14-08-2012, 02:17 PM
FINANCIAL PERFORMANCE
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Introduction
Financial management is a managerial activity, which is concerned with planning and controlling of funds financial resources. Through it was a branch of economy is till 1890 as a separate activity or discipline it is of recent origin. Still it has no unique body of its own draws heavily on economies for its theoretical concepts even today.
The subject of financial management is immense interest to academicians because the subject is still developing and there are still certain areas where controversies exit for which no unanimous solutions have been reached as yet. Practicing managers are interested in the subject because among the all crucial decisions of the firm are those which related to financial and an understanding of the theory of financial management provides then with conceptual to make those decisions skillfully.
Nature of financial management:
The term nature as applied to financial management refers to its relationship with closely related fields of economics and according accounting, its functions. Scope and objectives of financial management as an academic discipline, has undergone fundamental changes in the scope and coverage. In the early years of its evolution was created synonymously with the raising of the funds.
In the current literature, pertain to the financial management, a broader scope so as to include in addition to procurement of funds, efficient use of resources is universally recognized. Similarly, the academic thinking as regards the objective of financial management is also characterized by a change over the years.
Scope of Financial management:
Firms create manufacturing capacities for production for goods; some provide services to customers. They sell their goods or services to earn profits. They raise funds to acquire manufacturing and other facilities. Thus, the three most important activities of a business firm are:
Production
Marketing
Finance
A firm secures whatever capital it needs and employs it (finance activity) in activities that generate returns on invested capital (production and marketing activities). A business firm thus is an entity that engages in activities to perform the function of finance, production marketing. The raising of capital funds and using them for generating returns to the supplies of funds is called the finance function of the firm.
The main functions of the financial mangers are to plan for analyzing and utilizing funds to make the maximum contribution for the operation of organization. It realizes knowledge of the financial market from which the funds are drawn. It realizes knowledge of how to make investment decisions and to stimulate efficient operation in the organization. The choices include the use of internal resources, external funds and long-term funds.
Functions of Finance:
Financing decisions depending upon the nature and size of the firm, the finance manager is required to perform all over some of these functions from time to time. While performing these functions he is required to take different decisions, which can be broadly classified in to three groups. Those relating to resource allocation (the investment decision), those covering the financing of these investments (the financing or capital structure decision) and those determining how much cash be taken out and how much reinvested (the dividend decision).
i) INVESTMENT DECISIONS:-
Firms have scarce resources that must be allocated among competitive uses. The financial management provides a frame work for firms to take these decisions wisely.
ii) FINANCING DECISIONS:-
Another group of decision taken by a finance manager is known as financing decisions, which deals with the financing pattern of the firm. As firms make decisions concerning where to invest these resources they have to decide how they should raise these resources. There are two main sources of finance for any firm, the share holder’s funds and the borrowed funds.
iii) DIVIDEND DECISIONS:-
Another major area of decision making by a finance manager is known as the dividend decisions which deal with the appropriation of after tax profits. These profits are available to be distributed among the share holders (subject to legal provisions) or can be retained by the firm for reinvestment with in the firm.
Profit Maximization Decision Criterion:
According to this approach actions that increase profit should be undertaken and those that decrease profits are to be avoided. In specific operational terms, as applicable to financial management, the profit maximization criterion implies that the investment financing and dividend policy decisions of a firm should be oriented to maximization of profits.
The main technical flaws of this criterion are ambiguity timing of benefits and quality of benefits. This criterion is inappropriate and unsuitable as operational objectives of investment financing and dividend decisions of a firm. It is not only vague and ambiguous but it also ignores two important dimensions of financial analysis namely risk and time value of money.
METHODOLOGY
The present study is based on both primary and secondary sources of data. Most of the data has been collected from internal records and other reports of the company. The collected data has been tabulated and interpreted by using ration analysis technique also. At the end meaningful interpretation also drawn to reflect the working capital practices of Nava Bharat Ventures Limited., and finally suitable suggestions are offered for improving the efficiency of working capital management in Nava Bharat Ventures Limited.
SUGAR INDUSTRY PROFILE
Profile of Indian Sugar Industry:
India has been known as the original home of sugarcane and sugar. Indians knew the art of making sugar since the fourth century. However the advent of modern sugar industry in India dates back to mid 1930's when a few vacuum pan units were established in the sub-tropical belts of Uttar Pradesh and Bihar.
Until the mid 50s, the sugar industry was almost wholly confined to the states of Uttar Pradesh and Bihar. After late fifties or early sixties the industry dispersed into Southern India, Western India and other parts of Northern India.
India is the largest consumer and second largest producer of sugar in the world. The sufficient and well distributed monsoon rains, rapid population growth and substantial increases in sugar production capacity have combined to make India the largest consumer and second largest producer of sugar in the world.
The Indian sugar industry has not only achieved the singular distinction of being one of the largest producer of white plantation crystal sugar in the world but has also turned out to be a massive enterprise of gigantic dimensions. With over 450 sugar factories located throughout the country, the sugar industry is amongst the largest agro processing industries, with an annual turnover of Rs150bn. It plays a major role in rural development and its importance for India stretches far beyond the role of a sweetener supplier.
The sugar factories located in various parts of the country work as nuclei for development of rural areas by mobilizing rural resources and generating employment, transport and communication facilities.