Project Report

(Submitted for the Degree of B.Com. Honors in Accounting & Finance Under the University of Calcutta

WORKING CAPITAL OF JINDAL STEEL & POWER LIMITED

Submitte b!
N"me o# t$e C"% i "te& TAN'J SARAF Re(i)tr"tio% No* & Ro++ No*& N"me o# t$e Co++e(e& 'MES,C,ANDRA COLLEGE

Super-i)e b!
N"me o# t$e Super-i)or& N"me o# t$e Co++e(e&

JAN'AR./0123

Ac4%o5+e (eme%t
! "ould li#e to e$%ress my gratitude to"ards all the %eo%le "ho guided me throughout& and "ithout "hose guidance and su%%ort& this %ro'ect "ould not have been com%leted successfully ! "ould li#e to than# my Su%ervisor& (rof. )))))))))))) for his su%%ort and #no"ledge. !t hel%ed me throughout the %ro'ect and also guided me in various "ays. ! en'oyed "or#ing on this %ro'ect title because ! gained #no"ledge about *or#ing Ca%ital +anagement of ,indal Steel & (o"er -imited. ! had throughout hel% of my friends and ! also too# hel% from internet and different boo#s for ma#ing this %ro'ect.

S'PER6ISOR/S CERTIFICATE
.his is to certify that +r. .anu' Saraf a student of B.Com. Honours in Accounting & Finance of U+/SHCHA0D1A C2--/3/ under the University 2f Calcutta has "or#ed under my su%ervision and guidance for his (ro'ect "or# and %re%ared a (ro'ect re%ort "ith the .itle 4*215!03 CA(!.A- 2F ,!0DA- S.//-6 .he %ro'ect re%ort & "hich he is submitting& is his genuine and original "or# to the best of my #no"ledge.

Signature7 (lace7 52-5A.A Date7 0ame7 Designation7 0ame of College7 U+/SH CHA0D1A College

ST'DENT/S DECLARATION

! hereby declare that the %ro'ect "or# "ith the title *215!03 CA(!.A- 2F ,!0DA- S.//- submitted by me for the %artial fulfillment of the degree of B.Com . Honours in Accounting & Finance under the University 2f Calcutta is my original "or# and has not been submitted earlier to any other University8!nstitution for the fulfillment of the re9uirement of any course of study. ! also declare that no cha%ter of this manuscri%t in "hole or in %art has been incor%orated in this re%ort from any earlier "or# done by others or me. Ho"ever& e$tracts of any literature "hich has been used for this re%ort has been duly ac#no"ledged %roviding details of such literature in the references.

Signature7 (lace7 52-5A.A Date7 0ame7 Address7 1egistration 0o.7 1oll 0o.

E7ecuti-e Summ"r!
,indal Steel & (o"er limited (,S(- is one of the leading %o"ers in steel industry "ith interests s%anning across the s%ectrum from mining iron ore& to manufacturing value:added steel %roducts. .he com%any has a ca%acity of %roducing ; +.(A steel and has %lans to e$%and further. (roduction is very im%ortant for any com%any but the management of the %roducts is also very im%ortant. .he steel industry is gro"ing at a very ra%id rate and technological changes are very fre9uent today. .he com%etition is getting fierce as com%ared to earlier days as every com%any is designing its o"n strategies to gro" at a ra%id rate. +ergers and ac9uisitions are also very common in steel industry. .he need for a better and im%roved system is a must for any industry. *or#ing ca%ital is commonly used to meet the ca%ital re9uirements of day:to:day "or#ings in a business concern. ,ust as blood is essential in human body for maintaining life& "or#ing ca%ital is very essential for maintaining smooth functioning of the business. 0o business can run successfully "ithout an ade9uate amount of "or#ing ca%ital. Hence in the current economic scenario& "here there is shortage in the economy& o%timum use of "or#ing ca%ital become critical as com%ared to long term borro"ings. So& "or#ing ca%ital "as chosen as the to%ic to deal "ith as efficient utili<ation of "or#ing ca%ital "hich hel%s to im%rove marginal rate of return. !n the study of "or#ing ca%ital management& the study of "or#ing ca%ital of various sections in the finance de%artment of ,indal Steel and (o"er -imited "as underta#en and analysis of "or#ing ca%ital ratios of this com%any "as done. I i et"i+e "%"+!)i) o# Wor4i%( C"pit"+ o# JSPL7 .heoretical as "ell as (ractical. *hen you go through the "hole %ro'ect& you "ill find that theoretical analysis has been done "ith the hel% of theory as "ell as "ith diagrams to understand things %recisely. -i#e"ise& %ractical analysis is also there by the name =*or#ing Ca%ital Changes in ,S(- in three years>. !t de%icts the effect of increase 8 decrease in Current Assets or Current -iabilities on *or#ing Ca%ital.

I have done the analysis of the ratios, which have been calculated by me. I have taken data of three financial years, i.e. 2012-2013, 2011-2012 20102011. Along "ith the calculation of ratios& ! have also %lotted gra%hs for better e$%lanation in inter%retation and analysis. .he analysis of different ratios de%icts "hether these ratios are near the ideal values or not and if not& "hat can be the %ossible reasons for these variations. !f the ratios are near the ideal values& it is considered good for a com%any>s gro"th.

S N o

Co%te%t)

P( No 9 : 20 2< 2= 03

2 I% u)tr! o-er-ie5 0 Comp"%! o-er-ie5 ; T$e Project 3 Project Report < R"tio A%"+!)i) 9 C"+cu+"tio% o# R"tio) o# JSPL "% A%"+!)i) b")e o% t$em

= Co%c+u)io%) : Limit"tio%) > Recomme% "tio% 21 ?ib+io(r"p$!

31 30 3; 33

T"b+e o# Co%te%t)

IND'STR. O6ER6IEW
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Steel is one such material that has %layed an im%ortant role in the develo%ment of man#ind in the last century. .oday& it is difficult to imagine a "orld "ithout steel. Steel has become vital to our everyday life. !t is at the root of the 9uality of life that each of us en'oys today& hel%ing to shelter us& to feed us and to facilitate both our "or#ing day and leisure activities. *e de%end on steel for almost everything from our houses and buildings& the cars "e drive& roads& bridges& agricultural e9ui%ment& machines& the list is endless. Steel is a versatile& constantly develo%ing material that under%ins all manufacturing activity. /ven if a %roduct is not made entirely from steel& it "ill undoubtedly have steel as a com%onent at some %oint in the manufacturing %rocess. .here are currently more than ;&?@@ different grades of steel "ith many different %ro%erties : %hysical& chemical& environmental& A?B of "hich have been develo%ed in the last C@ years. Steel is also an environment friendly material and has the distinction of being the most recycled material in the "orld today. .oday& consum%tion of steel is also regarded as an indicator of develo%ment of a nation. (er ca%ita steel consum%tion is no" universally acce%ted as an inde$ of economic develo%ment of a nation. 3iven its role& steel has established itself as the bac#bone of any economy .he !ndian Steel industry is almost D@@ years old no". .ill DEE@& the !ndian steel industry o%erated under a regulated environment "ith insulated mar#ets and large:scale ca%acities reserved for the %ublic sector. (roduction and %rices "ere determined and regulated by the 3overnment& "hile SA!- and .ata Steel "ere the main %roducers& the latter being the only %rivate %layer. !n DEE@& the !ndian steel

!ndustry had a %roduction ca%acity of C; +.. DEEC sa" the onset of liberali<ation and the !ndian economy "as o%ened to the "orld. !ndian steel sector also "itnessed the entry of several domestic %rivate %layers and large %rivate investments flo"ed into the sector to add fresh ca%acities. *ith ca%ital investments of over 1s D@@&@@@ cores& the !ndian steel industry currently %rovides direct8indirect em%loyment to over C million %eo%le. As !ndia moves ahead in the ne" millennium& the steel industry "ill %lay a critical role in transforming !ndia into an economic su%er%o"er. !0D!A0 steel industry is one of the least %rotected one in the "orld. .here is no restriction on chea% im%orts from com%letive nation "here as there are numerous tariff and non:tariff barriers in develo%ed countries. .he industries are "itnessing various merger & ac9uisition (+&A and the !ndian steel industry is not lagging behind. .he .ata>s ta#eover of Corus steel and the recent /ssar steel ac9uisition of Canadian firm Algoma& .isco ta#eover of a Singa%ore based C.? million tone steel com%any natsteel and 'indal steel stainless ta#e over f an !ndonesian cold roller called ma%sian stainless steel .in addition to global ac9uisition !ndian %layer are consolidating their %osition in the domestic mar#et ,!SC2 & ,FS- have merged to form ,!SC2.

Comp"%! O-er-ie5
*ith an annual turnover of over US GC.E billion& ,S(- is a %art of the about US G D? billion diversified 2. (. ,indal 3rou%. .he organi<ation has business interests in steel %roduction& steel %roducts& %o"er generation& mining& s%onge iron& Ferro chrome and heavy machinery. An enter%rising s%irit and ability to discern long: range trends have been the driving forces behind ,S(->s remar#able gro"th. Along the "ay& ,S(- has consistently ta%%ed ne" o%%ortunities by increasing %roduction ca%acity& diversifying investments& and leveraging the core ca%abilities to advance into ne" businesses. And that has %re%ared the com%any for gro"th today and tomorro". Steel !nfrastructure7 /$celling the level of steel ma#ing& ,S(- has e$ceeded the %roduction ca%acity of C.E@ +.(A "ith its %lant at 1aigarh& Chhattisgarh. U%grading its e$isting facility at 1aigarh and by commissioning of additional facilities in ,har#hand and 2rissa& ,S(- is encom%assing the future %roduction ca%acity of steel that "ill rise by DC +.(A in coming years. ,S(->s sinter %lant& blast furnaces (DHIDm and ;?Dm & co#e oven& state:of:theart Steel +elting Sho% "ith electric arc furnace& ladle refining& vacuum degassing and continuous casting bears testimony to its %romise of %roviding its customers "ith international 9uality steel.

Innovative products: ,S(- continuously endeavors to increase the %ortfolio

of the value:added %roducts. .he %roduct mi$ of the com%any includes Hot 1olled (arallel Flange Beams and Columns& 1ails& Channels& (lates& Cathode bar and Continuously Cast (roducts that includes Billets8Blooms& Beam Blan#s& 1ounds and Slabs and +etallic and Ferro Alloy.

Rails: *ith its un%aralleled technical #no":ho"& ,S(- %ioneered the "orld>s
longest finished rails of DC@ meters in !ndia. Further& an integrated Flash Butt *elding (lant has been installed to enable the su%%ly of CJ@:JI@ meters long "elded rail %anels. .hese rails are %referred for their economy& safety and for %roviding a comfortable rail 'ourney.

H-Beams and Columns: ,S(- has been a %ioneer in %roducing Hot 1olled
(arallel Flange Beams (H:beam and Columns in medium and large si<es in

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!ndia. .he structural engineers& architects and construction com%anies& consider these H:Beams and columns strongest& safest and most stable.

Plates: ,S(- also introduced ;.?m "ide steel %lates for the first time in !ndia.
Follo"ing "orld:class technology in its %roduction of the finest and "idest %lates ,S(- reaffirmed its commitment to develo% state:of:the:art steel %roducts of international standards. ,S(->s shar% focus on customer relationshi% management and manufacturing e$ecution systems ensures delivery of customised solutions to the customer needs.

Power: ,S(- has a ;J@ +* %o"er generation facility !n 1aigarh based on

"aste heat recovery from rotary #ilns& "ashery re'ects and coal fines to meet the ca%tive re9uirements as "ell as su%%ly to the State /lectricity Boards of Chhattisgarh. ,S(- have e$%ansion %lans of e$%anding the %o"er generation facility to H@@ +*. ,indal (o"er limited (,(- 7 ,(- a "holly o"ned subsidiary of ,S(-& is setting u% a D@@@ +* 2.(. ,indal Su%er .hermal (o"er (lant at 1aigarh& Chhattisgarh& "ith an investment of over 1s. J?@@ crores. .he %ro'ect has been accorded +ega (o"er (ro'ect status by the +inistry of (o"er& 3overnment of !ndia.

Coal mining: ,S(- has its ca%tive Coal +ines at Dongamahua& Chhattisgarh.
Since the coal is of very %oor grade and 9uality it has to be beneficiated. Hence a coal "ashery "ith ca%acity of H +.(A to "ash JA:JIB coal ash to CHB has been commissioned and is o%erating successfully. .he com%any has been allotted additional Coal Bloc# to meet increased re9uirement of coal for its e$%ansion %ro'ect.

Iron-ore mining: ,S(- has ca%tive !ron 2re +ines at .ensa& 2rissa& to meet
the %art re9uirement of its S%onge !ron (lant. Accoutered "ith fully mechani<ed techni9ues& it is currently %roducing about ???@@@ +. of s%onge grade ore. An additional crusher is also being installed to ensure the availability of high:grade iron ore. .he ca%tive !ron 2re and Coalmines are the core strength of the com%any.

Diamond Exploration: ,S(- has recently made its foray into e$%loration of
high value minerals and metals li#e diamonds& %recious stones& gold& %latinum grou% of minerals& base metals& tar sands etc. !nitiation has been made in e$%loration for diamond& gold and associated minerals in ,ash%ur district of

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Chhattisgarh& %arts of ,har#hand and Democratic 1e%ublic of Congo.S%onge !ron7 ,S(- has "orlds largest coal:based s%onge iron manufacturing facility& "hich uses indigenously develo%ed rotary #ilns.

Ferro chrome: +anufacturing of stainless and s%ecial steel re9uires an

im%ortant com%onent called Ferro chrome. Ferro chrome is the result of a continuous smelting of chrome ore& co#e& coal and 9uart< at the Submerged Arc Furnace (SAF .

achiner! Division7 ,S(- has set u% a state:of:the:art +achinery Division

at1ai%ur& Chhattisgarh& "hich caters to the in:house machinery & com%onents re9uirements of the 1aigarh %lant and other grou% com%anies. .he unit is !S2E@@C& has machinery:manufacturing ca%acity of DD&?@@ +. and %roduction ca%acity of ;@&@@@ +. of steel ingots and castings.

C"R initiative7 ,S(- has from the very beginning devoted itself entirely to the
cause of u% liftment of bac#"ard areas of the country. .he com%any has ta#en u% a number of %rogrammes to im%rove the lives of the under%rivileged. 1aigarh& a tribal district in Chhattisgarh is one such e$am%le. 2ne of the #ey %riority areas has been education as it has a direct im%act on nation building. .he D@KC co: educational 2.(. ,indal School& "ith an investment of over 1s. ? crore is o%erational at 1aigarh. .he oldest girlsL school has been renovated. !n addition& JC villages have been ado%ted& contributing to the develo%ment of the region through a more holistic effort. From %roviding se"age and sanitation facilities& building and maintaining roads and %ar#s& to healthcare and education facilities& ,S(- is leaving no stone unturned in serving the society. Availability of medical facilities by setting u% charitable clinics and hos%itals is yet another as%ect of our social initiative. ,S(- is constantly "or#ing to"ards %roviding "orld:class health facilities to the %eo%le of 1aigarh at the D@@:bedmulti:s%ecialty 2. (. ,indal Hos%ital & 1esearch Centre. .he hos%ital has four "ell:e9ui%%ed 2%eration .heatre& !ntensive care units& medical teams for various s%ecialty including ortho%edics and %ediatrics. +edical cam%s are regularly organi<ed "hich benefits more than J@&@@@ %eo%le in the district. *omen em%o"erment %rograms are organi<ed regularly "hich includes education& livelihood training& and health chec#u%s etc. ,S(-Ls sco%e of social activities e$tends beyond healthcare and "elfare to the cultural and s%orts arena& too. ,S(- has also develo%ed a uni9ue +usical Fountain in 1aigarh. .he 5amla 0ehru (ar# in the city has been develo%ed and is being maintained by ,S(-. .he initiation of a social

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accountability system& the SAI@@@& is a measure to"ards becoming an increasingly a"are and conscientious cor%orate member of society.

Expansion Pro#ects

Chhattisgarh /stablishing a A +.(A steel %lant in %hases& a C +.(A cement %lant and a DH@@ +* ca%tive %o"er %lant "ith a total investment of over US G H billion (1s. ;@&@@@ crore . $rissa A DC.? +.(A integrated steel %lant and CH@@ +* ca%tive %o"er %lant in %hases& "ith a total investment of US G D@ billion (1s. ?@&@@@ crore . .he com%any is investing close to 1s J?&@@@ crore (USG D@ billion on Coal to -i9uid %ro'ect in 2rissa to %roduce an estimated I@&@@@ barrels of crude %er day (J.@ ++.(A using environment:friendly indirect coal li9uefaction technology.

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T,E PROJECT
Objecti-e) o# t$e Stu !&
.o study the need and im%ortance of "or#ing ca%ital. .o study the various sources of "or#ing ca%ital in ,.S.(.-. .o study the methods ado%ted by the organi<ation to maintain o%timum "or#ing ca%ital com%onents. .o study the various techni9ues used in managing the "or#ing ca%ital effectively such as ratio analysis. .o study relevancy of ratios in the financial management of the organi<ation. Analy<ing and com%arison of ratios of ,.S.(.- for the ; years. .o assess li9uidity %osition& long term solvency& o%erational efficiency and overall %rofitability of ,.S.(.-.

Scope o# t$e Stu !&

*or#ing ca%ital refers to the funds invested in the Current assets& i.e. Stoc#& Sundry Debtors& Cash& etc. A concern needs current assets to use its fi$ed assets %ro%erly. .he im%ortance of ade9uate "or#ing ca%ital in a com%any can never be em%hasi<ed. A concern needs fund for its day to day o%erations. Ade9uacy or inade9uacy of fund "ould determine the efficiency "ith "hich the business may be carried on. +anagement of "or#ing ca%ital is an essential tas# of the finance manager. He has to ensure that the amount of the "or#ing ca%ital available for the com%any is neither too large nor too small. A large amount of "or#ing ca%ital "ould mean that the com%any has idle funds. As funds have cost& the com%any has to %ay the interest on such funds. A survey conducted by the bureau of %ublic

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enter%rises on SA!- in the year C@@@:@D has revealed that a large amount of fund "as loc#ed in the "or#ing ca%ital& this results in over ca%itali<ation. O-er C"pit"+i@"tio% im%lies that a com%any has too large funds for its re9uirements& resulting lo" rate of return "hich im%lies lesser use of o%timal resources. '% er C"pit"+i@e means inade9uate "or#ing ca%ital. !t means firm runs under the ris# of insolvency. .his is because lesser "or#ing ca%ital leads to situation "here the firm may not be able to meet its liabilities.

Co++ectio% o# D"t"&
2* Prim"r! D"t"&
Data collected from financial statements of the com%anyM (rofit & -oss A8c& Balance Sheet& Annual 1e%ort& etc.

0* Seco% "r! D"t"&

1eferring boo#s& 'ournals and maga<ines !nformation collected from !nternet.

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Project Report

FN:C@DC:D;
PARTIC'LARS C%RRE&' (""E'": Debtors !0F/0.21!/S SH21.:./1+ -2A0S & ADFA0C/S CASH & BA05 BA-A0C/S TOTAL C'RRENT ASSETS C%RRE&' )I(BI)I'IE": *less+ -!AB!-!.!/S (12F!S!20S TOTAL C'RRENT LIA?ILITIES NET WORKING CAPITAL AMO'N T AMO'N T

D&;@H.A? ;&?AE.?; E&;?H.A@ DJE.CD DJ&;EC.DE H&HE?.?; J&DJJ.IA D@&IJ@.J@ ;A<<2*=>

FN:C@DD:DC
PARTIC'LARS C%RRE&' (""E'": Debtors AMO'NT AMO'N T

D&D?;.A@

1!

!0F/0.21!/S SH21.:./1+ -2A0S & ADFA0C/S CASH & BA05 BA-A0C/S TOTAL C'RRENT ASSETS C%RRE&' )I(BI)I'IE": *less+ -!AB!-!.!/S (12F!S!20S TOTAL C'RRENT LIA?ILITIES NET WORKING CAPITAL

C&AA;.J; H&JID.CI D?C.AC D@&III.HC J&AHH.JH J&AHH.JH A&IAC.AC ;A12<*>1

FN:C@D@:DD
PARTIC'LARS C%RRE&' (""E'": Debtors !0F/0.21!/S SH21.:./1+ -2A0S & ADFA0C/S CASH & BA05 BA-A0C/S TOTAL C'RRENT ASSETS C%RRE&' )I(BI)I'IE": *less+ -!AB!-!.!/S (12F!S!20S TOTAL C'RRENT LIA?ILITIES NET WORKING CAPITAL ;&EAD.AJ C&@?C.CC H&@C;.EH >2<*92 A?;.;C D&J;@.IC J&HJC.HH II.ID H&E;E.?A AMO'NT AMO'NT

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RATIO ANAL.SIS
Fi%"%ci"+ A%"+!)i)
Financial analysis is the %rocess of identifying the financial strengths and "ea#nesses of the firm and establishing relationshi% bet"een the items of the balance sheet and %rofit & loss account.

1#

R"tio A%"+!)i)
.he term 41atio6 refers to the numerical and 9uantitative relationshi% bet"een t"o items or variables. .his relationshi% can be e$%ressed as7 (ercentages Fractions (ro%ortion of numbers. 1atio analysis is defined as the systematic use of the ratio to inter%ret the financial statements so that the strengths and "ea#nesses of a firm& as "ell as its historical %erformance and current financial condition can be determined. 1atio reflects a 9uantitative relationshi% and hel%s to form a 9uantitative 'udgment. 1atio analysis is one of the techni9ues of financial analysis to evaluate the financial condition and %erformance of a business concern. Sim%ly& ratio means the com%arison of one figure to other relevant figure or figures. According to !ers," Ratio analysis of financial statements is a study of relationship among various financial factors in a business as disclosed by a single set of statements and a study of trend of these factors as shown in a series of statements."

Financial ratio analysis is the calculation and com%arison of ratios& "hich are derived from the information in a com%any>s financial statements. .he level and historical trends of these ratios can be used to ma#e inferences about a com%any>s financial condition& its o%erations and attractiveness as an investment. .he information derived from 1atio Analysis is used by7 .rade creditors& to identify the firm>s ability to meet their claims i.e. li9uidity %osition of the com%any.

1$

 !nvestors& to #no" about the %resent and future %rofitability of the com%any and its financial structure. +anagement& in every as%ect of the financial analysis. !t is the res%onsibility of the management to maintain sound financial condition in the com%any.

Step) i% R"tio A%"+!)i)

1atio Analysis mainly involves the follo"ing three ste%s7 .he first tas# of financial analysis is to select the information relevant to the decision under consideration from the statements and calculates a%%ro%riate ratios. .o com%are the calculated ratios "ith the ratios of the same firm relating to the %ast or future (%ro'ected or "ith the ratios of another firm of the same industry. !t facilitates in assessing success or failure of the firm. .hird ste% is inter%retation& dra"ing of inferences and re%ort "riting. Conclusions are dra"n after com%arison in the sha%e of re%ort or recommended courses of action.

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?")i) or )t"% "r ) o# comp"ri)o%

1atios are relative figures reflecting the relation bet"een variables. .hey enable analyst to dra" conclusions regarding financial o%erations. .he use of ratios as a tool of financial analysis involves the com%arison "ith related facts "hich is the basis of ratio analysis. .he basis of ratio analysis is of four ty%es7 (ast ratios7 calculated from %ast financial statements of the same firm. Com%etitor>s ratio7 ratios of some %rogressive and successful com%etitor firm at the same %oint of time. !ndustry ratio7 ratios of the industry to "hich the firm belongs. (ro'ected ratios7 ratios of the future develo%ed from the %ro'ected or %ro forma financial statements.

I%terpret"tio% o# R"tio)
.he inter%retation of ratios is an im%ortant factor. .he inherent limitations of ratio analysis should be #e%t in mind "hile inter%reting them. .he im%act of factors such as %rice level changes& change in accounting %olicies& "indo" dressing etc.& should also be #e%t in mind "hen attem%ting to inter%ret ratios. .he inter%retation of ratios can be made in the follo"ing "ays7 Single absolute ratio 3rou% of ratios Historical com%arison (ro'ected ratios !nter:firm com%arison.

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Gui e+i%e) or Prec"utio%) #or t$e u)e o# R"tio)

.he calculation of ratios may not be a difficult tas# but their use is not easy. Follo"ing guidelines or factors may be #e%t in mind "hile inter%reting various ratios7 A%%ro%riation of data used 2b'ective or %ur%ose of analysis Selection of ratios Use of standards Caliber of the analyst.

A -"%t"(e) "% ')e) o# R"tio A%"+!)i)

There are various groups of people who are interested in analysis of financial position of a company. They use the ratio analysis to work out a particular financial characteristic of the company in which they are interested. Ratio analysis helps the various groups in the following manner: To 5or4out t$e pro#it"bi+it!& Accounting ratio hel% to measure the %rofitability of the business by calculating the various %rofitability ratios. !t hel%s the management to #no" about the earning ca%acity of the business concern. !n this "ay %rofitability ratios sho" the actual %erformance of the business. To 5or4out t$e )o+-e%c!& *ith the hel% of solvency ratios& solvency of the com%any can be measured. .hese ratios sho" the relationshi% bet"een the liabilities and assets. !n case e$ternal liabilities are more than that of the assets of the com%any& it sho"s the unsound %osition of the business. !n this case the business has to ma#e it %ossible to re%ay its loans.

22

 To $e+p i% "%"+!)i) o# #i%"%ci"+ )t"teme%t& 1atio analysis hel% the outsiders 'ust li#e creditors& shareholders& debenture:holders& ban#ers to #no" about the %rofitability and ability of the com%any to %ay them interest and dividend etc. To $e+p i% comp"r"ti-e "%"+!)i) o# t$e per#orm"%ce& *ith the hel% of ratio analysis a com%any may have com%arative study of its %erformance to the %revious years. !n this "ay com%any comes to #no" about its "ea# %oints and is able to im%rove them. To )imp+i#! t$e "ccou%ti%( i%#orm"tio%& Accounting ratios are very useful as they briefly summari<e the result of detailed and com%licated com%utations. To 5or4out t$e oper"ti%( e##icie%c!& 1atio analysis hel%s to "or#out the o%erating efficiency of the com%any "ith the hel% of various turnover ratios. All turnover ratios are "or#ed out to evaluate the %erformance of the business in utili<ing the resources. To 5or4out )$ortBterm #i%"%ci"+ po)itio%& 1atio analysis hel%s to "or#out the short:term financial %osition of the com%any "ith the hel% of li9uidity ratios. !n case short:term financial %osition is not healthy efforts are made to im%rove it. ,e+p#u+ #or #orec")ti%( purpo)e)& Accounting ratios indicate the trend of the business. .his trend is useful for estimating future. *ith the hel% of %revious years> ratios& estimates for future can be made. !n this "ay these ratios %rovide the basis for %re%aring budgets and also determine future line of action.

)imitations o, Ratio (nal!sis

23

n spite of many advantages, there are certain limitations of the ratio analysis techni!ues and they should be kept in mind while using them in interpreting financial statements. The following are the main limitations of accounting ratios: Limite Comp"r"bi+it!& Different firms a%%ly different accounting %olicies. .herefore the ratio of one firm can not al"ays be com%ared "ith the ratio of other firm. Some firms may value the closing stoc# on -!F2 basis "hile some other firms may value on F!F2 basis. Similarly there may be difference in %roviding de%reciation of fi$ed assets or certain of %rovision for doubtful debts etc. I%"ppropri"te Re)u+t)& Accounting ratios are based on data dra"n from accounting records. !n case that data is correct& then only the ratios "ill be correct. E##ect o# Price Le-e+ C$"%(e)& (rice level changes often ma#e the com%arison of figures difficult over a %eriod of time. Changes in %rice affect the cost of %roduction& sales and also the value of assets. .herefore& it is necessary to ma#e %ro%er ad'ustments for %rice:level changes before any com%arison. Cu"+it"ti-e #"ctor) "re i(%ore & 1atio analysis is a techni9ue of 9uantitative analysis and thus& ignores 9ualitative factors& "hich may be im%ortant in decision ma#ing. For e$am%le& average collection %eriod may be e9ual to standard credit %eriod& but some debtors may be in the list of doubtful debts& "hich is not disclosed by ratio analysis. E##ect o# 5i% o5B re))i%(7 !n order to cover u% their bad financial %osition some com%anies resort to "indo" dressing. .hey may record the accounting data according to the convenience to sho" the financial %osition of the com%any in a better "ay. Mi)+e" i%( Re)u+t)7 !n the absence of absolute data& the result may be misleading. For e$am%le& the gross %rofit of t"o firms is C?B& "here the %rofit earned by one is 'ust 1s. ?&@@@ and sales are 1s. C@&@@@ and %rofit

24

earned by the other one is 1s. D@& @@&@@@ and sales are 1s. J@& @@&@@@. /ven the %rofitability of the t"o firms is same but the magnitude of their business is 9uite different.

25

C$"rt S$o5i%( 6"riou) R"tio) o# J*S*P*L* #or ; !e"r)

S*No *
2
a. b.

RATIO
LIC'IDIT. RATIOS
Current 1atio Ouic# 1atio

0120B2;
D.;C D.@A

0122B20
D.;I D.@;

0121B22
D.D? @.EJ

0
a. b. C.

LE6ERAGE RATIOS
Debt:/9uity 1atio !nterest Coverage 1atio Ca%ital /m%loyed to 0et *orth 1atio

@.IA D?.JD
D.IA

@.EE DC.?
D.EE

@.I; D@.H
D.I;

;
a. b. c. d. e.

PROFITA?ILIT. RATIOS
3ross (rofit 1atio 0et (rofit 1atio 2%erating (rofit 1atio 1eturn on !nvestment (12! 1eturn on /9uity (12/

CE.@CB C@.J@B ;J.H;B DC.AAB CC.D@B

;E.EJB CA.DAB J?.E@B DJ.EAB CH.EHB

JI.DHB ;D.A;B ?@.EAB CD.I;B ;?.;EB

3
a. b. c. d. e.

ACTI6IT.8T'RNO6ER RATIOS
Inventory %urnover &atio 'et assets %urnover &atio %otal assets %urnover &atio (urrent assets %urnover &atio )orkin* (a+ital %urnover &atio
!.1# times 0.!4 times 0.5" times 1.32 times 1#.11 times !.!! times 0.55 times 0.4$ times 1.2$ times 21.54 times #." times 0.!3 times 0.!1 times 1.!" times ".##times

2!

C"+cu+"tio% o# r"tio) o# J*S*P*L* "% A%"+!)i) b")e o% t$em&

2* Curre%t R"tio& Curre%t R"tio D Curre%t A))et) 8 Curre%t Li"bi+itie)* P"rticu+"r) Curre%t A))et) Curre%t Li"bi+itie) Curre%t R"tio 0120B2; R)* Cr*F 23;>0*2> 21:31*3 2*;0&2 Ei% 0122B20 Ei% R)* Cr*F 21:::*90 =:=0*=0 2*;:&2 0121B22Ei% R)* Cr*F 9A>;>*<= 9A10;*>9 2*2<&2

Current Ratio
1.4 1.3 1.2 1.1 1 2010-11 2011-12 2012-13
Current Ratio

A%"+!)i)& .he Current 1atio of a firm measures its short term solvency. Higher the ratio better is the firm>s ability to meet its short term obligations. A Current 1atio of C7D is considered to be ideal (ban#s consider this ratio to be favorable till D.;;7D . From the above table and gra%h& it can be inferred that li9uidity of ,.S.(.-. has deteriorated from C@DD to C@DC as the Current 1atio has gone do"n from D.;I7D to D.;C7D (although it is still favorable . !t means that its ability to meet its

2"

current obligations (liabilities has gone do"n. .he reason "hy this ratio decreases mainly is more than %ro%ortionate decrease in Current Assets "hen com%ared to Current -iabilities. !t may be due to initiation of ne" %ro'ects. C. Cuic4 R"tio& Cuic4 R"tio D Curre%t A))et) G I%-e%torie) 8 Curre%t Li"bi+itie)* P"rticu+"r) Curre%t A))et) G I%-e%torie) Curre%t Li"bi+itie) Cuic4 R"tio 0120B2; R)* Cr*F 21:2; 21:31*3 2*1=&2 Ei% 0122B20 R)* Cr*F :22< =:=0*=0 2*1;&2 Ei% 0121B22Ei% R)* Cr*F 5508.75 9A10;*>9 1*>3&2

Quick Ratio
1.1 1.05 1 0.95 0.9 0.85 2010-11 2011-12 2012-13
Quick Ratio

A%"+!)i)& Ouic# 1atio re%resents a firm>s ability to meet its current obligations "ithin a very short %eriod of time& i.e. "ithin one month. A Ouic# 1atio of D7D is considered to be ideal. Ouic# 1atio of ,.S.(.-. in the year C@DC:D; is D.DC7D "hich sho"s that the com%any>s financial %osition is 9uite strong. .he com%any is ca%able of meeting

2#

its current obligations "ithin a short %eriod of time. .he ratio has gone u% from D.@;7D in C@DD:DC to D.@A in C@DC:D;.

;* Debt GEHuit! R"tio& DebtBEHuit! R"tio D Lo%( term ebt 8 S$"re$o+ er)/ #u% ) EeHuit!F* P"rticu+"r) Lo%( term ebt EHuit! DebtBEHuit! R"tio 0120B2; R)* Cr*F 2<=3> 2:222 1*:=&2 Ei% 0122B20 R)* Cr*F 2;>== 23221 1*>>&2 Ei% 0121B22Ei% R)* Cr*F :913 2132= 1*:0&2

D/ E Ratio
1.5 1 0.5 0 2010-11 2011-12 2012-13
D/E Ratio

A%"+!)i)& .his ratio offers one of the best %ictures of a com%any>s leverage. .he higher the figure the higher is the leverage the com%any en'oys. !t is a relationshi% describing the lenders> contribution for each ru%ee of the o"ners> contribution. !t reflects the relative claim of the creditors and o"ners against the assets of the firm. Alternatively& it also indicates the relative %ro%ortion of the debt and e9uity in financing the assets of the firm. .he Debt:/9uity 1atio of ,.S.(.-. has sho"n a decreasing trend over the years sho"ing that the com%any has focused more on financing its gro"th "ith e9uity as com%ared to debt. .he com%any has a better su%%ort from the shareholders. A ratio

2$

of @.IC7D sho"s that the claim of the o"ners is greater than those of the creditors. From the %oint of vie" of creditors& it re%resents a satisfactory situation since a high %ro%ortion of e9uity %rovides a larger margin of safety to them.

3*C"pit"+ Emp+o!e to Net Wort$ R"tio& C 8 N R"tio D C"pit"+ Emp+o!e 8 Net Wort$* P"rticu+"r) C"pit"+ Emp+o!e EDebt I Net Wort$F Net Wort$ C 8 N R"tio 0120B2; R)* Cr*F ;;:91 2:222 2*:=&2 Ei% 0122B20 R)* Cr*F 0:1:= 23221 2*>>&2 Ei% 0121B22Ei% R)* Cr*F 2>102 2132= 2*:;&2

C/ N Ratio
2.05 2 1.95 1.9 1.85 1.8 1.75 2010-11 2011-12 2012-13
C/N Ratio

A%"+!)i)& .his ratio sho"s the amount of funds being contributed together by lenders and o"ners for each ru%ee of the o"ners> contribution. !t is an alternative "ay of e$%ressing the basic relationshi% bet"een debt and e9uity.

30

.he ratio of D.IA times sho"s that the net "orth of the com%any is a%%ro$imately half of the total investment in the com%any and hence com%any has very sound financial %osition. *e can also say that o"ners finance around ?@B of the total investment in the com%any. <*I%tere)t Co-er"(e R"tio& I%tere)t Co-er"(e R"tio D E?IT 8 I%tere)t* P"rticu+"r) E?IT I%tere)t I%tere)t Co-er"(e R"tio D?.J7D 0120B2; Ei% R)* Cr*F <<3> ;91 0122B20 R)* Cr*F <3;> 3;3*> DC.?7D Ei% 0121B22Ei% R)* Cr*F <1<= <10*< D@.@H7D

I.C.Ratio
20 15 10 5 0 2010-11 2011-12 2012-13
I.C.R atio

A%"+!)i)& .his ratio is a measurement of the number of times a com%any could ma#e its interest %ayments "ith its earnings before interest and ta$es. -o"er the ratio& higher is the com%any>s debt burden. .he ratio of D?.J7D is high and hence the com%any has very sound financial %osition. !t has no tension of %aying interests over its loans as it creates much more "ealth from the debts than the interests to be %aid. Also& this ratio is sho"ing an increasing

31

trend over the years "hich de%ict the strengthening of the financial %osition of the com%any and continuous im%rovement in its o%erating efficiency.

9*Gro)) Pro#it M"r(i% & Gro)) Pro#it M"r(i% D EGro)) Pro#it 8 Net S"+e)F J211* P"rticu+"r) Gro)) Pro#it Net S"+e) Gro)) Pro#it M"r(i% 0120B2; Ei% R)* Cr*F <=3=*; 2>929*39 0>*10K 0122B20 Ei% R)* Cr*F =:;< 2;>>:*3 ;>*>3K 0121B22Ei% R)* Cr*F 9=30 2292>*<; 3:*29K

GrossProfit Margin
60 50 40 30 20 10 0 2010-11 2011-12 2012-13
ro!! "ro#it $ar%in

A%"+!)i)& .he 3ross (rofit +argin reflects the efficiency "ith "hich management %roduces each unit of %roduct. .his ratio indicates the average s%read bet"een the cost of goods sold and sales revenue. A high 3( ratio is a sign of good management as it im%lies that the cost of %roduction of the firm is relatively lo" and vice:versa. .he 3( ratio of ,.S.(.-. has gone since C@D@:DD "hich is due to considerable increase in its cost of %roduction& mainly cost of ra" materials (the main reason of

32

"hich can be inflation . !n s%ite of this decrease& the ratio is still high and satisfactory. .his sho"s the firm>s efficiency of %roduction. !t re%resents that ,.S.(.-. has been able to ma#e good %rofits although not as high as %revious years.

=*Net Pro#it M"r(i%& Net Pro#it M"r(i% D EPro#it "#ter t"7 EPATF 8 Net S"+e)F J 211* P"rticu+"r) PAT Net S"+e) Net Pro#it M"r(i% 0120B2; Ei% R)* Cr*F 3110*09 2>929*39 01*31K 0122B20 Ei% R)* Cr*F ;:13*12 2;>>:*3 0=*2=K 0121B22Ei% R)* Cr*F ;9:=*12 2292>*<; ;2*=;K

Net Profit Margin

40 30 20 10 0 2010-11 2011-12 2012-13
Net "ro#it $ar%in

A%"+!)i)& .his ratio establishes a relationshi% bet"een net %rofit and net sales and indicates management>s efficiency in manufacturing& administering and selling the %roducts. .he 0( 1atio of ,S(- in C@DC:D;&i.e.& C@.J@B is 9uite im%ressive and sho"s that the com%any is %erforming "ell and has high level of efficiency. .he com%any is able to achieve satisfactory return on shareholders> funds. Also& the firm has the

33

ca%acity to "ithstand adverse economic conditions. (A. is sho"ing an do"n"ard trend "hich is not good.

:*Oper"ti%( Pro#it M"r(i%& Oper"ti%( Pro#it M"r(i% D EOper"ti%( Pro#it 8 Net S"+e)F J 211* P"rticu+"r) Oper"ti%( Pro#it Net S"+e) Oper"ti%( Pro#it M"r(i% 0120B2; R)* Cr*F 9=>;*2= 2>929*39 ;3*9;K Ei% 0122B20 R)* Cr*F 930<*9 2;>>:*3 3<*>1K Ei% 0121B22Ei% R)* Cr*F <>00*9< 2292>*<; <1*>=K

Operating Profit Margin

60 40 20 0 2010-11 2011-12 2012-13
&'eratin% "ro#it $ar%in

A%"+!)i)& .his ratio indicates the earning ca%acity of the concern on the basis of its business o%erations and not from earnings from other sources. !t sho"s "hether the business is able to stand in the mar#et or not. !t ensures ade9uate coverage for o%erating e$%ense of the firm and sufficient return to the o"ners of the business. Although 2%erating (rofit of ,S(- increased over the years& the relative increase in o%erating %rofit and net sales of C@@E:D@ as com%ared to C@@I:@E "ere not in %ro%ortion. Because of this& a decrease in o%erating %rofit margin can be observed. But in s%ite of this& the ratio in C@@E:D@ is good (;J.JAB "hich re%resents the

34

firm>s good earning ca%acity solely from its business o%erations leaving aside earnings from other sources.

>*Retur% o% I%-e)tme%t EROIF& ROI D EPAT I I%tere)t 8 Net A))et)F J 211* P"rticu+"r) PAT I I%tere)t Net A))et) ROI 0120B2; R)* Cr*F 3;90*; ;329=*23 20*==K Ei% 0122B20 R)* Cr*F 30;:*:> 0:;01*;3 23*>=K Ei% 0121B22Ei% R)* Cr*F 32:>*39 2>2:9*>: 02*:;K

ROI
25 20 15 10 5 0 2010-11 2011-12 2012-13

R&I

A%"+!)i)& 1eturn on investment or 1eturn on ca%ital em%loyed measures the %rofit "hich a firm earns on investing a unit of ca%ital. .he %rofit being the net result of all o%erations& the return on ca%ital e$%resses all efficiencies and inefficiencies of a business. .o shareholders it indicates ho" much their ca%ital is earning and to the management as to ho" efficiently it has been "or#ing. .his ratio influences the mar#et %rice of the shares. .he higher the ratio& the better it is.

35

.he 12! of DC.AA B signifies that ,S(- is getting good return on its investments. .he consistency in good value of this ratio is sho"ing that the com%any>s #ey decision ma#ers are doing a great 'ob.

21* Retur% o% EHuit! EROEF& ROE D EPAT 8 EHuit! S$"re$o+ er)/ #u% )F J 211* P"rticu+"r) PAT EHuit! S$"re$o+ er)/ #u% ) ROE 0120B2; R)* Cr*F 3A110*09 2:A222*21 00*21K Ei% 0122B20 R)* Cr*F ;A:13*12 23A221*;1 09*>9K Ei% 0121B22Ei% R)* Cr*F ;A9:=*12 21A329*=: ;<*;>K

ROE
40 30 20 10 0 2010-11 2011-12 2012-13
R&E

A%"+!)i)& 1eturn on /9uity 'udges the %rofitability from the %oint of vie" of e9uity shareholders. .his ratio has great interest to e9uity shareholders. .he return on e9uity measures the %rofitability of e9uity funds invested in the firm. .he investors favor the com%any "ith higher 12/.

3!

.he 12/ of CC.D@ B for C@DC:D; is 9uite good and it sho"s that the com%any is utili<ing the e9uity funds in a good "ay to generate more %rofits for its e9uity share holders. Although the ratio has gone do"n in C@DC:D; as com%ared to C@DD:DC& it is still favorable and ade9uate for generating ca%ital.

22* I%-e%tor! Tur%o-er& I%-e%tor! Tur%o-er D Net S"+e) 8 A-er"(e I%-e%tor!* P"rticu+"r) Net S"+e) A-er"(e I%-e%tor! 0120B2; Ei% R)* Cr*F 2>929*39 ;A2=9*3: 0122B20 R)* Cr*F 2;>>:*3 0A210*2; 9*99 time) << "!) Ei% 0121B22Ei% R)* Cr*F 2292>*<; 2A;;<*<< :*= time) 30 "!)

I%-e%tor! Tur%o-er 9*2: time) D"!) o# I%-e%tor! ,o+ i%() <> "!) E;9< 8 I%-e%tor! Tur%o-erF

Inventory Turnover
10 5 0 2010-11 2011-12 2012-13
In(entor) *urno(er

A%"+!)i)& .he !nventory .urnover sho"s ho" ra%idly the inventory is turning into receivable through sales. 3enerally& a high inventory turnover is indicative of good inventory management and in turn higher %rofits for the com%any. A lo" value im%lies e$cessive inventory levels than "arranted by %roduction and sales activity& or a slo" moving or obsolete inventory.

3"

,S(->s efficiency in turning its inventories is continuously im%roving& the value for C@D@:DD being I.A times. .he com%any has been able to sell its stoc# or convert its inventories into receivables I.A times a year "hich can be considered to be moderate de%ending on the nature of manufacturing sector. Also& the com%any>s utili<ation of inventories in generating sales is satisfactory and the yearly holding of all ty%es of inventories is decreasing.

20* Net A))et) Tur%o-er& Net A))et) Tur%o-er D Net S"+e) 8 Net A))et) EC"pit"+ Emp+o!e F* P"rticu+"r) Net S"+e) Net A))et) Net A))et) Tur%o-er 0120B2; Ei% R)* Cr*F 2>929*39 ;192< 1*93 time) 0122B20 R)* Cr*F 2;>>:*3 0<;13 1*<< time) Ei% 0121B22Ei% R)* Cr*F 2292>*<; 2:0=2 1*9; time)

Net ssetsTurnover
0.66 0.64 0.62 0.6 0.58 0.56 0.54 0.52 0.5 2010-11 2011-12 2012-13
Net +!!et! *urno(er

3#

A%"+!)i)& A firm>s ability to %roduce a large volume of sales for a given amount of net assets is the most im%ortant as%ect of its o%erating %erformance. Unutili<ed or under utili<ed assets increase the firm>s need for costly financing. .he net asset turnover of @.HD times im%lies that ,S(- is %roducing 1s @.HD of sales for one ru%ee of ca%ital em%loyed in net assets. !t can be observed that the com%any>s net assets turnover is im%roving over the years "hich means its efficiency and o%erating %erformance is im%roving.

2;* Tot"+ A))et) Tur%o-er& Tot"+ A))et) Tur%o-er D Net S"+e) 8 Tot"+ A))et)* P"rticu+"r) Net S"+e) Tot"+ A))et) Tot"+ A))et) Tur%o-er 0120B2; Ei% R)* Cr*F 2>929*39 ;329= 1*<= time) 0122B20 R)* Cr*F 2;>>:*3 0:;01 1*3> time) Ei% 0121B22Ei% R)* Cr*F 2292>*<; 2>2:= 1*92 time)

Tota! ssetsTurnover
0.8 0.6 0.4 0.2 0 2010-11 2011-12 2012-13
*ot a, +!!et! *urno(er

A%"+!)i)& .he .otal assets turnover ratio sho"s the firm>s ability in generating sales from all financial resources committed to total assets.

3$

.he total asset turnover of @.?A times im%lies that ,S(- generates a sale of 1s @.?A for one ru%ee investment in fi$ed assets and current assets together. A consistency can be observed in this ratio over the years& "hich is a good thing.

23* Curre%t A))et) Tur%o-er& Curre%t A))et) Tur%o-er D Net S"+e) 8 Curre%t A))et)* P"rticu+"r) Net S"+e) Curre%t A))et) Curre%t A))et) Tur%o-er 0120B2; Ei% R)* Cr*F 2>929*39 23;>0*2> 2*;0 time) 0122B20 R)* Cr*F 2;>>:*3 21:::*90 2*0> time) Ei% 0121B22Ei% R)* Cr*F 2292>*<; 9A>;>*<= 2*9= time)

Current ssetsTurnover
2 1.5 1 0.5 0 2010-11 2011-12 2012-13
Current +!!et! *urno(er

A%"+!)i)& Current Assets .urnover of ,S(- is sho"ing a decline over the years. So& it can be inferred that the s%eed "ith "hich the firm converts its current assets into sales is declining. .his means that the efficiency "ith "hich the firm utili<es its current assets is decreasing. So this should be loo#ed u%on by the management.

40

2<* Wor4i%( C"pit"+ Tur%o-er& Wor4i%( C"pit"+ Tur%o-er D Net S"+e) 8 Net Wor4i%( C"pit"+* P"rticu+"r) Net S"+e) Net Wor4i%( C"pit"+ Wor4i%( C"pit"+ Tur%o-er 0120B2; R)* Cr*F 2>929*39 ;<<2*: 2:*22 time) Ei% 0122B20 R)* Cr*F 2;>>:*3 ;12<*> 02*<3 time) Ei% 0121B22Ei% R)* Cr*F 2292>*<; >2<*92 =*:: time)

"orkingCapita! Turnover
25 20 15 10 5 0 2010-11 2011-12 2012-13

-orkin% Ca'ita, *urno(er

A%"+!)i)& !t can be seen that the s%eed "ith "hich the firm is converting its "or#ing ca%ital or net current assets into sales has increased in C@DD:DC as com%ared to C@D@:DD. .he case "as o%%osite for current assets. .his means that the efficiency of the firm to utili<e its "or#ing ca%ital is more than its efficiency to utili<e its current assets. .he return of DI.DD times is a re%resentative of com%any>s good %erformance. .he com%any is generating DI.DD times of turnover from its "or#ing ca%ital annually. .his means that the com%any manages its "or#ing ca%ital very efficiently.

41

CONCL'SION
By studying the financial statements& "or#ing ca%ital schedules& ratios and other available facts and figures of ,S(-& ! made certain conclusions "hich are as follo"s7 ,S(- has been successful in maintaining sufficient "or#ing ca%ital during the %ast. .here "as tremendous increase in "or#ing ca%ital value in C@DD: DC as com%ared to the %revious year (CCEB . .here "as also increase in C@DC:D; ad ,S(- "as able to maintain the high value of ;??D.I in C@DC:D; "hich is very good and sho"s com%any>s efficient "or#ing ca%ital management.

Current Assets of ,S(- has been increasing significantly over the years. From a value of HE;E.?A Cr in C@D@:DD it reached D@III.HC Cr in C@DD:DC and finally it attained the value of DJ;EC.DE Cr in C@DC:D; (;C.DAB gro"th . .his is really a%%reciable.

42

 !n s%ite of such high increase in current assets& "or#ing ca%ital increased in last t"o years but not to the e$tent as com%ared to current assets& Since there "as a %ro%ortionate gro"th in current liabilities of the com%any.

.he li9uidity ratios have sho"n a increase.But Current ratio is still belo" the ideal value (D.JE7D in C@DC:D;. .his has led to the conclusion that the li9uidity of the com%any has deteriorated.

Decrease in Debt:/9uity ratio over the years is a re%resentative of higher focus of the com%any on financing its re9uirements "ith e9uity as com%ared to debt.

Decrease in 3ross %rofit& 0et %rofit and 2%erating %rofit margin ratios sho" that the increase in %rofits is not u% to the mar# "ith the increase in sales. .his is due to increase in e$%enditure along "ith increase in sales.

.he value of 12! is also sho"ing that the investment decisions made by the management "ere not good fetching better returns for the com%any.

.he value of 12/ is sho"ing that the com%any is not able to utili<e its e9uity funds in an efficient "ay to bring good %rofits for e9uity shareholders>.

.he efficiency of the com%any to utili<e its "or#ing ca%ital is more than its efficiency to utili<e its current assets.

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 *or#ing ca%ital turnover is DI.DD times sho"ing that the com%any manages its "or#ing ca%ital very efficiently.

,S(- has been #ee%ing sufficient "or#ing ca%ital "ith it. !t %rovides a strong financial base for the com%any. !t has been rising in relations to the gro"th of the com%any. .he "or#ing ca%ital investment decisions made by the com%any have also hel%ed it to gain a strong financial status in a mar#et "here strong and "ell established mar#et leaders li#e .A.A Steel are its com%etitors. !t "ill not be "rong to conclude "ith saying that the com%any>s financial management is highly a%%reciable and it is assumed that this "ould hel% the com%any to continue its race on the %ath of continuous success.

LIMITATIONS

*hile carrying out my study& ! came across certain limitations "hich the com%any might face. .hese limitations are7

44

 .here is very high level of com%etition in the mar#et as ,S(- has strong mar#et leaders li#e .A.A Steel and SA!- as its com%etitors. So& carrying out business %rocesses in such a "ay so as to increase the %rofit margins of the com%any and ma#e its hold on the mar#et stronger is the %rime challenge for ,S(-.

(ro%er o%eration of the *or#ing Ca%ital Cycle is very im%ortant for %ro%er functioning of a business. .herefore& if anything goes "rong "ith any ste% of the "or#ing ca%ital cycle of ,S(- and this cycle is interru%ted& business "ill be ham%ered drastically.

As ,S(- has become one of the biggest industries today "ith a big and continuously o%erating manufacturing unit& it needs to maintain a sufficient amount of "or#ing ca%ital "ith it al"ays to meet its current and emergency needs and to %revent any adverse situation.

RECOMMENDATIONS

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Based on the study and the conclusions dra"n& ! "ould li#e to %ut for"ard some recommendations "hich are as follo"s7

.he com%any should either try to bring about an increase in its current assets or a decrease in its current liabilities to %ull u% its current ratio near the ideal value. .his "ill result in an increase in the li9uidity of the firm and "ill ma#e its %osition safer.

+anagement should ta#e ste%s to reduce the e$%enditure or cost of %roduction in order to increase %rofit margins. For this& com%any should go for better 9uality ra" materials and im%roved technology. ,S(- is already %lanning to ado%t 3as Based D1! "hich "ill hel% to reduce the cost of %roduction of steel significantly.

4!

?I?LIOGRAP,.

Annual 1e%ort of ,S(- P C@DC:D;.

Annual 1e%ort of ,S(- P C@DD:DC.

Annual 1e%ort of ,S(- P C@D@:DD.

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