CHAPTER-1 INTRODUCTION

INTRODUCTION: Capital budgeting means planning for capital assets. The finance manager has various tools and techniques by means of which he assists the management in taking a proper capital budgeting decisions. Capital Budgeting is concerned with planning and development of available capital for the purpose of maximizing the long term profitability of the concern. Capital budgeting is finance terminology for the process of deciding whether or not to undertake an investment project.

In capital budgeting, we fix our total investment in best project which will provide us higher return. For capital budgeting, we use different techniques for evaluating different projects. All techniques are called capital budgeting techniques. Capital budgeting uses in all the area like construction business, defence and other large scale business because without capital budgeting, our investment will not give better return and we may get risk of loss of return. FUNCTIONS OF FINANCIAL MANAGEMENT: Financial decisions refer to decisions concerning financial matters of a business firm. There are many kinds of financial management decisions that the firm makes in pursuit of maximizing shareholders wealth, viz., kind of assets to be acquired, pattern of capitalization, distribution of firms income etc. We can classify these decisions into three major groups: Investment decision Financing decision Dividend decision

Investment Decision

Financing Decision

Dividend Decision

I) Investment Decision:

The investment decisions can be classified under two broad groups : (i) (ii) Long-term investment decision and Short-term investment decision, The long-term investment decision referred to the capital budgeting and the short-term investment decision referred to working capital management.

II Financing Decisions:

Once the firm has taken the investment decision and committed itself to new investment, it must decide the best means of financing these commitments. Since, firms regularly make new investments, the needs for financing and financial decisions are on going. Hence, a firm will be continuously planning for new financial needs. The financing decision is not only concerned with how best to finance new assets but also concerned with the best overall mix of financing for the firm.

II)

Dividend Decisions:

The establishment of dividend policy is another important function of finance manager which involves the determination of the percentage of profits earned by the enterprise which is to be paid to its shareholders. The dividend decision is concerned with the quantum of profits to be distributed among shareholders. A decision has to be taken whether all the profits to be distributed, to retain all the profits in business or to keep a part of profits in the business and distribute other among shareholders.

NEED FOR THE STUDY

In a perfect world there would be no necessity for current assets and current liabilities because there would be no uncertainty, no transaction costs, information search costs, scheduling costs, or production and technology constraints. However the world in which we live is not perfect.

So organization may be faced with an uncertainty regarding availability of sufficient quantity of critical inputs in future at reasonable price. This may necessitate the holding of critical inputs in future at reasonable price. This may necessitate the holding of Inventory i.e., current assets.

To ensure that each of the current assets is efficiently managed to ensure the overall liquidity of the unity and at the same time not keeping too high a level of any one of them Capital Budgeting management is a must.

Capital Budgeting management ensures smooth working of the unit without any production held ups due to the paucity of funds.

Thus as capital budgeting is the life blood and nerve center of a business. It is managed in order to attain a smooth running of the business.

OBJECTIVES OF THE STUDY To Know how the companiy Capital Expenditure has planned To study the relevance of copies of Capital budgeting in evaluating the Project. To Study the technique of Capital budgeting for decision making. To offer some useful suggestions in capital budgeting process for improving the financial position if the organization

SCOPE OF THE STUDY The present study is undertaken with an intention that it would be helpful in assessing the Capital Budgeting position in the organization and to make recommendations for the improvement of the Capital Budgeting requirements of Nagarjuna Fertilizers And Chemicals Limited. The Study also highlights the present scenario of the Fertilizers And Chemicals Industry in the global market as a whole and the contribution of Nagarjuna Fertilizers And Chemicals Limited in the Indian Market & State Market in Particular. The

Study

includes

various

aspects

regarding

the

future

plans

and

diversification activities of Nagarjuna Fertilizers And Chemicals Limited in Directors Report.

Thus a good deal of ground is covered in the study, including the trends of various components of Capital budgeting, so as to find the effect of each component on Capital Budgeting decision.

RESEARCH METHODOLOGY

The study of Capital Budgeting in Nagarjuna Fertilizers And Chemicals Limited, has been carried out of studying the companies project reports, budget and revenue estimates. The study can broadly divided into two phase.

1) Primary Data 2) Secondary Data

Primary Data

The data which is collected at first had for the purpose of the study is known as primary data. Primary data which is collected through interaction with the assistant financial manager of Nagarjuna Fertilizers And Chemicals Limited

Secondary Data

The data which is corrected by some one previously is called by secondary Data. It is already available in the form of internal records of the company and other publications.

Collecting relevant Annual Reports Analyzing the Collected data Drafting the report Updating the Final report Collecting the general information about Capital Budgeting from various standard text books Studying the project report of Nagarjuna Fertilizers And Chemicals Limited.,

LIMITAIONS OF THE STUDY

The topic for the study is very exhaustive and covers several crucial aspects of financial management for which the availabilities of the time is very much limited. Under the pretext of confidentiality the organization has not disclosed the total information. The study is made by secondary data collection and the calculation of various ratios depend on the information in the annual reports of the company. Through this study of the Capital Budgeting position in Nagarjuna Fertilizers And Chemicals Limited., the sources of funds have affected a lot due to major fluctuation in the Capital Budgeting decision. 1) The analysis made on the basis of secondary data 2) The availability of data is only pertaining to four years is one of the constraints. 3) As there is more dependency is secondary data realistic conclusion may not be possible to be made. 4) Even through there are no if indicates for analyzing the financial performance the study includes about liquidity position. 5) There may be approximations 6) The study was carried in Nagarjuna Fertilizers And Chemicals Limited., for a period of 8 weeks.

CHAPTERIZATION PLAN

Chapter 1 Introduction Need For the study Objectives of the study Scope of the study Research Methodology Chapter 2 - Review Of literature Chapter3 - Company Profile Chapter4 - Data Presentation, Analysis and Interpretation Chapter5 - Findings of the study Suggestions of the study Conclusion Bibliography Annexure