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  A Summer Training Report ON Working Capital Management Submitted in partial fulfillment for the Award of degree of Master of Business Administration Submitted By: - Submitted To: - PRASHANT VYAS Prof. Sonal Chouhan M.B.A. 2 nd year Faculty of Management Jodhpur National University, Jodhpur

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  A

Summer Training Report

ON

Working Capital Management

Submitted in partial fulfillment for the

Award of degree of 

Master of Business Administration

Submitted By: - Submitted To: -

PRASHANT VYAS Prof. Sonal Chouhan

M.B.A. 2nd year 

Faculty of Management

Jodhpur National University, Jodhpur

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2011-2013

ACKNOWLEDGMENT

I express my sincere thanks to my project guide, Mr. Vijay Vyas Jr. H.R. Manager, Shree

Cement, Beawar (Raj.), for guiding me right from the inception till the successful completion

of the project. I sincerely acknowledge him for extending their valuable guidance, support for 

literature, critical reviews of project and the report and above all the moral support he had

 provided to me with all stages of this project.

I would also like to thank Prof. Sonal Chouhan, for their help and cooperation through our 

 project.

I express my gratitude to faulty of Management, Jodhpur National University, Jodhpur for 

 providing me with this opportunity and constant guidance.

(Signature of Student)

Prashant Vyas

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PREFACE

The present project is undertaken as a part of my Internship with the Shree Cement

Ltd. The summer internship constitutes a very important part of the course curriculum as it

gives the students a chance to learn and incorporate in them the ways of working in the

corporate environment.

The increasing emphasis on branding has resulted in immense pressure and

competition among the producers and as a result of which retailer has been found toimportant mediator to increase the market share and sale of the product. Due to this,

Companies are eager to measure the satisfaction level of the retailers towards their brands.

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PROJECT

The survey guide ask me to analyze the position of Shree Cement Red Oxide Cement

in terms of quality in western Rajasthan. The first two weeks of training, visited the different

 places and knows the views of the contractor, builders toward our product.

Surprising result are that 90% builder and contractor are aware of our product and

Builder are not satisfied with its quality. But 75 % builder and contractor decision are based

on their contractor and retailer suggestions.

Finally, Project guide (Mr. Vijay Vyas) ask me do Project on “Working capitalManagement in Shree Cement’’

The study basically across attention towards the market share of the Shree Cement

and factor responsible for measuring the satisfaction level of the contractors, architect etc.

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EXECUTIVE SUMMARY

This project deals with the assessment of satisfaction level of the retailers towards the

Shree Cement Brand in terms of quality, and factor that are responsible for the satisfaction

level. We have focused our research on Shree Cement due to the slow growth rate instead of 

having huge market possibility.

With the help of Questionnaire we have analyzed each and every factor that is

responsible for the satisfaction level of the retailer toward Shree Cement. Study also includedthe market demand for the cement, market share, and competition analysis to know the exact

 position of cement in the market.

We have focused toward retailer scheme and its impact on the retailer and sale

 promotion of the cement.

Most important factor that are responsible are profitability margin , problem related to

quality, problem related to the monetary coupon , problem related to the disbursement

amount all these factor really hampering the retailers relationship with the company. We

have also discussed the challenges in front of the company and its recommendation.

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TABLE OF CONTENTS

S.no. Topic

1. Introduction to the Industry

2. Research Methodology

2.1 Title of the Study

2.2 Objective of Study

2.3 Type of Research

2.4 Sample Size and method of selecting sample

3. Facts and Findings

4. Analysis and Interpretation

5. SWOT

6. Conclusion

7. Bibliography

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Introduction

Fast rising Government Expenditure on Infrastructure sector in India has resulted a

higher demand of cement in the country. In the same direction, participation of larger 

companies in the sector has increased.

For raising efficiency in the sector, the Planning Commission of India in the 10th plan has

formed a 'Working Group on Cement Industry'.

There are a total number of 125 large cement plants and more than 300 small cement plants

operating in India presently.

1.  Indian cement industry dates back to 1914 - first unit was set-up at Porbandar with a

capacity of 1000 tones.

2.  Currently India is ranked second in the world with an installed capacity of 114.2

million tonnes.Industry estimated at around Rs. 18,000 crores (US $ 4185 mn)

3.  Current per capita consumption - 85 kgs. as against world standard of 256 kgs.

4.  Cement grade limestone in the country reported to be 89 bt. A large proportion

however is unexploitable.

5.  55-60% of the cost of production are government controlled

6.  Cement sales primarily through a distribution channel. Bulk sales account for < 1% of 

the total cement produced.

7.  Ready mix concrete a relatively nascent market in India

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Cement Industry : Structure

Installed capacity 114.2 mn tonnes per annum (mntpa) Production around 87.8 mn tonnes 

Major cement plants

  Companies : 59

  Plants : 116

  Typical installed capacity

   per plant : Above 1.5 mntpa

  Total installed capacity : 105 mntpa

  Production 98-99 : 81.6 mntpa

  Excise :Rs. 350/ tonne

  All India reach through multiple

 plants

  Export to Bangladesh, Nepal, Sri

Lanka, UAE and

  Mauritius

  Strong marketing network, tie-ups

with customers,

  contractors

  Wide spread distribution network .

  Sales primarily through the dealer 

channel

Mini cement plants

   Nearly 300 plants

  Located in Gujarat, Rajasthan, MP

  Typical capacity < 200 tpd

  Installed capacity around 9 mn.

Tonnes

  Production around : 6.2 mn tonnes

  Excise : Rs. 200/ tonne

  Mini plants were meant to tap

scattered

limestone reserves.

However most set up in AP

  Most use vertical kiln technology

  Production cost / tonne - Rs. 1,000 to

1,400

  Presence of these plants limited to the

state

  Infrastructural facilities not the best

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Cement Industry in India

Cement Industry in India is on a roll at the moment. Driven by a booming real estate

sector, global demand and increased activity in infrastructure development such as state and

national highways, the cement industry has witnessed tremendous growth. Production

capacity has gone up and top cement companies of the world are vying to enter the Indian

market, thereby sparking off a spate of mergers and acquisitions. Indian cement industry is

currently ranked second in the world.

The origins of Indian cement industry can be traced back to 1914 when the first unit

was set-up at Porbandar with a capacity of 1000 tonnes. Today cement industry comprises of 

125 large cement plants and more than 300 mini cement plants. The Cement Corporation of 

India, which is a Central Public Sector Undertaking, has 10 units. There are 10 large cement

 plants owned by various State Governments. Cement industry in India has also made

tremendous strides in technological upgradation and assimilation of latest technology.

Presently, 93 per cent of the total capacity in the industry is based on modern and

environment-friendly dry process technology. The induction of advanced technology has

helped the industry immensely to conserve energy and fuel and to save materials

substantially. Indian cement industry has also acquired technical capability to produce

different types of cement like Ordinary Portland Cement (OPC), Portland Pozzolana Cement

(PPC), Portland Blast Furnace Slag Cement (PBFS), Oil Well Cement, Rapid Hardening

Portland Cement, Sulphate Resisting Portland Cement, White Cement etc. Some of the major 

clusters of cement industry in India are: Satna (Madhya Pradesh), Chandrapur (Maharashtra),

Gulbarga (Karnataka), Yerranguntla (Andhra Pradesh), Nalgonda (Andhra Pradesh), Bilaspur 

(Chattisgarh), and Chandoria (Rajasthan).

Cement industry in India is currently going through a consolidation phase. Some

examples of consolidation in the Indian cement industry are: Gujarat Ambuja taking a stake

of 14 per cent in ACC, and taking over DLF Cements and Modi Cement; ACC taking over 

IDCOL; India Cement taking over Raasi Cement and Sri Vishnu Cement; and Grasim's

acquisition of the cement business of L&T, Indian Rayon's cement division, and Sri Digvijay

Cements. Foreign cement companies are also picking up stakes in large Indian cement

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 companies. Swiss cement major Holcim has picked up 14.8 per cent of the promoters' stake

in Gujarat Ambuja Cements (GACL). Holcim's acquisition has led to the emergence of two

major groups in the Indian cement industry, the Holcim-ACC-Gujarat Ambuja Cements

combine and the Aditya Birla group through Grasim Industries and Ultratech Cement.

Lafarge, the French cement major has acquired the cement plants of Raymond and Tisco.

Italy based Italcementi has acquired a stake in the K.K. Birla promoted Zuari Industries'

cement plant in Andhra Pradesh, and German cement company Heidelberg Cement has

entered into an equal joint-venture agreement with S P Lohia Group controlled Indo-Rama

Cement.

Issues concerning Cement Industry

  High Transportation Cost is affecting the competitiveness of the cement industry.

Freight accounts for 17% of the production cost. Road is the preferred mode for 

transportation for distances less than 250km. However, industry is heavily dependant

on roads for longer distances too as the railway infrastructure is not adequate.

  Cement industry is highly capital intensive industry and nearly 55-60% of the inputs

are controlled by the government.

  There is regional imbalance in the distribution of cement industry. Limestone

availability in pockets has led to uneven capacity additions.

  Coal availability and quality is also affecting the production.

Outlook 

Outlook for the cement industry looks quite bright. Given the sustained growth in the real

estate sector, the government's emphasis on infrastructure and increased global demand, it

looks as if the juggernaut of cement industry would continue to roll on the path of growth.

With the increased government expenditure on infrastructure, the demand for cement

in India has increased. The first cement industry was set up in 1914 in Porbandar. The fact

that India is the India is the second largest producer of cement in the world speaks volumes of 

the cement industry in India.

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Current Status of Cement Industries in India

Cement industry is growing at a rapid rate of around 10% annually. The Indian

cement industry has 130 large cement plants and 365 mini cement plants, whose total

capacity is 165 MT per annum. Large cement plants nearly contribute 94% of the total

capacity. Though the cement industry is developing at a fast rate, per capita consumption of 

cement in India is only 150 kilograms per person, which is even less than one third of China's

 per capita consumption.

Global Cement Companies in India

The financial performance of the cement industry has also recorded impressive

growth. The growth of the Indian Cement companies has also attracted global companies to

India. Top global companies such as Lafarge of France, Holcim of Switzerland, Italcementi

of Italy and Heidelberg Cements of Germany have already entered in India. Their investment

in the Indian cement sector is also giving a boost to the Indian economy. There are about 11

types of cement produced in India. They are Clinker Cement, Ordinary Portland Cement,

Portland Blast Furnace Slag Cement, Portland Pozzolana Cement, Rapid Hardening Portland

Cement, Oil Well Cement, White Cement, Sulphate Resisting Portland Cement etc.

Future of Cement Industry

It is expected that in the coming fiscal years the demand of cement is going to be

around 225 MT. The government is also going to spend more on infrastructure and so it is

 beyond doubt that in the coming years the future of the cement industry is very bright. Some

of the leading cement manufacturers of India are Binani Cement, Indian Cements Ltd,

Madras Cement, Ultra tech Cement, Ambuja Cements, Prism Cements etc.

Cement industry in India has been identified as one of the major air polluting industries for 

which the Central Pollution Control Board evolved emission regulations for different plant

 production capacities. The emission standards are applicable for all sections of production in

cement plant, such as raw mill, kiln, coal mill, clinker cooler, cement mill etc. In order to

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 combat emission from these sources and comply with the standards, cement industries are

installing different types of pollution control devices. In this context, it was felt necessary to

undertake a study on the "cost benefit analysis of various dust control equipment in cement

industry" to establish the economic viability of various dust collectors used in cement plants

of varying capacities. The study was carried out by the National Council for Cement and

Building Materials (NCB), Ballabhgarh in association with the Central Board. Findings of the

study form the basis of this report. Dust collectors for different.sections have been

recommended depending on the requirrnents of the emission regulation and their pay-back 

 periods are also brought out in the report.

Indian Cement Industry on Growth Trajectory……. 

The Cement industry has continued its growth trajectory over the past seven years.

Domestic cement demand growth has surpassed the economic growth rate of the country for 

the past couple of years. The growth rate of cement demand over the past five years at 8.37 %

was higher than the rate of growth of supply at 4.84% as also the rate of growth of capacity

addition during the same period. Demand for cement in the country is expected to continue its buoyant ride on the back of robust economic growth and infrastructure development in the

country.

The key drivers for cement demand are real estate sector, infrastructure projects and

industrial expansion projects. Among these, real estate sector is the key driver and accounted

for almost 55% in FY 07.

During the period FY 03  –  07, capacity additions in the country (30.6 mn tonnes)

were at a slower rate compared to demand growth leading to higher average capacity

utilization rates from 81.3% to 93.8% during the same period. This has exerted pressure on

average prices which have increased from Rs. 156 per bag in FY 03 to Rs. 216 per bag in FY

07. In December 2007, prices stood at Rs. 245 - Rs. 250 per bag.

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 Low capacity addition coupled with higher utilization rate also led to increase in

 proportion of production of blended cements in product mix. Blended cement accounted for 

68% of product mix in FY 07 as compared to 49% in FY 03.

Cement is a bulky commodity and cannot be easily transported over long distances

making it a regional market place, with the nation being divided into five regions. Each

region is characterised by its own demand-supply dynamics. The Southern region dominated

the cement consumption at 44.5 mn tonnes in FY 07, accounting for about 30% of total

domestic cement consumption. During FY 03-07, Southern region has witnessed highest

CAGR of cement demand growth at 10.4% followed by Northern and Eastern regions at

8.9% and 9%, respectively.

Over the past five years, cost of cement production has grown at a CAGR of 8.4%.

Also, the producers have been able to pass on the hike in cost to consumers on the back of 

increased demand. Average realizations have increased from Rs. 1,880 per tonne in FY 03 to

Rs. 3,133 per tonne in FY 07, at a CAGR of 13.6%, which has been reflected in higher profit

margins of the industry.

To reduce the cost of production, the industry has focused on captive power 

generation. Proportion of cement production through captive power route has increased over 

the years. Also, cement movement by rail has increased over the years.

Market share of top five players in the industry has increased from 42% in FY 02 to

56% in FY 07. In FY 07, Holcim group captured a leadership position with market share of 

22.6% followed by Aditya Vikram Birla group at 19.4%.

Domestic Cement industry is highly insulated from global cement markets. Exports

have been constant at about 6% of total cement demand for past few years. With GoI

intervention, making cement duty free, cement is being imported from neighbouring

countries. However, due to logistics issues and lack of port handling capabilities, imports of 

cement will remain negligible and do not pose a threat to domestic industry.

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Cement demand is expected to remain buoyant driven by boost in construction sector 

in the country. As per estimates, investment of USD 25 bn is required in urban housing, USD

450 bn will be required in infrastructure related projects and industrial expansion projects

would witness investments of USD 88 over the next five years.

We estimate domestic cement demand to grow at a CAGR of approximately 10% for 

the next 5 years. The current tight demand - supply situation is expected to extend up to end

of calendar year 2008 owing to delays in capacity expansion programmes by various

companies. We expect prices to remain firm till the end of CY2008 due to tight demand -

supply situation and increase in input costs. Thereafter as new capacities come in, we may

witness a softening in prices in some regions.

The report elucidates facts on the Indian Cement industry, supplemented by the latest

Statistics. Emphasis is laid on the following topics to accomplish the report:

-Performance of the Cement industry over past five years with evaluation of trends of 

capacity addition, production and capacity utilisation.

-Evaluation of Overall demand  – supply scenario in the country covering trend of domestic

consumption and exports.

-Regional dynamics of industry depicted by detailed analysis of demand  – supply situation in

the five distinct regions in India.

-Influence of various cement demand driving sectors like real estate, infrastructure and

industrial projects covering region-wide demand drivers.

-Changing scenario of product mix – override of blended cements on OPC.

-Cost analysis with emphasis on power & fuel cost, RM cost, Freight cost and evaluation of 

average cost of production, average realizations and margins of the industry.

-Our perspective on region-wide future capacity addition, demand estimation and

identification of deficit/surplus regions in the country.

-Operating & financial performance of top players in the industry along with future outlook.

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 -Brief on peculiar characteristics of industry, types & applications of cement variants and

cement manufacturing process.

-Comprehensive database of company-wide financial & operational statistics and region-wide

key operational statistics.

\

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CHAPTER  – 2

Introduction of the

Organization 

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 Shree Cement Ltd. is an energy conscious & environment friendly business organization.

Having 9 directors on its board under the chairmanship of Shri.B.G. Bangur, the policy

decisions are taken under the guidance of Shri. H.M. Bangur, Managing Director. Shri.

M.K.Singhi, Executive Director of the Company, is looking after all day-to-day affairs. The

company is managed by qualified professionals  with broad vision who are committed to

maintain high standards of quality & leadership to serve the customers to their fullest

satisfaction. The board consists of eminent persons with considerable professional expertise

in industry and field such as banking, law, marketing & finance

Company History - Shree Cements

YEAR EVENTS

1979 - The Company was incorporated on 25th October, at Jaipur.

The Company was promoted by members of the Bangur family and

others.

Shree Digvijay Cement Co. Ltd., Graphite India, Ltd. and Fort Gloster Industries, Ltd. took 

active part in the promotion of the Company. The Company

manufacture's cement & cement products.

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SHREE CEMENT LIMITED 

CODE OF CONDUCT ON CORPORATE GOVERNANCE

PHILOSOPHY

Shree Cement Ltd is a professionally managed company. The company always believes in

complete transparency and discharge of the fiduciary responsibilities which has been

assumed by Directors as well as by the Senior Management Executives and/or Staff.

Therefore in order to ensure the continuity thereof though, not written but otherwise

ingrained, the Board of Directors has approved of the following Code of Conduct for all

Directors as well as for the Senior Management Executive and/or personnel and other 

employees.

Community And Environment 

Shree‟s community concern extends from direct assistance to safe and dependable

operations for its members and the environment.

Markets classification

Markets States

Primary Rajasthan

Secondary Delhi, Punjab, JK, Haryana, Western U.P. and Uttaranchal

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Tertiary Gujarat, M.P. and Central U.P.

Markets

Each cement manufacturer has a primary and secondary market. The former is one,

which is the closest to the production centre where it fetches the best realizations while the

latter is usually at a distance where realizations are lower.

In an industry where consumer loyalties change every rupee, Shree‟s biggest achievement

was that it built an emotional bond with its stakeholders.

This transpired as a result of a number of initiatives:

The company positioned its brands around longer life (durability), emphasizing

 product longevity.

The company innovated the launch of corrosion resistant grade like Red Oxide

Cement, winning innovations in a staid industry.

Rajasthan is India‟s largest cement producing state and Shree‟s is the largest single

location plant in northern India. The company‟s northern-most positioning within Rajasthan

makes it the closest among all Rajasthan manufacturers to Delhi, Haryana and some parts of 

Punjab, a significant cost edge. The company enjoys a market share of about 11 per cent innorth India.

Challenges

Due to the nature of the product - bulky, low priced - it became increasingly difficult

to sell the product across a large territory. Besides, higher realizations in distant territories did

not mean that the gain would accrue to the company since the incremental freight would

neutralize the price advantage. As a result, it became important to arrive at a median between

realizations and distribution costs and earn a comfortable margin.

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ERP implementation

 Network that delivers online, real-time access to information and processes. Towards

this end, the company is adopting the Oracle e-Business Suite ERP with Tata Consultancy

Services as the implementation partner. Imbibing the best practices of companies worldwide,

this ERP suite will impact all processes of the company, right from procurement, through

operations, to sales and distribution. It involves a complete re-engineering of business

 processes to make them more high-performing and tuned towards the global order.

 building and environment, health and safety functions.

CREATING LEADERS AT EVERY LEVEL

Shree Cement emphasises that creating leaders not just at the organisational apex but

at every level results in strong sense of emotional ownership. Thus the employees are

delegated with responsibility and authority to adopt one Electric motor and related equipment

for keeping watch and care resulting in energy conservation, thus generating multiple CEO's

in the Energy Management System.

RECOGNITION AND REWARD SCHEME 

The management believes in the self-actualisation of its employees by injecting the

concept of Human resource Development in all its policies and strategies. By recognition and

reward the employees are motivated to give their best in the interests of the organization in

 particular and for the society in general. So many schemes of recognition and rewards are

given to boost the morale and motivate the employees.

According to Managing Director of the company, morale management is considered

to be more challenging than material management. According to him it is important to keep

walking around and congratulating the teams for their small victories. Efforts and their 

success stories are disclosed to all in special functions so that other employees may take

inspiration from them. Employees are rewarded for doing exemplary work in the field of 

reducing/ eliminating breakdown, in-house development, better house keeping, and reduction

in raw material, fuel, power and wastage. Cash awards and Certificates of honour have been

given in a function.

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 For example a scrapper chain of reclaimer II is to be replaced which takes 80 hours. The team

completed this task in minimum possible time with the result that the reclaimer was put into

operation in just 36.5 hours. The team was rewarded with a cash amount of Rs. 11,000/- and

certificate of honour.

RAS CEMENT PROJECT

Shree Cement Limited is setting up a new green field Project at Village Ras,

Tehsil Jaitaran, District Pali of Rajasthan. The capacity of the plant is 3000 Ton

Per Day of clinker production with an approximate investment of about Rs. 300

Crores.

The main plant & machineries would be supplied by KHD Humboldt Wedag AG

- Germany & GEBR Pfeiffer AG - Germany. The plant will be based on the latest

Technology available and maximum Automation would be done to keep the

minimum manpower. The company is having sufficient mining lease at Ras to

cater its production requirements for the upcoming 50 years.

SHREE CEMENT OTHER POLICIES

We Perform Differently

· Only Company in the Country Banned use of Tobacco within Premises.

· No strike since inception.

· Firmly Integrated as Shree Family.

· Celebrates 13 Safety Day in a year (i.e. Ist Day of Every Month & one National Safety

Day).

· The Company that is having more than100 CEO‟s.

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Culture & Values of Employees:- 

• Highly cohesive work Culture:- Superior acts as friend philosopher & guide to subordinates.

• Culture of Learning

• Concept of Family Development

Unique Practice :- 

- We negotiates with all the three unions.

-  We enters into long terms agreements with the unions.

-  Continual increase in Distribution of Bonus & ex-gratia.

-  We have not lost a single man day production due to either strike or Lockout ever 

since inception.

-

  Initiated Small group activities for self Development & Energy Conservation.

SOCIAL SECURITY MEASURES AT SHREE CEMENT 

1. Employees Provident Fund Scheme 1952.

2. Shree Cement Employees Provident Fund Trust (For those who are not members of EPF)

3. Group gratuity scheme.

4. Mediclaim Policy.

5. Insurance Coverage upto 60 months Salary in case of Death in an accident.

6. Shree Cement Superannuation Scheme.

7. Death Relief Fund

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 Career Development 

Ample opportunity is accorded for career growth to the performers.

Employees recruited at entry level are accorded assured career growth to a certain level.

Thereafter performance, of employees is the only criteria for career growth in the

organization.

RESEARCH METHODOLOGY

TITLE OF THE STUDY  : Working Capital Management in Shree

Cement

OBJECTIVE OF THE STUDY :

Qualitative research on weakness of Shree Ultra Red Oxide Cement in Working Capital

Management in Shree Cement

As primary data collected from the company, its was being observed that Shree

Cement is weak in the Working Capital Management in Shree Cement , our objective was to

analyze the major reasons at the back of that, we found that quality was the major reason

 behind this , and decided to target the qualitative research in this direction.

1-To measure the satisfaction level of retailers, dealers, contractors, architect and ICH,

in terms of quality?

2-How many satisfied retailers, dealers, contractors, architect are there in Jodhpur?

3-What Qualitative measures should be adopted to enhance the quality ?

4-What factors must be adopted to enhance Working Capital Management in ShreeCement ?

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 5-What are the promotional activities affecting Working Capital Management in Shree

Cement ?

MEANING OF WORKING CAPITAL

Working capital refers to the management of current assets.

Working capital refer to that part of total capital which is used for carrying out the routine or 

regular business operation. In other words, it is the amount of funds used for financing the

day-to day operation. In short, it is the capital with which the business is worked over.

Thus, the capital invested and locked up in various current assets , such as stocks of raw

material, work in progress , stocks of finished goods account receivable and cash and bank 

 balances constitutes the working capital.

Working capital may be regarded as life blood of a business. Its effective provision can do

much to ensure the success of a business while its in provision can do much to ensure the

success of a business while its in efficient management can lead not only to loss of profits but

also to the ultimate downfall of what otherwise might be considered as a promising concerns.

> According to shoo-in, “Working Capital is the amount of funds necessary to cover the cost

of  operating the enterprise”. Working Capital is also known as Revolving or Circulating

Capital.

> According to Genesterberg, “Circulating Capital means current assets of a company that are

changed in the ordinary cause of business from one to another form. Example: From cash to

inventory, inventories to bills receivable and bills receivable to cash.

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Concept of working capital

There are five concepts of working capital :-

o Gross Working Capital

o Net Working Capital

o Negative working capital

o Permanent working capital

o Variable working capital

On the basis of the components or items comprised in working capital, working capital can be

classified into the following types:

Gross Working capital:  Simply called as working capital, refers to the firms investment

in current assets. Current assets which can be converted in to cash with in the accounting year 

(or operating cycle) and includes cash, short term securities, debtors, Bills receivable andstock (inventory) .

Net Working Capital:  Refers to the difference between current assets and current

liabilities. Current liabilities are those claims of outsiders, which are expected to mature for 

 payment with in a year and include creditors, Bills payable and outsider‟s expenses. 

Negative working capital or working capital deficit: means the excess of current

liabilities over the current assets. It accurse when the current liabilities exceed the current

assets

Permanent working capital or fixed working capital:   refer to the minimum

amount of investment in current assets required throughout the year for carrying out the

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  business. In other words , it is the amount of working capital which remains in the business

 permanently in one form or other.

Variable working capital or fluctuating working capital: refer to the amount of 

working capital which goes on fluctuating or changing from time to time with the change in

the volume of business activities.

Ratios :

The term ratio simply means one number expressed in terms of another. It describes in

mathematical terms the quantitative relationship that exists between two numbers.

NEED FOR WORKING CAPITAL

Every business undertaking requires funds for two purposes, investments in fixed assets &

investment in current assets.

Funds required for investing in inventory, debtors & other current assets keep changing in

shape & volume. Company has some cash in the beginning; this cash may be the source of 

raw material, keeping the labor cost & other overheads. These three combined would

generate work in progress, which will be converted into finished goods on the completion of 

the production process into debtors & when the debtor pay, the firm may generate cash.

Working capital is needed for sustaining (i.e., maintaining) the sales activities. If adequate

working capital is not maintain for this period ,the firm will not be able to sustain or maintainthe sales , since it may not be in a position to purchase raw material and pay wages and other 

expenses ands produce the goods required for the sales.

NATURE OF WORKING CAPITAL

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 In ordinary parlance, Working Capital is taken to be the fund available for meeting day-to-

day requirements of enterprises. It cannot be denied that a part of the fixed or permanent

capital is invested in assets, which are kept in the business or for a long period for the

 purpose of earning profit. These are usually known as fixed assets viz. Land & buildings,

 plant & machinery, furniture & fitting & intangibles like goodwill, patents, trademarks &

long-term investment.

Another part of permanent capital left in the business for supporting the day-to-day normal

operation is known as the “Working Capital”. This Working Capital generates the important

element of cost viz. Material, wages & expenses. These cost usually lead to production &

sales in case of manufacturing concerns & sales alone in others. These costs occur gradually

in a flow & do not come into being abruptly at a given moment.

Hence the initial investment of cash as working capital for this specific purpose has to be

continued until the sales revenue commences flowing in substantially & in a regular way.

From this stage the business is found to acquire a momentum of its own. The flow of revenue

is expected to continue to replace the cost lost in its day-to-day out flow for the generation of 

the revenue mentioned above.

SOURCE OF WORKING CAPITAL

The financial manager is always interested in obtaining the working capital at the right time,

at a reasonable cost and at the best possible favorable terms. A part of the working capital

investment are permanent investments is fixed assets. The following is snapshot of various

source of working capital.

Sources of working capital divided into two

• Long – term

• Short – term

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Sources of long term working capital

• Issue of shares

• Floating of debentures

• Ploughing back of profit

• Loans 

• Public deposit 

Sources of short-term working capital

Internal sources 

• Depreciation 

• Taxation 

• Accured expenses 

External sources

• Trade credit

• Credit papers

• Bank credit

• Customer‟s credit

• Govt. Assistances

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 • Loans from director  

• Security of employees 

WORKING CAPITAL CYCLE:-

The working capital of a concern goes on changing in shape and volume. For Instance, a

concern may have some cash in the beginning. The cash may be used by the concern for the

 purpose of purchase of raw material, payment of wages and other expenses‟. These elements

of cost or items of expenses, raw material , wages and overheads , will result in work- in-

 progress during the process of manufacture. On the in compilation of the production process,

the work- in –  progress becomes finished goods.

Meaning

The length of time involved in this cycle of conversion of cash into raw material, raw

material into work-in progress, work-in-progress into finished goods, finished goods into

debtors and debtors into cash again is called the operating cycle or working capital cycle of 

the firm, in other words, it is period between the date raw material are purchased and the date

the sale proceeds of finished goods are realized by concern.

INTER-DEPENDENCE AMOUNG COMPONENTS OF WORKING CAPITAL

OPERATING CYCLE :

A company starting with cash purchase raw materials, components etc., on a cash or credit

 basis. These materials will be converted into finished goods after undergoing various stages

of work-in-process. For this purpose the company has to make payments towards wages,

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 salaries and manufacturing costs. Payments to suppliers have to be made on purchases in the

case of cash purchases and on the expiry of the credit purchases. Further, the company has to

meet other operating costs such as selling and distribution costs, general administration costs

and non-operating costs described as financial costs (interest on borrowed capital). In case the

company sells its finished goods on cash basis, it will pass through one more stage, viz,

accounts receivable and gets back cash along with profit on expiry of credit period. Once

again the cash will be used for the purchase of materials and / or payments to suppliers and

the whole cycle is termed as working capital or operating cycle repeats itself. This process

indicates the dependents of each stage or components of working capital on its previous stage

or component.

WORKING CAPITAL MANAGEMENT

Introduction

Working capital management is one of the most important aspects of financial management.

It forms a major function of the finance manager.

Meaning :

Working capital management means management or administrating of all aspect of working

capital, i.e., currents assets and currents liabilities.

In other words of Smith, “working capital management is concerned with the problems that

arise in attempting to manage the current assets, the current liabilities and the inter-relationship that exists between them”. 

BASIC OBJECTIVE OF WORKING CAPITAL MANAGEMENT :

The basic objective of working capital management is to manage the firm‟s working capital

(i.e., currents assets and currents liabilities) in such a way that a satisfactory level of working

capital (i.e., neither excessive nor inadequate working capital) is maintained. This isnecessary because, if the working capital is excessive or large, the liquidity position of the

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 firm would, no doubt, improve, but its profitability would be adversely affected, as funds

would remain idle. Conversely, if the working capital is too small, the, profitability of the

firm may improve, but the liquidity position of the firm would be adversely affected.

Advantages of working capital:

• It helps the business concern in maintaining the goodwill. 

• It can arrange loans from banks and others on easy and favorable terms.  • It enables a concern to face business crisis in emergencies such as depression.

• It creates an environment of security, confidence, and over all efficiency in a business.  

• It helps in maintaining solvency of the business. 

Disadvantages of working capital:

• Rate of return on investments also fall with the shortage of working capital.

• Excess working capital may result into over all inefficiency in organization.  

• Excess working capital means idle funds which earn no profits. 

• Inadequate working capital can not pay its short term liabilities in time.

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OBJECTIVES OF THE PROJECT

The objectives of study

1) To identify the financial strengths & weakness of the company.

2) Through the net profit ratio & other profitability ratio, understand the profitability of the

company.

3) Evaluating company s performance relating to financial statement analysis.

4) To know the liquidity position of the company with the help of current ratio.

5) To find out the utility of financial ratio in credit analysis & determinig the financial

capacity of the firm.

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BUSINESS POLICY 

“In-line with Company’s Vision, Mission and values, we dedicate ourselves to sustained

growth with increasing positive Economic Value Addition and Customer focussed business

leadership in the Industry Sector.

CRITICAL SUCCESS FACTORS:   Increase Orders of Spares/Services to 230 Cr.

  Decrease Capital employed by Rs. 120 Cr.

  Saving in Material Cost by 16 Cr. i.e. 5%- Rs. 4 Cr.

  Decrease in indirect material +miscellaneous expenses by 5%- Rs. 4 Cr.

  Effective implementation of QTM/RCA/CTQ

  Strengthening Internal customer concept

  Development of an Incentive Scheme

  Reward Scheme including EXCEL Awards

  Effective implementation of PMS

  Effective Contract Management

  Technology Upgradation

„Excellence triangle‟ for each Critical Success Factor is now being drawn comprising

improvement projects. These projects will be centrally registered under On-line Central

Registration system to be developed for it. While CSF Champion will take the total stock of 

 position in the improvement projects undertaken in his respective CSF, progress of individual

 projects will be reviewed by Area TQ Council (ATQC) and Functional TQ Council (FTQC).

One of the major strengths of HEEP Hardwar is its free, open and consistent work culture for 

making continuous improvement evident from the participation of employees in Suggestions

and Quality Circles. To recognize their efforts various productivity drives and competition are

organized throughout the year and Executive director awards the winners in the special Award

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 Distribution Functions. National Award for Excellence in Suggestion Scheme for 11 th 

consecutive year by INSSAN, National Award for excellence in Energy Conservation as an

“Energy Efficient unit”  by CII, CMD‟s Rolling Trophy for 3rd consecutive year, „Well known

Forge Shop “ by Central Boiler Board etc. are some Vir Award 2001” and 12 employees

honored with “Vishwakarma Rashtriya Puraskar”during 2001-02.

The journey to excellence is unending .It is a continuous search with commitment and

 belongings. Sky indeed is not the limit for perfection. The transition has strongly experienced a

silent internalization with a blend of commitment of the existing human resource for creating

 benchmarks for excellence. The emergence of role models and clear-cut driving force at the top

 provide an anvil to unleash the potential, which remain unexplored in search of “Attitude to

 perform”. The surge has started and is being communicated down the. SHREE CEMENT today

through TQM is on March towards excellence.

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CHAPTER-2

RESEARCH

DESIGN

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General Methodology

The study was carried on an explorative basis using accounting and financial data.

The procedures followed in this study consist of following steps:

1)The research includes figurative and diagrammatic interpretation for the ease of 

comparison.

2) Understanding of cement industry in global and domestic scenario.

3) Determining the demand and supply in near future to understand the future prospect of the

industry.

4) Analysis of Government Policy toward cement industry.

5) Evaluating SHREE CEMENT , BEHWAR position in cement industry.

Research Methodology

  Research methodology that is used here was purely exploratory because we know it is

used when one is seeking insight in to the general nature of the problem possible

decision alternatives and relevant variables that need to be considered. 

  This resistance also help full / use full for establishing priorities among research

questions and for learning about practical problems of carrying out the research.  

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CHAPTER -3

DATA

ANALYSIS,

PRESENTATION

AND

INTERPRETATION 

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Data source

Data collection was through literature survey and expert opinion. Literature survey includes

the collection of data from various sources like bank agreement and statement, handbooks as

well as study material. 

A part of data` s was collected from primary data and other was collected from the secondary data.

Primary sources

Information gathered by interview and discussions with the head and employees of various

departments and my project guide.

Secondary sources

  Company annual report.

  Published information on finance.

  Internal circulation booklets.  Company Websites

DATA ANALYSIS AND INTERPRETATION

Ratio Analysis is a powerful tool o financial analysis. Alexander Hall first presented it in

1991 in Federal Reserve Bulletin. Ratio Analysis is a process of comparison of one figure

against other, which makes a ratio and the appraisal of the ratios of the ratios to make proper 

analysis about the strengths and weakness of the firm‟s operations. The term ratio refers to

the numerical or quantitative relationship between two accounting figures. Ratio analysis of 

financial statements stands for the process of determining and presenting the relationship of 

items and group of items in the statements.

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Ratio analysis can be used both in trend analysis and static analysis. A creditor would like to

know the ability of the company, to meet its current obligation and therefore would think of 

current and liquidity ratio and trend of receivable.

Major tool of financial are thus ratio analysis and Funds Flow analysis. Financial analysis is

the process of identifying the financial strength and weakness of the firm by properly

establishing relationship between the items of the balance sheet and the profit account

The financial analyst may use ratio in two ways. First he may compare a present ratio with

the ratio of the past few years and project ratio of the next year or so. This will indicate the

trend in relation that particular financial aspect of the enterprise. Another method of using

ratios for financial analysis is to compare a financial ratio for the company with for industry

as a whole, or for other, the firm‟s ability to meet its current obligation. It measures the firm‟s

liquidity. The greater the ratio, the greater the firms liquidity and vice-versa.

A ratio can be defined as a numerical relationship between two numbers expressed in terms

of (a) proportion (b) rate (c) percentage. It is also define as a financial tool to determine an

interpret numerical relationship based on financial statement yardstick that provides a

measure of relationship between two variable or figures.

Meaning and Importance:

Ratio analysis is concerned to be one of the important financial tools for appraisal of financial

condition, efficiency and profitability of business. Here ratio analysis id useful from

following objects.

1. Short term and long term planning

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2. Measurement and evaluation of financial performance

3. Stud of financial trends

4. Decision making for investment and operations

5. Diagnosis of financial ills

6. Providing valuable insight into firms financial position or picture

ADVANTAGES & DISADVANTAGES OF RATIO

ANALYSIS : 

Advantages:

The following are the main advantages derived of ratio analysis, which are obtained from the

financial statement via Profit & Loss Account and Balance Sheet.

a) The analysis helps to grasp the relationship between various items in the financial

statements.

 b) They are useful in pointing out the trends in important items and thus help the management

to forecast

c) With the help of ratios, inter firm comparison made to evolve future market strategies.

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 d) Out of ratio analysis standard ratios are computed and comparison of actual with standards

reveals the variances. This helps the management to take corrective action.

e) The communication of that has happened between two accounting the dates are revealed

effective

Action.

f) Simple assessments of liquidity, solvency profitability efficiency of the firm are indicted by

ratio analysis. Ratios meet comparisons much more valid.

Disadvantages: 

Ratio analysis is to calculate and easy to understand and such statistical calculation

stimulation thinking and develop understanding. But there are certain drawbacks and dangers

they are.

i)There is a trendy to use to ratio analysis profusely.

ii)Accumulation of mass data obscured rather than clarifies relationship.

iii) Wrong relationship and calculation can lead to wrong conclusion.

1. In case of inter firm comparison no two firm are similar in size, age and product unit.(for 

example) one firm may purchase the asset at lower price with a higher return and another 

firm witch purchase the asset at asset at higher price will have a lower return)

2. Both the inter period and inter firm comparison are affected by price level changes. A

change in price level can affect the validity of ratios calculated for different time period.

3. Unless varies terms like group profit, operating profit, net profit, current asset, current

liability etc., are properly define, comparison between two variables become meaningless.4. Ratios are simple to understand and easy to calculate. The analyst should not take

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 decision should not take decision on a single ratio. He has to take several ratios into

consideration.

STANDARDS OF COMPARISION: 

1. Ratios calculated from the past financial statements of the same firm.

2. Ratio developed using the projected or perform financial statement of the same firm

3. Ratios of some selected firm especially the most progressive and successful, at the same

 point of time.

4. Ratios of the industry to which the firm belongs.

IMPORTANCE OF RATIO ANALYSIS

In the preceding discussion in the form, we have illustrated the compulsion and implication

of important ratios that can be calculated from the Balance Sheet and Profit & Loss account

of a firm. As a tool of financial management, they are of crucial significance. The importance

of ratio analysis lies in the fact and enables the drawing of inferences regarding the

 performance of a firm. Ration analysis is a relevant in assessing the performance of a firm in

respect of the following aspect.

CAUTION IN USING RATIOS:

1. It is difficult to decide on the proper bases of comparison.

2. The comparison rendered difficult because of difference in situation of two companies or 

of one-company for different years.

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3. The price level change make the interpretation of ratios invalid

4. The difference in the definition of items in the balance sheet and Profit & Loss statement

make the interpretation of ratios difficult.

5. The ratios calculated at a point of time are less informative and defective as they suffer 

from sort term changes.

6. The ratios are generally calculated from the past financial statement and thus are no

indicators of future.

CURRENT RATIO : The relationship of current assets to current liabilities is known as

current ratio. It is also known as banker‟s ratio or working capital ratio. 

1.  CURRENT RATIO

It is relationship between firm‟s current assets and current liability. 

Current assets

Current ratio = __________________________ 

Current liability 

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TABLE – 1

STATEMENT SHOWING CURRENT RATIO

Rs in lakhs

YEAR 2005 -2006 2006-2007 2007-2008 2008-09 2009-10

CURRENT

ASSETS

1633078 2106400 2770400 3690107 4293481

CURRENT

LIABILITIES

1032002 1442000 2002230 2833290 3244172

CURRENT

RATIO

1.58 1.46 1.38 1.30 1.32

SOURCE: SECONDARY DATA FROM SHREE CEMENT ANNUAL REPORTS

INTERPRETATION

The current ratio is a test of the short term solvency of the business enterprise since this ratio

assumes current assets could be converted into cash to meet current liabilities.

It is often accepted that current assets should be 2times the current liabilities.

Current ratio during the year 2005-2006 was 1.58 and its come down in 1.46 at 2006-2007

and its again decreased 2007 – 2008 and 2008-09 and its slightly increased in 1.32 at 2009-10.

The standard norm for this ratio is 2:1 required.

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 SHREE CEMENT should maintain sufficient amount of current assets in order to maintain

the standard form of current ratio.

CHART – 1 

CURRENT RATIO

QUICK RATIO:It establishes the relationship of a company‟s current assets that can be

quickly converted into cash and its current liabilities.

1.  QUICK RATIO

It is relationship between liquid assets and current liabilities.

Liquid assets

Quick ratio = _________________________ 

0

0.20.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2005-06 2006-07 2007-08 2008-09 2009-10

   P   E   R   C   E   N   T   A   G   E

 YEARS

current ratio

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 Liquid Liabilities

TABLE – 2 

STATEMENT SHOWING QUICK RATIO

Rs in lakhs

YEAR 2005 -2006 2006-2007 2007-2008 2008-09 2009-10

LIQUID

ASSETS

1258640 1684600 2216978 2906405 3369935

LIQUID

LIABILITIES

1032002 1442000 2002230 2833290 3244172

LIQUID RATIO 1.22 1.17 1.10 1.03 1.04

SOURCE: SECONDARY DATA FROM SHREE CEMENT ANNUAL REPORTS

INTERPRETATION

It is in fact the measure of the “Instant” debt paying ability of the business enterprise. 

The quick ratio in the year 2005-2006 was 1.22 and its decreased 0.04% at 2006 and 2007

(1.17) and in 2007-2008 get decreased 0.06% (1.10) and 2008-2009 get decreased 0.063%

(1.03) and its get increase in slightly on 2009-2010 at 0.001%(1.04). The standard norm for 

this ratio is 1:1, means for every 1 rupee of current liability, company must have 1 rupee of 

quick assets.

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CHART – 2

LIQUID RATIO

CASH MANAGEMENT

Introduction: 

Cash management is one of the key areas of working capital management. Cash is the liquid

current asset. The main duty of the finance manager is to provide adequate cash to all

segments of the organization. The important reason for maintaining cash balances is the

transaction motive. A firm enters into variety of transactions to accomplish its objectives

which have to be paid for in the form of cash.

0.9

0.95

1

1.05

1.1

1.15

1.2

1.25

2005-06

2006-07

2007-08

2008-09

2009-10

   P   E   R   C   E   N   T   A   G   E

 YEARS

Liqui…

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Meaning of cash:

The term “cash” with reference to cash management used in two senses. In a narrower sense

it includes coins, currency notes, cheques, bank drafts held by a firm. n a broader sense it also

includes “near -cash assets” such as marketable securities and time deposits with banks. 

Objectives of cash management: 

There are two basic objectives of cash management. They are-

  To meet the cash disbursement needs as per the payment schedule.  To minimize the amount locked up as cash balances.

Basic problems in Cash Management:

Cash management involves the following four basic problems.

  Controlling level of cash

  Controlling inflows of cash

  Controlling outflows of cash and

  Optimum investment of surplus cash.

  Determining safety level for cash:

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 The finance manager has to take into account the minimum cash balance that the firm must

keep to avoid risk or cost of running out of funds. Such minimum level may be termed as

“safety  level of cash”. The finance manager determines the safety level of cash separately

 both for normal periods and peak periods. Under both cases he decides about two basic

factors. They are-

Desired days of cash:

It means the number of days for which cash balance should be sufficient to cover payments.

Average daily cash flows:

This means average amount of disbursements which will have to be made daily.

Criteria for investment of surplus cash:

In most of the companies there are usually no formal written instructions for investing the

surplus cash. It is left to the discretion and judgment of the finance manager. While

exercising such judgment, he usually takes into consideration the following factors-

Security: 

This can be ensured by investing money in securities whose price remains more or less

stable. Liquidity: 

This can be ensured by investing money in short term securities including short term fixed

deposits with banks.

Yield: 

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 Most corporate managers give less emphasis to yield as compared to security and liquidity of 

investment. So they prefer short term government securities for investing surplus cash.

Maturity:

It will be advisable to select securities according to their maturities so the finance manager 

can maximize the yield as well as maintain the liquidity of investments.

Cash Management in SHREE CEMENT : 

The cash management is carried out in seaways by CTM (Corporate Treasury Management).

CTM is a commonly followed procedure in most of the companies.

 Now we see the cash ratio / quick ratio in Shree Cement

1.  CASH RATIO

It is relationship between cash and current liabilities. 

Cash

Cash ratio = _______________________ 

Current liabilities

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STATEMENT SHOWING CASH RATIO

TABLE – 3

Rs in lakhs

YEAR 2005 -2006 2006-2007 2007-2008 2008-2009 2009-2010

CASH 413398 580900 838600 1031467 979008

CURRENT

LIABILITIES

1032002 1442000 2002230 2833290 3244172

CASH RATIO 0.40 0.40 0.42 0.36 0.30

SOURCE: SECONDARY DATA FROM SHREE CEMENT ANNUAL REPORTS

INTERPRETATION

The Cash ratio of SHREE CEMENT in the 2005-2010 was fluctuation in 2009-2010

it was 0.30 times and in 2005-2006 it was 0.40 times and 2007-2008 it was reduced to 0.42.

The standard norms of absolute quick ratio are 0.5:1. From the above table the firms

not maintain the sufficient level of quick assets because of the day-to-day expenses .It is

fluctuating between the standard norms for this ratio is 1:2 means for every 2 rupees of 

current Liabilities, Company must have 1 rupee of cash and bank balance and marketable

securities. 

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CHART- 3

CASH RATIO

   C   A   S   H

0

0.2

0.4

0.6

2005 -2006

2006 -2007

2007-2008

2008 -2009

2009 -2010

PERCENTAGE

 YEARS

CASH

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RECEIVABLES MANAGEMENT 

Introduction:

Receivables constitute a significant portion of the total assets of the business. When a

firm seller goods or services on credit, the payments are postponed to future dates and

receivables are created. If they sell for cash no receivables created.

Meaning: 

Receivable are asset accounts representing amounts owed to the firm as a result of sale of 

goods or services in the ordinary course of business. 

Purpose of receivables:

Accounts receivables are created because of credit sales. The purpose of receivables is

directly connected with the objectives of making credit sales. The objectives of credit sales

are as follows-

  Achieving growth in sales.

  Increasing profits.

  Meeting competition.

The main factors that affect the size of the receivables are-

  Level of sales.

  Credit period.

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   Cash discount.

Costs of maintaining receivables:

The costs with respect to maintenance of receivables are as follows-

Capital costs:

This is because there is a time lag between the sale of goods to customers and the payment by

them. The firm has, therefore to arrange for additional funds to meet its obligations.

Administrative costs:

Firm incur this cost for manufacturing accounts receivables in the form of salaries to the staff 

kept for maintaining accounting records relating to customers.

Collection costs:

The firm has to incur costs for collecting the payments from its credit customers.

Defaulting costs:

The firm may not able to recover the over dues because of the inability of customers. Such

debts treated as bad debts.

Receivables management: 

Receivables are direct result of credit sale. The main objective of receivables management is

to promote sales and profits until that point is reached where the ROI in further funding of 

receivables is less than the cost of funds raised to finance that additional credit (i.e.; cost of 

capital). Increase in receivables also increases chances of bad debts. Thus, creation of receivables is beneficial as well as dangerous. Finally management of accounts receivable

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 means as the process of making decisions relating to investment of funds in this asset which

result in maximizing the overall return on the investment of the firm. 

Receivables management and Ratio Analysis: 

Ratio Analysis is one of the important techniques that can be used to check the efficiency

with which receivables management is being managed by a firm. The most important ratios

for receivables management are as follows-

DEBTORS TURNOVER RATIO: -

Debtors constitute an important constituent of current assets and therefore the quality of the

debtors to a great extent determines a firm‟s liquidity. It shows how quickly receivables or 

debtors are converted into cash. In other words, the DTR is a test of the liquidity of the

debtors of a firm. The liquidity of firm‟s receivables can be examined in two ways they are

DTR and Average Collection Period.

It indicates the number time debtors turned over each year. Generally the higher value of 

debtor‟s turnover shows high efficiency to manage the credit management. 

Total sales

Debtors turnover ratio = ______________________________ 

Debtors

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TABLE – 4

STATEMENT SHOWING DEBTORS TURNOVER RATIO

Rs in lakhs

YEAR 2005 -2006 2006-2007 2007-2008 2008-2009 2009-2010

TOTAL SALES 1337403 1723753 1930464 2621233 3286144

DEBTORS 716806 969582 1197487 1597550 2068875

DEBTOR 

TURNOVER 

RATIO1.87

1.78 1.61 1.64 1.59

SOURCE: SECONDARY DATA FROM SHREE CEMENT ANNUAL REPORTS

INTERPRETATION

Debtors constitute an important constituent of current assets and therefore the quality of the

debtors to a great extent determines a firm‟s liquidity. It shows how quickly receivables or 

debtors are converted into cash. In other words, the DTR is a test of the liquidity of the

debtors of a firm. The liquidity of firm‟s receivables can be examined in two ways they are

DTR and Average Collection Period. .The higher the ratio, the better it is, since it would

indicate that debts are being collected promptly.

In the year 2009 - 2010 the debt is 1.59 comparing to the previous year came

downwards.

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CHART- 4

DEBTOR TURNOVER RATIO

DEBT COLLECTION PERIOD 

Debtor‟s collection period is nothing but the period required to collect the money from the

customers after the credit sales. A speed collection reduces the length of operating cycle and

vice versa. The more quickly the customers pay, the less risk from bad debts, the lower the

expenses of collection and more liquid the nature of of this asset.

It indicates the speed with which debts are collected.

   D   E   B   T   O

   R   S

1

1.5

2

2005 -

2006

2007 -

2008

2009 -

2010

PERCENTAGE

 YEARS

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TABLE – 5

Rs in lakhs

YEAR 2005 -2006 2006-2007 2007-2008 2008-2009 2009-2010

DAYS 365 365 365 365 365

DEBT

TURNOVER 

RATIO

1.87 1.78 1.61 1.64 1.59

DEBT

COLLECTION

PERIOD195 205 227 223 230

SOURCE: SECONDARY DATA FROM SHREE CEMENT ANNUAL REPORTS

INTERPRETATION

The debt collection period of SHREE CEMENT in the 2005-2006 was 195 days and

in goes to 2009 - 2010 it was increased in (0.18%) 230 days. Standard Debt Collection

Days/months in a year 

Debt collection period = _______________________________ 

Debtor‟s turnover ratio 

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 Period of a firm is less than 90 days. But, above tables consists of increased of DCP in

rapidly.

CHART – 5

DEBT COLLECTION PERIOD

CREDITORS TURNOVER RATIO

The ratio shows on an average the number of times creditors turned over during the

year.

   D   T   C   P

160

180

200

220

240

2005 -2006

2007 -2008

2009 -2010

No. of Days

 YEARS

DTCP

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TABLE – 6

Rs in lakhs

YEAR 2005 -2006 2006-2007 2007-2008 2008-2009 2009-2010

CREDIT

PURCHASE709940 1018186 1182087 1762005 2067232

SUPPLIERS /

CREDITORS280409 353895 442400 585285 757980

CREDITORS

TURNOVER 

RATIO

2.53 2.88 2.67 3.01 2.73

SOURCE: SECONDARY DATA FROM SHREE CEMENT ANNUAL REPORTS

INTERPRETATION

The Creditors turnover ratio of SHREE CEMENT was fluctuating during the year 

2005 – 2010. It was upward in (2008 – 2009) was 3.01 times and it was downward in 2009  –  

2010 is 2.73 times.

Greater the CTR the more time firm has to pay to their creditors.

Credit purchase

Creditors turnover ratio = ________________________ 

Average creditors

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CHART -6

CREDITORS TURNOVER RATIO

CTR2.22.42.6

2.83

3.2

   2   0   0   5

  -   2   0   0   6

   2   0   0   6  -   2   0   0   7

   2   0   0   7  -

   2   0   0   8

   2   0   0   8  -   2   0   0   9

   2   0   0   9  -   2

   0   1   0

PERCENTAGE

 YEARS

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TABLE – 7

CASH TO CURRENT ASSETS RATIO

Rs in lakhs

YEAR 2005 -2006 2006-2007 2007-2008 2008-2009 2009-2010

CASH 413398 580900 838600 1031467 979008

CURRENT

ASSETS

1633078 2106400 2770400 3690107 4293481

CAS TO

CURRENT

ASSETS

RATIO

0.25 0.27 0.30 0.28 0.23

SOURCE: SECONDARY DATA FROM SHREE CEMENT ANNUAL REPORTS

INTERPRETATION

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 The Cash to current assets turnover ratio of SHREE CEMENT was fluctuating during the

year 2005  – 2010. It was upward in (2005 – 2008) was 0.25 times to 0.30 times and it was

downward in 2008 – 2010 is 0.23 times.

CHART -7 

CASH TO CURRENT ASSETS RATIO

0

0.1

0.2

0.3

2005-06

2006-07

2007-08

2008-09

2009-2010

PERCENTAGE

 YEARS

CASH TO CURRENT ASSETS RATIO

C.C.A.R

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TABLE – 8

CASH TURNOVER RATIO

Rs in lakhs

YEAR 2005 -2006 2006-2007 2007-2008 2008-2009 2009-2010

SALES 1337403 1723753 1930464 2621233 3286144

CASH 413398 580891 838602 1031467 979008

CASH

TURNOVER 

RATIO

3.24 2.97 2.31 2.54 3.36

SOURCE: SECONDARY DATA FROM SHREE CEMENT ANNUAL REPORTS

INTERPRETATION

The cash turnover ratio in the years 2005-2010 it was on fluctuating ratios, in the year 2009-

2010 it was increased (0.037%) 3.36.

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CHART -8

CASH TURNOVER RATIO

0

1

2

3

4

2005-06 2006-07 2007-08 2008-09 2009-10

PERCENTAGE

 YEARS

CASH TURNOVER RATIO

C.T.R

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INVENTORY MANAGEMENT

Introduction: 

Inventories are stock of the product a company is manufacturing for sale and components.

That makeup the products. The various forms in which inventories exist in a manufacturing

company are: Raw-materials, work-in-process, finished goods. 

  Raw-Materials: - Are those basic inputs that are converted into finished products

through the manufacturing process. Raw-materials inventories are those units, which

have been purchased and stored for future production.

  Work-In-Process inventories are semi-manufactured products. The represent products

that need more work before they become finished products for sale.

  Finished Goods inventories are those completely manufactured products, which are

ready for sale. Stocks of raw-materials and work-in-process facilitate production

which stock of finished goods is required for smooth marketing operations. These

inventories serve as a link between production and consumption of goods.

  Stores and spares are also maintained by some firms. This includes office and plant

cleaning materials like soaps, brooms, oil, fuel, light, bulbs etc. These materials do

not directly enter in production. But are necessary for production process.  

Need to holding inventory

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The question of managing inventories arises only when the company holds inventories.

Maintaining inventories involves tying up of the company's funds and incurrence of storage

and handling cost. It is expensive to maintain inventories, why does company hold

inventories? There are three general motives for holding inventories.

1. Transaction Motive: -  Emphasizes the need to maintain inventories to facilitate

smooth production and sales operations.

2. Precautionary motive: -  Necessitates holding of inventories to guard against the risk 

of unpredictable changes in demand and supply forces and other factors.

3. Speculative motive: - Influences the decision to increase or reduce inventory levels to

take advantages of price influences.

A company should maintain adequate stock of materials for a continuous supply to the

factory for the uninterrupted production. It is not possible for a company to procure raw

materials whenever it is needed. A time lag exists between demand for materials and its

supply. Also there exists uncertainty in procuring raw materials in time on many occasions.

The procurement of materials may be delayed because of such factors as strike, transport

disruption or short supply. Therefore, the firm should maintain sufficient stock of raw

materials at a given time to stream line production.

Objective of Inventory Management 

In the context of inventory management the firm is faced with the problem of meeting two

conflicting needs ;

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 To maintain a large size of inventory for sufficient and smooth production and sales

operations.

 To maintain a minimum investment in inventories to maximize profitability.

Both excessive and inadequate inventories are not desirable. These are two dangerous points

within which the firm should operate. The objective of inventory management should be to

determine and maintain optimum level of inventory investment. The optimum level of 

inventory will lie between the two danger points of excessive and inadequate inventories.

The firm should always avoid a situation of over investment or under investment in

inventories. The major dangerous of over investment are,

  Unnecessary tie-up of the firms funds losses of profit

  Excessive carrying cost

  Risk of quality

The aim of inventory management thus should be to avoid excessive and inadequate levels of 

inventories and to maintain sufficient inventory for smooth production and sales operations.

Efforts should be made to place an order at the right time with the right source to acquire the

right quantity at the right price and quality. An effective inventory management should

  Ensure a continuous supply of raw materials to facilitate uninterrupted

 production.

 Maintain sufficient stock of raw materials in periods of short supply and anticipate

 price changes.

 Maintain sufficient finished goods inventory for smooth sales operations and efficient

customer service.

 Minimize the carrying cost and time.

 Control investment in inventories and keep it at an optimum level.

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Inventory management techniques :

In managing inventories the firm objective should be in consonance with the shareholders'

wealth maximization principle. To achieve this firm should determine the optimum level of 

inventory. Efficiently controlled inventories make the firm flexible. Inefficient inventory

control results in unbalanced inventory and inflexibility-the firm ma sometimes run out of 

stock and sometimes may pileup unnecessary stocks. This increases level of investment and

makes the firm unprofitable.

To manage inventories efficiency, answers should be sought to the following two questions.

1) How much should be ordered?

2) When should it be ordered?

The first question how much to order, relates to the problem of determining economic order 

quantity (EOQ), and is answered with an analysis of costs of manufacturing certain level of 

inventories. The second question when to order arise because of determining the reorder 

 point.

When the order is placed for raw material certain raw material is in transit, such raw material

is called as raw material in transit.

Example – Raw material on overseas.

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 The raw material can be transfer from unit to another unit or from one department to another 

is called transfer-in – transit. It is nothing but to the transfer of raw material among the inter 

firm units of SHREE CEMENT .

The raw material, which is production process, is called work-in process. The work in

 process becomes finished goods inventory. The finished should not be kept for a longer time.

They should be sold off to clear off the entire inventory. However, finished goods inventory

is not there for SHREE CEMENT , since production is mainly done on customer order and

specifications. The raw material is purchased and the whole process is repeated again which

we call it as inventory cycle.

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Inventory turnover Ratio:-

Inventory turnover ratio indicates the efficiency of the firm in producing and selling its

 products. It is calculated by dividing the cost of goods sold by the average inventory. The

average inventory is the average of open and closing balance of inventory.

TABLE – 9

INVENTORY TURNOVER RATIO

It indicates the inventories turning into receivables through sales.

Sales

Inventory turnover ratio =__________________________ 

Inventory

Rs in lakhs

YEAR 2005 -2006 2006-2007 2007-2008 2008-2009 2009-2010

SALES 1337403 1723753 1930464 2621233 3286144

INVENTORY 374437 421767 573640 783702 923546

INVENTORYT

URNOVER 

RATIO

3.57 4.09 3.37 3.34 3.56

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SOURCE: SECONDARY DATA FROM SHREE CEMENT ANNUAL REPORT

INTERPRETATION

This ratio indicates the liquidity of the inventory, that is, how quickly, on the average, the

inventory was sold during the year and consequently the significance of the inventory for the

debt paying purposes.

A high stock turnover ratio is generally considered desirable because it is indicative of 

efficient performance since an improvement in the ratio shows hat volume of sales has been

either maintained or increased without additional investment in stock.

Inventory turnover of SHREE CEMENT for 2006  –  2007 was 4.09. In 2007-2008 the

inventory turnover ratio was high up to 3.37 and it was high in 2009-20010 at 3.56. 

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CHART – 9

INVENTORY TURNOVER RATIO

2005-062006-07

2007-082008-09

2009-10

0

1

2

3

4

5

ITR

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 TABLE – 10

INVENTORY HOLDING PERIOD

Rs in lakhs

YEAR 2005 -2006 2006-2007 2007-2008 2008-2009 2009-2010

DAYS /

MONTH IN

YEAR 

365 365 365 365 365

INVENTORY

TURNOVER 

RATIO

3.57 4.09 3.37 3.34 3.56

INVENTORYH

OLDING

PERIOD

102 89 108 109 103

SOURCE: SECONDARY DATA FROM SHREE CEMENT ANNUAL REPORTS

INTERPRETATION

Inventory holding period of Shree Cement is varying on every year. In the year of 2005-06 to 2007-

08 it‟s increased in 0.06% (102 to 108) and 2009-10 it‟s decreased by 0.047 %. 

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 CHART – 9

INVENTORY HOLDING PERIOD

0

100

200

300

400

500

600

IHP

2009-10

2008-09

2007-082006-07

2005-06

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TABLE-11

WORKING CAPITAL TURNOVER RATIO

Rs in lakhs

YEAR 2005 -2006 2006-2007 2007-2008 2008-2009 2009-2010

SALES 1337403 1723753 1930464 2621233 3286144

 NET

WORKING

CAPITAL

601076 664286 788388 856817 1049309

WORKING

CAPITAL

TURNOVER 

RATIO

2.23 2.59 2.45 3.06 3.13

SOURCE: SECONDARY DATA FROM SHREE CEMENT ANNUAL REPORTS

INTERPRETATION

Working capital turnover ratio for the year 2009 - 2010 was 3.13 times. It is higher when

comparing the past four years. The working capital management has to improve by more

concentration on collection strategies.

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CHART-11

WORKING CAPITAL TURNOVER RATIO

0

0.5

1

1.5

2

2.5

3

3.5

2005 -06

2006 -07

2007 -08

2008 -09

2009 -10

PERCENTAGE

 YEARS

WCTR

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TABLE – 12

WORKING CAPITAL FOR TREND ANALYSIS

Rs in lakhs

YEAR 2005 -2006 2006-2007 2007-2008 2008-2009 2009-2010

CURRENT

ASSETS1633078 2106297 2770472 3690107 4293481

CURRENT

LIABILITIES1032002 1442011 1982084 2833290 3244172

WORKING

CAPITAL 601076 664286 788388 856817 1049309

SOURCE: SECONDARY DATA FROM SHREE CEMENT ANNUAL REPORTS

INTERPRETATION

In this current asset is increasing during the period of study. Current liability is also

increased during the period of study. And working capital is also increasing..

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CHART – 12

WORKING CAPITAL FOR TREND ANALYSIS

0

500000

10000001500000

2000000

2500000

3000000

3500000

4000000

4500000

5000000

2005-06

2006-07

2007-08

2008-09

2009-10

VALUES

 YEARS

CA CL

WC

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TABLE – 13

ANALYSIS OF VARIOUS COMPONENTS IN WORKING CAPITAL

CURRENT ASSETS

Rs in lakhs

Particulars2005 -

2006

2006-

2007

2007-

2008

2008-

2009

2009-

2010

inventories 22.93

43.90

25.30

0.52

7.35

20.03

46.03

27.58

0.95

5.41

20.71

43.22

30.27

1.52

4.28

21.24

43.29

27.95

0.95

6.57

21.52

48.18

22.80

0.95

6.55

Sundry debtors

C& B balance

Other assets

Loans and advances

Total 100 100 100 100 100

SOURCE: SECONDARY DATA

INTERPRETATION

In this period 2005 – 2010 Sundry debtors and other current assets was only maintained in stable

for the period of study. Shree Cement must be extra care about cash and bank balance in future.

In the period of 2007-2010 inventory ratios are increased. All about Shree Cement should be

very care and must maintain in adequate current assets in future.

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CHART – 13 

ANALYSIS OF VARIOUS COMPONENTS IN WORKING CAPITAL

GRAPH 13 .1 INVENTORY

0

0.2

0.4

0.6

0.8

1

1.2

2005-06

2006-07

2007-08

2008-09

2009-10

PERCENTAGE

 YEARS

INVENTORIES

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GRAPH 13 .2 SUNDRY DEBTORS

GRAPH 13 .3 CASH AND BANK BALANCES

40

41

42

43

44

45

46

47

48

49

2005-06 2006-07 2007-08 2008-09 2009-10

PERCENTAGE

 YEARS

0

0.2

0.4

0.6

0.8

1

1.2

2005-06

2006-07

2007-08

2008-09

2009-10

PERCENTAGE

 YEARS

INVENTORIES

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GRAPH 13 .4 OTHER CURRENT ASSETS

GRAPH 13 .5 LOANS AND ADVANCES

O.C.A0

1

2

2005-06 2006-07 2007-08 2008-09 2009-10

PERCENTAGE

 YEARS

LOAN&

ADV.

0

2

4

6

8

2005-06 2006-07 2007-08 2008-09 2009-10

PERCENTAGE

 YEARS

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GROSS PROFIT RATIO :

Gross profit margin shows the company can return income at the gross level. This ratio

helps to control inventory usage and production performance and fixing unit price of 

goods.

TABLE – 14

ANALYSIS OF GROSS PROFIT RATIO

Rs in lakhs

Particulars 2005-2006 2006-2007 2007 - 2008 2008-2009 2009-2010

Gross Profit /

Profit before tax256435 373607 443039 484885 659065

Total Sales 1337403 1723753 1930464 2621233 3286144

Gross Profit ratio 0.192 0.217 0.230 0.185 0.201

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GRAPH 14 - GROSS PROFIT RATIOS

SOURCE: SECONDARY DATA FROM SHREE CEMENT ANNUALREPORTS

INTERPRETATION

In the analysis of Gross profit ratio Shree Cement must control production expenses in future.

Comparison of 2007-08 to 2009-10 margin profit ratio will goes down in 2 %. Firm will be

control in production cost in next coming years, such as raw material, freight and transport

expenses. Otherwise, Shree Cement must increase in sales unit price.

2005-0619%

2006-0721%

2007-0822%

2008-0918%

2009-1020%

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NET PROFIT RATIO:

As every business is to earn profit, this ratio is very important because it measures the

 profitability of sales. A business may yield high gross income but low net income because of 

increasing operating and non-operating expenses. This situation can easily be detected by

calculating this ratio.

The profits used for this purpose may be profits after/before tax. To obtain this ratio, the figure

of net profits after tax is divided by the figure of net profits after tax is divided by the figure of 

sales the ratio is also known as sales margin as we can ascertain with its help the margin which

the sales leave later deducting all the expenses. The unit of expression is percentage, as is thecase with profitability ratios.

TABLE – 15

ANALYSIS OF NET PROFIT RATIO

Rs in lakhs

Particulars 2005-2006 2006-2007 2007 - 2008 2008-2009 2009-2010

 Net Profit /

Profit after tax167916 241470 285934 313821 431064

 Net Sales 1337403 1723753 1930464 2621233 3286144

 Net Profit ratio 0.126 0.140 0.148 0.120 0.131

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GRAPH 15 NET PROFIT RATIOS

SOURCE: SECONDARY DATA FROM SHREE CEMENT ANNUAL REPORTS

INTERPRETATION

In this period of research of study Net profit of the Shree Cement company goes

downwards from 2008 – 2010 comparing previous year achievements.

0

0.02

0.04

0.06

0.08

0.1

0.120.14

0.16

2005-06 2006-07 2007-08 2008-09 2009-10

%

 YEARS

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Gross Profit to Net Profit Ratio:

Analysis of ratio‟s G.P. to N.P is very important in every firm. It helps to find out the cost of expense

increased in production or administrative level and other hand it helps to control in overall financial

expenses.

TABLE – 16 

ANALYSIS OF G.P. TO N.P RATIO

Rs in lakhs

Particulars

2005-2006 2006-2007 2007 - 2008 2008-2009 2009-2010

Gross Profit

256435 373607 443039 484885 659065

 Net Profit

167916 241470 285934 313821 431064

G.P. - N.P. RATIO

1.53 1.55 1.55 1.55 1.53

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GRAPH 16 G.P. TO N.P. RATIO

SOURCE: SECONDARY DATA FROM SHREE CEMENT ANNUAL REPORTS

INTERPRETATION

In this period of research of study Gross Profit and Net Profit are equal. Shree Cement control

his marginal and administrative cost in his control. There is no variation and its goes to stable. 

   G .   P .

   N .   P

 .

   %

0

100000

200000

300000

400000

500000600000

700000

   2   0   0   5  -   0   6

   2   0   0   6  -   0   7

   2   0   0   7  -   0   8

   2   0   0   8  -   0   9

   2   0   0   9  -   1   0

 YEARS

G.P.

N.P.

%

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TREND ANALYSIS

Particulars 2006 2007 2008 2009 2010

Current Assets :

Inventories / Stock 100 112.64 153.20 209.30 246.65

Debtors

100 135.26 167.06 222.87 288.62

Cash and Bank Balances

100 140.52 202.86 249.51 236.82

Other Current Assets

100 236.33 498.33 414.45 481.48

Loans & Advances

100 95.08 98.87 201.99 234.50

Current Liabilities :

Liabilities

100 135.08 188.20 265.19 318.17

Provisions

100 166.79 214.54 329.01 292.14

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INTERPRETATION

Above Table Inventory and debtors goes to growth level in all the years. Loans and Advances and Other 

Current assets show high level of improvement in all the years. Cash and Bank balances are fluctuating

ratio in the year 2008  –  2010. Current Liabilities are increasing in all the years and Provisions arefluctuating in the year 2010 compared to previous years.

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FINDINGS

1) Standard current ratio is 2:1 and for industry it is 1.33:1. SHREE CEMENT ratio

satisfactory.

2) Acid test ratio is more than one but it does not mean that company has excessive liquidity &

firm quick ratio is declining from 2005-06 to 2009-10

3) Debtors of the company were high; they were increasing year by year, so more funds were

 blocked in debtors. But now recovery is becoming faster.

4) Debtors turnover ratio is fluctuating from 2005-06 to 2009-10, which means inventory is not

utilized in better way so it is not a good sign for the company.

5) Inventory turnover ratio is improving from 2001-02 to 2005-06.increase in ratio is beneficial

for the company because as ratio increases the number of days of collection for debtors

decreases.

6) Working capital turnover ratio is continuously increasing that shows increasing needs of 

working capital.

7) Production capacity is not utilized to the full extent

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 The study is basically done to have a deep knowledge about WORKING CAPITAL of the

SHREE CEMENT industries limited. SHREE CEMENT , Industries limited is having an

appropriate working capital management of the organizations. NET PROFIT growth rate is

13.10% in 2009-10, it is showing a nominal increase in net profit as compared to last year. The

GROSS PROFIT of SHREE CEMENT more or less is maintaining same margin of profit.

The firm DCP is rising every year which is major concern for firm as larger the DCP greater the

chances of bad debts. DTR is also decreasing in 2005-06 it was 1.87times now it has drop down

to 1.59times.

Current ratio is also below the standard norm. in the financial year 2005-06 it was 1.58 now it

has decreased upto 1.32.The firm should maintain the adequate level of current assets in order to

discharge its current liabilities.

As far as cash ratio is concerned the firms not maintain the sufficient level of quick assets

 because of the day-to-day expenses . It is fluctuating between the standard norms for this ratio is

1:2 means for every 2 rupees of current Liabilities.

Company must have 1 rupee of cash and bank balance and marketable securities.

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SUGGESTIONS

1)It can be said that overall financial position of the company is normal but it is required to be

improved from the point of view of profitability.

2) Net operating cycle is increasing that means there is a need to make Improvements in receivables/deb

management.

3) Company should stretch the credit period given by the suppliers.

4) Company should not rely on Long-term debts.

5) Company should try to increase Volume based sales so as to stand in the competition.

Since the SHREE CEMENT is a profit making company and the interests of the investors are

also safe so for making more profit and for increasing the net profit as well as gross profit the

organization should curtail its operating, administrative & non productive expense. Company is

having good marketability, profitability and liquidity so the company can raise its fund.

Company should not forget its „Quality Policy‟ i.e. we at SHREE CEMENT , should aim to

achieve and sustain excellence in all our activities.We are committed to total customer satisfaction by providing producers and services which meet

or exceed the customer expectation.

Modernization of the manufacturing facilities, stress on technological innovation and training of 

employees at all levels shall be continuous process in SHREE CEMENT .

LIMITATIONS

  The study does not consider the market fluctuations in all its calculations.

  Analysis is very much dependent on the companies‟ internal bulletin.

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BIBLIOGRAPHY

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Reports

  Annual Report (2005-2010)

  Bonus issue bulletin 2005

Websites

  www.SHREE CEMENT .com as on 20th July 2011

  Books

  Basic corporate accounting – CA Dr. Girish Ahuja, Page No. 110

  Financial Management – R.P Rustagi, Page No. 56