Volume 7 • Number 10 • October 2013

Capital Budgeting in Small-Scale Industries
Indian Journal of Finance, 7(10), 5 - 13

The decisions on capital expenditures are very important for every firm, whether it is a small-scale industry or a large firm, because their impact is more or less permanent on the well-being and economic health of the enterprise. Capital budgeting may be more important to the smaller firms than it is to their larger counterparts because of the lack of the diversification in smaller firms. The main objective of this study is to examine the decision-making process followed by small-scale industries to evaluate the purchase of major fixed assets. For this purpose, relevant data were collected through a questionnaire, interviews and personal observations by undertaking an intensive case study of 400 small-scale industries of Haryana. This study found that in the small-scale industries, only large units, in the true sense of capital budgeting, prepared capital budgets for taking long-term capital investment decisions, and comprised of only 12.5% units of the total small-scale industries. In the small-scale industries, the traditional methods of capital budgeting- PBP and ARR -were used for evaluation of projects. It was found that in the small-scale industries, capital budgets were prepared by a committee comprising of both - the owner and the experts. It was also observed that an important aspect of capital budgeting - post audit - was used by only 6% of the sample units.

Keywords : capital budgeting, priority of the projects, projects evaluation, post- audit, small scale industry
JEL Classification: G 31

Paper Submission Date: July 7, 2013; Paper sent back for Revision : August 2, 2013 ; Paper Acceptance Date : August 24, 2013

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9 Gupta, S., Batra, R., & Sharma, M. (2007). Capital budgeting practices in Punjab based companies. The ICFAI Journal of Applied Finance, 13 (2), 57-70.
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16 Runyon, L.R. (1983). Capital expenditure decisions making in small firms. Journal of Business Research, 11 (3), 389-397.
17 Shinoda, T. (2010). Capital budgeting management practices: A focus on the use of capital budgeting methods. Economic Journal of Hokkaido University, 39 (6), 39-50.
18 Truong, G., Partington, G., Peat, M. (2008). Cost-of-capital estimation and capital budgeting practices in Australia. Australian Journal of Management, 33 (1), 95-121.
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Vinod Kumar Yadav
Associate Professor, Department of Commerce
Maharaja Agrasen College (University of Delhi)
Vasundhara Enclave, New Delhi-110 096.

Profitability Analysis of Selected Companies in the Sugar Industry in India Based on their Margin on Sales

Indian Journal of Finance, 7(10), 14 - 24
Sugar is made from sugarcane, which was arguably discovered thousands of years ago in New Guinea. From there, the route was traced to India and Southeast Asia. It was India which began producing sugar following the process of pressing sugarcane to extract its juice and boil it to get crystals. A business needs profit not only for its existence, but also for expansion and diversification. The investors want an adequate return on their investments, workers want higher wages, creditors want higher security for their interest and loan, and so on. The objective of this study is to analyze whether the overall profitability of the selected companies in the Sugar industry depends on their age, size, and region to which the company belongs based on their margin on sales. From the analysis, it was found that the southern region companies had a higher profitability than the northern region companies, and the companies having paid-up share capital less than `  26 crores and greater than ` 26 crores had, on an average, the same amount of profitability, and the three groups of companies based on their age - new, moderate, and old - had, on an average, the same level of profitability in terms of margin on sales. It is suggested that to increase their profitability, the companies need to effectively monitor and control their expenses and effectively use their by-products. The companies can also adopt a framework for monitoring the profitability at all levels.
Keywords: profitability, margin on sales, paid-up share capital, sugar industry
JEL Classification: C12, G32, M41

Paper Submission Date : March 2, 2013 ; Paper sent back for Revision : July 2, 2013; Paper Acceptance Date : August 16, 2013
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6 Sona, C. (2004). A study on financial statement analysis for a period of five years (1999-2003) with special reference to Sakthi Sugars Limited, Coimbatore. Research Project, Bharathiar University, pp.126-132.
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R. Umarani
Associate Professor, SNR Institute of Management Science, SNR Sons College
Coimbatore – 06, Tamil Nadu.

G. Nithya
Assistant Professor, Sri Krishna Institute of Management, Kuniamuthur (P.O)
Coimbatore - 08.

India's Export Performance and Its Determinants : An ARDL Bounds Testing Approach
Indian Journal of Finance, 7(10), 25 – 33
The export-led growth strategy adopted in the aftermath of the economic crisis of 1991 has removed all sorts of bias against exports. In this context, this paper examined the export performance and its determinants during the period from 1981-2011. The export growth has been higher in the post reform period as compared to the pre - liberalization period. The higher trade GDP ratio indicates that the Indian economy is more deeply integrated with the world economy. However, declining export-import ratio reflecting a deteriorating trade balance has been a cause of concern for the country. An ARDL bound testing approach to cointegration was adopted to identify the determinants of export performance. The empirical results indicated a long run as well as short run relation between the exports and the GDP, income of foreign countries (FGDP), real and effective exchange rate (REER), trade liberalization index (TLI), and foreign direct investment (FDI). While the impact of RGDP, TLI, and REER were positive; the impact of FGDP and FDI were found to be negative. The policy implication of the negative effect of the FGDP is that the government should take initiatives to improve the quality of local products and should reduce the average cost of production to increase the share of Indian exports in the world market. To realize the advantage of FDI for export growth, the government should provide infrastructural facilities and remove all barriers to attract more export oriented FDI, as is the case with China and Singapore.
Keywords: export, autoregressive distributed lag (ARDL) approach, cointegration, trade liberalization index (TLI), foreign direct investment (FDI), exports
JEL Classification: C32, F14, F21, F23

Paper Submission Date : March 20, 2013 ; Paper sent back for Revision : August 2, 2013 ; Paper Acceptance Date : August 24, 2013
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Karuna Kanta Saikia
Assistant Professor
Department of Business Administration
North Eastern Regional Institute of Management (NERIM)
Joyanagar, Khanapara, Guwahati - 22, Assam.


Evaluating Financial Performance of SBI Through Financial Ratios
Indian Journal of Finance, 7(10), 34 - 44

The objective of the present paper is to analyze the financial performance of SBI (State Bank of India) over a period of eleven years (2002-2012). For this purpose, financial ratio analysis has been used. With the help of this analysis, it was inferred that in the public sector banks, SBI is the top ranking bank in India, with its performance in terms of financial soundness being the best. For this analysis, investment valuation ratio, profitability ratio, management efficiency ratio, balance sheet ratio, and cash flow indicators were used. Results indicate that the performance of SBI in the study period has been excellent. SBI's excellent performance can be attributed to the adoption of modern technology, banking reforms, and good recovery mechanisms. However, SBI needs to improve its position with regards to a few parameters including debt-equity, operating profit, and non-interest income to total income.

Keywords: financial performance, public sector bank, financial ratios, investment, profitability, management efficiency, balance sheet, cash flow
JEL Classification: M4, G10, G17, G19, G32, G39

Paper Submission Date: June 20, 2013 ; Paper sent back for Revision : July 23, 2013 ; Paper Acceptance Date : August 2, 2013
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8 Mishra, A. K., Harsha, G. S., Anand, S., & Dhruva N.R. (2012). Analyzing soundness in Indian Banking: A CAMEL approach. Research Journal of Management Sciences, 1 (3), 9-14.
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14 Singh, A., Anurag, B., & Tandon, P. (2012). A study of financial performance: A comparative analysis of SBI and ICICI Bank. International Journal of Marketing, Financial Services & Management Research, 1 (11), 56-71 .
15 Veni, P. (2004). Capital adequacy requirement of commercial banks: A study in Indian Context. GITAM Journal of Management, 2 (2), 99-107.
Neeta Maheshwari
Associate Professor, Department of Management Studies
College of Engineering –Roorkee
Roorkee 247 667, Uttarakhand.
Neha Agarwal
Lecturer, Department of Management Studies
College of Engineering –Roorkee
Roorkee 247 667, Uttarakhand.
Impact of Project Size and Social Cost Benefit Analysis on Capital Budgeting Decisions of Indian Firms
Indian Journal of Finance, 7(10), 45 - 53
Purpose: This paper is an exploratory research on the application of capital budgeting techniques in Indian companies. Two parameters - project size and social cost benefit analysis were considered for the study and the influence of these factors for the adoption of capital budgeting techniques by the Indian companies has been analyzed.
Design/Methodology: This paper is based on the primary data. OLS (observed least square model) was used to evaluate the degree of relationship between project size and social cost benefit analysis with the frequency of usage of capital budgeting techniques in the companies and with the type of capital budgeting techniques used by the companies.
Findings: Using a sample size of 75 companies, the result shows that there is a positive relationship between frequency of usage of capital budgeting techniques and application of discounted cash flow techniques with the firm project size and social cost benefit analysis.
Practical Implications: The paper provides information to the students and researchers about the practices adopted in the Indian companies related to capital budgeting techniques.
Originality/Value: The paper provides new insights about the frequency of the capital budgeting techniques used in the firms along with the type of technique used by the companies.
Keywords: capital budgeting, DCF techniques, project size, social cost benefit analysis, regression analysis
JEL Classification: G31

Paper Submission Date : March 22, 2013 ; Paper sent back for Revision : July 11, 2013 ; Paper Acceptance Date : August 16, 2013
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Divya Gupta
Sr. Assistant Professor in Finance
Institute of Management and Information Science
Vivekanand Marg, Bhubaneswar - 751 002


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