INTRODUCTION

Financial management is the life blood of the every business organization. The subject of financial management is of immense interest to both academicians and practicing managers. Financial management is that managerial activity which is concerned with the planning and controlling and of the firms financial resources. The modern thinking in financial management accords a far greater. Importance to management in decision-making and formulation of policy financial management occupies key position in top management and plays a dynamic role in solving complex management problems. They are now responsible for shaping the fortunes of the enterprise and are involved in allocation of capital.

Definition: Financial management is the operations activity of a business that is responsible for obtaining and effectively utilizing the funds necessary for efficient operations JOSEPH and MASSIE Financial management is the activity concerned with the planning, raising, controlling and administrating the funds used in the business. Guthman and Dougall. Financial management is that managerial activity which is concerned with the planning and controlling of the firms financial resources. I.M.Panday. Financial management is concerned with the efficient use of an important economic resource namely capital funds. Ezra Soloma

OBJECTIVES The objectives of financial management are considered usually at two levels, at micro-level and at macro-level. At micro-level, the chief objectives of financial management are to make an intensive and economical use of capital resources. The objectives of financial management at macro-level are considered at firm level. Since business firms are profit seeking organizations, their objectives are commonly encountered.

1) Maximization of profits. 2) Maximization of returns. 3) Maximization of owners wealth.

Profitmaximization: The duty of the managers is to achieve the highest possible flow of the returns that will belong to the owners after all other delegations have been met.

Maximization of returns: Returns are mainly based on the profits earned by the concern, if the organization earns sufficient profit, it will be able to satisfy the owner as well as its employment in the minimum possible extent.

Wealth maximization: The proper goal of financial management is wealth maximization of equity shareholders as it is expressly concerned with the relationship or profitability and the volume of capital being used in the enterprise.

SCOPE OF FINANCIAL MANAGEMENT The approach to the scope and the functions of financial management is divided for the purpose of expositions into two broad categories.

A) Traditional Approach: Traditional approach to the finance function relates to the initial stages of its evolution during 1920s and 1930s when term corporate finance was used to describe in the academic world today as the financial management. The approach was focused on procurement of long-term funds. In that issue allocation of funds which is so important today is completely ignored. The utilization of funds was considered beyond the pure view of finance function. B) Modern Approach The Modern approach views finance function in broader sense. It includes both rising of funds as well as this effective utilization under the preview of finance. The cost of raising funds and the returns from their use should be compared. The utilization of funds requires decision making.
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Finance functions covers financial planning rising of funds, allocation of funds, financial control etc. Modern approach is an analytical way of dealing with financial problems of firms. In that approach considers there are three basic management decisions i.e., investment decisions, financing & dividend decisions with in the scope of finance functions.

DECISIONS OF FINANCIAL MANAGEMENT: Financial management, in the modern sense of the term, can be broken down into three major decisions as functions of finance. They are:1) The investment decision. 2) The financing decision. 3) The dividend policy decision. 4) The liquidity decision.

Investment decision: It is broadly concerned with the investment of assets. The main idea is maximization of owners wealth. Decision is taken to maximize the benefits of equity shareholders.

Financial decision: The major second decision of the firm is the financing decision. The use of debt affects the return and rise of shareholders. It may increase the return of the equity funds.

Dividend decision: The finance manager must decide whether the firm should distribute all profits or certain term or distribute a portion and retain the balance.

Liquidity Decision: Along with terms of funds current assets should also be managed efficiently for safeguarding the firm against the dangerous of ill liquidity and insolvency. An investment in current assets affects the firm profitability, liquidity and risk.

An Overview of Financial Management

Financial

Management
Maximization of share value

Financial Decision

Investment Decision

Financing Decision

Dividend Decision

Liquidity Decision

Return

Trade-Off

Risk

Finance Functions It may be difficult to separate the finance functions from production, marketing and other functions, Yet the functions themselves can readily identified. The functions of raiding funds, investing them in assets to shareholders are respectively known as financing, investing and dividend decisions. While performing these functions a firm attempts to balance cash inflows and outflows. This is called liquidity decision. The five basic corporate finance functions are described as those functions related to Raising capital to support company operations and investments (financing functions). Selecting those projects based on risk and expected return that are the best use of a companys resources (capital budgeting functions). Management of company cash flow and balancing the ratio of debt and equity financing to maximize company value (financial management function);

Developing a company governance structure to encourage ethical behavior and actions that serve the best interests of its stockholders (corporate governance function).

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

INTRODUCTION TO TOPIC

Assets and liabilities management

Assets and liability management (ALM) is aimed at systematically getting the right match of assets and liabilities, to make sure those commitments to policyholders can be met all times. It is the process of planning, organizing, and controlling asset and liability volumes, maturities, rates, and yields in order to minimize interest rate risk and maintain an acceptable profitability level. Simply stated, ALM is another form of planning. It allows managers to be proactive and anticipate change, rather than reactive to unanticipated change. Company liquidity is directly affected by ALM decisions. Managers must always analyze the impact that any ALM decision will have on the liquidity position of the institution. Liquidity is affected by ALM in several conditions any changes in the maturity structure of the assets and liabilities can change the cash requirements and flows. Savings or credit promotions to better serve clients or change the ALM mix could have a detrimental effect on liquidity, if not monitored closely. Changes in interest rates could impact liquidity. If savings rates are lowered, clients might withdraw their funds a cause a liquidity shortfall. Higher interest rates on loans could make it difficult for some clients to meet interest payments, causing a liquidity shortage.

Assets and liabilities: Definition: It is the process of planning, organizing, and controlling asset and liability volumes, maturities, rates, and yields in order to minimize interest rate risk and maintain an acceptable profitability level. Asset Liability Management(ALM) is a strategic approach of managing the balance sheet dynamics in such a way that the net earnings are maximized.

This approach is concerned with management of net interest margin to ensure that its level and riskiness are compatible with the risk return objectives. If one has to define Asset and Liability management without going into detail about its need and utility, it can be defined as simply management of moneywhich carries value and can change its shape very quickly and has an ability to come back to its original shape with or without an additional growth. The art of proper management of healthy money is ASSET AND LIABILITY MANAGEMENT (ALM). The Liberalization measures initiated in the country resulted in revolutionary changes in the sector. There was a shift in the policy approach from the traditionally administered market regime to a free market driven regime. This has put pressure on the earning capacity of co-operative, which forced them to foray into new operational areas thereby exposing themselves to new risks. As major part of funds at the disposal from outside sources, the management are concerned about RISK arising out of shrinkage in the value of asset, and managing such risks became critically important to them. Although co-operatives are able to mobilize deposits, major portions of it are high cost fixed deposits. Maturities of these fixed deposits were not properly matched with the maturities of assets created out of them. The tool called ASSET AND LIABILITY MANAGEMENT provides a better solution for this. ASSET LIABILITY MANAGEMENT (ALM) is a portfolio management of assets and liability of an organization. This is a method of matching various assets with liabilities on the basis of expected rates of return and expected maturity pattern In the context of ALM is defined as a process of adjusting s liability to meet loan demands, liquidity needs and safety requirements.This will result in optimum value of the same time reducing the risks faced by them and managing the different types of risks by keeping it within acceptable levels.

Purpose and objectives of assets and liabilities: An effective Asset Liability Management Technique aims to manage the volume, mix, maturity, rate sensitivity, quality and liquidity of assets and liabilities as a whole so as to attain a predetermined acceptable risk/reward ration. It is aimed to stabilize short-term profits, long-term earnings and long-term substance of the bank. The parameters for stabilizing ALM system are: 1. Net Interest Income (NII) 2. Net Interest Margin (NIM) 3. Economic Equity Ratio Components of liabilities: 1. Capital: Capital represents owners contribution/stake in the bank. It serves as a cushion for depositors and creditors. It is considered to be a long term sources for the bank.

2. Reserves & Surplus: Statutory Reserves Capital Reserves Investment Fluctuation Reserve Revenue and Other Reserves Balance in Profit and Loss Account

3. Deposits: This is the main source of banks funds. The deposits are classified as deposits payable on demand and time. They are reflected in balance sheet as under: Demand Deposits Savings Bank Deposits Term Deposits

4. Borrowings: (Borrowings include Refinance / Borrowings from RBI, Inter-bank & other institutions) Borrowings in India

Other Institutions & Agencies Borrowings outside India

5. Other Liabilities & Provisions: It is grouped as under: Bills Payable Inter Office Adjustments (Net) Interest Accrued Unsecured Redeemable Bonds -II Capital) Others(including provisions)

Components of assets: 1. Cash & Bank Balances with RBI:

(Including foreign currency notes) e Bank of India In Current Accounts In other accounts

2. Balances with banks and money at call and short notice:

Balances with Banks

With Banks With Other Institutions

In Current Accounts

In Other Deposit Accounts Money at Call & Short Notice

3. Investments: A major asset item in the banks balance sheet. Reflected under 6 buckets as under: I. Investments in India in: Government Securities Other approved Securities Shares Debentures and Bonds Subsidiaries and Sponsored Institutions Others (UTI Shares, Commercial Papers, COD & Mutual Fund Units etc.) Investments outside India in: and/or Associates abroad

4. Advances: The most important assets for a bank. A. Bills Purchased and Discounted Cash Credits, Overdrafts & Loans repayable on demand Term Loans B. Particulars of Advances: Secured by tangible asset (including advances against Book Debts) Covered by Bank/ Government Guarantees and Unsecured

5. Fixed Assets: Premises Other Fixed Assets (Including furniture and fixtures)

6. Other Assets: Interest accrued Tax paid in advance/tax deducted at source(Net of Provisions) Stationery and Stamps Non-banking assets acquired in satisfaction of claims Deferred Tax Asset (Net) Others.

SCOPE OF THE STUDY

The study is based on company analysis. The study is based on five consecutive years from 2008-12. The trend is in assets and liabilities analysis. The study is only for 45days period of time. The study is related with various aspects of working current assets, current liabilities. The information collected from primary data and secondary data.

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OBJECTIVES OF THE STUDY:

1. To know about the possible sources of risk in retunes with the funding and lending activities of FORTUNE INFRA DEVELOPERS. 2. To study and analyze the strength of existing risk management tools and improves it further. 3. To understand the important Course of business and to the best possible ways to minimize risks. 4. To study the concept of ASSET & LIABILITY MANAGEMENT in FORTUNE INFRA DEVELOPERS PVT LTD 5. To study process of CASH INFLOWS and OUTFLOWS in FORTUNE INFRA DEVELOPERS PVT LTD 6. To study about concrete steps to increase net profit in future FORTUNE INFRA DEVELOPERS PVT LTD

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LIMITATIONS OF THE STUDY

The study is conducted with the availability of FORTUNE INFRA PVT Ltd expansion data & annual reports. The limited period of the study may not by detail full-fledged in all aspects. Since this is a case study, all the limitations applicable to a case study apply to this study also. The analysis is based on working capitals which were subject to several limitations. Therefore any analyses based on such statements also suffer from similar limitations. The external factors on that effect the financial performance of the company have not been given much importance. These decisions are cannot be taken as ultimate tools for the estimation of company whether good or bad.

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SIGNIFICANCE OF THE STUDY:

An effective Asset Liability Management Technique aims to manage the volume, mix, maturity, rate sensitivity, quality and liquidity of assets and liabilities as a whole so as to attain a predetermined acceptable risk/reward ration. It helps provide and inside into the various aspects of assets and liabilities management o It acts as a future guide. o It helps to know the credit worthiness of firm. Studies of these types are also useful to competitors to more necessary steps to improve assets and to reduce liabilities Studies of these types of make necessary steps to improve assets to the organization.

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METHODOLOGY OF THE STUDY

For the preparation of a project the collection of data is very essential. There are two broad methods, from which date is to be collected. They are primary data and secondary data. Primary data: o This is collected through discussions and by interviewing the personnel concerned within the Company. Secondary Data: o This information is collected mainly from published information Viz., annual reports, journals, books, magazines, internet available on the subject. Data collected from documents, records and files of the company. Data gathered from the annual reports of the company. Data collected from company website.

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Real Estate Industry Background

Real estate tends to be a particularly cyclical industry, going up and down based on trends in the economy at large such as the fluctuation in interest rates. The story of real estate often mirrors the general story of the American economy. Real estate soared in the postWorld War II 1950s, sank in the 1970s, rose again in the early 1980s until the depression at the end of that decade, and was prosperous again at the end of the 1990s. Because of low interest rates in the mid-2000s, residential real estate was booming even when the economy was slow until the mortgage crisis hit and the bubble collapsed. After that point it sank and as of 2011 has yet to truly recover. Brokerage firms have taken on property management divisions in order to diversify their revenue streams and combat poor economic climates. The real estate industry consists of three primary fields: brokerages, leasing, and management. Brokers bring together buyers and sellers of property, assist in the price negotiations and arrange the steps between a buyer first taking interest in a property and closing, including appraisals and inspections. Generally, the seller pays a commission, dependent on the sale price (usually 5 or 6 percent), and this is split between a broker working for the buyer and the broker working for the seller. Real estate brokers must be licensed in the state in which they work. Leasing brings together property owners with tenants, sometimes owning that property themselves, or subleasing property they have leased from someone else. Management companies are responsible for making sure their buildings are filled with tenants, deciding what to charge these tenants, making sure the buildings run properly, paying utilities, hiring staff and other maintenance for owners who do not want to manage buildings themselves. Since most property expenses are fixed, maintaining low vacancy rates is critical to management companies. In particular, property management has been a fast growing field and should continue in its expansion, as commercial and residential properties that were overbuilt during the real estate boom will continue to need management until they are sold. The old adage, Location, location, location, is clich but true location is centrally important to determining the marketplace and the value for real estate. Factors controlling the quality of a location include public transportation access, the quality of the roads and schools, income levels and stability and success of the local economy. Some popular real estate franchises are the Century 21 Real Estate franchise and the Coldwell Banker Real Estate franchise.

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Current State of the Real Estate Industry in 2012 In 2010, there were 517,800 brokers working in the United States, 59 percent of who were self-employed. The industry is divided into residential and commercial real estate services, although some brokerages and management companies engage in both. The residential real estate industry is quite fragmented. The fifty largest companies make up less than thirty percent of the industrys total revenue. Of the three primary areas, brokerage services compose 45 percent of the industrys total revenue, leasing residential units makes up 35 percent and property management makes up fifteen percent. Since the collapse of the housing bubble, residential real estate revenue is still in the pits and unemployment has remained high. Some predict that when jobs come back en masse, residential real estate success will follow. The commercial industry is highly fragmented as well. The fifty largest companies make up one third of total revenue. The commercial segment of the industry has fared slightly better than the residential segment since the recession. While it has not yet reaching the peaks of 2006 before the fall, analysts predict that the market bottomed out in 2010 and expect it to rebound somewhat in 2011. Real Estate Industry Future Potential obstacles for the industry include factors beyond the control of the business owner, such as downturns in the local or national economy, as well as changing neighborhood demographics where agencies are located. Also out of the owners control is the building of properties, and what properties in the area are available. For management companies, indoor air quality liability has become a serious legal issue in recent years. Removal of mold growth in particular has been increasingly necessary for property owners and managers. The use of technology will continue to transform the field in the years ahead, enabling home buyers to research both properties and the areas in which they are located, including looking at pictures and finding out about the neighborhoods schools, crime rates and other statistics. Marketing over the internet with pictures of properties and virtual tours will be important for brokers. More than ninety percent of people use the internet before purchasing real estate. United States population growth will also be an important driving factor in the growth of the industry at large. The workforce is expected to to grow fourteen percent between 2008 and 2018. The internet arguably may eliminate the need for brokers altogether in the future. Banks also represent a potential competitor.

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Recently they have been freed by rule changes to enter the commercial real estate field in a limited way, and it is possible to see future rule changes allowing them to enter the residential field. The biggest growth areas are expected to be in the southern half ot the country, particularly in the southwest. A recent survey revealed the hottest buyers market to be Albuquerque, New Mexico. Even in spite of the poor economic conditions and the state of the industry, analysts are confident in the future growth in the industry. Brokers commissions are expected to grow at a compounded rate of fourteen percent annually from 2010 to 2015. The output of United States real estate businesses is expected to grow at an annually compounded rate of six percent between 2010 and 2015. Andrew Weber is an Analyst for FranchiseHelp.com and is a graduate of New York University and New York University School of Law. Indias real estate market is on a high growth curve. The industry is projected to grow to US$50 billion by the end of FY2010 at an average rate of 20%. Looking at the bigger picture, the recession seems like a hiccup. Despite talks of price correction, the worse is definitely behind us. In this feature, we present our list of market leaders. The task was daunting and complicated. Instead of a list that says Indias Top 20, we divided the players regionally based on their headquarters. Many are national players but some are purely regional players and hence it would be unfair to compare them. The idea was to identify national as well as local leaders. Of course, all such lists are subject to market dynamics. TOP REALESTATE COMPANIES Headed by: DrKasha Pal Singh, Chairman About: With a track record of 64 years, DLF is Indias largest real estate company in terms of revenues, earnings, market capitalization and developable area. It currently has pan India presence across 30 cities with approximately 238 million sqft of completed development and 413 million sqft of planned projects, of which 56 million sqft. of projects are under construction during FY10. Project Spectrum: Residential, townships, commercial complexes, IT Parks, hotels, multiplexes, etc. Quick fact: Only listed real estate Company included in the BSE Sensex, NSE Nifty, MSCI India Index and MSCI Emerging Markets Asia Index. Latest: Will take its luxury mall DLF Emporia (already operational in New Delhi) to other big cities such as Hyderabad and Chennai.
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OMAX LTD Headed by: Rotas Gael, CMD About: Over the past 22 years, Omaxi has established itself through diverse range of residential and commercial projects. The company at present has 53 projects under execution and planning. Omaxe Ltd was the first Construction Company of northern India to receive an ISO 9001:2000 Certification. Project Spectrum: Integrated townships, Group housing, SEZs, Shopping malls &complexes and hotels. Latest: Has entered into infrastructure sector through Omaxe Infrastructure & Construction Ltd (OICL), a wholly owned subsidiary. OICL has bagged the first contract to construct Highway and three high level bridges in Punjab. The contract is awarded by Greater Mohali Area Development Authority and its value is pegged at Rs704 million. UNITECH Headed by: Ramesh Chandra, Executive Chairman About: Established in 1972, Unitech is today Indias leading real estate developer in India. It is the first developer to have been certified ISO 9001:2000 in North India. Project Spectrum: Unitech offers diversified projects across residential, commercial/IT parks, retail, hotels, amusement parks and SEZs segments. Unitech was the first real estate company to be part of the National Stock Exchanges NIFTY 50 Index. The company has over 600,000 shareholders. Unitech and Norway based Telenor Group came together to build Uninor - a telecommunication services company providing GSM services across India. Latest: Has ventured into the infrastructure business by launching Unitech Infra. ANSALAPI Headed by: Sushi Ansell, Chairman About: Established in 1967 as a family business, Ansell API today is clearly amongst the real estate leaders of India. Having established itself very strongly in the NCR region, Ansell API is now focusing on ventures in cities like Bhatia, Mohali, Amritsar, Ludhiana, Jalandhar, Jaipur, Jodhpur, Ajmer, Sonata, Pan pat, Carnal, Kurukshetra, Faridabad, Gurgaon, Greater Noida, and Ghaziabad, Meerut, Agra, Luck now, to name a few. Ansell API has till date, developed and delivered more than 190 million sq ft. The company currently has a land reserve of about 9,335 acres.Project Spectrum: Integrated Townships, Condominiums, Group Housing, Malls, Shopping Complex, Hotels, SEZs, IT Parks and Infrastructure and Utility ServicesLatest: Raised Rs231.4 core through private placement of shares with institutional investors for reducing its debt and execute ongoing projects.
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PARSVNATH DEVELOPERS LTD Headed by: Pradeep Jain, Chairman About: Incorporated in July 1990 by Mr. Jain in New Delhi, Parsvnath today has a substantial pan India presence in over 45 cities across 16 states. The company has emerged as one of the most progressive and multi-faceted real estate and construction entities in India. Project spectrum: Housing (premium, mid-market as well as affordable), office complexes, shopping malls & hypermarkets, hotels, multiplexes, IT Parks and SEZs. Quick fact: First real estate Company to have integrated with ISO 9001, 14001 and OHSAS 18001. Latest update: Has partnered with Red Fort Capital to execute a Concession Agreement with DMRC for development of a prime Grade a office project in New Delhis Connaught Place.With property boom spreading in all directions, real estate in India is touching new
heights. However, the growth also depends on the policies adopted by the government to facilitate investments mainly in the economic and industrial sector. The new stand adopted by Indian government regarding foreign direct investment (FDI) policies has encouraged an increasing number of countries to invest in Indian Properties.

India has displaced US as the second-most favored destination for FDI in the world. As the investment scenario in India changes, India which has attracted more than three times foreign investment at US$ 7.96 billion during the first half of 2005-06 fiscal, as against US$ 2.38 billion during the corresponding period of 2004-05, making India amongst the "dominant host countries" for FDI in Asia and the Pacific (APAC). The positive outlook of Indian government is the key factor behind the sudden rise of the Indian Real Estate sector - the second largest employer after agriculture in India. This budding sector is today witnessing development in all area such as - residential, retail and commercial in metros of India such as Mumbai, Delhi & NCR, Kolkata and Chennai. Easier access to bank loans and higher earnings are some of the pivotal reasons behind the sudden jump in Indian real estate. Real estate is "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; (also) an item of real property; (more generally) buildings or housing in general. Also: the business of real estate; the profession of buying, selling, or renting land, buildings or housing..

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Etymology In the laws of the United States of America, the 'real' in 'real estate' means relating to a thing as distinguished from a person. Thus the law broadly distinguishes between 'real' property (land and anything affixed to it) and 'personal' property or chattels (everything else, e.g., clothing, furniture, money). The conceptual difference was between 'immovable property', which would transfer title along with the land, and 'movable property', which a person could lawfully take and would retain title to on disposal of the land. INTERNATIONAL REAL ESTATE TERMINOLAGY AND PRACTICE Real estate as "real property" in the U.K. In British usage, "real property", often shortened to just "property", generally refers to land and fixtures, while the term "real estate" is used mostly in the context of probate law, and means all interests in land held by a deceased person at death, excluding interests in money arising under a trust for sale of or charged on land.As one main object of "probate" is to "prove" title to the real estate interests in the property held by a deceased person at the time of death, and the earliest recorded use the word in this capacity is 1463, it is reasonable to assume this tradition dates back to the death of the first owner of the 'allodia land' referred in the etymology section above to die. Real estate in Mexico and Central America Real estate business in Mexico, Canada, Guam, and Central America operates differently than in the United States. Some similarities include legal formalities (with professionals such as real estate agents generally employed to assist the buyer); taxes need to be paid (but typically less than those in U.S.); legal paperwork will ensure title; and a neutral party such as a title company will handle documentation and money to make the smooth exchange between the parties. Prices are often much cheaper than most areas of the U.S., but in many locations, prices of houses and lots are as expensive as the U.S., one example being Mexico City. U.S. banks have begun to give home loans for properties in Mexico, but, so far, not for other Latin American countries.One important difference from the United States is that each country has rules regarding where foreigners can buy. For example, in Mexico, foreigners cannot buy land or homes within 50 km (31 mi) of the coast or 100 km (62 mi) from a border unless they hold title in a Mexican Corporation or a Mexican trust In Honduras, however, they may buy beach front property directly in their name.
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There are different rules regarding certain types of property: ejidalland communally held farm property can be sold only after a lengthy entitlement process, but that does not prevent them from being offered for sale. Real estate agents in Costa Rica currently do not need a license to operate, but the transfer of property requires a lawyer. CCCBR (Camera Costarricense de Corridors de Benes Raikes) is the only official body that represents the Real Estate industry to the government. The Costa Rica MLS is the official MLS of the Costa Rica Chamber of Real Estate Brokers Board. The Chamber institutes the rules, regulations and ethical guide for officially licensed brokers in Costa Rica. In Mexico, real estate agents do not need a license to operate, but the transfer of property requires a notary public. Real estate in Thailand and south East Asian countries In Thailand it is not possible for a foreigner to own land but property can be purchased then Land acquired under a 30 year lease option; Until recently it was considered by most legal advisors that the ownership of land by a foreigner through a Thai Limited Company was acceptable, although the Law clearly states that foreigners cannot own land in Thailand. The Government has now made clear that such ownership may be illegal. The legitimacy of such ownership depends on the status of the Thai Shareholders who must be shown to be active and financially participating shareholders. Philippines In the Philippines, one of the growing businesses in the country is the real estate industry.[8] Aside from the development and rising of tall buildings and establishment in the metropolitan area, nearby provinces are now on the stage of land development with its continuous expansion for horizontal development projects in the nearby provinces such as Laguna, Cavite, Rizal, Bulacan,Pampanga and Barangays. The major expansion in vertical real estate development projects are in Cebu in the Vishays and Davao in Mindanao, where medium to high rise buildings are beginning to sprout in the two southern capitals.Names and the similarities between high quality internet domain names and real-world, prime real estate.

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RESIDENTIAL REAL ESTATE The legal arrangement for the right to occupy a dwelling in some countries is known as the housing tenure. Types of housing tenure include owner, Tenancy, cooperative, (individually parceled properties in a single building), public housing, squatting, and cohousing. The occupants of a residence constitute a household.Residences can be classified by, if, and how they are connected to neighboring residences and land. Different types of housing tenure can be used for the same physical type. For example, connected residents might be owned by a single entity and leased out, or owned separately with an agreement covering the relationship between units and common areas and concerns. . It is not clear if all debt and equity investments are counted in the categories equities and bond. MORTGAGES IN REAL ESTATE In recent years, many economists have recognized that the lack of effective real estate laws can be a significant barrier to investment in many developing countries. In most societies, rich and poor, a significant fraction of the total wealth is in the form of land and buildings. In most advanced economies, the main source of capital used by individuals and small companies to purchase and improve land and buildings is mortgage loans (or other instruments). These are loans for which the real property itself constitutes collateral. Banks are willing to make such loans at favorable rates in large part because, if the borrower does not make payments, the lender can foreclose by filing a court action which allows them to take back the property and sell it to get their money back. For investors, profitability can be enhanced by using an off plan or pre-construction strategy to purchase at a lower price which is often the case in the pre-construction phase of development. But in many developing countries there is no effective means by which a lender could foreclose, so the mortgage loan industry, as such, either does not exist at all or is only available to members of privileged social classes.

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COMPANY PROFILE A successful project is always inspired by a successful person. Behind fortune infra lines a young and enthusiastic Mr.B.SeshagiriRao as its CMD. He started his business career with a great vision of providing quality life to discerning clientele. He is an accomplished charted accounted and his forte is finance, administration and leading marketing terms. Mr..B.Seshagiri Rao has over a decade of experience in auditing and consulting with some of the top companies in India. He enjoy a credible reputation among client circles. At fortune infra Mr. Rao excels in corporate planning, finance and strategy. He overseas day-to-day activities of the company and help other director in investments and new ventures. His zeal of excellence is transferable and fortune infra terms function in similar spirit. MrRao values business ethics and believes in industrious approach to all his projects. COMPANY VISION To make fortune infra as one of the fortune 500 companies. To provide one lakh jobs as early as possible. To share the wealth through knowledge to the society. To develop knowledge based society for beautiful and powerful India. To provide serene &blissful life. COMPANY MISSION Integrate building technology with nature and mankind. To meet excel fortune clients expectation through accountability, hard work and through constant pursuit of highest standards of quality. To work with strategic planning and enduring perseverance to achieve customer satisfaction, stake holder benefits and economic growth for the organization. OPERATIONS The companys operations during this year are very well. Presently, your company is executing the following projects: FORTUNE BUTTERFLY CITY An ultra-modern township being classically developed in 100 Acres of land to match the requirement upper class customers with 400&1000 sq.yards sizes near Kadthal village, adjacent to Srisailam Highway in the suburbs of Hyderabad.
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FORTUNE TIMES: Fortune Times is started to cater the needs of the middle and lower middle income group people to provide residential plots in 3 sizes. The highlight of this project is it facilitates the payment of the plot cost in easy installments. This project is also is being developed in 100 Acres of land as an extension to the Fortune Butterfly City venture. Fortune Weekend Homes: Fortune week end homes project is a unique of its kind in Hyderabad. This venture is planned to provide 3 sizes of developed residential plots with dwelling houses which are excellent for the weekend stay of the proud owners. Further, your company could able to establish good contacts, which will be materially converted into business during the financial year 2010-2011. Your company is also planning to diversify in various infrastructural projects in the nearest future. SERVICES: With the announcement of Fab City, Hardware Park, Nanotech Park near Shamshabad International Airport, on Sri Srisalaim State Highway, the place has become a home to a cluster of world class gated communities, changing the perception of living. The small confines are dissolved. The scope of living is expanded. The art of fine living comes designed with all facilities incorporated for a happy life. The bar on living standards raised and set precedence. One such gated community is Fortune Butterfly City. Fortune Butterfly City is a well-planned, high quality gated lifestyle community situated in between Kadthal and Dasarlapalli, KandukurMandal, on Sri Sailam Highway. The township is planned in 100 acres in its first phase with all conceivable facilities like security, health, education, entertainment, parks, restaurants, sports, boating, greenery and well-laid paths. The layout fosters freedom of living, happiness, laughter, a sense of community wellbeing, spaces and clean environment. 48% of its total land is open spaces with breathtaking ambience. This is the essence of Butterfly City - The brighter, happier world that is being brought to you in Hyderabad's Garden of Eden. The locale around Shamshabad has never seen anything like thisNor have you, for that matter! Experience the many hues of life in Butterfly City. Experience life, appreciate the Opportunity. Butterfly City is a well-planned self-sufficient high quality township situated in between Kadthal and Dasarlapalli, KandukurMandal, R.R.Dist,A.P. For the first time a dream lifestyle is being offered to all classes of people on such a mammoth scale.
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This township has been planned in 100 Acres in the First Phase and 300 acres of land in the Second Phase . 48 % of its total land area is open & surrounded by breathtaking ambience, laden with greenery. Fortune Butterfly City will be a hub for all the assured facilities of security, health, education, well-connected transport and communication. It will also have fully developed infrastructure with an easy access to all the amenities providing leisure and happiness, amusement and pleasure, boost of energy and eternal peace to its residents. SERVICES With the announcement of Fab City, Hardware Park, Nanotech Park near Shamshabad International Airport, on Sri Sailam State Highway, the place has become a home to a cluster of world class gated communities, changing the perception of living. The small confines are dissolved. The scope of living is expanded. The art of fine living comes designed with all facilities incorporated for a happy life. The bar on living standards raised and set precedence. One such gated community is Fortune Butterfly City. Fortune Butterfly City is a well-planned, high quality gated lifestyle community situated in between Kadthal and Dasarlapalli, KandukurMandal, on Sri Sailam Highway. The township is planned in 100 acres in its first phase with all conceivable facilities like security, health, education, entertainment, parks, restaurants, sports, boating, greenery and well-laid paths. The layout fosters freedom of living, happiness, laughter, a sense of community wellbeing, spaces and clean environment. 48% of its total land is open spaces with breathtaking ambience. This is the essence of Butterfly City - The brighter, happier world that is being brought to you in Hyderabad's Garden of Eden. The locale around Shamshabad has never seen anything like this. Nor have you, for that matter! Experience the many hues of life in Butterfly City. Experience life, appreciate the Opportunity. Butterfly City is a well-planned self-sufficient high quality township situated in between Kadthal and Dasarlapalli, KandukurMandal, R.R.Dist,A.P. For the first time a dream lifestyle is being offered to all classes of people on such a mammoth scale. This township has been planned in 100 Acres in the First Phase and 300 acres of land in the Second Phase. 48 % of its total land area is open & surrounded by breathtaking ambience, laden with greenery. Fortune Butterfly City will be a hub for all the assured facilities of security, health, education, well-connected transport and communication. It will also have fully developed infrastructure with an easy access to all the amenities providing leisure and happiness, amusement and pleasure, boost of energy and eternal peace to its residents.
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PRESENTLY OUR SERVICES Services we offer: Serene and Blissful Life spaces Wild Green and World-class Abodes Application of modern technology and Science Timely Delivery Financial Assistance and schemes Investments and Appreciation analysis Advanced Management System Highest of quality standards Future services: Resorts Educational Institutions/International Schools Foreign Realty Investments Hospitality Industry Financial, BPO, KPO Power Generation FORTUNE WEEKEND HOMES Here is the holiday home you've always wanted. Weekend Homes at Fortune Butterfly City offer an elegant tropical lifestyle with all modern conveniences provided for your comfort and convenience. The beautiful villas with private pools feature graceful architecture, functional floor plans, private courtyards, pools and striking landscaping. Spread over 100-acres, Weekend Homes represent the essence of relaxed and refined lifestyle in a secured, harmonious eco-friendly environment. They offer privacy without the insecurity of isolation. Each of the villas incorporates a unique architectural blend of vaastu and pyramid ology that helps in creating positive energy around. The esoteric geometric shape of the structure in league with the magnetic field promote healthy environment in and around. This exclusive private community of Weekend Homes affords the discerning customer an unparalleled investment opportunity. Virtually guaranteed returns on real-estate ownership coupled with a privileged vacation home purchase is the enviable choice of a select few owners at The Fortune Butterfly City.
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FORTUNE CLOUDS For A Change, Shift over to Clouds We believe living is more than being. Its essence lies in evolving towards self-actualization. And a home is more than a transient shelter. Its essence lies in its capacity for accretion, in its quality of representing the persona of the people who live in it. Fortune Clouds Park draws its inspiration from the infinite, shape-shifting dances of clouds. Puffy one time, piled up at another time, flat sometimes and layered at another moment, they demonstrate remarkable malleability for transformation. Fortune Clouds incorporates several features that lend space for innovation and accretion. It has in place all the essential elements that combine to make it a vibrant, socially and economically sustainable living community. We believe 'development' is more than creating beautiful residential or commercial spaces. It is creating living environments with character which are well planned, cohesive, connected and allow people to live, work and enjoy themselves at close quarters. We move an extra mile or make an extra effort towards that end. Fortune Clouds Park reflects that commitment quite eloquently. It excels the expectations of our customers in every way. FORTUNE TIMES Exquisite, yet affordable is how we define it. Fortune Times is a 100-acre openplotting venture within the integrated township of Fortune Butterfly City. The venture is promoted in line with the aspirations of the vast and growing middle class community, who constitute the pillars of the current vibrant Indian economy Fortune Times allows them the opportunity to acquire property at Fortune Butterfly City at easily affordable price and on convenient payment terms. Payments can be made on monthly installments basis over a period of 24-36 months @ Rs.5000/- per month. As members of Fortune Times, they have access to the finest facilities in a premier master planned residential locality. Nothing is left to imagination. None of the facilities fall short of expectations in any respect. Commonly shared facilities include a Community Clubhouse, Gym, Pay Areas, School, Tennis Court, Health Centre, Shopping Zone, Party Lawns, Parking Zones and Indoor Stadium.

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HIGHLETS OF FORTUNE INFRA DEVELOPERS 20 min drive from South East Asias biggest Rajiv Gandhi International Airport. Fab city goes live, 120MW modules and 60MW solar cells produced by Feb 2009. Fab city currently employees 600 people expected lto increase employees to 5000 More than 6 companies operative in fab city, paying way to more town ship developments. Rajiv nanotech park APHB Township in 600 Acres. Hardware park in 4000 acres. IT SEZs. Download approved site layout. International Gitanjaligems&jewellery park. Apparel park. Aghakhaninternationalscholl. Outer ring road. Star hotels. Air cargo complex. Very close to Mucherla IT cluster n 700 acres. Tummaluru IT cluster Completely free from pollution. Asiasbiggestamusementpark. Surrounded by prestigious private ventures. PV express highway from Mehdipatnam to Shamshabad(work in progress). Download approved site layout . DTCP approval with HUDA norms. Gated community (layout surrounded by security fencing) Master planners, architects&engineersjurong India (singapure). 100% vastu compliant. Wide black top roads -60ft main road,40ft internal roads. Underground power cabling system. Underground drainage. Beautiful landscaped gardens. 6 acres natural lake,boating Wi-fi enabled club house.
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 State-of-the-art swimming poll. Hitech gymnasium. Indoor/outdoor sports area. Electronic games park. Illuminated tank bund. Childrenspark. Abundant drinking water sources. Over head tank. Rain water harvesting. Commercial spaces. ATM/bank. Green walkways. Health spa/clinic,crche,Laundromat, milk diary. World 14 wonders miniature park. Round the clock security. Avenue plantation. Rock formations. Solar electronic lamps in parks. Site is well connected by state highways Srisailem road and having 4 side connective roads. Plot sizes in 500&1000sq.yds. Property management service.

Number of Workers employed in the Firm:

At present more than 200 employees are working in the company. Recruitment in FORTUNE INFRA DEVELOPERS is mainly though internal sources. Promotion is mainly based on seniority. It has good industrial relations with its workers. The company provides retirement benefits in the form of provident fund, superannuating and gratuity. Contributions to the provident fund are made at prescribed rates to the Provident Fund Commissioner and absorbed in the profit and loss account liability in respect of Superannuating benefits to certain employees is Contributed by the Company of life Insurance Corporation of India against a master policy at 13% of the basic salary of such employees. The company has

taken a group gratuity insurance policy with Life Insurance Corporation of India to secure gratuity liability.
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COMPANY DEPARTMENTS Fortune infra developers having a 10 departments are having they are Human resource management Accounting Administration Marketing Purchasing Transport Loans Legal Engineering IT Admin FUNCTIONS OF HR DAPARTMENT Pre-recruitment process Recruitment process Joining formalities Employee data base Conformation formalities Employee relation Report generation Exit formalities FUNCTIONS OF ACCOUNTING DEPARTMENT Routine functions of accounting department To prepare interim financial statements To prepare annual financial statements Security of accounts Inventory management FUNCTIONS OF ADMINISTATION DEPARTMENT Accounting Personal Budget/financial analysis Management Public information

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FUNCTIONS OF MARKETING DEPARTMENT Focus on the customer Monitor the competition Own the brand Find& direct outside vendors Create new ideas Communicate internally Manage a budget Understand the ROI Set the strategy, plan the attack, and excite FUNCTIONS OF PURCHASING DEPARTMENT Purchasing materials Evaluating price Prepare work and accounting Policy compliance FUNCTIONS OF TRANSPORT DEPARTMENT Control of motor transport Control of Bihar state road Transport Corporation Motor vehicles taxation Shipping and navigation on inland water ways declared by the parliament by law to be national waterways regarding to mechanically prospered vessels Shipping and navigation on inland water ways, rail ways and minor rail ways , ferries Rotating on tires Control of all officers serving with transport department FUNCTIONS OF LOAN DEPARTMENT Shelving and checking the order of books in the stacks Circulating materials and assisting patrons at service desks Searching for materials Shipping and relocating library materials Other projects as needed

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COMPANY DETAILS FORTUNE INFRA DEVELOPERS PVT LIMITED Plot No:448, Road No:20, Jubli Hills HYDERABAD ANDHRA PRADESH-500033 Board of directors: 1)Mr. B.SeshagiriRao-Managing Director 2)Mr. P.RameshBabu-Director 3)Mr. HariChalla-Director AUDIT COMMITTEE M/s VSPN&Co., Charted Accountants Flat No:4, Rukmini Apartments, Yousufguda Check-post, Hyderabad-500045. BANKERS Syndicate Bank Madhapur ICICI Bank Madhapur HDFC Bank Madhapur State Bank of India A C Guards

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CONCEPTUAL FRAME WORK

Definitions: 1. Asset Liability Management is the ongoing process of formulating implementing,

monitoring, and revising strategies related to assets and liabilities to achieve financial objectives, for a given set of risk tolerances and constraints. 2. ALM is critical for the sound financial management of any entity that invests to meet future cash flow needs within constraints. ALM is broader than risk mitigation1 and is inextricably linked to the liability and investment management functions. 3. ALM is a vital element within an Enterprise Risk Management framework. Some companies use ALM as part of a strategic decision-making framework to exploit opportunities to create value and optimize their risk/reward profile Assets: An asset is anything of value that your company owns including cash. Assets get recorded on the balance sheet in terms of their dollar values. Remember, even if you used credit to purchase an asset, you still own it. Its full dollar value gets recorded on one side of the balance sheet as an asset, and the amount you owe gets recorded on the other side of the balance sheet as a liability. Types of assets: Current assets: These are assets with dollar amounts that continually change, for example, cash, accounts receivable, inventory or raw materials your company uses to make a product. They are listed on the balance sheet in order of their liquidity, or how fast they can be converted into cash. Investments: Companies, like individuals, can own securities such as stocks and bonds. Investments, like cash or property, are considered assets. Capital assets: Think of capital assets, also called plant assets, as permanent things your company owns. Land, buildings, equipment and vehicles are common capital assets. So are things like computers, furniture and appliances, as long as they remain for use within your business and are not items you sell.

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Intangible assets: Patents, copyrights and other nonmaterial assets that have value are referred to as intangible. Fixed assets: These assets are acquired for long_ term use in the business .they is not meant for resale. Land and buildings, plant and machinery, vehicles and furniture etc. are some of examples of fixed assets. Liquid assets: These assets are also known as circulating, fluctuating or current assets. these assets can be converted into cash as early as possible. Current assets are cash, bank balance, debtors, stock, and investments. Fictitious assets: Fictitious assets are those assets which do not have physical form .they do not have any real value. Examples are loss on issue of shares, preliminary expenses etc. Wasting assets: Wasting assets are those assets which are consumed through being worked or used. Mines are the examples of wasting assets. Liabilities: Anything a company owes to people or businesses other than its owners is considered a liability. Liabilities are the obligations or debts payable by the enterprise in future in form of money or goods. Types of liabilities: Current liabilities: In general, if a liability must be paid within a year, it is considered current. This includes bills, money you owe to your vendors and suppliers, employee payroll and short-term loans. Long-term liabilities: A long-term liability is any debt that extends beyond one year, such as a mortgage. Fixed liabilities: These liabilities are payable generally after a long period of time. capital, loan debentures, mortgage etc. Contingent liabilities: These are not the real liabilities. Future events can only decide whether it is really a liability are not due to their uncertainty these liabilities are termed as contingent liabilities.

Profit &loss account:

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The business man is always interested in knowing his net income or net profit.net profit represents the excess of gross profit plus other revenue incomes over sales expense including sales costs and other expenses. the debit side of profit and loss account shows the expenses and the credit side incomes. if the total of credit side is more it will be net profit .and if the debit side happens to be more it will be net loss. In preparing the profit and loss account it must be remembered that expenses relating to the owner or partners are not to be accounted for in the profit and loss account of the firm. They are personal expenses and hence are transferred to the drawings accounts of owner or partners. These expenses are usually 1. Life insurance premium 2. Income tax 3. Household or personal expenses. Objectives of profit and loss account: To provide information about net profit To compare of current years income with that of previous income To take concrete steps to increase the net profit in the future through analysis of expenses To allocate net profit among partners. Balance sheet: This forms the second part of final accounts. It is prepared after the trading and profit &loss accounts have been compiled and closed. A balance sheet may be described as a statement of the financial position of a concern at a given date. The financial position of a concern is revealed by its assets on a given date and its liabilities on that date. Excess of assets over liabilities represents capital. Such excess may be taken as an indication of financial soundness of a concern. A balance sheet may therefore be defined as a statement which sets out the assets and liabilities of a business firm and which serves to ascertain the financial position of the same on any particular date. On the left hand side of its statement the liabilities and capital are shown. On the right hand side all assets are shown. There the two sides of a balance sheet must always be equal. Otherwise there is an error somewhere. Characteristics of a balance sheet: The balance sheet as a distinct from other financial statements has the following characteristics. 1. It is a statement and not an account. Although balance sheet is a part of final accounts and prepared with the help of final accounts, yet it is not an account but a statement.
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2. It is always prepared on a particular date and thus shows the position at that date not a period. 3. It has no debit side and credit side. Not the words to and by are used before the names of the accounts shown therein. The headings are liabilities and assets. 4. It shows the financial position of the business concern. 5. It shows what the firm owes to others and also what other owes to the firm. 6. The total of assets and liabilities always are equal. Arrangement of assets and liabilities in the balance sheet: 1. Arrangement of assets: In order of liquidity In order of performance Cash in hand Cash at book Investments Bills receivable Sundry debtors Stock plant& machinery Furniture Buildings Furniture Plant& machinery Stock Sundry debtors Bills receivable Investments Cash at bank cash in hand Arrangement of liabilities: In order of discharge ability in order of fixity Bills payable Trade creditors Bank overdrafts Loans Capital
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Bank over drafts Trade creditors Bills payable ASSETS, LIABILITIES: In the accounting sense, an asset is an item of value owned by a company. Assets may be tangible physical items or intangible items with no physical form. Assets add value to a company, and are important to a company's continued success.As with assets, you may look at the wider world to gain an understanding of what's a liability. No one is particularly pleased when he or she is described as a "liability". This is so because the liability description is a negative one. In accounting, liabilities are obligations of the company to transfer something of value to another party. On a companys balance sheet, a liability may be a legal debt or an accrual, which is an estimate of an obligation. GROUPING ASSETS: Assets are grouped in order of liquidity, not only because it makes sense but also because liquidity is the lifeblood of a company. Liquidity refers to the ease in which an asset can be converted to cash. Cash is therefore the most liquid of all assets. Assets that are very liquid are shown on the balance sheet as current assets. Current assets are assets that are expected to be converted to cash in 12 months or less. Those assets with convertibility exceeding twelve months are considered to be illiquid and are categorized as fixed or long-term assets. CURRENT ASSETS: Cash Short-term investments Accounts Receivable Inventories Prepayments (Prepaid expenses) Many methods of depreciation calculation exist today, however major corporations usually use one of the following methods: Straight line

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Declining/Reducing balance. a. Sum of years in digits b. Double declining balance While it is not possible to list all fixed assets here, the following are a few that will show up on the typical balance sheet: a. Machinery b. Property, Plant and Equipment c. Motor Vehicles Liabilities: Companies will borrow from financial institutions, from suppliers or from the any individual, group of individuals or corporation willing to lend. Debt is therefore an everpresent part of a company's financial consideration. Liability is a source of funds for a company, and the company will use the fund (purchasing power) to enhance the business (purchase fixed assets, inventory, pay creditors etc.) Current Liabilities: Current liabilities may be viewed as the flip side of current assets, and requires similar managerial attention as current assets. Current liabilities represent the amount owed to creditors due for payment within 12 months. The following are a few of the current liabilities you may see on the typical balance sheet: a. Accounts Payable b. Notes Payable c. Short-term portion of long-term debts d. Income Tax Payable e. Wages Payable f. Accruals/accrued expenses LONG-TERM LIABILITIES: Long-term liabilities are debt obligations of the company that is not due for repayment within the next 12 months. Most companies will hold both short and long-term debt, with no limit on how "long-term" the debt may be. So while there are a minimum number of months for a liability to be considered long-term, there is no maximum time period. The following are the ones you will probably find under the Long-Term Liabilities section of the next balance sheet you peruse:
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a. Debt to Financial institutions b. Bonds c. Debentures d. Mortgages Importance of current assets and current liabilities: Current assets represent assets that can be quickly transferred into money. Some of them are: a. Cash b. Cash equivalents c. Inventories d. Accounts receivable (these are the money that customers owe to the company for services or products provided) e. Current liabilities represent the short term obligations of the company. Some of them are: f. Accounts payable g. Short term debt Current assets and current liabilities should be compared over periods of time. It is good if the current assets have increased significantly over longer periods of time. This means that the company generates cash. On the other hand, it can be also interpreted as the company not being able to collect the money it has to take from its accounts receivable. If the current liabilities of the company are growing at a fast pace, then there might be some problem with the company. However, this is not always bad since the company may incur higher liabilities since it needs money to finance some of its goals. Finally, you should carefully study these indicators of the target company in order to determine its future potentials. You can quickly and easily obtain this information from financial statements. Role of assets and liabilities in a firm: INTRODUCTION The argument for the significant importance of emotional assets and liabilities in adding value to firms is acceptable but has not been widely addressed in the accounting literature. The literature on Balanced Scorecard and intellectual capital has attempted to address the issue of monitoring emotional assets and liabilities through non-financial performance measures but have been in a more superficial manner .A number of authors have attempted to theorize about the impact of the emotional state of a firms staff on work performance
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However, there is little research done in conceptualizing how emotional assets and liabilities affect other types of assets and liabilities, namely, intellectual and accounting. The dearth of research in conceptualizing emotional assets and liabilities could be due to several reasons and some of which are common to assets and liabilities not recognized in financial statements. First, emotional assets and liabilities lack a uniform definition. Second, traditional financial reporting system recognition of assets and liabilities tends to exclude emotional assets and liabilities because they cannot be measured reliably. As a result, any costs incurred to enhance emotional assets in a firm are treated as an expense in the traditional financial reporting system.

Previous research has demonstrated that the absence of intangibles such as emotional assets and liabilities in traditional financial reports leads to a systematic under valuation of firms. This has resulted in production of unrealistic and unrepresentative financial statements .Several authors agree that without the inclusion of emotional assets and liabilities financial statements are unable to indicate accurately the economic efficiency of a firm. This conceptual paper discusses the relationship between accounting, intellectual and emotional assets and liabilities, and attempts to show that emotional assets and liabilities are of significance in determining the value of a firm. It then offers some guidance on how certain emotional assets and liabilities are to be monitored and disclosed. The paper then includes theories from psychology that may help explain future empirical research findings to validate the impact of managing emotional assets and liabilities on the value of a firm.

MONITORING AND REPORTING EMOTIONAL ASSETS AND LIABILITIES: All firms have assets of one type or another or a combination of a few types of assets. A financial statement reports a firms assets as current and non-current assets. The majority of non-current assets are tangible assets, except for goodwill, which is an intangible asset. All the current and non-current assets covered in financial statements are accounting assets in that they can be clearly traced back to an accounting transaction.Although previous literature has proposed descriptions of emotional assets, these are not defined in relation to other asset types. This paper defines emotional assets as those assets that activate both intellectual and accounting assets, and emotional liabilities as those assets that de-activate both intellectual and tangible assets.
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The paper argues that there are two types of intangibles: intellectual capital and emotional capital (sensational capital). Intellectual capital is an intangible regardless of whether or not it is recognized in the financial statements of a firm intellectual assets is defined as the knowledge that can be converted into value. Intellectual capital can be divided into three categories: 1. Internal Capital 2. External Capital 3. Human Capital. Internal Capital: Internal capital of the firm includes processes, systems, intellectual property and financial relations. External capital: External capital of the firm includes brands, customer satisfaction, corporate image, quality standards, distribution channels, business partnerships, franchising and licensing agreements. Human capital: Capital related to employees includes know-how, the educational levels of employ sand relations between employees. PRINCIPLES AND STANDARDS: The practice of any profession is shaped by the experience of its members as well as by accumulated scientific knowledge. The practice of the actuarial profession is based on principles and standards.Principles abstract the key elements of the scientific framework. Principles are not prescriptions that specify how actuarial work is to be done, but are statements grounded in observation and experience. As our experience and understanding continues to develop, the articulation of these principles may change. In addition to

principles, the actuarial profession requires standards. Standards are normative rules, based on the state of the art and science of actuarial practice, regulatory constraints, and other external conditions. They guide the actuary in the selection of appropriate models and assumptions. Standards are subject to change and new standards will be introduced as actuarial practice evolves. This document is not intended to set forth standards.Principles may be categorized as general or practice-specific. The principles discussed herein are specific to the Asset Liability Management (ALM) area of practice.

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APPLICABILITY OF ALM PRINCIPLES: A wide variety of entities are faced with ALM related considerations. Such entities include: Insurance companies, banks and thrifts, investment firms, and other financial services companies Pension and trust funds (e.g., endowments and foundations) Governments Other commercial or not-for-profit enterprises Individual investors PRINCIPLES ECONOMIC VALUE ALM focuses on Economic Value. A consistent ALM structure can only be achieved for economic objectives. Economic value is based on future asset and liability cash flows. ALM uses these future cash flows to determine the risk exposure and achieve the financial objectives of an entity. An entitys financial objectives may include maximizing one or more of these values: economic value, accounting measures such as earnings and return on equity, or embedded value. For private pension plans, financial objectives may include the pattern of future funding. Various accounting measures are affected by rules that change the emergence of income and the reported book value of the assets and liabilities. These measures can sometimes distort economic reality and produce results inconsistent with economic value. Because ALM is concerned with the future asset and liability cash flows, the natural focus of ALM is economic value. Accounting measures or future funding requirements are often included as constraints within an ALM framework. Entities that focus on economic value tend to achieve their financial objectives more consistently in the long term. MUTUAL DEPENDENCE Liabilities and their associated assets are mutually dependent. manage the between the asset and liability cash flows to achieve economic and financial objectives. The mutual dependence principle applies to portfolios consisting of both assets and liabilities. It holds even if the assets and liabilities are affected by different economic factors, or even if asset and liability cash flows are fixed. Mutual dependence may be greater when the performance of one portfolio affects the performance of another portfolio. For example, the credited rate on the liabilities may influence the lapse/withdrawal rate, which in turn may require unexpected liquidation or reinvestment of assets.
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The mutual dependence principle implies that assets and liabilities must be managed concurrently in order to optimize achievement of economic and financial objectives.

DIVERSIFICATION The level of risk associated with a given financial objective can be reduced through diversification by combining exposures that are less than 100% positively correlated. Risks are diversifiable through aggregation up to the point where only systematic risk remains. For example, the return volatility of a portfolio of assets caused by changes to the level of prevailing interest rates is diversifiable through investing in different asset classes such as stocks. However, the residual systematic risk cannot be diversified through simple aggregation. It can, however, be reduced through hedging. In times of significant economic turmoil asset correlations tend toward 1.0 or 1.0. This can be observed in equity market data from October 1987 or bond market data from August 1998. During such environments the risk reduction benefits of diversification may temporarily disappear. Correlations between asset returns may not be a constant function, but instead may vary over time and between different scenarios. Moreover, true relationships between variables may be nonlinear. The diversification principle applies to all combinations of asset and liability portfolios.

RISK/REWARD TRADE-OFF Greater rewards are generally expected from portfolios with higher levels of risk. Rational investors2 expect greater rewards for accepting higher levels of risk. The higherrisk/greater-reward relationship may not hold if the portfolio is sub-optimal for a given level of risk (i.e., a comparably risky portfolio has a higher return); if an arbitrage opportunity exists in the markets, or if environmental pressures affect investors preferences and behaviors. As a direct result of the risks accepted, greater reward commensurate with higher risk levels may not be actually realized. In an ALM context, the riskiness of a portfolio is determined by the net position of the combined assets and liabilities.

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CONSTRAINTS Expected risk/reward trade-off tends to worsen as more constraints are imposed and as the constraints become more restrictive. An ALM framework contains internal and external constraints including investment policy requirements, rating agency expectations, regulatory issues, and required capital goals.

For example, an investment policy may specify that no below investment grade bonds may be purchased and bonds downgraded to below investment grade must be sold within 30 days. This constraint forces a sale at a time when a bonds price is under short -term pressure and may offer an opportunity to investors not subject to this constraint. Another common example of constraints within an ALM context is the professional judgment constraints applied to outcomes generated by mathematical models. For example, traditional efficient frontier analysis is extremely sensitive to input assumptions, and slight adjustments to assumptions can produce very different efficient portfolio outcomes. Professional judgment is typically applied to temper the models outcomes by constraining asset class allocations and forcing additional portfolio diversification.

DYNAMIC ENVIRONMENT The risks to which an entity is exposed and the associated rewards are determined by internal and external factors that change over time. ALM is an ongoing process. Risks an entity assumes and to which it is exposed are continuously changing. Internal factors arise from the financial objectives, risk tolerances, and constraints of the entity. External factors include interest rates, equity returns, competition, the legal environment, regulatory requirements, and tax constraints. Such factors often impact both assets and liabilities simultaneously, although the impact is not necessarily of the same magnitude or in the same direction. Furthermore, an entity may have different risk tolerances under different circumstances and for different time horizons. Accordingly, analyses, conclusions, and strategies relevant to a specific point in time need to be periodically reevaluated and updated.

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UNCERTAINTY Asset and liability cash flows cannot be projected with certainty. The dynamic environment as well as pure randomness create uncertainties in the portfolio cash flows and, hence, in the true risk exposure. Risk varies as the underlying risk factors (e.g., interest rates, equity returns, defaults, policyholder/customer behavior, lapses/withdrawals, pension shutdowns, etc.) change and as future expected cash flows is replaced by actual cash flows. This process reflects cash flows reacting to factor changes (e.g., interest-sensitive cash flows), truing up to actual experience, and results in revisions of future assumptions. The ultimate risk exposure will be a function of the actual cash flows. ALM requires the use of models to project future uncertain cash flows. In some cases, simple deterministic models can be used and ALM can be based on one set of expected future cash flows. In other cases, such as when future cash flows are expected to depend on future economic conditions, more complex models may be required to understand the interaction of the asset and liability cash flows. Stochastic models are often used to simulate future expected cash flows under various scenarios to help identify the associated risk exposures. These models produce statistical distributions of potential results and different ALM strategies can be evaluated by studying the range of results produced from modeling these strategies. Modeling can also be used to construct many possible futures or scenarios, and then, results across all the scenarios can be used to measure risk in the portfolio. Model risk is the additional risk created when the model does not adequately represent the underlying process or reality. There are two general classes of model risk: the risk of model misspecification, oversimplification, or outright errors, and the risk of a changing environment not anticipated in the model. For example, using a lognormal model of stock market prices produces a distribution with too few extreme value sample points (i.e., that is not fat enough in the tails) to adequately assess the risk for some complex embedded options, such as guaranteed minimum death benefits. In addition, the volatility of equity returns varies over time and this may not be accurately captured in the model.

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HEDGING The overall risk of a portfolio may be reduced through hedging. Hedging plays an integral role in the ALM process. Once the risks associated with a portfolio or transaction has been identified, the existing risks can be modified to suit the entitys risk tolerances and financial objectives. Undertaking additional risks that partially or fully offset the existing risks may accomplish this goal. Hedging may be done at either the transaction or portfolio level. Hedging may be complete or partial, perfect or imperfect (i.e., cross hedging). Hedging instruments include assets, liabilities, and derivatives. An asset with a matching liability is a natural hedge. The time horizon over which the hedge is in place may vary, but should nevertheless be explicitly defined. Risk can be controlled through diversification when the law of large numbers applies (e.g., when risks are diversifiable). Hedging is a strategy available to reduce risk when the law of large numbers does not operate, such as when a stock market decline results in equity-linked guarantees of an annuity block of business being in the money for every annuity contract at the same time. Hedging may reduce some risks but often introduces other risks, such as counterparty risk and basis risk. Basis risk arises from imperfect or partial hedging, where the hedging instruments are not perfectly negatively correlated with the risks being hedged. In some instances, an imperfect hedge may even increase the overall risk. As the overall risk is reduced through hedging, the expected reward normally decreases as well.

CONSIDERATIONS ECONOMIC VALUE For a pension plan, economic value is the value of plan surplus taking into account the level of contributions required to achieve that surplus. In practice many entities do not focus on economic value and focus instead on accounting earnings. Accounting results are relevant for many reasons: they are reported to regulators, shareholders, and to the public; they may be the basis for measuring managements performance and have other uses. However, ALM is internally consistent only if it is based on economic value. All of the traditional risk metrics (duration, convexity, VaR, CTE or TailVaR, key rate sensitivity analysis, etc.) focus on the asset and liability cash flows for the purpose of measuring the exposure of economic surplus to changes in financial variables.
46

If an entity is not concerned with economic value, it does not need ALM. However, many entities who have managed their assets and liabilities based on the accounting treatment ended up mismatching their assets and liabilities and ultimately failed. Today, there are still companies that do not focus on the economic value and permit unrewarded mismatches on an economic value basis. These mismatches are not to be confused with accounting asset and liability mismatches, which may actually be naturally occurring in ALM.

Process of assets and liabilities management: FUNDAMENTAL STEPS OF AN ALM PROCES: An effective ALM process begins with the support of the entitys senior management. Ongoing communication is essential. The process consists of five fundamental steps: ASSESS THE ENTITYS RISK/REWARD OBJECTIVES The purpose of ALM is not necessarily to eliminate or even minimize risk. The level of risk will vary with the return requirement and entitys objectives. Financial objectives and risk tolerances are generally determined by senior management of an entity and are reviewed from time to time.

IDENTIFY RISKS All sources of risk are identified for all assets and liabilities. Risks are broken down into their component pieces and the underlying causes of each component are assessed. Relationships of various risks to each other and/or to external factors are also identified.

QUANTIFY THE LEVEL OF RISK EXPOSURE Risk exposure can be quantified 1) Relative to changes in the component pieces, 2) As a maximum expected loss for a given confidence interval in a given set of scenarios, 3) By the distribution of outcomes for a given set of simulated scenarios for the component piece over time. Regular measurement and monitoring of the risk exposure is required. Formulate and Implement Strategies to Modify Existing Risks

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ALM strategies comprise both pure risk mitigation and optimization of the risk/reward tradeoff. Risk mitigation can be accomplished by modifying existing risks through techniques such as diversification, hedging, and portfolio rebalancing. For a given risk tolerance level, a given set of investment opportunities, and a given set of constraints, optimization ensures that the portfolio has the most desirable risk/reward tradeoff. Optimization presupposes that the management team has been previously educated on the risk/reward profile of the business and understands the necessity to take action based on ALM analysis. Practitioners are cautioned not to put undue reliance on the results of a mechanical calculation. Professional judgment is an important part of the process.

Monitor Risk Exposures and Revise ALM Strategies As Appropriate ALM is a continual process. All identified risk exposures are monitored and reported to senior management on a regular basis. If a risk exposure exceeds its approved limit, corrective actions are taken to reduce the risk exposure. For pension plans, monitoring current financial status and possible short-term outcomes is very helpful in managing pension risk. Operating within a dynamic environment, as the entitys risk tolerances and financial objectives change, the existing ALM strategies may no longer be appropriate. Hence, these strategies need to be periodically reviewed and modified. A formal, documented communication process is particularly important in this step.

Characteristics: Our liquidity risk management policies are designed to ensure we have a sufficient amount of financing, even when funding markets experience persistent stress. We seek to maintain a long-dated and diversified funding profile, taking into consideration the characteristics and liquidity profile of our assets. Our approach to asset-liability management includes: Conservatively managing the overall characteristics of our funding book, with a focus on maintaining long-term, diversified sources of funding in excess of our current requirements. Actively managing and monitoring our asset base, with particular focus on the liquidity, holding period and our ability to fund assets on a secured basis.

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 This enables us to determine the most appropriate funding products and tenors. Less liquid assets are more difficult to fund and therefore require funding that has longer tenors with a greater proportion of unsecured debt. Rising secured and unsecured financing that has a sufficiently longer term than the anticipated holding period of our assets. This reduces the risk that our liabilities will come due in advance of our ability to generate liquidity from the sale of our assets. Because we maintain a highly liquid balance sheet, the holding period of certain of our assets may be materially shorter than their contractual maturity dates.

Our goal is to have sufficient total capital (unsecured long-term borrowings plus total shareholders equity) so that we can avoid reliance on asset sales (other than our GCE). However, we recognize that orderly asset sales may be prudent or necessary in a severe or persistent liquidity crisis. The target amount of our total capital is based on an internal funding model which incorporates the following long-term financing requirements: The portion of financial instruments owned, at fair value that we believe could not be funded on a secured basis in periods of market stress, assuming stressed fair values. Goodwill and identifiable intangible assets, property, leasehold improvements and equipment, and other illiquid assets. Derivative and other margin and collateral requirements. Anticipated draws on our unfunded loan commitments. Regulatory requirements to hold capital or other forms of financing in excess of what we would otherwise hold in regulated subsidiaries.

Asset/Liability Management Philosophy: Adopting an asset/liability management philosophy is an important first step in drafting ALM policy. The philosophy should set out the broad goals and objectives of the credit unions asset/liability portfolio, as established by the board of directors, who represent the membership at large. This philosophy governs all ALM policy constraints and helps address new situations where policy does not yet exist. While goals and objectives will differ depending upon the circumstances and environment of the credit union, the ALM philosophy should always address the following

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principles: The credit union will manage its asset cash flows in relation to its liability cashflows in a manner that contributes adequately to earnings and limits the risk to the financial margin. Product terms, pricing and balance sheet mix must balance members product demands with the need to protect the equity of the credit union. Financial derivatives instruments must only be used to limit interest rate risk and must never be used for speculative or investment purposes.

Risk Measurement: The following are minimum risk and performance measures of ALM, required by sound business and financial practices: Periodic measurement of overall balance sheet mix. Periodic measurement of asset, liability and capital growth or decline. Periodic measurement of operational cash flows. Periodic measurement of financial margin. Periodic measurement or projection of the impact of interest movements. Periodic measurement of the level of unhedged foreign currency funds. Periodic assessment of the appropriateness of financial derivatives held..

The credit union must also meet ALM measurement requirements set out in the Act and Regulations. The credit union may track any other measures of the loan portfolio as it sees fit. These measurements should be compared to financial targets in the annual business plan and the budget, so that management can determine whether the credit union is meeting its goals. Management can also assess whether there are material variances from the plan which need to be addressed. Comparison of these measurements against historical

performance, where possible, can also identify significant trends which may need to be addressed by management.

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Interest Rate Risk Measurement: An important element of asset/liability management is the measurement of interest rate risk. This topic was introduced in Section 7207. Interest rate risk is the risk of an impact on an institution's earnings and capital due to changes in interest rates. One of the primary causes are mismatches in the terms of a credit union's deposits and loans. Interest rate risk exposure can lead to significant operating losses, and deterioration of capital, and therefore must be periodically measured and where appropriate, managed effectively.

Measuring Interest Rate Risk: In most credit unions, the interaction of portfolio volumes, rates, maturities and yield curves is so complex that it cannot be left to intuitive judgment to quantify interest rate risk. Therefore, techniques for accurately measuring interest rate risk are required.The

following are some techniques that can be used to measure interest rate risk: Gap (Matching) Schedule analysis. Gap Ratio analysis (30/70 Rule). Earnings Shock Test. Dynamic Gap analysis. Simulation analysis. Dollar Duration analysis.

Risk in assets and liabilities management Asset-Liability Management (ALM) can be termed as a risk management technique designed to earn an adequate return while maintaining a comfortable surplus of assets beyond liabilities. It takes into consideration interest rates, earning power, and degree of willingness to take on debt and hence is also known as Surplus Management. But in the last decade the meaning of ALM has evolved. It is now used in many different ways under different contexts. ALM, which was actually pioneered by financial institutions and banks, are now widely being used in industries too. The Society of Actuaries Task Force on ALM Principles, Canada, offers the following definition for ALM: "Asset Liability Management is the on-going process of formulating, implementing, monitoring, and revising strategies related to assets and liabilities in an attempt to achieve financial objectives for a given set of risk tolerances and constraints."

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Techniques for assessing Asset-Liability Risk Techniques for assessing asset-liability risk came to include Gap Analysis and Duration Analysis. These facilitated techniques of managing gaps and matching duration of assets and liabilities. Both approaches worked well if assets and liabilities comprised fixed cash flows. But cases of callable debts, home loans and mortgages which included options of prepayment and floating rates, posed problems that gap analysis could not address. Duration analysis could address these in theory, but implementing sufficiently sophisticated duration measures was problematic. Accordingly, banks and insurance companies started using Scenario Analysis. Under this technique assumptions were made on various conditions, for example:

Several interest rate scenarios were specified for the next 5 or 10 years. These specified conditions like declining rates, rising rates, a gradual decrease in rates followed by a sudden rise, etc. Ten or twenty scenarios could be specified in all.

Assumptions were made about the performance of assets and liabilities under each scenario. They included prepayment rates on mortgages or surrender rates on insurance products.

Assumptions were also made about the firm's performance-the rates at which new business would be acquired for various products, demand for the product etc.

Market conditions and economic factors like inflation rates and industrial cycles were also included.
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Based upon these assumptions, the performance of the firm's balance sheet could be projected under each scenario. If projected performance was poor under specific scenarios, the ALM committee would adjust assets or liabilities to address the indicated exposure. Let us consider the procedure for sanctioning a commercial loan. The borrower, who approaches the bank, has to appraise the banks credit department on various parameters like industry prospects, operational efficiency, financial efficiency, management qualities and other things, which would influence the working of the company. On the basis of this appraisal, the banks would then prepare a credit-grading sheet after covering all the aspects of the company and the business in which the company is in. Then the borrower would then be charged a certain rate of interest, which would cover the risk of lending. But the main shortcoming of scenario analysis was that, it was highly dependent on the choice of scenarios. It also required that many assumptions were to be made about how specific assets or liabilities will perform under specific scenarios. Gradually the firms recognized a potential for different type of risks, which was overlooked in ALM analyses. Also the deregulation of the interest rates in US in mid 70 s compelled the banks to undertake active planning for the structure of the balance sheet. The uncertainty of interest rate movements gave rise to Interest Rate Risk thereby causing banks to look for processes to manage this risk. In the wake of interest rate risk came Liquidity Risk and Credit Risk, which became inherent components of risk for banks. The recognition of these risks brought Asset Liability Management to the centre-stage of financial intermediation. Today even Equity Risk, which until a few years ago was given only honorary mention in all but a few company ALM reports, is now an indispensable part of ALM for most companies. Some companies have gone even further to include Counterparty Credit Risk, Sovereign Risk, as well as Product Design and Pricing Risk as part of their overall ALM. Now a day's a company has different reasons for doing ALM. While some companies view ALM as a compliance and risk mitigation exercise, others have started using ALM as strategic framework to achieve the company's financial objectives. Some of the business reasons companies now state for implementing an effective ALM framework include gaining competitive advantage and increasing the value of the organization.
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Asset-Liability Management Approach ALM in its most apparent sense is based on funds management. Funds management represents the core of sound bank planning and financial management. Although funding practices, techniques, and norms have been revised substantially in recent years, it is not a new concept. Funds management is the process of managing the spread between interest earned and interest paid while ensuring adequate liquidity. Therefore, funds management has following three components, which have been discussed briefly. A. Liquidity Management Liquidity represents the ability to accommodate decreases in liabilities and to fund increases in assets. An organization has adequate liquidity when it can obtain sufficient funds, either by increasing liabilities or by converting assets, promptly and at a reasonable cost. Liquidity is essential in all organizations to compensate for expected and unexpected balance sheet fluctuations and to provide funds for growth. The price of liquidity is a function of market conditions and market perception of the risks, both interest rate and credit risks, reflected in the balance sheet and off-balance sheet activities in the case of a bank. If liquidity needs are not met through liquid asset holdings, a bank may be forced to restructure or acquire additional liabilities under adverse market conditions. Liquidity exposure can stem from both internally (institution-specific) and externally generated factors. Sound liquidity risk management should address both types of exposure. External liquidity risks can be geographic, systemic or instrument-specific. Internal liquidity risk relates largely to the perception of an institution in its various markets: local, regional, national or international. Determination of the adequacy of a bank's liquidity position depends upon an analysis of its:

Historical funding requirements Current liquidity position Anticipated future funding needs Sources of funds Present and anticipated asset quality Present and future earnings capacity Present and planned capital position

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As all banks are affected by changes in the economic climate, the monitoring of economic and money market trends is key to liquidity planning. Sound financial management can minimize the negative effects of these trends while accentuating the positive ones. Management must also have an effective contingency plan that identifies minimum and maximum liquidity needs and weighs alternative courses of action designed to meet those needs. The cost of maintaining liquidity is another important prerogative. An institution that maintains a strong liquidity position may do so at the opportunity cost of generating higher earnings. The amount of liquid assets a bank should hold depends on the stability of its deposit structure and the potential for rapid expansion of its loan portfolio. If deposit accounts are composed primarily of small stable accounts, a relatively low allowance for liquidity is necessary. Additionally, management must consider the current ratings by regulatory and rating agencies when planning liquidity needs. Once liquidity needs have been determined, management must decide how to meet them through asset management, liability management, or a combination of both.

B. Asset Management Many banks (primarily the smaller ones) tend to have little influence over the size of their total assets. Liquid assets enable a bank to provide funds to satisfy increased demand for loans. But banks, which rely solely on asset management, concentrate on adjusting the price and availability of credit and the level of liquid assets. However, assets that are often assumed to be liquid are sometimes difficult to liquidate. For example, investment securities may be pledged against public deposits or repurchase agreements, or may be heavily depreciated because of interest rate changes. Furthermore, the holding of liquid assets for liquidity purposes is less attractive because of thin profit spreads. Asset liquidity, or how "salable" the bank's assets are in terms of both time and cost, is of primary importance in asset management. To maximize profitability, management must carefully weigh the full return on liquid assets (yield plus liquidity value) against the higher return associated with less liquid assets.

55

Income derived from higher yielding assets may be offset if a forced sale, at less than book value, is necessary because of adverse balance sheet fluctuations. Seasonal, cyclical, or other factors may cause aggregate outstanding loans and deposits to move in opposite directions and result in loan demand, which exceeds available deposit funds. A bank relying strictly on asset management would restrict loan growth to that which could be supported by available deposits. The decision whether or not to use liability sources should be based on a complete analysis of seasonal, cyclical, and other factors, and the costs involved. In addition to supplementing asset liquidity, liability sources of liquidity may serve as an alternative even when asset sources are available. C. Liability Management Liquidity needs can be met through the discretionary acquisition of funds on the basis of interest rate competition. This does not preclude the option of selling assets to meet funding needs, and conceptually, the availability of asset and liability options should result in a lower liquidity maintenance cost. The alternative costs of available discretionary liabilities can be compared to the opportunity cost of selling various assets. The major difference between liquidity in larger banks and in smaller banks is that larger banks are better able to control the level and composition of their liabilities and assets. When funds are required, larger banks have a wider variety of options from which to select the least costly method of generating funds. The ability to obtain additional liabilities represents liquidity potential. The marginal cost of liquidity and the cost of incremental funds acquired are of paramount importance in evaluating liability sources of liquidity. Consideration must be given to such factors as the frequency with which the banks must regularly refinance maturing purchased liabilities, as well as an evaluation of the bank's ongoing ability to obtain funds under normal market conditions. The obvious difficulty in estimating the latter is that, until the bank goes to the market to borrow, it cannot determine with complete certainty that funds will be available and/or at a price, which will maintain a positive yield spread. Changes in money market conditions may cause a rapid deterioration in a bank's capacity to borrow at a favorable rate. In this context, liquidity represents the ability to attract funds in the market when needed, at a reasonable cost vis-e-vis asset yield. The access to discretionary funding sources for a bank is always a function of its position and reputation in the money markets.
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Although the acquisition of funds at a competitive cost has enabled many banks to meet expanding customer loan demand, misuse or improper implementation of liability management can have severe consequences. Further, liability management is not riskless. This is because concentrations in funding sources increase liquidity risk. For example, a bank relying heavily on foreign interbank deposits will experience funding problems if overseas markets perceive instability in U.S. banks or the economy. Replacing foreign source funds might be difficult and costly because the domestic market may view the bank's sudden need for funds negatively. Again over-reliance on liability management may cause a tendency to minimize holdings of short-term securities, relax asset liquidity standards, and result in a large concentration of short-term liabilities supporting assets of longer maturity. During times of tight money, this could cause an earnings squeeze and an illiquid condition. Also if rate competition develops in the money market, a bank may incur a high cost of funds and may elect to lower credit standards to book higher yielding loans and securities. If a bank is purchasing liabilities to support assets, which are already on its books, the higher cost of purchased funds may result in a negative yield spread. Preoccupation with obtaining funds at the lowest possible cost, without considering maturity distribution, greatly intensifies a bank's exposure to the risk of interest rate fluctuations. That is why banks who particularly rely on wholesale funding sources, management must constantly be aware of the composition, characteristics, and diversification of its funding sources.

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DATA INTERPRETATION

Sources of funds:

Year 2008 2009 2010 2011 2012

amount 23733603 45000000 47500000 47500000 47500000

share capital
50000000 45000000 40000000 35000000 30000000 25000000 20000000 15000000 10000000 5000000 0 2008 2009 2010 2011 2012

share capital

Figure: 4.1 Sharecapital of fortune infra developers from April 2008 to march 2012

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YEAR

AMOUNT CHANGED

PERCENTAGE CHANGED

2008-09 2009-10 2010-11 2011-12

21266397 2500000 0 0

47.25 5.26 0 0

Figure: 4.1 percentage change in share capital of fortune infra developers from April 2008 to March 2012

INTERPRETATION
It is one of the way to raise the funds by issuing shares in return for cash or other considerations. The amount of share capital a company has can change over time because each time a business sells new shares to the public in exchange for cash. As we see the past years share capital of a FORTUNE INFRA DEVELOPERS PVT.LTD. The company maintained Increases year to year share capital for 5 years.

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Reserve&surplus: year 2008 2009 2010 2011 2012 amount 3402960 7535997 11177259 14255012 17461279

Reserves & surplus

20000000 18000000 16000000 14000000 12000000 10000000 8000000 6000000 4000000 2000000 0 2008 2009 2010 2011 2012 Reserves & surplus

Figure: 4.2 reserves and surplus of fortune infra developers from April 2008 to march 2012

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YEAR

AMOUNT CHANGED

PERCENTAGE CHANGED

2008-09 2009-10 2010-11 2011-12

4133037 3641262 3077753 3206267

54.84 32.57 21.59 18.36

Figure: 4.2 percentage change reserves and surplus of fortune infra developers from April 2008 to march 2012

INTERPRETATION a) Reserves: Amount set aside for the possibility of economic setback or for the

replacement of worn-out Assets. b) c) Surplus: it is an amount or a quantity in excess of what is needed. FORTUNE INFRA DEVELOPERS PVT.LTD. Reserves and Surplus are

rising as per the growth of the company. The reserve and surplus was increased year by year the year 2008 to 2012. It increases the credit worthiness of the company so many financial institutions will come forward to give loans to this company.

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Secured loans: Year 2008 2009 2010 2011 2012 amount 33685204 93355779 54240353 32078062 8170412

Secured Loans
100000000 90000000 80000000 70000000 60000000 50000000 40000000 30000000 20000000 10000000 0 2008 2009 2010 2011 2012 Secured Loans

Figure: 4.3 secured loans of fortune infra developers from April 2008 to march 2012

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YEAR

AMOUNT CHANGED

PERCENTAGE CHANGED

2008-09 2009-10 2010-11 2011-12

59670575 -39115426 -22162291 -23907650

63.91 -72.11 -69.08 -292.61

Figure: 4.3 percentage change in secured loans of fortune infra developers from April 2008 to march 2012

INTERPRETATION

A loan that is collateralized by assignment of rights to property is called secured loans. It also gradually decreases with the requirement of the industry. But 2008-09 it was more increase, and 2011-12 it will going to fall. It shows the company having more profits and reducing their secured loans.

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Unsecured loans: year 2008 2009 2010 2011 2012 amount 4204650 7305480 10740305 20342769 22042113

Unsecured Loans
25000000

20000000

15000000 Unsecured Loans 10000000

5000000

0 2008 2009 2010 2011 2012

Figure: 4.4 unsecured loans of fortune infra developers from April 2008 to march 2012

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YEAR

AMOUNT CHANGED

PERCENTAGE CHANGED

2008-09 2009-10 2010-11 2011-12

-26379724 3434825 9602464 1699344

-361.09 31.98 47.20 7.70

Figure: 4.4 percentage change in unsecured loans of fortune infra developers from April 2008 to march 2012

INTERPRETATION

A loan that is issued and supported only by the borrower's creditworthiness, rather than by some sort of collateral. Generally, for this type of borrower must have a high credit rating to receive unsecured loans. There is continious flucations in unsecured loans of FORTUNE INFRA DEVELOPERS PVT.LTD.. It may due to several external and internal factors. Like: 1. 2. 3. market trends. Company policies and plans. Profits of the company.

Fortune Infra Developers Pvt.Ltd. unsecured loans in 2008-2012Increases. It is due to expansion and market trends. Company should try to increse credit rating of there company.

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TOTAL FUNDS EMPLOYEE

Year 2008 2009 2010 2011 2012

amount 65060906 153218934 123679596 114221916 95219878

Total funds employee

180000000 160000000 140000000 120000000 100000000 80000000 60000000 40000000 20000000 0 2008 2009 2010 2011 2012 Total funds employee

Figure: 4.1 sources of fortune infra developers from April 2008 to march 2012

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YEAR

AMOUNT CHANGED

PERCENTAGE CHANGED

2008-09 2009-10 2010-11 2011-12

88158028 -29539338 -9457680 -19002038

57.53 -23.88 -8.28 -19.95

Figure: 4.1 percentage change in share capital of fortune infra developers from April 2008 to march 2012

INTERPRETATION Total funds employed are actual capital employed in the business. In Fortune Infra Developers Pvt.Ltd. there is a gradually decrease in total funds employed from 2008- 2011 but in financial year 2009 it increased by 57.53% due to major works completed and also it does taken new projects when compare with previous year 2008-2009.

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FIXED ASSETS: Net block: Year 2008 2009 2010 2011 2012 amount 6771050 8443059 20272392 18479854 21377307

Net block
25000000

20000000

15000000 Net block 10000000

5000000

0 2008 2009 2010 2011 2012

Figure: 4.5 net block of fortune infra developers from April 2008 to march 2012

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YEAR

AMOUNT CHANGED

PERCENTAGE CHANGED

2008-09 2009-10 2010-11 2011-12

1672009 11829333 -1792538 2897453

19.80 58.35 -9.69 13.55

Figure: 4.5 percentage change in net block of fortune infra developers from April 2008 to March 2012

INTERPRETATION

Total funds employed are actual capital employed in the business. In Fortune Infra Developers Pvt.Ltd. there is a gradually changes in total funds employed from 2008-12 some Fluctuations are arrange in 2009 and 2012.

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INVESTMENTS:

year 2008 2009 2010 2011 2012

amount 0 0 105800 0 0

Investments
120000 100000 80000 60000 40000 20000 0 2008 2009 2010 2011 2012

Investments

Figure: 4.7 investments of fortune infra developers from April 2008 to march 2012

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YEAR

AMOUNT CHANGED

PERCENTAGE CHANGED

2008-09 2009-10 2010-11 2011-12

0 105800 -105800 0

0 100 0 0

Figure: 4.8 percentage change investments of fortune infra developers from April 2008 to March 2012

INTERPRETATION Investements is the amout invested in some of the assets to gain some revenue.In Fortune Infra Developers Pvt.Ltd.In the year 2009-10 only invest the investment. it is a onetime investment.

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CURRENT ASSETS: Cash& bank balances: year 2008 2009 2010 2011 2012 amount 5136654 13848822 3898000 2497519 4865911

Cash & Bank Balances

16000000 14000000 12000000 10000000 8000000 6000000 4000000 2000000 0 2008 2009 2010 2011 2012 Cash & Bank Balances

Figure: 4.6 cash and bank balance of fortune infra developers from April 2008 to march 2012

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YEAR

AMOUNT CHANGED

PERCENTAGE CHANGED

2008-09 2009-10 2010-11 2011-12

8712168 -9950822 -1400481 2368392

6.29 -255.28 -50.06 48.67

Figure: 4.6 percentage change in cash and bank balance of fortune infra developers from April 2008 to March 2012 INTERPRETATION Cash and bank balances are the current assets of the company. it shows the liquidity position of the company.In Fortune Infra Developers PVT.LTD. there is a increase of 48.67% in the finanacial year 2011-2012. So it shows the fiancial pocession of the compay.

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Loans&advances: year 2008 2009 2010 2011 2012 amount 20449799 51930301 48926589 45589880 43465762

Loans & Advances

60000000 50000000 40000000 30000000 20000000 10000000 0 2008 2009 2010 2011 2012

Loans & Advances

Figure: 4.9 loans and advances of fortune infra developers from April 2008 to march 2012

74

YEAR

AMOUNT CHANGED

PERCENTAGE CHANGED

2008-09 2009-10 2010-11 2011-12

31480502 -3003712 -3336709 -2124118

60.62 -6.13 -7.31 -4.88

Figure: 4.9 percentage change in loans and advances of fortune infra developers from April 2008 to march 2012

INTERPRETATION Loans and advaces are the amount paid for future works. In 2012 the loans ofIn Fortune Infra Developers Pvt.Ltd. is decreased.In 2008-09 it was increasing 60.62%.

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TOTALCURRENTASSETS:

year 2008 2009 2010 2011 2012

Amount 58018256 144572175 103165604 95674162 73842571

Net Current Assets

160000000 140000000 120000000 100000000 80000000 60000000 40000000 20000000 0 2008 2009 2010 2011 2012 Net Current Assets

Figure: 4.10 total current assets of fortune infra developers from April 2008 to march 2012

76

YEAR

AMOUNT CHANGED

PERCENTAGE CHANGED

2008-09 2009-10 2010-11 2011-12

86553919 -41406571 -7491442 -21831591

59.86 -40.13 -7.83 -29.56

Figure: 4.10 percentage change in total current assets of fortune infra developers from April 2008 to march 2012

INTERPRETATION Current assets are the short term assets which are expected to be sold or otherwise used up in the near future, usually within one year, or one business cycle whichever is longer. Typical current assets include cash, cash equivalents, accounts receivable, inventory. In Fortune Infra Developers Pvt. Ltd. there is a fluctuation of current assets. So it means the company has volatilityliquidity and it has lightly ability to face extreme conditions also. The total current asset was fluctuation year by year from 2008 to 2012.

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CURRENT LIABILITIES & PROVISIONS:

year 2008 2009 2010 2011 2012

Amount 3890134 8435304 140283568 139043050 178968915

Current Liabilities & Provisions

200000000 180000000 160000000 140000000 120000000 100000000 80000000 60000000 40000000 20000000 0 2008 2009 2010 2011 2012 Current Liabilities & Provisions

Figure: 4.11 current liabilities and provisions of fortune infra developers from April 2008 to march 2012

78

YEAR

AMOUNT CHANGED

PERCENTAGE CHANGED

2008-09 2009-10 2010-11 2011-12

4545170 131848264 -1240518 39925865

53.88 93.98 -0.89 22.30

Figure: 4.11 percentage change in current liabilities and provisions of fortune infra developers from April 2008 to march 2012 INTERPRETATION

Current liabilities are the obligation payable within one year or the normal operating cycle of the business. A current liability requires payment out of a current asset or the incurrence of another short-term obligation. In 2008-09 low liabilities in this year, it means company reducing their current liabilities. In 2011-12 company having more liabilities.

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INVENTRY Year 2008 2009 2010 2011 2012 Amount 36321937 87228356 1900624583 186629813 204479813

inventory
2E+09 1.5E+09 1E+09 500000000 0 2008 2009 2010 2011 2012

inventry

Figure: 4.12 Inventory of fortune infra developers from April 2008 to march 2012

80

YEAR

AMOUNT CHANGED

PERCENTAGE CHANGED

2008-09 2009-10 2010-11 2011-12

50906419 1813396227 -1881961600 17850000

58.35 9.53 -1008.39 8.72

Figure: 4.12 percentage change in inventory of fortune infra developers from April 2008 to march 2012

INTERPRETATION
Work in progress is the value which is incurred in business and waiting for outcome. In Fortune Infra Developers Pvt.Ltd. work in progress is reduced by 1008.39% in 2010-2011. This fall is mainly due to major projects are completed in 2009-2010. This fall is mainly due to major projects are completed in the previous year.

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FINDINGS
1. All the liabilities and reserves and surplus of Fortune infra developersPvt.Ltd. are increased in financial year-2011- 2012 due to major projects are completed in previous year. 2. Current Assets of Fortune infra developersPvt.Ltd. are decreased in financial year-2012 due to the stated to purchase assets like land & buildings, plant & machinery for starting new projects. 3. Though there are fluctuations in assets and liabilities the overall effect is positive (assets are more than liabilities) so there is a better availability of working capital. 4. At present the company is in expansion stage but current assets and current liabilities are decreasing (growth stage in life cycle). 5. The net current assets in 2008 to 2009 were increased. But it was increased gradually in 2012. 6. In 2011 there is a decrease of current liabilities in the financial year 2010-2011. It means total liabilities are less than total assets. 7. Fortune infra developers Pvt.Ltd. provisions was increased by in the year 2011. it increses the working capital but it reduces the ability to face the risks. 8. The company maintained same share capital for 5 years and So it shows that company is growing and entering in new horizons. 9. Fortune infra developers Pvt.Ltd. unsecured loans in 2010-2011 fall drastically. It is due to expansion and market trends. Company should try to increse credit rating of thre company

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SUGGESTIONS 1. We suggest that Pricing policies must be standardized & updated as per the marketing conditions using technology like ERP( Enterprise Resource Planning) 2. In Fortune infra developersPvt.Ltd. capital work in progress is reduced, This fall is mainly due to major projects are completed in 2009-2010. 3. The General business risks should be known and minimized by using SWOT analysis of a specific project. It includes regulatory changes, changes in tax laws, and venturing into new lines of business. 4. Company should implement ALM at least in future for better performance. 5. Credit Exposure Ceilings: Company should follow the credit ceilings given by RBI for construction companies. 6. Prepare Maturity gap reports and liquidity assessment at regular intervals. 7. Reports should prepare to facilitate the maintenance of an appropriate liquid combination of assets and liabilities. 8. For monitoring operational risk on an on-going basis, the company must establish an Operational Risk Management Committee.

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BIBLIOGRAPHY

TEXT BOOKS REFERED: 1. M Y Khan, P K Jain, Management accounting, McGraw-hill publications 2. John J. Hampton, Financial decision making, Eastern Economic Edition. 3. S.N. Maheshwari, S.K. Maheswari, Financial accounting, Vikas publications. 4. Michael Pawley, Financial Innovation and Monetary Policy, McGraw-hill publications

Web sites www.google.com www.assets and liabilities.com

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