COMPANY PROFILE

Sunflag Iron and Steel Company ltd is a prestigious unit of Sunflag group was promoted by Sunflag UK. The Sunflag Group was founded by Satyadev Bhardwaj in Kenya in 1937. The Company incorporated in 1984 is engaged in the manufacture of Steel products like Rolled products, Billets, Sponge Iron etc., with a present capacity of 150000 MT of Direct reduced Iron, 200000 MT of Mild & Alloy Steel Rolled products and with captive power plant capacity of 108 million Kwh. The company has set up a state* of art integrated plant at Bhandara, India to produce 200000 tons per annum of high quality steel using iron ore and non-coking coal as basic inputs. The products are spring steel rounds flats, carbon steel and alloy steel. They are used by automobile leaf spring manufacturers, engineering goods manufacturers and the forgings industry Spring steel forms 70% of the total production The plant comprises a 1, 50,000 tons per annum Direct Reduction Plant, to produce sponge iron for captive consumption in the Steel Melting Shop. This shop comprises a 50/60 tones ultra. High power Electric Are Furnace with Eccentric bottom arrangement; a Ladle auto mould level controller and electromagnetic stirrer. The billets produced at the steel melting shop are rolled at the Mannesmann Debag Designed ultra modern 18 stand Continuous mill. This mill has a walking hearth reheating furnace, quick roll-changing facilities, a 65 meter long walk and wait type modern cooling bed and above all computerized process linking and controlling the various stages. The company came out with a rights issue in Feb 92 to part-finance the capital cost of a 15.5-MW waste heat recovery project to gain full use of waste gases and coal ash/fires generated in the process of making Sponge Iron. Installation of a new Captive Power Plant of 10 MW is under progress. The company has also started manufacturing high value stainless steel for which tremendous growth of domestic and international market is

SUNFLAG IRON & STEEL CO. LTD 33 Mount Road, Sadar, Nagpur 440001 The People An organization is known by its people. And here we would like to introduce you to the people behind Sunflag. Our FounderShri Satyadev Bhardwaj

ChairmanMr. RB Bhardwaj Vice Chairman and Managing

DirectorMr. Ravi B hush an Bhardwaj Jt. Managing Director-Mr. Pranav Bhardwaj

Board of DirectorsDr. E.R.C. Shekar (Director) Mr. S. K, Gupta (Whole time Director) Mr. S. Gajendran (Director) CA Jayesh M Parmar (Director) Mr. Naresh Gwalani (Nominee Director)

Company SecretaryMr. Mukesh D. Parakh

INTRODUCTION
Working capital Working capital is that amount of founds is required to carry out the day-to-day operation of an enterprise weather big or small. It may also be regarded as that portion of an enterprises total capital, which is employed in its shorts term operation. These operation consist of primarily such items as raw material semi processed goods sundry debtors, finished products, shorts investment etc. thus working capital also refers to all the shorts assets known current asset used in day to day operation of an enterprise.

What is working capital? Working capital refers to the investment by the company in shorts terms asset such as cash, marketable securities. Net current asset or net working capital refers to the current asset less current liabilities.

Definition The following are the most important definition of working capital "Working capital sometimes called networking capital is represented by the excess of current assets over current liability and identification the relatively liquid portion of total enterprise capital which constitutes a margin of buffer for manufacturing obligation within the operation cycle of the business". "Working capital is the difference between the inflows and outflow of the fund I other words it is the net cash inflow" "Working capital is define as the excess of current assent over current liabilities and provision .in other words it is the net current asset or net working capital"

Introduction of Ratio Analysis The Financial Statements i.e. Income Statement & the Balance Sheet report what has Actually happened to the earnings during a specified period and presents a summary of financial position of the company at a given position of time. The statement of retained.

Earnings reconcile income earned during the year and any dividends distributed with the change in retained earnings between the start & the end of financial year under study. Is a very powerful analytical tool useful for measuring performance of an organization? The ratio analysis Concentrates on the inter relationship among the figures appearing in the aforementioned four financial statements. The ratio analysis helps the management t analyze the past performance of the firm and to make the future projections.

While interpreting the financial information, the analyst has to be careful in limitations imposed by the accounting concept and methods of valuation. Information of non financial nature will also be taken into consideration before a meaningful analysis is made. Ratio analysis is extremely helpful in providing valuable insight into a company's financial picture. Ratios normally pinpoint a business strengths and weakness in two ways: Ratios provide an easy way to compare present performance with the past. Ratios depict the area in which particular business is competitively advantaged or

disadvantaged through comparing ratios to those of other business of the same size within the same industry.

HYPOTHESIS
Hypothesis can be defined as a tentative generalization of the validity of which remains to be tasted in its most elementary stage the hypothesis may be any hunch guess imaginative idea, become the basis for action or investigation the Working capital management at sunflag is adequate there are several factor which influences working capital at sunflag that performance of the working capital at sunflag is satisfactory

OBJECTIVE OF STUDY To study the working capital concept To study the work long capital management process in sunflag To know they expect of managing working capital To compare the performance of working capital for a particular year with the previous year To analysis way to improve the current situation in working capital management To study the various factor influencing working capital

NEED FOR STUDY

A firm need working capital because the production sales and cash flow are not instantaneous the firm need cash to purchase raw materials and pay expenses, as there may not be perfect matching between cash inflows and outflow. Cash may also be held to meet the future exigencies. The stocks of raw material are kept in order to ensure smooth production and protect against the risk of non-availability of raw material. Similarly stocks of finish goods have to be carried to meet the demands of the customer on continuous basis and sudden demand from customer. Goods are sold on credit for competitive reasons. Thus an adequate amount of funds has to be invested in current asset for a smooth and uninterrupted production and sale process.

RESEARCH METHODOLOGY
Research is a common parlance refers to a search for knowledge. One can also define research as a scientific and systematic search for pertinent information on a specific topic. In fact, are search in an art of scientific investigation. It is a way to solve to systematically solve the research problem. Some people consider research as a movement from the known to unknown. It is actually a voyage of discovery. Primary sources being an integral part has me a lot discussions were done with the executives of the company and charter accountant. Based on the discussion and there response my project work has been completed. Besides primary sources a secondary source has me to complete my project work. The secondary sources used are Internet Financial journal, ad book

The combination of these two made it easy for me to collect the information and to work on accordingly. Gross working capital: it refers to the firm's investment in total current or circulation assets Net working capital: the terms working capital has been defined in two different days 1. It is the excess of current assets over current liability. This is a matter of fact the most commonly accepted definition some people define it is only the difference between current asset and current liability. The former seems to be a batter definition as compare to latter. 2. it is that portion of the firms current asset which is financed by long termed funds.

INTRODUCTION AND CONCEPT

Gross working capital: it refers to the firm's investment in total current or circulation assets Net working capital: the terms working capital has been defined in two different days 1. It is the excess of current assets over current liability. This is a matter of fact the most commonly accepted definition some people define it is only the difference between current asset and current liability. The former seems to be a batter definition as compare to latter. 2. It is that portion of the firms current asset which is financed by long termed funds.

NEED FOR WORKING CAPITAL

OPERATING CYCLE: it is clear that working capital is require because of the time gap between the sale and there actual realization in cash. This time gap is technically termed as 'operating cycle' of the business. In case of manufacturing company the operating cycle is the length of the necessary to complete the following cycle events:

TYPE OF WORKING CAPITAL Working capital can be divided into two categories in the base of time: PERMANT WORKING CAPITAL TEMPORARY WORKING CAPITAL

PERMANT WORKING CAPITAL this refers to that minimum amount of investment in all current asset which is require at all the time carry out minimum level of business activities . In other word as, it represent the current asset and a counting basis over the entire year, tendon committee has refers to this type of working capital as core current asset the following are the characteristic of this type of working capital: Amount of permanent working capital remains in the business in one form of anther. This is a particular important for the point of view of financing. The suppler of such W.C. should not expect its return during the life time of firm. It also grows with the size of business. In the word, grater the size of the business, rater the amount of such W.C. & vice versa.

TEMPORARY WORKING CAPITAL The amount of such working capital keeps on fluctuating from time to time on the bases of business activity. In other words it represent additional current asset require at different time during the operating year. For example, extra inventory has to uC rninteu to support sales during peak sale pcnod. Similarly, receivable and must be financed during period of high scale. On the other hand investment in inventory, receivable etc., will decrease in period of depuration. Supplier of temporary working capital can expect it return in offseason when the firm dose not require it. Hence temporary working capital is generally financed from short term sources of financed such as bank credit

1)

ADEQACY OF WORKING CAPITAL

a firm most have adequate W.C as much as needed by the firm, It should neither excessive nor inadequate. Both situations are dangerous. Excessive W.C, mines the firm has ideal fund, which no profit

from the firm. In a inadequate W.C. means the firm dose not have sufficient fund for running its operation, which ultimately result in production interruption and lowering the profitability.

IMPORTANCE OF ADVANTAGE OF ADEQUATE WORKING CAPITAL

Working capital is the life blood & never center of business. Just as a blood is essential in the human body for maintain life, working capital is very essential to maintain the smooth running of the business. No business can run successfully without an adequate of working capital. The main advantage of maintaining adequate amount of W.C, are follows Solvency of business Goodwill Easy loan Cash discount Regular supply of raw material Regular payment of salaries, wages and other day to day commitment Exploitation of favorable market condition Ability to face crises Quick & regular return on investment High morale

2)

EXCESS WORKING CAPITAL

Every business concern should have adequate W.C to run its business operation. It should have neither redundant or excess of W.C nor inadequate or shortages of W.C both excess as well as short W.C position are bad for any business. However out of the, it is the inadequate W.C which is more dangerous from the point of view of the firm. DISADVANTAGE 1. Excessive W.C means idle fund, which earn no profit from business & hence the business can not earn proper rate of return on its investment. 2. When there is a redundant W.C it may lead to unnecessary purchasing & accumulation of inventories causing more change of theft, waste & losses 3. Excessive W.C implies excessive debtors & defective credit policy incidence of bad debit 4. It may result into overall inefficiency in the organization which may cause higher

5. When there is excessive W. C , relation with bank & other financial institution may not be maintained 6. Due to low rate on investments, the value of share may also fall 7. The redundant W.C gives capital gives rise to speculative transaction

DISADVANTAGE OF INADEQUATE W.C 1. A concern which has in adequate W.C can not a pay its short term liability in time. Thus it will lose its reputation & shall not be able to get good facility. 2. It can not buy its requirement in bulk can not avail of discount etc. 3. its become difficult for the firm to exploit favorable market condition & under take profitable project due to lack of W.C 4. it become impossible to utilize efficiently the fixed asset due to non - availability of liquid fund

FACTOR DETERMINING THE W.C REQUIREMENT The W.C requirement of a concern depend upon a large number of factor such has nature & size of business the character of there operation the length of production cycle the rate of stock turnover & the state of economic situation. It is not possible to rank them because such factor are of different important and the influence of individual factor change for a form our time. However the following are important

1. Nature of business: the W.C requirement of a firm basically detain upon the nature of its business, public utility undertaking like electricity , water supply , & railway need vary ltd. W.C because they offer cash sale only & supply service , not product & as such no fund are tide of in inventor & reliable . on the other hand trading & financial firm require less investment in fixed asset but have to invest a large amount in current asset like inventory , receivable & cash as such they need large amount of W.C the manufactory undertaking also require sizeable W.C along with fixed investment require a small amount of W.C , trading & financial form require relatively

vary large amount where as manufacturing undertaking require sizeable W.C between this two extremes 2) Size of business /Scale of operation The W.C requirement of a concern is directly influenced by the size of its business, which may be measured in term of scale of operation. Greater the size of the business unit generally larger will be the requirement of W.C however in some cases even a smaller concern may need more W.C due to high overhead charge inefficient use of available resource & other economic disadvantage of small size

3) Production policy In certain industries the demand is the subject wide fluctuation due to seasonal variation, the requirement of W.C in such case depends upon the production policy the production would be kept either steady by accumulation inventories during slack period with a view to meet high demand during peak season or the production could be curtailed during the slack season and increase during peak season .If the policy is to keep production keep steady by accumulating inventories it will require high working capital

4) Manufacturing process/ length of production cycle In manufacturing business the requirement of W.C increase in direct proportion to length of manufacturing process .longer the process period of manufacturing large in the amount of W.C requirement. The longer the manufacturing time the raw material and other supplier have to be carried for a longer period in process with progressive increment of labour & services cost before the finished production is finally obtained therefore if there are alternative process of production the process with the shortest production period should be chosen. 5) Seasonal Variation In a certain industrial raw material is not available through out the year .the have to buy raw material in bulk durina the season to insure an uninterrupted flow SL process during the inventories during such season which give rise large W,C then in the slack season

6) Working Capital Cycle In a manufacturing the W.C cycle starts with the purchase of raw material. Material with the realization of cash from the sale of finish product this cycle involve the purchase of raw material & store, its conversion into stock of finish goods through working in progress with progressive increment of labor & service cost conversion of finish stock into sales, debtor and receivable & ultimately realization of cash & this cycle continuous again to purchase of raw material and so on The speed with which the W.C complete one cycle determine the requirement of W.C longer the period of the cycle larger the requirement of W.C

7) Rate of stock turnover There is a high degree of inverse co-relation between the quantum of W.C & the velocity with which the sale are effected ,a firm having higher rate of stock turnover will need lower amount of W.C compared to firm having a low rate of turnover thus the working capital requirement of such a dealer shall be higher than that of a provision store

8) Credit Policy The credit policy of a concern in its dealing with debtor & creditor influence considerably the requirement of W.C . a concern that purchases its requirement on credit and sell its product/ service on cash requirement lesser amount of W.C on the over hade a concern buying its requirement for cash & allowing the credit for customers shall need larger amount of W.C as very huge amount fund are bound to be tide up in debtor. 9) Business Cycle Business cycle refer to alternate expansion & contraction in general business activity in a period of boom Le when the business is prosperous there is a need for the large amount of W.C due to increase in sale rise in price optimistic expansion of business etc. on the contrary in the time of depression i.e. when there is down swing of cycle the business contract sales decline difficulties are faced in collection from debtor & firm may have a larger amount of working capital lying idea.

Introduction of Ratio Analysis The Financial Statements i.e. Income Statement & the Balance Sheet report what has Actually happened to the earnings during a specified period and presents a summary of Financial position of the company at a given position of time. The statement of retained Earnings reconcile income earned during the year and any dividends distributed with the change in retained earnings between the start & the end of financial year under study. Ratio analysis is a very powerful analytical tool useful for measuring performance of an organization. The ratio analysis concentrates on the inter relationship among the figures appearing in the aforementioned four financial statements. The ratio analysis helps the management t analyze the past performance of the firm and to make the future projections. While interpreting the financial information, the analyst has to be careful in limitations imposed by the accounting concept and methods of valuation. Information of non financial nature will also be taken into consideration before a meaningful analysis is made. Ratio analysis is extremely helpful in providing valuable insight into a company's financial picture. Ratios normally pinpoint a business strengths and weakness in two ways: Ratios provide an easy way to compare present performance with the past Ratios depict the area in which particular business is competitively advantaged or disadvantaged through comparing ratios to those of other business of the same size within the same industry.

Importance Ratio Analysis Ratio analysis stands for the purpose of determining and presenting the relationship of items and group of items in the financial statement. It is an important technique of financial analysis. It is a way by which financial stability and health of a concern can be judged. The following are the main points of importance of ratio analysis: Useful in financial position analysis. Accounting ratios reveal the financial position of any concern. This helps the banks, insurance companies and other financial institutions in lending and making investment decisions. Useful in simplifying accounting figures. Accounting ratios simplify, summaries and

systematize the accounting figures in order to make them more understandable and in a lucid form. They highlight the interrelationship which exists between various segments of the business

as expressed by accounting statements. Often the figures standing alone cannot help them convey any meaning and ratios help them to relate with other figures. Useful in assessing the operational efficiency. Accounting ratios help to have an idea of the working of a concern. The efficiency of the firm becomes evident when analysis is based on accounting ratios. They diagnose the financial health by evaluating liquidity, solvency, profitability, etc. is helping the management to assess financial requirements and the capabilities of various business units. Useful in forecasting purpose. If accounting ratios are calculated for a number of years, then a trend is established. This trend helps in setting up future plans and forecasting. For example, expenses as a percentage of sales can be easily forecasted on the basis of sales and expenses of the past years. Useful in locating the weak spots of the business. Accounting ratios are of great assistance in locating the weak spots in the business even though the overall performance may be efficient. Weakness in financial structure due to incorrect policies in the past or present are revealed through accounting ratio. For example, if a firm finds that increase in distribution expenses is more than proportionate to the result expected or achieved, it can take remedial steps to overcome this adverse situation. Useful in comparison of performance. Through accounting ratios comparison can be made between one departments of the firm with another of the same firm in order to evaluate the performance of the various departments in the firm. Manager is naturally interested in such comparison in order to know the proper and smooth functioning of such departments. Ratios also help him to make any change in the organization structure.

Limitation of Ratio Analysis Ratio analysis is very important in revealing the financial position and soundness of the business. But in spite of its advantages, it has some limitations which restrict its use. These limitations should be kept in mind while making use ratio analysis for interpreting the financial statements. The following are the main limitations of accounting ratios: False results if based on incorrect accounting data. Accounting ratios can be correct only if the data (on which they are based) are correct. Sometimes, the information given in the financial statement is affected by window dressing, i.e., showing a position better than what actually is. For example if inventory valued are inflated or depreciation is not charged on fixed assets, not only will have an optimistic view of profitability of the firm but also of its financial position. So the analyst must be on the lookout for sign of window dressing, if any, No idea of probable happenings in future. Ratios are an attempt to make an analysis of the past financial statements; so they are historical documents. Now a days keeping in view the complexities of the business it is important to have an idea of the probable happenings in the future. Variation in accounting methods. The two firms' results are comparable with the help of accounting ratios only if they follow the same accounting methods or bases. Comparison will become difficult if the two concerns follow different methods of providing depreciation or valuing stock. Similarly if the two concerns are following two different standards or methods an analysis reference to the ratios would be misleading. Moreover utilization of inbuilt facilities and scale of operation would affect financial statements of different firms. Price level changes. Changes in price levels make comparison for various years difficult. For example, the ratio of sales to total assets in 2005 would be higher than in 2000 due to rising prices, fixed assets being shown at cost price and not at market price. Only one method of analysis. Ratio analysis is only the beginning and gives just 2 fraction of information needed for decision making. So, to have a comprehensive analysis of financial statements, ratios should be used along with other methods of analysis. No common standards. It is very difficult to lay down a common standard for comparison because circumstances differ from concern to concern and the Nature of each industry is different. For example, a business with current ratio of more than 2: 1 might not be in a position to pay current liabilities in time because of an unfavorable distribution of current assets in relation to liquidity. On the other hand, another business with a current ratio of even less than 2 :1 might

not be experiencing any difficulty in making the payment of current liabilities in time because of its favorable distribution of current assets in relation to liquidity. Different meanings assigned to the same term. Different firms in order to calculate ratios may also assign different meanings. For example, profit for calculating a ratio may be taken as PBIT or PBT (after interest) or even PAT (after interest and tax). This may affect the calculation of ratios in different firms and such ratio when used for comparison may lead to wrong conclusions. Ignores qualification factors. Accounting ratios are tools of quantitative analysis only. But sometimes qualification factors may surmount the quantitative aspects. The calculation derived from the ratio analysis under such circumstances may get distorted. For example, though credit may be granted to a customer on the basis of the information regarding his financial position, yet the grant of credit ultimately depends on debtor's character, honesty, past records and his managerial abilities. No use if ratios are worked out for insignificant and unrelated figures. Accounting ratios may be worked for any two insignificant or unrelated figures as ratio of sales and investment in government securities. Such ratios may be misleading. Ratios should not be calculated on the basis of cause and effect relationship. One should be clear as to what is cause and what is effect before calculating a ratio between two figures.

RATIO ANALYSIS IS MADE UNDER SIX BROAD CATEGORIES AS FOLLOWS

Long Term Solvency Ratios. Debt Equity Ratio Shareholder's Equity Ratio Debt to Net Worth Ratio Capital Gearing Ratio Fixed Assets to Long Term Ratio Proprietary Ratio Interest Cover Debt Service Coverage Ratio Dividend Cover

Short Term Solvency Ratios. Current Ratio Quick Ratio

Profitability Ratios. Return on Capital Employed Earnings per Share Cash Earnings per Share Gross Profit Margin Net Profit Margin Cash Profit Margin Return on Assets

Activity Ratio Inventory Turnover Ratio Inventory Ratio Debtors Ratio Debtors Collection Period Bad Debts to Sales Ratio Fixed Assets Turnover Ratio Total Assets Turnover Ratio Working Capital Turnover Ratio Sales to Capital Employed

Market Test Ratio. Dividend Payout Ratio Book Value

IMPORTANT FORMULA WORKING CAPITAL Working capital = current asst Net working capital current asst - current liabilities Equity working capital = current asst- current liability - long term debt

RATIO ANALYSIS Depth equity ratio Depth equity ratio= long term debt Share holder fund

Equity ratio Equity ratio = shareholder equity Total asset

Debt to net worth ratio Debt to net worth ratio = long term debt Net worth

Capital gearing ratio Capital gearing ratio= fixed interest bearing funds Equity shareholder funds

Fixed asset to long term ratio Fixed asset to long term ratio = fixed asset Long term fund

Proprietary ratio Proprietary ratio= net worth Total asset

Dividends cover Dividends cover = net profit after tax Dividends

Short term solvency ratio Current ratio Current ratio = current ratio, loans & advances Current liabilities & provision Quick ratio Quick ratio = current assets + loans & advances - inventories Current liability & provision - bank overdraft

Profitability ratio

Return on capital employed ROI = net profit X 100

Capital employed

Gross profit margin Gross profit margin = gross profit Sale X 100

Net profit margin Net profit margin = net profit before interest and tax Sale X 100

DATA COLLECTION AND ANALYSIS

INCOME STATEMENT for the year ended on 31st March, 2009,2010,2011 Particular 2009 Amount Rs.000) Amount (Rs.000) 4615631 Sales Cost of sales Less excise duty Raw material consumption other manufacturing exps GROSS PROFIT - operating expenses staff & establishment selling expenses Interest Deprecation 234481 149083 268493 254881 3769238 846393 242047 171448 219705 259030 4315713 888003 441190 332650 214700 448464 6900265 1897629 565312 2676768 1073633 908114 4597178 1394973 Amount Rs.000) 20 10 Amount Rs.000) 5203716 Amount Rs.000) 2011 Amount (Rs.000) 8797894

906938 GROSS LOSS/ PRF1T + non operating expenses export incentive other income profit before tax income tax NET PROFIT 100329 29459 129788 69243 2688 66555 88281 13914 -60545

892230 -4227

1437004 460625

21094 102195 97968 13031 84937 5513 26607 487232 183740 348492

BALANCE SHEET AS ON 31st March, 2009. 2010, 2011

Particular

2009 Amount (Rs.000) Amount (Rs.000)

2010 Amount (Rs.000) 788020 433688 98528 223853 1847557 1544089 522911 870838 12124 535035 Amount (Rs.000)

2011 Amount (Rs.000) Amount (Rs.000)

CURRENT ASSET Inventories Sundry debtors Cash & bank balance Loan & advance

715248 703784 75976 352549

1340813 540 1 62 136708 605956 2623639 859706 62365 922071 1701568

CURRENT LIABILITE C.L Provision 860462 10376

WORKING CAPITAL + Fixed Asset

976719 2585666 64423

1009054 2396593 998

1927010 998 415539 4045115

+ work in process WO"RKINP PA PIT A I EMPLOYED

3626808 74574 3481219

CALCULATION OF WORKING CAPITAL BY FOLLOWING METHOD % OF SALES METHOD % OF FTXEDASSET METHOD AS PER OPERATING CYCLE METHOD VALUATION OF EACH ITEM INDIVIDUALLY

WORKING CAPITAL: REQUIREMENT % OF SALES METHOD FORMULA WORKING CAPITAL AWORKING CAPITAL * 100 SALES

ESTIMATED W.C FOR 2012

Average % of

W.C. = 21.16% + 19.39%+19.34% 3

Average % of W.C = 59.89 = 19.96%3 Therefore estimated sales for 2006 6205747 W.C. - Average % of W.C. * sales - 19.96*6205747 -1238667

Interpretation: As it is clear above data that sales is in increasing position every year so as per sales w.c. is also in increasing position but as per estimated figures of 2012, sales is decreasing. So as per sales* working capital is also decreasing.

2) Working Capital as per of fixed asset i.e. W.C = Working Capital * 100 Fixed Asset

ESTIMATED WORKING CAPITAL FOR 2012 AVERAGE % OF W.C -17 - 56.06% 3 Estimated fixed asset for 2012 =23,030,90w.c = percentage * fixed asset= 56.06* 23,030,90=1291112 Interpretation: As it is clear from the above data that fixed asset is in declining position every year so as per decline in fixed asset W.C. is also in declining position by above calculation it is estimated

3) WORKING CAPITAL AS PER OPERATING CYCLE METHOD

O = R+W+F+D - C Raw material storage (days) = Average stock of material Daily average consumption

Average stock of material = opening + closing stock 2 Daily average consumption = consumption for the year 365 Conversion period (days) = average stock of semi finished goods Average daily factory cost

Average stock of semi finished goods = Opening + Closing stock 2 Average daily factory cost = Total factory cost 365

Finished goods storage period days - Average stock of finished good Average daily cost of sales

Average stock of finished good = opening + closing stock 2 Average daily cost of sales = Total cost of sale for the year 365

Average collection period (days) = Average debtors & B/R Net credit sales per day

Average debtors & B/R = opening. Drs. & B/R - closing .Drs. & B/R

2 Net credit sales per day = Total credit sale for the year 365 Average payment period (days) = Average creditors & B/P

Net credit purchases per day Average creditors & B/P = Opening_ Cr,_ & B/P- closing .Cr & B/P

Net credit purchases per day = Total credit purchases for the year 365

Number of operating cycle -

365 Duration of operating cycle

W.C

= Total operating expenses Number of operating cycle

OPERATING CYCLE

Operating cycle

2009 (days)

2010 (days)

2011 (days)

Average (days)

Raw material Work in process Finished stock Debtors Creditors Operating cycle No. of operating cycle

56 11 43 62 55 117 3.12

27 13 37 34 14 97 3.76

22 11 33 25 28

35 12 38 40 32 93

5.78

3.92

W.C. requirement

1208089

1147796

1193817

1183234

4) Valuation of each item individually W,C for 2009, 2010, 2011 Stock of raw material- R/m* 365days Work in process= w-I-p* 365days finished stock - f/s * 365davs Debtors debtors * 365days Creditors= creditors * 365days

CURRENT ASSET Raw material Work in process Finished stock Debtors CURRENT LIABILITIES Creditors WORKING CAPITAL

2009 52696 3150 48865 119547

2010 14495 4888 37983 40398

2011 16639 6263 53467 36997

49650 174608

4522 93242

29141 84225

RATIO ANALYSIS RATIO ANALYSIS Investment Valuation Ratios Force Value dividend Per Share Operating Profit Per Share (Rs) Net Operating Profit Per Share (Rs) Free Reserves Per Share (Rs) Bonus in Equity Capital Profitability Ratios Operating Profit Margin (%) 10.51 14.15 10.36 10.00 0.50 10.01 95.20 19.25 0.00 0.50 11.78 83.21 15.48 0.00 0.50 7.05 67.97 10.22 Mar '11 Mar ' 1 0 Mar '09

Profit Before Interest And Tax Margin (%) Gross Profit Margin (%) Cash Profit Margin (%) Adjusted Cash Margin (%) Net Profit Margin (%) Adjusted Net Profit Margin (%) Return On Capital Employed (%) Return On Net Worth (%) Adjusted Return on Net Worth (%)

7.91 7.94 7.12 7.12 4.55 4.55 14.06 14.85 14.90

11.30 11.34 9.80 9.80 7.00 7.00 21.29 22.94 22.94

7.52 7.56 6.68 6.68 3.93 3.93 13.78 13.28 13.14

Return on Assets Excluding Revaluations

29.27

-5.50

0.23

leturn on Assets Including devaluations Return on Long Term Funds (%) liquidity And Solvency Ratios Current Ratio Quick Ratio Debt Equity Ratio Long Term Debt Equity Ratio Debt Coverage Ratios [nterest Cover Total Debt to Owners Fund Financial Charges Coverage Ratio Financial Charges Coverage Ratio Post Tax Management Efficiency Ratios Inventory Turnover Ratio Debtors Turnover Ratio Investments Turnover Ratio Fixed Assets Turnover Ratio Total Assets Turnover Ratio

29.27 16.00

25.50 22.49

0.23 4.05

1.29 1.22 0.92 0.69

1.77 1.30 0.80 0.70

.94 .33 0.95 0.91

3.43 0.92 4.48 3.94

5.26 0.80 6.53 5.42

2.90 0.95 3.92 3.45

5.73 11.76 5.73 1.72 1.69

5.99 13.67 5.99 1.53 1.82

7.60 15.07 7.60 1 1. 72

<* Technology policy is to be so designed by the government that it will generate the thrust to update the technology by the steel producers. *> R&D focus is to be increased substantially. Expenditure on R&D by steel plants should be increased. With a strong R&D base, organizations will be able to assimilate the technology faster. * Organizational adjustments must be made while adopting newer technologies. Effective human resource policy will help speedier technology adoption. Socio-economic aspects should be dovetailed while selecting a technology.

t* As per the profitability ratio, the ratio is not in increasing position. So as per my analysis, company must make more efforts for increasing the profitability ratio. *> The company must also make effort to increase the market value of shares DETAIL STUDY OF RATIO ANALYSIS & WORKING CAPITAL OFSUNFLAGSTEELLTD

DETAIL STUDY OF RATIO ANALYSIS & WORKING CAPITAL < By making lot of efforts as per my data collection and calculations there is no need of any more suggestions as the company has sound business policy. <* At the time of doing this project current year consolidated balance sheet, profit & loss account and other financial information were not available since the financial year is not completed due to which only available data could be used * Calculation of ratio have been done as per text book not as per the company scheduled <* As the field of working capital is too vast therefore it was only possible for us to collect accurate information and data which was available for the public to be shared DETAIL STUDY OF RATIO ANALYSIS & WORKING CAPITAL OF SUNFLAG STEELLTD

DETAIL STUDY OF RATIO ANALYSIS & WORKING CAPITAL BIBUOGRAPHT books refers :

financial management financial management financial analysis

by by by

khan & jain i.m. pandey james o gill

site visited www.sunflag.com www.wealthtowealth.com www.irrvestopeuia.corn www. stock, aboutcom www.google.com www.monymarket.com sources of data annual report of sunflag companies from the year 2009-2010-2011 DETAIL STUDY OF RATIO ANALYSIS & WORKING CAPITAL OF SUNFLAG STEEL.LTD