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CHAPTER - I
1.1 INTRODUCTION
Working capital management is the part of financial management. In working capital
management, management of cash, management of inventory, management of debtor and
creditor will include.
The study of working capital behavior occupies an important place in financial
management. The earlier emphasis of financial management was more on a long-term financial
decision. Working capital management, which is concerned with short – term financial decision,
appears to have been relatively neglected in the literature of finance.
The developing economies generally face the problem of inefficient utilization of
esources available to them. !apital is the scarce productive resource in such economies and
hence a proper utilization of these resources promotes the rate of growth, cuts down the cost of
production and above all, improves the efficiency of the productivity system. "i#ed capital and
working capital are the dominant contributors to the capital of a developing country. "i#ed
capital investment generates productive capacity, whereas working capital makes the utilization
of that capacity possible.
Working capital management $W!%& is the management of short-term financing
re'uirements of a firm. This includes maintaining optimum balance of working capital
components – receivables, inventory and payables – and using the cash efficiently for day-to-day
operations. (ptimization of working capital balance means minimizing the working capital
re'uirements and realizing ma#imum possible revenues. )fficient W!% increases firms* free
cash flow, which in turn increases the firms* growth opportunities and return to shareholders.
)ven though firms traditionally are focused on long term capital budgeting and capital structure,
the recent trend is that many companies across different industries focus on W!% efficiency.
There is much evidence in the financial literature that present the importance of W!%.
esults of empirical analysis show that there is statistical evidence for a strong relationship
between the firm*s profitability and its W!% efficiency. +owever the study undertaken based on
the data from !"( magazine on the rankings of firms on W!% efficiency reveals that the
measures of W!% efficiency vary across different industries.
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The study also gives significant evidence that issues of W!% are different for different
industries and firms from different industry sectors adopt different approaches to working capital
management. "irms follow an appropriate working capital management approach that is
favorable to their industry. "irms in an industry that has less competition would focus on
minimizing the receivable to increase the cash flow. "or firms in industry where there are large
numbers of suppliers of materials, the focus would be on ma#imizing the payable. The
Telecommunication industry is characterized by high intensive working capital re'uirements and
high competition because of rapid technology changes, which make the W!% crucial to bring
attractive earnings to shareholders. The study undertaken based on the data from !"( magazine
on the rakings of firms on W!% efficiency gives statistical evidence that telecommunication
industry showed.
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Working Capital Management Concept
The working capital meets the short-term financial re'uirements of a business enterprise. It is the
investment re'uired for running day-to-day business. It is the result of the time lag between the
e#penditure for the purchase of raw materials and the collection for the sales of finished products. The components of working capital are inventories, accounts to be paid to suppliers,
and payments to be received from customers after sales. "inancing is needed for receivables and
inventories net of payables. The proportions of these components in the working capital change
from time to time during the trade cycle. The working capital re'uirements decide the li'uidity
and profitability of a firm and hence affect the financing and investing decisions. esser
re'uirement of working capital leads to less need for financing and less cost of capital and hence
availability of more cash for shareholders. +owever the lesser working capital may lead to lost
sales and thus may affect the profitability.
The management of working capital by managing the proportions of the W!% components is
important to the financial health of businesses from all industries. To reduce accounts receivable,
a firm may have strict collections policies and limited sales credits to its customers. This would
increase cash inflow. +owever the strict collection policies and lesser sales credits would lead to
lost sales thus reducing the profits. %a#imizing account payables by having longer credits from
the suppliers also has the chance of getting poor 'uality materials from supplier that would
ultimately affect the profitability. %inimizing inventory may lead to lost sales by stock-outs.
The working capital management should aim at having balanced optimal proportions of
the W!% components to achieve ma#imum profit and cash flow.
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1.! O"#ECTI$E% O& THE %TUD'
Primar( o)*ecti+e
• To study about the Working capital management and atio nalysis in /eyveli ignite
!orporation imited.
%econ,ar( o)*ecti+e
• To analyze the working capital re'uirement of /eyveli ignite !orporation imited for
the period 0112-13 to 0140-45.
• To analyze the changes in working capital.
• To analyze and evaluate li'uidity position of the company.
• To analyze and evaluate the profitability position of the company.
• To analyze and evaluate the level of current asset and current liability.
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1. %COPE O& THE %TUD'
This study is about the ratio analysis of 6W(7I/8 !9IT %/8)%)/T:,
which is a part of financial analysis. atio analysis is perhaps the first financial tool
developed to analyze and interpret the financial statement and is still used widely for
this purpose.
The company to understand its own position over time.
The present and potential investors, outside parties such as the creditors, debtors,
government and many more to get an idea of the overall performance of the firm.
atio analysis is the specific area of finance dealing with the financial decision
corporations make, and the tools and analysis used to make the decisions.
It may divide as long-term and short-term decisions and techni'ues.
1. NEED &OR THE %TUD'
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To know the company*s working capital.
To pay wages and salaries.
To incur day to day e#penses.
To maintain inventories of raw materials, work in progress and finished goods.
8ives a company the ability to meet its current liabilities.
1./ RE%EARCH METHODO0O'
The term 6esearch: refers to the systematic method consisting of enunciating the
problem, formulating a hypothesis, collecting the data, analyzing the facts and reaching certain
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conclusions either in the form of solutions towards the concerned problem or in certain
generalized form of some theoretical formulation.
RE%EARCH DE%IN2
esearch design is the blue print for doing the research. It is the arrangement of conditions for
collection and analysis of data in a manner that aims to combine relevance to the research
purpose with economy in procedure.
This is an empirical study based on the financial information contained in the annual
reports of /!. The study adopts descriptive methodology for evaluating the financial
performance of the organization.
study on financial performance of /eyveli ignite !orporation imited has been made
by calculating various ratios. The data for such analysis have been e#tracted from the financial
statements. These ratios have been interpreted and conclusions have been drawn. ;ased on
which, suggestion have been made to improve the financial performance of /eyveli ignite
!orporation imited.
CONCEPT O& WOR3IN CAPITA0
4. 8ross Working !apital
0. /et Working !apital
RO%% WOR3IN CAPITA0
It refers to the firm*s investment in total current or circulating assets. ccording to this concept,
the working capital refers to the firm*s total investment in current assets. !urrent assets mean
assets which can be converted into cash within an accounting year. !urrent assets include cashand bank balance, bills receivable, sundry debtors, inventory, prepaid e#penses.
NET WOR3IN CAPITA0<
ccording to this concept the working capital refers to the difference between current assets and
current liabilities. !urrent liabilities refer to the claims of outsiders which are e#pected to mature
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for payment within an accounting year. /et working capital can be positive or negative. 9ositive
/etworking capital arises when current assets e#ceed current liabilities. /egative net working
capital occurs when current liabilities are in e#cess of current assets.
PERIOD O& %TUD'
The period of the study for pro=ect work is > month.
TOO0% U%ED
The data collected are analyzed with the help of the following tools
atio nalysis
!omparative ?tatement (f Working !apital
!ommon ?ize ;alance sheet.
DATA CO00ECTION2
%ECONDAR' DATA2
The secondary data on the other hand are those which have already been collected by
someone else. The analysis of working capital management of the organization necessitatesaccurate and reliable data. Therefore the sources for collecting the data include secondary data.
"or the purpose of the study available secondary data is used. The nnual eports of the
company for the past five years $i.e.& "[email protected] to "[email protected] constituted the basis of the
study. "or the purpose of nalysis, "inancial statements viz.., "und "low ?tatements and
"inancial atios relating to working capital on specific current assets were used. Information
collected from the above source helped the researcher to conduct the study successfully.
P0AN O& ANA0'%I%<
The study is made only by using accounting ratios, comparative statements and average
performance. It is basically a common size statement analysis. The five years gross and net
working capitals are obtained. The percentage shares of the components of working capital are
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compared to that of the standard norms and deviations if any are described as either favorable or
unfavorable.
Aiagrammatic presentations of statistical data are e#hibited through bar diagrams, 9ie
!harts for analysis of data for better understanding.
%INI&ICANCE O& THE %TUD'
The working capital of an organization is the lifeblood, which flows through the veins
and arteries. It gives courage and moral to the brain $management& and the muscles $personnel&.
It digests to the best degree, the raw material used, by its constant and regular flow and returns to
the heart $cash flow& for another =ourney. +ence when working capital is lacking or slow, the
financial bodies have value only as a =unk.
"unds are needed for short term purposes, viz., for purchases of raw material payments of
wages and other day to day business e#penses. %any a times, in the event of failure of a
business concern, the shortage of working capital is given out as its main cause. ;ut in ultimate
analysis, it may be the mismanagement of resources of the firm that could have converted the
otherwise successful business, an unsuccessful one. firm can e#ist and survive without making
profit but cannot survive without working capital funds.
Working capital has ac'uired a great significance and a sound position for the twin ob=ects of
69rofitability and i'uidity:. It consumes a great deal of time to increase profitability as well as
to maintain proper li'uidity at minimum risk. ?o the effective management of working capital is
the primary means of achieving the firm*s goal of ade'uate li'uidity, which helps to measure the
degree of protection against problems that might cause a shortage of funds. )ssentially, the
efficient management of working capital minimizes risk in the repayment of its sources of
finance, thereby contributing to the ma#imization of firm*s value.
The present study on working capital management of /eyveli ignite !orporation td
enables the organization to efficiently manage its working capital components and achieve the
goal of ma#imizing the value of the organization.
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1.4 0IMITATION% O& THE %TUD'
The working capital analysis is based on the annual reports published by the
organization. Thus the reliability of the analysis is depending on the data provided
in the balance sheets.
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The study on working capital management is confined to a period of B years, i.e.,
from 0112-0113 to 0140-0145 due to time constraints.
The study is based on secondary data and not on the basis of primary data.
The study is based on the accounting standards and not based on the economic
condition.
CHAPTER 5 I1
!.1 COMPAN' PRO&I0E
/eyveli ignite !orporation is a large-scale business organization with its core activities of
lignite mining and power generation in /eyveli.
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/! is a profitable business entity with the firm of running business for more than B1 year. In
the year 011>, it celebrated its golden =ubilee. The occurrence of lignite in neyveli, district of
Tamilnadu first became known in 435C the than government of madras took up regular
e#ploration the 43C5 to democrat the e#tant of the field. %eaning operation $mine& commenced
in %ay 43BD.
/eyveli ignite !orporation limited $/! td& was register as a company on 4C th /ovember
43B> under companies act 43B>. The mining operations in mine-I were formally inaugurated on
01th may 43BD by the then prime minister pandit Eawaharlal /ehru of the total deposits of 5D4BC
million tones $as on 4.C.011B& of lignite in India, neyveli has a geological minable reserves of
043C million tonnes. In Tamilnadu, Eayamkondacholapuran, %annargudi and east and Eammu
F7ashmir are the other states in which lignite resources were identified. The lignite occurrence
depths vary from 011 to 511 meters deeper.
The ma=or lignite deposits in India are in the status of Tamilnadu, a=asthan, 8u=arat, Eammu and
7ashmir, and 7erala. bout 20G of the lignite reserves in the country are in Tamilnadu and
puducherry. /eyveli is endowed with proven e#istence of C4B1 million tones of lignite in an area
of C21s'.km.
Today %ine-I and II and I are producing 0C %illion Tons per annum. /eyveli opens cast
ignite %ines are the first of its kind, which have obtained I?( 3114
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0ignite Depoit in Ne(+eli
ignite is the younger offspring of the coal family. It is a fossil fuel belonging to the
%iocene age $0B million years&. 9opularly known as 6;rown !oal:, lignite is tan brown in color,
light to handle and brittle in nature. This fuel is born from vegetable matter having undergone
bio-chemical decay to the stage of peat $rotten wood& and then metamorphosed to lignite under
the pressure of the soil above through floods, movements of the earth*s crust and dehydration
when the pressure of the lignite, particularly the horizontal thrust is further increased, lignite is
made more dense, less volumetric and becomes coal as such. The lignite mined at /eyveli varies
in color from brown to dark brown and has a non-bonded granular structure. %icroscopic studies
of these sections prepared from bulk samples of lignite indicate that the fuel is composed of a
wide variety of plant ingredients, mainly of coniferous nature.
$iion
To emerge as a leading %ining and 9ower !ompany, continue to be a socially responsible
company and strive for operational e#cellence in %ining and )#ploration.
Miion
?trive towards greater cost competitiveness and work towards continued financial strength.
!ontinually imbibe best practices from the best Indian and International (rganizations engaged
in 9ower 8eneration and %ining. ;e a preferred employer by offering attractive avenues of
career growth and e#cellent work environment and by developing human resources to match
international standards. 9lay an active role in society and be sensitive to emerging environmental
issues.
/eyveli, the home of the /eyveli ignite !orporation td., is today India*s )nergy ;ridge to the
04st century and a fulfillment of 9andit /ehru*s vision. Incidentally, 9andit/ehru and /! share
a common birthday $4C.44.43B>& and /! td., is celebrated the year $011>& as the 8olden
Eubilee @ear.
HUMAN RE%OURCE
With a view to develop and maintain harmonious relationships at workplace and striking a
balance between organizational goals and individual goals, our !ompany continues to have good
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+ practices and recognize the huge potential of its human resource. The thrust on achieving
higher growth coupled with optimal utilization of manpower continued. The focus on improving
productivity and adoption of best practices in every area was relentlessly pursued. )fforts for
active participation by employees has been at the core + initiative and interventions. The total
manpower of our company as on 14.14.014C was 4D,5>C.
HIH0IHT% O& NE'$E0I 0INITE CORPORATION 0IMITED
+ighest overburden removal and lignite production in any year since inception.
ll time high generation and e#port of power.
ignite production from %ine-II highest in any year since inception.
+ighest ever lignite production from ;arsingsar %ine.
+ighest ever generation and e#port of power from T9?-II F T9?-I )#pansion.
%ore than 31G 9lant oad "actor achieved by T9?-I e#pansion. The authorized share capital has been s.0111 crores and the issue and past share capital
to s.4>DD.D4 crores
CORPORATE %OCIA0 RE%PON%I"I0IT'2
(ur company, as a socially responsible corporate citizen, has been carrying out development
works in the surrounding villages, right from its inception.
n nnual !? budget of not less than 4G of the profit after ta# has been created by our
company and the !? pro=ects are monitored periodically by a ?ub- committee of ;oard of
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PRODUCTION
0ignite
%ine-I T D3.>1 DD.5C 25.1B 34.B3 31.C1
%ine-I T 03.C1 02.DD 0D.43 0D.44 51.B>
%ine-II T 453.CC 451.3> 44D.44 41C.C5 34.13
;arsingsar %ine T 45.D3 2.25 C.13 1.0B 4.10
TOTA0 0T !4!.! !/.76 !1. !!.8 !1.69
Po:er
T.9.?.-I -8ross %M C15B.C5 532D.2B 52D2.>B C44C.CC 5BDD.C3
-/et
%M
5B>3.CC 5B41.BB 5C11.BC 5>51.45 54C4.15
T.9.?.-I )#pn. -8ross %M 5543.DD 51C0.>2 033D.1C 03D3.C5 540>.1B
-/et
%M
515B.B2 0213.3D 0DC5.CC 0D01.40 02B2.C0
T.9.?.-II -8ross %M 44052.13 4412D.>B 41D53.D2 41BB3.>3 31>C.CC
-/et
%M
414B0.4> 41142.3> 3D14.B4 3BC3.33 24D0.4C
;arsingsar T.9.?. -8ross %M 4021.2B >4D.>2 0>B.>4 0.C2 1.11
-/et
%M
4442.C1 B4C.03 435.CB 0.C2 1.11
T.9.?.-II )#pn. -8ross %M 02.01 B5.B2 1.11 1.11 1.11
-/et
%M
43.24 53.5C 1.11 1.11 1.11
TOTA0 -ro MU 1776!. 18987. 19881.68 194/4.6 1/949.78
-/et
%M
4D23B.53 4>235.44 4>152.3C 4B310.D0 4C4D4.B3
%A0E%
0ignite 0T !9./4 !9.18 !1.48 !1.47 !1./
Po:er MU 1481./1 1/816.49 1791.!4 18!8.!! 1!6.6/
!. RE$IEW O& 0ITERATURE
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There is no unanimity in the definition of the working capital. There are as many definitions of
the concepts as there are many authors on financial management, some of the definitions are
reproduced below<
6Working !apital is the e#cess of current assets over current liabilities:
+arry 8. 8uthman and +erbert ). Aougall.
%ost commonly, working capital is defined as the e#cess of current assets of a business $!ash,
ccounts eceivable Inventories& over current items owned to employees and others $such as
salaries, wages ccounts 9ayable owned to the 8overnment.&
- Ar. !olin 9ark and 9rof. 8ladson
6!urrent ssets by definitions are assets normally converted into cash within one year. Working
capital management usually concerned to involve the administration of these assets namely cash
and marketable securities, receivables and inventories:.
- Eames !. van +orne
(f these definitions, net working capital concept is more popular and has pragmatic value.
)conomists like ineout ?ailor*s approve of the net working capital on the following grounds<
a. It enables the creditors and investors to =udge the financial soundness of the enterprise.
b. The e#cess of the current assets over current liabilities is the only amount that can rely
upon to meet contingencies and emergencies.
c. The comparison of two concerns having the same amount of current assets can be done
only with the help of these concepts.
"aner*ee t;,( on corporate li
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ccording to +ampton $4325& the working capital management is the functional area of
finance that covers all the current accounts of the firm. It is concerned with the ade'uacy of
current assets as well as the level of risk posed by current liabilities. +e also viewed that the
firm*s policies for managing its working capital should be designed to achieve three goals such
as ade'uate li'uidity minimization of risk and contribute to minimizing firm value.
3no: >%co? > Martin an, Pett( +ie: on managing t?e in+etment
ccording to 7now, ?coh, %artin and 9etty $4325& working capital management
involves managing the firm*s li'uidity, managing the firm*s investments in current assets and its
use of current assets was found to reduce the firm*s risk of li'uidity at the e#penses of lowering
its overall rate of return on its investment in assets. "urthermore the use of long term sources of
financing was found to enhance the firm*s li'uidity, which reduces the rate of return on assets.
%arma an, Re,,( t;,( on li& in his work on working capital management of /epal )nterprise used
econometric models to describe the demand for working capital and its various components.
Msing regression and coefficient of variation, it is used to find holding costs also.
Re,,( t;,( on maintaining t?e li
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DATA ANA0'%I% AND INTERPRETATION
This chapter deals with the study of working capital management of /eyveli ignite !orporation
imited. The tools used for the study are common size statements and ratio analysis.
RO%% WOR3IN CAPITA02
The 8ross Working !apital of /eyveli ignite !orporation imited registered trend
during the entire period of the last five years of study. It has gone up to from s.DB2>.42 crores
in 0112-13 to s. 2405.4Ccrores in 0140-45.
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TA"0E 5 .1.1
%TATEMENT O& RO%% WOR3IN CAPITA0 R. In CroreB
COMPONENT%
O& CURRENT
A%%ET%
!668-
!667
!667-
!616
!616-!611 !611-
!61!
!61!-
!61
Inventories B5B.2B B10.3> C34.D4 4B1>.4
3
>25.D0
?undry Aebtors D24.CC 4>44.>
0
0010.53 5>CD.1
5
5211.0
D
!ash and ;ank
balance
BC20.4
3
C205.>
5
CC01.D5 5503.4
1
02>>.>
C
(ther current ssets 423.C2 4>C.B> 4DD.C2 4B>.0C 4>0.0C
oans and dvances B3D.00 B24.B3 BB3.24 C1>.21 >41.0D
TOTA0
CURRENT
A%%ET%
9/84.1
8
948.
4
98/!.1! 86/.8
4
81!.1
%o;rce2 !ompiled from the nnual eports of /! td.
8ross working capital includes various current assets such as inventory, sundry debtors,
cash and bank balances and loans and advances. The position of gross working capital, the
components of gross working capital and their percentage in the total assets are shown in Table-4
The components of !urrent iabilities and their percentage in the total !urrent iabilities
are shown in Table-0.
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TA"0E-.1.!
CURRENT 0IA"I0ITIE% AND PRO$I%ION% R. In Crore
%TATEMENT O& CURRENT
0IA"I0ITIE%
!668-67 !667-16 !616-11 !611-1! !61!-1
A. C;rrent lia)ilitie
4. ?undry creditors and
accrued e#penses
0. %ine closure
5. !apital works and
purchases
C. (ther liabilitiesB. Mnutilised revenue grant
>. Mnclaimed dividend
D. ?taff security deposit
2. Interest accrued but not
due
a. /eyveli ;onds b. !alyon ;ank
c. 7fW
D5C.4>
533.01
CD4.C4
C54.5C
2.5B
1.>5
1.14
3.2D
0.DD
4.4>
44DB.D1
C34.C1
C0>.>1
0D>.2D
>.04
4.02
1.14
3.2D
1.3>
4.14
4415.55
412.3C
C20.3C
000.1C
5.3C
1.2>
1.14
3.2D
4.4D
4.14
0B0.5C
42.2D
432.2B
432.CB
C.D2
1.35
1.14
3.2D
0.42
4.1B
0>>.B3
43.21
004.CB
004.CB
>.33
4.0D
1.14
3.33
4.3
4.15
". Pro+iion =or
4. ccrued earned leave0. +alf pay leave
5. ?hort-term benefit ofearned leave
C. ?hort-term benefit of half
pay leave
B. 8ratuity
>. !ontingencies
3>.1>
C3.42
5.C>
4.C2
4C5.C4
D1.55
5.C5
4.3B
3>.1>
51.5B
C.5>
0.BD
401.>2
BC.5>
41.>3
C.04
31.>>
1.11
B.B2
5.D5
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D. 9ostretirement medical
benefit
2. oss on assets
3. 9roposed final dividend
41. 9roposed final dividendta#
015.DD
5B.45
41.4B
1.2>
55B.BC
BD.15
4C4.5D
CC.20
44.C2
1.2>
4>D.DD
0D.2>
1.11
BC.20
40.CB
1.2>
52B.2D
>0.>1
B2.01
C>.>1
4C.32
4.11
C>3.D>
D>.04
C0.1B
2C.22
4D.04
1.C4
514.33
B4.55
TOTA0 18.6 66.17 !84.1 1/.6! 18.!
%o;rce2 !ompiled from the nnual eports of /! td..
"rom the 9revious Table, it is inferred that the current liability of /! show a mi#ed trend. It
was low in 0112-13 i.e. s. 425C.1C !rores but gradually raised to s. 45C2.50!rores in 0140-
45.
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TA"0E -.1.
COMPONENT% O& CURRENT A%%ET% !668-67R. In CroreB
COMPONENT% O&
CURRENT A%%ET% !668-67 PERCENTAE
Inventories B5B.2B D.1>
?undry Aebtors D24.CC 41.5
!ash and ;ank balance BC20.43 D0.0>
(ther current ssets 423.C2 0.C3
oans and dvances B3D.00 D.2D
TOTA0 CURRENT A%%ET% 9/84.18 166
%o;rce2 !ompiled from the nnual eports of /! td.
CHART - .1.
COMPONENT% O& CURRENT A%%ET% !668-67
535.85
781.44
5482.19
189.48
597.22 Inventories
Sundry Debtors
Cash and Ban
ba!an"e
#ther "urrent $ssets
%oans and $dvan"es
TA"0E -.1.
COMPONENT% O& CURRENT A%%ET% !667-16R. In CroreB
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COMPONENT% O&
CURRENT A%%ET% !667-16 PERCENTAE
Inventories B10.3> >.BB
?undry Aebtors 4>44.>0 01.3D
!ash and ;ank balance C205.>5 >0.DD
(ther current ssets 4>C.B> 0.4C
oans and dvances B24.B3 D.BD
TOTA0 CURRENT A%%ET% 948.4 166
%o;rce2 !ompiled from the nnual eports of /! td.
CHART - .1.
COMPONENT% O& CURRENT A%%ET% !667-16
502.961611.62
4823.63
164.56581.59 Inventories
Sundry Debtors
Cash and Ban
ba!an"e
#ther "urrent $ssets
%oans and $dvan"es
TA"0E -.1./
COMPONENT% O& CURRENT A%%ET% !616-11R. In CroreB
COMPONENT% O&
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CURRENT A%%ET% !616-11 PERCENTAE
Inventories C34.D4 >
?undry Aebtors 0010.53 02
!ash and ;ank balance CC05.33 BD
(ther current ssets 4DD.C3 0
oans and dvances B>1.1B D
TOTA0 CURRENT A%%ET% 98//.4 166
%o;rce2 !ompiled from the nnual eports of /! td.
CHART - .1./
COMPONENT% O& CURRENT A%%ET% !616-11
491.71
2202.39
4423.99
177.49
560.05 Inventories
Sundry Debtors
Cash and Ban
ba!an"e
#ther "urrent $ssets
%oans and $dvan"es
TA"0E .1.4
COMPONENT% O& CURRENT A%%ET% !611-1!R. In CroreB
COMPONENT% O&
CURRENT A%%ET% !611-1! PERCENTAE
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Inventories B1>.43 >.04
?undry Aebtors 5>CD.15 CC.DB
!ash and ;ank balance 5503.41 C1.2B
(ther current ssets 0B3.CC 5.42
oans and dvances C1>.21 C.33
TOTA0 CURRENT A%%ET% 818./4 166
%o;rce2 !ompiled from the nnual eports of /! td
CHART - .1.4
COMPONENT% O& CURRENT A%%ET% !611-1!
506.19
3647.033329.1
259.44
406.8 Inventories
Sundry Debtors
Cash and Ban
ba!an"e
#ther "urrent $ssets
%oans and $dvan"es
TA"0E .1.9
COMPONENT% O& CURRENT A%%ET% !61!-1R. In CroreB
COMPONENT% O&
CURRENT A%%ET% !61!-1 PERCENTAE
Inventories >25.D0 2.C
?undry Aebtors 5211.0D C>.D
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%ine !losure 533.01 45.3D
(ther iabilities CB3.50 4>.1D
9rovisions D30.>> 0D.DC
Total C;rrent 0ia)ilitie !8/4.9/ 166
%o;rce2 !ompiled from the nnual eports of /! td.
CHART 5 .1.8
COMPONENT% O& CURRENT 0IA"I0ITIE% !668-67
734.16
471.41
399.2459.32
792.66 Sundry Creditors
Ca&ita! 'ors (
)ur"hases
*ine C!osure
#ther %iabi!ities
)rovisions
TA"0E 5 .1.7
COMPONENT% O& CURRENT 0IA"I0ITIE% !667-16R. In CroreB
COMPONENT% O&
CURRENT 0IA"I0ITIE%
!667-16R. In Crore PERCENTAE
?undry !reditors 44DB.D1 53
!apital Works F 9urchases C0>.>1 4C
%ine !losure C34.C1 4D
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(ther iabilities 0D>.2D 3
9rovisions >45.02 04
Total C;rrent 0ia)ilitie !78.8/ 166
%o;rce2 !ompiled from the nnual eports of /! td.
CHART 5 .1.7
COMPONENT% O& CURRENT 0IA"I0ITIE% !667-16
1175.7
426.6491.4
276.87
613.28
Sundry Creditors Ca&ita! 'ors ( )ur"hases *ine C!osure
#ther %iabi!ities )rovisions
TA"0E 5 .1.16
COMPONENT% O& CURRENT 0IA"I0ITIE% !616-11R. In CroreB
COMPONENT% O&
CURRENT 0IA"I0ITIE%
!616-11
R. In Crore PERCENTAE
?undry !reditors 4412.21 53
!apital Works F 9urchases D04.CD 0>
%ine !losure 412.3C C
(ther iabilities 00B.4B 2
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9rovisions >C3.3C 05
Total C;rrent 0ia)ilitie !81. 166
%o;rce2 !ompiled from the nnual eports of /! td.
CHART 5 .1.16
COMPONENT% O& CURRENT 0IA"I0ITIE% !616-11
1108.8
721.47
108.94
225.15
649.94 Sundry Creditors
Ca&ita! 'ors (
)ur"hases*ine C!osure
#ther %iabi!ities
)rovisions
TA"0E 5 .1.11
COMPONENT% O& CURRENT 0IA"I0ITIE% !611-1!R. In CroreB
COMPONENT% O&
CURRENT 0IA"I0ITIE%
!611-1!
R. In Crore PERCENTAE
?undry !reditors 0B0.5C 45.4
!apital Works F 9urchases 432.2B 41.5
%ine !losure 42.2D 1.3
(ther iabilities >CD.C1 .9
9rovisions D32.C3 C4.>
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Total C;rrent 0ia)ilitie 171/.7/ 166
%o;rce2 !ompiled from the nnual eports of /! td.
TA"0E 5 .1.11
COMPONENT% O& CURRENT 0IA"I0ITIE% !611-1!
252.34
198.85
18.87
647.4
798.49
Sundry Creditors
Ca&ita! 'ors (
)ur"hases*ine C!osure
#ther %iabi!ities
)rovisions
TA"0E 5 .1.1!
COMPONENT% O& CURRENT 0IA"I0ITIE% !61!-1R. In CroreB
COMPONENT% O&
CURRENT 0IA"I0ITIE%
!61!-1
R. In Crore PERCENTAE
?undry !reditors 0>>.B3 3.3
!apital Works F 9urchases 004.CB 2.0
%ine !losure 43.21 1.D
(ther iabilities 4>02.CC >1.C
9rovisions BBB.D3 01.>
Total C;rrent 0ia)ilitie !47!.69 166
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%o;rce2 !ompiled from the nnual eports of /! td.
TA"0E 5 .1.1!
COMPONENT% O& CURRENT 0IA"I0ITIE% !61!-1
266.59
221.45
19.8
1628.44
555.79 Sundry Creditors
Ca&ita! 'ors (
)ur"hases
*ine C!osure
#ther %iabi!ities)rovisions
CA0CU0ATION O& NET WOR3IN CAPITA0
/et working capital is a 'ualitative concept. It indicates the li'uidity position of the firm and
suggests the e#tent to which working capital needs may be financed by permanent source of
funds.
Net :orking Capital N !urrent sset – !urrent iabilities.
TA"0E 5 .1.1
CA0CU0ATION O& NET WOR3IN CAPITA0
R.in Crore
'EAR% CURRENT CURRENT NET WOR3IN
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A%%ET% 0IA"I0ITIE% CAPITA0
!668-!667 DB2>.42 02B>.DB CD03.C5
!667-!616 D>2C.5> 0325.2B CD11.B4
!616-!611 D2B0.40 0B>D.43 B02C.35
!611-!61! 24C2.B> 0D>1.3B B52D.>4
!61!-!61 254C.>B 0D2C.5C BB51.5C
%o;rce2 !ompiled from the nnual eports of /! td
CHART 5 .1.1
NET WOR3IN CAPITA0
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2 0 0
8 + 2 0 0
9
2 0 0
9 + 2 0 1
0
2 0 1
0 + 2 0 1
1
2 0 1
1 + 2 0 1
2
2 0 1
2 + 2 0 1
3
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
C,--/ $SSS
C,--/ %I$BI%IIS
/ '#-I/ C$)I$%
RATIO ANA0'%I%
atio nalysis is a powerful tool of "inancial nalysis. atio nalysis of business
enterprises centers on efforts to drive 'uantitative measures or guides concerning the e#pected
capacity of the firm to meet its future financial obligations or e#pectations. The ratio analysis
facilitates a firm to consider the time dimensions into account i.e., whether the financial position
of a firm is showing any improvement or deteriorating over years.
atio is known as one number e#pressed in terms of another, it is an e#pression of
relationship spelt out by dividing one figures into the other.
T'PE% O& RATIO%
atios are classified in broad groups. They are as follows<
i'uidity atios.
everage atios.
ctivity ratios.
9rofitability atios.
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0IUIDIT' RATIO
i'uidity ratios derive a picture of the capacity of a firm to meet its short term obligations
out of its short term resources. These ratios constitute ratio-analysis of the short-term financial
position. i'uidity ratios, by establishing a relationship between cash and other current assets tocurrent obligations, provide a 'uick measure of li'uidity.
The most common ratios which indicate the i'uidity are<
!urrent atio
Huick atio
!ash 9osition atio
CURRENT RATIO
!urrent atio is the relationship between the total current assets and current liabilities. It
is the ratio of the current assets and current liabilities and is found out by dividing the current
assets by the current liabilities. s the ratio is connected with the working capital O!urrent ssets
– !urrent iabilitiesP and it is also called working capital ratio. !urrent ratio is the indicator of
short term li'uidity position of a firm.
!urrentssets
C;rrent Ratio N -----------------------
!urrentiabilitie
TA"0E 5 .1.1
CURRENT RATIO
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(Rs. in crores)
'ear
C;rrent
Aet
C;rrent
0ia)ilitieRatio
0112-13 DBBD.1D 02B4.B> 0.>
0113-41 D>2C.5> 0BC4.2B 5.10
0141-44 D2BB.>5 0B>D.43 5.1>
0144-40 24C2.B> 0D>1.3B 0.3B
0140-45 D>51.35 0002.BB 5.C0
%o;rce2 !ompiled from the nnual eports of /! td.
CHART 5 .1.1
CURRENT RATIO
2008+09 2009+10 2010+11 2011+12 2012+13
0
0.5
1
1.5
2
2.5
3
3.5
4
2.63.02 3.06 2.95
3.42
INTERPRETATION
The calculated current ratio of the company was decrease from the 5.C0
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increased from DBBD.1Dcrore to D>51.35crore due to increase in cash and bank balance has a
main constituent of current asset. +ence the li'uidity of the company is high for the period under
the review from the current ratio point of view.
UIC3 RATIO
It is also a tool of testing the li'uidity of an organization. This ratio is also called as
i'uid atio $or& cid test ratio. cid Test atio or i'uid atio is concerned with the
relationship between i'uid ssets and !urrent iabilities. Huick atio is an Indicator of ?hort
term solvency of the company.
i'uidssets
;ick Ratio N ----------------------
!urrentiabilities
TA"0E 5 .1.1/
UIC3 RATIOR. in croreB
'ear
;ick
Aet
C;rrent
0ia)ilitie
Ratio
0112-13 D104.00 02B4.B> 0.C
0113-41 >1DB.10 0BC4.2B 0.53
0141-44 D44C.25. 0B>D.43 0.DD
0144-40 DDD4.B5 0BB3.D3 5.1C
0140-45 D>51.35 0002.BB 5.C0
%o;rce2 !ompiled from the nnual eports of /! td
CHART 5 .1.1/
UIC3 RATIO
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2008+09 2009+10 2010+11 2s011+12 2012+13
0
0.5
1
1.5
2
2.5
3
3.5
4
2.4 2.392.77
3.043.42
INTERPRETATION
The calculated 'uick ratio or li'uid ratio decreases from5.C0
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R. in croreB
'ear
Ca?
Marketa)le
%ec;rit(
C;rrent
0ia)ilitie
Ratio
0112-13 BCB0.01 02B4.B> 4.34
0113-41 C205.>5 0BC4.2B 4.23
0141-44 CC01.D5 0B>D.43 4.D0
0144-40 CC4B.BB 0BB3.D3 4.D0
0140-45 5C1>.2C 0D2C.5C 4.00
%o;rce2 !ompiled from the nnual eports of /! td.
CHART 5 .1.14
CA%H PO%ITION RATIO
2008+09 2009+10 2010+11 2011+12 2012+130
0.5
1
1.5
2
2.5
1.91 1.891.72 1.72
1.22
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INTERPRETATION
8enerally, ideal absolute li'uid ratio of 4
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(utsider*s "und
De)t E
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2008+09 2009+10 2010+11 2011+12 2012+13
0
0.1
0.2
0.3
0.4
0.5
0.6
0.32 0.320.28
0.39
0.56
INTERPRETATION
The calculated debt e'uity ratio has been increased from 1.B> in the year 0140-45 to 1.53
in the year 0144-40. The resource and surplus of the firm shows Kan increasing trend from
5411.11 crore to D5B4.B3 crore in 0112-45 and also outsiders funds such as secured loans and
unsecured loans are increased because of the e#pansion pro=ects.
INTERE%T CO$ERAE RATIO
Interest !overage atio is also known as 6"i#ed charges cover:. This ratio establishedthe relationship between );IT and fi#ed interest charges. Interest coverage ratio measures the
ability of the company to meet interest commitments.
It also highlights the ability of the firm to raise additional funds in future. +igher the
ratio, better is the position of long-term creditors and the company*s risk is lesser.
)arnings before Aepreciation, Interest and Ta#
Interet Co+erage Ratio ------------------------------------------------------------- Interest
TA"0E5 .1.18
INTERE%T CO$ERAE RATIOR. in croreB
'ear E"IT Interet Ratio
0112-13 4C2>.5D 2.4B 420.5D
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0113-41 4223.4> 55.B2 B>.0>
0141-44 00B3.32 4B3.1D 4C.42
0144-40 01B1.D> 5D>.CD B.CB
0140-45 01CB.>> 435.53 41.BD
%o;rce2 !ompiled from the nnual eports of /! td
CHART 5 .1.18
INTERE%T CO$ERAE RATIO
2008+09 2009+10 2010+11 2011+12 2012+13
0
20
40
60
80
100
120
140
160
180
200
182.37
56.26
14.18 5.45 10.57
INTERPRETATION
The calculated interest coverage ratios from 0112-13 to 0140-45 are appears to be the
average of around 420 and it is 41 for the year 0112-13 and it is 420 for the year 0112-41. This is
due to low interest is to be covered and higher earnings of the company ;ut in 0141-44 interest
charged is very high when compared to rest of the years so the interest coverage ratio is reduced
to 4C.42.The higher interest coverage ratio indicates more solvency to the company and the
company can very well cover the interest payments on its long term debt..
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PROPRIETAR' RATIO2
This ratio relates the shareholders* funds to total assets. It throws light on the general financial
strength of the company. It is of greater importance to the creditors since it enables to find out
the proportion of shareholders* funds in the total assets of the business. high 9roprietary atioindicates relatively secure position to the creditors in the event of li'uidation. low proprietary
ratio will include greater risk to the creditors.
?hareholders "und
Proprietar( Ratio ------------------------------
Total ssets
TA"0E 5 .1.17
PROPRIETAR' RATIO
R. in croreB
'ear
%?are?ol,er
Total Aet Ratio&;n,
0112-13 3C>3.05 4D1C3.3 1.BB
0113-41 41135.4B 4C3D0.C> 1.>D
0141-44 444DC.C2 4BDBD.3B 1.D1
0144-40 CC22.34 403B.31 1.03
0140-45 45124.0> 0504D.43 1.B>
%o;rce2 !ompiled from the nnual eports of /! td.
CHART 5 .1.17
PROPRIETAR' RATIO
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2008+09 2009+10 2010+11 2011+12 2012+13
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.55
0.67 0.7
0.29
0.56
INTERPRETATION
The calculated proprietary ratio are varying from 1.B> for 0140-45 and then decrease to
1.BB for the year 0112-13The decrease in ratio is because of purchase of some special mining
e'uipment during the year 0112-13. The total asset of the company has been increased from
4D1C3.3in 0112-13 to 0504D.43in 0140-45. In 0141-44proprietory ratio increase by 1.D1 The
higher ratio indicate more security to the creditors and relatively secure position of the company
in the event of li'uidation.
ACTI$IT' RATIO%2
n activity ratio measures the effectiveness of the employment of resources. These ratios
not only analyze the use of the total resources of the firm but also the use of the components of
the total assets. ctivity atios involve a relationship between assets and sales. ?everal ctivity
atios can be calculated to =udge the effectiveness of asset utilization.
?ome of these ratios are<
Aebtor*s turnover ratio.
"i#ed assets turnover ratio.
Working capital turnover ratio.
!apital turnover ratio.
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DE"TOR% TURNO$ER RATIO
Aebtors constitute an important constituent of current assets and therefore the 'uality of
debtors to a great e#tent determines a firm*s li'uidity.
This ratio indicates the efficiency of the staff entrusted with the collection of book debts.
The higher the ratio, the better it is.
/et ?ales
De)tor T;rno+er Ratio ----------------
Aebtors
Ta)le 5 .1.!6
De)tor T;rno+er RatioR. in CroreB
'ear Net %ale De)tor Ratio
0112-13 55BC.34 D24.CC C.03
0113-41 C404.15 4>44.>0 0.B>
0141-44 53C3.12 0010.53 4.D3
0144-40 CC23.C> 0B15.CB 4.D3
0140-45 BB31.3D 5211.0D 4.CD
%o;rce2 !ompiled from the nnual eports of /! td.
CHART 5 .1.!6
De)tor T;rno+er Ratio
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2008+09 2009+10 2010+11 2011+12 2012+13
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
4.29
2.56
1.79 1.791.47
INTERPRETATION
The calculated debtors turnover ratio increased from C.03 in 0112-13 to 0.B> in 0113-41 and the
decreases from there to 4.D3 in 0141-44. It indicates the company has taken efficient debt
management
&IGED A%%ET TURNO$ER RATIO
"i#ed sset Turnover atio indicates the e#tent to which the investment in fi#ed assets
contributes towards sales. highest ratio is an indication of greater efficiency in the utilization of
fi#ed assets. "i#ed asset of the company are land and building, 9lant and machinery etc.
!ost of 8oods ?old
&ie, Aet T;rno+er Ratio ---------------------------
"i#ed sset
TA"0E 5 .1.!1
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&ie, Aet T;rno+er
R. in croreB
'ear
Cot o=
oo, %ol,&ie, Aet Ratio
0112-13 0>05.5C CB15.1C 1.B2
0113-41 0054.2D B052.21 1.C5
0141-44 5510.C0 C331.4B 1.>>
0144-40 CC22.34 2B4B.2C 1.B5
0140-45 BB31.1D 4C310.BC 1.5D
%o;rce2 !ompiled from the nnual eports of /! td.
CHART 5 .1.!1
&ie, Aet T;rno+er Ratio
2008+09 2009+10 2010+11 2011+12 2012+13
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.58
0.43
0.66
0.53
0.37
INTERPRETATION
The fi#ed asset turnover ratios for the period under study are very less when compared to
standard ratio of B. /! being an integrated comple# having capital intensive mining and power
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industry, investment in fi#ed asset is high and the ratio indicates the lesser ability of the company
to generate sales from the investment in the fi#ed assets. +igher ratio will help in improving the
profitability of the company.
WOR3IN CAPITA0 TURNO$ER RATIO
The ratio of cost of goods sold to /et working capital is determined in order to test the
efficiency with which net working capital is utilized. It indicates whether the business is being
operated on a small or large amount of /et working capital in relation to sales.
high working capital turnover may be the result of favorable turnover of inventories
and receivables whereas a low turnover of net working capital results in slow turnover of
inventories and receivables.
!ost of 8oods ?old
Working Capital T;rno+er Ratio -----------------------
Working !apital
Ta)le 5 .1.!!
WOR3IN CAPITA0 TURNO$ER RATIO
R. in croreB
'ear
Cot o=
oo, %ol,
Working
Capital
Ratio
0112-13 0>05.5C CD1B.B4 1.BB
0113-41 0054.12D C>24.4D 1.C2
0141-44 5510.C0 0B2C.1B 4.02
0144-40 5403.DB B52D.>4 1.B2
0140-45 5B24.14 BB51.5C 1.>C
%o;rce2 !ompiled from the nnual eports of /! td.
CHART 5 .1.!!
WOR3IN CAPITA0 TURNO$ER RATIO
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1 2 3 4 5
0
1
2
3
4
5
6
0.55 0.481.28
0.58 0.64
INTERPRETATION
The working capital turnover ratios show a Aecreasing trend from 1.BB the year 0112-13 to 1.C2
for the year 0113-41 and has shown some improvement during 0112-13. The decreasing trend of
the working capital turnover ratio indicates the company*s ability to generate sales was
decreasing up to 0113-41 and has shown a sign of reversal in 0141-44. It means utilization
working capital in generating sales has started increasing from 011D-12 and continued in 0140-
45. Working capital turnover ratio is high in 0140-45 when compared with other year because of
mine closure and provision of gratuity
CAPITA0 TURNO$ER RATIO
!apital Turnover atio indicates the e#tent to which capital employed contributes
towards sales. +igh ratio signifies that there e#ists efficient utilization of the capital employed by
the firm !ost of 8oods ?old
Capital T;rno+er Ratio --------------------------
!apital )mployed
Ta)le 5 .1.!
CAPITA0 TURNO$ER RATIO
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R. in croreB
'earCot o= oo,
%ol,
Capital
Emplo(e,Ratio
0112-13 0>05.5C 3515.>0 1.02
0113-41 0054.2D 444>>.22 1.01
0141-44 5510.C0 44>04.11 1.02
0144-40 5403.DB 4DD55 1.4D
0140-45 5B24.14 4D5>C 1.01
%o;rce2 !ompiled from the nnual eports of /! td.
CHART 5 .1.!
CAPITA0 TURNO$ER RATIO
2008+09 2009+10 2010+11 2011+12 2012+13
0
0.05
0.1
0.15
0.2
0.25
0.3
0.28
0.2
0.28
0.170.2
INTERPRETATION
The calculated capital turnover ratio was 1.02 for the year 0112-13 it decreased to 1.10
in 0113-41 and then increased to 1.02in 0141-44. It indicates the effective utilization of the
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capital employed by the company to generate sales has decreased from the year 0112-13 to 0113-
41 and increased in the latter years from 0141-44 to 0140-45.
PRO&ITA"I0IT' RATIO%2
9rofitability ratios are calculated to measure the operating efficiency of the company.
9rofitability atios are designed to highlight the end-result of business activities. 9rofitability
ratios can be determined on the basis of ?ales or Investment. 9rofitability atios indicates the
profitability i.e., the ability of the firm to earn profit.
The important ratios are<
/et profit ratio.
eturn on net worth.
eturn on capital employed.
8ross profit ratio.
NET PRO&IT RATIO2
/et 9rofit atio is the ratio of /et Income or 9rofit after Ta#es to /et sales. It indicates with
portion of sales is left to the proprietors after all costs, charges and e#penses have been
deducted. It is e#tremely useful to the firm being an indication of cost control and sales
promotion. /et profit atio is a guide as to the efficiency or otherwise of operating the firm./et
profit ratio is widely used as a measure of over-all profitability and is very useful to the
proprietors. +igher the ratio better is the operational efficiency of the company.
/et 9rofit
Net Pro=it Ratio --------------
?ales
Ta)le 5 .1.!
NET PRO&IT RATIO
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R. in croreB
'ear Net Pro=it %ale Ratio
0112-13 204.13 55BC.34 1.0C
0113-41 40CD.C> C404.15 1.51
0141-44 4032.02 53C3.12 1.50
0144-40 CC22.34 403B.31 1.03
0140-45 BB31.1D 45124.0> 1.C0
%o;rce2 !ompiled from the nnual eports of /! td.
CHART 5 .1.!
NET PRO&IT RATIO
2008+09 2009+10 2010+11 2011+12 2012+13
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
0.240.3 0.32 0.29
0.42
INTERPRETATION
The calculated net profit ratio of the company was 1.0C for 0112-13 and decreased to 1.5 for the
year 0113-41 due to fall in net profit from s204.13!r for 0112-13 to s40CD.C> !r for 0113-41
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and has shown a sign of improvement in 0141-44 to 1 50. It decreased to 1.03for 0144-40 due to
fall in net profit to s 4032.>2 !r due to 9rovision for gratuity of s CC22.34 !r . The reduction
in the sales turnover during the year 0140-45 as compared to previous year 0113-41 was due to
the ad=ustment of mine closure cost amounting to s 5C1.D0 crore in the sale income of 0140-
45.and %inistry of coal revised downward in view of the reduction in mine closure cost for the
above period as stated the e#cess liability created in the earlier years amounting to s 520.CB
crore has been withdrawn and included in other income.
RETURN ON NET WORTH
eturn on net worth is desired to work out the profitability of the company from the
shareholder*s point of view, because the shareholders are interested in total income after ta#
including net /on-operating Income.
9rofit after ta#
Ret;rn on Net :ort? -------------------
/et worth
Ta)le 5.1.!/
RETURN ON NET WORTH
R. in croreB
'ear
Pro=it
a=ter ta
Net :ort? Ratio
0112-13 204.13 3C40.D2 1.12
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0113-41 40CD.C> 4100B.>1 1.40
0141-44 4032.02 44404.C1 1.44
0144-40 4C44.55 44323.BD 1.40
0140-45 4CB3.DB 4030B.4B 1.44
%o;rce2 !ompiled from the nnual eports of /! td.
CHART 5 .1.!/
RETURN ON NET WORTH
2008+09 2009+10 2010+11 2011+12 2012+13
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.08
0.120.11
0.120.11
INTERPRETATION
The calculated return on net worth was high at 1.12 in the year 0112-13 and slowly
decreased to 1.40 in 0113-41 and increased to 1.44 in 0141-44 and then decreased to 1.40 in the
year 0144-40. The decrease in trend on return on net worth was due tom fall in profit from
204.13 crore for 0112-13 to 40CD.C>crore in 0141-44. The decrease in returns on net worth for
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the year 0144-40 is 1.40 due to provision for gratuity and mine closure to e#tent of
rupees4032.02crore further decrease in return on net worth in 0140-45 is 1.44 is due to The board
of Airectors of the company has recommended a dividend of 05G for the year 0141-44 $previous
year 01G& the total outgo on account of the dividend including distribution ta# will be s CC2.CD
!rore $previous year s 534.34!rore&
RETURN ON CAPITA0 EMP0O'ED
eturn on !apital )mployed atio shows the overall efficiency of the firm. This ratio is
the indicator of profitability of a firm. The profit being the net result of all operations, the return
on capital employed e#presses all efficiency the Inefficiency of a business collectivity and thus it
is a dependable basis for =udging its overall efficiency or inefficiency.
9rofit after Ta#
Ret;rn on Capital Emplo(e, N -----------------------
!apital )mployed
Ta)le 5 .1.!4
RETURN ON CAPITA0 EMP0O'ED
R. in croreB
'ear
Pro=it
a=ter ta
Capital emplo(e, Ratio
0112-13 0054.2D B052.21 1.C5
0113-41 5510.C0 C331.4B 1.>>
0141-44 4032.55 44>04.11 1.44
0144-40 4C44.55 4DD55 1.1D
0140-45 4CB3.DB 4D5>C 1.12
CHART 5 .!4
RETURN ON CAPITA0 EMP0O'ED
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0113-41 0141-44 0141-44 0144-40 0140-45
1
1.4
1.0
1.5
1.C
1.B
1.>
1.D
1.C5
1.>>
1.44 1.1D 1.12
INTERPRETATION
The calculated return on capital employed ratio is 1.C5 in 0112-13 and slowly increased
to 1.>> in 0113-41 and decreased to 1.44 in 0141-44 and then decreased to 1.1D in 0144-40. The
decrease in trend on return on capital was due to fall in net profit from s 0054.2D !r for 0112-
13 to s CC22.34!r in 0141-44. The reason for decrease in return on capital for 0141-44 is due to
provision for gratuity and mine closure to an e#tent of s4032.55!r and in 0140-45 return on
capital is stable because little increase in profit leads to increase in capital works and purchases
up to 4CB3.DB!r when compared to last year .
RO%% PRO&IT RATIO2
8ross profit ratio is the ratio of gross profit to net sales e#pressed as a percentage
representing the percentage of gross profits earned on sales. n increase in gross profit ratio may
reflect an increase in the sale price of goods sold without any corresponding increase in costs, a
decrease in cost without its impact on the sale price of goods. ow gross profit ratio may indicate
un-favorable purchasing and mark-up policies.
8ross 9rofit
ro Pro=it Ratio -------------------
?ales
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TA"0E 5 .1.!9
RO%% PRO&IT RATIO
R. in croreB
'ear ro Pro=it %ale Ratio
0112-13 4C2>.5D 55BC.34 1.C3
0113-41 4223.4> C404.15 1.C>
0141-44 00B3.32 53C3.12 1.BD
0144-40 431B.DC C2>>.2B 1.53
0140-45 422>.54 BB31.1D 1.55
%o;rce2 !ompiled from the nnual eports of /! td.
CHART 5 .1.!9
RO%% PRO&IT RATIO
2008+09 2009+10 2010+11 2011+12 2012+13
0
0.1
0.2
0.3
0.4
0.5
0.6
0.49 0.46
0.57
0.39
0.33
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INTERPRETATION
The gross profit ratio for 0140-45 is the lowest during the period under the study. The
gross profit shows a fluctuating trend. The declining trend in gross profit ratio is due to reduction
in operating profit. The operating e#pense was 422>.54crore during the year 0140-45 it wasconsiderably high when compared to other years, in 0140-45 gross profit increase to due to
overburden removal of 422>.54%5 from all mines of the company put together so the gross
profit also increased so gross profit ratio increased by 1.55.
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TA"0E 5 .!.1
%CHEDU0E O& CHANE% IN WOR3IN CAPITA0
CURRENT A%%ET% !669-68 !668-67 INCREA%E DECREA%E
I/R)/T(I)? CC2.1B B5B.2B 2D.2
?M/A@ A);T(? 042.25 D24.CC B>0.>4
!?+ F ;/7 ;/!)? CDC3.B> BCB0.0 D10.>C
(T+) !M)/T ??)T? 4B3.>D 423.CD 03.2
(/? F AR/!)? 51D.>C B32.44 031.CD
TOTA0 AB /88.9/ 9//9.69 149.!
CURRENT 0IA"I0ITIE% !669-68 !668-67
!M)/T I;IITI)? 4C>B.3> 01B2.3 B30.3C
9(RI?I(/? 5>2.12 D30.>> C0C.B2
TOTA0 "B 18.6 !8/1./4 1619./!
WOR3IN CAPITA0 A-"B 67.91 96/./1 4//.8
INCREA%E IN WOR3IN
CAPITA04//.8 - - 4//.8
TOTA0 96/./1 96/./1 4//.8 4//.8
INTERPRETATION
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?chedule of !hanges in Working !apital, when compared between 0112-13 and 0113-41
It is stated that,
IN CURRENT A%%ET%
Inventories increases by s. 2D.2 !rores.
Aebtors increases by s. B>0.>4 !rores.
!ash and ;ank ;alance increases by s. D10.>C !rores.
(ther !urrent ssets increases by s. 03.2!rores.
oans and advances increases by s. 031.CD !rores
IN CURRENT 0IA"I0ITIE% PRO$I%ION%
!urrent iabilities increases by s. B30.3C !rores.
9rovisions increases by s. C0C.B2 !rores.
%CHEDU0E O& CHANE% IN WOR3IN CAPITA0
Increase in Working capital s. >BB.2 !rores.
TA"0E 5 .!.!
%CHEDU0E O& CHANE% IN WOR3IN CAPITA0
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CURRENT A%%ET% !668-67 !667-16 INCREA%E DECREA%E
I/R)/T(I)? B5B.2B B10.3> 50.23
?M/A@ A);T(? D24.CC 4>44.>0 251.42
!?+ F ;/7 ;/!)? BCB0.0 C205.>5 >02.BD
(T+) !M)/T ??)T? 423.CD 4>C.B> 0C.34
(/? F AR/!)? B32.44 B24.B3 4>.B0
TOTA0 AB 9//9.69 948.4 86.18 96!.87
CURRENT 0IA"I0ITIE% !668-67 !667-16
!M)/T I;IITI)? 01B2.3 0523.34 554.14
9(RI?I(/? D30.>> >45.02 4D3.52
TOTA0 "B !8/1./4 66.17 1.61 197.8
WOR3IN CAPITA0 A-"B 481.19 96/./1 /!./1 77.19
INCREA%E IN WOR3IN CAPITA0 !. !.
TOTA0 96/./1 96/./1 /!./1 /!./1
INTERPRETATION
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?chedule of changes in working capital, when compared between 0112-13 and 0113-41.
It is stated that,
IN CURRENT A%%ET%2
Inventories Aecreases by s. 50.23 !rores.
Aebtors increases by s. 251.42 !rores.
!ash and ;ank ;alance Aecreases by s.>02.BD !rores.
(ther !urrent ssets Aecreases by s. 0C.34 !rores.
oans and dvances Aecreases by s. 4>.B0 !rores.
IN CURRENT 0IA"I0ITIE% PRO$I%ION%2
!urrent iabilities increases by s. 554.14!rores.
9rovisions Aecreases by s. 4D3.52 !rores.
%CHEDU0E O& CHANE% IN WOR3IN CAPITA0
Increase in working capital s. 0C.5C !rores.
TA"0E 5 .!.
%CHEDU0E O& CHANE% IN WOR3IN CAPITA0
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CURRENT A%%ET%!667-
16!616-11 INCREA%E DECREA%E
I/R)/T(I)? B10.3> C34.D4 44.0B
?M/A@ A);T(? 4>44.>0 0010.53 B31.DD
!?+ F ;/7 ;/!)? C205.>5 CC01.D5 C10.3
(T+) !M)/T ??)T? 4>C.B> 4DD.C2 40.30
(/? F AR/!)? B24.B3 BB3.24 04.D2
TOTA0 AB 948.4 98/!.1! 46.47 /.7
CURRENT 0IA"I0ITIE%
!667-
16 !616-11
!M)/T I;IITI)? 0523.34 435C.44 CBB.2
9(RI?I(/? >45.02 >C3.3C 5>.>>
TOTA0 "B
66.17 !/8.6/ 4.44 //.8
WOR3IN CAPITA0 A-"B481.19 /!48.69 /49.6 17.89
INCREA%E IN WOR3IN
CAPITA0/9.14 - - /9.14
T6TA0 /!48.69 /!48.69 /49.6 /49.6
INTERPRETATION
?chedule of changes in working capital, when compared between 0113-41 and 0141-44. It is
stated that,
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IN CURRENT A%%ET%2
Inventories decreases by s. 44.0B !rores.
Aebtors increases by s. B31.DD !rores.
!ash and ;ank ;alance decreases by s.C10.3 !rores.
(ther !urrent ssets increases by s. 40.30 !rores.
oans and dvances decreases by s. 04.D2 !rores.
IN CURRENT 0IA"I0ITIE% PRO$I%ION%<
!urrent iabilities decreases by s. CBB.2!rores.
9rovisions increases by s. 5>.>>!rores.
%CHEDU0E O& CHANE% IN WOR3IN CAPITA0
Increase in working capital s. BCD.4>!rores.
J
TA"0E NO-.!.
%CHEDU0E O& CHANE% IN WOR3IN CAPITA0
CURRENT A%%ET% !616-11 !611-1! INCREA%E DECREA%E
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I/R)/T(I)? C34.D4 B1>.43 4C.C2
?M/A@ A);T(? 0010.53 5>CD.15 4CCC.>C
!?+ F ;/7 ;/!)? CC01.D5 5503.414134.>5
(T+) !M)/T ??)T? 4DD.C2 0B3.CC 24.3>
(/? F AR/!)? BB3.24 C1>.21 4B5.14
TOTA0 AB 98/!.1! 818./4 1/1.68 1!4/.88
CURRENT 0IA"I0ITIE% !616-11 !611-1!
!M)/T I;IITI)? 435C.44 43>0.C> 02.5B
9(RI?I(/? >C3.3C D32.C3 4C2.BB
TOTA0 "B !/8.6/ !946.7/ 194.7
WOR3IN CAPITA0 A-"B /!48.69 /89.41 14.18 1!4/.88
INCREA%E IN WOR3IN
CAPITA078. - - 78.
TOTA0 /89.41 /89.41 14.18 14.18
INTERPRETATION
?chedule of changes in working capital, when compared between 0113-41 and 0141-44.
It is stated that,
IN CURRENT A%%ET%2
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?M/A@ A);T(? 5>CD.15 5211.0D 4B5.0C
!?+ F ;/7 ;/!)? 5503.41 02>>.>C C>0.C>
(T+) !M)/T ??)T? 4B>.0C 4>0.0C 24.3>
(/? F AR/!)? C1>.21 >41.0D >.1
TOTA0 AB 86/..84 81!.1 !/.! 1!8.7
CURRENT 0IA"I0ITIE% !611-1! !61!-1 INCREA%E DECREA%E
!M)/T I;IITI)? 43>0.C> 4214.>B 4>1.24
9(RI?I(/? D32.C3 BBB.D3 0C0.D
TOTA0 "B !946.7/ !/9. 6./1
WOR3IN CAPITA0 A-"B /!8.71 /94/.9 !/.! 881.!
INCREA%E IN WOR3IN
CAPITA044.!! - - 44.!!
TOTA0 /94/.9 /94/.9 881.! 881.!
INTERPRETATION
?chedule of changes in working capital, when compared between 0144-40 and 0140-45.
It is stated that,
IN CURRENT A%%ET%2
Inventories Aecreases by s. 200.CD!rores.
Aebtors increases by s. 4B5.0C!rores.
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!ash and ;ank ;alance Aecreases by s.C>0.C>!rores.
(ther !urrent ssets increases by s. 24.3>!rores.
oans and dvances Aecreases by s. >.14!rores.
IN CURRENT 0IA"I0ITIE% PRO$I%ION%2
!urrent iabilities decreases by s. 4>1.24!rores.
9rovisions decreases by s. 0C0.D!rores.
%CHEDU0E O& CHANE% IN WOR3IN CAPITA0
Increase in working capital s. >C>.00crores
TA"0E - .!.4
CURRENT A%%ET% AND 0IA"I0ITIE% O& N0C 0t,..
R. In Crore
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INTERPRETATION
!hanges in !urrent ssets and !urrent iabilities, when compared between 0112-13 and
0140-45, It is stated that,
IN CURRENT A%%ET%2
Inventories increases by s. 45C !rores in 0140-45 compared to base year 0112-13 it
is a normal increase S 41G p.a.
70
9TI!M? !668-67 !667-16 !616-11 !611-1! !61!-1 BK-B
Inventories B5> B15 C30 B1>.43 >25.D0 1
Aebtors D24 4>40 0010 5>CD 5211 !6
!ash and ;ank
;alance
BCB0 C20C CC01 5503 02>> 1891
(ther !urrent
ssets
423 4>B 4DD 4B> 4>0 -!4
oans and
dvances
B32 B2C BB3.24 C1> >41 !!1.81
!reditors D5C 44D> 4415 0B3 0DD 8/9
Work in 9rogress CD4 C04 C25 432 004 76
(ther iabilities CBC 0DD 000 0B4 525 -
9rovisions D35 >45 >B1 D32 BBB /!!
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Aebtors decreases by s. 015C !rores due to reduction in power tariff by !)! norms
and parameters and ad=ustment relating to earlier year sales. !ash and ;ank ;alance increases by s. 42D4 !rores due to increase in ?ecured and
Mnsecured oans for our e#pansion pro=ect, the amount is invested in bank and
utilizing the fund day by day. ccumulation of eserve from our profit.
(ther !urrent ssets decreases by s 0> !rores it is a normal decrease.
oans and dvances increases by s.004.24 !rores it is a normal increase.
IN CURRENT 0IA"I0ITIE% PRO$I%ION%2
?undry !reditors increases by s2BD !rores, due to our e#pansion pro=ects, it is a normal
increase.
Work in 9rogress increases by s. 531 !rores due to our e#pansion pro=ects in a=asthan,
%ine-II )#pansion and Thermal-II )#pansion, it is a normal increase.
(ther liabilities is decreases by s 55 !rores due to our e#pansion pro=ects in a=asthan,
%ine-II )#pansion and Thermal-II )#pansion,it is a normal decrease.
9rovisions are increases by s.B00, due to final dividend declared in the earlier years but,
in current year interim dividend paid partly. contingency provision also increases.
CHAPTER 5I$
.1 &INDIN%
The study of working capital and its management in /eyveli ignite !orporation imireveals
the following<
The net working capital of the company has shown an increasing trend as against
s.CD03.C5 in 0112-13 it has grown to s.BB51.5Ccrores in 0140-45 thus it has increased
from 0.> to 5.C0 times during the period of study.
The increasing working capital is due to increase in the current assets without a
corresponding increase in current liabilities.
The current ratio of 0 to 5.C0 average of current ratio is 5.1>
compared to the fi#ed norms. The li'uidity position of the concern is good.
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The information given above reveals that 'uick ratio of /! td fluctuate between 0.C
and 5.C0 during the whole period of study its clearly indicates the concern has the ability
to maintain its li'uidity positions in better manner.
The ideal absolute li'uid ratio of 4 in 0113-41
and the decreases from there to 4.D3 in 0141-44. It indicates the company has taken
efficient debt management
The working capital turnover ratio shows a decreasing trend from 1.BB the year 0112-13
to 1.C2 for the year 0113-41 and has shown some improvement during 0140-45. The calculated capital turnover ratio was 1.02 for the year 0112-13 it decreased to 1.10 in
0113-41 and then increased to 1.02in 0141-44. It indicates the effective utilization of the
capital employed by the company to generate sales has decreased from the year 0112-13
to 0113-41 and increased in the latter years from 0141-44 to 0140-45.
The calculated net profit ratio of the company was 1.0C for 0112-13 and decreased to 1.5
for the year 0113-41 due to fall in net profit from s204.13!r for 0112-13 to s40CD.C>
!r for 0113-41 and has shown a sign of improvement in 0140-45 to 1 50.
The calculated capital turnover ratio was 1.01 for the year 0112-13and increased by 1.02
in 0140-45 it shows the effective utilization of the capital employed by the company to
generate sales.
Working capital turnover ratio of average 1.D1.for the period from 0112-0113 to 0140-
0145. It indicates that the ratio ranges between1.BB to 1.>C.
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?chedule of changes in working capital, when compared between 0144-40 and 0140-45.
It is stated that, Aebtors increases by s.4B5.0C!rores, (ther !urrent ssets increases by
s.24.3>!rores, !urrent iabilities decreases by s.4>1.24!rores, 9rovisions decreases
by s.0C0.D!rores, Increase in working capital s.>C>.00crores.
.! %UE%TION% AND RECOMMENDATION%
To earn more profit the amount invested in current assets should be reduced by way of
reducing the 'uantum of inventories and debtors.
sset utilization is goodmore efforts should be taken to achieve efficient utilization of
assets to earn more profit.
The members may aware that power generation is very necessary for infrastructure
development. /! plays important role in the country*s development. /! may take
necessary efforts to increase its capacities.
Aevelopment of participative culture and improve involvement of workmen and others to
be maintain conducive industrial climate for improving the productivity and growth.
/ew initiatives are being taken by the 8overnment to streamline this sector in order to
achieve the ultimate ob=ect of 69ower to all:. /! should are strive hard to generate
power at affordable cost.
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. CONC0U%ION%
The analysis of working capital of /eyveli ignite !orporation imited, /eyveli reveals
effective position also of the company*s working capital policy. "inancial position of the
company is well and good for the past B years. i'uidity position of the company is e#cellent.
The company can still improve its working capital position by implementing the suggestion
made in this report.
?chedule of changes in working capital i.e. Increase or Aecrease in Working !apital
during the period of study shows increases in working capital.
+ence, it is concluded that the company*s financial position is at high level and Working
capital is being managed effectively.
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. "I"0IORAPH'
1. Ann;alReport $0112-13 to 0140-45& collected from the library of /eyveli ignite
!orporation imited., /eyveli.
!. I.M.Pan,e( 5 si#th edition– "inancial %anagement, 9rentice hall of India pvt.ltd.
. Praanna C?an,ra-seventh edition, "inancial %anagement- %c8raw-hill publication.
. T.%. Re,,( '. HariPra
/. a, Rea,( – "inancial and %anagement ccounting – %argham publishers, !hennai.
4. A:at?Damo,aran 5 !orporate "inance 0nd )dition, wiley India $9& td /ew Aelhi,
0112.
9. Man Mo?an an, %?i+. N. o(al – ?i# )dition $433B&, 69I/!I9)? ("
%/8)%)/T !!(M/TI/8: – ?ahitya;hawan 9ublications, gra-020 115, 99.
522-C4B, C4>-B1D.
8. %.N. Ma?e:ari 5 %anagement ccounting – ?ultan chandF !o., /ew Aelhi.
7. Re=erral We)ite<
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www.nlcindia.com
www.moneycontrol.com
www.enmoney.com
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