Professional Documents
Culture Documents
Chapters Particulars Sl. No. Subject No
Chapters Particulars Sl. No. Subject No
Chapters Particulars
Sl.
Chapter
No.
Subject
INTRODUCTION
a.
Page
No.
3 10
Introduction
II
12 26
III
28 - 50
IV
52 - 67
68 - 69
1 | Page
2 | Page
BIBLIOGRAPHY
71 - 76
INTRODUCTION
4 | Page
The gross working capital concept is financial or going concern whereas net
working capital is an accounting of working capital. These two concepts of
working capital are not exclusive; rather both have their own merits.
Gross concept is very suitable to the company form of organization where
there is divorce between ownership, management and control. The net
concept of working capital may be suitable only for proprietary form of
organizations such as sole-trader or partnership firms. However, it may be
made clear that as per the general practice net working capital is referred to
simply as working capital.
ii.
6 | Page
7 | Page
The variable working capital changes with the volume of business. It may be
sub-divided into:
i.
Seasonal.
ii.
not available at the right point of time. All the operating plans cannot be
successfully implemented when funds are in short supply. In adequate
working capital can also lead to temporary insolvency of a firm.
FACTORS DETERMINING THE WORKING CAPITAL REQUIREMENTS
The working capital requirements of a concern depend upon a large number
of factors such as nature and size of business, the character of their
operations, the length of production cycles, the rate of stock turnover and
the state of economic situation.
3. Production policy
In certain industries the demand is subject to wide fluctuations due to
seasonal variations. The requirements of working capital, in such cases,
demand upon the production could be kept either steady by accumulating
inventories during slack periods with a view to meet high demand during
the peak season or the production could be curtailed during the slack
season and increased during the peak season.
other supplies have to be carried for a longer period in the process with
progressive increment of labor and service costs before the finished product
is finally obtained.
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5. Seasonal variations
In certain industries raw material is not available throughout the year. They
have to buy raw
6. Credit policy
The credit policy of a concern in its dealings with debtors and creditors
influence considerably the requirements of working capital .a concern that
purchases its requirements on credit and sells its products/services on cash
requires lesser amount of working capital.
7. Business cycle
Business cycle refers to alternate expansion and contraction in general an
activity .In a period of i.e. when the business is prosperous there is a need
for larger amount of working capital due to increase in sales, rise in prices,
optimistic expansion of business, etc.
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OBJECTIVES:
o To promote the growth of the cement interest
o To promote the customer interest
o To identify newer application of cement usage
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I. CASH MANAGEMENT
1. Cash turnover ratio.
DEBTORS MANGEMENT
1. Debtors turnover ratio.
SOURCES:
The study is based on the analysis of data from the annual reports of
MADRAS CEMENTS Ltd. The data used in the present study are mainly of
two types primary data and secondary data.
1. The primary data is collected through the discussions made with the
officials of MADRAS CEMENTS Ltd.
2. The secondary data is collected through the annual reports published
by the company and company website.
LIMITATIONS:
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The present study limits itself to the study of working capital management.
In the present study the analysis is mainly based on secondary data given in
the annual reports published by MADRAS CEMENTS Ltd. The limitations
prevailing in the secondary sources are self evident in the study. Despite
their weakness, they continue to be the only source for comparison of the
results of the analysis. The present study is carried taking this into
consideration.
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COMPANY PROFILE
Madras Cements Ltd (MCL) is the flag ship company of Ramco Group,
a well-known business group of South India. It is based at Chennai. The
main product of the company is Portland cement manufactured through the
four advanced production facilities spread over South India.
The manufacturing products are:
The company is the sixth largest cement producer in the country and
the second largest in South India. Ramco Super grade is the most popular
cement brand in South India. The company also produces Ready Mix
Concrete and Dry Mortar products. In addition, the company also operates
one of the largest wind farms in the country. They are: Pioneer in Cement
technology, Sixth largest Cement Producer in India, Single largest Cement
Brand in South and Sophisticated R&D Centre in Chennai.
It has been known for its penchant for technology that has kept the
company ahead of competition. MCL was the first to switch from the energyguzzling wet process to the dry process for manufacture of cement. With
energy costs continuously shooting up, it derived handsome savings and
also was the beneficiary of software developed by the group extensively for
the entire gamut of operations - from mining to the production of clinker
and cement.
MCL is the first company to implement a full-fledged ERP system in
the cement industry and one of the early adaptors among corporation in
India. MCL is equipped with a modern computer based quality control
system.
Madras Cements Ltd is managed by a board of directors comprising of
eminent personalities as its members. The chairman of the board is Shri
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company
board
brings
together
team
of business,
(iii)
MISSION
To conserve, protect and enhance quality of life for our employees and
community.
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To preserve the credence in our motto "our real resources are the
human assets".
school
S.S.R vidhya mandir
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COMPANY HISTORY
In 1950's, investment in Cement Industry was not attractive due to price
controls and the massive investments required. Only those entrepreneurs
who were not profit minded but cared for country's development came
forward in investing in Cement Industry.
When Shri. Manubai Shah, Central Minister for Industries in late fifties
came to Madras to meet the Industrialists, he called upon Shri P A C
Ramasamy Raja and requested him to start a cement factory in TN . This
was readily accepted by Shri PACR and this marked the birth of "Madras
Cements Ltd" in 1961.
On the night of September 3, 1962, while the whole city slept, PACR lay on
his bed in the Madras General Hospital, seriously ill. As all his near and
dear watched with tears in their eyes, PACR summoned his son
Ramasubrahmaneya Rajha, to his bedside. "There is no more hope", he
whispered :
"You should take care of everything from now". My main concern is for
Madras Cements. I have taken a lot of money as shares from well wishers I
have not paid them back any dividends as yet. This has to be taken care of
immediately ...."
PACR's
last
wish
was
dutifully
fulfilled
by
the
present
chairman
Shri.P.R.Ramasubrahmaneya Rajah.
Today Madras Cements Ltd is not only one of the most respected cement
companies in the country but also leads in giving the best return for the
investors. With a cement capacity of 6 millions tons per annum, the
company is the sixth largest producer of cement in India. It is also one of the
largest wind energy producer in the country with a capacity of 45 MW.
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The first plant of MCL at Ramasamy Raja Nagar, near Virudhunagar in Tamil
Nadu commenced its production in 1962 with a capacity of 200 tonnes,
using wet process. In 70's, the plant switched over to more efficient dry
process. A second kiln was also added to bring the total capacity to 12 lakh
ton per annum. The second venture of MCL is its Jayanthipuram plant near
Vijayawada in A.P set up in 1987 . The 16 lakh ton per annum plant
employs the latest state of art technology.
The third venture of MCL is at Alathiyur in TN set up in 1997 and expanded
by addition of another line in 2001. The 30 lac ton per annum plant is the
most modern plant in the country.
In 2000 , MCL acquired Gokul Cements situated in Mathod in Karnataka
whose capacity is 600 TPD. Being a eco-friendly company, MCL set up the
Ramco Winfarm in 1993 at Muppandal TN. This was followed by wind farms
in Poolavadi near Coimbatore in 1995 and Oothumalai in 2005.
The
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After returning to Rajapalayam, he put his plans into action. To start the
yarn mill, he found that he needed Rs.5 lakhs, which in 1936 was a huge
sum. It was considered a Herculean task to raise such a big capital.
But the determined Raja was not deterred. He decided to make the people
"Shareholders".
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Ramasamy Raja needed one crore as capital. The State Government for the
first time in the history of India, invested Rs.10 lakhs An indication of the
total trust and implicit faith the Government had in him.
AWARDS
4 Leaves Award
Centre for Science and Environment
National Award for Energy Conservation
Confederation of Indian industry
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Technology Overview
Madras Cements Ltd is a trend-setter in adopting
state-of-the-art technology for the manufacture of
Cement, Ready Mix Concrete and Dry Mortar
Products. MCL is the first to bring the following
technologies in South India's cement industry.
Pre-calciner technology
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JAYANTHIPURAM UNIT
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EXPANSION
Slag grinding unit
Madras cements have always stayed in the forefront of the industry. Special
task forces within the company keep track of the latest international
development in cement technology and promote action to adopt the state of
art technology.
India generates about 70 million tones of Fly ash and 10 millions of
slag annually. Disposal of Fly and slag problem to the environment. Concern
for the environment and ecology is percolating very fast into customer
awareness globally and there by a check on eco-hostile products is becoming
an imperative exercise. Both the central and state governments are strongly
propagating to use these products in cement manufacture.
A working group has been constituted by the government of
Andhrapradesh to study the generation and disposal of Fly ash and BD slag.
Based on the recommendations of the working group the government of
Andhrapradesh issued a GO instructing all government departments for
utilization of 100% Pozzolana/slag cement, with in a period of 5 years.
In line with the policies of the government and our philosophy of using
otherwise no usable materials like Fly ash and slag to produce value added
blended cement and there by conserve limestone and other materials like
coal etc, and also to save energy apart from being eco-friendly and creating
clean atmosphere by reducing carbon dioxide emission proud of serving our
nation by preserving minerals and maintaining clean atmosphere for our
future generations.
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ISO certification
Madras cements limited, Jayanthipuram unit also got ISO 9002 certification
in may, 1998.
A stacker re-claimer for pre blending and continuous flow silo for
below
Vertical roller mills for grinding raw material and coal
Five stage per heater for their mail efficiency per calcinatory for
1. Personnel department
2. Accounts department
3. Mines
4. IT
5. Stores and Material department
6. Quality control lab
7. Process department
8. Engineering departments
-
Instrumentation
Security liaison
DETAILS OF EMPLOYEES
The total workforce of MCL at Jayanthipuram is 600 out of which permanent
employees are 346 and remaining 254 are contract labours. The following
illustrates the details of the employees in MCL
S.No.
1
2
3
4
5
6
7
8
9
10
Category
Officers
Officer prob-with grade
Officer trainee
Staff
Staff worker
Staff prob-with grade
Staff trainee
Voucher staff
Voucher worker
Workers
No. of employees
53
3
7
70
2
7
1
1
4
198
INDUSTRY PROFILE
CEMENT INDUSTRY IN INDIA
The Cement industry in India has come a long way since 1914, when
the first cement plant was commissioned with a production level of 1000
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tons/ annum. The first true Portland cement was manufactured in Calcutta
presently called as Kolkata. India is the second largest cement producer in
the world. As cement is a basic construction material with virtually no
substitute, it is used worldwide for all construction work. Thus the growth in
the construction industry has a direct relation with the production and
consumption of cement.
India is the second largest cement producer in the world with a
production level of about 99 million tons (about 5% of world production ~
2000 million tons). The installed capacity is about 119 million tones and at
an expected 10 % growth rate the production is likely to grow to about 158.5
million tons at the end of 2006-2007.
Over the years, the growth of the industry has been uneven. With
traditionally cement deficit regions covering the most of the major growth
centers of the country.
Cement industry in India has made tremendous strides in technological up
gradation and assimilation of latest technology. At present ninety three per
cent of the total capacity in the industry is based on modern and
environment-friendly dry process technology and only seven per cent of the
capacity is based on old wet and semi-dry process technology. The major
players of Indian cement industry are Madras cements, ACC, India cements,
Gujarat Ambuja, Ultratech, Grasim, JK group, Jaypee group, Century
textiles, Birla Corporation, Lafarge.
There is tremendous scope for waste heat recovery in cement plants
and thereby reduction in emission level. Cement plants in the country have
mostly changed from the wet process to the energy efficient dry process. In
India, the cement factories are localized in the states of Tamil Nadu, Madhya
Pradesh, Gujarat, Bihar, Rajasthan, Karnataka and Andhra Pradesh.
industry installed capacity has reached to 18.5 million tones. The total
production of entire Andhra Pradesh cement industry is approximate 12
million tones. In this the major cement plants contribution was 10.5 million
tones where as the mini cement plants only producing the approximate 1.58
million tones. The cement consumption of Andhra Pradesh is only 6 million
tones. In 1997-98 and this figure has increased to 7 million tons by the end
of 1998 because of various development program taken up by the state
government and the industrys dynamic promotional activities.
The cement configuration in the state has been observing steady
growth. In 1996-97 the cement the consumption was only 4.87 million tons
and the further consumption increased to 5.87 million tons. As far as
production and consumption is concurrent, Andhra Pradesh cement
industry performance increased its 5.29% and 8% respectively in the year
1996-97. This percentage increase is very low when compared to national
average i.e. 8.5% because in this no production activity from the newly
erected plants as well as the existing plants which are increased their
installed capacity. One more reason for this type if low growth rate was
number of new plants and the existing plants which were increasing their
capacities started their production in various parts of our country the
cement exports in the year 1992-93, 36,200 tons exported to Bangladesh
and some other countries and this export figure increased to 1, 35,000 tons
in 1993-94, there is only 10,000 tons of cement exported to Burma from
Vishakhapatnam. The following are the major contributors of cement
industry in Andhra Pradesh.
1. Madras Cements Limited
2. India Cements Limited
3. Zuari cements limited
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WORKING CAPITAL MANAGEMENT:Working Capital is the firms holdings of current assets such as cash,
receivables, inventory & marketable securities. Every firm requires working
capital for its day to day transactions such as purchasing raw material, for
meeting salaries, wages, rents, rates, advertising etc.
Significance of Working Capital:The world in which real firms function is not perfect. It is
characterized by the firms considerable uncertainty regarding the demand,
market price, quality & availability of its own products and those suppliers.
While
the
firm
has
many
strategies
available
to
address
these
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This is the loop (previous page) which starts at the cash and the marketable
securities account, goes through the current account as direct labor and
materials which are purchased and use to produce inventory, which in turn
is sold and generates accounts receivables, which are finally collected to
replenish cash. The major point to notice about this cycle is that the
turnover or velocity of resources through this is very high related to the
other inflows and outflows of the cash account. There are two concepts of
working capital namely; Gross Working Capital and Net Working Capital.
Gross Working Capital, simply called as working capital refers to the
firms investment in current assets. Current assets are the assets, which in
ordinary course o business can be converted into cash within an accounting
year. Current assets include cash and bank balances, short term loans and
advances bills receivables, sundry debtors, inventory, prepaid expenses,
accrued incomes, money receivable ( within 12 months).
The following are the few advantages of adequate working capital in
the business: Cash Discount: Adequate working capital enables a firm to
avail cash discount facilities offered to it by the suppliers. The amount of
cash discount reduces the cost of purchase.
Goodwill: Adequate working capital enables a firm to make prompt
payment. Making prompt payment is a base to create and maintain goodwill.
Ability to face crisis: The provision of adequate working capital
facilities to meet situations of crisis and emergencies. It enables a business
to with stand periods of depression smoothly.
Credit-Worthiness: It enables a firm to operate its business more
efficiently because there is not delay in getting loans from banks and other
on easy and favorable terms.
Regular supply of raw materials: It permits the carrying of inventories
at a level that would enable a business to serve satisfactory the needs of its
35 | P a g e
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3. Easy loans: A concern having adequate working capital, high solvency and
good credit standing can arrange from banks and other an easy and favorable
terms.
4. Cash discount: Adequate we also enable a concern to avail cash discount on
the purchases and hence it reduces costs.
5. Regular supply of raw material: Sufficient working capital ensures regular
supply or raw material and continuous production.
6. Regular payment of salaries and wages and other day-to-day commitments:
A company which has ample working capital can make regular payment of salaries,
wages and other day-to-day commitments which raises the moral of its employees
increase their efficiency, reduces wastages and costs and
profits.
7. Exploitation of favorable market condition:
be much
working capital positions are bad for any business. However, out of the two, it is
the inadequacy of working capital, which is more dangerous from the point of
view of the firm.
DISADVANTAGES OF REDUNDANT OR EXCESSIVE WORKING CAPITAL
Excessive working capital means idle funds which earn no profits for the
business and hence the business cannot earn a proper rate of return on its
investments.
When there is a redundant working capital, it may lead to unnecessary
purchasing and accumulation of inventories causing more chances of theft, waste
and loses.
credit policy which may cause higher incidence of bad debts. It may results into
overall inefficiency in the organization.
When there is excessive working capital, relation with banks and other
financial institution may not be maintained.
Due to low rate of return on investment, the value of share may also fall.
The redundant working capital gives rise to speculative transactions.
DISADVANTAGES OR DANGERS OF INADEQUATE WORKING CAPITAL
A concern, which has inadequate working capital, cannot pay its shortterm liabilities in time. Thus it will lose its reputation and shall not be
able to get good credit facilities.
It cannot buy its requirements in bulk and cannot avail of discount, etc. It
becomes difficult for the firm to exploit favorable market condition and
undertake profitable projects due to lack of working capital.
The firm cannot pay day-to-day expenses of its operations and its creates
inefficiencies, increases costs and reduces the profits of the business.
It becomes impossible to utilize efficiently the fixed asset due to nonavailability of liquid funds .The rate of return on investment also falls with
the shortage of working capital.
CHARACTERISTICS OF CURRENT ASSETS:
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finished goods, generally sold on credit are converted into sundry debtors, on
realization, generate cash. Below diagram shows the cycle of transformation.
CASH Cycle
Finished
goods
Accounts
receivable
Wages, Salaries,
Factory
overheads
Cash
Work in
progress
Raw
materials
Supplier
s
The short life span of working capital components and their swift
transformation from one form into another has certain implications Decisions
relating to working capital management are repetitive and frequent.
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Above diagram depicts these events on the cash flow line. The firm begins with
the purchase of raw materials which are paid for after a delay which represents
the accounts payable period.
The length of operating cycle of a manufacturing firm takes into account.
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The Inventory Conversion Period is the total time needed for producing and
selling the product .The firm converts the raw material in to finished goods and
then sells the same. The time lag between the purchase of raw materials and the
sale of finished goods is the inventory period.
. Typically, it includes:
is
amount from customers. Customers pay their bills sometimes after the sales. The
period that elapses between the date of sales and the date of collection of
receivables is the accounts payable period or debtors period.
The total of inventory conversion period and debtor collection period is referred to
as Gross Operating Cycle (GOC).
The Payments Deferred Period is the length of time the firm is able to defer
payment on various resource purchases.
firm. In cross-section analysis, the duration of the operating cycle and its
individual components is compared with that of other firms of a comparable
nature
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Review of Literature
1) Sushma Vishnani and Bhupesh Kr. Shah have done a study in the area
of Working Capital Management in comparison with various companies;
the findings in the study indicate clearly that a companys inventory
management
policy,
management
policy
debtors
play
an
management
important
policy
role
in
and
its
creditors
profitability
performance.
Higher
levels
of
accounts
receivable
are
performance.
Higher
levels
of
accounts
receivable
are
equity.
Market-to-book
ratio
is
calculated
as
(shares
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and stockholders' equity; 4) Sales Growth defined as (sales^sub t^ sales^sub t-1^) divided by total assets^sub t-1^; 5) Technology Dummy
equal to one if the firm is a technology firm as defined in Table 1 ; 6)
Market-to-book ratio defined as each IPO firm's beginning of year stock
price times the number of common equity shares outstanding divided by
beginning year's stockholder equity; 7) Firm size calculated as the
logarithm of the firm's total assets at the beginning of the year. Year After
Dummy and Year of IPO are included (not reported). T-statistics are
reported in parentheses. ***, ** and * denote significance level at the 1%,
5% and 10% levels, respectively.
Although working capital shows no association with performance,
working capital less cash is positively related to performance. These
results are inconsistent and not particularly consistent with regard to
prior research, that maintaining moderate levels of working capital tends
to support a higher level of firm performance. Further, the individual
components of working capital show different but significant effects on
firm performance. Specifically, cash and securities, inventory, and
accounts payable are negatively related to performance; while accounts
receivable is positively related to performance. It is of practical
implication to document that the working capital components, though
they all support growth, influence performance differently.
of
using
IPO
companies
to
examine
working
capital
and
denote
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DATA ANALYSIS
&
INTERPRETATIONS
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Table 1.1
CURRENT RATIO
in Rs.
CURRENT
YEAER
2006-07
2007-08
2008-09
2009-10
CURRENT ASSETS
3149756052
3270733711
6147532582
7792358719
LIABILITIES
RATIO
1656267950
1.9
2286973441
1.43
3945088370
1.56
4015124569
1.94
Interpretation:The Current Ratio during the period of the study was higher than the
standard. This in turn indicates that the company is maintaining sufficient
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Table 1.2
QUICK RATIO
in Rs
CURRENT
YEAR
2006-07
2007-08
2008-09
2009-10
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LIABILITIES
QUICK ASSETS
RATIO
1792815683
1656267950
1.08
2252011403
2286973441
0.98
4848409659
3945088370
1.22
5356761021
4015124569
1.33
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Interpretation
The table reveals that the overall quick ratio is around 1.5. This is according
to the standard, which indicates that the company has maintained sufficient
current assets to meet the current of liquid assets are locked in current
assets (which if effectively used can increase the productivity).
WORKING CAPITAL TURNOVER RATIO:Working capital turnover ratio establishes a relationship between net sales
and working capital. This ratio provides information as to how effectively a
company is using its working capital to generate sales. A higher ratio
indicates the managements efficient utilization of the assets while low
turnover ratio indicates the underutilization of available resources and
presence of idle capacity.
NET SALES
Table 1.3
WORKING CAPITAL TURNOVER RATIO
YEAR
2006-07
2007-08
2008-09
2009-10
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NET SALES
7145429942
9863449724
15301309179
19246718554
NET WORKING
CAPITAL
1493488102
983760270
2202444212
3777284150
RATIO
4.78
10.02
6.94
5.09
Interpretation:
The working capital turnover ratio was 4.78 in the year 2006-07, increased
to 10.02 in the year 2007-08 and again decreased to 6.94 in the year 200809 And again decreased 5.09 in the year 2009-10 Thus, the ratio during the
period of the study is showing a fluctuating trend. But the average ratio
during the period was high, which is an indication that the firm has been
utilizing the assets efficiently.
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TRADEDEBTORS
TRADECREDITORS ADVANCEPAY MENTS
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Table 1.4
Working Capital Performance Ratio
TRADE
YEAR
2006-07
2007-08
2008-09
2009-10
TRADECREDITORS+ADVANCE
DEBTORS
PAYMENTS
452734619
493474854
653448795
616072465
1069142870
1198528794
23834113029
4504830991
RATIO
0.42
0.41
0.23
0.13
Interpretation:
The working capital performance ratio was 0.42 during the year 2006-07 it
decreased to0.41 in the year 2007-08 and it decreased to 0.23 in the year
2008-09 and it again decrease much higher than the standard ratio; this
indicates that the company has been financing the debtors very well.
CURRENT ASSETS TURNOVER RATIO: It explains the relationship between sales and current assets. This ratio
indicates the sales generating capacity of current assets. The lower the ratio
more is the amount of current assets required per unit of sales
SALES
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Table 1.5
Current Assets turnover ratio
YEAR
2006-07
2007-08
2008-09
2009-10
NET SALES
CURRENT ASSETS
RATIO
7145429942
3149756052
2.26
9863449724
3270733711
3.01
15301309179
6147532582
2.48
19246718554
7792358719
2.46
Interpretation:
The current assets turnover ratio was 2.26 in the year 2006-2007, it
increased to 3.01 in the year 2007-2008 and decreased to 2.48 in the year
2008-2009 and again decreased 2.46 in the year 2009-2010The current
asset turnover ratio during the period under the study had a fluctuating
trend. But when we refer 2006-2007 to 2007-2008, 2008-2009 and 20092010 we can see that there is an increase which indicates that the company
has been using the current assets properly to generate sales.
CASH MANAGEMENT
Cash Turnover Ratio: This ratio focuses on the cash holding policy of the
firm. A decline in this ratio indicates high levels of idle cash. A high ratio is
more preferable.
Cash Turnover ratio =
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CASHOPERATINGEXPENSES
CASHANDBANKBALANCDES
Table 1.6
Cash Turnover Ratio
YEAR
2006-07
2007-08
2008-09
2009-10
CASH OPERATING
CASH AND BANK
EXPENSES
BALANCES
RATIO
6330921229
434118131
14.58
8313160381
493065688
16.86
1028447999
565713869
18.13
13200044657
229435639
57.53
Interpretation:
The Cash turnover ratio was 14.58 in the year 2006-07 which increased to
16.86 in 2007-08 and increased to 18.17 in the year2008-09.again
increased 57.53 in the year2009-10. The ratio has been above 14 .58 during
the period of study, which indicates that the cash holding policy of the firm
is good.
INVENTORY MANAGEMENT
Activity Ratios:Funds of various creditors and owners are invested in various assets to
generate sales and profits. The better the management of assets, the larger
the amount of sales. Activity ratios are employed to evaluate the efficiency
with which the firm manages and utilizes its assets. These ratios are also
known as Turnover ratios because they indicate the speed with which the
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assets are being converted or turned over into sales. Activity ratios, thus
involve a relationship between sales and assets. A proper balance between
sales and assets generally reflect that assets are managed well.
Inventory Turnover Ratio:Inventory Turnover Ratio indicates the efficiency of the firm in producing
and selling its product. It is calculated by dividing cost of goods sold by the
average inventory.
COSTOFGOODSSOLD
AVERAGEINV ENTORY
Table 1.7
Inventory Turnover Ratio
COST OF GOODS
YEARS
2006-07
2007-08
2008-09
2009-10
SOLD
3820898207
4367281138
5788755562
7840396793
Interpretation:
The inventory turnover ratio indicates the number of times a rupee
generates turn over with respect to inventory investment. A high ratio
indicates a better conversion of inventory. The inventory turnover ratio in
71 | P a g e
the year 2006-07 was 32.47 which decreased to 12.03 in 2007-08 and which
further increase to 19.72 in 2008-09 and again increased 28.02 in the year
2009-10which shows an upward trend which is a very good sign for the
company.
RAW MATERIAL INVENTORY TURNOVER:This ratio shows the efficiency of the firm in converting raw material into
finished goods. Raw material turnover and holding period shows the number
of times raw material is rotated during the period. It shows the number of
times raw material is converted into work-in-progress. It also shows the
number of days it takes to convert raw material into finished goods.
RAWMATERIA LCONSUMED
Raw material Inventory Turnover = AVERAGERAW MATERIAL
Table 1.8
RAW MATERIAL INVENTORY TURNOVER
AVERAGE RAW MATERIAL
YEAR
2006-07
2007-08
2008-09
2009-10
72 | P a g e
67226226
8877554
128567141
227080390
RATIO
17.52
17.16
15.64
11.29
COSTOFGOODSSOLD
AVERAGEWOR KINPROGREESINVENTORY
Interpretation:
The raw material turnover ratio in the year 2006-07 was 17 .52which
decreased to 17.16 in 2007-08 and which further decreased to 15.64 in
2008-09 and again decreased 11.29 in the year 2009-10The raw material
turnover ratio is showing a downward trend which is not a good sign. A
decrease in ratio is showing increase in raw material inventory levels or
slow-moving inventory. A high level of raw material inventory indicates
unnecessary tie-up of funds, reduced profit and increased cost
Table 1.9
Work in Progress Inventory Turnover
Average Work-inYEAR
2006-07
2007-08
2008-09
2009-10
73 | P a g e
20135147
250658932
197407203
1476644491
Ratio
189.76
17.42
29.32
53.1
Interpretation:
The Work-in-progress inventory was189.76 in 2006-07, it decreased to 17.42
in 2007-08 and it further increased to 29.32 in 2008-09. And it again
increased53.10in the year2009-10 It is showing a fluctuating trend, which is
good for the organization. A high ratio indicates fast conversion of goods into
finished goods.
FINISHED GOODS INVENTORY TURNOVER RATIO:Finished goods turnover indicates the efficiency of the management in
managing the finished goods. A high level of inventory is an indication of
inefficient management of finished goods inventory.
FINISHED GOODS TURNOVER RATIO =
COSTOFGOODSSOLD
AVERAGEFIN ISHEDGOODSINVENTORY
Table 1.10
Finished Goods Inventory Turnover Ratio
Average Finished Goods
Year
2006-07
2007-08
2008-09
2009-10
74 | P a g e
101513919
11211003
112110013
132102568
Ratio
37.63
38.95
51.63
59.35
DEBTORS MANAGEMENT
Debtors Turnover Ratio:Debtors turnover indicates the number of times debtors turnover each year.
Generally the higher the value of debtors turnover, the more efficient is the
management of credit.
NETSALES
AVERAGEDEB TORS
Table 1.11
Debtors Turnover Ratio
Year
2006-07
2007-08
2008-09
2009-10
Interpretation:
75 | P a g e
Average Debtors
Net Sales
7145429942
9863449724
15301309179
19246718554
43,97,11,321
47,31,04,737
57,34,61,825
63,47,60,630
Ratio
16.25
20.84
26.68
30.32
PARTICULARS
Assets
Current Assets
Cash & Bank Balances
Loans & Advances
Sundry Debtors
Inventories
Increase
Decrease
2006
2007
52,38,60,3
78
96,37,39,8
85
42,66,88,0
22
52,73,64,6
29
43,41,18,1
31
95,15,54,2
57
42,27,34,6
19
131,13,49,
045
244,16,52,
914
314,97,56,
052
135,50,17,
102
150,54,85,
367
15,04,68,2
65
12,19,49,2
53
15,07,82,5
83
2,88,33,33
0
147,69,66,
355
96,46,86,5
59
165,62,67,
950
146,34,88,
102
78,39,84,4
16
8,97,42,24
7
1,21,85,62
8
39,53,403
Total Assets
Liabilities and Capital
Current Liabilities
Provisions
Total Liabilities
Increase in working
capital
49,88,01,5
43
Total
146,34,88,
102
77 | P a g e
49,88,01,5
43
146,34,88,
102
78,39,84,4
16
78,39,84,4
16
PARTICULARS
Assets
Current Assets
Cash & Bank
Balances
Loans & Advances
Sundry Debtors
Inventories
Total Assets
Liabilities and
Capital
Current Liabilities
Provisions
Total Liabilities
Net working capital
78 | P a g e
49,30,65,688
127,47,15,77
0
135,50,17,1
02
184,14,55,50
4
12,19,49,25
3
147,69,66,3
55
44,55,17,937
146,34,88,1
02
30,18,71,6
46
49,34,74,854
100,94,77,39
9
327,07,33,71
1
146,34,88,1
02
Decrease
5,89,47,557
32,31,61,51
3
70,740,235
311,97,56,0
52
Decrease in
working capital
Total
2008
Increase
48,64,38,4
02
32,35,68,6
84
228,69,73,44
1
98,37,60,270
47,97,27,832
47,97,27,83
2
146,34,88,10
2
111,18,78,7
32
111,18,78,
732
PARTICULARS
Assets
Current Assets
Cash & Bank
Balances
Loans & Advances
Sundry Debtors
Inventories
Total Assets
Liabilities and
Capital
Current Liabilities
Provisions
Total Liabilities
49,30,65,68
8
127,47,15,7
70
49,34,74,85
4
100,94,77,3
99
327,07,33,7
11
184,14,55,5
04
44,55,17,93
7
2009
56,57,13,86
9
364,59,98,9
40
65,34,48,79
5
128,23,70,9
78
Decrease
7,26,48,181
237,12,83,1
70
15,99,73,94
1
27,28,93,57
9
614,75,32,5
82
243,79,37,2
15
150,71,51,1
55
228,69,73,4
41
394,50,88,3
70
98,37,60,27
0
220,24,44,2
12
Decrease in
working capital
121,86,83,9
42
Total
220,24,44,2
12
79 | P a g e
Increase
59,64,81,71
1
106,16,33,2
18
121,86,83,9
42
220,24,44,2
12
165,81,14,9
29
165,81,14,9
29
PARTICULARS
Assets
Current Assets
Cash & Bank
Balances
Loans & Advances
Sundry Debtors
Inventories
Total Assets
Liabilities and
Capital
Current Liabilities
Provisions
Total Liabilities
80 | P a g e
56,57,13,869
364,59,98,94
0
65,34,48,795
128,23,70,97
8
Increase
Decrease
2010
22,94,35,639
451,98,15,38
1
61,60,72,465
242,70,35,23
4
614,75,32,58
2
779,23,58,71
9
243,79,37,21
5
150,71,51,15
5
290,76,23,18
7
110,75,01,38
2
394,50,88,37
0
220,24,44,21
2
401,51,24,56
9
377,72,34,15
0
157,47,89,93
8
87,38,16,4
41
114,46,64,
256
39,96,49,7
73
33,62,78,23
0
37,376,330
46,96,85,97
2
157,47,89,9
38
81 | P a g e
FINDINGS
&
SUGGESTIONS
82 | P a g e
83 | P a g e
FINDINGS
1. The inventory turnover ratio of the form gradually increased 10.02 in
year 2007-2008and in the year 2009-2010 5.09 decreased.
2. The proportion of current liabilities is very high.
3. During the overall study period the quick ratio of the from is not
satisfactory
4. The networking capital of the company has largely increased during the
year from 149, 34,88,102 to 377,72,34,150 the study of period in the
working capital turnover ratio is satisfactory.
5. The current ratio of the firm is satisfactory and it is maintaining. It is
ideal ratio.
6. Debtors turnover ratio of company is decreased during the current due to
increased in closing debtors level. The debtors turnover ratio of the firm is
not satisfactory.
7. Materials department and bin cards system maintain in MCL to control
the WORKING CAPITAL.
8. The company implements the SAP (system application program) planning
by June 2008.
Suggestions:
The company should use a just-in-time approach in managing rawmaterial, which makes cash available for other operations.
84 | P a g e
BIBLIOGRAPHY
85 | P a g e
Bibliography:
Websites:
www.madras cements.com
www.naukrihub.com/india/cement industry/overview
Annexure:
Calculations:
Current Assets:-
Particulars
2006-07
2007-08
2008-09
2009-10
Inventories
131,13,49,045
100,94,77,399
128,23,70,978
242,70,35,234
Sundry debtors
45,27,34,619
49,34,74,854
65,34,48,795
61,60,72,465
43,41,18,131
49,30,65,688
56,57,13,869
22,94,35,639
95,15,54,257
127,47,15,770
364,59,98,940
451,98,15,381
Cash &bank
balances
Loans&advances
86 | P a g e
Total
87 | P a g e
314,97,56,052
327,07,33,7
614,75,32,5
779,23,58
11
82
,719
Current Liabilities:-
Particulars
2006-07
2007-08
2008-09
2009-10
Current
liabilities
150,54,85,367
184,14,55,504
243,79,37,215
290,76,23,187
Provisions
15,07,82,583
44,55,17,937
150,71,51,155
110,75,01,382
Total
165,62,67,950
228,69,73,441
394,50,88,370
401,51,24,569
2006-07
2007-08
2008-09
2009-10
327,07,33,
614,75,32,
779,23,58
711
582
,719
Current assets
314,97,56,052
Inventories
131,13,49,045
100,94,77,399
128,23,70,978
242,70,35,234
4,55,91,324
92,44,909
1,67,51,945
85,62,464
179,28,15,683
225,20,11,403
484,84,09,659
535,67,61,021
Prepaid expenses
Quick Assets
2006-07
2007-08
2008-09
2009-10
Current assets
314,97,56,052
327,07,33,
711
614,75,32,
582
779,23,58
,719
Current
Libilities
165,62,67,950
228,69,73,441
394,50,88,370
401,51,24,569
Net working
Capital
149,34,88,102
98,37,60,270
220,24,44,212
377,72,34,150
88 | P a g e
2006-07
Trade creitors
30,78,52,017
Advances
76,12,90,
Pataments
853
Total
1069142870
2007-08
2008-09
2009-10
71,17,56,017
108,55,75,288
83,96,63,461
212,23,57,012
314,92,45,708
1198528794
23834113029
4504830991
2007-08
2008-09
35,88,65,3
33
2006-07
Net sales
714,54,29,942
Current Assets
314,97,56,052
986,34,49, 1,530,13,09
724
,179
327,07,33, 614,75,32,5
2009-10
1,924,67,18
,554
779,23,58,7
711
82
19
2006-07
2007-08
2008-09
2009-10
Raw materials
consumed
117,78,43,411
152,07,14,101
201,15,00,369
256,41,31,071
Power &fuel
213,09,90,165
253,77,39,394
309,96,30,439
407,91,09,987
Stores
consumed
17,65,89,866
27,30,51,716
39,18,96,722
51,83,87,209
Repairs &
maintenance
10,20,11,133
13,62,11,942
16,69,12,337
20,93,37,523
Salaries
,wages,& others
40,50,21,168
46,18,38,018
56,51,83,734
81,02,19,938
Administrative
expenses
18,84,79,404
20,69,29,688
23,57,84,081
22,40,93,039
12,43,47,388
11,47,25,995
3,52,73,732
5,74,66,340
89 | P a g e
Managing
directors
remuneration
1,91,32,8256
6,16,75,173
24,78,52,296
32,40,44,976
Packing
charges
50,17,99,705
63,29,86,822
81,28,22,757
82,37,50,450
Interest &
finance charges
35,88,92,443
34,35,16,151
22,82,94,830
51,69,75,617
90,53,10550
169,86,74,224
221,42,08,346
285,85,53,827
22,91,27,610
31,18,74,555
26,01,20,007
19,69,26,956
Donations
1,13,75,561
1,32,22,602
1,09,96,686
1,72,07,803
Current
Operating
Expenses
633,09,21,229
831,31,60,381
1028,82,44,7999
1320,00,44,657
Transportation
& handling
expenses
Advertisements
& other sales
promotion
expenses
2006-07
2007-08
2008-09
2009-10
Cash& bank
balance
43,41,18,131
49,30,65,688
56,57,13,869
22,94,35,639
Cash& bank
balances
43,41,18,131
49,30,65,688
56,57,13,869
22,94,35,639
2006-07
2007-08
2008-09
2009-10
Opening Stock
23,53,35,756
37,03,95,007
35,51,42,883
23,18,31,768
Purchases
94,09,54,038
65,43,34,516
105,05,39,210
209,93,72,884
Manufacturing/Di
rect Expenses*
301,50,03,420
369,76,94,498
461,49,05,237
583,68,54,491
90 | P a g e
Closing Stock
37,03,95,007
35,51,42,883
23,18,31,768
32,76,62,350
COGS
382,08,98,207
436,72,81,138
578,87,55,562
784,03,96,793
2006-07
2007-08
2008-09
2009-10
Opening Stock
23,53,35,756
37,03,95,007
35,51,42,883
23,18,31,768
Closing Stock
37,03,95,007
35,51,42,883
23,18,31,768
32,76,62,350
Average Inventory
11,76,67,878
36,27,68,945
29,34,87,301
27,97,47,059
2006-07
2007-08
2008-09
2009-10
6,33,17,601
7,11,34,851
10,60,20,257
15,11,14,024
7,11,34,851
10,60,20,257
15,11,14,024
30,30,46,756
6,72,26,226
8,85,77,554
12,85,67,141
22,70,80,290
Particulars
Particulars
Opening Raw
Material
Closing Raw
Material
Average Raw
Material
91 | P a g e
Particulars
2006-07
2007-08
2008-09
2009-10
Opening work-inprogress
16,77,35,679
23,49,67,246
26,63,50,618
12,84,63,788
Closing work-inprogress
23,49,67,246
26,63,50,618
12,84,63,788
16,65,25,194
Average Work-inprogress
20,13,51,463
25,06,58,932
19,74,07,203
19,76,44,491
2006-07
2007-08
2008-09
2009-10
Opening Finished
Goods
6,76,00,077
13,54,27,761
8,87,92,265
10,33,67,980
Closing Finished
Goods
13,54,27,761
8,87,92,265
10,33,67,980
16,08,37,156
Average Finished
Goods Inventory
10,15,13,919
11,21,10,013
9,60,80,123
13,21,02,568
2006-07
2007-08
2008-09
2009-10
42,66,88,022
45,27,34,619
49,34,74,854
65,34,48,795
92 | P a g e
Closing Debtors
Average Debtors
93 | P a g e
45,27,34,619
49,34,74,854
43,97,11,32
47,31,04,
737
65,34,48,795
61,60,72,465
57,34,61,825
63,47,60,630