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AN ANALYSIS ON CASH MANAGEMENT OF THEJO

ENGINEERING LTD
ORGANIZATION STUDY
Submitted to

MAHATMA GANDHI UNIVERSITY, KOTTAYAM


In partial fulfilment of the requirement for the award of
MASTERS DEGREE IN BUSINESS ADMINISTRATION
(2013-2015)
By

REMYA RAJEEV
Register Number: 50738

RAJAGIRI COLLEGE OF SOCIAL SCIENCES


RAJAGIRI P O
KOCHI - 683104

DECLARATION
I, Remya Rajeev, hereby declare that this summer project report titled An Analysis on
Cash management of Thejo Engineering Limited is prepared in partial fulfillment of the
requirement for the award of Masters degree in business administration during the academic
year 2013-15 by Rajagiri College of Social Sciences, under the guidance of, Dr. Mathew
Joseph (Rajagiri College of Social Sciences).
I also declare that this report has not been submitted in full or part thereof, to any university
or institutions for the award of any degree or diploma.

Kalamassery
21-07-2014

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Remya Rajeev

ACKNOWLEDGMENT

I express my heartfelt thanks to the Management of THEJO ENGG LTD for giving me a
golden opportunity to undergo this organization study & internship in their organization.

I owe my sincere thanks to the head of my institution, Dr. Joseph I. Injodey, for giving me
an opportunity to undergo this organization study.

I consider this as a privilege to express my sincere gratitude to Dr. Mathew Joseph, faculty
guide, Department of Management Studies for his valuable support and suggestion and
guidance during the course of the project.

In preparing this report, I want to give special acknowledgement to Mr. Sanjaya Kumar,
Senior Manager HR, Project Guide, Thejo Engineering Ltd. for his guidance to carry out my
project work and providing me intellectual guidance and assistance.

I thank Almighty for his blessings in completing this project work successfully.

Last but not the least I extend my sincere thanks to my parents, friends and all well-wishers
who have been the back bone in completing this project work in a successful manner.

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LIST OF CONTENTS
CHAPTER

PARTICULARS

PG NO

EXECUTIVE SUMMARY

SECTION I

PROFILE STUDY OF THE ORGANIZATION

1.

INDUSTRY PROFILE

10

2.

INCORPORATION AND HISTORY OF THE


ORGANIZATION

11

3.

VISION/MISSION STATEMENTS

12

4.

CORPORATE OFFICE/HEAD QUARTERS,


NUMBER OF UNITS

13

5.

CAPITAL STRUCTURE, INITIAL INVESTMENTS,


SHARES

14

6.

BUSINESS TURN OVER, PROFIT/LOSS DETAILS,


MARKET SHARE

16

7.

ORGANIZATIONAL STRUCTURE/HIERARCHY,
EMPLOYEE STRENGTH

17

8.

PRODUCTS/SERVICES

18

9.

PRODUCTION PROCESS/BUSINESS & SERVICE


OPERATIONS

21

10.

CUSTOMERS/CLIENTS

22

11.

FUNCTIONAL DEPARTMENTS, THEIR


ORGANIZATION AND ACTIVITIES

27

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12.

INNOVATIVE MANAGEMENT PRACTICES

43

13.

FUTURE PLANS & BUSINESS


STRATEGY/EXPANSION/DIVERSIFICATION

43

14.

SWOT ANALYSIS

45

SECTION II

PROBLEM CENTERED STUDY

48

CHAPTER 1.

RESEARCH METHODOLOGY

49

CHAPTER 2.

DATA ANALYSIS AND PRESENTATION

60

CHAPTER 3.

FINDINGS AND CONCLUSION

95

BIBLIOGRAPHY

97

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LIST OF TABLES
TABLE NO:

TABLE NAME

TABLE 1
TABLE 2

CAPITAL STRUCTURE
SHAREHOLDING PATTERN

TABLE 3

SHAREHOLDING OF PERSONS BELONGING TO THE


CATEGORY "PUBLIC" AND HOLDING MORE THAN
1% OF THE TOTAL NUMBER OF SHARES

TABLE 4
TABLE 5
TABLE 6
TABLE 7
TABLE 8
TABLE 9
TABLE 10
TABLE 11
TABLE 12
TABLE 13
TABLE 14
TABLE 15
TABLE 16
TABLE 17
TABLE 18
TABLE 19
TABLE 20
TABLE 21
TABLE 22
TABLE 23
TABLE 24
TABLE 25

TURNOVER OF THE COMPANY


CASHFLOW STATEMENT
CURRENT RATIO
QUICK RATIO
NET WORKING CAPITAL RATIO
INVENTORY TURNOVER RATIO
DEBTORS TURNOVER RATIO
CREDITORS TURNOVER RATIO
FIXED ASSETS TURNOVER RATIO
TOTAL ASSETS TURNOVER RATIO
CAPITAL TURNOVER RATIO
DEBT-EQUITY RATIO
OWNERS FUND TO TOTAL FUND
INTEREST COVERAGE RATIO
EQUITY DIVIDEND COVERAGE RATIO
NET PROFIT RATIO
OPERATING PROFIT RATIO
RETURN ON ASSETS
RETURN ON CAPITAL EMPLOYED
RETURN ON NETWORTH
EARNINGS PER SHARE
DIVIDEND PER SHARE

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PAGE
NO:
14
14
15

16
61
63
65
66
68
70
71
72
74
75
77
79
80
82
84
85
86
88
89
91
93

LIST OF GRAPHS
TABLE NO:
GRAPH 1
GRAPH 2
GRAPH 3
GRAPH 4
GRAPH 5
GRAPH 6
GRAPH 7
GRAPH 8
GRAPH 9
GRAPH 10
GRAPH 11
GRAPH 12
GRAPH 13
GRAPH 14
GRAPH 15
GRAPH 16
GRAPH 17
GRAPH 18
GRAPH 19
GRAPH 20

TABLE NAME
CURRENT RATIO
QUICK RATIO
NET WORKING CAPITAL RATIO
INVENTORY TURNOVER RATIO
DEBTORS TURNOVER RATIO
CREDITORS TURNOVER RATIO
FIXED ASSETS TURNOVER RATIO
TOTAL ASSETS TURNOVER RATIO
CAPITAL TURNOVER RATIO
DEBT-EQUITY RATIO
OWNERS FUND TO TOTAL FUND
INTEREST COVERAGE RATIO
EQUITY DIVIDEND COVERAGE RATIO
NET PROFIT RATIO
OPERATING PROFIT RATIO
RETURN ON ASSETS
RETURN ON INVESTMENTS
RETURN ON NETWORTH
EARNINGS PER SHARE
DIVIDEND PER SHARE

PAGE
NO:
63
65
66
68
70
71
72
74
75
77
79
80
82
84
85
86
88
89
91
93

LIST OF CHARTS
TABLE NO:
CHART 1
CHART 2
CHART 3
CHART 4
CHART 5
CHART 6
CHART 7
CHART 8
CHART 9
CHART 10

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TABLE NAME
ORGANIZATIONAL STRUCTURE OF THE
COMPANY
PRODUCTION PROCESS
FINANCE DEPARTMENT
MATERIALS & STORES DEPARTMENT
COD DEPARTMENT
EXECUTION & MONITORING DEPARTMENT
MARKETING DEPARTMENT
SALES DEPARTMENT
STRUCTURE OF FACTORY
TOTAL MAINTENANCE CENTER

PAGE
NO:
17
21
27
28
30
31
34
34
39
41

EXECUTIVE SUMMARY

Bulk material handling is an engineering field that is centered on the design of equipment
used for the handling of dry materials such as ores, coal, cereals, wood chips, sand, gravel
and stone in loose bulk form. It can also relate to the handling of mixed wastes. Thejo
Engineering Ltd is one of Indias major solution providers in bulk material handling,
conveyor systems, mineral processing and corrosion protection sectors. The company
pioneered the cold vulcanizing process in India and over the years has registered a steady and
systematic growth. It is one of the few organizations engaged in the manufacturing, sales and
servicing of specialized engineering products, catering to various segments of bulk materials
handling industry

The study is conducted for Thejo Engineering Ltd on its cash management system. The
objective of the study is to find out the liquidity position of the concern through ratio
analysis, to understand the growth of the company in terms of cash flow statement and make
necessary suggestions to improve the cash position of the company. The research design
adopted for the project is analytical in nature where the facts and information used in the
study are already available and these are analyzed to make critical evaluation of the
performance. The primary data for the study is collected through personal interviews and
discussion with Deputy Manager (Material Planning) and the secondary data is collected
from the annual reports, company website and other books and journals related to the study.
The time period taken for the study has been four years 2009-2013. The tools used in the
analysis are cash flow statement for the study period, ratio analysis and trend analysis. From
the above methods of analysis it is found that the cash management of Thejo Engineering has
been working well within the norms. The major limitation of the study is the lack of adequate
data due to confidentiality of information.

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SECTION-I
PROFILE STUDY OF THE
ORGANIZATION

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INDUSTRY PROFILE
Bulk material handling is an engineering field that is centered on the design of equipment
used for the handling of dry materials such as ores, coal, cereals, wood chips, sand, gravel
and stone in loose bulk form. It can also relate to the handling of mixed wastes.
Bulk material handling systems are typically composed of stationary machinery such
as conveyor

belts, screw

conveyors, stackers,reclaimers, bucket

elevators,

truck

dumpers, railcar dumpers or wagon tipplers, ship loaders, hoppers and diverters and various
mobile equipment such as loaders, various shuttles,[combined with storage facilities such
as stockyards, storage or stockpiles. Advanced bulk material handling systems feature
integrated bulk storage, conveying, and discharge.
The purpose of a bulk material handling facility may be to transport material from one of
several locations (i.e. a source) to an ultimate destination or to process material such as ore in
concentrating and smelting or handling materials for manufacturing such as logs, wood chips
and sawdust at sawmills and paper mills. Other industries using bulk materials handling
include flour mills and coal fired utility boilers.
Providing storage and inventory control and possibly material blending is usually part of a
bulk material handling system.
.

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INCORPORATION AND HISTORY OF THEJO ENGG LTD

ABOUT THEJO ENGG LTD


Thejo Engineering Ltd. was established in the year 1974, with the objective of being the
torchbearer for the maintenance of Belt Conveyor systems. Thejo pioneered the cold
vulcanizing process in India and over the years have registered a steady and systematic
growth. It is one of the few organizations engaged in the manufacturing, sales and servicing
of specialized engineered products, catering to various segments of bulk materials handling
industry. The organization was founded by Mr.K.J.Joseph and Mr. Thomas John as a
partnership concern in the year 1974, and was subsequently converted to a private limited
company in the year 1986. In 2008, the company was converted to public limited Co and
subsequently in 2012 company was listed in NSE EMERGE platform. Building on the
founders vision and bringing a touch of professionalism to the company is Mr. V.A George,
the CEO and President of Thejo Engineering Through commitment to quality and dedicated
service, Thejo has established a coveted clientele which includes all leading Steel Plants,
Mines, Cement & Fertilizer Industries, Thermal Power Stations, and Shipping Ports.
Thejo has grown today into Indias foremost solution provider in bulk material handling,
conveyor systems, mineral processing and corrosion protection sectors. Thejos commitment
to customers, dedication to deliverables and consistent control over quality has seen the
company grow surely and steadily into a frontrunner in the field, with a market share of over
85percent.
The companys equity share is listed in new SME platform EMERGE of the NSE.Thejo is
the first SME company to be listed in the EMERGE platform. On February 29Th 2012,
Thejo has been awarded a Rating of SE1A by NSIC-CRISIL. CRISIL Research has assigned
a CRISIL SME IER fundamental grade of 'SME 5/5' to Thejo Engineering Ltd (Thejo). The
grade indicates that the company's fundamentals are 'excellent' relative to other SMEs in
India. The company is certified with ISO 9001.Dedicated man power is the key success
behind the company.

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HISTORY-AT A GLANCE

1974

THEJO ENGG SERVICES:


A PARTNERSHIP FIRM

1986

THEJO ENGG: PVT LTD


Converted to a PVT LTD Co with Board Of Directors
THEJO ENGG LTD: Converted to a Public LTD Company

2008 Appoints a Professional CEO


THEJO HATCON LLC

2009 Established a joint venture at Jubail,Saudi Arabia.

2012

2013

2014

THEJO AUSTRALIA PTY:Established Australian subsidiary at Perth. Appoints an Australian CEO.


THEJO ENGG LTD: First SME to be listed on NSE "EMERGE"

BRIDGESTONE, Japan joins THEJO AUSTRALIA PTY as a stakeholder


THEJO AUSTRALIA branch ofice at PERTH, AUSTRALIA

VISION & MISSION STATEMENTS


VISION
To emerge as a world class leader in the field of total maintenance, pertaining to bulk
material handling systems.

MISSION
To efficiently manage an investor owned Company engaged in the manufacture of
quality rubber products.
To emerge as a reliable leader in the Maintenance of bulk materials handling before
2015.
To strive for a balance among various products.
To earn optimum and long term profit while offering viable products and services par
excellence.
To ensure steady growth of the company.
To strive for the well-being of the employees and their families and their mental,
physical and emotional growth.
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CORPORATE OFFICE/HEAD QUARTERS, NUMBER OF


UNITS
There are four manufacturing units in Chennai and one at Jubail, Saudi Arabia and Zonal &
Branch offices spreading across India.

CORPORATE OFFICE

#41, VDS HOUSE,CATHEDRAL ROAD,CHENNAI

ZONAL OFFICES

1.
2.
3.
4.

EAST ZONE
SOUTH-EAST ZONE
CENTRAL ZONE
SOUTH ZONE

ASSOCIATES

1.
2.
3.
4.
5.
6.

Vadodara(Gujrat)
Varanasi(UP)
Vasco(Goa)
DuPont(USA)
African Relining Services-Ghana
Losugen-Australia

BRANCHES

1. Tata Nagar
2. Dhanbad
3. Talcher
4. Shakthi Nagar
5. Nagpur
6. Delhi
7. Korba
8. Chennai
9. Vizag
10. Ramagundam
11. Bellary
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CAPITAL STRUCTURE, INITIAL INVESTMENTS, SHARES


BUSINESS TURN OVER, PROFIT/LOSS DETAILS,
MARKET SHARE
CAPITAL STRUCTURE
From
Year

To
Year

Class Of
Share

Authorized Issued
Capital
Capital
(Crores) (Crores)

Paid Up
Shares
(Nos)

Paid Up
Face
Value

Paid Up
Capital
(Crores)

2012

2013

Equity Share

2.00

1.72

1716776

10

1.72

2011

2012

Equity Share

2.00

1.18

1184740

10

1.18

TABLE:1
Source: Annual reports for the years 2011-12 ,2012-13

SHARE HOLDING PATTERN


The latest three shareholding pattern for the company under two broad categories (Promoter
& Non Promoters)
Share Holding Pattern as on :

31/03/2013

Face Value

10
No. Of Shares

% Holding

PROMOTER'S HOLDING
0.00

0.00

Indian Promoters

979920

57.08

Sub Total

979920

57.08

Foreign Promoters

NON PROMOTER'S HOLDING


Institutional Investors
Banks Fin. Inst. and Insurance

288436

16.80

Sub Total

288436

16.80

26700

1.56

900

0.05

Other Investors
Private Corporate Bodies
NRI's/OCB's/Foreign Others

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76500

4.46

Sub Total

104100

6.06

General Public

344320

20.06

1716776.0000

100.00

Others

GRAND TOTAL
TABLE: 2

STATEMENT SHOWING SHAREHOLDING OF PERSONS BELONGING TO THE


CATEGORY "PUBLIC" AND HOLDING MORE THAN 1% OF THE TOTAL
NUMBER OF SHARES
Source: www.nseindia.com

Name of the shareholder

Sidbi Trustee Company


Ltd A/C India
Opportunities Fund

317072

9.23

Emerging India Growth


Fund Cvcf V

248400

7.23

S P George

124000

3.61

Anand T Pethe

62420

1.82

Lukose O J

62080

1.81

George V A

50000

1.46

Idbi Cap MktServ Ltd

225000

6.55

Jose Kozhipat

43140

1.26

N R Gold Pvt Ltd

37800

1.10

1169912

34.07

Total

Number of
shares held

Shares as a percentage of total number of


shares {i.e., Grand Total (A)+(B)+(C)
indicated in Statement at Para (I)(a) above}

Sr.
No

TABLE: 3

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TURNOVER OF THE COMPANY


YEAR
2009-10

AMOUNT(IN
CRORE)
66 crore

2010-11

95.22 crore

2011-12

115.36 crore

2012-13

133.38 crore
TABLE: 4

Source: Annual report for the years 2009-10 to 2012-13

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ORGANISATIONAL STRUCTURE THEJO ENGINEERING


LIMITED

DGM-MKTNG
CORROSION
PROTECTION
DY- MANAGER
TRANSFER POINT
SOLNS
DY MANAGER

DIRECTOR, MA
RKETING
HEAD,COD

WEAR &
ABRASION
PROTECTION
SR. ENGG
CONVEYOR CARE

FC-F&A

DY MANAGER
DESIGN

GM,TMC
BOARD OF
DIRECTORS

M.D

V.P
BUSINESS DIV
ZONE

DGM, HR&AD
MN
ZM-CENTRAL

HEAD,
MATERIALS
DIRECTOR
,SALES

SALES &
SERVICES

ZM-EAST

ZM-SOUTH
HEAD. EMD
GMOPERATIONS(

CHART: 1

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ZMSOUTHEAST

PRODUCTS/SERVICES
MAJOR PRODUCTS
1. CONVEYOR CARE
Vulcanizing equipments

Hydraulic machine
Pressure bay machine

9. TRANSFER POINT SOLUTION


Belt cleaners

Titan- heavy duty primary secondary and internal belt scrappers


Belt scrappers

Spillage control

FLEXI SEALS
Segmented skirt board sealing system
Skirt rubbers

Impact cushion cradles

HERCULES
Rubber with UHMWPE

Belt tracking systems

SURRACK
1. Carrying side trackers
2. Return side trackers

2. DUST CONTROL
Dry forging dust suppression for confined space
Dry forging dust suppression for open space
Dusgon-dust suppression of stock piles, haul roads and wagons.

Changing the properties of dusting materials


Formatting a proactive layer over the layer

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3. FLOW ENHANCEMENT
G force air canons

Elastometer free valve construction


300,000 firing guarantee

4. ABRASION& WEAR PROTECTION


Thor-mill liners

Rubber
Alloy steel cast cap

RHINO- liner plates and panels

Rubber
Ceramic
Alloy steel casting

MATROX- Roaching

UHMWPE

TWISTER- cyclone spares


TEIWAR-sheeting
CERALINE-sheeting
5. FILTRATION SPARES
HIPO-diaphragms

Rubber
Larox
Customized

Seals, scrapers, pinch valve sleeves, hose and feed colles


Filter plate rollers
Floatation spares
6. SLURRY HANDLING
ANAKONDA-slurry hose

Rubber with fabric and steel wire reinforcement


Vacuum and gravity application
Customized design
End connectors

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Lined pipes
-Soft, high abrasion resistant rubber lining polyurethane lined pipe fitting, ceramic coated
pipes
8. CORROSION PROTECTION
Rubber sheeting, primers and adhesives-materials
Site lining
Fabrication and rubber lined supplies
9. CONVEYOR SERVICES
Belt repair-Fabric ply, steel cord
Conveyor pulling

Lagging in-situ: cold process

Project execution &conveyor installation

Belt transition flow


Spillage control
Belt cleaning
Dust suppression

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PRODUCTION PROCESS

Production planning

Mixing
(Banburry)

Designing

Raw material stores

Technical
(Quality check of batches
, Stage-I)

Pre-form(Mill)

1. Calendering
Warming&

2. Extruder

Quality check Stage -II

3. Rotocure

Trimming

(Hydraulic press)

Finished Goods ,
Quality check Stage -III &
Client inspection

Dispatch to client site or


factory

Inspection

CHART: 2

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Product installation
byThejo Engineers

CUSTOMERS/CLIENT

LIST OF MAJOR CLIENTS-IN INDIA


STEEL PLANTS
Bokaro steel plant
Bhilai steel plant
Rourkela steel plant
Durgapur steel plant
Indian Iron &Steel Co Ltd.
Vizag Steel Plant
PRIVATE SECTOR STEEL PLANT
TATA Steel Ltd.
Jindal Steel &Power Ltd.
Jindal South West Ltd.
Essar Steel Ltd
IspatMetalics Ltd.
Sun Flag Iron&Steel Ltd.
THERMAL PLANT
Koradi Thermal power station
Satpura Thermal power station
Chandrapur super Thermal power station
Karnataka power Corporation Ltd
North Chennai Thermal Power station etc.
NATIONAL THERMAL POWER CORPORATION LTD.
Badarpur Thermal Power station
Singrauli Super Thermal Power station

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Vindhyachal Super thermal Power station


Rihand Super Thermal Power station
Tanda Super Thermal Power station
Unchchar Thermal Power station
Kahalgaon Super Thermal Power station
Farakah Super Thermal Power station

PORT TRUSTS
Chennai
Mormugao, Goa
Jawaharlal Nehru Porttrust
Paradeep
Vishakapatinam
Tuticorin
CEMENT FACTORIES
Associated Cement Co. Ltd
Cement Corporation of India Ltd
India Cements Ltd
Madras Cements Ltd
Tamilnadu Cement Corporation Ltd
Panyam Cements & Minerals
Coromandel Cement
Priyadarshini Cement
Visaka Cement
Grasim Industries
Ambuja Cements
Vikram Cement
UTLRATECH CEMENTS
Tadipatri
Awarpur
Arakkonam
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Rajula
Hirmi
OTHER PRIVATE SECTORS
Lafarge Cements
Diamond Cements Ltd
Zuari Cements
Manikgarh Cement
CHEMICAL PLANTS
Mangalore Chemicals &Fertilizers Ltd
Fertilizers & Chem. Travancore Ltd
Aluminium Industries Ltd.
Southern Petrochemicals Indus Coprn.
Fertilizer Corp of India Ltd
Zuari Agro-Chemicals,Goa
Sindri Fertilizers Corp.
Paradip Phosphates
Oswal Chemicals
IFFCO,Chasnala
FOUNDRIES
Ennore Foundries Ltd
Talcher Super Thermal power station
Ramagundam Super thermal power station
Korba Thermal power station
Simhadhri Thermal power station
PVT SECTOR POWER PLANTS
Tata Power plant-Mumbai
Bharat Aluminium-Captive Power plant
MINES
Tata Steel- Joda mines, Namundi Iron ore mines, Jamadoba Coal mines
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West Bokaro Collieries


Hindustan Zinc Ltd- Bhilwara ,Rampura mines, Dariba mines
Kudremukh Iron ore mines Ltd
Neyveli Lignite Corpn Ltd
Hindustan Copper Ltd- Malajkhand,Khetri
STEEL AUTHORITY OF INDIA
Bolani Iron ore mines
Kiriburu Iron ore mines
Meghahatuburu Iron ore project
Barsua Iron ore mines
Gua ore mines
COAL INDIA LTD
Bharat Coaking Coal Ltd
Eastern Coal fields Ltd
Central Coal fields Ltd
South Eastern Coal fields Ltd
Western Coal fields Ltd
Mahanadi Coal fields Ltd
Singareni Collieries Company Ltd
H.M.T Ltd
Visveswaraya Iron & Steel Ltd. (SAIL)
Nelcast Ltd
Grey Iron Foundary Jabalpur
SPACE RESEARCH CENTRES
ISRO
VSSC
DEFENCE
Naval Dockyard-Vizag
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ALUMINIUM
National Aluminium Company-Angul, Damanjodi
PVT SECTOR
Bharat Aluminium Company
OEMs
Lakshmi Machine works Ltd
Larsen & Toubro-Material handling division
Thyssen Krupp Industries(Buckau Wolf)
B.M.M
Tata Robin Fraser(TRF)
O&K Orenstein &Koppel(I) Pvt. Ltd
McNally Bharath
MECON Ltd
UB Engineering
FLSmidth Minerals Pvt.Ltd
GEA Energy Systems

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FUNCTIONAL DEPARTMENTS, THEIR ORGANIZATION


AND ACTIVITIES
1. FINANCE DEPARTMENT
Finance department which was once decentralized has been now converted in to a centralized
department for achieving better control of departmental activities. In total there are 10
branches and each of them has one branch accountant. These branches itself are divided into
different zones. The entire branch accountant has to report to Financial Controller at the Head
Office in Chennai.
Mr.Ravikanth is the Finance controller and the company secretary at the corporate office.

.
FINANCE
CONTROLLER

SENIOR MANAGER

ZONAL
ACCOUNTANTS

ASSISTANT
COMPANY
SECRETARY

MANAGER
COSTING(FACTORY)

BRANCH
ACCOUNTSMENTOR

( 4 ZONES)

BRANCH ACCOUNTS
ASST(4 ZONES)

HEAD FACTORY
ACCOUNTS

ASST MANAGER
ACCOUNTS
(FACTORY)

BRANCH ACCOUNTS
ASST

SITE ACCOUNTANTS

CHART: 3

In the above figure, left side indicates the service operations and right side indicates
the manufacturing operations.
The main function of the Branch Accountants is to collect the expense sheets, check
transactions; budget details etc from the sites which is obtained from the site
accountants and the Branch Manager have to approve it.
The Branch Accountants has to report the same to the corresponding Zonal
Accountants that is; Thejo is mainly having four zones of operations East, South,
Central and Southeast zones.
The main function of Branch Accounts in Charge is to enter the details in accounting
software.

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This will be verified by the Branch Accounts Mentors. They also determine the
statutory requirements, other budgets, methods to reduce cost, tax etc.
Zonal Accountants, Branch Accounts Mentors have to report to the Senior Manager
Accounts.
Senior Manager will make the necessary modifications if any.
Factory Accountants will estimate the expenses statement of different departments
like materials, production and maintenance.
They also enter the same in accounting software.
It is further verified by the Head Factory Accounts. Central excise will take care of it.
Head Factory Accounts and the Senior Manager Accounts will finally report to the
Finance Controller.

2. MATERIALS AND STORES DEPARTMENT

HEAD, MATERIALS
DEPT

RAW MATERIALS
STORES AT FACTORY

PURCHASE

CORPORATE(CRITICAL
,RUBBER)

FACTORY(ROUTINE
ACTIVITIES)

.
CHART: 4
Inventory is an essential part of manufacturing process. Without essential inventory, a
manufacturing or a production unit cannot work efficiently. The materials department meets
these requirements of inventory whenever is needed. Materials and stores department is
divided in to three; raw materials products, engineering products and stores products.
The raw materials will be purchased according to the reorder level of the stock. Whenever the
reorder level is reached a particular amount of stock is purchased. In the case of commonly
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consumed materials, it will be purchased more or less according to the market conditions. If
the department forecasts any deviation in the price or policies of the government regarding
these materials the purchase decision is changed in according to the situation. The
requirements of the production department and other departments is informed to the materials
department according to the purchase requisition of the departments they order the product.
The engineering products are purchased according to the decision of the CEO only. If the
management fined an engineering product is essential to the plant, CEO takes the decision
accordingly. Materials department makes the purchase order and the decisions regarding
stores materials, tools and other spare parts are purchased by materials department whenever
is necessary. Thejo mainly import the materials from Germany, USA, and Brazil etc.
CRITERIA TO SELECT A SUPPLIER
The supplier of the company is selected by certain criteria

The company should be an ISO certified company.


The company should be able to deliver products in time with quality and competitive
price.
Category D companies (without ISO certificate).

3. CORPORATE PLANNING AND ORDER PROCESSING


DEPARTMENT (COD)
COD plays an important role to plan the entire manufacturing process in coordination with
Marketing, EMD, TMC, Factory and Projects. When an enquiry is received, the Marketing
Department analyses the enquiry and forward it to the Designing department for making the
drawings. According to the drawings, the Estimation department prepares estimates and
sends it to COD. COD department is headed by Mr.Satheesh.

ROLE OF COD
ORDER PROCESSING
CORPORATE PLANNING

29 | P a g e

HEAD,COD

AT
CORPORATE

PRODUCTION
PLANNING AT
FACTORY
CHART: 5

ORDER PROCESSING

1. All quotes made by Zonal Office/BDM/Marketing team shall be vetted by the COD
before it is submitted to clients.
2. To verify all tender documentation, to ensure that accurate costing/estimates are
provided in accordance with company/business strategy.
3. To co-ordinate and scrutinize the commercial aspects concerned with all contracts,
tenders and projects.
4. In case of new products, the Order Processing Department shall consult with the
R&D Department in the factory about the viability, cost and lead time for
manufacturing the products.
5. To work as an extension of the Factory Planning Department for viability of
Production in the time for all orders for services and supplies.
6. The offer/quote should be sent after vetting to the concerned Zonal office/Marketing
department within immediately from the date of receipt to the corporate office. If no
response is received from COD within immediately, the concerned office can go
ahead with the quote.
7. This department should work in co-ordination with Marketing Department, Zonal
offices, EMD, marketing back office and factories/ dispatch.

CORPORATE PLANNING
1. To prepare short and medium term plan for all operations of the company.
2. Periodic monitoring of the plans estimated and report to top management.
3. To ensure in co-ordination with the finance department, whether the approved
CAPEX requirement are met promptly apart from working capital requirement.
30 | P a g e

4. Submission of MIS in the prescribed format.

4. EXECUTION& MONITORING DEPARTMENT (EMD)


STRUCTURE OF EMD
HEAD,EMD

ZONAL
MANAGERS(4
ZONES)

BRANCH IN
CHARGE

BDM

SITE IN CHARGE

PRODUCT
INSTALLATION
ENGINEERS

TECHNICIANS

CHART: 6

Execution Monitoring department in Thejo integrate all the services activities and co-ordinate
all the projects works. The major service activities are:
1. Conveyor Belt Splicing(joint)

Cold process

Hot process

2. Pulley Lagging (cold process)


3. Conveyor Belt Looping & Laying (Project works)

Mr.Premjit is the Head of this department.

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5. HR DEPARTMENT
The five resources which constitute any organization are man, materials, machine,
market and money. Simultaneously 5 departments are functioning correspondingly for
the effective use of these resources.

5 MS
RESOURCES

5 MS DEPARTMENT

MAN

HRD

MACHINE

PRODUCTION

MATERIALS

PURCHASE/MATERIALS

MONEY

FINANCE

MARKET

MARKETING

HR department is headed by Mr. Thomas Abraham. The department takes care of


functions starting from recruitment to exit interview and also General administration.
It forecasts the manpower requirements and recruits suitable candidates thru different
sources, right position at right time according to the need of the particular department.
The main functions of this department are:
Recruitment
Training Induction & Functional
Performance Appraisal
Career Development Plan
Employee counseling
Compensation and benefits
Welfare activities etc.
32 | P a g e

The appraisal policy adopted by the HR department is 360 degree appraisal policy which
includes:
(a) Self appraisal, (b) Peer appraisal and (c) HOD appraisal and apart from these there will
also be a potential appraisal. The promotion policy of the company is based upon
performance of the employee after the completion of minimum of three years experience
in the company. Training need will be analyzed through the appraisal. TNA will be
consolidated and the workers employees are then deputed for suitable training programs.

6. MARKETING AND SALES DEPARTMENT

Marketing and Sales Department integrate all the marketing activities of the product. The
activities of the Marketing Department commences when an enquiry comes from a client.
The marketing department first audits and gives engineering solutions with the help of the
companys engineers. Then based on the solution, necessary products will be designed. The
designing department prepares an accurate design according to the client requirements and
then prepares a quotation before giving it to the COD department. The COD department then
analyses and study on the quotation and gives it to the Marketing department and them in turn
forward it to the particular client. Mr. Manoj Joseph is the Director of Marketing and Mr.
Rajesh John is the Director of Sales.

33 | P a g e

ORGANISATIONAL CHART

MARKETING

DIRECTOR,
MKTNG

CPD(PDH)

TRANSFER
PT
SOLN(PDH)

WEAR
&ABRASION
(PDH)

CONVEYOR
CARE(PDH)

DUST
SEPARATIO
N & FLOW
ENHANCEM
ENT(PDH)

CHART: 7

SALES
DIRECTOR
OF SALES

HEAD, EMD

ZONAL
MANAGERS
(4 ZONES)

BRANCH
MANAGERS

BDM

PRODUCT
INSTALLATIO
N
ENGINEERS

SITE-INCHARGE

TECHNICIAN
S

CHART: 8
34 | P a g e

VP, BUSINE
SS
DEVELOPM
ENTY(OEM)

MARKETIN
G COORDINATO
R(INTERNAT
IONAL)

PRODUCTS

1. CONVEYOR CARE
Vulcanizing equipment

Hydraulic machine

2. TRANSFER POINT SOLUTION

Belt cleaners

Titan- heavy duty primary secondary and internal belt scrappers

Belt scrappers

Spillage control

FLEXI SEAL

Segmented skirt board sealing system

Skirt rubbers

Impact cushion cradles

HERCULES

Rubber with UHMWPE

Belt tracking system

SURRACK

Carrying side tracker

Return side tracker

3. DUST CONTROL
Dry forging dust suppression for confined space
Dry forging dust suppression for open space
Dusgon-dust suppression of stock piles, haul roads and wagons.

Changing the properties of dusting materials

Formatting a proactive layer over the layer

35 | P a g e

4. FLOW ENHANCEMENT
G force air canons

Elastometer free valve construction

300,000 firing guarantee

5. ABRASION& WEAR PROTECTION


Thor-mill liners

Rubber

Alloy steel cast cap

RHINO- liner plates and panels

Rubber

Ceramic

Alloy steel casting

MATROX- Roaching

UHMWPE

TWISTER- cyclone spares


TEIWAR-sheeting
CERALINE-sheeting
6. FILTRATION SPARES
HIPO-diaphragms

Rubber

Larox

Customized

Seals, scrapers, pinch valve sleeves, hose and feed colles


Filter plate rollers
Floatation spares

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7. SLURRY HANDLING
ANAKONDA-slurry hose

Rubber with fabric and steel wire reinforcement

Vacuum and gravity application

Customized design

End connectors

Lined pipes
-Soft, high abrasion resistant rubber lining polyurethane lined pipe fitting, ceramic coated
pipes
8. CORROSION PROTECTION
Rubber sheeting, primers and adhesives-materials

Site lining

Fabrication and rubber lined supplies

9. CONVEYOR SERVICES
Belt repair-Fabric ply, steel cord
Conveyor pulling

Lagging in-situ: cold process

Project execution &conveyor installation

Belt transition flow

Spillage control

Belt cleaning

Dust suppression

MAJOR ACHIEVEMENTS OF PROJECT DEPARTMENT


Worlds largest pipe conveyor at Vallur Thermal, Tamil Nadu(2012)

Belt width 2400 mm

Indias fastest conveyor belt at Adani West Port,Mundra,Gujarat(2011)


NCTPS Ennore-World Bank and Asian development bank funded project.
Jindal steel and power Ltd,Raigarh
ACC
37 | P a g e

7. MANUFACTURING UNIT
Mr. Manesh Joseph is the GM. Operation; Head of Factory. The factory is located at Ponneri.
There are five units and a PU unit and R&D lab.
UNIT-1

Production of all main products takes place here and dispatches it after its quality checking.
In unit-I, mixing department, technical department, production department, mould
department and lining department works together for the production of better, good quality
products.

PRODUCTS

Rubber lined pipes and fittings

Rubber lining

Vulcanized natural rubber and synthetic rubber sheets

Pulley lagging

Thor

Material handling hose etc.

Unit-II
Unit-II generally takes care of reconditioning and repair of conveyor belt, production of
pressure bags, HIPO diaphragms, air bags etc. Mr.Arulanand is the in-charge of this unit.
Unit-III
This unit is divided in to three divisions: vulcanizing material department (VMD), Bulk
material handling and Tool room. The production is undertaken according to the need of the
client.
Unit IV

Unit four mainly concentrates on production of solution and adhesives according to the need
of the client.

38 | P a g e

UNIT V
All lining activity takes place in unit v. The different lining activities are:

Vessel Lining

Pipe Lining

Pulley Lagging(hot process)

STRUCTURE OF THE FACTORY

GENERAL
MANAGEROPERATION

R&D

PU

UNIT-I

UNIT-II

CHART: 9

39 | P a g e

UNIT-III

UNIT-IV

UNIT-V

VARIOUS DEPARTMENTS AT FACTORY

Production Planning
HR and Administration
Materials and stores
Technical
Pre-form
Mixing
Production
Maintenance
Lining
Mould
Design
Quality &
Dispatch

POLYURETHANE DEPARTMENT

PU is the next department under manufacturing unit. Poly urethane is a costly, hard material
and is more flexible which lasts long compared to normal rubber materials. In PU department
they produce PU products according to the clients needs. One of the main products is belt
cleaner. Mr. Pradeep Banerjee is the in-charge of this department.
RESEARCH AND DEVELOPMENT
Thejos R&D sector has been the cornerstone for developing products that meets the needs of
customers and society. R&D uses innovative technology to update their existing products and
services and also tries to put forward something new in the market. The R&D team regularly
focuses on market and takes necessary studies according to the market conditions and
competitors strategies. If any quality issue related to any product arises, then proper research
is carried out to rectify the problem. Thejo focuses on R&D with core emphasis on polymeric
science and materials research which made them outsource manufacturer of choice for many
US and European Original Equipment Manufacturers. Along with these, the R&D centre at
Thejo is certified by DSIR which helps it to act as an independent testing
centre.Mr.Gopinathan.C is the General Manager of the department.

40 | P a g e

THEJO QUALITY POLICY


Innovative products as per the Voice of the customer

Comply with requirements in all areas

Prompt study of Quality products, support and service to enhance customer


satisfaction.

Continually improve the effectiveness of the QMS through training, development and
employee involvement.

8. TOTAL MAINTANANCE CENTER


TMC coordinate the different works that undertaken by the company across India. TMC
provides suitable employees according to the need of the client whenever they are required.
Mr. Raghu is the GM of TMC department and Mr. Venkataraman is the AGM.

GM

AGM

HR

FINANCE

ADMIN

CHART: 10

41 | P a g e

OPERATIONS

FUNCTIONS OF TMC

Total maintenance of conveyor system

Auditing of conveyor system

Maintenance of cranes

Operations and maintenance of plant

UNDERTAKING PROJECTS
The TMC is now undertaking the following projects:
i.

Godavari Power Ispat LTD- Raipur

ii.

Sarada Energy Mineral LTD-Raipur

iii.

Brahmin River Pellets LTD-Jaipur

iv.

Bokaro Steel LTD- Bokaro

v.

Orissa Manganese and Minerals LTD- Jamshedpur

vi.

Adani Power LTD- Mundra

vii.

Essar Steel LTD

viii.

Jindal Steel Power LTD Bengaluru

42 | P a g e

INNOVATIVE MANAGEMENT PRACTICES

SAP implementation for the entire organization


By implementing an integrated software-and-service package, we can identify the many
drivers and processes shaping manufacturing performance. We can also automate
procurement transactions, optimize financial margins, and manage suppliers, capital, and
risks.

Manage the entire sales cycle, from order generation to post-sales activities

Optimize procurement and logistics cycles for requisitioning, invoicing, and


payment processing

Leverage predefined processes to improve discrete, process, and repetitive


manufacturing

Establish a network connecting the companys headquarters with subsidiaries and


business partners

Increases finance departments efficiency by automating processes and reporting


functions with accelerated financial closes

FUTURE PLANS & BUSINESS STRATEGY


The Operations & Maintenance under the Total maintenance centre is the major business
strategy adopted by the company. Here the TMC handles:
Conveyor belt maintenance
Entire maintenance of running plant (Mechanical, Civil, Monorail, Loco
,Electrical, Housekeeping)
This is Thejos latest division and there is scope for future expansion.
Overseas expansion which gives Thejo Engineering Ltd an opportunity to tap the
untapped market with huge business potential. The overseas markets where Thejo is
presently concentrating are given below.
43 | P a g e

Saudi operations
Australia
African markets like Liberia, Ghana
North American markets like Brazil, Chile, Argentina

44 | P a g e

SWOT ANALYSIS

45 | P a g e

STRENGTH
Professional Management team
First organization in the field of conveyor belt servicing and related products
manufacturing.
First company in India which is NSE listed under SME Category.
85% market share in servicing.
Wide range of clients in core sector industries.
Thejos own plants of operation and no outsourcing.
ISO 9000, CRISIL Rating
First company in India which introduced the cold vulcanizing process.
Overseas operations:

Thejo Hatcon

Thejo Australia

Provides different kinds of engineering solutions.


Implemented EHS {environmental health and safety} policy.
On the process of implementing SAP.

WEAKNESS
Supply and transportation are subject to various uncertainties and risks, and delays in
delivery or non delivery may result in penalty clause and Thejo is responsible to pay
the client heavy penalties according to the penalty clause agreed.

Agreements with various banks contain restrictive clauses for certain activities and if
Thejo is unable to get their approval, it might restrict their scope of activities.

46 | P a g e

OPPORTUNITIES

Products and services are intended to core industries, so high opportunities in such
industries.
During the period of sluggishness , any loss of business in installation related work
will be compensated by increased maintenance works as well as maintenance of
existing systems would be given due importance.
Increasing demand for operations and Maintenance service.
Opportunity to tap the untapped market with huge business potential.

THREATS
Competition from parties in unorganized sectors.
Prices of the key raw materials such as natural rubber and synthetic rubber are highly
volatile.
Each of the products is unique and according to customer specifications, so cost of
implementation is very high.

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SECTION-II
PROBLEM CENTERED STUDY OF
THE ORGANIZATION

48 | P a g e

CHAPTER-1
RESEARCH METHODOLOGY OF THE
STUDY

49 | P a g e

1.1 TITLE OF THE STUDY


AN ANALYSIS ON CASH MANAGEMENT OF THEJO ENGINEERING LTD

1.2 OBJECTIVES OF THE STUDY

Primary Objective:
To analyze the cash management of THEJO ENGINEERING LTD.
Secondary Objective:

To find out the liquidity position of the concern through ratio analysis.

To study the growth of THEJO ENGINEERING LTD in terms of cash flow


statement.

To make suggestion and recommendation to improve the cash position of THEJO


ENGINEERING LTD.

1.3 RESEARCH DESIGN


The research design used in this project is Analytical in nature the procedure using,
which researcher has to use facts or information already available, and analyze these to make
a critical evaluation of the performance.

1.4 DATA COLLECTION


Primary Sources
a. Data are collected through personal interviews and discussion with Finance
Executive.
b. Data are collected through personal interviews and discussion with Material
Planning- Deputy Manager.

50 | P a g e

Secondary Sources
a. From the annual reports maintained by the company.
b. Data are collected from the companys website.
c. Books and journals pertaining to the topic.

1.5 TOOLS USED IN THE ANALYSIS

Cash flow statement

Ratio analysis.

1.6 PERIOD OF STUDY

The present study has taken into account four financial years viz., 2009-2010 to 2012-2013.

51 | P a g e

1.7 REVIEW OF LITERATURE


MEANING:

Cash is the money which a firm can disburse immediately without any restriction.
The term cash includes coins, currency and cheques held by the firm, and balances in its bank
accounts. Sometimes near-cash items, such as marketable securities or bank times deposits,
are also included in cash. The basic characteristic of near-cash assets is that they can readily
be converted into cash.

FACETS OF CASH MANAGEMENT:

Cash management is concerned with the managing of: (i) Cash flows into and out of
the firm, (ii) Cash flows within the firm, and (iii) Cash balances held by the firm at a point of
time by financing deficit or investing surplus cash.

It can be represented by a cash

management cycle. Sales generate cash which has to be disbursed out. The surplus cash has
to be invested while deficit this cycle at a minimum cost. At the same time, it also seeks to
achieve liquidity and control. Cash management assumes more importance than other current
assets because cash is the most significant and the least productive asset that a firms holds.
It is significant because it is used to pay the firms obligations.
unproductive.

However, cash is

Unlike fixed assets or inventories, it does not produce goods for sale.

Therefore, the aim of cash management is to maintain adequate control over cash position to
keep the firm sufficiently liquid and to use excess cash in some profitable way.

Cash management is also important because it is difficult to predict cash flows


accurately, particularly the inflows, and there is no prefect coincidence between the inflows
and outflows of cash. During some periods, cash outflows will exceed cash inflows, because
payments for taxes, dividends, or seasonal inventory buildup. At other times, cash inflow
will be more than cash payments because there may be large cash sales and debtors may be
realized in large sums promptly. Further, cash management is significant because cash
constitutes the smallest portion of the total current assets, yet managements considerable
52 | P a g e

time is devoted in managing it. In recent past, a number of innovations have been done in
cash management techniques. An obvious aim of the firm these days is to manage its cash
affairs in such a way as to keep cash balance at a minimum level and to invest the surplus
cash in profitable investment opportunities.

In order to resolve the uncertainty about cash flow prediction and lack of
synchronization between cash receipts and payments, the firm should develop appropriate
strategies for cash management. The firm should evolve strategies for cash management.
The firm should evolve strategies regarding the following four facets of cash management.

Cash planning: Cash inflows and outflows should be planned to project cash surplus
or deficit for each period of the planning period. Cash budget should be prepared for
this purpose.

Managing the cash flows: The firm should decide about the properly managed. The
cash inflows should be accelerated while, as far as possible, the cash outflows should
be decelerated.

Optimum cash level: the firm should decide about the appropriate level of cash
balances. The cost of excess cash and danger of cash deficiency should be matched to
determine the optimum level of cash balances.

Investing surplus cash: The surplus cash balances should be properly invested to
earn profits. The firms should decide about the division of such cash balances
between alternative short-term investment opportunities such as bank deposits,
marketable securities, or inter-corporate lending.

MOTIVES FOR HOLDING CASH


The firms need to hold cash may be attributed to the following three motives:

The transactions motive

The precautionary motive

The speculative motive

53 | P a g e

TRANSACTION MOTIVE
The transactions motive requires a firm to hold cash to conduct its business in the
ordinary course. The firm needs cash primarily to make payments for purchases, wages and
salaries, other operating expenses, taxes, dividends etc. The need to hold cash would not
arise if there were perfect synchronization between cash receipts and cash payments, i.e.,
enough cash is received when the payment has to be made. But cash receipts and payments
are not perfectly synchronized. For those periods, when cash payments exceed cash receipts,
the firm should maintain some cash balance to be able to make required payments. For
transactions purpose, a firm may invest its cash in marketable securities. Usually, the firm
will purchase securities whose maturity corresponds with some anticipated payments, such as
dividends or taxes in the future. Notice that the transactions motive mainly refers to holding
cash to meet anticipated payments whose timing is not perfectly matched with cash receipts.

PRECAUTIONARY MOTIVE
The precautionary motive is the need to hold cash to meet contingencies in the future.
It provides a cushion or buffer to withstand some unexpected emergency. The precautionary
amount of cash depends upon the predictability of cash flows. If cash flows can be predicted
with accuracy, less cash will be maintained for an emergency. The amount of precautionary
cash is also influenced by the firms ability to borrow at short notice when the need arises.
Stronger the ability of the firm to borrow at short notice less is the need for precautionary
balance.

The precautionary balance may be kept in cash and marketable securities.

Marketable securities play an important role here.

The amount of cash set aside for

precautionary reasons is not expected to earn anything; the firm should attempt to earn some
profit on it. Such funds should be invested in high-liquid and low-risk marketable securities.
Precautionary balances should, thus, be held more in marketable securities and relatively less
in cash.
SPECULATIVE MOTIVE

The speculative motive relates to the holding of cash for investing in profit-making
opportunity to make profit may arise when the security prices change. The firm will hold
cash, when it is expected that interest rates will rise and security prices will fall. Securities
can be purchased when the interest rate is expected to fall; the firm will benefit by the
54 | P a g e

subsequent fall in interest rates and increase in security prices. The firm may also speculate
on materials prices. If it is expected that materials prices will fall, the firm can postpone
materials purchasing and make purchases in future when pric4e actually falls. Some firms
may hold cash for speculative purposes. By and large, business firms do not engage in
speculations. Thus, the primary motives to hold cash and marketable securities are: the
transactions and the precautionary motives.

CASH PLANNING

Cash flows are inseparable parts of the business operations of firms. A firm needs
cash to invest in inventory, receivable and fixed assets and to make payment for operating
expenses in order to maintain growth in sales and earnings. It is possible that firm may be
making adequate profits, but may suffer from the shortage of cash as its growing needs may
be consuming cash very fast. The poor cash position of the firm cash is corrected if its cash
needs are planned in advance. At times, a firm can have excess cash may remain idle.
Again, such excess cash outflows. Such excess cash flows can be anticipated and properly
invested if cash planning is resorted to. Cash planning is a technique to plan and control the
use of cash. It helps to anticipate the future cash flows and needs of the firm and reduces the
possibility of idle cash balances ( which lowers firms profitability ) and cash deficits (which
can cause the firms failure).
Cash planning protects the financial condition of the firm by developing a projected
cash statement from a forecast of expected cash inflows and outflows for a given period. The
forecasts may be based on the present operations or the anticipated future operations. Cash
plans are very crucial in developing the overall operating plans of the firm.
Cash planning may be done on daily, weekly or monthly basis. The period and
frequency of cash planning generally depends upon the size of the firm and philosophy of
management. Large firms prepare daily and weekly forecasts. Medium-size firms usually
prepare weekly and monthly forecasts. Small firms may not prepare formal cash forecasts
because of the non-availability of information and small-scale operations. But, if the small
firms prepare cash projections, it is done on monthly basis. As a firm grows and business
operations become complex, cash planning becomes inevitable for its continuing success.
55 | P a g e

OTHER FACTORS THAT AFFECT THE SIZE OF CASH BALANCE

1. Availability of short-term credit:


To avoid holding unnecessary large balances of cash, most firms attempt to make
arrangements at borrow money is case of unexpected needs. With such an agreement,
the firm normally pays interest only during the period that the money is actually used.

2. Money market rates:


If money will bring a low return a firm may choose not to invest it. Since the loss or profit
is small, it may not be worth the trouble to make the loan. On the other hand, if interest rates
are very high, every extra rupee will be invested.
3. Variation in cash flows:
Some firms experience wide fluctuation in cash flows as a routine matter. A firm with
steady cash flows can maintain a fairly uniform cash balance.
4. Compensating balance:
If a firm has borrowed money from a bank, the loan agreement may require the firm to
maintain a minimum balance of cash in its accounts. This is called compensating balance. In
effect this requires the firm to use the services of bank a guaranteed deposit on which it pays
no interest. The interest free deposit is the banks compensation for its advice and assistance.
CASH MANAGEMENT BASIS STRATEGIES

The management should, after knowing the cash position by means of the cash
budget, work out the basic strategies to be employed to manage its cash.

CASH CYCLE:

The cash cycle refers to the process by which cash is used to purchase materials from which
are produced goods, which are then sold to customers.

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Cash cycle=Average age of firms inventory +Days to collect its accounts receivables Days
to pay its accounts payable.
The cash turnover means the numbers of times firms cash is used during each year.
360
Cash turnover = ---------------Cash cycle

The higher the cash turnover, the less cash the firm requires. The firm should, therefore, try
to maximize the cash turn.

MANAGING COLLECTIONS:

a) Prompt Billing:
By preparing and sending the bills promptly, without a time log between the dispatches
of goods and sending the bills, a firm can ensure earlier remittance.
b) Expeditious collection of cheques:
An important aspect of efficient cash management is to process the cheques receives
very promptly.
c) Concentration Banking:
Instead of a single collection center located at the company headquarters, multiple
collection centers are established. The purpose is to shorten the period between the time
customers mail in their payments and the time when the company has use of the funds are
then to a concentration bank usually a disbursement account.
d) Lock-Box System:
With concentration banking, a collection center receives remittances, processes them
and deposits them in a bank. The purpose is to lock-box system is to eliminate the time
between the receipt of remittances by the company and their deposit in the bank. The
company rents a local post office box and authorizes its bank in each of these cities to pick up
57 | P a g e

remittances in the box. The bank picks up the mail several times a day and deposits the
cheque in the companys accounts. The cheques are recorded and cleared for collection. The
company receives a deposits the cheque in the companys accounts.
recorded and cleared for collation.

The cheques are

The company receives a deposit slip and a lift of

payments. This procedure frees the company from handling a depositing the cheques.
CONTROL OF DISBURSMENT
a) Stretching Accounts Payable
A firm should pay its accounts payables as late as possible without damaging its credit
standing. It should, however, take advantages of the cash discount available on prompt
payment.
b) Centralized Disbursement
One procedure for rightly controlling disbursements is to centralize payables in to a
single account, presumably at the companys headquarters. Such an arrangement would
enable a firm to delay payments and can serve cash for several reasons. Firstly, it increases
transit time. Secondly, if a firm has a centralized bank account, a relatively smaller total cash
balances will be needed.
c) Bank Draft
Unlike an ordinary cheque, the draft is not payable on demand. When it is presented
to the issuers bank for collection, the bank must present it to the issuer for acceptance. The
funds then are deposited by the issuing firm to cover payments of the draft. But suppliers
prefer cheques. Also, bank imposes a higher service charge to process them since they
require special attention, usually manual.
d) Playing the float
The amount of cheques issued by the firm but not paid for by the bank is referred to as
the payment float. The differences between payment float and collection float are the
net float. So, if a firm enjoys a positive net float, it may issue cheques even if it means
having an ever drown account in its books. Such an action is referred to as playing the
float; within limits a firm can play this game reasonably safely.
Thus management of cash becomes essential and it should be seen to, that neither
excessive nor inadequate cash balances are maintained.

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CASH FLOW ANALYSIS


The cash flow analysis is done with the help of cash flow statement. A cash flow
statement is a statement depicting changes in cash position from one period to another. It is
an important planning tool. Cash flow statement gives a clear picture of the source of cash,
the uses of cash and the net changes in cash. The primary purpose of cash flow statement is
to show that as to where from the cash to be acquired and where to use them.
UTILITY OF CASH FLOW ANALYSIS
A Cash flow analysis is an important financial tool for the management. Its chief
advantages are as follows.
(a) Helps in efficient cash management
Cash flow analysis helps in evaluating financial policies and cash position. Cash is the
basis for all operation and hence a projected cash flow statement will enable the
management to plan and co-ordinate the financial operations properly. The management
can know how much cash is needed from which source it will be derived, how much can
be generated, how much can be utilized.
(b) Helps in internal financial management
Cash flow analysis information about funds, which will be available from operations.
This will helps the management in repayment of long-term debt, dividend policies etc.
(c) Discloses the movements of Cash
Cash flow statement discloses the complete picture of cash movement. The increase
in and decrease of cash and the reasons therefore can be known. It discloses the
reasons for low cash balance in spite of heavy operation profits on for heavy cash
balance in spite of low profits.
(d) Discloses success or failure of cash planning
The extent of success or failure of cash planning is known by comparing the projected
cash flow statement with the actual cash flow statement and necessary remedial
measures can be taken.

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CHAPTER-2
PRESENTATION AND ANALYSIS OF
DATA

60 | P a g e

2.1CASH FLOW STATEMENT


2009-2010

Inflow

2010-2011

2011-2012

2012-2013

Opening balance

18167225

11691544

29693648

33047928

Cash from operation

30812867

35603657

65808370

32293691

Increase in loan funds

36616628

167584138

11231917

Sales of Asset

60444

530612

31205269

Increase in share capital

1000000

Total

865,596,720

47,355,645

263,616,768

107,778,805

Purchase of Asset

26289207

15540564

16552286

4060528

Decrease in loan funds

3211747

Closing balance

11691544

29693648

33047927

26655452

Total

37,980,751

48,445,959

49,600,213

30,715,980

Outflows
Cash outflow from
operation

TABLE: 5
Inference:

This table shows that the cash flow statements of THEJO ENGINEERING LTD are
to be efficient. The cash inflow of the company is to be increased for year after year. The
fund from operation is also to differ from every year. The company increased their share
capital from 2009-2010 for Rs. 10, 00,000. It was used as efficient for the next year for
decrease their loan amount.

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RATIO ANALYSIS:

Ratio Analysis is a powerful tool of financial analysis. A Ratio is defined as the indicated
quotient of two mathematical expressions and as the relationship between two or more
things. In financial analysis, a ratio is used as a benchmark for evaluating the financial
position and performance of a firm. Ratio helps to summarize large quantities of financial
data and to make qualitative judgment about the firms financial performance.

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2.2 RATIO ANALYSIS


2.2.1 LIQUIDITY RATIOS
These are ratios which measure a firms ability to meet its maturing short-term obligations.
(a) CURRENT RATIO
Current ratio is a financial ratio that measures whether or not a company has enough
resources to pay its debt over the next business cycle (usually 12 months) by
comparing firm's current assets to its current liabilities.
Acceptable current ratio values vary from industry to industry. Generally, a current
ratio of 2:1 is considered to be acceptable. The higher the current ratio is, the more
capable the company is to pay its obligations. Current ratio is also affected by
seasonality.

If current ratio is bellow 1 (current liabilities exceed current assets), then the company
may have problems paying its bills on time. However, low values do not indicate a
critical problem but should concern the management.
Current ratio gives an idea of company's operating efficiency. A high ratio indicates
"safe" liquidity, but also it can be a signal that the company has problems getting paid
on its receivable or have long inventory turnover, both symptoms that the company
may not be efficiently using its current assets.
Current ratio = Current assets/ Current Liabilities

YEAR
2009-10

RATIO
39.94/15.06=2.65

REMARKS
Liquidity position is
good

2010 11

52.73/25.01=2.11

good

2011 12

66.23/53.03=1.25

Satisfactory

2012 13

90.13/61.79=1.46

Satisfactory

TABLE: 6

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current ratio
3
2.5
2
1.5

current ratio

1
0.5
0
2009-10

2010 - 11

2011 - 12

2012 - 13

GRAPH: 1
INFERENCE:
Since, the current ratios are above 1, the company has a safe liquidity position i.e. the
company can pay off its debt over the next business cycle. During the FY2010 till
FY2011, the ratio is slightly high which can be a signal that the company has
problems getting paid on its receivable or have long inventory turnover, both
symptoms that the company may not be efficiently using its current assets. But during
FY2012 and FY2013, the ratio attained a safe position which indicates the operational
efficiency of the company has improved. Increase in current ratio over a period of
time may suggest improved liquidity of the company or a more conservative approach
to working capital management. A decreasing trend in the current ratio may suggest a
deteriorating liquidity position of the business or a leaner working capital cycle of the
company through the adoption of more efficient management practices.
Traditional manufacturing industries require significant working capital investment in
inventory, trade debtors, cash, etc, and therefore companies operating in such
industries may reasonably be expected to have current ratios of 2 or more. However,
with the advent of just in time management techniques, modern manufacturing
companies have managed to reduce the size of buffer inventory thereby leading to
significant reduction in working capital investment and hence lower current ratios.

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(b) QUICK RATIO

Quick ratio specifies whether the assets that can be quickly converted into cash are sufficient
to cover current liabilities. Ideally, quick ratio should be 1:1.If quick ratio is higher, company
may keep too much cash on hand or have a problem collecting its accounts receivable. Higher
quick ratio is needed when the company has difficulty borrowing on short-term notes. A
quick ratio higher than 1:1 indicates that the business can meet its current financial
obligations with the available quick funds on hand. A quick ratio lower than 1:1 may indicate
the company relies too much on inventory or other assets to pay its short-term liabilities.
Quick ratio shows the extent of cash and other current assets that are readily convertible into
cash in comparison to the short term obligations of an organization.

Quick Ratio = Quick assets/ Current Liabilities

YEAR

RATIO

2009-10

33.54/15.06 = 2.22

REMARKS
Liquidity
position is
good

2010-11

44.61/25.01 = 1.78

good

2011-12

54.59/53.03 = 1.03

good

2012-13

77.66/61.79 = 1.26

good

TABLE: 7

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Quick ratio
4.5
4
3.5
3
2.5

Quick ratio

2
1.5
1
0.5
0
2009-10

2010 11

2011 12

2012 13

GRAPH: 2
INFERENCE:
A quick ratio of 0.5 would suggest that a company is able to settle half of its current liabilities
instantaneously. Quick ratio differs from current ratio in that those current assets that are not
readily convertible into cash are excluded from the calculation such as inventory and deferred
tax credits since conversion of such assets into cash may take considerable time. Thejo
Engineering LTD has quick ratio which ranges from 2.22 maximum during FY2010 and
lowest ratio 1.03 at FY2012. These ratios indicate that the company has a good liquidity
position which indicates the business can meet its current financial obligations with the
available quick funds on hand.

(c) NET WORKING CAPITAL RATIO


There are two concepts of working capital namely gross working capital and net working
capital. Net working capital is the difference between current assets and current liabilities. An
analysis of the net working capital will be very help full for knowing the operational
efficiency of the company.
Net working capital = Current Assets Current Liabilities

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YEAR

RATIO

REMARKS

2009 10

39.94-15.06 =24.88

Good

2010 11

52.73- 25.01 =
27.72

Good

2011 12

66.23 -53.03 =
13.20

Good

2012 13

90.13 61.79 =
28.34

Good

TABLE: 8

Net W.C ratio


30
25
20
15

Net W.C ratio

10
5
0

2009-10

2010 11

2011 12

2012 13

GRAPH: 3
INFERENCE:
Positive working capital means that the business is able to pay off its short-term liabilities.
Also, a high working capital can be a signal that the company might be able to expand its
operations. Negative working capital means that the business currently is unable to meet its
short-term liabilities with its current assets. Therefore, an immediate increase in sales or
additional capital into the company is necessary in order to continue its operations. Working
67 | P a g e

capital also gives an idea of company's efficiency. Money tied up in inventory or accounts
receivable cannot pay off any of the company's short term financial obligations. Therefore,
working capital analysis is very important, but very complex too. For example, an increase in
working capital can be explained by sales increase, but can also be explained by slow
collection or inadequate increase in inventory. Here, it is found that there is an increase in the
working capital ratio.

2.2.2 TURNOVER RATIOS


These are ratios which measures the effectiveness with which the firm is using its resources.

(a) INVENTORY TURNOVER RATIO


Inventory Turnover Ratio = Cost Of Goods Sold/ Average Inventory
This ratio indicates how fast inventory is sold. A company with a higher inventory ratio
has better liquidity. Inventory Turnover Ratio measures company's efficiency in turning
its inventory into sales. Its purpose is to measure the liquidity of the inventory.
Inventory Turnover Ratio is figured as "turnover times". Average inventory should be
used for inventory level to minimize the effect of seasonality.

YEAR

RATIO

REMARKS

2009-10

6409.95/651.98 =

Average

9.83
2010-11

9693.89/726.77 =

Good

13.33
2011-12

11888.53/988.79 =

Good

12.02
2012-13

13420.6/1206.08 =
11.127

TABLE: 9

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Satisfactory

Inventory turnover rato


14
12
10
8
Inventory turnover rato

6
4
2
0
2009-10

2010 11

2011 12

2012 13

GRAPH: 4
INFERENCE:
A low inventory turnover ratio is a signal of inefficiency, since inventory usually has a rate of
return of zero. It also implies either poor sales or excess inventory. A low turnover rate can
indicate poor liquidity, possible overstocking, and obsolescence, but it may also reflect a
planned inventory buildup in the case of material shortages or in anticipation of rapidly rising
prices.
A high inventory turnover ratio implies either strong sales or ineffective buying (the company
buys too often in small quantities, therefore the buying price is higher).A high inventory
turnover ratio can indicate better liquidity, but it can also indicate a shortage or inadequate
inventory levels, which may lead to a loss in business.
High inventory levels are usual unhealthy because they represent an investment with a rate of
return of zero. It also opens the company up to trouble if the prices begin to fall.
Thejo Engineering LTDs inventory turnover ratio is found to increase over the years which
are considered satisfactory.

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(b) DEBTORS TURNOVER RATIO


Debtors Turnover ratio = Net Credit Sales/ Average debtors
Receivables turnover ratio (also known as debtors turnover ratio) is computed by dividing
the net credit sales during a period by average receivables.
Accounts receivable turnover ratio simply measures how many times the receivables are
collected during a particular period. It is a helpful tool to evaluate the liquidity of receivables.

YEAR

RATIO

REMARKS

2009-10

65.96/17.33 = 3.81

Low

2010-11

96.20/22.63 = 4.25

Satisfactory

2011-12

117.86/29.46 =4.00

Satisfactory

2012-13

135.49/36.80 = 3.68

Low

TABLE: 10

Debtor's Turnover ratio


4.3
4.2
4.1
4
3.9
3.8

Debtor's Turnover ratio

3.7
3.6
3.5
3.4

3.3
2009-10

2010 11

2011 12

2012 13

GRAPH: 5

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INFERENCE:
Generally, a high ratio indicates that the receivables are more liquid and are being collected
promptly. A low ratio is a sign of less liquid receivables and may reduce the true liquidity of
the business in the eyes of the analyst even if the current and quick ratios are satisfactory.
Thejo Engineering LTD is found to have low debtors turnover ratio.
(c) CREDITORS TURNOVER RATIO
A business organization has to pay creditors if it buys goods on credit. Any new creditor will
give us the goods on credit if he knows that we pay our creditors bill within short period of
time. So, for knowing this time period, both parties calculate creditor turnover ratio.

Creditors Turnover Ratio = Net credit purchases/ Average creditors

YEAR

RATIO

2009 10

3.84

2010 11

1.39

2011 12

3.14

2012 13

3.23

TABLE: 11

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REMARKS

Creditor's turnover ratio


4
3.5
3
2.5
2

Creditor's turnover ratio

1.5
1
0.5
0
2009 10

2010 11

2011 12

2012 13

GRAPH: 6
INFERENCE:
Higher creditor turnover ratio is good because it will decrease the average payment period.
The company have low creditors turnover ratio.

(d) FIXED ASSETS TURNOVER RATIO


This ratio is often used as a measure in manufacturing industries, where major purchases
are made for Property, Plant & Equipment to help increase output. When companies
make these large purchases, prudent investors watch this ratio in following years to see
how effective the investment in the fixed assets was.

Fixed Assets Turnover Ratio = Sales/ Net Fixed Assets


Higher the ratio, more efficient is the firm in utilizing its assets.

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YEAR

RATIO

REMARKS

2009-10

6,432.30/ 889.66=

Satisfactory

7.23

Performance

2010-11

9,521.95/905.54 =

Good

10.51
2011-12

11,536.44/1,132.10

Good

= 10.19
2012-13

13,338.12/1,504.89

Satisfactory

= 8.86

TABLE: 12

Fixed assets turnover ratio


12
10
8
6

Fixed assets turnover ratio

4
2
0
2009-10

2010 11

2011 12

2012 13

GRAPH: 7
INFERENCE:
The fixed-asset turnover ratio measures a companys ability to generate net sales from fixedasset investments specifically property, plant and equipment (PP&E) net of depreciation.
A higher fixed-asset turnover ratio shows that the company has been more effective in using
the investment in fixed assets to generate revenues. Thejo Engineering LTD has a satisfactory
73 | P a g e

FA turnover ratio which indicates that the company is effective in using fixed assets to
generate revenues.
(e) TOTAL ASSTES TURNOVER RATIO
Total Assets Turnover Ratio = Sales / Total Assets
It measures the efficiency of a firm in managing and utilizing its assets.

YEAR

RATIO

REMARKS

2009 10

6,432.30/4916.76 =

Satisfactory

1.31

Performance

9,521.95/6211.26 =

Good

1.53

Performance

11,536.44/7,976.04

Good

= 1.45

Performance

13,338.12/11.583.87

Satisfactory

= 1.15

Performance

2010 11

2011 12

2012 13

TABLE: 13

Total assets turnover ratio


1.6
1.4
1.2
1
0.8

Total assets turnover ratio

0.6
0.4
0.2
0
2009-10

2010 11

2011 12

2012 13

GRAPH: 8
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INFERENCE:
The lower the total asset turnover ratio, as compared to historical data for the firm and
industry data, the more sluggish the firms sales. This may indicate a problem with one or
more of the asset categories composing total assets inventory, receivables, or fixed assets.
The small business owner should analyze the various asset classes to determine in which
current or fixed asset the problem lies. The problem could be in more than one area of current
or fixed assets. Since current assets also include the liquidity ratios, such as the current and
quick ratios, a problem with the total asset turnover ratio could also be traced back to these
ratios. Many business problems can be traced back to inventory but certainly not all. The firm
could be holding obsolete inventory and not selling inventory fast enough. With regard to
accounts receivable, the firms collection period could be too long and credit accounts may
be on the books too long. Fixed assets, such as plant and equipment, could be sitting idle
instead of being used to their full capacity. All of these issues could lower the total asset
turnover ratio.

(f) CAPITAL TURNOVER RATIO

A ratio of how effectively a publicly-traded company manages the capital invested in it


to produce revenues. It is calculated by taking the total of the companys annual sales
and dividing it by the average stockholder equity, which is the average amount of money
invested in the company. A high ratio indicates that the company is using its capital
well, while a low ratio indicates the opposite. It is also called equity turnover.

Capital Turnover Ratio = Sales/ Capital employed

It measures the efficiency of a company in utilizing its capital for generating sales.

75 | P a g e

YEAR

RATIO

REMARKS

2009-10

6,432.30/3,388.07

Satisfactory

=1.90
2010-11

9,521.95/3,690.72

Good

=2.58
2011-12

11,536.44/2,641.67

Good

= 4.37
2012-13

13,338.12/5,334.77

Good

= 2.50

TABLE: 14

Capital turunover ratio


4.5
4
3.5
3
2.5
Capital turunover ratio

2
1.5
1
0.5

0
2009-10

2010 11

2011 12

2012 13

GRAPH: 9
INFERENCE:
The ratio is fluctuating towards the end of the study period i.e. during FY2012 the ratio
decreased from 4.37 to 2.50 in FY2013.This indicates that the company is not effectively
utilizing its capital for generating sales.

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2.2.3 CAPITAL STRUCTURE RATIOS


(a) DEBT-EQUITY RATIO
Debt to equity ratio is a long term solvency ratio that indicates the soundness of long-term
financial policies of the company. It shows the relation between the portion of assets
provided by the stockholders and the portion of assets provided by creditors. Debt to equity
ratio is also known as external-internal equity ratio.
Debt-Equity Ratio=Long term debt/ Shareholders Equity
A ratio of 1:1 is considered safe.
TABLE: 15

YEAR

RATIO

REMARKS

2009-10

1,993.57/1,394.50 =

Not safe

1.43
2010-11

1,961.45/1,729.27

Not safe

=1.13
2011-12

66.87/2,574.80 =

Safe

0.02
2012-13

13.64/5,331.13
=0.03

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Safe

Debt-Equity ratio
1.6
1.4
1.2
1
0.8

Debt-Equity ratio

0.6
0.4
0.2
0
2009-10

2010-11

2011-12

2012-13

GRAPH: 10
INFERENCE:
A ratio of 1 or 1: 1 means that creditors and stockholders equally contribute to the assets of
the business.
A less than 1 ratio indicates that the portion of assets provided by stockholders is greater than
the portion of assets provided by creditors and a greater than 1 ratio indicates that the portion
of assets provided by creditors is greater than the portion of assets provided by stockholders.
Creditors usually like a low debt to equity ratio because a low ratio (less than 1) is the
indication of greater protection to their money. But stockholders like to get benefit from the
funds provided by the creditors therefore they would like a high debt to equity ratio.
Debt equity ratio varies from industry to industry. Different norms have been developed for
different industries. A ratio that is ideal for one industry may be worrisome for another
industry. A ratio of 1: 1 is normally considered satisfactory for most of the companies.

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(b)OWNERS FUND TO TOTAL FUND


Owners Fund to Total Fund= Owners Equity/Total Fund
Higher the proportion of owners fund to total fund invested in the business, lower is the
degree of risk.

YEAR

RATIO

REMARKS

2009-10

1,394.50/3,388.07

Risk is more

=0.41
2010 11

1,729.27/3,690.72

Risk is more

=0.47
2011 12

2,574.80/2,641.67

Less risk

=0.97
2012 13

5,331.13/5.344.77

Less risk

=0.99

TABLE: 16

Owner's fund to Total fund


1
0.9
0.8
0.7
0.6
0.5

Owner's fund to Total fund

0.4
0.3
0.2
0.1
0
2009-10

2010-11

2011-12

2012-13

GRAPH: 11

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INFERENCE:
Higher the proportion of owners fund to total fund invested in the business, lower is the
degree of risk. In the FY2010 and 11 the risk was more due to high proportion of owners
fund to total fund. The ratio came down to safer level during the FY2012 and 13.

2.2.4 COVERAGE RATIOS


(a) INTEREST COVERAGE RATIO
Interest Coverage Ratio, also known as Times Interest Earned Ratio (TIE), states the number
of times a company is capable of bearing its interest expense obligation out of the operating
profits earned during a period.
Interest Coverage Ratio= EBIT/ Interest
This ratio is used to determine how easily a company can pay interest on outstanding debt. A
high ratio indicates its ability to pay interest easily. Interest Coverage Ratio indicates the
capacity of an organization to pay its interest obligations. An interest cover of 2 implies that
the entity has sufficient profitability to bear twice the amount of its current finance cost. The
effect of taxation is normally ignored in the interest cover calculation to facilitate a better
comparison of the contribution of the company's underlying profitability towards meeting its
interest obligations which may be blurred to an extent by the effects of revision in tax rates,
policies and prior period tax adjustments over several accounting periods.

YEAR

RATIO

REMARKS

2009 10

1,817.79/257.53 =

Good position

7.06
2010 11

1,652.33/257.32 =

Good position

5.96
2011 12

855.07/367.07

Satisfactory

=2.33
2012 13

608.46/380.16
=1.60

TABLE: 17
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Satisfactory

8
7
6
5
4

Interest coverage ratio

3
2
1
0
2009 10

2010 11

2011 12

2012 13

GRAPH: 12
INFERENCE:
Loans and borrowings are cheap source of finance primarily because the interest cost is
usually tax deductible in most jurisdictions unlike dividend payments. However, interest
costs are obligatory payments unlike dividend payouts which are discretionary upon
management's intent. Therefore, the level of debt financing must be at an acceptable level and
should not exceed the point which exposes an organization to unacceptably high financial
risk as might be reflected in a low interest cover. Generally, companies would aim to
maintain interest coverage of at least 2 times. Interest cover of lower than 1.5 times may
suggest that fluctuations in profitability could potentially make the organization vulnerable to
delays in interest payments. A very high interest cover may suggest the fact that the company
is not capitalizing on the relatively cheaper source of finance (i.e. debt) and in such instances
an increase in gearing ratio may actually add value to the enterprise. From the table, it is
found that the ratio is declining and for the FY2013, the ratio had reached a low value of 1.60
times. Since the value is above 1.5 times, it is considered to be satisfactory.

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(b) EQUITY DIVIDEND COVERAGE RATIO


Dividend Coverage Ratio indicates the capacity of an organization to pay dividends out of
profit attributable to the share holders. A dividend cover of 3 implies that a company has
sufficient earnings to pay dividends amounting to 3 times of the present dividend payout
during the period. When calculating dividend coverage for ordinary share capital, it is
necessary to deduct any dividend paid on irredeemable preference shares from the net profit
earned during the accounting period in order to arrive at the earnings attributable to ordinary
share holders. Dividend on redeemable preference shares is already deducted from the
income statement as interest expense (finance cost) and hence no further adjustment is
required in its respect in the dividend cover calculation.
Equity Dividend coverage ratio= Earnings after tax and preference dividend/ Equity
dividend
TABLE: 18

YEAR

RATIO

REMARKS

2009 10

226.98/332.80

Satisfactory

=6.92

position

382.96/41.46=9.23

Satisfactory

2010 11

position
2011 12

2012 13

671.83/47.39

Satisfactory

=14.18

position

974.78/85.84
=11.35

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Satisfactory
position

Equity dividend coverage ratio


16
14
12
10
8

Equity dividend coverage ratio

6
4
2
0
2009 10

2010 11

2011 12

2012 13

GRAPH: 13
INFERENCE:
Dividend Coverage is a measure of the ability of an organization to pay dividends. Although
dividend payments are usually discretionary, companies normally seek to maintain a
reasonable level of dividend payout in line with the market expectations.
Generally, companies would aim to sustain a dividend cover of at least 2 times in order to
avail adequate financing through retained earnings while providing a reasonable cash return
on shareholder's investment. A higher or lower dividend cover may be appropriate depending
on the level of stability in earnings of the organizations.
Dividend cover consistently below 1.5 may suggest that the company might not be able to
maintain the present level of dividends in case of adverse variation in profit in the future.
A high dividend cover may suggest that the company is retaining a higher portion of its
earnings to meet its financing requirements which may result in higher dividend payouts in
the future. Thejo Engineering LTD maintains a high equity dividend coverage ratio.

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2.2.5 PROFITABILITY RATIOS

(a) NET PROFIT RATIO


Net Profit Ratio = (Net profit after tax / Sales) x 100
It measures the net profit in relation to sales.

YEAR

RATIO

2009 10

REMARKS

226.98/6,432.30

Satisfactory

=3.53 %
2010 11

382.96/9,521.95

Satisfactory

=4.02%
2011 12

671.83/ 11,536.44

Satisfactory

=5.82%
2012 13

974.78/13,338.12

Satisfactory

=7.31%

TABLE: 19

Net profit ratio


8.00%
7.00%
6.00%
5.00%
4.00%

Net profit ratio

3.00%
2.00%
1.00%
0.00%
2009 10

2010 11

2011 12

GRAPH: 14

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2012 13

INFERENCE:
Net profit (NP) ratio is a useful tool to measure the overall profitability of the business. A
high ratio indicates the efficient management of the affairs of business.
There is no norm to interpret this ratio. The use of net profit ratio in conjunction with the
assets turnover ratio helps in ascertaining how profitably the assets have been used during the
period.
(b)OPERATING PROFIT RATIO
The operating profit margin ratio indicates how much profit a company makes after paying
for variable costs of production such as wages, raw materials, etc. It is expressed as a
percentage of sales and shows the efficiency of a company controlling the costs and expenses
associated with business operations. Phrased more simply, it is the return achieved from
standard operations and does not include unique or one time transactions. Terms used to
describe operating profit margin ratios this includes operating margin, operating income
margin, operating profit margin or return on sales (ROS).
Operating Profit Ratio = (EBIT/Sales) x 100

YEAR

RATIO

REMARKS

2009-10

1,817.79/6,432.30

Reasonable

= 28.26 %
2010-11

1,652.33/9,521.95

Reasonable

= 17.35%
2011-12

855.07/ 11.536.44

Average

= 7.41 %
2012-13

608.46/13,338.12 =
4.56%

TABLE: 20

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Average

Operating profit ratio


30.00%
25.00%
20.00%
15.00%

Operating profit ratio

10.00%
5.00%
0.00%
2009 10

2010 11

2011 12

2012 13

GRAPH: 15
INFERENCE:
The ratio is expressed as a percentage of sales and shows the efficiency of a company
controlling the costs and expenses associated with business operations. For Thejo
Engineering LTD, the ratio is found to decline towards the FY 2012 and 2013 which
indicates the decrease in efficiency of the company in controlling the costs and expenses
utilized for the operations.

2.2.6 RETURN ON INVESTMENTS


(a) RETURN ON ASSETS (ROA)
Return on Assets (ROA) is an indicator of how profitable company's assets are in generating
profit. The only common rule is that the higher return on assets is, the better, because the
company is earning more money on its assets. A low return on assets compared with the
industry average indicates inefficient use of company's assets.
Return on Assets is one of the profitability ratios and is usually expressed as a percentage.
Return on Assets= (Net profit after tax/ Total assets) x100

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YEAR

RATIO

REMARKS

2009-10

226.98/3410.41

Average

=6.65%

performance

382.96/3,709.81

Satisfactory

2010-11

=10.32%
2011-12

671.83/7,976.04

Average

= 8.42%
2012-13

974.78/11,583.87

Average

= 8.41%

TABLE: 21

ROA
12.00%
10.00%
8.00%
6.00%

ROA

4.00%
2.00%
0.00%
2009 10

2010 11

2011 12

GRAPH: 16

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2012 13

INFERENCE:
The higher the return on assets is, the better, because the company is earning more money on
its assets. A low return on assets compared with the industry average indicates inefficient use
of company's assets. Thejo engineering has an average Return on Assets rate.
(b) RETURN ON CAPITAL EMPLOYED (ROCE)
ROCE is especially useful when comparing the performance of companies in capitalintensive sectors such as utilities and telecoms. This is because unlike return on equity
(ROE), which only analyzes profitability related to a companys common equity, ROCE
considers debt and other liabilities as well. This provides a better indication of financial
performance for companies with significant debt.

Return on Capital Employed = [(Net Profit after Taxes + Interest)/ (Total Capital
employed)] x100
Higher the ratio, the more efficient is the use of capital employed.

YEAR

RATIO

REMARKS

2009-10

484.51/3,388.07 =

Reasonable

14.30%
2010-11

660.28/3690.72 =

Reasonable

17.89%
2011-12

751.72/2,641.67 =

Good

28.46%
2012-13

1.227.69/5,344.77
=22.97%

TABLE: 22

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Good

ROCE
30.00%
25.00%
20.00%
15.00%

ROCE

10.00%
5.00%
0.00%

2009 10

2010 11

2011 12

2012 13

GRAPH: 17
INFERENCE:
A higher ROCE indicates more efficient use of capital. ROCE should be higher than the
companys capital cost; otherwise it indicates that the company is not employing its capital
effectively and is not generating shareholder value.

(C) RETURN ON NETWORTH


The net worth ratio states the return that shareholders could receive on their investment in a
company, if all of the profit earned were to be passed through directly to them. Thus, the ratio
is developed from the perspective of the shareholder, not the company, and is used to analyze
investor returns. The ratio is useful as a measure of how well a company is utilizing the
shareholder investment to create returns for them, and can be used for comparison purposes
with competitors in the same industry.

Return on Net worth = Profit after Taxes / Net worth

Net worth means equity share capital + preference share capital + reserves and surplus
miscellaneous expenditures if any.
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YEAR

RATIO

REMARKS

2009-10

226.98/1,394.50 =

Satisfactory

16.28%
2010-11

382.96/ 1,729.27

Reasonable

=22.15%
2011-12

671.83 / 2,574.80

Good

=26.09%
2012-13

974.78/5,331.13 =

Satisfactory

18.28%

TABLE: 23

Return on networth
30.00%
25.00%
20.00%
15.00%

Return on networth

10.00%
5.00%
0.00%
2009 10

2010 11

2011 12

2012 13

GRAPH: 18

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INFERENCE:
An excessively high net worth ratio may indicate that a company is funding its operations
with a disproportionate amount of debt and trade payables. If so, a decline in its business
could result in the inability to pay back the debt, which increases the risk of bankruptcy; this
means that the shareholders may lose their investment in the company. Thejo Engineering
LTD has a moderate net worth ratio.

2.2.7 SHAREHOLDERS RATIOS


(a) EARNINGS PER SHARE
The shares are normally purchased to earn dividend or sell them at a higher price in future.
EPS figure is very important for actual and potential common stockholders because the
payment of dividend and increase in the value of stock in future largely depends on the
earnings of the company. EPS is the most widely quoted and relied figure by investors. In
most of the countries, the public companies are required to report EPS figure on the income
statement. It is usually reported below the net income figure.

Earnings per Share = Net profit after taxes & preference dividend / No: of Equity
shares
It measures the profit available to equity share holders on a per share basis.

YEAR

RATIO

REMARKS

2009-10

226.98/11.847 =

Average

19.16
2010-11

382.96/11.847 =

Reasonable

32.32
2011-12

671.83/ 11.847 =

Good

56.71
2012-13

974.78/17.168 =
56.78

TABLE: 24
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Good

Earnings per share


60
50
40
30

Earnings per share

20
10
0
2009-10

2010-11

2011-12

2012-13

GRAPH: 19
INFERENCE:
There is no rule of thumb to interpret earnings per share. The higher the EPS figure, the better
it is. A higher EPS is the sign of higher earnings, strong financial position and, therefore, a
reliable company to invest money. A consistent improvement in the EPS figure year after
year is the indication of continuous improvement in the earning power of the company. Thus,
Thejo is having continuous improvement in the earning power as the EPS ratio is found to be
consistently improving year after year.

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(b) DIVIDEND PER SHARE


Dividend per Share (DPS) ratio relates the dividends announced for the year to the number of
shares issued for that year. It is an indication of the cash return that shareholders receive from
holding shares in the listed company.
Dividend per Share = Total dividend distributed / No: of equity shares

YEAR

RATIO

REMARKS

2009-10

32.80/11.847 =

Average

2.77
2010-11

41.46/11.847 =

Average

3.50
2011-12

47.39/11.847 =

Average

4.00
2012-13

85.84/17.168 =

Average

5.00

TABLE: 25

Dividend per share


5
4.5
4
3.5
3
2.5

Dividend per share

2
1.5
1
0.5
0
2009-10

2010-11

2011-12

2012-13

GRAPH: 20
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INFERENCE:
A high ratio is preferred from the investors point of view. It is found that Thejo Engineering
LTD has only an average dividend per share value. Dividends are a form of profit distribution
to the shareholder. Having a growing dividend per share can be a sign that the company's
management believes that the growth can be sustained.

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CHAPTER-3
FINDINGS AND CONCLUSIONS

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FINDINGS
The cash management of Thejo Engineering Ltd has been working well in the
organization.
The cash inflow and outflow of cash flow statement have a cash balance will be
increased times when compared to last year balance.
Current Ratio shows that the company has sufficient funds to meet its short-term
obligations. Since, the current ratios are above 1, the company has a safe liquidity
position i.e. the company can pay off its debt over the next business cycle.
The quick ratio shows the company has a good liquidity position which indicates the
business can meet its current financial obligations with the available quick funds on
hand.

Positive working capital means that the business is able to pay off its short-term
liabilities. The working capital of the company is found to increase year after year.
Thejo Engineering LTDs inventory turnover ratio is found to increase over the years
which are considered satisfactory.

A low debtors turnover ratio is a sign of less liquid receivables and may reduce the
true liquidity of the business in the eyes of the analyst even if the current and quick
ratios are satisfactory. Lower debtor turnover ratio is not good because it tells us that
we have not managed debtors better. Money from debtors is not collected quickly.

The company have low creditors turnover ratio.


Thejo Engineering LTD has a satisfactory FA turnover ratio which indicates that the
company is effective in using fixed assets to generate revenues.
The Capital turnover ratio is fluctuating towards the end of the study period i.e. during
FY2012 the ratio decreased from 4.37 to 2.50 in FY2013.This indicates that the
company is not effectively utilizing its capital for generating sales.
Thejo Engineering LTD has a safe Debt-Equity ratio.
The owner's fund to total fund ratio of the company has reached a safe level towards
the FY2013.
It is found that the interest coverage ratio is declining and for the FY2013, the ratio
had reached a low value of 1.60 times. Since the value is above 1.5 times, it is
considered to be satisfactory.
Thejo Engineering LTD maintains a high equity dividend coverage ratio.

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Thejo Engineering LTD has a satisfactory Net profit ratio.


The Operating profit ratio is found to decline towards the FY 2012 and 2013 which
indicates the decrease in efficiency of the company in controlling the costs and
expenses utilized for the operations.
Thejo engineering has an average Return on Assets rate.
Return on capital employed of Thejo Engineering LTD is satisfactory.
Thejo Engineering LTD has a moderate net worth ratio.
Thejo is having continuous improvement in the earning power as the EPS ratio is
found to be consistently improving year after year.
Thejo Engineering LTD has only an average dividend per share value.

CONCLUSION
The Cash Management Analysis done on the financial position of the company has provided
a clear view on the activities of the company. The use of the ratio analysis, Cash Flow
Statement and other accounting and financial management helped in this study to find out the
financial soundness of the company. On completion of my two months internship period, I
observed that there is effective and efficient management of working capital. No material
discrepancies were found during the study. There is a greater efficiency of asset utilization
and management of inventories in the organization. It was further observed that the credits of
the company have to be managed more efficiently. Also, efficiency of the company in
controlling the costs and expenses utilized for the operations have to be improved.
They have reduced the level of imports by producing products in their own factories and also
the level of exports is high compared to imports. The services offered by the company are
always made sure to be of superior quality. Proper records of all types of business operations
are kept in the organization and there is also very efficient customer recovery system.

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BIBLIOGRAPHY

WEBSITES

http://www.thejo-engg.com
www.moneycontrol.com
www.nseindia.com

BOOK

I.M Pandey, Financial management, Vikas publishing house pvt Ltd.


REPORTS
Annual reports for the years 2009-10 to 2012-13 of Thejo Engineering Limited

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