This document discusses various aspects of finance management in Echjay Steel company. It covers the following key points: 1. The finance department manages all financial activities of the company including capital budgeting, profit distribution, sourcing capital, and accounting. 2. The organization structure of the finance department includes a finance manager who oversees assistants, a cash/bank manager, costing assistant, and clerks. 3. The company obtains short-term financing from internal sources like profits and long-term financing from external sources like banks. Capitalization and working capital management are also discussed.

1. Introduction
Finance is lifeblood of business. It is reightly termed as the science of the
money. We need finance for production of goods and service as well as their
distribution. The affiance of the production and marketing operation is directly
influenced by the manner in which the faience function assumes an important role in
the business system and it should be given equal importance, as with production and
marketing function
It has been said that business man take money to make money. The statement
need correction. It you have money and you make correction, if you have money and
you manage properly, you will make more money. Thus, finance management is that
managerial activities which is concerned with the planning and controlling of the
firms financial resources. Finance function means procurement of funds effective
utilization in the business. It is concern with maintaining adequate funds on hand to
meet the expenses of both revenue and capital nature. It has to manage the finance in
such way that the goal of the business i.e. profit maximization is realized. Finace
function is concern with salutation of three major functions relegating to the finance
operation of the firm and i.e. investment, finance, finance and dividend decision.
In Echjay steel there is spared finance department. The finance manager has to
manage all the financial activities. Like,
1. Estimated the requirement of capital of company.
2. Distribution of profit.
3. Find out new sources of profit.
4. Determining the capital structure.
5. Cash and bank management.
6. Control overall finance activities.
7. Recording of Truncation.
8. Maintenance of account.
9. Fixing of price.
10. Clearance of bills.
Organization Of Finance Department
In Echjay, there are six department namely production, financing, personnel,
marketing, purchases and export department. The entire department plays their won
role in proper functioning of whole Echjay.
As we know there is one separate financial department for understanding it
very deeply, we should understand the following organization.
CHIF EXECUTIVE
GENERAL MANAGER
FINACE MANAGER
ASSISTANT CASH BANK COSTING

2. MANAGER
ASSISTANT ASSISTANTS
SENIOUR
CLERK
CLERK/TYPIST
PEON
Organization Of Finance Department
Financial planning include the determining the proper amount of capital i.e.
capitalization. It means plan relegating to the amount of each type of capital, the
sources from which they are raised and the proportion of the total capital in relation to
the earning of the business. Financial planning should be drifted from viewpoint at
present as well as future. The success of failure of any business depends upon the
financial planning. If the financial planning prepared carefully, accurately and without
any fault, the net. Will get success in the business. It involves setting of objective and
identification of the various affecting the objective.
There are two types of financial planning.
1. Long term planning
2. Short term planning
In the long term planning the firms has plan for expansion of its unit t a large
extant where as in the short term planning the firm plan about the production
incensement. Such financial planning is necessary to keep a proper balance between
expanse and income. This company has computer system so there is no problem for
calculation of debit bill regularly paid to the parties concerned.
Source of Finance
The sources of finance has been defined as “from where to collect fund and
also at same time in which way it comes at the time of requirement, generally there are
two main sources i.e. internal sources and external sources.
Funds available for a period of one year of less as called short-term finance.
Mostly short-term funds used to finance working capital of the firm. Echjay obtaines
its short-term finance from profit funds, short term lone, share holders funds, etc…
this short term finance is required to pay day to day expense and regular operation of
the expenses and regular operation of the expense and regular operation of the
business environment. Mostly these funds obtain internally.
External sources means to borrow fund back, financial institute, etc…This unit
has borrowed 2 crores from I.D.B.I. There is also borrowings ban of India, which is
the lead bank of Echjay industry Ltd. Other banks like Indian overseas bank S.B.I.
State Bank of Saurshtra is also helpful to this unit. Thus this company has both
internal and external finance for its financial requirements.
Capitalization
Capitalization means total amount of a company’s capital or total value of its
capital stock. It is the sum of all kind of long terms securities issued by the company
as well as the surplus, which is not meant for distribution. It capitalization of a

3. company is just equal to its capital requirements. It is conceder to be proper
capitalized. It is more than required, it is not desirable.
CAPITALIZATION = Ownership capital + long term loan
Capital
SHARE CAPITAL = Free reserves + debenture capital + long term loan
TYPES OF CAPITALIZATION
1. Normal capitalization
If its expected earnings justify the total amount of capital invested in various
aspects is it said to be normal capitalization.
2. Over capitalization
When a company is consistently unable to earn the prevailing rate on its out
standings securities, it is said to be over capitalization.
3. Under capitalization
A company is in under capitalization when its actual capitalization is lower
then its proper capital as warranted by its earning capacity
Pertaining to this unit, it is difficult to say whether it is under capitalization or
over capitalization because it does not face any problem, as there is proper finance
planning and capital is utilized properly.
Management o f fixed assets
Fixed assets are distinguished from current asset on the basis of their physical
and economical life. Fixed assets means the assets, which are used by the firm in long
duration in the operation of the products. They are permanent capital, which helps the
company in the continuous production process.
Fixed assets have fixed cost burden and heaving long term and huge
investments. They must be manage properly efficiently otherwise it may create
danger for survival of the firm.
Fixed assets are of two types, tangible and intangible. Machines, fixtures,
buildings, etc… are tangible assets while goodwill; patent copyrights, etc… are
intangible form of fixed assets. The size and nature of fixed assets can be determining
by following factors.
1) Nature of business
2) Size of business
3) Types of product to be produced
4) Nature of production process
5) Technological development
The finance manager of this company is ultimate responsible for maintaining
proper management of fixed assets. It adopts proper depredation policies. The
department is providing by using diminishing rate of method for the valuating of its
fixed assets every year.
Management of working capital
The management of working capital or current assets management, is one of
the most important of the most important of the all over financial management.
Working capital management is an integral part of the over all financial management.
It is essential for smooth running of day-to-day operation. There are two types of
working capital.
1) GROSS WORKING CAPITAL :

4. It includes firm’s investment in current assets.
2) NET WORKING CAPITAL
Net working capital refers to the difference between current assets and
current liabilities.
Thus, the goal of working capital is to manage the current assets and
current liabilities in such a way that an acceptable level of working maintained.
DEPARTMENTS OF WORKING CAPITAL :
1. Nature and size of business
2. Operating cycles
3. Business fluctuations
4. Credit policy
5. Growth and expansion
Profit Graph
YEARS SALES VALUE
(Rs. In lacks)
1997 200
1998 225
1999 350
2000 420
2001 510
2002 625
2003 680
Here we can measure year on ‘X’ axis and profit on ‘y’ axis. We can see that
profit is increasing every year. Thus, Echjay’s sales increasing trend.
Scales
On ‘x’ axis 1 c. m. = 7 year
On ‘y’ axis 1 c. m.= 100
2004 800
2003 2003
700
2002 2002 680
2001 2001 625 600
2000 2000 510 500
1999 1999 420 400
1998 1998 350 300
1997
1997 225 200
200
1996
100
1995
1994 0
1 2 3 4 5 6 7

5. Year 1997 1998 1999 2000 2001 2002 2003
Sales value 200 225 350 420 510 625 680
Bonus share right issue & public deposit
Echjay industry Ltd. Company is pvt. Ltd. Company but is can be treated as
demand public ltd. Company. This company earns much profit and it run well so there
is no need of such type of issue, this company has started its expansion plan. For this
the company has enough money. It can take loan from bank so its financial position is
very well.
So far as bonus issue and right issues are concern there is no question for issue
and public deposit is also not existing in this company. There is no bonus share, right
issue and public deposited in this company.
Capital budgeting
Capital budgeting decision carried out by top-level management. It is decision
regarding long term fixed investment in business by firm. Capital budgeting decision
pertains to fixed assets or long-term assets, which in operation yield a return over a
period of time usually exceeding one year.
Capital budgeting may be defined as decision-making process by which firms
evaluates the purchase of fixed assets. It may be describe as the forms formal planning
process for the acquisition and investment of capital and result is capital budget, that is
firms formal plan for the expenditure of money to purchase of fixed assets. There are
many methods for selecting best investment proposal. It may be shown as
1. Unsophisticated or traditional method
 Average rate of return method
 Pay back method
2. Time adjust or modern method
 Present value method
 Internal rate of return method
Echjay steels is managing its fixed assets efficiently and also preparing
capital budgeting. It first estimated the requirement of capital for five years, then up to
daily requirement of capital is estimated. Echjay has presently made investment in
AGUL plan of Germany. In this plan they have introduced completely automatic
system. So now we can say that this is modernization of investment
The unit manages working capital very efficiently and yielding maximum
return for the profitable management of working capital. This unit gives sharp
attention for the following aspects
basic. Cash in money, which a firm can disburse immediately without any
restriction. Echjay looks after its cash very carefully. They keep enough cash to payB.
MANAGEMENT OF BANK
.
 INTERPRETATION:
A variant of current ratio is the quick or liquid ration, which is designed to
show the amount of cash available to meet immediate payment. It is obtained

6. by dividing the liquid assets by liquid liabilities. The hundred level of this ratio
is 1 : 1 and in Echjay the ratio is 1.82 : 1 is satisfactory.