SUMMER INTERNSHIP PROGRAMME 2009-2010

NATIONAL ALUMINIUM CO. LTD.
MINES & REFINERY COMPLEX DAMANJODI, Dist. KORAPUT, ORISSA

FACULTY GUIDE Prof.V.K.GOYAL

INDUSTRY GUIDE R.C. JOSHI SENIOR MANAGER, FINANCE PREPARED AND SUBMITEBY CHITTA RANJAN BEHERA REGD.NO.—209115

Final Dissertation of Summer Internship Topic: Ghaziabad.

By Chitta Ranjan Behera Dated

SIMS

A PROJECT REPORT SUBMITTED IN PARTIAL FULFILLMENT OF AWARD OF POST GRADUATION DIPLOMA IN MANAGEMENT.

A study on Financial Health of NALCO By adopting different financial techniques.
SUBMITTED BY
Final Dissertation of Summer Internship Topic: Ghaziabad. By Chitta Ranjan Behera Dated SIMS

CHITTA RANJAN BEHERA PGDM 2ND SEMISTER Enrollment No: 209115

Project Report On
A study on financial health of NALCO by adopting different financial techniques.
FOR

Post graduation diploma in management Shiva institute of management studies Ghaziabad.
***********

Submitted by CHITTA RANJAN BEHERA Enroll. No: 209115

Final Dissertation of Summer Internship Topic: Ghaziabad.

By Chitta Ranjan Behera Dated

SIMS

Guided by: Mr. Ramesh Chandra Joshi SR.Manager (Finance), NALCO, Smelter Plant

BONAFIDE CERTIFICATE

TO WHOMSOEVER IT MAY CONCERN This is to certify that CHITTA RANJAN BEHERA S/o KAILASH CH. BEHERA is a Bonafide student of PGDM, Batch 2009 -11 , bearing Enrollment No. 209115.Conducted by Shiva Institute of Management Studies. The course is approved by All India Council for Technical Education (AICTE) Ministry of HRD , Government of India.

for SHIVA INSTITUTE OF MANAGEMENT STUDIES

Final Dissertation of Summer Internship Topic: Ghaziabad.

By Chitta Ranjan Behera Dated

SIMS

By Chitta Ranjan Behera Dated SIMS . The training commenced from 19 May 2010 and was completed on 3rd July 2010. Final Dissertation of Summer Internship Topic: Ghaziabad. “Nalco”. The project work entitled “Project Title” embodies the original work done by Chitta Ranjan Behera during his summer project training period.Dr. Shefali Gautam Director Dated : CERTIFICATE FROM THE ORGANISATION This is to certify that Chitta Ranjan Behera Enrollment No: 209115 a student of Post Graduate in Management from Shiva Institute of Management studies has done his summer training in our organization at division of Damonjodi.

has been carried out the project work in “NALCO” on “A study on Financial Health of NALCO by Adopting different financial techniques” under my guidance. Training Division) SEAL OF THE ORGANIZATION (A Government of India Enterprise) REFINERY DIVISION: DAMANJODI: ORISSA CERTIFICATE This is to certify that Mr. He is very sincere and always keen to Final Dissertation of Summer Internship Topic: Ghaziabad. By Chitta Ranjan Behera Dated SIMS . GHAZIABAD. CHITTA RANJAN BEHERA. a bonafide student of SIMS.Name Mr. R C Joshi (Company Guide) Name (Head.

Joshi) Sr. Manager (Finance) DECLARATION I hereby declare that the project study entitled “A study on Financial Health of NALCO by adopting different financial techniques” is submitted to SIMS.learn. It is an original work done by me and to the best of my knowledge and belief. I wish him all success in life. ( R.C. He is having positive attitude which will take him in to new heights in his career. it has not been published earlier elsewhere or presented Final Dissertation of Summer Internship Topic: Ghaziabad. By Chitta Ranjan Behera Dated SIMS .

diploma or other similar title. I would like to thank my institute authorities and my internal guide Prof V. By Chitta Ranjan Behera Dated SIMS . Goyal first for providing me the opportunity to work with one of the most prestigious organization. I want to thank the head of Training Department Mr.K. D C Das for Final Dissertation of Summer Internship Topic: Ghaziabad. (CHITTA RANJAN BEHERA) ACKNOWLEDGEMENT I would like to express my gratitude to all those who gave me the opportunity to complete this project.to any University / Institution for award of any degree.

I would like to thank Mr. I would like to give a special thanks to my parents. R C Joshi and other executive Mr. damonjodi Chitta Ranjan Behera PREFACE Final Dissertation of Summer Internship Topic: Ghaziabad. V K Goyal. Date: Nalco.giving me permission to commence this summer training project in the first instance. stimulating suggestions and encouragement helped me in giving the final shape to this project. whose constant help. B N Behera. T K Pani for their stimulating support. By Chitta Ranjan Behera Dated SIMS . Who gave and confirmed this permission and encourage me to go ahead with my training. their constant support enable me to complete this project work. to do the necessary research work and to use departmental data and resources. I bound to thank other staff Mr. I am deeply indebted to my faculty guide Prof.

The project work is divided into various sections and each section deals with different aspects of financial health analysis like profitability. budgeting and inventory control gives a true and fair view of the sound financial stability of the company to the investors.Healthy finance is the responsibility of the Company’s top Management. The project work is based on the study undertaken by me at Refinery Division of Nalco. earning per share. Final Dissertation of Summer Internship Topic: Ghaziabad. dividend. cash flow statement. ratio analysis. By Chitta Ranjan Behera Dated SIMS . The study and analysis of Segment analysis. share holders. Bankers and creditors. foreign exchange earnings and repayment capacity.

3 CHAPTER – 4 CHAPTER . CHAPTER – 1 CHAPTER – 2 CHAPTER . By Chitta Ranjan Behera Dated SIMS .6 ENCLOSURES: INTRODUCTION NALCO PROFILE INVENTORY CONTROL RATIO ANALYSES CASH FLOW STATEMENTS CONCLUSION & SUGGETION PROFIT & LOSS ACCOUNT BALANCE SHEET ACCOUNTING POLICIES BIBLIOGRAPHY 11-14 15-24 25-36 37-70 71-72 73-74 75 76 77-82 83 Final Dissertation of Summer Internship Topic: Ghaziabad.NATIONAL ALUMINIUM COMPANY LIMITED. CONTENTS PAGE NO.5 CHAPTER .

These yardsticks are fund flow and cash flow analysis for short term problems. We cannot imagine a business without finance. All these strategic and tactical healthy decision are taken in light of the change of economic and monetary policy of Government. top Management uses the following yardsticks as barometer in its finance discipline. National and international level. legal & political changes. optimum dividend policy for share holders and investors. in the customers market and to compare with competitors products. It is the responsibility of top Management to safeguard and protect the specialized profitable activities from the weak and sick operations. To measure finance performance of its products.INTRODUCTION For growth and survival of Company’s business in the intense competitive era of modern product – market technology. inventory and cash budget to meet customer’s service and flow of production. a) Common objectives. To have a high degree of potential excellence carrier in the global market and to carry out each future plan and action among all multinational corporations. its proper planning and control is highly essential to achieve the corporate objectives and goals by extending social benefits to the community. maximizing the wealth of the share holders. healthy finance is required in all its facets to assess and revaluate its goals and objectives. credit policy for Bankers etc. As resources are always scarce and vital. Final Dissertation of Summer Internship Topic: Ghaziabad. environmental turbulence and in the dynamic and rapid changing competitive pressures in the global market place a sound financial health of every organization is highly essential. ratio analysis for operating problems. keeping surplus funds for expansion and diversification. OBJECTIVES OF THE STUDY The objectives can be divided into two parts. By Chitta Ranjan Behera Dated SIMS . social & cultural changes at the regional. Finance is the life blood of every business. divisions.

b) Individual objectives. b) To assess the short term solvency position of Nalco. c) To know and assess the work culture of Nalco of various segments ii) Final Dissertation of Summer Internship Topic: Ghaziabad. To assess the strength and stability of Nalco. INDIVIDUAL OBJECTIVES: i) For owners and investors: a) To assess the long term financial position of Nalco. b) To assess the profitability of Nalco. b) To assess the performance of various segments of Nalco. To assess Nalco’s capacity to pay its short term payments. d) To assess the borrowing capacity of Nalco. To assess the future prospect of Nalco based on current and past performance. For Bankers and money lenders: a) To assess paying capacity of Nalco. c) To assess the cash flow of Nalco. iii) For Management: a) To take important decisions with the help of financial statement analysis. COMMON OBJECTIVES: i) ii) iii) iv) v) To get true & fair view of financial health of Nalco. To assess the operational efficiency and profitability of Nalco. By Chitta Ranjan Behera Dated SIMS .

Separate personal interviews were made with the staff of finance department. Data were collected from Internal and External sources. similarly a business cannot run without financial analysis. 2. 1. where it’s utilized. (b) If incurring losses.(IV) SIGNIFICANCE OF STUDY: A vehicle cannot run without any engine. (A) INTERNAL: Data were interpreted from both primary and secondary sources. By Chitta Ranjan Behera Dated SIMS . METHODOLOGY: For Analysis and study on financial health of Nalco. (a) If making profit. Financial analysis can determine the significance and meaning of the financial statement data. To read daily transactions. To know the profit and loss of the company. Financial analysis is done to know the following factors. 3. ability to pay interest and debt and profitability of sound dividend policy. what is the weakness of the company? The financial statements are major sources of financial information of an enterprise. Questionnaires were given to executives of the finance department Final Dissertation of Summer Internship Topic: Ghaziabad. so that forecast may be made of the future earnings. To know the financial position that is where the company stands.

Printed material carrying the policies of the organization. 3) Balance Sheet 4) Profit and Loss Account 5) Monthly in house Magazine “Parichaya” TOOLS & TECHNIQUES USED: 1) 2) Cash Flow Statement. SOURCE OF DATA: 1) Annual Report of NALCO. . By Chitta Ranjan Behera Dated SIMS Final Dissertation of Summer Internship Topic: Ghaziabad. (B) EXTERNAL: The financial data were collected from various sources like: i) ii) iii) iv) Annual financial report of the company for the five-year period from 1999-00 to 2003-04. Internal report. Ratio analysis.of the company with request to supply data regarding the procedure and technique adopted by them for the management of finance. Manual reports regarding management decisions on different financial aspects. Interaction was also held with the General Manager (Finance) in order to supplement the information received. 2) Annual Audited Accounts. These data have been analyzed with a view to arrive at conclusions regarding the practice of different methods by the management for effective control of financial parameters.

optical and electromagnetic radiation. The demand of aluminum is based on its enviable combination properties. Pure unalloyed aluminum alloys may surpass the tensile strength of steel. While rate of growth in other countries is low due to the fact that they have reached towards the peak. an important packaging material for food. Many possibilities are available for treating and texturing aluminum surface. aluminum has accelerated its applications in a multiple of sectors by replacing other metals. Aluminum permits rapid heat dissipation. By Chitta Ranjan Behera Dated SIMS . INTRODUCTION TO THE ALUMINIUM INDUSTRY Aluminum is a unique metal with remarkable features and versatile applications in every range of life. Inventory Control. Aluminum surface can be reinforced to protect from weather and chemical corrosion. It is a good reflector of thermal. Presently the per capita consumption of aluminum in Final Dissertation of Summer Internship Topic: Ghaziabad. the same in Asia and in particular India is increasing. Aluminum can be formed into different shapes by any of the usual processes in industry. In the last several years. Segment analysis. The metal and its sources are non-toxic and it is. Aluminum weighs only 0.34 times as much as iron. Even minor addition of iron has no significant magnetic field of aluminum. therefore. Aluminum is equivalent in conductance while being 50% lighter.3) 4) 5) Budgeting.

27 kg in USA and 3. It is one of the most prestigious industrial projects in the field of alumina and aluminum making. in a highly optimistic scenario. the Government of India established National Aluminum Company Limited (NALCO) as a public sector enterprise on January 7. Aluminum industry is in the growth period of life cycle and till another five decades it is predicted that the demand in aluminum will remain buoyant. Its impact has already been felt both in the national and international horizon. 1981 at Damanjodi in the tribal District of Koraput. power generation. Today. Orissa. alumina refining. aluminum smelting and casting.5% and per capita income growth as 8%.6 kg in Brazil. Indira Gandhi on March 29. As a major step towards exploiting these vast bauxite deposits. 1981. By Chitta Ranjan Behera Dated SIMS . the per capita consumption figure of aluminum will grow by 10% in the coming days. But with the population growth of 2.5 kg compared to 32 kg in Japan. NALCO has completed 25 glorious years of corporate excellence. The foundation stone of the project was laid by the Prime Minister of India. It is Asia’s largest integrated aluminum complex. rail and port facilities. encompassing bauxite mining. In a major leap forward NALCO has not only addressed itself to the country’s need for self sufficiency Final Dissertation of Summer Internship Topic: Ghaziabad. COMPANY PROFILE ORIGIN-HISTORY OF NALCO The discovery of over one billion tones of bauxite deposits in the east coast of India in the mid-seventies has placed India on the world bauxite map. NALCO is considered to be a turning point in the 55 year old history of Indian Aluminum Industry. Late Mrs.India is only 0.

The company has won many laurels including Star Trading House Status.1298 cr. Aluminum Pechiney of France. alumina refinery and smelter. equivalent Euro-dollar loan raised through a consortium of international banks and the balance RS. This strategic metal is the best of world metals. (PAT) in 2005-06. implementation and monitoring of the project activities as well as speedy decision making in the organization are responsible for the success and growth. Ever since the setting up of the company and commencement of commercial production.2408 cr. Though youngest of all metal. The production of aluminum metal started just a century ago. 1119 cr. This was one of the biggest public sector undertakings set up by the Government in the eighties. The profit of the company has steadily increased from Rs.in Aluminum metal. The entire paid-up equity capital was held by Central Government. The complete and firm reliability of project financing was another hallmark. in 1988-89 to Rs. but also given the country the technological edge in productivity. coming in from the Government of India Plan Funds. provided the technology and basic engineering for bauxite mines.92 cr. the company has been growing by leaps and bounds including earning a considerable foreign exchange for the country by export of its products namely Alumina and Aluminum and achieving a high degree of productivity and efficiency as well as financial performance. By Chitta Ranjan Behera Dated SIMS . Final Dissertation of Summer Internship Topic: Ghaziabad. was partly financed by Rs. there has been strong demand in the country and international market. APEXIL Awards etc. The initial total capital cost of Rs. Efficient planning.18.65 Cr. a world leader in the field.1564.

3700 cr. With low cost operations and international customer base. power generation and managing port facility. This in turn. Nalco enjoys the status of a FiveStar Export House and a Mini Ratna company. Leveraging the technical collaboration with Aluminum Pechiney of France. Nalco has started the second phase expansion after the successful completion of the first phase. In order to strengthen its market position. By 1998. segments viz. Captive Power Plant at Angul and Port Facilities at Vizag. the company not only achieved a zero debt status but it has gone steadily with an internally funded major expansion plan involving an investment of over Rs. By Chitta Ranjan Behera Dated SIMS . low cost operations. Aluminum Smelter. LME registration of products. aluminum smelting. Aluminum Refinery at Damanjodi. Final Dissertation of Summer Internship Topic: Ghaziabad. helped in earning precious foreign exchange and profits for the company brought from its 2nd years of commissioning. NALCO constantly produced high quality aluminum products at completive prices for both domestic and overseas customers and established itself in national and international market in a short span of time. expansion will considerably raise the capacities of its various segments.NALCO has chartered a course of international confidence in Indian industrial capability. The present Rs. international base. NALCO has continued to add value and is poised to grow further. alumina refinery. The company has five multi-locations.4091 cr. NALCO is credited for its well-managed integrated operations in as many diverse areas as bauxite mining. well-integrated. ISO 9002 certification of quality management. Bauxite Mines. environment care conforming to ISO 14001.

cost efficiency and customer service. By Chitta Ranjan Behera Dated SIMS . OBJECTIVES ➢ To maximize capacity utilization. share holders and community at large”. ➢ To provide a steady growth in business by technology up gradation. employees. This has been clearly spelt out in the Company’s Memorandum & Articles 0f Association. not only in the use of modern technology but also in production of world standard aluminum products. Final Dissertation of Summer Internship Topic: Ghaziabad. ➢ To optimize operational efficiency and productivity. NALCO heralded a new era of Aluminum making in the country. Thus. ➢ To maintain highest international standards of excellence in product quality.Thus. employee satisfaction is a part of the Company’s broad mission and is a thrust area. MISSION OF NALCO The broad mission of the company is: “To achieve growth in business with global competitive edge providing satisfaction to the customers. expansion and diversification.

safety and environment friendly products. NATURE OF ACTIVITIES The main activities of Nalco are production of alumina and aluminum. ➢ To instill financial discipline at all level for achieving cost and budgetary controls. optimize utilization of working capital and effective cash flow management. To promote a result oriented organizational work culture that empowers employees and helps realization of individual and organizational goals. ➢ To maintain leadership in domestic market. ➢ To foster high standards of health. ➢ To develop a strong R&D base and increase business development activities. ➢ To maximize return on investment.➢ To have global presence and earn foreign exchange. (B) PRODUCTION UNITS  Bauxite mines Final Dissertation of Summer Internship Topic: Ghaziabad. For this the company has the following units of activities: (A) CORPORATE OFFICE The corporate and registered office of Nalco is situated at Bhubaneswar. the capital city of Orissa. It is housed in a magnificent building named Nalco Bhawan built in lines with the temple architecture of Orissa. ➢ To maximize internal customer satisfaction. By Chitta Ranjan Behera Dated SIMS .

00. Manufacturing of 26. this plant utilizes time tested Bayer Process technology of atmospheric pressure digestion at low temperature. is located in the picturesque valley of Damanjodi. with an average overburden thickness of 3 meters. single-flight. on Panchpatmali hills of Koraput district in Orissa. Taking advantage of the topography. this conveyor is an engineering marvel. multi-curve. One among the top ten alumina refineries in the world. from a captive deposit of about 310million tones. By Chitta Ranjan Behera Dated SIMS . in Koraput district of Orissa.6 kilometer long.00.000 taps energy efficient alumina refinery.Nalco’s bauxite mining. The capacity of bauxite mining is presently being expanded to 63.000 tones per annum. is done through a 14. located downhill.000 tpa detergent grade zeolite are well integrated with the main process streams. cable belt conveyor of 1800 tph capacity. is among the most sophisticated and eco-friendly mining operations to be found worldwide.000 tonnes of bauxite per annum. having three parallel streams of equal capacity. Highly mechanized. the open cast bauxite mining of Nalco features geo-statistics application and computerized mine planning.000 tpa special grade alumina and hydrate as well as 10. co-generation of power Final Dissertation of Summer Internship Topic: Ghaziabad. The transportation of ore to alumina refinery. Nalco’s bauxite mining facility is capable of producing 48. spread over 16 square kilometers.  Alumina Refinery The 15. Apart from distributed digital process control. 75.

By Chitta Ranjan Behera Dated SIMS . The self-reliance of smelter comes from the assured supply of calcined alumina from the company’s refinery at Damanjodi and 410 mw of uninterrupted supply of power from the captive power plant located nearby. comprising a cluster of 8x120 mw turbo generator sets. features micro-processor-controlled burner management.5 mw back pressure turbo generator sets. casting of ingots. strips and wire rods. Capacity of smelter is presently being expanded to 4.000 tpa.60. Final Dissertation of Summer Internship Topic: Ghaziabad. the Aluminum per annum.000 Orissa.from process stream. the smelter has a capacity 3.45. along with integrated facilities for production of carbon anodes.  Aluminium Smelter Based on the state-of-art 180 KA cell to technology produce in of Aluminum tones of Pechiney. is yet another unique feature of the refinery. The 960 mw unit.  Captive Power Plant The captive thermal power plant at Angul is another showpiece in efficient and reliable power generation. Located at Angul smelter complex consists of two pot-lines with 240 electrolytic pot cells in each. using 3x18. billets. It’s also connected to the state grid for sale of surplus electricity. sows.

(C) PORT FACILITIES Nalco has a dedicated port facility at the inner harbour of Visakhapatnam Port on the Bay of Bengal with integrated handling and storage facilities for bulk export of alumina and import of caustic soda lye. The in-house Research & Development efforts in the direction of process improvement.computerized data acquisition and process control. (D) MARKETING / REGIONAL OFFICES The marketing / regional offices of Nalco are located in New-Delhi. Mumbai. The storage facility is up to 75. (E) RESEARCH & DEVELOPMENT Nalco’s R&D centre at Damanjodi is recognized by DSIR.000 tonnes and this gateway to overseas market can reliably handle export of about one million tones of alumina per annum. Chennai. brushless excitation of generators and continuous coal handling systems for optimum. commercial Final Dissertation of Summer Internship Topic: Ghaziabad. automated turbine run-up. Kolkata. Ships up to 35. To meet future needs the capacity is being expanded to 1200 mw. efficiency and quality in power supply. Government of India. Bangalore and Paradip.000 dwt cargo holding capacity can be berthed here. By Chitta Ranjan Behera Dated SIMS . promotion of indigenous technologies. energy conservation. Ministry of Science and Technology.

Development of synthetic granite. the company has already obtained patents for certain special types of aluminas and hydrates. Use of eco-friendly process.000 tpa Zeolite-A Plant by the company. Extensive care is taken in the management of fly ash. wear-resistant ceramics from fly ash and synthetic wood. ENVIRONMENTAL PROTECTION Nalco is a responsible steward for the protection and care of the environment. Development of indigenous technology for production of detergent grade zeolite has leadership to the establishment of 10. Nalco’s collaboration with premier research laboratories of the country has resulted in several research initiatives in alumina and aluminum. safe handling of materials. Final Dissertation of Summer Internship Topic: Ghaziabad. monitoring of occupational health. By Chitta Ranjan Behera Dated SIMS . preparedness for disaster management are all integral to the company’s Commitment to nature and society. ferrite cement. Nalco has set up facility for making 26. have been beneficial to the company’s operation. wear-resistant cast iron and micro alloyed steel from red mud are some of the other achievements on pilot scales. Recovery of iron from red mud with Romelt process is under feasibility study. The ISO 14001 certification of all production units and winning of Indira Priyadarshini Vrikshamitra Award. caustic red mud and fluoride – the three major pollutants associated with Nalco’s operations.000 tpa special grade alumina and hydrates. While continuing its R&D efforts in right earnest. Also based on the collaborative research. efforts at greening-of-the-land.utilization of wastes and development of value added products. The highest level of ecological performance is a standard requirement for the company and the responsibility of the entire workforce. a national honour. bear testimony to Nalco’s concern for environment.

the Nalco product enjoys world wide reputation on account of high standard of customer services. By Chitta Ranjan Behera Dated SIMS . INVENTORY CONTROL INTRODUCTION: Final Dissertation of Summer Internship Topic: Ghaziabad. which are registered with London Metal Exchange.PRODUCTS Along with standard aluminum ingots and sows.

by operational & sales activities.. its physical control & price control is essential. By Chitta Ranjan Behera Dated SIMS . Inventories constitute the most significant part of current assets of NALCO. raw materials. wastage & damages. INVENTORY TECHNIQUES: Final Dissertation of Summer Internship Topic: Ghaziabad. intermediary goods. actually lying in stores. Its theft. absolutely imperative to manage inventories efficiently and effectively in order to avoid unnecessary investment & to have smooth production & sales. To avoid both over-stocking & under –stocking of inventory. semi-finished products. Holding too inventories involve insurance cost. OBJECTIVES OF INVENTORY CONTROL. spares & finished goods. To keep material cost under control so that they contribute in reducing costs of production & overall costs. advantage of price fluctuations. To maintain investments in inventories at the optimum level as required To minimize losses through deterioration. 1) 2) 3) TRANSACTION MOTIVE : To facilitate smooth production & sales PRECAUTIONARY MOTIVE: To guard against the risk of unpredictable SPECULATIVE MOTIVE: To increase or reduce inventory levels to take operation. stores & spares.Financial health of Nalco largely depends on good inventory policy. changes in demand & supply forces & other factors. pilferage. As inventories are the significant cost element of cost of production. storage costs etc. wastage. leakage may jeopardize the long term profitability. therefore. NEED TO HOLD INVENTORIES. 60% of the cost of production is invested in inventories i. It is. 1) 2) 3) 4) 5) 6) 7) To ensure continuous supply of materials.e. To ensure perpetual inventory control so that material lying in stock ledgers should be To ensure right quality goods at reasonable prices.

The ABC analysis is also known as control by importance & exception (CIE). the absence of which cannot be tolerated for more than a view hours and the cost of lost production is high and which are essential for the production to continue as known as essential spares.: The spares. 4) Review of slow and non-moving items. Spare parts of Nalco have been divided into three categories: i) Vital: The spares. These techniques are: 1) ABC Analysis 2) ECONOMIC ORDER QUANTITY. 1) ABC ANALYSIS:The highest value items are classified as ‘A’ category items & kept under tightest possible control. inventory carrying costs are equal to order costs. ii) Essential. about 20% of the items contribute about 20% of value of consumption & are grouped under ‘B’ category & category ‘C’ covers about 70% of items of materials which contribute only 10% of value of consumption. 2) ECONOMIC ORDER QUANTITY (EOQ) : The quantity to be purchased should neither be small nor big because costs of buying & carrying materials are very high. Final Dissertation of Summer Internship Topic: Ghaziabad. Experience has shown that almost 10% of the items contribute to 70% of value of consumption which are grouped under ‘A’ category. Items of relatively least value are grouped under ‘C’ category and kept under simple control. Economic order quantity is the size of the lot to be purchased which is economically viable. 3) VED Analysis: Vital.NALCO has adopted various techniques for control of inventories. the stock out of which even for a short time will stop production and where the cost of stock out is very high are known as Vital spares. By Chitta Ranjan Behera Dated SIMS . Items of relatively lesser value are classified as ‘B’ category items & are kept under reasonable control. Essential & Desirable analysis is used primarily for control of spare parts. 5) Review of obsolete stocks. 3) VED Analysis. It is the point at which.

Consumption of such items is almost Nil. For example. & hyd. may be vital for the production to continue and require constant attention.: The desirable spares are those spares which are needed but their absence for even a week will not lead to stoppage of production. 06-07 523828 227 296 76840 512 4536 880 07-08 659133 23 154 68765 103 3999 1097 08-09 466916 253 461 52848 51 9089 512 Aluminium Metal Rolled Products Final Dissertation of Summer Internship Topic: Ghaziabad. spares pares may be needed when the machine goes out of order. By Chitta Ranjan Behera Dated SIMS . 4) Review of slow and Non-moving items: Slow moving items are those items which are not issued regularly or issued at irregular intervals.iii) Desirable. Some spares though negligible in monetary value. 1) STATEMENT OF INVENTORY OF FINISHED GOODS INVENOTRY OF FINISHED GOODS PRODUCT Bauxite Zeolite Alumina Hydrate Calcined Alumina Spl grd alum. 5) Review of obsolete stocks: Obsolete stocks are those items which have become outdated due to no further use for production purposes.

the same is not being sold and used for captive consumption Bauxite may be considered as major raw material for Alumina and accordingly downtrend of inventory is cause of concern for the company. Level(MT) Inventory (end of the year) SIMS Final Dissertation of Summer Internship Topic: Ghaziabad. The inventory of other finished products as more or less in the comfortable zone. 2) Zeolite inventory is showing steep increase in trend which clearly shows the demand for the product is not there and accordingly management should try to explore new market or make a cost benefit analysis as whether to continue the production or not.Graphical Presentation:- ANALYSIS:1) Bauxite inventory is showing a downward trend even though Bauxite has been classified as finished goods. 2) STATEMENT OF INVENTORY OF RAW MATERIAL (COMPANY AS A WHOLE) Raw Material INVENTORY OF RAW MATERIAL (COMPANY AS A WHOLE) Min. The company should step up excavation of Bauxite and keep sufficient inventory at any point of time to avoid stock out position and thereby loss of production. By Chitta Ranjan Behera Dated . The zeolite plant has already impaired since 2006-07.

32 {0.39 0.67} {0.61} {0.47} 2.02} {0.32 0.84 Raw Material Caustic Soda Coal Fuel Oil Lime Wt.84 ANALYSIS:- Final Dissertation of Summer Internship Topic: Ghaziabad.76 6.98 31320 3694 2356 479 16 61 963171 131523 53157 1727 250 107 1 1 1 1 1 1 0. By Chitta Ranjan Behera Dated SIMS .33 0.24} 5.Caustic Soda Coal Fuel Oil Lime Wt brand Cytec CGM 4000 50000 4000 KL 1000 125 75 30 9422 31320 3694 2356 479 16 61 3) STATEMENT OF INVENTORY OF RAW MATERIAL (REFINARY DIVISION) INVENTORY OF RAW MATERIAL (REFINARY DIVISION) Inventory Yearly Norm Inventory (end of consumption (months) holding the year) (MT) 9422 114787 2 0. Level(MT) 4000 50000 4000 KL 1000 125 75 30 Sort/excess {1. brand Cytec CGM Min.53 3.

which is more than double of minimum level. e-auction coal at higher price.25 13 2007-2008 268. 2) Sourcing of coal is the main constraint company is facing in the near past . Coal being the major source of power for the company. the supply is facing a setback. considering the inflation. Company should take up at highest level to get sufficient linkage coal.08 257. washed coal. is being maintained by the company. OF STORES & SPARES (COMPANY AS A WHOLE) Year Inventory(End of Yearly Inventory the year) Consumption Holding(month) 2006-2007 247.1) Very high inventory of caustic soda.94 222. The inventory holding has gone up from 13 months in 2006-07 to 15% in 2008-09. 4) STATEMENT OF INVENTORY OF STORES AND SPARES (COMPANY AS A WHOLE) STATEMENT OF INV. which clearly shows that the procurement of inventory is on but consumption is not taking place. The extra inventory holding has blocked substantial working capital of the company and also resulting into high carrying cost.44 15 ANALYSIS:Inventory holding of stores & spares is showing steep increasing trend whereas the consumption remains more or less constant.66 230. Lower consumption of Final Dissertation of Summer Internship Topic: Ghaziabad. Management should regulate the supply in such a manner so as to maintain inventory at around minimum level to avoid blocking up of capital and thereby extra carrying cost. Because of less availability of linkage coal. management is resorting to other means of procurement like imported coal.60 14 2008-2009 329. By Chitta Ranjan Behera Dated SIMS . low inventory level in comparison to minimum level is showing a danger signal.Even though the company has long term arrangement of linkage coal with coal companies.

5) STATEMENT OF INVENTORY OF STORES AND SPARES (REFINARY) (AFTER WRITE OFF) Final Dissertation of Summer Internship Topic: Ghaziabad.stores & spares with the aging of the plant is giving an indication that preventive maintenance is not being carried out which may call for a disaster situation for the company in future. The company shout relook the management of stores & spares inventory. The higher inventory is the cause of concern for the company. By Chitta Ranjan Behera Dated SIMS . as large amount of working capital is blocked up causing additional financial implication by way of extra carrying cost.

Imported Indigenous Consumable Imported Indigenous Consumable Imported Indigenous Consumable 33.46 Inventory Holding 50 12 5 16 12 14 6 12 15 18 5 14 Nor m 17 14 6 17 14 6 17 14 6 Sort/E xcess {33} 2 1 5 0 0 2 {4} 1 Extra carryin g cost (15%) 3.38 13.INVENTORY OF STORES AND SPARES (REFINARY) (AFTER WRITE OFF) Year Year end inv.61 15. in 2008-09.06 56.71 16.36 13.28 13.26 6.11 58.63 Yearly Consumptio n 7.87 40.09 66.36 GRAPHICAL PRESENTATION:- ANALYSIS:Inventory of stores & spares of refinery division is showing more or less the same trend as the company as a whole.23 16. On analysis.98 26.97 35.69 50.70 30.10 27.68 7.55 14. By Chitta Ranjan Behera Dated SIMS . However.36 cr. it is seen the refinery division is more or less maintain inventory of imported items & consumables as per norm except in the year 200607. 1. 6) STATEMENT OF INVENTORY OF STORES AND SPARES (REFINARY) (BEFORE WRITE OFF) Final Dissertation of Summer Internship Topic: Ghaziabad.92 7. company is holding high inventories of indigenous material which has resulted in to an additional carrying cost of Rs.37 25.13 56.29 06-07 07-08 08-09 1.50 63.

64 5. In Cr INVENTORY HOLDING OF LAST 5 YRS.(REFINARY) Years After written off Before written off % of write off 2004-2005 69.46 25 17 {8} Extra carrying cost (15%) 3.64 ANALYSIS:The company has a policy of writing off 95% value of the inventory of the items which have not moved for more than 5 years.14 3. The inventory data clearly shows there is no effective inventory control system exists in the company.57 58. Considering the write off. 2009 stood as Rs. (REFINARY) Rs. which is merely a book entry. Consumpti Holding on 91. since 1998-99. considering the actual investment on inventory. 63.Year 06-07 07-08 08-09 INVENTORY OF STORES AND SPARES (REFINARY) (BEFORE WRITE OFF) Sort/Excess Year end Yearly Inventory Norm inv.28 22 17 {5} 104.34 50. the additional financial implication due to higher inventory is Rs.28 corers. 7) STATEMENT OF INVENTORY HOLDING OF LAST 5 YRS. 5. the actual inventory of refinery division as 31st march. Accordingly.07 24.36 22 17 {5} 117.65 corers of non-moving inventory.26 56. By Chitta Ranjan Behera Dated SIMS .65 = 101.63+37. the inventory holding stood at 25 months. Refinery division has so far written off 37.64 cr.19 92. Even if we consider 15% carrying cost & 17 months consumption as a norm.85 Final Dissertation of Summer Internship Topic: Ghaziabad.

which is going to be non move next year.93 >5 17836 1.47 2>1 2180 10.63 92. within one year. The age wise analysis also clearly shows that only 19% of total items are consumed regularly.. SUGGESTI0N FOR BETTER INVENTORY MANAGEMENT:Inventory management of the company.64 27.16 91. i. which may call for write off of 95% value. About 805 items are more than 4 years old and less than 5 years old amounting to Rs.89 45. which is nearly 60% of total items has already been declared as non-moving as per company’s policy and accordingly the value has been reduced by 95%. seems not to be very satisfactory.57 117.93 corers.67 4>3 1373 5.) <1 5605 38.34 104.7 Graphical presentation: 8) Age wise analysis of stores and spares inventory (ref. Div.32 34.38 68. 1.2005-2006 2006-2007 2007-2008 2008-2009 67. in particular for stores & spares. The procurement of stores & spares is Final Dissertation of Summer Internship Topic: Ghaziabad.26 26. By Chitta Ranjan Behera Dated SIMS . 17836 items.e.) YEAR END INVENTORIES(AGE WISE ANALYSIS) Age No of items Inventories(cr.60 66.32 5>4 805 1.51 3>2 1683 5.73 ANALYSIS:Out of total 29482 active items.08 63.

23To make comparison of similar industries lying in different parts of the country. The suggestion for better inventory management is as follows: 1) The proprietary purchase should be reduced to minimum by developing new vendors. OBJECTIVES OF RATIO ANALYSIS:1To know whether the financial performance of Nalco is better or worse than previous period. It should be compared with some standard to make it meaningful.on but consumption is not taking place and thereby the inventory is showing an increasing trend resulting into high inventory carrying cost. It involves four steps. Meaning: RATIO ANALYSIS Nalco likes to use ratios in its financial analysis because of its close relationship between two variables. EPS price. 3) A sense of proprietary concept may be inculcated across all level. To provide information to the shareholders. A single ratio in itself shows nothing & does not indicate favorable or unfavorable condition. It is the process of establishing and interpreting various ratios for helping in making certain decisions. investors. debenture holders. 2) The equipments may be standardized. Final Dissertation of Summer Internship Topic: Ghaziabad. By Chitta Ranjan Behera Dated SIMS . financial institutions regarding return on equity. NATURE OF RATIO ANALYSIS:Ratio analysis is a technique of analysis and interpretation of financial statements.

deteriorated or remained constant over a period of time. it gives indication of the direction of changes and reflects whether the performance and financial position of the Company has improved. Interpretation of the ratios. Group ratios:. intelligence and foresightedness because of the change in price level.Group Ratios are more understandable and meaningful. (i) (ii) Single absolute ratios:. Objectives of analysis :. (iii) (iv) PRECAUTIONS FOR USE OF RATIOS :Following guidelines or may be kept in mind while interpreting various ratios:1) Accuracy of financial statements :. Comparison of the calculated ratios with the ratios of the same firm in the past or the ratios developed from projected financial statements or the ratios of some other firm or the comparison with ratios of the industry to which the firm belongs. For example. changes in accounting policies. The purpose of user is also important for the analysis of ratios. The reliability of ratios is linked to the accuracy of information in these statements. Before calculating ratios one should see whether proper concepts and conventions have been used for preparing financial statements or not. If the purpose is to study current financial position then ratios relating to current assets and current liabilities will be studied.If single ratios is used one cannot draw any meaningful conclusion. the ratio of current assets to current liabilities may be supported by the ratio of liquid liabilities to draw more accurate and specific conclusion. Projected ratios:.The type of ratios to be calculated will depend upon the purpose for which these are required.i) ii) Selection of relevant data from the financial statement depending upon the objective of the analysis. By Chitta Ranjan Behera Dated SIMS .It can be calculated for future for interpreting and taking corrective action for improvement in future plans of investment decisions. The purpose or object 2) Final Dissertation of Summer Internship Topic: Ghaziabad. window dressing etc. Historical comparison:.The ratio are calculated from the data available in financial statements.These ratios are compared over a period of time. iii) INTERPRETATION OF THE RATIOS:Interpretation of the ratios needs skill. The interpretation of the ratios can be made in the following ways.

Another precaution in ratio analysis is the proper selection of appropriate ratios. The information contained in the financial statements is conveyed in a meaningful manner to the one for whom it is meant.for which ratios are required to be studied should always be kept in mind for studying various ratios. He should be familiar with various financial statements and the significance of changes.The ratios will give an indication of financial position only when discussed with reference to certain standards.The ratios are only the tools analysis and their interpretation will depend upon caliber and competence of the analyst. Unless otherwise these ratios are compared with certain standards one will not be able to reach at conclusion. Caliber of the Analyst:. The ratio should match the purpose for which these are required. Planning is looking ahead and the ratio calculated for a number of years work as a guide for the future. By Chitta Ranjan Behera Dated SIMS 2) 3) 4) Final Dissertation of Summer Internship Topic: Ghaziabad. before reaching final conclusions. Use of Standard:. Helps in financial forecasting and planning: Ratio analysis is of much help in financial forecasting and planning. These standards may be rule of thumbs as in case of current ratios and acid-test ratio. etc. Ratio analysis helps in making decision from the information provided in these financial statements. he should not base his decisions entirely on them. 4) 5) 6) USES AND SIGNIFICANCE OF RATIO ANALYSIS TO MANAGEMENT:1) Helps in decision making: Financial statements are prepared primarily for decision making. The interpreter should use the ratios as guide and may try to solicit any other relevant information which helps in reaching a correct decision. A wrong interpretation may create wave for the concern. But the information provided in financial statements is not an end in itself and no meaningful conclusion can be drawn from these statements alone. Meaningful conclusions can be drawn for future from these ratios. since wrong conclusions may lead to wrong decisions. Ratios provide only a base:.The ratios are only guidelines for the analyst. Helps in co-ordination: Ratio even help in co-ordination which is of utmost importance in effective business management. Only those ratios should be selected which can throw proper light on the matter to be discussed. Helps in communication: The financial strength and weakness of a firm are communicated in more easy and understandable manner by the use of ratios. 3) Selection of ratios:. . Better communication of efficiency and weakness of an enterprise results in better co-ordination in the enterprise.

Other uses: There are so many other uses of the ratio analysis. i. By Chitta Ranjan Behera Dated SIMS . To make a better interpretation a number of ratios have to be calculated which is likely to confuse the analyst than help him in making any meaningful conclusion. Ratios are immense importance in the analysis and interpretation of financial statements as they bring the strength or weakness of a firm. one has to be very careful in making a decision for ratio calculation for such financial 4) 5) Final Dissertation of Summer Internship Topic: Ghaziabad. Ratios of the past are not necessarily true indicators of the future. It is an essential part of budgetary control and standard costing. Standard ratios can be based upon Performa financial statements and variance or deviation if any can be found out by comparing the actual with the standard so as to take a corrective action at the right time.e. 3) Inherent limitations of accounting: Like financial statements. It renders interpretation of the ratio difficult. a change in the valuation of methods of inventories from FIFO to LIFO increase the cost of sales and reduce considerably the value of closing stocks which makes stock turnover ratio to be lucrative and an unfavorable gross profit ratio. 2) Lack of adequate standard: There are no well acceptance standards or rules of thumb for all ratios which can be accepted as norms. Inter-firm comparison:. Change of accounting procedures: Changes in accounting procedure by a firm makes ratio analysis misleading. Window dressing: Financial statements can easily be window dressed to present a better picture of its financial and profitability position to outsiders.5) Helps in control: Ratio analysis even helps in making effective control of the business. Hence. This kind of comparison helps in evaluating relative financial position and performance of the Company.Ratios of one Company can be compared with the ratios of some other selected Companies in the same industry at the same point of time. ratios also suffer from the inherent weaknesses of accounting records such as their historical nature. 6) 7) LIMITATIONS OF RATIO ANALYSIS:1) Limited use of a single ratio: A single ratio usually does not convey much of a sense.

It makes comparison of ratios difficult and misleading. 6) Personal bias: Ratios are means of financial analysis and not an end in itself. no consideration is made to the changes in price levels and this makes the interpretation of ratios invalid. Price level changes: While making ratio analysis. Moreover comparisons are made difficult due to difference in definition of various financial terms used in the ratio analysis. Ratios have to be interpreted in different ways. Hence ratios become useless if separated from the statements from which they are computed. Ratios no substitutes: Ratios analysis is merely a tool of financial statements. 7) 8) 9) 10) CLASSIFICATION OF RATIOS :In view of the financial health on the requirement of various uses of ratios. By Chitta Ranjan Behera Dated SIMS . Final Dissertation of Summer Internship Topic: Ghaziabad. Absolute figure distortive: Ratios devoid of absolute figures may prove distortive as ratio analysis is primarily a quantitative analysis and not a qualitative analysis. Activity Ratios. it can be classified into four categories: A) B) C) D) Liquidity Ratios. Profitability Ratios.statements. But it may be very difficult for an outsider to know about the window dressing made by a firm. Leverage Ratios. Un-comparable: Not only industries differ in their nature but also the firms of the similar business widely differ in their size and accounting procedure etc.

By Chitta Ranjan Behera Dated SIMS .NALCO’S FIVE YEARS FINANCIAL PERFORMANCE AT A GLANCE: Final Dissertation of Summer Internship Topic: Ghaziabad.

12 40. & taxes 14.25 50 06-07 2586 3929 6515 575 5940 103 311 2412 3631 3942 3942 322 3620 1239 2381 644 7051 7695 3711 3755 7466 61.43 36. Operating expenses 10. Net Current Assets 24. Prov.91 19. Earnings before Interest. Net profit Balance Sheet 18.21 18.33 60 19.00 3944 2357 6301 54.09 31. Non operating 9. No.39 137. Domestic Sales 3.79 26. Operating profit margin 26.73 08-09 2071 3446 551 8 423 5095 96 400 3431 1760 2160 4 2156 229 1927 655 1272 644 9125 9769 4032 2596 6628 34.89 30.29 72. Particulars Income Statement A. 1. D. By Chitta Ranjan Behera Dated SIMS . Earning before dep. Earnings per share (in Rs. Net fixed Assets 23. Reserves & Surplus 20.95 119.96 75 07-08 2134 3340 5474 485 4989 146 441 2822 2313 2754 2 2752 285 2467 835 1632 644 8230 8874 3531 3500 7031 46. Taxes 12.36 30. For tax 17.09 24. Profit Before Taxes 16. Return of net worth 29.75 50 Final Dissertation of Summer Internship Topic: Ghaziabad.71 23.53 25 19 13 151. Net worth 21. Gross Sales 4. Equity Capital 19. Dividend declared (%) 25.36 32.) 32. Net Sale 6. C. Export 2.51 91. Net Profit margin 27. Depreciation.60 B. Capital Employed Ratios 25. Debt Equity Others 30.01 26. Operating 8. Interest & financing charges 13. Operating profit 11. Book value per share of Rs.96 24. Other income: 7. Depreciation &Amortization 15. Return on cap.Sl. 04-05 2200 2220 4420 316 4104 174 77 1965 2313 2390 61 2329 459 1870 635 1235 644 4054 4698 0. Loans outstanding 22.17 40 05-06 2306 3018 5324 435 4889 101 132 2311 2679 2811 2811 381 2430 868 1562 644 5249 5893 0.00 4139 1005 5144 56.10 each 31.46 24. Employed 28.81 31. Less: Excise duty 5.

Ideal assets earn nothing. or even in legal tangles resulting in the closure of the company.This ratio also known as working capital ratio is a measure of general liquidity & most widely used to make the analysis of a short-term financial position or liquidity position of the firm. Liquidity ratios measure the ability of the Company to meet its current obligations i. debtors and inventories. Bills payable accrued expenses. bills receivable and prepaid expenses. cash and funds flow statements . short-term bank loans. Income – tax liabilities and long-term debt maturing in the current year. so it is necessary to strike a proper balance between high liquidity and lack of liquidity. Quick Ratio or Acid –Test Ratio CURRENT RATIO: The current ratio is calculated by dividing the total current assets by total current liabilities. By Chitta Ranjan Behera Dated SIMS . which can be converted into cash within a year such as marketable securities.The failure of a company to meet its obligations due to lack of sufficient liquidity will result in a poor credit worthiness. ability to pay its obligations as and when they become due. Final Dissertation of Summer Internship Topic: Ghaziabad. Current liabilities include creditors. A very high degree of liquidity is also bad. In fact analysis of liquidity needs the preparation of cash budgets .A) LIQUIDITY RATIOS: Liquidity ratio is one of the important tools of finance department of every organization. Current Assets Current ratio = Current Liabilities Current ratio may be defined as the relationship between current assets and current liabilities . loss of creditors worthiness. The liquidity ratios are classified into:1) 2) 1) Current Ratio.e. All obligations maturing within a year are included in current liabilities. Current assets include cash and those assets.

By Chitta Ranjan Behera Dated SIMS . poor credit management and excessive inventories for the current requirement.CURRENT ASSETS 1) 2) 3) 4) 5) 6) 7) Cash in hand Cash at Bank Marketable Securities Short term investments Bills receivable Sundry Debtors Inventories 3) CURRENT LIABILITIES 1) 2) 4) 5) 6) 7) 8) Outstanding Expenses Bills payable Short term advances Income tax payable Dividends payable Bank overdraft Accrued expenses and Sundry creditors 8) Work in process 9) Prepaid expenses and others which Can be converted into Cash within a year other obligations maturing in current year As a conventional rule a current ratio of 2:1 or more is considered to be satisfactory it represents the margin of safety for creditors. Final Dissertation of Summer Internship Topic: Ghaziabad. An extremely high ratio of current asset to current liability is an indication of slack management.

271 2008-09 4528. 2) Acid Test or Quick Ratios: - This ratio is calculated by dividing Total liquid assets by Total current liabilities.081 2007-08 5041.27 in 2007-08 and 2. company is liquid enough and can meet its short term liability on maturity.81 1933. the funding of which is made internally.The current ratios of NALCO from the year 2006-07to 2008-09 are as follows: 2006-07 C.61 4. The term ‘’Liquidity” refers to the ability of a firm to pay its short-term obligations as and when they become due.08 1218. liability C. Quick ratio may be defined as the relationship between quick liquid assets and current or liquid liabilities. The other assets. The reduction in current ratio was mainly because of ongoing expansion activities . Asset C.34 in 2008-09.08 which got reduced to 3. Quick Assets Quick Ratio = ------------------------Current Liabilities Acid test or quick ratio is a more rigorous test of liquidity than the current ratio. An asset is liquid if it can be converted into cash immediately or reasonably soon without a loss of value.The current ratio in the year 2006-07 was 4. Cash in hand and cash at bank are the most liquid assets.33 1540. Since the current ratio is more than 2:1. By Chitta Ranjan Behera Dated SIMS .24 2.88 3.342 ANALYS IS:. Ratio 4974. which can be included in the Final Dissertation of Summer Internship Topic: Ghaziabad.

a low quick ratio represents that the company’s liquidity position is not good.88 2. marketable securities and short-term or temporary investments. sundry debtors.56 2007-08 5041. Quick ratio of Nalco from the year 2006. and marketable securities. Ratio 4974. A company with a high value of quick ratio can suffer from the shortage of funds if it has slow paying.81-841. bills receivables.33-686.61 3. Generally a quick ratio of 1:1 is considered satisfactory.24 1. corers 2006-07 Quick Asst C.82 2008-09 4528.07 to 2008-09 are as follows:Rs.96 1218.liquid assets. are bills receivable.90 1933. Usually a high acid test ratio is an indication that the company is liquid and has the ability to meet its current liabilities in time and on the other hand. By Chitta Ranjan Behera Dated SIMS .65 1540. liability Q. doubtful and long duration outstanding book debts (receivable) and it can really prospering with a low value of quick ratio if it is realizing cash efficiently from inventories and paying its current obligations in time.9 Final Dissertation of Summer Internship Topic: Ghaziabad. Quick Assets are those assets which are converted into cash immediately for example cash.08-634. debtors.

it clearly indicates that the company is liquid enough and can meet its short term liability on maturity. Final Dissertation of Summer Internship Topic: Ghaziabad.83 in 2007-08 and further reduced to 1. Since the company’s quick ratio is more than 1:1. By Chitta Ranjan Behera Dated SIMS .ANALYSIS:- The quick ratio in the year 2006-07 was 3.46 which was reduced to 2.91 in 2008-09. The reducing trend of ratio is mainly because of ongoing expansion activities.

76 7695.19 2007-08 1925.E Ratio 1484. The capital base of the company is 644.31 Cr against reserve and surplus of Final Dissertation of Summer Internship Topic: Ghaziabad. The funds which are provided by the long-term creditors and the owners are to meet the short term as well as long-term borrowings .22 ANALYSIS:NALCO is a very cash rich company and the only public sector company having zero debt.75 9769. 1) Debt-Equity Ratio: Debt-equity is calculated by dividing Total debt by Total equity.and the repayment of fixed Interest costs. A lower ratio reviles a high margin of safety to the creditors and a relatively high stake of the owners in the capital structures of the firm. A ratio of 1:1 may be usually considered satisfactory although the norm of such ratio is 2:1. By Chitta Ranjan Behera Dated SIMS .B) LEVERAGE RATIO: Leverage ratio judges the long-term financial position of the company. The higher the ratio the greater will be the risk to the creditors and too dependent on long term debts by the firm.45 0. The leverage ratios are classified into:(1) (2) Debt-equity ratio Interest coverage ratio.81 0.21 2008-09 2224. The Debt-Equity Ratio of Nalco from 2006-07 to 2008-09 is as follows: Rs in corers 2006-07 Debt Equity D. Debt -Equity Ratio Total Debt = ------------------------Total Equity The debt equity ratio describes the lenders contributions for each rupee of the owner’s contribution. This ratio indicates an ideal mix of debt and equity in financing the company’s assets or it shows the proportion of Debt and Equity in financing of the firm.22 0.74 8874.

2) Interest coverage Ratio: . EBIT Interest coverage ratio = --------------Interest Interest coverage ratio measure the debt servicing capacity of the firm in so far as fixed interest on long-term loan is concerned.It is calculated by dividing EBIT by Interest. However a low ratio is a danger signal to the firm. the larger the coverage the larger the ability of the firm to handle fixed charge liabilities and more assumed the payment of interest to the creditors.9125. The company’s debt equity ratio is very low which indicates.5 2007-08 2466.Coverage Ratio of NALCO from the year 2006-07 to 2008.40 1. The ratio is used to test the firm’s debt servicing capacity. In contrast.51 1633.12 3232.50 cr.65 Final Dissertation of Summer Internship Topic: Ghaziabad.C Ratio 3620. The idle debt equity ratio is 2:1. The borrowing will also give income tax benefit to the company. The company’s balance sheet is so strong that they can bargain loan at a much cheaper rate.50 2008-09 1927.Coverage Ratio is calculated by diving EBIT by Interest. Also. it is advisable for the company to borrow for expansion activities at lower cost of capital & invest the surplus fund at higher rate of interest. It shows the number of times the interest charges on long term loan are covered by the fund that are ordinarily available for payment. the present expansion activities are done through internal fund.09 is as follows: 2006-07 EBIT Interest I. for long time the company has not gone for expansion activities and retained the surplus profit as reserves & surplus. The Interest.59 1. a low ratio is a danger signal that the firm is using excessive debt and does not have the ability to offer assured payment of interest to the creditors From the point of view of the creditors. A higher interest coverage ratio is desirable but too may not be good for the firm because it will affect the EPS of the firm. Therefore. However too high a ratio may imply unused debt capacity. By Chitta Ranjan Behera Dated SIMS . The interest.16 3.96 480.

Average Inventory = Average Final Dissertation of Summer Internship Topic: Ghaziabad. Cost of goods sold Sales –Gross Profit Inventory Ratio = --------------Inventory Every firm has to maintain certain level of inventory of finished goods so as to be able to meet the requirement of the business.ANALYSIS:. But the level of inventory should neither be too high nor too low. Inventory Turnover ratio indicates the number of times the stock has been turned over during the period and evaluates the efficiency with which a firm is able to manage its inventory. A high level of sluggish inventory amounts to unnecessary tie up funds reduced profits and increased cost. By Chitta Ranjan Behera Dated SIMS .The interest coverage ratio has come down from 3232 in 2006-07 to 480 in 2008-09. The activity ratio is classified into:(1) (2) (3) (4) 1) (A) Inventory turnover ratio Debtors turnover ratio Fixed assets turnover ratio Total assets turnover ratio Inventory Turnover Ratios: The Inventory turnover ratio is calculated by diving cost of goods sold by average inventory. possible deterioration of Inventories and so on. Activity ratios thus involve a relationship between sales & assets. Generally a high Inventory turnover is an indicative of good inventory management. rental of space. (C) ACTIVITY RATIOS :- Activity Ratios measures the efficiency of effectiveness with which a firm manage and utilizes its assets. These ratios are also called turnover ratios because they indicate the speed with which assets are converted or turned over into sales. where as a low Inventory turnover is a danger signal from company point of view because it cannot meet customers demand in time of urgency. it is meaningless to read the ratio as the company has hardly any borrowings. Even though the interest coverage ratio has been calculated. This ratio measures how fast the inventory is moving through the company and generating sales in a year.

2006-07 Net sales Average inventory Inventory Ratio 5940.19 634.96 9.35

2007=08 4988.80 686.65+6 34.96 7.54

2008=09 5094.52 841.90+6 86.65 6.66

The inventory Turnover Ratio of NALCO from the year 2006-07 to 200809 is as follows:

ANALYSIS:- The inventory turnover ratio for 2006-07 was 9.35 which has reduced to
7.26 in 2007-08 and further reduced to 6.05 in 2008-09. The Inventory turnover ratio of the company is too low which indicates high inventory holding of the company.

(b)

Days of Inventory Holdings (DIH)
It is calculated by diving Days in a year by Inventory Turnover Ratio
Days in a year DIH =

Inventory Turnover Ratio

Final Dissertation of Summer Internship Topic: Ghaziabad.

By Chitta Ranjan Behera Dated

SIMS

The Days of Inventory Holdings of NALCO from the year 2006-07 to 2008-09 are as follows:
2006-07 Days Inventory Ratio DIH 365 9.35 39 days 2007-08 365 7.55 48 days 2008-09 365 6.66 54 days

ANALYSIS:- The inventory holding days has gone up from 39 days in 2006-07 to 54 days
in 2008-09 which indicates high holding of inventory and consequential higher carrying cost.

2)

(A) Debtors Turnover Ratio:

Debtor’s turnover ratio indicates the velocity of debt collection of firm. The liquidity position of the firm depends on the quality of debtors to a great extent. Debtors turnover ratio is one of the ratios which financial analysts apply to judge the quality or liquidity of debtors. The debtor’s turnover ratio is calculated by dividing total sales by Total Debtors. Total sales ---------------Debtors

Debtor’s Turn over =

This ratio indicates the number of times debtors are converted into sales during a year. The higher the value of debtor’s turnover, the more efficient is the management of credit and a

Final Dissertation of Summer Internship Topic: Ghaziabad.

By Chitta Ranjan Behera Dated

SIMS

symbol of quick collection of cash from debtor’s. A low ratio reflects the payment by debtors is being delayed.

Debtor turnover ratio from the 2006-07 to 2008-09
sales Average debtor DTR 2006-07 6514.51 34.13 191 2007-08 5474.45 60.65+34.13 2 116 2008-09 5517.52 60.65+26.50 2 126

ANALYSISAccording to above chart we find out that company has failure in collection of cash from debtor, which will be affected to company’s working capital. Company collcted more cash (Rs.174 cr) from debtors in 2006-07. But it reduced to (Rs.105 cr) in 2007-08 and again it increased to (Rs.117 cr) in 2008-09. This information intimates to us that company has collected more cash in 2006-07 and after decreasing collection of cash in 2007-08, it again little bit increased in collection of cash during 2008-09.

Average Collection Period (ACP) It is calculated by diving Days in a year by Debtors turnover ratio. Days in a year
ACP = Debtors turnover Ratio

Average collection period from 2006-07 to 2008-09Day in a year DTR Average collection period 2006-07 360 191 2 2007-08 360 116 3 2008-09 360 126 3

Final Dissertation of Summer Internship Topic: Ghaziabad.

By Chitta Ranjan Behera Dated

SIMS

ANALYSISAccording to above chart we found that company collect cash from debtors in 2 days in 2006-07 and in 2007-08 &2008-09 company collected cash in 3 days. This intimates that in 2006-07 company has collected quick cash from debtor. The delay in collection of cash due to bad debt. The company is in monopoly market and all the export sales are against letter of credit which gets collected within 3 days. Similarly all domestic sales are either against sight L.C or against 30 days usance L.C. The sales policy clearly shows the credit sales by the company, is only to the extent of 30 days usance period in case of domestic sales, which is negligible in comparison to total turnover.

3)

Fixed Assets Turnover Ratio:
It is calculated by diving Days in a year by Debtors turnover ratio
Net sales

Fixed Asset Turnover Ratio = Net fixed Assets

This ratio measures sales per rupee of investment in fixed assets. The ability of a company is judged from the volume of sales generation from a given amount of investment in fixed assets. This ratio measures the efficiency of sale with which fixed assets are employed. A high ratio indicates a high degree of efficiency of management in asset utilization and a low ratio reflects inefficient use of assets .The concept of fixed assets is always net of depreciation.

The fixed assets turnover ratios of NALCO from the year 2006-07 to 2008-09 are as follows:
Rs in corers
2006-07 Net sales
Final Dissertation of Summer Internship Topic: Ghaziabad.

2007-08 4988.80

2008-09 5094.52
SIMS

5940.19

By Chitta Ranjan Behera Dated

41 4031. By Chitta Ranjan Behera Dated SIMS .6 in 200607 to 1. Net Sales Total assets turnover ratio = Total Assets Final Dissertation of Summer Internship Topic: Ghaziabad. The reduction in ratio is mainly due to lower realization and increase in asset of the company due to expansion activities.41 in 2007-08 and further reduced to 1.60 which has reduced to 1.The fixed assets turnover ratio is consistently decreasing from 1. Fixed asset turnover ratio in 2006-07 was 1.54 1.95 1.Net fixed assets Fixed Asset ratio 3710.26 in 2008-09.41 in 2008-09. v) Total Assets Turnover Ratio: The total assets turnover ratio is calculated by dividing Net sales by total assets.88 1.60 3530. The company’s assets are continuously increasing by taking up expansion activities and corresponding sales is also keeping pace with increase in assets.26 ANALYSIS:.

44 in 2008-09.45 2008-09 5094. The reduction in ratio is mainly due to lower realization and increase in asset of the company due to expansion activities.19 9526.44 ANALYSIS:The total asset turnover ratio in 2006-07 was 0. In the words of Lord Keynes:’ Profit is the engine that drives the business enterprise’.47 0.The total assets turnover ratio is a significant ratio since it shows the firm’s ability of generating sales from all the financial resources committed to the company.57 0.52 11428. The total assets turnover ratios of NALCO from the year 2006-07 to 2008-09 are as follows: Rs in corers 2006-07 Net sales Assets Asset turnover ratio 5940. (D) PROFITABILITY RATIOS: The primary objective of a business undertaking is to earn profit.80 10907.45 in 2007-08 and further reduced to 0.A business needs profits not only for its existence but also for expansion and diversification. The profitability ratios are calculated to measure the operating efficiencies of the Final Dissertation of Summer Internship Topic: Ghaziabad.73 0. By Chitta Ranjan Behera Dated SIMS . As this ratio increases there is more revenue generated per rupee of total investment in assets.62 which has reduced to 0.62 2007-08 4988. Therefore the financial manager should continuously evaluate the efficiency of the company in terms of profits.

By Chitta Ranjan Behera Dated SIMS . 1) Gross Profit ratio:This ratio is calculated by dividing gross profit by net sales. creditors and owners are also interested in the profitability of the firm. A low ratio reflects higher cost of goods sold due to the company’s inability to purchase raw material at favorable terms. 5) Return on Net worth (RONW). 2) Net Profit Margin.company. Profitability ratios are classified into: 1) Gross Profit Ratio. 3) Operating Profit Margin (OPM). A high gross profit margin ratio is a sign of good management and it implies the company’s ability to produce at a relatively lower cost. This ratio reflects company’s pricing policy. Besides management. 2) Net Profit turnover ratios This ratio is calculated by dividing Profit after Tax by net sales Net Profit Ratio = PAT --------------------Sales Final Dissertation of Summer Internship Topic: Ghaziabad. : Gross Profit Net Sales The ratio establishes relationship of gross profit with sales to measure the operating efficiency of the company. 4) Return on Capital Employed (ROCE). inefficient utilization or over investment in plant and machinery. It reflects the efficiency with which management produces each unit of product. the company.

The net profit ratio has come down due to lower realization. The net profit margin in 2006-07 was 40% which has reduced to 33% in 2007-08 and 25% in 2008-09. By Chitta Ranjan Behera Dated SIMS . 3) Operating Profit Ratio This ratio is calculated by dividing Operating Profit by net sales Operating profit Operating Profit Ratio = ----------------------- Net Sales Operating profit = Net sales – Indirect Expenses This ratio measures the relationship between Operating profits and Sales.38 5940. It is showing a phenomenal net profit ratio of 25%. Final Dissertation of Summer Internship Topic: Ghaziabad. Operating profit expresses the amount of operating profit for each rupee of sale. A high Operating Profit Ratio is a good simple of sound management and a low ratio indicates a deficiency of management. rising costs of productions or declining demand. A high net margin ratio ensures adequate return to shareholders and it remains in an advantageous position to survive in the face of falling sells prices. The Net Profit turnover ratios of NALCO from the year 2006-07 to 2008-09 are as follows: 2006-07 PAT Net sales Net profit ratio 2381.52 4988.27 5094.19 40% 2007-08 1631.80 33% 2008-09 1272.52 25% ANALYSIS:. If the net margin is inadequate the company will fail to achieve satisfactory returns on shareholders fund. Even though.NALCO is one of the lowest cost producer of alumina and aluminum in Asia. the net profit ratio showing a decreasing trend.This ratio measures the company’s ability to turn each rupee of sale into net profit.

it is showing a phenomenal operating profit ratio of 33%. The higher the ratio the more efficiently the funds are used and better is the management and a low ratio indicates the in efficiency of management. It measures the overall performance of the Company.71 4988.52 33% ANALYSIS:-NALCO is one of the lowest cost producer of alumina and aluminum in Asia.22 5094. The operating profit margin in 2006-07 was 60% which has reduced to 45% in 2007-08 and 33% in 2008-09. Net Profit Return on Capital Employed ratios = ---------------Capital Employed It establishes a relationship between Net Profit and Capital employed. The operating ratio in recent past has come down because of higher cost due to implementation of pay revision and increase in input cost of power & fuel. 4) Return on Capital Employed (ROCE) This ratio is calculated by dividing Net Profit by Capital Employed. The operating profit ratio has come down due to lower realization.19 60% 2007-08 2250. This ratio shows how well the resources of a company are being used efficiently by the management. By Chitta Ranjan Behera Dated SIMS .78 5940. Final Dissertation of Summer Internship Topic: Ghaziabad. Even though.The Operating Profit turnover ratios of NALCO from the year 2006-07 to 2008-09 are as follows: Rs in corers 2006-07 Operating profit Net sales Operating profit ratio 3597. the operating profit ratio is showing a decreasing trend.80 45% 2008-09 1663.

reserves and surplus less accumulated losses. It can also be found out by subtracting total liabilities from total asset.23 13. The prices were peaked during 2006-07 and showing downward trend since 2007-08. The Shareholders equity or net worth includes paid up share capital. Return on Net Worth (RONW) = Net Profit Net Worth This ratio shows the relationship between Net profit and funds provided by the owner.85 17.52 9366.40% 8307. Return on Net Worth (RONW) This ratio is calculated by dividing Net Profit (after Tax) by Net Worth.27 9495. share premium. Even 19% Return on capital employed is very good in context of aluminum industry which clearly indicates the company is doing exceedingly well. The higher the Final Dissertation of Summer Internship Topic: Ghaziabad.38 2007-08 1631.41% 2008-09 1272.66% ANALYSIS:. The return on capital employed in 2006-07 was 32% which has reduced to 23% in 2007-08 & 19% in 2008-09.Aluminum industry is basically cyclical in nature. It measures how well firm has used the resources of the owner and also it reviles whether the firm has a reasonable profit to its equity shareholders or not. By Chitta Ranjan Behera Dated SIMS .The Return on Capital Employed ratios of NALCO from the year 2006-07 to 2008-09 is as follows: 2006-07 Net profit Capital employed Return on capital employed ratio 2381.96 28.

This ratio is of great interest to the prospective share holders and to the management because it reveals the relative performance and the strength of the company in attracting future investment for its expansion. By Chitta Ranjan Behera Dated SIMS . The return on capital employed in 2006-07 was 31% which has reduced to 18% in 2007-08 & 13% in 2008-09. The prices were peaked during 2006-07 and showing downward trend since 2007-08. Even 13% Return on capital employed is very good in context of aluminum industry which clearly indicates the company is doing exceedingly well.38 7695.81 1631. The Return on Net Worth ratios of NALCO from the year 2006-07 to 2008-09 are as follows: 2006-07 Net profit Net worth RONW 31% 2381.27 9769.22 2007-08 2008-09 1272.ratio the greater will be the return to the owner and vice versa.Aluminum industry is basically cyclical in nature. WORKING CAPITAL TURNOVER RATIO:NET SALES --------------------NET WORKING CAPITAL Working Capital Turnover Ratio = Final Dissertation of Summer Internship Topic: Ghaziabad.52 8874.45 18% 13% ANALYSIS:.

45 2008-09 5094.57 1. The working capital turnover ratio in 2008-09 has gone up from 1.88 3500.19 3755.47 2007-08 4988.96 ANALYSIS:. 100 cr but the company is not utilizing the limit due to excessive cash surplus.96 in 2008-09 due to very high cash and bank balance as on 31st march.42 in 200708 to 1.Net working capital = Current Asset – Current Liability The working capital turnover ratios of NALCO from the year 2006-07 to 2008-09 are as follows: 2006-07 Net sales Net working capital Working capital turnover ratio 5940.58 1. 2009. EARNING PER SHARE:Earnings per share = Net profit after tax .42 1. It would always be better for the company to opt for working capital loan instead of using own fund for better financial management.52 2595.preference dividend ----------------------------------------------No of Equity Shares Final Dissertation of Summer Internship Topic: Ghaziabad. By Chitta Ranjan Behera Dated SIMS .The company has sanctioned working capital loan of Rs.

No. of equity shares = Issued. subscribed & paid up capital ----------------------------------------------Face value of shares Final Dissertation of Summer Internship Topic: Ghaziabad. By Chitta Ranjan Behera Dated SIMS .

19.96 which has come down to Rs.75 in 2008-09.27 644.38 644.The Earning per share of NALCO from the year 2006-07 to 2008-09 are as follows: 2006-07 Net profit after tax Eqity share EARNING PER SHARE 2381.96% 2007-08 2008-09 1272. By Chitta Ranjan Behera Dated SIMS .32% ANALYSIS:.52 644.31 36.The Earning per share in 2006-07 was Rs. The reason of fall in Earning per share is mainly due to fall in profit because of downward in alumina & aluminum prices.31 19. Meaning of Cash Flow Statement Cash Flow Statement is a statement which describes the inflows (sources) and outflows (uses) of cash and cash equivalents in an enterprise Final Dissertation of Summer Internship Topic: Ghaziabad.75% 1631.36.31 25.

of say. If the effect of transaction results in the increase of cash and its equivalents. cash equivalents: for example.comprises cash on hand and demand deposits with banks. highly liquid investment that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.are inflows of cash and cash equivalents. Cash Flows:. Flow of cash is said to have taken place when any transaction makes changes in the amount of cash and cash equivalents available before happening of the transaction. Cash equivalents:are short term.2008. it is called an inflow (source) and if it results in the decrease of total cash. "NALCO" for the year ending 31st march 2007.2009 Final Dissertation of Summer Internship Topic: Ghaziabad. Such a statement enumerates net effects of the various business transaction on cash and its equivalents and takes into account receipts and disbursements of cash. By Chitta Ranjan Behera Dated SIMS . an enterprise should prepare a cash flow statement and should present it for each period for which financial statements are prepared. Therefore an investment normally qualifies as a cash equivalent only when it has a short-maturity. three months or less from the date of acquisition. preference shares of a company acquired shortly before their specified redemption date (provided there is only an significant risk of failure of the company to repay the amount at maturity).during a specified period of time. in substance. it must be readily convertible to a known amount of cash and be subject to an insignificant risk of change in value. it is known as outflow (use) of cash. For an investment to qualify as cash equivalent. Cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes. The terms cash. According to AS-3 (Revised). Investments in shares are excluded from cash equivalents unless they are. Cash Flow Statement of. A cash flow statement summarizes the cause of changes in cash position of a business enterprise between dates of two balance sheets. cash equivalents and cash flows are used in this statement in the following meanings:Cash:.

12 8.71 -1.74 1492.04 2259.54 1.61 2810.40 -908.53 -3.91 -647.2008 2466.22 3620.90 -0.13 -2211.98 -641.69 -163.42 3516.54 8.31 -0.68 275.66 -170.62 1901.10 0.13 -1.44 1.16 272.44 0.94 -177.46 SIMS By Chitta Ranjan Behera Dated .90 -1.14 6.08 13.18 2723.35 -527.58 285.62 2723.98 3955.80 -1273.2007 (A) Cash flow from Operating Activities Net Profit before tax and Extraordinary Income Adjustment for: Depreciation Interest & financing charges Provision(net) Claims/recoverable written off Stores & spares Exchange variation gain Loss/profit on sale of asset(net) Operating profit before working capital changes Adjustment for: Inventories Trade & other receivables Trade payables Cash generated from operation Direct taxes paid Cash flow before extra ordinary items Extra ordinary items Net cast from operating activities (B)Cash flow from investing activities: Purchases of fixed assets Dividend income from mutual fund Net cash used in investing activities (C)Cash flow from financing activities: Interest & financing charges Exchange variation gain Dividend including dividend tax paid (D)Net changes in cash & cash equivalent(A+B+C) (E)cash & cash equivalents-opening balance Final Dissertation of Summer Internship Topic: Ghaziabad.40 321.82 2193.18 0.79 -376.2009 1927.98 -1544.92 0.49 1901.38 3.11 2780.12 -587.91 1938.22 -642.44 -682.72 -6.Year ended 31st march.18 1.47 65. Year ended 31st march.91 Year ended 31st march.09 -116.13 2620.96 -6.94 -1544.07 3686.15 -49.58 18.98 3996.22 1938.24 206.96 3.09 459.15 1.96 55.10 -2197.41 -67.

By Chitta Ranjan Behera Dated SIMS . The Aluminium smelter have achieved the highest ever cast metal production since section with capacity utilization of 106%. The company is already listed in London Metal Exchange.04 CONCLUSION PRODUCTION The company has exceeded the target set for production of Alumina & Aluminium for the year 2008-09.46 2869. achieved during the previous year. 1272 cr. The Final Dissertation of Summer Internship Topic: Ghaziabad. rolled products & special grade Alumina/hydrate during the year.(F)Cash & cash equivalents-closing balance 3686. as against 1632 cr. The domestic sales of metal are affected from the smelter plant at Angul and 9 stockyards at Kolkata. The bauxite production has improved compared to previous year though still below the rated capacity.53 3516. as against 2135 cr. Banagalore. FINANCE The company has achieved a turnover of Rs. As against the turnover of Rs. Jeypore. During the previous year profit after tax stands at Rs. The decline in the sales realization and net profit during the year. Baddy. 5517 cr. Silwasa. The company has achieved an export earnings of 2071 cr. Biswandi. MARKETING The company has achieved the highest ever sale of metal. 5474 cr. Fariddabad. compared to previous year is mainly due to lower sales realization from export of metal which has partly compensated by substantial depreciation of Rupee against US dollars. in the previous year. Chennai & Bishakhapatnam.

in previous year. GROWTH PLANS The company is going on with second phase expansion program at an estimated cost of Rs. the company has recommended a dividend of 50% during the year as against 60% during the previous year. Foreign exchange output of the company for this year is 618 cr. Refinery Aluminum.75 in current year. Final Dissertation of Summer Internship Topic: Ghaziabad. 5003 cr. By Chitta Ranjan Behera Dated SIMS . 2097cr. DIVIDEND AND APPROPRIATIONS As per company’s philosophy that growth in shareholders values lies in capacity expansion and backward & forward integration. from internal accruals only.Earning per share has come down from Rs. Keeping this in view and in accordance with company’s policy of balancing dividend payout with the requirement to deploy internal accruals for its growth plan. as against 702 cr. Mines Alumina.32 last year to 19. 25. Project segment Bauxite. The annual capacities of the various project segments after second phase expansion are given below. Smelter Captive power plant Unit MT MT MT MT present capacity 4800000 1575000 345000 960 Capacity after second phase expansion 6300000 2100000 460000 1200 FOREIGN EXCHANGE EARNING AND OUTPUT Foreign exchange earnings of the company for the year are Rs. in the previous year.

Final Dissertation of Summer Internship Topic: Ghaziabad. By Chitta Ranjan Behera Dated SIMS .

33 123.19 12.13 557.98 1.87 13.65 31.03 -17.2008.98 -25.51 547.39 0.98 771.43 -6.52 174.74 113.27 15.59 851.04 23.94 96.88 85.12 0.03 3620.92 10.44 3703.04 -23.16 634.76 3626.80 -15.65 6354.97 84.33 3.13 2727.PROFIT AND LOSS ACCOUNT OF NALCO FOR THE YEAR ENDED 31ST MARCH 2007.39 2466.36 994.91 4.81 1272.91 -21.51 -0.19 5474.2009 PARTICULARS 2006-07 2007-08 2008-09 INCOME: Gross sales Less: excise duty Net sales Finished goods internally consumed/capitalized Other income TOTAL EXPENDITURE Decretion/accretion to stock of finished/intermediary products/work in progress Raw materials Power & fuel Repair & maintenance Other manufacturing expenses Employees remuneration & benefits Administrative expenses Other expenses Selling & distribution expenses Interest & financing charges Provisions Depreciations TOTAL PROFIT FOR THE YEAR Add/less : prior period adjustment(net) PROFIT BEFORE TAX Less : provision for taxation Current fringe benefits Deferred Earlier years PROFIT AFTER TAX Balance brought forward from previous year Transfer from capital reserve Transfer from general reserve Provision for differential actuarial liability Amount available for appropriation APPROPRIATIONS Interim dividend Proposed final dividend Final Dissertation of Summer Internship Topic: Ghaziabad. 6514.45 485.35 281.76 1311.68 1287.66 392.74 1.80 10.34 152.97 106.49 0.00 5094.10 3083.12 5.65 SIMS By Chitta Ranjan Behera Dated .04 1667.84 5616.59 849.82 552.65 4988.52 26.10 84.77 5575.52 423.24 2491.44 495.51 96.64 -5.15 161.55 250.65 554.65 225.06 1631.22 5517.70 322.04 2391.37 72.45 1913.23 272.31 -20.04 -85.69 231.02 230.30 0.06 103.32 5940.54 163.35 401.96 -3.08 289.35 696.81 1927.35 13.40 1248.85 574.32 2381.25 317.97 7.52 36.55 76.38 10.

1. in accordance with the generally accepted accounting principles. Any revision of such estimates is recognized in the period in which the same is determined. By Chitta Ranjan Behera Dated SIMS . Actual result in some cases could differ from those estimates. the company makes estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent liabilities as the date of financial statements and the amount of expenses during the reported period. accounting standards issued by the Institute of Chartered Accountants of India.1 Basis of Accounting: The financial statements are prepared under historical cost convention on accrual basis of accounting. 1956. and the relevant provisions of the Companies Act.SIGNIFICANT ACCOUNTING POLICIES 1.2 Use of Estimates: In preparing the financial statements in conformity with accounting principles generally accepted in India.3 Fixed Assets : Final Dissertation of Summer Internship Topic: Ghaziabad. 1.

Equivalent amount of depreciation provided on such assets each year is transferred from Capital Reserve to Profit & Loss Account.3.3. Expenditure of capital nature incurred on assets on land not owned by the company is capitalized under appropriate asset head.6 Fixed assets retired from active use and held for disposal are stated at lower of net book value and estimated net realizable value. 1.3 Fixed assets acquired out of financial grant from Government are shown at cost by crediting the grant-in-aid received to Capital Reserve. 1. if it is of a permanent nature. 1 Lakh per unit are capitalized with the related fixed assets.1 All fixed assets are stated at historical cost less depreciation.4 Insurance spares valuing more that Rs.3.3.1. wherever applicable. Cost includes all direct expenditure of acquisition. 1. 1.4 Investments: Long-term investments are carried at cost.5 Application Software package like ERP and application development tools like RDBMS acquired from outside agencies for internal use are treated as intangible assets and amortized over a period of three years or the period of license whichever is earlier. 1.3. Final Dissertation of Summer Internship Topic: Ghaziabad. after providing for diminution in value. 1. Current investments are carried at lower of cost and market value. By Chitta Ranjan Behera Dated SIMS . attributable borrowing cost and net of Cenvat credit.2 Expenditure on development of land including leasehold land are capitalized as part of cost of land.3.

1. 1. appropriate share of labour and related overheads. Shortage of coal up to 1% is treated as abnormal loss.3 Finished goods are valued at lower of cost and net realizable value Cost is determined on the basis of material cost plus appropriate share of labour.6 Provisions A provision is recognized when there is present obligation as a result of a past event. Inventory stores and spares.1.5 1.5.4 Intermediary products viz. anode butts and anode rejects are valued at lower of realizable value or 45% of direct material cost. 1.5. Anodes are valued at cost. The reviewed at each year end date and adjusted to reflect the best current estimate.7 Foreign Currency Transaction Final Dissertation of Summer Internship Topic: Ghaziabad. stores and spares are valued at monthly weighted average cost net of cenvat credit wherever applicable.1 Inventories: Raw materials.5.6 Scrap of various nature is valued at estimated net realizable value. other than insurance spares identified as not moved for more that 5 years is valued at 5% of the cost. 1.5. it is probable that an out flow of resources will be required to settle the obligation and in respect of which reliable estimate can be made. 1.5. related overheads and duties.5 1.2 Work in process is valued at lower of cost and net realizable value. By Chitta Ranjan Behera Dated SIMS .5. Cost is ascertained on the basis of annual average cost of material. 1.

By Chitta Ranjan Behera Dated SIMS . 1.1.1 Monetary assets and liabilities related to foreign currency transactions remaining unsettled are translated at year-end rates.5000/. evaluated on the basis of technical estimate made annually:Earth work portion of : a) Red mud pond at Alumina Refinery b) Ash pond at Alumina Refinery c) Ash ponds at Captive Power Plant 1.1.1.7.7.2 The difference in translation of monetary assets and liabilities and realized gains and losses in foreign exchange transactions are recognized in the profit and loss account. Final Dissertation of Summer Internship Topic: Ghaziabad.2 Assets costing Rs.8. In respect of transactions covered by forward exchange contracts.1 Certain Assets at Port Facilities are depreciated at rates calculated on the basis of balance lease period of land belonging to the Port Authority on which these assets are installed 1.of less individually are depreciated fully in the year in which they are put on use. the difference between the contract rate and spot rate on the date of transaction is recognized in the profit and loss account over the period of the contract.1 Depreciation on fixed assets is provided on straight-line method at the rates and manner prescribed under Schedule XIV of the Companies Act 1956 except in case of certain assets where depreciation at higher rates is provided based on their estimated remaining useful life.8 Depreciation and Amortization 1. 1.

2 Claims and interest receivables are accounted for in the Profit and Loss Account based on certainty of their realization. 1.3 Assets on land not owned by the Company are depreciated over a period of five years. 1.2 Prior Period Income/Expenditure & Pre-Paid Expenses: Income / Expenditure relating to prior period and pre-paid expenses not exceeding Rs. 1. 1 lakh in each case is treated as income / expenditure of current year.1. Export sales are recognized on issue of bill of lading. under Duty Entitlement Pass Book (DEPB) scheme are accounted for on accrual basis after providing for expected shortfall in realization based on last sale. By Chitta Ranjan Behera Dated SIMS . Sales in the domestic market are recognized at the time of dispatch of materials to the buyers.5 Classification of plant and machinery into continuous and noncontinuous is made on the basis of technical opinion and depreciation provided accordingly.3 Export incentives in the form of duty credit on exports made during the year.3. where lease agreement is yet to be signed. 1.4 Cost of leasehold land including development expenses thereon is amortized over the period of lease.3 Recognition of Revenue: 1.1 Sales include excise duty and are net of rebates and price concessions. 1. However.3. Final Dissertation of Summer Internship Topic: Ghaziabad. such expenses are amortized over a period of 20 years commencing from the year of commercial operation. 1.3.1.1.1.

family rehabilitation facilities. leave encashment.5 Employee Benefits : 1. port retirement medical retirement benefits.8 Deferred Taxation: Deferred Tax expense or benefit is recognized on timing difference being the difference between taxable incomes and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.2 Liabilities towards Gratuity. Development expenditure except of capital nature is charged to Profit & Loss Account in the year incurred after setting off of incidental income. 1.6 scheme. Deferred Final Dissertation of Summer Internship Topic: Ghaziabad. valuation. 1.7 Borrowing Cost : Borrowing costs attributable to the acquisition or construction of a qualifying asset are capitalized as part of the cost of that asset. if any.1 Contribution to Provident Fund. leave travel benefits. Other borrowing costs are recognized as expenses in the period in which these are incurred. a defined contribution scheme.5. 1. is charged to Profit & Loss Account on the basis of actual liability. By Chitta Ranjan Behera Dated SIMS .5.1. 1. long service reward and provided for on the basis of actuarial Research & Development Expenditure : Research expenditure is charged to Profit & Loss Account in the year in which incurred. Port relining expenses are charged to Profit & Loss Account as and when incurred 1.4 Repairs and Replacements.

M. Chandra. New Delhi Vikash New Delhi SIMS 2. BIBLIOGRAPHY AUTHOR NAME OF THE BOOK PUBLISHER&PLACE OF PUBLICATION 1.Pandey Financial Management Tata Mc GrawHill. Final Dissertation of Summer Internship Topic: Ghaziabad. Prasanna Financial Management L.tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. By Chitta Ranjan Behera Dated .

COM) (WWW.Khan Corporation Finance Indian Financial System Chaitanya New Delhi Tata Mc GrawHill.C Kuchhal M.GOOGLE.Y.3 4. S. New Delhi Das Printers. 5. ICWA Advanced Financial Management 6. Kolkata. By Chitta Ranjan Behera Dated SIMS . ANNUAL MAGAZINE OF NALCO “ PARICHAYA ” Final Dissertation of Summer Internship Topic: Ghaziabad.IN) 7.CO.NALCO. THROUGH THE INTERNET LIKE (WWW.

Final Dissertation of Summer Internship Topic: Ghaziabad. By Chitta Ranjan Behera Dated SIMS .

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