51Fixed Assetsa)Decreasing. b)No depreciation reserve (unable to replace old assets out of its own resources).

Assets Rs. in million Fixed assets Current assets -Cash5432 -Receivable from Bibo Other Receivables2233 -Pre-paid1111 -Inventory Total current assets Total Assets

61Current Assets: = due from Bibo:Rs.17 m -Book debt =Rs.6.71 m on Interest over the = Rs m period ____ 17 m Bibo had made counter claims These are doubtful debts. No provision for bad debts. Liquidity overstated. Interest treated as miscellaneous Income. Treating interest as misc. income understated operating losses by Rs million. Accumulated loss rises from 114 million to 124 million.

71Other Receivables Loans given to cane growers. Aging detail. Loans of Rs.0.5 million outstanding for 6-10 years. Doubtful/bad loans. No provision. Liquidity overstated. 83LiquidityCurrent and quick ratios. Poor liquidity. Actual ratios much lower in view of doubtful debts. Cannot repay its current obligations.

Table-3 Current and Quick Ratios Rs. in million Year end June Current assets Current assets less inventory & pre-paid Current liabilities Current ratio0.8:10.7:10.6:10.5:1 Quick ratio0.5:10.3:1 0.4:1

Table-4 XYZ SUGAR MILLS PROFIT AND LOSS ACCOUNT Rs. in Thousands Year Sales 58,000%52,000%42,000%20,000% Cost of Sales Cane, carriage & incidentals 35, , , ,00080 Salaries & Wages 6,000107,000136,000146,00030 Excise duty15, , ,000262,00010 Depreciation1, Others3,00053,40073,00072,00010 Total:60, , , , Gross Profit (loss) (2,000)3(8,400)16(2,800)6(6,800)34

Operating & Non-Operating Expenses Admin & selling3, ,000105,00025 Financial4,50084,60095,500138,00040 Total:7,500137,600149, ,00065 Operating (loss)(9,500)16(16,000)30(12,300)29(19,800)99

ANALYSIS OF PROFIT & LOSS ACCOUNT No.DATA/FACTS/DOCUMENTSFINDING 1.Table-4 Profit & Loss AccountsBottom line figures: operating losses. Never made profit. 2.Table-4Various costs as % of sales. Constantly reducing sales. 3.Table-5 Production and capacity utilization. Reduced sugar production. Below capacity utilization. 4.Non availability of cane; feasibility report Erroneous assumption in PC 1 5.Table-6 Sugarcane procured locally Only 5 to 44% of plant’s requirement (of 185,000 tons) met locally. 6.Table-7 Total procurement of cane.Cane crushing capacity = 1500 tons/day normal crushing season = 120 days. Full requirement of cane never met. During , growers switched to turmeric, they also preferred gur making due to its high price.

7Table-8 Area-wise procurement of sugar-cane Between 42% to 60% cane brought from far-off places. Result was excessive cost of transportation, drying up of cane (less recovery percentage).

Table-5 Production and Capacity Utilization Tons Cane crushing capacity 185,000 Cane crushed140,292166,27193,93114,375 Capacity utilization76%90%51%8% Sugar produced ,0158,0071,206 % recovery8.08%8.43%8.55%8.38%

Table-6 Procurement of Sugar Cane Locally Quality procured (Tons) 81,44481,36737,8578,392 Procurement as % of total requirements 44% 20%5%

Table-7 Total Procurement of Sugar-cane Cane procured (tons) % of requirement 140,292 76% 166,271 90% 93,731 51% 14,375 8%

Table-8 Area-wise Procurement of Sugar-cane TONS Qty % Sugar-cane produced from Local Area A Distt. (200 km North) B Distt. (150 km South) C Area (150 km East) D Area (300 km West) Total: % % % % % 140, % % % % % % 166, % % % % % % 93, % % 801 6% % % 116 1% 14, %