Introduction To Finance And Creditors Management

Published Date: 02 Nov 2017

Chapter 1

Finance is the study of how investors allocate their assets over time under conditions of certainty and uncertainty. A key point in finance, which affects decisions, is the time value of money, which states that a unit of currency today is worth more than the same unit of currency tomorrow. Finance aims to price assets based on their risk level, and expected rate of return. Finance can be broken into three different sub categories: public finance, corporate finance and personal finance.

Types of Finance

Personal Finance

Questions in personal finance revolve around

How can people protect themselves against unforeseen personal events, as well as those in the external economy?

How can family assets best be transferred across generations (bequests and inheritance)?

How does tax policy (tax subsidies and/or penalties) affect personal financial decisions?

How does credit affect an individual's financial standing?

How can one plan for a secure financial future in an environment of economic instability?

Personal financial decisions may involve paying for education, financing durable goods such as real estate and cars, buying insurance, e.g. health and property insurance, investing and saving for retirement.

Personal financial decisions may also involve paying for a loan, or debt obligations. The six key areas of personal financial planning, as suggested by the Financial Planning Standards Board, are:

Financial position: is concerned with understanding the personal resources available by examining net worth and household cash flow. Net worth is a person's balance sheet, calculated by adding up all assets under that person's control, minus all liabilities of the household, at one point in time. Household cash flow totals up all the expected sources of income within a year, minus all expected expenses within the same year. From this analysis, the financial planner can determine to what degree and in what time the personal goals can be accomplished.

Adequate protection: the analysis of how to protect a household from unforeseen risks. These risks can be divided into liability, property, death, disability, health and long term care. Some of these risks may be self-insurable, while most will require the purchase of an insurance contract. Determining how much insurance to get, at the most cost effective terms requires knowledge of the market for personal insurance. Business owners, professionals, athletes and entertainers require specialized insurance professionals to adequately protect themselves. Since insurance also enjoys some tax benefits, utilizing insurance investment products may be a critical piece of the overall investment planning.

Tax planning: typically the income tax is the single largest expense in a household. Managing taxes is not a question of if you will pay taxes, but when and how much. Government gives many incentives in the form of tax deductions and credits, which can be used to reduce the lifetime tax burden. Most modern governments use a progressive tax. Typically, as one's income grows, a higher marginal rate of tax must be paid.[citation needed] Understanding how to take advantage of the myriad tax breaks when planning one's personal finances can make a significant impact.

Investment and accumulation goals: planning how to accumulate enough money for large purchases, and life events is what most people consider to be financial planning. Major reasons to accumulate assets include, purchasing a house or car, starting a business, paying for education expenses, and saving for retirement. Achieving these goals requires projecting what they will cost, and when you need to withdraw funds. A major risk to the household in achieving their accumulation goal is the rate of price increases over time, or inflation. Using net present value calculators, the financial planner will suggest a combination of asset earmarking and regular savings to be invested in a variety of investments.

In order to overcome the rate of inflation, the investment portfolio has to get a higher rate of return, which typically will subject the portfolio to a number of risks. Managing these portfolio risks is most often accomplished using asset allocation, which seeks to diversify investment risk and opportunity.

This asset allocation will prescribe a percentage allocation to be invested in stocks, bonds, cash and alternative investments. The allocation should also take into consideration the personal risk profile of every investor, since risk attitudes vary from person to person.

Retirement planning is the process of understanding how much it costs to live at retirement, and coming up with a plan to distribute assets to meet any income shortfall. Methods for retirement plan include taking advantage of government allowed structures to manage tax liability including: individual (IRA) structures, or employer sponsored retirement plans.

Estate planning involves planning for the disposition of one's assets after death. Typically, there is a tax due to the state or federal government at your death. Avoiding these taxes means that more of your assets will be distributed to your heirs. You can leave your assets to family, friends or charitable groups.

Corporate finance

Managerial or corporate finance is the task of providing the funds for a corporation's activities (for small business, this is referred to as SME finance). Corporate finance generally involves balancing risk and profitability, while attempting to maximize an entity's wealth and the value of its stock, and generically entails three interrelated decisions. In the first, "the investment decision", management must decide which "projects" (if any) to undertake. The discipline of capital budgeting is devoted to this question, and may employ standard business valuation techniques or even extend to real options valuation; see Financial modeling. The second, "the financing decision" relates to how these investments are to be funded: capital here is provided by shareholders, in the form of equity (privately or via an initial public offering),creditors, often in the form of bonds, and the firm's operations (cash flow). Short-term funding or working capital is mostly provided by banks extending a line of credit.

The balance between these elements forms the company's capital structure. The third, "the dividend decision", requires management to determine whether any unappropriated profit is to be retained for future investment / operational requirements, or instead to be distributed to shareholders, and if so in what form. Short term financial management is often termed "working capital management", and relates to cash-, inventory- and debtors management.

These areas often overlap with the firm's accounting function, however, financial accounting is more concerned with the reporting of historical financial information, while these financial decisions are directed toward the future of the firm.

Another business decision concerning finance is investment, or fund management. An investment is an acquisition of an asset in the hope that it will maintain or increase its value. In investment management – in choosing a portfolio – one has to decide what, how much and when to invest. To do this, a company must:

Identify relevant objectives and constraints: institution or individual goals, time horizon, risk aversion and tax considerations;

Identify the appropriate strategy: active versus passive hedging strategy

Measure the portfolio performance

Financial management is duplicate with the financial function of the Accounting profession. However, financial accounting is more concerned with the reporting of historical financial information, while the financial decision is directed toward the future of the firm.

Financial risk management, an element of corporate finance, is the practice of creating and protecting economic value in a firm by using financial instruments to manage exposure to risk, particularly risk and market risk. (Other risk types include Foreign exchange, Shape, Volatility, Sector, Liquidity, Inflation risks, etc.) It focuses on when and how to hedge using financial instruments; in this sense it overlaps with financial engineering.

Similar to general risk management, financial risk management requires identifying its sources, measuring it (see: Risk measure: Well known risk measures), and formulating plans to address these, and can be qualitative and quantitative. In the banking sector worldwide, the Basel Accords are generally adopted by internationally active banks for tracking, reporting and exposing operational, credit and market risks.

Financial Services

An entity whose income exceeds its expenditure can lend or invest the excess income. On the other hand, an entity whose income is less than its expenditure can raise capital by borrowing or selling equity claims, decreasing its expenses, or increasing its income.

The lender can find a borrower, a financial intermediary such as a bank, or buy notes or bonds in the bond market. The lender receives interest, the borrower pays a higher interest than the lender receives, and the financial intermediary earns the difference for arranging the loan.

A bank aggregates the activities of many borrowers and lenders. A bank accepts deposits from lenders, on which it pays interest. The bank then lends these deposits to borrowers. Banks allow borrowers and lenders, of different sizes, to coordinate their activity.

Finance is used by individuals (personal finance), by governments (public finance), by businesses (corporate finance) and by a wide variety of other organizations, including schools and non-profit organizations.

In general, the goals of each of the above activities are achieved through the use of appropriate financial instruments and methodologies, with consideration to their institutional setting.

Finance is one of the most important aspects of business management and includes decisions related to the use and acquisition of funds for the enterprise.

In corporate finance, a company's capital structure is the total mix of financing methods it uses to raise funds. One method is debt financing, which includes bank loans and bond sales. Another method is equity financing - the sale of stock by a company to investors, the original shareholders of a share. Ownership of a share gives the shareholder certain contractual rights and powers, which typically include the right to receive declared dividends and to vote the proxy on important matters (e.g., board elections). The owners of both bonds and stock, may be institutional investors - financial institutions such as investment banks and pension funds  or private individuals, called private investors or retail investors.

Public finance

Public finance describes finance as related to sovereign states and sub-national entities (states/provinces, counties, municipalities, etc.) and related public entities (e.g. school districts) or agencies. It is concerned with:

Identification of required expenditure of a public sector entity

Source(s) of that entity's revenue

The budgeting process

Debt issuance (municipal bonds) for public works projects

Central banks, such as the Federal Reserve System banks in the United States and Bank of England in the United Kingdom, are strong players in public finance, acting as lenders of last resort as well as strong influences on monetary and credit conditions in the economy.

Functions of Finance

The following explanation will help in understanding each finance function in detail

Investment Decision

One of the most important finance functions is to intelligently allocate capital to long term assets. This activity is also known as capital budgeting. It is important to allocate capital in those long term assets so as to get maximum yield in future. Following are the two aspects of investment decision

Evaluation of new investment in terms of profitability

Comparison of cut off rate against new investment and prevailing investment.

Since the future is uncertain therefore there are difficulties in calculation of expected return. Along with uncertainty comes the risk factor which has to be taken into consideration. This risk factor plays a very significant role in calculating the expected return of the prospective investment. Therefore while considering investment proposal it is important to take into consideration both expected return and the risk involved.

Investment decision not only involves allocating capital to long term assets but also involves decisions of using funds which are obtained by selling those assets which become less profitable and less productive. It wise decisions to decompose depreciated assets which are not adding value and utilize those funds in securing other beneficial assets. An opportunity cost of capital needs to be calculating while dissolving such assets. The correct cut off rate is calculated by using this opportunity cost of the required rate of return (RRR)

Financial Decision

Financial decision is yet another important function which a financial manger must perform. It is important to make wise decisions about when, where and how should a business acquire funds. Funds can be acquired through many ways and channels. Broadly speaking a correct ratio of an equity and debt has to be maintained. This mix of equity capital and debt is known as a firm’s capital structure. A firm tends to benefit most when the market value of a company’s share maximizes this not only is a sign of growth for the firm but also maximizes shareholders wealth. On the other hand the use of debt affects the risk and return of a shareholder. It is more risky though it may increase the return on equity funds. A sound financial structure is said to be one which aims at maximizing shareholders return with minimum risk. In such a scenario the market value of the firm will maximize and hence an optimum capital structure would be achieved. Other than equity and debt there are several other tools which are used in deciding a firm capital structure.

Dividend Decision

Earning profit or a positive return is a common aim of all the businesses. But the key function a financial manger performs in case of profitability is to decide whether to distribute all the profits to the shareholder or retain all the profits or distribute part of the profits to the shareholder and retain the other half in the business. It’s the financial manager’s responsibility to decide an optimum dividend policy which maximizes the market value of the firm. Hence an optimum dividend payout ratio is calculated. It is a common practice to pay regular dividends in case of profitability another way is to issue bonus shares to existing shareholders.

Liquidity Decision

It is very important to maintain a liquidity position of a firm to avoid insolvency. Firm’s profitability, liquidity and risk all are associated with the investment in current assets. In order to maintain a tradeoff between profitability and liquidity it is important to invest sufficient funds in current assets. But since current assets do not earn anything for business therefore a proper calculation must be done before investing in current assets. Current assets should properly be valued and disposed of from time to time once they become non profitable. Currents assets must be used in times of liquidity problems and times of insolvency.

Financial Statement

A financial statement (or financial report) is a formal record of the financial activities of a business, person, or other entity. In British English—including United Kingdom company law—a financial statement is often referred to as an account, although the term financial statement is also used, particularly by accountants.

For a business enterprise, all the relevant financial information, presented in a structured manner and in a form easy to understand, are called the financial statements. They typically include four basic financial statements, accompanied by a management discussion and analysis:[1]

Statement of financial position: also referred to as a balance sheet, reports on a company's assets, liabilities, and ownership equity at a given point in time.

Statement of comprehensive income: also referred to as a profit and loss statement (or a "P&L"), reports on a company's income, expenses, and profits over a period of time. A profit and loss statement provides information on the operation of the enterprise. These include sales and the various expenses incurred during the processing state.

Statement of changes in equity: explains the changes of the company's equity throughout the reporting period

Statement of cash flows: reports on a company's cash flow activities, particularly its operating, investing and financing activities.

For large corporations, these statements are often complex and may include an extensive set of notes to the financial statements[2]and explanation of financial policies and management discussion and analysis. The notes typically describe each item on the balance sheet, income statement and cash flow statement in further detail. Notes to financial statements are considered an integral part of the financial statements.

Purpose Of Financial Statement By Business Entities

The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions."[3] Financial statements should be understandable, relevant, reliable and comparable. Reported assets, liabilities, equity, income and expenses are directly related to an organization's financial position.

Financial statements are intended to be understandable by readers who have "a reasonable knowledge of business and economic activities and accounting and who are willing to study the information diligently."[3] Financial statements may be used by users for different purposes:

Owners and managers require financial statements to make important business decisions that affect its continued operations. Financial analysis is then performed on these statements to provide management with a more detailed understanding of the figures. These statements are also used as part of management's annual report to the stockholders.

Employees also need these reports in making collective bargaining agreements (CBA) with the management, in the case of labor unions or for individuals in discussing their compensation, promotion and rankings.

Prospective investors make use of financial statements to assess the viability of investing in a business. Financial analyses are often used by investors and are prepared by professionals (financial analysts), thus providing them with the basis for making investment decisions.

Financial institutions (banks and other lending companies) use them to decide whether to grant a company with fresh working capital or extend debt securities (such as a long-term bank loan or debentures) to finance expansion and other significant expenditures.

Creditors Management or Accounts Payable Management

Accounts payable is money owed by a business to its suppliers and shown on its Balance Sheet as a liability. An accounts payable is recorded in the Account Payable sub-ledger at the time an invoice is vouchered for payment.

Vouchered, or vouched, means that an invoice is approved for payment and has been recorded in the General Ledger or AP sub ledger as an outstanding, or open, liability because it has not been paid. Payables are often categorized as Trade Payables, payables for the purchase of physical goods that are recorded in Inventory, and Expense Payables, payables for the purchase of goods or services that are expensed.

Common examples of Expense Payables are advertising, travel, entertainment, office supplies and utilities. A/P is a form of credit that suppliers offer to their customers by allowing them to pay for a product or service after it has already been received. Suppliers offer various payment terms for an invoice.

Payment terms may include the offer of a cash discount for paying an invoice within a defined number of days.

For example, 2%,30 Net 31 terms mean that the payer will deduct 2% from the invoice if payment is made within 30 days. If the payment is made on Day 31 then the full amount is paid.

In households, accounts payable are ordinarily bills from the electric company, telephone company, cable television or satellite dish service, newspaper subscription, and other such regular services.

Householders usually track and pay on a monthly basis by hand using cheques , credit cards or internet banking. In a business, there is usually a much broader range of services in the A/P file, and accountants or bookkeepers usually use accounting software to track the flow of money into this liability account when they receive invoices and out of it when they make payments.

Increasingly, large firms are using specialized Accounts Payable automation solutions (commonly called e-Payables) to automate the paper and manual elements of processing an organization's invoices.

Commonly, a supplier will ship a product, issue an invoice, and collect payment later, which describes a cash conversion cycle, a period of time during which the supplier has already paid for raw materials but hasn't been paid in return by the final customer.

When the invoice is received by the purchaser it is matched to the packing slip and purchase order, and if all is in order, the invoice is paid.

This is referred to as the three-way match.[1] The three-way match can slow down the payment process, so the method may be modified. For example, three-way matching may be limited solely to large-value invoices, or the matching is automatically approved if the received quantity is within a certain percentage of the amount authorized in the purchase order.

Expense Administration

Expense administration is usually closely related to accounts payable, and sometimes those functions are performed by the same employee.

The expense administrator verifies employees' expense reports, confirming that receipts exist to support airline, ground transport, meals and entertainment, telephone, hotel, and other expenses.

This documentation is necessary for tax purposes and to prevent reimbursement of inappropriate or erroneous expenses.

Airline expenses are, perhaps, the most prone to fraud because of the high cost of air travel and the confusing nature of airline-related documentation, which can consist of an array of reservations, receipts, and actual tickets.

Internal Control

A variety of checks against abuse are usually present to prevent embezzlement by accounts payable personnel. Segregation of duties is a common control. Nearly all companies have a junior employee process and print a cheque and a senior employee review and sign the cheque.

Often, the accounting software will limit each employee to performing only the functions assigned to them, so that there is no way any one employee – even the controller – can singlehandedly make a payment.

Some companies also separate the functions of adding new vendors and entering vouchers. This makes it impossible for an employee to add himself as a vendor and then cut a cheque to himself without colluding with another employee.

This file is referred to as the master vendor file. It is the repository of all significant information about the company's suppliers. It is the reference point for accounts payable when it comes to paying invoices.

In addition, most companies require a second signature on cheques whose amount exceeds a specified threshold.

Accounts payable personnel must watch for fraudulent invoices. In the absence of a purchase order system, the first line of defense is the approving manager.

However, A/P staff should become familiar with a few common problems, such as "Yellow Pages" rip offs in which fraudulent operators offer to place an advertisement.

The walking-fingers logo has never been trademarked, and there are many different Yellow Pages-style directories, most of which have a small distribution. These may be charges for directory listings or advertisements.

Recently, some companies have begun sending what appears to be a rebate or refund check; in reality, it is a registration for services that is activated when the document is returned with a signature."

In accounts payable, a simple mistake can cause a large overpayment. A common example involves duplicate invoices.

An invoice may be temporarily misplaced or still in the approval status when the vendors calls to inquire into its payment status.

After the A/P staff member looks it up and finds it has not been paid, the vendor sends a duplicate invoice; meanwhile the original invoice shows up and gets paid. Then the duplicate invoice arrives and inadvertently gets paid as well, perhaps under a slightly different invoice number.

Audits Of Accounts Payable

Auditors often focus on the existence of approved invoices, expense reports, and other supporting documentation to support cheques that were cut.

The presence of a confirmation or statement from the supplier is reasonable proof of the existence of the account. It is not uncommon for some of this documentation to be lost or misfiled by the time the audit rolls around. An auditor may decide to expand the sample size in such situations.

Auditors typically prepare an aging structure of accounts payable for a better understanding of outstanding debts over certain periods (30, 60, 90 days, etc.). Such structures are helpful in the correct presentation of the balance sheet as of fiscal year end.

Chapter 2 – Research Design

Introduction

Finance is the study of how investors allocate their assets over time under conditions of certainty and uncertainty. A key point in finance, which affects decisions, is the time value of money, which states that a unit of currency today is worth more than the same unit of currency tomorrow. Finance aims to price assets based on their risk level, and expected rate of return. Finance can be broken into three different sub categories: public finance, corporate finance and personal finance.

Functions of Finance

The five basic corporate finance functions are described as those functions related to;

raising capital to support company operations and investments (aka, financing functions);

selecting those projects based on risk and expected return that are the best use of a company's resources (aka, capital budgeting functions);

management of company cash flow and balancing the ratio of debt and equity financing to maximize company value (aka, financial management function);

developing a company governance structure to encourage ethical behavior and actions that serve the best interests of its stockholders (aka, corporate governance function); and

5) Management of risk exposure to maintain optimum risk-return trade-off that maximizes shareholder value (aka, risk management function).

Creditors Management

Creditors Management or Accounts Payable is money owed by a business to its suppliers and shown on its Balance Sheet as a liability.

An accounts payable is recorded in the Creditors Management sub-ledger at the time an invoice is voucher for payment. Voucher, or vouched, means that an invoice is approved for payment and has been recorded in the General Ledger or AP sub ledger as an outstanding, or open, liability because it has not been paid. Payables are often categorized as Trade Payables, payables for the purchase of physical goods that are recorded in Inventory, and Expense Payables, payables for the purchase of goods or services that are expensed.

Common examples of Expense Payables are advertising, travel, entertainment, office supplies and utilities. A/P is a form of credit that suppliers offer to their customers by allowing them to pay for a product or service after it has already been received.

Statement of Problem

Since creditors are important to this company as they are into processing steel and such a study or analysis was not been performed before, this research is being done which will invariably help the company to manage their creditors properly .

Objectives of the Study

To study the payment policy at R.S Steel Tech.

To study the major creditors and their outstanding

To conduct an age wise analysis of the creditors in R.S Steel Tech

To give suitable suggestions to the company wherever necessary

Scope of the Study

This research is conducted on the basis of past 5 years financial statements i.e. from (2007-2012)`

This research is limited to R.S STEEL TECH

This research is done to analyze the Creditors Management of the firm.

Operational Definitions

Creditor –A creditor is a party (e.g. person, organization, company, or government) that has a claim on the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some property or service to the second party under the assumption (usually enforced by contract) that the second party will return an equivalent property and service. The second party is frequently called a debtor or borrower. The first party is the creditor, which is the lender of property, service or money.

A/P File – Unpaid bills. Accounts that are owed to suppliers (trade creditors) as distinguished from accrued interest, rent, salaries, taxes, and other such accounts. Accounts payable are shown under current (short-term) liabilities in the balance sheet. Lenders and investors examine the relationship of these accounts to the firm's purchases in order to judge the soundness of its day to day financial management.

Three Way Match –A 3-way match in Accounts Payable is when the invoice from the vendor is matched against the purchase order and shipping documents before it is posted

Audit – The general definition of an audit is an evaluation of a person, organization, system, process, enterprise, project or product. The term most commonly refers to audits in accounting, internal auditing, and government auditing .

Auditors –An official whose job it is to carefully check the accuracy of business records. An auditor can be either an independent auditor unaffiliated with the company being audited or a captive auditor, and some are elected public officials.

HR Sheets – Hot rolling is a hot working metalworking process where large pieces of metal, such as slabs or billets, are heated above their recrystallization temperature and then deformed between rollers to form thinner cross sections. Hot rolling produces thinner cross sections than cold rolling processes with the same number of stages. Hot rolling, due to recrystallization, will reduce the average grain size of a metal while maintaining an equiaxed microstructure where as cold rolling will produce a hardened microstructure.

MS Plate –Mild steel, also called plain-carbon steel, is the most common form of steel because its price is relatively low while it provides material properties that are acceptable for many applications, more so than iron.

CR Sheet –Cold rolled steel is metal that has been made by rolling it out at room temperature. When they cold roll a steel it is to get a better finish or more strength.

GP Sheet –Galvanized sheets are zinc coated cold rolled sheets or coils manufacture as per IS 513/1994.Plain galvanized sheets are used for automotive body building, panels, electrical appliances like refrigerator, washing machine, and use for advertisement panels. Etc.The use of galvanized sheets improves paint ability and corrosion resistance and aesthetic looks.

GC Sheets - These sheets are manufactured using premium quality material which provides high tensile strength and makes them seepage resistant. GC sheets prove to be a cost effective solution for various construction purposes such as roofing, side-walls, partitions and panels.

Partnership Concern – Partnership is defined as a relation between two or more persons who have agreed to share the profits of a business carried on by all of them or any of them acting for all. The owners of a partnership business are individually known as the "partners" and collectively as a "firm"

Job Work – It is the work done by one company to another company or firm .

Punching – Punching is a metal forming process that uses a punch press to force a tool, called a punch, through the work piece to create a hole via shearing.

Methodology

Source of Data:

Primary data is obtained from the Finance Managers and Auditors.

Secondary Data is gathered from the past 5 year financial records of the company

Tools for data collection:

Data Is gathered through various interview schedules .

Plan of Analysis

The information obtained from the annual creditor’s statement is thoroughly analyzed and the data will be analyzed using simple percentages and comparative analysis.

Limitations Of The Study

Due to the time constraint an in-depth study could not be done.

This Research is only limited to R.S Steel Tech , Bangalore

All the creditors in the organization could not be analyzed because the company hadn’t maintained proper bills for all its creditors.

The study is limited to the objectives formulated for the research .

The study of Creditors Management is limited for a period of 5 years only , that is , from 2007-20012 .

Overview Of the Chapter Scheme

Chapter 1- Introduction

A brief introduction about finance and its functions is provided in this chapter. Also a brief introduction of the Creditors Management, its objectives, merits, limitations, etc. is provided in this chapter.

Chapter 2- Research Design

It includes information on the below mentioned topics:

Introduction- Introduction to the Title.

Statement of problem- What is the problem we’re researching upon?

Objectives – Gives the various objectives of the study.

Scope of the study – What do we intend to gain from this study and the benefits to the company .

Methodology – The method used for gathering data

Plan of analysis – The method chosen to analyze the acquired data.

Chapter 3- Company Profile

Gives a brief introduction to the company , its vision & mission ,

The organizational structure of the company etc.

Chapter 4- Analysis of Data

Creditors’ Management is made based on the annual creditor’s statement of the company and the data is analyzed through simple percentages and comparative analysis.

Chapter 5- Summary of Findings, Conclusion and Suggestions.

In this chapter summary of the analysis is provided along with conclusion and suggestions that can be adopted by the company which they will benefit from.

Chapter 3 – Profile of the Company

R.S STEEL TECH was incorporated in the year 2001 and their plant is set up in Old Madras Road , Bangalore .

This Company is a Partnership firm which was formed by 4 partners namely:-

Mrs. . Geeta Ravindra Kumar

Mr. Rajan Aggarwal

Mr.Gautham Aggarwal

Mr.Ravindra Kumar

Values

They believe that the softest pillow is a clear conscience. The values that drive them are :

Go beyond what the client expects

To strive to new heights and be an exceptional market leader for the others in the industry and themselves

Being honest in all their business activities and transactions.

Continuously striving to improve themselves to be the best they can possibly be .

Vision

To continually increase the quality of their products.

To cater to a large client base around the world..

To come out with various innovations and thereby attain success.

To constantly aim at rewarding our partners .

Mission

To be the best quality supplier and vendor.

To adhere to various international quality standards and not deviate in any way.

To aim at attaining total consumer satisfaction.  

To function ethically , adhering to all business rules and regulations

Nature of Activity

The Firm is basically in De-coiling , Slitting , Shearing and Cutting of iron coils into sheets.

The following paragraphs will give you an understanding on what exactly is the firm into :-

De-coiling – One of the major processing work R.S Steel Tech is into is Decoiling is the action by which they unwind a parent coil, passing it through rollers to make it flat and then cutting the sheets into desired sizes. These sheets can be varied in length to suit the clientele they serve .

The parent coil is unwound and passed through a leveling head. This bank of hardened rolls are positioned below and above the passing steel. The rolls have a controlled level of pressures placed on them at varying intensity and location.

Curvature existing in the material leaving the parent coil is then fully removed to create a flattened product. When sufficient material has been flattened a shear is used to cut it to length and it is then fed into a system which stacks it into bundles of the specified quantity or weight.

Finished bundles are then moved to a banding area where they are securely strapped ready for dispatch. Their customers have the option of collecting their material or requesting us to arrange delivery.

Metal Sheets

HR Sheets

MS Plate

CR Sheet

GP/GC Sheets

Features:

Durability

High performance

Anti-corrosive properties

Dimensional accuracy

Minimal maintenance requirements

Slitting -Slitting is also a shearing process, but rather than making cuts at the end of a work piece like shearing, slitting us used to cut a wide coil of metal into a number of narrower coils as the main coil is moved through the slitter. During the slitting process, the metal coil passes lengthwise through the slitter's circular blades.

The Reason R.S Steel Tech Uses Slitting:

being restricted to cutting relatively thin materials (0.001 to 0.125 in.),

leaving left-over burrs on slit edges of the narrower coals,

its ability to be used on both ferrous and nonferrous metals,

its categorization as a high production designed to control metal coil width.

Shearing-Shearing, also known as die cutting is a process which cuts stock without the formation of chips or the use of burning or melting. Strictly speaking, if the cutting blades are straight the process is called shearing; if the cutting blades are curved then they are shearing-type operations. The most commonly sheared materials are in the form of sheet metal or plates, however rods can also be sheared. Shearing-type operations include: blanking, piercing, roll slitting, and trimming. It is used in metalworking and also with paper and plastics.

Several cutting processes exist that utilize shearing force to cut sheet metal. However, the term "shearing" by itself refers to a specific cutting process that produces straight line cuts to separate a piece of sheet metal. Most commonly, shearing is used to cut a sheet parallel to an existing edge which is held square, but angled cuts can be made as well. For this reason, shearing is primarily used to cut sheet stock into smaller sizes in preparation for other processes. Shearing has the following capabilities:

Sheet thickness: 0.005-0.25 inches

Tolerance: ±0.1 inches (±0.005 inches feasible)

Surface finish: 250-1000 μin (125-2000 μin feasible)

The shearing process is performed on a shear machine, often called a squaring shear or power shear, that can be operated manually (by hand or foot) or by hydraulic, pneumatic, or electric power. A typical shear machine includes a table with support arms to hold the sheet, stops or guides to secure the sheet, upper and lower straight-edge blades, and a gauging device to precisely position the sheet. The sheet is placed between the upper and lower blade, which are then forced together against the sheet, cutting the material. In most devices, the lower blade remains stationary while the upper blade is forced downward. The upper blade is slightly offset from the lower blade, approximately 5-10% of the sheet thickness. Also, the upper blade is usually angled so that the cut progresses from one end to the other, thus reducing the required force. The blades used in these machines typically have a square edge rather than a knife-edge and are available in different materials, such as low alloy steel and high-carbon steel

Cutting -Cutting sheet metal can be done in various ways from hand tools called tin snips up to very large powered shears. With the advances in technology, sheet metal cutting has turned to computers for precise cutting.

Many sheet metal cutting operations are based on computer numerically controlled (CNC) lasers cutting or multi-tool CNC punch press.

CNC laser involves moving a lens assembly carrying a beam of laser light over the surface of the metal. Oxygen, nitrogen or air is fed through the same nozzle from which the laser beam exits. The metal is heated and burnt by the laser beam, cutting the metal sheet. The quality of the edge can be mirror smooth and a precision of around 0.1 mm (0.0039 in) can be obtained. Cutting speeds on thin 1.2 mm (0.047 in) sheet can be as high as 25 m (82 ft) a minute.

Punching -is a metal forming process that uses a punch press to force a tool, called a punch, through the work piece to create a hole via shearing. The punch often passes through the work into a die. A scrap slug from the hole is deposited into the die in the process. Depending on the material being punched this slug may be recycled and reused or discarded. Punching is often the cheapest method for creating holes in sheet metal in medium to high production volumes. When a specially shaped punch is used to create multiple usable parts from a sheet of material the process is known as blanking. In forging applications the work is often punched while hot, and this is called hot punching.

Punch tooling (punch and die) is often made of hardened steel or tungsten carbide. A die is located on the opposite side of the work piece and supports the material around the perimeter of the hole and helps to localize the shearing forces for a cleaner edge. There is a small amount of clearance between the punch and the die to prevent the punch from sticking in the die and so less force is needed to make the hole. The amount of clearance needed depends on the thickness, with thicker materials requiring more clearance, but the clearance is always less than the thickness of the work piece. The clearance is also dependent on the hardness of the work piece.

The punch press forces the punch through a work piece, producing a hole that has a diameter equivalent to the punch, or slightly smaller after the punch is removed. All ductile materials stretch to some extent during punching which often causes the punch to stick in the work piece. In this case, the punch must be physically pulled back out of the hole while the work is supported from the punch side, and this process is known as stripping.

The hole walls will show burnished area, rollover, and die break and must often be further processed. The slug from the hole falls through the die into some sort of container to either dispose of the slug or recycle it.

Suppliers of Materials

Tata Steel

JSW Steel Ltd

SAIL

Vizac Steel Plant

RINL

Payment Policy

The company pays its suppliers within a span of three months or to a maximum of six months.

ORGANIZATIONAL STRUCTURE OF R.S STEEL TECH

The unit is headed by the managing partner of the company Mr.Rajan Agarwal , who has over 15 years of experience in this field of activity who is over-all in charge of the activities of this company . He is ably assisted by his brother Mr.Gautam Aggarwal who has more than 10 years in this line of activity and is in charge of assisting and taking care of various administrative matters including H.R functions, the day to day activities in the shop floor is handled by the Works Manager who has more than 15 years of experience in this field . He handles a team of over 25 workmen and the finance and accounting section is handles by the Finance Manager who has more than 25 years of experience in his line of activity .

MAJOR CLIENTS

Ramswaroop and Sons

G.K Steels

TTP Technologies Pvt Ltd

Triveni Enterprises

Kanunga Extrusions Pvt Ltd

Merlecha Steel Pvt Ltd

Jain Bros

Tata Steel Processing And Distribution Pvt Ltd

Parellel Track Engineering Pvt Ltd

Company Profile of the Creditors

Asian Electrical Services

Asian Electronics Limited (AEL) is involved in Design, Manufacturing and Marketing of Energy Efficient Products and specializing in lighting solutions. With its world-class manufacturing facility at Nasik, India, it is meeting international standards of quality in lighting solutions.

AEL is offering elegant, efficient and high quality luminaries for use with T8 / T5 FTLs, CFLs, MV, SV, HID, lamps for all possible applications in the House hold, Corporate, Industrial, Down lighting, Flood lighting, Landscaping segments, Under Water, Municipalities, Street Lighting and for special applications as in Clean Rooms in the Pharmaceutical Industry.

AEL's Nationwide presence and strategic International Partnerships has made its presence in the Lighting world.

Divine Machines Pvt Ltd

Divine Machines has established an undisputed position of being a leading manufacturer of Coil Processing Lines. Divine Machines offers one of the most versatile ranges of machinery to meet exact client requirements at affordable cost. Due to their technological expertise and decades of experience they specialize in design, build and commission coil- processing line. Divine’s coil processing lines and equipments are characterized by world -class technology, reliability, quality and advanced engineering features to meet the dynamic requirements of business. They provide competitive edge to our clients due to cost-effective product range. Divine Machines has become the preferred choice due to world-class products, readily available low-priced raw materials resources like steel and skilled manpower.

Their product range includes Cut to Length lines, Slitting Lines, Roll Forming Lines, Barrel Corrugators, and auxiliary/ Terminal equipment like Uncoiler, Recoiler, Flatner, and Accumulators in Process Lines. They specialize in automation devices like Press Feed Units, Servo Roll Feeders, Folding Lines & F.M.S.

Divine Traders

Divine traders are the market distributor specializing in is certified wire and cables ranging from cctv camera cables, networking lan cables, co-axial cables, telephone cables, speaker and house wire, multicore cables.

The use of cutting edge technology and low operating cost results in cost efficiency than other market leaders. The brand has acquired a name in quality, price and delivery thus being the pillar for the growth and continues to strive for the same. 

The sole objective is to provide customer satisfaction on all costs in the highly saturated market. The company aims to promote the same and keep long & trustworthy relationship with the customer.

John Fowler India Pvt ltd

John Fowler is a pioneer in the field of filters and filtration systems in India and is in operation since 1953.With its wide product range for Internal Combustion Engines and Industrial applications, John Fowler caters to the requirements of several reputed Original Equipment-Manufacturers.

John Fowler is a professionally managed, technology - driven company, committed to satisfying its customer's needs of filtration solution through innovative research and development.

Its in-house R&D centre, recognized by Dept. of Scientific and Industrial Research (DSIR), is equipped with comprehensive test facilities to test various filters as per national and international standards.

 

The company is certified for ISO 9001:2008 - Quality Management System and ISO 14001:2004-Environmental Management System. It has state-of-the-art manufacturing facilities at two locations, one at Bommasandra Bangalore for manufacture of filters for IC engines and industrial applications and the other at Dehradun (Uttarakhand) for filters for automotive application.

Fowler Westrup India Pvt Ltd

A Joint ventures of John Fowler, India and Westrup, DenmarkFowler Westrup (India) Pvt. Limited was incorporated in the year 2000 as a joint venture between John Fowler (India) Pvt. Limited and Westrup A/s, Denmark for manufacturing Post Harvest Agricultural processing machine and Oil Filtration System.

The operations commenced in the year 2001.

Fowler Westrup has established leadership through its commitment to highest quality standards, superior performance, reliability, safety and durability. It has a modern manufacturing plant located at Bangalore, India. The manufacturing is supported by an advanced design set up with capability of three dimensional design layout.

New Product development is an on-going process to meet the continued enhancement of customer need. The company has a R&D test bed to ensure that every new development is tested to meet the rigorous field conditions.

Chapter 4 – DATA ANALYSIS

Analysis For The Year 2007-2008

Table Showing Financial Analysis Of Asian Electricals For The Year 2007-2008

Billing Date

Amount

Total Amount Of All The Bills

Amount Paid

Amount Outstan-

ding

Years Outstan-ding

October 2007

15650.00

29313.00

10025.00

19,308.00

5.5 Years

November 2007

9,315.00

5.4 Years

February 2008

4380.00

4.1 Years

Analysis –From the above table it can be seen that R.S Steel Tech has made purchases from Asian Electricals worth Rs.15,650.00 in the month of October 2007 , out of which Rs.10,250.00 was paid . In the month of November 2007 goods worth Rs.9,315.00 were bought and no payment was made and in the month of February 2008 goods worth Rs.4,380.00 were bought and even in this month no payment was made . The total outstanding amount after the payment is Rs.19,308.00 and the amounts are outstanding for 5.5 years , 5.4 years and 4.1 years in the month of October , November and February respectively .

Graph Showing the Total Bill Amount and the Amount Paid In the Year 2007-2008 of Asian Electricals

Inference - There is a difference because the amount paid in the month of October amounted to Rs.10,025 as the amount was paid and the balance wasn’t paid because of poor quality goods supplied by Asian Electricals to R.S Steel Tech .

Table Showing Financial Analysis Of Shree Venkateshwara Packing For The Year 2007-2008

Billing Date

Amount

Total Amount Of All The Bills

Amount Paid

Amount Outstanding

Years outstanding

September 2007

6760.00

6760.00

6760.00

nil

nil

Analysis – The total bill amount for the month of September 2007 is Rs.6,760.00 and there is no outstanding amount for this year nor is there any year outstanding as R.S Steel Tech has made the payment of Rs.6,760.00 in the same year therefore creating no outstanding balance for the year 2007-2008

Graph Showing the Total Bill Amount and the Amount Paid In the Year 2007-2008 of Shree Venkateshwara Packing

Inference – There is no outstanding amount to be paid to Shree Venkateshwara Packing because , R.S Steel Tech had supplied Steel sheets to them and this amount was settled by the amount payable by R.S Steel Tech to Shree Venkateshwara Packing

Table Showing Financial Analysis Of Dee Tee Industries Limited For The Year 2007-2008

Billing Date

Amount

Total Amount Of All The Bills

Amount Paid

Amount Outstanding

Total Amount Of All The Bills

October 2007

20247.98

(-)

6,000.00

14,248.00

14,248.00

Nil

0

Analysis – The purchases made during the year from Dee Tee Industries Limited amounted to a total of Rs.20,247.98 for the month of October 2007 and there has been a deduction of Rs.6,000.00 because there was an advance payment which was made from Dee Tee Industries Limited to R.S Steel Tech for job work done to them , There is no outstanding amount for the year 2007-2008 and the amount was paid in full , hence no outstanding amounts.

Graph Showing the Total Bill Amount and the Amount Paid In the Year 2007-2008 of Dee Tee Industries Limited

Inference – An Amount of Rs.6,000 is reduced from the bill because there was an advance payment which had to be made to R.S Steel Ltd for job work done for them and later Dee Industries Ltd had to owe the rest of the amount . This amount was reduces from the total bill amount and hence showing that the payment was made immediately this year and hence no outstanding amounts .

Table Showing Financial Analysis Of Vishal Percision Steel Tube And Stripes Pvt Ltd For The Year 2007-2008

Billing Date

Amount

Total Amount Of All The Bills

Amount Paid

Amount Outstanding

Number Of Years Of The Outstanding Amount

October 2007

2,880.00

2,880.00

Nil

38,786.00

5 years 5 months

Analysis – The total amount for the month of October 2007 of Vishal Percision Steel Tube And Stripes Pvt Ltd is Rs.2,880.00 but the outstanding amount to be payable is Rs.38,789.00 and the number of years Of the present amount outstanding is 5 years and 5 months.

Graph Showing the Total Bill Amount and The Amount Paid In The Year 2007-2008 Of Vishal Percision Steel Tube & Stripes Pvt Ltd

Inference – The total amount of bills is Rs.2,880.00 but the outstanding amount is Rs.38,786.00 . There has not been any payments done this year and the outstanding amount is the amount accumulated over the previous years .

Table Showing Financial Analysis Of Divine Machine Pvt Ltd For The Year 2007-2008

Billing Date

Amount

Total Amount Of All The Bills

Amount Paid

Amount Outstanding

Number of years of the payment outstanding

nil

nil

1,33,251.00

(from previous year)

nil

1,33,251.00

Over 6 years

Analysis – There has not been any purchases with Divine Machines Pvt Ltd , the amount shown in the total amounts column is the total bill amount from previous years’ that is carried forward to this year . There was no payment made this year i.e in the year 2007-2008 and the outstanding amount still remains Rs.1,33,251.00 , which has been outstanding for over 6 years.

Graph Showing the Total Bill Amount and the Amount Paid In the Year 2007-2008 of Divine Machines India Pvt Ltd

Inference – There are no bills available for the firm as the amount shown outstanding against it is due for over 6 years and the total amount shown is the total bill amount of the previous years is carried on to this year , as the firm had supplied inferior quality machinery as R.S Steel has not made the payment hence due .

Table Showing Financial Analysis Of Divine Traders For The Year 2007-2008

Billing date

Amount

Total amount of all the bills

Amount paid

Amount outstanding

Number of years of the outstanding amount

nil

nil

18,928.00

(from previous year)

nil

18,928.00

Over 6 years

Analysis – There has not been any purchases with Divine Traders , the amount shown in the total amounts column is the total bill amount from previous years’ that is carried forward to this year . There was no payment made this year i.e in the year 2007-2008 and the outstanding amount still remains Rs.18,928.00 , which has been outstanding for over 6 years.

Graph Showing the Total Bill Amount and the Amount Paid In the Year 2007-2008 of Divine Traders

Inference- The amount shown is the total amount is the bill total for the previous year and is carried on to this year .The amount of Rs.18,928.00 is due or outstanding over 6 years as the party had supplied inferior quality party as R.S Steel has not made the amount hence due .

Analysis For The Year 2008-2009

Table Showing Financial Analysis Of Asian Electricals For The Year 2008-2009

Billing date

Amount

Total amount of all the bills

Amount

Paid

Amount outstanding

Number of years of the outstanding amount

May 2008

6,805.00

7,644.00

2390.00

24,552.00

4 years 10 months

August 2008

839.00

0

4 years 7 months

Analysis – The total bill amounts for the month of May 2008 is Rs.6,805.00 , which consists of two separate bills one amounting to Rs.3,805.00 and another for Rs.3000 ,the total bill amount for the Month of August 2008 is Rs.839.00. Out of the total amount Rs.2390.00 was paid from the May 2008 and a balance of Rs.24,552.00 remains outstanding for this period and the next 5 years .

Graph Showing the Total Bill Amount and the Amount Paid In the Year 2008-2009 of Asian Electricals

Inference- There was a payment of Rs. 2,390.00 to Asian Electricals for its May bill and the outstanding amount is the current years’ accumulation plus the previous years.

The total amount wasn’t paid because the goods supplied weren’t of standard quality.

Table Showing Financial Analysis Of Divine Machine Pvt Ltd For The Year 2008-2009

Billing date

Amount

Total amount of all the bills

Amount paid

Amount outstanding

Number of years of the outstanding amount

nil

nil

1,33,251.00

(from previous year)

nil

1,33,251.00

Over 6 years

Analysis – There has not been any purchases with Divine Machines Pvt Ltd , the amount shown in the total amounts column is the total bill amount from previous years’ that is carried forward to this year . There was no payment made this year i.e. in the year 2007-2008 and the outstanding amount still remains Rs.1,33,251.00 , which has been outstanding for over 6 years.

Graph Showing the Total Bill Amount and the Amount Paid In the

Year 2008-2009 of Divine Machines Pvt Ltd

Inference – There are no bills available for the firm as the amount shown outstanding against it is due for over 6 years and the total amount shown is the total bill amount of the previous years is carried on to this year , as the firm had supplied inferior quality machinery as R.S Steel has not made the payment hence due .

Table Showing Financial Analysis Of Divine Traders For The Year 2008-2009

Billing date

Amount

Total amount of all the bills

Amount paid

Amount outstanding

Number of years of the outstanding amount

nil

nil

18,928.00

(carry forward from previous year)

nil

18,928.00

Over 6 years

Analysis – There has not been any purchases with Divine Traders , the amount shown in the total amounts column is the total bill amount from previous years’ that is carried forward to this year . There was no payment made this year that is , in the year 2007-2008 and the outstanding amount still remains Rs.18,928.00 , which has been outstanding for over 6 years.

Graph Showing the Total Bill Amount and the Amount Paid In the Year 2008-2009 of Divine Traders

Inference- The amount shown is the total amount is the bill total for the previous year and is carried on to this year .The amount of Rs.18,928.00 is due or outstanding over 6 years as the party had supplied inferior quality party as R.S Steel has not made the amount hence due .

Table Showing Financial Analysis Of John Fowler India Pvt Ltd For The Year 2008-2009

Billing date

Amount

Total amount of all the bills

Amount paid

Amount outstanding

Number of years of the outstanding amount

nil

nil

2,34,326.00

nil

2,34,326.00

0

Analysis –There was no purchases made during this year from John Fowler and the total amount of bills is the amount from the previous year. Even in this year that is , 2008-2009 it can be seen from the above table that no payments of any sort have been made and the amount still remains outstanding .

Graph Showing the Total Bill Amount and the Amount Paid In the Year 2008-2009 of John Fowler India Pvt Ltd

Inference – there was no purchases made during this year from John Fowler India Pvt Ltd , hence no bills and there has been an accumulation of money because of lack of funds to pay them and in the year 2008-2009 this outstanding amount was settled by R.S Steel Tech doing work job for the party and they have made the payment hence the credit . However the final bill was made in subsequent years .

Table Showing Financial Analysis Of Fowler Westrup India Pvt Ltd For The Year 2008-2009

Billing Date

Amount

Total Amount Of All The Bills

Amount Paid

Amount Outstanding

Number Of Years Of The Outstanding Amount

Nil

nil

207.00

nil

207.00

3 years

Analysis – From the above table it can be seen that there were no purchases made during this year and hence no bill is available and the amount shown as the total amount of Rs.207.00 is the amount from the previous year . It can be also seen that there is no payment made during this period and an amount of Rs.207.00 still remains outstanding for this period and for a further 3 years .

Graph Showing the Total Bill Amount and the Amount Paid In the Year 2008-2009 of Fowler Westrup India Pvt Ltd

Inference- There were no purchases made during this year and the total bill amount is the amount which is a carry forward from the previous year and the since no payment is made this year the outstanding amount is Rs.207.00 . This amount was due to short term payments made in the previous year.

Table Showing Financial Analysis Of Metal Solutions Pvt Ltd For The Year 2008-2009

Billing Date

Amount

Total Amount Of All The Bills

Amount Paid

Amount Outstanding

Number Of Years Of The Outstanding Amount

Nil

nil

63,546.00

63,546.00

nil

nil

Analysis- From the above table it can be seen that no purchases were made during the year and the amount mentioned in the total bills column is the amount which is carried forward from the previous year and this amount is paid off in full during 2008-2009 and hence no amount remains outstanding.

Graph Showing the Total Bill Amount and The Amount Paid In The Year 2008-2009 Of Metal Solutions Pvt Ltd

Inference – the amount outstanding was Rs.63,546.00 , this amount was squared up or cleared off by R.S Steel Tech providing them with metal sheets (punched) , for which Metal tech Solutions had paid an advance , thereby squaring off the amount .

Analysis For The Year 2009-2010

Table Showing Financial Analysis Of Asian Electricals For The Year 2009-2010

Bi