Financial Statement Analysis in CCL

SUMMER TRAINING PROJECT REPORT ON
FINANCIAL STATEMENT ANALYSIS IN CCL
Master school Of Management, Meerut Page 1
Acknowledgement
I would like to express my gratitude towards the Mr. Utpal Banerjee, GM HRD, Central
Coalfields Limited, for providing me an opportunity to undergo summer internship in his
organization.
I would sincerely acknowledge the enduring support provided by my project guide Mr. A. D.
Wadhwa (Senior Finance Officer, CCL Ranchi) during the course of the project. Without his
support, it would not have been possible for me to successfully complete the project.
I also want to pay acknowledgements to my Institute (Master School Of Management, Meerut)
for instilling in me the confidence to work on such a wonderful project. I am thankful to my
faculty guide Ajay Sharma for guiding me during the course of the project.
Dinesh Kumar Mandal
Table of Contents
page no.
Topic
1
.
Acknowledgement
Successful Completion Certificate
Executive summary
Introduction
Objectives of the study
Brief introduction of Concepts/Models introduced in the study
7-11
Brief about the Organization/Company
12-14
Methodology followed
15
Tabulation and Findings
16-22
Interpretation and Conclusions
23-50
Recommendations
51
Limitations of the study
52
Scope for further improvements
53
Appendices
54-60
Bibliography
61
Executive Summary
Central Coalfields Limited is awarded a Miniratna Company status by the Government of India.
This means that the company is productive and Rs. 500 crores can be invested in the company at
any moment. Also in India the major amount of electricity is produced by Thermal Power
Stations which uses coal as a major raw material, and Coal India Limited has got the sole
authority to mine coal in India. Central Coalfields Limited is one of the seven subsidiaries of
Coal India Limited. Coal India Limited is also the second largest employer in India after Indian
Railways. Besides this Coal India Limited is also one of the highest payers, who pays almost
equivalently to ONGC. The main reason for carrying our study in this company is that all the
subsidiaries of Coal India Limited were previously running into losses, but over the last few
years they are recovering the previous losses and started generating profits. So it was a good
opportunity for us to track the changes in the company and how it started making profits.
Analysis of Financial Statements is a major tool to judge the companys profitability and its
financial performance over the years. Also it is helpful in judging the solvency position of the
company.
Introduction
The process of Financial Analysis includes various steps like ratio analysis, trend analysis
comparative statements, schedule of changes in working capital, common size percentages, funds
analysis, etc. Financial statement analysis refers to an assessment of the viability, stability and
profitability of a business, sub-business or project. The main objective of any financial analysis
or financial statement analysis will be assessing corporate excellence, judging creditworthiness,
forecasting bond ratings, predicting bankruptcy, and assessing market risk.
The detailed methodology is explained further in this project report.
Objectives of Study
In this study we would mainly learn how to do financial analysis of a company. And judge how
Central Coalfields Limited is performing financially. Also we will see the solvency position of
the firm and its future financial strengths
Introduction of concepts/models used in the Study

In our study we would do the analysis in the following way:
Ratio Analysis
Trend Analysis
Common Size Statements
And then carrying out multiple discriminate analyses to find out the financial health of the
organization in the near future.
The methods used are explained below in details:
Ratio Analysis
Ratio analysis is a powerful tool of financial analysis. In financial analysis, a ratio is used as a
benchmark for evaluating the financial position and performance of a firm. The absolute
accounting figures in the financial statements do not provide a meaningful understanding of the
performance of a firm. Ratios help to summarize large quantities of financial data qualitative
judgment about the firms financial performance. But it should be noted that a ratio reflecting a
quantitative relationship helps to form a quantitative judgment. Financial ratios quantify many
aspects of a business and are an integral part of financial statement analysis.
Financial ratios are categorized according to the financial aspect of the business which the ratio
measures.
Liquidity ratios measure the availability of cash to pay debt.

Activity ratios measure how quickly a firm converts non-cash assets to cash assets.
Debt ratios measure the firm's ability to repay long-term debt.
Profitability ratios measure the firm's use of its assets and control of its expenses to
generate an acceptable rate of return.
Liquidity ratio
Liquidity refers to the ability of a firm to meet its obligations in the short run, usually one year.
Liquidity ratios are generally based on the relationship between current asset (the sources for
meeting short term obligations) and current liabilities. The important liquidity ratios are: current
ratio, acid test ratio, and cash ratio.
Current ratio: - it is defined as current asset divided by current liabilities. The current ratio is a
measure of the firms short term solvency. It indicates the availability of current asset in rupees
for every one rupee of current liability. A ratio greater than one is desirable. It is given as
Current Asset / Current Liabilities
Quick ratio: - It is also known as acid test ratio. It establishes a relationship between quick, or
liquid, assets and current liabilities. Inventories normally require some time for realizing into
cash. Quick ratio is given as
Quick ratio = (Current Asset Inventories) / Current Liabilities
Cash ratio: - Since cash is the most liquid asset. We may examine the cash ratio and its
equivalent to current liabilities. This is a very stringent measure of liquidity.
(Cash and Bank Balances + Current Investments) / Current Liabilities
Leverage Ratio
Financial leverage refers to the use of debt finance. While debt capital is a cheaper source of
finance, it is also riskier. Leverage ratio help in assessing the risk arising from the use of debt
capital. It helps in judging the long term financial position of the firm. Leverage ratios convey a
firm's ability to meet the interest costs and payment schedules of its long term obligations.
Following are some of the most important long term solvency or leverage ratios.
Debt Equity Ratio: - The relationship describing the lenders contribution for each rupee of the
owners contribution is called debt-equity ratio. Debt equity ratio is given as
Total Debt / Equity or Net Worth
Debt-Asset Ratio: - The debt-asset ratio measures the extent to which borrowed funds support
the firms assets. It is
Total Debt / Total Assets
Interest Coverage Ratio: - This ratio is used to test the firms debt-servicing capacity. It shows
the number of times the interest charges are covered by funds that are ordinarily available for
their payment. As funds equal to depreciation (non cash expense) are also available to pay
interest charges, they are also taken into account. The ratio is given as
EBITDA / Interest
EBITDA / [Interest + Repayment of loan/ (1-tax rate)]
Turnover Ratios
Turnover ratios, also referred as activity ratio or asset management ratios, measure how
efficiently the assets are employed by a firm. These ratios are based on the relationship between
the level of activity, represented by sales or cost of goods sold, and levels of various assets. The
important turnover ratios are: inventory turnover, average collection period, debtors turnover,
fixed asset turnover and total asset turnover.
Inventory Turnover: - It measures how fast the inventory is moving through the firm and
generating sales. The inventory turnover reflects the efficiency of inventory management. It is
defined as
Cost of goods sold / Average inventory
Debtors Turnover: - This ratio shows how many times sundry debtors turn over during the
year. It is defined as
Net Credit Sales / Average Debtors
Average Collection Period: - It represents the number of days worth of credit sales that is
locked in sundry debtors. The average collection period may be compared with the firms credit
terms to judge the efficiency of credit management. It is given as
Average sundry debtors / Average daily credit sales
or
365 / Debtors turnover
Fixed Asset Turnover: - The ratio measures sales per rupee of investment in fixed assets. It
measures the efficiency with which the fixed assets are employed. It is defined as
Net Sales / Average net fixed assets
Total Asset Turnover: - this ratio measures how efficiently assets are employed, overall. It is
defined as
Net Sales / Average total assets
Profitability Ratios
Profitability reflects the final result of business operations. There are two types of profitability
ratios: profit margin ratios and rate of return ratios. Profit margin ratios show the relationship
between profit and sales. The most popular profit margin ratios are: gross profit margin, net
profit margin, and operating profit margin. Rate of return ratios reflect the relationship between
profit and investment. The important rate of return measures are: return on asset, earning power,
return on capital employed and return on equity.
Gross Profit Margin: - This ratio shows the margin left after meeting the manufacturing costs.
It measures efficiency of production as well as pricing. It is defined as
Gross Profit / Net Sales
EBITDA Margin: - This ratio shows the margin left after meeting manufacturing expenses,
selling, general, and administrative expenses. It reflects operating efficiency of the firm. It is
defined as
EBITDA / Net sales
Net Profit Margin:-This ratio shows the earnings left for shareholders as a percentage of net
sales. It measures overall efficiency of production, administration, selling, financing, pricing, and
tax management. It is defined as
Net profit / Net sales
Return on Asset: - it represents the earning generated from the total assets of the firm. It is
defined as
PAT / Average total assets
Earning Power: - Earning power is a measure of business performance which is not affected by
interest charges and tax burden. It is defined as
PBIT / Average total assets
Return on Capital employed: - ROCE is a post tax version of earning power. It considers the
effect of taxation. It is defined as
PBIT (1-Tax rate) / Average total assets
Return on Equity: - ROE measures the profitability of equity funds invested in the firm.
Because maximizing shareholder wealth is the dominant financial objective. It is defined as
PAT / Equity or Net worth
Trend Analysis
Besides looking at the ratios for one year, one would like to look at the ratios for several years.
This will help in detecting secular changes and avoiding the bias introduced by transitory forces.
Comparison of two or more year's financial data is known as horizontal analysis, or trend
analysis. Trend analysis is facilitated by showing changes between years in both rupees and
percentage form. Trend analysis of financial statements can also be carried out by computing
trend percentages. Trend percentage states several years' financial data in terms of a base year.
The base year equals 100%, with all other years stated in some percentage of this base. When the
resulting figures are shown on a graph, we will get the trend of growth.
Common Size Statements

A useful and convenient way of understanding financial statements is to express each item on the
profit and loss account as a percentage of sales and each item on the balance sheet as a
percentage of total assets. The resulting financial statements are called common size statements.
An investigation of the comparative financial statements helps to highlight the significant facts
and points out the items which need further analysis. From analytical point of view, such
statements are quite useful to investors.
Introduction of C.C.L
C.C.L is a subsidiary company of coal India limited under ministry of coal and mines govt. of
India. C.C.L is one of the 7 coal production subsidiaries of Coal India Limited. Company is
governed by a board of directors consisting of 5 full time directors and 6 part time directors. Full
time directors are responsible for specific functions of operation, project & planning, finance and
personnel.
Coal India Limited A Profile

Coal India limited is the third largest coal producing company in the world. It was formed on 21 st
October, 1975 as a Holding Company under the ministry of coal, Govt. of India, for the entire
coal industry in the country barring the coal mines in Andhra Pradesh and captive mines of
TISCO, IISCO and DVC. Its registered office is located at 10, Netaji Subhash Road, Kolkata. It
was declared Public Sector Undertaking in November, 1975 for reorganizing the nationalized
coal mines and ensuring integrated development of coal, the prime source of energy.
Coal India Ltd. is a Schedule - A Nav Ratna Company with turnover Rs. 45,796.59 crores during
the fiscal year 2008-2009 and gross profit of Rs. 5,744 Crores. It is the single largest coal
producing company in the world. It contributes about 85% of total Coal production in India. Coal
India operates 473 mines spread over in eight states out of which 283 are underground, 155
opencast and 35 mixed mines. It operates 19 Coal Beneficiation Plants.CIL produces both,
coking and non - coking coal. CIL commands 75% of the Indian coal market. CIL fuels 76 power
stations (69812 MW) out of 78 coal-based thermal power stations (71055 MW), which is 75.5%
of total thermal power generating capacity of 92893 MW in the country. 78% of total coal
produced by Coal India is catered to Power Utilities in the country. CIL also fuels Steel, Cement,
Fertilizer and a host of other industries. It is the largest corporate employer in the world with
4.05 lakhs employees (approx) including 15,328 (as on 1.09.09) executives and has its
headquarters at Kolkata, West Bengal.
Coal India Limited was formed in 1975 as a holding company has eight subsidiary companies:
Eastern Coalfields Ltd., Sanctoria near Asansol
Bharat Coking Coal Ltd., Dhanbad
Central Coalfields Ltd., Ranchi
Western Coalfields Ltd., Nagpur
South Eastern Coalfields Ltd., Bilaspur
Mahanadi Coalfields Ltd., Sambalpur
Northern Coalfields Ltd., Singrauli
Coal Mine Planning & Design Institute Ltd., Ranchi
Central Coalfields Limited

Central Coalfield Limited has been on the coal map the country as a public sector on October
1956 under different names. In the beginning it was known as National Coal Development
Corporation, then Central Division of Coal Mines Authority, and finally under its present
nomenclatures at Ranchi, Jharkhand. The Central Coalfield Limited is one of the subsidiaries of
Coal India Limited registered under the Companys Act 1956 in the year 1975. The mining and
extraction of coal is entrusted to a public sector organization Coal India Limited. The Company
is divided into eight subsidiaries and Central Coalfield Limited is one of them.
Like other industries and organization, the affair of CCL too is not settled by its owner (Govt. of
India). Rather the professional team of management called Board of Directors (BOD) is
appointed by the Govt. of India to manage the affair of CCL. It consists of chairman cumManaging Director, four functional Directors in charge of operations, personnel, finance and
projects & planning.
CCL is the major source of medium coking coal in India. CCLs other important activities are
beneficiation of medium coking coal for steel plants through its chain of coal washeries and
manufacture of soft coke for domestic kitchen. Most of the production (88%) comes from
surface mines. The productivity of underground mines and many of the surface mines is low, but
because of high priced of coking coal, the company has been making marginal profit and losses
with the recent deregulation of coking coal price the profitability of the company is expected to
improve. The command area of CCL companies 10 coalfields namely Giridih, East Bokaro, West
Bokaro, Ramgarh-kaitha, North Karanpura, South Karanpura, Auranga, Hutar, Daltongang and
Giridih/ Jayanti.
Vision of the Company:
"Committed to create eco-friendly mining"
Mission of the Company:
"To become a World class, Innovative, Competitive & Profitable

Coal Mining Operation to achieve Customer Satisfaction
as top priority."
Objectives of the Company:
Coal mining through efficiently operated mines.

Besides fulfilling coal needs of the customer in terms of quantity, focus on quality, value
addition and beneficiation to the satisfaction of the customers.

Marketing of coal as main product
CCL has played a major role in socio-economic growth of Jharkhand region. In 47 years of its
existence it has virtually brought out development in many backward areas through its mining
activities, employment opportunities and reaching basic infrastructure to several remote and
inaccessible areas. CCL also strive to help in establishing Coal based industries in this region and
also to reach coal as domestic fuel to homes with an objective of improving forest cover.
Method of Coal Mining
Coal is obtained from the earths surface called mines. Mines are of two types:
1. Opencast Mines
In this type of mine with the help of technology attempt is made to reach the level of coal seam
by removing the overburden (i.e. after removing everything lying above the coal seam). For this
heavy machines like HEMM (Heavy Earth Moving Machine) are used the manpower is reduced.
2. Underground Mines
In this type of mine, technology attempts to reach the coal seam not by removing the overburden
but through a pit. These mines are in those areas where coal seam is deep. The overburden
remains intact the workers dig the ground. The workers are sent to the level of coal seam either
through shaft (an inclination) or through lift, i.e. DOLI. There is optimum utilization of
manpower in these mines.
In this type of mines there is high risk of accidents due to the fall of roofs and sides. In order to
avoid these accidents thrust is given to provide support of green roof with steel supports like
steel cogs, pit props, roof, Bolts, W-straps, etc
Methodology Followed
Training
The initial training consisted of gaining the required knowledge about the industry and the
working of the company. It also included the working of finance department in the company and
a brief about the significance of the industry. How it is helping India to grow.
Information gathering
The following techniques were used for the information gathering:
1. Regular visits to the organization and getting information about the procedures and working of
the organization.
2. Websites and brochures of the organization and the leading company in this sector
Analysis using quantitative techniques

The information gathered was compiled and analyzed using quantitative techniques to identify
the financing needs of the organization and its financial health. This analysis helped in
identifying the weak and strong areas of Central Coalfields Limited. It also helped in identifying
the areas of concern for the organization.
Tabulation and Findings

Consolidated Balance Sheet of Central Coalfields Limited (2005-2009)
2009
(Rs. In
Lakhs)
2008
(Rs. In
Lakhs)
2007
(Rs. In
Lakhs)
2006
(Rs. In
Lakhs)
2005
(Rs. In
Lakhs)
94000.0
0
120682.
60
214682.
60
94000.0
0
94617.2
0
188617.
20
94000.0
0
74627.8
2
168627.
82
94000.0
0
38247.5
2
132247.
52
94000.0
0
-4363.37
89636.6
3
0.00
29397.5
8
29397.5
8
0.00
42287.7
7
42287.7
7
0.00
58312.8
0
58312.8
0
0.00
89593.7
6
89593.7
6
0.00
105870.
10
105870.
10
244080.
18
230904.
97
226940.
62
221841.
28
195506.
73
448490.
81
303800.
93
144689.
88
31135.3
1
175825.
19
6596.12
56499.5
3
437863.
79
298292.
52
139571.
27
32338.1
5
171909.
42
7538.42
34356.8
9
419881.
08
278372.
96
141508.
12
26707.8
9
168216.
01
8480.72
21405.7
8
403692.
50
269641.
86
134050.
64
27174.1
3
161224.
77
9423.02
16619.3
6
381103.
31
246728.
25
134375.
06
43635.3
3
178010.
39
9423.02
12972.1
6
96806.3
2
74526.4
8
99117.9
4
54130.9
8
81363.5
1
47217.3
1
71584.5
5
61106.5
9
60586.2
9
65984.0
2
Sources of Funds
Shareholder's Funds
Share Capital
Reserve & Surplus
Loan Funds
Secured
Unsecured
TOT
AL
Application of Funds
Fixed Assets
Gross Block
Less: Depreciation
Net Block
Capital Work in
Progress(net)
Investments
Deferred Tax Assets
Current Assets, Loans &
Advances
Inventories
Debtors
181588.
39
274092.
26
111546.
67
223695.
97
33408.7
8
207696.
63
23482.0
2
188181.
52
18411.4
3
79648.4
2
Total Current Assets, Loans &

Advances
Less: Current Liabilities &
Provisions
627013.
45
621854.
11
488491.
56
471391.
32
369686.
23
340848.
12
344354.
68
309780.
55
224630.
16
229529.
00
Net Current Assets
5159.34
17100.2
4
28838.1
1
34574.1
3
4898.84
TOT
AL
244080.
18
230904.
97
226940.
62
221841.
28
195506.
73
Cash & Bank Balances

Loans & Advances(incl.
other C/A)
Consolidated Profit & Loss Account of Central Coalfields Limited (2005-2009)

2009
(Rs. in
Lakhs)
2008
(Rs. in
Lakhs)
2007
(Rs. in
Lakhs)
2006
(Rs. in
Lakhs)
2005
(Rs. in
Lakhs)
INCOME
Sales
Coal issued for other
purposes
Accretion/Decretion in Stock
Other Income
Total Income
521088.
78
103844.
53
-6993.82
46457.6
0
664397.
09
436294. 390072. 391000. 349211.

37
61
70
69
107800. 105972. 102938. 103702.
14
03
85
98
13657.7
13762.0 10910.8
4 7269.90
5
2
36553.3 41848.0 26012.3 22139.4
9
3
3
9
594305. 545162. 533713. 485964.
64
57
93
98
EXPENDITURE
Colliery consumption
consumption of stores &
spares
Employee remuneration &
benefits
Social overhead
Power & Fuel
Repairs & Contractual
expenses
Miscellaneous Expenses
102017.
24
47980.0
0
258928.
00
19300.5
3
25628.6
6
49277.6
3
37535.0
103772.
84
48155.3
1
179092.
14
16527.3
1
22595.2
3
43891.8
4
28045.5
102489.
02
41668.6
2
145125.
14
14360.0
9
22651.9
7
38097.3
0
18355.6
104293.
66
43457.4
9
132292.
09
11977.5
0
21952.8
0
37076.9
8
24951.4
103242.
22
41467.0
1
171845.
58
11645.3
9
21151.6
4
31927.8
7
16255.9
6
Overburden Removal
Adjustment
7198.27
547865.
39
116531.
70
Total Expenditure
Gross Operating Profit
Interest
Financial Charges
4351.05
330.60
19005.3
0
18593.4
8
Depreciation
Provisions/Write-of
PROFIT FOR THE YEAR

Prior Period Adjustment(credit)
PROFIT BEFORE TAX
Provision for income tax

Provision for deferred tax
Fringe benefit tax
PROFIT AFTER TAX
APPROPRIATION
9190.90
5209.21
9748.06
9515.44
74251.2 104303. 102213. 103176. 42541.1

7
09
12
90
0
14331.8
2129.12
-778.58
-182.73
1 1240.35
76380.3 103524. 102030. 117508. 43781.4
9
51
39
71
5
48341.0 46122.5 40931.4 44566.1 22892.1
0
1
5
0
0
22142.6
4 -6206.47 -4786.42 -3647.20 -7097.05
1189.12 1050.51
911.48
752.02
0.00
48992.9 62557.9 64973.8 75837.7 27986.4
1
6
8
9
0
General reserve
Proposed dividend(incl.
taxes)
Profit up to the previous
year
BALANCE CARRIED TO
BALANCE SHEET
8
6
3
1
10356.6 26383.3
2
9 2179.12 5921.83
452436. 409131. 378181. 403457.
87
19
07
45
141868. 136031. 155532. 82507.5
77
38
86
3
10961.7
6425.70 8918.16 9798.43
0
174.32
202.10
235.99
265.83
21774.7 19488.7 32573.4 19223.4
6
9
8
6
7974.00
22927.5
1
10352.0
0
29275.6
6
10578.0
0
28593.5
8
62037.2 39106.9 26597.5

0
0
2
80128.6 62037.2 52399.8
0
0
2
11650.0
0
33226.9
0
0.00
32349.7
-4363.37
7
26597.5
2 4363.37
Accounting Ratios of Central Coalfields Limited for last 5 years

Liquidity Ratios
Current ratio
2005
0.978657
2006
1.111608
2007
1.084607
0.00
2008
1.036276
2009
1.008297
Acid test ratio
0.714698
0.880527
0.845898
0.826009
0.852623
Cash ratio
0.121268
0.10622
0.122898
0.252625
0.302618
Debt-equity ratio
1.181103
0.67747
0.345808
0.224199
0.136935
Debt-asset ratio
0.541516
0.403864
0.256952
0.183139
0.120442
Interest coverage ratio
6.747732
16.31696
14.62604
20.49971
22.92245
Fixed charges coverage ratio
2.195798
4.916037
4.122286
4.51894
3.683737
Inventory turnover
7.157438
5.874913
5.377572
4.849146
5.900666
Debtor's turnover
4.233894
5.118933
6.608976
6.44798
5.593596
Average collection period
86.20905
71.30392
55.22792
56.60687
65.25319
Fixed assets turnover
1.961749
2.42519
2.318879
2.537932
2.963675
Total assets turnover
1.786188
1.762525
1.718831
1.889498
2.134908
Gross profit margin
0.236268
0.397782
0.348733
0.325168
0.223631
EBITDA margin
0.21181
0.408901
0.334392
0.301918
0.191401
Net profit margin
0.080142
0.193958
0.166569
0.143385
0.09402
Return on asset
0.143148
0.341856
0.286303
0.270925
0.200725
Earning power
0.280006
0.573866
0.488888
0.476171
0.330758
Return on capital employed
0.184832
0.378809
0.322715
0.31432
0.218333
Return on equity
0.312221
0.573453
0.385309
0.331666
0.228211
Leverage ratio
Turnover ratio
Profitability ratio
Common Size Balance Sheet of CCL for last 5 years (2005-09)

2005
2006
2007
2008
2009
48.08
-2.23
45.85
42.37
17.24
59.61
41.42
32.88
74.30
40.71
40.98
81.69
38.51
49.44
87.96
54.15
54.15
0.00
100.0
0
40.39
40.39
0.00
100.0
0
25.70
25.70
0.00
100.0
0
18.31
18.31
0.00
100.0
0
12.04
12.04
0.00
100.0
0
194.9
3
126.2
0
68.73
181.9
7
121.5
5
60.43
185.0
2
122.6
6
62.35
189.6
3
129.1
8
60.45
183.7
5
124.4
7
59.28
22.32
91.05
4.82
6.64
12.25
72.68
4.25
7.49
11.77
74.12
3.74
9.43
14.00
74.45
3.26
14.88
12.76
72.04
2.70
23.15
30.99
33.75
9.42
32.27
27.55
10.59
35.85
20.81
14.72
42.93
23.44
48.31
40.74
84.83
91.52
96.88
39.66
30.53
74.40
112.3
0
Less: Current Liabilities & Provisions
114.9
0
117.4
0
155.2
3
139.6
4
162.9
0
150.1
9
211.5
6
204.1
5
256.8
9
254.7
7
Net Current Assets
-2.51
15.59
12.71
7.41
2.11
Sources of Funds
Shareholder's Funds
Share Capital
Reserve & Surplus
Loan Funds
Secured
Unsecured
TOTA
L
Fixed Assets
Gross Block
Less: Depreciation
Net Block
Capital Work in
Progress(net)
Investments
Deferred Tax Assets
Advances
Inventories
Debtors
Loans & Advances(incl.
other C/A
Advances
TOTA
L
100.0
0
100.0
0
100.0
0
100.0
0
100.0
0
Common Size Profit & Loss Account of CCL for last 5 years (2005-09)
2005
2006
2007
2008
2009
100.0
0
100.0
0
100.0
0
100.0
0
100.0
0
29.70
3.12
6.34
139.1
6
26.33
3.52
6.65
136.5
0
27.17
1.86
10.73
139.7
6
24.71
3.13
8.38
136.2
2
19.93
-1.34
8.92
127.5
0
29.56
26.67
26.27
23.79
19.58
11.87
11.11
10.68
11.04
9.21
49.21
3.33
6.06
33.83
3.06
5.61
37.20
3.68
5.81
41.05
3.79
5.18
49.69
3.70
4.92
9.14
4.66
9.48
6.38
9.77
4.71
10.06
6.43
9.46
7.20
1.70
115.5
3
0.56
96.72
6.76
104.8
9
2.37
103.7
0
1.38
105.1
4

Interes
t
Financial Charges
Depreciation
Provisions/Write-of
23.63
39.78
34.87
32.52
22.36
3.14
0.08
5.50
2.72
2.51
0.06
8.33
2.49
2.29
0.05
5.00
1.34
1.47
0.04
4.99
2.11
0.83
0.06
3.65
3.57
PROFIT FOR THE YEAR

PROFIT BEFORE TAX
12.18
0.36
12.54
26.39
3.67
30.05
26.20
-0.05
26.16
23.91
-0.18
23.73
14.25
0.41
14.66
6.56
-2.03
0.00
11.40
-0.93
0.19
10.49
-1.23
0.23
10.57
-1.42
0.24
9.28
-4.25
0.23
INCO
ME
Sales
purposes
Other Income
Total Income
EXPENDITURE
spares
benefits
Social overhead
Power & Fuel
expenses
Overburden Removal
Adjustment
Total Expenditure

Fringe benefit tax
PROFIT AFTER TAX

APPROPRIATION
General reserve
taxes)
Profit up to the previous year
BALANCE CARRIED TO BALANCE
SHEET
8.01
19.40
16.66
14.34
9.40
0.00
2.98
2.71
2.37
1.53
0.00
-9.26
8.50
-1.12
7.33
6.82
6.71
8.96
4.40
11.91
-1.25
6.80
13.43
14.22
15.38
Balance Sheet of Northern Coalfields Limited year ended 31st Mar 09

2009
(Rs. In Lakhs)
Sources of Funds
Shareholder's Funds
Share Capital
Reserve & Surplus
Deferred Tax Liabilities
Loan Funds
Secured
Unsecured
TOTAL
Fixed Assets
Gross Block
Less: Depreciation
Net Block
Capital Work in Progress(net)
Investments
Deferred Tax Assets
Current Assets, Loans & Advances
Inventories
Debtors
Loans & Advances(incl. other C/A)
17767.28
648320.08
666087.36
8555.78
96380.45
96380.45
771023.59
650833.29
459396.48
191436.81
26374.50
217811.31
8019.20
35935.07
7372.85
550602.46
333831.50
Total Current Assets, Loans & Advances

927741.88
382548.80
Net Current Assets
545193.08
TOTAL
771023.59
Profit & Loss Account of Northern Coalfields Limited year ended 31st Mar 09
200
9
(Rs. in
Lakhs)
INCOME
Sales
Coal issued for other purposes
Other Income
655194.21
Total Income
-3452.90
83900.88
735642.19
EXPENDITURE
consumption of stores & spares
Employee remuneration & benefits
Social overhead
Power & Fuel
Repairs & Contractual expenses
Overburden Removal Adjustment
Total Expenditure
Interest
Financial Charges
Depreciation
Provisions/Write-of
0.00
119326.32
102783.21
21677.81
17993.58
87093.95
24359.22
2886.50
376120.59
359521.60
2436.10
2335.34
42208.67
17.14
PROFIT FOR THE YEAR

PROFIT BEFORE TAX
312524.35
576.74
313101.09

Fringe benefit tax
PROFIT AFTER TAX
APPROPRIATION
General reserve
Proposed dividend(incl. taxes)
BALANCE CARRIED TO BALANCE SHEET
121762.12
-5223.56
470.00
196092.53
19609.25
137651.07
429315.29
468147.50
Interpretations and Conclusions

Liquidity Ratios:
2005
Current ratio
0.978657
2006
1.111608
2007
1.084607
2008
1.036276
2009
1.008297
The standard current ratio is 2:1 and bankers in India have used a norm of 1.33:1 but in CCL we
have seen that the ratio is around 1:1 over the last five financial years, being highest in 2006 i.e.
1.11:1. The ratio indicates that firm is able to meet exactly its current liabilities with its current
assets. This is a good sign for creditors as they can entrust the company that there advances will
be recovered. Also this show that the firm is maintaining a lesser amount in current asset and
investing more in fixed assets, as it is visible from the Balance Sheet.
Acid Test Ratio
2005
Acid test ratio
0.714698
2006
0.880527
2007
0.845898
2008
0.826009
2009
0.852623
The standard norm for acid test ratio is 1:1 and CCL is maintaining almost equal. As the
inventories require a considerable time to be converted into cash and fulfill the current liabilities.
And CCL is maintaining a lesser inventory which shows an improvement in its inventory
management as well as it may be a result of liberal credit terms which in turn increases the sales
and a decrease in inventory level. This point is visible through increasing average collection
period.
Cash Ratio
Cash ratio
2005
0.121268
2006
0.10622
2007
0.122898
2008
0.252625
2009
0.302618
There is a considerable rise in the cash ratio, which shows that the company is becoming more
able to fulfill its liabilities directly through almost purely liquid asset. But it also shows that the
company is holding huge cash in hand and not utilizing it for earning more profit. The reason
behind this is that CCL cannot invest in any kind of investments as directed by Government. Its
investment only involves tax free bonds and securities given to it by its suppliers or customers in
order to pay back their debts.
Leverage Ratios
Debt-Equity Ratio
Leverage ratio
Debt-equity ratio
2005
1.181103
2006
0.67747
2007
0.345808
2008
0.224199
2009
0.136935
The ideal value for Debt-equity ratio is 2:1. As the cost of equity is higher than cost of debt and it
is suggested to make investment more through debt to achieve the optimum cost of capital. But
as we can see that the Debt-equity ratio is decreasing every year, this shows that company is
getting stronger and financing its projects through own funds and relying less on loans. Also a
reason for this is the Government regulations on the company, the company cannot borrow funds
from any organization, there are a limited number of organization who can lend to CCL. There
has been a significant decrease in the ratio because the company is repaying its long term loan
taken from Coal India Limited (150 crores every year).
Debt-Asset Ratio
2005
Debt-asset ratio
0.541516
2006
0.403864
2007
0.256952
2008
0.183139
2009
0.120442
The ratio indicates that the companys assets are supported through mainly owners fund and
very less through borrowed funds. This is a good indication from the companys point of view as
it is holding all its assets under its own control.
Interest Coverage Ratio
2005
Interest coverage ratio
6.747732
2006
16.31696
2007
14.62604
2008
20.49971
2009
22.92245
Over the last five years the company shows a lot of improvement in its interest coverage ratio,
which indicates that the company can easily meet its interest burden even if earning before
interest and taxes suffer a considerable decline. The reason being the decrease in the total amount
for loan and so is the interest.
Fixed Charges Coverage Ratio
Fixed charges coverage ratio
2005
2.195798
2006
4.916037
2007
4.122286
2008
4.51894
2009
3.683737
This ratio shows that how much the company is able to pay back its fixed expenses including
interest and the principal amount of the loan. As we see the ratio is continuously improving per
year showing the companys efficiency in meeting its fixed expenses.
Activity Ratio
Inventory Turnover Ratio
Inventory turnover
2005
7.157438
2006
5.874913
2007
5.377572
2008
4.849146
2009
5.900666
The inventory turnover reflects the efficiency of inventory management. The higher the ratio
more efficient the management of inventories is and vice-versa. But over the year we have seen
that the company trend shows that the ratio was declining but there is an improvement in the last
year which indicates that the company is paying more attention in converting its inventory into
sales.
Debtors Turnover Ratio
Turnover ratio
Debtor's turnover
2005
4.233894
2006
5.118933
2007
6.608976
2008
6.44798
2009
5.593596
There is downward trend in the Debtors turnover ratio over the last three years showing liberal
credit terms of the company. But this can be interpreted as good if the marginal increase in sales
due to liberal credit terms is higher than the average amount of funds locked up with the debtors
and vice versa.
Average Collection Period
2005
Average collection period
86.20905
2006
71.30392
2007
55.22792
2008
56.60687
2009
65.25319
The average collection period compared with the firms credit terms to judge the efficiency of
credit management. An average collection period of 86 days means that the collection is slow
and average collection period of 56 days means the collection is prompt. Also seeing through the
consumers of CCL which comprises mainly government companies the average collection period
of 2 months is very prompt. And the increase in average collection period in last year is due to
liberal credit term which is strategically done to increase the inventory turnover as well as the
overall sales of the company.
Fixed Asset Turnover Ratio
Turnover ratio
Fixed assets turnover
2005
1.961749
2006
2.42519
2007
2.318879
2008
2.537932
2009
2.963675
The fixed asset turnover ratio of CCL is growing consistently for last five years except some
depression in 2007. This shows that the company is efficiently using its fixed assets in producing
sales. Also as we saw that company is relying more on fixed asset for generating profits than
current assets.
Total Asset Turnover
2005
Total assets turnover
1.786188
2006
1.762525
2007
1.718831
2008
1.889498
2009
2.134908
This ratio indicates that how efficiently the overall assets are employed. And over the years we
find that CCL is efficiently utilizing its assets to contribute to the profitability of the firm.
Profitability Ratios:
Gross profit Margin
Profitability ratio
Gross profit margin
2005
0.236268
2006
0.397782
2007
0.348733
2008
0.325168
2009
0.223631
Over the years the sales of CCL is increasing but the expenditure is increasing at a faster pace
than sales resulting in lesser profit margin. The company is not able to effectively control its cost
or expenditure.
EBITDA Margin
2005
EBITDA margin
0.21181
2006
0.408901
2007
0.334392
2008
0.301918
2009
0.191401
As mentioned earlier, the earnings or income of the company is increasing approximately at the
rate of 10% but the expenditure had increased at the rate of 20% approximately. The major
increases in the expenses are due to employee remuneration and contractual expenses. As the
company is facing a shortage of workers, the company instead of recruiting new workers, it is
giving them to contractors to extract the coal from the mines and supply it to the company.
Therefore, there has been a huge increase in the contractual expenses.
Net Profit Margin
2005
Net profit margin
0.080142
2006
0.193958
2007
0.166569
2008
0.143385
2009
0.09402
This shows the overall efficiency of the Company net of taxes. The impact of increase in cost
which is reflected in gross profit margin is also impacting the net profit margin as well. Over the
year other income of the company and sales is also improving but the expenditure of the
company is too much high as compared to revenue, the major reason being employee
remuneration. As there has been the sixth pay revision due to which the remuneration expenses
have doubled approximately leading to increased expenditure.
Return on Asset
Return on asset
2005
0.143148
2006
0.341856
2007
0.286303
2008
0.270925
2009
0.200725
Over the years the return on asset is decreasing because as seen earlier the profit margins are
decreasing and the investments made in the assets is increasing, leading to a decrease in the ratio.
Earning Power
Earning power
2005
0.280006
2006
0.573866
2007
0.488888
2008
0.476171
2009
0.330758
Earning power abstracts away the effect of capital structure and tax factor and focusing on
operating performances as we have seen over the five years that companys operating
performance is declining which leads impact on tax structure as well as capital structure. Due to
this, the whole earning power is declining.
Return on Capital Employed
2005
Return on capital employed
0.184832
2006
0.378809
2007
0.322715
2008
0.31432
2009
0.218333
Return on capital employed is the post tax version of the earning power. So it shows the same
trend as earning power.
Return on Equity
Return on equity
2005
0.312221
2006
0.573453
2007
0.385309
2008
0.331666
2009
0.228211
There is a decline because of the operational inefficiency that the company is not able to generate
higher profits. Main factors affecting the operations, of the company, are external and cannot be
regulated. As the company cannot go against the government for Pay revision or the regulations
that it cannot invest it funds in anywhere else.
Common Size Balance Sheet of CCL and NCL for the year ended 31st Mar 09
CCL
(Rs. In
Lakhs)
Sources of Funds
Shareholder's Funds
Share Capital
Reserve & Surplus

Loan Funds
Secured
Unsecured
TOTAL
94000.00
120682.60
214682.6
0
0.00
NCL
%
38.51
49.44
(Rs. In
Lakhs)
87.96
0.00
17767.28
648320.08
666087.3
6
8555.78
2.30
84.09
86.39
1.11
0.00
29397.58
29397.58
0.00
12.04
12.04
0.00
96380.45
96380.45
0.00
12.50
12.50
244080.1
8
100.0
0
771023.5
9
100.0
0
650833.29
84.41
459396.48
191436.81
26374.50
217811.3
1
8019.20
0.00
59.58
24.83
3.42
28.25
1.04
0.00
39.66
30.53
74.40
112.3
0
35935.07
7372.85
550602.46
4.66
0.96
71.41
333831.50
43.30
256.8
9
254.7
7
927741.8
8
120.3
3
382548.80
49.62
Fixed Assets
Gross Block
448490.81
Less: Depreciation
Net Block
303800.93
144689.88
31135.31
175825.1
9
6596.12
56499.53
Investments
Deferred Tax Assets
Advances
Inventories
Debtors
Loans & Advances(incl. other
C/A
96806.32
74526.48
181588.39
274092.26

Advances
627013.4
5
621854.11
183.7
5
124.4
7
59.28
12.76
72.04
2.70
23.15
Net Current Assets
TOTAL
5159.34
2.11
545193.0
8
70.71
244080.1
8
100.0
0
771023.5
9
100.0
0
Comparative Analysis of Central Coalfields Limited and Northern Coalfields Limited

CIL is holding very less amount or value of share of NCL i.e. only 2.3 % of the total asset as
compared to CCL where it is holding 38% of the total assets. Besides this both the companies are
investing around equal proposition of owners fund i.e. 87% approximately. NCL is carrying a
huge amount in reserve and surplus as compared to CCL as it is carrying a lot of previous year
profits as well as it is generating higher profits than CCL.
Both the companies have no amount as secured loans and both are holding around 13% of total
capital employed as unsecured loans which is from CIL, SBI (guaranteed by CIL), etc.
CCL is holding a huge amount of fixed assets as compared to NCL. This shows that CCL
believes in investing more on fixed assets. As we see that NCL is generating higher revenue than
CCL and holding very less amount in fixed assets, this shows that NCL is efficiently using its
fixed asset but CCL is not. Also CCL have a higher capital work in progress than NCL which
shows some operational inefficiency on the part of CCL to convert its work in progress to final
sales.
Both the companies are having a very less amount of investments due to the regulations led
down by government that they can invest in only a limited number of options. And as compared
to NCL, CCL is holding a higher value of investments.
Looking at the current assets holding of both the companies we see that CCL is holding a lot of
inventories as compared to NCL, showing its inability to convert inventories into sales. Also it
has a lot of amount in debtors than NCL indicating the liberal credit terms of CCL. This also
raises question about the type of customer CCL has and that NCL has. Behind this we can say
that CCL is not efficient in collection of its bills receivable.
As far as cash & bank balance is concerned both the companies are maintaining a huge amount
of cash balance to meet out their current liabilities.
CCL is holding a huge amount of current assets in the form of Loans & advances as compared to
NCL. The loans and advances of CCL mainly consist of loans given to its employees.
Along with holding a huge amount in total current assets than NCL, CCL is also having a huge
amount in current liabilities which results in a very lower net current asset. As NCL is having a
lesser amount in current liabilities, it has a higher net current asset value than CCL. This also
shows the preference of NCL to hold higher amount as current asset than fixed asset.
Common Size Profit & Loss A/C OF CCL& NCL for the year ended 31st Mar 2009
CCL
(Rs. in
Lakh)
NCL
%
(Rs.
InLakh)
INCO
ME
Sales
purposes
Other Income
Total Income
521088.7
8
103844.5
3
-6993.82
100.00
19.93
-1.34
46457.60
664397.
09
8.92
127.50
102017.2
4
19.58
655194.
21
0.00
-3452.90
83900.8
8
735642.
19
100.00
0.00
-0.53
12.81
112.28
EXPENDITURE
spares
benefits
47980.00
258928.0
0
9.21
49.69
Social overhead
19300.53
3.70
Power & Fuel

expenses
25628.66
4.92
49277.63
9.46
Overburden Removal
Adjustment
37535.06
7.20
7198.27
547865.
39
1.38
0.00
119326.
32
102783.
21
21677.8
1
17993.5
8
87093.9
5
24359.2
2
0.00
18.21
15.69
3.31
2.75
13.29
3.72
105.14
2886.50
376120.
59
57.41
116531.
70
22.36
359521.
60
54.87
4351.05
330.60
0.83
0.06
Depreciation
Provisions/Write-of
19005.30
18593.48
3.65
3.57
2436.10
2335.34
42208.6
7
17.14
PROFIT FOR THE YEAR
74251.2
7
14.25
312524.
35
Total Expenditure

Interes
t
Financial Charges
0.44
0.37
0.36
6.44
0.00
47.70

PROFIT BEFORE TAX

Fringe benefit tax
PROFIT AFTER TAX

APPROPRIATION
General reserve
taxes)
Profit up to the previous
year
SHEET
2129.12
76380.3
9
0.408590
64
14.66
576.74
313101.
09
0.088025
81
47.79
48341.00
22142.64
1189.12
9.28
121762.
12
18.58
-4.25
0.23
-5223.56
470.00
-0.80
0.07
48992.9
1
9.40
196092.
53
29.93
7974.00
1.53
22927.51
4.40
62037.20
80128.6
0
11.91
15.38
19609.2
5
137651.
07
429315.
29
468147.
50
2.99
21.01
65.52
71.45
Comparative Analysis of Central Coalfields Limited and Northern Coalfields Limited

The total income generated as compared with the sales is higher for CCL than NCL. As CCL is
generating huge revenue through coal issued for other purpose whereas that value is zero for
NCL, and NCL has a higher value of other income as compared to CCL.
CCL has a major expenditure which is not present for NCL i.e. colliery consumption.CCL does
not realize any revenue for this purpose. CCL is more efficient in the consumption of stores and
spares as compared to NCL. The biggest expenditure born by CCL is employee remuneration. as
it can be seen that it is almost 50% of the expenditure, whereas NCL have a very low expenditure
on this as compared to CCL. The reason for such a higher remuneration is the sixth Pay revision
combined with the 11th pay revision of CIL which occurred just the previous year. This led to
almost doubling of the remuneration. NCL has a good stand on this expenditure and is
performing well. Both the companies incur almost the same proportion of expenditure on social
overheads & overburden removal. CCL incurs higher power and fuel cost than NCL. NCL incurs
higher contractual expenses but lower miscellaneous expenses than CCL. Overall expenses of
NCL is very low as compared to CCL, this shows the cost efficiency production of NCL. And
CCL is not able to control its cost mainly due to employee remuneration and coal issued for other
purpose. Also these costs cannot be controlled much as they are governed by the Government
and also influenced by labor unions.
Thus the gross profit of NCL is much higher than CCL i.e. around 2.5 times that of CCL. After
this interest charges borne by CCL is almost double that of NCL. NCL has a high value of
depreciation than CCL which is quite evident as the value of fixed assets held by NCL is almost
1.5 times that of CCL. And CCL keeps a considerable amount as provision for contingent
liabilities but that for NCL is almost negligible.
After the adjustments the profit left for taxation of NCL is much higher than CCL this is due to
the savings on expenditure by NCL. Also this leads to higher net profit for NCL.
Looking at the appropriation we can see that NCL has a huge amount of profit carried up to
previous year. NCL is paying much higher dividend than CCL this must because it is generating
a lot of profit. Both the companies transfer almost the same proportion of amount to their general
reserves. At the end NCL is still left with a higher amount to be transferred to the balance sheet
than CCL.
Common Size Balance Sheet of CCL and ECL for the year ended 31st Mar 09
Sources of Funds
Shareholder's Funds
Share Capital
Reserve & Surplus

Loan Funds
Secured
Unsecured
TOTAL
CCL
2009
(Rs.inlak
h)
ECL
2009
(Rs.inlak
h)
221845.0
0
0.00
221845.0
0
94000
120682.6
38.51
49.44
76.29
0
214682.6
87.96
0
29397.58
29397.58
0.00
12.04
12.04
68925.49
68925.49
0
23.70
23.70
244080.
18
100.0
0
290770.
49
100
76.29
Fixed Assets
Gross Block
Less: Depreciation
Net Block
Investments
Deferred Tax Assets
Current Assets, Loans & Advances
Inventories
Debtors
Loans & Advances(incl. other
C/A
448490.8
1
303800.9
3
144689.8
8
31135.31
175825.1
9
6596.12
56499.53
72.04
2.70
23.15
521733.6
5
398367.0
2
123366.6
3
3984.85
127351.4
8
31.10
0.00
39.66
30.53
32383.41
33810.94
11.14
11.62
183.75
124.47
59.28
12.76
179.43
137.01
42.42
1.37
43.79
0.01
0.00
96806.32
74526.48
181588.3
9
274092.2
6
74.40
68897.84
23.69
112.30
17867.75
6.15
627013.4
256.89
152959.9
52.60
Advances
5
621854.1
1
254.77
Net Current Assets
5159.34
2.11
Profit & Loss Account
0.00
244080.
18
0.00
100.0
0
TOTAL
4
846311.6
7
693351.
73
856739.6
4
290770.
49
291.05
-238.45
294.64
100
Comparative Analysis of Central Coalfields Limited and Eastern Coalfields Limited

As ECL is running in losses for last several years it has no amount in reserve and surplus and has
only share capital as shareholders fund. But CCL is holding much amount as reserve and surplus
which is more than its share capital. ECL is more dependent on the outside funds than CCL for
their operations, this is visible from the figures of unsecured loans which is almost double that of
CCL.
ECL and CCL are having almost equal amount of gross block as a percentage of total capital
employed. But ECL is charging higher rate of depreciation, this may be due to the type of asset
held by ECL. Due to this the net block value of ECL is much lower than that of CCL.
CCL is holding a huge amount as Capital work in Progress as compared to ECL; reason being
CCL is always searching for new mines but the operations of ECL is limited. Also CCL is having
higher amount as Investments than ECL, which has almost nil amount as investments.
As expected from the operation level of CCL as compared to ECL, CCL is holding larger
inventories as well as cash and bank balance. Also CCL has more debtors and also extending
much loans and advances as compared to ECL. This all leads to a huge current asset for CCL but
ECL looks weaker in its current asset holdings.
In spite of lesser current asset ECL is having huge current liabilities even higher than that of
CCL. This also means that ECL is not able to meet is current liabilities with its current assets
showing a weak liquidity position.
Common Size Profit & Loss Account of CCL and ECL for the year ended 31st Mar 09
CCL
2009
(Rs.in
Lakh)
ECL
2009
(Rs.inLak
h)
INCO
ME
Sales
Coal issued for other purposes
Other Income
Total Income
EXPENDITURE
spares
benefits
Social overhead
Power & Fuel
expenses
Overburden Removal
Adjustment
Total Expenditure
521088.8
103844.5
-6993.8
46457.6
664397.
1
100.0 383740.3
19.9
7052.4
-1.3
-1190.0
8.9
25228.1
414830.
127.5
7
100.0
1.8
-0.3
6.6
108.1
102017.2
19.6
4237.1
1.1
47980.0
9.2
46659.9
12.2
49.7 430921.5
3.7
29607.7
4.9
25925.3
112.3
7.7
6.8
258928.0
19300.5
25628.7
49277.6
37535.1
9.5
7.2
32582.2
14794.7
8.5
3.9
7198.3
547865.
4
1.4
15586.3
600314.
6
4.1
105.1
156.4
116531.
7
22.4
4351.1
330.6
19005.3
18593.5
0.8
0.1
3.6
3.6
PROFIT FOR THE YEAR

74251.3
2129.1
14.2
0.4
PROFIT BEFORE TAX
76380.4
14.7

Fringe benefit tax
48341.0
-22142.6
1189.1
9.3
-4.2
0.2
PROFIT AFTER TAX

APPROPRIATION
General reserve
Proposed dividend(incl. taxes)
48992.9
9.4
7974.0
22927.5
1.5
4.4

Interes
t
Financial Charges
Depreciation
Provisions/Write-of

SHEET
62037.2
80128.6
185484.
0
-48.3
7.3
2095.6
20685.8
2019.5
210292.
1
-278.3
210570.
5
0.0
0.5
5.4
0.5
-54.8
-0.1
-54.9
0.0
0.0
338.4
210908.
9
0.0
0.0
11.9 645830.8
856739.
15.4
6
0.0
0.0
0.1
-55.0
0.0
0.0
-168.3
-223.3
Comparative Analysis of Central Coalfields Limited and Eastern Coalfields Limited

CCL as compared to ECL issued much more coal for other purposes; due to this the total income
generated by CCL is higher than that of ECL as a percentage of sales. ECL and CCL both are
providing coal for colliery consumption which is not the case with other subsidiary firms. But
here also CCL is providing higher amount for colliery consumption. Looking at the employee
remuneration figures of ECL, it is quite amazing that the firm is paying much higher than the
total sales to its employees, which is the main reason for its running in losses. Also the figures of
ECL are more than double that of CCL.
All the other expenditure items are more or less comparable or at the same level, major
difference being in employee remuneration and OBR which is three times that of CCL. As ECL
is running in losses it has no provisions for taxation. ECL has a huge amount of carried forward
losses which leads to a total negative profit carried to the final Balance Sheet.
Constraints of Central Coalfields Limited
Employee Remuneration- As CCL is operating at a large scale; total number of
employees working here is also large approx. fifty thousand.

Traditional Method of Production- As CCL is less mechanized than NCL and most of
the work is done by workers here. So the productivity is lesser as compared to NCL.
Political Forces- The political environment plays a vital role in CCL which is not fruitful
for the organization, e.g.- allocation of tenders, employee recruitment, etc.

Trade Unions- There are many trade unions in spite of a single trade union and the
management has to deal with each one of them. The union leaders are very much active
here and they are less concerned for the organization than their personal gains. There are
regular strikes and bandhs.

Mindset of Employees- The employees here are very less motivated towards their work.
Also they had a feeling that once they are recruited, company cannot lay off them before
their retirement. The culture of the region is also inhibiting the productivity as the people
her have not the zeal to improve their skills, they just want a regular source of income
and no extra work.

Colliery Consumption- As other subsidiary firms is not providing any coal for colliery
consumption but CCL is providing a huge amount of coal for colliery consumption for
the welfare of its employees. CCL does not realize any income in return to the coal issued
for colliery consumption.

Customer Profile of CCL- We have seen that the customers of CCL mainly consist of
government bodies and are distributed over a large area as well. So they realize the
revenue after a long duration and they face a problem in transporting the coal to a diverse
region. This increases the cost and the amount remaining as Bills receivables.
Advantages of Northern Coalfields Limited
Highly Mechanized- NCL uses advanced machinery to extract coal from mines. This
improves its productivity and reduces the cost.

Motivated Employees- The number of employees working in NCL are motivated and
also the number of employees working is also low due to which the expenses in
employee remuneration is low.

Colliery Consumption- NCL does not issue any amount of coal for colliery
consumption. All its production is sent for sale.

Customer Profile- The main customer of NCL is NTPC which is close to the company
premises, so the expenditure on transportation is nil and cash is immediately realized
from the debtor.

Type of Mines- NCL mainly operates surface or open cast mines; this facilitates the use
of machines and thus increasing productivity and efficiency of the coal mines.
1. CCL should stop issuing coal for colliery consumption as this is a major source of
expense but the company is getting nothing in return for it.
2. Company should launch a performance based payment system to control the
remuneration expenses.
3. The company should have a single labor union to take care of the issues of employment
and other decisions.
4. There should be centralized recruitment of all the officers as well as blue collar
employees. As we have seen that in one subsidiary there is shortage of worker and its
hiring but there is surplus in another subsidiary but it cannot downsize its employees. So
there should be relocation of workers and officers.
5. There should be mechanization of the company; this would help in extraction of coal with
higher efficiency and reduced cost as well.
6. The company should launch new training programs for its employee to improve their
skill as well as increase their motivation.
7. The company should be allowed to make investments as it is holding a lot of idle funds
which can be used to earn more profits.
Limitations of the Study

Current Data: As the annual reports for the year ending March 2010 is not out for the company.
This study is limited to the study of financial statements till last year
Limitations of financial statements: Ratios are based only on the information which has been
recorded in the financial statements. Financial statements themselves are subject to several
limitations. Thus ratios derived, there from, are also subject to those limitations.
Problems of price level changes: A change in price level can affect the validity of ratios
calculated for different time periods. In such a case the ratio analysis may not clearly indicate the
trend in solvency and profitability of the company.
Scope for further improvements

a. We could have taken the latest data of 2009-10 for comparison. This would reveal some
new facts as well as improvements in the company over the last year.
b. While comparing with other subsidiary we could compare the financial results of surface
mines and underground mines separately, as there is a large difference in their
productivity as well operations. But obtaining data for each mine separately would have
been very difficult and almost impossible to obtain data for its subsidiary company.
c. We could have reached to the place of actual production i.e. mines and collieries and
done the analysis. This would have thrown light on some new prospects of the company.
d. We could take into account all the subsidiaries and calculate the industry average and
compare the performance of the company.
APPENDICES
Significant Accounting Policies of CCL
Basis for Preparation of Financial Statement
The financial statements are prepared and presented under the historical cost convention on an
accrual basis of accounting following going concern concept and complying with generally
accepted Accounting Principles, the accounting standards (AS) issued by ICAI to the extent
applicable and the relevant provisions of the Companies Act, 1956.
Use of Estimates
The presentation of financial statements in the conformity with the generally accepted
Accounting Principles requires that the management of the Company makes estimates and
assumptions that affect the reported amounts of Assets and Liabilities, revenue and expenses of
the period and the disclosure relating to contingent liabilities as at the date of the financial
statements. Actual results could differ from those estimates, but the management of the Company
believes that the estimates used in the preparation of financial statements are prudent and
reasonable. Any revision to the accounting estimates is recognized prospectively in the current
and future periods.
Revenues and Expenditures
All Income and Expenditures having a material bearing on the financial statements are
recognized on the accrual basis and provision is made for all known losses and liabilities except
in the following cases:Master school Of Management, Meerut Page 67
Liquidated damages, interest on delayed payment and escalation claims from customers are
recognized on the basis of final settlement.
Insurances/Railway claims are accounted for on admission/final settlement.
Sale of Scraps is accounted for on delivery of the scraps.
Refund/Adjustment of Tax Authorities is accounted for on cash basis. Additional demands for
income tax, royalty, cess, sales tax, entry tax, etc. are accounted for after final order. In appeal,
payments made against additional demand are treated as advance claim.
Interest payable on account of income tax/sales tax as, demanded by the tax authorities, and is
accounted for in the year of payment. Similarly, interest receivable, if any, are accounted for in
the year of receipt.
Demands/ claims against the companies, which are not likely to materialize into actual liabilities,
are regarded as contingent liabilities. To disclose claims against the company not acknowledged
as debts after a careful evaluation of the facts and legal aspects of the matter involved.
Pending finalization of investigation, no adjustment is carried out in the books in respect of
contingent nature of assets and liabilities.
Revenue Recognition
Revenue from sale of coal is recognized when all the significant risks and rewards of ownership
of the products are passed on to the customers i.e. on the basis of D notes for dispatch by rail and
weightment cards in respect of road dispatches.
Sales exclude royalty, SED, CST/JST/JVAT and accepted deductions made by customers on
account of quality of coal and shortage etc.
The revenue recognition is done where there is a reasonable certainty of collection. On the other
hand revenue recognition is postponed in the case of uncertainty as assessed by management.
Bonus claims on customers in the case of sale of coal, as a result of joint sampling, are accounted
for in sales in the year of settlement irrespective of period of dispatch.
Fixed Assets
Land includes the cost of acquisition, compensation, cash rehabilitation and resettlement
expenses. Other expenditure incurred on acquisition of land viz. compensation in lieu of
employment etc. is, however, treated as revenue expenditure.
Plant & machinery include cost and expenses incurred for erection/installation and other costs
attributable to bring those assets, to working conditions for their intended use.
Capital work in progress includes the advances paid to acquire fixed assets and the cost of the
assets not put to use during the year.
Gross block as well as the accumulated depreciation on surveyed off P&M, vehicles etc. are
taken out of Fixed assets and provision for depreciation respectively and the residual value at 5%
of Book value are transferred to surveyed off assets for disposal. In case of premature survey
off of assets the difference between the WDV and residual value of 5% is charged to Profit &
Loss account, as loss on surveyed off assets.
Development Expenses net of income of the projects/ mines under development are booked to
development account and grouped under Capital work in progress till the projects/mines are
brought to revenue account, except otherwise specially stated in the Project report to are brought
to revenue account, except otherwise specially stated in the project report to determine the
commercial readiness of the project to yield production on a sustainable basis and completion of
required development activity during the period of construction, projects and mines under
development are brought to revenue:(a) From beginning of the financial year immediately after the year in which the project
achieves physical output of 25% of rated capacity as per approved project report, or
(b) 2 years of touching of coal or
(c) From the beginning of the financial year in which the value of production is more than
total expenses,
Whichever event occurs first.
Prospecting & Boring and other Development expenditure: the cost of exploration and other
development expenditure incurred in one five year plan period will be kept in capital work in
progress till the end of subsequent two five year plan periods for formulation of projects before
it is written off except in the case of Blocks identified for sale or proposed to be sold to outside
agency where the expenditures are kept under inventory at cost till finalization of sale
To charge off as a revenue expenditure all up-gradation/enhancements unless they bring
significant additional benefits.
Investments
Investments are stated at cost.
Inventories
Book stock of coal/coke is considered in the accounts where the variance between book stock
and measured stock is up to +/- 5% and in cases where the variance is beyond +/- 5% the
measured stock is considered. Such stock are valued at Net realizable value or cost whichever is
lower. Cost of inventories to their present location and condition.
The allocation of fixed production overheads for the purpose of their inclusion in the costs of
conversion is based on the normal capacity i.e. Annual Action Plan (AAP). The actual production
is considered where it approximates to AAP and in case where the actual production exceeds
AAP, the actual production is considered.
Coking slurry, middlings of washeries are valued at net realizable value except in the case of the
stock of coking slurry on the basis of E-auction price for the quantity booked through E-auction
sale.
Stocks of stores & spare parts (including loose tools) at Central & Area stores are generally
valued at weighted average basis after providing for cost of obsolescence and other anticipated
losses. The year end inventory of stores & spare parts lying at collieries/sub-stores/consuming
centers, which have been initially charged off, are valued at issue price of Area stores. Workshop
jobs i.e. manufactured items in progress are valued at cost plus appropriate production overeads.
Provisions are made at the rate of 100% for unserviceable, damaged and obsolete stores and 50%
for stores and spare parts not moved for 5 years.
Stock of stationary (other than lying at printing press), bricks, sand, medicine (except at Central
Hospitals), and scraps are not considered in inventory.
Depreciation
Depreciation on fixed assets is provided on straight line method at the rates and manner
prescribed in Schedule XIV of the Companies Act, 1956. However, in respect of the following
assets depreciation is provided at the higher rates in line with their estimated useful life.
Particular of the asset
Rate of Depreciation
Telecommunication equipment
15.83% or 10.55%
Dumper up to 35T
15.83%
Dumper up to 50T
13.57%
Hydraulic Shovels>5-10 CUM
11.87%
Hydraulic Shovels up to 1.2 CUM
13.57%
Hydraulic Shovels>1.2-2.2 CUM
13.57%
Hydraulic Shovels>2.2-5 CUM
13.57%
B.H. Drills less than 160 MM
13.57%
LHD
15.83%
SDL
19.00%
Depreciation for additions to/deductions from owned assets during the year is provided with
reference to the month of addition/deduction. Extra shift depreciation is provided on a location
basis except the cases pointed out further.
Capital asset whose ownership does not vest in the company is depreciated over their estimated
useful life.
Provisions equivalent to the amount of depreciation is made against machinery/assets which
could not be put to use for more than three years from the date of purchase/acquisition after three
years i.e. from fourth year prospectively.
Prospecting, boring and development expenditure are amortized over 20 years from the year
when the mine is brought under Revenue or over the estimated useful working life of the project
whichever is lower.
Individual assets costing Rs. 5000/- or less and in case of 100% depreciable assets are entirely
depreciated in the year of acquisition. Assets attracting 100% depreciation, other than items
costing Rs. 5000/- are taken out from the Accounts after expiry of two years following the year
in which these are fully depreciated.
In case of impairment of assets, the depreciation is on the adjusted cost computed after
impairment.
Effect of exchange fluctuation
The reporting currency of the Company is Indian rupee.
Balances of dues from /to overseas parties at the end of the year are translated at the rate of
exchange prevailing at the year end date and the resultant net losses or net gains relating to
revenue items as well as the fixed assets are charged to P&L Accounts as the case may be.
Balance with Coal India Limited (Holding Company)
Amount due to Coal India Limited on account of loan is shown as unsecured loan. Amount
due/receivable arising out of the transaction of revenue nature under Current account is shown as
Current liabilities/Current assets/ Short term deposit, as the case may be.
Apex office charges and interest to Holding Company
Apex office charges by holding company are allocated to revenue mines on the basis of coal
production.
Interest on loans from CIL is allocated to the units on the basis of Net Fixed Assets (excluding
the assets procured against specific loan) at the beginning of the year.
In the terms of CIL letter no. CGM (F)/126/07 dated 08.04.2004 an additional charge at the rate
of Rs. 6/- per tone of coal released towards rehabilitation fund for dealing with fire, shifting and
stabilization of unstable areas of ECL & BCCL is accounted for on the basis of debit advice
received from CIL.
Overburden Removal (OBR) expenses
For opencast mines which have been brought to revenue and have rated capacity of 1 million
tones or above, the cost of OBR is charged on technically evaluated average ratio (coal: OB) at
each mine with due adjustment for advance stripping and ratio variance account.
The net balance of advance stripping and ratio variance at the end of the year is shown as cost of
removal of Overburden.
Lease Transactions
Assets given on operating lease are capitalized at cost. Rental receipts are recognized in Profit &
Loss Account when becomes due.
Impairment of Assets
The carrying amount of the assets, other than inventories is received at each Balance Sheet date
to determine whether there is any indication of impairment. If any such indication exists, the
recoverable amount of assets is estimated.
Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognized for the liabilities that can be measured only by using a substantial
degree of estimation, if
(a) The company has a present obligation as a result of a past event
(b) A probable outflow of resources is expected to settle the obligation :and
(c) The amount of the obligation can be reliably estimated.
Reimbursements by another party expected in respect of expenditure required to settle a
provision is recognized when it is virtual certain that the reimbursement will be received if
obligation is settled.
Contingent liability is disclosed in case of:
(a) A present obligation arising from past events, when it is not probable than an outflow of
resources will be required to settle the obligation.
(b) A present obligation when no reliable estimate is possible: and
(c) A possible obligation arising from past events where the probability of outflow is not
remote.
(d) Contingent asset are neither recognized nor disclosed.
(e) Provisions, Contingent liabilities and Contingent Assets are reviewed at each Balance
Sheet date.
Employee Benefits
Companys contribution paid/ payable during the year to provident fund arre recognized in the
profit and loss accounts on actual liability basis.
Companys liabilities towards gratuity, leave encashment, LLTC/LTC,LCS, Personal Accident
Insurance and settlement allowance, are determined using the projected unit credit method which
considers each period of service as giving rise to additional unit of benefit entitlement and
measures each unit separately to build up the final obligation and is accrued on the basis of
actuarial valuation.
Taxes on Income
Tax on income for the current period is determined on the basis of estimated taxable income and
tax credits computed in accordance with the provisions of the Income tax Act,1961 and based on
the expected outcome of assessments /appeals.
Deferred tax is recognized, subject to the consideration of prudence in respect of deferred tax
assets, on timing differences, being the difference between taxable income and accounting
income that originate in one period and are capable of reversal in one or more subsequent
periods.
Deferred tax assets are recognized and carried forward only to the extent that there is reasonable
certainty supported by convincing evidence that sufficient future taxable income will be
available against which such deferred tax assets can be realized.
Deferred tax is quantified using the tax rates and laws enacted or substantively enacted as on the
balance sheet date.
General
Securities by way of deposit in the form of Fixed Deposit Receipts, National Saving Certificates,
and Bank Guarantee etc. received from the suppliers, contractors etc. are kept in Companys
custody and are not accounted for.
Research and Development Expenditure of revenue nature are charged to various natural revenue
head of accounts in the year the expenses are incurred. Expenses of capital nature are treated ass
fixed assets.
The Mandatory Accounting Standards on Segment Reporting (AS-17), related Party Transactions
(AS-18), Discounting Operation (AS-24), Interim Financial Report (AS-25) and Financial
Reporting of Interest in Joint Ventures (AS-27) are not applicable to the Company.
Bibliography
References:
1.
2.
3.
4.
5.
Financial Management, Prasanna Chandra, pg- 79-95

Financial Management, I M Pandey, pg- 579-615
Annual Report of Central Coalfields Limited 2008-09
Annual Report of Northern Coalfields Limited 2008-09
Annual Report of Eastern Coalfields Limited 2008-09
Web References:
1.
2.
3.
4.
www.ccl.gov.in
www.coalindia.in
www.ncl.nic.in
www.easterncoal.gov.in

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SUMMER TRAINING PROJECT REPORT ON

Master school Of Management, Meerut Page 1

Dinesh Kumar Mandal

Master school Of Management, Meerut Page 2

Successful Completion Certificate

Objectives of the study

Brief introduction of Concepts/Models introduced in the study

Brief about the Organization/Company

Tabulation and Findings

Interpretation and Conclusions

Limitations of the study

Scope for further improvements

Master school Of Management, Meerut Page 3

Master school Of Management, Meerut Page 4

The detailed methodology is explained further in this project report.

Master school Of Management, Meerut Page 5

Master school Of Management, Meerut Page 6

Introduction of concepts/models used in the Study

Liquidity ratios measure the availability of cash to pay debt.

Master school Of Management, Meerut Page 7

Master school Of Management, Meerut Page 8

Master school Of Management, Meerut Page 9

Master school Of Management, Meerut Page 10

Master school Of Management, Meerut Page 11

Master school Of Management, Meerut Page 12

Common Size Statements

Master school Of Management, Meerut Page 14

Coal India Limited A Profile

Master school Of Management, Meerut Page 15

Eastern Coalfields Ltd., Sanctoria near Asansol

Bharat Coking Coal Ltd., Dhanbad

Central Coalfields Ltd., Ranchi

Western Coalfields Ltd., Nagpur

South Eastern Coalfields Ltd., Bilaspur

Mahanadi Coalfields Ltd., Sambalpur

Northern Coalfields Ltd., Singrauli

Coal Mine Planning & Design Institute Ltd., Ranchi

Master school Of Management, Meerut Page 16

Central Coalfields Limited

Master school Of Management, Meerut Page 17

"Committed to create eco-friendly mining"

Mission of the Company:

"To become a World class, Innovative, Competitive & Profitable

Objectives of the Company:

Coal mining through efficiently operated mines.

addition and beneficiation to the satisfaction of the customers.

Master school Of Management, Meerut Page 18

Master school Of Management, Meerut Page 19

Analysis using quantitative techniques

Master school Of Management, Meerut Page 20

Tabulation and Findings

Master school Of Management, Meerut Page 21

Total Current Assets, Loans &

Net Current Assets

Cash & Bank Balances

Consolidated Profit & Loss Account of Central Coalfields Limited (2005-2009)

436294. 390072. 391000. 349211.

Master school Of Management, Meerut Page 22

PROFIT FOR THE YEAR

Provision for income tax

74251.2 104303. 102213. 103176. 42541.1

62037.2 39106.9 26597.5