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A STUDY ON Financial MANAGEMENT

PREFACE
Management has two faces : One is the theoretical and other is the practical aspect. The theoretical aspect of management, we learn in our class room and also it is made clear through lectures, seminars, group discussions which are conducted time to time. To know the second face, i.e. practical management, a practical training is provided to the students in the form of summer- training. The main idea behind practical training is to bring a business management student to the actual environment of practical management, so that he will be able to judge the theoretical and practical aspects and know the difference between the two as well as to have a glimpse of a corporation in way of practical training before finally moving into the professionalism corporate world to show the efficiency and capability. In this study, efforts have been made to prepare the report as judicially as possible and errors & omission, if any may kindly be taken as unintentional and be pardoned.

ACKNOWLWLEDGEMENT

At the very outset, I wish to express my heartily gratitude to all those who extended their help, guidance and Suggestion and without their help it was not possible for me to complete this Report. I am deeply indebted to my guide Mr. manish shrivastava for his valuable and enlightened guidance as well as freedom he had offered to me during the project work. I cant forget the contribution and helped extended to me by They ever prepared to feed Necessary information and guidance. I am also thank full to all the employee who provide the practical information about the production process, practical show the working criteria of the plant & those employee who give the lift to me at the time of plant visit because without them I cant visit the plant easily. Next, I would like to extend my thanks to my respective faculty Mr. m.r jain who have constantly helping me either directly or indirectly and for their valuable suggestions for the completion of the project.

Ankur shukla

CONTENTS
Page no.

Chapter I
GLOBAL STEEL SCENARIO & INDIAN STEEL INDUSTRY 10 - 20

Chapter - II INTRODUCTION Company Profile Bokaro Steel Plant 21 - 48

Chapter III ACCOUNTING PROCESS IN BSL 50

Chapter IV ROLE OF FINANCE & ACCOUNTS 52

Chapter V SECTION IN FINANCE & ACCOUNTS 54 - 57


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Chapter VI WORKING CAPITAL MANAGEMENT Working Capital Management Inventory Conversion Period Receivable Conversion Period Operating Cycle Conversion 2007 2008 2008 2009 Analysis Ratio Analysis Comparative Analysis 59 - 104

Chapter VII CONCLUSION & SUGGESTION 106 - 107

BIBIOGRAPHY

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GLOBAL STEEL SCENARIO & INDIAN STEEL INDUSTRY

GLOBAL STEEL SCENARIO AND INDIAN STEEL INDUSTRY


INTRODUCTION:
Though evidences indicate that iron and steel have been used by for almost 6000 years, the modern form of iron and steel industry came into being only during the 19 th century. The growth and development of Iron and Steel Industry in the world until the Second World War was comparatively slower. But the industry has grown very rapidly after the Second War was. World production of steel, which was only 28.3 million tones (MT) in 1900, rose to 695 MT by 1992. The oil crisis of the seventies affected the entire economy of the world including the steel industry. The position started improving after 1983 and peaked at 780 MT in 1989. It starred declining till 1994 (723MT), picked up again to 755.8 in 1995. The World Steel production is around 1132 MT in 2005, registering a growth of 6% over 2004.

HISTORICAL BACKGROUND
The antiquity of mans use of iron attested by references to that metal both in fragmentary writing & inscriptions that survived ancient civilization of Babylon, Mexico, Egypt, China, India, Greece & Rome. However, it is believed that most of the iron used by prehistoric people might have been
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obtained by fragment of meteorites and it remained a rare metal for many centuries. For many years after man learned how to extract iron from its ores, the product probably was so relatively soft and unpredictable, that bronze continued to be preferred for many tools and weapons. Eventually iron replaced the nonferrous metal for these purposes when man learned how to master the difficult arts of smelting, forging, hardening and tempering iron. Archeological findings in Mesopotamia and Egypt have proved that iron or steel has been in the service o mankind for nearly 6000 years. The origin of the methods used by early man for extracting iron from its ores is unknown. Some have suggested that many learned the method accidentally. Iron, in the beginning was smelted by charcoal made from wood. Later coal was discovered as a great source of heat. Subsequently, it was converted into coke, which was found to be ideal for smelting of iron. Iron kept its dominant place for 200 or more years after the Saugus works that was the first successful Iron Works in America founded in 1646, with the advance of Industrial Revolution, iron formed the rails for newly invented railroad trains. It was also used to amour the sides of the fighting ships. About the mid 19 th century the new age of steel began with the invention of Bessemer process (1856) making steel available in large quantities at reasonable cost.

INDIAN HISTORY
Indian history is also replete with references to the usage of iron and steel. Some of the ancient monuments like the famous iron pillar near New Delhi or the massive beams used in the Sun Temple at Konark bear ample testimony to the technological excellence of the Indian metallurgists. The history of iron in India goes back to the ancient era. Our ancient literary sources like Rig Veda, the Atharva Veda, the Puranas and other Epics are full of references to iron and its uses in peace and war. According to one of the studies, iron has been produced in India for over 3000 years. GLOBAL SCENARIO WORLD STEEL PRODUCTION REPORT ISSB Monthly World I & S Review WORLD STEEL REVIEW, JUNE 2008 Production of crude steel for the 66 countries reporting to the IISI in April was estimated to be 116.4 million tones, an increase of 5.6% over April 2007. The total of the 4 months to date was 457.3 million tones, 5.7% above the January to April period in 2007. Excluding China, which accounted for 37% of world production in the first four months of 2008, the rise in April was only 2.9%, with the four months total only up by 3.7%. Global trade in steel was 440 million tons in 2007 (including internal EU trade), 5% higher than in 2006. China increased its exports by one
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third to 68 million tones, almost double the Japanese total.

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the European Union 27, crude steel production was flat in April at 18.2 million tones compared to April 2007, and fell by 0.7% in the 4 month to date to 71.6 million tonn4es. Monthly production in Germany decreased by 1.3% in April, and by 1.9% in the January to April period to 16.1 million tones. Steel production in France fared even worse dropping by 9% in the month, and by 7.9% in the four months to date to 6.5 million tones. However, Italian crude steel production increased by 7.2% in April, and by 1.5% in the year to date to 11.2 million tones. Spanish production rose by 1% in April, while the year to date was up 2.5% to 6.4 million tones. In the UK, production fell by 10.3% in April, bringing the 4 months total down 0.8% to 4.8 Million tones. In the rest of Europe Turkish production increased by 2.7% in April and by 8.2% in the four months to 9.2 million tones. The four months total for Serbia was up 14.1% to 664 thousand tones. Crude steel production in the CIS countries only rose by 0.3% in April, with Russian production down 0.4%, bringing the year to date for the CIS up 3.0% with Russia four month total up 3.6% to 25.3 million tones. Ukrainian steel production increased by 2.7% in April, with the year to date total up 3.3% to 14.7 million tones. Kazakhstan steel production fell by 12.4% in the four months to 1.3 Million tones. In 2007 the Ukraine overtook Russia as the third largest exporter of steel after China and Japan, and it has remained third into 2008. In the first four months of 2008 Ukraine exported to 10.9 million tones of steel, up 6.2% on the same four months in 2007. Exports of semis rose by 13.5% to 4.6 million tones, with hot rolled plate lengths up 20.7% to 1.6 million tones. Exports of hot rolled wide coil fell slightly to 1.1 million tones. The large increase in semis was primarily in semis over 0.25% carbon, with some increase in slabs until 0.25% carbon. The rise in plate exports was mostly in plate over 10mm thick, with some increase in the 4.75 to 10mm range. In terms of markets, the Middle East was the destination for 20% of total Ukrainian exports in the first four months of 2008, up 48% from the previous year. The next largest market was the EU 27 at 17.5%, with Italy by far the largest recipient, although the EU total was down 12% from 2007. The other CIS countries received a further 15% of Ukrainian exports, with the tonnage to the Far East more than doubling to 14% of the total. Turkey remained the largest single market at 1.3 million tones, followed by Russia at one million tones. On the North American continent US steel production increased by 1.1% in April, bringing the year to date total up 6.5% to 33.8 million tones. Canadian steel production rose by 3.7% in April, while the four months total was up 3.0% to 5.6 million tones. Mexican steel production, however, increased by 10.5% in April, with the year to date total up 10.4% to 6.3 million tones.

Crude steel production in South America showed an increase with Brazilian production up 7.1% in April and by 7.8% in the year to date to 11.5 million tones. Steel production in Venezuela fell by 2.1% in April, while the four months total was down 13% to just under 1.5 million tones. Argentinean production, however, rose by 5.9% in April, while the year to date total was up 9.9% to 1.9 million tones. In Africa and the Middle East, South African production rose by 0.5% in April, although the year to date total was down 2.6% to 3 million tones. Egypts steel production, however, increased by 1.7% in April, while the four months total was 14.% up at 2.3 million tones. Iranian production increased by 3.1% in the month, although the year to date total was down 1.1% to nearly 3.4 million tones. Turning to the Far East, Chinas steel production increased by 10.2% in April to 44.7 million tones, and by 9.1% in the four months to 1679.8 million tones. Japanese crude steel production was up 4.2% in April, while the January to April total increased by 4.4% to 41 million tones. South Korean production fell by 0.4% in April with the year to date total at 17.5 million tones, 3.7% up on the same period in 2007. In India, production showed a rise of 12.7% in April, bringing the four months total up by 7.7% to 19 million tones. Crude steel production in Taiwan was up 12.2% in April, while the year to date total was up by 11.2% to 7.6 million tones. Japanese steel exports increased by 15.7% to 13.4 million tones in the first four months of 2008 compared to 2007. Hot rolled coil exports were 3.1 million tones, up 15.4%, semis were 1.8 million tones, up 16.2%, and galvanized steel exports were just below 1.8 million tones, up 10.5%. Some 84% of Japanese exports in 2008 went to other far eastern countries with 3.5 million tones to South Korea, up 19%, 2.3 million tones to China, up 12%, 1.5 million tones to Thailand, up 9%, and 1.3 million tones to Taiwan, up 18.5%. These four countries a counted for 64% of Japanese exports, the same percentage as in the previous year. OUTLOOK FOR THE INDIAN ECONOMY After witnessing rapid strides during the years after the liberalization process was set in motion, Indias GDP grew at an average rate of 5.2 % during the period 199899 to 200203. However, there was a break from the trend in 200304, during which the economy is estimated to have grown at more than 8%. The economy of India, measured in USD exchange rate terms, is the twelfth largest in the world, with a GDP of around $1 trillion (2008). It recorded a GDP growth rate of 9.0% for the fiscal year 2007 2008 which makes it the second fastest high emerging economy, after China, in the world. The economy is expected to continue on a high growth path with continued macroeconomic stability.
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Over the years there has been a downward trend in interest rates accompanied by moderate inflation and adequate liquidity in economy. In April 2003, the Bank Rate was reduced to 6%, which was a 30 years low. Commercial Banks have also resorted to subPLR lending. With sub PLR lending and reduction in maximum spread over PLR, lending rates have effective come down Infrastructure development has been a focus area for the Government in recent years. In the road and highway network, India is witnessing development of multiplelane, safe and well designed interstate highways. Recently the Government has announced a planned outlay for the rural road and highway network development. The Golden Quadrilateral Project is an ambitious project that would connect the four major metros via state of the art highways. The EastWest and North South corridors would link up the remotest parts of the country. The Government is also planning to facilitate investments in seaports and airports in a major way. STEEL DEMAND SCENARIO Indias steel production is likely to surpass the domestic requirement by 201112, easing pressure on prices of the alloy, which has been adding to the spiraling inflation. We shall achieve 124 million tons of steel capacity by 201112, well exceeding the requirement that would be to the tune of about 110 million tons at that point of time, Steel Minister Paswan said. Steel prices shot up by over 50 percent since January, adding to the woes of the UPA government, which is battling a sevenyear high inflation of 8.75 percent in its last year. The annual demand for steel in India has been rising by about 13 per cent, but production is growing by over 6 percent, according to official sources. Last fiscal, the countrys crude steel production stood at 53.9 million tons, of which about 5 million tons were exported. To bridge the demand supply mismatch, India had to import nearly 7 million tons of steel. Steel Secretary R S Pandey while endorsing India becoming a net steel importer from being a net exporter till a few years ago, said the trend is likely to continue for some time as increase in capacity takes at least three to four years. As per official figures, countrys finished steel import went up by over 300 percent from 1.6 million tons in 200203 to nearly 7 million tons in 200708 (provisional). In view of the growing demand, the government plans to scale up steel production to over 290 million tons by 2020. It has also envisaged that the sector will see an investment of Rs. 8, 70,640crore by that time. Going by an estimate of Rs. 4,000-crore outlay per million tones of additional capacity, an investment of Rs. 2, 76,000crore is likely to take place by 2012 and Rs. 8,70,000crore by 2020. As of now, both domestic and foreign steel players have signed 193 memoranda of understanding with states for setting up new units with a total planned capacity of around 243 million tons and a total proposed investment of over Rs. 5,14,000crore.
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Private and public sector steel companies have also embarked on capacity expansion, Steel Authority of India Limited plans to take up its hot metal production to 26.13 million tons by 2010 from the present 12.84 million tons. Private steel majors including Tata, JSPL, ISPAT and JSW Steel have also lined up expansion of their existing production strength.

CORPORATE AGENDA FOR THE FUTURE:


One of the key objectives of SAIL is to be a World Class Company and the leader in Indian steel business by leveraging its key competencies. These competencies will enable the company to manufacture products at lower cost and more speedily than competitors. The real source of advantage will be organizations ability to consolidate corporate wide technological knowledge base and skills into competencies, with sufficient empowerment to adapt quickly to changing opportunities. The thrust is on building a World Class Corporation, which will be able to maintain its growth and profitability by leveraging its internal strength and outperforming others in the market place irrespective of the vagaries of the market.

Satisfaction Aspiration Improvement Leadership


Vision:

Customer Unlimited Continual Market

To be a respected world class corporation and the leader in Indian Steel Business in quality, productivity, profitability and customer satisfaction.

Credo:
We build lasting relationships with customers based on trust and mutual benefit. We uphold highest ethical standards in conduct of our business. We create and nurture a culture that supports flexibility, learning and proactive to change. We chart a challenging career for employees with opportunities for advancement and rewards.
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We value the opportunity and responsibility to make a meaningful difference in peoples lives.

Strategic Goals:
To continue in the business of steel and steel related activities. To enhance market share in growth segments. To improve profits by productivity improvements cost reduction, high value added products and customer satisfaction. To achieve excellence in quality across the value chain. To secure availability of key raw materials and alleviate infrastructure bottleneck which may constrain long term growth.

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BACKGROUND & HISTORY

A Rich Heritage The Precursor SAIL traces its origin to the formative years of an emerging nation - India. After independence the builders of modern India worked with a vision - to lay the infrastructure for rapid industrialisaton of the country. The steel sector was to propel the economic growth. Hindustan Steel Private Limited was set up on January 19, 1954. The President of India held the shares of the company on behalf of the people of India. Expanding Horizon (1959-1973)

Hindustan Steel (HSL) was initially designed to manage only one plant that was coming up at Rourkela. For Bhilai and Durgapur Steel Plants, the preliminary work was done by the Iron and Steel Ministry. From April 1957, the supervision and control of these two steel plants were also transferred to Hindustan Steel. The registered office was originally in New Delhi. It moved to Calcutta in July 1956, and ultimately to Ranchi in December 1959. A new steel company, Bokaro Steel Limited, was incorporated in January 1964 to construct and operate the steel plant at Bokaro. The 1 MT phases of Bhilai and Rourkela Steel Plants were completed by the end of December 1961. The 1 MT phase of Durgapur Steel Plant was completed in January 1962 after commissioning of the Wheel and Axle plant. The crude steel production of HSL went up from .158 MT (1959-60) to 1.6 MT. The second phase of Bhilai Steel Plant was completed in September 1967 after commissioning of the Wire Rod Mill. The
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last unit of the 1.8 MT phase of Rourkela - the Tandem Mill - was commissioned in February 1968, and the 1.6 MT stage of Durgapur Steel Plant was completed in August 1969 after commissioning of the Furnace in SMS. Thus, with the completion of the 2.5 MT stage at Bhilai, 1.8 MT at Rourkela and 1.6 MT at Durgapur, the total crude steel production capacity of HSL was raised to 3.7 MT in 1968-69 and subsequently to 4MT in 1972-73.

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INTRODUCTION

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COMPANY PROFILE
FORMATION OF HINDUSTAN STEEL LIMITED
When the Government of India decided to enter into the field of Iron and Steel production, it broadly envisaged not to run the firm as a departmental undertaking. Although initially steel project administration was directly under a Ministry of the Central Government, Hindustan Steel was formed as a Limited Company, with President of India owning the shares on behalf of the people of India. Thus Hindustan Steel Limited was set up on January 19, 1954.

GROWTH OF HINDUSTAN STEEL LIMITED (1959 1973)


To start with, Hindustan Steel was designed to manage with only plant, that was coming up at Rourkela. For Bhilai & Durgapur plants, the preliminary work was done by officials in Iron & steel Ministry. From April 1957, the supervision and control of the Bhilai & Durgapur Plant were also transferred to Hindustan Steel. The registered office was originally in New Delhi, moved to Calcutta in July 1956 and ultimately shifted to Ranchi in December 1959. Initially Bokaro Project was also under HSL. A new steel company Bokaro Steel Limited was incorporated in January 1964 to construct and operate the steel plant at Bokaro. The 1 MT phases of Bhilai & Rourkela Steel Plants were completed by end of December 1961. The 1 MT phase of Durgapur was completed in January 1962 after commissioning of wheel and axle plant. As a result, the crude steel production of HSL went up form 158 thousand tones (in 1959 60) to 1.6 MT (196162). 2.5 MT phase of Bhilai was completed on 2 nd September, 1967 after commissioning of Wire Rod Mill. The last unit of 1.8 MT phase of Rourkela was Tandem Mill commissioning on 17th February, 1968 and 1.6 MT phase of Durgapur was completed on 6th August 1969 after commissioning of furnace in SMS. Thus, with the completion of 2.5 MT stage in Bhilai, 1.8 MT in Rourkela and 1.6 MT phase of Durgapur, the total
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Crude Steel output from HSL was raised to .7 MT in 196869 and 4 MT in 197273. Steel Authority of India limited (SAIL) is the leading steel making company in India. It is fully integrated iron and steel maker, producing both basic and special steel for domestic construction engineering, power, railway automotive and defense industries and for safe in export markets.

Ranked amongst the top ten public sector companies in India in terms of turnover, SAIL manufactured and sells a broad range of steel product, including hot and cold rolled sheets and coils, galvanized sheets, electrical sheets, structural, railways product, plates, bar and rods, stainless steel and other alloy steels. SAIL produces iron and steel at four integrated plants and three special steel plants, located principally in the eastern and central region of India and situated close to domestic sources of raw material, including the companys iron ore, limestone and dolomite mines. SAILs wide ranges of long and flat steel products are much in demand in the domestic as well as international market. This vital responsibility is carried out by SAILs own central marketing organization (CMO) and the international trade division.CMO and the International trade division. CMO and the International Trade Division. CMO encompasses a wide networks of 38 branch office and 47 stockyards located in major cities and towns throughout India.

With technical and managerial expertise and knowhow in steel making gained over four decades, SAILs consultancy Division (SAILCON) at New Delhi offers services and consultancy to clients world wide. SAIL has a wellequipped Research and Development for iron and steel (RDCIS) at Ranchi which helps to produce quality steel and develop new technologies for steel industry. Besides, SAIL has its own inhouse centre for engineering and Technology (CET), Management training institute (MTI) and safety organization at Ranchi. Our captive mines are under the control of the raw materials Division in Kolkata. The Environment Management Division and Growth Division of SAIL operate from their headquarter in Kolkata

MAJOR UNITS: Integrated Steel Plants


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Bhilai Steel Plant (BSP) in Chhattisgarh Bokaro Steel Plant (BSL) in Jharkhand Durgapur Steel Plant (DSP) in West Bengal Indian Iron and Steel Company (IISCO) in West Bengal Rourkela Steel Plant (RSP) in Orissa.

Special Steel Plants


Alloy steel plant (ASP) in West Bengal Salem Steel Plants (SSP) in Tamilnadu Visvesvaraya iron and Steel Plant (VISL) in Karnataka

Subsidiaries
Maharashtra Elektrosmelt Limited (MEL) in Maharashtra Bhilai oxygen limited (BOL) in New Delhi

BHILAI STEEL PLANT (BSP)


An agreement was signed in New Delhi on February 2, 1955 between the Government of India and Soviet Union to set up an integrated steel plant at Bhilai with a capacity of 1 MT of ingot steel. The plant began its operation on January 31, 1959 when Coke Oven Battery No. 1 was commissioned. Production of Pig Iron at Bhilai began on February 4, 1959 when Blast Furnace No. 1 was commissioned. Situated in Chhattisgarh, this was one of the three 1 MT capacity crude steel plant set up in the Public Sector in the late fifties. Subsequently it was expanded to 2.5 MT ingot capacities, and currently expanded to 4.0 Mt. With this, the Saleable Steel Capacity increased from 1,965 MT (2.5MT) stage) to 3,153 MT (4.0 MT stage).

PRODUCT MIX OF BSP


Product Mix Semis Rails Tones / Annum 553,000 500,000

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Heavy Structurals

250,000

Merchant product

500,000

Wire roads

400,000 950,000

Plates Total Saleable Steel

3,153,000

ROURKELA STEEL PLANT (RSP)


RSP was the first of the three steel plants taken up in the Public Sector. On December 31, 1953, an agreement was made between the Government of India and a Consortium consisting of Thyssen & Demag, Aktiengesselischaft, Duisburg to set up steel plant of initial capacity of 0.5 MT subsequently a supplementary agreement was signed in July 1955 to set up a 1 MT plant. The Coke Oven Battery No. 1 was commissioned on 3 rd December, 1958 and the first of the three Blast Furnaces was commissioned on 3 rd February, 1959.

PRODUCT MIX OF RSP

Product Mix Plate Mill Plates HR Plates HR Coils ERW Pipes SW Pipes

Tones/ Annum 325,000 130,000 746,000 45,000 55,000


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Galvanized Sheets (GP & GC) Electrolytic Tin Plates Silicon Steel Sheets (CRNO) Special Steel Plates Total Saleable Steel

180,000

60,000 75,000

3,000 1,839,000

DURGAPUR STEEL PLANT (DSP)


Set up with an initial annual capacity of 1 million tones of ingot steel, DSP was later expanded to 1.6 million tones and further expanded to 1.876 MT. Among the various products rolled out are medium structurals, merchant products, scalp and continuously cast billets. Anew product-extra high strength thermo mechanically treated (TMT) bar has been successfully developed and marketed. Besides these, it is a major producer of railway products like forged wheels and axles, sleepers and fish plates.

PRODUCT MIX OF DSP


Product Mix Merchant product Structurals Scalp Wheels and Axles Semis Total Saleable Steel Tones / Annum 325,000 180,000 220,000 30,000 1000,000 1,755,000

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BOKARO STEEL PLANT (BSP)


Bokaro Steel Plant brings out before ones eyes the vision of a massive giant in the making. As the fourth steel plant in the Public Sector, conceived in 1959, it actually started taking shape in 1965 with the signing of an agreement with the Government of USSR on 25th January 1965. Envisaging a capacity of 1.7 MT in 1 st stage and 4.0 MT in 2nd stage, its construction started on 6 th April, 1968.

PRODUCT MIX OF BSP


Product Mix Tones/Annum

HR Coils, HR Plates & HR Sheets

2,120,000

CR Coils and Sheets

1,390,000

GP / GC Sheets

170,000

Tin Mill Black Plates

100,000

Total Saleable Steel

3,780,000

IISCO STEEL PLANT (ISP), BURNPUR


The erstwhile India Iron and Steel Company (IISCO), one of the oldest steel plants of the country has been amalgamated with Indias largest steel maker, Steel Authority of India Limited (SAIL) with effect from 16th February 2006. Following merger, IISCO has been
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now renamed as IISCO Steel Plant (ISP). The plant is all set to achieve new milestones implementing its growth plan in tune with SAILs Corporate Plan 2011-12 Plans are already approved to invest around Rs. 8,000crore for technological up gradation of the IISCO Steel Plant and its collieries. ISPs annual hot metal production capacity is envisaged to go up to 2.5 million tons (MT) by 2011-12 from a level of 0.35 MT in 200405. The appointed date of amalgamation is 1st April 2005. The spotlight is now on ISP, the fifth integrated steel plant of SAIL.

PRODUCT MIX OF ISP


Product Mix Structurals & rails Bars & Rods Special Section Semis for sale Saleable Steel Conversion Total Saleable Steel Tones /Annum 1,60,000 1,12,000 11,000 14,000 2,97,000 54,000 3,780,000

Pig Iron

3,32,000

Alloy Steel Plant (ASP)


The pioneer in the production of ally and special steels, Alloy Steel Plant (ASP), Durgapur was commissioned with an initial capacity of 1,00,000 tones of ingot steel and 60,00 tones of saleable steel. Through two phases of expansion and modernization, the capacity has been revised to 2, 46 lakh tones liquid steel and 1.78 lakh tones of saleable steel from SMS-1.

Salem Steel Plant (SSP)

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Salem Steel Plant (SSP) is a premier in the producer of international quality stainless steel in India. Commissioned in 1981, the Plant has a capacity to roll 1,86,000 tones of hot rolled carbon and stainless steel flat products and 70,000 tones of cold rolled stainless steels and coils per annum. The Plant has gone beyond its designed capacity and successfully cold rolled value-added 0.13 mm thick stainless steel. SSP can also supply hot rolled carbon steel in 1.5, 1.4 and 1.25 mm thickness range. Its products have become a household name Salem Stainless in the domestic market and are widely exported, besides meting the requirements of 100 percent export oriented units and free-trade zones in India. In hot rolled special grade carbon steels, SSP has been recognized as a well known manufacturer of boiler quality steel. The Plant is also supplying LPG grade IS 6240 steel in sheet form. The entire Plant is certified for the ISO 9001 Quality Assurance and the ISO 14001 Environmental Management System.

Viswesvaraya Iron & Steel Plant (VISP)

Viswesyaraya Iron & Steel Plant (VISP) is a pioneer in the production of high quality alloy and special steels and pig iron. Steel is produced through BF-BOF-LRF-VD route. The facilities include vacuum degassing, vacuum oxygen-decarburization, ladle refining furnaces, continuous casting machine, 1600 tones-hydraulic-high-speed forging press, a fully automatic horizontal long forging machine with numerical control system for a semi-automatic and automatic mode of operation. VISP has an installed capacity of 77,000 tones of alloy and special steels and 205, 000 tones of hot metal.

Raw Materials Division (RMD)


SAIL has the second largest mining outfit in the country after Coal India Ltd. Spread over the mineral rich states of Jharkhand, Orissa and Chhatisgarh, the mines of SAIL, started
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their operations as captive sources of raw materials of its integrated steel plants. By virtue of their locations and also having developed under the different steel plants for more than 2 to decades, they present a picture of fascinating diversity, not only in the nature of their reserves / deposits but in their legacies as well, with each one of them being remarkably distinct from the other. In 1989 SAIL launched Raw Materials Division (RMD) as a separate unit and by June 1990 had brought all its mines that were captive to its steel plants in the eastern sector RSP, DSP, BSP and ISP (then a subsidiary) under its umbrella. The mines attached to Bhilai Steel Plant continued to work separately and were kept out of the RMD ambit.

Maharashtra Elektrosmelt Limited (MEL)


Maharashtra Elektrosmelt Limited (MEL) besides being the largest producer of manganese based Ferro-alloys in the country with a capacity to produce 100,000 tones of Ferro-alloys, has emerged as a leader and trend-setter in technology development. A fast changeover from High Carbon Ferro Manganese to Silicon Manganese and vice-versa in the submerged Arc Furnaces, production of Medium Carbon and Low Carbon Ferro Manganese through Electric Arch Furnaces, Sintering of manganese one fines through Conventional and High Pressure Sintering Process, Generation of 4.2 MW electric power by gainfully utilizing Ferro-alloys furnace gases and production of building bricks from Ferro-alloy slogs are some of MELs major technological achievements. Its Ferro-alloys route has received ISO 9001:2000 Certification.

Central Coal Supply Organization (CCSO)


Situated at Dhanbad in Jharkhand, the Central Coal Supply Organization (CCSO) of the Operations Directorate, SAIL is entrusted with the crucial task of arranging around 14,000 tones each of indigenous coking coal and power grade coal daily for steel plants.

Central Marketing Organization (CMO)


Central Marketing Organization (CMO), one of the largest marketing networks in the country, markets mild steel products from the four integrated steel plants of SAIL. The CMO headquarters is at Kolkata and the Commercial Directorate is located at New Delhi. A nation-wide network of regional offices, sales offices and several strategically placed warehouses is further supplemented by consignment agents and authorized dealers to meet the demands of the smallest customers in the remotest corners of the country.

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SAIL Consultancy Division (SAILCON)


SAIL, during its existence of over four decades, has acquired a level of expertise and vast experience in building, operating and maintaining a chain of integrated and mini steel plants and associated facilities encompassing diverse technologies, equipment and product-mix. The knowledge thus gained led to formation of a constancy an services marketing division SAIL. Consultancy Division (SAILCON), based in New Delhi, to provide a wide range of service to the iron & steel and other industries in India and abroad.

Research & Development Centre for Iron & Steel (RDCIS)


The Research & Development Centre for Iron & Steel (RDCIS) at Ranchi is the corporate R & D unit of SAIL, set up in 1972, the Centre has ISO 9001 certification to its credit. It undertakes R & D projects in diverse realms of Iron & Steel Technology under the categories of Basic Scientific research, Plant Performance Improvement, investigation & Consultancy Assignments, Equipment & Instrument Design and major Technology Development.

SAIL Safety Organization (SSO)


SAIL Safety Organization (SSO), a Corporate Unit set up in 1988 at Ranchi, monitors and guides the Safety Promotional, Fire and Occupational Health Services activities undertaken at different Steel Plants / Units / Mines / Stockyards. To accomplish the above mentioned functions, SSO formulates and prepares appropriate safety policies, procedures, systems, action plans, guidelines etc. and follows up for their implementation and thereby helps in providing accident free work environment. Consistent efforts are also being made by SSO for competence building in the area of safety management through HRD interventions covering heads of shops, line managers, safety personnel & trade union leaders.

Centre for Engineering & Technology (CET)

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Centre for Engineering & Technology (CET), an ISO 9001 certified organization, is the design, engineering & consultancy unit of SAIL. It has its Head Office at Ranchi, Sub Centers at Bhilai, Durgapur, Rourkela, Bokaro and an IPSS Secretariat at New Delhi for formulation of Interplant Standards for Steel Industry. As a solution provider for all project needs, CET has been rendering complete range of services not only to the steel plants under SAIL but also to various clients other than SAIL both within and outside the country. Some of the important clients other than SAIL include EGITALEC (Egypt). Ashok Steel (Nepal), Chittagong Steel Mills (Bangladesh), Birla Copper, Mukand Ltd. CET is also the nodal agency for acquisition and lateral transfer of technologies within SAIL plants.

Management Training Institute (MTI)


This apex training institute for management training in SAIL was set up in 1962 in Ranchi to fulfill the managerial development needs of senior executives of the first management training centers to be set up in the corporate sector in India.

Environment Management Division (EMD)


The Environment Management Division (EMD) is a corporate unit monitoring and facilitating the environment management and pollution control activities in the SAIL plants and units. This division, set up in 1988, has its headquarters in Kolkata. This unit is certified with QMS-ISO 9001-2000. in was set up in 1962 in Ranchi to fulfill the managerial development needs of senior executives of the first management training centers to be set up in the corporate sector in India.

Growth Division (GD)


Growth Division (GD) function as a nodal agency for manufacture and supply of various spare parts and equipment of the SAIL Plants by utilizing available in house facilities and vendor base. GD functions focus on effective utilization of the engineering shops in the plants. Main objectives of GD are:

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Effective utilization of captive engineering facilities of each steel plant.

Providing technical help to manufacture specialized equipment to cater to present requirement as well as long-term expansion and modernization. Undertake projects within SAIL plants or outside .

The Bokaro Steel Plant


Initially the Bokaro Steel Plant was located in the suburban area of Dhanbad District of Bihar and on the bank of Damodar river. Now after formation of Jharkhand State, it is in it and the District is Bokaro. Its foundation was laid down in the year 1964 and was built with the assistance of Soviets. All the Steel Plants at time were under one name Hindustan Steel Ltd. But in 1973 after merging few other Steel Plant, the name changed to Steel Authority of India Ltd. (SAIL). Bokaro Steel Plant is situated in coal belt of eastern India. At that time it was established with the aim to increase the Steel production in India as well as to curb the unemployment status of the country. and the district is Bokaro. Holding Company The Ministry of Steel and Mines drafted a policy statement to evolve a new model for managing industry. The policy statement was presented to the Parliament on December 2, 1972. On this
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basis the concept of creating a holding company to manage inputs and outputs under one umbrella was mooted. This led to the formation of Steel Authority of India Ltd. The company, incorporated on January 24, 1973 with an authorized capital of Rs. 2000 crore, was made responsible for managing five integrated steel plants at Bhilai, Bokaro, Durgapur, Rourkela and Burnpur, the Alloy Steel Plant and the Salem Steel Plant. In 1978 SAIL was restructured as an operating company. Since its inception, SAIL has been instrumental in laying a sound infrastructure for the industrial development of the country. Besides, it has immensely contributed to the development of technical and managerial expertise. It has triggered the secondary and tertiary waves of economic growth by continuously providing the inputs for the consuming industry.

JOINT VENTURES SAIL has promoted joint ventures in different areas ranging from power plant to e-commerce. The important joint ventures of the company, among others, are:

COMPANY NTPC-SAIL Power Company Pvt. Ltd Bokaro Power supply company Pvt. Ltd M- Junction services Ltd.

LOCATION NEW DELHI

JV PARTNER NTPC

EQUITY 50:50

PROFILE Operates & manages the captive power plants of durgapur, Rourkela & Bhilai

BOLARO

DVC

50:50

Manages 302MW power generation 660tonnes per hour steam generation facilities at Bokaro steel plant.

KOLKATA

TATA Steel

50:50

Promotes e-commerce activities in steel and related areas.

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SAIL & MOIL Ferro Alloys Pvt. Ltd. Bhilai jaypee cement limited

BHILAI

MANGANESE ORE (INDIA) LIMITED

50:50

Production of ferro -manganese and silicon Manganese at Bhilai with furnace operation at Nandini/ Bhalai

SANTNA & BHILAI

Jaiparkash Associates Ltd.

26:74

To set up and operate a cement plant of 2.2 million tones per annum capacity at split location at satna & Bhilai , using slag generated during blast furnace .

Bokaro jaypee cement Ltd.

BOKARO

Jaiparkash Associates Ltd.

26:74

To set up and operate a cement plant of 2.1 million tones per annum capacity, utilizing generated slag during Blast furnace operation at BSL.

MEMORANDUM OF UNDERSTANDINGS to set up, develop, manage and own captive/independent power plant (s) at suitable location/s to meet future power requirements of SAIL. The scope of agreement also includes exploration of opportunities to own captive thermal coal blocks to cater to the power plant requirements. to promote a Joint Venture Company, which shall primarily provide shipping related services to SAIL for imported coking coal and also participate in world wide dry bulk shipping trade. to increase production from the existing facilities at Steel Complex Limited (SCL), Calicut and also set up, develop & manage a 50,000 TMT Rolling Mill along with its balancing facilities and auxiliaries at SCL, Calicut. to collaborate in a wide range of strategic business and commercial areas of mutual interest. to jointly explore and develop low silica limestone mines in the Sultanate of Oman. for exploration by MECL at all SAIL mines for assessing the reserves and quality of ore available. It has already started exploratory work in Gua and Chiria mines.
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Larsen & Toubro Ltd.

Shipping corporation of India. Government of Kerala

POSCO Rashtriya Ispat Nigam Ltd. (RINL) Mineral Exploration Corporation Ltd. (MECL)

Heavy Engineering Corporation (HEC) Bharat Earth Movers Limited (BEML) Rajasthan State Mines & Minerals Limited (RSMML)

for equipment/spares required for modernization/expansion. for supply of crucial equipment. for long-term supply of low-silica limestone.

IIM, Ahmedabad and knowledge sharing. Management Development Institute (MDI), Gurgaon for procurement of high power locomotives Indian Railways

BOKARO STEEL PLANT - PRODUCT BASKET Mill Capabilities


Shop Products Facility Annual Capacity (,000 Tonnes) HSM HR Coils/ Sheets/ Plates HR Sheets/ Plates HR Coil CRM CR Coils/ Sheets CR Coils/ Sheets CR Coils/ Sheets, TMBP GP Coils & Sheets GC Sheets CRM-I complex CRM-II complex DCR Mill HDGL 100 170 Continuous Mill Shearing Line-I Shearing Line-II Slitting Line 1660 0.63-2.5 0.63-1.6 0.22-0.8 0.3-1.6 700-1850 650-1250 650-1040 650-1250 3955 1.6 -16 5-10 1.6-4 900-1850 1800 1500 2.5-12 1.5-4.5 HRCF HR Sheets/ Plates Thickness range (mm) Width range (mm) Length (metre)

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By-products Nitration-grade Benzene Nitration-grade Toluene Light Solvent Naphtha Still Bottom Oil Hot Pressed Naphthalene Anthracene Oil Pitch Creosote Mixture Extra-hard Pitch BF Granulated Slag Hard-medium Pitch (solid/ liquid) Liquid Nitrogen Ammonium Sulphate Phenol Fraction

Special Grades of Steel Special Steel Grades SAE 1541 MC 11 SPC 370/390 C 15 API X-42, X-46, X-52, X-56, X-60 (SAILAPI) SAILCOR (corrosion resistant) SAILMEDSi (Medium Silicon Steel) SAILPROP Strapping Steel (for internal use only) Full-hard Galvanised Coil Cold Rolled Medium Electrical Steel Extra-low Carbon Extra Deep Drawing (HR & CR) DMR 249A Grade Steel Application Automobile Industry Cycle Industry Cycle Industry Cycle Industry Pipe Line Railways Heavy Electrical Winding Propeller Shaft Strapping Finished Products Extra hard roof of houses Transformer core White goods Defence Research Development Organisation (DRDO) for fabrication of Submarine parts (import substitution) E460/E500/E550 IS8500 Fe 540B high strength low alloy steel with UTS Floating bridges for Defence. For M/S BEML; for making. (import substitution) Kolkata fly-over

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value in excess of 540 Mpa Low Carbon, Low Manganese, High Strength Structural Steel without microalloying (Carbon 0.10%) Structural purposes. Thermo-mechanically Controlled Processing.

ROLE OF FINANCE & ACCOUNTS


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ROLE OF FINANCE AND ACCOUNTS


Finance is described as science of money and involves the process of conversion of accumulated funds to productive use. The essence of the effective financial management I that the finance so converted should generate income than the cost of procuring such finance by utilization the same in the best possible way. In the recent changed business scenario which has become the outcome of the changed Indian economy policy from command economy to free economy to integrate the Indian economy to world economy order. The role o financial manager has become a crucial one since the factor of efficiency in all productivity field become paramount. In a multi process industry like an integrated steel plant like this one where some processes remain involved in certain endothermic reaction the traditional behavior of cost finds it difficult in making out the cost volume profit analysis, hence in deciding the optimum level of activity because each level of activity can be attained with the various number alternatives resources available at a particular point of time. F & A is an important department of BSL headed by E.D there are 34 production cost centers, 24 service centers and 18 job costing center of engineerings shops: Cost and budget section follows process costing system for its production and service center and job costing for its engineering shop for maintaining its cost record like production and consumption of RM, power, fuel, stores, spares etc. in production and service center cost per unit is determined upon output and in engineering shop cost is determined upon machine hour rate. Monthly and annual cost is prepared on actual basis and derivations are reported to higher management through MIS report. The reporting of actual business performance and analysis of reason for variance with planned one is done by use of management accountings technique like variance analysis, ration analysis and sensitivity analysis cost reduction activity is being monitored by cost and budget section and performance in this front is brought to the notice of higher management. Organization like SAIL which have various units and subsidiaries also in these kind of organization role of finance and accounts plays an important role. Finance in these kind of organization is needed in vast and thousands of accounts are maintained.

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SECTIONS IN FINANCE & ACCOUNTS

SECTIONS IN FINANCE & ACCOUNTS


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Code-01 PAY SECTION


It deals with the accounting of employees related salary slip. Basically deals with any activity related to pay. Loan Bonus Any monthly payments taken once in a year

Code-02 MAIN ACCOUNTS SECTION


It deals with the consolation of accounts with each quarter along with the final close. It prepares a main ledger, assets ledger, section ledger and trial balance etc. it prepares and maintains assets register of the company. It facilitates the inter plant reconciliation, coordination with the various auditors.

Code-03 PURCHASE ACCOUNTS


It basically deals with the payments and accountings of all the goods against which purchase order has been placed. It works started when goods are received and verified with GRN (goods returned notes). They Receive the bill Verify the bill

Code-04 CASH ACCOUNT


It deals with the disbursement and receipt of cash as per the bills passed by the officers of various sections. Its main function includes monitoring of cash deposit, liasioning with banks. They generally prepare the bank reconciliation statements (BRS). They deal with RS 350-380 crores of expenditure on monthly basis. Whereas the revenue side consists of lease rent etc.

Code-05 PROJECT FINANCE

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It deals with the project accounting (not deal with the project calculation). Basically deals with the payments to parties, which are related to different projects.

Code-06 ESTATE ACCOUNT


It deals with the accounting of social amenities like house rents, electricity charges, lease rents etc.

Code-07 PLANT AND EQUIPMENT


It deals with the accounting of IPU cases. IPU is investment in planning unit an is related to projects.

Code-08 STORE ACCOUNTS


It deals with the accounting an maintenance of stores ledger, receipt, balance of inventories etc. stores department has the custody of around two lakh items. The document raised by the stores department are: Issue notes Material return notes Dispatch notes Goods receipt notes Stock transfer voucher Stock adjustment voucher Provisional voucher Book transfer voucher

Code-09 PROVIDENT FUNDS

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It deals with the accountings of employees provident funds along with the loans taken against provident funds balance.

Code-01 FRAIGHT ACCOUNTS


It deals with the payments and accounting of freight bills related to raw materials. This section generally deals with the freight inward whereas outward is deal by invoicing section (which is not part of sales accounts).

Code-11 INSURANCE ACCOUNTS


It is a statuary requirement to get your vehicles, machine, an equipment ensured. Insurance like fire and marine are dealt by this section. For e.g. it deal with the whole procedure when any fire took place till date on which you receive money .

Code-12 SALES TAX


It deals with the accounting of sales tax matters which related with the steel and goods.

Code-13 OPERATIONAL PAYMENTS SECTION


It deals with the payment of those expenditure which are generally not related with to any particular departments.

Telephone bills Water bills-15crores Township managing bills Aviation Miscellaneous payments City park (horticulture) In plant scrape recovery 15crores
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Railway related 10crores Sports CMO

Code-14 SALES ACCOUNTS


It deals with preparation of invoice and accounting thereof.

Code-15 COST AND BUDGET


There are 77 cost centers. They prepare the budget on monthly, quarterly and on annual basis also. They deal with the daily profitability. They prepare the MIS

reports. They make the valuation of finished/semi- finished stock of


plant. Actually this section decides the rate of each output .

Code-16 RAW MATERIAL


It deal with the accounting of raw material consumption including Ferro and non Ferro items. Its deal with the valuation of raw material as well as payments of bills related to raw material.

Code-17 EXCISE ACCOUNTS


It deals with the CENVAT, Excise duty.

Code-18 VAT
It deals with the accounting and payments of VAT to central governments.

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Financial analysis

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REVIEW OF FINANCE
Working Capital management is the management of assets that are current in nature. Current assets, by accounting definition are the assets normally converted in to cash in a period of one year. Hence working capital management can be considered as the management of cash, market securities receivable, inventories and current liabilities. In fact, the management of current assets is similar to that of fixed assets in the sense that is both in cases the firm analyses their effect on its profitability and risk factors, hence they differ on three major aspects: 1. In managing fixed assets, time is an important factor discounting and compounding aspects of time play an important role in capital budgeting and a minor part in the management of current assets. 2. The large holdings of current assets, especially cash, may strengthen the firms liquidity position, but is bound to reduce profitability of the firm as ideal car yield nothing. 3. The level of fixed assets as well as current assets depends upon the expected sales, but it is only current assets that add fluctuation in the short run to a business. To understand working capital better we should have basic knowledge about the various aspects of working capital. To start with, there are two concepts of working capital: Gross Working Capital Net working Capital

Gross Working Capital: Gross working capital, which is also simply known as working capital, refers to the firms investment in current assets: Another aspect of gross working capital points out the need of arranging funds to finance the current assets. The gross working capital concept focuses attention on two aspects of current assets management, firstly optimum investment in current assets and secondly in financing the current assets. These two aspects will help in remaining away from the two danger points of excessive or inadequate investment in current assets. Whenever a need of working capital funds arises due to increase in level of business activity or for any other reason the arrangement should be made quickly, and similarly if some surpluses are available, they should not be allowed to lie ideal but should be put to some effective use.

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Net Working Capital: The term net working capital refers to the difference between the current assets and current liabilities. Net working capital can be positive as well as negative. Positive working capital refers to the situation where current assets exceed current liabilities and negative working capital refers to the situation where current liabilities exceed current assets. The net working capital helps in comparing the liquidity of the same firm over time. For purposes of the working capital management, therefore Working Capital can be said to measure the liquidity of the firm. In other words, the goal of working capital management is to manage the current assets and liabilities in such a way that a acceptable level of net working capital is maintained. Importance of working capital management: Management of working capital is very much important for the success of the business. It has been emphasized that a business should maintain sound working capital position and also that there should not be an excessive level of investment in the working capital components. As pointed out by Ralph Kennedy and Stewart MC Muller, the inadequacy or mis-management of working capital is one of a few leading causes of business failure. Current assets, in fact, account for a very large portion of the total investment of the firm. Determinants of Working Capital: There is no specific method to determine working capital requirement for a business. There are a number of factors affecting the working capital requirement. These factors have different importance in different businesses and at different times. So a thorough analysis of all these factors should be made before trying to estimate the amount of working capital needed. Some of the different factors are mentioned here below:Nature of business: Nature of business is an important factor in determining the working capital requirements. There are some businesses which require a very nominal amount to be invested in fixed assets but a large chunk of the total investment is in the form of working capital. There businesses, for example, are of the trading and financing type. There are businesses which require large investment in fixed assets and normal investment in the form of working capital. Size of business: It is another important factor in determining the working capital requirements of a business. Size is usually measured in terms of scale of operating cycle. The amount of working capital needed is directly proportional to the scale of operating cycle i.e. the larger the scale of operating cycle the large will be the amount working capital and vice versa. Business Fluctuations: Most business experience cyclical and seasonal fluctuations in demand for their goods and services. These fluctuations affect the business with respect to working capital because during the time of boom, due to an increase in business activity the amount of working capital requirement increases and the reverse is true in the case of recession. Financial
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arrangement for seasonal working capital requirements are to be made in advance. Production Policy: As stated above, every business has to cope with different types of fluctuations. Hence it is but obvious that production policy has to be planned well in advance with respect to fluctuation. No two companies can have similar production policy in all respects because it depends upon the circumstances of an individual company. Firms Credit Policy: The credit policy of a firm affects working capital by influencing the level of book debts. The credit term is fairly constant in an industry but individuals also have their role in framing their credit policy. A liberal credit policy will lead to more amount being committed to working capital requirements whereas a stern credit policy may decrease the amount of working capital requirement appreciably but the repercussions of the two are not simple. Hence a firm should always frame a rational credit policy based on the credit worthiness of the customer. Availability of Credit: The terms on which a company is able to avail credit from its suppliers of goods and devices credit/also affects the working capital requirement. If a company in a position to get credit on liberal terms and in a short span of time then it will be in a position to work with less amount of working capital. Hence the amount of working capital needed will depend upon the terms a firm is granted credit by its creditors. Growth and Expansion activities: The working capital needs of a firm increases as it grows in term of sale or fixed assets. There is no precise way to determine the relation between the amount of sales and working capital requirement but one thing is sure that an increase in sales never precedes the increase in working capital but it is always the other way round. So in case of growth or expansion the aspect of working capital needs to be planned in advance. Price Level Changes: Generally increase in price level makes the commodities dearer. Hence with increase in price level the working capital requirements also increases. The companies which are in a position to alter the price of these commodities in accordance with the price level changes will face fewer problems as compared to others. The changes in price level may not affect all the firms in same way. The reactions of all firms with regards to price level changes will be different from one other.

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WORKING CAPITAL- OVERALL VIEW


CASH MANAGEMENT Cash is the important current asset for the operations of the business. Cash is the basic input needed to keep the business running on a continuous basis It is also the ultimate output expected to be realized by selling the service or product manufactured by the firm. The firm should keep sufficient cash, neither more nor less. Cash shortage will disrupt the firms operations while excessive cash will simply remain idle, without contributing anything towards the firms profitability. Thus a major function of the Financial Manager is to maintain a sound cash position. Cash is the money which a firm can disburse immediately without any restriction The term cash includes currency and cheques held by the firm and balances in its bank accounts. Sometimes near cash items, such as marketable securities or bank time deposits are also included in cash. The basic characteristics of near cash assets are that they can readily be converted into cash. Cash management is concerned with managing of: i) ii) iii) cash. Sales generate cash which has to be disbursed out. The surplus cash has to be invested while deficit cash has to be borrowed. Cash management seeks to accomplish this cycle at a minimum cost. At the same time it also seeks to achieve liquidity and control. Therefore the aim of Cash Management is to maintain adequate control over cash position to keep firm sufficiently liquid and to use excess cash in some profitable way. The Cash Management is also important because it is difficult to predict cash flows accurately, particularly the inflows and that there is no perfect coincidence between the inflows and outflows of the cash. During some periods cash outflows will exceed cash inflows because payment for taxes, dividends or seasonal inventory etc., build up. On the other hand cash inflows will be more than cash payment because there may be large cash sales and more debtors realization at any point of time. Cash Management is also important because cash constitutes the smallest portion of the current assets, yet managements considerable time is devoted in managing it. An obvious aim of the firm now-a-days is to manage its cash affairs in such a way as to keep cash balance at a minimum level and to invest the surplus cash funds in profitable opportunities. In order to resolve the uncertainty about cash flow prediction and lack of synchronization between cash receipts and payments, the firm should develop appropriate strategies regarding the following four facets of cash management.
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Cash flows in and out of the firm Cash flows within the firm Cash balances held by the firm at a point of time by financing deficit or inverting surplus

1.

Cash Planning: - Cash inflows and cash outflows should be planned to project cash

surplus or deficit for each period of the planning period. Cash budget should prepared for this purpose. 2. Managing the cash flows: - The flow of cash should be properly managed. The cash

inflows should be accelerated while, as far as possible decelerating the cash outflows. 3. Optimum cash level: - The firm should decide about the appropriate level of cash

balances. The cost of excess cash and danger of cash deficiency should be matched to determine the optimum level of cash balances. 4. Investing surplus cash: - The surplus cash balance should be properly invested to earn

profits. The firm should decide about the division of such cash balance between bank deposits, marketable securities and inter corporate lending. The ideal Cash Management system will depend on the firms products, organization structure, competition, culture and options available. The task is complex and decision taken can affect important areas of the firm. Functions of Cash Management: Cash Management functions are intimately, interrelated and intertwined Linkage among different Cash Management functions have led to the adoption of the following methods for efficient Cash Management:

Use of techniques of cash mobilization to reduce operating requirement of cash Major efforts to increase the precision and reliability of cash forecasting. Maximum effort to define and quantify the liquidity reserve needs of the firm. Development of explicit alternative sources of liquidity Aggressive search for relatively more productive uses for surplus money assets. The above approaches involve the following actions which a finance manager has to perform.
1. To forecast cash inflows and outflows 2. To plan cash requirements 3. To determine the safety level for cash. 4. To monitor safety level for cash 5. To locate the needed funds 6. To regulate cash inflows 7. To regulate cash outflows

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8. To determine criteria for investment of excess cash 9. To avail banking facilities and maintain good relations with bankers Motives for holding cash: There are four primary motives for maintaining cash balances: 1. Transaction motive 2 .Precautionary motive 3. Speculative motive 4. Compensating motive 1. Transaction motive: - The transaction motive refers to the holding of cash to meet

anticipated obligations whose timing is not perfectly synchronised with cash receipts. If the receipts of cash and its disbursements could exactly coincide in the normal course of operations, a firm would not need cash for transaction purposes. Although a major part of transaction balances are held in cash, a part may also be in such marketable securities whose maturity conforms to the timing of the anticipated payments. 2. Precautionary motive: - Precautionary motive of holding cash implies the need to hold

cash to meet unpredictable obligations and the cash balance held in reserve for such random and unforeseen fluctuations in cash flows are called as precautionary balances. Thus, precautionary cash balance serves to provide a cushion to meet unexpected contingencies. The unexpected cash needs at short notice may be the result of various reasons as: unexpected slowdown in collection of accounts receivable, cancellations of some purchase orders, sharp increase in cost of raw materials etc. The more unpredictable the cash flows, the larger the need for such balances. Another factor which has a bearing on the level of precautionary balances is the availability of short term credit. Precautionary cash balances are usually held in the form of marketable securities so that they earn a return. 3. Speculative motive: - It refers to the desire of a firm to take advantage of opportunities

which present themselves at unexpected movements and which are typically outside the normal course of business. The speculative motive represents a positive and aggressive approach. Firms aim to exploit profitable opportunities and keep cash in reserve to do so. The speculative motive helps to take advantage of: opportunity to purchase raw materials at a reduced price on payment of immediate cash; chance to speculate on interest rate movements by buying securities when interest rates are expected to decline; delay purchases of raw materials on the anticipation of decline in prices; etc.

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4.

Compensation motive: - Yet another motive to hold cash balances is to compensate banks

for providing certain services and loans. Banks provide a variety of services to business firms, such as clearances of cheques, supply of credit information, transfer of funds, etc. While for some of the services banks charge a commission of fee for others they seek indirect compensation. Usually clients are required to maintain a minimum balance of cash at the bank. Since this balance can not be utilized by the firms for transaction purposes, the bank themselves can use the amount for services rendered. To be compensated for their services indirectly in this form, they require the clients to always keep a bank balance sufficient to earn a return equal to the cost of services. Such balances are compensating balances. Compensating balances are also required by some loan agreements between a bank and its customer. Cash Management: Objectives The Basic objective of cash management is twofold: To meet the cash disbursement needs (payment schedule); (b) To minimize funds committed to cash balances. These are conflicting and mutually contradictory and the task of cash management is to reconcile them. Meeting the payments schedule: A basic objective of the cash management is to meet the payment schedule, i.e. to have sufficient cash to meet the cash disbursement needs of the firm. The importance of sufficient cash to meet the payment schedule can hardly be over emphasized. The advantages of adequate cash are : (i) it prevents insolvency or bankruptcy arising out of the inability of the firm to meet its obligations; (ii) the relationship with the bank is not strained; (iii) it helps in fostering good relations with trade creditors and suppliers of raw materials, as prompt payment may also help their cash management; (v) it leads to a strong credit rating which enables the firm to purchase goods on favorable terms and to maintain its line of credit with banks and other sources of credit; (vi) to take advantage of favorable business opportunities that may be available periodically; and (vi) finally the firm can meet unanticipated cash expenditure with a minimum of strain during emergencies, such as strikes , fires or a new marketing campaign by competitors. Minimizing funds committed to cash balances: The second objective of cash management is to minimize cash balances. In minimizing cash balances two conflicting aspects have to be reconciled. A high level of cash balance will, ensure prompt payment together with all the advantages, but it also implies that large funds will remain idle ultimately results less to the expected. A low level of cash balances, on the other hand, may mean failure to meet the payment schedule that aim of cash management should be to have an optimal amount of cash balances (a)

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Cash Management Techniques & Processes The following are the basic cash management techniques and process which are helpful in better cash management: Speedy cash collection: In managing cash efficiently the cash in flow process can be accelerated through systematic planning and refined techniques. These are two broad approaches to do this which are narrated as under: Prompt payment by customer: One way to ensure prompt payment by customer is prompt billing with clearly defined credit policy. Another and more important technique to encourage prompt payment the by customer is the practice of offering trade discount/cash discount. Early conversion of payment into cash: Once the customer has makes the payment by writing its cheques in favor of the firm, the collection can be expedited by prompt encashment of the cheque. It will be recalled that there is a lack between the time and cheque is prepared and mailed by the customer and the time funds are included in the cash reservoir of the firm. Concentration Banking: In this system of decentralized collection of accounts receivable, large firms which have a large no. of branches at different places, select some of these which are strategically located as collection centers for receiving payment for customers. Instead of all the payments being collected at the head office of the firm, the cheques for a certain geographical areas are collected at a specified local collection centers. Under this arrangement the customers are required to send their payments at local collection center covering the area in which they live and these are deposited in the local account of concerned collection, after meeting local expenses, if any. Funds beyond a predetermined minimum are transferred daily to a central or disbursing or concentration bank or account. A concentration banking is one with which the firm has a major account usually a disbursement account. Hence this arrangement is referred to as concentration banking. Lock-Box System: The concentration banking arrangement is instrumental in reducing the time involved in mailing and collection. But with this system of collection of accounts receivable, processing for purposes of internal accounting is involved i.e. sometime in elapses before a cheque is deposited by the local collection center in its account. The lock-box system takes care of this kind of problems, apart from effecting economy in mailing and clearance times. Under this arrangement, firms hire a post office box at important collection centers. The customers are required to remit payments to lock-box. The local banks of the firm, at respective places, are authorized to open the box and pick up the remittance received from the customers. Usually the authorized bank picks up the cheques several times a day and deposits them in the firms account. After crediting the account of the firm the
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banks send a deposit 4epo slip along with the list of payments and other enclosures, if any, to the firm by way of proof and record of the collection. Slowing disbursements: A basic strategy of cash management is to delay payments as long as possible without impairing the credit rating/standing of the firm. In fact, slow disbursement represents a source of funds requiring no interest payments. There are several techniques to delay payment of accounts payable namely (1) avoidance of early payments; (2) centralized disbursements; (3) floats; (4) accruals. Avoidance of early payments: One way to delay payments is to avoid early payments. According to the terms of credit, a firm is required to make a payment within a stipulated period. It entitles a firm to cash discounts. If however payments are delayed beyond the due date, the credit standing may be adversely affected so that the firms would find it difficult to secure trade credit later. But if the firm pays its accounts payable before the due date it has no special advantage. Thus a firm would be well advised not to make payments early i.e. before the due date. Centralized disbursements: Another method to slow down disbursements is to have centralized disbursements. All the payments should be made by the head office from a centralized disbursement account. Such an arrangement would enable a firm to delay payments and conserve cash for several reasons. Firstly it involves increase in the transit time. The remittances from the head office to the customers in distant places would involve more mailing time than a decentralized payment by a local branch. The second reason for reduction in operating cash requirement is that since the firm has a centralized bank account, a relatively smaller total cash balance will be needed. In the case of a decentralized arrangement, a minimum cash balance will have to be maintained at each branch which will add to a large operating cash balance. Finally, schedules can be tightly controlled and disbursements made exactly on the right day. Float: A very important technique of slow disbursements is float. The term float refers to amount of money tied up in the cheque that have been written, but have yet to be collected and encashed. Alternatively, float represents the difference between the bank balance and book balance of cash of a firm. The difference between the balance as shown in the firms record and the actual bank balance is due to transit and processing delays. There is time lag between the issue of a cheque by the firm and its presentation to its bank by the customers bank for payment. The implication is that although a cheque has been issued cash would be required later when the cheque resented for encashment. Therefore, a firm can send remittance although it does not have cash in its bank at the time of issuance of cheque. Meanwhile, funds can be arranged to make payments when the cheque is presented for collection after a few days. Float used in this sense is called cheque kitting.

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Accruals: Finally, a potential tool for stretching accounts payable is accruals which are defined as current liabilities that represent a service or goods received by a firm but not yet paid for. For instance, payroll, i.e., remuneration to employees, who render services in advance and receive payment later. In a way they extend credit to the firm for a period at the end of which they are paid, say, a week or month. The longer the period after which payment is made, the greater the amount of free financing and the smaller the amount of cash balances required. Thus, less frequent payrolls, i.e. monthly as compared to weekly, are important sources of accruals. They can be manipulated to slow down disbursements. . PRACTICE OF CASH MANAGEMENT IN BOKARO STEEL CITY Cash management of Bokaro Steel Plant is totally governed at Corporate Level. Here fund are provided from Corporate Office after every 10 to 15 days as per requirement by BSL.
YEARS CASH & BANK BALANCE (IN LAKHS) TOTAL CURRENT ASSETS (IN LAKHS) % OF CASH & BANK BALANCE TO CURRENT ASSETS

2006 2007 2008 2009

3790 4108 4400 4660

182611 186244 183588 231202

2.08 2.21 2.40 2.02

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Figure 1: Composition of Cash & Bank Balance in Total Current Assets

Year

Inventories (in crore)

Total current assets

% of inventories to current assets

2007 2008 2009

1365.6 1185.5 1755.02

1826.1 1835.9 2312.02

74.78 64.59 75.87

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Figure 2: Contribution of Inventories in Total Current Assets

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FINANCIAL STATEMENTS AND RATIO ANALYSIS

54

WORKING CAPITAL STATUS OF BSL


Rs. Lakhs

PARTICULARS (A) CURRENT ASSETS CASH & BANK BALANCES RAW MATERIALS STORES &SPARE PARTS FINISHED/SEMI-FINISHED PRODUCTS SUNDRY DEBTORS LOANS & ADVANTAGES OTHER CURRENT ASSETS TOTAL (B) CURRENT LIABILITIES & PROVISIONS SUNDRY CREDITORS SECURITIES & OTHER DEPOSITES ADVANCES RECEIVED OTHER LIABILITIES PROVISIONS (EXCLUDING PROVISIONS FOR VRS, GRATUITY & ACCUMULATED LEAVES) TOTAL WORKING CAPITAL (A-B) INCREASE/DECREASE IN WORKING CAPITAL OVER PREVIOUS YEAR
NOTE:-ITEMS ON CAPITAL ACCOUNT HAVE BEEN EXCLUDED

2005-06

2006-07

2007-08

2008-09

3790 25621 34129 76806 1251 39118 1896 182611

4108 25113 37846 77790 895 39090 1402 186244

4400 16828 46798 54948 774 58745 1095 183588

4660 28811 54047 92644 903 49296 841 231202

30572 4291 2427 38824 9482 85596 97015

32507 6768 2568 38204 9151 89198 97046

43268 2369 10404 35706 60254 152001 31587

45387 13189 2789 28049 111898 201312 29890

44566

31

-65459

-1697

55

Figure 3: Four year comparative studies between current assets, current liabilities and working capital of Bokaro Steel Plant

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100%

90%

80%
Other Current Assets Loans & Advantages

70%

60%

Sundary Debtors

Current Assets

50%

Finished/SemiFinished P roducts Stores & Spare P arts Raw Material Cash & Bank Balances

40%

30%

20%

10%

0% 2007-08 2008-09 2009-10 2010-11

Year

Figure 4: Four year comparative studies between current assets composition

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100%

90%

80%

70%

Provisions Other Liabilities

60%

Current Liabilities

Advances Received Securities & Others Deposites Sundary Creditors

50%

40%

30%

20%

10%

0% 2007-08 2008-09 2009-10 2010-11

Years

Figure 5: Four year comparative studies between current liabilities composition

TRADE-OFF BETWEEN PROFITABILITY AND RISK


58

In evaluating a firms NWC position, an important consideration is the trade-off between profitability and risk. The term profitability used in this context is measured by profit after expenses. The term risk is defined as the probability that a firm will become technically insolvent so that it will not be able to meet its obligations when they become due for payment. In evaluating the profitability-risk trade-off related to the level of NWC, three basic assumptions, which are: (a) that we are dealing with manufacturing firm; (b) that current assets are less profitable than fixed assets; and (c) that short-term funds are less expensive than long-term funds. Effect of the level of current assets on the profitability-risk trade-off This effect can be shown by using the ratio of current assets to total assets. Effect of increase/higher ratio: An increase in the ratio of current assets to total assets will lead to a decline in profitability because current assets are assumed to be less profitable than fixed assets. A second effect of the increase in the ratio will be that the risk of technical insolvency would also decrease because the increase in current assets, assuming no change in current liabilities, will increase NWC. Effect of decrease/lower ratio: A decrease in the ratio of current assets to total assets will lead to an increase in profitability as well as risk. The increase in profitability will primarily be due to the corresponding increase in fixed assets which are likely to generate higher returns. Since the current assets decrease without a corresponding reduction in current liabilities, the amount of NWC will decrease, thereby increase risk. Effect of the level of current liabilities on the profitability-risk trade-off Effect of increase/higher ratio: An increase in the ratio of current liabilities to total assets will lead to a increase in profitability. The reason for the increased profitability lies in the fact that current liabilities, which are a short term sources of finance will be reduced. As short term sources of finance are less expensive than long-run sources, increase in the ratio will, in effect, mean substituting less expensive sources for more expensive sources of financing. There will, therefore, be a decline in cost and a corresponding rise in profitability. The increase in the ratio will also increase the risk. Any increase in current liabilities, assuming no change in current assets, would adversely affect the NWC. A decrease in NWC leads to an increase in risk. Thus, as the current liabilities-total assets ratio increases, profitability increases, but so dose risk. Effect of decrease/lower ratio: A decrease in the ratio of current liabilities to total assets will lead to decrease in profitability as well as risk. The use of more long term funds which, by definition, are more expensive will increase the cost; by implication, profits will also decline. Similarly, risk will decrease because of the lower level of current liabilities on the assumption that current assets remain changed. Rs. Lakhs 2009-10 183588.00 2010-11 231202.00
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Current Assets

Fixed Assets Total Assets Current Liabilities Current Assets/Total Assets (% age) Current Liabilities/Total Assets (% age)

265877.00 449465.00 152001.00

342467.00 573669.00 201312.00

40.85

40.30

33.82

35.09

SAIL/BOKARO STEEL PLANT Profit & Loss Account for the year ended 31st March, 2009 Year ended 31st March, 2011 Year ended 31st March, 2010 (Rupees in crores) 12037.57 10462.79 37.41 24.71 133.79 20.09 427.03 11105.82 EXPENDITURE Accretion(-)/Depletion to stocks Raw materials consumed Purchase of finished / semi-finished products Employees' Remuneration & Benefits Stores & Spares Consumed Power & Fuel Repairs & Maintenance Freight outward Other expenses Share of expenditure over income - Corporate Office - CMO - CCSO Interest & finance charges Depreciation 199.23 67.68 2.07 52.77 246.74 115.56 63.45 2.82 40.41 246.70 -392.29 5458.55 0.00 1930.04 824.79 933.36 120.08 143.63 400.32 188.88 3672.82 0.00 1956.93 845.37 857.52 96.01 168.18 360.56 1660.95 10376.62 42.59 16.85 115.68 12.59 719.47 11283.80

INCOME Sales Less : Excise duty Finished products internally consumed Interest earned Other revenues Provisions no longer required written back Stock transfer to other units 11857.69 1394.90

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Total Less : Inter Account Adjustments Adjustments pertaining to earlier years Profit /Loss(-) before Tax Balance brought Forward Less: Extraordinary items Amount available for appropriation APPROPRIATIONS Balance carried over to BalanceSheet Significant Accounting Policies and Notes on Accounts

9986.97 167.65 9819.32 1286.50 6.28 1292.78 16187.50 0.00 17480.28

8615.21 161.84 8453.37 2830.43 0.00 2830.43 13357.07 0.00 16187.50

17480.28 17480.28

16187.50 16187.50

Schedules 2 and 3 annexed hereto, form part of the Profit & Loss Account.

SAIL/BOKARO STEEL PLANT Balance Sheet as at 31st March, 2009 As at 31st March, 2011 As at 31st March, 2010 (Rupees in crores)

SOURCES OF FUNDS Shareholders' Fund Reserves and Surplus Loan Funds Secured Loans Unsecured Loans Inter Unit Current Account 89.26 0.00 89.26 4538.70 22108.28 APPLICATION OF FUNDS Fixed Assets Gross Block Less: Depreciation Net Block Capital Work-in-Progress 7226.17 4980.46 2245.71 1178.96 3424.67 7072.41 4790.17 2282.24 376.53 2658.77 69.42 0.00 69.42 2602.88 18859.84 17480.32 17480.32 16187.54 16187.54

Investments Current Assets, Loans & Advances

0.10

0.10

61

Inventories Sundry Debtors Cash & Bank Balances Interest Receivable/Accrued Loans & Advances Less: Current Liabilities & Provisions Current Liabilities Provisions Net Current Assets Miscellaneous Expenditure (to the extent not written off or adjusted) Inter Unit Current Account Significant Accounting Policies and Notes on Accounts

1755.02 9.03 46.60 8.41 492.96 2312.02 1066.36 2512.13 3578.49 -1266.47 0.00 19949.98 22108.28

1185.74 7.74 44.00 10.95 587.45 1835.88 1024.56 1870.81 2895.37 -1059.49 14.81 17245.65 18859.84

Schedules 1 and 3 annexed hereto, form part of the Balance Sheet.

RATIO ANALYSIS:
LIQUIDITY RATIO: Liquidity ratio shows the firms short term solvency and its ability to pay off the liabilities. It has been devised to keep a track of their firms exposure the risk that it will not be able to meet its short term obligations. It provides a quick measure of liability of the firm by establishing a relationship between its current assets and its current liabilities. Some of the liquidity ratio: a) Current ratio: The current ratio gives the margin by which the value of the current assets may go down without creating and payments the firms. The total current assets include prepaid expenses and short term investments. Whereas the current liability includes all types of liability which will mature for payments within a period of one year e.g. bank overdraft, bills payable, trade creditor, outstanding etc. the current ratio throw light on the firms ability to pay its currents liabilities out of its currents assets. The current ratio is compared with the standard ratio of two times for 2: 1 b) Quick ratio / Acid test ratio / Liquid ratio: This ratio establishes relationship between quick current assets and current liabilities. A current assets is considered to be liquid if it I convertible into cash without loss of time and value. Therefore Liquid assets = currents assets (inventory + prepaid expenses) The inventory is singled out of the total current assets as the inventory is considered to be the potential illiquid. The reason for keeping inventory out is that it may become absolute, un saleable or out of fashion and always requires time for realizing into cash. Generally a quick ratio of 1:1 is considered to be satisfactory because this mean that the quick assets of the firm are just
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equal to the quick liability and there has not been seen to be a possibility of default in payments by the firm. c) Net Working Capital Ratio: It indicates the firms potential reservoir of fund. Net Working Capital Ratio= Net Working Capital/ Net Assets ACTIVITY / TURNOVER / PERFORMANCE RATIO: It is measure of movement and thus indicates as to how frequently an account has moved over during a period. It shows as to how efficiently and effectively the assets of the firm are being utilized. These ratios are usually calculated with references to sales / cost of goods sold and its expressed in terms of rate or times. a) Working capital turnover ratio: The WCT ratio studies the velocity or utilization of the working capital of the firm during a year. The WC here refers to the net working capital which is equal to the total current assets less total current liabilities. The higher the WCT ratio the lower is the investment in the working capital and higher would be the profitability. A high WCT ratio reflects the better utilization of the WC of the firm. However, a high WCT ratio implies a low net working capital in relation to the sales volume and therefore implies over trading by the firm in relation to its net WC. b) Fixed assets turnover ratio: This ratio shows the contribution of average fixed assets to net sales. Higher the ratio better will be the sales per unit of fixed assets. FA turnover ratio = (net sales) / average fixed assets c) Capital turnover ratio: Capital turnover ratio = (net sales) / average capital employed. I. Ratio Analysis Calculations (200910) Liquidity position: a) Current Ratio: Current assets = Rs. 1835.88 crore Current liability & provisions = Rs. 1520.01 crore. Current ratio = current assets / current liabilities = 1835.88/1520.01 = 1.21 times b) Quick Ratio: Inventory = Rs. 1185.74 crore Quick ratio = (total CA inventory)/total current liabilities = (1835.88 1185.74)/1520.01 = 650.14/1520.01 =0.43 times. c) Net Working Capita Ratio: Net Working Capital = 315.87 Total Assets = Fixed Assets + Current Assets =1835.88+ 2658.77=4494.65
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Net Assets = Total Assets - Current Liabilities =4494.65-1520.01 =2974.64 Net Working Capital Ratio= Net Working Capital/ Net Assets = 315.87/2974.64 = 0.11 Activity Ratio: a) Capital turnover ratio: Net sales = Rs. 12037.57 crore Working Capital = Total CA Total CL = Rs. 315.87 crore Net capital employed = Net block + working capital (Here Net block = gross block depreciation) = 2282.24 + 315.87 = Rs. 2598 .11 crore Capital turnover Ratio = net sales / net capital employed = 12037.57 / 2598.11 = 4.63 times b) Working capital turnover ratio: Net sales = Rs. 12037.57 crores Working capital = Rs. 315.87 crores Working capital turnover ratio = Net sales / W.C. = 12037.57 / 315.87 = 38.11 times c) Fixed Turnover Ratio: Net sales = Rs. 12037.57 crore Net fixed assets = Rs. 2658.77 Fixed turnover ratio = Net sales / net fixed assets = 12037.57/ 2658.77 = 4.53 times

II. Ratio Analysis Calculations (2001011) Liquidity position:

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a) Current ratio: Current assets = Rs. 2312.02 crore Current liability = Rs 2013.12 crore Current ratio = current assets / current liabilities = 2312.02 / 2013.12 = 1.15 times b) Quick Ratio: Inventory Quick ratio = Rs. 1755.02 crore = (total CA inventory) /total current liabilities = [2312.02 1755.02]/2013.12 = (557)/ 2013.12 = 0.28 times

c) Net Working Capita Ratio: Net Working Capital = 298.90 Total Assets = Fixed Assets + Current Assets =3424.67+ 2312.02 =5736.69 Net Assets = Total Assets - Current Liabilities = 5736.69-2013.12=3723.57 Net Working Capital Ratio= Net Working Capital/ Net Assets = 298.90 /3723.57 =0.08 Activity Ratio: a) Capital turnover ratio: Net sales = Rs. 11857.69 crore Working capital = total CA Total CL = Rs. 298.90 crore Net capital employed = Net block + working capital = 2245.71 + 298.90 = Rs. 2544.61 crores Capital turnover Ratio = net sales / net capital employed = 11857.69 / 2434.15 = 4.66 times b) Working capital turnover ratio: Net sales = Rs. 11857.69 crore Working capital = Rs. 298.90 Working capital turnover ratio = net sales / W.C = 11857.69 / 298.90 = 39.67 times c) Fixed turnover ratio: Net sales = Rs. 11857.69 crore Net fixed assets = RS. 3424.67 Fixed turnover ratio = Net sales / net fixed assets = 11857.69/3424.67 = 3.46 times YEAR CURRENT RATIO

2009-10 1.21

2010-11 1.15

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QUICK RATIO NET WORKING CAPITAL RATIO CAPITAL TURNOVER RATIO WORKING CAPITAL TURNOVER RATIO FIXED TURNOVER RATIO

0.43 0.11 4.63 38.11 4.53

0.28 0.08 4.66 39.67 3.46

Interpretation Current ratio is decreasing because of increase in provisions (mainly due to pay revision), security & other deposits (by contractors involve in different projects) and decrease in loans & advances (due to change in policies). Quick ratio is decreasing because of increase in inventory and provisions. Net working capital ratio is decreasing because of decrease in working capital (i.e. increase in provisions) and huge investment in fixed assets. Capital turnover ratio is slightly increased because of decrease in net block and working capital. Working capital turnover ratio is increasing because of decrease in working capital (i.e. in provisions, security & other deposits). Fixed turnover ratio is decreasing because of huge investment in fixed assets.

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CONCLUSION & SUGGESTION

CONCLUSION AND SUGGESTION

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During 2007 2008. Bokaro Steel Plant progressively notched the impressive gain from 2736.96 crores to 2830.43 crores in 200809. The continuous strengthening of the companys financial fundamentals was the outcomes of multi-pronged strategy including increase in production and sales volume, improvement in product mix, cost reduction major, reduction in borrowing coupled with buoyancy in the steel market. Reducing overall debt through repayment of loan, as well as the cost of finance. As consequences of this, and substitution of higher interest bearing debt by lower interest bearing instruments, interest payments also declined during this year. Authority on financial management is of opinion that one of the cause of losses incurred by an enterprises can be located in imprudent management of working capital. To earn possible rate of return on capital invested effective and efficient utilization of working capital is necessary. The study at working capital management at BSL is management of inventory, receivable, cash and working finance. The conclusion has been based on the data provided by the annual accounts of the three consecutive years and on other information. Working capital in Bokaro Steel Plant is managed well though there been decrease in working capital but the production is all time high. This shows that working capital at BSL has been managed well. Still there is scope of improvement. Bokaro Steel Plant in current financial year did the record production. The working capital has shown decreasing trend and the current ratio is below ratio i.e. 2:1. At this moment BSL performing very well but in case of contingency BSL will face problem in paying it dues. Quick ratio has decreased through there has been increased in the amount of case the management should try to decrease its current liabilities especially creditors. Furthermore, working capital management is not an end in itself. It is an integral part of the departments overall management. The needs of efficient working capital management must be considered in relation to other aspects of the departments financial and non-financial performance.

BIBLIOGRAPHY
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1. Financial Management by Dr. I. M. Pandey 2. Management Accounting by Khan & Jain 3. History of Bokaro by Dr. N. R. Srinivasan 4. Annual Accounts of the Year 2006-07, 2007-08, 2008-09 of B.S.L.

WEBSITES:

www.sail.co.in www.metaljunction.com www.steelrx.com www.bokaro.nic.in www.steel.nic.in www.steel.gov.in

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