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A Project of Liquidity Analysis &
Trend Analysis
Coal India Limited July to December
BYName: Dipika ChakrabortyROLL NO. –50/2010 (Class roll - 54)
GUIDED BYProf. Manab Mukherjee(faculty member IISWBM)
& MR. PROBIR CHAKRABORTY
FINANCE MANAGER (CIL)
For the partial fulfillment of POST GRADUATE DIPLOMA IN MANAGEMENT
Of INDIAN INSTITUTE OF SOCIAL WELFAREAND
BUSINESS MANAGEMENT
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ACKNOLEDGEMENT
At the very outset, I take the opportunity to express my sincere regards &
gratitude for every individual linked with my Research work. I am grateful
for the inspiration and wisdom of many people for their insights and
encouragement. I mention the names of all those people who have enriched
and improved my thinking through their conversations.
First and foremost, I would like to express my sincere gratitude towards my
External Guide MR. PROBIR CHAKRABORTY-SR.FINANCE MANAGER (CIL) for
his relevant support, guidance, valuable advice and suggestions. His vision
and the valuable time that he shared with me will always be a source of
inspiration for me.
I am extremely grateful to him for giving me an opportunity to undertake
my project in their esteemed organization.
Then I would like to thank my Internal Guide, Prof. Manab Mukherjee
(Faculty, member of IISWBM) who allowed me to initiate the project and
provided valuable suggestions and guidance during the whole project. His
perspective has encouraged me to incorporate a different dimension to the
project.
DIPIKA
CHAKRABORTY
PGDBM: 2008-2010
EXAM ROLL-50/2009
CLASS ROLL-54
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TABLE OF CONTENT
Acknowledgement 3Table of Contents 4
List of Illustrations 5
Tables
Diagrams
Charts
Objective of the study 6
Introduction: Company Profile 11 COAL INDIA LIMITED(Introduction) 21 Introduction of Working Capital Management with Ratio Analysis & Trend Analysis 22
Ratio Analysis-Current asset & current liabilities 33
Activity analysis 36
Concluding remarks on Working Capital Management 40
A Case Study 42
Result & Conclusion 46
Bibliography 50
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LIST OF ILLUSTRATION
TABLES
The Various types of tables……
DIAGRAMS
Research Methodology Flowchart
CHARTS
Various types of Bar & Pie Charts
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OBJECTIVE OF THE STUDY
In this project we are looking at the Financial Statement Analysis and behavioral analysis of cost in a core sector industry. Balance sheet review of the last five years along with the changes in the Working Capital and component wise analysis of Current Asset and Current Liabilities to identify the causes of changes, covering a case study of a company to establish” The story of revival of a sick company”.
In the words of Myers, “Financial Statement Analysis is largely a study of relationship among the various financial factors in a business as disclosed by a single set of statements and a study of the trends of these factors as shown in a series of statements.”
The purpose of financial analysis is to diagnose the information content in financial statements so as to judge the profitability and financial soundness of the firm.
In this project we will perform the financial analysis of Coal India Limited we will go through the financial statements of the company to diagnose financial soundness.
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ABSTRACT
In this project we are looking at the Financial Statement Analysis and behavioral analysis of cost in a core sector industry. Balance sheet review of the last five years along with the changes in the Working Capital and component wise analysis of Current Asset and Current Liabilities to identify the causes of changes, covering a case study of a company to establish” The story of revival of a sick company”.
In the words of Myers, “Financial Statement Analysis is largely a study of relationship among the various financial factors in a business as disclosed by a single set of statements and a study of the trends of these factors as shown in a series of statements.”
The purpose of financial analysis is to diagnose the information content in financial statements so as to judge the profitability and financial soundness of the firm.
In this project we will perform the financial analysis of Coal India Limited; we will go through the financial statements of the company to diagnose financial soundness.
SCOPE OF THE RESEARCHThe financial statement is the depiction of companies’ growth and establishing its available resources. . The statements are prepared for a particular period. The financial statements by nature are summaries of items recorded in the business and these statements are prepared periodically. They are prepared for the purpose of presenting a periodical review of reports on progress by the management and deal with the status of investment in the business and the results achieved during the period under review.
RATIO ANALYSIS
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Ratio Analysis is a powerful tool of financial analysis. A ratio is defined as “the indicated quotient of two mathematical expressions” and as “the relationship between two or more things”. In financial analysis, a ratio is used as a benchmark for evaluating the financial position and performance of the firm. The absolute accounting figures reported in the financial statements do not provide a meaningful understanding of the performance and a financial position of the firm. An accounting figure conveys meaning when ‘it is related to some other relevant information’. For example, a Rs. 5 crores net profit may look impressive, but the firm’s performance can be said to be good or bad only When the net profit figure is related to the firm’s investment. The relationship between two accounting figures, expressed mathematically, is known as a financial ratio. Ratios help to summarize large quantities of financial data and to make qualitative judgment about the financial performance.
EXECUTIVE SUMMARY
A SHORT CHRONOLOGICAL HISTORY OF THE COMPANY
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Year Event
1774 Warren Hastings initiates commercial coal mining at Raniganj (West Bengal)
1815-1820 First Shaft Mine opened at Ranigunj
1835 Carr, Tagore & Company takes over the Ranigunj Coal Mines
1843 Bengal Coal Company takes over Ranigunj Coal Mines and others; is first Joint Stock Coal Company in India.
Up to 1900 Minimal development; River transportation used to transport coal to Calcutta; railway lines at Calcutta leads to expansion of Coal Production
Early 1900s Capacity at 6 million tones per annum
1955-56 Focus on Coal Industry; capacity up to 38.4 Million tones.
1956 National Coal Development Corporation (NCDC) formed to explore and expand coal mining in Public Sector
1972 Coking Coal Industry Nationalized, Bharat Coking Coal Limited formed to manage operations of all Coking Coal mines in Jharia Coalfield.
1973 Non-coking coal nationalized; Coal Mine Authority Limited set up to manage these mines; NCDC operations bought under the ambit of CMAL.
1975 Coal India Limited formed as holding Company with 5 subsidiaries viz. Bharat Coking Coal Limited (BCCL), Central Coalfields Limited (CCL), Western Coalfields Limited (WCL), Eastern Coalfields Limited (ECL) and Central Mine Planning and Design Institute Limited (CMPDIL).
1985 Northern Coalfields Limited (NCL) and South Eastern Coalfields Limited (SECL) carved out of CCL and WCL
1992 Mahanadi Coalfields Limited (MCL) formed out of SECL to manage the Talcher and IB Valley Coalfields in Orissa.
2000 De-regulation of Coal pricing and distribution of coal.
COMPANY PROFILE
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Coal India Limited has been incorporated under the companies Act 1956 on 21.10.1975 and is wholly owned by the Government of India. The company is chiefly in to the business of coal mining, coal based products and mining consultancy.
The wholly owned subsidiaries of the company are as follows:
1. Eastern Coalfields Limited.
2. Bharat Coking Coal Limited
3. Central Coalfields Limited
4. Northern Coalfields Limited
5. Western Coalfields Limited
6. Southeastern Coalfields Limited
7. Mahanadi Coalfields Limited.
8. Central Mine Planning and Design Institute Limited
North Eastern Coalfields is directly under control of Coal India Limited.
Registered office of the Company is Coal Bhawan, 10 Netaji Subhas Road, Kolkata – 700 001, West Bengal, India.
India is the 3rd largest coal producing country in the world and Coal India Limited produces 85% of total coal production in India. It is the largest company in the world in terms of coal production. It employs around 436 thousand people and is the largest corporate employer in the country.
The objectives of the company are as follows:
1) To promote the development and utilization of the coal reserves in the country for meeting the present and likely future requirement of the nation with due regard to need for conservation of non-renewable resources and safety of mine workers.
2) To raise the productivity of coal mining and related activities through introduction of improved technology, streamlining of organization, management and improving the skills, motivation of the work-forces.
3) Efficiency of operations and adopting appropriate cost reduction and cost control methods.
4) To make efficient arrangements for marketing and supply of coal so that coal, coke and other similar derivatives are available to consumers throughout the country conveniently and at reasonable prices.
5) To promote research and development activities on a continuing basis in the areas of coal mining, beneficiation development of new coal based products or by-products, fuel technology or any other area having a bearing
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on conservation, development for utilization of the coal reserves of the
country.
EVOLUTION OF CIL AS COALGIANT SAGA OF 32 YEARS JOURNEY
PRIOR TO
1972-73
1970 S EARLY1990S 1996 2000-07
Mostly in private hands except for two public sector units namely SCCL & NCDC.
1972-73 Coal mines Nationalization Act.1975-92CIL formed as Holding Company with 5 subsidiaries Expanded in Phases to 8 subsidiaries by 1992.
1993Amendment in act to allow Captive mining by private operator and not for sale
1995-96Budgetary support withdrawn
Capital Restructuring and decontrol of price & distribution.
Pricing and distribution fully deregulated.
2007
Introduction of new distribution policy by Government
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Coal –the mainstay of India’s Energy Security.
Strategic role of coal in India’s Energy/Economic Scenario.
-Coal the dominant energy source in India meets 55% of country’s primary commercial energy supply.
---In India, 84% of hard coal is produced by Coal India Limited (CIL), a Navaratna Coal Mining PSU and 7% by Singareni Collieries Company Limited (SCCL)-under Ministry of Coal.
---Coal prices in India are deeply discounted compared to international prices even in the face of Global Economic meltdown.
---Coal Sector in India thus plays an extremely important strategic role in making the end user industry globally competitive.
---The benefit granted without creating any burden on Government of India or on the producing company.
---CIL contributes more than Rs 5000Crores to per annum to the exchequer on account of Dividend and corporate taxes alone and meets its investment requirement entirely from internally generated funds.
CURRENT PICTURE OF THE COMPANY
Coal India Limited has been able to maintain its record of growth and excellence in performance in another fiscal 2009-10. Coal India Ltd. (CIL) as a whole achieved raw coal production of 431.27 million tones in the year under review against 403.73 million tones in the last year
Table1.2 Statement Showing Coal Production, OBR & Coal off-take
Coal OB Off- Coal OB Off-
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(Mt) (Mcum) take (Mt)
(Mt) (Mcum) take (Mt)
Actual Actual Actual Actual Actual Actual
Company\Year 08-09 08-09 08-09 09-10 09-10 09-10
ECL 28.13 43.07 28.26 30.07 49.96 29.19
BCCL 25.51 53.60 24.60 27.52 61.94 25.07
CCL 43.24 55.63 43.84 47.08 56.04 44.21
NCL 63.65 202.75 64.23 67.67 190.18 66.65
WCL 44.70 126.66 45.37 45.73 134.01 45.51
SECL 101.75 107.00 103.02 108.01 129.97 106.07
MCL 96.34 51.84 91.30 104.08 65.96 98.15
NEC/CIL 1.01 4.58 0.84 1.11 7.23 1.07
OVERALL 403.73 645.13 401.46 431.27 695.59 415.92
'Note: - OB=Over burden specially stone & muddy, top surface of the soil
Since after nationalization the Dispatch shoots from 81.73Mt during 75-76 to 415.22 Mt being a yearly record of 2009-10. Improved dispatch is due to deployment of Rail, Road, MGR, and Belt & Rope.An all-time high turnover (Gross Sales) of over Rs. 52,188 crores was achieved during the year registering a growth of about 13%. The pre tax profit for the year was Rs. 13965 crores. It was recommended a dividend payment of Rs. 2210 crore. CIL, the single largest coal producing company in the world is now venturing into new initiatives in India and abroad.
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Glance View of the Company
COAL VISION 2025
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Inputs for Coal Vision 2025 have been submitted, which aims at laying down the framework for guiding the policies relating to the coal sector for next 20 years. India now possesses about 8.6% of the total recoverable coal reserves of the world and contributes about 7.5% of the world’s coal production. Considering an overall GDP growth of 8%, India would be requiring about 1267 Mt of coal (1147 Mt in case of overall GDP growth of 7%) by 2025 to drive its energy economy on coal as projected by the studies. It has been proposed to develop coal sector as a globally competitive industry through of state-of-the art high productive mining & beneficiation technologies and capacity building.Coal India Ltd., with an impressive track record in meeting the coal requirement of energy need of the country by registering a growth in production in excess of 5% annually over the years, is aiming at playing a more purposeful role in establishing itself as the prime supplier of coal for power generation. In this respect, CIL has not restricted itself within the conventional gamut of coal mining, but is also exploring the possibilities of expanding its horizon in harnessing the potential of non-conventional energy sources viz. (i) Coal Bed Methane (CBM), (ii) Underground Coal Gasification (USG), (iii) Coal Liquefaction and (iv) Over ground Coal Gasification (OCG). CIL is also contemplating setting up of Power Plants in Joint Venture. For this purpose, CIL is negotiating with both Naively Lignite Corporation Limited (NLC) and National Thermal Power Corporation (NTPC) for power plant in Orissa.
CIL has also taken up various initiatives for non-conventional energy sources, which are as follows:
Coal Bed Methane (CBM): The consortium of CIL and ONGC, an un-incorporated joint venture, had already obtained Petroleum Exploration License (PEL) from the respective Governments against the two blocks allotted by Govt. Of India, one at Jharia Coalfields in Jharkhand. The Project is in progress since August 2003 under the guidance of CMPDIL, a subsidiary of CIL. Besides this, Govt. of India, in collaboration with UNDP/GEF (Global Environment Facility) had taken up a ‘Demonstration
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Project’ at Moonidh and Sudamdih mines of BCCL. A subsidiary of CIL in Jharia Coalfields for Coal Bed Methane Recovery and Commercial Utilization. The project costing about Rs. 100 crores is under implementation by CMPDIL and BCCL since 15th September 1999.
Underground Coal Gasification (UCG): Underground Coal Gasification (UCG) is the in-site gasification of coal in the seam. It is achieved by injecting oxidants, gasifying the coal and bringing the product (gas) to surface through boreholes drilled from the surface. The gas is used for power generation, industrial heating or as chemical feedstock. UCG was developed as a large-scale gas production process in the former Soviet Union and trial schemes have been evaluated in many other countries including United States, China, Australia and UK. Coal India has given high priority to the issue of Underground Coal Gasification. CIL and ONGC is likely to take up jointly a pilot project for establishing UCG technology. A draft MOU after its approval by CIL board is presently under consideration of the ministry of Coal (MOC) for approval. However, initial work of data exchange needed for identification of trial site has already been taken up.
Coal Liquefaction: Oil India Limited (OIL) has approached CIL to become a partner in its venture of producing oil from coal in its Duliajan plant in Assam and requested for supply of about 3.5 Mt of coal per annum from NEC. CMPDIL has prepared a report on possibilities of producing 3.5 MTPA coal in NEC. CIL and OIL held a meeting on July 11, 2005 to discuss future possibilities when OIL had indicated that the tentative cost of production of oil obtained from this process was about US $ 35 per barrel which appears to be quite attractive particularly keeping in view the burgeoning oil price in international market which has reached a level of US $61 per barrel. It was decided to form a ‘joint task force’ of CIL and OIL which would study the CMPDIL report as also the possibility of formation of two joint ventures- one for coal production and the other for setting up a Coal Liquefaction plant and its upstream activities.
Over ground Coal Gasification (OCG): Director (Planning & Business Development), GAIL (India) Limited met Director (Technical), Coal India Limited on 20th July, 2005 in connection with their interest to form a joint venture with CIL for joint evolution of work in various coal sector related potential opportunities including OCG. Accordingly, a draft memorandum of co-operation has been made.
The nature of actions needed to penetrate into the coal business opportunities in a foreign land is somewhat different from those in homeland. CIL has therefore, already decided to float a new subsidiary viz Coal India Ltd. which is expected to come into being very shortly. Considering the fact that the demand for coal in India is always greater than supply from indigenous
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sources, more particularly for coking coal and low ash non- coking coal primarily because of their limited availability, CIL is poised to venture into coal business potentialities abroad either through acquisition of equity in any existing coal company or through coal mining on green field area in order to ensure energy security of our country. On a quest for meeting the said objectives, CIL has, based on the extensive interactions with consultants of international repute, High Commissions/Embassies and Coal MNCs, short listed countries like Australia, Indonesia, South Africa, Mozambique and Zimbabwe as first preferred destinations and countries like Russia, Kazakhstan, Mongolia, China, Canada and Venezuela as second line of priority. CIL has so far participated in the bidding process of two opportunities – one for green field venture in Mozambique and the other for acquisition of a part of equity in a company in Australia. But both the attempts ultimately could not materialize for some reasons or the other. CIL is, however geared up for taking an aggressive drive for fulfilling its objective in this direction.
Apart from taking various measures for better consumer satisfaction, coal companies have also introduced the system of sale of coal through E-Auction in order to put in place more transparency in marketing of coal more particularly to non-core consumers. This is, basically, based on the sole idea of going by market economy and eliminating the scope of black-marketing in coal distribution. During the year 2004-05, CIL and one of its subsidiaries viz BCCL, as a trial-run could sell more than 2 lakhs tones of coal through E-Auction and the coal companies have planned to achieve a sale of 10 million tones of coal through this mode during the year 2005-06. Besides this, CIL had, in order to mitigate the problem being faced by them in getting coal through official channel, introduced the system of releasing coal to small and dry consumers (whose requirement of coal is small) through the channel of Union Ministry of Consumer affairs, Food & Public Distributions and state undertakings nominated by various states for the purpose.
In this connection it is heartening to note that consequent upon net worth of CCL being positive, AAIFR, the appellate Authority under the Sick Industrial Companies (Special provisions) Act, 1985 (SICA), in its hearing held on 31st January, 2005 had granted the prayer of CCL to withdraw its case from them. Accordingly, the CCL is no longer under the purview of SICA. The other two subsidiary companies viz. ECL and BCCL are still sick as per the provisions of SICA. Rehabilitation Scheme (March 2004) of ECL as approved by the Board for Industrial and Financial Reconstruction (BIFR) on 2nd November 2004 and recommended by the office of the Controller General of Accounts for revival of the company is under implementation. As directed by the BIFR, BCCL had already submitted its Revival Plan on 12th April 2004 and valuation Report of its assets carried out by a Govt. approved values on 31st 2004 to it.
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But above all topmost priority is being given to safety in mines though in recent times we have witnessed some of the most horrendous and pathetic accidents where the precious lives of the miners have been lost. Lastly apart from safety measures in mines, welfare for employees, environment protection remains the main priority while envisaging new capacity additions.
INTRODUCTION
AN OVERVIEW OF COAL INDIAINDIA is the 3rd largest coal producing country in the world. In terms of hard coal production COAL INDIA limited, is the single largest producing company in the world, employing 4.36 lakhs manpower with its h.q. In KOLKATA is a holding company under ministry of coal, GOVT OF INDIA. It was formed as public sector undertaking in 1975 pursuant to nationalization of the coking coalmines in 1971 and non-coking coalmines in 1973 for reorganizing the nationalized coalmines and ensuring integrated development of coal the prime source of energy.
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Coal India presently contributes 85%of the total coal production in India. It operates through eight subsidiaries. Seven producing companies and one Planning and Design institute. Subsidiaries are as under: -
Eastern coalfields limited. (ECL) Sanctoria.W.B
Bharat coking coal limited. (BCCL) Dhanbad, Jharkhand.
Central coalfields limited. (CCL) Ranchi. Jharkhand.
Northern coalfields limited. (NCL) Singrauli.MP.
Western coalfields limited. (WCL) Nagpur, Maharashtra.
Southeastern coalfield limited (SECL) Bilaspur, Chattisgarh.
MAHANADI Coalfields Limited. (MCL) Sambalpur, Orissa.
Central mine planning & design institute limited (CMPDIL) Ranchi, Jharkhand. For mine planning, design & engineering consultancy services and exploration activity The mines of North Eastern coalfields (Assam & Meghalaya) operate directly under COAL INDIA.
COAL INDIA currently operates 467 mines and 17 washeries (11 coking and 6 non-coking) spread over eight states to produce and beneficiate coal for meeting the demand of the consumers all over the country. The ranges of products are: Raw coal, (coking and non-coking), washed coal, middling, Soft coke, Hard coke, Coal tar, Coal gas, coal chemicals etc. 78% of CIL total production contributes towards electricity generation. COAL INDIA, for over three decades, has been fuelling economic growth of INDIA keeping its wide array of consumers like Thermal power plants, steel plants, cement plants, fertilizer units and innumerable industrial units satisfied with supply of coal.
COAL INDIA has played a significant role in securing India’s energy future .The integrated energy policy of the country clearly indicates that coal is the main and cheapest source for Indian energy sector. CIL currently accounts for 85% of the total coal produced in the country and Power sector is the largest consumer utilizing 80% of CIL production.Coal based power generation constitutes 75% of power generation in the country and CIL supplies coal to as many as 71 power station.FINANCIAL HIGHLIGHTS
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IMPROVED DEBTORS POSITION SHOWS IMPROVED LIQUIDITY
REVIEW OF LITERATURE
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The financial statement is the depiction of companies’ growth and establishing its available resources. The financial growth is highlighted from profit and loss and the position of resource and liabilities id depicted from Balance sheet.
Ratio Analysis:
Ratio Analysis is a powerful tool of financial analysis. In financial analysis, a ratio is used as a benchmark for evaluating the financial position and performance of the firm. It can be used to compare the risk and return relationships of firms of different sizes.
Working Capital Management:
Working Capital management is the managing of the imbalance between current asset and current liabilities and the right determination of resources to manage the business cycle. The interaction between current assets and current liabilities is, therefore the main theme of the theory of working management.
RESEARCH METHODOLOGY
HYPOTHESISThe financial statements are mirror which reflect the financial position and operating strength of a concern, practical application of financial statement is reviewed through ratio analysis and working capital management. Multifarious behavior is projected through pictorial representation.
OUTLINE METHODOLOGY OF THE RESEARCHStage 1: Recorded Facts.
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The figures of various accounts such as cash in hand, cash at bank, sundry debtors, fixed assets, etc., are taken as per the figure recorded in the accounting books. Since, all these recorded facts are based on original cost or historical costs and not on replacement costs, financial statements do not show current financial position of the concern.Stage 2: Accounting Conventions.Fundamental accounting principles are followed to prepare the financial statements. Provisions are made for expected losses but expected profits are ignored on account of the ‘convention of conservatism.’Various accounting conventions are used to make financial statements simple, comparable and realistic.Stage 3: Accounting PostulatesWhile preparing accounting records, certain assumptions are also made like the enterprise is treated as an ongoing concern, etc. These assumptions are fundamental while preparing financial statements.Stage 4: CalculationsAt this stage after gathering the required information the calculations are made by using the methods or tools of the financial statement analysis.Stage 5: Write upThis stage involves the writing up of the contents of the dissertation and should cover the chapter proposed in the following section.
DISSERTATION CONTENTS1. Ratio Analysis.
SOURCE OF DATA1) Audited financial statement and an annual report of the company.2) Management information statement.-prepared by cost and budget section of Coal India.3) Statistical information is obtained from Annual Action Plan.-prepared by the corporate planning and project monitoring department.
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ANALYSIS OF THE SURVEY
FINANCIAL STATEMENT ANALYSIS
Meaning:
A Financial Statement is an organized collection of data which contains summarized information of the firm’s financial affairs, organized systematically. Its purpose is to convey an understanding of the financial aspect of the business concern.
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The term ‘Financial Statement’ generally refers to two basic statements: (i) The income statement or the profit and loss account, and (ii) Position statement or balance sheet. These two statements are combine called financial report of a concern. They are the means to present the firms financial position to the users.Financial statements are prepared primarily for decision making. They play an important role in setting the framework of managerial decisions. The information provided in financial statements is of great use in making decisions through analysis and interpretation of financial statements. Here a distinction can be made between the two terms ‘Analysis’ and ‘Interpretation’. The term ‘Analysis’ means methodical classification of the data given in the financial statements so that they are put in a simpler form. On the other hand, ‘Interpretation’ means explaining the meaning and significance of the data so simplified. However, both ‘Analysis’ and ‘Interpretation’ are complementary to each other. Interpretation requires analysis while analysis is useless without interpretation. The term ‘Financial Analysis’ which is also known as ‘Analysis and Interpretation of Financial Statements’ refers to the process of determining financial strengths and weaknesses of the firm by stabilizing relationship between the terms of balance sheet, profit and loss accounts and other operative data.
The comparative financial statements are the statement of the financial position at different period of time. The elements of financial position are shown in a comparative form to give an idea of the financial position of two or more periods. Generally two financial statements (Balance sheet and income statements) are prepared in comparative form for the purpose of financial analysis. Common Size Statements: Common size statements are those in which the figures are converted into percentage on some common basis. The figures are shown as a percentage of total assets, total sales and total liabilities. The advantage of this conversion is that the analyst is able to assess the figures in relation to total value.Trend Analysis:
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The financial statement may be analyzed by computing trends of several years. The method of calculating trend percentage involves the calculation of percentage relationship that each item bears to the same item in the base year. Any year may be taken as the base year. It is usually the earliest year. Each item of base year is taken as 100 and on that basis the percentages for each of the items of each of the years are calculated.Analysis of the Flow of Fund:
Every business concern prepares the basic fundamental statements, i.e. Profit and Loss Account and Balance Sheet which shows the net effect of various transactions on the operational and financial position of the concern. The Profit and Loss Account reflects the results of the business operation for a period of time. It contains a summary of expenses incurred and the revenues realized on the accounting period. The Balance Sheet gives the summary of the assets and liabilities of the undertaking at a particular point of time. Both the financial statements provide the basic essential information about the financial activities of a business, but their utility is limited for the purpose of analysis and interpretation. There are many transactions that take place in an undertaking which do not operate through profit and loss account. Hence the need for preparing another statement is realized to show the changes in the assets and liabilities from the end of one period of time to the end of another period of time. The statement is called ‘Fund Flow Statement’.
Ratio Analysis:
Ratio analysis is a technique of analysis and interpretation of financial statement. It is the process of establishing various ratios which help in making certain decisions. However, ratio analysis is not an end in itself. It is only a means of better understanding of financial strength and weaknesses of the firm. Calculations of these ratios do not serve any purpose, unless several appropriate ratios are analyzed and interpreted. There are a number of ratios which can be calculated from the information given in the financial statements but the analyst have to select the appropriate data and calculate the appropriate ratios keeping in mind the objectives of analysis.
Ratio Analysis:
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Ratio analysis is the most widely used method. It is process of establishing and interpreting quantitative relationship between figures and groups of figures. With the help of ratios, the financial statements can be analyzed more clearly and decisions can be made more logically.
“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 study of the trend of these factors as shown in series of statements.” -Myers
Thus, the ratio analysis is a tool to present the figures of financial statements in simple concise and intelligible form. It is the process of stabilizing meaningful relationship between two figures or set of figures of financial statements.
An Overview on Ratios >---------
KEY BUSINESS RATIOS The 14 most widely used financial ratios.
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Every Dun’s Financial Profile Report, PRO Model Statement and Industry Norm Report deliver the advantage of D&E Norms and Key Business Ratios. These specific measures of business performance provide significant insights into a companies financial condition, based on its performance compared to others in its industry. Simplifies the task of evaluating a company’s financial condition by providing objective, quantitative measurements of business performance.
Teamed with industry norms – as in the Customized Information Systems and Services family of products and services – Key Business Ratios allow quick comparison of a company’s performance to others in its industry.
Includes more than 800 lines of business segmented by up to 15 asset ranges and four geographic areas.
SOLVENCY RATIOS
Here’s what each of the 14 Key business ratios used by customized information Systems and Services means:
QUICK RATIO: Cash \ Accounts Receivable \ Total Current Liabilities CURRENT RATIO: Total Current Assets \ Total Current Liabilities
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CURRENT LIABILITIES TO NET WORTH:
Total Current Liabilities \ Net Worth This contrasts the amounts due creditors within a year with the funds permanently invested by the owners. The smaller the net worth and the larger the liabilities, the greater the risk.
CURRENT LIABILITIES TO INVENTORY: Total Current Liabilities \ Inventory. This tells you how much a firm relies on funds from disposal of unsold inventories to meet debt.
TOTAL LIABILITIES TO NET WORTH: Total Liabilities \ Net WorthThe effect of long term debt on a business can be determined by comparing this ratio with that of Current Liabilities to Net Worth.
FIXED ASSETS TO NET WORTH: Fixed Assets \ Net WorthThe amount of net worth that consists of Fixed Assets will vary greatly from industry to industry, but generally a smaller portion is desirable.
EFFICIENCY RATIOS
COLLECTION PERIOD: Accounts Receivable \ Sales x 365 DaysGives you an idea of the quality of receivables.
INVENTORY TURNOVER: Sales \ InventoryWhen compared to industry norms this ratio tells you how fast inventory is moving and the cash flow into business.
ASSETS TO SALES: Total Assets \ Sales
This rate ties in sales and the total investment that is used to generate those sales.
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SALES TO NET WORKING CAPITAL: Sales \ Net Working
Capital
This measurement indicates whether a company is over-trading or, conversely, carrying more liquid assets than needed for its volume.
ACCOUNTS PAYABLE TO SALES: Accounts Payable \ Sales
This measures how the company is paying its suppliers in relation to the volume being transacted.
PROFITABILITY RATIOS
RETURN ON SALES (Profit margin): Net Profit after Taxes \ SalesTells you profits earned per dollar of sales and measures the efficiency of the operation.
RETURN ON ASSETS: Net Profit after Taxes \ Total Assets
This is the key indicator of profitability for a firm. It matches operating profits with the assets available to earn a return. A high rate will tell you a company is well run and has a good return on assets.
RETURN ON NET WORTH (Return of Equity):
Net Profit after Taxes \ Net Worth
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Analyzes the ability of the firm’s management to realize an adequate return on the capital invested by the owners of the firm.
What does Liquidity Ratios Mean……
Financial Metrics is used to determine a company’s ability to discharge its short term debt obligations. Higher the ratios shall indicate larger Margin of Safety. This will register that the company will able to cover short term debt obligation.
Liquidity Ratios –Current Ratio, Quick Ratio and Operating Cash Flow Ratio. It is observed from Analytical angle that liquidity is the assessment of volatility of the company to combat the discharge of liability. Determination of liquidity and volatility is a technique to assess judiciously to continue the company as a going concerned. Liquidity Ratios
As per Consolidated Audited Accounts
Year Ending 31st March 2009-10 2008-09 2007-08 2006-07 2005-06
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(A) LIQUIDITY RATIOSCurrent Assets 54324 47096 36307 28828 14412Current Liabilities 42909 41153 29695 22821 21741(a) Current Ratio 1.27 1.14 1.22 1.26 0.66(Current Asset / Current Liability) Quick Asset 41246 31521 22618 17516 15232Current Liabilities 42909 41153 29695 22821 21741(b) Quick Ratio 0.96 0.77 0.76 0.77 0.70(Quick Asset / Current Liability) Net Working Capital 11415 5943 6612 6007 2670Net Asset 54324 47096 36307 28828 14412(c) Net Working Capital Ratio 0.21 0.13 0.18 0.21 0.19
(Net Working Capital / Net Asset)
Year Ending 31st March 2009-10 2008-09 2007-08 2006-07 2005-06(A) LIQUIDITY RATIOS (a) Current Ratio 1.27 1.14 1.22 1.26 0.66(b) Quick Ratio 0.96 0.77 0.76 0.77 0.70(c) Net Working Capital Ratio 0.21 0.13 0.18 0.21 0.19
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As observed by Short Term Creditors that High Current Ratio is a buffer as it reduces their risk.
Equity Holder allows Low Current ratio since it allows the assets to be deployed in the business and it can grow.
Cyclical Industry shall prefer High Current ratio since it can put buffer during Slack Season.
Movements of Current Assets To Current Liabilities
Year ending 31st March
2009-10
2008-09
2007-08
2006-07
2005-06
CURRENT RATIO
Current Assets 54324 47096 36307 28828 14412
Current Liabilities 42909 41153 29695 22821 21741
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Ratio of CA : CL 1.27 1.14 1.22 1.26 0.66
The liquidity position of the company is improving significantly and the terminal year has registered its growth positively and has established that Current Assets has exceeded over Current Liabilities.
Movement to Quick Assets To Current Liabilities
Year ending 31st March 2009-10 2008-09 2007-08 2006-07 2005-06QUICK RATIO Quick Asset 41246 31521 22618 17516 15232Current Liabilities 42909 40506 29695 22821 21741Ratio of Q.A/CL 0.96 0.78 0.76 0.77 0.70
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Quick convertibility of current assets is a very sensitive symptom to discharge the company's Creditors. CR.is not a true indicator of Liquidity Analysis since it comprises with Inventories some of it is not easily converted into cash easily. So Quick ratios exclude the Inventories to determine easy liquidity and it further termed as Acid Test Ratio. Company can also establish its credential in the market to fetch more funds. For better Liquidity identification finer approach is Cash Ratio. (Cash Marketable Securities)/Current Liabilities.
More liquidity is establishes from '04-05 onward. And simultaneous growth in CL is registered from the same period also
Movement of Net Working Capital To Net Asset
Year Ending 31st March 2009-10 2008-09 2007-08 2006-07 2005-06NET WORKING CAPITAL RATIO Net Working Capital 11415 5943 6612 6007 2670Net Asset 54324 47096 36307 28828 14412Share of Working Capital on 21.01 12.62 18.21 20.84 18.53
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Net Assets % % % % %
As we can see from the above bar diagram that the net working capital is improving and getting its grip from the year 2005-06.
As net working capital measures the firm’s potential reservoir of funds, so we can estimate its importance. Year 2007-08 and 2008-09 were not impressive but it gained its pace in the year 2006-07 and increased further in 2009-10.
Leverage Ratios As per Consolidated Audited Accounts
Year Ending 31st March2009-
102008-
092007-
082006-
072005-
06 (B) LEVERAGE RATIOSTotal Debt 2087 2148 2082 2386 2800Capital Employed 23451 16964 17108 16224 12741(a) Debt Ratio 0.09 0.13 0.12 0.15 0.22(Total Debt / Capital Employed)
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Total Debt 2087 2148 2082 2386 2800Net Worth 25794 19165 19342 17889 14115(b) Debt Equity Ratio 0.08 0.11 0.11 0.13 0.20(Total Debt / Net Worth) 23451 16964 17108 16224 12741Capital Employed 25794 19165 19342 17889 14115Net Worth(c) Capital Employed to Net 0.91 0.89 0.88 0.91 0.90 Worth Ratio(Capital Employed / Net Worth)
Year Ending 31st March2009-
102008-
092007-
082006-
072005-
06(B) LEVERAGE RATIOS (a) Debt Ratio 0.09 0.13 0.12 0.15 0.22(b) Debt Equity Ratio 0.08 0.11 0.11 0.13 0.20(c) Capital Employed to Net 0.91 0.89 0.88 0.91 0.90 Worth Ratio
From the graph above it can be seen that there is immense reduction of the percentage of debt during the years. Thus, we can say that the company has low financial risk and the company can use its debt to its shareholder’s advantage. Movement of Total Debt To Capital Employed
Year ending on 31st March2009-
102008-
092007-
082006-
072005-
06DEBT RATIO Total Debt 2087 2148 2082 2386 2800Capital Employed (NW+Debt) 23451 16964 17108 16224 12741
% of Debt /Capital Employed 8.90% 12.66% 12.17% 14.71% 21.98%
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Dipped in the debt position is indicated a significant improvement in the company's financial health.If we look year 2005-06 we can see that the debt ratio is 0.2198 which means that the lenders have financed 21.98% of the company’s net assets. Whereas, in the year 2009-10 the debt ratio is 0.0890 which means that the lenders have financed only 8.90% of the company’s net assets. This says that the company has less debt which is good for the financial health of the company.
Movement of Total Debt
To Net Worth
Year ending on 31st March 2009-10 2008-09 2007-08 2006-07 2005-06DEBT-EQUITY RATIO Total Debt 2082 2386 2800 3396 3647Net Worth 25794 19165 19342 17889 14115% of Debt / Net Worth 8.09% 11.21% 10.76% 13.34% 19.84%
Debt burden of the company is drastically reducing, is a good indication for the stakeholders that the company is able to withstand its financial need from
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its own generation and the siphoning of fund from outer sources is gradually in decreasing order.
Movement of Capital Employed To Net Worth
Year ending 31st March 09-10 08-09 07-08 06-07 05-06CAPITAL EMPLOYED to NW RATIO Capital Employed (NW+DEBT) 23451 16964 17108 16224 12741Net Worth 25794 19165 19342 17889 14115Growth rate of Stake holder (%) 90.92% 88.52% 88.45% 90.69% 90.27%
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Profitability Ratios
As per Consolidated Audited Accounts
Year Ending 31st March 09-10 08-09 07-08 06-07 05-06 (C) PROFITABILITY RATIOS Gross Profit 14101 5901 8888 8687 8879Sales 52188 46131 38866 35129 33997(a) Gross Profit Margin 0.27 0.13 0.23 0.25 0.26(Gross Profit / Sales) PAT 9622 2079 5243 5709 5892Sales 52188 46131 38866 35129 33997(b) Net Profit Margin 0.18 0.16 0.13 0.16 0.17PAT / Sales Assuming tax to be 33%EBIT 14101 5901 8888 8602 8788Sales 52188 46131 38866 35129 33997(c} Net Margin based on NOPAT 0.26 0.26 0.23 0.24 0.26(EBIT (1 - T) / Sales) Assuming tax to be 33%EBIT 14101 5901 8888 8602 8788Net Asset 12035 11021 10497 28828 14412(d) Return on Investment 0.61 0.61 0.61 0.30 0.61
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(EBIT (1 - T) / Net Asset) PAT 9622 2079 5243 5709 5892Net Worth 25794 19165 19342 17889 14115(e) Return on Equity 0.32 0.32 0.27 0.32 0.42(PAT / Net Worth) Year Ending 31st March 09-10 08-09 07-08 06-07 05-06(C) PROFITABILITY RATIOS (a) Gross Profit Margin 0.27 0.13 0.23 0.25 0.26(b) Net Profit Margin 0.18 0.16 0.13 0.16 0.17(c} Net Margin based on NOPAT 0.26 0.26 0.23 0.24 0.26(d) Return on Investment 0.61 0.61 0.61 0.30 0.61(e) Return on Equity 0.32 0.32 0.27 0.32 0.42
If we compare the Gross Profit Margin, Net profit Margin, Net Margin based on NOPAT, Return on Investment and Return on Equity of the year 2005-06 with 2009-10 we will see that the company is making profit and its operating efficiency is sound. Movement of Gross Profit
To Sales
Year ending 31st March 09-10 08-09 07-08 06-07 05-06GROSS PROFIT MARGIN Gross Profit 14101 5901 8888 8687 8879Sales 52188 46131 38866 35129 33997Return on Turnover 27.03% 12.80% 22.86% 24.73% 26.12%
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Graphical presentation is highlighting that the trend of return as well as the trend of Gross Turnover is in improving order but the rate signifies that there is marginal decline during 8-09 only due to pay revision and thus PBT has dropped.
Movement of PAT To Sales
Year ending 31st March 09-10 08-09 07-08 06-07 05-06NET PROFIT MARGIN Profit After Tax 9622 2079 5243 5709 5892Gross Sales 52188 46131 38866 35129 33997Rate of Return on Turnover 18.44% 4.51% 13.49% 16.25% 17.33%
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Improvement in the Gross Turnover is followed by improved return has established the positive growth of the company. Double digit growth has been witnessed during the year ’05-06 followed by ’06-07,07-08 and ’09-10.
Movement of EBIT To Sales
Year ending 31st March 09-10 08-09 07-08 06-07 05-06NET MARGIN based on NOPAT EBIT 14101 5901 8888 8602 8788Sales 52188 46131 38866 35129 33997Return on Turnover 27.02% 12.80% 22.87% 24.49% 25.85%
Growing growth in the turnover is viewed from the graph and the return is also following the same pattern, the growth is significantly high during 09-10 compared to all other years and there is marginal decline during the year of 08-09 during pay revision. Movement of EBIT To Net Asset
Year ending 31st March 09-10 08-09 07-08 06-07 05-06RETURN ON INVESTMENT EBIT 14101 5901 8888 8687 8879Net Asset 12035 11021 10497 10217 10143Share of Return on Investment 117.17% 53.54% 84.67% 85.02% 87.53%
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Return on Investment is significantly very high during the year 09-10. Viewed from the graphical representation it is appended that during the year of 05-06 and 09-10 the return is high but during 08-09 the return has dipped down significantly due to pay revision.
A CASE STUDY
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THE STORY OF REVIVAL OF A SICK COMPANY (BCCL)
BHARAT COKING COAL LIMITED Bharat coking coal limited (BCCL), the DHANBAD based coal India subsidiary, rich in coking coal reserve in the forerunner of the Indian nationalized coal sector. It was formed in 1971 through nationalization of coking coal mines and subsequently with nationalization of non coking coal mines BCCL become a unit of Coal India Limited (CIL) on 1-11-1975It operates 76 mines -74 arc in JHARIA COALFIELD2 in RANIGUNJ COALFIELD It has 41 underground mines 13 opencast mines 22 mixed mines Besides, bccl operates 6 coking coal washieres, 2 non-coking coal washeries and various other units
PERFORMANCE PARAMETRES -:
Production – 23.3 mts during 05-06Registering the growth of coal production of 1 mt over last yearProfit reported during five year 05-06 – Rs 205.08 crGross sales reported during five year 05-06- Rs 3467.04 crNet sales reported during five year 05-06- Rs 3112.28 cr Washeries loss till (03-04)
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It was managed to turn around in o4-05 with a profit of 58.38 cr and earned a profit of Rs 293.40 cr in 2005-06BCCL contributed an amount of Rs 458.05 cr to government exchange in the term from Royalty, Cess, Sales tax, Stowing excise duty (SED) and Entry tax during 2005.
PAST SCENARIO AND MEASURES INITIATED FOR TURN AROUND -:
Owing to various reasons BCCL has been consistently incurring losses over the years. Its turn- around in 2005-06 is the result of perseverance, dedication and resolve to its employee. The company reported loss of Rs 569.85 cr and cash loss of Rs 209 cr in 03-04.The turn around in less than 2 years from a near bankruptcySituation has been made possible through dedicated and sustained pursuit of a revival strategy focused on -:
Enhancing production of high value coking and washed coal Internalizing premium on coal marketed to non core sector through e –marketingArresting / reversing the trend of persistent decline in coal production since 1999-2000 Several decisive steps were taken towards the end of 03-04 and the order of priorities was re adjusted to turn around. In order to procure production holding items on a fast track and subsequent payment Worn out machines were surveyed off. Procurement of heavy earth moving machinery (HEMM) was adjusted as a new major thrust area To supplement the drive to improve production from departmental mines by revamping the existing capacity. Efforts were made to obtain coal from isolated patches by deployment of hired HEMM. A number of contracts were awarded in 05-06 for deployment of HEMM. In 03-04 on a production of 22.68 mts the company incurred a loss of Rs. 569.85 cr. This loss was equivalent to contribution of around 8 mts. In other words the break even level was 30.68mts achieving increase in production of such magnitude was ruled out under the given circumstances it therefore became imperative to focus on -: -Increase in production of high value prime washed coking coal & unshakable the constraints in value realization, wherever possible. Accordingly efforts were made to reserve the steep decline in washed coal production witnessed
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during the earlier year. As a consequence of all the above measures, acting in Tandem. BCCL earned profit slowly from operations, for the first time in its history of 05-06. During 06-07 BCCL has also registered it performance in line with 05-06 & the estimated profit is Rs.21crore
FUTURE PLAN Revamping departmental capacity Deploying hired HEMM for coal production from isolated patches. Long wall Mechanization is Moonidihi project Developments of MANDRA Block in BARORA Area Up gradation & modernization of washeries
It is estimated that net worth will be positive by 2010-11 & production will tend to 30mts by 2011-12.
A Similar Project like BCCL is ECL:Eastern coalfield limited (ECL) Eastern coalfield limited (ECL) a subsidiary of coal India limited was incorporated on Nov 1975; ECL’s estimated command area stretches over 1620 sq km of which 1530 sq km in Raniganj coalfield and remaining 90 sq km in Santal Parganas and Rajmahal coalfield. ECL mining operations are located in west Bengal and Jharkand and it operates a total of 113 mines of which 88 are underground and 19 opencast and rest 6 combined (OC and UG) spread over Ranigunj, Mugha-Salanpur and Hura coalfields.
PERFORMANCE PARAMETER During 2005-06 ECL recorded a coal production of 31.11 Million Tones at a growth of 14.18%. Coal dispatches to consumers were to the turn of 28.20 million tones registering a growth of 5.74 % .For the first time since its inception ECL achieved a profit of Rs. 371.96 crores during the year. This was way beyond the projected profit of Rs 55.11 cr. Reported to BIFR. ECL period Rs 884.91 Crore towards state central exchequer in the form of Royalty During 2005-06. During 06-07 the profitability is also ensured by at the end of March 07 to the tune of Rs 101 crore
PAST PERFORMANCE AND FACTORS THAT HELPED IN TURN AROUND Upon nationalization of coal sector in mid seventies centuries ECL acquired mines where the mining methods adapted by erstwhile private owners were unscientific. It also inherited large unskilled manpower the cumulative effect of these factors resulted in continuous losses since ECL come into being and the company had to b referred to BIFR in Nov 1999. ECL was declared as sick
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and state bank of India was appointed as its operating agency to prepare a revival plans for rehabilitation. Some of the silent features of the revival plan are -: Incremental production of 18.91 mts during 03-04 onwards till 2012-13 Increase in underground production to 13.81 mts by ’10-’11 through introduction of continuous mines, long wall technology at jhnajra, mechanization of manual districts Increase in opencast production to 33.70 mts during 2012 –13 through Rajmahal expansion. Opening in green field projects, expansion of Sonepur Bazari Project and Chitra opencast Outsourcing of 17 opencast patches to produce 23.25 mts from 2003-04 to 2010-2011 Introduction of high wall mining to produce 3.2 mts Conversion of current account balance into equity share capital by coal India limited and waiver of unsecured loan by CIL Investment of Rs 2591.40 crore from 03-04 to 12-13 through internal accrual. All these measure shall render net worth to become positive by Rs. 82.74 crore. During 2009-10 ECL is then expected to come out of BIFR.
RESULTS AND CONCLUSIONAIM: To analyze the Financial Statement of Coal India Limited for the past five years.COMMENT on OBJECTIVES:1. To measure the efficiency of the Organization – If we go through the ratio analysis part we will see that during the analysis of liquidity ratio there is positive growth from 2005-06 onwards. The liquidity position of the company is improving significantly and the terminal year has registered its growth positively and has established that current assets has exceeded over current liabilities.
There is also immense reduction of the percentage of debt during the years, which is the company has low financial risk which is beneficiary to the shareholders. If we go through the profitability ratios we will see that the company is making profit and its operating efficiency is sound.2. To judge the profit earning capacity of the Organization – The profitability position of the organization on the whole for last five years as has been depicted before is following a healthy and rising trend because of improved productivity, increased turnover and containing cost between single digit inflation.3. To know about the financial strength of the Organization – The debt burden of the company is drastically reducing, which is a good indication for the shareholders that the company is able to withstand it financial needs from its own generation and the siphoning of funds from outer sources is gradually in decreasing order. From the information in the dissertation, it can be said that the company is financially sound and it is identified that the company including its
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eight subsidiaries has attained the stage of profitability and it is a remarkable achievement in the arena of Financial Management.4. Information about activities in the Organization - In addition to above, the following jobs were also undertaken:
Revision of project reports/cost estimates.
Feasibility reports for coking/non-coking coal washeries.
Study on improvement/modernization of existing BCCL washeries.
Operational plans for large OC mines.
Environmental Management Plan (EMP) including EMP for Post-facto environmental clearance for incremental production.
Special reports for dealing with fire, subsidence and rehabilitation etc.
Detailed design and drawings, NIT, tender scrutiny etc.
Mine capacity assessment of underground & opencast mines of CIL.
Various technical studies relating to opencast & underground mines.
Performance analysis of HEMM operating in OC mines, Powered Support Long wall faces, Continuous Miners and intermediate technology using SDLs and LHDs in CIL mines.Preparation of Global bid documents for introduction of Long wall and Continuous Miner Technology in underground mines of CIL.COMMENT on HYPOTHESIS:-
The hypothesis was ‘The financial statements are mirrors which reflect the financial position and operating strength of the concern’, which is absolutely true because after analyzing and going through the data of the dissertation we can say that the financial position and operating strength of the company is sound.
As we have marked before, we will see that during the analysis of liquidity ratio there is positive growth from 2005-06 onwards. The liquidity position of the company is improving significantly and the terminal year has registered its growth positively and has established that current assets has exceeded over current liabilities. There is also immense reduction of the percentage of debt during the years, which is the company has low financial risk which is beneficiary to the shareholders. If we go through the profitability ratios we will see that the company is making profit and its operating efficiency is sound.Personal recommendationFrom the overall analysis of financial statements and component wise cost, the company is being looked from all the dimension and finally it can be concluded that economic health is sufficiently strong with huge cash reserve can enable the company for diversification and many other venture is being
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processed apart from the main business of coal mining. Cost aspect is also registering that the price increase is contained within the level of inflation in spite of many other extraneous factors.In my opinion it is a cash rich PSU and should go for diversification meeting all social commitment. In global context for its survival and growth many other conditional ties to be complied. Under corporate governance more transparency should be maintained and many other commitment to be achieved.
LIMITATIONS OF THE STUDY AND FUTURE SCOPE OF THE WORK
After reviewing all sets of financial data as well as statistical information of the company, an effort is taken to highlight the company’s financial position along with sufficient comment to diagnose the financial health from time to time. It is a drive with time constraint so overall review of the company from several direction cannot be viewed which can help the management to take concrete managerial decision. Further to note that the structure of company is massive in nature with manpower of 4, 26,000 with 465 mines scattered throughout whole of India varying geo-mining conditions with a different cost structure, it is not similar to any other industry to study the whole company in a single thrust. From my observation, it is identified that the company had tremendous potential for its growth and expansion. Now the facing problem of land acquisition, so further expansion is restricted, so the company should think for alternative set of business and the
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new venture which the company has already adopted viz. setting up of Coal Videsh, approved by the Coal India board for its formation as its separate subsidiary to pursue foreign ventures.
APPENDICES
CIL – Coal India LimitedONGC- Oil and Natural Gas CorporationCA- Current AssetCL- Current LiabilitiesFormulas used in Ratio Analysis1. Current Ratio= CA/CL2. Quick Ratio=Quick Asset/Current Liability3. Net Working Capital Ratio=Net Working Capital/Net Asset4. Debt Ratio=Total Debt/Capital employed5. Debt Equity Ratio=Total Debt/Net Worth6. Capital Employed to Net Worth Ratio=Capital Employed/Net
Worth7. Gross Profit Margin=Gross Profit/Sales8. Net Profit Margin=Profit After Tax(PAT)/Sales9. Net Margin based on NOPAT=EBIT-Tax/Sales10. Return on Investment=EBIT-Tax/Net Asset11. Return on Equity=PAT/Net WorthEBIT=Earning before interest and taxNOPAT=Net operating profit after tax
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BIBLIOGRAPHY
Reference book:
Financial Management by I.M. PandeyFinancial Management by Dr.S.P. GuptaManagement Accounting by Khan & Jain
Annual Reports and accounts of 2006-07 of Coal India Limited.Non-print media
www.coalindia.nic.inwww.coalindialimited.comwww.cil.com
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