“A STUDY ON CASH MANAGEMENT ON CARBORUNDUM

UNIVERSAL LIMITED”

BY

R.KRISHNAMOORTHY

(REGNO: 210117631010)

DEPARTMENT OF MANAGEMENT STUDIES

ALPHA COLLEGE OF ENGINEERING

A PROJECT REPORT

Submitted to the

FACULTY OF MANAGEMENT STUDIES

In partial fulfillment of the requirements

For the award of the degree

Of

MASTER OF BUSINESS ADMINISTRATION

ANNA UNIVERSITY

CHENNAI-600025

May 2019

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 DECLARATION

I, R.KRISHNAMOORTHY, (Reg No.210117631010), II year MBA student of Department of

Management Studies, ALPHA COLLEGE OF ENGINEERING, do hereby declare that the

report on summer training undergone in “Carborundum Universal Limited” (CUMI),

submitted in partial fulfillment for the award of the degree of Master of Business Administration

of the Anna University, is my original and independent work.

Place: Signature of the student

Date: (R.KRISHNAMOORTHY)

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 ACKNOWLEDGEMENT

With the immense pleasure I thank the almighty for his grace and blessings, which drove me to

the successful completion of this project. In this accomplishment of the academic task, many

people have helped me and guided me directly and indirectly. It is not possible for me to thank

all of them separately. However a few of them deserve special mention here.

I would like to express my sincere gratitude to the encouragement and motivation provided by

our management SEVA RATNA DR. Mrs. GRACE GEORGE – CHAIRPERSON ALPHA

GROUP OF INSTITUTIONS (AGI) and Mrs. SUJA GEORGE – VICE CHAIRPERSON,

AGI.

I would like to express my thanks to our beloved Principal Dr.B.SOWMYA and our Head of

the Department DR. B.YAMUNA KRISHNA, and my project guide DR. B.YAMUNA

KRISHNA who has helped me in each and every moment by supervising my efforts and has

always been a source inspiration,. I thank all the faculty members of our department for

rendering their valuable assistance and guidance to me.

I express my sincere thanks and heartfelt gratitude to Mr. C. AYYAPAN – HEAD OF THE

DEPARTMENT, CUMI SHARED SERVICE (CSS) for permitting me to carry out the project

in the organization.

I also thank my family members and my friends for providing me with their co-operation and

valuable help in completing the project work.

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INDEX

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CHAPTER NO. CONTENT PAGE NO

1.1 INTRODUCTION 11

1.2 SCOPE OF THE STUDY 12

CHAPTER 1
1.3 NEED OF THE STUDY 12

1.4 OBJECTIVE OF STUDY 13

2.1 RESEARCH METHODOLOGY 13

2.2 SOURCE OF DATA 14

CHAPTER 2
2.3 INFLOW AND OUTFLOW 16
INVENTORY ANALYSIS
3.1 INDUSTRY PROFILE 19

3.2 COMPANY PROFILE 27

CHAPTER 3
3.3 PRODUCT PROFILE 32

4.1 LITERATURE REVIEW 36

CHAPTER 4 4.2 BALANCE SHEET 40

5.1 Z SCORE MODEL 44

CHAPTER 5
5.2 MILLER-ORR MODEL 57

6.1 FINDINGS 59

6.2 SUGGESTIONS 62
CHAPTER6
6.3 CONCLUSIONS 63

CHAPTER 7 BIBLIOGRAPHY 64

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S.NO TABLE NO TITLE PAGE NO

1 1.1 Working capital to Total Asset 44

2 1.2 Retained Earnings to Total Asset 45

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 3 1.3 EBIT to Total Asset 46
4 1.4 Book Value of Equity to Total Liabilities 46

5 1.5 Sales to Total Assets 47

6 1.6 Analysis of Z Score 48

7 1.7 Growth Rate Calculation for Revenue 49

8 1.8 Growth Rate Calculation of Profit Before Tax 50

9 1.9 Growth Rate Calculations of EPS 51

10 1.10 Growth Rate Calculations of Z Score 52

11 1.11 Calculation of Trend Revenue 53

12 1.12 Profit before Tax 54

13 1.13 Earning Per Share 55

14 1.14 Z Score 56
LIST OF TABLE

S.NO CHART NO TITLE PAGE NO

1 1.1 Working capital to Total Asset 44

2 1.2 Retained Earnings to Total Asset 45
3 1.3 EBIT to Total Asset 46

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 4 1.4 Book Value of Equity to Total Liabilities 47

5 1.5 Sales to Total Assets 47

6 1.6 Analysis of Z Score 48

7 1.7 Growth Rate Calculation for Revenue 49

8 1.8 Growth Rate Calculation of Profit Before Tax 50

9 1.9 Growth Rate Calculations of EPS 51

10 1.10 Growth Rate Calculations of Z Score 52

11 1.11 Calculation of Trend Revenue 53

12 1.12 Profit before Tax 54

13 1.13 Earnings Per Share 55

14 1.14 Z Score 57
LIST OF CHARTS

LIST OF FIGURES

FIGURE.
S.NO TITLE PAGE NO
NO

1 1.0 BONDED ABRASIVES 32

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2 1.1 COATED ABRASIVES 33

3 1.2 INDUSTRIAL CERAMIC 33

4 1.3 SUPER REFRACTORIES 34

5 1.4 ELECTRO MINERAL DIVISION 34

6 1.5 POWER TOOLS 36

7 1.6 BALANCE SHEET 01 40

8 1.7 BALANCE SHEET 02 42

LIST OF ABBREVIATIONS

S.NO ABBREVIATIONS

1 CUMI CARBORUNDUM UNIVERSAL LIMITED

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 2 CSS CUMI SHARED SERVICES

3 EPS EARNINGS PER SHARE

4 EBIT EARNING BEFORE INTEREST ON TAX

5 PBT PROFIT BEFORE TAX

ABSTRACT

Cash management refers to a broad area of finance involving the collection, handling,

and usage of cash. It involves assessing market liquidity, cash flow, and investments.
In banking, cash management, or treasury management, is a marketing term for certain
services related to cash flow offered primarily to larger business customers. It may be
used to describe all bank accounts (such as checking accounts) provided to businesses

10
of a certain size, but it is more often used to describe specific services such as cash
concentration, zero balance accounting, and clearing house facilities.
Sometimes, private banking customers are given cash management services.
Financial instruments involved in cash management include money market
funds, treasury bills, and certificates of deposit.
A company can improve its chances of having adequate cash by following five basic
principles of cash management:
• Increase the speed of collection on receivables. The more quickly customers pay the
more quickly a company can use those funds. ...
• Keep inventory levels low.
• Delay payment of liabilities.
In some ways, managing cash flow is the most important job of business managers. If
at any time a company fails to pay an obligation when it is due because of the lack
of cash, the company is insolvent. Companies suffering from cash flow problems have
no margin of safety in case of unanticipated expenses.
Cash management strategies are intended to minimize the operating cash balance
requirement. The basic strategies that can be employed to effectively manage cash are:
Delaying and stretching Accounts Payables. Speeding up collection of Accounts
Receivables.

CHAPTER I

1.1 INTRODUCTION

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Cash flow management for business is the process of monitoring, analyzing, and
optimizing the net amount of cash receipts minus the cash expenses. Net cash flow is an
important measure of financial health for any business. It helps the business owner to
analyze optimum cash needs; this can be achieved by estimating the monthly cash needs
and identifying the sources from where these can be met.
Cash flow management involves:
• Knowing when, where, and how your cash needs will occur,

• Knowing the best sources for meeting additional cash needs and

• Being prepared to meet these needs when they occur, by keeping good
relationships with the debtors and creditors.

• It helps in avoiding cash shortages, caused by a gap between cash inflows and

outflows.

• It helps in budgeting your cash requirements and in a way helps to control the
business expenses and setting targets for your sales.

• Helps with managing limited cash/resources effectively, facilitates planning for

timely debt repayment. It also helps in recognizing current patterns and making
predictions.

CASH OUTFLOW FROM INVESTING ACTIVITIES

• Cash payments to acquire fixed assets including intangibles and capitalized

R&D.

• Cash advances and loans made to third party (other than advances and loans
made by a financial enterprise wherein it is operating activities).

• Cash payments to acquire shares, warrants or debt instruments of other

enterprises other than the instruments those held for trading purposes.

CASH INFLOW FROM INVESTING ACTIVITIES

• Cash receipt from disposal of fixed assets including intangibles.

• Cash receipt from the repayment of advances or loans made to third parties
(except in case of financial enterprise).

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 • Dividend received from investments in other enterprises.

• Cash receipt from disposal of shares, warrants or debt instruments of other enterprises
except those held for trading purposes.

1.2 SCOPE OF THE STUDY

• This study uses the annual reports of CUMI ltd for the past five years.
• The study aims at identifying the existing procedures
• This study also provides the information about the organization regarding the
current cash management
• The study helps the company to take a short term financial decision
• The study enables to know the current cash system prevailing in the
organization
• The study shows the management and control of the cash balance to the
optimal level

1.3 NEED FOR THE STUDY

Preventing and monitoring company debt. Preventing unnecessary expenditure from

interest, late payment and debt cost. Ensuring timely investment and cash available for
investment opportunities. Ensuring the payment of expenses and debts. Ensuring the
level of regular business income without relying outside investment of cash borrowing.
Preventing and monitoring company debt. Preventing unnecessary expenditure from
interest, late payment and debt cost. Ensuring timely investment and cash available for
investment opportunities. Ensuring the payment of expenses and debts. Ensuring the
level of regular business income without relying outside investment of cash borrowing.

1.4 OBJECTIVES OF STUDY

Primary objective

• A study on cash management in Carborundum Universal limited

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Secondary objectives
• To find the liquidity position of CUMI.

• To study the firms liquidity on z score.

• To calculate the optimal cash balance of cumi through miller orr model

CHAPTER II

2.1 RESEARCH METHODOLOGY

Research is often described as an active, diligent & systematic process of inquiry aimed
at discovering, interpreting & revising facts. This intellectual investigation produces a
greater knowledge’s application possible. The research is also used to describe an entire
collection of information about a particular subject & finding solution.

Methodology is defined as:

“A body of method, rules & postulates employed by discipline”.

“A particular procedure or set of procedures”.
“The manipulation of thing, concept or symbols for the purpose of generalizing to extend
correct or verify knowledge, whether that knowledge aid in construction of theory or in the
practice of an art” - M.STEPHSON

A way that a company will manage all aspects of the financial end of the business,
such as the collection of revenue as well as the investing of the company's cash and
other assets. This helps businesses to stay afloat financially.

RESEARCH DESIGN

A research project conducted scientifically has a specific frame of research from the problem
identification to the presentation of the research project. This framework of conducting research
is known as the research design.

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A research design is the arrangement of the conditions for the collection & analysis of data in a
manner that aims to combine relevance to the research purpose with economy in procedure. It is
a blue print followed in the completion of the study.

A research design helps in:

• Guiding the research in the right direction

• Gives an idea regarding the type of resources required in terms of money, manpower,
time, and efforts.

• Helpful for collecting research materials.

• Helpful in getting maximum efficiency and reliability.

Project period
Data collected from 5 years annual reports of CUMI , 2013-2014, 2014-2015, 2015-
2016, 2016-2017, 2017-2018&2019. Has been analysed.
ANALYTICAL RESEARCH

Analytical research is a specific type of research that involves critical thinking skills and
the evaluation of facts and information relative to the research being conducted. A
variety of people including students, doctors and psychologists use analytical research
during studies to find the most relevant information. From analytical research, a person
finds out critical details to add new ideas to the material being produced.

2.2 SOURCES OF DATA

The present study is entirely based on Secondary Data.

The data has been compiled from annual reports of cumi, text books, reference books,
Journals, articles, magazines and from the internet. It is a quantitative analysis of the
financial data, the necessary data collected from the top web sources and official sites of
the company.

Cash flow from operating activities

Cash flow from operating activities (CFO) is an accounting item that indicates the
amount of money a company brings in from ongoing, regular business activities, such as

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manufacturing and selling goods or providing a service. Cash flow from operating
activities does not include long-term capital or investment costs.
Cash Flow from Operating Activities = EBIT + Depreciation - Taxes +/- Change in
Working Capital

Cash flow from investing activities

Cash flow from investing activities is an item on the cash flow statement that reports the
aggregate change in a company's cash position resulting from any gains (or losses)
from investments in the financial markets and operating subsidiaries and changes
resulting from amounts spent on investments in capital assets such as plant and
equipment.

Cash from financing activities

Cash flow from financing (CFF) activities is a category in a company’s cash flow
statement that accounts for external activities that allow a firm to raise capital. In
addition to raising capital, financing activities also include repaying investors, adding or
changing loans, or issuing more stock. Cash flow from financing activities shows
investors the company’s financial strength. A company that frequently turns to new debt
or equity for cash, for example, could have problems if the capital markets become less
liquid.
Cash Received from Issuing Stock or Debt - Cash Paid as Dividends and Re-
Acquisition of Debt/Stock.

Working capital analysis

Working capital is a measure of both a company's efficiency and its short-term financial
health. Working capital is calculated as:

Working Capital = Current Assets - Current Liabilities

The working capital ratio (Current Assets/Current Liabilities) indicates whether a

company has enough short term assets to cover its short term debt. Anything below 1
indicates negative W/C (working capital). While anything over 2 means that the
company is not investing excess assets. Most believe that a ratio between 1.2 and 2.0 is
sufficient.  Also known as "net working capital"

Operating profit analysis

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Operating profit is an accounting figure that measures the profit earned from a firm's
normal core business operations, thus excluding deductions of interest and taxes. This
value also does not include any profit earned from the firm's investments, such as
earnings from firms in which the company has partial interest.
Operating profit can thus be calculated using the following formula:
Operating Profit = Operating Revenue - Cost of Goods Sold (COGS) - Operating
Expenses - Depreciation - Amortization

2.3 Inflow and outflow of investing analysis

Cash flow from investing activities is an important aspect of growth and capital.
Changes to property, plant and equipment (PPE), a large line item on the balance sheet,
fall here. When analysts want to know how much a company is spending on PPE, they
can look for the sources and uses of funds in the investing section of the cash flow
statement.
Examples of negative cash flow from investing activities includes the purchase of fixed
assets, the purchase of investment instruments such as stocks, and lending money.
Examples of positive cash flow from investing includes the sale of fixed assets, the sale
of investment instruments, and the collection of loans and insurance proceeds.

Inflow and outflow of financing activities

Cash flow from financing (CFF) activities is a category in a company’s cash flow
statement that accounts for external activities that allow a firm to raise capital. In
addition to raising capital, financing activities also include repaying investors, adding or
changing loans, or issuing more stock. Cash flow from financing activities shows
investors the company’s financial strength. A company that frequently turns to new debt
or equity for cash, for example, could have problems if the capital markets become less
liquid.

Cash Received from Issuing Stock or Debt - Cash Paid as Dividends and Re-
Acquisition of Debt/Stock
Financing activities that generate positive cash flow include receiving cash from issuing stock
and receiving cash from issuing bonds. Financing activities that generate negative cash flow
include spending cash to repurchase previously issued stock, to pay down debt, to pay interest
on debt, and to pay dividends to shareholders.

Miller-Orr Model

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The Miller-Orr model of cash management is developed for businesses with uncertain
cash inflows and outflows. This approach allows lower and upper limits of cash balance
to be set and determine the return point (target cash balance). This is different from the
Baumol-Tobin model, which is based on the assumption that the cash spending rate is
constant.

Assumptions
The Miller-Orr model of cash management can be used if the following assumptions are
met:
1. The cash inflows and cash outflows are stochastic. In other words, each day a
business may have both different cash payments and different cash receipts.
2. The daily cash balance is normally distributed, i.e., it occurs randomly.
3. There is a possibility to invest idle cash in marketable securities.
4. There is a transaction fee when marketable securities are bought or sold.
5. A business maintains the minimum acceptable cash balance, which is called the
lower limit.

Formula
The return point for the cash balance under the Miller-Orr model can be calculated as
follows:

Return Point = Lower Limit + 1/3 × Spread

The lower limit is set by management. It depends on the acceptable risk of cash flows
gap, creditworthiness of a business, and expected needs in cash. However, the lower
limit can be set as zero if a business has sufficient investments in marketable securities
or perfect creditworthiness and can raise additional short-term debt at any time.
The equation to compute the spread is as follows:

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where F is the transaction cost, K is the opportunity cost of holding cash, and σ2 is a
variance of a daily cash balance.
To find the upper limit of the cash balance, the following formula should be used:
Upper Limit = Lower Limit + Spread

Limitations
When the Miller-Orr model of cash management is applied, we should take into account
the following limitations:

An increase in transaction cost results in an increase of spread and a higher return point.
The higher the standard deviation (σ) of daily cash balance, the wider the spread and
higher return point. A higher volatility of the daily cash balance also means a higher
probability of reaching the lower or upper limit.

By contrast, an increase in the return on investment in marketable securities will lead to

a narrower spread and lower return point because the opportunity cost of holding cash is
also growing, so a business will seek to decrease its cash holdings.

CHAPTER III
CARBORUNDOM UNIVERSAL LIMITED

3.1 INDUSTRY PROFILE

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CERAMIC INSDUSTRY
Ceramics also known as fire clay is an inorganic, non-metallic solid article, which is
produced by the art or technique of heat and subsequent cooling. Ceramics isa diverse
industry and contains several categories of products, including sanitary ware, refractory,
cement, advanced ceramics and ceramic tiles. Ceramic products like crockery, sanitary
ware, tiles etc. play a very important role in our daily life. This is because, apart from
their decorative look, ceramic products are primarily hygiene products. This is also one
of the chief reasons for their wide usage in bathrooms and kitchens in modern
households to medical centers, laboratories, milk booths, schools, public conveniences
etc. The ceramic industry has a long history, with the first instance of functional pottery
vessels being used for storing water and food, being thought to be around since 9,000 or
10,000 BC. Clay bricks were also made around the same time. The ceramic industry has
been modernizing continuously, by newer innovations in product design, quality etc.

GLOBAL SCENARIO
Global Trade Profile
During the period from 2001 to 2008, total ceramics trade grew at a CAGR of9.8%,
from US$ 39.6 billion to US$ 83.5 billion. During the period exports Ceramic Tiles and
Stone Standards Refractory is a ceramic material, which can withstand volatile and
high-temperature conditions encountered in the processing of metals. Refractory
ceramics are enabling materials for other industries as well.

The chemical, petroleum, energy conservation, glass and other ceramic industries, all
rely upon refractory materials. Tiles could be further segmented into wall tiles, floor
tiles, vitrified and porcelain tiles increased from US$ 19.8 billion to US$ 41.3 billion
(CAGR of 9.7%), while imports increased from US$ 19.9 billion to US$ 42.2 billion
(CAGR of 9.9%).China is the largest trader of ceramics in the world, with total trade of

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US$ 8.5billion during 2008, followed by Italy, US and Germany with total trade of US$
7.4billion, US$ 6.9 billion and US$ 6.8 billion, respectively.

Major Exporters
China was the largest ceramic exporter during 2008, with exports of US$ 8billion. Italy,
Germany and Spain followed China with annual exports of US$ 6.3billion, US$ 4.2
billion and US$ 3.9 billion, respectively. The top ten countries together accounted for
close to 72% of total ceramics exports during 2008.

Major Importers
United States was the world’s largest ceramic importer during 2008, with imports worth
US$ 5.4 billion. US rely heavily on imports of ceramic to meet its domestic ceramics
consumption. This is also reflected in its high ceramics trade deficit of close to US$ 4
billion.US is followed by France, Germany and United Kingdom with annual imports of
US$ 2.7 billion, US$ 2.6 billion and US$ 2.0 billion, respectively.

Trade Situation in Emerging Markets

The global ceramic industry has undergone a period of significant change over the
years, driven by the demands of a globalized economy. While the traditional markets of
Europe and the US continue to grow, primarily led by public sector investment, the
most significant envelopments are however to be found in the emerging economies.

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They have, in recent years become the most significant players in the ceramic market, in
terms of consumption, growth and investment. Since the future of the ceramic sector is
so intricately linked with the continued economic growth in emerging economies, the
paper assesses the trade situation in emerging markets, excluding India. As per the data
available, during the period from 2001 to 2008, while the world ceramics trade grew at
a CAGR of 9.8%, the average growth in trade for these economies was around 14%.
The increased demand for ceramics in emerging markets may be attributable to rapid
economic growth and greater public and private sector investment in these countries.
Nigeria witnessed the highest growth in ceramics trade, with a CAGR of 29.4%.The
rapid increase in Nigeria’s ceramics trade was led by rapid increase in ceramics imports.
Ukraine, Russia and China followed Nigeria with a CAGR of21.6%, 21.2% and 20.3%
respectively. Despite a high base, China’s exports grew at a CAGR of 20.8% and
ceramic imports increased by 13.7%.During 2008, Vietnam imposed the highest5
customs duty of 60%, on ceramics, among the emerging economies under consideration.
This was followed by Thailand, which imposed a customs duty of 30%. Like India,
China and Ukraine imposed a customs duty of 10%, while Chile imposed a customs
duty of 6% and Singapore did not impose any customs duty on ceramic imports.

Level of Intra-Industry Trade

Intra-industry trade arises if a country simultaneously imports and exports similar types
of goods or services. The paper uses the Grubel Lloyd Index6, proposed byGrubel and
Lloyd in 1975, to determine the extent of intra-industry trade.

If the country only imports or only exports goods or services within the same sector,
such that there is no intra-industry trade, value of the Grubel – Lloyd Index reduces to
zero. On the other hand if the export value is exactly equal tithe import value, Grubel –
Lloyd Index takes a value of 1. The Grubel–Lloyd index therefore varies between zero
(indicating pure inter-industry trade) and one(indicating pure intra-industry trade).Since

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the value of the Grubel-Lloyd Index changes with an increase in deviation in country’s
imports and exports, low level of intra-industry trade in China may be explained by low
level of ceramics imports compared to exports. On the other hand, low intra-industry
trade in South Korea may be explained by low value of exports compared to imports.
While, China, Russia, South Korea and South Africa saw a drastic decline in theGrubel-
Lloyd Index values during the period from 2001 to 2008, the Index values for Brazil,
Singapore and USA increased.

INDIA’S TRADE PROFILE AND MARKET ACCESS

The ceramics industry in India came into existence about a century ago and has matured
over time to form an industrial base. From traditional pottery making, the industry has
evolved to find its place in the market for sophisticated insulators, electronic and
electrical items. Over the years, the industry has been modernizing through new
innovations in product profile, quality and design to emerge as a modern, world-class
industry, ready to take on global competition. The Indian Ceramic Industry ranks at 8th
position in the world and produces around 2.5% of global output. The industry provides
employment to 550,000people, of whom 50,000 are directly employed. Gujarat
accounts for around 70 %of total ceramic production. The ceramic products are
produced both in organized as well as in unorganized sector. The share of organized
sector in total production is around 55%. The organized sector is characterized by the
existence of a few large players7. Small and medium enterprises (SMEs) account for
more than 50 per cent of the total market in India, offering a wide range of articles
including crockery, art ware, sanitary ware, ceramic tiles, and refractory and stoneware
pipes among others.

Most of the players are grouped together in clusters. Over the last two decades, the
technical ceramics segment has recorded an impressive growth propelled by the demand
for high-alumina ceramics, cuttings tools and structural ceramics from the industry.
Overall, the Indian ceramics industry has emerged as a major manufacturer and supplier
in the global market.

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INDIA’S CERAMICS TRADE
During 2008, India was the 24th largest ceramic trading nation in the world and
accounted for a share of around 0.9% in total ceramics trade. During the period, from
2001 to 2008, India’s ceramics trade increased from US$ 143 million to US$738 million
at a CAGR of 22.2%. The increase in trade was led by rise in imports, which increased,
from US$ 60.9 million in 2001 to US$ 523.8 million in 2008, at afar of 30.9%. India’s
ceramic exports on the other hand increased at a CAGRof 12.8%, from US$ 82.3
million to US$ 214.5 million. China was India’s main source of ceramics imports,
during 2008 with imports worth US$ 317.5 million followed by Germany and Italy with
imports worth US$50.7 million and US$ 22.5 million, respectively. India’s top five
import sources together accounted for close to 82% of India’s total ceramics imports
during2008. China alone accounted for 60.7% of India’s ceramic imports.UAE, Saudi
Arabia and Malaysia were the major destinations for India’s Ceramics exports during
2008. India’s top five ceramics export destinations together accounted for 30% of
India’s total ceramics exports.

India’s sect oral competitiveness

This paper measures India’s changing pattern of trade specialization by applying an
approach originally adopted in Lafay (1992). The Lafay Index8 defines country’s trade
specialization with regard to a specific good as the difference between the trade balance
of that good and the country’s overall trade balance, weighted by the good’s share of
total trade. The Lafay index for the ceramics sector in India has been computed at
disaggregate level of 6-digit HS classification.

Intra-Industry Trade
The intra-industry trade in India’s ceramics sector after increasing until 2005 has shown
signs of falling since then. As figure IX, below shows the values of Grubel– Lloyd
Index after rising to 1 in 2005 have fallen to 0.6 in 2008. Since, the Grubel-Lloyd Index
measures the extent of intra-industry when the country simultaneouslyexports and

24
imports the same good, any divergence between exports and imports results in fall in
index values. Since, 2005 while India’sceramic imports picked up, the exports could not
keep up with the pace and hence led to a decline in Grubel-Lloyd Index values.

Major Inputs and Issues

The ceramics industry is a highly energy intensive sector. Petroleum and raw material
products together form the most critical component in the production of thesector. As
per the data from CSO, petroleum products and clay products account for ashore of
15.6% and 12.7%, respectively in the production of ceramic products. Other no-metallic
minerals and mineral products, bauxite etc. account for a share of 11.3%, 5.3% and
4.9% respectively. On the import duties front, while the tariffs on ceramic tiles are 10%,
the inputs used in the production process attract a customs duty of 5%, 7.5% and
10%.China became member of Bangkok Agreement (now known as Asia – Pacific
Trade Agreement) with effect from 1st January 2004 and ceramic tiles imported from
China are eligible for 57% concession on the applied rate of customs duty.
Presently customs duty rate on ceramic tiles from China is 4.3% since 1st March2007,
which is less than customs duty on any input for tiles creating an anomalous situation.
In the year 2007-08, out of total imports of Rs. 59,965 lakh of tiles under tariff heading
6907and 6908, imports from China were Rs.45,477lakh.

FIRM LEVEL PERFORMANCE

The main ceramic articles in the industry are the Wall tiles, Floor tiles, Vitrified tiles
and Porcelain tiles, with respective market shares of 35 percent, 53 percent9 Union
Budget 2010-11: An Analysis, Ciano 12 percent. There have been a few initiatives in
the past at the national and International level for constant technological and quality up

25
gradations to make the industry globally competitive. The National Program for Energy
Efficiency ins ME Ceramic Industries, A Joint UNIDO – DIPP Project is a major
initiative in India to reduce the energy costs, improve productivity, foster market
linkages and promote the Indian brand image. Ceramics products are one of the major
inputs of the construction sector.
However, as the graph below shows, there is not a very high degree of correlation
between the two sectors. During 2002-03, while the growth in Profit After Tax (PAT) of
ceramics sector increased, the PAT of construction sector declined. It was only from
2004-05 to 2006-07, that growths in PAT of ceramics and construction sector show a
mirror image of each other.

Structure of the Indian Ceramics Industry

In India ceramic items like crockery, sanitary ware, art ware, refractory, stoneware pipes
and many others are manufactured in the Small and Medium Enterprises (SME) sector.
The structure of Indian ceramics industry is highly fragmented with very few large
players and a large number of SMEs who face problems of poor economies of scale.

Profitability of Ceramics Companies

To evaluate the competitiveness of firms in the Indian ceramics industry, the paper
measures the dispersion in the performance of all the public listed ceramics
manufacturing companies in India, on the basis of following parameters

• Profit Margin: It measures how much profit a company earns out of every rupee
of sales. It is calculated as PAT/Net Sales.
• Interest Incidence: Interest incidence measures the burden of interest expenses on
total profits of the company. It is used to measure the cost of borrowed capital for a
company.

26
• Gross Fixed Assets Turnover Ratio: Gross fixed assets turnover ratio measures
how efficiently fixed assets are utilized to generate sales. These performance indicators
have been chosen, since it is possible to compare these indicators across companies,
irrespective of their size and years of operation.

Competitiveness of Firms

In the overall profitability rankings, HSIL Ltd was the most profitable company in the
Indian market, followed by Nitco Ltd and H&R Johnson India Ltd. Over period from
2000-01 to 2008-09, the profits of HSIL Ltd grew at a CAGR of 31%,and that of Nitco
Ltd increased by 17%.

Profit Margin
A look at the profit margin of all the ceramics companies in India shows that the profits
per rupee of sales stood in the range of 0.01% and 0.30%, during 2008-09.
Interest Incidence
Interest incidence during 2008-09 was in the range of 5% to 20%. The various liquidity
infusion measures that the Reserve Bank of India initiated towards the latter half of
2008 to reduce the cost of credit for Indian industry.

Gross Fixed Assets Turnover Ratio

During 2008-09, the gross fixed assets turnover ratio for Indian ceramics companies 0%
to 3%.

3.2 COMPANY PROFILE

CUMI was founded in 1954 as a tripartite collaboration between the Murugappa Group,
The Carborundum Co., USA and the Universal Grinding Wheel Co. Ltd., U.K.

27
The company pioneered the manufacture of Coated Abrasives and Bonded Abrasives in
India in addition to the manufacture of Super Refractories, Electro Minerals, Industrial
Ceramics and Ceramic Fibres. Today the company's range of over 20,000 different
varieties of abrasives, refractory products and electro-minerals are manufactured in ten
locations across various parts of the country.

With state-of-the art facilities and strategic alliances with global partners, CUMI has
achieved a reputation for quality and innovation. CUMI is one of the five manufacturers
in the world with fully integrated operations that include mining, fusioning, wind and
hydro power stations, manufacturing, marketing and distribution.

Almost all of CUMI's ten manufacturing facilities have received the ISO 9001:2008
accreditation for quality standards. A well connected marketing and distribution
network of offices and warehouses in India and abroad, ensure that service to customers
is given prime importance.

CUMI's constant innovation and product up gradation, through in-house R&D and
strategic alliances with global leaders in grinding technology, have not only ensured it
market leadership in India and abroad, but also international recognition as a
manufacturer of quality abrasives and a provider of total grinding solutions.

Carborundum Universal Limited manufactures and sells abrasives, ceramics (industrial

ceramics, refractories) and electro minerals. The Company operates in Abrasives,
Ceramics, Electro-minerals, information technology (IT) services and Power segments.
Abrasive segment consists of bonded, coated, processed cloth, polymers, power tools
and coolants. Ceramics consists of super refractories, industrial ceramics, bio ceramics,
ceramic fiber products, anti-corrosives and calciastabilised zirconia. Electro minerals
segments include abrasive / refractory grains, micro grits for the photovoltaic industry
and captive power generation from hydel power plant.

IT services include Web enabling services and digitized data capture. Power denotes the
generation of power from natural gas.

Carborundum Universal Ltd is a largest high alumina ceramic manufacturing company

in India. They are an industrial ceramic material-based products and service provider,
with operations spread across three business segments namely Abrasives, Ceramics and

28
Electro minerals. They pioneered the manufacture of coated and bonded abrasives in
India, besides super refractories, electro minerals, industrial ceramics and ceramic
fibres. The company's major customers include bearing, automobile and auto ancillary,
alloy steel, foundry and forging, fabrication and general engineering industries.

The company products are manufactured in fourteen locations across various parts of
the country in which all their manufacturing units are ISO 9001:2000 certified. The
company has their presence in 43 countries and also has 200,000 retail outlets.
Carborundum Universal Ltd was incorporated in the year 1954 as a joint venture
between Carborundum company, USA, Universal Grinding Wheel company, UK and
Murugappa Group, India. Within ten year, they acquired a coated abrasives facility from
Ajax Products Pvt Ltd and set up a bonded abrasive facility at Thiruvottiyur in Chennai
and bauxite mining in Bhatia. In the year 1978, the company acquired the Eastern
Abrasives Ltd which is a coated abrasives manufacturer in Kolkata.

In the year 1982, the company established MMTCL as a joint venture company with
Morgan Group plc for manufacturing ceramic fibres. The company had collaboration
with Wendt GmBH of Germany, Morgan Crucible Co, UK, and also a Joint venture in
Australia for the supply of wear resistant ceramics to coal washers. The industrial
ceramics division was started in the year 1991 in technical collaboration with Coors
Ceramics, USA and the manufacturing plant is located at Hosur in Tamil Nadu. During
the year 1994-95, in order to augment infrastructure facilities, the company
commissioned a 2 MW wind farm at Perungudi, Tamilnadu. Cut fast Abrasive Tools
Ltd, Eastern Abrasive Ltd, Cut fast Polymers Ltd and Carborundum Universal
Investment amalgamated with the company with effect from April 1, 1997.

During the year 1999-2000, the company set up a 5 MW natural gas based thermal
power plant in Tiruvarur with an outlay of Rs 16 crores. In March 2002, the company
commissioned the cloth processing facility at Maraimalainagar in Tamil Nadu. Sterling
Abrasives Ltd, which is engaged in bonded abrasives business, and SEDCO, which
operates a 5.5 MW natural gas based thermal power plant in Tamil Nadu became the

29
subsidiary of the company with effect form March 31, 2003. During the year 2003-04,
the company acquired 51% stake in CUMI Australia Pty Ltd.

During the year 2004-05, the company established state-of-the art facilities for certain
product lines in their Tiruvottiyur and Pallikaranai plants and also they installed new
kilns in their Hosur industrial ceramics plant and the Ranipet super refractories plant.
During the year 2005-06, the company set up a 100% subsidiary with the name CUMI
Middle East FZE in Ras Al Khaimah, UAE to promote exports in the region and also in
February 2006, they set up a 100% subsidiary in Canada, CUMI Canada Inc and
acquired the business of a coated abrasive supplier, Abrasive Enterprises Inc at an
investment of 2.25 million Canadian Dollars.

In October 2006, the company acquired 48.7% stake in SanheYanjiaoJingri Diamond

Industrial Company Ltd, which is engaged in the manufacture of synthetic diamond
grits, which serves as a raw material for super abrasives. The coated abrasive plant at
Sriperumbudur in Tamil Nadu commenced their production in December 2006. During
the year 2006-07, the company consolidated their coated abrasive back-end operations
of cloth processing and polymer manufacturing at Maraimalai Nagar near Chennai. In
order to strengthen their position in the monolithic market, the company acquired two
industrial units at Jabalpur, Madhya Pradesh, one, which manufactures monolithic
refractories and the other high quality refractory cement, which is an input for
monolithic refractories. Also they completed the first phase expansion of silicon carbide
during the year.

Prodorite Anticorrosives Ltd, a wholly owned subsidiary of the company merged with
the company with effect from April 1, 2007 which is engaged in the business of acid
resisting cements, corrosion resisting products, polymer concrete and fibre reinforced
plastics. Also, the company set up a 100% subsidiary in Cyprus, CUMI International
Ltd with an investment of nearly Rs 100 crores. CUMI International Ltd acquired 86%
stake in Volzhsky Abrasive Works, Russia which is ranked as the world’s second

30
largest silicon carbide manufacturer, with an installed capacity of 65,000 tons per
annum.

In November 2007, CUMI acquired the engineered ceramic business of IVP Ltd
in Aurangabad to strengthen their presence in the high alumina ceramics business.
During the year 2007-08, the company commissioned a modern 2000 tonne facility for
resin bonded abrasives and a 1000 tonne vitrified bonded abrasives plant and also they
spent Rs 1030 million for the greenfield / brownfield expansions, new product and
technology up gradation projects.

They set up new automated plant at Hosur for manufacturing wear resistant liner
tiles at a cost of Rs 318 million. The company is in the process of setting up a green
field facility in Vellore district in order to strengthen their position in the fired
refractories segment. In July 2008, the company entered into an agreement with Foskor
(Proprietary) Ltd, South Africa to acquire 51% equity stake in Foskor Zirconia
(Proprietary) Ltd, Phalaborwa, South Africa which is engaged in the manufacture of
zirconia and fumed silica.

Quality Policy of CUMI

We shall proactively meet customer expectations by providing quality products and

services. This will be achieved through:
• Total commitment of the management in implementing an effective quality
management system.

31
 • Continual technology development to fulfill changing needs of the customer.
• Total employee involvement for continuous improvement.
• Enhancing employee competence through education and training.
• Building mutually beneficial relationship with supplier.
Vision
“To become an admired company in abrasives and technical ceramics driver by
innovation continuously enhancing stock holder’s wealth”.
Mission
“protect environment through innovative solutions for structures and corrosives
handling”.

• Construction
• Protection
• Rehabilitation

3.3 PRODUCT PROFILE

The company pioneered the manufacture of coated abrasives and bonded abrasives in
India in addition to the manufacture to the super refractoriness, electro minerals,
industrial ceramics and power tools. Today the company’s range over 20000 different
varieties of abrasives, refractory products and electro minerals are manufactured in ten

32
 locations across various parts of the country. CUMI’s products are being exported to 43
countries across North America, Europe, Australia, South Africa and Asia.

Following are the products manufactured in CUMI

• Bonded Abrasives
Grinding wheel is made. It is used for polishing, cutting, reducing thickness. The
industries under bonded abrasives are auto industries, fabrication industries, steel
industries, construction and bearing.CUMI make crankshaft, rubber control, ball
grinding, and vitrified centre less etc…manufactured in Thiruvottiyur, hosur and
uttarkand.

• Coated Abrasives
It is made of cloth, paper and fibre.with this it can be made in the form of roll,
sheet, belt and disc. It is used for woods, wall remover, flooring and fabrication.CUMI
makes fiber disc, paper sheets, cloth sheets, cloth disc, and paper Disc, cloth rolls, paper

33
 rolls, coated ceramics etc...Manufactured in Sriperambathur, Kolkata, MM nager,
Uttarkand.

• Industrial Ceramic
It is a high type Alumina. Industries served are Power generation, Cement,
Coal Washery, Armour, Steel Industry, Fluid Handling, Power Distribution Equipment,
and Ceramic Tiles. It is ceramic tiles used for Ball mills and Grinding Media.
Manufactured in Hosur, Aurangabad.

• Super Refractories

34
 It is of low Alumina type. It is the Bricks/ Batts used for kiln purpose. Industries
under Super Refractories are Ceramics, Glass Industries, Cement, Carbon Black,
Chemical Process, Sponge Iron, Non Ferrous, Iron & steel, Foundry and Power
Generation. Manufactured in Ranipur, Serkand (Vellore), Jabalpur.

• Electro Mineral Division

It is the business of Brown Fused Alumina, White Fused Alumina, Silicon
Carbide and High Quality Micro Grits. It also offers other Fused and Sintered products
for various applications like Abrasives, Refractories, Metallurgical, Blasting, Rice
Polishing etc. Manufactured in Cochin, Kakanadu, Okha (Gujarat).

• Power Tools

35
 It is used for Construction, Wood Working, and Metal Working. CUMI has
variety of Power Tools for Construction Industry applications. It involves installing of
the wooden features to get a decorative appearance of the interior or exterior of the
Wood Working. For Metal Working CUMI has range of products to perform various
applications. CUMI Angel Grinder and Cut-off machines are widely used in Grinding
applications, Pipe cutting process in the industry.

MAJOR CUSTOMERS
• TELCO -Pune
• BAJAJ -Pune
• FAG Precision Bearing -Pune
• NEI -Raipur
• TVS -Chennai
• BHARATH EARTH MOVER -Bangalore
• BILL FORGE PRIVATE LTD -Bangalore
• FEDERAL MOGUL GOETZE INDIA LTD -Bangalore

CHAPTER IV
36
 REVIEW OF LITERATURE

4.1 LITERATURE REVIEW

1. TITLE: “THE RESEARCH OF CASH FLOW MANAGEMENT IN GROUP

ENTERPRISE”

BY: SPRINGER BERLIN HEIDELBERG

Abstract: Cash is the important assets of enterprise, and cash flow is compared to the
enterprise’s blood, which is formatted by the cash inflow and outflow. Combining with the
present situation of the current cash flow management research and the general flow of cash flow
management of group enterprise, some existing problems of cash flow management situation of
L Group enterprise had analyzed. And cash flow management model of L Group enterprise was
put forward in the paper, from those aspects of in construction of the organization, cash flow
analysis, budget management, operation management, risk control, performance evaluation and
system guarantee.

Keywords:Cash flow Cash flow budget Cash flow management Group enterprise

2. TITLE: “A REVIEW OF ACADEMIC RESEARCH ON THE REPORTING OF CASH

FLOW FROM OPERATION”

BY : JEFFREY HALES

GEORGIA INSTITUTE OF TECHNOLOGY - SCHELLER COLLEGE OF BUSINESS

Abstract: We provide a comprehensive review of academic research related to direct method

cash flow presentation. While many financial statement users have stated a preference for the
direct method, few accounting standard setters around the world have required it, and, given a
choice, most entities present operating cash flows using the indirect method. Our review
indicates that academic research has generally found direct method cash flow information to be
decision useful. Also, research finds that direct method information is reflected in stock prices
indicating that users appear to utilize this information when available. However, there are, as of
yet, no studies detailing how this information makes its way into stock prices. Finally, the
evidence we review suggests that direct method information is economically significant and that
the recurring benefits than many firms derive from providing direct method information likely
exceed recurring costs.

37
Our review should be of interest to academics researching cash flow reporting and also to policy
makers as they continue debating the merits of the direct method presentation of operating cash
flows.

Keywords: Cash flow from operations, Direct method, Statement of cash flows

3. TITLE: “ON THE ANALYSIS OF FIRMS’ CASH FLOWS”.

BY: JAMES A. OHL SON;W.P.CAREY CHAIR IN ACCOUNTANCY,

SCHOOL OF ACCOUNTANCY.

Abstract: This paper revisits the why and how of cash flows analysis. The analysis maintains a
strict common share holders’ perspective with an equity valuation focus. The paper argues that
analysts turn to cash flows to evaluate the potential ambiguity inherent in accruals. The GAAP
statement of cash flows, however, (i) relies on a too narrow concept of cash and (ii) lacks a clear
bottom-line directly comparable to net income per GAAP. To circumvent (i) and (ii), the paper
proposes a framework of Modified Cash Accounting (MCA). A MCA statement of cash earnings
satisfies a crucial property: It works like a regular income statement yet eschews all accruals.
The paper discusses not only how one motivates and develops a MCA statement of cash
earnings, but also how it should be put to use. A crucial issue deals with how one compares the
two bottom-lines -- GAAP income vs. that of MCA cash earnings -- given alternative growth
scenarios. The paper shows how one can estimate a “normal accrual”, which can be added to
MCA cash earnings, given assumptions about the firm

Key Words: Modified Cash Accounting, cash earnings.

4. TITLE: A STUDY ON "IMPACT CASH FLOW REPORTING ON THE INDIVIDUAL

SHARE HOLDER’S INVESTMENT DECISION MAKING"

BY: ROHIT KUMAR SHAR

Abstract: The investment by the retail investors is ought to be most critical in the capital market. The
reason of this because they have the least amount of expertise in the domain of financial report analysis
and understanding the basic concepts of the financial statements. Moreover, understanding accounting
jargons is not a cup of tea for everyone. Thus, the research is an attempt to study the impact of cash flow
reporting on the individual shareholders investment decision. The study reveals that the investors are not
confident about the impact of the cash flow reported on their investment decision process.

Key Words: Investment Decision, Earnings, Cash flow.

38
5. TITLE“THE CASH-FLOW STATEMENT –BETWEEN TRUE AND MANIPULATION”

BY: OVIDIU MEGAN, CAMELIA HAŢEGAN, LEONORA CACIUC,BOGDAN COTLET

Abstract: financial statements aim is to assure an efficient dialogue between the company and
the external operators interested in having a good perspective of the entity .information about the
cash flows, as component of financial statements, is useful in providing users of financial
statements with a basis to assess the ability of the entity to generate cash and cash equivalents
and the needs of the entity to utilize those cash flows. the objective of our paper is to present the
main informational valences of cash-flow statement for investors and also to show the potential
“make-up actions” made to give wrong information about a company for the decision makers.
for this purpose we will use a research methodology based on are search study by questionnaire
on a sample of small and medium enterprises.

Keywords: cash-flow, financial statements, decisions, manipulation

39
The original model for the O-Score was derived from the study of a pool of just over
2000 companies, whereas by comparison its predecessor the Altman Z-Score considered
just 66 companies. As a result, the O-Score is significantly more accurate a predictor of
bankruptcy within a 2-year period.

The original Z-Score was estimated to be over 70% accurate with its later variants
reaching as high as 90% accuracy.

The O-Score is more accurate than this. However, no mathematical model is 100%
accurate, so while the O-Score may forecast bankruptcy or solvency, factors both inside
and outside of the formula can impact its accuracy.

Furthermore, later bankruptcy prediction models such as the hazard based model
proposed by Campbell, Hilscher, and Szilagyi in 2011 have proven more accurate still.
For the O-Score, any results larger than 0.5 suggests that the firm will default within
two years.

Lenmox (1999) carried on a study on 949 UK listed companies for a period of 7 years
ranging from 1987 to 1994 and applied discriminant analysis in his study to identify the
most important determinants of bankruptcy. His study demonstrated that the industry
sector, company size and the economic cycle have important effects on the likelihood of
corporate failure, which is expected to increase when the company in question is
unprofitable, is highly leveraged and it has liquidity problems.

Charitou et al. (2004) conducted a study on 51 matched pair of UK public industrial

firms for a period of 10 years ranges between 1988 and 1997 to predict the financial
distress and thus applied discriminant analysis to develop a reliable business failure
prediction model. The above model can be used to assist investors, creditors, managers,
auditors and regulatory agencies in UK to predict the probability of business failure.

Bhunia and Sarkar (2011) carried on a study on 64 private pharmaceutical companies

for a period of 10 years since 1996 to 2005 and applied multiple discriminant analysis
on selected financial ratios from different segments like liquidity, profitability, solvency
and efficiency to develop a business failure prediction model.

40
4.2 BALANCE SHEET.

41
42
43
44
 CHAPTER V

DATA ANALYSIS AND INTERPRETATION

5.1 Z -SCORE MODEL

• WORKING CAPITAL TO TOTAL ASSET

TABLE

• PERCENTAGE= WORKING CAPITAL/TOTAL ASSET

INTERPRETATION

• a= working capital to total assets .the working capital increases during the study
period.this ratio shows the upgrowth.

45
 GRAPH

• RETAINED EARNINGS TO TOTAL ASSETS

TABLE

INTERPRETATION

• b= retained earnings to total assets. The retained earnings of company have rise in over
the five years through profit.
GRAPH

46
• EBIT TO TOTAL ASSET
TABLE

• PERCENTAGE = EBIT/TOTAL ASSETS

INTEPREATION

• c= earnings before interest and tax to total assets. the company has a lowest percentage
in 2013-2014 and has shown a growth over the next four years.

• BOOK VALUE OF EQUITY TO TOTAL LIABILITIES

TABLE

YEAR BOOK TOTAL PERCENTGE

VALUE OF LAIBILITIE
EQUITY S

2013-2014 7335.7 3135.33 2.339689921

2014-2015 8758 2748.19 3.186824783

2015-2016 9584.3 3119.6 3.072284908

2016-2017 10550.3 2422.86 4.354481893

2017-2018 11696.7 2661.9 4.394116984

47925 14087.88 3.401860322

• PERCENTAGE = BOOK VALUE OF EQUITY/ TOTAL LIABILITIES

INTREPREATION

47
• d= book value of equity to total liabilities the company liabilities have been fluctuating
over the five years and book value of equity has been increase over the five years. the
percentage have shown a growth.
GRAPH

E-SALES TO TOTAL ASSETS

TABLE

• PERCENTAGE= SALES/TOTAL ASSET

INTERPREATION

• e= sales to total asset. the company sales have shown a good progress in sales

48
 GRAPH

ANALYSIS OF Z-SCORE

TABLE

YEAR A *1.2 B*1.4 C*3.3 D*.6 E*1 Z-SCORE ZONES

2013- 0.02969 0.1767952 0.0363405 1.4038139 0.1076037 1.7542466 GREY

2014 3126 74 85 53 06 43 ZONE

2014- 0.31332 1.6222830 0.3553336 1.9120948 1.0232855 5.2263261 HEALTH

2015 901 69 47 7 66 62 Y ZONE

2015- 0.27279 1.4295408 0.4582214 1.8433709 1.0024480 5.0063794 HEALTH

2016 8117 5 91 45 67 7 Y ZONE

2016- 0.32254 2.0957513 0.4565965 2.6126891 1.0658929 6.5534728 HEALTH

2017 285 82 42 36 67 77 Y ZONE

2017- 0.39354 2.1775652 0.4750532 2.6364701 1.0804674 6.7631042 HEALTH

2018 8118 22 78 9 55 63 Y ZONE

49
INTERPRETATION

• after analyzing the z-score for the past five years there has been a grey zone on
2013-14 and healthy zone for the years from 2014-2018 & 2019
• Grey zone- average level
• Healthy zone- high level.
GRAPH

GROWTH RATE CALCULATION FOR REVENUE

TABLE

YEARS VALUE

2013-2014 11276

2014-2015 11518

2015-2016 12735

2016-2017 13828 8.30%

2017-2018
15514
&2019

50
 FORMULA

V1(1+ GROWTH)4= V5

V1=11276

V5=15514

GROWTH=8.30%

INTERPRETATION

• The growth rate of revenue is positive as the revenue has increased.

GRAPH

GROWTH RATE CALCULATION OF PROFIT BEFORE TAX

TABLE

FORMULA

FORMULA

51
V1(1+ GROWTH)4= V5

V1=1024

V5=2052

GROWTH=18.98%

INTERPREATATION

• as the growth rate is 18.98%, it has been going on positive manner

GRAPH

GROWTH RATE OF CALCULATIONS OF EPS

TABLE

FORMULA

V1(1+GROWTH)4=V5

52
V1=3.9

V5=7.6

GROWTH=18.151%

INTERPRETATION

• the eps rate groth was 3.9 in 2013-14 but it increased to 7.9 in 2014-15 with the
growth rate of eps is 18.15 in positive manner.

GRAPH

GROWTH RATE CALCULATION OF Z-SCORE

TABLE

FORMULA

V1(1+GROWTH)4=V5

V1=1.75426643

53
V5=6.763104263

GROWTH=40.124%

INTERPREATATION

• BASED ON THE Z-SCORE THE GROWTH RATE HAS INCREASED FROM

6.55 DURING 2016-17 TO 6.76 DURING 2017-18.
GRAPH

CALCULATIONS OF TREND

REVENUE

TABLE

INTERPRETATION

• An attempt was made to find the trend percentage for the revenue, the base value
for the year 2013-14 was fixed as 100 and the trend value for the year 2014-15 was
102.14, 2015-16 was 112.93,2016-17 had the trend value of 122.63 and it became
137.58 for 2017-18.

54
GRAPH

PROFIT BEFORE TAX

TABLE

INTERPRETATION

• The base value to find the trend percentage for the profit before tax for the year
2013-14 was fixed 100 and it became 200.390 for the year 2017-18.

55
GRAPH

EARNINGS PER SHARE

TABLE

INTERPERATATION

• For earnings per equity share the base value was 100 for 2013-14 and raised to
194.871 for 2017-18 & 2019.

56
GRAPH

Z SCORE

TABLE

INTERPRETATION

• Even though the trend percentage for the z-score the base level for the year 2013-14
was 100,it became 385.527 in the year 2017-18 & 2019.

57
GRAPH

5.2 MILLER-ORR-MODEL

In the Miller-Orr model, when a company's cash balance reaches the upper or lower limit, the
company should purchase or sell enough securities to return the cash balance to the optimal
level.

Daily cash variance: 1000000 the cash variance in daily cash flow

Daily interest rate: 0.00025 the daily interest rate on marketable securities. This value
should be entered in decimal format (e.g., 0.025% should be entered as 0.00025)

Fixed transaction cost 100000 the fixed cost incurred by the company for buying or
selling market securities

Minimum cash balance 500000 the minimum cash balance that is acceptable to the
company's management

Optimal cash level: 566,943.30

Upper limit on cash: 700,829.89

58
5.3 LIQUID RATIO:
CURRENT RATIO
Formula:

Current Ratio = Current asset/ current liabilities

CR = 11552.20/4185.81
= 2.75984815

QUICK RATIO:
Formula:

quick ratio=Current asset – inventory / current liabilities.

= 11552.20-4380.24 / 4185.81
= 1.71339836

ABSOLUTE RATIO:
Formula:

Absolute ratio =cash /current liabilities

=195.67/4185.81
= 0.0467

59
 CHAPTER VI

6.1 FINDINGS

• On analyzing the Z -Score, it has to be calculate the four components (x1, x2, x3,
x4) for non-manufacturing companies

• The X1 component ratio shows a huge decline in 2017 from 0.56 to 0.18.

• The X2 component value is zero because there is no retained earnings for the past
five years.

• The X3 component ratio indicates the poor financial performance in the year 2017
with the value of 0.02.

• The X4 component value is fluctuating every year. And it declines over the study
period from 0.47 to 0.42 in 2017.

• On analyzing the Z-Score for the past five years, there is an occurrence of healthy
and grey zone with the value of 2.39, 2.33, 3.47, 4.24, and 1.70. And there is a
scope for the further improvement.

• The growth rate calculation for the revenue has the value of -8.65%. It shows that
there is decline for the past 5 years.

• The growth rate calculation for profit before tax has the value of -78.86%. There is
a huge decline in the net profit.

• The growth rate calculation for earnings per equity share has the value of -7.78%.

• The growth rate value of z-score is –8.18% it seems that there is no growth for the
past five years.

• An attempt was made to find the trend percentage for the revenue, the base value
for the year 2012-13 is fixed as 100 and the value is 69.98, 89.30, 62.03, and 69.51
for the year 2013-14 to 2016-17 respectively.

60
• An attempt was made to find the trend percentage for the profit before tax, the base
value for the tear 2012-13 is fixed as 100 and the value is 65.21, 47.24, 77.15, and
20.16 for the year 2013-14 to 2016-17 respectively.

• An attempt was made to find the trend percentage for the earnings per equity share,
the base value for the tear 2012-13 is fixed as 100 and the value is 708.69, 26.08,
78.26, and 0 for the year 2013-14 to 2016-17 respectively.

• An attempt was made to find the trend percentage for the Z-Score, the base value
for the tear 2012-13 is fixed as 100 and the value is 97.48, 145.18, 177.40, and
71.12 for the year 2013-14 to 2016-17 respectively.

• An attempt was made to find the time series regression for various like revenue,
profit before tax, earnings per equity share and z-score.

• The time series regression was calculated for the next four years(2018, 2019, 2020,
2021) respectively. The time series is used to predict the upcoming year’s growth
and value is projected to be 2.98, 3.04, 3.09 and 3.14.

• The frequently incurred expenses are employee benefit expenses and other
expenses. In employee benefit expenses, the salaries and incentives had the higher
percentage for the past five years and the value is projected to be 87.51, 86.71,
90.28, 90.40, 90.46

• The frequently incurred other expenses are professional and consultancy charges,
commission paid, rent and telephone expenses.

• The professional and consultancy charges percentage for the past five years (2012-
13 to 2016-17) are 21.31, 20.40, 31.75, 25.98, and 26.48.

• The commissions paid percentage for the past five years (2012-13 to 2016-17) are
13.13, 9.16, 12.24, 4.38 and 10.50.

• The rent expense percentage for the past five years (2012-13 to 2016-17) is 25.83,
29.29, 23.94, 29.69 and 24.60.

61
• The telephone expenses percentage for the past five years (2012-13 to 2016-17) are
6.79, 7.41, 5.83, 6.81 and 4.69.

• In a Segmental Reporting, the Brokerage segment earns a lower value 0.017, 0.145,
0.207, 0.144 and 0.144 for the year 2012-2013 to 2016-2017 respectively.

• When the cash payments are uncertain, Miller-Orr model can be used. This model
places upper and lower limits on cash balances.

• When the upper limit is reached, a transfer of cash to marketable securities is

made; when the lower limit is reached, a transfer from securities to cash is made

• Through miller orr model the cash optimal level of cumi 566943.5 has been
calculated

• The upper limit of cash is 700,829.89

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6.2 SUGGESTION

• They should reduce their incentives expenses.

• They should reduce their employee benefit expenses.

• They should also reduce their commission paid expenses to increase the profits.

• To reduce the rent expenses, they should re-locate the office place.

• There should be acceleration of receivables to increase the net profits.

• They should concentrate on brokerage segment to increase the revenue.

• They should also concentrate on PMS & Windmill segment to increase the revenue.

• Merger is one of the option to prevent bankruptcy.

• They should focus on the current assets to maintain the Working Capital.

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6.3 CONCLUSIONS

The Z-Score and miller orr model is a valuable management tool to proactively
assess the financial condition of the company’s , uncover factors that are stressing the
balance sheet and initiate actions to improve the financial wellness and credit
worthiness of the firm. All business decisions and actions are ultimately revealed in the
company’s balance sheet. The Z-Score measures the effectiveness of business decisions
on cumi. It empowers managers to anticipate changes occurring in credit worthiness and
proactively manage changes in financial condition.

The Z Score gives business managers an important negotiating tool to defend

their credit rating during capital raises when excess leverage or deficient levels of
working capital and equity are present.

The miller orr model give the optimal cash balance that the company as to hold
in the hand for prevent the company from uncertain risk

To be a profitable business, a company must have total expenses lower than the
gross profit.so the company should reduce their expenses and to perform well to prevent
the Bankruptcy.

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 CHAPTER VII

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