CHAPTER –I

1.1 INTRODUCTION TO THE STUDY

Finance is regarded as the life blood of the business enterprises. Financial

management is that managerial activity concerned with the planning and controlling of the
firm‘s financial resources.it was a branch of economics till 1890, and as a separate discipline,
it is of recent origin. Still, it has no unique body of knowledge of its own, and draws heavily
on economics for its theoretical concepts even today.
The subject of financial management is of immense interest to both academicians and
practicing managers. It is of great interest to academicians because the subject is still
developing, and there are still certain areas where controversies exist for which no unanimous
solutions have been reached as yet. Practicing managers are interested in this subject because
among the most crucial decisions of the firm are those which relate to finance, and an
understanding of the theory of financial management provides them with conceptual and
analytical insights to make those decisions skillfully.

DEFINITION
―Business finance is that business activity which is concerned with the acquisition and
conservation of capital funds in meeting financial needs and over all objectives of business
enterprises‖

NATURE OF FINANCE
The term ―Finance‖ can be defined as the management of the flows of money through
an organization. A bank‘s and finance corporation success and its survival depend upon how
efficient it is able to generate funds, as and when needed. Financial management refers to that
part of the management activity which is concerned with the planning and controlling of
banks and Finance Corporation, financial resources, managing, controlling of banks and
finance corporation financial resources. Managing of finance is on important task in industry.
It requires both short-term and long-term planning.

1
SCOPE OF FINANCE

Firms create manufacturing capacities for finance providing, some provide services to
customers. They sell their finance or services to earn profit. They raise funds to acquire other
facilities. Thus, the four most important activities of a business firm are:
 Production
 Marketing
 Finance
 Human Resource management
A firm secures whatever capital it needs and employs it (financial activity) in activities,
which generates Return on investment.

FINANCE FUNCTIONS
The functions of raising funds, investing them in assets and distributing returns earned
from assets to shareholders are respectively known as financing decision, investment decision
and dividend decision. Thus finance functions include:
 Long-term assets-mix or investment decision.
 Capital mix or finance decision.
 Profit allocation or dividend decision.
 Short- term asset-mix or liquidity decision.

OBJECTIVES OF FIRM
Profit maximization
 To Maximizes the income of the firm
 Resources are efficient utilization of the financial resource.
 Appropriate measure of Finance performance
 To Serves interest of society also
Shareholders‘ wealth maximization
 To provide fair dividend to the shareholders.
 Maximizes the net present value of a course of action to shareholders.
 Fundamental objective-maximize the value of the firm‘s shares.

2
Financial goals and firm‘s mission and objectives:

 Firms‘ primary objective is maximizing the welfare of owners, but, in

operational terms, they focus on the satisfaction of its customer through the
finance providing and services needed by them.
 Firms state their vision, mission and values in broad terms.
 Wealth maximization is more appropriately a decision criterion, rather than an
objective or a goal.
 Goals or objectives are mission or basic purposes of a firm‘s existence.
 The shareholders‘ wealth maximization is the second-level criterion ensuring
that the decision meets the minimum standard of the economic performance.
 In the final decision-making, the judgment of management plays the crucial
role. The wealth maximization criterion would simply indicate whether an
action is economically viable or not.

OVERVIEW OF FINANCIAL PERFORMANCE

DEFINITION:
The process of evaluating businesses, projects, budgets and other finance related
entities to determine their suitability for investment. Typically , financial analysis is used to
analysis whether an entity is stable ,solvent, liquid or profitable enough to be invested in
when looking a specific company the financial analyst will often focus on the income
statement, balance sheet and cash flow statement. One key area of financial analysis involves
extrapolating the company‘s past performance into an estimate of the company‘s future
performance.

SIGNIFICANCE OF THE FINANCIAL PERFORMANCE

The basis of financial planning, analysis and decision-making is the financial
information. Financial information is needed to predict, compare and evaluate the finance
corporation earning ability. It is also required to aid in economic decision making, investment
and finding decision- making. The financial information of the enterprise is contained in the
financial statement of according reports.

3
 According to the financial system of finance is the information‘s are the main source
to evaluate the financial performance of firm. The accounting system helps to accumulate,
measure and communicates financial information to various users for making economic
decision. The users of financial information include owner, creditors, manager, employees,
customer, depositor, government and society in the business environment.

The financial statement balance sheet and profit and loss account are the basis
instruments of an accounting system of communicate financial information to users, balance
sheet shows the financial condition or the statement of the finance corporation at a particular
point of time. More specifically, balance sheet contains detailed information about the
finance corporation assets and liabilities. Assets represent economic resources possessed by
the finance corporation. Fixed assets are used in business for more than accounting period of
one year, while current assets are converted into cash payable within an accounting period are
called current liabilities funds contributed by owner equity. Thus balance sheets give concise
summary for the banks resources and obligations and measure the finance corporation
liquidity and solvency.
The profit and loss account shows the profitability of the finance corporation by
giving details above revenues and expenses. Revenues are benefits which customers
contribute of the finance corporation in exchange for goods of services provided by the
finance corporation.
The cost of the economic resource use in providing goods and service to the
customers is called expenses. Thus the basis purpose of the profit and loss account is to
provide a concise summary of the finance corporation revenues and expenses during a period
of time and measure its profitability.
The computation of accounting profit is affected by the arbitrary allocation of
expenditure between revenue expenditure (expired cost) and capital expenditure (unimpaired
cost). Price level changes complicate the measurement of the accounting profit. In decision
making situation, the financial manager needs to focus on cash flows and economic definition
of profit.
Financial statement are used by the management as the basis for planning operations
including procurement of procurement of adequate financing and as a means of exercising
control financing position of the business and efficient and profitable use of assets. An
understanding of different aspects of financial statement is necessary for the development of
financial skills.

4
1.2 STATEMENT OF THE PROBLEM:
`Many financial performances are calculated on the basis of the balance sheet figures.
This figures as on the balance sheets data only and may not be indicative of the Year-round
position.

 Financial performances are calculated on the basis of past data. Therefore, they do not
provide complete information for future forecasting. Because, financial performances
are tools of quantitative analysis which are highly important to know qualitative point
of view of a business firm.
 Financial performances give flash result, if they are calculated form in correct
accounting data and mostly financial performances are distorted by inflation.
 Financial performances may be misleading, if they are pasted on flash or window-
dressed accounting information.

5
1.3 OBJECTIVES OF THE STUDY:

1. To examine the financial performance of the finance corporation

2. To identify financial strength and weakness of finance corporation
3. To find out the portability and liquidity position of the finance corporation.
4. To understand, to analyze and to suggest methods of improving the profitability.
5. To estimate the future earnings of the finance corporation based on the trend
percentage method.

6
1.4 SCOPE OF THE STUDY
 The study covers almost the entire area of financial operations covered by ―Sri
Maharani Finance Corporation Ltd‖ the study has been conducted with the help of
data obtained from audited financial records. The audited financial records are the
finance corporation annual reports pertaining to past 5 years from 2009-14and the
audited financial records are obtained from the finance corporation‘s annual report.
The research tries to measure the performance of the organization and its working
capital management in terms of financial wealth.
 This study will help in making some financial decision for further years.
 The study tells the detailed operations related to the firms operations and its efficiency
to be improved.
 Then the study clearly explains about at what areas they have to improve their
performance.

7
1.5 LIMITATIONS OF THE STUDY
 The use of estimates in allocating costs to each period. The ratios will be as
accurate as the estimates.
 The cost principle is used to prepare financial statements. Financial data is not
adjusted for price changes or inflation/deflation.
 Finance corporations have a choice of accounting methods . These differences
impact ratios and make it difficult to compare Finance Corporation using
different methods. However collection of entitle original financial data‘s for
this analysis is difficult due to confidential maintenance of some of the things
by this firm.
 Hence it is not possible to evaluate accurate financial performance of the firm.
 Finance Corporation may have different fiscal year ends making comparison
difficult if the industry is cyclical.

8
1.6 REVIEW OF LITERATURE
A personal of research studies in projects reveals that the topic of financial
performance and analysis of major interest to finance students over the last decade the topic
has been researched by a good number of management students. In this chapter the researcher
briefly brings to light some of the selected studies on the topic.
Debasissur, (1997) the working capital management refers to management of
working capital or to be more precise the management of current assets. A bank‘s working
capital consists of its investment in current assets which include short-term assets such as
cash and bank balance, inventories, receivable and marketable securities so the working
capital management refers to the management of the level of all these individuals current
assets.
Surendra S.Yadav P.K.Jain Ashish K.Raslogi (2001) estimated the importance of
working capital in any industrial concern needs no emphasis. The management of working
capital in one of the most important aspects of the overall financial management.
The existence of an adequate working capital and its careful management can make
substantial difference between the success and failure of an enterprise. Even in a well-
established business with a long history of successful operation, careful attention of
management of working capital can result in greater profitability.
Dr.D.Schundawat and Dr.Shurveer Singh Bhanawat (2000) reveals that in order to
earn sufficient profit a bank‘s has to depend on its sales activities apart from others. It is well-
known that sales are not converted into cash immediately i.e. there is a time lag between
occurrence of sale and realization of cash so an adequate amount of working capital is
required by a bank‘s in the form of current assets.
This happen simply due to operating cycle to cash cycle. It involves a) conversion of
receivable into cash. The amount of current assets which are kept by a bank‘s in hand lay in
and layout i.e. throughout the year is indicated as regular or fixed working capital whereas
seasonal increase or decrease due to seasonal requirements are designated as variable
working capital
Merger and acquisition for long have been an important phenomenon in the US and UK
economics In India also, they have now become a matter of everyday occurrence.

They are the subject of counting interest to different persons such as the business executives
who are looking for potential merger partners, investment bankers who manage the mergers,

9
lawyers who advice the parties, regulatory authorities concern with the operations of security
market and growing corporate concentration in the economy and academic researchers who
want to understand these phenomenon better.

Gallet C.A (1996), ―Merger and Market Power in the US Steel industry‖ He examine
the relationship between mergers in the U.S. steel industry and the market power. The study
employed New Empirical Industrial Organization (NEIO) approach which estimates the
degree of market power from a system of demand and supply equations. The study analyzed
yearly observations over the period between 1950 and 1988 and results have revealed that in
the period of1968 to 1971 merges did not have a significant effect on market power in the
steel industry; whereas mergers in 1978 and 1983 did slightly boost market power in the steel
industry.

Anup Agraval Jeffrey F. Jaffe (1999), ―The Post-merger Performance Puzzle‖ they
examines the literature on long-run abnormal returns following mergers. The paper also
examines explanations for any findings of underperformance following mergers. We
conclude that the evidence does not support the conjecture that underperformance is
specifically due to a slow adjustment to merger news. We convincingly reject the EPS
myopia hypothesis, i.e. the hypothesis that the market initially overvalues acquirers if the
acquisition increases EPS, ultimately leading to long-run under-performance.

Saple V. (2000), ―Diversification, Mergers and their Effect on Firm Performance: A

Study of the Indian Corporate Sector‖ he finds that the target firms were better than industry
averages while the acquiring firm shad lower than industry average profitability. Overall,
acquirers were high growth firms which had improved the performance over the years prior
to the merger and had a higher liquidity.

Beena P.L (2000), ‗An analysis of merger in the private corporate sector in India‘ she
attempts to analyze the significance of merger and their characteristics. The paper establishes
that acceleration of the merger movement in the early 1990s was accompanied by the
dominance of merger between firms belonging to the same business group of houses with
similar product line.

10
 Vardhana Pawaskar (2001), ―Effect of Mergers on Corporate Performance in India‖
he studied the impact of mergers on corporate performance. It compared the pre- and post-
merger operating performance of the corporations involved in merger between 1992 and 1995
to identify their financial characteristics. The study identified the profile of the profits. The
regression analysis explained that there was no increase in the post- merger profits. The study
of a sample of firms, restructured through mergers, showed that the merging firms were at the
lower end in terms of growth, tax and liquidity of the industry. The merged firms performed
better than industry in terms of profitability.

Paul (2003) ―The merger of Bank of Madura with ICICI Bank‖. The researcher
evaluated the valuation of the swap ratio, the announcement of the swap ratio, share price
fluctuations of the banks before the merger decision announcement and the impact of the
merger decision on the share prices. He also attempted the suitability of the merger between
the 57 year old Bank of Madura with its traditional focus on mass banking strategies based on
social objectives, and ICICI Bank, a six year old ‗new age‘ organisation, which had been
emphasizing parameters like profitability in the interests of shareholders. It was concluded
that synergies generated by the merger would include increased financial capability, branch
network, customer base, rural reach, and better technology. However, managing human
resources and rural branches may be a challenge given the differing work cultures in the two
organizations.

Joydeep Biswas (2004) ― Recent trend of merger in the Indian private corporate
sector‖. They research about Corporate restructuring in the form M&A has become a natural
and perhaps a desirable phenomenon in the current economic environment. In the tune with
the worldwide trend, M&A have become an important conduit for FDI inflows in India in
recent years. In this paper it is argued that the Greenfiled FDI and cross-border M&As are not
alternatives in developing countries like India.

Vanitha. S (2007) ―Mergers and Acquisition in Manufacturing Industry‖ she analyzed

the financial performance of the merged companies, share price reaction to the announcement
of merger and acquisition and the impact of financial variables on the share price of merged
companies. The author found that the merged company reacted positively to the merger
announcement and also, few financial variables only influenced the share price of the merged
companies.

11
 Vanitha.S and Selvam. M (2007) ―Financial Performance of Indian Manufacturing
Companies during Pre and Post Merger‖ they analyzed the pre and post merger performance
of Indian manufacturing sector during 2000-2002 by using a sample of 17 companies out of
58 (thirty percent of the total population). For financial performance analysis, they used ratio
analysis, mean, standard deviation and‗t‘ test. They found that the overall financial
performance of merged companies in respect of 13 variables were not significantly different
from the expectations.

Kumar (2009), "Post-Merger Corporate Performance: an Indian Perspective"

examined the post-merger operating performance of a sample of 30 acquiring companies
involved in merger activities during the period 1999-2002 in India. The study attempts to
identify synergies, if any, resulting from mergers. The study uses accounting data to examine
merger related gains to the acquiring firms. It was found that the post-merger profitability,
assets turnover and solvency of the acquiring companies, on average, show no improvement
when compared with pre- merger values Ravi Sanker and Rao K.V(1998), ‖Takeovers as a
strategy of turna- round‘ They analysis the implications of takeovers from the financial point
of view with the help of certain parameters like liquidity, lever- age, profitability etc. They
observed that a sick company is takeover by a good management and makes serious attempts;
it is possible to turnaround successfully.

ABHINAV NATIONAL MONTHLY REFEREED JOURNAL OF REASEARCH IN

COMMERCE & MANAGEMENT ,VOLUME NO.1, ISSUE NO.11, ISSN 2277-1166 195
www.abhinavjournal.com.

12
 Anup Agraval Jeffrey F. Jaffe (1999), ―The Post-merger Perfor- mance Puzzle‖, they
examines the literature on long-run abnormal re- turns following mergers. The paper also
examines explanations for any findings of underperformance following mergers. We
conclude that the evidence does not support the conjecture that underperformance is
specifically due to a slow adjustment to merger news. We convincingly reject the EPS
myopia hypothesis, i.e. the hypothesis that the market initially overvalues acquirers if the
acquisition increases EPS, ultimately leading to long-run under-performance.

Canagavally R.(2000); ―An Analysis of Mergers and Acquisitions‖ they measures the
performance in terms of size, growth, profitability and risk of the companies before and after
merger. The dissertation also investigates the share prices of sample companies in response to
the announcement of merger.

Beena P.L (2000), ‗An analysis of merger in the private corporate sector in India‘ she
attempts to analyze the significance of merger and their characteristics. The paper establishes
that acceleration of the merger movement in the early 1990s was accompanied by the domi-
nance of merger between firms belonging to the same business group of houses with similar
product line.

Saple V. (2000), ―Diversification, Mergers and their Effect on Firm Performance: A

Study of the Indian Corporate Sector‖, he finds that the target firms were better than industry
averages while the acquiring firm shad lower than industry average profitability. Overall,
acquirers were high growth firms which had improved the performance over the years prior
to the merger and had a higher liquidity.

Vardhana Pawaskar (2001), ―Effect of Mergers on Corporate Perfor- mance in India‖,

he studied the impact of mergers on corporate perfor- mance. It compared the pre- and post-
merger operating performance of the corporations involved in merger between 1992 and 1995
to iden- tify their financial characteristics. The study identified the profile of the profits. The
regression analysis explained that there was no increase in the post- merger profits. The study
of a sample of firms, restructured through mergers, showed that the merging firms were at the
lower end in terms of growth, tax and liquidity of the industry. The merged firms performed
better than industry in terms of profitability.

13
 Huzifa Husain, (2001), ‗Merger and Acquisition unlocking value‘ he explains that
takeovers (hostile or non-hostile) may be beneficial to the shareholders if they unlock the
hidden value of a company. They also help the existing management to the more receptive to
shareholders. Economically, takeovers make sense if the ‗private market value‘ of a company
is higher than the market capitalization of the company. Fur- ther if takeovers are used as a
ploy to prevent competition, it becomes harmful to the economy. Therefore, proper checks
and balances have to be put in place to ensure that takeover facilitation improves overall
efficiency of the company.

Chitranandi A.K, (2001), ―Trumps for M & A – Information Technol- ogy

Management in a merger and acquisition strategy‖ he try to found the success of merger and
acquisitions depends on proper integration of employees, organization culture, IT, products,
operations and service of both the companies. Proper IT integration in merger plays a critical
role in determining how effectively merged organizations are able to integrate business
processes and people, and deliver products and ser- vices to both internal and external
customers of the organization. The study suggests that to address the challenges, Chief
Information Offic- ers should be involved from the earliest phase.

Mansur.A.Mulla (2003), ―Forecasting the Viability and Operation- al Efficiency by

use of Ratio Analysis - A Case Study‖, he assessed the financial performance of a textile unit
by using ratio analysis. The study found that the financial health was never in the healthy
zone during the entire study period and ratio analysis highlighted that managerial
incompetence accounted for most of the problems. It also suggested toning up efficiency and
effectiveness of all facets of management and put the company on a profitable footing.

Joydeep Biswas (2004), ― Recent trend of merger in the Indian private corporate
sector‖. They research about Corporate restructur- ing in the form M&A has become a
natural and perhaps a desirable phenomenon in the current economic environment. In the tune
with the worldwide trend, M&A have become an important conduit for FDI inflows in India
in recent years. In this paper it is argued that the Greenfiled FDI and cross-border M&As are
not alternatives in develop- ing countries like India.

14
 Vijay Shrimali and Karunesh Saxena‘s (2004), ―Economic Advan- tages of Merger
and Acquision.‖ due to the imminent implementation of WTO Guidelines with effect from
July 2005, it was become manda- tory for business organization to strengthen their R&D
base. Conse- quently, the size of the business organization matters most, merger and
acquisition have, therefore, become order of the day, an attempt has been made in the paper
to provide a theoretical framework of M&A, various examples of merger and acquisition in
the world market and finally, the economic advantage of M&A have been outlined.

Vanitha. S (2007), ―Mergers and Acquisition in Manufacturing Industry‖, she

analyzed the financial performance of the merged com- panies, share price reaction to the
announcement of merger and acqui- sition and the impact of financial variables on the share
price of merged companies. The author found that the merged company reacted posi- tively
to the merger announcement and also, few financial variables only influenced the share price
of the merged companies.

Vanitha. S and Selvam. M (2007) ―Financial Performance of Indian Manufacturing

Companies during Pre and Post Merger‖, they analyzed the pre and post merger performance
of Indian manufacturing sector during 2000-2002 by using a sample of 17 companies out of
58 (thirty percent of the total population). For financial performance analysis, they used ratio
analysis, mean, standard deviation and ‗t‘ test. They found that the overall financial
performance of merged companies in respect of 13 variables were not significantly different
from the expec- tations.

Pramod Mantravadi and Vidyadhar Reddy,(2007), ―Relative size in Mergers and

Operating Performance‖ they explains that This re- search study aims to study the impact of
m & A on the operating per- formance of acquiring corporate in different periods in India, by
exam- ining some pre and post merger financial ratios with chosen sample firms and mergers
between 1991-2003. The result suggests that there are minor variations in terms of impact on
operating performance fol- lowing merger in different intervals of time in India.

15
 Ryo Kawahara and Fumiko Takeda, (2007), ―M & A and Corporate Performance in
Japan‖ This paper investigates how M & A affect corpo- rate performance for three years
after their implementation. The corpo- rate performance of 162 M & A that took place in
Japan from 2001-03 is analyzed by using Wilcoxon signed rank test. They find that overall
effects of M & A on corporate performance are statistically insignificant, compared to the
corporate performance of other companies within the same industry with similar pre-
acquisition performance.

David C. Cheng, (2009); ‗Financial determinants of fiance Takeo- vers‘ he found that
several studies have examined the determinants of bank merger pricing. Those studies focus
on the characteristics of the target and downplay the characteristics of acquirer. Their study
found that the purchase price is a negative function of the target‘s capital to asset ratio. The
only variable used in their model is the ratio of acquirer to target assets.

Kumar (2009), ―Post-Merger Corporate Performance: an Indian Perspective‖,

examined the post-merger operating performance of a sample of 30 acquiring companies
involved in merger activities during the period 1999-2002 in India. The study attempts to
identify synergies, if any, resulting from mergers. The study uses accounting data to exam-
ine merger related gains to the acquiring firms. It was found that the post-merger profitability,
assets turnover and solvency of the acquiring companies, on average, show no improvement
when compared with pre- merger values.

N. M. Leepsa & Chandra Sekhar Mishra (2009), ―Post Merger Fi- nancial
Performance: A Study with Reference to Select Manufacturing Companies in India‖, there
intends to study the trend in merger and acquisition (M&A) particularly with reference to
manufacturing com- panies. The present study is an attempt to find out the difference in post-
merger performance compared with pre-merger in terms of prof- itability, liquidity and
solvency. The statistical tools used are descriptive statistics, paired sample t-test.

Salma Ahmed & Yasser Mahfooz (2009), ―Consolidation in the Sky - A Case Study
on the Quest for Supremacy between Jetlite and Kingfisher Airlines‖, they made attempt to
descriptively analyze the ra- tionale for consolidation in the Indian airline industry. The paper
also evaluates major changes in the business environment affecting the airline industry.

16
 Ruhani Ali and Gupta G S (2010); ―Motivation and Outcomes of Malaysian
takeovers: An international perspective‖ they examine the potential motives and effects of
corporate takeovers in Malaysia. The Mullar‘s methodology, which involves the use
accounting measures like size, growth, profitability, risk and leverage, is employed for the
study to analyze the performance characteristics of takeover firms in the pre and post
takeovers periods.

GRA - GLOBAL RESEARCH ANALYSIS X 51, Volume: 1 | Issue: 4 | Sep 2012

• ISSN No 2277 – 8160.

17
 Corporate governance is a relatively recent concept (Cadbury 1992; OECD 1999,
2004). Over the past decade, the concept has evolved to address the rise of corporate social
responsibility (CSR) and the more active participation of both shareholders and stakeholders
in corporate decision making. As a result, definitions of corporate governance vary widely.

Two categories prevail. The first focuses on behavioral patterns—the actual behavior
of corporations, as measured by performance, efficiency, growth, financial structure, and
treatment of shareholders and other stakeholders. The second concerns itself with the
normative framework—the rules under which firms operate, with the rules coming from such
sources as the legal system, financial markets, and factor (labor) markets. Both definitions
include CSR and sustainability concepts.

For studies of single countries or firms within a country, the first type of definition is
the more logical choice. It considers such matters as how boards of directors operate, the role
of executive compensation in determining firm performance, the relationship between labor
policies and firm performance, and the roles of multiple shareholders and stakeholders. For
comparative studies, the second type is more relevant. It investigates how differences in the
normative framework affect the behavioral patterns of firms, investors, and others.

In a comparative review, the question arises: how broadly should we define the
framework for corporate governance? Under a narrow definition, the focus would be only on
those capital markets rules governing equity investments in publicly listed firms. This would
include listing requirements, insider dealing arrangements, disclosure and accounting rules,
CSR practices, and protections of minority shareholder rights.

Under a definition more specific to the provision of finance, the focus would be on
how outside investors protect themselves against expropriation by the insiders. This would
include minority rights protections and the strength of creditor rights, as reflected in collateral
and bankruptcy laws and their enforcement. It could also include such issues as requirements
on the composition and rights of executive directors and the ability to pursue class-action
suits.

18
 This definition is close to the one advanced by economists Shleifer and Vishny
(1997): ―Corporate governance deals with the ways in which suppliers of finance to
corporations assure themselves of getting a return on their investment.‖ This definition can be
expanded to define corporate governance as being concerned with the resolution of collective
action problems among dispersed investors and the reconciliation of conflicts of interest
between various corporate claimholders.

A somewhat broader definition would characterize corporate governance as a set of

mechanisms through which firms operate when ownership is separated from management.
This is close to the definition used by Sir Adrian Cadbury, head of the Committee on the
Financial Aspects 2. What is Corporate Governance, and Why is it Receiving More
Attention? Of Corporate Governance in the United Kingdom: ―Corporate governance is the
system by which companies are directed and controlled‖ (Cadbury Committee 1992,
introduction).

An even broader definition of a governance system is ―the complex set of constraints

that shape the ex post bargaining over the quasi rents generated by the firm‖ (Zingales 1998).
This definition focuses on the division of claims and can be somewhat expanded to define
corporate governance as the complex set of constraints that determine the quasi-rents (profits)
generated by the firm in the course of relationships with stakeholders and shape the ex post
bargaining over them. This definition refers to both the determination of the value added by
firms and the allocation of it among stakeholders that have relationships with the firm. It can
be read to refer to a set of rules and institutions.

Corresponding to this broad definition, the objective of a good corporate governance

framework would be to maximize firms‘ contributions to the overall economy—including all
stakeholders. Under this definition, corporate governance would include the relationship
between shareholders, creditors, and corporations; between financial markets, institutions,
and corporations; and between employees and corporations. Corporate governance would
also encompass the issue of corporate social responsibility, including such aspects as the
firm‘s dealings affecting culture and the environment and the sustainability of firms‘
operations. Looking over the past decade, we see increased emphasis on CSR, as reflected in
investor codes, companies‘ best practices, company laws, and securities regulatory
frameworks. In an analysis of corporate governance from a cross-country perspective, the
question arises whether a common, global framework is optimal for all.

19
 With the emergence of China, India, and Brazil, among others, as global economic
powers, the traditional model for corporate governance—monitoring and supervision through
active investors, free and informed financial media, and so on—is not necessarily the
framework that works best in the increasingly significant emerging market economies.
Concepts such as accountability and safeguarding shareholders‘ interests have cultural
moorings in addition to legal and economic foundations.

Western concepts and approaches may not be translatable, easily understood, or

relevant to non-Western cultures. Because corporate governance is essentially about decision
making, it is inevitable that social norms and structures play a role. These vary from country
to country. In Islamic countries, for example, Sharia law has a large role in many aspects of
life, ethical and social, in addition to its role in criminal and civil jurisprudence (Lewis 2005).

Corporate governance must operate differently in these environments. These

differences underscore the necessity for some level of adaptation of corporate governance
principles, an area of increasing activity in recent reform efforts, and of much research
interest. Another question arises over whether the framework extends to rules or institutions.
Here, two views have been advanced. One—considered as prevailing in or applying to
Anglo-Saxon countries—views the framework as determined by rules and, related to that, by
markets and outsiders. The second, prevalent in other areas, views institutions—specifically,
banks and insiders—as the determinants of the corporate governance framework.

In reality, both institutions and rules matter, and the distinction, although often used,
can be misleading. Moreover, institutions and rules evolve. Institutions do not arise in a
vacuum; they are affected by national or global rules. Similarly, laws and rules are affected
by the country‘s institutional setup. In the end, institutions and rules are endogenous to a
country‘s other factors and conditions. Among these, ownership structures and the state‘s role
are important in the evolution of institutions and rules through the political economy process.

Shleifer and Vishny (1997) offer a dynamic perspective: ―Corporate governance

mechanisms are economic and legal institutions that can be altered through political process.‖
This dynamic aspect is especially relevant in a cross-country review, but only lately has it
received attention from researchers (see Roe and Siegel 2009; Licht 2011). It is easy to
become bewildered by the scope of institutions and rules that can be thought to matter.

20
 An easier way to ask the question of what corporate governance means is to take the
functional approach. This approach recognizes that financial services come in many forms,
but that if the services are unbundled, most, if not all, key elements are similar (Bodie and
Merton 1995). This approach—rather than the specific products provided by financial
institutions and markets—has distinguished six types of functions: pooling resources and
subdividing shares; transferring resources across time and space; managing risk; generating
and providing information; dealing with incentive problems; and resolving competing claims
on corporation- generated wealth. We can operationalize the definition of corporate
governance as the range of institutions and policies that are involved in these functions as
they relate to corporations. Both markets and institutions will, for example, affect the way the
corporate governance function of generating and providing high-quality and transparent
information is performed.

FOCUS 10 Corporate Governance and Development—An Update4, Stijn Claessens and Burcin
Yurtoglu, Foreword by Ira M. Millstein Commentary by Philip Koh A Global

21
 CHAPTER-II

FINANCIAL PROFILE

What is a finance career? Finance embodies a variety of different fields and areas,
including commercial banking, corporate finance, financial analysis and personal financial
advising, insurance, investment banking, commercial banking, loan counseling, money
management, real estate, as well as securities, commodities, and financial services sales
agents. In general, though, finance ―studies and addresses the ways in which individuals,
businesses and organizations raise, allocate and use monetary resources over time, taking into
account the risks entailed in their projects.‖
Finance may incorporate the study of money and assets, the management of those
assets, as well as the profiling and managing of project risks.
Finance positions ―provide opportunities for strategic financial planning, quantitative
analysis, investment management, and sales.‖ Each position in the finance field requires
different skills and provides the employee with different rewards.
Generally, finance is considered one of the most encompassing of all business fields;
it requires immense knowledge of business and the economy.
The finance industry is known for its long work hours. In 2006, about 1 in 4
employees worked 50 hours or more per week. Financial employees do not stop working
once the workday is over; when they are not working they keep abreast of market events. In
return, most workers in the finance industry enjoy comfortable office environments and,
depending upon the field, large salaries.
Financial positions are available in a number of institutions, particularly corporations
and financial specific institutions. Industry organizations include investment banks, securities
and commodities exchanges, brokerage firms, investment advisory firms, and portfolio
management firms.
 Investment banks help corporations to finance their operations by ―underwriting or
purchasing and reselling new stock and bond issues.‖ They also advise corporations.
 Securities and Commodities Exchanges ―offer a central location where buyers and
sellers of securities meet to trade securities and commodities.‖
 Brokerage Firms ―trade securities for those who cannot directly trade on exchanges.‖

22
  Investment Advisory Firms ―provide advice to their investors on how to best manage
their investments.‖ They also provide advice on other matters such as life insurance,
estate planning, and tax preparation.

 Portfolio Management Firms ―such as mutual funds, hedge funds, and private banks
manage a pool of money for investors in exchange for fees.‖

AREAS OF SPECIALIZATION:
As mentioned above, there are numerous fields in finance. Some of the largest
industries that employ college graduates interested in finance include real estate, insurance,
investment banking, financial planning, commercial banking, and corporate finance.7
Below is an examination of some of the most prominent areas of specialization in the finance
profession. Please see the investment banking profile for information on investment banking
and corporate finance.

Commercial Banking:
Banks are responsible for safeguarding money and valuables, as well as for providing
loans, credit, and payment services. They may also offer investment and insurance products.
―Banking offers a variety of positions, some more broad in scope and others more
specific. A branch manager, for example, is responsible for the overall success of the branch,
including personnel issues, customer relations, and loan quality. More specific positions
include credit analyst, loan officer, trust officer, and mortgage banker.
Each of these jobs requires the ability to review financial statements and project
future performance. Many of them also require sales and customer service skills.‖
Commercial banks tend to serve large corporations, small businesses, as well as the general
public.
These banks range in size from a large global bank to a community bank. Most
commercial bankers have a Bachelor‘s degree in an area related to economics or business
administration, or a Master‘s degree in business administration. Advancement is achieved
through additional training.

23
 Commercial banks are now looking to employ those who have accounting and written
communication skills, a strong work ethic, international skills, as well as marketing expertise.
Aside from commercial banking, those looking for a career in banking may look for jobs in
savings banks and loan associations, credit unions, and Federal Reserve banks.

Financial Sales Agents/(Stock)Brokers:

Investors seek out financial sales agents when buying or selling stocks, bonds, shares
in mutual funds, insurance annuities, or other financial products. Brokers also provide many
other services, such as financial counseling or ―advice on the purchase or sale of specific
securities, explain stock market terms and trading practices, or design an individual client‘s
financial portfolio including securities, corporate and municipal bonds, certificates of deposit,
life insurance, annuities, mutual funds and other investments.‖ Some financial sales agents
serve institutional investors, yet most serve individual investors. Brokers must have a college
education, with a special focus on gaining familiarity with economic trends and conditions.
While a degree is important, most employers focus on brokers‘ personal qualities and skills
rather than their academic training. Stockbrokers must meet state licensing requirements.
Many college graduates are hired as sales agents in banks and other credit institutions.

Money Management:
―Money managers work on the purchasing end of Wall Street deals and act as
custodians for the investments of institutional customers.‖ Specific jobs in this industry
include portfolio manager, portfolio management marketing, investment advisory, mutual
fund analyst, and hedge fund principal/trader. While it is difficult to get jobs at the leading
management firms, money managers also work at insurance companies, government pension
funds, and bank trust departments. Employers look to hire money managers with outstanding
interpersonal, sales, analytical, and communication skills.

24
TYPES OF FINANCIAL ROLES

Finance seeks talented people in several job categories. Below are descriptions of
some of the many challenging and rewarding roles we offer.

Investment services
Providing a broad array of financial products - loans, equity, trade finance, structured
finance, and syndications - to promote development in emerging economies and frontier
markets. Investment professionals focus on identifying investment opportunities, executing
transactions and actively managing portfolio projects.
Career opportunities include:
 Investment Analyst
 Investment Officer
 Industry Specialist
Advisory services
Offering advice, problem solving, and training to companies, industries, and
governments, all aimed at helping private sector enterprises unlocking investment and
overcoming obstacles to growth.
Advisory Services are offered in four main business lines:
 Access to Finance
 Investment Climate
 Sustainable Business
 Public-Private Partnership

Career opportunities include:

 Private Sector Development Officer
 Operations Officer
 Evaluation/Monitoring Officer

25
CORPORATE SUPPORT

Sustaining our core business through a variety of functions including:

 Portfolio/Risk management
 Financial/Treasury operations
 Human resources
 Information technology
 Legal
 Communications

Career opportunities include:

 Portfolio Officer
 Financial Officer
 Human Resources Officer
 Information Officer
 Counsel
 Communications Officer

CURRENT OPPORTUNITIES
To begin your search, select a location, job stream or job number. Click on the Title
of the position you are interested in to view the vacancy information. When you are ready to
begin the application process, click "Apply Online". You will then be directed to our Member
Center to register a new account or to log in to an existing account.
If you do not find a current opportunity that fits your interest and skills, we encourage
you to:
 Create a Job Search Agent Profile to be notified by email of any jobs meeting
your specified criteria.
 Submit an expression of interest to be added to our pipelines of qualified
candidates for Investment Officer and Investment Analyst role so that you may be
matched to a position when it becomes available.

26
INDUSTRY/PROFESSIONAL ORGANIZATIONS:
1)American Academy of Financial Management
2)American Finance Association
3)Association for Financial Professionals
4)CFA Institute
5)Financial Economics Network
6)Financial Planning Association
7)National Banking and Financial Services Network
8)Securities and Exchange Commission
9)The World Bank Group

IndustryWebsites:
Bloomberg.com (Bloomberg terminals available for JHU students in the MSE and Career
Center libraries)
Barron‘s
Financial Planning Magazine
Wall Street Journal
Economist
Fortune Magazine
Forbes.com

27
2.2 COMPANY PROFILE

The Sri Maharani Finance Corporation (MFC) was a private corporation in the
Tamil Nadu that operated between 1983 which provided financial support to state and local
private and made loans to banks, mortgage associations and other businesses. Its aim was to
boost the country‘s confidence and help banks return to performing daily functions after the
start of the Great Depression. It continued to operate through the Tiruchengode where it
became more prominent and longer needed to stimulate lending.
It was modeled after the Maharani Finance Corporation. The agency gave 40 lakh in
aid to state and local governments and made a large number of loans which were nearly all
repaid. The MFC was created to solve the problem that the finance corporation could not fix
by itself since they had some limitations. The Finance Corporation System was created in
1983 to act as a lender of last resort during financial panics but was not able to lend to every
Finance or firm.
The MFC continued under the Tamil Nadu and played a major role in recapitalizing
finances. The Sri Maharani Finance Corporation was effective at reducing the probability of
bank failure stimulating , and lending. The Sri Maharani Finance Corporation played a major
role in handling the Great Depression States of setting up the relief programs that were taken
over by the Tamil Nadu in 1983.

History
The Finance Corporation‘s missions act as a lender of last resort to finance during
financial panics. There were other missions as well but the leaders were in conflict in how to
itemize their missions. The Federal Reserve banks were not able to come up with a solution
to which everyone agreed with and the Board did not have enough authority to mandate
policies or act independently. Many board members in the Federal Reserve, Congress, and
the public wanted the Federal Reserve to be more active during this time. Some things that
were expected were to increase the amount of money in circulation and to liquidate all
financial markets. The ones who opposed these ideas believed that policies that would allow
this would end the contraction and/or eventually create high inflation. These things would
hurt the economy in the future.

28
 To solve this problem, the Sri Maharani Finance Corporation (MFC) Act was drafted.
Like the Federal Reserve, the MFC would loan to banks. Even though it was owned by the
government, the staff consisted of individuals not part of the civil service system. It addressed
the problem of state-chartered banks that did not join the Finance Corporation System. Small
banks in rural cities were also not part of the Finance Corporation System.

The Sri Maharani Finance Corporation initial money came from selling $500 million
worth of stock bonds to the US Treasury. To obtain more capital, $1.5 billion bonds were
sold again to the Treasury which was then sold to the general public. In the next couple of
years the MFC would find itself needing a loan of $51.3 billion from the Treasury and from
the public it needed $3.1 billion. A distinction of the MFC and the Finance Corporation was
that the MFC would loan money and as collateral could accept they seemed acceptable.
Loans would be available to solvent institutions that could not be sold to repay their current
responsibilities but in the long-run would be able to accomplish this. A main reason why
loans were given out was to relieve the depositors to get their money back.

Corporate Governance Statement

The Board of Directors has been charged by the shareholders with overseeing the
affairs of the Company to ensure that they are conducted appropriately and in the interest of
all the shareholders. The Board defines the strategic goals and objectives of the Company, as
well as the broad issues of policy and establishes an appropriate framework of corporate
governance within which the Board members and management must operate. The Board is
responsible for ensuring the maintenance of corporate governance policies and procedures in
according with prevailing best practices and Bank of Papua New Guinea guidelines.
Management is charged with the day to day running and administration of the Company
consistent with the objectives and policies set down by the Board. The Managing Director is
directly accountable to the Board for the performance of the management team.

29
Independent Advice

Directors are entitled to seek independent legal advice on their duties at the
company‘s expense, provided that they seek approval from the Chairman.
Staff Employment Policy
Finance Corporation Limited is an equal opportunity employer and does not
discriminate on the basis of sex, race, color or sexuality. A Code of Conduct and a
comprehensive policy and procedure manual is available for all staff and the company will
not tolerate any violation to the code or policies.

Risk Management
The Board is fully aware of the risk management principles, and is committed to
ensure that business risks are identified and managed within policies and procedures which
are approved by the Board.

MANAGEMENT COMMITTEES
The Senior Management Team is the principal policy decision-making body in the
company and is under the chairmanship of the Managing Director.
Asset and Liability Committee (ALCO) meets on a fortnightly basis and manages the
liquidity and interest risks as well as all aspects of the balance sheet.

LOAN PRODUCTS
Business loans
Our goal is simple – to help your business thrive and prosper. Whether it‘s borrowing
to grow, cash flow assistance, purchase of plant and machinery, or any of your business
needs. Fin Corp‘s professional team of credit officers are well experienced in the finance
industry and take great privilege in facilitating all the financial needs for your business.

Personal loans
From K5, 000.00 – K50, 000.00 fully secured loans available to approved purchasers
Ideal for Holidays, Bride Price, and Medical Expenses. Payments can be structured to suit the
clients requirements.

30
Auto loans

From K5, 000.00 fully secured by motor vehicle purchased from a Licensed Motor
Car Dealer Maximum amount financed 70 % of the purchase price of the vehicle. Payments
can be structured to suit individual clients‘ requirements.
The above products are available to consumers from any walk of life providing they
meet our lending guidelines. The applicants must have stable employment and stable
residence histories, and be able to service (pay for) the new loan from non-committed proven
income.

Home Loans

If you can dream it, you can own it! Everything you need to know to avail of a home
loan is right here. You can be assured of fair terms, total transparency and flexibility. We
believe that when it comes to owning a home, nothing should come in the way.

Features and Benefits of DHFL Home Loans

Loan Amount:

Avail a Home Loan of up to `500,00,000 (minimum loan amount `1 lac) but not exceeding
85% of the cost of property (including stamp duty and registration fees) or 80% of market
value, whichever is lower

Tenure & Term:

The tenure of your Home Loan ranges from 1 to 30 years. The term however does not extend
beyond the retirement age or 60 years whichever is earlier (65 years for self employed
individuals)

Purpose:

Avail of a home loan for ready built-up or under construction house/flat purchase

Reduce your EMI :

With tenure of 30 years, you can reduce the EMI amount on your Home Loan, so that
your outgoings every month do not come in the way of your lifestyle and living standards
31
Interest Rates:

The Interest rate applicable is based on the DHFL‘s Retail Prime Lending Rate (RPLR)
which fluctuates from time to time based on the money market conditions

Processing Fees:

This is charged as the fee towards processing your home loan application.

Salaried individuals (SAL) / Self- Self-Employed Non Professionals

Employed Professionals (SEP) (SENP)
` 5000* to ` 20,000* 1.5%*

*Service Tax and Cess as applicable

Easy Repayments:

You have 2 options for repayment of the loan based on the EMIs payable on your Home
Loan:

a. Through ECS (Electronic Clearing Service) based on standing instructions to

your bank
b. Post Dated Cheques(PDCs) drawn on your Savings/Salary account

Home Loan Tax Benefits:

Get Maximum Tax benefit under Home Loan scheme. As per Indian IT Rules, the current
applicable exemption u/s 24 is `1.5 lacs for the interest amount paid in a financial year and up
to `1 lac for the Principal amount repaid in the same year. Thus up to`2.5 lacs is tax exempt,
helping you save up to `70,000 tax annually.

Applicant and Co-Applicant:

Home Loans can be applied by an individual. The loan amount can be further enhanced by
including an earning co-applicant.

32
Home Loan Eligibility

You can avail a Home Loan of up to `500,00,000 (minimum loan amount `1 lac) but not
exceeding 85% of the cost of property (including stamp duty and registration fees) or 80% of
market value, whichever is lower. The loan amount can be further enhanced by including an
earning co-applicant.

The actual Home Loan amount is determined taking into various account factors such as:

 Repayment Capacity
 Age
 Educational qualifications
 Stability and continuity of income
 Number of dependents
 Co-applicant‘s income
 Assets
 Liabilities
 Saving habits, and more

Agricultural Loans:

Agricultural Loans are made to farmers to finance farming activities. Agricultural loans make
up about 1% of all bank loans but are an important form of lending for small rural banks.
Smaller banks used about 6% of their assets to make agricultural loans. Short-term
agricultural loans are usually seasonal and are used to finance the purchase of seeds, fertilizer
and livestock. These types of loans usually require a lending officer to inspect the borrowers
farm once a year.

Farmer Finance& Crop Loan

 Crop Loan
 Cattle & Dairy Loan
 Poultry & Fisheries Loan
 Micro Irrigation
 Horticulture
 Allied Agriculture Activity

33
Agriculture Commodity Finance

 Warehouse Receipt Finance to Farmers

 Cold Storages & Cold Chain
 Construction of Rural Warehouse & Godowns

Corporate & Value Chain Finance

 Agriculture Value Chain Finance

 Finance to Processors, Traders and Aggregators
 Food & Agro Processing
 Farmer Service Societies and Farmer Producer Organisations (FPOs)
 Custom Hiring Companies
 Horticulture
 Contract Farming

Farm Mechanization & Vehicle Finance

 Tractors Finance
 Farm Machinery
 Small & Light Commercial Vehicles
 Two wheeler

TERM DEPOSITS

 Term Deposit Accounts are an ideal investment opportunity for those who
want to save for short or long term goals or just to save for a rainy day.

 Finance Corporation offers competitive interest rates for investments starting

from K5, 000. Terms of 1 to 36months are available.

 Finance Corporation Term Deposits are available for everyone, from

individuals, companies and church groups to landowners and Non-
Government Organizations

34
Terms,

 1 MONTH
 2 MONTHS
 3 MONTHS
 6 MONTHS
 9 MONTHS
 12 MONTHS
 24 MONTHS

CREDIT READY

This product is available to all permanent employees of Government Departments that have
signed an agreement with Finance Corporation.

Customers can apply for K300 up to K7000 for whatever purpose they wish. Flexible
repayment terms of 5 up to 30 fortnights are available for customers to choose to best suit
their budget.

Customers also benefit from having their loans processed within 24 hours and funds
dispatched directly to their bank account by electronic transfer.

There is also the option available to obtain top-up loans for emergencies.
 No upfront fees .
 No deposit required.
 Flexible loan amounts.
 Flexible repayment terms

Benefits:
 Fast Processing time
 Direct payment to bank account instantly
 Ability to top-up for emergencies

35
BUDGET BOOSTER

Private sector employees are eligible to apply for Budget Booster.

Loans start from K300 up to a maximum of K7000 with repayment terms of 5 to 30

fortnights available.

Customers can enjoy personalized service as we have specific sales representatives assigned
to look after employees of individual companies to ensure they receive the best deals and
service.

Budget Booster is available all year round for whatever purpose.

 No upfront fees.
 No deposit required.
 Flexible loan amounts.
 Flexible repayment terms

Benefits:

 Ability to choose a repayment term which suits your budget.

 Ability to receive loans all year round.
 Customized service for individual companies to ensure their employees receive the
best deals and service.

36
ADMINISTRATIVE BOARDS:

S.NO NAME OF THE DESIGNATION NAME DUTIES

1 MANAGING DIRECTOR K.SUBRAMANI All administration

2 DEPUTY DIRECTOR K.KUMARASAN To help the MD

3 MANAGER C.CHINNUSAMY Conductthe

meeting,financial
performanceand
prepared auditing

4 BOARD OF DIRECTORS K.SAROJA All meeting attend

5 BOARD OF DIRECTORS M.SAROJA All meeting attend

6 BOARD OF DIRECTORS S.RAJAMMEL All meeting attend

7 BOARD OF DIRECTORS R.SUSILA All meeting attend

8 BOARD OF DIRECTORS N.MUTHU All meeting attend

9 BOARD OF DIRECTORS M.PERIYASAMY All meeting attend

10 BOARD OF DIRECTORS K.RAJAMANI All meeting attend

37
FINANCE BOARD:

S.NO NAME OF THE DESIGNATION NAME DUTIES

1 MANAGING DIRECTOR K.SUBRAMANI All financial decision

making

2 DEPUTY DIRECTOR K.KUMARASAN Support to the MD

3 MANAGER C.CHINNUSAMY Discuss merits and

demerits of financial
performance

4 BOARD OF DIRECTORS K.SAROJA All meeting attend

5 BOARD OF DIRECTORS M.SAROJA All meeting attend

6 BOARD OF DIRECTORS S.RAJAMMEL All meeting attend

7 BOARD OF DIRECTORS R.SUSILA All meeting attend

8 BOARD OF DIRECTORS N.MUTHU All meeting attend

9 BOARD OF DIRECTORS M.PERIYASAMY All meeting attend

10 BOARD OF DIRECTORS K.RAJAMANI All meeting attend

38
LEGAL ADVISOR:

S.NO NAME OF THE DESIGNATION NAME DUTIES

1 LEGAL ADVISOR D.KANDASWAMY LAWYER

2 LEGAL ADVISOR M.SARAVAN LAWYER

COMPANY INFORMATION

Sector: Financial Corporation

Industry: Specialty Finance
Sri Maharani Finance Limited is a financial services company that operates
branches in India, which provide an assortment of financial services.

Address:

Tiruchengode - Velur Road

Namakkal.
India
Phone: 91-20-2747-2851
Fax: 91-20-2748-4486
Web: www. Sri Maharani Finance Corporation. In

SERVICE STANDARDS OF THIS COMPANY

 We will treat our customers with respect and dignity. Our job is to help them.

 We will action all requests from our customers as our main priority. If a process takes
longer than 48 hours, we will communicate with our customer to ensure that they are
informed of the status until completion.

39
  We will answer the telephone within 5 rings. When redirecting telephone calls we will
personally ensure that the customer is directed to the appropriate staff member. This
includes fully alerting the recipient about the nature of the call.

 We will own the customers at first point of contact. We will identify ourselves and
provide contact details.

 We will strive to ensure the highest level of quality and accuracy with justified
customer complaints held to NIL.

 We will adhere to policy and procedures to ensure risk are minimized

.
 We will continually look for ways to improve our processes, in order to make it easier
for our customers and easier for us to provide the highest quality service.

 We will ensure that adequate staff levels are available to answer customer enquiries
(e.g. lunch hours).

 We will ensure our customers will include both internal and external clients with both
tied to the highest standard.

40
 CHAPTER-III

RESEARCH METHODOLOGY

MEANING OF RESEARCH:
Research means ―know about new thing‖. Something‘s, it may refer to scientific and
systematic search pertinent information on specific topic. In fact research is an art of
scientific investigation.

DEFINITION:
According to Redman &Mory, research is defined as a systematized effort to gain
new knowledge.
Accounting to Clifford Woody research comprises of.‖ define and redefining
problem, formulating hypothesis or suggested solution , collecting, organizing and evaluating
data; making deduction and reaching conclusion; and at last carefully testing the conclusion
to determine whether they fit the formulating hypothesis
In general ―RESEARCH‖ can be termed as an inquiry in to the nature of, the reasons
for, and the consequences of any particular set of circumstances. It is the process of finding
solution for a problem after a thorough study and analysis of the situational factors. It tries to
solve a complex and complicated problem through use of various tools and techniques. These
tools and techniques try to bring out a logical, accurate and scientific solution to given
problem.
―METHODOLOGY‖ as the name suggests is the method through which the problem
or situation is tackled. Managers in organization constantly engage themselves in studying
and analyzing issues and hence are involved in some form of research activity as they make
decisions at the work place.it involves a lot of factor like the research design, sample size,
segment , techniques of sampling ,tools used etc. all these steps and factors put together to
bring out a clear and accurate result.

41
 The research methodology adopted for the present study has been systematic and was
done in accordance to the objectives set , which has been discussed in the earlier pages.
Research methodology is the way to systematically research to solve the problem. Research
methodology as many dimension and research method constitute the part of it thus when we
talk of research method we use and explain why we use the particular method or technique
and evaluation of results.

Methodology as the name suggests is the method through which the problem or
situation is tacked.it involves a lot of factor like the research design, sample size, segment
techniques of sampling, tools used etc. all these steps and factor put together to bring out a
clear and accurate result.
In general research can be termed as an inquiry into the nature of reasons for and the
consequences of any particular any set of circumstances. It‘s the process of finding solutions
for the problem after a through analysis of the situational factors,

DATA COLLECTION METHOD

The main source through which data are collected only by Secondary data not by any
primary data

SECONDARY DATA
Secondary data refers to information gathered from sources already existing. Some
sources of secondary data are data available from previous research, information available
from any published or unpublished sources available either within or outside the
organization, library records, online data , web sites and the internet. The secondary data of
information of this study were obtained through web sites, books, annual report, and internet.
Secondary data marks the beginning of the research process. Information gathered
from both internal and external sources. Secondary data is required to analyze the primary
data. Secondary data gathered through journals, books and websites.

42
RESEARCH DESIGN

Research design is the arrangement of condition for collection and analysis of data in
a manner that aim to combine research purpose with economy in procedure. It is the
conceptual structure within which research is conducted.
The research design is the blue print for fulfilling objectives and answering of specific
research problem. A research design is purely and simply the framework a plan for a study
that guides the collection and analysis of the data.
In fact, the research design is the conceptual structure with in which research is
conducted; it constitutes the blue print for the collection, measurement and analysis of data,
the research design utilized in this study is analytical research.

PERIOD OF STUDY
The duration taken by the researcher for the data collection and analysis regarding the
profitability analysis of The Sri Maharani Finance Corporation Ltd six months. The data used
are of five years from2007-11.

TOOLS USED
 Ratio Analysis
 Trend Percentage Analysis
 Comparative Balance Sheet Analysis

RATIO ANALYSIS
Analysis and interpretation of financial statements with the help of ‗ratio‘ is termed as
―Ratio Analysis‖. It is the process of identifying the financial strengths and weaknesses of the
firm. This may be accomplished either through a trend analysis of the firm‘s ratio over a
period of time or through a comparison of the firm‘s ratio with its nearest competitors and
with the industry averages. The four most important dimensions, which a firm would like to
analyses, are: liquidity, leverage, activity and profitability.
Ratio analysis was pioneered by alexander wall, who presented a system of ratio
analysis in the year 1909. Alexander‘s contention was that interpretation of financial
statements can be made either by established quantitative relationship between various items
of financial statements.

43
MEANING OF RATIO:
A ratio is a mathematical relationship between two items expressed in a quantitative
form. Ratio can be defined as ―relationship expressed in quantitative forms, between figures
which have caused and effect relationship or which are connected with each other in some
manner or the other‖.
Ratio analysis is an age old technique of financial analysis. The information provided
by the financial statement in absolute form is historical and static, conveying very little
meaning to the users.

TYPES OF RATIOS:
They are four important categories of categories of ratios related to the working
capital management of the firms. They are such as
 Dept. equity ratios
 Current ratios
 Profitability ratios

TREND ANALYSIS
Trend analysis is immensely helpful in making a comparative study of the financial
statements for several years. One of the most important tasks before economic and business
these days is to make estimate for the future. A businessman is interested in finding out his
likely sales as a long term planning. It provides great significant to business people and also
economics.
 Mainly it helps to understand past behavior.
 It helps in planning future operation.
 It helps to evaluate current accomplishment.

44
COMPARATIVE STATEMENT ANALYSIS
Comparative balance sheet as on two or more different dates can be used for
comparing Assets and liabilities and findings out any increase or decrease in the items. Thus
while in single balance sheet the emphasis is on present position, it is on change in the
comparative balance sheet

The comparative balance sheet is the study trend of the same items, groups of items
and computed items in two or more balance sheets of the same business enterprises on
different dates. The changes in periodic balance sheet items reflect the conduct business. The
change can be observed by comparison of the balance sheet, at the beginning and at the end
of the period and these can be helping them forming an opinion about the progress often
enterprise.
The comparative balance sheet has two columns for the original balance sheet. A third
column is used to increase figures.

45
 CHAPTER-IV

DATA ANALYSIS AND INTERPRETATION

4.1 DEBT –EQUITY RATIO

This ratio also called as ‗External –Internal Equity ratio‘. It mainly calculated to
assess the soundness of long term financial policies and to determine the stakes of outsiders
and owners. It determines the relationship between debt and equity. It computed by following
formula

Debt-Equity ratio = Long term fund / shareholders fund

TABLE 4.1
DEBT-EQUITY RATIO
Year Long term fund shareholders fund D-E Ratio(in
times)
2009-10 4,487,969 499,969 8.97

2010-11 4,952,001 855,665 5.78

2011-12 4,764,900 314,681 15.14

2012-13 4,978,201 360,243 13.81

2013-14 5,736,202 406,332 14.11

Source: Annual report of Finance Corporation from the year 2009-10 to 2013-14

INTERPRETATION:
The above table shows that Debt- Equity ratio has gradually increased in all years
than the first year 8.97. but in preceding years it was increased .so it leads to improvement of
functions at the period of 2013-2014.

46
 CHART 4.1
DEBT –EQUITY RATIO

4.5

3.5

total netprofit 2.5

trend 2

1.5

0.5

0
2009-10 2010-11 2011-12 2012-13 2011-12

47
4.2 CURRENT RATIO
Current ratio may be defined as the relationship between current assets and current
liabilities. This ration also known as working capital ratio. It is measure of general liquidity
of a firm. It is calculated by dividing the total of current assets by total of the current
liabilities. Current assets include inventories, cash and finance balances, loans and advances,
etc., Current liabilities include sundry creditors, and advances received provisions and other
liabilities.
Current ratio = Current assets /Current liability

TABLE 4.2
CURRENT RATIO
Year Current assets Current liability Ratio(in times)
2009-10 5,166,375 680,902 7.58

2010-11 5,971,939 1,021,762 5.84

2011-12 5,262,621 499,363 10.53

2012-13 5,475,767 499,044 10.97

2013-14 6,406,103 671,168 9.54

Source: Annual report of finance corporation from the year 2009-10 to 2013-14.

INTERPRETATION:
From table the current ratio was found to be higher than standard norm throughout the
study period except in the year 2009-2010, to 2013-2014. 7.5:1 is considered as standard
ratio. The ratio was lower in the year 2010-2011 i.e., 5.8:1, due to high investment in current
assets and low amount of current liabilities was found. From the same table it was observed
in 2011-12, the ratio was below the standard norm i.e. 10.53:1 due to a sudden increase in
current liabilities compared with the previous year. Current assets shown a fluctuating trend
and current liabilities have an increased in other preceding year.

48
 CHART 4.2
CURRENT RATIO

7,000,000

6,000,000

5,000,000

4,000,000 current assets

current liability
3,000,000
ratio

2,000,000

1,000,000

0
2009-10 2010-11 2011-12 2012-13 2011-12

49
4.3PROPRIETARY RATIO
This ratio point‘s outs relationship between the shareholders‘ funds and total tangible
assts. Also its called as ‗EQUITY RATIO ‗or‘ NET WORTH RATIO‘

Proprietary ratio = Shareholders fund / total tangible assets

TABLE 4.3
PROPRIETARY RATIO
Year Shareholder fund Total tangible assets Ratio(in times)
2009-10 499,969 5,168,402 0.09

2010-11 855,665 5,973,763 0.14

2011-12 314,681 5,264,263 0.05

2012-13 360,243 5,477,245 0.06

2013-14 406,332 6,407,433 0.06

Source: Annual report of Finance Corporation 2009-10 to 2013-14.

INTERPRETATION:
The above table indicates that the proprietary ratio has the proportion of
shareholders‘ funds in the total tangible assets. A high proprietary ratio indicates less danger
risk to investors in the event of insolvency. But the study also showing improvement needs of
the finance corporation.

50
 CHART 4.3
PROPRIETRAY RATIO

7,000,000

6,000,000

5,000,000

4,000,000
SHAREHOLDER FUND
3,000,000
TOTAL TANGIBLE
2,000,000 ASSETS
RATIO(IN TIMES)
1,000,000

0
2009- 2010-
10 2011- 2012-
11 12 2013-
13 14

51
TREND PERCENTAGE
Method of analyzing information obtain over an extended period by choosing a base
line period (usually the earliest year) and starting the data associated with subsequent periods
as a percentage of that period.

4.4 TREND PERCENTAGE OF ASSETS

The following table explains the trend percentage analysis of sales for the period of
2009- 2010 to 2013-2014. In this, the year 2009-2010 considered as base year

TABLE 4.4
TREND PERCENTAGE OF ASSETS
Year Total assets Trend
2009-10 5,168,402 100.00

2010-11 5,973,763 115.58

2011-12 5,264,263 101.85

2012-13 5,477,245 105.97

2013-14 6,407,433 123.97

Source: Annual report of Finance Corporation from the year 2009-10 to 2013-14

INTERPRETATION:
The above table reveals the trend in Total Assets. For analyzing the trend, 2009-2010
is taken as the base year. During the study period, trend percentage shows the highest in
2013-2014 as 123.97% and lowest in 2011-2012 as 101.85%. It indicates the asset
fluctuation of the finance corporation.

52
 CHART 4.4
TREND PERCENTAGE OF TOTAL ASSEST

7,000,000

6,000,000

5,000,000

4,000,000

3,000,000 Total
assets
2,000,000

1,000,000

53
 TABLE 4.5
TREND PERCENTAGE OF NET PROFIT
Year Net profit Trend
2009-10 134,129 100.0

2010-11 5,700 4.24

2011-12 22,736 16.95

2012-13 562 0.41

2013-14 2,862 2.13

Source: Annual report from the year 2009-10 to 2013-14

INTERPRETATION:
The above table shows the trend in net profit. For analyzing the trend, 2009-2010 is
taken as the base year. All the year the net profit shows a positive trend percentage value.
During the study period, trend percentage shows the highest in 2011-2012 as 16.95 % and
lowest in 2012- 2013 as 0.41 %. In terms of difference it shows highest and only one positive
difference in up to 2013-2014 as 2.1.It indicates the high fluctuation of the finance
corporation.

54
 CHART - 4.5
TREND PERCENTAGE OF NET PROFIT

140,000

120,000

100,000

80,000
Net profit

60,000 Trend

40,000

20,000

0
2009-10 2010-11 2011-12 2010-11 2011-12

55
 TABLE 4.6

COMPARATIVE BALANCE SHEET FOR THE YEAR 2009- 2010

PARTICULARS 31.3.2009 31.3.2010 ABSOLUTE PERCENTAGE
INCREASE / OF INCREASE/
DECREASE DECREASE

Current assets(CA)

Partners advances 440,000 440,000 - -

Pronote Loans 3,666,100 4,062,100 396,000 10.80

Hire purchase loans 841,500 1,139,720 298,220 35.43

Room advances 6,000 6,000 0 0

Interest receivables 30,811 100,513 69,702 226.22

Cash at bank 17,504 4,218 -13,286 -75.90

Cash at hand 164,460 219,388 54,928 33.39

TATOL 5,166,375 5,971,939 805,564 15.59

Current liability

interest payable FD 99,536 67,689 31,847 31.99

Interest received in advances 18,287 24,095 5,808 31.76

audit fees payable 2,000 2,250 250 12.5

salary payable 48,000 72000 24,000 50.00

Provision for FBT 2,432 - 0 0

Provision for C.Tax 10,615 - 0 0

TOTAL 180,870 166,034 -14,836 -8.20

Fixed assets(FA)
Furniture 2,027 1,824 -203 -10.01

Shareholders fund
Capital A/C 499,969 855,665 355,696 71.14

TOTAL 499,969 855,665 355,696 71.14

Source: Annual Report of Finance Corporation from the Year 2009-10 to 2013-14

56
 TABLE 4.7
COMPARATIVE BALANCE SHEET FOR THE YEAR 2010-2011

PARTICULARS 31.3.2010 31.3.2011 ABSOLUTE PERCENTAGE

INCREASE/ OF INCREASE/
DECREASE DECREASE

Current assets
Partners advances 440,000 - 0 0

Pronote Loans 4,062,100 4,094,300 32,200 0.79

Hire purchase loans 1,139,720 429,540 -710,180 -62.31

Room advances 6,000 6,000 0 0

Interest receivables 100,513 185,998 85,485 85.04

Cash at bank 4,218 252,119 +247,901 5877.2

Cash on hand 219,388 294,664 +75,276 0.34

TOTAL 5,971,939 5,262,621 -709,318 -11.87

Current liability

interest payable FD 67,689 91,341 +23,652 34.94

Interest received in 24,095 18,778 -5,317 22.06

advances

audit fees payable 2,250 2,500 250 11.11

salary payable 72000 72,000 0 0

TOTAL 166,034 184,619 +18,585 11.19

Fixed assets 1,824 1,642 -182 -9.97

TOTAL 1,824 1,642 -182 -9.97

Shareholder’s fund
Capital A/C 855,665 314,681 -540,984 -63.22

TOTAL 855,665 314,681 -540,984 -63.22

Source: Annual Report of Finance Corporation from the Year 2009-10 to 2013-14

57
 TABLE 4.8

COMPARATIVE BALANCE SHEET FOR THE YEAR 2011- 2012

PARTICULARS 31.3.2011 31.3.2012 ABSOLUTE PERCENTAGE
INCREASE OR OF INCREASE
DECREASE OR DECREASE

Current assests

Pronote Loans 4,094,300 4,508,100 +413,800 10.10

Hire purchase loans 429,540 0 - -

Room advances 6,000 6,000 0 -

Interest receivables 185,998 11,924 -174,074 -93.58

Cash at bank 252,119 636,503 +384,384 152.46

Cash on hand 294,664 313,240 +18, 576 6.304

TOTAL 5,262,621 5,475,767 +213,146 4.05

Current liability

interest payable FD 91,341 118,777 +27,436 30.03

Interest received in 18,778 17,461 -1,317 -7.01

advance

audit fees payable 2,500 2,500 0 _

salary payable 72,000 - 0 _

TOTAL 184,619 138,738 -45,881 -24.85

FA in furniture 1,642 1,478 -164 -9.98

TOTAL 1,642 1,478 -164 -9.98

Shareholder’s fund

Capital & current a/c 314,681 360,243 +45,562 14.47

TOTAL 314,681 360,243 +45,562 14.47

Source: Annual Report of Finance Corporation from the Year 2009-10 to 2013-14

58
 TABLE 4.9

COMPARATIVE BALANCE SHEET FOR THE YEAR 2012- 2013

PARTICULARS 31.3.2012 31.3.2013 ABSOLUTE PERCENTAGE
INCREASE OF INCREASE
/ECREASE /DECREASE
Current assests

Pronote Loans 4,508,100 5,028,200 +520,100 11.53

Hire purchase loans 0 746,250 +746,250 _

Room advances 6,000 6,000 0 _

Interest receivables 11,924 42,801 +30,877 258.94

Cash at bank 636,503 450,622 -185,881 -29.20

Cash on hand 313,240 132,230 -181,010 -57.78

TOTAL 5,475,767 6,406,103 +930,336 16.99

Current liability
Interest payable FD 118,777 95,239 -23,538 -19.81

Interest received in 17,461 16,597 -864 -4.94

advance

Audit fees payable 2,500 3,000 +500 20.00

Salary payable - 150,000 +15O,000 _

TOTAL 138,738 264,836 +126,098 90.88

FA in furniture 1,478 1,330 -148 -10.01

TOTAL 1,478 1,330 -148 -10.01

Shareholder’s fund

Capital & current a/c 360,243 406,332 +46,089 12.79

TOTAL 360,243 406,332 +46,089 12.79

Source: Annual Report of Finance Corporation from the Year 2009-10 to 2013-14

59
 TABLE 4.10

COMPARATIVE BALANCE SHEET FOR THE YEAR 2013- 2014

PARTICULARS 31.3.2013 31.3.2014 ABSOLUTE PERCENTAGE
INCREASEOR INCREASE
DECREASE OR
DECREASE

Current assets
Pronote Loans 5,028,200 4,024,200 -4,000 -0.07

Hire purchase loans 746,250 645,250 -101,000 -13.53

Room advances 6,000 6,000 _ _

Interest receivables 42,801 46,877 +4,076 9.52

Cash at bank 450,622 786,500 +335,878 74.53

Cash on hand 132,230 140,560 +8,330 6.29

TOTAL 6,406,103 5,649,387 -756,716 -11.81

Current liability

Interest payable FD 95,239 98,242 +3,003 3.15

Interest receivables in 16,597 19,867 +3,270 19.70

advances

Audit fees payable 3,000 2,250 -250 -8.33

Salary payable 150,000 150,000 - _

TOTAL 264,836 270,359 +5,523 2.08

FA in furniture 1,330 1,100 -230 -17.29

TOTAL 1,330 1,100 -230 -17.29

Shareholder’s fund
Capital &c urrent A/c 406,332 336,786 -69,546 -17.11

TOTAL 406,332 336,786 -69,546 -17.11

60
Source: Annual Report of Finance Corporation from the Year 2009-10 to 2013-14

61
 CHAPTER-V
5.1 FINDINGS

It is observed that in the year 2013 – 14, the amount of Debt-Equity ratio is increased
then 2012-13.

Current liability position increased in study period.

It was found that assets of the finance corporation have increased in all the years.

Trend Percentage of total assets shows positive trend with low fluctuation.

Trend percentage of Net Profit is decreased in the year 2012-2013.

Loans and advances position has increased at the same time liability of the finance
corporation is decreased; It shows growth of the finance corporation.

It was found out from the comparative balance sheet for the year march 2009 and
march 2010 the current assets of the finance corporation has been increased.

It was found out from the comparative balance sheet for the year march 2010 and
march 2011 the current assets of the finance corporation has been increased.

It was found out from the comparative balance sheet for the year march 2011 and
march 2012 the current assets of the finance corporation has been increased.

It was found out from the comparative balance sheet for the year march 2012and
march 2013 the current assets of the finance corporation has been increased.

It was found out from the comparative balance sheet for the year march 2013 and
march 2014 the current assets of the finance corporation has been increased.

62
5.2 SUGGESTIONS

Hence, it is suggested that the company has to minimize the amount of Dept.– equity
capital.

Finance Corporation should minimize the external fund of the finance corporation.

Finance Corporation can invest in other functions due to low position of current
liability.

If the concern maintains enough cash and Finance Corporation balances proportionate
to current liability, it can easily meet the working capital requirements.

It is suggested that the finance corporation should maintain present position of the
current ratio.

Debt-equity ratio is in the satisfactory level, so the finance corporation should

maintain the same level in future too.

Finance Corporation has to maintain present position of Total assets carefully and
effectively.

Finance Corporation can minimize their expenses for increasing the level of their Net
Profit.

The company has to follow effective financial maintenance system for utilizing in the
resources efficiently and economically.

63
5.3 CONCLUSION

The performance of Finance Corporation has been evaluated by using Ratio analysis,
Trend Percentage and Comparative Balance Sheet. The growth indicates that performance of
Finance Corporation is in the satisfactory level. The profitability ratio is not reveal that to
increase its performance finance corporation increase its share capital and reduce their
external fund utility.

64
 BIBLIOGRAPHY

TEXT SOURCES
1. Management Accounting – A Murthy and S Gurusamy 2nd Edition The McGraw
Hill Companies

2. Fundamentals of Financial Management – Prasanna Chandra Tata McGraw Hill

publishing

3. Financial Management –I.M. Pandey- Vikas publishing house 4.Financial

Management-M.Y. Khan Tata McGraw Hill

WEB SOURCES
www.managementparadise.com
www.enotes.com

65
 APPENTX

STATEMENT OF TOTOAL INCOME AS ON 2009-2010

PARTICULSR DATE RS RS

Income from business & profession: 134,129

Net profit as per P&L A/C

Add-inadmissible expenses: 7,782

Pooja expenses
Income tax 1,496

Provision for FBT 2,432

Provision for Current Tax 10,615

156,454

Less: 422,836
Profit on sale of land considered separately
Total income from Business (266,382)

Long term capital gains on sale of land: 14.12.2008 840,000

Less: indeed cost of acquisition:

Date of acquisition 20.07.2000

Cost of acquisition 392,164

Cost inflation index on 20.07.2000 406

14.12.2008 519
Indexed cost of acquisition 501,313

Less: Land leveling & other exp 25,000

Long term capital gains 313,687

Taxable gains to be taxed at 20% as per S.112(1)(D) 47,305

Income tax @20% 9,461

Add:surcharge 946

Education cess 208

10,615
Add: interest U/s 234B 424
INTEREST U/s 234C 295
TOTAL 11,334

C/F LOSS: 2008-2009 24,888

ASST. YEAR

66
 REVENUE ACCOUNT FOR THE YEAR 2009-2010

PARTICLUAR RS. PARTICULAR RS.

To Interest payments 724,706 By interest receipts 756,426

― staff salary & bonus 63,720 By profit in sale of land 422,836

(392164-840000)
― rent 21000

―stationery 26,280

― newspaper subscription 2,235

Pooja expenses 7,782

Travelling expenses 15,573

Phone bill 15,312

Lighting 1,020

Bank commission 916

Audit fees 2,000

Office expenses 20,041

Depreciation 225

Income tax 1,496

Interest to partners 49,780

Remuneration to partners 48,000

Bad debts W/off 35,000

Provision for FBT 2,432

Provision for C.Tax 10,615

Net profit 134,129

TOTAL 1,182,262 1,182,262

67
 BALANCESHEET OF THE YEAR 2009-2010

PARTICULAR RS. PARTICULAR RS.

God‘s A/C 63 Furniture 2,027

Capital And Current A/C 499,969 Partners Advances 440,000

Fixed Deposits 4,487,500 Pronote Loans 3,666,100

Interest Payable FD 99,536 Hire Purchase Loans 841,500

Interest Received In advance 18,287 Room Advances 6,000

Audit Fees Payable 2,000 Interest Receivables 30,811

Salary Payable 48,000 Cash At Bank 17,504

Provision For FBT 2,432 Cash On Hand 164,460

Provision For C.Tax 10,615

TOTAL 5,168,402 5,168,402

DEPRECIATION ON FURNITURE AS ON 31.03.2009

PARTICULAR RS

W.D.V as on 01.04.2008 2,252

Less: depreciation @ 10% 225

W.D.V as on 31.03.2009 2,027

68
 PARTNERS CAPITAL AND CURRENT ACCOUNT ON2009-2010

NAME OPENING ADDITIONS INTEREST SHARE DRAWINGS CLOSING

BALANCE TO OF BALANCE
PARTNERS PROFIT
K.Saroja 30,740 5,000 5,465 14,903 (1,176) 54,932

M.Saroja 30,740 5,000 5,465 14,903 (1,176) 54,932

K.Kumaresan 30,740 5,000 5,465 14,903 (1,176) 54,932

S.Rajammel 30,740 5,000 5,465 14,903 (1,176) 54,932

K.Subramani 31,165 5,000 5,516 14,903 (1,176) 55,408

R.Susila 31,165 5,000 5,516 14,903 (1,176) 55,407

N.Muthu 31,165 5,000 5,516 14,903 (1,176) 55,406

M.Periyasamy 34,450 5,000 5,907 14,904 (1,175) 59,086

K.Rajamani 30,740 5,000 5,465 14,904 (1,175) 54,934

TOTAL 281,642 45,000 49,780 134,129 (10,582) 499,969

69
INTEREST RECEIPTS, OFFICE EXPENCESES AND BAD DEBTS AS ON 2009-2010

PARTICULAR RS

INTEREST RECEIPTS:

Interest Collected During The Year 802,587

Add:

Interest Receivable As On 31.03.09 30,811

Interest Recd In Advance As On 31.03.2008 13,985

Less:

Interest Receivable As On 31.03.08 (69,670)

Interest Recd In Advance As On 31.03.2009 (18,287)

TOTAL 759,426

OFFICE EXPENSES:

1 ASSOCIATION SUBSCRIPTION 500

2 TEA EXPENSES 5,244

4 MISCELLANEOUS EXPENSES 14,297

TOTAL 20,041

BAD DEBTS:

PNL NO.846 P. THANGAVEL 5,000

PNL NO.928 P. THANGAVEL 5,000

PNL NO.988 P. THANGAVEL 10,000

PNL NO.1026 P. THANGAVEL 10,000

PNL NO. 1324 P. THANGAVEL 5,000

TOTAL 35,000

70
 STATEMENT OF TOTAL INCOME 2010-2011

PARTICULAR RS. RS.

Income from Business & profession: 5,700

Net profit as per P & L A/C
Add: inadmissible expenses:

Pooja expenses 2,010

Income tax 720

FBT 203

Salary to working partners 72,000 74,933

Less: salary allowable to working partners 80,633

TOTAL INCOME (70,879)

C/F LOSS:
Asst.year 2005 – 06 06.07.05/ 01160 (24,888)

LOSS C/F (15,134)

71
 REVENUE ACCOUNT FOR THE YEAR ENDED 31.03.010

PARTICULAR RS. PARTICULAR RS.

TO Interest payments 668,533 By interest receipts 920,300

T0Staff salary & bonus 52,120

Rent 21,000

Stationery 10,021

News paper 2,251

subscription

Pooja expenses 2,010

Travelling expenses 10,000

Phone bill 5,267

Entertainment 826

Lighting 1,235

Bank commission 1,836

Audit fees 2,250

Office expenses 4,129

Depreciation 203

Income tax 720

Interest to partners 59,996

Remuneration to 72,000
partners
FBT Tax paid 203

Net profit 5,700

TOTAL 920,300 920,300

72
 BALANCE SHEET AS ON 2010-2011

PARTICULAR RS. PARTICULAR RS.

God‘s A/C 63 Furniture 1,824

Capital And Current A/C 855,665 Partners Advances 440,000

Fixed Deposits 4,952,001 Pronote Loans 4,062,100

Interest Payable FD 67,689 Hire Purchase Loans 1,139,720

Interest Received In advance 24,095 Room Advances 6,000

Audit Fees Payable 2,250 Interest Receivables 100,513

Salary Payable 72,000 Cash At Bank 4,218

Cash On Hand 219,388

TOTAL 5,973,763 (0.02) 5,973,763

DEPRECIATION ON FURNITURE AS ON 31.03.2010

PARTICULAR RS

W.D.V as on 01.04.2009 2,027

Less: depreciation @ 10% 203

W.D.V as on 31.03.2010 1,824

73
 PARTNERS CAPITAL AND CURRENT ACCOUNT AS ON 2010-2011

NAME % OPENING ADDITIONS INTEREST SHARE CLOSING

BALANCE RS. TO OF BALANCE
RS. PARTNERS PROFIT RS.
RS. RS,
K.Saroja 11.11 54,932 32,917 6,592 633 95,074

M.Saroja 11.11 54,932 32,917 6,592 633 95,074

K.Kumaresan 11.11 54,932 32,917 6,592 633 95,074

S.Rajammel 11.11 54,932 32,917 6,592 633 95,074

K.Subramani 11.11 55,408 32,383 6,649 634 95,074

R.Susila 11.11 55,407 32,383 6,649 635 95,074

N.Muthu 11.11 55,406 32,386 6,649 633 95,074

M.Periyasamy 11.11 59,086 28,265 7,090 633 95,074

K.Rajamani 11.11 54,934 32,915 6,592 633 95,074

TOTAL 100.00 499,969 290,000 59,996 5,700 855,665

74
INTEREST RECEIPTS, OFFICE EXPENCESES AND BAD DEBTS AS ON 2010-2011

PARTICULAR RS

INTEREST RECEIPTS: 856,406

Interest Collected During The Year

Add:

Interest Receivable As On 31.03.09 100,513

Interest Recd In Advance As On 31.03.2008 18,287

Less:

Interest Receivable As On 31.03.08 (30,811)

Interest Recd In Advance As On 31.03.2009 (24,095)

TOTAL 920,300

SALARY TO WORKING PARTNER: AS IN LAST YEAR :

1. K.KUMARESAN 24,000

2 M.PERIYASAMY 24,000

4 N.MUTHU 24,000

TOTAL 72,000

75
 STATEMENT OF TOTAL INCOME AS ON YEAR 20011-12

PARTICULAR RS. RS.

Income from Business & profession: 22,736

Net profit as per P & L A/C
Add: inadmissible expenses:

Pooja expenses 2,668

FBT 620

Salary to working partners 72,000 75,288

98,024

Less: salary allowable to working partners

75,0000 90% OF 67,500
23,000 60% OF 13,314
98,024 81,314 (72,000)
26,024

LESS : C/F LOSS:

Asst.year 2005 – 06 06.07.05/ 01160 (15,134)

TOTAL INCOME (10,890)

Tax Thereon 3,267

Add: Edu.Cess @ 3% 98

TAX PAYABLE 3,365

76
 REVENCE ACCOUNT FOR THE YEAR ENDED 31.03.11

PARTICULAR RS. PARTICULAR RS.

TO Interest payments 749,909 By interest receipts 991,912

Staff salary & bonus 58,380

Rent 21,000

Stationery 5,343

News paper 2,255

Subscription

Pooja expenses 2,668

Travelling expenses 10,101

Phone bill 4,503

Entertainment 1,109

Lighting 998

Bank commission 2,099

Audit fees 2,500

Office expenses 3,729

Depreciation 182

Income tax 500

Interest to partners 31,280

Remuneration to partners 72,000

FBT Tax paid 620

Net profit 22,736

TOTAL 991,912 0.43 991,912

77
 BALANCE SHEET AS ON YEAR 31.03.11

PARTICULAR RS. PARTICULAR RS.

God‘s A/C 63 Furniture 1,642

Capital And Current A/C 314, 681

Fixed Deposits 4,764,900 Pronote Loans 4,094,300

Interest Payable FD 91,341 Hire Purchase Loans 429,540

Interest Received In advance 18,778 Room Advances 6,000

Audit Fees Payable 2,500 Interest Receivables 185,998

Salary Payable 72,000 Cash At Bank 252,119

Cash On Hand 294,664

TOTAL 5,264,263 (0.41) 5,264,263

DEPRECIATION ON FURNITURE AS ON 31.03.2011

PARTICULAR RS

W.D.V as on 01.04.2010 1,824

Less: depreciation @ 10% 182

W.D.V as on 31.03.2011 1,642

78
 PARTNERS CAPITAL AND CURRENT ACCOUNT

NAME % OPENING ADDITIONS INTEREST SHARE CLOSING

BALANCE RS. TO OF BALANCE
RS. PARTNERS PROFIT RS.
RS. RS,
K.Saroja 11.11 95,074 (66,111) 3,475 2,526 34,964

M.Saroja 11.11 95,074 (66,111) 3,475 2,526 34,964

K.Kumaresan 11.11 95,074 (66,111) 3,475 2,526 34,964

S.Rajammel 11.11 95,074 (66,111) 3,475 2,526 34,964

K.Subramani 11.11 95,074 (66,111) 3,476 2,526 34,965

R.Susila 11.11 95,074 (66,111) 3,476 2,526 34,965

N.Muthu 11.11 95,074 (66,111) 3,476 2,526 34,965

M.Periyasamy 11.11 95,074 (66,111) 3,476 2,527 34,965

K.Rajamani 11.11 95,074 (66,111) 3,476 2,527 34,965

TOTAL 100.00 855,665 (595,000) 31,280 22,736 314, 681

79
INTEREST RECEIPTS, OFFICE EXPENCESES AND BAD DEBTS AS ON 2011-2012

PARTICULAR RS

INTEREST RECEIPTS:

Interest Collected During The Year 901,110

Add:

Interest Receivable As On 31.03.09 185,998

Interest Recd In Advance As On 31.03.2008 24,095

Less:

Interest Receivable As On 31.03.08 (100,513)

Interest Recd In Advance As On 31.03.2009 (18,778)

TOTAL 991,912

SALARY TO WORKING PARTNER: AS IN LAST YEAR :

1. K.KUMARESAN 24,000

2 M.PERIYASAMY 24,000

4 N.MUTHU 24,000

TOTAL 72,000

80
 STATEMENT OF FRINGE BENEFITS 2011-2012

PARTICULAR RS. RS.

Nature of business- others

Entertainment expenses 20 1,109

Telephone expenses 20 4,503

Tour and travel expenses 5 10,101

Grand total 15,713

Fringe benefit tax

Add – surcharge

Add – education cess

Total fringe benefit tax

Interest U/s 115WJ(4) 17

Interest U/s 115WJ(5) 15

Net tax payable

Balance tax payable

Date :17-jun-2010
Place: tirchengode

81
 STATEMENT OF TOTAL INCOMEAS ON YEAR 2012-13

PARTICULAR RS. RS.

Income from business & profession:

Add: inadmissible expenses: 562

Pooja expenses 2,854

FBT paid 590

Income tax paid 3,365 6,809

TOTAL INCOME 7,371

Tax thereon 2,211

Add: edu.cess @ 3% 66

Tax payable 2,278

82
 REVENUE ACCOUNT FOR THE YEAR ENDED 31.03.012

PARTICULAR RS. PARTICULAR RS.

TO Interest payments 721,491 By interest receipts 846,899

Staff salary & bonus 64,870

Rent 21,000

Stationery 4, 941

News paper 2,261

Subscription

Pooja expenses 2,854

Travelling expenses 12,635

Phone bill 3,649

Entertainment 175

Lighting 1,335

Bank commission 616

Audit fees 2,500

Office expenses 3,391

Depreciation 164

Association Fees 500

Interest to partners -

Remuneration to -
partners
FBT Tax paid -

Net profit 562

TOTAL 846,899 0 846,899

83
 BALANCE SHEET AS ON 31.03.12

PARTICULAR RS. PARTICULAR RS.

God‘s A/C 63 Furniture 1,478

Capital And Current A/C 360,243

Fixed Deposits 4,978,201 Pronote Loans 4,508,100

Interest Payable FD 118,777 Hire Purchase Loans 0

Interest Received In advance 17,461 Room Advances 6,000

Audit Fees Payable 2,500 Interest Receivables 11,924

Salary Payable - Cash At Bank 636,503

Cash On Hand 313,240

TOTAL 5,477,245 (0.60) 5,477,245

84
 PARTNERS CAPITAL AND CURRENT ACCOUNT AS ON 2012-2013

NAME % OPENING ADDITIONS SHARE OF CLOSING

BALANCE RS. PROFIT BALANCE
RS. RS, RS.
K.Saroja 11.11 34,964 5,000 63 34,964

M.Saroja 11.11 34,964 5,000 63 34,964

K.Kumaresan 11.11 34,964 5,000 63 34,964

S.Rajammel 11.11 34,964 5,000 63 34,964

K.Subramani 11.11 34,965 5,000 62 34,965

R.Susila 11.11 34,965 5,000 62 34,965

N.Muthu 11.11 34,965 5,000 62 34,965

M.Periyasamy 11.11 34,965 5,000 62 34,965

K.Rajamani 11.11 34,965 5,000 62 34,965

TOTAL 100.00 314, 681 45,000 562 360,243

85
INTEREST RECEIPTS, OFFICE EXPENCESES AND BAD DEBTS AS ON 2012-2013

PARTICULAR RS

INTEREST RECEIPTS:

Interest Collected During The Year 1,019,656

Add:

Interest Receivable As On 31.03.09 11,924

Interest Recd In Advance As On 31.03.2008 18,778

Less:

Interest Receivable As On 31.03.08 (185,998)

Interest Recd In Advance As On 31.03.2009 (17,461)

TOTAL 846,899

DEPRECIATION ON FURNITURE:

W.D.V AS ON 01.04.2009 1,642

Less: depreciation @ 10% 164

W.D.V as on 31.03.2012 1,478

86
 STATEMENT OF TOTAL INCOMEAS ON YEAR 2013-14

PARTICULAR RS. RS.

Income from business & profession

Net profit as per P& L A/C 2,862

Add:inadmissible expenses

Pooja expenses 3,526

Income tax paid 2,290

Remuneration to working partners 150,000 155,816

BOOK PROFIT 158,678

LESS: remuneration to working partners to the 150,000

extent allowable

TOTAL INCOME 8,678

Tax thereon 2,603

Add: edu.cess@3% 81

Tax payable 2,685

87
 REVENUE ACCOUNT FOR THE YEAR ENDED 31.03.13
PARTICULAR RS. PARTICULAR RS.

TO Interest payments 775,550 By interest receipts 1,112,941

Staff salary & bonus 73,870

Rent 23500

Stationery 7,894

News paper subscription 2,285

Pooja expenses 3,526

Travelling expenses 14,283

Phone bill 3,088

Entertainment -

Lighting 1,268

Bank commission 1,763

Audit fees 3,637

Office expenses 2,290

Depreciation 148

Association Fees 500

Interest to partners 43,227

Remuneration to partners 150,000

FBT Tax paid -

Net profit 2,862

TOTAL 1,112,941 0.28 1,112, 941

88
 BALANCE SHEET AS ON 31.03.13

PARTICULAR RS. PARTICULAR RS.

God‘s A/C 63 Furniture 1,330

Capital And Current A/C 406,332

Fixed Deposits 5,736,202 Pronote Loans 5,028,200

Interest Payable FD 95,239 Hire Purchase Loans 746,250

Interest Received In advance 16,597 Room Advances 6,000

Audit Fees Payable 3,000 Interest Receivables 42,801

Salary Payable 150,000 Cash At Bank 450,622

Cash On Hand 132,230

TOTAL 6,407,433 (0.28) 6,407,433

REMUNERATION TO WORKING PARTNERS (AS PER PARTNERSHIP DEED)

PARTICULAR RS.

K.KUMARESAN 30,000

M.PERIYASAMY 30,000

N.MUTHU 30,000

K.RAJAMANI 30,000

K.SUBRAMANI 30,000

TOTAL 150,000

89
 PARTNERS CAPITAL AND CURRENT ACCOUNT AS ON YEAR 2012-2013

NAME % OPENING ADDITIONS SHARE OF CLOSING

BALANCE RS. PROFIT BALANCE
RS. RS, RS.
K.Saroja 11.11 40,027 4,803 318 45,148

M.Saroja 11.11 40,027 4,803 318 45,148

K.Kumaresan 11.11 40,027 4,803 318 45,148

S.Rajammel 11.11 40,027 4,803 318 45,148

K.Subramani 11.11 40,027 4,803 318 45,148

R.Susila 11.11 40,027 4,803 318 45,148

N.Muthu 11.11 40,027 4,803 318 45,148

M.Periyasamy 11.11 40,028 4,803 318 45,149

K.Rajamani 11.11 40,027 4,803 318 45,148

TOTAL 100.00 360,243 43,227 2,862 406,332

90
 CHANGE IN CONSTITUTION: NO CHANGE

PARTICULAR RS.

INTEREST RECEIPTS:

Interest Collected During The Year 1,081,200

Add:

Interest Receivable As On 31.03.12 42,801

Interest Recd In Advance As On 31.03.2011 17,461

Less:

Interest Receivable As On 31.03.11 (11,924)

Interest Recd In Advance As On 31.03.2012 (16,597)

TOTAL 1,112,941

DEPRECIATION ON FURNITURE: 1,478

W.D.V AS ON 01.04.2011

Less: depreciation @ 10% 148

W.D.V AS ON 31.03.2013 1,330

91