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Managing, Capital

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CHAPTER , I INTRODUCTION 1 . 1 . WORKING CAPITAL MANAGEMENT Seed money may be viewed as life blood vessels of a organization.

Working capital managing is a process of planning and controlling the level and mix from the current assets of the firm as well as auto financing these resources. A study of working capital is of major importance to internal and external analysis due to its close marriage with the everyday operation of the business. Also in a well-established business has a long history of successful operation, careful attention to the administration of seed money results in greater profitability.

Cash which are necessary for short term goal for the purchase of raw materials, payment of wages and other day-to-day bills are called working capital. The aim of working capital managing is to control each of the business current assets and current liabilities. Seed money is also referred to as circulating capital or current capital or revolving capital. Capital required for a business can be classified under two key categories viz,? Fixed capital? Working capital Every single business needs cash for two functions for its establishment and carryout its day-to-day operations.

Long-term funds have to create development facilities just like purchase of plant, machinery, land, building, furniture’s, etc ., Investment in these resources represent that part of the firms capital which is permanently clogged and it is known as as set capital. Funds are also needed for short-term goal for the purchase of raw materials, payment of wages and also other day-to-day bills. These money are known as working capital. The significant capital may possibly rightly to get called because the going around or spinning capital, since current property keep spinning fast and therefore are being frequently onverted in to cash which cash runs out again in exchange pertaining to other current assets. 1 ) 1 . 1 . DEFINITIONS In accordance to Genestenberg “Circulating capital means current assets of a company which have been changed in the ordinary span of business from one from to another. Based on the Institute of Chartered Curator of India “Working capital means the funds obtainable from everyday operations associated with an enterprise. Inside the words of Shubin, “Working capital is definitely the amounts of money necessary to cover the cost of working the enterprise. 1 . 1 ) 2 . TYPES OF WORKING CAPITAL a) Long term working capital It means the lowest amount of investment in every current assets which is viewed at all times to continue minimum level of current asset is known as permanent working capital. Tandon committee features named this as “Core current assets Features of permanent working capital 1 . Amount of permanent working capital remains in the commercial in one type or another. installment payments on your There is a great correlation between the amount of permanent seed money and the scale the business. 3. Permanent working capital should be economic out of long term cash. (b) Momentary working capital

This is also called the fluctuating or variable working capital. The amount of momentary working capital will keep on changing depending upon the alterations in development and sales. The extra working capital required to support the changing production and sales activities is known as non permanent working capital. (c)Gross working capital It’s the amount of funds used various aspects of current assets. This concept provides type next advantages. 1 . Financial administration is mainly worried about management of current possessions ( Low working capital) 2 . This enables a strong to release the highest returns upon its investments.. It enables a firm to plan and control the funds in its disposal. some. It helps inside the fixation of varied areas of obligation. (d) Net working capital Within a narrow sense, the term working capital refers to the web working capital. Net working capital is definitely the excess of current assets more than current liabilities. Net functioning capital=Current assets-Current liabilities Net working capital as being a qualitative strategy indicates.? The liquidity location of the company and supply of funds? Implies the level to which working capital needs could possibly be financed by simply permanent method to obtain funds.

Increased liquidity is likewise bad. It could be due to mismanagement of current assets. As a result prompt and timely action has to be taken by the management to improve and address imbalances inside the liquidity situation of the firm. (e) “balance sheet” working capital The balance sheet seed money is one particular, which is computed from the products appearing in the balance sheet. Major working capital and net seed money are types of the balance piece working capital. (f) Cash working capital Cash working capital is one particular, which is calculated from the products appearing in the profit and loss bank account.

Its shows the real flows of money or perhaps value at a particular time and is considered to be one of the most realistic approach in seed money management. The money working capital implies the adequacy of the income, which is an essential pre-requisite of the business. 1 . 1 . several. THE NEED FOR WORKING CAPITAL The need for working capital cannot be over emphasized. Every single business needs a lot of amount of working capital. The need for working capital arises due to the time gap between production and realization of cash from sales. There is a great operating routine involved in the revenue and recognition of cash.

Working capital is needed to get the following functions:? For the purchase of recycleables, components and spares.? To pay income and wages.? To get day-to-day bills and cost to do business cost such as fuel, electrical power and business office expenses, and so forth,? To meet the selling price as packaging, advertising, and so forth,? To provide credit rating facilities to the consumers.? To keep up the inventories of organic material, work-in-progress, stores and spares and finished inventory. 1 . 1 . 4. IMPORTANCE OF ADEQUATE WORKING CAPITAL (a) Solvency of the Business Adequate seed money helps in keeping solvency from the business by giving uninterrupted flow of creation. b) Very good Will Sufficient working capital allows a business matter to make fast payment thus helps in creating and preserving good will certainly. (c)Cash Lower price Adequate seed money enables the firm into avail cash discount features offered to it by the suppliers. The amount of cash discount minimizes the cost of order.

You examine ‘Working Capital Management’ in category ‘Management’ (d)Credit Worthiness It enables the company to operate it is business even more efficiency as there is on simple favorable terms. (e)Expansion of Markets A firms which have adequate seed money, create advantageous market condition.

This is thus because purchasing its requirements in bulk. The moment prices were lower and holding the inventories intended for higher. Profits are elevated. (f)High Comfort Adequacy of working capital makes an environment of security, confidents, high spirits etc, and creates over-all efficiency in corporate. 1 . 1 . 5. DRAWBACKS OF LIMITED WORKING CAPITAL Once working capital is inadequate, a firm faces the following problems.? It may not be able to take advantage of profitable business opportunities.? It can certainly not buy the requirements in bulk and are not able to avail of special discounts.? It will not be able to pay their dividends. It cannot afford to increase its cash sales and might have constrained its actions to credit rating sales just.? It becomes not possible to utilize proficiently the fixed assets due to nonavailability of liquid funds.? The rate of return in investments likewise falls while using shortage of seed money. 1 . 1 ) 6. DISADVANTAGES OF SURPLUS WORKING CAPITAL The moment there is an excessive amount of working capital also, it is dangerous abnormal working capital elevates the following concerns.? A firm might be tempted to over trade and lose seriously.? There may be an imbalance among liquidity and profitability?

The excess of working capital may lead to negligence about expense of production.? Increased working capital means funds will be idle. The moment funds happen to be idle, zero profit is earned. Launched so , the rate of revenue goes down. 1 . 1 . several. OPERATING PATTERN Modern business enterprises produce products in anticipation. Goods made are not immediately. Cash available for sale is also recognized immediately, Operating cycle is usually involved in the time of acquiring raw materials towards the time realization of cash pertaining to sales built. Following levels are usually present in an operating cycle of the manufacturing firm Conversion of money into raw materials.? Conversion raw materials.? Conversion of in-progress in finished merchandise.? Conversion of finished goods into borrowers through revenue? Conversion of debtors into cash. This cycle will be repeated again and again. The procedure cycle of producing business can be shown just as the following data. There are period gaps among purchases of raw materials and production, development and sales, sales and realization of money. Thus the need for working capital occurs due to the period gap between purchases of raw materials and realization of money from revenue.. 1 . eight. FACTORS AFFECTING WORKING CAPITAL You will discover no set of rules or formulae to determine the working capital requirements of companies. A large number of factors each have another type of influence seed money need of firms. Listed below are the determinants of seed money. (a)Nature of Business Working capital requirements of your firm will be basically affected by the nature of its business. Trading and financial firms have a very small expense in set assets although require a significant sum of money to be invested in working capital. (b)Size of Business

The working capital requirements of a concern are directly influenced by the size of the business which might be measured in terms of scale of operations. Greater the size of a small business unit, generally larger would be the requirements of working capital. (c)Credit policy The credit plan of the company affects the significant capital simply by influencing the level of debtors. The credit terms to be granted to clients may depend upon the norms of the industry to which the firm belongs. (d)Sales and demand state The working capital heads of your firm happen to be related to their sales.

Product sales depend on demand conditions. Many firms experience seasonal and cyclical fluctuations in the demand for their products and services. Dealing periods of peak require increasing production may be expensive for the firm. (e)Manufacturing Cycle The manufacturing cycle starts with buy and utilization of raw materials and completes with all the production of finished products. The level of working capital depends upon enough time required to produce goods. (f)Price level changes Changes in the selling price level likewise affect the seed money requirements.

Generally, the increasing prices requires the organization to maintain bigger amount of working capital as more money will be instructed to maintain the same current property. 1 . 1 ) 9. METHODS OF FORECASTING SEED MONEY In organizing working capital prediction, the following information is required. 1 ) Cost to become defrayed upon materials, wages and expenditure. 2 . Length of time during which unprocessed trash are to continue in stock before they put to production. several. Length of creation cycle four. Length of deal cycle denoting that the time period finished merchandise has to be in the warehouse before sales.. Period of credit rating availed of coming from creditors 6. Time separation involved in the payment of income and expense expenses. 1 ) 1 . 15. SOURCES OF SEED MONEY The following are the sources of seed money (a)Trade Credit rating Trade credit is a temporary credit facility extended simply by suppliers of raw materials and other suppliers. It is just a common supply. It is an crucial source. Either open accounts credit or acceptance credit rating may be adopted. In the ex – as per organization custom credit is extended to the purchasers, the buyer is not putting your signature on any debt instrument consequently. (b)Commercial Banking institutions

Commercial financial institutions are the up coming important source of working capital financial. Commercial financial in the country is usually broad based and reasonably developed. Straight loans, money credits, hypothecation loans, give your word loans, overdrafts and expenses purchase and discounting would be the principal kinds of working capital financial provided by industrial banks. (c)Finance Companies Finance Companies are rich in the country. About 50, 000 companies exist at present. They offer service practically similar to banking institutions, though not really they are banks. They provide want based loans and sometimes arrange loans via others can be.

Interest rate is definitely higher. Nevertheless timely assistance may be achieved. (d)Indigenous Lenders Indigenous brokers are also abundant and provide economical assistance to small business and investments. They alter exorbitant interest rates by very much understanding. (e)Public Deposits Public deposits are unsecured deposits raised simply by business to get periods exceeding beyond a year but not more than three years by making concerns and not more than five years simply by nonbanking financial institutions. The RBI is managing deposit choosing by these companies in order to guard the depositors.

Quantity limit is placed at 25% of paid up capital and free services for debris solicited via public are prescribed to get nonbanking developing concerns. The rates of interest ceiling are also fixed. This form of working capital financing is resorted to simply by well established businesses. (f)Advances via customers Developments from customers are normally demanded by suppliers of costly goods in the time accepting requests for supply of goods. Builder might also demand advances coming from customers where sellers market prevail advances from customers may be insisted.

In certain instances to ensure performance of contract in advance can be insisted. 1 ) 2 . INDUSTRY PROFILE India is the world’s second largest producer of cement after china, with cement businesses adding practically eight million tones (MT) capacity in April 2009, taking the total installed ability to 219 MT and despatch of of sixteen. 65 mil tones during April 2009. a few of the leading manufacturers will be the India cements, Ultra technology cements, Dalmia cements, Holcim etc . With all the boost given by the government to varied infrastructure assignments, road systems and enclosure facilities, progress in the cement consumption is usually anticipated inside the coming years.

Another 50 MT ability is likely to be added this year, in accordance to industry sources. Constant technological upgrading and retention of latest technology has been taking place in the concrete industry. At present, 93 percent of the total capacity in the industry is based on contemporary and environmentally safe dry procedure technology in support of 7 percent of the ability is based on older wet and semi-dry method technology. There is certainly tremendous scope for waste materials heat recovery in cement plants and thereby reduction in emission level.

Government initiatives in the infrastructure sector, coupled with the enclosure sector increase and city development, remain the main drivers of expansion for the Indian bare cement industry.? Improved infrastructure spending has been a essential focus place over the last five years implying good times ahead for cement manufacturers.? The us government has increased financial allocation to get roads below National Highways Development Job (NHDP).? Hiring a fossil fuel regulator is looked upon being a positive move as it is going to facilitate timely and correct allocation of coal (a key uncooked material) hindrances to the main sectors, concrete being one.. 3. INDIA CEMENTS LIMITED The India Cements Ltd was established in 1946 and the first plant was create at Sankarnagar in Tamilnadu in 1949. Since then they have grown in stature to seven plant life spread over Tamilnadu and Andhra Pradesh. The capacities while on Drive 2002 have got increased multifold to being unfaithful million tons per annum. The founders of the India cements limited will be Shri Sankaralinga Iyer and Shri To. S. Narayanaswami. 1 . several. 1 . Identity of the Relate /Subsidiary Corporations

Industrial Chemicals , Monomers Ltd Supplementary Company ICL Securities Ltd Subsidiary Organization ICL Financial Services Ltd Subsidiary Company ICL International Ltd Subsidiary Company Trishul Tangible Products Ltd Subsidiary Organization Coromandel Electric Company Ltd Relate Company Exclusive Receivable Administration Private Limited Associate Organization Coromandel All kinds of sugar Ltd Connect Company India Cements Capital Ltd Affiliate Company Raasi Cement Limited Associate Company The overall potential utilization of the corporation was at a record 105% and was more than the capacity utilization of some of the majors in the country. During the year, the company experienced successfully finished the transformation of the Sankaridurg Unit via wet process to dry procedure and the fresh plant offers stabilized quickly. 1 . three or more. 2 . Eye-sight ICL Perspective is “to be the marketplace leader in the manufacture of world class concrete, by implementing innovative solutions for lasting development. 1 . 3. a few. Mission ICL provides quality product through A clear understanding of customer requirements? Continuous r and d of current and appearing technologies. 1 . 3. 4. Company Highlights? The Company is definitely the largest producer of concrete in To the south India.? The Company’s plants are well spread with three in Tamilnadu and four in Andhra Pradesh which cater to key markets in South India and Maharashtra.? The Company is definitely the market head with a business of 28% in the Southern region. It should achieve a 35% market share in the future. The Company features access to huge limestone assets and ideas to increase capacity simply by de-bottlenecking and optimization of existing crops as well as simply by acquisitions. The corporation has a solid distribution network with more than 10, 1000 stockists of whom 25% are dedicated.? The Company features well established brands- Sankar Extremely Power, Coromandel Super Electricity and Raasi Super Electricity.? Regional offices in all southern states and Maharasthra offices/representative in every district. 1 . 5. MAIN CONCEPT OF THE PROJECT 1 ) 4. 1 . Need for the research Working capital is required in every corporation to meet day-to-day business actions. Since we have a time separation between the sale for produce and realization of money, every corporation requires sufficient amount of working capital to met the daily need, to take on the problem as and when arises pertaining to the smooth jogging of business. 1 . 5. 2 . Goals of examine

The study of working capital analysis in the INDIA CEMENTS LIMITED has become undertaking this objectives.? To learn the profitability location of the company.? To find out the liquidity and solvency placement of the company.? To study, the significant capital position of the business.? To offer, ideas for improving the working capital situation of the concern. 1 . some. 3. Range of the analyze The study pertains to the existing system of finance and working capital examination in THE INDIA CEMENTS LIMITED. The study provides an idea regarding the working capital position from the company. The research will also be useful for improving the significant capital position of the Firm.

The study will certainly helpful for management in making decisions relating to Working capital. 1 . four. 4. Limits of the study? The analysis was made with the help of the extra data collected from the organization.? The period of study is usually 5 years from 2003-04 to 2007-08.? The credit rating sales , purchases were not separately presented so each of the sales and purchases are assumed being credit product sales , buys. CHAPTER , II ANALYSIS METHODOLOGY installment payments on your 1 . Research design Research design may be the specification of methods and procedures pertaining to acquiring the data needed to structure or to resolve the provided problem. Deductive research technique was implemented in the project.

Generally deductive studies are created to analyze anything and that collects info for a definite purpose. installment payments on your 2 . Amount of study This kind of study contains the working capital analysis for the period of five years from 2003-2004 to 2007-2008. The accounting year is starting from very first April to 31st 03. 2 . three or more. Sources of data The study will be based upon secondary data obtained from the published Annual reports with the company, composed of of income and reduction account and balance sheet. The world wide web is the main causes of data collection. 2 . 5. Tools employed Tools utilized to analysis are ratio research and account flow assertion. CHAPTER ” III EVALUATION AND INTERPRETATION 3. 1 . RATIO ANALYSIS Ratio research is a widespread technique of analyzing financial statements.

It simply refers to analysis of financial transactions by processing ratios. It’s the process of creating and interpretation various ratios for assisting in making selected decisions. Rate analysis could possibly be defined as the computing and interpreting romantic relationship between the components of financial affirmation for arriving at conclusions about the financial position and performance of the enterprise. It can help in understanding the financial health insurance and trend of the business. Listed below are the 4 steps involved in the ratio evaluation? Selection of relevant data in the financial transactions depending upon the objectives of research.? Calculation of appropriate proportions from the data. Comparison of the calculated percentages with the rate of the same company in the past, for the ratios produced from expected financial transactions.? Interpretation of the ratios. USES AND RELEVANCE OF PROPORTION ANALYSIS Quite advantages of accounting ratio or ratio examination are described under the subsequent heads: ¢UTILITY TO SUPERVISION Ratio examination helps the management in (a) making the guidelines, (b) forecasting and planning, (c) decision making, (d) the actual trends of business, (e) measuring efficiency and (f) controlling. ¢UTILITY TO SHAREHOLDERS AND SHAREHOLDERS An investor might normally measure the financial position of any business ahead of he spends his profit it.

He is interested in the safety, security and profitability of his investment. Accounting ratios help the possible investors in selecting greatest companies obtain their cash. Ratios allow the shareholders to evaluate the performance and future prospective customers of the business. On the basis of several ratios, they are able to calculate the price tag on their stocks and shares. ¢UTILITY TO CREDITORS The creditors or suppliers are those who supply goods to firm upon credit basis. They are thinking about the liquidity position in the firm. To known the liquidity position or short-term financial position, they use liquidity percentages. ¢UTILITY TO EMPLOYEES The employees are interested in earnings of the firm.

Their pay, fringe rewards, working conditions etc . will be related to the gains earned by the company. They need to ascertain the profitability for challenging wage increase and other rewards. For understanding the profitability with the company, success ratios come to their help. ¢UTILITY TO GOVERNMENT The federal government uses rate analysis intended for studying the price structure from the industries. Based on this analyze, the government may formulate several policies. It might implement the price control measures to protect the interest of consumers. 3. 1 . 1 ) CURRENT RATE Current ratio is defined as the ratio of current property to current liabilities.

It shows the relationship between total current assets and total current financial obligations. The objective of processing this percentage is to measure the ability of obligations on time. The current proportion of 2: 1 is considered acceptable or best. Current assets Current ratio=___________________ Current debts TABLE several. 1 . 1 CURRENT PROPORTION (Rs. in lakhs) YearCurrent AssetsCurrent LiabilitiesRatio 2003-2004 130817. 59 19751. 31 6. 62 2004-2005 136844. fifth there’s 89 30727. 40 4. forty-five 2005-2006 151241. 62 37312. 68 4. 05 2006-2007 171751. forty five 43399. 13 3. 95 2007-2008 214941. 24 98353. 24 2 . 19 Resources: Annual record of THE INDIA CEMENTS LIMITED. Table several. 1 . 1 shows the current ratio of THE INDIA CEMENTS LIMITED.

The typical norm can be 2: 1 ) The current percentage is much higher than standard via 2003-2004 to 2006-2007. The greatest ratio was 6. 62 in the year 2003-2004 and the most affordable ratio was 2 . nineteen in the year 2003-2004. The proportion shows that the current assets are more than current liabilities to pay-off financial obligations. This implies that the company is usually enjoying credit worthiness. CHART three or more. 1 . one particular 3. 1 . 2 SPEEDY RATIO/LIQUID RATIO Quick ratio is also called acid test ratio. Liquid ratio is the proportion of liquid assets to current liabilities. That establishes the relationship between quick assets and current liabilities. It is the way of measuring the instant having to pay ability with the business enterprises.

The goal of computing this ratio is always to measure the ability of the firm to meet its short term liabilities as and when because of without based upon the understanding of stock. The speedy ratio of 1: 1 is recognized as as sufficient or best. Quick (or) liquid assets The liquid ratio= ____________________ Current liabilities TABLE several. 1 . 2 LIQUID RATE (Rs. in lakhs) YearLiquid AssetsCurrent LiabilitiesRatio 2003-2004 117351. 56 19751. 31 your five. 94 2004-2005 118854. 77 30727. forty two 3. 87 2005-2006 131943. 78 37312. 68 three or more. 53 2006-2007 148944. 01 43399. 13 3. 43 2007-2008 181920. 19 98353. 24 1 . 85 Options: Annual survey of THE INDIA CEMENTS LIMITED. Table three or more. 1 . 2 shows the quick ratio of THE INDIA CEMENTS LIMITED. The highest rate was a few. 94 in the year 2003-2004 as well as the lowest rate was 1 ) 85 in the year 2003-2004.

The quick rate of the company was more than the standard usual. The rate shows investment funds available are more than the current liabilities to pay-off short term financial obligations. It mentioned that temporary creditors happen to be in a very much secured position. CHART 3. 1 . a couple of 3. 1 ) 3 DEBT-EQUITY RATIO Financial debt equity rate indicates the relative amount of debts and value in auto financing the resources of a company. In short, that expresses the partnership between debt (external equity) and equity (internal equity). This rate is also referred to as External ” Internal Equity Ratio. The standard norm is definitely 2: 1 ) It is determined as follows: Long-term debt Debt-equity ratio= ____________________ Equity DESK 3. 1 ) 3 DEBTS EQUITY PROPORTION (Rs. and lakhs) YearLong term debtEquityRatio 2003-2004 209263. 61 167316. 73 1 . 25 2004-2005 198724. 18 159705. 10 1 . twenty-four 2005-2006 152523. 10 201945. 02 0. 76 2006-2007 205875. 47 220853. 34 0. 93 2007-2008 181150. 58 332110. 82 0. 55 Resources: Annual report of THE INDIA CEMENTS LIMITED. Table a few. 1 . several shows the debt-equity proportion of THE INDIA CEMENTS LIMITED. The highest rate was 1 . 25 in the year 2003-2004 as well as the lowest percentage was zero. 55 back in 2003-2004. In the year 2003-2004 and 2004-2005, the borrowing is far more when compared with equity. From 2005-2006 to 2007-2008, the value is more in comparison to borrowings. DATA 3. 1 . 3 3. 1 . some PROPRIETORY RATE

Proprietory ratio establishes the partnership between shareholders’ or proprietors’ fund and total property. This rate shows simply how much funds have been contributed by the shareholders inside the total property of the organization. Proprietory rate is also called equity ratio or net-worth ratio. Generally a percentage of zero. 5: one particular or previously mentioned is considered ideal. It is computed by using the subsequent formula. Shareholders’ fund Proprietory ratio= ___________________ Total Asset TABLE 3. 1 . 4 PROPERITORY RATE (Rs. in lakhs) YearShareholder’s fundTotal AssetRatio 2003-2004 167316. 73 381209. 93 zero. 44 2004-2005 159705. 15 363058. 87 0. forty-four 2005-2006 201945. 02 366664. 57 0. 55 2006-2007 220853. 34 432757. 84 0. 51 2007-2008 332110. 82 535832. 86 zero. 2 Resources: Annual survey of THE INDIA CEMENTS LIMITED. Table a few. 1 . some shows the properitory ratio of THE INDIA CEMENTS LIMITED. The ratio shows a growing trend. The proprietor’s contribution in to the total assets is less than half in 2003-2004 and 2004-2005. The proprietor’s contribution in to the total assets from 2005-2006 to 2007-2008 is about the required level. CHART 3. 1 . some 3. 1 . 5 FIXED ASSET PROPORTION A fundamental basic principle of sound financing coverage is that most fixed property must be borrowed out of long term money. Short term funds should not be utilized for purchasing fixed assets. They shall be used only for seed money requirement.

In the event the short term funds are used during the buy of fixed assets, it can affect the liquidity position. It can be computed as follows: Fixed advantage (after depreciation) Fixed Advantage Ratio= ________________________________ Long term funds TABLE three or more. 1 . a few FIXED ADVANTAGE RATIO (Rs. in lakhs) YearFixed AssetLong Term FundsRatio 2003-2004 233387. 44 376580. 34 zero. 62 2004-2005 220484. fifty-five 358429. twenty eight 0. sixty two 2005-2006 211497. 00 354468. 12 0. 60 2006-2007 293858. 26 426728. seventy eight 0. 69 2007-2008 403937. 17 513261. 40 zero. 79 Options: Annual statement of THE INDIA CEMENTS LIMITED. T in a position 3. 1 . 5 shows the set asset proportion of THE INDIA CEMENTS LIMITED. The highest percentage was 0. 9 in the year 2007-2008 plus the lowest ratio was 0. 60 back in 2005-2006. The fixed property ratio is no more than 1: one particular, it means that the entire fixed assets have been completely purchased away of long term funds. During the study period the set asset percentage is satisfactory. CHART 3. 1 . your five 3. 1 . 6 LOW PROFIT PERCENTAGE This the ratio of gross income to sales expressed as a percentage. Also, it is known as gross margin. The primary objective of computing this kind of ratio is usually to determine the efficiency in trading or perhaps production activity. Another target is deciding the selling price. It is determined as follows: Gross profit Gross profit ratio= ______________ * 100 Net sales TABLE 3. 1 . 6

MAJOR PROFIT RATIO (Rs. in lakhs) YearGross profitNet SalesRatio 2003-2004 74065. 52 122541. 08 sixty one 2004-2005 79355. 45 137427. 79 54.99 2005-2006 114585. 40 181875. 53 63 2006-2007 181318. 85 260439. 47 seventy 2007-2008 253335. 05 353704. 35 72 Sources: Gross annual report in the INDIA CEMENTS LIMITED. Desk 3. 1 ) 6 shows the major profit rate of THE INDIA CEMENTS LIMITED. The highest percentage was 72 in the year 2007-2008 and the cheapest ratio was 58 back in 2004-2005. The ratio reveals an increasing pattern during the analyze period besides in the year 2004-2005. Increases in gross income ratio show that the firm is earning a higher margin on its sales. DATA 3. 1 ) 3. 1 . 7 NET PROFIT RATE Net income ratio may be the ratio of net earnings earned by a business as well as net product sales. It steps overall profitability. Net revenue ratio implies efficiency along with profitability of any business. This determines the returns to the owners. Bigger the ratio is the success. This means earnings to shareholders. It is worked out as follows: Net profit Net profit proportion = ______________ * 75 Net product sales TABLE 3. 1 . six NET PROFIT RATIO (Rs. in lakhs) YearNet profitNet SalesRatio 2003-2004 -31242. 05 122541. ’08 -25 2004-2005 -30783. 93 137427. seventy nine -22 2005-2006 -26252. sixty two 181875. 53 -14 2006-2007 4656. 63 260439. 47 2 007-2008 52732. 02 353704. thirty five 15 Sources: Annual statement of THE INDIA CEMENTS LIMITED. Table three or more. 1 . six shows the web profit proportion of THE INDIA CEMENTS LIMITED. The highest percentage was 15 in the year 2007-2008 and the cheapest ratio was -25 back in 2003-2004. In first 3 years, there has been a loss and net income ratio has become moving in an increasing trend. The profitability of the firm has been demonstrating a steady return to the owners. GRAPH AND OR CHART 3. 1 . 7 several. 1 . almost eight RETURN ON INVESTMENT When a firm invests money in business, it naturally expects satisfactory return upon its expense. Therefore , the firm really wants to know how much profit is definitely earning upon its investment.

It is for knowing this, ROI can be computed. ROI measures the general profitability. This establishes the relationship between profit or come back and expense. It computed as follows: Profit before interest and duty Return about investment= _____________________________ * 95 Capital utilized TABLE three or more. 1 . almost eight RETURN ON INVESTMENT (Rs. in lakhs) YearProfit just before interest and taxCapital employedRatio 2003-2004 -13838. 88 361577. 45 -3. 83 2004-2005 -5882. twenty nine 332473. twenty six -1. seventy seven 2005-2006 -4041. 21 329351. 89 -1. 23 2006-2007 49196. thirty-six 392404. 94 1 . twenty-five 2007-2008 89278. 04 444068. 23 twenty. 10 Options: Annual survey of THE INDIA CEMENTS LIMITED. Table a few. 1 . reveals the return on investment of THE INDIA CEMENTS LIMITED. The highest proportion was twenty. 10 in the year 2007-2008 as well as the lowest rate was -3. 83 back in 2003-2004. The return on investment was increasing coming from -3. 83 to 20. twelve. The company was earned a high return on investment in the year 2007-2008 throughout the study period. It indicates the efficiently the administrative centre employed in organization is utilized. CHART three or more. 1 . eight 3. 1 . 9 RETURNING ON SHAREHOLDERS’ FUND This can be a ratio of net profit to shareholders’ fund or net worth. That measures earnings from the shareholders’ point of view. What this means is how successfully the shareholders’ funds have been completely utilized by the business. It is determined as follows:

Net profit after interest and tax Go back on shareholders’ fund = _____________________________ * 100 Shareholders’ fund DESK 3. 1 ) 9 GO BACK ON SHAREHOLDERS’ FUND (Rs. in lakhs) YearNet Revenue after fascination and taxShareholders’ fundRatio 2003-2004 -31242. 05 167316. 73 -19 2004-2005 -30783. 93 159705. 10 -19 2005-2006 -26252. sixty two 201945. 02 -13 2006-2007 4656. 63 220853. thirty four 2 2007-2008 52732. 02 332110. 82 16 Resources: Annual survey of THE INDIA CEMENTS LIMITED. Table a few. 1 . on the lookout for shows the return upon shareholders’ finance of THE INDIA CEMENTS LIMITED. The highest rate was 18 in the year 2007-2008 and the least expensive ratio was -19 back in 2003-2004.

The return about shareholders’ account was elevating from -19 to16. In first 3 years, there has been a loss towards the shareholders’ and return in shareholders’ finance has been moving in an increasing craze. The go back to shareholders’ signifies better using owners’ finance. CHART a few. 1 . on the lookout for 3. 1 ) 10 DEBTORS TURNOVER PROPORTION Debtors’ turnover ratio signifies the velocity of debt collection of firm. Trade debtors are expected to be changed into cash within a short period and are include in current assets. Therefore the fluid of a concern to pay out its short-term obligations with time depends upon the quality of its transact debtors. Net credit product sales Debtors proceeds ratio= ___________________

Average operate debtors Opening trade debtors +Closing control debtors Normal trade debtors= _________________________________________ 2 TABLE a few. 1 . 10 DEBTORS TURNOVER RATIO (Rs. in lakhs) YearNet Credit SalesAverage Operate DebtorsRatio 2003-2004 122541. 08 13492. 52 9. 08 2004-2005 137427. 79 16427. 74 eight. 37 2005-2006 181875. 53 21198. fifty four 8. fifty eight 2006-2007 260439. 47 25039. 86 twelve. 40 2007-2008 353704. 35 28564. 18 12. 37 Sources: Gross annual report of THE INDIA CEMENTS LIMITED. Table 3. 1 . 10 shows the borrowers turnover proportion of THE INDIA CEMENTS LIMITED. The highest percentage was 12. 38 back in 2007-2008 as well as the lowest percentage was almost 8. 37 back in 2004-2005.

The increased ratio shows that the debtors happen to be converted into money and lessening ratio demonstrates that the credit sales receive decreased when compared to average debtors. CHART 3. 1 . 12 3. 1 . 11 CREDIT CARD COMPANIES TURNOVER PROPORTION Creditors’ yield ratio is also known as payable turnover percentage. This percentage indicates the speed with which the creditors are turned over to in relation to the purchase. A supplier of products, i. e., creditors is naturally interested in discovering how much time the organization in more likely to taken in trying to repay its control creditors. Generally, higher the creditors’ velocity better it can be or otherwise decrease the creditors’ velocity, bad will be the results. Net credit rating purchase Collectors turnover ratio= ___________________ Average trade collectors

Opening trade creditors +Closing trade collectors Average transact creditors= _________________________________________ 2 STAND 3. 1 . 11 LENDERS TURNOVER PROPORTION (Rs. in lakhs) YearNet Credit PurchaseAverage Trade CreditorsRatio 2003-2004 12859. 31 17153. 77 0. 75 2004-2005 14674. 60 13399. 01 1 . 12 2005-2006 18988. 48 13306. 10 1 ) 43 2006-2007 24220. seventy two 13341. 54 1 . 82 2007-2008 31294. 80 38785. 95 zero. 81 Sources: Annual statement of THE INDIA CEMENTS LIMITED. Table several. 1 . eleven shows the creditors’ turnover ratio with the INDIA CEMENTS LIMITED. The ratios demonstrated an increasing pattern except 2007-2008. The lowest percentage was found at 0. 75 in the year 2003-2004 and the greatest ratio was found at 1 . 2 in the year 2006-2007 which will shows a much better settlement regarding dues. CHART 3. 1 ) 11 several. 1 . 12 INVENTORY PROCEEDS RATIO Products on hand or inventory turnover percentage shows the relationship between costs of goods sold and normal inventory or perhaps stock. Additionally it is called while merchandise turnover ratio. It indicates the number of instances the inventory is turnover or converted into sales. The objective of stock proceeds ratio is always to know how efficiently the share or products on hand is utilized. Stock proceeds ratio is computed by the following solution: Cost of products sold Products on hand turnover ratio= _______________________ Typical stock Starting stock & Closing stock Average stock= ___________________________ 2 TABLE 3. 1 . doze

INVENTORY PROCEEDS RATIO (Rs. in lakhs) YearCosts of products soldAverage inventoryRatio 2003-2004 48475. 56 13170. 70 a few. 68 2004-2005 58072. thirty four 15728. 08 3. 69 2005-2006 67290. 13 18643. 98 3. 61 2006-2007 79120. 62 21052. 62 3. 76 2007-2008 100369. 30 27914. 22 three or more. 60 Options: Annual record of THE INDIA CEMENTS LIMITED. Table several. 1 . doze shows the inventory proceeds ratio from the INDIA CEMENTS LIMITED. The ratio shows the varying trend from 2003-2004 to 2007-2008. The increased ratio reveals the company is usually maintaining even more stock level. The decreased ratio shows the average products on hand is certainly not raised when compared to sales level. CHART three or more. 1 . doze 3. 1 . 3 SET ASSET YIELD RATIO A small business enterprise acquisitions fixed resources for carrying out the business. Without fixed possessions, it are not able to make profits. Thus sales depend on just how fixed property are utilized in corporate. For being aware of whether set asset are effectively, employed or not really, fixed asset turnover proportion is used. Set asset yield ratio creates the relationship among net sales and fixed property. It procedures the efficiency with which a strong is making use of its set assets in producing sales. It is calculated as follows: Net sales Fixed asset proceeds ratio=___________________ Set asset TABLE 3. 1 . 13 FIXED ASSET PROCEEDS RATIO Rs. in lakhs) YearNet SalesFixed AssetRatio 2003-2004 122541. ’08 233387. forty-four 0. 53 2004-2005 137427. 79 220484. 55 0. 62 2005-2006 181875. 53 211497. 00 0. eighty six 2006-2007 260439. 47 293858. 26 zero. 89 2007-2008 353704. thirty-five 403937. 17 0. 88 Sources: Annual report with the INDIA CEMENTS LIMITED. Desk 3. 1 ) 13 reveals the fixed asset turnover ratio of THE INDIA CEMENTS LIMITED. The ratio reveals an increasing tendency except in the year 2007-2008. The highest ratio was 0. 89 in the year 2006-2007 and the lowest ratio was 0. 53 in the year 2003-2004. It was increased from 0. 53 to 0. fifth there’s 89. It indicates the better utilization of fixed advantage. CHART a few. 1 . 13 3. 1 ) 4 INVENTORY TO CURRENT ASSET The ratio implies the amount of investment in inventory per rupee of current assets expenditure. It also shows the state of fluidity positions of current possessions. Generally an ever-increasing proportion of inventory is definitely an indication of inefficient products on hand management. The greater the amount of products on hand to current assets lowers the liquidity. Average inventory Inventory to current asset= ___________________ Current assets TABLE 3. 1 ) 14 PRODUCTS ON HAND TO CURRENT ASSET (Rs. in lakhs) YearAverage inventoryCurrent AssetsRatio 2003-2004 13170. 70 130817. 59 0. 12 2004-2005 15728. 08 136844. 89 0. 11 2005-2006 18643. 98 51241. sixty two 0. 12 2006-2007 21052. 62 171751. 40 zero. 12 2007-2008 27914. twenty two 214941. 24 0. 13 Sources: Gross annual report of THE INDIA CEMENTS LIMITED. Table 3. 1 ) 14 reveals the inventory to current asset rate of THE INDIA CEMENTS LIMITED. The proportion shows an ever-increasing trend. The highest ratio was 0. 13 in the year 2007-2008 and the lowest ratio was 0. 15 in the year 2003-2004. The lowest percentage indicates the inventory was managed successfully. CHART a few. 1 . 14 3. 1 ) 15 INVENTORY TO PRODUCT SALES This percentage explains the way in which a provider’s inventory can be turning. The inventory to sales rate indicates the efficiency which inventory converts in the sales.

Even so the ratio more proficiently the inventory is said to be maintained. The high ratio shows the unsound liquidity placement of the business. Average products on hand Inventory to sales= ___________________ Net sales TABLE 3. 1 . 12-15 INVENTORY TO SALES (Rs. in lakhs) YearAverage inventoryNet SalesRatio 2003-2004 13170. 75 122541. ’08 0. 14 2004-2005 15728. 08 137427. 79 zero. 11 2005-2006 18643. 98 181875. 53 0. 12 2006-2007 21052. 62 260439. 47 0. 08 2007-2008 27914. twenty-two 353704. thirty-five 0. ’08 Sources: Annual report of THE INDIA CEMENTS LIMITED. Desk 3. 1 . 15 displays the inventory to product sales of THE INDIA CEMENTS LIMITED. The highest rate was 0. 08 in the year 2007-2008 plus the lowest ratio was zero. 11 back in 2003-2004.

It had been decreased via 0. 10 to 0. 08. It indicates the products on hand was managed efficiently since more frequently the stock was sold. DATA 3. 1 . 15 several. 1 . 16 WORKING CAPITAL PROCEEDS RATIO Current assets changes with difference in sales. This implies working capital is usually related with revenue. The relation between revenue and seed money is called seed money turnover percentage. This rate shows how many times the working capital is usually turned over to produce sales. Working capital turnover ratio is computed by following formula: Net sales Working capital turnover ratio= ___________________ Working capital STAND 3. 1 ) 16 SEED MONEY TURNOVER RATE (Rs. n lakhs) YearNet SalesWorking CapitalRatio 2003-2004 122541. 08 111066. 28 1 ) 10 2004-2005 137427. 79 106117. 47 1 . 40 2005-2006 181875. 53 113928. 94 1 ) 60 2006-2007 260439. forty seven 128352. twenty six 2 . 02 2007-2008 353704. 35 116588. 00 several. 03 Sources: Annual survey of THE INDIA CEMENTS LIMITED. Table several. 1 . sixteen shows the working capital turnover ratio with the INDIA CEMENTS LIMITED. The greatest ratio was 3. goal in the year 2007-2008 and the lowest ratio was 1 . twelve in the year 2003-2004. There is a growing trend in working capital and it indicates the company is usually generating a lot of sales compared to the cash it uses to finance the product sales. CHART several. 1 . 16 3. installment payments on your FUND MOVEMENT STATEMENT

The fund flow statement can be described as statement which usually reveals the method by which the business enterprise has been loaned and how it has used the funds among two balance sheet dates. In the words if Foulke: A statement of sources and application of cash is a specialized device, made to analyze the changes in the financial conditions of any business enterprise among two balance sheet dates. MANAGERIAL USES OF FUND MOVEMENT STATEMENT Finance flow statement is a significant analytical device for a economic manager when it comes to evaluating of funds by a firm as well as to assess causes of such money. Following would be the important managerial uses of fund flow statement. The foremost usage of the finance flow declaration is to make clear the reasons intended for changes in the property and liabilities between two balance sheet date ranges.? Fund circulation statement gives details about the funds attained and employed in past. Based upon this details, manager may take correct activities at appropriate times.? Fund flow affirmation act as a control device as compared to budgeted statistics. It also provides guidance to the financial manager for taking helpful action if there is any deviation.? It helps the management to formulate different financial policies ” viz dividend, added bonus etc .? By making use of the finance flow assertion, financial and leading organizations can easily measure the credit worthiness and repaying capacity of the asking for company. That enables the management to reformulate the firm’s monetary activity on the basis of the statement. 3. 2 . 1 DECLARATION OF WITHIN WORKING CAPITAL FOR THE YEAR CONCLUDED 2004 AND 2005 (Rs. in lakhs) Particulars20042005Effect upon working capital _____________________ Increase Reduce Current assets Inventories 13466. 03 17990. 12 4524. 09 Actual estate-projects happening 2440. seventy four 2170. goal 270. 71 Sundry borrowers 14517. 02 18338. 45 3821. 43 Cash and Bank harmony 372. twenty-three 292. 06 80. 17 Loans and advances 100021. 57 98054. 23 1967. 34 Total current assets(A) 130817. 59 136844. fifth 89 Current Debts Current liabilities 19632. forty eight 30585. sixty one 10953. three or more Provision pertaining to taxation 118. 83 141. 81 twenty-two. 98 Total current liabilities(B) 19751. 31 30727. 40 Working Capital (A-B) 111066. twenty-eight 106117. forty seven Decrease in working capital 4948. 81 4948. 81 111066. twenty eight 111066. twenty eight 13294. 33 13294. thirty-three Sources: Total annual report with the INDIA CEMENTS LIMITED. Tweaked P/L A/C Particulars (Rs. in lakhs) Particulars (Rs. in lakhs) To Equilibrium b/d 31242. 05 By simply Dividend received 19. sixty one To Depreciation 7876. 96 By Fascination on expenditure 127. 97 To Supply for taxation 141. 81 By Salary from supplementary 1409. sixty four By Revenue on sale of asset 431. 68 Simply by Funds dropped in operation 6487. 98 By simply Balance c/d 30783. 93 39260. seventy eight 9260. 81 Sources: Total annual report with the INDIA CEMENTS LIMITED. 3. 2 . 2 FUND CIRCULATION STATEMENT OF ICL TO GET THE YEAR FINISHED 31ST DRIVE 2005 OPTIONS (Rs. in lakhs) APPLICATIONS (Rs. in lakhs) Concern of stocks and shares 0. 06 Repayment of secured mortgage 8762. 05 Sale of fixed asset 12092. 89 Repayment of unsecured loan 1777. 38 Decrease in working capital 4948. 81 Purchase of investment 16. 35 Fund lost functioning 6487. 98 17041. seventy six 17041. seventy six Sources: Annual report from the INDIA CEMENTS LIMITED. In the year 2004, working capital was Rs. 111066. 28. But also in the year june 2006, working capital was Rs. 106117. 47. As a result there is a decline in working capital of Rs. 4948. 81.

A decrease in seed money is discovered due to significant decrease in current liabilities, loans and advancements and cash and lender balance. An increase is observed in Inventories and sundry borrowers. The net end result is decline in Working capital. 3. 2 . a few. STATEMENT OF CHANGES IN SEED MONEY FOR THE ENTIRE YEAR ENDED june 2006 AND 2006 (Rs. in lakhs) Particulars20052006Effect On Working Capital ______________________ Enhance Decrease Current assets Inventories 17990. doze 19297. 84 1307. 72 Real estate-projects in progress 2170. 03 2084. 38 eighty five. 65 Manifold debtors 18338. 45 24058. 62 5720. 17 Money and Financial institution balance 292. 06 4362. 18 4070. 12 Financial loans and developments 8054. twenty three 101438. 70 3384. 37 Total Current assets(A) 136844. 89 151241. 62 Current Liabilities Current liabilities 30585. 61 37312. 68 6727. 07 Dotacion for taxation 141. seventy eight , 141. 81 Total current liabilities(B) 30727. 42 37312. 68 Working Capital (A-B) 106117. 47 113928. 94 Increase in working capital 7811. 47 7811. 47 113928. 94 113928. 94 14624. 19 14624. nineteen Sources: Twelve-monthly report of THE INDIA CEMENTS LIMITED. Adjusted P/L AIR-CONDITIONING Particulars (Rs. in lakhs) Particulars (Rs. in lakhs) To Balance b/d 3078. 93 By simply Dividend received 21. twenty-three To Downgrading 7886. 96 By Interest on investment 545. fifty five To Loss on sale of fixed advantage 9. 76

By Cash flow from additional 23963. 15 To Funds from procedure 39806. eighty six By Stability c/d 26252. 62 50782. 50 50782. 50 Resources: Annual statement of THE INDIA CEMENTS LIMITED. 3. 2 . 4 FUND FLOW AFFIRMATION OF ICL FOR THE SEASON ENDED 31ST MARCH 06\ SOURCES (Rs. in lakhs) APPLICATIONS (Rs. in lakhs) Issue of shares 5218. 14 Repayment of secured loan 44189. 93 Sale for fixed property 8987. fifty-five Repayment of unsecured loan 2011. 12-15 Funds by operation 39806. 86 Increase in working capital 7811. 47 54012. 85 54012. 85 Resources: Annual report of THE INDIA CEMENTS LIMITED. In the year june 2006, working capital was Rs. 106117. 47. But also in the year 06\, working capital was Rs. 113928. 94.

Thus there is a rise in working capital of Rs. 7811. 47. A rise in working capital is observed as a result of increase in arrays, loans and advances, manifold debtors and cash bills and decrease in current Liabilities. The net consequence is Embrace Working capital. 3. 2 . five. STATEMENT OF CHANGES IN WORKING CAPITAL FOR 12 MONTHS ENDED 2006 AND 2007 (Rs. in lakhs) Particulars20062007Effect On Seed money ______________________ Boost Decrease Current Assets Stocks 19297. 84 22807. 39 3509. fifty five Real estate-projects in progress 2084. 38 2042. 47 41. 91 Manifold debtors 24058. 62 26021. 09 1962. 47 Money and Financial institution balance 4362. 18 23018. 2 18656. 14 Financial loans and improvements 101438. 60 97862. 13 3576. 47 Total Current Assets(A) 151241. 62 171751. 40 Current Liabilities Current liabilities 37312. 68 40352. 90 3040. 22 Provision for taxation , 3046. 24 3046. 24 Total Current Liabilities(B) 37312. sixty-eight 43399. 14 Working Capital (A-B) 113928. 94 128352. 21 Increase in working capital 14423. 32 14423. thirty-two 128352. 26 128352. dua puluh enam 24128. 16 24128. sixteen Sources: Twelve-monthly report from the INDIA CEMENTS LIMITED. Tweaked P/L A/C Particulars (Rs. in lakhs) Particulars (Rs. in lakhs) To Depreciation 10262. 88 By Balance b/d (26252. 62) To Provision pertaining to taxation 3046. 24 Simply by Dividend received 25. 0 To Lower price on concern of shares 48812. 78 By Curiosity on expense 173. 98 To Recommended dividend 3046. 24 By simply Funds via operation 195180. 25 To Transfer to reserve 99102. 86 To Balance c/d 4656. 63 168927. 63 168927. 63 Sources: Total annual report with the INDIA CEMENTS LIMITED. three or more. 2 . six. FUND CIRCULATION STATEMENT OF ICL PERTAINING TO THE YEAR CONCLUDED 31ST 03 2007 RESOURCES (Rs. in lakhs) APPLICATIONS (Rs. in lakhs) Concern of shares 4460. 16 Repayment of secured bank loan 23739. 81 Fund from operation 195180. 25 Repayment of unsecured loan 77092. 18 Acquiring fixed asset 82361. dua puluh enam Purchase of purchase 2023. 84 Increase in working capital 14423. 32 199640. sixty one 199640. 61

Sources: Gross annual report in the INDIA CEMENTS LIMITED. In the year 2007, seed money was Rs. 128352. dua puluh enam. But in 12 months 2006, seed money was Rs. 106117. forty seven. Thus there may be an increase in working capital of Rs. 14423. thirty-two. An increase in seed money is observed due to significant increase in money balance, sundry debtors and inventories and decrease in loans and advances and current Liabilities. The net result is definitely Increase in Working capital. 3. 2 . 7. ASSERTION OF CHANGES IN WORKING CAPITAL FOR THE YEAR ENDED 2007 AND 2008 (Rs. in lakhs) Particulars20072008Effect Upon Working Capital ______________________ Increase Reduce Current possessions Inventories

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