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A Project Report On

(WORKING CAPITAL MANAGEMENT OF MAHARASHTRA ELEKTROSMELT LIMITED CHNDRAPUR)

SUBMITTED BY MR. HEMANT SHRIWANT TITIRMARE

IN PARTIAL FULFILLMENT OF POST GRADUATE PROGRAMME (PGPBM+MBA)

2008-2010 IAEERs PUNE INSTITUTE OF BUSINESS MANAGEMENT (PIBM), PUNE

Declaration
I, Mr. / Ms. ___________________________________________________________________________ hereby declare that this project report is the record of authentic work carried out by me during the period from_________to___________ and has not been submitted earlier to any university or institute for the award of any degree/diploma etc.

Name of the student :

Date :

COMPANY LETTER HEAD


Certificate

This is to certify that the organizational study project is a bonafide and sincere work of Mr, is original and has been made under my supervision in partial fulfillment of requirement for the award of Post Graduate Program for the period of 2 months in the month of May & June, 2009. His/her performance during this period was : Poor/Satisfactory/Good/Excellent.

_________________ Company Guide

Date :

ACKNOWLEDGEMENT

for any successful work, it owes many thanks

Any task that is under taken reaches successful completion not only by an individuals effort but also by the guidance and support of many others. Here we are to acknowledge a few of those who have helped me to carry out this project work successfully. This assistance was offered to me different forms like dissemination of information regarding information, broachers, pamphlet when provided helpful in completing the project report. My sincere gratitude to my project guide Mr.Sitaram P. (Finance executive) for their constant guidance, encouragement and support to the completion of this project.

I would also like to thank specially Mr. P.P. Chakrabarthy (AGM of Personal dept.), Mr.Khodankar (AGM of HRD), and entire finance department for the most valuable help and support extended during the project work.

Last but not the least; I am thankful to our Director Raman Prit & Finance Prof. Neetu Negi for being the source of inspiration and motivation to strive for excellence.

Mr. HEMANT S. TITIRMARE

TABLE OF CONTENTS
Sr. No. 1 2 Topics Objectives And Scope Of The Project Background Introduction / Synopsis Of The Project. a) Company profile, b) Basic introduction of the project, c) Organizational hierarchy, d) Department. Methodology Used for the study a) Methods & Tools adopted for study, b) Data collection, c) Analysis of Data d) Pictorial / Graphic / pie charts, presentation of data. Observations / Findings Limitations Conclusion Suggestions / Recommendations Page no.

4 5 6 7

Bibliography

MAHARASTRA ELEKTROSMELT LTD.


(A Subsidiary of Steel Authority of India Ltd.)

MAHARASTRA ELEKTROSMELT LTD. (A Subsidiary of Steel Authority of India Ltd.) An ISO 9001-2000 Company

QUALITY POLICY
We are committed to excellence in all spheres of Its activities and has adopted Total quality Process as a mean to attain and sustain it though Special emphasis on customer Satisfaction.

&
Employee involvement

Objectives of the Project


Working capital management involves the relationship between a firm's short-term assets and its short-term liabilities. The goal of working capital management is to ensure that a firm is able to continue its operations and that it has sufficient ability to satisfy both maturing short-term debt and upcoming operational expenses. The management of working capital involves managing inventories, accounts receivable and payable, and cash. Maintenance of working capital at appropriate level

Availability of ample funds as and when they are needed.

To determine the amount of working capital requirement and to calculate various ratios relating to working capital. To make an item wise study of the components of the working capital. To suggest the steps to be taken to increase the efficiency in management of working capital.

Scope of the Project


The scope of the study is identified after and during the study is conducted. The Study of working capital is based on tools like trend Analysis, Ratio Analysis, Working capital leverage, operating cycle etc. Further the study is based on last 4 years Annual Reports of Maharashtra Elektrosmelt Ltd. And even factors like Competitors analysis, industry analysis were not considered while preparing This project.

Company profile MAHARASTRA ELEKTROSMELT LIMITED AN ISO 9001-2000 COMPANY INTRODUCTION:Maharashtra elektrosmelt limited is a public limited company date 27th February1974 under the companies Act 1956. M.E.L. was promoted by state industries and Investment Corporation (SICOM) and Development Corporation of vidarbha Govt. of Maharashtra undertaking. M.E.L is a subsidiary of Steel Authority of India ltd. (a Govt of India) enterprise and the largest manganese based Ferro and Silicon Alloy producer in the country. The finished products are provided as the raw material for Bokaro Steel plant (BSP), Bhilai steel plant (BSL), Rourkela steel Plant (RSP), Durgapur Steel Plant (D S P). M.E.L. is the largest Manganese based Ferro Producer in the country. The plant is situated 166 kms away from Nagpur; it is well connected by the railways and roads by the all major cities of the India. M.E.L. has created the direct employment for nearly 2000 people. It is supporting various industries M.E.L. is quickening the pace of industrialization of the region. Maharashtra Elektrosmelt Ltd is a Government Company U/s 617 of the Companies Act, 1956. Steel Authority of India Ltd (SAIL), a Government Company, is holding 99.12% in shares of MEL and that is why MEL falls under the category of Government Company. The Company is managed by the Board of Directors appointed by the Holding Company (SAIL). Being a Government Company, it is subjected to the control of Government of India through the respective Ministry viz Ministry of Steel. The Board of Directors consists of Chairman, three Directors from SAIL and one Independent Director appointed by the Holding Company and one Nominee Director appointed by the Govt of Maharashtra. The Company has its Registered Office at SAIL, International Building, 3rd Floor, Off: MK Road, Churchgate, Mumbai 400 020 and One Unit Office each at Nagpur

and Bhilai.

The Plant is located at Chandrapur in Maharashtra. Executive Director appointed by the Holding Company stationed at Chandrapur is the CEO of the organization. He is assisted by the Head of Departments of Works, Finance, Personnel & Administration, Commercial, Marketing, Vigilance, Board & Company Affairs, Law, Internal Audit and Public Relations. The Production facilities in the Plant consist of two Submerged Arc Furnaces (annual production capacity - 1,00,000 tonnes of equivalent Ferro Manganese) for production of Manganese based ferro alloys; one Electric Arc Furnace for production of medium carbon Ferro Manganese (annual production capacity - 2,500 tonnes); one Power Plant of 4.2 MW capacity producing electric power; two Sinter Plants (annual production capacity - 30,000 tonnes) for producing Manganese ore sinter from Manganese ore fines. Other Service Departments include Raw Material Yard, finished Product Handling Yard, Maintenance Departments, Environment Management Dept, Safety Engineering Dept, Commercial Dept, Personnel & Administration Dept, Finance & Accounts Dept etc.

The main functions of MEL are :a) Production and selling of High Carbon Ferro Manganese, Medium / low

Carbon Ferro Manganese and Silico Manganese to the integrated steel plants of SAIL and others in private sector. b) To help SAIL plants in formulating policies with respect to procurement of ferro alloys, a major raw material, for their steel plants. c) To help SAIL in conducting R&D activities with respect to ferro alloys and developing new grades of ferro alloys d) To ensure uninterrupted supply of ferro alloys to SAIL plants

VISION To be a respected world class corporation and the leader in Indian steel business in quality, productivity, profitability and customer satisfaction. CREDO We build lasting relationship with customer based on trust and mutual benefit. We uphold highest ethical standarads in conduct of our business. We creat and nurture a culture that support flexibility, lerning and is proactive to change. We chart a challanging career advancement and rewards. for employees with opportunities for

We value the opportunity and responsibility to make a meiningful difference in peoples lives.
CORPORATE PLAN MISSION

MEL has prepared an ambition corporate plan for its grout till 2005 AD. MEL has work based upon the corporate social responsibilities (CSR) in the village of Lohara. They provide book for student. MEL arranged a annual blind meeting other CSR activities of MEL is free treatment by American plastic surgeon in Chandrapur per year by Dr. Dikshit. Its mission is to develop and sustain as a leader in the field of ferro alloys. Diversification in production of other value added special Ferro alloy instillation of Ferro alloy instillation of Ferro alloy casting machine is one of its corporate plans.

PERFORMANCE Phenomenal growth in Production Ferro Alloys since 1986-1987 achieving almost 110% of capacity utilization. Techno-Economical parameter comparable to International levels.

A new record in turnover to the tune of around RS.200 crores.

TECHNOLOGICAL DEVELOPMENT

Development of new technology in the field of alloys and raw materials preparation has been made as fallows:

Production of low and medium carbon Ferro manganese through Sillicothermic route. Preheating of raw materials in binds with the use of furnace gases. All the products and process of M E L are ISO standard because of ISO9001 certification to whole company. As a part of diversification, lime is produced for use in paper industry. A 100 TDP High pressure sinter plant was installed with the active association of R&D center for iron & steel, SAIL, Ranchi for gainful utilization of manganese ore fines and conservation of valuable lumpy ore. It is the first plant of its kinds of the world.

MEL is think about new power plant in this premise.

RESEARCH AND DEVELOPMENT

SAIL has set its RESEARCH AND DEVELOPMENT centre at MEL which plays a significance role in technological up gradation. Many projects of waste management, environment control, energy conservation & beneficiation of ores have been undertaken through this centre. This centre also certifies the quality of finished goods prior to dispatch.

UTILIZATION OF WASTE PRODUCT:-

Gainful utilization of waste product has been given prime important to conserve valuable resources some of that are Bricks for construction are manufactured utilizing the granulated slag for the first time in the country.

Ferro manganese slag is utilized as manganese feed in production of sillico manganese.

Granulated slag as stowing material in mines.

Manganese ore fines are agglomerated to produce sinter and are used in SiMn production.

The gases emanating from furnace are utilized as a fuel for or manganese ore. Lime and in sintering plant. Thus replacing expensive furnace oil.

Furnace waste gas is utilized in Electric generation through 4.2 MW power plant.

PRODUCT OFFERED BY MEL MEL produced the following manganese based Ferro alloys with the size ranges and chemical specification as detailed as below:-

HIGH CARBON FERRO MANGANESE Size 10 15mm, 40 100mm, 12 15mm. CHEMICAL SPECIFICATION Manganese 70 74% & 74 78% Carbon 6 8% Silicon 1.5% max Phosphorus 0.43% max SILICO MANGANESE

Size 10 15mm, 40 100mm,12 25mm CHEMICAL SPECIFICATION Manganese 60 65% & 66 70% Carbon 200% max Silicon 15 - 20 % max Phosphorus 0.35% max

SERVICES OFFERED BY MEL

MEL having qualified and skilled technical man power also offers consultancy services in the following areas

INDUSTURIAL SAFETY / DISASTER MANAGEMENT MEL is trend setter in the field of industrial safety already being the safety plant it extent services to other industries for training the manpower in preparation of disaster management plan establishing safety system etc. MEL has already offered its services to a number of organizations in the MAHARASTRA and adjoining states. REFACTORING CONSULTING SERVICES:-

MEL also extends its consultancy services in the area of refactoring particularly for lining of steel ladies, LD and Arc furnace.

COMPETITORS MEL has not having greater competition as it is Subsidiary unit of SAIL and about 90% of finish product being consumed by SAIL COMPETITORS LIST AS BELOW:I. II. III. IV. V. VI. VII. M/S. Sova Ispat Alloy Ltd. Durgapur Bhasker Sarchi Alloy Ltd. Durgapur M/S Majthan Smelter Ltd. Meghalaya M/S Corporate Ispat Alloy Ltd. Durgapur M/S Shyam Ferro Alloy Ltd. Kolkata M/S Ajaymey Ferro Alloy Ltd. Raipur M/S Navbharat Ferro Alloy Ltd. Hydrabad

VIII. IX. X. XI. XII. XIII. XIV. XV. XVI. XVII. XVIII. XIX.
XX.

Chhattisgarh Elektro Ltd. Raipur M/S Mommet Power Ltd. Raipur Alok Ferro Alloy Ltd. Raipur M/S Hira Ferro Alloy Ltd. Shinivasa Ferro Alloy Ltd. Durgapur IMPEX Ferro Tech Ltd. Kalaneshwar (W.B.) Hindustan Steelwork Construction Ltd. Bharat Refractorys Ltd. Ferro Scrap Nigam Ltd. MSTC Ltd. MECON Ltd. Visvesariya Iron& Steel Ltd. Indian Iron & Steel Company Ltd.

Basic introduction of the project


The life blood of business, as is evident, signified funds required for day-to-day operations of the firm. The management of working capital assumes great importance because shortage of working capital funds is perhaps the biggest possible cause of failure of many business units in recent times. Working capital management is concerned with the problems arise in

Attempting to manage the current assets, the current liabilities and the inter Relationship that exist between them. The term current assets refers to those Assets which in ordinary course of business can be, or, will be, turned in to cash Within one year without undergoing a diminution in value and without Disrupting the operation of the firm. The major current assets are cash, Marketable securities account receivable and inventory. Current liabilities ware Those liabilities which intended at there inception to be paid in ordinary course Of business, within a year, out of the current assets or earnings of the concern. The basic current liabilities are account payable, bill payable, bank over-draft, And outstanding expenses. The goal of working capital management is to manage the firms current assets and current liabilities in such way that the satisfactory level of working capital is mentioned. The current should be large enough to cover its current liabilities in order to ensure a reasonable margin of the safety. Definition:According to Guttmann & DougallExcess of current assets over current liabilities. According to Park & GladsonThe excess of current assets of a business (i.e. cash, accounts receivables, inventories) over current items owned to employees and others (Such as salaries & wages payable, accounts payable, taxes owned to Government).

Organizational hierarchy

Department
RAW MATERIAL YARD

Raw material is the unprocessed product. This is required for producing Ferrow and Sillico Alloys in MEL. Raw material necessary for the

production of HC Fe Mn, Si Mn, MC/Fe Mn which is handled by Raw material yard. It is I/P order material of the production process.

RAW MATERIAL:Mn ore Flux: Lime stone dolomite Quarts Sinter These raw materials are bought to raw material yard from different mines.

SUPPLIES OF Mn ORE OF MEL MN ORE OF INDIA (MOIL) 89% Balance mine(mp) contain 50% Mn Balaghat Mn ore from Madhya Pradesh 48-50% Sandur Mn ore from Karnataka 40-45% Anant and Aishwarya Mn ore

SUPPLIER OF FLUX TO MEL Flux is used for making slag inside furnace. It is easily available because of all the mines of it are near by Chandrapur.

Mn ore + flux

HCFeMn

This chemical analysis of the Raw material is then carried out. After this Raw material is fed the ground hopper from where it is then linefeed to the from the bunker house. PH YARD (PRODUCT HANDLING YARD)

PRODUCT HANDLING YARD Handling product Storage product Packaging of product Dispatching of product

PROCEDURE OF HANDLING,STORAGE, PACKAGING,DISPATCHING OF PRODUCT

PURPOSE: This procedure is used for perform activities of receipt, Handling, Storage, Packaging, Dispatching of product. SCOPE: This procedure covers the following activities prefacing to HCFeMn and SiMn and MC/LC FeMn.

Handling storage identification protecting packaging dispatch. Recoveries from Slag, Slags-mix and Metal dust.

SINTERING PLANT There are Two sinter plant in MEL and each plant has per day production 50 tones. Hence the per day total production of sinter plants is 100 tones. The sinter plant is work on the continuous process or system but the sinter plant 2 is work on the pot system. The sinter plant 1 was established in 1981 and sinter plant 2 was established in 1992. The 100 TPD high pressure sinter plant at MEL comprises of main unit as below: Raw material Crushing Screening & storing Raw material proportioning & mixing Sintering Sinter dispatching Cooling & dispatch system. PROCEDURE First of all Raw materials receiving and storing and crushing in the small particles. This small particle is sending in sintering part.

The temp of the sintering part is 11000c to 12000c. The temp of the middle part is 4000c to 4500c. And the temp of the bottom part is 1100c. Where Mn is obtained as liquid state. The air pressure flow on the furnace. There are four section of pressure. The first pressure pump has 2000c, the second pressure pump has 1900c, the third pressure pump has 1700c and the last pressure pump has 1650c after this pressure the material is passed on cooler. The Mn is obtained at 650c to 750c. FURNACE OPERATION In MEL there are two type of furnace which is used for production.

SAF: - Submerged Arc Furnace (two in number). EAF: - Electric Arc Furnace.

SAF:- it is used for production of HCFeMn and SiMn EAF:- it is used for the production of LCFeMn.

OPERATION The raw material is transferred to the bunker house from the ground hopper after then screening, crossing operation in bunker house. It is transferred to the furnace bins. There are TWO types of SAP-1 & SAP-2. There are 8 bins & 3 Electrodes in SAP& supply is provided. The raw material from the bins injured in furnace, where the Electrodes are merged. Hence this is called furnace operation. The 22MW power is consumed by the electrodes in the Arc furnace and in near about 1700-20000c temp. The raw material is consumed in stolen state. Hence for one tapping process it takes minimum 2 hours. The coke is used in this process as a reducing agent. Here the reduction process is take place & in this reaction carbon monoxide (CO) is produced. This gas is well used in plant sintering and lime kiln less than the molted material so the slag float on the top can be recovered. After the cooling process material is transferred to the PH-Yard. The furnace generates very large heat. So it is cooled by flowing the cold water through the pump, which covers the furnace.

LABORATORY Laboratory department is that department where the Qualitavely & Quantatively analysis operation of raw material which is used in the production process & Finish material also analysis before sending procedure in MEL.

SCOPE I. II. III. IV. V.


VI.

The raw materials are first analysis after then raw material send for production process. Product meant for Dispatch Determination of moisture content of Mn ore and coke. Chemical analysis of Fe Si production process. Raw material, product, metallic by product at sample preparation room. Chemical analysis of CaO.MgO.SiO2 in limestone & dolomite. Analysis of loss of ignition content in lime.

VII.

LIME KIL For the production of medium carbon Ferrow manganese. The lime kil produces the lime from limestone. Which act as raw material. MEL has two limes kin one having the capacity of 7 tones per day and other having 4 tones per day. In kiln lime stone is heated at 10000c so the lime is produced.

PPC DEPARTMENT ( PRODUCTION PLANNING AND CONTROL DEPARTMENT )

PPC department operates around the clock in this shift with a line Manager in this shift to keep a track of all operational activities in production main tender raw material yard. Product handling dispatch and activities of other associated department are the function is this PPC department. It serves as an important communication link between the line Manager and working in different department and the section anchored. All the Information about product is gather in PPC department.

PRODUCT RANGE:HCFe Manganese Silico Manganese MC Ferro Manganese High & Low MnO slag Mn Ore Fines Mn Ore Microfine Khad Sludge AUTO DEPARTMENT

Auto Department or transport department plays a very Important role industry. The Transportation is done by various ways for various material products in furnace. (HCFeMn and SiMn and MC/LC FeMn). The various way of transportation are Dumper Loader Trucks Buses Tractors Trailer Bulldozer Ambulance Car(Esteem,Indica&Ambastor)

The current year budget for transport department is Rs.90 lakhs. There are 85 workers work in the transportation department for all the kinds of vehicles maintenance. The role of transport department is very important because all the raw material and prepared goods are send by the transportation as a road and train. WORK SHOP Work shop is department where all the mechanical operation are performed and mainly it consists of mechanical accessories such as drilling machine lathe m/c etc. The main function of this department is production of electrode. The following machines are used in work shop:HMT lathe machine Kirloskar length machine Drilling machine

Punching machine Grinder Bending machine Rolling machine Milling machine ELECTRODE CASING SPECIFICATION Height Diameter Angle between ribs Weight of ribs 1200mm 1.5mm 25.7mm 270kg

POWER PLANT The power plant is established in 1998. The capacity of power plant is 4.2MW. The power plant is one of the steam based power plant which is self generated electricity suppliers by using carbon monoxide (CO) as main fuel sources. In any production process electricity as a main raw material parameter near about 65% to 70% of cost of production is required for the electricity supply. MEL take electricity from M.S.E.B. (Maharashtra state Electricity board) the per month electricity bill is paid by MEL is near about 10 crores. This is very high amount 70% of total production cost. So that MEL plan for establish the new POWER PLANT. The power plant having more capacity and they are earn the more profit. PERSONNEL DEPARTMENT Personnel management may be defined as planning, organized, directing and controlling of the resources and maintenance of employees for the purpose of contributing to the organizing grades. The main objectives of the personnel department is to achieve the objective of the organization, for this purpose they make proper planning, organized, directing and controlling of the resources and maintenance of employees for the purpose of controlling to the organizing grades.

OBJECTIVES AND FUNCTIONS:-

Maintaining employees safety. Maintaining employees health. Maintaining employees services activities. Procurement and maintained of adequate work force. Maintains positive attitude of employee towards his work and work environment.

SAFETY AND HRD The safety department works on this basis of HANRICH TRIANGLE, this theory is given in 1939. This theory is based upon the study of Fifteen thousand accidents HANRICH TRIANGLE is green triangle. In the area of industries safety MEL has carried a Niche for itself as one of the safes industrial establishment in the India and the World. The innumerable step undertaken have culminated in the winning many National and International Awards such as sword honor from British Safety council. UK certificate of mint from National safety council, USA, etc. In safety sector MEL got 20 awards on International level and 57 awards on National level. Here are 4 employees working in the safety department (2 Engineer and 2 Assistant).

FINANCIAL STATEMENT OF MEL The financial statement is prepared primarily for decision making the statement are not an ending themselves, but must be useful in decision making context

In any kinds of organization there are various kinds of accounting works done simultaneously which is given below:i. ii. iii. iv. v. vi. vii. Sales and Excise Accounting Raw material Accounting Stores Accounting Salary and Wages Accounting Contractor Accounting Stock valuation & costing department Accounting All expenditure Accounting

The controlling of these departments is called as Central Accounting. The central Account section prepares Trial balance, Profit& Loss Account and Balance Sheet of the company.

i.

SALES ACCOUNTING

These contain inversing of each and every product including sale of scrap is raised in this Accounting, the party A/c debited and sales A/c credited along with respected with Excise duty and sales tax Accounting. Company sales material for provided party against advance payment the major product dispatch for SAIL (Steel Authority India limited) is under conversation basis where the major raw material is supplied by sail and the company by its only conversion charges to the SAIL plant. The amount due on SAIL plant for is being menatared by finance department for its realization in respect to Excise duty payment same is paid to Government on 5th of the following month for the presiding months at the end of the month of Central Accounting.

ii.

RAW MATERIAL ACCOUNTING

In the raw material accounting, the purchase A/c debited and the party A/c credited.

MIN (material inward notes) is prepared for the raw material accounting. It is such kinds of accounting where all the properties related to the raw material is prepared in this accounting and after this is controlled by the central accounting.

iii.

STORES ACCOUNTING

This is prepared on the basis of GRN (good receipt note). By stores A/c debited to the party A/c credited. The accounting of sales department is very simple ,there are 200 party A/c in MEL CONDITION OF PURCHASE:a) Condition of contract and Delivery terms. b) Delivery c) Packing d) Inspection of good. e) Removal of rejected good f) Bills and Invoice g) Risk of loss h) Recovery of material cost i) Warranty j) Insurance k) LD for late delivery l) Right of Buyer to set of m) Jurisdiction In the purchase order we see the Discount, Excise duty, Education cess and VAT/CST and then calculate the price of the good, and the price to be taken for the current value not the previous value. To read all the purchase order and done

the calculation because these are some condition like Delivery date, Dispatch price, LD and etc. If there are found any mistake so we can return the Bill for correction. CALCULATION IS DONE LIKE THAT:Product Qty *Price Add Add = Basic Price Excise duty Education cess (on the excise duty) Add Less VAT/CST (on the basic price) Discount (on the basic price)

FINAL PRICE OF THE PRODUCT

iv.

CONTRACTOR ACCOUNTING

In MEL the contract based security is also allowed there are following kinds of contractor in MEL, Breaking contractor, Handling contractor, Stacking contractor, Loading contractor and Unloading contractor.

v.

SALARY- WAGES ACCOUNTING

In this part of accounting by Salary A/c debited to Bank A/c credited. In the salary accounting there are 25 heads found in MEL. In salary including Basic pay +DA+ HRA+ Car allowances/scooter allowances+ HRD allowances+ Canteen allowances +Incentives is also available in MEL

vi.

ALL EXPENDITURE ACCOUNTING

In this part of accounting, the calculation is taken place such as Regular Expenditure Telephone Expenditure Traveling Expenditure Seminar Expenditure Stationary Expenditure etc. Such kind of Expenditure is calculated in this part. There is no separate place for suspense account in MEL.

Methods & Tools adopted for study

Types of Ratios:A. Liquidity Ratio 1. Current Ratio 2. Quick Ratio

B. Activity Ratio
1. Debtors Turnover Ratio 2. Average Collection Period 3. Net Working Capital Turnover Ratio 4. Fixed Turnover Ratio 5. Current Assets Turnover Ratio 6. Capital Employed Turnover Ratio

C. Profitability Ratio
1. Net Profit Ratio

Data collection
What Does Working Capital Management Mean? A managerial accounting strategy focusing on maintaining efficient levels of both components of working capital, current assets and current liabilities, in respect to each other. Working capital management ensures a company has sufficient cash flow in order to meet its short-term debt obligations and operating expenses. What Does Cash Flow Mean? A revenue or expense stream that changes a cash account over a given period. Cash inflows usually arise from one of three activities - financing, operations or investing - although this also occurs as a result of donations or gifts in the case of personal finance. Cash outflows result from expenses or investments. This holds true for both business and personal finance. What Does Current Assets Mean? A balance sheet account that represents the value of all assets that are reasonably expected to be converted into cash within one year in the normal course of business. Current assets include cash, accounts receivable, inventory, marketable securities, prepaid expenses and other liquid assets that can be readily converted to cash. In personal finance, current assets are all assets that a person can readily convert to cash to pay outstanding debts and cover liabilities without having to sell fixed assets.

Current Assets = Cash +Bank + Debtors + Bills Receivable + Short Term Investment + Inventory + Prepaid Expenses

What Does Current Liabilities Mean? A company's debts or obligations that is due within one year. Current liabilities appear on the company's balance sheet and include short term debt, accounts payable, accrued liabilities and other debts.

What Does Days Working Capital Mean? An accounting and finance term used to describe how many days it will take for a company to convert its working capital into revenue. The faster a company does this, the better. To calculate days working capital, the following formula can be used:

Days working capital can be used in ratio and fundamental analysis. What Does Inventory Accounting Mean? The body of accounting that deals with valuing and accounting for changes in inventoried assets. Changes in value can occur for a number of reasons including depreciation, deterioration, obsolescence, change in customer taste, increased demand, and decreased market supply and so on.

What Does Working Capital Mean? A measure of both a company's efficiency and its short-term financial health. The working capital ratio is calculated as:

Positive working capital means that the company is able to pay off its shortterm liabilities. Negative working capital means that a company currently is unable to meet its short-term liabilities with its current assets (cash, accounts receivable and inventory). Also known as "net working capital", or the "working capital ratio". If a company's current assets do not exceed its current liabilities, then it may run into trouble paying back creditors in the short term. The worst-case scenario is bankruptcy. A declining working capital ratio over a longer time period could also be a red flag that warrants further analysis. For example, it could be that the company's sales volumes are decreasing and, as a result, its accounts receivables number continues to get smaller and smaller. Working capital also gives investors an idea of the company's underlying operational efficiency. Money that is tied up in inventory or money that customers still owe to the company cannot be used to pay off any of the company's obligations. So, if a company is not operating in the most efficient manner (slow collection), it will show up as an increase in the working capital. This can be seen by comparing the working capital from one period to another; slow collection may signal an underlying problem in the company's operations.
CURRENT ASSETS Cash at bank Temporary investment Short term advances Receivable Inventories Prepaid expenses CURRENT LIABILITIES Creditor Outstanding expenses Short term borrowing Trade Advance Short term borrowing Bill receivable

Effects of excessive working capital Accumulation of inventories resulting in theft, waste etc

Delays in collection of debtors Idle cash Effects of insufficient working capital Fixed assets may not be optimally used Firms growth may stagnate, reduced profitability Interruptions in production line Increase in creditors, poor liquidity Loss of opportunities, negative effect on Goodwill. Delivery schedules not met

The types of working capital

Gross Working Capital refers to firms investment in all the current assets taken together. Net Working Capital refers to the excess of total current assets over total current liabilities. The net working capital measures the firms liquidity. Permanent Working Capital minimum level of WC always required by a firm to maintain its activities. Also known as Fixed or Core working capital. Temporary Working Capital WC required to meet seasonal changes, fluctuations, contingencies etc

Principles of Working Capital Management Concept of working capital Operating and cash conversion cycle Permanent and variable working capital

Balanced working capital Determinants of working capital Issues I working capital management Estimating working capital

Policies of working capital finance

Concepts of Working Capital Gross working capital (GWC) GWC refers to the firms total investment in current assets. Current assets are the assets which can be converted into cash within an accounting year (or operating cycle) and include cash, short-term securities, debtors, (accounts receivable or book debts) bills receivable and stock (inventory). Net working capital (NWC).

NWC refers to the difference between current assets and current liabilities. Current liabilities (CL) are those claims of outsiders which are expected to mature for payment within an accounting year and include creditors (accounts payable), bills payable, and outstanding expenses. NWC can be positive or negative.

Positive NWC = CA > CL Negative NWC = CA < CL

GWC focuses on

Optimization of investment in current Financing of current assets

NWC focuses on

Liquidity position of the firm

Judicious mix of short-term and long-tern financing

Operating Cycle

OPERATING CYCLE

Operating cycle is the time duration required to convert sales, after the conversion of resources into inventories, into cash. The operating cycle of a manufacturing company involves three phases:

Acquisition of resources such as raw material, labour, power and fuel etc. Manufacture of the product which includes conversion of raw material into work-in-progress into finished goods. Sale of the product either for cash or on credit. Credit sales create account receivable for collection.

The length of the operating cycle of a manufacturing firm is the sum of: Inventory conversion period (ICP). Debtors (receivable) conversion period (DCP). Inventory conversion period is the total time needed for producing and selling the product. Typically, it includes: raw material conversion period (RMCP) work-in-process conversion period (WIPCP) finished goods conversion period (FGCP) Creditors or payables deferral period (CDP) is the length of time the firm is able to defer payments on various resource purchases.

Gross operating cycle (GOC)

The total of inventory conversion period and debtors conversion period is referred to as gross operating cycle (GOC).

Net operating cycle (NOC) NOC is the difference between GOC and CDP.

Cash conversion cycle (CCC) CCC is the difference between NOP and non-cash items like depreciation. Sources of Working Capital

1) Trade Credit 2) Commercial Banks a) WC term loans b) Cash credit facility c) Bank overdraft d) Bill discounting 3) Accounts Payable 4) Outstanding expenses 5) Inter-corporate deposits 6) Commercial Paper 7) Factoring

Ratio Analysis
Ratio Analysis is a power fool tool of financial analysis. A financial analysis a ratio is used as an index or yard sticks for evaluating the financial position and performance of a firm. A ratio is defined as the indicate quotient of two mathematical expression and as the relationship between two or more things. The absolutes accounting figures reported in financial statement do not provide a meaningful understanding of performance and financial position of the firm unless it is related to some other relevant information. Meaning of Ratio Analysis

The relationship between two accounting figures expressed mathematically is known as a financial ratio. A ratio helps the analyst to make qualitative judgment about the firms financial position and performance. These ratios indicate a quantitative relationship, which can be in turn used to make a qualitative judgment.

The ratio analysis is involves comparison for useful interpretation of the financial statement for comparison of the ratio they required some standard, which may consist of: 1) Ratio calculated from the past financial statement of the firm gives indication of the direction of change and reflects whether the firms financial position and performance have improved, deteriorated or remained constant over time. 2) Ratios developed using the projected financial statement of the firm are also called future ratio, which are use of standard of comparison. It shown firms relative strength and weakness in the past and future. 3) Ratio of some competitive firms indicated the relative financial position and performance of the firm. A firm can easily resort to such comparison, as it is not difficult to get the published financial statement of the similar firm. 4) Ratios of the industry to which the firm belong are used as the average ratios from which the firms ratios are compared. Types of Ratios:

The ratios can be grouped into various classes according the financial activity or function to be evaluated. In view of the requirement of the various users of ratios we may classify into the following four important categories: A. B. C. D. Liquidity Ratio Solvency Ratio (Leverage Ratio) Activity Ratio Profitability Ratio

A. Liquidity Ratio:

Liquidity ratio measure the firms ability to meet the current obligation. This ratio established a relationship between cash and other current assets to current obligation, which provide a quick measure of liquidity.

Through this ratio the firm ensures that it does not suffer from lack of liquidity and also that is not too much highly liquid. If the company suffers from the lack of liquid than it will result in bad credit rating, loss of creditors confidence or even in low suits resulting in the closure of the company and high degree of liquidity means idle asset earn nothing. That means the firms fund will be unnecessary tide up in current assets. The ratio which indicates the extent of liquidity or lack of it are b. Current Ratio c. Quick Ratio (a) Current Ratio

Current Ratio = current assets/current liability

Current asset includes cash and those assets, which can be converted into cash within a year for example marketable securities, debtors and stock. Prepaid expenses are also includes in current assets and current liabilities mean all obligations maturing within a year for example creditors, bills payable, accrued expenses, bank overdraft, income tax liability and long term maturing in the current year.

As a conventional rule a current ratio of 2:1 or more is considered to be satisfactorily. This rule is based on the logic that in a worst situation even if the value if the value of current assets becomes half the film will be able to meet its obligations. The current asset is ht e measure of the firms short-term solvency. It indicates the availability of current asset in rupees for every one rupee of current liability.

(b) Quick Ratio

Quick Ratio= current assets / current liability

Quick ratio established the relationship between quick or liquid assets and current liability. An asset is liquid if it can be converted into cash immediately and reasonably soon without a loss of value. Factory current financial condition is calculated through this ratio. However while analyzing this ratio the analyst must keep note of the following points:

1) The liquidity ratio should be subjected to qualitative test. The major components of current assets must be carefully assessed to determine their quality. 2) The liquidity ratios are subjected to the influence of other financial force, which can improve or determine the ratio in no time. These ratios fluctuate not only because of the movement by change in fixed assets, investment, sales, and profit or loss. 3) The 2:1 current ratio and 1:1 quick ratio should not be relied blindly. Each industry has its own operating and financial characteristics. B. Solvency Ratio

A firm should have a strong short term as well as long term financial position of the firm. To judge the long-term financial position of the firm, financial leverage or capital structure ratio (solvency ratio) are calculated. These ratios indicate the fund provided by owners and creditors. Solvency ratios are calculated to measure the financial risk and the firms ability using of debt for the benefit of shareholders.

As a general rule there should be an appropriate mix of debt and owners equity mix in financing the firms asset. The manner in which asset have been financed has number of implications.

1) Debt is more risky from the firms point of view because firm has a legal obligation to pay interest to debt holders irrespective of the profit made or the loss inquired by the firm. 2) Employment of debt is advantageous to shareholder in two ways: i. ii. They can retain control of the firm with a limited stake. Their earning will be magnified when the firm earns a rate of return on capital employed higher then the interest rate on the invested fund.

3) A highly debt burdened firm will find difficulty in raising fund from and creditors and owner in future. (a) Debt Equity Ratio

Debt equity ratio = Long term debt/ Shareholders Equity Debt equity ratio is the measure of the relative claims of creditors and owners against the firms assets here in the above formula share holders equity = common shareholders equity + preference shareholders equity. Past accumulated losses and deferred expenditure should be excluded from the shareholders equity.

Interpretation

This ratio shows the extent to which debt financing has been used in the business. A high ratio shows that the claims are greater than those of owners. There is needed to strike a proper balance between the use of debt and equity. The most appropriate debt equity combination would involve a trade off between return and risk. A high debt company is able to borrow funds on very restrictive term and condition and at a time of low profit it is difficult to pay the interest charges of creditors and at time of need the firm finds difficult to get credit. A low debt equity ratio implies a greater claim of the business since a high proportion of equity provides a larger margin of safety for them.

(b) Debt Ratio

Debt ratio = Total debt/ Capital employed

This ratio is calculated to know the proportion of the interest-bearing debt in the capital structure. Several debt ratios may be used to analyze the longterm solvency of the firm. Here total debt include secured and unsecured loan. Whereas capital employed include total debt and net worth.

(c) Coverage Ratio or Time Interest Earned Ratio

Interest coverage = Net Profit before Tax and Interest/ Interest Charges This ratio is use to test the firms debt servicing capacity. It indicates the extent to which earnings may fall without causing any embarrassment to the firm regarding the payment of the interest charges.

Interpretation

It shows how much time the interest charges are covered by funds that are ordinarily available to pay the interest charges. A higher ratio is desirable but too higher ratio indicates that the firm is very conservative in using debt and lower ratio indicates excessive use of debt or inefficiency operation. The firm should make effort to improve the operating efficiency or to retire debt to have a comfortable coverage ratio.

(C) Activity Ratio

This ratio indicates the speed with which assets are being converted or turned over into sales. Thus activity ratio involves a relationship between the sales and various assets and presumes that there exist an appropriate balance between sales and the various assets.

(a) Inventory turnover Ratio

Inventory turnover ratio = cost of goods sold/ average stock

It indicates the efficiency of the firms inventory management. The cost of goods sold may not be available in the published financial statement therefore the analyst computes this ratio by dividing sales by inventory as of the year and therefore the formula will be: Sales/ Inventory

Interpretation

This ratio shows how rapidly the Inventory is turning into receivable through sales. A high inventory turnover ratio is indicative of goods inventory management. A low inventory turnover implies excessive inventory levels than warranted by production and sales activity or slow moving or absolute inventory. A too high ratio may be result of low of level inventory o or if the firm replenishes its inventory in too many small lot size, which are costly for the firm.

(b) Debtors turnover ratio The liquidity position of the firm depends upon the quality of the debtors to a great extent, which are expected to be converted into cash over a short period. This ratio can be calculated by following formula: Credit sales/average Debtors But if information of credit sales and average debtors are available than this formula is used: Total sales /Debtors Interpretation

Its indicates the number of times on the average that debtors each year. Generally the higher the value of the debtors turnover the more efficient is the management of credit.

(c) Fixed and current assets turnover ratio

Fixed and current assets turnover ratio = Sales/ Current assets

It measures the efficiency with which the firm is utilizing its investment in fixed assets and current assets.

(d) Capital Employed Turnover Ratio or Net Assets Turnover Capital employed turnover ratio or Net assets turnover = Sales/ Capital Employed

Here capital employed means working capital and non-current assets. The presumption is that the working capital and non-current assets should be financed from the long term sources.

Interpretation

This ratio indicates the firms ability to produce a large volume of sales for a given amount of net assets is the most important aspect of its operating performance. Unutilized and Underutilized assets increase the firm needs for costly financing as well as expenses for maintenance and upkeep. The higher the ratio the more efficient the utilization of owners and long term creditors fund.

D. Profitability Ratio

Profit is the ultimate output of the company. The firm should earn sufficient profit to sustain the operation of the business to be able to obtain funds from

investors for expansion and to contribute towards the social overhead for the welfare of the society. This ratio is calculated to measure the operating efficiency of the company. The profitability of the company should also be evaluated in terms of the firms investment in assets and in terms of capital contributed by creditors and owners. (a) Gross Profit Margin

Gross profit margin = (Sales- Cost of goods sold) / Sales

Interpretation

The gross profit margin reflects the efficiency with which management produces each unit of product. It indicates average speed between the cost of goods sold and sales revenue. A high ratio implies that the firm is able to produce at relatively lower cost. A gross margin ratio may increase due to any of the following factor: 1. Higher sales price, cost of goods sold remaining constant 2. Lower cost of goods sold, sales price remaining constant 3. A combination of variation of sales price and cost, the margin widening 4. An increase in the proportion volume of higher margin items

(b) Net Profit Margin

Net profit margin = Net profit after taxes / Sales

A reasonable gross profit margin is necessary to earn adequate net profit where net profit is assumed as gross profit minus non-operating expenses and income tax.

Interpretation

A high operating ratio is unfavorable since it will leave a small amount of operating income to meet interest, dividend etc. it gives us the idea of the behavior of operating expenses. The variation in operating ratio can occur due to several factors such as: 1. 2. 3. 4. Changes in sales prices Changes in dividend for the product Changes in cost of goods sold and operating expenses Changes in the proportionate share of sales of different products with varying gross margins.

This ratio is affected by number of factor such as external uncontrollable factor, internal factor, employee and managerial efficiency.

(c) Return on Investment

Profitability is the also measure in relation to investment. Investment means total assets, capital employed and the owners equity. Accordingly many profitability ratios in relation to investment can be calculated some are as follows: Return on Assets Return on Capital Employed Return on Shareholders Equity

Return on Assets

Return on Total assets = Net profit after tax + interest / Total assets

This ratio is use to know how well the "pool of the funds has been used. Here interest is included because total assets have been financed from the pool of funds supplied by creditors and owners.

Interpretation

It evaluate to the sources of funds without any regard to the source of the funds. This ratio is particularly used to evaluate the performance of division in a multidivisional firm.

Return on Fixed assets = Net Profit after Tax + Interest/ Fixed Assets

Return on Capital Employed

Return on capital employed = Net profit after tax/ Capital employed This ratio indicates how well management has used the funds supplied by creditors and owners. The higher the ratio the more efficient the firm is using funds entrusted to it. Return on Shareholders Equity

The shareholders equity will include common share capital, preference share capital, share premium and reserve and surplus less accumulated losses. It is also called net worth.

The common shareholders are the residual owners in the real sense of the word. Since common shareholders are the real owners of the company, the performance of it operation is judge on the basis of return earned on small equity therefore return on equity.

Analysis of Data
Maharastra Electrosmelt Limited Balance sheet As at 31st March,2006 Sched -uled No. Sources of Fund:Shareholders Fund Share capital Reserves and capital Loan Funds:Secured Loans Unsecured Loans TOTAL Application of Funds:Fixed Assets Gross Blocks Less: Depriciation 1.5 6018.32 3489.95 1.1 1.2 1.3 1.4 Rupees in lacs Total

2400.00 3094.93 1.11 206.40

5494.93

207.51 5702.44

Net Blocks Capital work-in-Progress Deferred Tax Assets Current Assets, Loan & Advances:Inventories Sundry Debtors Cash and Bank Balances Interest Receivable/Accured Loans and Advancs Less : Current Liabilities& Provision Current liabilities Provision Net Current Assets Miscellaneous Expenditure TOTAL Maharastra Electrosmelt Limited Balance sheet As at 31st March,2007

1.6

2528.37 87.00

2615.37 540.04

1.7 1.8 1.9 1.10 1.11 1.12 1.13 1.14

6828.75 130.94 2179.24 97.31 1488.55 10724.79 5396.93 2879.61 8276.54

2448.25 98.78 5702.44

Sched uled No. Sources of Fund:Shareholders Fund Share capital Reserves and capital Loan Funds:Secured Loans Unsecured Loans TOTAL Application of Funds:Fixed Assets Gross Blocks Less: Depriciation Net Blocks 1.5 1.1 1.2 1.3 1.4

Rupees in lacs

Total

2400.00 4374.26 0.00 98.14

6774.26

98.14 6872.40

6107.30 3610.86 2496.44

Capital work-in-Progress Deferred Tax Assets Current Assets, Loan & Advances:Inventories Sundry Debtors Cash and Bank Balances Interest Receivable/Accured Loans and Advancs Less : Current Liabilities& Provision Current liabilities Provision Net Current Assets Miscellaneous Expenditure TOTAL

1.6

221.17

2717.61 659.95

1.7 1.8 1.9 1.10 1.11 1.12 1.13 1.14

6502.74 1720.74 719.43 88.48 2072.98 11104.37 4722.80 2936.10 7658.90

3445.47 49.37 6872.40

Maharastra Electrosmelt Limited Balance sheet As at 31st March,2008 Sched uled No. Sources of Fund:Shareholders Fund Share capital Reserves and capital Loan Funds:Secured Loans Unsecured Loans TOTAL Application of Funds:Fixed Assets Gross Blocks Less: Depriciation 1.5 6363.84 3777.21 1.1 1.2 1.3 1.4 Rupees in lacs Total

2400.00 7140.10 0.00 38.68

9540.10

38.68 9578.78

Net Blocks Capital work-in-Progress Deferred Tax Assets Current Assets, Loan & Advances:Inventories Sundry Debtors Cash and Bank Balances Interest Receivable/Accured Loans and Advancs Less : Current Liabilities& Provision Current liabilities Provision Net Current Assets Miscellaneous Expenditure TOTAL

1.6

2586.63 288.40

2875.03 1366.81

1.7 1.8 1.9 1.10 1.11 1.12 1.13 1.14

4219.39 3389.08 8610.23 194.47 1303.30 17716.47 6792.42 5600.37 12392.79

5323.68 13.26 9578.78

Maharastra Electrosmelt Limited Balance sheet As at 31st March,2009

(A) Liquidity Ratio


Sched uled No. Sources of Fund:Shareholders Fund Share capital Reserves and capital Loan Funds:Secured Loans Unsecured Loans TOTAL Application of Funds:Fixed Assets Gross Blocks Less: Depriciation Net Blocks Capital work-in-Progress Deferred Tax Assets Current Assets, Loan & Advances:Inventories Sundry Debtors Cash and Bank Balances Interest Receivable/Accured Loans and Advancs Less : Current Liabilities& Provision Current liabilities Provision Net Current Assets Miscellaneous Expenditure TOTAL 1.7 1.8 1.9 1.10 1.11 1.12 1.13 1.14 6051.90 2701.30 5990.30 0.00 6864.00 21607.50 4977.50 7565.10 12542.60 1.5 7083.50 3966.40 3117.10 561.10 1.1 1.2 1.3 1.4 Rupees in lacs Total

2400.00 10242.10 78.90 22.10

12642.10

101.00 12743.10

1.6

3678.20

9064.90 0.00 12743.10

(a) Current Ratio

Year Current Ratio Current Assets/ Current Liabilities Current Assets Current Liabilities

2009 1.72 21607.50 12542.60

2008 1.43 17716.47 12392.79

2007

2006

1.30 1.45 10724.80 11104.40 8276.54 7658.90

b)Quick Ratio
Year Quick Ratio Quick Assets/ Current Liabilities Quick Assets = Currents Assets - Inventory Current Assets Inventory Current Liabilities 2009 1.24 2008 1.09 2007 0.51 2006 0.56

15555.60 13497.08 4222.05 4275.62 21607.50 17716.47 10724.79 11104.37 6051.90 4219.39 6502.74 6828.75 12542.60 12392.79 8276.54 7658.90

B) Activity Ratio (a) Debtors Turnover Ratio

Year Debtors Turnover Ratio Total Sales/ Debtors Sales Debtors

2009

2008

2007 16.94 29153.60 1720.74

2006 188.89 24732.71 130.94

15.46 11.70 41762.54 39641.12 2701.30 3389.08

(b) Average Collection Period

Year

2009

2008

2007

2006

Average Collection Period Debtors*365/Sales Debtors Sales Days

23.61 2701.30 41,762.54 365

31.21 3389.08 39641.12 365

21.54 1720.74 29153.60 365

1.93 130.94 24732.71 365

(c) Net Working Capital Turnover Ratio


Year Net working Capital Turnover Ratio Net Sales/ Net Working Capital Net Sales Net Working Capital 2009 2008 2007 2006

4.61 41762.5 4 9064.90

7.45 39641.1 2 5323.68

11.91 29153.6 0 2448.25

7.18 24732.7 1 3445.47

(d) Fixed Turnover Ratio

Year Fixed Assets Turnover Ratio Sales/Fixed Assets Sales Fixed Assets

2009

2008

2007

2006 9.78 24732.7 1 2528.37

13.40 15.33 11.68 41762.5 39641.1 29153.6 4 2 0 3117. 10 2586.63 2496.44

(e) Current Assets Turnover Ratio Year Current Assets Turnover Ratio Sales/Current Assets
2009 1.93 2008 2.24 2007 2.72 2006 2.23

Sales Current Assets

41762.54 39641.12 29153.60 21607.50 17716.47 10724.79

24732.71 11104.37

(f) Capital Employed Turnover Ratio Year Capital Employed Turnover Ratio Sales/Capital Employed Sales Capital Employed = Working Capital+ Fixed Assets Working Capital Fixed Assets (c) Profitability Ratio (a) Net Profit Ratio Year Net Profit Ratio Net Profit after Tax/ Net Sales Net Profit After Tax Net Sales
2009 10.03% 4187.42 41762.5 4 2008 9.17% 3636.28 39641.1 2 2007 6.35% 1849.95 29153.6 0 2006 8.48% 2097.23 24732.71

2009
3.43 41762.5 4 12182.0 0 9064.90 3117.10

2008
5.07 39641.1 2 7820.12 5323.68 2496.44

2007
5.86

2006
4.10

29153.6 24732.71 0 4976.62 2448.25 2528.37 6030.03 3445.47 2584.56

Pictorial / Graphic / pie charts, presentation of data

Observations / Findings
WORKING CAPITAL MANAGEMENT OF MAHARASTRA ELEKTROSMELT LIMITED FOR THE YEAR 2006 CURRENT ASSEST, LOAN & ADAVANCES:Particular Inventories Sundry Debtors Cash and Bank Balance Interest Receivable/ Accrued Loan and Advances TOTAL CURRENT LIABILITIES & PROVISION:Particular Current liabilities Provision TOTAL Rs.(In lakhs) 4722.80 2936.10 7658.90 Rs.(In lakhs) 6502.74 1720.74 719.43 88.48 2072.98 11104.37

WORKING CAPITAL = CURRENT ASSEST CURRENT LIABITILIES WORKING CAPITAL = 11104.37 7658.90 WORKING CAPITAL = 3445.47 WORKING CAPITAL RATIO = 1.5:1

FOR THE YEAR 2007 CURRENT ASSEST, LOAN & ADAVANCES:Particular Inventories Sundry Debtors Cash and Bank Balance Interest Receivable/ Accrued Loan and Advances TOTAL CURRENT LIABILITIES & PROVISION:Particular Current liabilities Provision TOTAL Rs.(In lakhs) 5396.93 2879.61 8276.54 Rs.(In lakhs) 6828.75 130.94 2179.24 97.31 1488.55 10724.79

WORKING CAPITAL = CURRENT ASSEST CURRENT LIABITILIES WORKING CAPITAL = 10724.79 8276.54 WORKING CAPITAL = 2448.25 WORKING CAPITAL RATIO = 1.25:1

FOR THE YEAR 2008 CURRENT ASSEST, LOAN & ADAVANCES:Particular Inventories Sundry Debtors Cash and Bank Balance Interest Receivable/ Accrued Loan and Advances TOTAL CURRENT LIABILITIES & PROVISION:Particular Current liabilities Provision TOTAL Rs.(In lakhs) 6792.42 5600.37 12392.79 Rs.(In lakhs) 4219.39 3389.08 8610.23 194.47 1303.30 17716.47

WORKING CAPITAL = CURRENT ASSEST CURRENT LIABITILIES WORKING CAPITAL = 17716.47 12392.79 WORKING CAPITAL = 5323.68 WORKING CAPITAL RATIO = 1.40:1

FOR THE YEAR 2009 CURRENT ASSEST, LOAN & ADAVANCES:Particular Inventories Sundry Debtors Cash and Bank Balance Interest Receivable/ Accrued Loan and Advances TOTAL CURRENT LIABILITIES & PROVISION:Particular Current liabilities Provision TOTAL Rs.(In lakhs) 4977.50 7565.10 12542.60 Rs.(In lakhs) 6051.90 2701.30 5990.30 0.00 6864.00 21607.50

WORKING CAPITAL = CURRENT ASSEST CURRENT LIABITILIES WORKING CAPITAL = 21607.50 12542.60 WORKING CAPITAL = 9064.90 WORKING CAPITAL RATIO = 1.72:1 CURRENT ASSETS & CURRENT LIABILITIES FOR FOUR YEARS

Year CURRENT ASSET CURRENT LIABILITIES

2006 11104.3 7 7658.9

2007 10724.7 9 8276.54

2008 2009 17716.4 7 21607.5 12392.7 9 12542.6

WORKING CAPITAL FOR FOUR YEARS YEAR CURRENT ASSET CURRENT LIABILITIES WORKING CAPITAL 2006 11104.3 7 7658.9 3445.5 2007 10724.7 9 8276.54 2448.3 2008 2009 17716.4 7 21607.5 12392.7 9 12542.6 5323.7 9064.9

Working Capital Ratio for Three year Year Working Capital ratio 2006 1.5 2007 1.25 2008 1.4 2009 1.7227

Change in Working Capital 2008-2009 Amount (Rs.lacs) Particulars (A) Current Assets Inventory Sundry Debtors Cash & Bank Balances Interest Receivable/ Accrued Loan and Advances Total (A) (B) Current Liabilities Current liabilities provision Total (B) Sub Total (A - B) Dec. in working capital 5323.68 9064.90 6792.42 5600.37 12392.79 5323.68 4977.50 7565.10 12542.60 9064.90 7380.18 11027.6 1 11027.61 1814.92 1964.73 4219.39 3389.08 8610.23 194.47 1303.30 17716.47 6051.90 2701.30 5990.30 0.00 194.47 6864.00 21607.50 5560.7 1832.51 687.78 2619.93 2008 2009 Inc. Dec.

Change in Working Capital

2007-2008 Amount (Rs.lacs) Particulars (A) Current Assets Inventory Sundry Debtors 2179.24 Cash & Bank Balances Interest Receivable/ Accrued Loan and Advances Total (A) (B) Current Liabilities Current liabilities provision Total (B) Sub Total (A - B) Inc. in working capital 2448.25 5323.68 9786.2 9 5396.93 2879.61 8276.54 2448.25 6792.42 5600.37 12392.79 5323.68 2875.43 9786.29 1395.49 2720.76 97.31 1488.55 10724.79 194.47 97.16 1303.30 17716.47 185.25 8610.23 6828.75 130.94 4219.39 3389.08 3258.1 4 6430.9 9 2609.36 2007 2008 Inc. Dec.

Change in Working Capital

2006-2007 Amount (Rs. lacs) Particulars (A) Current Assets Inventory Sundry Debtors Cash & Bank Balances Interest Receivable/ Accrued Loan and Advances Total (A) (B) Current Liabilities Current liabilities provision Total (B) Sub Total (A - B) Dec. in working capital 3445.47 2448.25 997.22 2848.36 2848.36 3445.47 2448.25 4722.80 2936.10 7658.90 5396.93 2879.61 8276.54 56.49 674.13 6502.74 1720.74 719.43 88.48 2072.98 11104.37 6828.75 130.94 2179.24 97.31 8.83 1488.55 10724.79 584.43 1459.81 326.01 1589.8 2006 2007 Inc. Dec.

Limitations

Following limitations were encountered while preparing this project: 1) Limited data:This project has completed with annual reports; it just constitutes one part of data collection i.e. secondary. There were limitations for primary data collection because of confidentiality. 2) Limited period:This project is based on five year annual reports. Conclusions and recommendations are based on such limited data. The trend of last five year may or may not reflect the real working capital position of the company 3) Limited area:Also it was difficult to collect the data regarding the competitors and their financial information. Industry figures were also difficult to get.

Conclusion
After studying the components of working capital management system of MAHARASHTRA ELEKTROSMELT LIMITED CHANDRAPUR. It is found that the company has a sound and effective policy and its performance is very good even in this bad recession situation company has managed to post good profit. Company is competing well at the domestic as well as the international level and it is among the low cost producers of FERRO MANGNISE in the INDIA only because of its proper management of finance, specially the short term finance known as the working capital. The company is a matured one and it has contributed well in the countries growth and development and will also continue to perform and contribute to the whole nation. In conclusion ,we can say that the companies management is an effective one and knows well the management of finance, its working capital management system is very good because of which only the company has got the status of NAVRATNA company.

Suggestions / Recommendations

Bibliography
Financial Management
(NINTH EDITION)

I.M.Pandey

Management Accounting

A.P.Rao

Referred Web- site:www.investopedia.com www.google.com www.economictimes.com www.moneycontrol.com


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