Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
No.
Title Page I
Declaration II
Certificate From Company III
Certificate From Guide IV
Acknowledgement V
1 WORKING CAPITAL
MANAGEMENT
I. Introduction
II. Objectives Of The Study
III.Need And Importance Of Working Capital
IV. Gross W.C And Net W.C
V. Types Of Working Capital
VI. Determination Of Working Capital
VII. Scope & Limitations
2 RESEARCH METHODOLOGY
I. Introduction
II. Type of Research Methodology
3 INTRODUCTION OF COMPANY
I. Company Overview
II. Industrial Overview
III.Literature Overview
4 DATA ANALYSIS
1 Working Capital Size And Analysis
1.1.1 Working Capital Level
1.1.2 Working Capital Trend Analysis
1.1.3 Current Asset Analysis
1.1.4 Current Liabilities Analysis
1.1.5 Change In Working Capital
1.1.6 Operating Cycle
1.1.7 Working Capital Leverage
2 Working Capital Ratio Analysis
2.1.1 Introduction
2.1.2 Role Of Ratio Analysis
2.1.3 Limitation Of Ratio Analysis
2.1.4 Classification Of Ratio
2.1.5 Efficiency Of Ratio
2.1.6 Liquidity Of Ratio
3 Working Capital Component
3.1.1 Receivable Management
3.1.2 Inventory Management
3.1.3 Cash Management
4 Working Capital Finance & Estimation
4.1.1 Introduction
4.1.2 Source Of Working Capital Finance
4.1.3 Working Capital Loan & Interest
4.1.4 Estimation Of Working Capital
5 FINDING, RECOMMENDATION,
CONCLUSION
ANNEXURE
QUESTIONNAIRE
BIBLIOGRAPHY
Total no. of page content in this project
CHAPTER I
1) Introduction
2) Need of working capital
3) Gross W.C. and Net W.C.
4) Types of working capital
5) Determinants of working Capital
1.1) Introduction
Definition :
According to Guttmann & Dougall-
“Excess of current assets over current liabilities”.
6) Profitability
The profitability of the business may be vary in each and every individual case,
which is in turn its depend on numerous factors, but high profitability will
positively reduce the strain on working capital requirement of the company,
because the profits to the extend that they earned in cash may be used to meet the
working capital requirement of the company.
7) Operating efficiency
If the business is carried on more efficiently, it can operate in profits which may
reduce the strain on working capital; it may ensure proper utilization of existing
resources by eliminating the waste and improved coordination etc.
RATIO ANALYSIS
Introduction of Ratio Analysis
Alexander Wall made the presentation of an elaborate system of ratio analysis in
1919. He criticized the bankers for their lopsided development owing to their
decisions regarding the grant of credit on current ratio alone. Alexander Wall, one
of the foremost proponents of ratio analysis, pointed out that in order to get a
complete picture, it is necessary to consider the other relationship in the financial
statement than current ratio. Since then, more & more types of ratios have been
developed and are used for analysis and interpretation point of view.
Ratio analysis is the one of the powerful tools of the financial analysis. “A ratio
can be defined as the indicated quotient of mathematical expression” and as “the
relationship between two or more things”.
1. False results: - Ratios are based upon the financial statement. In case,
financial statements are incorrect or the data upon which ratios are based
is incorrect, ratios calculated will also be false and defective. The
accounting system itself suffers from many inherent weaknesses, so the
ratios based upon it cannot be said to be always reliable.
For instance, if inventory value is inflated, not only will one have an
exaggerated view of profitability of the concern, but also of it financial position.
Also the ratios worked out on its basis are to be relied upon.
2. Variation in accounting policies: - Financial results of two enterprises
are comparable with the help of accounting ratios only if they follow the same
accounting policy or bases, comparison will become difficult if they two concerns
follow different policies for providing depreciation, valuation of stock etc.
Similarly, if the enterprises are following different standards and methods, an
analysis by reference to the ratio would be misleading. The ratio of the one firm
cannot always be compared with the performance of other firm, if they do not
adopt uniform accounting policies.
3. Price level changes affect ratios: - The third major limitation of the ratio
analysis, as a tool of financial analysis is associated with price level change. This,
in fact, is a weakness of the Traditional Financial Statements, which are based on
Historical cost. As a result, ratio analysis will not yield strictly comparable and,
therefore, dependable results.
To illustrate, there are two firms, which have identical rates of return on
Investment, say, 15%. But one of these had acquired its Fixed Assets when prices
were relatively low while the other one had purchased them when prices were
high. The result will be that the book value of fixed assets of the former firm
would be lower, while that of the later will be high. From the point of profitability
the Return on Investment of the firm with lower book value are over-stated.
Even when the ratios are worked out correctly, it should be remembered that they
can at best be used like a Doctor uses symptoms – indication that something is
wrong somewhere. Just as the Doctor will try to get to the real reason, in the same
manner the analyst should try to identify the real factor leading to the present state
of affairs. Suppose the ratio of Gross Profit to Sale is low. The reason may be poor
sales, bad purchasing, defective pricing policy, wastage and losses etc. Ratio thus
point out the area that needs investigation –this is only a tool in the hand of the
person trying to get at the truth.
A. Liquidity Ratio,
D. Profitability Ratio.
Liquidity Ratios
To study the liquidity position of the concern in order to highlight the relative
strength of the concern in meeting their current obligation liquidity ratios are
calculated. These ratios are used to measure the enterprise’s ability to meet
short-term obligations. These ratios compare short-term obligation to short-
term (or current) resources available to meet these obligations. From these
ratios, much insight can be obtained about the present cash solvency of the
enterprise and the enterprises ability to remain solvent in the event of
adversity. A proper balance between the two contradictory requirements, i.e.
Liquidity and Profitability is required for efficient financial management. The
important liquidity ratios are: -
1. Current Ratio: - This is the most widely used ratio. It is the ratio of Current
Assets to Current Liabilities. It shows an enterprise ability to cover its current
liabilities with its current assets. It is expressed as follows: -
Current Assets
Current Ratio =
Current Liabilities
Generally, Current Ratio of 2:1 is considered ideal for any concern i.e. current
assets should be twice the amount of current liabilities. If the current assets are two
times the current liabilities, there will be no adverse effect on business operations
when current liabilities are paid off. If the ratio is less than 2 difficulties may be
experienced in the payment of current liabilities and day-to-day operations of the
business may suffer. If the ratio is higher than 2, it is very comfortable for the
creditors but, for the concern, it indicates accumulation of idle funds and a lack of
enthusiasm for work. However this standard of 2:1 is only quantitative and may
differ from industry to industry.
2. Liquid or Acid Test or Quick Ratio: - This is the Ratio of Liquid Assets
to Liquid Liabilities. It shows an enterprises ability to meet current liabilities with
its most liquid (quick assets). It is expressed as follows: -
Quick Assets
Liquid Ratio =
Current Liabilities
The quick ratio of 1:1 ratio is considered ideal ratio for a concern because it is wise
to keep the liquid assets at least equal to the liquid liabilities at all time. Liquid
assets are those assets, which can be readily converted into cash and will include
cash balance, bills receivable, sundry debtors, and short-term investments.
Inventories and prepaid expenses are not included in liquid assets because the
emphasis is on the ready availability of cash in case of liquid assets. Liquid
liabilities include all items of current liabilities except bank overdraft. This ratio is
the “acid test” of a concerns financial soundness.
Current liabilities
Or
The desirable norm for this ratio is 1:2, i.e., Rs. 1 worth of absolute liquid assets
are sufficient for Rs 2 worth of current liabilities. Even though the ratio gives a
more meaningful measure of liquidity, it is not in much use because the idea of
keeping large cash balance or near cash items has long since been disapproved.
Cash balance yields no return and as such is barren.
4. Cash Ratio: - Since cash is the most liquid assets, a financial analyst may
examine cash ratio and its equivalent to current liabilities. Trade investment or
marketable securities are equivalent of cash; therefore, they may be included in the
computation of cash ratio:
Inventory
Working capital is the excess of current assets over current liabilities. Increase in
volume of sales requires increase in size of inventory, but from a sound financial
point of view, inventory should not exceed amount of working capital. The
desirable ratio is 1:1.
1. Debt-Equity Ratio: - This ratio relates debts to equity or owners funds. Here,
Equity is used in a broader sense as net worth (i.e., capital + retained earnings)
while debt normally means long-term interest bearing loans.
Debt (Long-term) Total Debt Outsider fund
Debt-Equity Ratio = Or Or
2. Proprietary Ratio: -This ratio indicates the relationship between proprietary fund
and total assets. The Proprietary funds include Equity Share Capital, Preference
Share Capital, Revenue, Capital Reserves and accumulated surplus. Total Assets
include Fixed, Current and Fictitious assets.
This ratio is very important for the creditors, because they know the share of
Proprietors Funds in the total assets and satisfy how far their loan is secured. The
higher the ratio, the more safety will be to the creditor. The ratio also shows the
general financial position of the company also. 50% is supposed to be the
satisfactory Proprietary Ratio for the creditors. Less than 50% is the sign of risk for
creditors. The following formula is used to calculate Proprietary Ratio: -
Proprietary Ratio = Or
3. Debt Ratio: - Several debt ratios may be used to analyze the long-term solvency
of an enterprise. The enterprise may be interested in knowing the proportion of the
interest bearing debt (also called funded debt) in the capital structure. It may,
therefore, compute debt ratio by dividing total debt by capital employed or net
assets.
Total Debt
Debt Ratio =
4. Capital Employed to Net Worth Ratio: - There is yet another alternative way of
expressing the basic relationship between debt and equity. One may want to know,
how much funds are being contributed together by lenders and owners for each
rupee of the owners contribution. This can be found out by calculating the ratio of
capital employed or net assets or net worth.
Capital Employed
Net Worth
Capital Employed
The higher the ratio, the greater are the profits. A low capital turnover ratio would
mean that sufficient sales are not being made and profits are lower.
2. Sales to Fixed Assets (or Fixed Assets turnover) Ratio: - This ratio measures
the efficiency of the assets use. The efficient use of assets will generate greater
sales per rupee invested in all the assets of a concern. The inefficient use of the
assets will result in low sales volume coupled with higher overhead changes and
under utilization of the available capacity. Hence the management must strive for
using total resources at optimum level, to achieve higher ratio. This ratio expresses
the number of times fixed assets are being turned over in a stated period. It is
calculated as under:
Sales
3. Sales to working capital (or Working Capital Turnover) Ratio: - This ratio is
shows the number of times working capital is turnover in a stated period. It is
calculated as below: -
Sales
The higher is the ratio, the lower is the investment in working capital and the
greater are the profits. However, a very high turnover of working capital is a sign
of overtrading which may put the concern into financial difficulties. On the other
hand, a low working capital turnover ratio indicates that working capital is not
efficiently utilized.
4. Total Assets Turnover Ratio: - This ratio is calculated by dividing the net sales
by the value of total assets.
Net Sales
Total Assets
A high ratio is an indicator of overtrading of total assets while a low ratio reveals
idle capacity. The traditional standard for this ratio is two times.
5. Inventory or Stock Turnover Ratio: - This ratio indicates the number of times
inventory is rotated during the year. It is calculated as follows:
Cost of good sold
Average Inventory
If only closing inventory data is given and opening inventory data is not available
then the formula will be as follows:
Cost of Good Sold
Inventory Turnover =
Closing Inventory
However, this formula should be applied only when the opening inventory figures
are not available.
The inventory turnover ratio measures how quickly stock is sold. It is really a test
of stock (inventory) management. In general high inventory turnover ratio is good.
Yet a very high inventory turnover ratio requires careful analysis. Because very
high ratio will lower investment in inventory, and lower investment in inventory is
considered to be very dangerous. Similarly, very low inventory turnover is also
dangerous as there will be very heavy amount invested in inventory.
6. Receivable (or Debtors) Turnover Ratio: - Receivable turnover ratio is the
comparison of sales with uncollected amounts from debtors or customers to whom
goods were sold on credit basis. If the enterprise is having a large amount of
debtors, it will have a low ratio. Conversely, with prompt collection from debtors,
the debtor’s balance will be low and the debtors’ turnover ratio will be high. In
other words, the debtors or receivable turnover is the test of liquidity of a business
enterprise.
Credit Sales
If some information, i.e. figures for Credit sales, opening figures of debtors or bills
receivable etc., is not available them the following formula can be used:
Total Sales
It should be noted that the first formula is superior to second formula as the
question of speed of conversion of sales into cash arises only in case of credit
sales.
7. Creditors Turnover (or Accounts Payable) Ratio: - This ratio gives the
average credit period enjoyed from the creditors and is calculated as under:
Credit Purchases
Profitability Ratio
Profitability is the overall measures of the companies with regard to efficient and
effective utilization of resources at their command. It indicates in a nutshell the
effectiveness of the decision taking by the management from time to time.
Profitability ratios are of at most importance for a concern. These ratios are
calculated to enlighten the end result of business activities, which is the sole
criterion of the overall efficiency of a business concern. The following are the
important profitability ratios:
1. Gross Profit Ratio: - This ratio tells gross profit on trading and is calculated as
under:
Gross Profit
Net Sales
(Gross Profit = Net Profit + Interest + Prior Period Item + Extra Ordinary
Expense –Extra Ordinary Income)
Higher the ratio the better it is, a lower ratio indicates unfavorable trends in the
form of reduction in selling prices not accompanied by proportionate decrease in
cost of goods or increase in cost of production.
A high gross profit margin ratio is a good sign to management or owners. This
high ratio can be due to:
(iv) A combination of variations in sales prices and costs, the margin widening.
(i) Higher cost of goods sold as the enterprise is not getting the raw materials at
lower prices.
Net Sales
Net Sales
The ratio differs from the operating profit ratio in as much as it is calculated after
deducting non-operating expenses, such as loss on sale of fixed assets etc., from
operating profit and adding non-operating income like interest or dividends on
investments, profit on sale of investments or fixed assets etc., to such profit.
Higher the ratio, the better it is because it gives idea improved efficiency of the
concern.
Sales
A higher operating expenses ratio is not favorable, as it will leave a very small
amount of operating income to meet interest and dividend etc.
Expenses
Sales
Capital Employed
Or
6. Return on Investment (ROI): - The term investment may refer to total assets
or net assets. The funds employed in net assets are known as capital employed.
Net Assets = Net Fixed Assets + Current Assets – Current Liabilities (excluding
Bank loans) Or
I. Return on Investment =
Research Methodology
1) Introduction
2) Types of research methodology
3) Objective of study
4) Scope and limitations of study
2.1) Introduction
Research methodology is a way to systematically solve the research problem. It
may be understood as a science of studying now research is done systematically. In
that various steps, those are generally adopted by a researcher in studying his
problem along with the logic behind them.
It is important for research to know not only the research method but also know
methodology. ”The procedures by which researcher go about their work of
describing, explaining and predicting phenomenon are called methodology.”
Methods comprise the procedures used for generating, collecting and evaluating
data. All this means that it is necessary for the researcher to design his
methodology for his problem as the same may differ from problem to problem.
Data collection is important step in any project and success of any project will be
largely depend upon now much accurate you will be able to collect and how much
time, money and effort will be required to collect that necessary data, this is also
important step. Data collection plays an important role in research work. Without
proper data available for analysis you cannot do the research work accurately.
1) Primary data
The primary data is that data which is collected fresh or first hand, and for first
time which is original in nature. Primary data can collect through personal
interview, questionnaire etc. to support the secondary data.
Project is based on
• Annual report of SECL 2005-06
• Annual report of SECL 2006-07
• Annual report of SECL 2007-08
• Annual report of SECL 2008-09
• Annual report of SECL 2009-10
1) Limited data:-
This project has completed with annual reports; it just constitutes one part of data
collection i.e. secondary. There were limitations for primary data collection
because of confidentiality.
2) Limited period:-
This project is based on five year annual reports. Conclusions and
recommendations are based on such limited data. The trend of last five year may or
may not reflect the real working capital position of the company.
3) Limited area:-
Also it was difficult to collect the data regarding the competitors and their
financial information. Industry figures were also difficult to get.
CHAPTER III
INTRODUCTION OF COMPANY
INTRODUCTION
Coal has been and shall remain the prime source of commercial energy in India. It
meets nearly 60 % of the total commercial energy requirement of our country. Since
coal India contributed almost 90 % of the coal produced in the country it can be
perceived to be the synonym of Indian coal industry. India is currently the third largest
coal producing country in the world after China & U.S.A. The Coal India has to play
a significant role in shaping the destiny of industries of the nation at large. We
currently witness changes that are sweeping economic & social life of our
country, as well as, that of the world. Products, services and manufacturing goods
or no longer limited to any national boundary but are getting across to countries
where they find acceptance. The liberalization and the economic reforms initiated
in our country, in real earnest, since the mid of 1991,are attempt to bring India in to the
economic main stream of global market. Performance for the competence, if I
may say so, is the key word for any company or corporation. Undoubtedly these
moves effect our life, as well as our thinking.
History of Coal Industry in India:
Coal and oil are two primary natural fuels. Coal constitutes approximately 85% of
total fossil fuel reserves in the world. The Gondwana coal contributes about 99%
of the country’s coal resources. They are located in peninsular India and the too in
the southeastern quadrant bounded by 78E longitudes & 24° N latitude, thus
leaving a major part of country devoid of any coal deposits. The major Gondwana
Coalfields are represented by isolated basins, which occur along prominent present
day rivers viz Damodar, Sone, Mahanadi, and Kanhan & Godavari. The relative
minor resources of tertiary coal are located on the either extremities of peninsular
India.
The mining industry in India is next to agriculture in terms of resource generation and
employment opportunity. Coal mining occupies a major position, contributing nearly
60 % of commercial energy requirement of India, followed by iron-ore,
limestone and bauxite.
Coal has traditionally been a vital input to the industrial heritage of India nearly
200 year ago, in Ranigunj coal field, about 120 miles west of Calcutta. Coal
mining gradually spread to other parts of India as the railway network developed. By
1900, almost 80% of the country's coal production of 6 million tons came from
Jharia and Raniganj coalfields. In 1975 the government consolidated control over
the coal industry by transferring the ownership & management of all nationalized
coalmines to the newly established coal India limited headquarter in Kolkata
Coal India presently contributes 90% of the total coal production in India. It
is the largest public sector in terms of employment to the tune of
636,000 people producing 250 million tons of coal
2. BCCL - 1975: Bharat Coking Coal Ltd. Comprising of BCCL together with
Sudanidin & Moonidih mines of NCDC with head quarter at Dhanbad.
3. CCL - 1975: Central coalfield ltd, comprising of the central division of CMAL/
NCDC with head quarter at Ranchi.
4. NCL-1986: northern coal field ltd, with its registered office at Israeli (M.P).
5. WCL-1975: western coalfield ltd, with its registered office at Napery
(Maharastra).
7. CMPDIL-1975: central mining planning & design institute ltd, with head quarter
at Ranchi.
All the shares of above-mentioned subsidiaries are held by the President of India
through the holding company of coal industries holds all the shares of above-
mentioned subsidiaries. Coal India currently operates 449 mines & 15 washeries
spread over nine states to produce & beneficent coal for meeting the demand of the
consumers all over the country. 4 major consuming sector i.e. power, steel, railway
& the organized industrial sector units of varying size numbering about 2000
consume cement. 18% presently consume Seventy five percent of coal. The balance
7% is consumed by a very large no. of consumers viz brick kilns, domestic
consumer etc through coal depots & retail shops.
With the dawn of independence a greater need for efficient coal production was
felt in the first five-year plan. Coal being the most crucial energy resource, was
considered necessary to expedite development of modernization of the coal
industry. Thus, by the end of 1955-56 our country produced 38.4 million tones.
During the second five-year plan too the coal production was stepped up further to
60 million tonnes per annum. In 1956, National Coal Development Corporation
(NCDC) was formed with 11 collieries belonging to railways as its nucleus. NCDC
was given the task of exploring new coal fields and expediting development of
new coal mines in the out laying coal fields. Subsequently, in the context of
conservation, safety, scientific development of coal reserves, systematic and
proper mining of coking coal and increasing demands from iron and steel
industries the Govt. of India took over all the coking coal mines on 16 th of October
1971 and nationalized them on 1st of May 1972. A company known as Bharat
Coking Coal Ltd. was formed to manage the coking coal mines.
Timeline
2008 : Coal India accorded ‘Navratna’ status
Coal India and four of its subsidiaries NCL, SECL, MCL, WCL
2007 :
accorded ‘Mini Ratna’ status
2000 : De-regulation of coal pricing and distribution
Mahanadi Coalfields Limited (MCL) formed out of SECL to manage
1992 :
the Talcher and IB Valley Coalfields in Orissa
Northern Coalfields Limited (NCL) and South Eastern Coalfields
1985 :
Limited (SECL) carved out of CCL and WCL
Coal India Limited formed as a holding company with 5 subsidiaries:
Bharat Coking Coal Limited (BCCL), Central Coalfields Limited
1975 : (CCL), Western Coalfields Limited (WCL), Eastern Coalfields
Limited (ECL) and Central Mine Planning and Design Institute
Limited (CMPDIL).
Non-coking coal nationalised; Coal Mines Authority Limited
1973 : (CMAL) set up to manage these mines; NCDC operations bought
under the ambit of CMAL
Coking coal industry nationalised; Bharat Coking Coal Limited
1972 : (BCCL) formed to manage operations of all coking coal mines of
Jharia Coalfield
National Coal Development Corporation (NCDC) formed to explore
1956 :
and expand coal mining in the Public Sector
1955-56 : Focus on coal industry; capacity up to 38.4 million tonnes
CHAPTER 2
COMPANY PROFILE
SECL is the largest coal producing company. It is one of the subsidaries of Coal India Ltd. A
government of India undertaking under ministry of coal .SECL, the prime coal company of
Coal India ltd, is having 89 coal mines situated in the sate of Madhya Pradesh and
Chhattisgarh. The coal mines are geographically located at the heart of country in CG and in
M.P. inhabited by simple minded hard working people. Ever since the formation in 1986-87
SECL has exceeded its physical and financial targets.
Coal mining is the most prominent industry in C.G. and in M.P. in terms of
employment generation and infrastructure development. The coal mining areas are
spread over from Sarguja and Korba district of C.G. up to Shadol and Umaria
district further North west in M.P. due to opening of coal mines in these region,
rail connection, power supply, telecommunication, other industries etc. have
expanded over the past decades.
SECL is the largest coal producing company in the country. It is one of the eight
subsidiaries of CIL (A Govt. undertaking under Ministry of Coal). SECL, Coal
India’s premier coal company is operating its coal mines in the state of Madhya
Pradesh and Chhattisgarh state which is also geographically located at the heart of
the country. Chhattisgarh and Madhya Pradesh inhabited by simple minded and
hard working tribes with a rich cultural heritage. Chhattisgarh is not only the rice
bowl if India but also rich in mineral resources with coal being the prime mineral
resource that is being exploited commercially for about a century.
A new area known as Dipka Area has been separated from Gevra Area w.e.f. 1st of
April 2006. Coal mining is the most prominent industry in Chhatisgarh in terms of
employment generation, economic infrastructure development and generation of
revenue for the state and the central Govt. Due to opening of coal mines in this
region, rail connections and power supply lines, roads and tele-communication
have expanded over the past decades and a large number of power houses and
other industries have come up. The coal based industry have in turn generated
multiplier effect in the economy of Chhatisgarh and Madhya Pradesh and the
region has become the most important center of industrial economy of Chhatisgarh
and Madhya Pradesh.
The Statewise, type wise composition of those 90 mines is given in Table below:
MADHYA PRADESH
1. SHAHDOL- Sohagpur area
2. UMARIA- Johilla area
3. ANUPPUR- Hasdeo & j&k area
CHHATTISGARH
1. KORBA- Korba, Gevra & Kusmunda
2. RAIGARH- Raigarh area
3. KOREA- Baikunthpur,Chirimiri & Hasdeo area
4. SURGUJA- Bishrampur & Bhatgaon
5. BILASPUR- SECL HQ.
SECL IS THE LARGEST COAL PRODUCING COMPANY IN INDIA.
SECL OPERATES THROUGH 12 ADMINISTRATIVE AREAS.
SECL HAS 92 MINES.
GEOGRAPHICAL COAL RESERVES 44.838 BILLION TES AS ON 1-01-
2008.
MINING RIGHTS OVER 956.41KM.
ALL RIGHTS OVER 259.85KM.
SPECIFIC FUNCTIONS:
A. PRICING OF COAL.
B. NEGOTIATION OF WAGES. (JBCCI-VII)
C. EXECUTIVE CADRE CONTROL - RECRUITMENT, PROMOTION/
POSTINGS, PAY/PERKS ETC.
D. MANPOWER PLANNING - HRD.
E. FOREIGN C0LLABORATION.
F. INTRODUCTION OF NEW TECHNOLOGY.
G. R&D ACTIVITIES.
H. MOBILISATION OF RESOURCES - LONG TERM & SHORT TERM.
I. CONSUMER SERVICES THROUGH REGIONAL OFFICES.
To produce & market the planned quantity of coal efficiency and economically
with due attention to safety, conservation and quality.
All plan and procedure of finance is prepared under the authority of SECL. All
sections have one finance department. All fund are decided and polices are making
related to distribution and section of funds.
Finance department of CWS is arranging fund for the each shop which is required
to the fulfill the needs of section of workshop. As per requirement of section fund
is issue by the finance department. Like in planning section fund is issue to
purchase of material, in engine repair shop fund is issue to repair of engine etc.
Financial planning is done annually basis. Generally all financial plans are prepare
with the help of previous year data of each section of shop. Required fund is issue
by the finance manager.
2. Supply Bill: This section concerned with supply of all necessary inputs
required to the plant.
3. Maintenance Bills: In this, section the whole maintenance of the plant
and machinery.
Asst. - Assistant
DATA ANALYSIS
Liquidity Ratio
1. Current Ratio
Current Ratio = Current Assets /Current Liabilities
Rs. In Lakhs
Particulars 2007-08 2008-2009 2009-10
Current Assets 7338.08 8942.38 9395.96
Current 5685.49 7038.05 7854.99
Liabilities
Current Ratio 1.29 1.27 1.20
Comment: - From the above figures it is evident that Current Ratio has
decreased from 1.29 to 1.20. The decrease has been on account of decrease in
Cash and Bank balances and Advances. Ideal Current Ratio is taken as 2:1
however it is quantitative rather than qualitative thus despite the Current
Ratio being less than 2 the company’s liquidity position is sound.
2. Quick Ratio
Quick Ratio = Quick Assets / Current Liabilities
Particulars 2007-08 2008-2009 2009-10
Quick Assets 6891.45 8448.16 8730.96
Current 5685.49 7038.05 7854.99
Liabilities
Current Ratio 1.20 1.20 1.11
Comment: -
Generally Quick Ratio / Liquid Ratio of 1:1 is considered satisfactorily. As
we can see the company’s Quick / Liquid Ratio has decreased from 1.20 to
1.11. This decrease is mainly on account of decrease in Cash and Bank
balance and Loan and Advances
Comment: -
Generally the Inventory to Working Capital Ratio less than 1 is considered
satisfactorily. Working Capital has increased from 0.31 in year 2007-08 to 0.42 in
the year 2009-2010, which shows sound working capital position of the company.
Leverage Ratio
( Solvency Ratios)
1. Debt-Equity Ratio –
Dept-Equity Ratio = Debt/Equity or Net Worth +total debt
Particulars 2007-08 2008-2009 2009-10
Debt 337.30 392.18 314.80
Equity 4459.52 4766.81 5397.65
Debt Equity Ratio 0.08 0.08 0.06
Comment: -
This ratio reflects share of debt in the Net Worth. The company’s Ratio of 0.06
indicates a moderate level of debt in the company. Reduction of Debt – Equity
Ratio shows that the company has liquidated its debt in time. The Debt-Equity of
0.06 also shows that the company is mainly relying on shareholders fund for doing
the business.
2. Proprietary Ratio
Proprietary Ratio = Shareholders Fund / Total Assets
Particulars 2007-08 2008-2009 2009-10
Shareholders 4459.53 4766.81 5397.65
Fund
Total Assets 10847.60 12831.56 13669.15
Proprietary Ratio 0.41 0.37 0.39
Comment: -
Creditors loan is safe because Proprietary Ratio is 0.39 as against the satisfactory
ratio of 0.5 times.
3. Debt Ratio –
Debt Ratio = Total Debt / Total Debt + Net Worth
Particulars 2007-08 2008-2009 2009-10
Total Debt 337.30 392.18 314.80
Comment: -
This ratio reflects share of debt in the Capital Employed. The company’s ratio of
0.05 in 09-10 indicates a low level of Debt in the company. Reduction of Debt
Ratio from 0.07 in 09-10 to 0.05 in 09-10 shows that the company is continuously
relying on own funds.
4. Capital Employed to Net Worth Ratio
Capital Employed to Net Worth Ratio = Capital Employed / Net Worth
particulars 2007-08 2008-2009 2009-10
Capital Employed 3814.60 4380.28 4360.76
Net Worth 4459.52 4766.81 5397.65
0.86 0.92 0.81
Comment: -
st
This shows that as on 31 March 2010 for every rupee of owner’s contribution. Re
0.81 is contributed together by Lenders and Owners. This reflects that the
company is not dependent on borrowed capital.
Comment: -
This Ratio ensures whether the capital employed has been effectively used or not.
The increase in the ratio to 2.15 in 09-10 from 1.94 in 08-09 shows better
utilization of resources in the year 09-10.
Comment: -
As we know in case of Sales to Fixed Assets Ratio that the higher the ratio the
better in the performance. From the above data there is decrease in ratio from 3.48
to 3.32. This means that the utilization of fixed assets is very ineffective.
3. Working Capital Turnover Ratio –
Comment: -
This shows that the company could manage to achieve better result in 08-09 with
less Working Capital. This above ratio also shows that during the year 09-10 the
company could utilize its resources in the better way it is utilized in 08-09.
The increase in the ratio in 09-10 shows better utilization of its resources.
Comment: -
The increase in the ratio shows the better performance of the company in the year
09-10 as compared to 08-09.
Comment: -
The decrease in ratio in the year 2009-10 shows better realization position of the
company against its sales.
Comment: -
The reduction in the ratio in 09-10 shows better utilization of fund and better
inventory management of the company. It also shows that the company has
avoided unnecessary locking of its funds in inventory.
Operating Ratio –
B) Current
Liabilities
Current 4257.89 5657.38 6409.56
Liabilities
Provisions 2090.72 2072.83 1628.84
Total(B) 6348.61 7730.2 8038.4
1 0
RoCE= E.B.I.TC.A
3. Management of Cash –
Size of Indices of Cash
Particulars 2007-08 2008- 2009-
09 10
Cash and 3996.21 5451.3 6995.2
Bank 6 3
Indices 100 136.41 175.05
Cash Cycle
Conclusion
Working capital management is important aspect of financial management. The
study of working capital management of Jain Irrigation system ltd. has revealed
that the current ration was as per the standard industrial practice but the liquidity
position of the company showed an increasing trend. The study has been
conducted on working capital ratio analysis, working capital leverage, working
capital components which helped the company to manage its working capital
efficiency and affectively.
· Working capital of the company was increasing and showing positive working
capital per year. It shows good liquidity position.
· Positive working capital indicates that company has the ability of payments of
short terms liabilities.
· Working capital increased because of increment in the current assets is more
than increase in the current liabilities.
· Company’s current assets were always more than requirement it affect on
profitability of the company.
· Current assets are more than current liabilities indicate that company used long
term funds for short term requirement, where long term funds are most costly then
short term funds.
· Current assets components shows sundry debtors were the major part in
current assets it shows that the inefficient receivables collection management.
· In the year 2006-07 working capital decreased because of increased the
expenses as manufacturing expenses and increase the price of raw material as
increased in the inflation rate.
· Inventory was supporting to sales, thus inventory turnover ratio was increasing,
but company increased the raw material holding period.
· Study of the cash management of the company shows that company lost control
on cash management in the year 2005-06, where cash came from fixed deposits
and ZCCB funds, company failed to make proper investment of available cash.
Reco
mmendations
Recommendation can be use by the firm for the betterment increased of the
firm after study and analysis of project report on study and analysis of working
capital. I would like to recommend.
· Company should raise funds through short term sources for short term
requirement of funds, which comparatively economical as compare to
long term funds.
· Company should take control on debtor’s collection period which is
major part of current assets.
· Company has to take control on cash balance because cash is non
earning assets and increasing cost of funds.
· Company should reduce the inventory holding period with use of zero
inventory concepts.
Over all company has good liquidity position and sufficient funds to repayment
of liabilities. Company has accepted conservative financial policy and thus
maintaining more current assets balance. Company is increasing sales volume per
year.
APPENDICES
Bibliography
Books Referred
• www.secl.gov.in
• www.google.co.in
• www.workingcapitalmanagement.com
• www.bing.com
• www.coalindia.nic.in
Working Notes
2003-04 2004-05
= 72.01 = 606.99
= 931.24