and Financial Charges   8082.91 8303.07 7725.02
Profit Before Depreciation   33037.8 32541.6 58128.76
Depreciation   16472.12 16575.77 20892.21
Profit Before Tax   16565.68 15965.83 37236.55
Less: Income Tax        
Current Tax   1310 1345 4170
MAT Credit Available for set off   _ _ -4120
Deferred Tax   -79.54 -856.28 5742.88
Fringe Benefits Tax   _ 32 117.69
Profit After Tax   16565.68 15445.11 31325.98
Profit brought forward from

previous year   12576.34 3992.52 3604.36

Profit available for

Appropriations   27911.56 19437.63 34930.34

Appropriations        
Proposed Dividend   607.07 1031.79 1061.79
Provision for Dividend Tax   79.34 144.71 180.45
Dividend paid for earlier year   _ 4.5 _
Interim Dividend paid   404.72 _  
Dividend tax paid on Interim

Dividend   52.89 _  
Dividend Tax paid for earlier

year   _ 6.44 _
Tranferred to Debenture

Redemption Reserve   2500 _ 8975

Release from Debenture

Redemption Reserve   -734.38 -5354.17 -3036.45

Tranferred to General Reserve   21009.4 20000 26000
Balance carried forward to

Balance sheet   3992.52 3604.36 1749.55

    27911.56 19437.63 34930.34
Basic Earning Per Share   37.89 37.9 74.96
Diluted Earning Per Share   37.89 37.75 74.45
Nominal Value of Share   10 10 10
CASH FLOW STATEMENT OF DAYAL FETILIZER ( In Rs. Lacs)

A. Cash flow from operating activities 2005-06 2006-07 2007-08

Net Profit before Tax, Dep. and

Extraordinary items 16565.68 15965.83 37236.55

Depreciation 16472.12 16575.77 20892.21
Transfer from General Reserve _ _ _
Expenses Amortised _ _ _
Provisions 58.1 23.53 90.15
Interest & Financial Charges 7938.7 8303.07 7725.02
Interest /Dividend Income _ -0.46 -28.46
Interest Income on Investments -652.16 -1185.31 -1653.71
Profit on sale of non trade Investment -1.05 -7.47 -69.88
Profit on sale of fixed assets -22.64 -16.47 -64.41
Provision for doubtful debts 2.18 -193.31 127.68
Bad debts written off 0.96 254.24 __
Effects of exchange rate change 4.32 102.54 -1837.57
Operating Profit Before Working
40366.21 39821.13 62417.58
Capital Changes      
Adjustments for:      
Increase(-) / Decrease in inventories -18756.28 10688.79 -28155.68
Increase (-)/Decrease in other

receivables 1115.34 -6564.65 -13618.13

Increase (-)/Decrease in loans and

advances -4099.28 -11174.53 -8503.28

Increase/ Decrease (-) in trade payables 5941.22 13840.3 27237.36
  15799 6789.91 -23039.73
       
Cash flow from operating activities 24567.21 46611.87 39377.85
Less: Direct tax paid(net of refund) -1239.9 -1260.79 -4068.4
Net cash flow from operating activities

(A) 23327.31 45351.08 35309.45

B. Cash flow from investing activities      
Purchase of fixed assets -50353 -96090.85 -

132421.7
 6
Sale of fixed assets 68.21 27.64 99.58
Purchase of investments -18.39 -10317.66 -20756.12
Sale of investments 20 10307.57 20657.18
Interest income 652.16 1185.31 2559.33
Dividend income _ 0.46 28.46
-

129833.3

Net cash used in investing activities (B) 49631.02 -94887.53 3

C). Cash flow from financing activities      
Interest & financial charges paid -10692.7 -17219.77 -27397.27
Proceeds from cash credit from banks 10009.84 -8436.52 13879.8
106700.0

Proceeds from other borrowings 28676.45 80307.18 9

Proceeds from share capital' _ 80 120
Proceeds from share premium _ 1570 2280
Proceeds from share warrants _ 360 -360
Dividend paid -809.44 -612.24 -1031.4
Dividend tax paid -104.75 -85.78 -144.71
Effect of exchange rate change -166.8 -13.72 2339.41
Net cash flow from financing activities

© 26912.6 55949.15 96385.92

Net increase in cash and cash

equivalents (A+B+C) 608.89 6412.7 1862.04

Opening balance of cash and cash

equivalents 1130.05 1738.94 8151.64

Closing balances of cash and cash

equivalents 1738.94 8151.64 10013.68

PURPOSE OF FINANCIAL STATEMENTS

"The objective of financial statements is to provide information about the

financial strength, performance and changes in financial position of an

enterprise that is useful to a wide range of users in making economic decisions."

Financial statements should be understandable, relevant, reliable and

comparable. Reported assets, liabilities and equity are directly related to an

organization's financial position. Reported income and expenses are directly

related to an organization'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."

Owners and managers require financial statements to make important business

decisions that affect its continued operations. Financial analysis is then

performed on these statements to provide management with a more detailed

understanding of the figures. These statements are also used as part of

management's annual report to the stockholders.

Employees also need these reports in making collective bargaining agreements

(CBA) with the management, in the case of labour unions or for individuals in

discussing their compensation, promotion and rankings.

2. External Users: are potential investors, banks, government agencies and

other parties who are outside the business but need financial information about

the business for a diverse number of reasons.

Prospective investors make use of financial statements to assess the viability of

investing in a business. Financial analyses are often used by investors and is

prepared by professionals (financial analysts), thus providing them with the

basis in making investment decisions.

Financial institutions (banks and other lending companies) use them to decide

whether to grant a company with fresh working capital or extend debt securities

(such as a long-term bank loan or debentures) to finance expansion and other

significant expenditures. Government entities (tax authorities) need financial

statements to ascertain the propriety and accuracy of taxes and other duties

declared and paid by a company.

Media and the general public are also interested in financial statements for a

variety of reasons.
BANK COLLECTION CHARGES

CORP-CMS BANK SERVICE CHARGES FOR THE M/O

JAN-2009

LOCATION COLLECTION RATE TOTAL

ALLAHABAD 3983356.00 0.00008 318.67
SAHARANPUR 4135340.00 0.00008 330.83
BHOPAL 905190.00 0.00003 27.16
LUCKNOW 10106181.00 0.00008 808.49
GORAKHPUR 40055502.90 0.00008 3204.44
AGRA 10362284.00 0.00008 828.98
DEHRADUN 3398447.00 0.00008 271.88
JAMMU 30438496.00 0.00008 2435.08
TOTAL 103384796.90   8225.52

CORP-CMS CH.RTURNS CHARGES FOR THE M/O JAN-

2009

LOCATION AMOUNT RET.CHGS INTEREST TOTAL

BHOPAL 452595 100.00 359.60 459.60
TOTAL 100.00 359.60 459.60

PARTICULARS AMOUNT
Collection-

Charges 8325.52
SERVICE-TAX 12.36% 1029.03
INTEREST 359.60
TOTAL 9714.16

CORP-CMS BANK SERVICE CHARGES FOR

THE M/O FEB-2009

COLLECTIO TOTA

LOCATION N RATE L
ALLAHABAD 2138971.00 0.00008 171.12
SAHARANPU

R 3843031.00 0.00008 307.44

BHOPAL 329907.00 0.00003 9.90
LUCKNOW 10964321.06 0.00008 877.15
2890.9

GORAKHPUR 36136865.00 0.00008 5

1218.8

AGRA 15236079.00 0.00008 9

DEHRADUN 1264099.00 0.00008 101.13
1868.8

JAMMU 23360461.00 0.00008 4

7445.4

TOTAL 93273734.06   0
CORP-CMS CH.RTURNS CHARGES FOR THE M/O

FEB-2009

LOCATION AMOUNT RET.CHGS INTEREST TOTAL

GORAKHPUR 345573.00 100.00 137.28 237.28
JAMMU 249682.00 100.00 0.00 100.00
GORAKHPUR 644589.00 100.00 256.07 356.07
TOTAL 1239844.00 300.00 393.35 693.35

PARTICULARS AMOUNT 12.36% 10.30% TOTAL

Collection-

Charges 7838.75 5671.00 2167.72 7838.72

RET.CHARGRS 300.00 0.00 0 300.00
SERVICE-TAX 922.34 700.94 223.28 924.21
TOTAL 9061.09 6371.94 2391.00 9062.93

UTI-CMS BANK SERVICE CHARGES FOR THE M/O JAN-2009

LOCATION COLLECTIO RATE COLL.CHGS. COURIER TO
 N
COIMBATORE 2131775.00 0.00004 85.27 0.00 8
RUDDRAPUR 460704.00 0.00004 18.43 0.00 1
VARANASI 50102939.07 0.00004 2004.12 400.00 240
TOTAL 52695418.07   2107.82 400.00 250

UTI-CMS BANK CH.RETURNS FOR THE M/O JAN-2009

LOCATION AMOUNT RET.CHARGS INTEREST TOTAL
RUDDRAPUR 24000.00 100.00 11.67 111.67
VARANASI 168856.38 100.00 82.12 182.12
VARANASI 364366.00 100.00 177.19 277.19
TOTAL   300.00 270.98 570.98

Collection+Ret.Chargs 3078.79
SERVICE-TAX 12.36% 380.54
TOTAL 3459.33

UTI-CMS BANK SERVICE CHARGES FOR THE M/O FEB-2009

COLLECTIO COLL.CHGS COURIE TOTA

LOCATION N RATE . R L
COIMBATOR

E 2438624.00 0.00004 97.54 0.00 97.54

RUDDRAPUR 1175094.00 0.00004 47.00 0.00 47.00
VARANASI 58848048.42 0.00004 2353.92 400.00 2753.92
TOTAL 62461766.42   2498.47 400.00 2898.47

UTI-CMS BANK CH.RETURNS FOR THE M/O FEB-2009

RET.CHARG

LOCATION AMOUNT S INTEREST TOTAL

VARANASI 100000.00 100.00 49.64 149.64
VARANASI 403373.00 100.00 196.16 296.16
VARANASI 557367.00 100.00 271.05 371.05
VARANASI 337665.00 100.00 0.00 100.00
VARANASI 232607.00 100.00 0.00 100.00
VARANASI 118371.00 100.00 0.00 100.00
TOTAL   600.00 516.85 1116.85

Collection+Ret.Chargs 4015.32
SERVICE-TAX 12.36% 496.29
TOTAL 4511.62

CHARGED BY BANK 4510.47

HDFC-23-CMS BANK COLLECTION CHARGES FOR THE

M/O JAN-2009

COLLECTIO

LOCATION N RATE COLL.CHGS. TOTAL

LUDHIANA 38454277.00 0.00005 1922.71 1922.71
BELAGUM 1427504.00 0.00005 71.38 71.38
ALIGARH 10883185.00 0.00005 544.16 544.16
MADRAS 14985828.75 0.00002 299.72 299.72
ALLAHABAD 3322628.30 0.00005 166.13 166.13
HALDWANI 16959326 0.00005 847.97 847.97
SRINAGAR 55499596.00 0.00005 2774.98 2774.98
CHANDIGARH 2291431.00 0.00004 91.66 91.66
TRIUPATHI 11889163.00 0.00005 594.46 594.46
PUNE 20702003.43 0.00004 828.08 828.08
MUZAFAR

NAGAR 6691780.06 0.00005 334.59 334.59

JAIPUR 34666128.00 0.00004 1386.65 1386.65
KANPUR 125790462.34 0.00004 5031.62 5031.62
GUWAHATI 100167375.00 0.00004 4006.70 4006.70
TOTAL 443730687.88   18900.79 18900.79

HDFC-23-CMS BANK -CH.RETURNS FOR THE M/O JAN-

2009
LOCATION AMOUNT PER.CH INTEREST TOTAL
HALDWANI 69379.00 100.00 0.00 100.00
GUWAHATI 50000.00 100.00 0.00 100.00
PUNE 543524.00 100.00 0.00 100.00
KANPUR 1548306.00 100.00 0.00 100.00
GUWAHATI 942981.00 100.00 0.00 100.00
CHANDIGARH 208033.00 100.00 0.00 100.00
CHANDIGARH 209780.00 100.00 0.00 100.00
GUWAHATI 50000.00 100.00 0.00 100.00
GUWAHATI 1689504.00 100.00 0.00 100.00
MADRAS 1000000.00 25.00 250.00 275.00
MADRAS 1000000.00 25.00 250.00 275.00
MADRAS 1915491.00 25.00 478.87 503.87
TOTAL 9226998.00 975.00 978.87 1953.87

PARTICULARS AMOUNT
COLLECTION-

CHARGES 20854.66
SERVICE-TAX

12.36% 2577.64
TOTAL 23432.29

CHARGED BY

BANK 23432.27
HDFC-23-CMS BANK COLLECTION CHARGES

FOR THE M/O FEB-2009

COLLECTI COLL.CH TOTA

LOCATION ON RATE GS. L

0.0000 1399.8

LUDHIANA 27997404.5 5 1399.87 7

0.0000

BELAGUM 215478 5 10.77 10.77

0.0000

ALIGARH 9177777 5 458.89 458.89

0.0000

MADRAS 12472932.65 2 249.46 249.46

0.0000

ALLAHABAD 3621722 5 181.09 181.09

0.0000

HALDWANI 16396284 5 819.81 819.81

0.0000 3079.0

SRINAGAR 61581320 5 3079.07 7

0.0000

CHANDIGARH 1947787 4 77.91 77.91

0.0000 1104.1

TRIUPATHI 22083026 5 1104.15 5

0.0000

KOLHAPUR 301107.00 5 15.06 15.06

0.0000

BANGALORE 14803837.79 3 444.12 444.12

INDORE 12695119.86 0.0000 380.85 380.85
 3
0.0000

PUNE 10233839.71 4 409.35 409.35

MUZAFAR 0.0000

NAGAR 5541336.88 5 277.07 277.07

0.0000

JAIPUR 13648449.00 4 545.94 545.94

105954613.7 0.0000 4238.1

KANPUR 2 4 4238.18 8
0.0000 4951.2

GUWAHATI 123780224 4 4951.21 1

442452259.1 18642.

TOTAL 1   18642.80 80

HDFC-23-CMS BANK -CH.RETURNS FOR THE M/O

FEB-2009

PER.C INTERES TOTA

LOCATION AMOUNT H T L
HALDWANI 184564.00 100.00 0.00 100.00
GUWAHATI 1004566.00 100.00 0.00 100.00
PUNE 301107.00 100.00 0.00 100.00
KANPUR 666888.00 100.00 0.00 100.00
GUWAHATI 1693781.00 100.00 0.00 100.00
GUWAHATI 1303746.00 100.00 0.00 100.00
GUWAHATI(COU

RIER) 0.00 800.00 0.00 800.00

GUWAHATI 1473642.00 100.00 0.00 100.00
MADRAS 667126.00 100.00 0.00 100.00
MADRAS 752655.00 100.00 0.00 100.00
MADRAS 667126.00 100.00 0.00 100.00
LUDHIANA 344719.00 100.00 0.00 100.00
LUDHIANA 901375.00 100.00 0.00 100.00
LUDHIANA 773857.00 100.00 0.00 100.00
KANPUR 200000.00 0.00 25.00 25.00
KANPUR 200000.00 100.00 25.00 125.00
MADRAS 595697.00 25.00 148.92 173.92
JAIPUR 400000.00 100.00 0.00 100.00
JAIPUR 423578.00 100.00 0.00 100.00
2425.0 2623.9

TOTAL 12554427.00 0 198.92 2

PARTICULARS AMOUNT
COLLECTION-

CHARGES 21266.72
SERVICE-TAX

10.30% 2190.47
TOTAL 23457.19

CHARGED BY

BANK 23457.18

ICICI-CMS BANK SERVICE CHARGES FOR M/O

JAN-2009

COLLECTIO

LOCATION N RATE TOTAL

AHMEDABAD 1172762.00 0.00004 1500.00
JALLANDHAR 2967710.00 0.0003 1500.00
LUDHIANA 10109515.00 0.0002 2021.90
TOTAL 14249987.00   5021.90

ICICI-CMS BANK CH.RET.CHARGES FOR M/O JAN-

2009
LOCATION AMOUNT TOTAL
JALLANDHAR 342816.00 100.00
TOTAL 100.00

PARTICULARS AMOUNT
Collection-Charges 5121.90
SERVICE TAX 12.36% 633.07
TOTAL 5754.97

ICICI-CMS BANK SERVICE CHARGES FOR M/O

FEB-2009

COLLECTIO

LOCATION N RATE TOTAL

AHMEDABAD 1235827.00 0.00004 1500.00
JALLANDHAR 2076661.00 0.0003 1500.00
LUDHIANA 5557843.00 0.0002 1500.00
TOTAL 8870331.00   4500.00

PARTICULARS AMOUNT
Collection-Charges 4500.00
SERVICE TAX 10.30% 463.50
TOTAL 4963.50
 CONCLUSION

Cash Management Services has saved huge amount of cost which DAYAL

FETILIZER had to pay to procure funds from its customers. The savings have

been nearly to the tune of Rs 4800000. CMS has not only saved cost but have

also ensured fast realization of cash.

Earlier it used to take DAYAL FETILIZER at least 4-5 days to realize the

payments made by its customers whereas now it takes 24-48 hrs. The cost to

DAYAL FETILIZER under conventional method of collection (through drafts)

is estimated by taking the cash inflow through sale in cash only and current

rates in the market is used for the calculation e.g. DAYAL FETILIZER has

been availing the CC facility from Punjab national bank and paying an interest

@ 11% p.a. Also, the return charges are ignored while doing all the calculations

because there are very few cases of return each month and most of the time the

banks adjust the amount the very same days so no interest is levied upon it. In

such cases DAYAL FETILIZER has to pay Rs 100 flat as return charges. It
would be in best interest of DAYAL FETILIZER to change the banks from

which it is availing CMS as the cost can be further reduced. The above study

leads us to the conclusion that HDFC and UTI are best suited for DAYAL

FETILIZER. The conclusion has not been made only on the grounds of

financial charges, while finalizing the banks the return interest rate, MIS report

by banks have also been taken into consideration. Any rate below 13.5% should

be acceptable to DAYAL FETILIZER. The MIS reports of all the banks are at

par. Also, the banks have ruled out the possibility of delayed credit as they have

sophisticated software to insure timely credit. Still DAYAL FETILIZER should

insist on writing a clause in the agreem

ent stating that in case of delayed credit DAYAL FETILIZER is entitled to

claim an interest equivalent to the interest charged by the bank in case of

instrument return. Thus fresh negotiations with banks could save up to 70% of

the cost.

Where as, Letter of Credit has been an important source of funds for DAYAL

FETILIZER and huge amount of transactions are carried out by way of Letter of

credit in both domestic and international market. It not only hedges the

company against the default risk but also ensures that the cash is realized much

earlier than the due date of payment. However, in many cases I have noticed

that the party does not default but delays the payment to the bank which in turn

charges interest to DAYAL FETILIZER for the period for which it has

remained out of funds. This increases the cost of financing. Provisions should
be made while entering into agreement with the party so as to avoid such costs.

Also, at times it has been observed that the party makes payment to its banker

on the due date only and hence the transfer of funds are delayed, again DAYAL

FETILIZER ends up paying an interest for the same. This does not make much

of a difference if the credit period is anywhere between 60-180 days. But in

case the credit period is less than 60 say 30-45 the cost of financing becomes

high. Thus, while entering into agreement with the party such costs must also be

taken into consideration.

DAYAL FETILIZER has been managing the funds very well by employing

latest management techniques and have also ensured timely realization of funds.

RECOMMENDATION

 I would like to recommend DAYAL FETILIZER to negotiate with HDFC

for location suchasLudhiana,Aligarh,Allahabad,Mandi-

Gobindgarh,Kanpur,Pune,Guhawati as from these location DAYAL

FETILIZER is receiving a huge amount, so if negotiated at lower rates,

then the saving would increase at higher rates.

 DAYAL FETILIZER is doing business with UTI but not at a large,

furthermore DAYAL FETILIZER should negotiate with UTI for the rates

which would suits the dealing.

 As regard business with Corporation Bank, Corporation Bank is having

very high rate as compared to HDFC and UTI.

  ICICI Bank is another option but it charges high in case of delayed

payment

KEY FINDING

 Company has an outstanding name in the field increasing of

exports as increment of around rs. 500cr. as compare to last financial

year.

 The purchases made by the company are in cash whereas the sales

are in cash and credit both this makes the working capital

requirement of the company very high.

 The company has a conservative approach towards hedging exchange rate

risks.

 From the locations as varanasi, gorakhpur, kanpur, Allahabad compny is

receiving a huge amount.

BIBILOGRAPHYT

1. www.google.com

2. www.Dayal Fetilizer.com

3. www.wikipedia.com

NEWSPAPERS

1Business line
2Financial Express