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Working Capital Management is concerned with the problems that arise in attempting to manage the current Assets, current liabilities and the inter-relationship that exists between them. The aim of working capital management is to manage the concerns current assets and current liabilities in such a way that an adequate working capital is maintained. An adequate level of working capital provides a business with operational flexibility. Emerson has very rightly observed that, “business with an adequate level of working capital has more option available to it, and can make its own choice as to when working capital will be used. On the other hand, if a firm is short of working capital, it may be forced to limit business operations, extension of credit to customers and the amount that it invests in inventory. This will adversely affect production as well as sales which in turn will affect probability of a concern.”
Meaning and definition There is no universally accepted definition of Working Capital, but the one most widely acceptable is the observation that ‘Working Capital’ represents the excess of current assets over current liabilities. Although the term ‘Working Capital’ has been depreciated by the Institute of Chartered Accountants for use in balance sheets and has preferred the term ‘current assets less liabilities’ nevertheless, for management purposes the former is useful phrase to summarize the factor, which is effective lifeblood of much business.
Importance Study of working capital is of major importance to internal and external analysis because of its close relationship to current day-to-day business. Inadequacy or mismanagement of working capital is the leading cause of business failure. Choyal is of the view that, “The working capital of a firm is the lifeblood which flows through the veins and arteries of the structure, Indeed, it engages every part of the structure, gives courage and moral strength to brain (management) and muscles (Personnel), digests to the best degree the raw material used by its constant and regular flow and returns to the heart (Cash flow) for another journey and so when working capital is lacking or slows down, the financial bodies have value just as much as junk.” It is reflected by the fact that Financial Manager spends a great deal of time in managing current assets and current liabilities. Arranging short term financing, negotiating favorable credit terms, controlling, administering accounts receivables and monitoring the investment in inventories consume a great deal of their time. In the words of I.M.Pandey: “The net Working Capital indicates • • The liquidity position of the firm. Suggests the extent to which working capital needs may be financed by permanent sources of funds.”
5 million tonnes. two by Chennai Petroleum Corporation Limited and one each by Bharat Petroleum Corporation Limited. the total products availability would be about 113 million tonnes at 100% capacity utilization. product like LPG is in deficit and other products are in surplus. Out of the public sector refineries seven refineries are owned by Indian Oil Corporation. While this is on overall basis. which would necessitate operating refining capacity to match demand or export products depending on refinery economics and logistics. During the year. Government of India has sold its entire shareholding in BRPL and CPCL to IOCL.INDUSTRY PROFILE At present. The one Refinery in joint sector Mangalore Refineries and Petrochemicals Limited and one by private sector Reliance Petroleum Limited. subsidiaries of IOCL. Thus. BRPL and CPCL have become . there are seventeen refineries operating in the country. The installed capacity of the Indian refineries is about 117 million tonnes per annum from which the product availability may be about 108 million tonnes. Kochi Refineries Limited. KRL and NRL have become the subsidiaries of BPCL. fifteen in public sector unit. and one in private sector. Bongaigaon Refineries and Petrochemical Limited and Numaligarh Refineries Limited. two by Hindustan Petroleum Corporation Limited. as a part of reconstructing of downstream oil sector. Taking into account the product availability from the fractionators of about 4.
.4. the refineries have to face the challenge of deregulation. As per the current program contemplated by the government.1998.By this arrangement. for which the Government of India has already taken measures like phased dismantling of Administered Pricing mechanism for refinery sector. INDUSTRY STRUCTURE As part of the deregulation of the oil sector as notified by the Government of India in 1997. In the liberalized business scenario. The year 2002-03 was the first year of operation of the oil sector in the deregulated scenario and the prices to the customers were fixed by and large on import parity (IPP) basis. The oil sector has since been totally deregulated from 1. the oil sector was deregulated in phases.4.4. The refining sector was deregulated in the first phase from 1. particularly marketing deregulation etc.2002.2002. Administered Pricing Mechanism. CPCL has completely switched over to Market Driven Pricing Mechanism (MDPM) from APM. the marketing of controlled products has been de regulated from 1. ie.
35 COMPANY PROFILE Chennai Petroleum Corporation Limited (CPCL).50 7. Gauhati.The table below gives the refining capacities of the oil refineries in India: Name of the company Assam Oil company. Mumbai HPCL. West Bengal IOC. UP BPCL.00 7. Punjab Mangalore Refineries & Petrochemicals Ltd Reliance Petroleum Corporation Ltd Bongaigoan Refineries & Petrochemicals Ltd Capacity Million MTs(MMTPA) 0. 9 Crore under a formation agreement amongst the government if India. Madras Refinery Limited (MRL). Chennai was incorporated on Dec-30. Barauni.00 27. Mathura. The initial paid up capital was Rs 8. of which the government of India held 74% and the other two partners held 13% each.00 2. National Iranian Oil company of Iran and AMOCO India Limited Inc. Assam IOC.00 6. Haldia. kerala CPCL.00 3.50 Crore. AMOCO relinquished their share holdings in 1985 – 86 in favor . Vizag HPCL. Chennai CPCL.30 2. CBR Karnal Refinery. Bihar IOC.85 3.50 7. Koyali. Gujarat IOC. Assam IOC.50 9. formerly. Digboi.50 1.50 0.50 6. of USA.75 9. 1965 with an authorized capital of Rs.00 4. Mumbai Kochi Refineries Ltd..
5 MMTPA was put up at a cost of Rs 43 Crore.000 TPA to 2.000 TPA at a cost of RS 238. The refinery processes indigenous crude available from the near by ONGC fields. 70.5 MMTPA Cauvery basin refinery of CPCL.5 MMTPA by optimization in 1993-94 at a cost of Rs 38 Crore. The refining capacity was further increased to 6. De-bottlenecking then increased the capacity to 2. TamilNadu went into the commercial production in Nov 1993. .71 Crore was commissioned in 1994.81 % was disinvested in favor of Indian Oil Corporation on 29/03/2001 and hence CPCL in now a subsidiary of IOCL Chennai Petroleum Corporation Limited is one of the three refineries producing lube stocks. at Panangudi village near Nagapatnam. The marketing products from this refinery is being done through M/S IBP CO LIMITED. The lube expansion project to increase the lube production from 1.6 MMTPA was completed in 1984 – 85 at a cost of Rs 170 Crore.of government of India. And initial crude refining capacity of 2. The additional power generation project involving installation of a Boiler and Turbine of 20 MW capacity at a cost of Rs 44 Crore was commissioned in 1994. As crude supplies from ONGC fields near by are insufficient to meet the throughput levels of CBR unit. The 0. 40.8 MMTPA in 1972 –. A 20000 TPA wax plant was commissioned in March 1984. crude is also transported from Manali unit to CBR unit by road to maximum capacity utilization at CBR. and the entire government of India’s share holdings of 51. Expansion of refining capacity to 5.
the projects were completed during the year 2001-2002: The facilities to de-bottleneck the existing capacity from 0. fire alarm system project to augment the safety requirements of Manali Refinery and the tank form areas at a cost Rs 1. manual call point.13 Crore. As per the directive of OISD.32 Crore were commissioned in 1997.The project to install wax hydro-finishing unit in place of existing wax de-oiling unit plant capacity from 20000 TPA to 30000 TPA at a cost Rs 41. The project diesel hydro de-Sulphurisation to reduce the sulphur content in diesel from 1% to 0. the company has installed and commissioned during Aug 2001. project to facilitate their collection. One cell of new cooling tower was .0 MMTPA at Cauvery basin refinery were installed.5% sulphur in Diesel and to medicate the particulate emissions. In additions to above. Two numbers of new crude takes and seven numbers of new product tanks were commissioned.5MMTPA to 1. treatment and reuse was implemented in May 2001 at a cost of Rs 2.25 % by weight has been commissioned during the year 1999-2000. This unit was commissioned in Sep 2001. With a view to ensure reclamation of sewage generator from various refineries buildings and canteen waste waters. to produce a eco-friendly fuels. In order to meet the future specifications of 0. a second reactor in Diesel hydro de-sulphuriser unit was installed at a cost of Rs 20 Core in the existing Diesel Hydro de-sulphurisation unit. This project would enable quicker communications and response actions during emergencies.16 Crore.
Proposed Projects Power Project The company had signed an “Expression of Intention” with Neyveli Lignite Corporation (NLC). for the joint development of 492 MW power project. This project is for the purpose of converting refinery treated effluents into usable water for various process applications and the treated effluent water would end with “Zero discharge” from the Manali refinery. New RO unit was installed for additional requirement of de-materials water for boilers. since the life of the existing crude oil pipeline from Chennai port to the Manali Refinery may be outlived by 2006. carrying on project development activities and fuel supply issues. Crude unloading facilities for Manali Refinery The company proposes to have new facilities for crude unloading for the Manali refinery. The transportation of crude oil in very large crude carriers (VLCCs) has also been found to e cost effective as per the study do new by Indian oil tanking limited. The company also commissioned the zero discharge projects at a cost RS 4. Discussions are on with NLC regarding formations of a joint venture company.also commissioned. by way of lower crude . a premier PSU in the power sector. The company will benefit transportation costs on completion of this is project.6 Crores.
near Chennai on built own and operates (BOO) Basis.Desalination Project The company is proposing to install a desalination plant to supplement the current raw water requirement at Manali complex and the future requirements of 3MMTPA expansion project. National Aromatics and Petrochemical Corporation Ltd (AROCHEM) The government of India has approved the memorandum of settlement (MOS) to e entered in to between the company and SPIC. the joint venture of the company with Chevron Oronite Company (LLC) (Successor of Chevron Chemical Corporation) has shown improvements over the previous year and it posted cash profit of Rs 4.89 Crore. Joint Venture Project Indian additives Limited (IAL) The performance of Indian additives Ltd. Indegeniousing and outsourcing has been taken up in the big way to improve the competitiveness of the unit. Research and Development (R & D) . SPIC had indicated that they are in the process of finalizing the financial tie-up with banks and financial institutions.
Information Technology The company firmly believes that Information Technology is integral to all aspects of the company’s operations and continuous assimilations of emerging technologies. R&D pilot plants and analytical facilities provide valuable data for solving problems related to the Refinery process units optimizing the operating parameters. web enabled business solutions and constant automation is becoming inevitable commercial compulsions to sustain growth and profitability. .The company recognizes the need for continuous up gradation of technologies and absorption of cutting edge technology to attain leadership position under the liberalized policies of the government. all the facts of the operations if the company receives the focused attention of the management to keep pace with technological developments in the rest of the world. Accordingly. The company has taken all the required steps to further accelerate and intensify its R&D activities to augment its growth opportunities. The company’s R&D center has been continuously providing technical support service to the refinery in evaluation of crude’s. catalyst and feedstock.
stock and oil movement.69 crore during the year. The company has taken a number of steps for improving network performance over wide area network (WAN) through installation of necessary hardware and software. Safety . material managing. Sales and distribution. data integrity and information flow between various modules have been achieved. data availability.Towards achieving this end the company engaged M/S CMC Ltd and M/S RAMCO SYSTEMS LTD for implementing the state-of-art enterprise resource planning (ERP) based business information systems encompassing the functional areas of finance and accounts. human resources management. The system facilitates effective operational monitoring and decision-making. on comprehensive operational report and online information availability. the above functional areas were automated. The value of import substitution amounted to Rs. maintenance and project management. The company continued to give thrust to the development of small-scale industries. The company effected purchases to the tune of Rs. 0. Import Substitution and Development of Small Scale Industries.60 crore during the year from scale industries.1.
. The company embarked up on various measures to ensure the safety of its employees and important among them are: The best practices team formed for safety in refinery operations continued its study developed best practices and safety procedures. The safety practices adopted by the company received many accolades from various quarter . which is clearly reflected in the safety policy of the company aims at zero accident and freedom from occupational illness at the work place. Safety study carried out M\s Allianz Singapore as part of reinsurance assessment.the most important ant prestigious among them was the award of the OHSAS 18001 certification for occupational health safety management systems. USA as a part of the Excellency in competitive performance programme were implemented. The company is strongly committed to achieve production without compromising on safety. this year. which are in line with world-class refineries. Each with specific focus.The company recognizes safety management as an important tool for preventing accidents involving people and property. Recommendations for improvement of refinery safety system given by M\s Solomon associates inc. Foreign experts carried out the independent safety studies.
Chennai. Share Holding Pattern . Two off-site the statutory authorities to check the effectiveness of the off-site emergency plan. M\s CLRI. Various safety committees regularly meet and discuss safety related issues to enhance safety in the refinery.K out to audit the safety management system. The audit score qualified us for a 3-star award. British safety council carried out U. Your company conducted mock drills in Manali – Ennore area participated in these mock drills. Efforts being taken to bridge the gaps with a view to achieve 5-star award in future. The risk potential assessed and found to be within controllable limits. Papers on safety were presented. and case studies wee taken up for discussion. The study was completed. The company sponsored a workshop on “SAFETY IN REFINERIES” jointly with oil industry safety directorate at Chennai in which safety professionals from other oil companies participated. The five-year safety audit. carried out a review of Hazop and risk assessment of the entire refinery complex. occupational health & hygiene practices.
70 7.00 DIAGRAM .00 crores as on 31. Financial Institutions/Mutual Funds/Banks/ Insurance Companies Foreign Institutional Investors Corporate Bodies/General Public/Non-Resident Indians etc Total 51.2005.88 15.400 crores and the paid-up share capital was Rs.The Company’s Authorised Capital was Rs. Naftiran Intertrade Company Ltd.16 9.40 15. The Shareholding pattern as on March 2006 was: (%) Indian Oil Corporation Ltd.86 100.3.149.
• It is also necessary to identify the idle assets and non-utilization of funds. as it is necessary to identify the over utilization or under utilization of assets to the turnover of the company. • The study is being carried out. . • It is necessary to identify the ‘liquidity dimension of Working Capital’ and the ‘Profitability’.NEED FOR THE STUDY • The study is needed to analyze the working capital management of the company.
OBJECTIVE OF THE STUDY .
• To evaluate the operating efficiency of Chennai Petroleum Corporation Limited.• To study the working capital management of Chennai Petroleum Corporation Limited by analyzing the profitability. • To critically analyze the working capital requirement of Chennai Petroleum Corporation Limited. . profit and working capital requirements of Chennai Petroleum Corporation Limited. • To project the future sales. solvency and liquidity position of the company. • To measure utilization of various assets with the turnover of the company.
These techniques reveal the measures that can adopt to improve the existing trend . • The working capital of the organization will be further revealed through the adoption of various techniques available for analysis.SCOPE OF THE STUDY • The study finds out the operational efficiency of the organization and suggests the proper utilization and allocation of cash resources. to improve the efficiency of the organization.
It is also not in a position to fix prices for major products produced by it. economic crisis and emergence of war at the countries from which the crude oil is being imported. .LIMITATION OF THE SYUDY • The study will be carried out mainly based on the information gathered from the Secondary Data mainly Balance Sheet and Profit and Loss Account. • The study will not be carried out from the point of national policies. The observation made will be related to laws operated in the past. • The study will be limited to observations of the past. it is not in a position to enjoy the full control of ownership. • The company being under the control of Indian Oil Corporation and in the direct administration of the government. • Sufficient data will not be made available to study the current operations being carried out in the company.
which are used in or related to current operations. finance plays a role in every organization. inflation the demand and the stages of business cycle. At present most of the industrial undertakings are faced with the problem of effective utilization of resources. Financial Management is an integral part of the overall management and is mainly concerned with fund raising operations. Statement of the Problem The present study seeks to collect in depth information of the working capital management of Chennai Petroleum Corporation Limited with special emphasis on an examination of the management performance in regard to financial management. Working Capital is the major importance to internal and external analysis because of its close relationship with the day-to-day operations of a business.In the modern business environment. Working Capital is the portion of asset of a business. cost of funds. Hence. One among the reason the company could perform well is the efficient management of the . the analysis of working capital helps the management to have knowledge of current asset required to business concern to have continuous production. It also helps the finance manager to know about the type of product. attitude of the management. and represented at any one time by the operating cycle of such items as against receivables and cash. The present study is an effort to analyze the working capital management of Chennai Petroleum Corporation Limited over a period of time and to provide adequate support for the smooth functioning of the normal business operations of the company. market share.
which automatically includes inventory.e.company’s working capital. excess of current assets over current liabilities. account receivables and cash i. . Research Methodology The project study mainly focuses on the critical assessment of Working Capital Management of Chennai Petroleum Corporation Limited and deals with the liquidity dimension of working capital and the profitability. Primary Data As a part of strengthening the study. The present study undertakes to deal with the net concept of working capital i. Research Design is purely and simply the framework or plan for a study that guides the collection and analysis of data. Research Design Research is an organized activity focused on specific objective with the support of data collection involving tools for analysis deriving logically sound inferences. The function of researcher is to ensure that requires the data collected or accurate and economically.e. personal contacts are made with the officials and staff members of finance department in the form of discussions and collection of reports.. the proper management of working capital has brought access to this company..
. official files. records and other available related material. Tools and techniques for collection of data • • • • Ratio analysis and interpretation Statement of changes in working capital Common size balance sheet analysis Comparative balance sheet statement Statistical Tools Implemented are • • Z-Score analysis Regression analysis .e. Income and Expenditure and other brouchers of the company. mainly Balance Sheet. from 2000 – 2005.Secondary Data The Secondary Data are collected from Annual Reports. Period of Study The period of study will be carried out from last five financial years i. Method of Collection The data for the analysis are collected and gathered from the printed reports of Chennai Petroleum Corporation Limited like annual reports.
the other current assets must be sufficient to meet other current liabilities. Loans & Advances Current Ratio = Current Liabilities & Provisions This ratio measures the solvency of the company in the short-term. Loans & Advances . Current liabilities and provisions are those liabilities that are payable within a year. This ratio is also called the acid test ratio.Inventories Quick Ratio = Current Liabilities & Provisions – Bank Overdraft Quick ratio is used as a measure of the company’s ability to meet its current obligations. A current ratio of 2:1 indicates a highly solvent position.Ratio Analysis Current Ratio: Current Assets. Quick Ratio or Liquid Ratio: Current Assets. A quick ratio of 1:1 indicates highly solvent position. . Since bank overdraft is secured by the inventories. This ratio serves as a supplement to the current ratio in analyzing liquidity. which can be converted into cash within a year. Current assets are those assets.
group of items and computed items in two or more balance sheets of the same business enterprise on different dates. Comparative balance sheet analysis is useful for studying the trends of an undertaking. liabilities and the net worth of the company. Advantages • Comparative statements help the analyst to evaluate the performance of the company. The changes in periodic balance sheet items reflect the conduct of a business. The changes can be observed by comparison of the balance sheet at the beginning and at the end of a period and these changes can help in forming an opinion about the progress of an enterprise. • Comparative statements can also be used to compare the performance of the firm with the average performance of the industry between different years.Comparative Balance Sheet Statements: The comparative balance sheet analysis is the study of the trend of the same items. . • It helps in identification of the weaknesses of the firm and remedial measures can be taken accordingly. Balance sheets as on two or more different dates are used for comparing the assets.
. The total assets are taken as 100 and different assets are expressed as a percentage of the total. which is gaining more and more importance in recent years. Similarly. The figures are shown as percentages of total assets. The figures shown in financial statements viz. is the ‘Operating Cycle Concept’ of Working Capital. Operating Cycle consists of four stages: . Operating Cycle Analysis: A new concept. These statements are useful in analysis of the performance of the company by analyzing each individual element to the total figure of the statement. The operating cycle refers to the average time elapses between the acquisition of raw materials and the final cash realization. These statements will also assist in analyzing the performance over years and also with the figures of the competitive firm in the industry for making analysis of relative efficiency. various liabilities are taken as a part of total liabilities. Balance Sheet are converted to percentages so as to establish each element to the total figure of the statement and these statements are called Common Size Statements. total assets and total liabilities.Common Size Balance Sheet Analysis: A statement in which balance sheet items are expressed as the ratio of each asset to total assets and the ratio of each liability is expressed as a ratio of total liabilities is called common size balance sheet.
Regression Analysis : A fundamental and versatile research technique that seeks to explain an outcome (dependent) variable in terms of multiple predictor (independent) variables. which models a linear relationship among variables. The term typically refers to Ordinary Least Squares (OLS) regression.• • • • The raw materials and stores inventory stage. An example is the Z score. . This analysis reveals the nature and strength of the relationship between each predictor variable and the outcome. everyone is on the lookout for financial models that summaries one general aspect of overall company performance. Z -Score Analysis: The dozens of financial ratios seem to provide different answers to the same simple question of “How will a company do”. independent of the influence from all other predictors. which reveals the efficiency of working capital management. So. The finished goods inventory stage. The receivable stage. The work-in-progress inventory stage.
warning bells should ring. Out of a selection of 22 financial ratios. if the Z score to fall sharply. The interesting thing about the Z score is that is good analytical tool no matter what shape the company is in.The original Z score was created by Edward I Altman at New York University in the mid 1960’s and it has stood as the test of time. • The study is needed to identify the current position of the company through ZScore Analysis. Even if the company is very healthy. . Altmann found 5 that could be combined to discriminate between the bankrupt and non-bankrupt companies in this study.
36 211078.5 2 1. 1.77 115980.20 119000.75 208989.55 2. the creditors will be able to get their dues in full.84 157667..40 (Rs.14 361170.5 1 0. In Lakhs) Current Liabilities CA/CL 64712.27 1.73 Graphical representation of change of direction of current ratio 3 2. Here.Ratio Analysis and Interpretation Current Ratio: Year 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 Current Assets 172673.16 2. .67 71938.23 1. the ratio is showing a decreasing trend. which may be due to rise in production.23 203573.5 0 2000-01 2001-02 2002-03 2003-04 2004-05 CA/CL Interpretation The ideal ratio between current assets and current liabilities is 2:1.37 1. This is insisted because even if current assets are reduced to half i.e.
72 0.60 Quick Liabilities 64712. . the company is in an position to liquidate its current asset and gain an recovery of money within shortest possible time.40 1.Quick Ratio: Year 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 Quick Assets 86710.2 0 2000-01 2001-02 2002-03 2003-04 2004-05 QA/QL Interpretation The ideal quick ratio is 1.6 0.8 0.23 115980.4 0.81 119554.42 83259.37 (Rs.2 1 0.27 208989. When there is no corresponding increase in liquidity of current asset.09 81962. In Lakhs) QA/QL 1.76 0.57 Graphical representation of change of direction of quick ratio 1.52 90770. the analysis shown as decrease trend due to increasing inventory level which has resulted in increase in current liabilities.16 71938. where as the current liabilities as gone up. The downward trend in the quick ratio therefore has no significant and is not representational.55 119000.14 0. Here. The quick ratio is tend to decrease since the company is in an oligopolystic market.4 1.
Debtor’s Turnover Ratio
(Rs. In Lakhs) Year 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 Sales 698269.21 617481.66 807612.81 869351.35 1418835.85 Average Receivables 22954.92 30501.04 48906.84 56759.48 70822.26 Sales/Avg. receivables 30.42 20.24 16.51 15.32 20.03
Graphical representation of change of direction of Debtors Turnover ratio
35 30 25 20 15 10 5 0 2000-01 2001-02 2002-03 2003-04 2004-05 Sales/Avg. receivables
Debtor’s Collection Period
(Rs. In Days) Year 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 Days in a Debtor’s Year Turnover Ratio 365 30.42 365 20.24 365 16.51 365 15.32 365 20.03 Year/DTR 12.00 18.03 22.11 23.83 18.22
Graphical representation of change of Debtors Collection Period. 25 20 15 10 5 0 Year/DTR
2000-01 2001-02 2002-03 2003-04 2004-05
The debtor’s turnover ratio shows a decreasing trend and the debtors collection period is increasing. This implies that the collection of payments from debtors has been delayed. In other words, the company has allowed extended credit period to its customers.
Creditors Turnover Ratio
(Rs. In Lakhs) Year 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 Purchases 628630.94 558658.42 724122.91 768150.85 1275166.14 Average Creditors 53579.19 55809.94 77785.64 96024.94 128634.42 Purchases/Avg. Creditors 11.73 10.01 9.31 7.99 9.91
Graphical representation of change of direction of Creditors Turnover ratio
12 10 8 6 4 2 0 2000-01 2001-02 2002-03 2003-04 2004-05 Purchases/Avg. Creditors
Creditors Collection Period
(Rs. In Days) Year 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 Days in a Creditors Year Turnover Ratio 365 11.73 365 10.01 365 9.31 365 7.99 365 9.91 Year/CTR 31.12 36.46 39.21 45.68 36.83
Graphical representation of change of Creditors Collection Period. 50 45 40 35 30 25 20 15 10 5 0
2000-01 2001-02 2002-03 2003-04 2004-05
The Creditors turnover ratio shows a decreasing trend and the creditors collection period is increasing. It is only an temporary phenomenon.
00 87592.77 9. which means that the turnover has increased with a lesser working capital as sign of efficient management of working capital.81 869351.85 Net Working Capital 107961.35 1418835.Working Capital Turnover Ratio (Rs.87 152181.92 9. the ratio shows a decreasing trend.32 Graphical representation of change of direction of Working Capital ratio 10 9 8 7 6 5 4 3 2 1 0 Sales/NWC 2000-01 2001-02 2002-03 2003-04 2004-05 Interpretation This analysis helps to measure effective utilization of Working Capital. as the sales grown the ratio has also gone up. but in the current year 2004-2005.68 85728. In Lakhs) Year 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 Sales 698269. .21 617481.03 Sales/NWC 6.66 807612.81 92078.47 7.20 8. Here.
where as the asset position is taken in full. In Lakhs) Year 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 Sales 698269. In the year 2004-05.06 257073.35 1418835.74 3.85 Fixed Assets 117060.89 119827.25 331879. That resulted in declining in ratio.70 Sales/Fixed Assets 5.Fixed Asset Turnover Ratio (Rs. due to water scarcity the company was shut down for more than 45 days. the company completed 3 Million Met Return Per Annum (MMTPA) during the course of the year.97 5.36 114201. which resulted in a poor turnover.38 4.66 807612.21 617481.81 869351.28 Graphical representation of change of direction of Fixed Asset Turnover ratio 7 6 5 4 3 2 1 0 2000-01 2001-02 2002-03 2003-04 2004-05 Sales/FA Interpretation In the year 2003-2004. .41 6.
81 869351.91 31275.21 617481. which is reasonable. .17 53122.34 19.56 16.37 75967.85 Average Inventory 32717.14 41295.37 18.Inventory Turnover Ratio (Rs.35 1418835.74 19.66 807612. In Lakhs) Year 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 Sales 698269.68 Graphical representation of change of direction of Inventory Turnover ratio 25 20 15 10 5 0 Sales/AI 2000-01 2001-02 2002-03 2003-04 2004-05 Interpretation This ratio indicates that the stock is moving with a constant range.86 Sales/AI 21.
66 22.Inventory Turnover Period (Rs. This is only an temporary phenomenon. . In Days) Year 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 Days in a Inventory Year Turnover Ratio 365 21.56 365 16.68 Year/ITR 17.49 18.74 365 19.10 18.54 Graphical representation of change of Inventory Turnover Period.30 19. 25 20 15 10 5 0 Year/ITR 2000-01 2001-02 2002-03 2003-04 2004-05 Interpretation The inventory turnover period is increasing every year.37 365 18.34 365 19.
04 161133.85 Shareholder’s Fund 124845.81 869351. In Lakhs) Year 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 Sales 698269.35 1418835.04 200433. However.08 Graphical representation of change of direction of Owned Capital Turnover ratio 8 7 6 5 4 3 2 1 0 200001 2001.62 105122. .21 617481. its aim now being to maximize the profit and to maximize the wealth of the shareholders.66 807612.87 6. the company is searching for the better growth of company by improving the turnover of the company.59 5.Owned Capital Turnover Ratio (Rs.07 129528.200404 05 Sales/Sh.200202 03 2003. Holders fund Interpretation This ratio has shown some improvement over the period of time. Holder’s Fund 5. This means that the company has made use of the owner’s fund efficiently.69 Sales/Sh. Thus.40 7.24 5.
Fixed Assets a.44 332.43 -1087. Less: Dep & Amortization c.55 -24.47 39033.00 -19723.41 1903.97 -8.85 164967.80 6.95 497. a.24 -20. Capital WIP 2. Sundry Debtors c.63 52015.60 0.23 16584.00 -11.62 3267.84 56895.44 9.33 1258.74 3161.73 117060.73 0. Inventories b.33 14900.43 255828.64 14.94 122550.01 10547.56 34. Gross Block b.74 52.46 75743. Secured Loans b.94 255828. Unsecured Loans 3.Net Current Assets 6.73 1931.75 9.09 88542.98 -22194.55 2000-2001 2001-2002 Absolute Change Change % .85 8737.33 210721.14 85766.15 172673.91 11.64 -14923.Cur.94 -15.00 85818.15 115245.69 0.24 -2858.71 28.55 240091.32 124845.74 15737.Share Holders Funds a.74 105122.Investments Interest Accrued on Inv.71 14900. Loans & Adv. Cash & Bank Balances d.60 5118.16 125793.73 132.58 -19723.45 2055.56 111978.27 2.00 6.10 24913.80 36175.16 107961.Comparative Balance Sheet (2000-2001 & 2001-2002) Particulars Sources of Funds 1.Miscellaneous Expenditure (to the extent not written off) Total 205603.97 8358.51 157749.49 9.39 24913.71 6.89 50765.82 -25470.26 12642.33 109945.28 89.23 36822.07 3242.75 64712.77 7977.91 -48.69 -13.15 0.38 7846.97 114201.45 26544.84 6729. Assets.86 96519.00 -17.Loan Funds a.04 0.33 90221.72 1922.01 -2.Less: Current Liabilities a. Other Current Assets e.30 71983.45 7270.Deferred Tax Liability (Net) Total Application of Funds 1.27 0.80 -0.09 66.14 0. Reserves & Surplus 2. Capital b.41 7816.43 15737.49 24179. Net Block d.46 -10075. Loans & Advances 4.36 11732.62 10572.20 240091. Provisions 5.87 65253. Current Liabilities b.05 128792. 3.68 1434.
5118 lakhs (2.49%). There is an increase in loaned funds than the share capital.94%). This is due to appropriation of deferred tax liability. This further confirms that the company has no improvement in the short-term financial position. There is also an increase in long-term loans of about Rs.19723 lakhs (17. This fact depicts that the policy of the company is to purchase fixed assets from the long-term sources of finance thereby not affecting the working capital.24%).10572 lakhs (9. . there has been a decrease in inventories amounting to Rs. Profitability of the Concern There is a decrease in the reserves and surplus of the company of about Rs.7270.44%). On the other hand. Long Term Financial Position There is an increase in fixed assets of about Rs. The current liabilities have increased by Rs.10075 lakhs. so this increases the interest liability for the company.12642 lakhs (52%).64%) and sundry debtors have increased by Rs. This depicts that fixed assets are not only financed from long term sources but part of working capital has also been financed from long term sources.98 lakhs (11.Interpretation Current Financial Position and Liquidity Position The current assets have decreased by Rs.14923 lakhs (8.
54 2001-2002 2002-2003 Absolute Change Change % .89 71773. Capital WIP 2.50 10.23 92078.06 24405.23 101381.41 28867.74 105122.56 0. Net Block d.43 94781. Gross Block b. Cash & Bank Balances d.97 14257.45 2055.17 89156.75 33.14 85766.17 -2045.Fixed Assets a.Comparative Balance Sheet (2001-2002 & 2002-2003) Particulars Sources of Funds 1. 3.Share Holders Funds a.09 6311.63 46.64 -94.Less: Current Liabilities a.28 211078. Reserves & Surplus 2.87 65253.58 354419.57 -99.22 -15683.97 114201.Miscellaneous Expenditure (to the extent not written off) Total 210721.Cur.81 55.05 197567.49 0.74 3161.Loan Funds a.57 5625.10 47017.05 23.62 57.06 9. Inventories b.54 14900.49 8.36 98590.54 4.Investments Interest Accrued on Inv.60 226518.84 65. Secured Loans b.45 -24.94 255828.37 161.06 139922.22 439.39 114627.33 90221. Current Liabilities b.32 7. Loans & Advances 4.68 38. Loans & Adv.Net Current Assets 6.65 129528. Sundry Debtors c.54 119827. Other Current Assets e.28 259749.81 60991.00 27.99 10889.82 65.94 122550.09 15796.23 36822.34 2397.93 175.73 0.77 53328.45 901.57 98590.18 0.85 164967.89 50765.91 24405.49 7.00 194.07 3242.00 58. Less: Dep & Amortization c.83 17618.10 24913.51 157749. a. Capital b.Deferred Tax Liability (Net) Total Application of Funds 1.73 1931.05 27324. Unsecured Loans 3.93 57.40 119000.93 38.60 106691.30 71983.06 57516.04 17500.60 14900.00 354419.00 180067.00 44564.23 16584. Provisions 5.16 125793.60 -764.74 10171.58 24169.27 -1737.95 2410.36 36127.04 2322. Assets.84 6729.46 75743.00 120307.43 255828.86 96519.36 -89.09 0.17 0.28 10.45 26544.
47017 lakhs (65%).15796 lakhs (7. On the other hand.Interpretation Current Financial Position and Liquidity Position The current assets have increased by Rs. there has been a increase in inventories amounting to Rs.81%) and sundry debtors have increased by Rs. so this increases the interest liability for the company. This further confirms that the company has no improvement in the liquidity position.71773 lakhs (57%). Profitability of the Concern There is an increase in the reserves and surplus of the company of about Rs. Long Term Financial Position There is an increase in fixed assets of about Rs. . There is an increase in loaned funds than the share capital.24169 lakhs (65%).5%). This depicts that fixed assets are not only financed from long term sources but part of working capital has also been financed from long term sources. The current liabilities have increased by Rs.44564 lakhs. This fact depicts that there is an increase in the profitability of the concern. There is also an increase in long-term loans of about Rs.24405 lakhs (27%).53328 lakhs (33. This fact depicts that the policy of the company is to purchase fixed assets from the long-term sources of finance thereby not affecting the working capital.
90 58.33 52527.Fixed Assets a.54 -4. Loans & Adv.31 -21.00 194.Loan Funds a.11 339392. Cash & Bank Balances d.99 141801.10 -3.07 31604.80 34635.30 87592.58 354419.27 432299.51 29472.46 146232. Other Current Assets e.17 79643.00 180067.93 31605.21 12228.Miscellaneous Expenditure (to the extent not written off) Total 226518.80 0.88 10591.96 -4485.19 -57603.83 17618.76 21.Share Holders Funds a.57 24.28 259749.06 139922.72 26.81 60991.41 28867.60 106691.09 14900.46 114.00 5. Inventories b.00 120313.00 120307. Capital WIP 2. Assets.10 105388. Reserves & Surplus 2. Loans & Advances 4.39 114627.04 94728. Current Liabilities b.00 -13.02 137246.04 17500.34 2397.37 0.40 441.23 92078.60 2.00 0.09 4007.97 14900. Capital b.05 27324.00 77228.25 19.Investments Interest Accrued on Inv.28 10.89 16.05 197567.17 30.00 354419.09 375992.39 115980.66 -50.83 236530.28 211078.05 -7027.99 11.Deferred Tax Liability (Net) Total Application of Funds 1. Provisions 5.50 149474.02 -1200.62 -7505.87 -27.60 432299.51 1242.95 -39.58 161133.56 3.88 37. Secured Loans b.81 118919.88 -2.77 7311.52 -8463.00 27. Sundry Debtors c.97 2002-2003 2003-2004 Absolute Change Change % .90 203573.22 38963.50 0.45 901.37 0.Cur.17 0.60 77880.13 -53.99 -38265. 3.37 65.54 119827. Net Block d.40 21.Comparative Balance Sheet (2002-2003 & 2003-2004) Particulars Sources of Funds 1.56 257073.07 0.31 77880.01 -3019.65 129528.Less: Current Liabilities a.23 101381.Net Current Assets 6.40 119000.54 -41.94 341. Gross Block b.10 605. Less: Dep & Amortization c.61 6.40 1196. a.87 141. Unsecured Loans 3.25 82319.
77228 lakhs (441%). so this increases the interest liability for the company.7505 lakhs (3. This fact depicts that there is a increase in the profitability of the concern.52 lakhs.56%) and sundry debtors have decreased by Rs. This fact depicts that the policy of the company is to purchase fixed assets from the long-term sources of finance thereby not affecting the working capital. .5.8463 lakhs (13%).79643 lakhs (30%).Interpretation Current Financial Position and Liquidity Position The current assets have decreased by Rs. This depicts that fixed assets are not only financed from long term sources but part of working capital has also been financed from long term sources. On the other hand. Profitability of the Concern There is a increase in the reserves and surplus of the company of about Rs. Long Term Financial Position There is an increase in fixed assets of about Rs.31604 lakhs (27%). There is an increase in loaned funds than the share capital. there has been a increase in inventories amounting to Rs. There is also an increase in long-term loans of about Rs.
01 208989.Fixed Assets a.02 94811.00 157597.16 3290.74 14.40 36589. Inventories b.00 100.18 59.50 470804.88 331879.66 -21.06 55082.82 27.58 .03 77.96 495337.Less: Current Liabilities a. Gross Block b. Cash & Bank Balances d. Provisions 6.23 200433.87 26.87 -0.Intangible Assets 3.67 63037.37 152181.80 120313.32 74806.00 26.Deferred Tax Liability (Net) Total Application of Funds 1. Current Liabilities b.48 12647.11 339392.46 185533.00 121302.53 1196.62 93009.80 241615.90 361170.03 87. a. Reserves & Surplus 2.04 94728.51 1242.25 82319.92 3675.56 25.45 -77801. Unsecured Loans 3.89 -0.70 4518.56 0.99 141801. Capital b.Share Holders Funds a.56 257073. Net Block d.60 432299.51 -0. Other Current Assets e. Less: Dep & Amortization c.00 336397.31 63037.88 37. Loans & Adv.83 236530.33 52527.10 64588.58 2003-2004 2004-2005 Absolute Change Change % 375992.10 105388.59 2.41 2.86 -9.89 16.46 146232.24 20446.36 3976.80 34635.82 69.70 5473.78 -12.01 970.00 39300.19 73.58 161133.54 -94.26 80361.90 203573.39 115980.65 -384.11 3.74 -37.Cur.27 495337.95 -77.50 -272.73 89117.11 -2994.Investments .Comparative Balance Sheet (2003-2004 & 2004-2005) Particulars Sources of Funds 1.37 0.54 14900. Loans & Advances 5.36 23239. Sundry Debtors c.02 0.66 0.58 138924.65 39300.07 145476.Net Current Assets 7.77 20005. Secured Loans b.16 1196. Capital WIP 2.30 87592.88 10591.65 29463.99 239821.27 432299.81 118919.16 -53.87 141.Miscellaneous Expenditure (to the extent not written off) Total 14900.40 185750. Assets.03 14.25 1. 4.22 16.42 76.Loan Funds a.51 29472.69 94344.66 1497.19 80.
This further confirms that the company has improvement in the liquidity position.121302 lakhs.66%).36589 lakhs (69. so this increases the interest liability for the company. This fact depicts that there is a increase in the profitability of the concern.157597 lakhs (77.Interpretation Current Financial Position and Liquidity Position The current assets have increased by Rs. Also it is clear that there is no addition of fixed assets.2994 lakhs (. The current liabilities have decreased by Rs.87).80361 lakhs (76.39300 lakhs (26. . there has been a increase in inventories amounting to Rs. This depicts that fixed assets are not only financed from long term sources but part of working capital has also been financed from long term sources.88%).3290 lakhs (2.18%). This fact depicts that the policy of the company is to purchase fixed assets from the longterm sources of finance thereby not affecting the working capital. Long Term Financial Position There is a decrease in fixed assets of about Rs.42%) and sundry debtors have decreased by Rs. On the other hand.25%). There is also an increase in long-term loans of about Rs. Profitability of the Concern There is a increase in the reserves and surplus of the company of about Rs. There is an increase in loaned funds than the share capital.
0 100 19.0 5.5 32.1 6.4 13. Provisions Total b) Shareholders Funds Capital Reserves & Surplus Total c) Loan Funds Secured Loans Unsecured Loans Total d) Deferred Tax Liability Total Liabilities Assets a) Net Fixed Assets b) Intangible Assets c) Investments d) Current Assets Inventories Sundry Debtors Cash & Bank Balances Other Current Assets Loans & Advances Total e) Misc.3 25.2 2.1 36.1 26.6 28.3 100 26.0 1.1 48.7 38.2 21.3 0.0 4.2 99.7 5.7 34.6 0.1 34.7 0.3 0.2 1.5 27.7 0.0 1.Common size Balance Sheet Analysis Values in % Particulars Liabilities a) Current Liabilities Current liab.7 29.4 20.1 41.6 8.8 100 .1 0.6 100 21.3 29. Expenditure Total Assets 42.9 36.3 28.2 7.1 22.2 27.5 25.0 6.2 0.5 100 50.4 7.1 0.8 0.0 0.4 12.9 0.6 17.9 21.4 17.3 12.4 38.4 3.1 0.0 41.1 56.6 21.6 100 54.9 9.0 0.0 0.9 2.9 0.9 0.1 0.1 100 2000-01 2001-02 2002-03 2003-04 2004-05 18.9 0.1 7.7 25.7 0.1 24.0 4.0 100 47.7 2.0 23.4 3.9 43.4 37.6 0.2 4.1 11.4 3.7 26.0 1.0 37.2 5.1 44.9 2.8 100 19.0 100 62.7 2.7 37.1 3.2 0.8 0.6 0.
It is due to a part of current liability arrives net profit have contributed to the increase in fixed assets. This has vitiated the trend in current liabilities from the old years. so as to reduce the production cost. The current asset part has considerably decreased since 2000 and it is due to decrease in loans and advances. which is because of fluctuation in the reserves & surplus. it is because the company is doing mass production. There is also a decline in reserves & surplus in the last few years due to introduction of AS-22.Interpretation In common size balance sheet analysis in CPCL. The total net worth has decreased by 10%. Fixed assets have increased in figures during all the years of study. There is no decrease in inventory. The total capital % shows a decreasing trend for the last two years. The company adopted regrouping of certain loans and advances under crude oil loan transaction in line with industry’s practice of representing the same. The percentage of loan funds is increasing which states the availing of fresh loan from the year 02 to 04 for the purpose of expansion of the business. . it is found that the total assets and liabilities are taken as 100% total and other components of assets and liabilities are also expressed in terms compared to total asset and total liability.
Current liabilities Provisions Total Current Liability (B) Net Working Capital (A-B) Net Increase in Working Capital (B/F) Total Interpretation 2000 3472.68 1506.14 63214.68 Increase 5265.41 7816.68 2001 8737.84 56895. The total current assets decreased because of decrease in inventory level.15 172673.87 290.59 87550. The current liabilities decreased because of repayment of loans.STATEMENT OF CHANGES IN WORKING CAPITAL Changes in Working Capital – (2000-2001) Particulars Current Assets & Adv.55 20411.17 18131.95 53521.98 1631. Prov.68 32456.63 52015.21 In the year 2001. Cash and Bank Balance Inventories Sundry Debtors Other Current Assets Loans and Advances Total Current Assets (A) Current liabilities.21 32456.49 24179.58 25948.49 96357.72 85818. The sundry debtors increased considerably indicating more credit being given to the customers. the inventory level is reduced because of low production. The cash and bank balance increased because of non-utilization of funds.01 89162.53 6319.23 Decrease 10538.85 1922.26 20411.13 107961.16 107961.55 2449.68 176713.04 21729.75 64712. .13 107961.
45 75704.85 36822. The cash and bank balance include a sum of Rs.68 2002 16584.38 1902.87 43811.23 19.94 157667.36 65211. the inventory level is reduced because of not holding up the inventory.74 23479.15 172673. Cash and Bank Balance Inventories Sundry Debtors Other Current Assets Loans and Advances Total Current Assets (A) Current liabilities.91 107961.49 24179. .72 85818.91 43811.32 1089.Changes in Working Capital – (2001-2002) Particulars Current Assets & Adv.87 Increase 7846.81 22232.89 28535.55 85728. Current liabilities Provisions Total Current Liability (B) Net Working Capital (A-B) Net Increase in Working Capital (B/F) Total 2001 8737.84 56895.68 107961. Prov.63 52015.162 crores in Term deposits that are earmarked for certain short term obligations maturing with in 2-3 days like payment towards purchase of crude oil.85 1922.64 12642.41 7816.21 8316.73 6726.93 22232.75 64712. The loans given were reduced because of utilization of funds for production purposes.68 Interpretation In the year 2002. The sundry debtors increased considerably indicating more credit being given to the customers.82 71938.16 107961.73 Decrease 10113.
28 211078.83 17618.58 6349.81 6349.55 85728. Loans given were increased slightly.45 75704.17 44602.40 119000.23 101381.00 2003 901.73 6726.00 Increase Decrease 15683. Prov. .19 92078.Changes in Working Capital – (2002-2003) Particulars Current Assets & Adv. The total current liabilities are increased because of rise in the level of borrowings made by the business.36 65211.48 331.94 157667.45 10.34 36170. Current liabilities Provisions Total Current Liability (B) Net Working Capital (A-B) Net Increase in Working Capital (B/F) Total 2002 16584.85 36822.00 69103.28 120307.23 19.41 28867.81 60991.89 28535.23 92078.19 92078.10 10891.22 9. The inventory level is raised because of increase in production. However. Cash and Bank Balance Inventories Sundry Debtors Other Current Assets Loans and Advances Total Current Assets (A) Current liabilities. The sundry debtors are increasing because of rise in sales level.96 24169. it shows the best management of surplus funds.52 Interpretation In the year 2003. cash and bank balance reduced indicating lesser liquidity position of the company.82 71938.52 69103.
.51 16.10 605.83 17618. The level of debtors decreased indicating immediate cash flow into the business. The cash and bank balance raised indicating stability in the liquid position of the company.89 120313. Prov.51 29472. Current liabilities Provisions Total Current Liability (B) Net Working Capital (A-B) Net Increase in Working Capital (B/F) Total 2003 901.33 52527.13 12470.Changes in Working Capital – (2003-2004) Particulars Current Assets & Adv.61 5.88 10591.39 115980.00 92078.23 101381.40 119000. The current liabilities decreased because of repayment efforts.05 7027.27 87592. Cash and Bank Balance Inventories Sundry Debtors Other Current Assets Loans and Advances Total Current Assets (A) Current liabilities.94 6.90 203573.52 Decrease 8463.13 Increase 341.01 4485.14 105388.81 60991.62 4007.41 28867. The level of loans given also increased indicating effective utilization of cash.28 120307.87 4485.28 211078.00 Interpretation In the year 2004.99 92078. the inventory is increased slightly.99 12470.45 10.00 2004 1242.23 92078.
90 203573.03 Increase Decrease 272.62 64588. The cash and bank balance.Changes in Working Capital – (2004-2005) Particulars Current Assets & Adv.14 105388.39 115980. Cash and Bank Balance Inventories Sundry Debtors Other Current Assets Loans and Advances Total Current Assets (A) Current liabilities.01 208979.11 241615. the inventory and sundry debtors shows a big hike. It may be due to the repayment of current liabilities.48 12647. Prov.00 80361.90 157891.89 120313. which means that there is an mass payment and settlement of creditors.87 64588. Loans and advances have been reduced.16 152181.51 16.33 52527.88 10591.40 36589.36 23239.40 185750.27 87592.16 152181.03 2005 970.78 121302. .90 Interpretation In the year 2005.90 361170.86 9. Current liabilities Provisions Total Current Liability (B) Net Working Capital (A-B) Net Increase in Working Capital (B/F) Total 2004 1242.03 157891.01 3.65 29463.50 12.51 29472.37 152181. The current liabilities have been decreased. It is due to the increase in turnover of the company.73 89117.
the creditors has allowed a maximum credit of 37 days for each supply. If the company maintains the present year situation.19 21. then it means that the company is able to collect the payments in time and they are using the funds efficiently for the production purposes.Operating Cycle Year R.47 Operating Cycle refers to the average time elapses between the purchase of raw material and final cash collection. Cash is used to buy the raw materials and other stores. then there will be a comfortable growth for the company’s business. instead it has started closing the outside loans. The number of cycles if maximized.77 6. However. Operating Cycle shows an increasing trend because of increase in debtors and delayed payments to creditors.90 11. the company can improve the turnover because of that reason. Z-Score Analysis for the year 2000-2001 to 2004-2005 The formula for calculating Z-Score analysis is .41 7. The decrease in the operating cycle of times reveals the possibility of delay or decrease in yielding the profit. The collection process of the company has improved.M (a) WIP (b) Finished Goods (c) Drs (d) Crs (e) Duration of Operating Operating Cycle Cycle in (a+b+c+d-e) = f Times (365/f) 2000-01 2001-02 2002-03 2003-04 2004-05 Interpretation 18 20 20 25 11 28 14 25 33 14 11 13 14 16 11 11 17 20 21 18 27 32 32 36 37 41 32 47 59 17 8. but the company is not paying its trading creditors first.
0146 Z-Score more than 3. Z-Score between 1.Z = 0.51183 + 0.48 27.17 27.0518 0.46 Z-Score 3.12141 3.26037 + 0.8 and 3.5892 0.23 7.97 21.44424 + 0.61 X2 2.48756 3.77588 3.63 18.46 X5 244.22764 + 0.4457 0.92 205.58872 + 0.00356 3.18 201.49 31.02 31.24294 +2.033X3 + 0.09576 + 0.37404 + 0.32 6. .36876 + 0.40 15.0 indicating that the company is prone to financial sickness.0392 + 0.01722 + 0.09 258.57 228.34 X3 9. Z = Financial Health Score X1 = Working Capital / Total Assets * 100 X2 = Retained Earnings / Total Assets * 100 X3 = EBIT / Total Assets * 100 X4 = Net Worth / Total Liability * 100 X5 = Sales / Total Assets * 100 Year 2000-01 2001-02 2002-03 2003-04 2004-05 Year 2000-01 2001-02 2002-03 2003-04 2004-05 Interpretation X1 37.4522 + 0.32 29.56 7.25932 + 0.18888 + 2.010X5 Where.33156 + 0.8 1.17616 + 2.006X4 + 0.84 13.16392 + 2.2809 0.32527 Z-Value 0.014X2 + 0.17076 + 2.36 28.012X1 + 0.8 shows certain in bankruptcy.84 26.31548 + 0.10248 + 0.51 X4 40.0 is financially sound and less than 1.89 17.
Regression Analysis Profit on Sales Year 2000-2001 Sales (x) Rs. From the year 2000-2001 to the year 2004-05. For example. indicating that the company is prone to financial sickness.0. which reacts to the growth in the financial grounds of the company.crore 7132 Profit (y) Rs.0. This is because of increase in turnover. the z-score is less than 3. the score is more than 3. As this year was the second year of free marketing conditions. It indicates that the company’s financial position is sound in all the years. the volatility in crude prices have much affected the company’s financial strength especially when there were huge outstanding from government.crore 122 xy 870104 x2 50865424 .0. Indicating sound financial policy. in the year 1999-2000.Z-Score for CPCL in all the years is more than 3. The past records of the company have revealed some sickness in finance. and no support under the erstwhile APM mechanism. This was mainly because of the mismatching of product prices with those of crude oil prices under the import parity pricing mechanism.
b = constants Regression Equation y on x is yc = a + bx To find out the values of a. b Σ y = na + bΣ x Σ xy = aΣ x + bΣ x2 By substituting this Equation 1483 = 5a + 47804 b ------------------(Multiplied by 47804) 17373081 = 47804 a + 519978244 b ------------(Multiplied by 5) 70893322= 86865405 = 239020 a + 2285222416 b 239020 a + 2599891220 b ------------------------------------------------------15972073 = 314668804 b ------------------------------------------------------ .2001-2002 2002-2003 2003-2004 2004-2005 Total 6273 8629 9475 16295 47804 63 302 400 596 1483 395199 2605958 3790000 9711820 17373081 39350529 74459641 89775625 265527025 519978244 x = independent variable (sales) y = dependent variable (profit) a.
Interpretation Here the variable `y’ is taken as Profit and `x’ is taken as Sales.69 The Future Sales Estimation for the year 2006 is 23000 crore and for the year 2007. By substituting the values of a and b in the regression line y on x is FOR 2006 y = .188.79 cr.84 cr. 1115.188.69 + 0. FOR 2007 y = -188. it is 25700 crore. The estimated sales for 2006-07 is based on the budget estimates by the organization with a growth rate of about 12% factored over the Revised Estimates for 2005-06.69 + 0. The estimated sales for 2006 is based on the actuals for nine months up to December 2005 and realistic estimates for the balance three months of the year 2005-06.b = 0. .05076 (23000) y = Rs. 978.05076 (25700) y = Rs.05076 By substituting b value in Equation (1) 1483 = 5a + 47804 b a = .
84 cr. 978. Debtors to Sales Year 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 Sales (x) 7132 6273 8629 9475 16295 Debtors (y) 241 368 616 525 891 xy 1718812 2308464 5315464 4974375 14518845 x2 50865424 39350529 74459641 89775625 265527025 . Thus the regression analysis estimates a higher quantum of profitability for the organization in the coming two years 2005-06 and 2006-07.The projection of Rs. 1115. for the next two years indicates increase in profit due to estimation that the price of Raw Material and Finished goods may vary at a higher rate that result in such a huge increase in profit. and Rs.79 cr.
Total 47804 2641 28835960 519978244 x = independent variable (sales) y = dependent variable (debtors) a. b = constants Regression Equation y on x is yc = a + bx To find out the values of a. b Σ y = na + bΣ x Σ x = aΣ x + bΣ x2 By substituting this Equation 2641 = 5a + 47804 b ------------------(* 47804 ) 28835960 = 47804 a + 519978244 b ------------(*5) 126250364 = 239020 a + 2285222416 b 144179800 = 239020 a + 2599891220 b ------------------------------------------------------179294436 = 314668804 b ------------------------------------------------------b = 0.05698 .
16. 1293.79 cr. The estimated sales for 2006-07 is based on the budget estimates by the organization with a growth rate of about 12% factored over the Revised Estimates for 2005-06.05698 (25700) y = Rs.By substituting b value in Equation (1) 2641 = 5a + 47804 b a = . 1447. By substituting the values of a and b in the regression line y on x is FOR 2006 y = . The estimated sales for 2006 is based on the actual for nine months up to December 2005 and realistic estimates for the balance three months of the year 2005-06.56 + 0.56 + 0.16. it is 25700 crore . FOR 2007 y = .56 The Future Sales Estimation for the year 2006 is 23000 crore and for 2007. Interpretation Here the variable `x’ is taken as Sales and variable `y’ as Debtors.95 cr.05698 (23000) y = Rs.16. .
indicates increase in debtors due to increase in sales. Thus the regression analysis estimates a higher quantum of sundry debtors for the organization for the coming two years 2005-06 and 2006-07 . 1447.1293. Most of the sales made by the company is taken as credit sales. and Rs.79 cr. So increase in sales will result in increase in the amount of debtors.The projection of Rs.95 cr.
b = constants Regression Equation y on x is yc = a + bx To find out the values of a. Working Capital Year 20002001 20012002 20022003 20032004 20042005 Total Sales (x) 7132 6273 8629 9475 16295 47804 Working Capital (y) 1079 857 920 875 1522 Xy 7695428 5375961 7938680 8290625 x2 50865424 39350529 74459641 89775625 2480099 265527025 0 519978244 5253 5410168 4 x = independent variable (sales) y = dependent variable (debtors) a. b Σ y = na + bΣ x Σ x = aΣ x + bΣ x2 By substituting this Equation .Sales vs.
it is 25700 crore . 1878.90 cr. By substituting the values of a and b in the regression line y on x is FOR 2006 y = 461.34 + 0. FOR 2007 y = 461.06163 (23000) y = Rs.34 The Future Sales Estimation for the year 2006 is 23000 crore and for 2007.34 + 0.06163 (25700) .06163 By substituting b value in Equation (1) 5253 = 5a + 47804 b a = 461.5253 = 5a + 47804 b ------------------(* 47804 ) 54101684 = 47804 a + 519978244 b ------------(*5) 251114412 = 239020 a + 2285222416 b 270508420 = 239020 a + 2599891220 b ------------------------------------------------------19394008 = 314668804 b ------------------------------------------------------b = 0.
31 cr. Most of the production and other operational requirements like utilities and repairs and maintenance are made by the company out of working capital. The estimated sales for 2006 is based on the actual for nine months up to December 2005 and realistic estimates for the balance three months of the year 2005-06.1878. 1878. So increase in sales will result in increase in the amount of working capital demands also. and Rs. for the next two years is required because of expected increase in sales. indicates increase in working capital due to increase in production and in sales. The estimated sales for 2006-07 is based on the budget estimates by the organization with a growth rate of about 12% factored over the Revised Estimates for 2005-06. and Rs.90 cr. working capital required for the next 2 years is projected. .31 cr. In this analysis. The projection of Rs. Here the working capital is projected based on estimated future sales that in turn is derived by experience.31 cr. Interpretation Here the variable `x’ is taken as Sales and variable `y’ as Working Capital. 2045. Thus the regression analysis estimates a higher quantum of working capital (net) for the organization for the coming two years 2005-06 and 2006-07. 2045. 2045. The projected Working Capital of Rs.90 cr.y = Rs.
76 2003-04 132.38 35 140.This is matched by the working capital / short term funding limits of Rs.45 158.1500 crore approved by the board.99 213.30 85.13 220.54 140.27 487.18 52.98 247.29 52.29 102.13 20 80.17 104.21 81.41 97.06 327.16 326.19 217.40 99.85 160.45 60.22 288.19 120 482.37 149.85 83.40 117.99 330.43 2002-03 120.03 488.34 129.46 88.61 131.76 112.12 130.95 77.01 164.55 162.80 97.80 164.12 388.60 200.96 288.97 35.04 87. This working capital demands in funded mainly by the SBI and Canara bank.85 221. Trend Analysis PARTICULARS Sales PBIT Interest Depreciation PBT PAT Current Assets Current Liabilities Working Capital Net Fixed Assets Capital Employed Net Worth Debt Equity EPS Dividend (%) Dividend Amt 2000-01 100 100 100 100 100 100 100 100 100 100 100 100 100 100 25 100 2001-02 87.21 633.13 99.13 81.35 .97 2004-05 228.36 94.32 79.60 115.17 205.44 77.47 390.52 247.94 119.16 50 200.
Interpretation (i) The sales have continuously increased in all the years except 2002. The PBT is at 633% and PAT at 487% over the base year figure of 2001. Dividend payment at CPCL show a good track record and shown an increasing trend for the forth coming year. The increase in sales is quite satisfactory which is due to the completion of 3 MMTPA refinery expansion and higher value added products (ii) The earning has increased substantially in the year 2004 and 2005. commissioning and capitalization of the 3 MMTPA refinery expansions cum modernization project. (iii) Dividend has been increasing continuously from the year 2001 to 2005 except 2002. This is due to increase in value at production and higher demand for the product. (v) Depreciation also has considerably increased due to the completion. The percentage in 2005 is 228 as compared to the base of 100 in 2001. (iv) The profitability of the company has increased manifold as evidenced by the absolute numbers of PBT and PAT. There is a decrease in the year 2002 that was due to decrease in earnings. .
which is about 488% over the base year figure. (ix) The debt equity was at its best in 2001 started slowly moving unfavourably due to huge borrowings resorted to for funding the 3 MMTPA expansion project. (vii) The long-term borrowings of the company stand at Rs.40.8.21 for 2001.1521 crore for 2005 as against 1079 crore for 2001 which is140% of the base year figure. As of 2005.08 for 2005 as against Rs.1500 crore which is mainly funded by the SBI and consortium of other banks. it stood at 1. .1800 crore as of December 2005 and US $ 105 million as on the same date (latest figures) (viii) The working capital limit has been pegged at Rs.(vi) There is a sharp increase in the working capital limits. Out of this the company has availed about Rs. The net working capital was Rs. (x) The EPS has shown remarkable recovery and improvement and it was Rs.3000 crore including the foreign currency component of US $ 150 million.20 which is anyway a better figure considering the massive expansion programme.
178.(xi) The company has been aggressively pursuing the dividend policy decisions and it declared a whopping 120% dividend for 2004-05 entailing an outgo of Rs. .71 crore which was equivalent to a payout of about 30%.
The average payment period is also started showing an increasing trend indicating delayed payment being made to the creditors. The average collection period of the company is showing an increasing rend. The profits achieved by the company shows an increasing trend because of increase in sales and reduction in interest charges for funds borrowed by the company. This is because of rise in credit giving policy made by the company that is limited for up to 30 days. It has been found out that the profitability and investments being made by the firm are sound and showing an increasing trend. . This is because of effective production techniques implemented by the company. the payment period is extended up to 40 days The inventory turnover of the company is satisfactory. This indicates more time taken by the company to repay the suppliers. Profitability indicates the efficiency and effectiveness with which the operations are being carried on. There is no holding up of inventory thereby saving interest on investment amount. However.
this may be due to prudent investment/portfolio management being forwarded in the company. The Debt. it showed an decreasing trend for the last two years. This is because of decrease in Other Current Assets of the firm. The company indicating good asset position of the company. The company has also got sufficient reserves and Surplus to meet the future financial contingencies of the company. This is because of decrease in Current Liability of the Company. which should be taken note. which will contribute to a major extend for the company’s production purposes in future. The cash balance has increased in the year 2003-2004. The current financial position of the company compared to the last three years is decreased slightly. . There is a sudden decrease in the Cash Balance of the company in the year 20022003. The Total Resources of the company for the last five years is showing an increase in trend. The fixed asset of the company contributes more than 50% of the total asset position of the company. It is found that there is an increase in Reserves and Surplus Funds. Though the liquidity position of the company is moderate.Equity position of the company is satisfactory but it increased slightly from the last year’s ratio.
It is found from the analysis that the company has changed its policy after Administering Price Mechanism (APM). The Duration of Operation Cycle and operating Cycle in Times is moderate. . This effect has been mainly focused on Loans and Advances. In the year 2003-04. The Fund Flow Analysis reveals that the Total Sources position of the company is satisfactory and enough to meet the future requirements of the company to carry out its activities. The Working capital requirement of the company to carry out the production purpose is satisfactory and is not suffering from any inadequacy. it started showing slightly decreasing trend. The Common Size Balance sheet shows a decreasing trend in Current Assets and Current Liabilities of the firm indicating changes in policies of repayment made by the company. It is projected from Z-Score analysis that the company is financially sound in the year 2001-2003. The working capital is decreased in the year 2003-2004 because of consistency in maintaining the required level of inventories. It is projected from Operation Cycle the rotation of Debtors and Creditors are within the acceptable time period. But in the current year it started increasing. The Working capital position of the company is satisfactory.
It is projected from Regression Analysis that there will be a decrease in profits for the forthcoming year. This may be due to changes in Government Policies and wide fluctuations in Crude Oil Prices etc. . Net worth and Dividend. It is projected from Trend Analysis that the sales trend of the company for the last 5 years is satisfactory. Profit After tax. Due to sample constraint. This indicates the enhancement of credit worthiness of the company. total assets. It has been found out that overall solvency position of the company is satisfactory and it shows an increasing trend. this analogy may not however be sustainable. This analysis is showing a decreasing tend in all aspects such as Earnings before Interest and tax.
For their new products. . So that I can increase EPS. The company may try to reduce the Inventory Turnover Period by using the Inventory Management techniques such as EOQ and ABC analysis. which will add further sophistication and low cost techniques of production. Effective Costing Techniques may be implemented to control the operating expenses incurred by the company. The credit policy given can also be reviewed so that considerable amount of funds may not and up locking in debtors. This may result in saving of considerable amount of interest further from 6. It is better to choose different debt mix that is cheaper. The payment policy adopted by the company to the suppliers can be reviewed. The company may maintain the same Debt-Equity ratio in the future. This will result in increase of cash balances of the company. Effective measure have to be carried out to resume the export of petroleum products for the current year.3% on long-term loans. An alternative proposal of External Commercial borrowings will be cheaper for the company based on terms and conditions of the foreign fluctuations etc.
There has been slightly decreasing trend in the financial soundness of the company in the near future. Effective steps should be taken to find the root cause and control it. The solvency position of the company can be further improved by arresting the borrowings made by the company. . If the steps were not taken. this may affect the long-term credit interest of the company.
I conclude that if the company takes the above actions as suggested. the company would remain no one leader in the Indian Petroleum Industry in future. with its excellent past records. the profits for the company has increased over the past years which proves that the company has taken measure to generate profits by improving its capacity utilization which would maximize the generation of resources for expansion. Chennai Petroleum Corporation Limited has mobilized the funds in the same manner the funds are invested productivity in the capital asset as well as working capital. . since the government has dismantled the pricing of he product from 1. growth and diversification. There is a sudden increased in market price during the year 2002-2003 which is because of better control from top-level management. The company may take efforts to increase its efficiency in taking control. There is a sudden increase in market price during the year 2002-2003 which is because of better control from top-level management. To conclude that.4. The company has a high operational efficiency.98 To end with.
com . December 2004.indiainfoline. www. Warsaw Publications. Websites: 1.N. 2002. Hari Prasad Reddy. C. S. Dr. 1998.co. New Delhi.cpcl. 1996. ICFAI. 11th edition.S. Journal.in 2. Research methodology. 2002. Center for monitoring Indian Economy. Principles of Management Accounting.R Kothari. Margham Publications. Financial Management. T. ICFAI. Sultan Chand & Sons. Reddy and Y. Financial and Management Accounting. Maheswari. www.
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