Rasu in Final

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CHAPTER - I

1.1 INTRODUCTION

Working capital management is the part of financial management. In working capital

management, management of cash, management of inventory, management of debtor and

creditor will include.

The study of working capital behavior occupies an important place in financial

management. The earlier emphasis of financial management was more on a long-term financial

decision. Working capital management, which is concerned with short – term financial decision,

appears to have been relatively neglected in the literature of finance.

The developing economies generally face the problem of inefficient utilization of

esources available to them. !apital is the scarce productive resource in such economies and

hence a proper utilization of these resources promotes the rate of growth, cuts down the cost of

production and above all, improves the efficiency of the productivity system. "i#ed capital and

working capital are the dominant contributors to the capital of a developing country. "i#ed

capital investment generates productive capacity, whereas working capital makes the utilization

of that capacity possible.

Working capital management $W!%& is the management of short-term financing

re'uirements of a firm. This includes maintaining optimum balance of working capital

components – receivables, inventory and payables – and using the cash efficiently for day-to-day

operations. (ptimization of working capital balance means minimizing the working capital

re'uirements and realizing ma#imum possible revenues. )fficient W!% increases firms* free

cash flow, which in turn increases the firms* growth opportunities and return to shareholders.

)ven though firms traditionally are focused on long term capital budgeting and capital structure,

the recent trend is that many companies across different industries focus on W!% efficiency.

There is much evidence in the financial literature that present the importance of W!%.

esults of empirical analysis show that there is statistical evidence for a strong relationship

between the firm*s profitability and its W!% efficiency. +owever the study undertaken based on

the data from !"( magazine on the rankings of firms on W!% efficiency reveals that the

measures of W!% efficiency vary across different industries.

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The study also gives significant evidence that issues of W!% are different for different

industries and firms from different industry sectors adopt different approaches to working capital

management. "irms follow an appropriate working capital management approach that is

favorable to their industry. "irms in an industry that has less competition would focus on

minimizing the receivable to increase the cash flow. "or firms in industry where there are large

numbers of suppliers of materials, the focus would be on ma#imizing the payable. The

Telecommunication industry is characterized by high intensive working capital re'uirements and

high competition because of rapid technology changes, which make the W!% crucial to bring

attractive earnings to shareholders. The study undertaken based on the data from !"( magazine

on the rakings of firms on W!% efficiency gives statistical evidence that telecommunication

industry showed.

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Working Capital Management Concept

The working capital meets the short-term financial re'uirements of a business enterprise. It is the

investment re'uired for running day-to-day business. It is the result of the time lag between the

e#penditure for the purchase of raw materials and the collection for the sales of finished products. The components of working capital are inventories, accounts to be paid to suppliers,

and payments to be received from customers after sales. "inancing is needed for receivables and

inventories net of payables. The proportions of these components in the working capital change

from time to time during the trade cycle. The working capital re'uirements decide the li'uidity

and profitability of a firm and hence affect the financing and investing decisions. esser

re'uirement of working capital leads to less need for financing and less cost of capital and hence

availability of more cash for shareholders. +owever the lesser working capital may lead to lost

sales and thus may affect the profitability.

The management of working capital by managing the proportions of the W!% components is

important to the financial health of businesses from all industries. To reduce accounts receivable,

a firm may have strict collections policies and limited sales credits to its customers. This would

increase cash inflow. +owever the strict collection policies and lesser sales credits would lead to

lost sales thus reducing the profits. %a#imizing account payables by having longer credits from

the suppliers also has the chance of getting poor 'uality materials from supplier that would

ultimately affect the profitability. %inimizing inventory may lead to lost sales by stock-outs.

The working capital management should aim at having balanced optimal proportions of

the W!% components to achieve ma#imum profit and cash flow.

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1.! O"#ECTI$E% O& THE %TUD'

Primar( o)*ecti+e

• To study about the Working capital management and atio nalysis in /eyveli ignite

!orporation imited.

%econ,ar( o)*ecti+e

• To analyze the working capital re'uirement of /eyveli ignite !orporation imited for

the period 0112-13 to 0140-45.

• To analyze the changes in working capital.

• To analyze and evaluate li'uidity position of the company.

• To analyze and evaluate the profitability position of the company.

• To analyze and evaluate the level of current asset and current liability.

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1. %COPE O& THE %TUD'

This study is about the ratio analysis of 6W(7I/8 !9IT %/8)%)/T:,

which is a part of financial analysis. atio analysis is perhaps the first financial tool

developed to analyze and interpret the financial statement and is still used widely for

this purpose.

The company to understand its own position over time.

The present and potential investors, outside parties such as the creditors, debtors,

government and many more to get an idea of the overall performance of the firm.

atio analysis is the specific area of finance dealing with the financial decision

corporations make, and the tools and analysis used to make the decisions.

It may divide as long-term and short-term decisions and techni'ues.

1. NEED &OR THE %TUD'

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To know the company*s working capital.

To pay wages and salaries.

To incur day to day e#penses.

To maintain inventories of raw materials, work in progress and finished goods.

8ives a company the ability to meet its current liabilities.

1./ RE%EARCH METHODO0O'

The term 6esearch: refers to the systematic method consisting of enunciating the

problem, formulating a hypothesis, collecting the data, analyzing the facts and reaching certain

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conclusions either in the form of solutions towards the concerned problem or in certain

generalized form of some theoretical formulation.

RE%EARCH DE%IN2

esearch design is the blue print for doing the research. It is the arrangement of conditions for

collection and analysis of data in a manner that aims to combine relevance to the research

purpose with economy in procedure.

This is an empirical study based on the financial information contained in the annual

reports of /!. The study adopts descriptive methodology for evaluating the financial

performance of the organization.

study on financial performance of /eyveli ignite !orporation imited has been made

by calculating various ratios. The data for such analysis have been e#tracted from the financial

statements. These ratios have been interpreted and conclusions have been drawn. ;ased on

which, suggestion have been made to improve the financial performance of /eyveli ignite

!orporation imited.

CONCEPT O& WOR3IN CAPITA0

4. 8ross Working !apital

0. /et Working !apital

RO%% WOR3IN CAPITA0

It refers to the firm*s investment in total current or circulating assets. ccording to this concept,

the working capital refers to the firm*s total investment in current assets. !urrent assets mean

assets which can be converted into cash within an accounting year. !urrent assets include cashand bank balance, bills receivable, sundry debtors, inventory, prepaid e#penses.

NET WOR3IN CAPITA0<

ccording to this concept the working capital refers to the difference between current assets and

current liabilities. !urrent liabilities refer to the claims of outsiders which are e#pected to mature

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for payment within an accounting year. /et working capital can be positive or negative. 9ositive

/etworking capital arises when current assets e#ceed current liabilities. /egative net working

capital occurs when current liabilities are in e#cess of current assets.

PERIOD O& %TUD'

The period of the study for pro=ect work is > month.

TOO0% U%ED

The data collected are analyzed with the help of the following tools

atio nalysis

!omparative ?tatement (f Working !apital

!ommon ?ize ;alance sheet.

DATA CO00ECTION2

%ECONDAR' DATA2

The secondary data on the other hand are those which have already been collected by

someone else. The analysis of working capital management of the organization necessitatesaccurate and reliable data. Therefore the sources for collecting the data include secondary data.

"or the purpose of the study available secondary data is used. The nnual eports of the

company for the past five years $i.e.& "[email protected] to "[email protected] constituted the basis of the

study. "or the purpose of nalysis, "inancial statements viz.., "und "low ?tatements and

"inancial atios relating to working capital on specific current assets were used. Information

collected from the above source helped the researcher to conduct the study successfully.

P0AN O& ANA0'%I%<

The study is made only by using accounting ratios, comparative statements and average

performance. It is basically a common size statement analysis. The five years gross and net

working capitals are obtained. The percentage shares of the components of working capital are

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compared to that of the standard norms and deviations if any are described as either favorable or

unfavorable.

Aiagrammatic presentations of statistical data are e#hibited through bar diagrams, 9ie

!harts for analysis of data for better understanding.

%INI&ICANCE O& THE %TUD'

The working capital of an organization is the lifeblood, which flows through the veins

and arteries. It gives courage and moral to the brain $management& and the muscles $personnel&.

It digests to the best degree, the raw material used, by its constant and regular flow and returns to

the heart $cash flow& for another =ourney. +ence when working capital is lacking or slow, the

financial bodies have value only as a =unk.

"unds are needed for short term purposes, viz., for purchases of raw material payments of

wages and other day to day business e#penses. %any a times, in the event of failure of a

business concern, the shortage of working capital is given out as its main cause. ;ut in ultimate

analysis, it may be the mismanagement of resources of the firm that could have converted the

otherwise successful business, an unsuccessful one. firm can e#ist and survive without making

profit but cannot survive without working capital funds.

Working capital has ac'uired a great significance and a sound position for the twin ob=ects of

69rofitability and i'uidity:. It consumes a great deal of time to increase profitability as well as

to maintain proper li'uidity at minimum risk. ?o the effective management of working capital is

the primary means of achieving the firm*s goal of ade'uate li'uidity, which helps to measure the

degree of protection against problems that might cause a shortage of funds. )ssentially, the

efficient management of working capital minimizes risk in the repayment of its sources of

finance, thereby contributing to the ma#imization of firm*s value.

The present study on working capital management of /eyveli ignite !orporation td

enables the organization to efficiently manage its working capital components and achieve the

goal of ma#imizing the value of the organization.

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1.4 0IMITATION% O& THE %TUD'

The working capital analysis is based on the annual reports published by the

organization. Thus the reliability of the analysis is depending on the data provided

in the balance sheets.

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The study on working capital management is confined to a period of B years, i.e.,

from 0112-0113 to 0140-0145 due to time constraints.

The study is based on secondary data and not on the basis of primary data.

The study is based on the accounting standards and not based on the economic

condition.

CHAPTER 5 I1

!.1 COMPAN' PRO&I0E

/eyveli ignite !orporation is a large-scale business organization with its core activities of

lignite mining and power generation in /eyveli.

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/! is a profitable business entity with the firm of running business for more than B1 year. In

the year 011>, it celebrated its golden =ubilee. The occurrence of lignite in neyveli, district of

Tamilnadu first became known in 435C the than government of madras took up regular

e#ploration the 43C5 to democrat the e#tant of the field. %eaning operation $mine& commenced

in %ay 43BD.

/eyveli ignite !orporation limited $/! td& was register as a company on 4C th /ovember

43B> under companies act 43B>. The mining operations in mine-I were formally inaugurated on

01th may 43BD by the then prime minister pandit Eawaharlal /ehru of the total deposits of 5D4BC

million tones $as on 4.C.011B& of lignite in India, neyveli has a geological minable reserves of

043C million tonnes. In Tamilnadu, Eayamkondacholapuran, %annargudi and east and Eammu

F7ashmir are the other states in which lignite resources were identified. The lignite occurrence

depths vary from 011 to 511 meters deeper.

The ma=or lignite deposits in India are in the status of Tamilnadu, a=asthan, 8u=arat, Eammu and

7ashmir, and 7erala. bout 20G of the lignite reserves in the country are in Tamilnadu and

puducherry. /eyveli is endowed with proven e#istence of C4B1 million tones of lignite in an area

of C21s'.km.

Today %ine-I and II and I are producing 0C %illion Tons per annum. /eyveli opens cast

ignite %ines are the first of its kind, which have obtained I?( 3114


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0ignite Depoit in Ne(+eli

ignite is the younger offspring of the coal family. It is a fossil fuel belonging to the

%iocene age $0B million years&. 9opularly known as 6;rown !oal:, lignite is tan brown in color,

light to handle and brittle in nature. This fuel is born from vegetable matter having undergone

bio-chemical decay to the stage of peat $rotten wood& and then metamorphosed to lignite under

the pressure of the soil above through floods, movements of the earth*s crust and dehydration

when the pressure of the lignite, particularly the horizontal thrust is further increased, lignite is

made more dense, less volumetric and becomes coal as such. The lignite mined at /eyveli varies

in color from brown to dark brown and has a non-bonded granular structure. %icroscopic studies

of these sections prepared from bulk samples of lignite indicate that the fuel is composed of a

wide variety of plant ingredients, mainly of coniferous nature.

$iion

To emerge as a leading %ining and 9ower !ompany, continue to be a socially responsible

company and strive for operational e#cellence in %ining and )#ploration.

Miion

?trive towards greater cost competitiveness and work towards continued financial strength.

!ontinually imbibe best practices from the best Indian and International (rganizations engaged

in 9ower 8eneration and %ining. ;e a preferred employer by offering attractive avenues of

career growth and e#cellent work environment and by developing human resources to match

international standards. 9lay an active role in society and be sensitive to emerging environmental

issues.

/eyveli, the home of the /eyveli ignite !orporation td., is today India*s )nergy ;ridge to the

04st century and a fulfillment of 9andit /ehru*s vision. Incidentally, 9andit/ehru and /! share

a common birthday $4C.44.43B>& and /! td., is celebrated the year $011>& as the 8olden

Eubilee @ear.

HUMAN RE%OURCE

With a view to develop and maintain harmonious relationships at workplace and striking a

balance between organizational goals and individual goals, our !ompany continues to have good

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+ practices and recognize the huge potential of its human resource. The thrust on achieving

higher growth coupled with optimal utilization of manpower continued. The focus on improving

productivity and adoption of best practices in every area was relentlessly pursued. )fforts for

active participation by employees has been at the core + initiative and interventions. The total

manpower of our company as on 14.14.014C was 4D,5>C.

HIH0IHT% O& NE'$E0I 0INITE CORPORATION 0IMITED

+ighest overburden removal and lignite production in any year since inception.

ll time high generation and e#port of power.

ignite production from %ine-II highest in any year since inception.

+ighest ever lignite production from ;arsingsar %ine.

+ighest ever generation and e#port of power from T9?-II F T9?-I )#pansion.

%ore than 31G 9lant oad "actor achieved by T9?-I e#pansion. The authorized share capital has been s.0111 crores and the issue and past share capital

to s.4>DD.D4 crores

CORPORATE %OCIA0 RE%PON%I"I0IT'2

(ur company, as a socially responsible corporate citizen, has been carrying out development

works in the surrounding villages, right from its inception.

n nnual !? budget of not less than 4G of the profit after ta# has been created by our

company and the !? pro=ects are monitored periodically by a ?ub- committee of ;oard of

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PRODUCTION

0ignite

%ine-I T D3.>1 DD.5C 25.1B 34.B3 31.C1

%ine-I T 03.C1 02.DD 0D.43 0D.44 51.B>

%ine-II T 453.CC 451.3> 44D.44 41C.C5 34.13

;arsingsar %ine T 45.D3 2.25 C.13 1.0B 4.10

TOTA0 0T !4!.! !/.76 !1. !!.8 !1.69

Po:er

T.9.?.-I -8ross %M C15B.C5 532D.2B 52D2.>B C44C.CC 5BDD.C3

-/et

%M

5B>3.CC 5B41.BB 5C11.BC 5>51.45 54C4.15

T.9.?.-I )#pn. -8ross %M 5543.DD 51C0.>2 033D.1C 03D3.C5 540>.1B

-/et

%M

515B.B2 0213.3D 0DC5.CC 0D01.40 02B2.C0

T.9.?.-II -8ross %M 44052.13 4412D.>B 41D53.D2 41BB3.>3 31>C.CC

-/et

%M

414B0.4> 41142.3> 3D14.B4 3BC3.33 24D0.4C

;arsingsar T.9.?. -8ross %M 4021.2B >4D.>2 0>B.>4 0.C2 1.11

-/et

%M

4442.C1 B4C.03 435.CB 0.C2 1.11

T.9.?.-II )#pn. -8ross %M 02.01 B5.B2 1.11 1.11 1.11

-/et

%M

43.24 53.5C 1.11 1.11 1.11

TOTA0 -ro MU 1776!. 18987. 19881.68 194/4.6 1/949.78

-/et

%M

4D23B.53 4>235.44 4>152.3C 4B310.D0 4C4D4.B3

%A0E%

0ignite 0T !9./4 !9.18 !1.48 !1.47 !1./

Po:er MU 1481./1 1/816.49 1791.!4 18!8.!! 1!6.6/

!. RE$IEW O& 0ITERATURE

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There is no unanimity in the definition of the working capital. There are as many definitions of

the concepts as there are many authors on financial management, some of the definitions are

reproduced below<

6Working !apital is the e#cess of current assets over current liabilities:

+arry 8. 8uthman and +erbert ). Aougall.

%ost commonly, working capital is defined as the e#cess of current assets of a business $!ash,

ccounts eceivable Inventories& over current items owned to employees and others $such as

salaries, wages ccounts 9ayable owned to the 8overnment.&

- Ar. !olin 9ark and 9rof. 8ladson

6!urrent ssets by definitions are assets normally converted into cash within one year. Working

capital management usually concerned to involve the administration of these assets namely cash

and marketable securities, receivables and inventories:.

- Eames !. van +orne

(f these definitions, net working capital concept is more popular and has pragmatic value.

)conomists like ineout ?ailor*s approve of the net working capital on the following grounds<

a. It enables the creditors and investors to =udge the financial soundness of the enterprise.

b. The e#cess of the current assets over current liabilities is the only amount that can rely

upon to meet contingencies and emergencies.

c. The comparison of two concerns having the same amount of current assets can be done

only with the help of these concepts.

"aner*ee t;,( on corporate li


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ccording to +ampton $4325& the working capital management is the functional area of

finance that covers all the current accounts of the firm. It is concerned with the ade'uacy of

current assets as well as the level of risk posed by current liabilities. +e also viewed that the

firm*s policies for managing its working capital should be designed to achieve three goals such

as ade'uate li'uidity minimization of risk and contribute to minimizing firm value.

3no: >%co? > Martin an, Pett( +ie: on managing t?e in+etment

ccording to 7now, ?coh, %artin and 9etty $4325& working capital management

involves managing the firm*s li'uidity, managing the firm*s investments in current assets and its

use of current assets was found to reduce the firm*s risk of li'uidity at the e#penses of lowering

its overall rate of return on its investment in assets. "urthermore the use of long term sources of

financing was found to enhance the firm*s li'uidity, which reduces the rate of return on assets.

%arma an, Re,,( t;,( on li& in his work on working capital management of /epal )nterprise used

econometric models to describe the demand for working capital and its various components.

Msing regression and coefficient of variation, it is used to find holding costs also.

Re,,( t;,( on maintaining t?e li


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DATA ANA0'%I% AND INTERPRETATION

This chapter deals with the study of working capital management of /eyveli ignite !orporation

imited. The tools used for the study are common size statements and ratio analysis.

RO%% WOR3IN CAPITA02

The 8ross Working !apital of /eyveli ignite !orporation imited registered trend

during the entire period of the last five years of study. It has gone up to from s.DB2>.42 crores

in 0112-13 to s. 2405.4Ccrores in 0140-45.

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TA"0E 5 .1.1

%TATEMENT O& RO%% WOR3IN CAPITA0 R. In CroreB

COMPONENT%

O& CURRENT

A%%ET%

!668-

!667

!667-

!616

!616-!611 !611-

!61!

!61!-

!61

Inventories B5B.2B B10.3> C34.D4 4B1>.4

3

>25.D0

?undry Aebtors D24.CC 4>44.>

0

0010.53 5>CD.1

5

5211.0

D

!ash and ;ank

balance

BC20.4

3

C205.>

5

CC01.D5 5503.4

1

02>>.>

C

(ther current ssets 423.C2 4>C.B> 4DD.C2 4B>.0C 4>0.0C

oans and dvances B3D.00 B24.B3 BB3.24 C1>.21 >41.0D

TOTA0

CURRENT

A%%ET%

9/84.1

8

948.

4

98/!.1! 86/.8

4

81!.1

%o;rce2 !ompiled from the nnual eports of /! td.

8ross working capital includes various current assets such as inventory, sundry debtors,

cash and bank balances and loans and advances. The position of gross working capital, the

components of gross working capital and their percentage in the total assets are shown in Table-4

The components of !urrent iabilities and their percentage in the total !urrent iabilities

are shown in Table-0.

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TA"0E-.1.!

CURRENT 0IA"I0ITIE% AND PRO$I%ION% R. In Crore

%TATEMENT O& CURRENT

0IA"I0ITIE%

!668-67 !667-16 !616-11 !611-1! !61!-1

A. C;rrent lia)ilitie

4. ?undry creditors and

accrued e#penses

0. %ine closure

5. !apital works and

purchases

C. (ther liabilitiesB. Mnutilised revenue grant

>. Mnclaimed dividend

D. ?taff security deposit

2. Interest accrued but not

due

a. /eyveli ;onds b. !alyon ;ank

c. 7fW

D5C.4>

533.01

CD4.C4

C54.5C

2.5B

1.>5

1.14

3.2D

0.DD

4.4>

44DB.D1

C34.C1

C0>.>1

0D>.2D

>.04

4.02

1.14

3.2D

1.3>

4.14

4415.55

412.3C

C20.3C

000.1C

5.3C

1.2>

1.14

3.2D

4.4D

4.14

0B0.5C

42.2D

432.2B

432.CB

C.D2

1.35

1.14

3.2D

0.42

4.1B

0>>.B3

43.21

004.CB

004.CB

>.33

4.0D

1.14

3.33

4.3

4.15

". Pro+iion =or

4. ccrued earned leave0. +alf pay leave

5. ?hort-term benefit ofearned leave

C. ?hort-term benefit of half

pay leave

B. 8ratuity

>. !ontingencies

3>.1>

C3.42

5.C>

4.C2

4C5.C4

D1.55

5.C5

4.3B

3>.1>

51.5B

C.5>

0.BD

401.>2

BC.5>

41.>3

C.04

31.>>

1.11

B.B2

5.D5

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D. 9ostretirement medical

benefit

2. oss on assets

3. 9roposed final dividend

41. 9roposed final dividendta#

015.DD

5B.45

41.4B

1.2>

55B.BC

BD.15

4C4.5D

CC.20

44.C2

1.2>

4>D.DD

0D.2>

1.11

BC.20

40.CB

1.2>

52B.2D

>0.>1

B2.01

C>.>1

4C.32

4.11

C>3.D>

D>.04

C0.1B

2C.22

4D.04

1.C4

514.33

B4.55

TOTA0 18.6 66.17 !84.1 1/.6! 18.!

%o;rce2 !ompiled from the nnual eports of /! td..

"rom the 9revious Table, it is inferred that the current liability of /! show a mi#ed trend. It

was low in 0112-13 i.e. s. 425C.1C !rores but gradually raised to s. 45C2.50!rores in 0140-

45.

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TA"0E -.1.

COMPONENT% O& CURRENT A%%ET% !668-67R. In CroreB

COMPONENT% O&

CURRENT A%%ET% !668-67 PERCENTAE

Inventories B5B.2B D.1>

?undry Aebtors D24.CC 41.5

!ash and ;ank balance BC20.43 D0.0>

(ther current ssets 423.C2 0.C3

oans and dvances B3D.00 D.2D

TOTA0 CURRENT A%%ET% 9/84.18 166


CHART - .1.

COMPONENT% O& CURRENT A%%ET% !668-67

535.85

781.44

5482.19

189.48

597.22 Inventories

Sundry Debtors

Cash and Ban

ba!an"e

#ther "urrent $ssets

%oans and $dvan"es

TA"0E -.1.


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COMPONENT% O&


Inventories B10.3> >.BB

?undry Aebtors 4>44.>0 01.3D

!ash and ;ank balance C205.>5 >0.DD

(ther current ssets 4>C.B> 0.4C

oans and dvances B24.B3 D.BD

TOTA0 CURRENT A%%ET% 948.4 166


CHART - .1.


502.961611.62

4823.63

164.56581.59 Inventories

Sundry Debtors

Cash and Ban

ba!an"e


%oans and $dvan"es

TA"0E -.1./


COMPONENT% O&

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Inventories C34.D4 >

?undry Aebtors 0010.53 02

!ash and ;ank balance CC05.33 BD

(ther current ssets 4DD.C3 0

oans and dvances B>1.1B D

TOTA0 CURRENT A%%ET% 98//.4 166


CHART - .1./


491.71

2202.39

4423.99

177.49

560.05 Inventories

Sundry Debtors

Cash and Ban

ba!an"e


%oans and $dvan"es

TA"0E .1.4

COMPONENT% O& CURRENT A%%ET% !611-1!R. In CroreB

COMPONENT% O&

CURRENT A%%ET% !611-1! PERCENTAE

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Inventories B1>.43 >.04

?undry Aebtors 5>CD.15 CC.DB

!ash and ;ank balance 5503.41 C1.2B

(ther current ssets 0B3.CC 5.42

oans and dvances C1>.21 C.33

TOTA0 CURRENT A%%ET% 818./4 166

%o;rce2 !ompiled from the nnual eports of /! td

CHART - .1.4

COMPONENT% O& CURRENT A%%ET% !611-1!

506.19

3647.033329.1

259.44

406.8 Inventories

Sundry Debtors

Cash and Ban

ba!an"e


%oans and $dvan"es

TA"0E .1.9

COMPONENT% O& CURRENT A%%ET% !61!-1R. In CroreB

COMPONENT% O&

CURRENT A%%ET% !61!-1 PERCENTAE

Inventories >25.D0 2.C

?undry Aebtors 5211.0D C>.D

26


27/76


28/76

%ine !losure 533.01 45.3D

(ther iabilities CB3.50 4>.1D

9rovisions D30.>> 0D.DC

Total C;rrent 0ia)ilitie !8/4.9/ 166


CHART 5 .1.8

COMPONENT% O& CURRENT 0IA"I0ITIE% !668-67

734.16

471.41

399.2459.32

792.66 Sundry Creditors

Ca&ita! 'ors (

)ur"hases

*ine C!osure

#ther %iabi!ities

)rovisions

TA"0E 5 .1.7

COMPONENT% O& CURRENT 0IA"I0ITIE% !667-16R. In CroreB

COMPONENT% O&

CURRENT 0IA"I0ITIE%

!667-16R. In Crore PERCENTAE

?undry !reditors 44DB.D1 53

!apital Works F 9urchases C0>.>1 4C

%ine !losure C34.C1 4D

28


29/76

(ther iabilities 0D>.2D 3

9rovisions >45.02 04

Total C;rrent 0ia)ilitie !78.8/ 166


CHART 5 .1.7


1175.7

426.6491.4

276.87

613.28

Sundry Creditors Ca&ita! 'ors ( )ur"hases *ine C!osure

#ther %iabi!ities )rovisions

TA"0E 5 .1.16

COMPONENT% O& CURRENT 0IA"I0ITIE% !616-11R. In CroreB

COMPONENT% O&

CURRENT 0IA"I0ITIE%

!616-11

R. In Crore PERCENTAE

?undry !reditors 4412.21 53

!apital Works F 9urchases D04.CD 0>

%ine !losure 412.3C C

(ther iabilities 00B.4B 2

29


30/76

9rovisions >C3.3C 05

Total C;rrent 0ia)ilitie !81. 166


CHART 5 .1.16


1108.8

721.47

108.94

225.15


Ca&ita! 'ors (

)ur"hases*ine C!osure

#ther %iabi!ities

)rovisions

TA"0E 5 .1.11

COMPONENT% O& CURRENT 0IA"I0ITIE% !611-1!R. In CroreB

COMPONENT% O&

CURRENT 0IA"I0ITIE%

!611-1!


?undry !reditors 0B0.5C 45.4

!apital Works F 9urchases 432.2B 41.5

%ine !losure 42.2D 1.3

(ther iabilities >CD.C1 .9

9rovisions D32.C3 C4.>

30


31/76

Total C;rrent 0ia)ilitie 171/.7/ 166


TA"0E 5 .1.11

COMPONENT% O& CURRENT 0IA"I0ITIE% !611-1!

252.34

198.85

18.87

647.4

798.49

Sundry Creditors

Ca&ita! 'ors (

)ur"hases*ine C!osure

#ther %iabi!ities

)rovisions

TA"0E 5 .1.1!

COMPONENT% O& CURRENT 0IA"I0ITIE% !61!-1R. In CroreB

COMPONENT% O&

CURRENT 0IA"I0ITIE%

!61!-1


?undry !reditors 0>>.B3 3.3

!apital Works F 9urchases 004.CB 2.0

%ine !losure 43.21 1.D

(ther iabilities 4>02.CC >1.C

9rovisions BBB.D3 01.>

Total C;rrent 0ia)ilitie !47!.69 166

31


32/76


TA"0E 5 .1.1!

COMPONENT% O& CURRENT 0IA"I0ITIE% !61!-1

266.59

221.45

19.8

1628.44


Ca&ita! 'ors (

)ur"hases

*ine C!osure

#ther %iabi!ities)rovisions

CA0CU0ATION O& NET WOR3IN CAPITA0

/et working capital is a 'ualitative concept. It indicates the li'uidity position of the firm and

suggests the e#tent to which working capital needs may be financed by permanent source of

funds.

Net :orking Capital N !urrent sset – !urrent iabilities.

TA"0E 5 .1.1

CA0CU0ATION O& NET WOR3IN CAPITA0

R.in Crore

'EAR% CURRENT CURRENT NET WOR3IN

32


33/76

A%%ET% 0IA"I0ITIE% CAPITA0

!668-!667 DB2>.42 02B>.DB CD03.C5

!667-!616 D>2C.5> 0325.2B CD11.B4

!616-!611 D2B0.40 0B>D.43 B02C.35

!611-!61! 24C2.B> 0D>1.3B B52D.>4

!61!-!61 254C.>B 0D2C.5C BB51.5C


CHART 5 .1.1

NET WOR3IN CAPITA0

33


34/76

2 0 0

8 + 2 0 0

9

2 0 0

9 + 2 0 1

0

2 0 1

0 + 2 0 1

1

2 0 1

1 + 2 0 1

2

2 0 1

2 + 2 0 1

3

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

C,--/ $SSS

C,--/ %I$BI%IIS

/ '#-I/ C$)I$%

RATIO ANA0'%I%

atio nalysis is a powerful tool of "inancial nalysis. atio nalysis of business

enterprises centers on efforts to drive 'uantitative measures or guides concerning the e#pected

capacity of the firm to meet its future financial obligations or e#pectations. The ratio analysis

facilitates a firm to consider the time dimensions into account i.e., whether the financial position

of a firm is showing any improvement or deteriorating over years.

atio is known as one number e#pressed in terms of another, it is an e#pression of

relationship spelt out by dividing one figures into the other.

T'PE% O& RATIO%

atios are classified in broad groups. They are as follows<

i'uidity atios.

everage atios.

ctivity ratios.

9rofitability atios.

34


35/76

0IUIDIT' RATIO

i'uidity ratios derive a picture of the capacity of a firm to meet its short term obligations

out of its short term resources. These ratios constitute ratio-analysis of the short-term financial

position. i'uidity ratios, by establishing a relationship between cash and other current assets tocurrent obligations, provide a 'uick measure of li'uidity.

The most common ratios which indicate the i'uidity are<

!urrent atio

Huick atio

!ash 9osition atio

CURRENT RATIO

!urrent atio is the relationship between the total current assets and current liabilities. It

is the ratio of the current assets and current liabilities and is found out by dividing the current

assets by the current liabilities. s the ratio is connected with the working capital O!urrent ssets

– !urrent iabilitiesP and it is also called working capital ratio. !urrent ratio is the indicator of

short term li'uidity position of a firm.

!urrentssets

C;rrent Ratio N -----------------------

!urrentiabilitie

TA"0E 5 .1.1

CURRENT RATIO

35


36/76

(Rs. in crores)

'ear

C;rrent

Aet

C;rrent

0ia)ilitieRatio

0112-13 DBBD.1D 02B4.B> 0.>

0113-41 D>2C.5> 0BC4.2B 5.10

0141-44 D2BB.>5 0B>D.43 5.1>

0144-40 24C2.B> 0D>1.3B 0.3B

0140-45 D>51.35 0002.BB 5.C0


CHART 5 .1.1

CURRENT RATIO

2008+09 2009+10 2010+11 2011+12 2012+13

0

0.5

1

1.5

2

2.5

3

3.5

4

2.63.02 3.06 2.95

3.42

INTERPRETATION

The calculated current ratio of the company was decrease from the 5.C0


37/76

increased from DBBD.1Dcrore to D>51.35crore due to increase in cash and bank balance has a

main constituent of current asset. +ence the li'uidity of the company is high for the period under

the review from the current ratio point of view.

UIC3 RATIO

It is also a tool of testing the li'uidity of an organization. This ratio is also called as

i'uid atio $or& cid test ratio. cid Test atio or i'uid atio is concerned with the

relationship between i'uid ssets and !urrent iabilities. Huick atio is an Indicator of ?hort

term solvency of the company.

i'uidssets

;ick Ratio N ----------------------

!urrentiabilities

TA"0E 5 .1.1/

UIC3 RATIOR. in croreB

'ear

;ick

Aet

C;rrent

0ia)ilitie

Ratio

0112-13 D104.00 02B4.B> 0.C

0113-41 >1DB.10 0BC4.2B 0.53

0141-44 D44C.25. 0B>D.43 0.DD

0144-40 DDD4.B5 0BB3.D3 5.1C

0140-45 D>51.35 0002.BB 5.C0


CHART 5 .1.1/

UIC3 RATIO

37


38/76

2008+09 2009+10 2010+11 2s011+12 2012+13

0

0.5

1

1.5

2

2.5

3

3.5

4

2.4 2.392.77

3.043.42

INTERPRETATION

The calculated 'uick ratio or li'uid ratio decreases from5.C0


39/76

R. in croreB

'ear

Ca?

Marketa)le

%ec;rit(

C;rrent

0ia)ilitie

Ratio

0112-13 BCB0.01 02B4.B> 4.34

0113-41 C205.>5 0BC4.2B 4.23

0141-44 CC01.D5 0B>D.43 4.D0

0144-40 CC4B.BB 0BB3.D3 4.D0

0140-45 5C1>.2C 0D2C.5C 4.00


CHART 5 .1.14

CA%H PO%ITION RATIO

2008+09 2009+10 2010+11 2011+12 2012+130

0.5

1

1.5

2

2.5

1.91 1.891.72 1.72

1.22

39


40/76

INTERPRETATION

8enerally, ideal absolute li'uid ratio of 4


41/76

(utsider*s "und

De)t E


42/76

2008+09 2009+10 2010+11 2011+12 2012+13

0

0.1

0.2

0.3

0.4

0.5

0.6

0.32 0.320.28

0.39

0.56

INTERPRETATION

The calculated debt e'uity ratio has been increased from 1.B> in the year 0140-45 to 1.53

in the year 0144-40. The resource and surplus of the firm shows Kan increasing trend from

5411.11 crore to D5B4.B3 crore in 0112-45 and also outsiders funds such as secured loans and

unsecured loans are increased because of the e#pansion pro=ects.

INTERE%T CO$ERAE RATIO

Interest !overage atio is also known as 6"i#ed charges cover:. This ratio establishedthe relationship between );IT and fi#ed interest charges. Interest coverage ratio measures the

ability of the company to meet interest commitments.

It also highlights the ability of the firm to raise additional funds in future. +igher the

ratio, better is the position of long-term creditors and the company*s risk is lesser.

)arnings before Aepreciation, Interest and Ta#

Interet Co+erage Ratio ------------------------------------------------------------- Interest

TA"0E5 .1.18

INTERE%T CO$ERAE RATIOR. in croreB

'ear E"IT Interet Ratio

0112-13 4C2>.5D 2.4B 420.5D

42


43/76

0113-41 4223.4> 55.B2 B>.0>

0141-44 00B3.32 4B3.1D 4C.42

0144-40 01B1.D> 5D>.CD B.CB

0140-45 01CB.>> 435.53 41.BD


CHART 5 .1.18

INTERE%T CO$ERAE RATIO

2008+09 2009+10 2010+11 2011+12 2012+13

0

20

40

60

80

100

120

140

160

180

200

182.37

56.26

14.18 5.45 10.57

INTERPRETATION

The calculated interest coverage ratios from 0112-13 to 0140-45 are appears to be the

average of around 420 and it is 41 for the year 0112-13 and it is 420 for the year 0112-41. This is

due to low interest is to be covered and higher earnings of the company ;ut in 0141-44 interest

charged is very high when compared to rest of the years so the interest coverage ratio is reduced

to 4C.42.The higher interest coverage ratio indicates more solvency to the company and the

company can very well cover the interest payments on its long term debt..

43


44/76

PROPRIETAR' RATIO2

This ratio relates the shareholders* funds to total assets. It throws light on the general financial

strength of the company. It is of greater importance to the creditors since it enables to find out

the proportion of shareholders* funds in the total assets of the business. high 9roprietary atioindicates relatively secure position to the creditors in the event of li'uidation. low proprietary

ratio will include greater risk to the creditors.

?hareholders "und

Proprietar( Ratio ------------------------------

Total ssets

TA"0E 5 .1.17

PROPRIETAR' RATIO

R. in croreB

'ear

%?are?ol,er

Total Aet Ratio&;n,

0112-13 3C>3.05 4D1C3.3 1.BB

0113-41 41135.4B 4C3D0.C> 1.>D

0141-44 444DC.C2 4BDBD.3B 1.D1

0144-40 CC22.34 403B.31 1.03

0140-45 45124.0> 0504D.43 1.B>


CHART 5 .1.17

PROPRIETAR' RATIO

44


45/76

2008+09 2009+10 2010+11 2011+12 2012+13

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.55

0.67 0.7

0.29

0.56

INTERPRETATION

The calculated proprietary ratio are varying from 1.B> for 0140-45 and then decrease to

1.BB for the year 0112-13The decrease in ratio is because of purchase of some special mining

e'uipment during the year 0112-13. The total asset of the company has been increased from

4D1C3.3in 0112-13 to 0504D.43in 0140-45. In 0141-44proprietory ratio increase by 1.D1 The

higher ratio indicate more security to the creditors and relatively secure position of the company

in the event of li'uidation.

ACTI$IT' RATIO%2

n activity ratio measures the effectiveness of the employment of resources. These ratios

not only analyze the use of the total resources of the firm but also the use of the components of

the total assets. ctivity atios involve a relationship between assets and sales. ?everal ctivity

atios can be calculated to =udge the effectiveness of asset utilization.

?ome of these ratios are<

Aebtor*s turnover ratio.

"i#ed assets turnover ratio.

Working capital turnover ratio.

!apital turnover ratio.

45


46/76

DE"TOR% TURNO$ER RATIO

Aebtors constitute an important constituent of current assets and therefore the 'uality of

debtors to a great e#tent determines a firm*s li'uidity.

This ratio indicates the efficiency of the staff entrusted with the collection of book debts.

The higher the ratio, the better it is.

/et ?ales

De)tor T;rno+er Ratio ----------------

Aebtors

Ta)le 5 .1.!6

De)tor T;rno+er RatioR. in CroreB

'ear Net %ale De)tor Ratio

0112-13 55BC.34 D24.CC C.03

0113-41 C404.15 4>44.>0 0.B>

0141-44 53C3.12 0010.53 4.D3

0144-40 CC23.C> 0B15.CB 4.D3

0140-45 BB31.3D 5211.0D 4.CD


CHART 5 .1.!6

De)tor T;rno+er Ratio

46


47/76

2008+09 2009+10 2010+11 2011+12 2012+13

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

4.29

2.56

1.79 1.791.47

INTERPRETATION

The calculated debtors turnover ratio increased from C.03 in 0112-13 to 0.B> in 0113-41 and the

decreases from there to 4.D3 in 0141-44. It indicates the company has taken efficient debt

management

&IGED A%%ET TURNO$ER RATIO

"i#ed sset Turnover atio indicates the e#tent to which the investment in fi#ed assets

contributes towards sales. highest ratio is an indication of greater efficiency in the utilization of

fi#ed assets. "i#ed asset of the company are land and building, 9lant and machinery etc.

!ost of 8oods ?old

&ie, Aet T;rno+er Ratio ---------------------------

"i#ed sset

TA"0E 5 .1.!1

47


48/76

&ie, Aet T;rno+er

R. in croreB

'ear

Cot o=

oo, %ol,&ie, Aet Ratio

0112-13 0>05.5C CB15.1C 1.B2

0113-41 0054.2D B052.21 1.C5

0141-44 5510.C0 C331.4B 1.>>

0144-40 CC22.34 2B4B.2C 1.B5

0140-45 BB31.1D 4C310.BC 1.5D


CHART 5 .1.!1

&ie, Aet T;rno+er Ratio

2008+09 2009+10 2010+11 2011+12 2012+13

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.58

0.43

0.66

0.53

0.37

INTERPRETATION

The fi#ed asset turnover ratios for the period under study are very less when compared to

standard ratio of B. /! being an integrated comple# having capital intensive mining and power

48


49/76

industry, investment in fi#ed asset is high and the ratio indicates the lesser ability of the company

to generate sales from the investment in the fi#ed assets. +igher ratio will help in improving the

profitability of the company.

WOR3IN CAPITA0 TURNO$ER RATIO

The ratio of cost of goods sold to /et working capital is determined in order to test the

efficiency with which net working capital is utilized. It indicates whether the business is being

operated on a small or large amount of /et working capital in relation to sales.

high working capital turnover may be the result of favorable turnover of inventories

and receivables whereas a low turnover of net working capital results in slow turnover of

inventories and receivables.

!ost of 8oods ?old

Working Capital T;rno+er Ratio -----------------------

Working !apital

Ta)le 5 .1.!!


R. in croreB

'ear

Cot o=

oo, %ol,

Working

Capital

Ratio

0112-13 0>05.5C CD1B.B4 1.BB

0113-41 0054.12D C>24.4D 1.C2

0141-44 5510.C0 0B2C.1B 4.02

0144-40 5403.DB B52D.>4 1.B2

0140-45 5B24.14 BB51.5C 1.>C


CHART 5 .1.!!


49


50/76

1 2 3 4 5

0

1

2

3

4

5

6

0.55 0.481.28

0.58 0.64

INTERPRETATION

The working capital turnover ratios show a Aecreasing trend from 1.BB the year 0112-13 to 1.C2

for the year 0113-41 and has shown some improvement during 0112-13. The decreasing trend of

the working capital turnover ratio indicates the company*s ability to generate sales was

decreasing up to 0113-41 and has shown a sign of reversal in 0141-44. It means utilization

working capital in generating sales has started increasing from 011D-12 and continued in 0140-

45. Working capital turnover ratio is high in 0140-45 when compared with other year because of

mine closure and provision of gratuity

CAPITA0 TURNO$ER RATIO

!apital Turnover atio indicates the e#tent to which capital employed contributes

towards sales. +igh ratio signifies that there e#ists efficient utilization of the capital employed by

the firm !ost of 8oods ?old

Capital T;rno+er Ratio --------------------------

!apital )mployed

Ta)le 5 .1.!


50


51/76

R. in croreB

'earCot o= oo,

%ol,

Capital

Emplo(e,Ratio

0112-13 0>05.5C 3515.>0 1.02

0113-41 0054.2D 444>>.22 1.01

0141-44 5510.C0 44>04.11 1.02

0144-40 5403.DB 4DD55 1.4D

0140-45 5B24.14 4D5>C 1.01


CHART 5 .1.!


2008+09 2009+10 2010+11 2011+12 2012+13

0

0.05

0.1

0.15

0.2

0.25

0.3

0.28

0.2

0.28

0.170.2

INTERPRETATION

The calculated capital turnover ratio was 1.02 for the year 0112-13 it decreased to 1.10

in 0113-41 and then increased to 1.02in 0141-44. It indicates the effective utilization of the

51


52/76

capital employed by the company to generate sales has decreased from the year 0112-13 to 0113-

41 and increased in the latter years from 0141-44 to 0140-45.

PRO&ITA"I0IT' RATIO%2

9rofitability ratios are calculated to measure the operating efficiency of the company.

9rofitability atios are designed to highlight the end-result of business activities. 9rofitability

ratios can be determined on the basis of ?ales or Investment. 9rofitability atios indicates the

profitability i.e., the ability of the firm to earn profit.

The important ratios are<

/et profit ratio.

eturn on net worth.

eturn on capital employed.

8ross profit ratio.

NET PRO&IT RATIO2

/et 9rofit atio is the ratio of /et Income or 9rofit after Ta#es to /et sales. It indicates with

portion of sales is left to the proprietors after all costs, charges and e#penses have been

deducted. It is e#tremely useful to the firm being an indication of cost control and sales

promotion. /et profit atio is a guide as to the efficiency or otherwise of operating the firm./et

profit ratio is widely used as a measure of over-all profitability and is very useful to the

proprietors. +igher the ratio better is the operational efficiency of the company.

/et 9rofit

Net Pro=it Ratio --------------

?ales

Ta)le 5 .1.!

NET PRO&IT RATIO

52


53/76

R. in croreB

'ear Net Pro=it %ale Ratio

0112-13 204.13 55BC.34 1.0C

0113-41 40CD.C> C404.15 1.51

0141-44 4032.02 53C3.12 1.50

0144-40 CC22.34 403B.31 1.03

0140-45 BB31.1D 45124.0> 1.C0


CHART 5 .1.!

NET PRO&IT RATIO

2008+09 2009+10 2010+11 2011+12 2012+13

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.240.3 0.32 0.29

0.42

INTERPRETATION

The calculated net profit ratio of the company was 1.0C for 0112-13 and decreased to 1.5 for the

year 0113-41 due to fall in net profit from s204.13!r for 0112-13 to s40CD.C> !r for 0113-41

53


54/76

and has shown a sign of improvement in 0141-44 to 1 50. It decreased to 1.03for 0144-40 due to

fall in net profit to s 4032.>2 !r due to 9rovision for gratuity of s CC22.34 !r . The reduction

in the sales turnover during the year 0140-45 as compared to previous year 0113-41 was due to

the ad=ustment of mine closure cost amounting to s 5C1.D0 crore in the sale income of 0140-

45.and %inistry of coal revised downward in view of the reduction in mine closure cost for the

above period as stated the e#cess liability created in the earlier years amounting to s 520.CB

crore has been withdrawn and included in other income.

RETURN ON NET WORTH

eturn on net worth is desired to work out the profitability of the company from the

shareholder*s point of view, because the shareholders are interested in total income after ta#

including net /on-operating Income.

9rofit after ta#

Ret;rn on Net :ort? -------------------

/et worth

Ta)le 5.1.!/

RETURN ON NET WORTH

R. in croreB

'ear

Pro=it

a=ter ta

Net :ort? Ratio

0112-13 204.13 3C40.D2 1.12

54


55/76

0113-41 40CD.C> 4100B.>1 1.40

0141-44 4032.02 44404.C1 1.44

0144-40 4C44.55 44323.BD 1.40

0140-45 4CB3.DB 4030B.4B 1.44


CHART 5 .1.!/

RETURN ON NET WORTH

2008+09 2009+10 2010+11 2011+12 2012+13

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.08

0.120.11

0.120.11

INTERPRETATION

The calculated return on net worth was high at 1.12 in the year 0112-13 and slowly

decreased to 1.40 in 0113-41 and increased to 1.44 in 0141-44 and then decreased to 1.40 in the

year 0144-40. The decrease in trend on return on net worth was due tom fall in profit from

204.13 crore for 0112-13 to 40CD.C>crore in 0141-44. The decrease in returns on net worth for

55


56/76

the year 0144-40 is 1.40 due to provision for gratuity and mine closure to e#tent of

rupees4032.02crore further decrease in return on net worth in 0140-45 is 1.44 is due to The board

of Airectors of the company has recommended a dividend of 05G for the year 0141-44 $previous

year 01G& the total outgo on account of the dividend including distribution ta# will be s CC2.CD

!rore $previous year s 534.34!rore&

RETURN ON CAPITA0 EMP0O'ED

eturn on !apital )mployed atio shows the overall efficiency of the firm. This ratio is

the indicator of profitability of a firm. The profit being the net result of all operations, the return

on capital employed e#presses all efficiency the Inefficiency of a business collectivity and thus it

is a dependable basis for =udging its overall efficiency or inefficiency.

9rofit after Ta#

Ret;rn on Capital Emplo(e, N -----------------------

!apital )mployed

Ta)le 5 .1.!4


R. in croreB

'ear

Pro=it

a=ter ta

Capital emplo(e, Ratio

0112-13 0054.2D B052.21 1.C5

0113-41 5510.C0 C331.4B 1.>>

0141-44 4032.55 44>04.11 1.44

0144-40 4C44.55 4DD55 1.1D

0140-45 4CB3.DB 4D5>C 1.12

CHART 5 .!4


56


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0113-41 0141-44 0141-44 0144-40 0140-45

1

1.4

1.0

1.5

1.C

1.B

1.>

1.D

1.C5

1.>>

1.44 1.1D 1.12

INTERPRETATION

The calculated return on capital employed ratio is 1.C5 in 0112-13 and slowly increased

to 1.>> in 0113-41 and decreased to 1.44 in 0141-44 and then decreased to 1.1D in 0144-40. The

decrease in trend on return on capital was due to fall in net profit from s 0054.2D !r for 0112-

13 to s CC22.34!r in 0141-44. The reason for decrease in return on capital for 0141-44 is due to

provision for gratuity and mine closure to an e#tent of s4032.55!r and in 0140-45 return on

capital is stable because little increase in profit leads to increase in capital works and purchases

up to 4CB3.DB!r when compared to last year .

RO%% PRO&IT RATIO2

8ross profit ratio is the ratio of gross profit to net sales e#pressed as a percentage

representing the percentage of gross profits earned on sales. n increase in gross profit ratio may

reflect an increase in the sale price of goods sold without any corresponding increase in costs, a

decrease in cost without its impact on the sale price of goods. ow gross profit ratio may indicate

un-favorable purchasing and mark-up policies.

8ross 9rofit

ro Pro=it Ratio -------------------

?ales

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TA"0E 5 .1.!9

RO%% PRO&IT RATIO

R. in croreB

'ear ro Pro=it %ale Ratio

0112-13 4C2>.5D 55BC.34 1.C3

0113-41 4223.4> C404.15 1.C>

0141-44 00B3.32 53C3.12 1.BD

0144-40 431B.DC C2>>.2B 1.53

0140-45 422>.54 BB31.1D 1.55


CHART 5 .1.!9

RO%% PRO&IT RATIO

2008+09 2009+10 2010+11 2011+12 2012+13

0

0.1

0.2

0.3

0.4

0.5

0.6

0.49 0.46

0.57

0.39

0.33

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INTERPRETATION

The gross profit ratio for 0140-45 is the lowest during the period under the study. The

gross profit shows a fluctuating trend. The declining trend in gross profit ratio is due to reduction

in operating profit. The operating e#pense was 422>.54crore during the year 0140-45 it wasconsiderably high when compared to other years, in 0140-45 gross profit increase to due to

overburden removal of 422>.54%5 from all mines of the company put together so the gross

profit also increased so gross profit ratio increased by 1.55.

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TA"0E 5 .!.1

%CHEDU0E O& CHANE% IN WOR3IN CAPITA0

CURRENT A%%ET% !669-68 !668-67 INCREA%E DECREA%E

I/R)/T(I)? CC2.1B B5B.2B 2D.2

?M/A@ A);T(? 042.25 D24.CC B>0.>4

!?+ F ;/7 ;/!)? CDC3.B> BCB0.0 D10.>C

(T+) !M)/T ??)T? 4B3.>D 423.CD 03.2

(/? F AR/!)? 51D.>C B32.44 031.CD

TOTA0 AB /88.9/ 9//9.69 149.!

CURRENT 0IA"I0ITIE% !669-68 !668-67

!M)/T I;IITI)? 4C>B.3> 01B2.3 B30.3C

9(RI?I(/? 5>2.12 D30.>> C0C.B2

TOTA0 "B 18.6 !8/1./4 1619./!

WOR3IN CAPITA0 A-"B 67.91 96/./1 4//.8

INCREA%E IN WOR3IN

CAPITA04//.8 - - 4//.8

TOTA0 96/./1 96/./1 4//.8 4//.8

INTERPRETATION

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?chedule of !hanges in Working !apital, when compared between 0112-13 and 0113-41

It is stated that,

IN CURRENT A%%ET%

Inventories increases by s. 2D.2 !rores.

Aebtors increases by s. B>0.>4 !rores.

!ash and ;ank ;alance increases by s. D10.>C !rores.

(ther !urrent ssets increases by s. 03.2!rores.

oans and advances increases by s. 031.CD !rores

IN CURRENT 0IA"I0ITIE% PRO$I%ION%

!urrent iabilities increases by s. B30.3C !rores.

9rovisions increases by s. C0C.B2 !rores.


Increase in Working capital s. >BB.2 !rores.

TA"0E 5 .!.!


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CURRENT A%%ET% !668-67 !667-16 INCREA%E DECREA%E

I/R)/T(I)? B5B.2B B10.3> 50.23

?M/A@ A);T(? D24.CC 4>44.>0 251.42

!?+ F ;/7 ;/!)? BCB0.0 C205.>5 >02.BD

(T+) !M)/T ??)T? 423.CD 4>C.B> 0C.34

(/? F AR/!)? B32.44 B24.B3 4>.B0

TOTA0 AB 9//9.69 948.4 86.18 96!.87

CURRENT 0IA"I0ITIE% !668-67 !667-16

!M)/T I;IITI)? 01B2.3 0523.34 554.14

9(RI?I(/? D30.>> >45.02 4D3.52

TOTA0 "B !8/1./4 66.17 1.61 197.8

WOR3IN CAPITA0 A-"B 481.19 96/./1 /!./1 77.19

INCREA%E IN WOR3IN CAPITA0 !. !.

TOTA0 96/./1 96/./1 /!./1 /!./1

INTERPRETATION

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?chedule of changes in working capital, when compared between 0112-13 and 0113-41.

It is stated that,

IN CURRENT A%%ET%2

Inventories Aecreases by s. 50.23 !rores.

Aebtors increases by s. 251.42 !rores.

!ash and ;ank ;alance Aecreases by s.>02.BD !rores.

(ther !urrent ssets Aecreases by s. 0C.34 !rores.

oans and dvances Aecreases by s. 4>.B0 !rores.

IN CURRENT 0IA"I0ITIE% PRO$I%ION%2

!urrent iabilities increases by s. 554.14!rores.

9rovisions Aecreases by s. 4D3.52 !rores.


Increase in working capital s. 0C.5C !rores.

TA"0E 5 .!.


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CURRENT A%%ET%!667-

16!616-11 INCREA%E DECREA%E

I/R)/T(I)? B10.3> C34.D4 44.0B

?M/A@ A);T(? 4>44.>0 0010.53 B31.DD

!?+ F ;/7 ;/!)? C205.>5 CC01.D5 C10.3

(T+) !M)/T ??)T? 4>C.B> 4DD.C2 40.30

(/? F AR/!)? B24.B3 BB3.24 04.D2

TOTA0 AB 948.4 98/!.1! 46.47 /.7

CURRENT 0IA"I0ITIE%

!667-

16 !616-11

!M)/T I;IITI)? 0523.34 435C.44 CBB.2

9(RI?I(/? >45.02 >C3.3C 5>.>>

TOTA0 "B

66.17 !/8.6/ 4.44 //.8

WOR3IN CAPITA0 A-"B481.19 /!48.69 /49.6 17.89

INCREA%E IN WOR3IN

CAPITA0/9.14 - - /9.14

T6TA0 /!48.69 /!48.69 /49.6 /49.6

INTERPRETATION

?chedule of changes in working capital, when compared between 0113-41 and 0141-44. It is

stated that,

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IN CURRENT A%%ET%2

Inventories decreases by s. 44.0B !rores.

Aebtors increases by s. B31.DD !rores.

!ash and ;ank ;alance decreases by s.C10.3 !rores.

(ther !urrent ssets increases by s. 40.30 !rores.

oans and dvances decreases by s. 04.D2 !rores.

IN CURRENT 0IA"I0ITIE% PRO$I%ION%<

!urrent iabilities decreases by s. CBB.2!rores.

9rovisions increases by s. 5>.>>!rores.


Increase in working capital s. BCD.4>!rores.

J

TA"0E NO-.!.


CURRENT A%%ET% !616-11 !611-1! INCREA%E DECREA%E

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I/R)/T(I)? C34.D4 B1>.43 4C.C2

?M/A@ A);T(? 0010.53 5>CD.15 4CCC.>C

!?+ F ;/7 ;/!)? CC01.D5 5503.414134.>5

(T+) !M)/T ??)T? 4DD.C2 0B3.CC 24.3>

(/? F AR/!)? BB3.24 C1>.21 4B5.14

TOTA0 AB 98/!.1! 818./4 1/1.68 1!4/.88

CURRENT 0IA"I0ITIE% !616-11 !611-1!

!M)/T I;IITI)? 435C.44 43>0.C> 02.5B

9(RI?I(/? >C3.3C D32.C3 4C2.BB

TOTA0 "B !/8.6/ !946.7/ 194.7

WOR3IN CAPITA0 A-"B /!48.69 /89.41 14.18 1!4/.88

INCREA%E IN WOR3IN

CAPITA078. - - 78.

TOTA0 /89.41 /89.41 14.18 14.18

INTERPRETATION


It is stated that,

IN CURRENT A%%ET%2

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68/76

?M/A@ A);T(? 5>CD.15 5211.0D 4B5.0C

!?+ F ;/7 ;/!)? 5503.41 02>>.>C C>0.C>

(T+) !M)/T ??)T? 4B>.0C 4>0.0C 24.3>

(/? F AR/!)? C1>.21 >41.0D >.1

TOTA0 AB 86/..84 81!.1 !/.! 1!8.7

CURRENT 0IA"I0ITIE% !611-1! !61!-1 INCREA%E DECREA%E

!M)/T I;IITI)? 43>0.C> 4214.>B 4>1.24

9(RI?I(/? D32.C3 BBB.D3 0C0.D

TOTA0 "B !946.7/ !/9. 6./1

WOR3IN CAPITA0 A-"B /!8.71 /94/.9 !/.! 881.!

INCREA%E IN WOR3IN

CAPITA044.!! - - 44.!!

TOTA0 /94/.9 /94/.9 881.! 881.!

INTERPRETATION


It is stated that,

IN CURRENT A%%ET%2

Inventories Aecreases by s. 200.CD!rores.

Aebtors increases by s. 4B5.0C!rores.

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!ash and ;ank ;alance Aecreases by s.C>0.C>!rores.

(ther !urrent ssets increases by s. 24.3>!rores.

oans and dvances Aecreases by s. >.14!rores.


!urrent iabilities decreases by s. 4>1.24!rores.

9rovisions decreases by s. 0C0.D!rores.


Increase in working capital s. >C>.00crores

TA"0E - .!.4

CURRENT A%%ET% AND 0IA"I0ITIE% O& N0C 0t,..

R. In Crore

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INTERPRETATION

!hanges in !urrent ssets and !urrent iabilities, when compared between 0112-13 and

0140-45, It is stated that,

IN CURRENT A%%ET%2

Inventories increases by s. 45C !rores in 0140-45 compared to base year 0112-13 it

is a normal increase S 41G p.a.

70

9TI!M? !668-67 !667-16 !616-11 !611-1! !61!-1 BK-B

Inventories B5> B15 C30 B1>.43 >25.D0 1

Aebtors D24 4>40 0010 5>CD 5211 !6

!ash and ;ank

;alance

BCB0 C20C CC01 5503 02>> 1891

(ther !urrent

ssets

423 4>B 4DD 4B> 4>0 -!4

oans and

dvances

B32 B2C BB3.24 C1> >41 !!1.81

!reditors D5C 44D> 4415 0B3 0DD 8/9

Work in 9rogress CD4 C04 C25 432 004 76

(ther iabilities CBC 0DD 000 0B4 525 -

9rovisions D35 >45 >B1 D32 BBB /!!


71/76

Aebtors decreases by s. 015C !rores due to reduction in power tariff by !)! norms

and parameters and ad=ustment relating to earlier year sales. !ash and ;ank ;alance increases by s. 42D4 !rores due to increase in ?ecured and

Mnsecured oans for our e#pansion pro=ect, the amount is invested in bank and

utilizing the fund day by day. ccumulation of eserve from our profit.

(ther !urrent ssets decreases by s 0> !rores it is a normal decrease.

oans and dvances increases by s.004.24 !rores it is a normal increase.


?undry !reditors increases by s2BD !rores, due to our e#pansion pro=ects, it is a normal

increase.

Work in 9rogress increases by s. 531 !rores due to our e#pansion pro=ects in a=asthan,

%ine-II )#pansion and Thermal-II )#pansion, it is a normal increase.

(ther liabilities is decreases by s 55 !rores due to our e#pansion pro=ects in a=asthan,

%ine-II )#pansion and Thermal-II )#pansion,it is a normal decrease.

9rovisions are increases by s.B00, due to final dividend declared in the earlier years but,

in current year interim dividend paid partly. contingency provision also increases.

CHAPTER 5I$

.1 &INDIN%

The study of working capital and its management in /eyveli ignite !orporation imireveals

the following<

The net working capital of the company has shown an increasing trend as against

s.CD03.C5 in 0112-13 it has grown to s.BB51.5Ccrores in 0140-45 thus it has increased

from 0.> to 5.C0 times during the period of study.

The increasing working capital is due to increase in the current assets without a

corresponding increase in current liabilities.

The current ratio of 0 to 5.C0 average of current ratio is 5.1>

compared to the fi#ed norms. The li'uidity position of the concern is good.

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The information given above reveals that 'uick ratio of /! td fluctuate between 0.C

and 5.C0 during the whole period of study its clearly indicates the concern has the ability

to maintain its li'uidity positions in better manner.

The ideal absolute li'uid ratio of 4 in 0113-41

and the decreases from there to 4.D3 in 0141-44. It indicates the company has taken

efficient debt management

The working capital turnover ratio shows a decreasing trend from 1.BB the year 0112-13

to 1.C2 for the year 0113-41 and has shown some improvement during 0140-45. The calculated capital turnover ratio was 1.02 for the year 0112-13 it decreased to 1.10 in

0113-41 and then increased to 1.02in 0141-44. It indicates the effective utilization of the

capital employed by the company to generate sales has decreased from the year 0112-13

to 0113-41 and increased in the latter years from 0141-44 to 0140-45.

The calculated net profit ratio of the company was 1.0C for 0112-13 and decreased to 1.5

for the year 0113-41 due to fall in net profit from s204.13!r for 0112-13 to s40CD.C>

!r for 0113-41 and has shown a sign of improvement in 0140-45 to 1 50.

The calculated capital turnover ratio was 1.01 for the year 0112-13and increased by 1.02

in 0140-45 it shows the effective utilization of the capital employed by the company to

generate sales.

Working capital turnover ratio of average 1.D1.for the period from 0112-0113 to 0140-

0145. It indicates that the ratio ranges between1.BB to 1.>C.

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It is stated that, Aebtors increases by s.4B5.0C!rores, (ther !urrent ssets increases by

s.24.3>!rores, !urrent iabilities decreases by s.4>1.24!rores, 9rovisions decreases

by s.0C0.D!rores, Increase in working capital s.>C>.00crores.

.! %UE%TION% AND RECOMMENDATION%

To earn more profit the amount invested in current assets should be reduced by way of

reducing the 'uantum of inventories and debtors.

sset utilization is goodmore efforts should be taken to achieve efficient utilization of

assets to earn more profit.

The members may aware that power generation is very necessary for infrastructure

development. /! plays important role in the country*s development. /! may take

necessary efforts to increase its capacities.

Aevelopment of participative culture and improve involvement of workmen and others to

be maintain conducive industrial climate for improving the productivity and growth.

/ew initiatives are being taken by the 8overnment to streamline this sector in order to

achieve the ultimate ob=ect of 69ower to all:. /! should are strive hard to generate

power at affordable cost.

73


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. CONC0U%ION%

The analysis of working capital of /eyveli ignite !orporation imited, /eyveli reveals

effective position also of the company*s working capital policy. "inancial position of the

company is well and good for the past B years. i'uidity position of the company is e#cellent.

The company can still improve its working capital position by implementing the suggestion

made in this report.

?chedule of changes in working capital i.e. Increase or Aecrease in Working !apital

during the period of study shows increases in working capital.

+ence, it is concluded that the company*s financial position is at high level and Working

capital is being managed effectively.

74


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. "I"0IORAPH'

1. Ann;alReport $0112-13 to 0140-45& collected from the library of /eyveli ignite

!orporation imited., /eyveli.

!. I.M.Pan,e( 5 si#th edition– "inancial %anagement, 9rentice hall of India pvt.ltd.

. Praanna C?an,ra-seventh edition, "inancial %anagement- %c8raw-hill publication.

. T.%. Re,,( '. HariPra

/. a, Rea,( – "inancial and %anagement ccounting – %argham publishers, !hennai.

4. A:at?Damo,aran 5 !orporate "inance 0nd )dition, wiley India $9& td /ew Aelhi,

0112.

9. Man Mo?an an, %?i+. N. o(al – ?i# )dition $433B&, 69I/!I9)? ("

%/8)%)/T !!(M/TI/8: – ?ahitya;hawan 9ublications, gra-020 115, 99.

522-C4B, C4>-B1D.

8. %.N. Ma?e:ari 5 %anagement ccounting – ?ultan chandF !o., /ew Aelhi.

7. Re=erral We)ite<

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www.nlcindia.com

www.moneycontrol.com

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