Winter Training Project Report

ACKNOWLEDGEMENT
Any assignment puts to litmus test of an individual knowledge credibility or experience and thus sole efforts of an individual are not sufficient to accomplish the desired successful completion of a project. It involves the interest and effort of many people and so this becomes obligatory on the part to record our thanks to those who helped us out in the successful completion of our project. I am deeply grateful to my Faculty Guide Ms. PURNIMA JAISWAL, who provided valuable insights and guidance at every stage of the project.
I would thank to my DEAN. Mr. AJAY KUMAR VISHWAKARMA & all lab maintenance staff for proving me assistance in various hardware & software problem encountered during course of my project.
This project has been possible due to the support of several wonderful individuals. I also convey my sincere gratitude to my friends and my family for their encouragement and Support extended to me during the course of my project. In the end I would like to thank many unknown individuals, with whom I interacted. All of them with their due cooperation and motivation made the completion of this project successful. I would like to thank them all.
Date:
MD ZUHAIR ROLL NO: 091105
KANPUR INSTITUTE OF MANAGEMENT STUDIES
PREFACE
To start any business, First of all we need finance and the success of that business entirely depends on the proper management of day-to-day finance and the management of this short-term capital or finance of the business is called Working capital Management. Working Capital is the money used to pay for the everyday trading activities carried out by the business - stationery needs, staff salaries and wages, rent, energy bills, payments for supplies and so on. I have tried to put my best effort to complete this task on the basis of skill that I have achieved during the last one year study in the institute. I have tried to put my maximum effort to get the accurate statistical data. However I would appreciate if any mistakes are brought to me by the reader.
TABLE OF CONTENTS
S.NO. 1 2 3 4 5 6 7 8 9 10 11 12 13 14
DESCRIPTION EXECUTIVE SUMMARY INDUSTRY OVERVIEW COMPANY PROFILE AN INTRODUCTION TO WORKING CAPITAL MANAGEMENT OBJECTIVES OF THE STUDY SCOPE RESEARCH METHODOLOGY DATA INTERPRETATION AND ANALYSIS LIMITATION OF THE STUDY FINDINGS SUGGESTIONS CONCLUSION REFERENCES APPENDICES
PAGE NO.
6 7 15 24 46 47 48 50 66 67 68 69 70 71
LIST OF TABLES
TABLE NO. 1 2 3 4 5 6 7 8 9 10 11
DESCRIPTION Highlights of financial performance of ACC ltd Common size statement analysis of acc cements ltd. From 2005-2009 Statement showing change in working capital for acc ltd Similarly the calculation of wc for the year 2005 to 2009 Inventory analysis Sundry debtors analysis Cash & bank balances, loans & advances analysis Current liabilities & provisions analysis Working capital ratios and its interpretation Activity/management efficiency ratio Profitability & investment turnover ratio
PAGE NO. 23 51 53 54 55 56 57 58 60 62 64
LIST OF GRAPHS
FIGURE NO. 1 2 3 4 5 6 7 8 9 Demand-supply
DESCRIPTION
PAGE NO. 11 54 55 56 57 58 60 62 64
Working capital changes Inventory analysis Sundry debtors analysis Cash & bank balances, loans & advances analysis Current liabilities & provisions analysis Working capital ratios and its interpretation Activity/management efficiency ratio Profitability & investment turnover ratio
EXECUTIVE SUMMARY
The major objective of the study is to understand the working capital of ACC & to suggest measures to overcome the shortfalls if any. Funds needed for short term needs for the purpose like raw materials, payment of wages and other day to day expenses are known as working capital. Decisions relating to working capital (Current assets-Current liabilities) and short term financing are known as working capital management. It involves the relationship between a firms short-term assets and its short term liabilities. By definition, working capital management entails short-term definitions, generally relating to the next one year period. The goal of working capital management is to ensure that the firm is able to continue its operation and that it has sufficient cash flow to satisfy both maturing short term debt and upcoming operational expenses. Working capital is primarily concerned with inventories management, Receivable management, cash management & Payable management. Inventories management at ACC ACC is a large scale manufacturing company involved in production of Cement. Therefore, it has to maintain large quantity of inventories at production units for its smooth running and functioning. Cash management at ACC ACC has been accumulating huge cash surpluses over last several years, which enables the organization to maintain adequate cash reserves and to generate required amount of cash. Receivables management at ACC ACC has set up its marketing office at all major cities in India i.e. Bangaluru , Bhopal, Chandigarh , Coimbatore , Kanpur, Kolkata, Mumbai, Pune , Secunderabad New Delhi & patna This marketing office obtains sales order from Cement users in India as well as globally. The cement production and dispatch figures for the month of May 2010 are 1.81 & 1.75 million tones respectively. The Sales recorded for the FY 2009 was Rs. 83, 86.1crores.
INDUSTRY OVERVIEW
The cement industry is one of the vital industries for economic development in a country. The total utilization of cement in a year is used as an indicator of economic growth. Cement is a necessary constituent of infrastructure development and a key raw material for the construction industry, especially in the governments infrastructure development plans in the context of the nations socio-Economic development. India is the world's second largest producer of cement with total capacity of 219 million tones (MT) at the end of FY 2009, according to the Cement Manufactures Association. According to the Cement Manufacturers Association, cement dispatches during 2009-10 were 159.43 million tones (MT) increasing by 12 per cent over 142.23 in 2008-09. Cement production during 2009-10 was 160.31 MT an increase of 12.37 per cent over 142.65 MT in 200809.Moreover, the governments continued thrust on infrastructure will help the key building material to maintain an annual growth of 9-10 per cent in 2010, according to Indias largest cement company, ACC.In January 2010, rating agency Fitch predicted that the country will add about 50 million tone cement capacity in 2010, taking the total to around 300 million tones.
Government Initiatives Government initiatives in the infrastructure sector, coupled with the housing sector boom and urban development, continue being the main drivers of growth for the Indian cement industry. Increased infrastructure spending has been a key focus area. In the Union Budget 201011, US$ 37.4 billion has been provided for infrastructure development. The government has also increased budgetary allocation for roads by 13 per cent to US$ 4.3 billion.
Future Trends The cement industry is expected to grow steadily in 2009-2010 and increase capacity by another 50 million tons in spite of the recession and decrease in demand from the housing sector. The industry experts project the sector to grow by 9 to 10% for the current financial year provided India's GDP grows at 7%. India ranks second in cement production after China. The major Indian cement companies are Associated Cement Company Ltd (ACC), Grasim Industries Ltd, Ambuja Cements Ltd, J.K Cement Ltd and Madras Cement Ltd. The major players have all made investments to increase the production capacity in the past few months, heralding a positive outlook for the industry. The housing sector accounts for 50% of the demand for cement and this trend is expected to continue in the near future.
PORTERS FIVE FORCE MODEL It is useful for analyzing the industry overall and determining the level of competition among different existing players .It can be understood under different topics .Along with the industry we will try to point out the conditions for ACC too. i) THREAT OF NEW ENTRANTS: ACC has threat from new entrants like TATA; Reliance etc can enter into this industry. But there are certain barriers to their entry. These are: Availability of raw material Restrictions on entry by government into cement industry Cement industry requires a huge investment Switching costs are high in cement industry
ii) BARGAINING POWER OF SUPPLIERS Suppliers have very much impact on cement industry because of the following reasons: Raw materials used in cement are gypsum, fly ash and slag. There are few suppliers of these materials. Quality of finished goods i.e. cement is very important for ACC ltd. As already said, there are high switching costs in cement industry. There is no substitute to the raw material used in cement. iii) BARGAINING POWER OF BUYER ACC ltd plays the role of buyer. It has following bargaining powers: There are only few buyers of raw material of cement. ACC has major stake in cement industry i.e. 11% of the world. iv) THREAT OF SUBSTITUTES It has threat from its competitors like Ambuja cements, Birla cements, Binani cements, Grasim etc. V) RIVALRY AMONG THE COMPETING FIRMS IN INDUSTRY In spite of huge stake in cement industry, it is difficult to be on the top because of the other Competing companies i.e. Ambuja, Birla, and Binani etc. The competitors are using different promotional strategies to attract buyers. So, all the leading players in the industry have to analyze the situation frequently & they have to keep changing them too.
SWOT ANALYSIS
Strengths 1. The industry is likely to maintain its growth momentum and continue growing at about 9 10% in the foreseeable future. 2. Government initiative in the infrastructure sector such as the commencement of the second phase of the National Highway Development project, freight carriers, rural roads and development of the housing sector (Bharat Nirman Yojana) are likely to be the main drivers of growth. 3. In the coming few years the demand for the cement will increase which will be booming news for cement manufactures. As capacity utilization is over 90% now. 4. Huge potential for export.
Weakness 1. Cement Industry is highly fragmented & regionalized. 2. Low value commodity makes transportation over long distances un-economical. 3. High capital cost and investment cost for each and every project. 4. The complex Excise Duty structure based on the category of buyer and end use of the cement has caused at lot of confusion in the industry. 5. The recent ban on export of cement clinker would increase the availability of cement in the domestic market, which in turn would put pressure on cement prices.
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Opportunities: Demandsupply gap 1. Substantially low per capita cement consumption as compared to developing countries (1/3 rd of world average) Per capita cement consumption in India is 82 kgs against a global average of 255 kgs and Asian average of 200 kgs. 2. Despite slightly lower economic growth, the construction and infrastructure sector is expected to record healthy growth, which augurs well for cement industry. 3. Additional capacity of 20 million tons per annum will be required to match the demand.
Growing Demand-Supply Gap Capacity additions (Million Tones) 250
200
195.2
150
146.4
168.2
Demand
100
117.1
Capacity
50
0 2003-04 Fig. 1 2008-09
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Threats 1. The recent moves by the Central Government in making the import of the cement total duty free, is a cause of worry for the Indian cement industry. 2. Further recent changes in the Central Excise Duty structure by way of introduction of multiple slabs of Excise Duty is also a cause of worry for the industry. 3. Almost all the major players in the industry have announced substantial increase in the capacity and the possibility of over supply situation cannot be ruled out. 4. Increased railway freight, coal prices and dispatch bottlenecks on account of truck Loading restrictions imposed by various State Governments 5. Scarcity of good quality Coal is some other factors which are cause of concern for the industry.
Competitor analysis (Overall industry) ACC, with an installed capacity of 22.63 MTPA, enjoys an 11% market share in India, which with its total installed capacity of 207 MTPA, India is the second largest cement producing country in the world. ACCs nation-wide presence and brand image ensures a competitive edge and helps it to withstand regional fluctuations in prices and also to adapt its distribution to market place needs. Its key competitors are as follows:ACC Ltd is the market leader with the capacity of 22.63 MTPA .The top ten companies are given below with the details:Name Production Installed Capacity Net Profit (Quarter ended Sep 30, 2009) ACC Limited 17,902 18,640 41,550.89 lakhs
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Name Production Installed Capacity Net Profit (Quarter ended on Sep 30, 2009) Name Production Installed Capacity Net Profit (in 2008-09) Name Production Installed Capacity Net Profit (in 2008-09) Name Production Installed Capacity Net Profit (in 2008-09) Name Production Installed Capacity Net Profit (in 2008-09) Name Production Installed Capacity Name Production Installed Capacity Name Production Installed Capacity Net Profit (in 2008-09)
Gujarat Ambuja Cements Limited 15,094 14,860 31,848 lakhs Ultratech 13,707 17,000 97,700 lakhs Grasim 14,649 14,115 1,64,800 lakhs India Cements 8,434 8,810 43,218 lakhs JK Cement Ltd 6,174 6,680 14,234.40 lakhs Jaypee Group 6,316 6,531 Century Cement 6,636 6,300 Madras Cement 4,550 5,457 49,081 lakhs
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Name Production Installed Capacity Net Profit (in 2008-09)
Birla Corp. 5,150 5,113 9,061 lakhs
MARKET SHARE
Madras , 3.30%
Gujrat Ambuja, 7.60%
ACC, 11.80%
India Cement, 6.90%
L&T, 11.30%
Grasims, 9.60%
Others, 49.50%
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COMPANY PROFILE
ACC (ACC Limited) is India's foremost manufacturer of cement and concrete. ACC's operations are spread throughout the country with 14 modern cement factories, 19 Ready mix concrete plants, 19 sales offices, and several zonal offices. It has a workforce of about 9000 persons and a countrywide distribution network of over 9,000 dealers. ACC's research and development facility has a unique track record of innovative research, product development and specialized consultancy services. Since its inception in 1936, the company has been a trendsetter and important benchmark for the cement industry in respect of its production, marketing and personnel management processes. Its commitment to environmentfriendliness, its high ethical standards in business dealings and its on-going efforts in community welfare programs have won it acclaim as a responsible corporate citizen. In the 70 years of its existence, ACC has been a pioneer in the manufacture of cement and concrete and a trendsetter in many areas of cement and concrete technology including improvements in raw material utilization, process improvement, energy conservation and development of high performance concretes. ACCs brand name is synonymous with cement and enjoys a high level of equity in the Indian market. It is the only cement company that figures in the list of Consumer Super Brands of India. The company's various businesses are supported by a powerful, in-house research and technology backup facility - the only one of its kind in the Indian cement industry. This ensures not just consistency in product quality but also continuous improvements in products, processes, and application areas. ACC has rich experience in mining, being the largest user of limestone, and it is also one of the principal users of coal. As the largest cement producer in India, it is one of the biggest customers of the Indian Railways, and the foremost user ofthe road transport network services for inward and outward movement of materials and products. ACC has also extended its services overseas to the Middle East, Africa, and South America, where it has provided technical and managerial consultancy to a variety of consumers, and also helps in the operation and maintenance of cement plants abroad.
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ACC is among the first companies in India to include commitment to environmental protection as one of its corporate objectives, long before pollution control laws came into existence. The company installed pollution control equipment and high efficiency sophisticated electrostatic precipitators for cement kilns, raw mills, coal mills, power plants and coolers as far back as 1966. Every factory has state-of-the art pollution control equipment and devices.
History & Profile of ACC Cement Works ACC was formed in 1936 when ten existing cement companies came together under one umbrella in a historic merger the countrys first notable merger at a time when the term mergers and acquisitions was not even coined. The history of ACC spans a wide canvas beginning with the lonely struggle of its pioneer F E Din Shaw and other Indian entrepreneurs like him who founded the Indian cement industry. Their efforts to face competition for survival in a small but aggressive market mingled with the stirring of a countrys nationalist pride that touched all walks of life including trade, commerce and business. The first success came in a move towards cooperation in the countrys young cement industry and culminated in the historic merger of ten companies to form a cement giant. These companies belonged to four prominent business groups Tatas, Khataus, Killick Nixon and F E Din Shaw groups. ACC was formally established on August 1, 1936. Sadly, F E Din Shaw, the man recognized as the founder of ACC, died in January 1936. Just months before his dream could be realized. The ACC Board comprises of 13 persons. These include executive, non-executive, and nominee directors. This group is responsible for determining the objectives and broad policies of the Company - consistent with the primary objective of enhancing long-term shareholder value. The Board meets once a month. Two other small groups of directors - comprising Shareholders'/Investors' Grievance Committee and Audit Committee of the Board of Directors also meet once a month on matters pertaining to the finance and share disciplines. During the last decade, there has been a streamlining of the senior management structure that is more responsive to the needs of the Company's prime business. A Managing Committee - comprising, in addition to the Managing Director and the two executive directors, the presidents representing
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multifarious disciplines: finance, production, marketing, research and consultancy, engineering and human resources meets once a week. A Strategic Alliance The house of Tata was intimately associated with the heritage and history of ACC, right from its formation in 1936 up to 2000. The Tata group sold all 14.45% of its shareholdings in ACC in three stages to subsidiary companies of Gujarat Ambuja Cements Ltd. (GACL), who are now the largest single shareholder in ACC. This enabled ACC to enter into a strategic alliance with GACL; a company reputed for its brand image and cost leadership in the cement industry. Holcim A New Partnership A new association was formed between ACC and The Holcim group of Switzerland in 2005. In January 2005, Holcim announced its plans to enter into long term alliances with Ambuja Group by acquiring a majority stake in Ambuja Cements India Ltd. (ACIL), which at the time held 13.8% of total equity shares in ACC. Holcim simultaneously announced its bid to make an open offer to ACC shareholders, through Holdcem Cement Pvt. Ltd. and ACIL, to acquire a majority shareholding in ACC. An open offer was made by Holdcem Cement Pvt. Ltd. along with ACIL, following which the shareholding of ACIL increased to 34.69% of Equity share capital of ACC. Consequently, ACIL has filed declarations indicating their shareholding and declaring itself as a promoter of ACC. Holcim is the world leader in cement as well as being large supplier of concrete, aggregates and certain construction related services. Holcim is also a respected name in information technology and research and development. The group has its headquarters in Switzerland with worldwide operations spread across more than 70 countries.
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Plants & Their Capacity

No. 1 2 3 4 5 6 7 8 9 10 11 12 13 Units Bargarh Chaibasa Chanda Damodhar Gagal Jamul Kymore Lakheri Madukkarai Sindri Wadi New Wadi Plant Tikaria State Capacity Bargarh Cement Works Chaibasa Cement Works Chanda Cement Works Damodar Cement Works Gagal Cement Works Jamul Cement Works Kymore Cement Works Lakheri Cement Works Madukkarai Cement Works Sindri Cement Works Wadi Cement Works Wadi Cement Works Tikaria Cement Grinding andPacking Plant (MTPA) 0.96 0.87 1.00 0.53 4.40(Gagal I and II) 1.58 2.20 1.50 0.96 0.91 2.59 2.60 2.31
VISION
To be one of the most respected companies in India; recognized for challenging conventions and delivering on our promises
MISSION
Leadership Maintain our leadership of the Indian cement industry through the continuous modernization and expansion of our manufacturing facilities and activities, and through the establishment of a wide and efficient marketing network. Profitability Achieve a fair and reasonable return on capital by promoting productivity throughout the company.
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Growth
Ensure a steady growth of business by strengthening our position in the cement sector.
Quality
Maintain the high quality of our products and services and ensure their supply at fair prices.
Equity
Promote and maintain fair industrial relations and an environment for the effective involvement, welfare and development of staff at all levels.
Pioneering
Promote research and development efforts in the areas of product development and energy, and fuel conservation, and to innovate and optimize productivity.
Responsibility Fulfill our obligations to society, specifically in the areas of integrated rural development and in safeguarding the environment and natural ecological balance.
Few Achievement of ACC Limited YEAR 1936 1947 1955 Achievements The Associated Cement Companies Limited incorporated on August 1 India's first entirely indigenous cement plant installed at Chaibasa. ACC Sindri uses waste material - calcium carbonate sludge -from fertilizer factory at Sindri to make cement 1956 1961 Bulk Cement Depot established at Okhla, Delhi Blast furnace slag, (a waste by-product from steel) from TISCO used at ACC Chaibasa to manufacture Portland Slag Cement. 1961 1965 Manufacture of Hydrophobic (waterproof) cement at ACC Khalari. Manufacture of Portland Pozzolana Cement using naturally available materials. An Eco-friendly cements using an eco-friendly process
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1966
ACC inducts use of pollution control equipment and high efficiency sophisticated electrostatic precipitators for its cement plants and captive power plants decades before it becomes mandatory to do so.
1978
Introduction of the energy efficient pre-calcinations technology for the first time in India.
1982 1987
Commissioning of the first 1 MTPA plant in the country at Wadi, Karnataka. ACC develops a new binder, working at sub-zero temperature, which is successfully used in the Indian expedition to Antarctica.
1992
Incorporation of Bulk Cement Corporation of India, a JV with the Government of India.
1993 2001
Commercial manufacture of ready-mixed concrete at Mumbai. Commissioning of the new Wadi plant of 2.6 MTPA capacity in Karnataka, the largest in India, and among the largest sized kilns in the World.
AWARDS & ACCOLADES IMC Ramkrishna Bajaj National Quality Award - Gagal wins Commendation Certificate and New Wadi Plant wins Special Award for Performance Excellence in the Manufacturing Sector, 2007. National Award for outstanding performance in promoting rural and agricultural development by ASSOCHAM Sword of Honour - by British Safety Council, United Kingdom for excellence in safety performance. Indira Priyadarshini Vrikshamitra Award --- by The Ministry of Environment and Forests for "extraordinary work" carried out in the area of afforestation.
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FICCI Award --- for innovative measures for control of pollution, waste management & conservation of mineral resources in mines and plant. Subh Karan Sarawagi Environment Award - by The Federation of Indian Mineral Industries for environment protection measures. Drona Trophy - By Indian Bureau Of Mines for extra ordinary efforts in protection of Environment and mineral conservation in the large mechanized mines sector. Indo German Green tech Environment Excellence Award Golden Peacock Environment Management Special Award - for outstanding efforts in Environment Management in the large manufacturing sector. Indira Gandhi Memorial National Award - for excellent performance in prevention of pollution and ecological development Excellence in Management of Health, Safety and Environment : Certificate of Merit by Indian Chemical Manufacturers Association Vishwakarma Rashtriya Puraskar trophy for outstanding performance in safety and mine working Good Corporate Citizen Award - by PHD Chamber of Commerce and Industry Jamnalal Bajaj Uchit Vyavahar Puraskar - Certificate of Merit by Council for Fair Business Practices Greentech Safety Gold and Silver Awards - for outstanding performance in Safety management systems by Greentech Foundation FIMI National Award - for valuable contribution in Mining activities from the Federation of Indian Mineral Industry under the Ministry of Coal. ACC was the first recipient of ASSOCHAMs first ever National Award for outstanding performance in promoting rural and agricultural development activities in 1976. Decades later, PHD Chamber of Commerce and Industry selected ACC as winner of its Good Corporate Citizen
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Award for the year 2002. Over the years, there have been many awards and felicitations for achievements in Rural and community development, Safety, Health, Tree plantation, A forestation, Clean Mining, Environment Awareness and Protection.
MAP OF ACC NETWORK Corporate office Overseeing the companys rang of business; the Corporate Office is the central head quarters of all business and human resource function located in Mumbai. ACC Subsidiaries 1. Bulk Cement Corporation India Ltd (BCCI) 2. ACC Machinery Company Ltd (AMCL) 3. ACC Nihon Casting Ltd (ANCL) Regional marketing offices Offices at all major cities in India i.e Bangaluru , Bhopal, Chandigarh , Coimbatore , Kanpur, Kolkata, Mumbai, Pune , Secunderabad ,New Delhi & Patna.
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MAP OF ACC PLANTS
HIGHILIGHTS OF FINANCIAL PERFORMANCE of ACC LTD Table.1 Particulars NET SALES PBT OPERATING PROFIT PAT Capital Employed Basic Earnings per Share (Rs.) 2005 3,221 684 616 544 3,502 30.02 2006 5,803 1,620 1,717 1,232 4,234 66.02 2007 6,991 1,930 1,993 1,439 4,791 76.75 2008 7,283 1,737 1,899 1,213 5,746 64.63 (Rs. In Crore) 2009 8,027 2,294 2,643 1,607 6,932 85.60
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AN INTRODUCTION TO WORKING CAPITAL MANAGEMENT

Working capital means the part of the total assets of the business that change from one form to another form in the ordinary course of business operations. Concept of working capital The word working capital is made of two words 1.Working and 2. Capital The word working means day to day operation of the business, whereas the word capital means monetary value of all assets of the business. Working capital Working capital may be regarded as the life blood of business. Working capital is of major importance to internal and external analysis because of its close relationship with the current day-to-day operations of a business. Every business needs funds for two purposes. Long term funds are required to create production facilities through purchase of fixed assets such as plants, machineries, lands, buildings & etc Short term funds are required for the purchase of raw materials, payment of wages, and other day-to-day expenses. It is other wise known as revolving or circulating capital It is nothing but the difference between current assets and current liabilities. i.e. Working Capital = Current Asset Current Liability. Businesses use capital for construction, renovation, furniture, software, equipment, or machinery. It is also commonly used to purchase inventory, or to make payroll. Capital is also used often by businesses to put a down payment down on a piece of commercial real estate. Working capital is essential for any business to succeed. It is becoming increasingly important to have access to more working capital when we need it.
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Concept of working capital Gross Working Capital = Total of Current Asset Net Working Capital = Excess of Current Asset over Current Liability. Current Assets Cash in hand / at bank Bills Receivable Sundry Debtors Short term loans Investors/ stock Temporary investment Prepaid expenses Accrued incomes Current Liabilities Bills Payable Sundry Creditors Outstanding expenses Accrued expenses Bank Over draft
Working capital in terms of five components 1. Cash and equivalents: - This most liquid form of working capital requires constant supervision. A good cash budgeting and forecasting system provides answers to key questions such as: Is the cash level adequate to meet current expenses as they come due? What is the timing relationship between cash inflow and outflow? When will peak cash needs occur? When and how much bank borrowing will be needed to meet any cash shortfalls? When will repayment be expected and will the cash flow cover it? 2. Accounts receivable: - Many businesses extend credit to their customers. If we do, is the amount of accounts receivable reasonable relative to sales? How rapidly are receivables being collected? Which customers are slow to pay and what should be done about them? 3. Inventory: - Inventory is often as much as 50 percent of a firm's current assets, so naturally it requires continual scrutiny. Is the inventory level reasonable compared with sales and the nature
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of our business? What's the rate of inventory turnover compared with other companies in our type of business? 4.Accounts payable: - Financing by suppliers is common in small business; it is one of the major sources of funds for entrepreneurs. Is the amount of money owed suppliers reasonable relative to what we purchase? What is our firm's payment policy doing to enhance or detract from our credit rating? 5. Accrued expenses and taxes payable: - These are obligations of our company at any given time and represent a future outflow of cash.
Two different concepts of working capital are: Balance sheet or Traditional concept Operating cycle concept.
Balance sheet or Traditional concept It shows the position of the firm at certain point of time. It is calculated in the basis of balance sheet prepared at a specific date. In this method there are two type of working capital: Gross working capital Net working capital
Gross working capital It refers to the firms investment in current assets. The sum of the current assets is the working capital of the business. The sum of the current assets is a quantitative aspect of working capital. Which emphasizes more on quantity than its quality, but it fails to reveal the true financial position of the firm because every increase in current liabilities will decrease the gross working capital.
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Net working capital It is the difference between current assets and current liabilities or the excess of total current assets over total current liabilities. Working capital= current assets - current liabilities. Net working capital It is also can defined as that part of a firms current assets which is financed with long term funds. It may be either positive or negative. When the current assets exceed the current liability, the working capital is positive and vice versa. Operating cycle concept The duration or time required to complete the sequence of events right from purchase of raw material for cash to the realization of sales in cash is called the operating cycle or working capital cycle.
Cash
Raw Material
Debtors & Bill Receivables
Work in progress
Sales
Finished Goods
OPERATING CYCLE
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TYPES OF WORKING CAPITAL
WORKING CAPITAL
BASIS OF CONCEPT
BASIS OF TIME
GROSS WORKING CAPITAL
NET WORKING CAPITAL
PERMANENT/ FIXED WC
TEMPORARY / VARIABLE WC
SEASONAL WORKING CAPITAL
SPECIFIC WORKING CAPITAL
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SIGNIFICANCE OF WORKING CAPITAL
EASY LOAN FROM BANK
INCREASE EFFICIENCY
PAYMENT TO SUPPLIERS
SIGNIFICANCE OF WORKING CAPITAL
INCREASE IN FIX ASSETS
DIVIDEND DISTRIBUTION
INCREASE DEBT CAPACITY
Factors requiring consideration while estimating working capital The average credit period expected to be allowed by suppliers. Total costs incurred on material, wages. The length of time for which raw material are to remain in stores before they are issued for production.
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The length of the production cycle (or) work in process. The length of sales cycle during which finished goods are to be kept waiting for sales. The average period of credit allowed to customers The amount of cash required to make advance payment
Importance of Working Capital Ratios Ratio analysis can be used by financial executives to check upon the efficiency with which working capital is being used in the enterprise. The following are the important ratios to measure the efficiency of working capital. The following, easily calculated, ratios are important measures of working capital utilization. Key Working Capital Ratios The following, easily calculated, ratios are important measures of working capital utilization. Ratio Formulae Result Interpretation On average, we turn over the value of our entire stock every x days. We may need to break this Stock Turnover (in days) Average Stock * 365/Cost of Goods Sold =x days down into product groups for effective stock management. Obsolete stock, slow moving lines will extend overall stock turnover days. Faster production, fewer product lines, just in time ordering will reduce average days. It takes on average x days to collect monies due Receivables Ratio (in days) to we. If were official credit terms are 45 day Debtors * 365/Sales =x days and it takes 65 days... why? One or more large or slow debts can drag out the average days. Effective debtor management will minimize the days.
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On average, we pay our suppliers every x days. If we negotiate better credit terms this will Payables Ratio (in days) Creditors * 365/Cost of Sales (or Purchases) =x days increase. If we pay earlier, say, to get a discount this will decline. If we simply defer paying our suppliers (without agreement) this will also increase - but our reputation, the quality of service and any flexibility provided by our suppliers may suffer. Current Assets are assets that we can readily turn in to cash or will do so within 12 months in the course of business. Current Liabilities are Total Current Current Ratio Assets/Total Current Liabilities =x times amount we are due to pay within the coming 12 months. For example, 1.5 times means that we should be able to lay our hands on $1.50 for every $1.00 we owe. Less than 1 time e.g. 0.75 means that we could have liquidity problems and be under pressure to generate sufficient cash to meet oncoming demands. (Total Current Assets Quick Ratio Inventory)/ Total Current Liabilities Working Capital Ratio (Inventory + Receivables Payables)/Sales As% Sales A high percentage means that working capital needs are high relative to our sales. =x times Similar to the Current Ratio but takes account of the fact that it may take time to convert inventory into cash.
Note:- Once ratios have been established for companys business, it is important to track them over time and to compare them with ratios for other comparable businesses or industry sectors.
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The working capital needs of a business are influenced by numerous factors. The important ones are discussed in brief as given below: Nature of Enterprise:-The nature and the working capital requirements of an enterprise are interlinked. While a manufacturing industry has a long cycle of operation of the working capital, the same would be short in an enterprise involved in providing services. The amount required also varies as per the nature; an enterprise involved in production would require more working capital than a service sector enterprise. Manufacturing/Production Policy:-Each enterprise in the manufacturing sector has its own production policy, some follow the policy of uniform production even if the demand varies from time to time, and others may follow the principle of 'demand-based production' in which production is based on the demand during that particular phase of time. Accordingly, the working capital requirements vary for both of them. Working Capital Cycle :-In manufacturing concern, working capital cycle starts with the purchase of raw materials and ends with realization of cash from the sale of finished goods. The cycle involves the purchase of raw materials and ends with the realization of cash from the sale of finished products. The cycle involves purchase of raw materials and stores, its conversion in to stock of finished goods through work in progress with progressive increment of labor and service cost, conversion of finished stick in to sales and receivables and ultimately realization of cash and this cycle continuous again from cash to purchase of raw materials and so on. Operations:-The requirement of working capital fluctuates for seasonal business. The working capital needs of such businesses may increase considerably during the busy season and decrease during the slack season. Ice creams and cold drinks have a great demand during summers, while in winters the sales are negligible. Market Condition:-If there is high competition in the chosen product category, then one shall need to offer sops like credit, immediate delivery of goods etc. for which the working capital requirement will be high. Otherwise, if there is no competition or less competition in the market then the working capital requirements will be low. Credit Policy:-The credit policy is concerned in its dealings with debtors and creditors influence considerably the requirements of the working capital. A concern that purchases
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its requirements on credit and sells its products/services on cash requires lesser amount of working capital. On the other hand a concern buying its requirements for cash and allowing credit to its customers, shall need larger amount of funds are bound to be tied up in debtors or bills receivables. Business Cycle:-Business Cycle refers to alternate expansion and contraction in general business activities. In a period of born i.e. when the business is prosperous there is a need for larger amount of working capital due to increase in sales, rise in prices, optimistic expansion of business etc. On the country at he time of depression i.e. when there is a down swing of the cycle, business contracts, sales decline, difficulties are faced in collections from debtors and firms may have a large amount of working capital lying ideal Availability of Raw Material:-If raw material is readily available then one need not maintain a large stock of the same, thereby reducing the working capital investment in raw material stock. On the other hand, if raw material is not readily available then a large inventory/stock needs to be maintained, thereby calling for substantial investment in the same. Growth and Expansion:-Growth and expansion in the volume of business results in enhancement of the working capital requirement. As business grows and expands, it needs a larger amount of working capital. Normally, the need for increased working capital funds precedes growth in business activities. Earning Capacity and Dividend policy:-Some firms have more earning capacity than others due to the quality of their products, monopoly conditions etc. Such firms with high earning capacity may generate cash profits from operations and contribute to their capital. The dividend policy of a concern also influences the requirements of the working capital. A firm that maintains steady high rate of cash dividend irrespective of its generation of profits needs more capital than the firm retains larger part of its profits and does not pay high rate of cash dividend. Price Level Changes:-Generally, rising price level requires a higher investment in the working capital. With increasing prices, the same level of current assets needs enhanced investment.
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Manufacturing Cycle:-The manufacturing cycle starts with the purchase of raw material and is completed with the production of finished goods. If the manufacturing cycle involves a longer period, the need for working capital would be more. At times, business needs to estimate the requirement of working capital in advance for proper control and management. The factors discussed above influence the quantum of working capital in the business. The assessment of working capital requirement is made keeping these factors in view. Each constituent of working capital retains its form for a certain period and that holding period is determined by the factors discussed above. So for correct assessment of the working capital requirement, the duration at various stages of the working capital cycle is estimated. Thereafter, proper value is assigned to the respective current assets, depending on its level of completion.
Other Factors:-Certain other factors such as operating efficiency, management ability, irregularities a supply, import policy, asset structure, importance of labor, banking facilities etc. also influences the requirement of working capital.
Component of Working Capital Basis of Valuation: Stock of raw material Purchase cost of raw materials Stock of work in process At cost or market value, whichever is lower Stock of finished goods Cost of production Debtors Cost of sales or sales value Cash Working expenses
WORKING CAPITAL MANAGEMENT

Working Capital Management refers to management of current assets and current liabilities. The major thrust of course is on the management of current assets .This is understandable because current liabilities arise in the context of current assets. Working Capital Management is a significant fact of financial management. Its importance stems from two reasons:-
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1) Investment in current assets represents a substantial portion of total investment. 2) Investment in current assets and the level of current liabilities have to be geared quickly to change in sales. To be sure, fixed asset investment and long term financing are responsive to variation in sales. However, this relationship is not as close and direct as it is in the case of working capital components. The importance of working capital management is effected in the fact that financial manages spend a great deal of time in managing current assets and current liabilities. Arranging short term financing, negotiating favorable credit terms, controlling the movement of cash, administering the accounts receivable, and monitoring the inventories consume a great deal of time of financial managers. The problem of working capital management is one of the best utilization of a scarce resource. Thus the job of efficient working capital management is a formidable one, since it depends upon several variables such as character of the business, the lengths of the merchandising cycle, rapidity of turnover, scale of operations, volume and terms of purchase & sales and seasonal and other variations.
CONSEQUENCES OF UNDER ASSESSMENT OF WORKING CAPITAL Growth may be stunted. It may become difficult for the enterprise to undertake profitable projects due to non-availability of working capital. Implementation of operating plans may become difficult and consequently the profit goals may not be achieved. Cash crisis may emerge due to paucity of working funds. Optimum capacity utilization of fixed assets may not be achieved due to non availability of the working capital. The business may fail to honor its commitment in time, thereby adversely affecting its credibility. This situation may lead to business closure. The business may be compelled to buy raw materials on credit and sell finished goods on cash. In the process it may end up with increasing cost of purchases and reducing selling prices by offering discounts. Both these situations would affect profitability adversely.
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Non-availability of stocks due to non-availability of funds may result in production stoppage.
CONSEQUENCES OF OVER ASSESSMENT OF WORKING CAPITAL Excess of working capital may result in unnecessary accumulation of inventories. It may lead to offer too liberal credit terms to buyers and very poor recovery system and cash management. It may make management complacent leading to its inefficiency. Over-investment in working capital makes capital less productive and may reduce return on investment. Working capital is very essential for success of a business and, therefore, needs efficient management and control. Each of the components of the working capital needs proper management to optimize profit.
FINANCING WORKING CAPITAL Working capital or current assets are those assets, which unlike fixed assets change their forms rapidly. Due to this nature, they need to be financed through short-term funds. Short-term funds are also called current liabilities. The following are the major sources of raising short-term funds: I. Suppliers Credit At times, business gets raw material on credit from the suppliers. The cost of raw material is paid after some time, i.e. upon completion of the credit period. Thus, without having an outflow of cash the business is in a position to use raw material and continue the activities. The credit given by the suppliers of raw materials is for a short period and is considered current liabilities. These funds should be used for creating current assets like stock of raw material, work in process, finished goods, etc.
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ii. Bank Loan for Working Capital This is a major source for raising short-term funds. Banks extend loans to businesses to help them create necessary current assets so as to achieve the Required business level. The loans are available for creating the following Current Assets: Stock of Raw Materials Stock of Work in Process Stock of Finished Goods Debtors Banks give short-term loans against these assets, keeping some security margin. The advances given by banks against current assets are short-term in nature and banks have the right to ask for immediate repayment if they consider doing so. Thus bank loans for creation of current assets are also current liabilities. iii. Promoters Fund It is advisable to finance a portion of current assets from the promoters funds. They are longterm funds and, therefore do not require immediate repayment. These funds increase the liquidity of the business.
MANAGEMENT OF INVENTORY Inventories constitute the most significant part of current assets of a large majority of companies in India. On an average, inventories are approximately 60 % of current assets in public limited companies in India. Because of the large size of inventories maintained by firms maintained by firms, a considerable amount of funds is required to be committed to them. It is, therefore very necessary to manage inventories efficiently and effectively in order to avoid unnecessary investments. A firm neglecting a firm the management of inventories will be jeopardizing its long run profitability and may fail ultimately. The purpose of inventory management is to ensure availability of materials in sufficient quantity as and when required and also to minimize
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investment in inventories at considerable degrees, without any adverse effect on production and sales, by using simple inventory planning and control techniques.
Need to hold inventories Transaction motive emphasizes the need to maintain inventories to facilitate smooth production and sales operation. Precautionary motive necessities holding of inventories to guard against the risk of unpredictable changes in demand and supply forces and other factors. Speculative motive influences the decision to increases or reduce inventory levels to take advantage of price fluctuations and also for saving in re-ordering costs and quantity discounts etc. Objective of Inventory Management The main objectives of inventory management are operational and financial. The operational mean that means that the materials and spares should be available in sufficient quantity so that work is not disrupted for want of inventory. The financial objective means that investments in inventories should not remain ideal and minimum working capital should be locked in it. The following are the Objectives of inventory management To ensure continuous supply of materials, spares and finished goods. To avoid both over-stocking of inventory. To maintain investments in inventories at the optimum level as required by the operational and sale activities. To keep material cost under control so that they contribute in reducing cost of production and overall purchases. To eliminate duplication in ordering or replenishing stocks. This is possible with the help of centralizing purchases. To minimize losses through deterioration, pilferage, wastages and damages.
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To design proper organization for inventory control so that management. Clear cut account ability should be fixed at various levels of the organization. To ensure perpetual inventory control so that materials shown in stock ledgers should be actually lying in the stores. To ensure right quality of goods at reasonable prices. To facilitate furnishing of data for short-term and long term planning and control of inventory MANAGEMENT OF CASH
Cash is the important current asset for the operation of the business. Cash is the basic input needed to keep the business running in the continuous basis, it is also the ultimate output expected to be realized by selling or product manufactured by the firm. The firm should keep sufficient cash neither more nor less. Cash shortage will disrupt the firms manufacturing operations while excessive cash will simply remain ideal without contributing anything towards the firms profitability. Thus a major function of the financial manager is to maintain a sound cash position. Cash is the money, which a firm can disburse immediately without any restriction. The term cash includes coins, currency and cheques held by the firm and balances in its bank account. Sometimes near cash items such as marketing securities or bank term deposits are also included in cash. Generally when a firm has excess cash, it invests it is marketable securities. This kind of investment contributes some profit to the firm. MANAGEMENT OF RECEIVABLES A sound managerial control requires proper management of liquid assets and inventory. These assets are a part of working capital of the business. An efficient use of financial resources is necessary to avoid financial distress. Receivables result from credit sales. A concern is required to allow credit sales in order to expand its sales volume. It is not always possible to sell goods on cash basis only. Sometimes other concern in that line might have established a practice of selling goods on credit basis. Under these circumstances, it is not possible to avoid credit sales without adversely affecting sales. The increase in sales is also essential to increases profitability. After a certain level of sales the increase in sales will not proportionately increase production costs. The increase in sales will bring in more profits. Thus, receivables constitute a significant portion of
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current assets of a firm. But for investment in receivables, a firm has to insure certain costs. Further, there is a risk of bad debts also. It is therefore, very necessary to have a proper control and management of receivables. Needs to hold cash Receivables management is the process of making decisions relating to investment in trade debtors. Certain investments in receivables are necessary to increase the sales and the profits of a firm. But at the same time investment in this asset involves cost consideration also. Further, there is always a risk of bad debts too. Thus, the objective of receivable management is to take a sound decision as regards investments in debtors. In the words of Bolton, S.E., the need of receivables management is to promote sales and profits until that point is reached where the return of investment in further funding of receivables is less than the cost of funds raised to finance that additional credit. Working Capital Cycle Cash flows in a cycle into, around and out of a business. It is the business's life blood and every manager's primary task is to help keep it flowing and to use the cash flow to generate profits. If a business is operating profitably, then it should, in theory, generate cash surpluses. If it doesn't generate surpluses, the business will eventually run out of cash and expire. The faster a business expands the more cash it will need for working capital and investment. The cheapest and best sources of cash exist as working capital right within business. Good management of working capital will generate cash will help improve profits and reduce risks. Bear in mind that the cost of providing credit to customers and holding stocks can represent a substantial proportion of a firm's total profits. There are two elements in the business cycle that absorb cash - Inventory (stocks and work-inprogress) and Receivables (debtors owing our money). The main sources of cash are Payables (our creditors) and Equity and Loans.
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WORKING CAPITAL CYCLE
Equity & Loans
Cash
Payables
receivables
Overheads etc
inventory
sales
Each component of working capital (namely inventory, receivables and payables) has two dimensions ........TIME ......... and MONEY. When it comes to managing working capital TIME IS MONEY. If we can get money to move faster around the cycle (e.g. collect monies due from debtors more quickly) or reduce the amount of money tied up (e.g. reduce inventory levels relative to sales), the business will generate more cash or it will need to borrow less money to fund working capital. As a consequence, we could reduce the cost of bank interest or we'll have additional free money available to support additional sales growth or investment. Similarly,
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if we can negotiate improved terms with suppliers e.g. get longer credit or an increased credit limit; we effectively create free finance to help fund future sales.
If we....... Collect receivables (debtors) faster Collect receivables (debtors) slower
Then...... We release cash from the cycle Our receivables soak up cash
Get better credit (in terms of duration or We increase our cash resources amount) from suppliers Shift inventory (stocks) faster Move inventory (stocks) slower We free up cash We consume more cash
It can be tempting to pay cash, if available, for fixed assets e.g. computers, plant, vehicles etc. If we do pay cash, remember that this is now longer available for working capital. Therefore, if cash is tight, we should consider other ways of financing capital investment - loans, equity, leasing etc. Similarly, if we pay dividends or increase drawings, these are cash outflows and, like water flowing downs a plug hole, they remove liquidity from the business. More businesses fail for lack of cash than for want of profit.
Sources of Additional Working Capital Existing cash reserves Profits (when we secure it as cash!) Payables (credit from suppliers) New equity or loans from shareholders Bank overdrafts or lines of credit Long-term loans
If we have insufficient working capital and we try to increase sales, we can easily over-stretch the financial resources of the business. This is called overtrading.
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Early warning signs include: Pressure on existing cash Exceptional cash generating activities e.g. offering high discounts for early cash payment Bank overdraft exceeds authorized limit Seeking greater overdrafts or lines of credit Part-paying suppliers or other creditors Paying bills in cash to secure additional supplies Management pre-occupation with surviving rather than managing Frequent short-term emergency requests to the bank (to help pay wages, pending receipt of a cheque).
Handling Receivables (Debtors) Cash flow can be significantly enhanced if the amounts owing to a business are collected faster. Every business needs to know.... who owes them money.... how much is owed.... how long it is owing.... for what it is owed. Late payments erode profits and can lead to bad debts. If we don't manage debtors, they will begin to manage our business as we will gradually lose control due to reduced cash flow and, of course, we could experience an increased incidence of bad debt. The following measures will help manage our debtors: 1. Have the right mental attitude to the control of credit and make sure that it gets the priority it deserves. 2. Establish clear credit practices as a matter of company policy. 3. Make sure that these practices are clearly understood by staff, suppliers and customers. 4. Be professional when accepting new accounts, and especially larger ones. 5. Check out each customer thoroughly before we offer credit. Use credit agencies, bank references, industry sources etc. 6. Establish credit limits for each customer... and stick to them.
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7. Continuously review these limits when we suspect tough times are coming or if operating in a volatile sector. 8. Keep very close to our larger customers. 9. Invoice promptly and clearly. 10. Consider charging penalties on overdue accounts. 11. Consider accepting credit /debit cards as a payment option. 12. Monitor our debtor balances and ageing schedules, and don't let any debts get too large or too old. Recognize that the longer someone owes we, the greater the chance we will never get paid. If the average age of our debtors is getting longer, or is already very long, we may need to look for the following possible defects: weak credit judgment poor collection procedures lax enforcement of credit terms slow issue of invoices or statements errors in invoices or statements Customer dissatisfaction.
Debtors due over 90 days (unless within agreed credit terms) should generally demand immediate attention. Profits only come from paid sales.
The act of collecting money is one which most people dislike for many reasons and therefore put on the long finger because they convince themselves there is something more urgent or important that demands their attention now. There is nothing more important than getting paid for our product or service. A customer who does not pay is not a customer.
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Managing Payables (Creditors) Creditors are a vital part of effective cash management and should be managed carefully to enhance the cash position. Purchasing initiates cash outflows and an over-zealous purchasing function can create liquidity problems. Consider the following: 1. Who authorizes purchasing in our company - is it tightly managed or spread among a number of (junior) people? 2. Are purchase quantities geared to demand forecasts? 3. Do we use order quantities which take account of stock-holding and purchasing costs? 4. Do we know the cost to the company of carrying stock? 5. Do we have alternative sources of supply? If not, get quotes from major suppliers and shop around for the best discounts, credit terms, and reduce dependence on a single supplier. 6. How many of our suppliers have a returns policy? 7. Are we in a position to pass on cost increases quickly through price increases to our customers? 8. If a supplier of goods or services lets we down can we charge back the cost of the delay? 9. Can we arrange (with confidence!) to have delivery of supplies staggered or on a just-intime basis? There is an old adage in business that if we can buy well then we can sell well. Management of our creditors and suppliers is just as important as the management of our debtors. It is important to look after our creditors - slow payment by we may create ill-feeling and can signal that our company is inefficient (or in trouble!). Remember, a good supplier is someone who will work with us to enhance the future viability and profitability of our company.
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OBJECTIVE OF THE STUDY
The following are the main objective which has been undertaken in the present study: 1. To determine the amount of working capital requirement and to calculate various ratios relating to working capital. 3. To evaluate the financial performance of ACC limited using financial tools. 4. To suggest the steps to be taken to increase the efficiency in management of working capital.
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SCOPE OF THE STUDY
The study has got a wide & fast scope. It tries to find out the players in the industry & focuses on the upcoming trends. It also tries to show the financial performance of the major player of the industry i.e.; ACC Ltd. 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 Analysis, Inventory Turnover analysis etc. Further the study is based on last 4 and 5 years Annual Reports of ACC Ltd. And even factors like competitors analysis, industry analysis were not considered while preparing this project.
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RESEARCH METHODOLOGY
Research methodology is a way to systematically solve the research problem. It may be understood as a science of studying now research is done systematically. In that various steps, those are generally adopted by a researcher in studying his problem along with the logic behind them. It is important for research to know not only the research method but also know methodology. The procedures by which researcher go about their work of describing, explaining and predicting phenomenon are called methodology. Methods comprise the procedures used for generating, collecting and evaluating data. All this means that it is necessary for the researcher to design his methodology for his problem as the same may differ from problem to problem. Data collection is important step in any project and success of any project will be largely depend upon now much accurate you will be able to collect and how much time, money and effort will be required to collect that necessary data, this is also important steps. Data collection plays an important role in research work. Without proper data available for analysis you cannot do the research work accurately. Types of data There are two types of data available. 1. Primary data 2. Secondary data My research is based on secondary data Secondary data The data was available to me through the means of internet and then trend analysis was done accordingly .This project is based on secondary information collected through five years annual report of the company, supported by various books and internet sites. The data collection was aimed at study of working capital management of the company. Project is based on
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Type of Research As, my research being an Analytical research, I have used facts and information already available, and analyzed them to make a critical evaluation, the research methods used is Analysis of Past records.
1. Annual report of ACC LTD. 2005 2. Annual report of ACC LTD. 2006 3. Annual report of ACC LTD. 2007 4. Annual report of ACC LTD. 2008 5. Annual report of ACC LTD. 2009
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DATA INTERPRETATION AND ANALYSIS
ANALYSIS OF FINANCIAL STATEMENT OF ACC LIMITED Trend Analysis - Trend percentage analysis moves in one direction either progression or regression (upward or downward).This method involves the calculation of percentage relationship that each statements bear to the same item in the base year .Mostly the earliest period is taken as the base year. Advantages: It indicates the increase in an accounted item along with the magnitude of changes in percentages which is more effective then absolute data. It facilitates an efficient comparative study of the financial performance of a firm over a period of time. Limitations: Any one trend by itself is not very analytical & informative. During the inflationary periods the data becomes incomparable ,unless the absolute rupee data is adjusted. There is always the danger of selecting the base year which may not be representative, normal & typical. The calculated percentages having no logical relationship with one another. Precautions to be taken: Consistency in the principles & practices followed by the organization throughout the calculated period. The base year should be normal. Trend percentages should be calculated only for the items which are having logical relationship with each other. Figures of the current year should be adjusted according to the changes in price levels.
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Common size statement Analysis A financial statement that has variables expressed in percentages rather than in dollar amounts. For example, items on an income statement are shown as a percentage of revenue or sales, and balance sheet entries are displayed as a percentage of total assets. Common-size statements are used primarily for comparative purposes so that firms of various sizes can be equated. Also called one hundred percent statement. Advantages: The statement reveals the sources of funds & the distribution or application of the total funds in the asset of a business enterprise. Comparison of the common size statement over a number of years will clearly indicate the changing proportion of the various components of assets, liabilities, cost, net sales & profits. It will assist corporate evaluation & ranking. Limitations: It doesnt show variations in the different account items from period to period. Less useful due to lack of established standard proportion of an asset to the total asset & so on.
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COMMON SIZE STATEMENT ANALYSIS OF ACC CEMENTS LTD. FROM 2005-2009 Table 2 2005 (%) SOURCES OF FUNDS: Shareholders Funds:Loan Funds: Deferred Tax Liabilities (Net) TOTAL FUNDS APP. OF FUNDS:--Fixed Assets: Investments:Net Current Assets( Current Assistscurrent liabilities & provision) MISC EXP.(to the extent not written off or adjusted) TOTAL ASSETS (Net) 84.16 9.60 5.62 79.48 11.50 9.00 80.03 17.06 2.92 88.29 11.82 (0.11) 91.08 21.28 (12.37) 46.96 44.36 8.68 100 71.76 20.91 7.32 100 83.84 9.47 6.69 100 85.77 8.39 5.84 100 86.78 8.18 5.04 100 2006 (%) 2007 (%) 2008 (%) 2009 (%)
0.61 100
0.02 100
0.00 100
0.00 100
0.00 100
Interpretation:(a) There is a significant increase in shareholders fund & decrease in loan funds continuously over a period of time. (b) There is also a significant increase in the amount invested by the company for the purpose of future growth. (c) There is a significant decrease in current asset over a period of time.
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WORKING CAPITAL CALCULATION

STATEMENT SHOWING CHANGE IN WORKING CAPITAL FOR ACC LTD Table. 3 Particulars Current Assets Inventories Sund. Debtors Cash & Bank Bal Loan & Advances Other CA Total ( A ) 778.98 203.70 746.38 554.42 10.99 2294.47 793.27 310.17 984.24 651.28 20.67 2759.63 (14.29) (106.47) (237.86) (96.86) (9.68) Dec09 Dec08 Increase ( + ) ( Rs.in Crore) Decrease (- )
Current Liabilities C.L. Provisions Total ( B ) 2060.34 1091.88 3152.22 1801.79 963.93 2765.72 (851.66) ( A-B ) Changes in working capital Total (857.75) (857.75) (6.09) (851.66) (857.75) (465.16) (465.16) (465.16) (465.16) 258.55 127.95
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SIMILARLY THE CALCULATION OF WC FOR THE YEAR 2005 TO 2009 Table.4 2005 (A)Current assets (B)Current Liabilities Working capital 1,421 1,335 86 2006 1,921 1,672 249 2007 2,203 2,221 (18) 2008 2,760 2,766 (6) (Rs.in Crore) 2009 2,294 3,152 (858)
WORKING CAPITAL CHANGES 400 249 200 0 2005 -200 -400 -600 -800 -858 -1000 Fig.2 2006 2007 2008 2009 86 -18 -6
Interpretation:- current liabilities are increasing over current assets suggest that the credit period are not managed properly
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. INVENTORY ANALYSIS Table. 5 2005 Inventories 600.95 2006 624.13 2007 730.86 2008 793.27 (Rs.in Crore) 2009 778.98
INVENTORY ANALYSIS 900 800 700 600.95 600 500 400 300 624.13 793.27 730.86 778.98
200
100 0
2005
2006
2007
Fig. 3
2008
2009
By analyzing the 5 years data it can be seen that the value of inventories is increasing over a no of year. It indicates that the company is growing rapidly in cement sector. A company uses inventory when they have demand in market. From other point of view we can say that the liquidity of firm is blocked in inventories but it is important to keep stocks due to uncertainty of availability of raw material in time.
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SUNDRY DEBTORS ANALYSIS Table. 6 2005 Sundry Debtors 199.17 2006 213.96 2007 289.29 2008 310.17 (Rs.in Crore) 2009 203.70
SUNDRY DEBTORS ANALYSIS 350 310.17 300 250 200 150 100 50 199.17 213.96 203.7 289.29
0
2005 2006 2007 Fig. 4 2008 2009
Debtors will arise only when credit sales are made. The above graph depicts that there is continuous rise in the debtors of ACC Ltd in the successive years other than 2009. It represents an extension of credit to customers. The reason for increasing credit is competition and company liberal credit policy.
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CASH & BANK BALANCES, LOANS & ADVANCES ANALYSIS Table. 7: 2005 Cash and Bank Balance Loans and Advances 100.60 533.54 2006 152.98 569.21 2007 78.87 544.31 2008 87.57 779.76 (Rs.in Crore) 2009 95.64 714.55
CASH & BANK BALANCES, LOANS & ADVANCES ANALYSIS
900
800 700 600 500 400 300 200 100 0 2005 2006 2007 2008 Loans & Advances 2009 Cash & Bank Balances Fig. 5 Decrease in Cash & bank balance, which shows the financial position of the company. Though there is a almost 50% fall in the FY 2007 but increases significantly thereafter. Cash is basic input or component of working capital. Cash is needed to keep the business running on a continuous basis. So the organization should have sufficient cash to meet various requirements. After analyzing the table, we can say that the pattern of loans & advance is not static in nature. It shows upwards & downwards movement as the requirements influence it. 152.98 100.6 78.87 87.57 533.54 569.21 544.31
779.76
714.55
95.64
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CURRENT LIABILITIES & PROVISIONS ANALYSIS Table. 8 2005 Current Liabilities Provisions 1,449.02 316.77 2006 1,596.50 541.83 2007 1,991.27 666.27 2008 2,245.39 963.93 (Rs.in Crore) 2009 2,558.73 1,091.88
CURRENT LIABILITIES & PROVISIONS ANALYSIS
3000
2558.73 2500 2000 1500 1000 541.83 1449.02 1596.5 963.93 666.27 316.77 1091.88 1991.27 2245.39
500
0
2005
2006
2007
2008 Provisions
2009
Current Liabilities
Fig. 6 After analyzing the bar-chart, we can say that the amount of current liabilities is increasing significantly over years .An increase current liabilities indicates that company is using its credit facilities to the maximum extent for operating purpose. But at the same time there is continuous rise in the debtors which will increase working capital requirement Provision shows an increasing trend and the huge amount is being kept in these provisions. This is kept to pay the taxes, interest & other facilities or benefits to the employee. It is just kept for meeting future short-term liabilities.
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RATIO ANALYSIS
(A) Overview:Financial ratios are measures of the relative health, or sometimes the relative sickness of a business. A physician, when evaluating a persons health, will measure the heart rate, bloodpressure and temperature; whereas, a financial analyst will take readings on a companys growth, cost control, turnover, profitability and risk. Like the physician, the financial analyst will then compare these readings with generally accepted guidelines. Ratio analysis is an effective tool to assist the analyst in answering some basic questions, such as:1. How well is the company doing? 2. What are its strengths and weaknesses? 3. What are the relative risks to the company? Although an analysis of financial ratios will help identify a companys strengths and weaknesses, it has its limitations and will not necessarily provide the solutions or cures for the problems it identifies.
B. APPLICATION OF RATIO ANALYSIS:Integral tool in trend analysis Compares the companys own ratios to itself over time Identifies the companys strengths and weaknesses Assists in establishing appropriate capitalization rates (helps to identify risk factors particular to the subject company)
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WORKING CAPITAL RATIOS AND ITS INTERPRETATION
Table. 9 Dec05 Liquidity Ratio Current Ratio Quick Ratio Solvency Ratio Debt-equity ratio. 0.50 0.25 0.07 0.10 0.09 0.58 0.42 0.77 0.61 0.86 0.55 0.89 0.61 0.67 0.42 Dec06 Dec07 Dec08 Dec09
WORKING CAPITAL RATIOS AND ITS INTERPRETATION 1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2005 2006 2007 Quick Ratio Fig. 7 2008 Debt-Equity Ratio 2009 Current Ratio 0.07 0.58 0.5 0.42 0.77 0.67 0.61 0.55 0.42 0.61 0.86
0.89
0.25
0.1 0.09
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Interpretation As we know that ideal current ratio for any firm is 2:1.The current ratio of company is less than the ideal ratio. This depicts that companys liquidity position is not sound. Its current assets are less than its current liabilities. Generally a quick ratio of 1:1 is considered to represent satisfactory current financial position. The trend of quick ratio is uneven & the ratio is around 0.5:1 over a period of time. A quick ratio is an indication that the firm is liquid and has the less confidence to meet its current liabilities in time. This shows company has liquidity problem. Debt-equity ratio shows relationship between borrowed funds and owners capital is a popular measure of the long term financial solvency of the firm. For ACC it was the highest around 0.5:1 in 2005.After that it shows fluctuation.
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ACTIVITY/MANAGEMENT EFFICIENCY RATIO
Table. 10 Dec,05 Inventory Turnover Ratio Debtor Turnover Ratio Investment Turnover Ratio Work cap turn. 5.37 16.34 12.29 (27.93) Dec06 9.33 27.75 22.40 (6.96) Dec07 24.85 27.40 24.85 (18.25) Dec08 27.51 24.12 27.51 (17.02) Dec09 25.22 31.22 25.22 (54.17)
ACTIVITY/MANAGEMENT EFFICIENCY RATIO 60 50 40 31.22 30 20 10 0 27.93 16.34 12.29 5.37 27.75 27.4 24.85 24.85 18.25 9.33 6.96
54.17
22.4
27.51 27.51 24.12

17.02
25.22 25.22
2005
2006
2007
2008
2009
Inventory Turnover Ratio Investment Turnover Ratio
Debtor Turnover Ratio Working Capital Turnover Ratio Fig. 8
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Interpretation
Inventory Turnover Ratio shows increasing trend which is favorable for the company. As it indicates how rapidly the inventory is turning into receivable through sales. A high ratio is good from the view point of liquidity. A low ratio would signify that inventory does not sell fast.
A high Debtor Turnover Ratio is indicative of shorter time lag between credit sales and cash collection. The higher the value of debtors turnover the more efficient is the management of debtors or more liquid the debtors are. A low ratio shows that debts are not being collected rapidly. As the graph reveals that the debts are collected in time & the process is improving consistently. This shows that company is utilizing its debtors efficiently as compare to previous year.
The working capital ratio indicates high net working capital required. This company having negative working capital because, they have more current liabilities over current assets. It shows that the short term loans are not sufficient and more money are invested in the purchase of current assets. Thus this ratio is helpful to forecast the working capital requirement on the basis of sale.
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PROFITABILITY & INVESTMENT TURNOVER RATIO Table. 11 Dec,05 Profitability Ratio Gross Profit Ratio Net Profit Ratio Investment Valuation Ratio Face value Dividend per Share 10.00 8.00 10.00 15.00 10.00 20.00 10.00 20.00 10.00 23.00 17.32 16.85 28.97 21.16 23.72 20.44 20.59 16.29 27.68 19.69 Dec06 Dec07 Dec08 Dec09
PROFITABILITY & INVESTMENT TURNOVER RATIO 35
30
25 20 15 10 5 0 2005 8 17.32 16.85
28.97 23.72 20.44 20
27.68 21.16 15 23 20.59 16.29 20 19.69
2006
2007 Net Profit Ratio Fig. 9
2008
2009
Gross Profit Ratio
Dividend Per Share
64
Interpretation
Gross Profit Ratio shows the profit relative to sales. A high ratio of gross profits to sales is a sign of good management as it implies that the cost of production of the firm is relatively low. For ACC it is uneven but it was good in FY06 & FY09.
The net profit margin is indicative of management ability to operate the business with sufficient success not only to recover from revenues, but also to leave a reasonable margin to the owners. A high net profit margin would ensure adequate return to the owners as well as enable a firm to face adverse economic conditions. It is significant & satisfactory for the company.
As it shows the dividend per share ratio is increasing over years. It means that the investors have faith in the company.
65
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 I.e. 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. There may be limitations to this study because the study duration is very short and its not possible to observe every aspect of working capital management practices. The data collected were secondary in nature. 3) Limited area:Also it was difficult to collect the data financial information. Industry figures were also difficult to get.
66
FINDINGS
The net sale increases by 150% in 5 years (2005-2009) with increasing rate. Profit before tax increases by 235% in these 5 years, except in the year 2008. Operating Profit tax increases by 330% in these 5 years except in 2008. Profit after tax increases by 195% in 5 years (2005-2009) with increasing every year. Change in Capital Employed is increased by 98% from 2005 to 2009. Earnings per Share increases by 185% in these 5 years, except in the year except 2008. There is a significant increase in shareholders fund & decrease in loan funds continuously over a period of time. There is also a significant increase in the amount invested by the company for the purpose of future growth. The current ratio of company is less than the ideal ratio. Its current assets are less than its current liabilities. The amount of current liabilities is increasing significantly over years. By analyzing the 5 years data we can see that the value of inventories has been increasing over number of years. There is continuous rise in the debtors of ACC Ltd in the successive years except 2009. There is an almost 50% decline in Cash & bank balances in the FY 2007 as compared to 2008 but increases significantly thereafter. The pattern of loans & advances is not static in nature. It shows upwards & downwards movement as the requirements influence it. Provisions show an increasing trend and the huge amount is being kept in these provisions. A quick ratio is an indication that the firm is liquid and has the less confidence to meet its current liabilities in time. Debt-equity ratio for ACC was the highest around 0.5:1 in 2005.After that it showed fluctuations. Over a period of years, there is an increasing trend in all the Balance sheet items other than Investment & Current assets.
67
SUGGESTION
It is suggested that the company has to increase its current assets to meet its short-term obligations by reducing debtors collection period and using as working capital to increase its current assets.
The additional capacity of cement production will create new milestones for the ACC. Company has to improve debtors collection period continuously so that effective receivable management will possible.
Reserves should be utilized for the growth of the company.
While forecasting cash flow, the management should take into account the impact of unforeseen events, market cycles and actions by competitors. The effect of unforeseen demands of working capital should be factored in.
Collaborating with the customers & suppliers instead of being focused only on own operations will also yield good results. If feasible, helping them to plan their inventory requirements efficiently to match their production with their consumption will help reduce inventory levels.
68
CONCLUSION
Cement industry have lot of opportunities to make best use of it due to demand gap i.e., demand is increasing and therefore to meet out these increasing demand the working capital requirement also increases. So in order to decrease working capital requirement the current assets should be increased over liabilities. In case of ACC Ltd the decrease in working capital is because the current liabilities are increasing over current assets that suggest the creditor days are not managed properly and it indicates that company is using its credit facilities to the maximum extent for operating purpose, but at the same time there is continuous rise in debtors which will increase working capital requirement. The value of inventories is increasing over a number of years. Due to increase in current liabilities the provision also increases. Company uses inventory when they have demand in market. From other point of view liquidity of firm is blocked in inventories but it is important to keep stocks due to uncertainty of availability of raw material in time. Overall the significant increase in all ratios of the company are good.
69
REFERENCES
BOOK Research methodology URLS http://www.moneycontrol.com/financials/acc/balance-sheet/ACC06 http://www.moneycontrol.com/financials/acc/profit-loss/ACC06 http://www.moneycontrol.com/financials/acc/ratios/ACC06 http://ca.finance.yahoo.com/q/bs?s=acc.ns&annual http://money.rediff.com/companies/acc-ltd/11510001/balance-sheet http://money.rediff.com/companies/acc-ltd/11510001/profit-and-loss http://money.rediff.com/companies/acc-ltd/11510001/ratio C.R. Kothari
WEBSITES WWW.GOOGLE.COM WWW.ACCLIMITED.COM. WWW.MONEYCONTROL.COM WWW.REDIFF.COM
70
APPENDICES
71
Balance Sheet of ACC
------------------- in Rs. Cr. ------------------Dec '06 Dec '07 12 mths 12 mths Dec '08 12 mths 187.88 187.88 0.00 0.00 4,739.85 0.00 4,927.73 450.00 32.03 482.03 5,409.76 Dec '08 12 mths 5,835.67 2,365.97 3,469.70 1,602.86 679.08 793.27 310.17 87.57 1,191.01 779.76 896.67 2,867.44 0.00 2,245.39 963.93 3,209.32 -341.88 0.00 5,409.76 1,734.21 262.56 Dec '09 12 mths 187.94 187.94 0.08 0.00 5,828.20 0.00 6,016.22 559.74 7.18 566.92 6,583.14 Dec '09 12 mths 6,826.27 2,667.98 4,158.29 2,156.21 1,475.64 778.98 203.70 95.64 1,078.32 714.55 650.74 2,443.61 0.00 2,558.73 1,091.88 3,650.61 -1,207.00 0.00 6,583.14 840.52 320.45
Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities
187.48 187.48 0.28 0.00 2,955.16 0.00 3,142.92 720.96 50.20 771.16 3,914.08 Dec '06
187.83 187.83 0.10 0.00 3,964.78 0.00 4,152.71 266.03 40.38 306.41 4,459.12 Dec '07
12 mths 12 mths Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs) Source : Dion Global Solutions Limited 4,816.25 1,893.76 2,922.49 558.42 543.09 624.13 213.96 152.98 991.07 569.21 467.19 2,027.47 0.00 1,596.50 541.83 2,138.33 -110.86 0.94 3,914.08 341.56 167.81 5,464.07 2,149.35 3,314.72 649.19 844.81 730.86 289.29 78.87 1,099.02 544.31 664.61 2,307.94 0.00 1,991.27 666.27 2,657.54 -349.60 0.00 4,459.12 890.62 221.33
72
Profit & Loss account of ACC Dec '06 12 mths Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses 6,467.84 736.09 5,731.75 247.87 -29.25 5,950.37 1,513.55 430.98 318.02 262.45 1,298.32 189.08 0.00 4,012.40 Dec '06 12 mths Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit(pat) Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs) 1,690.10 1,937.97 75.19 1,862.78 254.61 6.24 1,601.93 14.55 1,616.48 369.10 1,231.84 2,498.85 0.00 280.92 39.40 1,872.78 65.78 150.00 167.81
------------------- in Rs. Cr. ------------------Dec '07 12 mths 7,865.11 970.32 6,894.79 369.35 6.93 7,271.07 1,843.65 517.56 352.73 344.17 1,547.30 354.51 0.00 4,959.92 Dec '07 12 mths 1,941.80 2,311.15 73.87 2,237.28 305.43 1.55 1,930.30 -0.16 1,930.14 491.70 1,438.59 3,116.27 0.00 375.02 63.74 1,876.24 76.67 200.00 221.33 Dec '08 12 mths 8,300.18 1,070.21 7,229.97 252.84 0.33 7,483.14 1,180.48 1,598.96 413.04 362.90 1,620.65 270.99 0.00 5,447.02 Dec '08 12 mths 1,783.28 2,036.12 39.96 1,996.16 294.18 0.00 1,701.98 35.39 1,737.37 524.60 1,212.79 4,266.54 0.00 375.33 63.79 1,876.82 64.62 200.00 262.56 Dec '09 12 mths 8,803.17 781.58 8,021.59 137.40 28.74 8,187.73 1,233.42 1,539.65 367.71 421.69 1,658.79 262.72 0.00 5,483.98 Dec '09 12 mths 2,566.35 2,703.75 84.30 2,619.45 342.09 0.00 2,277.36 21.54 2,298.90 688.93 1,606.73 4,250.56 0.00 431.76 73.38 1,877.40 85.58 230.00 320.45
Source : Dion Global Solutions Limited
73
Key Financial Ratios of ACC
------------------- in Rs. Cr. -------------------
Dec '06 Investment Valuation Ratios Face Value Dividend Per Share Operating Profit Per Share (Rs) Net Operating Profit Per Share (Rs) Free Reserves Per Share (Rs) Bonus in Equity Capital Profitability Ratios Operating Profit Margin(%) Profit Before Interest And Tax Margin(%) Gross Profit Margin(%) Cash Profit Margin(%) Adjusted Cash Margin(%) Net Profit Margin(%) Adjusted Net Profit Margin(%) Return On Capital Employed(%) Return On Net Worth(%) Adjusted Return on Net Worth(%) Return on Assets Excluding Revaluations Return on Assets Including Revaluations Return on Long Term Funds(%) Liquidity And Solvency Ratios Current Ratio Quick Ratio Debt Equity Ratio Long Term Debt Equity Ratio Debt Coverage Ratios Interest Cover Total Debt to Owners Fund Financial Charges Coverage Ratio Financial Charges Coverage Ratio Post Tax Management Efficiency Ratios Inventory Turnover Ratio Debtors Turnover Ratio Investments Turnover Ratio Fixed Assets Turnover Ratio Total Assets Turnover Ratio Asset Turnover Ratio Average Raw Material Holding Average Finished Goods Held 10.00 15.00 89.30 306.06 144.12 49.05 29.17 24.35 28.97 25.53 22.63 21.16 18.15 38.35 39.19 33.64 20.35 20.35 40.10 0.77 0.61 0.25 0.20 19.97 0.25 23.43 20.85 9.33 27.75 22.40 1.72 1.46 1.19 22.19 7.07
Dec '07 10.00 20.00 103.47 367.48 206.60 48.95 28.15 23.24 23.72 21.57 21.57 20.44 20.44 39.84 34.64 29.16 221.33 221.33 39.98 0.86 0.55 0.07 0.07 24.05 0.07 28.21 24.63 24.85 27.40 24.85 1.26 1.55 1.26 21.34 7.17
Dec '08 10.00 20.00 95.02 385.22 247.26 48.94 24.66 20.01 20.59 19.22 19.22 16.29 16.29 31.43 24.61 23.05 262.56 262.56 31.43 0.89 0.61 0.10 0.10 42.56 0.10 49.92 38.71 27.51 24.12 27.51 1.25 1.35 1.25 33.05 6.45
Dec '09 10.00 23.00 136.52 427.27 304.59 48.92 31.95 27.22 27.68 23.61 23.61 19.69 19.69 35.80 26.70 26.32 320.45 320.45 35.80 0.67 0.42 0.09 0.09 27.96 0.09 32.02 24.12 25.22 31.22 25.22 1.19 1.23 1.19 37.17 7.01
74
Number of Days In Working Capital Profit & Loss Account Ratios Material Cost Composition Imported Composition of Raw Materials Consumed Selling Distribution Cost Composition Expenses as Composition of Total Sales Cash Flow Indicator Ratios Dividend Payout Ratio Net Profit Dividend Payout Ratio Cash Profit Earning Retention Ratio Cash Earning Retention Ratio AdjustedCash Flow Times
-6.96 26.40 3.00 20.02 1.20 26.00 21.45 69.70 75.70 0.59 Dec '06
-18.25 26.73 6.49 18.55 1.29 30.49 25.13 63.78 71.10 0.20 Dec '07 76.67 221.33
-17.02 16.32 9.83 19.05 0.99 36.20 29.13 61.35 69.30 0.34 Dec '08 64.62 262.56
-54.17 15.37 15.72 17.37 0.69 31.43 25.92 68.11 73.78 0.29 Dec '09 85.58 320.45
Earnings Per Share Book Value Source : Dion Global Solutions Limited
65.78 167.81
75

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ACKNOWLEDGEMENT

MD ZUHAIR ROLL NO: 091105

KANPUR INSTITUTE OF MANAGEMENT STUDIES

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FIGURE NO. 1 2 3 4 5 6 7 8 9 Demand-supply

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Growing Demand-Supply Gap Capacity additions (Million Tones) 250

0 2003-04 Fig. 1 2008-09

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Name Production Installed Capacity Net Profit (in 2008-09)

Birla Corp. 5,150 5,113 9,061 lakhs

Gujrat Ambuja, 7.60%

India Cement, 6.90%

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Plants & Their Capacity

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Incorporation of Bulk Cement Corporation of India, a JV with the Government of India.

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MAP OF ACC PLANTS

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AN INTRODUCTION TO WORKING CAPITAL MANAGEMENT

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Debtors & Bill Receivables

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TYPES OF WORKING CAPITAL

GROSS WORKING CAPITAL

NET WORKING CAPITAL

SEASONAL WORKING CAPITAL

SPECIFIC WORKING CAPITAL

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SIGNIFICANCE OF WORKING CAPITAL

EASY LOAN FROM BANK

SIGNIFICANCE OF WORKING CAPITAL

INCREASE IN FIX ASSETS

INCREASE DEBT CAPACITY

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WORKING CAPITAL MANAGEMENT

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Non-availability of stocks due to non-availability of funds may result in production stoppage.

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