Ratio Analysis & Working Capital Management
In Partial Fulfillment of the requirements of
Master in Business Administration (M.B.A.)
Rashtrasant Tukdoji Maharaj, Nagpur University, Nagpur.
Under The Guidance Of
PROF. S. BHOYAR
Department of Management Technical & Research
Natwarlal Maniklal Dalal College, Gondia
This is to certify that Nilu Madhumatke is student of M.B.A.(sem
IV) in the Department of Management Technology & Research
Natwarlal Maniklal Dalal College, Gondia of session 2009-10. She
has complete her dissertation entitle Ratio Analysis and working
capital management of Birla corporation Ltd.
The dissertation is being submitted to Rashtrasant Tukdoji
Maharaj Nagpur University in partial fulfillment of the requirement
for the Degree of Master in Business Administration.
Prof. Vijay N. Bidwaikar Y.M. Nasre
Department of Management Department of Management
Technology & Research Technology & Research
N. M. D. collegeN. M. D. college
This is to certify that Nilu Madhumatke is student in M.B.A.(sem
IV) in the Department of Management Technology & Research
Natwarlal Maniklal Dalal College, Gondia of session 2009-10.
She has complete her dissertation entitle Ratio Analysis and
working capital management of Birla corporation Ltd.
PROF. S. BHOYAR
Department of Management
Technology & Research
I Nilu Madhumatke here by declared that the project work
entitled Ratio Analysis and working capital of Birla Corporation
Ltd. Is the outcome of my own research work based on personal study
and has not been submitted previously for award of any degree or
diploma to this university.
Practice makes more perfect
In the field of management every time there is a requirement of
understanding or practical aspect of the organization with
managerial mind. There is requirement to go for practical training
of any subject supplement to the theoretical knowledge and
The project report includes various ratio of the company and
comparison with other Cement industry and analysis on Working
Capital Of Company, which provide perfect direction of invest the
money. The data collections were by annual report of the different
companies, magazines related to the cement association and
discussion with concerned employees and experts.
At the end findings and suggestions are reported.
I hope this serves the Purpose.
I wish to express our sincere thanks to the honorable director
Dr. Y.M.Nasre and the co-ordinator Mr. Vijay N. Bidwaikar of
Department of Management Technology & Research Natwarlal
Maniklal Dalal College, Gondia for providing us variety of
opportunities, infrastructural facilities and inspiration to gather
professional knowledge and material without which it would have
been impossible to complete this hard work.
I wish to take this opportunity to express my deep gratitude and
completely hearted thanks to my project guide PROF. S. BHOYAR for
their kindness, encouragement and the valuable time which they have
devoted to me. I wish to thank all those, who have helped me in one
way or other in bringing out this project report.
INTRODUCTION OF BIRLA COROPORATION
History & Company profile
Plants of Cement Production
OBJECTIVES OF BIRLA CORPORATION
Awards & Achievements
COMMODITY (CEMENT) PROFILE
Types of cement
Ratios of the Company
Comparison with other Industries
Working Capital Requirement
Introduction of Birla Corporation
History of the company
The company was founded by Late Shri G.D.Birla and was
incorporated on 25th August 1919, in the name and style of The
Birla Jute Manufacturing Company Limited. A man of vision and
enterprise, he set up the first Indian Owned Jute Mill near Kolkata
which marked not only the birth of the company but also the
beginning of the Birla Industrial Group in India. The company grew
steadily under his guidance in the earlier years. Thereafter Shri
M.P.Birla took over the reins of the company and he helped
transform it from a jute mill to a leading multi-product,
multi-location corporate with widespread activities.
Today, the product range includes cement, jute goods, vinoleum
floor covering, auto trims and steel castings. After the demise of
Shri M.P.Birla in 1990, Smt.Priyamvada Birla took over as the
Chairman of the company and under her Chairmanship; company crossed
the Rs.1, 000 cores plus turnover mark. After the demise of Smt.
Priyamvada Birla on 3rd July 2004, Shri R.S.lodha took over as the
chairman of the company and under his Chairmanship, company has
attained new heights. The name of the company was changed to Birla
Corporation Limited with effect from 27th October, 1988 to
establish the size, image and conglomerate character of the
Credit Rating of the Company
Credit Analysis and Research Limited ( CARE ) has assigned CARE
AA rating for the company long and medium term facilities of more
than one year tenure and PR 1 + ( PR one plus ) rating for short
term bank facilities , aggregating Rs.500 crores. Further, the
rating Committee of CARE has re-affirmed PR 1 + rating and CARE AA
rating for short term debt and the proposed long term borrowing
programme of the company.
Late Shri M.P.Birla Late Smt. Priyamvada Birla
The day- to- day management of the company is being looked after
by the Chief Executive Officer, Shri B.R.Nahar who is assisted by a
team of highly qualified professional persons.
Former Chairman ED & CEO
Late Shri R.S. Lodha Shri B.R.Nahar
Board of Directors
Shri N.K. Kejriwal Shri Vikram Swarup
Smt Nandini Nopany Shri Anand Bordia
Shri Harsh V. Lodha Shri B.B. Tandon
Shri Pracheta Majumdar Shri D.N.Ghosh
MISSION & VISION
To achieve international standards of excellence in all aspect
of division and diversified business with focus on customer delight
through value of product, Services, cost and reduction.
To maximize creation for wealth and satisfaction for the
To foster a culture of participation and innovation of employee
growth and contribution.
To cultivate high standards of business ethics and total Quality
To provide technology and service through sustained research and
To attain leadership in developing, adopting and assimilating
state-of-art technology for competitive advantage.
Offered full opportunities and challenges to develop
individually enabling career growth.
Encouraged to acquire knowledge to meet the challenges of new
technologies and business needs in the changing scenario.
Educated and guided to inculcate and practice right values as
are nurtured by the organization.
A major diversified, transnational, integrated company with
leadership and a strong environment conscience playing a national
role in cement, Jute, Auto trim, Venolium and public
OBJECTIVES & OBLIGATIONS
To serve the national interests in the Product and related
sectors in accordance and consistent with Government policies.
To earn a reasonable ate of on interest.
To maximize utilization of the existing facilities in order to
improve efficiency and increase productivity.
To work towards the achievement of self-sufficiency in the field
of cement market by setting up adequate capacity and to build up
expertise in lying of crude.
To further enhance distribution network for providing assured
service to customers throughout the country through expansion of
reseller network as per Marketing Plan/ Government approval.
Towards Customers and Dealers: To provide prompt, courteous and
efficient service and quality products at fair and reasonable
Towards Suppliers: To ensure prompt dealings with integrity,
impartiality and courtesy and promote ancillary industries.
Towards Employees: Develop their capability and advancement
through appropriate training and carrier planning.
Towards Community: To develop techno-economically viable and
environment friendly products for the benefit of the people.
SUBSIDIRES COMPANY OF THE BIRLA CROPORATION
Cement is the primary product of the company and accounts for
around 90% of the turnover of the company. The company has seven
cement plants at four locations, namely, Satna Cement Works ( SCW )
and Birla Vikas Cement ( BVC ) at Satna (Madhya Pradesh ),
Chanderia Cement Works ( CCW ) and Birla Cement Works ( BCW ) at
Chanderia ( Rajasthan ), Durgapur Cement Works ( DCW ) and Durga
Hitech Cement ( DHC ) at Durgapur ( West Bengal ) and Cement
Grinding Unit at Raebareli (Uttar Pradesh). The present installed
capacity of cement is 58.80 lac metric tons per annum. Location
wise details are given here under:-
Location of Cement Plants in India
Satna Cement WorksBirla Vikas Cement
Birla Cement WorksChanderia Cement Works
Durgapur Cement WorksDurga Hitech Cement
Raebareli Grinding unit
CAPACITY: 5.78 Mill. Ts.
UNITS CAPACITY Mill. Ts
PLANTS OF CEMENT PRODUCTION
Total capacity: 15, 50,000 tones.
Total capacity: 20, 00,000 tones.
Capacity: 6, 00,000 tones
A new cement plant is established in Durgapur, which is Durgapur
This plant has the capacity of 10, 00,000 tones of cement
Thus total production capacity at Durgapur is 16, 00,000 tones
Capacity: 6, 30,000 tones
Corporate Social Responsibilities
South Point School, Kolkata, West Bengal
M.P. Birla Foundation Higher Secondary School, Kolkata, West
M.P. Birla Shiksha Bhawan, Allahabad, Uttar Pradesh
M.P. Birla Industrial Training Institute, Rewa, Madhya
Birlapur Vidyalaya, West Bengal
Birla Vikas Vidyalaya, Satna, Madhya Pradesh
School at Chittorgarh, Rajasthan
Sarada Kanya Vidyapith, Barrackpore, West Bengal
M.P. Birla Foundation Veda Sanskrit Pathshala, Bangalore,
Bombay Hospital, Mumbai, Maharashtra
Belle Vue Clinic, Kolkata, West Bengal
M.P. Birla Medical Research Centre at Birlapur, West Bengal and
Satna, Madhya Pradesh
Birla Vikas Hospital, Satna, Madhya Pradesh
Birlapur Hospital, Birlapur, West Bengal
Dispensary at Allahabad, Uttar Pradesh
Hindustan Medical Institution at Barrackpore, West Bengal
Other Philanthropic Activities:-
M.P. Birla Planetarium, Kolkata, West Bengal
Express Dairy, Behala, Kolkata, West Bengal
Joka Agricultural & Horticultural Society, Joka, West
Water Facilities in Satna & Chanderia.
Roads in Chanderia.
Cleanness Campaign with Zilla Parishad in Chanderia
AWARDS & ACHIEVEMENTS
CAPEXIL Special Export Award every year, since 1990
ISO 9002 certification for Satna Cement Works, Birla Vikas
Cement and Durgapur Cement Works.
ISO 9001 - 2000 (QMS) certification for Birla Cement Works,
Chanderia Cement Works from BVQI, UK.
IS/ISO 14001 certification in 1999-2000 for Satna Cement Works
and Birla Vikas Cement, in 2002-2003 for Birla Cement Works &
Chanderia Cement Works for environment management systems.
"Best in Energy Performance" in 1986-87.
"Best in Energy Performance" for Satna Cement Works in 1993-94,
1994-95, 1995-96, 1997-98.
"Best improvement in Thermal Energy Performance" recognition
from NCB for Birla Cement Works in 1992-93 and Chanderia Cement
Works in 1993-94.
"Bhama Shah Samman" from the Rajasthan Government for
Educational Activities for Birla Cement Works in 1996-97.
"Excellence in Improving Machinery Health Condition" in
Ministry of Labour, Government of India, for Birla Cement Works
& Chanderia Cement Works in 1998-99 and again in 2001-02.
"Lal Bahadur Shastri Memorial National Award" for Excellent
Pollution Control Implementation by Chanderia Cement Works in
Cement: - Cement is often confused with concrete. Cement is
finely ground, usually gray colored mineral powder, when mixed with
water ,cement acts as glue to bind together the sand, gravel and
crushed stone to form concrete ,the most widely used in
construction material in the world.
Types of cement
The Plants manufacture varieties of cement, including Ordinary
Portland Cement (OPC), 43 &53 grades, fly ash-based Portland
Pozzolona Cement (PPC), Portland Slag Cement (PSC) and low alkali
Portland cement. Recently, the company has started producing
Sulphate Resistant cement (SRC) and it has been well accepted in
The Cement is marketed under the brand names of Birla Cement
SAMART, Birla Cement KHAJURAHO, Birla CHETAK, Birla Cement and
Birla Premium cement, bringing the product under the common brand
of Birla Cement while retaining the niche identity of SAMART for
blended cement, i.e. PPC & PSC, for all the units, KHAJURAHO
(for the OPC product of Satna) and CHETAK (for the OPC product of
The Division exports large quantities of cement to Nepal, under
the brand names of SAMART and KHAJURAHO. BIRLA CEMENT SAMRAT is
ideal for mass concrete RCC/ pre stressed/precast structures (for
reduced thermal crack), increased water tightness of concrete,
increased resistance to sulphate soils and aggressive water,
increased resistance to alkali aggregate reaction, besides
corrosion and resistance properties.
Different types of cement that are produced in India are:
Ordinary Portland cement (OPC):
OPC, popularly known as grey cement, has 95 per cent clinker and
5 per cent gypsum and other materials. It accounts for 70 per cent
of the total consumption.
Portland Pozzolana Cement (PPC):
PPC has 80 per cent clinker, 15 per cent pozzolana and 5 per
cent gypsum and accounts for 18 per cent of the total cement
consumption. It is manufactured because it uses fly ash/burnt
clay/coal waste as the main ingredient.
White cement is basically OPC - clinker using fuel oil (instead
of coal) with iron oxide content below 0.4 per cent to ensure
whiteness. A special cooling technique is used in its production.
It is used to enhance aesthetic value in tiles and flooring. White
cement is much more expensive than grey cement.
Portland Blast Furnace Slag Cement (PBFSC):
PBFSC consists of 45 per cent clinker, 50 per cent blast furnace
slag and 5 per cent gypsum and accounts for 10 per cent of the
total cement consumed. It has a heat of hydration even lower than
PPC and is generally used in the construction of dams and similar
Oil Well Cement is made from clinker with special additives to
prevent any porosity.
Rapid Hardening Portland cement:
Rapid Hardening Portland Cement is similar to OPC, except that
it is ground much finer, so that on casting, the compressible
strength increases rapidly.
Water Proof Cement:
Water Proof Cement is similar to OPC, with a small portion of
calcium stearate or non- saponifibale oil to impart waterproofing
Portland Pozzolona Cement: -
It is known as strongest cement for strong and durable
structures. In Durgapur Hi-tech plant at Durgapur produces Birla
Cement Samrat, using high quality clinker, high-quality fly ash
from modern power plants and gypsum. This Portland Pozzolana Cement
(PPC) brand has all the advantages of 53-Grade Cement.
Portland cement is a blend of finely pulverized clinker,
produced by burning at high temperature materials containing lime,
alumina, iron and silica in pre-determined proportion to give the
desired end properties. Normally, Gypsum or its derivatives are
added during grinding stage for set control. When mixed with water
alone or in combination with sand and stone, it has the property of
combining slowly with water to form hard mass.
Raw Materials used in the manufacture of Portland cement:-
The two principal raw materials used in the manufacture of
Portland Cement are calcareous material such as limestone, chalk,
shells or marl and argillaceous materials such as clay and shale
(rich in silica).
Pozzolona are amorphous alliaceous and aluminous materials which
by itself have no cementations properties but in presence of
Calcium Hydroxide liberated by hydration of is cooled and ground to
fine power along with small quantity of gypsum (4-5%) to give
Portland Cement. OPC reacts chemically with it at ordinary
temperatures to form compounds possessing cementations
Portland Pozzolona Cement has two most trusted brands belong to
Birla Cement Samrat
Birla Cement Samrat Premium
Higher finesse for improved workability
Resistance to alkali-aggregate reaction
Low heat of Hydration resulting in reduction in cracking
Improved resistance to sulphate attack
Higher long-term strength over OPC
Segregation- free cohesive mix for excellent finish
Lower chloride content to minimize corrosion
Slag is a non-metallic product consisting essentially of gases
containing silicates, alumino silicate of lime and other bases and
is obtained as a byproduct with iron in blast furnace or electric
pig iron furnace.
Granulated slag is used in the manufacture of Portland Slag
Uses of Slag Cement:
Slag Cement can be used for all plain and reinforced concrete
construction, mass concreting structures such as dams, reservoirs,
swimming pools, river embankment, canal piers, etc. where low heat
of hydration and resistance to alkali silica reaction are desired,
structure in aggressive environments where chemical and mildly
acidic water are encountered (where OPC cannot used), marine
construction, dykes, wharves, etc. where sulphatic water is
Portland Slag Cement has three brands:
Birla Cement Samrat
Birla Premium Cement
Higher Compressive Strength
Low Water Absorption
Ordinary Portland cement
1. Birla Cement Khajurao,
2. Birla Cement Chetak
Special properties of these brands:
Moderate sulphate resistance.
Very low chloride content to avoid corrosion in steel.
Quicker rate of strength development.
Better surface finish.
Birla Cement Khajuraho/ Chetak-53 Grade Ordinary Portland
Pre-stressed grinders and electric poles.
For ready-mix concrete.
M 25 and above concrete.
Roads, runways, industrial building, RCC bridges tunnels and
high rise buildings.
All types of general constructions.
Birla Cement Khajuraho/Chetak-43 Grade Ordinary Portland
Brick and stone masonry.
Plastering and flooring.
For ready- mix concrete.
Plain and reinforced cement concrete.
Pre-cast and pre-stressed concrete.
RCC bridges, high-rise buildings and concrete roads.
All types of general constructions.
Plants where it is manufactured:
Satna Cement Works and Birla Vikas Cement, Satna.
Birla Cement Works and Chanderia Cement Works, Chanderia.
Special features of cement manufactured by BCL are :-
Ideal for mass concreting.
Reduced thermal cracks.
Increased water tightness of concrete.
Ideal for plastering.
Greater resistance to sulphate and other aggressive
Greater resistance to alkali- aggressive reaction.
Standard requirement of various Raw Materials
Clinker - Limestone92-93%
- Iron Ore02-03%
- Gypsum 05%
Fly ash 25%
A hypothesis is made in order to find out correct explanation of
the phenomenon through investigation.
On the basis of hypothesis facts are observed and collected when
by verification. In this project the following areas has been
The management of Long term finance is although a very important
but proper management of working capital and ratio analysis is the
most important in the company.
It is also a key to success of the overall working of any
It is our hypothesis that a Birla Corporation Ltd. has adequate
of proper management of working capital.
According to this hypothesis Ratio Analysis and other methods of
the analysis of working capital has been used as a measure tool to
test the hypothesis.
For Every Comprehensive research a proper research methodology
is indispensable & it has to be properly conceived. The
methodology adopted by me is as follows:-
Find out Ratios of Birla Corporation Ltd and compare with other
industry in same line of Business.
Find deviation of calculated ratios from standard or Norms
Calculating the working capital requirement of Birla Corporation
Information about firms assets, liabilities, revenue,
expenditure, bankers, investment etc.
Information about firms loan, security, stock level & other
My data collection source was secondary i.e.
Annual reports of companies
Profit & Loss Accounts
Analysis & Interpretation
The data collected and analysed subjectively as well as
graphically where it is possible. The analysis is based upon
available information & interpreted accordingly.
My scope of study is limited to the annual reports, Balance
sheet of units & number of companies taken for analysis.
Ratio: is the mathematical relationship between two quantities
in the form of a fraction or percentage.
Ratio analysis: A Ratio Analysis is essentially concerned with
the calculation of relationships which after proper identification
and interpretation may provide information about the operations and
state of affairs of a business enterprise.
The analysis is used to provide indicators of past performance
in terms of critical success factors of a business. This assistance
in decision-making reduces reliance on guesswork and intuition and
establishes a basis for sound judgment.
Note: A ratio on its own has little or no meaning at all.
Significance of Using Ratios
The significance of a ratio can only truly be appreciated
1. It is compared with other ratios in the same set of financial
2. It is compared with the same ratio in previous financial
statements (trend analysis).
3. It is compared with a standard of performance (industry
average). Such a standard may be either the ratio which represents
the typical performance of the trade or industry, or the ratio
which represents the target set by management as desirable for the
Ratios of Birla Corporation and comparison with the Binani
cement and Shree Cement
1) Current Ratio: - The Current Ratio expresses the relationship
between the firms current assets and its current liabilities.
Formula: - Current Asset
Ideal Ratio is 2:1 so,
In Birla corporation, it is 1.18 in 2007-08and, it is 1.13 in
2008-09 which is very low from the ideal ratio, so the company have
to reduce their liability otherwise it shows insolvency of the
company but in Binani cement the current ratio is 1.2 & 1.16 to
2007-08 & 2008-09 respectively and it is also low from the
Birla company and in Shree cement it is over from the ideal ratio.
It saws insufficient use of the capital.
Overall the Shree Company is quite good from the other two
2) Quick Ratio:- Measures assets that are quickly converted into
cash and they are compared with current liabilities.
Formula:- Current Assets Inventories Loans & Advances
Current Liability Bank Overdraft
Ideal Ratio is 1:1
In Birla Corporation, Quick Ratio is 0.14 and 0.10 in 2007-08
and 2008-09 respectively which shows the ability of the business to
cover its short-term obligations is not good. But in Binani Cement,
it is quite good from Birla cement and ultimate Shree Cement which
is in good position from these two companies.
3) Proprietor Ratio:- It express the relationship between the
propritors fund and total asset of the company.
Formula:- Propritor funds/Equities
In Birla Corporation Propritor ratio is 0.64 in 2007-08 &
0.74 in2008-09, It means the stake of the propritor in the total
asset is good but in binani cement, it is very low. In both the
year it is 0.24. And Shree cement shows the 0.38 and 0.36 in
consecutive year so it is quite bad position from proprietors point
4) Stock working Capital:- This Ratio expresses the relationship
between Stock and working capital of the company.
Ideal Ratio is 1:1
In Birla Company, the ratio is 1.87 and 2.43 times in 2007-08
and 2008-09 respectively which shows value of the stock of the
company will be reduced in the near future but in Binani cement, it
is very high in 2008 which is not good for the company.In Shree
Cement, Both the year it is fanatastic ratio for the company
compare to the other two companies.
5) Capital Gearing Ratio:- An investment Ratio that compare the
borrowing made by a company with the finance contributed by the
Formula:- Preference Share + Long term Borrowings
Equity Share Capital + Reserve Miss. Expenditure
If this ratio is more then it would be risky for the company
because if the sales or revenue companys is low still the company
have to pay their intrest. So the capital gearing ratio is good in
the birla Coporation but in Shree Cement, it is quite high from the
Birla Cor. So the company have to reduce their debt and in Binani
Cement, It is very high from other two companies and company have
to focous on the Debt.
Ultimate Birla Corporation is in very good postion in this
6) Debt Equity Ratio:-This ratio indicates the extent to which
debt is covered by shareholders funds. It reflects the relative
position of the equity holders and the lenders and indicates the
companys policy on the mix of capital funds.
Formula:- Long Term Debts
Shareholders Funds + Long term Debts
In Birla Corporation,debt equity ratio is 0.3 and 0.21 to 2007
and 2008 respectively which shows extremly good in financial
position and companys capital structuer is also strong.but in
Binani cement, it is high proportion of the debt which shows
financial weekness of the company.but the company was reduce their
debt in next year.and in Shree Cement it is not good but still
company have to concentrate on the reducing the debt.
Ultimate Birla corporation is good financial strength compare to
other two companies.
7) Gross Profit Margin:- It shows the relationship between gross
profit of the company and net sales of the company.
Formula:- Gross Profit Margin * 100
In Birla corporation it is quite same in both the year but it is
less from Binani and Shree Cement so the company have to increse
their sales part to improve their gross prfoit or the company have
to reduce their manufactuer expences in compare to Sales.
8) Operating Cost:- It express the relationship between
Operating Cost and net Sales of the Company.
Formula:- Operating Cost * 100
In Birla Corporation, it is 68.51% and 66.64% in both the 2007
and 2008 year so the company was reduce their opearting expenditure
in 2008. And Operating Expenditure is quite same in Binani cement
from the birla Cement but it is very high in Shree Cement which
ulimate effect to the Net Profit.
9) Administrative Expenditure:- This ratio is made up with two
things which is administrative expenditure of the company and net
sales of the company.
Formula:- Administrative Expenditure * 100
10) Selling Expenditure:- This Shows the relationship between
selling expenditure and net sales of the company.
Formula:- Selling Expenditure * 100
In Birla Corporation it is very less in selling expenditure but
In Binani it is very high due to they are showing the advertising
in media and their brand ambassador is BIG B and Shree Cement the
cost is between the both companies.
11) Finance Expenditure:- This ratio express the realtionship
between the finance expenditure and net Sales of the copmany.
Formula:- Finance Expenditure * 100
In Birla Corporation, Finance expenditure is ver less because
company have very less borrowings from outside and so the copmany
have pay less intrest in the market and company have also no
debenture part in capital structure.
12) Net Profit:- This is a widely used measure of performance
and is comparable across companies in similar industries. The fact
that a business works on a very low margin need not cause alarm
because there are some sectors in the industry that work on a basis
of high turnover and low margins.
Formula:- Net Profit * 100
All the three companies increse their profit in the next year
except the Shree Cement.Shree cement is reduce their profit by
0.34% and out of all the three companies, Birla Coropration earn
higher Net Profit.
13) Net Operating Profit:- It express the relationship between
Net Opearting Profit and the net sales of the company.
Formula:- Net Operating Profit * 100
Net Operating Profit is so good in the Shree Cement compare to
the other two companies but the company show the very poor result
in net profit so the reason is clear that the opearting cost of the
company is so high and the company have to reduce their cost due to
increse in the Net profit.
14) Stock Turn Over Ratio:- This ratio measures the stock in
relation to turnover in order to determine how often the stock
turns over in the business. It indicates the efficiency of the firm
in selling its product. It is calculated by dividing the cost of
goods sold by the average inventory.
Formula:- Cost of Goods Sold * 100
In Birla Cement Stock Turnover ratio is 7.57 times in 2007 but
it was reduce in the 2008 and it is 6.17 times. So the copmpany
have to increse their stock turnover ratio by incresing in the
Sales or Cost of goods sold. In Binani cement it is good in 2007
but it drastically change in 2008 and it was not good for the
company. But As usally Shree cement was perform good in year to
year. The company increse their turn over ration in next year.
Ulitimate Birla corpration is in good position compaire to other
15) Return on Capital Employed Ratio:- It is the value of the
assets that contribute to a companys ability to generate a
Formula:- NPBT,Intrest & Pref.Dividend * 100
Capital Employed (Fixed Assets + Current Assets Current
In Birla corporation, it is 46.96 and 42.90% which is excellent
for the company because the assets of the company generate a good
revenue for the company compaire to other companies which is very
low in this ratio. Both the companies are generate very low
16) Return On Proprietor Funds:- This Ratio Express the
relationship between Proprietors funds and Total assets.
Formula :- NPAT & Interest * 100
In Birla Corporation the proprietors stake in the total asset of
the company is 51.78 and 41.26% in the consecutive year but it is
reduce in te next year.In Binani Cement, it is 41.77 and 49.14% and
in shree cement, it is 35.13 and 38.70%.In Both Compnies it is
increse in the next year.
17) Earning Per Share: - Whatever income remains in the business
after all prior claims, other than owners claims (i.e. ordinary
dividends) have been paid, will belong to the ordinary shareholders
who can then make a decision as to how much of this income they
wish to remove from the business in the form of a dividend, and how
much they wish to retain in the business.
Formula:- Net Profit After tax Pref.Dividend
Number of Equity Share
Earning per Share of the all the three companies is shown in the
graphical represenatation and at the most the EPS is Shree Cement
and secondly, it is Birla corporation.
18) Dividend pay out:- This ratio looks at the dividend payment
in relation to net income
Formula:- Dividend Per Equtiy Share
Earning Per Share
From the investorss pointof view, Shree Cement is very good
company because the company provide 60 and 80% Divident pay and
this will be banificial for the investors but the Birla Corporation
earn more profit although the companys dividend pay out ratio is
very low due to reserve their money fo the expansion or any
19) Debtor Turnover:- This ratio Shows that How many days the
debtor can pay their debts to the company. So it express the
relationship between Avearge Debtors and Daily Avg. Sales.
Formula:- Avarage Debtor
Daily Avarage Sales
Debtor Turnover Ratio is 4.9 and 5.39 days in Birla Corporation
which is very good but in Binani Cement, it is very less of
collection period of debt and this ration in Shree Cement is quite
high from the Birla corporation but it is also good for the
20) Return on equity:- This ratio shows the profit attributable
to the amount invested by the owners of the business. It also shows
potential investors into the business what they might hope to
receive as a return.
Formula:- NPAT Pref.Dividend * 100
Equity Shareholders Funds
21) Return on investment:- Income is earned by using the assets
of a business productively. The more efficient the production, the
more profitable the business.
Formula:- After Tax Earning
In Birla coropration it was very good return on investment which
shows in the graph but in Bianani Cement and Shree Cement it was
very low ROI.
It means that the manager of the company is not invest the
companys fund at proper palce whare the company get more return and
this things done in the Binani and Shree Cement but Birla
coropraion is good from other two companies.
22) Debt Ratio:- This is the measure of financial strength that
reflects the proportion of capital which has been funded by debt,
including preference shares.
Formula:- Total Debt
In Birla Corporation debt proprotion was 54.29% and 49.70%
respectinely in 2007 and 2008 which was reduce by company in 2008
and it shows good financial strength. But in Binani And shree
cement it was not really good postion it was approxmatiley 70 to
75% which shows financial weekness of the company.
Ultimate Birla Corporation shows good financal postion in the
market compaire to the other two companies.
23) Dividend Cover:- This ratio measures the extent of earnings
that are being paid out in the form of dividends, i.e. how many
times the dividends paid are covered by earnings.
Formula:- Earning Per Share
Dividend Per Share
In Birla Corporation dividend cover was 10.34 and 10.92 times
which was very high and it means that a larger percentage of
earnings are being retained and re-invested in the business but in
the Binani Cement, it was 9.06 in the 2007 but it was reduce 4
times and in Shree Cement it was very low so that the company was
given larger percentage of earnings to shareholder in terms of the
Ultimate Companys point of view Birla Corporation is retained
their earning for expansion, reinvested in the business so it is
good compare to the other companies which shows in the graph.
Working Capital Management
Working capital means the part of the total assets of the
business that change from one form to another form in the ordinary
course of business operations.
Concept of working capital:-
The word working capital is made of two words 1.Working and 2.
The word working means day to day operation of the business,
whereas the word capital means monetary value of all assets of the
Working Capital: -
Working capital may be regarded as the life blood of business.
Working capital is of major importance to internal and external
analysis because of its close relationship with the current
day-to-day operations of a business.
Every business needs funds for two purposes.1. Long termfunds
are requiredto create production facilities through purchase of
fixed assets such as
Plants, machineries, lands, buildings & etc 2. Short term
funds are required for the purchase of raw materials, payment of
wages, and other day-to-day expenses.
It is otherwise known as revolving or circulating capital
It is nothing but the difference between current assets and
current liabilities. i.e.
Working Capital = Current Asset Current Liability.
Concept of working capital
Gross Working Capital = Total of Current Asset
Net Working Capital = Excess of Current Asset over Current
Cash in hand / at bank
Short term loans
Bank Over draft
Working capital in terms of five components:
1. Cash and equivalents: - This most liquid form of working
capital requires constant supervision. A good cash budgeting and
forecasting system provides answers to key questions such as: Is
the cash level adequate to meet current expenses as they come due?
What is the timing relationship between cash inflow and outflow?
When will peak cash needs occurs? When and how much bank borrowing
will be needed to meet any cash shortfalls? When will repayment be
expected and will the cash flow cover it? 2. Accounts receivable: -
Many businesses extend credit to their customers. If you do, is the
amount of accounts receivable reasonable relative to sales? How
rapidly are receivables being collected? Which customers are slow
to pay and what should be done about them?
3. Inventory: - Inventory is often as much as 50 percent of a
firm's current assets, so naturally it requires continual scrutiny.
Is the inventory level reasonable compared with sales and the
nature of our business? What is the rate of inventory turnover
compared with other companies in your type of business?
4. Accounts payable:- Financing by suppliers is common in small
business; it is one of the major sources of funds for
entrepreneurs. Is the amount of money owed suppliers reasonable
relative to what you purchase? What is your firm's payment policy
doing to enhance or detract from your credit rating? 5. Accrued
expenses and taxes payable: - These are obligations of your company
at any given time and represent a future outflow of cash.
Two different concepts of working capital are:-
Balance sheet or Traditional concept
Operating cycle concept.
Balance sheet or Traditional concept:- It shows the position of
the firm at certain point of time. It is calculated in the basis of
balance sheet prepared at a specific date. In this method there are
two type of working capital:-
Gross working capital
Net working capital
Gross working capital:- It refers to the firms investment in
current assets. The sum of the current assets is the working
capital of the business. The sum of the current assets is a
quantitative aspect of working capital. Which emphasizes more on
quantity than its quality, but it fails to reveal the true
financial position of the firm because every increase in current
liabilities will decrease the gross working capital.
Net working capital:- It is the difference between current
assets and current liabilities or the excess of total current
assets over total current liabilities.
Working capital= current assets - current liabilities.
Net working capital: - It is also can defined as that part of a
firms current assets which is financed with long term funds. It may
be either positive or negative. When the current assets exceed the
current liability, the working capital is positive and vice
Operating cycle concept:- The duration or time required to
complete the sequence of eve1nts right from purchase of raw
material for cash to the realization of sales in cash is called the
operating cycle or working capital cycle.
SHAPE \* MERGEFORMAT
Types of Working Capital:-
SHAPE \* MERGEFORMAT
SIGNIFICANCE OF WORKING CAPITAL:-
SHAPE \* MERGEFORMAT
CALCULATION OF WORKING CAPITAL FOR BIRLA CORPORATION LIMITED
(Rs. in lacks)
YEAR 31.03.06 31.03.07 31.03.08
INVENTORIES 10572.33 14258.83 20044.82
SUNDRY DEBTORS 2248.22 2722.47 3171.25
CASH AND BANK 5922.59 3439.42 3135.65
OTHER CURRENT ASSETS 28.38 --- ---
LOANS & ADVANCES 12442.01 30525.34 47311.27
TOTAL CURRENT ASSESTS 31213.53 50946.06 73662.99
CURRENT LIABILITIES AND PROVISIONS
CURRENT LIABILITIES 25753.21 24092.95 30109.32
PROVISION 4489.21 19215.28 35306.92
-------------- -------------- --------------
TOTAL CURRENT LIABILITIES 30242.42 43308.23 65416.24
NET CURRENT ASSETS 971.11 7637.83 8246.75
NET WORKING CAPITAL
Sources of Additional Working Capital
Sources of additional working capital include the following:
Existing cash reserves
Profits (when you secure it as cash!)
Payables (credit from suppliers)
New equity or loans from shareholders
Bank overdrafts or lines of credit
The overall performance of Birla Corporation Limited is getting
on a good track. The total turnover of the company has registered a
growth of 11.27% where as the operating profits for the year were
higher by 18.03% mainly on the accounts of increase in the volume
or blended cement in the overall cement sales, higher realization
and effective cost control measures taken by the company. The
profit before tax was up by 19.37% at Rs. 551.18 cores at against
Rs. 461.74 cores in the previous year. The cash earning of the
company improved substantially to Rs. 501.39 cores as against
Rs.179.25 cores in the last financial year. With the increase in
capacity on account of expansion projects being undertaken by the
company, it is expected that the company would be in a position to
maintain the growth in future years.
Company has parked its surplus fund in the various debt schemes
of mutual fund. There is an increase of 140% in investment from the
previous year. Company is cash rich but as there are expansion and
diversification plans under the pipeline, company is not utilizing
these funds. For meeting the working capital needs and capacity
expansion needs it has borrowed from banks.
The recent boom in the housing, construction and retail sector
in India coupled with continued thrust of the Government on
infrastructure projects is expected to sustain healthy growth of
cement demand. During the year 2007-08, Indian cement industry has
registered a growth of 9.34% in terms of cement production. Almost
all the major players in the industry including Birla Corporation
Ltd have announced substantial increase in capacity and the
possibility of oversupply situation cannot be ruled out.
During the year company has embarked upon expansion projects at
Satna and Chanderia which would effectively enhance the cement
capacity by 1.7 million tones. With the capacitive power plants
already in operation and expansion projects under implementation,
it is expected that the cement division of the company will do well
in the foreseeable future.
The concern about the cement industry is that it is one of the
most taxed industries in the country where the government levies
and taxes, taken together, constitute over 70% of the ex-factory
price. On the top of the above the increase in the cost of coal,
railway freight and transportation charge have further added
worries of cement manufactures.
1. BCLs NPAT is increasing day by day from last three years and
the growth is remarkable.
2. BCL has shown that it is very strong competitor in cement
sector of India.
3. Cement can be said as true fruitful business for BCL from
last many years.
4. Overall all ratios of the company are good and company need
to work with more efficiency.
5. The additional capacity of cement production at Durgapur will
create new milestones for the BCL.
6. Lack of advertisement can be said as weak point of the
7. BCLs investment policies are very much reliable.
8. Position of the stock is increasing per year that is good
sign to face the competition coming ahead.
9. Highest ever net profit of Rs. 393.57 cores
10. Highest ever dividend payout of Rs. 36.04 cores
Future of the Cement Industry:
Government policies have affected the growth of cement plants in
India in various stages. The control on cement for a long time and
then partial decontrol and then total decontrol has contributed to
the gradual opening up of the market for cement producers. The
consumption of cement is determined by factors influencing the
level of housing and industrial construction, irrigation projects,
and roads and laying of water supply and drainage pipes etc. The
level and growth of GDP and its sectoral composition, capital
formation, development expenditure, growth in population, level of
urbanization, etc, in turn, determine these factors. But the
domestic demand for cement is mainly from the housing activities
and infrastructure development.
The government paved the way for the entry of the private sector
in road projects. It has amended the National Highway Act to allow
private toll collection and identified projects, bridges,
expressways and big passes for private construction. The budget
gave substantial incentives to private sector construction
companies. Ongoing liberalization will lead to an increase in
industrial activities and infrastructure development. So it is
hoped that Indian cement industry shall boom again in near
The suggestion to the company as follows:
Management of the company should use the corporate strategy.
Management of the company should concentrate on the financial
Management should utilize all resources properly.
Company should evaluate the current financial position.
For the Inventory Maintenance company should use proficient
Management should also focus on research and development.
Company should control manufacturing expenses.
In spite of precautions taken to make the study objective, it
cannot be denied that there are certain procedural and technical
It is not possible to judge all the parameter to evaluate the
efficiency in a wide and dynamic area like financial analysis. Some
of the limitations of this study are as under:
(a) As the research has taken place in very short tenure, the
shortage of time is one of the limitations of this study.
(b) As the report is mainly based on secondary data, limitations
of secondary data are the limitations of the study.
The Reference Books Author
Financial ManagementKhan & Jain
Cement Manufacturing Association (April-2009)
DEBTORS & BILLS RECEIVABLES
WORK IN PROGRESS
TYPES OF WORKING CAPITAL
ON THE BASIS OF B/S CONCEPT
ON THE BASIS OF TIME
GROSS WORKING CAPITAL
NET WORKING CAPITAL
REGULAR WORKING CAPITAL
TEMPORARY WORKING CAPITAL
SEASONAL WORKING CAPITAL
SPECIFIC WORKING CAPITAL
SIGNIFICAN--CE OF WORKING CAPITAL
PAYMENT TO SUPPLIERS
INCREASE DEBT CAPACITY
INCREASE IN FIX ASSETS
EASY LOAN FROM BANKS