CHAPTER-I 1.1 INTRODUCTION TO THE STUDY 1.1.

1 WORKING CAPITAL MANAGEMENT

One of the important areas in the day to-day management of a firm is the

management of working capital which meets the short term financial requirements of a business enterprise The need for maintaining adequate working capital can hardly be over emphasized or questioned. Working capital may be regarded as the blood of business life, the flow of which is necessary to maintain business. If becomes weak, the business can hardly prosper or survive. By maintaining an adequate amount of working capital, the concern is able to maintain sound credit, avoid insolvency, take advantage of cash discount facilities offered by suppliers and bargain profitably in any transactions and innovations. The inadequacy or mismanagement of working capital is the leading cause of business failure In practice, a firm has to employ short-term assets and short-term sources of finances in addition to fixed assets and long-term sources of finance. The management of such shortterm assets is described as, working capital or current assets. It is one of the most important assets of the overall financial management. The problem involved in the management of working capital differs from those of fixed assets. An important feature of management of short-term assets is he question of profitability versus liquidity and the related aspects as risk, If the size of such asses is large the liquidity position would improve but profitability would adversely affect as funds will remain idle. Conversely, if the holding of such assets is relatively small, the overall profitability will no doubt increase but it will have an advance effect on the liquidity position and make the firms more risky. The risk return trade off involved in holding more current assets therefore is one of added liquidity verses profitability. Working capital management should, therefore, aim at striing a balance such there is an optimum amount of short-term assets.

Working capital comprises short-term net assets ; stock, debtors, and cash, less creditors. Working capital management is to do with management of all aspects of both

current assets and current liabilities, so as to minimize the risk of insolvency while maximizing return on assets. Working capital management is an integral part of over all corporate management. It is significant facet of financial management. Its importance stems from the fact the investment in current assets represents as substantial portion of total investment. Some 30 to 60 percent of a firms total assets are tied up in current assets. It is found that the private and public sector enterprises. Working capital, as a proportion of capital employed. Shares almost equal honors with fixed capital. This fact revealed by the Reserve Bank of India as prime object of making profit in industrial enterprises must depend on the manner in which they administer their working capital. The importance of working capital management is also reflected in the fact the financial Managers spend a great deal of time in managing current assets and current liabilities. Changes in the firms operations can have almost immediate effects on the working capital needed. Example if the supplier increases the price of raw material, more money will be tied up in inventories. Even if the firm can increase the price for its final products it will need additional working capital to support its sales efforts. An alert financial manager will estimate the level of working capital required for future periods once the needs have been estimated. The manager must acquire the necessary funds from the best source at the lowest cost and for the time period involved. All these consume a great dealof time of finance management and according to John J.Hampton , a great financial expert, somewhere between one third and two thirds of the financial managers time is spent managing the working capital management is an important duty of a financial manager and is worked upon as his driving seat. Even profitable companies fail if they have inadequate cash flow. Liabilities are settled with cash and not profits. The primary objective of working capital management is to ensure that sufficient cash and not profits. The Primary objective of working capital management is to ensure that sufficient cash is available to :

1.1.2.DRAWBACKS OF INADEQUATE WORKING CAPITAL

Stagnating growth, it becomes difficult for the firm to undertake profitable projects because of non-availability of working capital funds. It becomes difficult to implement operating plans and achieve the firms profit target. Operating inefficiencies creep in and it becomes difficult even to meet day today commitments. Fixed assets are not efficiently utilized because of the lack of working capital funds. Thus the firms profitability would slowly deteriorate. Paucity of working capital funds renders the firms inability to avail attractive credit opportunities, etc. The firm loses its reputation when it is not in a position to honour its short-term obligations. As a result the firm faces tight credit terms. An enlightened management should therefore, maintain a right amount of working capital on a continuous basis. Only then a proper functioning of business operations will be insured.

1.1.3.CONCEPT OF WORKING CAPITAL

In the modern business scenario, working capital is considered to be an important function in finance. For the success of the business operation the working capital is considered to be a main factor. The management of working capital is concerned with the management of the firms current assets and current liabilities. it is one of the most important facts of the firms overall financial management. The capital utilized in the business enterprises of fixed capital & working capital. Fixed capital is required to acquire fixed assets and working capital is use to finance in current assets. There are two concepts of working capital Gross working capital, Net working capital, Gross working capital refers to the firms investment in current assets, such as cash, short term securities, debtors, bills receivables and Stocks. Net working capital refers to the difference between current assets and current liabilities.

1.1.4.GROSS WORKING CAPITAL

Gross working capital also known as current capital is represented by the sum total of current assets of the firm.

1.1.5.NET WORKING CAPITAL

Net working capital is the difference between current assets and current liabilities . Net working capital concept is used to measure the liquidity of the firm.

1.1.6.TYPES OF THE WORKING CAPITAL

Working capital is classified as permanent or fixed working capital and temporary working capital.

1.1.7.PERMANENT WORKING CAPITAL

For any trading concern a regular supply of working capital is needed. For this minimum level of working capital is necessary on a continuous and uninterrupted basis. The minimum level that is maintained is known as permanent or fixed working capital.

1.1.8.TEMPORARY WORKING CAPITAL

There may certain occasions when an extra amount of working capital would be needed to meet demand. The excess of working capital used over and above the permanent level is known as temporary, fluctuating of variable working capital temporary working capital is created to meet the liquidity requirement that are of transient nature.

INTRODUCTION Cement is the important raw material for construction work which is essential for economic development of nation. India cements limited is cement manufacturing company in the India. Hence there is need to the industrial profile and company profile. 2. INDUSTRY PROFILE The cement industry in India has been enjoying its best period with a healthy growth in demand in the past two years. The industry has been operating at its near full capacity during this period. The cement prices have been steady throughout the year with this firm demand position. The cement industry is one of the main beneficiaries of the infrastructure boom. With robust demand and adequate supply, the industry has bright future. The Indian Cement industry with total capacity of 168 million tones is the second largest after China. Cement industry is dominated by 20 companies who account for over 70% of the market. Individually no company accounts for over 12% of the market. The major players like L&T and ACC have been quiet successful in narrowing the gap between demand and supply. Private housing sector is the major consumer of cement (53%) followed by the government infrastructure sector. Similarly northern and southern region consume around 20%-30% cement while the central and western region are consuming only 18%-16%. The all India clinker production picked up further by 6.5% to 129.70 million tones as compared to 121.75 million tones during the previous year. The overall production of cement in the country for the year ended march 2008 was up at 168.31 million tones as against 155.66 million tones in the previous year registering a growth of 8.1%. The domestic consumption of cement grew further by 9.8% over and above the double digit growth recorded in the previous two financial years and was at 164.02 million tones as compared to 149.40 million tones as against 5.89 million tones in the previous year due to buoyant domestic market. The clinker exports were also lower at 2.37 million tones as compared to 3.10 million tones in the previous year. India is the second largest cement producer in world after China. Right from laying concrete bricks of economy to waving fly overs cement industry has shown and shows a great future. The industry looks healthy and promising and shows significant growth on the back of robust demand from housing construction, Phase-II of NHDP (National Highway Development Project) and other infrastructure development projects by both private, public

and also by consortia of both. Domestic demand for cement has been increasing at a fast pace in India. Cement consumption in India is forecasted to grow by over 22% by 2009-10 from 2007-08. Among the states, Maharashtra has the highest share in consumption at 12.18%, followed by Uttar Pradesh, in production terms; Andhra Pradesh is leading with 14.72% of total production followed by Rajasthan. Cement production grew at the rate of 9.1% during 2006-07 over the previous fiscals total production of 147.8mt (million tons). Due to rising demand of cement the sales volume of cement companies are also increasing and companies reporting higher production, higher sales and higher profits. The net profit growth rate of cement firms was 85%. Cement industry has contributed around 8% to the economic development of India. Cement industry has a long way to go as Indian economy is poised to grow because of being on verge of development. Companies continue to emphasize on reduction of costs through enhanced productivity, reduction in energy costs and logistics expenses. The cement sector is expected to witness growth in line with the economic growth because of the strong co-relation with GDP. Future drivers of cement demand growth in India would be the road and housing projects. Cement industry in India has also made tremendous strides in technological up gradation and assimilation of latest technology. Presently, 93% of the total capacity in the industry is based on modern and environment-friendly dry process technology. The induction of advanced technology has helped the industry immensely to conserve energy and fuel and to save materials substantially. Indian cement industry has also acquired technical capability to produce different types of cement like Ordinary Portland Cement (OPC), Portland Pozzolana Cement (PPC), Portland Blast Furnace Slag Cement (PBFS), Oil Well Cement, Rapid Hardening Portland Cement, Sulphate Resisting Portland Cement, White Cement etc. MAJOR CEMENTS MANUFACTURERS IN INDIA: Ultratech cements ACC India Cements Ltd. Madras Cements

Lafarge Jaiprakash associates. Grasim industries Holcim Italicementi JK cements Birla Cements Gujarat Ambuja Cement ltd.

SOME OF THE MAJOR CLUSTERS OF CEMENT INDUSTRY IN INDIA ARE: Satna (Madhya Pradesh), Chandrapur (Maharashtra), Gulbarga (Karnataka), Yerranguntla (Andhra Pradesh), Bilaspur (Chattisgarh), and Chanoria (Rajasthan). CURRENT SCENARIO: India is the second largest producer of cement, which meets global standards. The cement industry comprises 130 large cement plants and more than 300 mini cement plants. The industrys capacity at the end of the year 2008 reached 188.97 million tones(approximately) which was 166.73 million tones (approximately) at the end of the year 2006-07. It is estimated that cement production would cross the 200 million tones mark by the year end of 2009. CEMENT INDUSTRY IN INDIA IS CURRENTLY GOING THROUGH A CONSOLIDATION PHASE SOME EXAMPLES OF CONSOLIDATION IN THE INDIAN CEMENT INDUSTRY ARE: a. Gujarat Ambuja taking a stake of 14% in ACC, and taking over DLF Cements and Modi Cements. b. ACC taking over IDCOL c. India cements Ltd.taking over Raasi Cement and Sri Vishnu Cement. d. Grasims acquisition of the cement business of L&T, Indian Rayons Cement division, and Sri Digvijay Cements.

FOREIGN CEMENT COMPANIES ARE ALSO PICKING UP STAKES IN LARGE INDIAN CEMENT COMPANIES. a. Swiss cement major Holcim has picked up 14.8% of the promoters stake in Gujarat Ambuja Cements (GACL). Holcims acquisition has led to the emergence of a major group in the Indian Cement industry, the Holcim-ACC-Gujarat Ambuja Cements group. b. Lafarge, the French cement major has acquired the cement plants of Raymond and Tisco. c. Italy based italcementi has acquired a stake in the K.K Birla promoted Zuari Industries Cementi plant in Andhra Pradesh, and d. German cement company Heidelberg cement has entered into an equal joint-venture agreement with S P Lohia Group controlled Indo-Rama Cement. A REVIEW OF REGIONAL PATTERN OF GROWTH IN CEMENT DEMAND REVEALS THE FOLLOWING: GROWTH IN CEMENT DEMAND 2007-08 North East South West Central Overall 12.17% 5.65% 9.71% 14.00% 6.05% 9.80% 2006-07 10.44% 5.87% 12.90% 9.10% 8.90% 9.90%

It can be observed that south in which the companys main markets are situated has registered a growth of 9.71% over and above 12.9% growth achieved in the previous year. This has clearly paved way for more remunerative prices in the market

3. COMPANY PROFILE The India Cements Ltd was established in 1946 and the first plant was setup at Sankarnagar in Tamilnadu in 1949. Since then it has grown in stature to seven plants spread over Tamilnadu and Andhra Pradesh. The capacities as on March 2010 have reached 14.05 mtpa. Company Highlights

The Company is the largest producer of cement in South India. The Company's plants are well spread with three in Tamilnadu and four in Andhra Pradesh which cater to all major markets in South India and Maharashtra.

The Company is the market leader with a market share of 28% in the South. It aims to achieve a 35% market share in the near future. The Company has access to huge limestone resources and plans to expand capacity by de-bottlenecking and optimization of existing plants as well as by acquisitions.

The Company has a strong distribution network with over 10,000 stockiest of whom 25% are dedicated.

The Company has well established brands- Sankar Super Power, Coromandel Super Power and Raasi Super Power.

Regional offices in all southern states and Maharashtra offices/representative in every district.

Name of the associate /subsidiary companies Industrial Chemicals & Monomers Ltd ICL Securities Ltd ICL Financial Services Ltd ICL International Ltd Trishul Concrete Products Ltds Indo Zinc Ltd PT.Coromandel Minerals Resourses,Jakarta,Indonesia Coromandel Minerals Pte. Ltd. Singapore Coromandel Electric Company Ltd

Unique Receivable Management Private Limited Coromandel Sugars Ltd India Cements Capital Ltd Raasi Cement Ltd Coromandel Travels Limited FOUNDERS Shri Sankaralinga Iyer was a pioneer of heavy industry in the South. Primarily a

banker, he ventured into the field of industry with a rare devotion and confidence with the prime objective of developing major industries in the state. With his banking experience and interest in exploring the mineral potential of South India, he went ahead boldly with his scheme of building a cement plant in the vicinity of Thalaiyuthu, where extensive deposits of limestone were assuredly available. Shri Sankaralinga Iyer with his energy and drive gave the cement project a realistic form and content. GENESIS Theres no stronger foundation than the one built with vision."

S.N.N.Sankaralinga T.S.Narayanaswami Iyer (1911-1968) (1901-1972)

FOUNDERS OF THE INDIA CEMENTS LTD. Two men with vision to inspire dreams for an industrial India. Two men with the ability to translate those dreams into reality. And the ability to build enduring relationships..... To build the future. In his task of establishing the enterprise, Shri Iyer was ably assisted by Shri T.S. Narayanaswami, who is always identified with the formation and running of The India

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Cements Limited. Shri T.S.Narayanswami was the catalyst who saw the project through numerous hurdles and made it emerge as a viable and marketable proposition.He looked beyond Cement to Aluminum production, Chemicals and Plastics and Shipping after he had fully established the India Cements' potential for expansion. A pioneer Industrialist and visionary, Shri T.S. Narayanswami played a dynamic role in the resurgence of industrialization in free India. The present pre-eminent status of The India Cements Limited in the cement economy of the country bears eloquent testimo. MANAGEMENT The India Cements Ltd is a professionally managed company headed by Mr.N.Srinivasan, Vice Chairman and Managing Director. The day-today affairs of the company are managed by him assisted by key personnel in each functional area. The Board of Directors is ultimately responsible for the management of the affairs of the company.

Shri.N.Srinivasan

Board of Directors:

Shri.N.Srinivasan Mrs.Chitra Srinivasan Ms.Rupa Gurunath

Vice Chairman & Managing Director Director Whole Time Director

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Shri.B.S.Adityan Shri.R.K.Das Shri.N.Srinivasan Shri.N.R.Krishnan Shri.A.Sankarakrishnan Shri.Arun Datta Shri.V.Manickam Shri.K.P.Nair

Director Director Director Director Director Director Representing Life Insurance Corporation of India Nominee of IDBI Bank Ltd Representing Housing & Urban Development Corporation Ltd

Shri.K.Subramanian

VISION AND MISSION Vision The new millennium will bring with it new challenges and greater opportunities. The 21st century will most certainly see the unfolding of a period of extraordinary possibilities and incredible developments bringing about more fundamental changes in the global economy than the last 200 years. The successful corporate will be those who equip themselves to meet the challenges and convert opportunities into winning strategies. If we are to keep pace, it is imperative that we learn to successfully tread the global pathway. In this journey, clarity of vision, a readiness to cultivate a global mindset, effectiveness, harnessing of human resources to enhance job and knowledge skills of employees, a strong accent on R & D and innovation and a move away from selling, to innovative marketing in recognition of the fact that the Customer is truly King, are some of the strategies that will help corporate to survive and succeed.

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However it must be remembered that it is not enough to adopt a set of values and just leave them in place. In order to move with the changing times, values and ideas must be ceaselessly re-examined so as to ensure that they are in tune with the organizations goals. The India Cements Limited is committed to contribute its might in making the 21st century an "Indian Century". Mission Aiming High: We should be one of the largest Cement Companies in the Country. Our growth in size will be through continuous review of potentials of the existing manufacturing resources, strategic acquisitions and expansions Core Competency: Cement will be our mainstay. However, we shall venture into related fields which afford purposeful Quality Quest: Product quality, consistency and customer service will be pursued as an act of faith throughout the organization. Modern Mindset: In an environment which is intensively competitive, we shall be futuristic in outlook and effective in management. Pursuit of Excellence: The growing size of our business permits us to have an R & D set up of our own. We shall continuously challenge methods, systems, operating parameters. We shall constantly review our manufacturing systems to upgrade quality and value of products. synergy.

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Human Resources: We consider people as our valuable assets. Our HRD Systems will be totally proactive and tuned to provide excellent working environment and transparent organizational culture for creativity, innovation and participation. Value Addition: ICL will continuously strive to enhance its value to its customers, Shareholders and Employees. Community Welfare: As the organization grows, as a good Corporate Citizen, we shall be sensitive to the welfare and development needs of the Society around us. OBJECTIVES OF THE COMPANY Maintain high standards of house keeping in Factories/Mines/Colonies Achieve zero accidents Institutionalize safety culture through interaction and involvement, continuous education and training, safety promotion activities and integration with performance management. Make available, encourage and ensure use of state of the art safety appliances, devices and equipment Be Proactive through safety audits, preventive practices. Institutionalize emergency response and evacuation procedure.

POLICIES OF INDIA CEMENTS LTD The India Cements Ltd resolves to emerge as market leader in winning customer confidence and strengthen THE UNSHAKEABLE TRUST. The Policies are The Consistent Quality with cost effectiveness Customer satisfaction by adopting current technologies The Latest feasible STATE OF ART TECHNOLOGY

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Team Work Systematic maintenance of employees

OBJECTIVES OF QUALITY POLICY: Maintaining Consistent Quality Maintaining Cost effectiveness Ensuring Customer satisfaction Ensuring continual improvement

SAFETY AND HEALTH POLICY The ICL as an act of faith between that good safety. Health and pollution control practices contribute to individual well being and organizational morale. Our commitment to Safety. Health and Environment stretch beyond statutory obligation. Our practices will be proactive and preventive. PRODUCT PROFILE Cement is the only product producing by India Cements Ltd. The Products are as follows53 Grade Cement Coromandel King-Sankar Sakthi- Raasi Gold Coromandel King, Sankar Sakthi and Raasi Gold are high strength cements to meet the needs of the consumer for high strength concrete. As per BIS requirements the minimum 28 days compressive strength of 53 Grade OPC should not be less than 53 Mpa. For certain specialized works such as prestressed concrete and certain items of precast concrete requiring consistently high strength concrete, the use of 53 Grade OPC is found very useful. 53 Grade OPC produces higher-Grade concrete at very economical cement content. In concrete mix design, for concrete M-20 and above Grades a saving of 8 to 10% of cement may be achieved with the use of above mentioned 53 Grade OPC. Coromandel King, Sankar Sakthi and Raasi Gold can be used for the following applications.

RCC works (Preferably where grade of concrete is M-25 and above). Precast concrete items such as paving blocks, tiles building blocks etc Prestressed concrete components

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Runways, concrete Roads, Bridges etc. Multistorey buildings.

43 Grade Cement Coromandel-Sankar-Raasi Coromandel, Sankar and Raasi are the 43 grade OPCs most popular general-purpose cement in the market today. The production of 43 grade OPC is nearly 50% of the total production of cement in the country. The compressive strength of cement at 28 days when tested as per IS code shall be minimum 43 Mpa. Blended Cement Coromandel Super Power, Sankar Super Power and Raasi Super Power are the premium blended cements from THE INDIA CEMENTS LIMITED. It is produced by intergrinding of OPC clinker alongwith gypsum and mineral admixtures. Dedicated to the end user after passing through stringent tests at our R&D laboratory, it ensures durable structures that lasts for generations. Salient features:

Strength increases as time passes. High durability concrete - protects from corrosion, coastal attack and extreme temperature.

Ideal cement for resisting aggressive environments like chemical, chloride and sulphate attack.

Best suited for high performance concrete. High fineness - suited for plastering and finishing works. Low heat of hydration - Ideal for mass concrete pours and machine foundations Equivalent to 53 grade cement.

Applications:

It is a general purpose cement and can be used with advantage wherever OPC is used. Marine structures.

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Mass concrete pours such as in dams etc. Highly suited for plastering and finishing works because of it's high fineness

Sulphate Resisting Portland cement (SRC) Sankar SRC can be used for structural concrete wherever OPC or PPC or Slag Cement is usable under normal conditions. Sankar SRC is particularly beneficial in such conditions where the concrete is exposed to the risk of deterioration due to sulphate attack. For example, in contact with soils and ground waters containing excessive amounts of sulphates as well as for concrete in seawater or exposed directly to seacoast. The IS 456 1978 (revised draft code) has made elaborate provisions for use of particular type of cement against different percentages of soluble sulphate salts The use of SRC is recommended for following applications:

Foundations, piles Basements and underground structures Sewage and Water treatment plants Chemical, Fertilizers and Sugar factories Food processing industries and Petrochemical projects Coastal works Also for normal construction works where OPC is used. Construction of building along the coastal area is 50 Km from sea.

MILE STONES 1.1946 Incorporation of The India Cements Limited. 2.1949 Commissioning of first Cement plant at Sankarnagar-Installed capacity 1 lac tonnes per annum. 3.1990 Conversion of Sankarnagar Plant to Dry Process with the increased capacity of 1.00 million tonnes per annum. 4.1991 India Cements ventures into Shipping. Sets up a Shipping Division. 5.ISO 9002 Certification for Sankarnagar plant.

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6.1995 Announces issue of 1:1 Bonus shares. 7.1997 India cements acquires Aruna Sugars Finance Ltd.Renamed as India Cements Capital & Finance Ltd 8.1998 India Cements acquires Cement Corporation of India's Yerraguntla Cement Plant at Andhra Pradesh. Installed capacity 0.4 Million Tonnes. 9.2001 India Cements divests its stake in Sri Vishnu Cement Limited. 10.2004 The Unique Waste Heat Recovery System for generation of power from waste gas at Vishnupuram Cement Plant was commissioned during November 2004, for a capacity of 7.7 MW of power 11.2005 The Company has successfully completed an equity issue in the international market during October 2005 by issuing 25,613,796 Global Depositary Shares (GDSs) at USD 4.3226 per GDS, (each GDS representing 2 underlying equity shares of Rs 10 each) and raised an amount of Rs 497 crores including a premium of Rs 446 crores. 12.2006 The Company has issued unsecured Zero Coupon Convertible Bonds due 2011 (FCCBs) for US $75 Million to investors outside India at an initial conversion price of Rs.305.57 per share. 13.2007 The Hon'ble High Court of Judicature at Madras vide its order dated 25th July 2007 sanctioned the Scheme of amalgamation of Visaka Cement Industry Limited with The India Cements Ltd. 14.2007 The Company has converted the Sankari plant from wet process to dry process and commissioned the plant 15.2008 The Company has completed and commenced commercial production of one million tonne grinding plant at Chennai. 16.2009 The II line of 1.2 MT at Malkapur was commenced operations from March 2009. 17.2010 The Company privately placed in March, 2010 2, 45, 94,000 equity shares at a price of Rs.120.20 per share (including premium of Rs.110.20 per share) to Qualified Institutional Buyers.

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COMPANY PERFORMANCE The company has achieved its best ever performance both in terms of operational and financial parameters in the 62 years history of the company. The clinker production for the year 2007-08 of the company was at 72.13 lakh tonnes (67.33 lakh tonnes) while cement production was at 92.34 lakh tonnes representing a capacity utilization of 105% as compared to 84.24 lakh tonnes in the previous year. Cement sales was also brisk at 92.15 lakh tonnes as against 84.14 lakh tonnes in the previous financial year. The clinker sales was further brought down to 0.08 lakh tonnes (0.18 lakh tonnes) and the overall sales of clinker and cement for the company was at 92.23 lakh tonnes as compared to 84.32 lakh tonnes in 2006-07. With the firm demand, the cement prices further improved during the year under review and this together with substantial increase in the volume, contributed to a jump in sales and other income to Rs.3605.61 crores during the year as against Rs.2620.88 crores in 2006-07, registering an increase of 38%. Despite the onslaught of increase in input costs of coal and gypsum, the company could contain its impact with the significant improvement in operations converting most of the increases in top line to flow directly to the bottom line. Accordingly, the income from operations surged to Rs.1130.56 crores from Rs.744.39 crores in 2006-07. The operating margin of the company has further improved to 36.5% from 32.8% in the previous year. The interest charge for the year was contained at Rs.109.86 crores as compared to Rs.149.80 crores in the previous year while the depreciation charge was higher at Rs.127.92 crores as compared to Rs.102.63 crores in the previous year. Consequently, the Net Profit Before Tax and exceptional items rose to a record Rs.892.78 crores as against to Rs.491.96 crores in the previous year. There was an extraordinary item of expenditure representing charges paid on One Time Settlement of loans of Rs.48.14 crores during this year. The deferred tax liability as per Accounting Standards 22 resulted in a tax liability of Rs.182.70 crores while the Fringe Benefit Tax accounted for Rs.9.60 crores during the year and the net current tax liability for the year was at Rs.14.80 crores and the Net Profit After Tax was a record Rs.637.54 crores against Rs.478.83 crores in the previous year.

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The performance of the company would have been still better but for the routine bouts of cost increase which included the following: The All India Cement Wage Board Settlement provision for increase in wages for workers Rs.450/- per month in addition to the cost of living index increasing by 160 points. The salaries of Management Staff also had to be revised in line with the industry which all together meant an impact of around Rs.40 crores. The increase in ocean freight and the firming up of imported coal price during the year meant a substantial increase of Rs.65 crores in fuel costs. The average increase in Excise Duty which was revised from 1st March 2007 had an additional outgo of Rs.122 crores during the year. Introduction of terminal charges, development charges and busy season surcharges by Railways had an impact of Rs.19 crores. The increase in the prices of domestic coal and increased dependence on e-auction/ open market coal due to restricted supply by domestic coal companies had an additional charge of Rs.12 crores. With the mandatory provisioning for Accounting Standards 15 issued by ICAI, the Company had to provide for un-availed leave balances to the tune of Rs.16.70 crores and also had to absorb an amount of Rs.18.25 crores towards the differential value for the Employees Stock Options Scheme which was exercised by the employees during the year. TOTAL DEPARTMENTS Accounts Human resource Public relation Crusher Sales Laboratory Instrumentation Civil

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Stores Time office Hospital Electrical Genset E.D.P (Electronic Data Processing) Process V.R.M ( Vertical Roller Mill) Workshop Packing Raw material Marketing

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1.4 OBJECTIVES OF THE STUDY

PRIMARY OBJECTIVES

To assess the efficiency of working capital management in the INDIA CEMENT LTD., Tirunelveli.

SECONDARY OBJECTIVES To examine the adequacy of working capital of INDIA CEMENT LTD. To forecast the working capital requirement of the company in the near future. To examine the short term solvency position of INDIA CEMENT LTD. To give suggestions for the improvement of efficiency of working capital management system.

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1.5 STATEMENT OF THE PROBLEM

The management of working capital has added significance in respect of largescale industries. In cement industry the working capital management has an important role in growth of the firm. In india cement a major of working capital is locked up in the inventories i.e. stores, spares, raw materials, loans & advances. When sophisticated machines are used in the operations, it may cause a heavy loss. Therefore continuous supply of materials and adequate flow of fund are inevitable. Moreover, the need for cement is much throughout the year and they should be able to satisfy the needy. For this purpose the company must invest adequate amount on its inventories. Keeping above mind, the researcher has developed a personal interest to examine the working capital management of India Cement ltd,. Sanker Nagar Tirunelveli. One of leading cement company in India.

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1.6 SCOPE OF THE STUDY

Every business need some amount of working capital. The need of working capital arises due to the time gap between production and realization of cash. There are time gap between or in purchase of Raw material and production, and sales and sales realization of cash. Thus working capital is needed for the purchase of Raw material, components spore points to pay wages, and salaries, to incur day to day expenses overhead cost such as fuel power and office. Etc.

The study is an assessment of relationship between working capital and profitability of INDIA CEMENT LTD.,Sankar nagar over a period of 5 Yrs. starting from 2007-08 to 2010-2011. Analysis of working capital provides guidelines to the management to make sensible decision regarding the future by the management.

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CHAPTER II

REVIEW OF LITERATURE
Eljelly( 2004) Elucidated that efficient liquidity management involves planning and controlling current assets and current liabilities in such a manner that eliminates the risk of inability to meet due short-term obligations and avoids excessive investment in these assets. The relation between profitability and liquidity was examined, as measured by current ratio and cash gap (cash conversion cycle) . The study found that the cash conversion cycle was of more importance as a measure of liquidity than the current ratio that affects profitability. The size variable was found to have significant effect on profitability at the industry level. The results were stable and had important implications for liquidity management in various companies. First, it was clear that there was a negative relationship between profitability and liquidity indicators such as current ratio , Quick ratio and ABSLR, Gross profit ratio, net profit ratio etc

Deloof( 2003) Discussed that most firms had a large amount of cash invested in working capital. It can therefore be expected that the way in which working capital is managed will have a significant impact on profitability of those firms. Using correlation and regression tests he found a significant negative relationship between gross operating income and the number of days accounts receivable, inventories and accounts payable . On basis of these results he suggested that managers could create value for their shareholders by reducing the number of days accounts receivable and inventories to a reasonable minimum. The negative relationship between accounts payable and profitability is consistent with the view that less profitable firms wait longer to pay their bills.

Ghosh and Maji(2003)For measuring the efficiency of working capital management, performance, utilization, and overall efficiency indices were calculated instead of using some common working capital management ratios. Setting industry norms as target-efficiency levels of the individual firms, this paper also tested the speed of achieving that target level of efficiency by an individual firm during the period of study.

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Smith and Begemann(1997) Emphasized that those who promoted working capital theory shared that profitability and liquidity comprised the salient goals of working capital management. The problem arose because the maximization of the firm's returns could seriously threaten its liquidity, and the pursuit of liquidity had a tendency to dilute returns. This article evaluated the association between traditional and alternative working capital measures and return on investment (ROI) The problem under investigation was to establish whether the more recently developed alternative working capital concepts showed improved association with return on investment to that of traditional working capital ratios or not. Results indicated that there were no significant differences amongst the years with respect to the independent variables. The results of their stepwise regression corroborated that total current liabilities divided by funds flow accounted for most of the variability in Return on Investment (ROI). The statistical test results showed that a traditional working capital leverage ratio, current liabilities divided by funds flow, displayed the greatest associations with return on investment. Well- known liquidity concepts such as the current and quick ratios registered insignificant.

Nayan chetia(2006) Working capital management deals with the minimum amount of resources required by a company to cover the common costs and expenses. It is very crucial for any company because the inability on the part of a company in maintaining efficient working capital would have bearing on the profitability of the company. A company which is incapable of maintaining a satisfactory of level of working capital is likely to become insolvent and may even be forced into bankruptcy. The industry with high fixed costs requires very little working capital. Taking into consideration this fact, the case deals with the variations in the working capital requirements of bothe the companies and analyses the factors that influence the quantum and frequency of working capital requirements.

26

Pedagogical Objectives: To discuss the concept of working capital management taking into consideration industry wise factors To discuss and debate why two companies operating in the same industy have different levels of working capital requirements.

S.C. Bardia(2002) The general state of liquidity in this sector in recent past particularly after the sharp decline in the interest rates has tended to be reasonably good in India. However, many companies both in public and private sector irrespective of their size, age or product range have been experiencing difficulties in meeting their short term liabilities. Liquidity and profitability are two important and vital aspects of corporate business life. No firm not making profit may be considered as sick but, one having no liquidity is a pre-requisite for the very survival of business firm. Liquidity management has thus, become a basic and broad aspect of judging the performance of a corporate entity.

Amy sonpal & dr. a. v. vedpuriswar (2006) The basic objectives of this study are: To examine and compare the effectiveness of working capital management of a company in this industry. To study the liquidity and management of short term finances of this company so that the specific problems and deficiencies faced in the management of different components of working capital can be identified. To get accustomed with the Enterprise Resource Planning (ERP) which is so successfully implemented in the organization.

J.ravi prakash (2008)There are a number of functions that have assumed significance in this sector. With rapid globalization, this complexity is likely to accelerate in the future. Hence the relentless pace of liberalization and integration of the Indian financial markets with the global markets has lead to study of WORKING CAPITAL MANAGEMENT and has made it quite significant in the modern world. The primary objective of the project is to study and understand WORKING CAPITAL MANAGEMENT with reference to Rubco. The findings include that the various components of Working Capital Management require differentiated treatment and hence it is recommended that each component should be treated according to its merit and peculates. The findings include that the various components of Working Capital Management require differentiated treatment and hence it is recommended that each component should be treated.

27

CHAPTER-III RESEARCH METHODOLOGY

The study is descriptive in nature and this attempt is made to evaluate the performance of the company through the financial data which are disclosed in accounting policies

Methodology

3.1 Research design The study is descriptive in nature. This is an attempt to evaluate the performance of the company through the financial statement analysis by the financial data which are disclosed in accounting policies.

3.2 Data collection I had collected the data from two ways that is primary source and secondary source.

3.2.1 Primary data I had collected the primary data from my own research study like total analysis of the study and get sharing from staff of ICL.

3.2.2 Secondary data I had got the data from annual reports of the company, books of accounts, information from company staff, and website of the company.

3.3 Tool for analysis The tools are used for analyzing the data such as ratio analysis and statement showing working capital. 3.4 Period of Study The data pertaining form 2006-07 to 2010-11 (5 year) were taken for analysis the main them of the study is forecasting the working capital management for the next year.

28

3.5 Limitation of the Study

Every study has its own limitations and this study is also not an exception for this. The study is based on the companys annual report and directors report hence it is only a postmortem of the financial statements. The period of the study is limited to 5 Yrs (i.e.) 2007-08 to 2010-2011. The value of inventory is based on the book value. It does not consider the effect of inflation, obsolescence, etc and this causes the value to increase or decrease. Mainly secondary data were used. Limitation of secondary data too high

3.6 Significance of the Study

Working capital management is one of the most important areas in the day-to-day management of a firm. Working capital management is concerned with the problems that arise in attempting to manage the current assets, current liabilities and the interrelationship that exists between them.

The goal of working management is to manage the current assets and the current liabilities in such a way that a satisfactorily level of working capital is maintained. The study of working capital management cement Industry has a great significance.

29

CHAPTER- IV 4. ANALYSIS AND INTERPRETATION

In order to extract a meaningful inference from data collected, the data analysis and interpretation is carried out. This analysis is basically aimed at ginning inference association of difference between the various variables present in the research. The analysis is conducted by using simple tools like ratio analysis and schedule of changes in working capital of INDIA CEMENT LTD,.

4.1 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 the firm. Ratio helps to summarize large quantities of financial data and to make qualitative judgment about the firms financial performance.

Ratio analysis is a widely used tool of financial analysis. It is defined as the systematic use of ratio to interpret the financial statements. The information contained in this statement is used by management, creditors, investors and others to form judgment about the operating performance and financial position of the firms. This is the process of identifying strength and weakness of the firm by properly establishing relationship between the items of the balance sheet and the profit and loss account.

30

4.1.1 Current Ratio:

Current Assets Current Ratio = Current Liabilities TABLE: 4.1.1 Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Current Assets 171751.40 214941.24 214352.83 287644.83 290385.92 Current Liabilities 40352.9 91764.63 106794.28 116419.73 104266.56 Current Ratio 4.26 2.34 2.01 2.47 2.79

CHART: 4.1.1

Current Ratio
4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Current Ratio

INTERPRETATION:
The above table shows that the current ratio is in satisfactory position as the ratio crosses the standard ratio. But it is found that the current ratio is higher than the standard ratio for all the years of study. This represents that the liquidly position of the firm is sound and thus the firm is able to meet its current liabilities in time. This ratio has slight decrease in 2008-2009 ie. 2.01

31

4.1.2 Acid Test Ratio:

Liquid Assets Acid Test Ratio = Current Liabilities Liquid Assets = Current Assets Inventory TABLE: 4.1.2 Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Liquid Assets 1,18,706.58 1,81,920.19 1,77,302.99 2,27,409.37 2,45,609.39 Current Liabilities 40352.9 91764.63 106794.28 116419.73 104266.56 Acid Test Ratio 2.94 1.98 1.66 1.95 2.35

CHART: 4.1.2

Acid Test Ratio

3.5 3 2.5 2 1.5 1 0.5 0 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Acid Test Ratio

32

INTERPRETATION:

The above table shows that the quick ratio is in increasing and decreasing trend from the year 2006 2009. But it is found that the quick ratio is higher than the standard ratio during the whole period of study. This ratio has decreased in 2008 2009 on 0.61. In the Year 2010 20011, current ratio has improved up to 2.35.

33

4.1.3 Debtors turnover ratio:

Net credit sales Debtors turnover ratio = Average debtors TABLE: 4.1.3 Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Net credit sales 261024.87 355446.91 383912.30 410070.28 388807.38 Average a/c receivable 26021.09 31107.23 35397.81 48525.88 25440.12 Debtors turnover ratio 10.03 11.43 10.85 8.45 15.28

CHART: 4.1.3

Debtors turnover ratio

16 14 12 10 8 6 4 2 0

Debtors turnover ratio

INTERPRETATION:
The above table shows that debtors turnover ratio for the year 2006-07 was 10.03. In 2007-08, it shows a increasing trend compared to previous year. In the year 2009-10, the ratio decreased to 10.85 and in 2008-09 and 2009-10 the ratio,

34

4.1.4 Average collection period:

No of working days Average collecton period = Debtors turnover ratio TABLE: 4.1.4 Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 No of working days 360 360 360 360 360 Debtors turnover ratio 10.03 11.43 10.85 8.45 15.28 Averagecollection period 36 32 33 43 24

CHART: 4.1.4

Avgrage colletion period

45 40 35 30 25 20 15 10 5 0

Avgrage colletion period

INTEPRPRETATION:
The above table reveals that, average collection period for the year 2009-10 has been increased when compared to previous years. It shows the firm takes 43 days to convert receivables into cash. In 2006-07 the collection period was 36 days. Then it was decreased to 32 days in 2007-08. In 2008-09 it again increased to 33 days. 2009-10 collection periods again increased to 43 days, however serious care should be taken.

35

4.1.5 Working capital turnover ratio:

Cost of good sold Working capital turnover ratio = Net working capital TABLE: 4.1.5 Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Cost of good sold 24220.72 31294.80 36993.86 49514.19 516214.89 Net working capital 131398.50 123176.61 107558.55 171225.10 186119.36 Working capital turnover ratio 0.18 0.25 0.34 0.29 0.28

CHART: 4.1.5

Working capital turnover ratio

0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 Working capital turnover ratio

INTERPRETATION:
Higher the ratio indicates efficient utilization of working capital. But very high working capital turnover ratio is not a good solution. The above table shows that there is a decreasing tendency till 2006-2007. The number of times working capital turnover increases the profitability also increases. In the last year company was trying to raise its profitability.

36

4.1.6 Inventory turnover ratio:

Cost of goods sold Inventory turnover ratio = Average inventory TABLE: 4.1.6 Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Cost of goods sold 24220.72 31294.80 36993.86 49514.19 51621.89 Average inventory 2204.72 2446.65 2936.02 3363.11 3731.37 Inventory turnover ratio 10.98 12.79 12.60 14.72 13.83

CHART: 4.1.6

Inventory turnover ratio

16 14 12 10 8 6 4 2 0

Inventory turnover ratio

INTERPRETATION:
The above table shows the decreasing trend of the inventory ratios in past 3 years. Its depends upon the stock of the goods and net sales of the company. This ratio has an increase in 2009 2010 on 14.72

37

4.1.7 Current assets turnover ratio:

Net sales Current assets turnover ratio = Current assets TABLE: 4.1.7

Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

Net sales 261024.87 355446.91 383912.30 410070.28 388807.36

Current Assts 171751.40 214941.24 214352.83 287644.83 290385.92

Current assets turnover ratio 1.52 1.65 1.79 1.43 1.34

CHART: 4.1.7

Current assets turnover ratio

1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0

Current assets turnover ratio

INTERPRETATION:
Here the ratios show an decreasing trend in the last year. Due to poor sales performance in the year 2010-2011, ratio is decreased to 1.34. When the sales progress come in effect accordingly the ratio also decreasesing. The current year ratio is 1.34.

38

4.1.8 Fixed assets turnover ratio:

Net sales fixed assets turnover ratio = Fixed assets TABLE: 4.1.8 Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Net sales 261074.87 355446.91 383912.30 410070.28 388807.36 fixed assets 293858.26 403937.17 471229.29 462150.64 487430.94 Fixed assets turnover ratio 0.89 0.88 0.81 0.89 0.80

CHART: 4.1.8

Fixed assets turnover ratio

0.9 0.88 0.86 0.84 0.82 0.8 0.78 0.76 0.74

Fixed assets turnover ratio

INTERPRETATION:
Here the ratios show an decreasing trend in the last year. Due to poor sales performance in the year 2010-2011, ratio is decreased to 0.80. When the sales progress come in effect accordingly the ratio also decreasesing. The current year ratio is 0.80.

39

4.1.9 Gross profit ratio:

Gross profit Gross profit ratio = Net sales TABLE: 4.1.9

Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

Gross profit 59459 101057 93105 110524 98415

Net sales 261024.87 355446.91 383912.30 410070.28 388807.36

Gross profit ratio 0.23 0.28 0.24 0.27 0.25

CHART: 4.1.9

Gross profit ratio

0.3 0.25 0.2 0.15 0.1 0.05 0 Gross profit ratio

INTERPRETATION:
The table shows an increasing trend from 2007-2008 onwards. It shows that the company is having sufficient amount of current assets. This reveals the company can meet its current requirements on time.

40

4.1.10 Net profit ratio:

Net profit Net profit ratio = Net sales TABLE: 4.1.10 Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 net profit 49196.36 84464 64830.40 53132.09 8987.35 Net sales 261024.87 355446.91 383912.30 410070.28 388807.36 Net profit ratio 0.19 0.24 0.17 0.13 0.02

CHART: 4.1.10

Net profit ratio

0.25 0.2 0.15 0.1 0.05 0 Net profit ratio

INTERPRETATION:
The table shows an decreasing trend from 2008-2011 onwards. It shows that the company is having sufficient amount of current assets. This reveals the company can meet its current requirements on time.

41

4.2 COMPARATIVE BALANCESHEET

The comparative balance sheet analysis is the study of the trend of the same items, group of items and computed items in two or more balance sheets of the same business enterprise on different dates. The changes in periodic balance sheet items reflect the conduct of a business. The changes can be observed by comparison of the balance sheet at the beginning and at the end of the period and these changes can help in forming an opinion about the progress of an enterprise.

A comparative balance sheet has two columns to records the figures of the current year and the previous year. A third column is used to show the decrease or increase in figures. A fourth column may be added to giving percentage of increase or decrease .in the balance sheet the emphasis is on status in the comparative balance sheet it is on change. Comparative balance sheet indicates whether the business is moving in a favorable or unfavorable direction. the comparative balance sheet show the assets, liabilities and owners equity of business enterprise at the beginning and at the end of the accounting period with increase and decrease in the absolute data in terms of rupees and percentage .the single balance sheet focus on the financial status of the firm as on a particular date ,while the comparative balance sheet focuses on the changes that have taken place in one accounting period .The changes in the balance sheet items are the result of acquisition or sale of asset ,change in current asset and current liabilities ,issue of shares profit or loss etc

42

COMPARATIVE BALANCE SHEET AS ON 2006 - 2007 AND 2007 - 2008

TABLE: 4.2.1

Particulars

2006-2007

2007-2008

Increase (+) / Decrease (-)

Sources of fund: 1. Shareholders Fund 2. Loan Fund 3. Deterred Tax Liability 220853.34 205875.47 6029.03 332110.82 181150.58 22571.46 111257.48 -24724.89 16542.43

TOTAL Application of Fund: 1. Fixed Assets 2. Investment 3. Current Assets, Loans & Advances: a. Inventories b. Real Estate-projects in progress c. Sundry Debtors d. Cash and Bank Balances e. Loans and Advances Less: Current Provisions Net Current Assets 4.Deferred tax Asset 5. Miscellaneous expenditure Liability and

432757.84

535832.86

103075.02

293858.26 5507.49

403937.17 12928.24

110078.91 7420.75

22807.39 2042.47 26021.09 23018.32 97862.13

33021.05 2042.47 31107.23 42564.04 106206.45

10213.66 0.00 5086.14 19545.72 8344.32

43399.14 128352.26 1727.57 3312.26

98353.24 116588.00 0.00 2379.45

54954.10 -11764.26 -1727.57 -932.81

TOLAL

432757.84

535832.86

103075.02

43

INTERPRETATION:
The above table shows the comparative balance sheet as on 2007 and 2008. The Common size percentages Inventory, other current assets, loans and advances, Current liabilities and provision are increased. The Sundry Debtors and Cash and Bank balance are decreased.

The inventory for the year 2007 is Rs.22807.39 lakhs. It has increased to Rs.10213.66 lakhs. The debtor for the year 2007 is Rs.26021.09lakhs. It has increased to Rs. 5086.14 lakhs. The loans and advances for the year 2007 is Rs. 97862.13 Lakhs. It has increased to Rs.8344.32 lakhs. The current liability for the year 2007 is Rs. 43399.14 lakhs. It has increased to Rs. 54954.10 lakhs. The cash and bank balance for the year 2007 is Rs. 23018.32 lakhs. It has inncreased to Rs.19545.72 lakhs.

44

COMPARATIVE BALANCE SHEET AS ON 2007 - 2008 AND 2008 - 2009

TABLE: 4.2.2

Particulars

2007-2008

2008-2009

Increase (+) / Decrease (-)

Sources of fund: 1. Shareholders Fund 2. Loan Fund 3. Deterred Tax Liability 332110.82 181150.58 22571.46 363138.98 198802.96 27406.24 31028.16 17652.38 4834.78

TOTAL Application of Fund: 1. Fixed Assets 2. Investment 3.Current Assets, Loans & Advances: a. Inventories b. Real Estate-projects in progress c. Sundry Debtors d. Cash and Bank Balances e. Loans and Advances Less: Current Provisions Net Current Assets 4.Deferred tax Asset 5. Miscellaneous expenditure Liability and

535832.86

589348.18

53515.32

403937.17 12928.24

471229.29 15897.33

67292.12 2969.09

33021.05 2042.47 31107.23 42564.04 106206.45

37049.84 2042.47 35397.81 8519.74 131342.97

4028.79 0.00 4290.58 -34044.3 25136.52

98353.24 116588.00 0.00 2379.45

115331.62 99021.21 1845.23 1355.12

16978.38 -17566.79 1845.23 -1024.33

TOLAL

535832.86

589348.18

53515.32

45

INTERPRETATION:
`The above table shows the comparative balance sheet as on 2008 and 2009. The Common size percentages of sundry debtors, bank and cash balance, loans and advances and provision are increased. The inventory and current liability are decreased.

The inventory for the year 2008 is Rs 33021.05 lakhs. It has increased to Rs.37049.84 lakhs. The debtor for the year 2008 is Rs.31107.23 lakhs. It has increased to Rs.35397.81 lakhs. The loans and advances for the year 2008 is Rs.106206.45 lakhs. it has increased to Rs.

131342.97 lakhs.
The current liability for the year 2008 is Rs.98353.24 lakhs. It has increased to Rs.

115331.62 lakhs.
The cash and bank balance for the year 2008 is Rs.42564.04 lakhs. It has decreased to Rs.8519.74 lakhs. Comparative percentage of 2008 and 2009 are.

46

COMPARATIVE BALANCE SHEET AS ON 2008 - 2009 AND 2009 - 2010

TABLE: 4.2.3

Particulars

2008-2009

2009-2010

Increase (+) / Decrease (-)

Sources of fund: 1. Shareholders Fund 2. Loan Fund 3. Deterred Tax Liability 363138.98 198802.96 27406.24 413582.40 213273.04 28990.54 50443.42 14470.08 1584.3

TOTAL Application of Fund: 1. Fixed Assets 2. Investment 3.Current Assets, Loans & Advances: a. Inventories b. Real Estate-projects in progress c. Sundry Debtors d. Cash and Bank Balances e. Loans and Advances Less: Current Provisions Net Current Assets 4.Deferred tax Asset 5. Miscellaneous expenditure Liability and

589348.18

655845.98

66497.80

471229.29 15897.33

462150.64 31397.33

-9078.65 15500.00

37049.84 2042.47 35397.81 8519.74 131342.97

44776.53 2042.27 48525.88 5381.34 186918.61

7726.69 -0.20 13128.07 -3138.40 55575.64

115331.62 99021.21 1845.23 1355.12

127410.35 160234.48 2063.53 0.00

12078.73 61213.27 218.3 -1355.12

TOLAL

589348.18

655845.98

66497.80

47

INTERPRETATION:
The above table shows the comparative balance sheet as on 2009 and 2010. The Common size percentages of sundry debtors, current liability, loans and advances and provision are increased. The inventory and bank and cash balance are decreased.

The inventory for the year 2009 is Rs. 37049.84 lakhs. It has increased to Rs. 44776.53 lakhs. The debtor for the year 2009 is Rs. 35397.81 lakhs. It has increased to Rs. 48525.88 lakhs. The loans and advances for the year 2009 is Rs. 131342.97 lakhs. it has increased to Rs. 186918.61 lakhs. The current liability for the year 2009 is Rs. 115331.62 lakhs. It has increased to Rs. 127410.35 lakhs. The cash and bank balance for the year 2009 is Rs. 8519.74 lakhs. It has increased to Rs.5381.34 lakhs. Comparative percentage of 2009 and 2010 are.

48

COMPARATIVE BALANCE SHEET AS ON 2009 - 2010 AND 2010 - 2011

TABLE: 4.2.4

Particulars

2009-2010

2010-2011

Increase (+) / Decrease (-)

Sources of fund: 1. Shareholders Fund 2. Loan Fund 3. Deterred Tax Liability 413582.40 213273.04 28990.54 408976.05 245606.74 29241.67 -4606.35 32333.70 251.13

TOTAL Application of Fund: 1. Fixed Assets 2. Investment 3.Current Assets, Loans & Advances: a. Inventories b. Real Estate-projects in progress c. Sundry Debtors d. Cash and Bank Balances e. Loans and Advances Less:Current Provisions Liability and

655845.98

683824.46

27978.48

462150.64 31397.33

487430.94 16030.97

25280.30 -15366.36

44776.53 2042.27 48525.88 5381.34 186918.61

49730.90 2042.47 25440.12 3309.06 209863.37

4954.37 0.00 -23085.76 -2072.28 22944.76

127410.35 160234.48 2063.53 0.00

111838.04 178547.88 1814.67 0.00

-15572.31 18313.40 -248.86 0.00

Net Current Assets 4.Deferred tax Asset 5. Miscellaneous expenditure

TOLAL

655845.98

683824.46

27978.48

49

INTERPRETATION:
The above table shows the comparative balance sheet as on 2010 and 2011. The Common size percentages of sundry debtors, bank and cash balance, loans and advances and provision are increased. The inventory and current liability are decreased.

The inventory for the year 2010 is Rs. 44776.53 lakhs. It has increased to Rs. 49730.90 lakhs. The debtor for the year 2010 is Rs. 48525.88 lakhs. It has decreased to Rs. 25440.12 lakhs. The loans and advances for the year 2010 is Rs. 186918.61 lakhs. it has increased to Rs.

209863.37 lakhs.
The current liability for the year 2010 is Rs. 127410.35 lakhs. It has decreased to Rs.

111838.04 lakhs.
The cash and bank balance for the year 2010 is Rs. 5381.34 lakhs. It has decreased to Rs.

3309.06 lakhs.

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4.3 STATEMENT OF SCHEDULE CHANGES IN WORKING CAPITAL

Statement of changes in working capital follows the statement of sources and applications of funds. The primary purpose of this statement is to explain the net changes in working capital as arrived in fund flow statements. All current assets and current liabilities are individually listed in this statement, and against each account, the figure pertaining to that account at the beginning and at the end of the accounting period is shown. The net change in its position is also added up to equal net change in working capital.

Statement showing changes in working capital is an important tool to study the changes in working capital of the concern and can also throw light on cause for these changes. Working capital means the excess of current asset over current liabilities. Statement of changes in working capital is prepared to show the changes in the working capital between the two balance sheet dates. This statement is prepared with the help of current assets and current liabilities derived from the two balance sheets.

As, Working Capital= Current Assets - Current Liabilities. So, i. An increase in Current Assets increases Working Capital. ii. A decrease in current assets decreases, working capital. iii. An increase in current liabilities decreases working capital, and iv. A decrease in current liabilities increases working capital.

In case a current asset in the current period is more than in the previous period, the effect is an increase in working capital and it is recorded in the increase column. But if a current liability in the current period is more than in the previous period, the effect is decrease in working capital and it is recorded in the decrease column or vice versa.

51

SCHEDULE OF CHANGAS IN WORKING CAPITAL AS ON 2006-2007 AND 2007-2008

TABLE: 4.3.1

PARTICULAR Current Assets: Inventory Real Estate-Project in Progress Sundry Debtors Cash and Bank Balances Loans and Advances Total Current Assets Current Liabilities: Current Liabilities Total Current Liabilities Working Capital Net decrease in Working Capital

2006-2007

2007-2008

INCREASE

DECREASE

22807.38 2042.47 26021.09 23018.32 97862.13 171751.40

33021.50 2042.27 31107.23 42564.04 106206.45 214941.49

10214.12 -----5086.14 19545.72 8344.32

-----0.20 ----------------

40352.90 40352.90 131398.50

91764.63 91764.63 123176.86 8221.64

------

51411.74

8221.64

------

TOTAL

131398.50

131398.50

51411.94

51411.94

INTERPRETATION:
The table no: 16 show the schedule of changes in working capital as on 2007-2008. The current asset has increased from Rs.171751.40 to Rs.214941.49 in the year 20072008. Current liability for the year 2007 was 40352.90. It has increased to Rs.91764.63 in the year 2008. The net decrease in working capital was Rs.8221.64.

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SCHEDULE OF CHANGAS IN WORKING CAPITAL AS ON 2007-2008 AND 2008-2009

TABLE: 4.3.2

PARTICULAR Current Assets: Inventory Real Estate-Project in Progress Sundry Debtors Cash and Bank Balances Loans and Advances Total Current Assets Current Liabilities: Current Liabilities Total Current Liabilities Working Capital Net decrease in Working Capital TOTAL

2007-2008

2008-2009

INCREASE

DECREASE

33021.50 2042.27 31107.23 42564.04 106206.45 214941.24

37049.84 2042.47 35397.81 8519.74 131342.97 214352.83

4028.34 0.20 4290.58 -----25136.52

---------------34044.30 ------

91764.63 91764.63 123176.61

106794.28 106794.28 107558.55 15618.06

------

15029.45

15618.06 49073.70

-----49073.70

123176.61

123176.61

INTERPRETATION:
The table no: 16 show the schedule of changes in working capital as on 2008-2009. The current asset has decreased from Rs.214941.24 to Rs.214352.83 in the year 20082009. Current liability for the year 2008 was 91764.63. It has increased to Rs.106794.28 in the year 2009. The net decrease in working capital was Rs. 15618.06.

53

SCHEDULE OF CHANGAS IN WORKING CAPITAL AS ON 2008-2009 AND 2009-2010

TABLE: 4..3.3

PARTICULAR Current Assets: Inventory Real Estate-Project in Progress Sundry Debtors Cash and Bank Balances Loans and Advances Total Current Assets Current Liabilities: Current Liabilities Total Current Liabilities Working Capital Net increase in Working Capital TOTAL

2008-2009

2009-2010

INCREASE

DECREASE

37049.84 2042.47 35397.81 8519.74 131342.97 214352.83

44776.53 2042.47 48525.88 5381.34 186918.61 287644.83

7726.69 -----13127.07 -----55576.64

---------------3138.40 ------

106794.28 106794.28 107558.55 63666.55 171225.10

116419.73 116419.73 171225.10

------

9625.45

-----171225.10 76430.40

63666.55 76430.40

INTERPRETATION:
The table no: 16 show the schedule of changes in working capital as on 2009-2010. The current asset has increased from Rs.214352.83 to Rs.287644.83 in the year 20092010 Current liability for the year 2009 was 106794.28. It has increased to Rs.116419.73 in the year 2010. The net increase in working capital was Rs. 63666.55.

54

SCHEDULE OF CHANGAS IN WORKING CAPITAL AS ON 2009-2010 AND 2010-2011

TABLE: 4.3.4 PARTICULAR Current Assets: Inventory Real Estate-Project in Progress Sundry Debtors Cash and Bank Balances Loans and Advances Total Current Assets Current Liabilities: Current Liabilities Total Current Liabilities Working Capital Net increase in Working Capital 116419.73 116419.73 171225.10 14894.26 104266.56 104266.56 186119.36 -----14894.26 12153.17 -----44776.53 2042.47 48525.88 5381.34 186918.61 287644.83 49730.90 2042.47 25440.12 3309.06 209863.37 290385.92 4954.37 ---------------22944.76 ----------23085.76 2072.28 -----2009-2010 2010-2011 INCREASE DECREASE

TOTAL

186119.36

186119.36

40052.3

40052.3

INTERPRETATION:
The table no: 16 show the schedule of changes in working capital as on 2010-2011. The current asset has increased from Rs.287644.83 to Rs.290385.92 in the year 20102011. Current liability for the year 2010 was 116419.73. It has increased to Rs.104266.56 in the year 2011. The net decrease in working capital was Rs. 14894.26.

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CHAPTER V 5. FINDINGS AND SUGGESTIONS

FINDINGS
Following are the major findings obtained from the study of working capital management of INDIA CEMENT LTD., Sankar Nagar. The data collected from the annual reports of the company for a period of five years from 2007-2008 to 2010-2011.

RATIO ANALYSIS
The current ratio is showing an decreasing trend. In the year 2008-09 the ratio becomes 2.01 which indicates the unfavourable liquidity position of the company.

The quick ratio is also showing decreasing trend. In the year 2008-09 the ratio becomes 1.66 which indicates the firms inability to pay its current obligation is good.

Debtors turnover ratio shows fluctuating trend. In 2006-07 the ratio was 10.03 and in 2010-11 the ratio increased to 15.28. Considering the average of 12.78 the ratio found to be satisfactory for the Organization

The average collection period was 43 during 2009-10. It has been decreased to 24 in 2010-11. It indicates the efficient collection performance of the management and the quality of debtors.

The working capital turnover ratio was 0.18 during 2006-07.and it is increased to 0.28 during the year 2010-11 because of the increase in working capital. It indicates the working capital position is favourable.

Gross profit ratio during 2007-08 shows 0.28. It indicates profitability condition of the firm.

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Net profit ratio shows that in 2008-09 & 2009-10 the ratio decreased to 4.27 & 3.51 respectively due to the impact of Recession. Hence serious care should be taken.

The Inventary turnover ratio was 10.98 during 2006-07.and it is increased to 13.83 during the year 2010-11 because of the increase in inventary. It indicates the inventary position is favourable.

The Current Asset turnover ratio was 1.52 during 2006-07.and it is decreased to 1.34 during the year 2010-11 because of the decrease in current asset.

The Fixed Asset turnover ratio was o.89 during 2006-07.and it is decreased to 0.80 during the year 2010-11 because of the decrease in fixed asset.

COMPARATIVE BALANCE SHEET

In the year 2007-08 the asset and liability has been increased Rs.54954.10 lacks.

In the year 2008-09 the assets and liability has been increased to Rs.16978.38 lacks.

In the year 2009-10 the assets and liability has been increased to Rs.12078.73 lacks.

In the year 2010-11 the assets and liability has been decreased to Rs.15572.31 Lacks The companys comparative balance sheet shows an increasing trend.

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SCHEDULE OF CHANGES IN WORKING CAPITAL

In the year 2007-08 the decrease in working capital is Rs.8221.64 lacks.

In the year 2008-09 the decrease in working capital is Rs.15618.06 lacks.

In the year 2009-10 the increase in working capital is Rs.63666.55 lacks.

In the year 2010-11 the decrease in working capital is Rs.14894.26 lacks.

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SUGGESTIONS

Cash position of INDIA CEMENT LTD should be increased in order to meet its current liability.

Realization of debtors is very important to keep working capital in a constant level. Therefore steps should be taken to improve the realization process.

The company should review the marketing policies and sales strategies for increasing sales turn over without much outflow of discounts. There are dealers and also subdealers for the sale of phenol and acetone. In order to reduce the sub dealers, the marketing offices located in Mumbai and New Delhi are to be strengthened.

The management of inventories in INDIA CEMENT LTD has to be increased.

The debtor to sales ratio in the year 2006-07 shows that there is a chance of decrease in the collection of debtors promptly. INDIA CEMENT LTD has to take steps to overcome this situation.

Collection period may be reduced by offering attractive discounts to the customers for prompting them to make payment before the allowable credit period.

In an overall analysis of operating financial position of INDIA CEMENT LTD, it was found that there is a steep decline in the year 2008 which is a result of import of similar goods in the market. Company will have to take innovative marketing efforts to retain their existing customers.

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CONCLUSION
A study is made on the working capital management for INDIA CEMENT LTD., Sankar Nagar. The effective utilization of working capital was analyzed and it brought into light the various problems faced by the company. The fact ltd is on a compulsion to increase, its working Capital in order to improve its sales. So the company should try to take continuous effort, for explore new market in abroad for increase the export volume. The company was able to meet its entire requirements for capital expenditures and higher level of working capital commitment with higher volume of operations and from its operating cash flows. The company should continuously maintain its proper planning & control techniques. The management of the unit may take into consideration of the suggestions, to improve it performances.

Though there are some limitations in the study, but the study has been conducted successfully. The findings suggest that the managers should stabilize its activities to achieve the financial efficiency. The study shows very bright future for INDIA CEMENT LTD., if it pay due attention to the problem areas as indicated and successfully implanted the given suggestions.

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APPENDIX

BALANCE SHEET AS AT 31ST MARCH 2007,2008,2009,2010,2011.

Particulars Sources of fund: 1. Shareholders Fund 2. Loan Fund 3. Deterred Tax Liability

2006-2007

2007-2008

2008-2009

2009-2010

2010-2011

220853.34 205875.47 6029.03

332110.82 181150.58 22571.46

363138.98 198802.96 27406.24

413582.40 213273.04 28990.54

408976.05 245606.74 29241.67

TOTAL Application of Fund: 1. Fixed Assets 2. Investment 3.Current Assets, Loans & Advances: a. Inventories b. Real Estate-projects in progress c. Sundry Debtors d. Cash and Bank Balances e. Loans and Advances Less: Current Provisions Net Current Assets 4.Deferred tax Asset 5. Miscellaneous expenditure Liability and

432757.84

535832.86

589348.18

655845.98

683824.46

293858.26 5507.49

403937.17 12928.24

471229.29 15897.33

462150.64 31397.33

487430.94 16030.97

22807.39 2042.47 26021.09 23018.32 97862.13

33021.05 2042.47 31107.23 42564.04 106206.45

37049.84 2042.47 35397.81 8519.74 131342.97

44776.53 2042.27 48525.88 5381.34 186918.61

49730.90 2042.47 25440.12 3309.06 209863.37

43399.14 128352.26 1727.57 3312.26

98353.24 116588.00 0.00 2379.45

115331.62 99021.21 1845.23 1355.12

127410.35 160234.48 2063.53 0.00

111838.04 178547.88 1814.67 0.00

TOLAL

432757.84

535832.86

589348.18

655845.98

683824.46

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BIBLIOGRAPHY
BOOK REFERENCE
Prasanna Chandra, Financial Management, New Delhi. Tata McGraw hill publishing co. Ltd. I.M. Panday, Financial Management, New Delhi, vikas publishing Home Pvt. Ltd. C.R. Kothari, Research Methodology, New Delhi New Age International Publishers Ltd. S.P. Guptha, Statistical Methods, New Delhi, Sultan Chand and Sons Publishers. A .Vinod, Management Accounting, Calicut University, Central co-operative ltd.no.4347

WEBSITE
www.personalfinance.co.in www.indiacement.com www.allbusiness.com www.ibscdc.org

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