financial analysis of cg

8/11/2019 Financial Analysis of Cg

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ANALYSIS OF FINANCIAL STATEMENT

EXECUTIVE SUMMARY

INDUSTRY PROFILE

The healthy growth in the industrial sector achieved during 2005-2006 has continued during the

current year as well with overall industrial growth (measured in terms of the index of Industrial

Production) growing at a rate of 8.5 percent during the April- September 2004-05 compared with 6.2

percent achieved during the same last year.

The existing installed capacity in the industry is of the order of 4500 MW thermal, 1345

MW of Hydro and about 25 MW of gas based power generation equipment per annum and

manufacturing units depending upon the needs and their capacity are augmenting the capacity.

COMPANY PROFILE

THE CROMPTON GREAVES GROUP

Col. R.E.B. Crompton founded R.E.B. Crompton & Company in 1878. The company was merged

with F.A. Parkinson in 1927 to form Crompton Parkinson Ltd. Greaves Cotton and Company,

established by James Greaves in 1859, was appointed as their concessionaire in India.

In 1937, Crompton Parkinson established Crompton Parkinson Works Ltd. in Bombay as a wholly

owned Indian subsidiary. In collaboration with Greaves Cotton, it also established a sales

organization, Greaves Cotton & Crompton Parkinson Ltd. In 1947, just before India's independence,

Lala Karam Chand Thapar, an eminent Indian industrialist, bought Greaves Cotton when the

company was put up for sale. With this acquisition, Karam Chand Thapar gained control of several

associated companies such as Crompton Parkison Works, Greaves Cotton and Crompton Parkinson

Company.

The name Crompton Greaves Limited was adopted on August 2, 1966, following a court-directed

amalgamation of Greaves Cotton and Crompton Parkinson Ltd.

Over the years, the company has evolved into one of India's largest private sector enterprises.

After the acquisition of theBelgium-based Pauwels Trafo/Pauwels Group in May 2005, Crompton

Greaves was ranked amongst the world's top ten electrical transformer manufacturers. The companysubsequently acquired a host of companies outside India. These includeGanz(Hungary), Microsol

(Ireland), Sonomatra (France), MSE Power Systems (USA)and ZIV (Spain).

Crompton Greaves is a part of the US$4 billionAvantha Group, and is headquartered in a self-

owned landmark building CG House at Worli, Mumbai. In 2009, reflecting its global presence and

diverse businesses, Crompton Greaves adopted a new brand identity and is known as CG.
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Crompton Greaves made series of acquisitions overseas which includes[4]-ZIV Group for Euro 150

Mn, QEI Inc, provider of SCADA and automation systems for $30.0 Mn and Emotron Group, a

power electronics and engineering company, for $82.3 Mn (57.8 Mn Euros).

In September 2012, HSBC Global Investment Funds raised its stake in Crompton Greaves from

1.29% to 2.68% through bulk deal on BSE for R92.73 Cr.

In March 2009, Crompton Greaves acquired 41% stake in Avantha Power & Infrastructure Limited

for R227Cr.

Mr Gautam Thapar is the Chairman of the Board and Mr Laurent Demortier is the Managing

Director and CEO of the company.

OBJECTIVES OF THE STUDY

To study on the financial performance of the company for the past 5 years.

To bring out the results of financial statements through ratio analysis.

To study about the Crompton Greaves Company Limited, Mandideep in general.

To study the financial position of the company.

SCOPE OF THE STUDY

The scope of the study is the covered area for the purpose of study. The study is limited to

Plant M7 (unit of CG ltd).

METHODOLOGY

Methodology is the systematic method or an activity, which is used to collect the

information required to complete this project work.

The data is collected by 2 methods:

1. Primary data

2. Secondary data.

Primary data is collected through collecting information from company officers, from external guide.
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Secondary data, which is secondary in nature i.e. already, collected information this secondary data

is collected through Companys Annual Report and discussion with them.

Interpretation of:

Balance sheet

Profit and loss account

Annual reports

INTRODUCTION OF THE STUDY

The accounting process begins with the recording of transactions in the books of primary

entry. The accounting information resulting from the transactions so recorded gets posted in to

various accounting heads in the ledger. In the ledger each account is balanced at the end of an

accounting period and a summary of all balances in the various accounting heads from the ledger is

prepared which is known as trial balance from such trial balances and after effecting certain

adjustments considered necessary (which is dependent on the particular accounting system followed

by the organizations) the financial statements relating to the accounting period are prepared.

NEED FOR THE STUDY

There are some questions, which arise from the study of financial statements. These could

be Is Companys profitability adequate? Why is a profit low in spite of increased sales? Why is

there liquidity problem though profitability is good? Why no reasons for changes in assets, liabilities

and equity between two dates? Why no dividends are paid though there are good profits? From

where have come cash flows and how they are applied? These and many other questions need

answers, which can be possible when the financial statements are suitably analyzed

Thus financial statement analysis deals with meaningful interpretation of financial data

available in financial statements to serve specific purpose of organizations of such data for their

decision making .this involves identifying the purpose and selecting suitable means of analysis.

Financial statement analysis is essentially purposive.

ABOUT THE ORGANIZATION


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Crompton Greaves group of companies are a century old company which comprises of over

20 companies with a total turnover of over Rs.1200crores and personnel strength of over 25000

workers, engineers and managers.

In the history of India industry, a significant event was the rise of Crompton Greaves group of

company.

The Crompton Greaves stands for excellence in engineering, quality and reliability. The business

areas of the group companies reflects its diversity, process control equipment and machine tools,

rotating electrical machines, internal combustion, engines, computers etc.

The company started with manufacture of AC Motors 1984. Today CG manufactures diversified

product range consisting of AC Motors, AC Generators, Transformers, DC Motors and Electric

equipments. The Unit-II in Mandideep, Crompton Greaves Company limited is a subsidiary of

Crompton Greaves (PLANT M-7). It manufactures AC Motors and AC Generators.

INDUSTRY PROFILE

The healthy growth in the industrial sector achieved during 2003-04 has continued during the current

year as well with overall industrial growth (measured in terms of the index of Industrial Production )

growing at a rate of 7.9 percent during the April- September 2004-05 compared with 8.5 percent

achieved during the same last year.

The worldwide electric power industry provides vital services essential to modern life. It provides

the nation with the most prevalent energy form known in historyelectricity. It advances the nations

economic growth and productivity; promotes business development and expansion; and provide

solid employment opportunities to workers globally in general and India in particular. It is a robust

industry that contributes to the progress and prosperity of our nation. Today the electric power

industry operates in a hybrid model of competition and regulation. The worldwide electrical and


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electronics industry is growing at a fast pace which consist of manufacturers, suppliers, dealers,

electricians, electronic equipment manufacturers.

Power industry restructuring, around the world, has a strong impact on Asian power industry as well.

Indian power industry restructuring with a limited level of competition, since 1991, has already been

introduced at generation level by allowing participation of independent power producers (IPPs). The

new Electricity Act 2003 provides the provision of competition in several sectors. It is felt that the

prevailing condition in the country is good only for wholesale competition and not for the retail

competition at this moment.

As per the recent survey, the global electric & electronic market is worth $1, 03.8 billion, which is

forecasted to grow to $ 1,216.8 billion at the end of the year 2008. If we talk of electric & electronic

production statistics, the industry accounted for $ 1,025.8 billion in 2006, which is forecasted to

reach $1,051.5 billion in future.

Size of the Electric/ Electronic Industry

Top three electric and electronic goods manufacturing countries in the world are;

United States of America, Japan and Korea respectively, The United States of America being the

largest producer of electronic products worldwide contributes the total share of around 21%

furthermore; USA is at the forefront to have the largest market share with around 29% in the global

market.

The worlds electrical market size was $ 1038.8 billion in 2006, since last year an increase of 10.6%

is forecasted to grow even more. The industrial electrical goods industry size was $ 651.3 billion,

contributing around 62.7% of the total. With regard to electronics parts and components sector, the

total market share was around $ 282.7 billion i.e.; 27.2% while home electronics was 104.7 billion.

This figure is supposed to increase in this decade.

Major Production and Export Centers

As electronic manufacturing industry is growing with a fast pace, Western Europe is developing

gradually to contribute this industry. Western Europe comprising of 16 countries is contributing


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around 22% of the global market. Simultaneously, Eastern Europe is forecasted to grow about $ 24

billion in 2013 from $ 9 billion in 2006.

If we talk of Asia Pacific region, China, Japan, North & South Korea, Singapore and India are the

top manufacturer of electrical and electronic products. Among these Asian countries, China is

becoming the manufacturing region of electronic products on the globe.

In United States of America, cities like New York, Atlanta, Colorado, Detroit, Florida, and New

England, San Diego, San Francisco, and Texas can be named as industrial hubs of electronics

industry.

At present, Asia is growing with more speed in comparison to America and Europe. In 2002, Asia

occupied 41% of total electronics market share, which grew up to 56% in 2007. Those days are not

far away when Asia will become the market leader globally.

Future Outlook of Electric & Electronic Industry

Totally, the electrical and electronic industry is experiencing phenomenon and remarkable changes

worldwide. The worldwide electronics industry is distinguished by fast technological advances and

has grown rapidly than most other industries over the past 30 years.

Products are heading towards new destinations where cost is less than other place with higher costs

involved. These places offer the most long term potential for market growth. Companies indulged in

manufacturing electrical products are investing a lot on research and development for the best

products to meet the demand of the market. They are manufacturing the products with the best

quality at reduced cost due to many competitors.


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COMPANY PROFILE

THE CROPMTON GREAVES GROUP

A significant event in history of Indian industry was the rise of the Crompton Greaves Group

of companies to a multibillion conglomerate. The Chairmen Mr. Gautam Thaper Crompton Greaves

strongly believed that a companys progress was determined by the integration of man and his

intellect with technological growth and environment.

The first Cropmton Greaves product 1200 KV Capacitive Voltage Transformer was an

innovation far ahead of its time a product designed wholly with the customer in mind. It ultimatelybecame an instrument of wealth for an entire society. The group is committed to innovation, quality

and continuing technological advancement. This is evident in there and customs designed products,

which have already gained a worldwide reputation for meeting critical industrial needs. The

companys growth within the country and their entry into global market is based on their highly

skilled Human resource and their vast distribution network. We have some of the best engineering

and technical brains in the country, who have made their mission immensely productive and

successful.

CG at a glance

A countrys progress has been closely linked to effective harnessing and use of electrical

energy for the benefit of its people. Cropmton Greaves Electric Companys endeavor has been to

contribute cost effective solutions in all application of electricity. They are actively involved in


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supplying electrical industrial electronic equipment, systems to industry, agriculture and utilities. In

all these ventures, their focus has been to provide state of the art technology that can living standards

and thereby make the environment a better place to live in.

In the words of Mr. Gautam Thapar:

My faith is in the human intellect. It gives us our means to create wealth by directing our

talents towards procedure work. And therefore, freedom for individual ability is the only way a

society can prosper. After all, you cannot distribute wealth unless you first create it. And you cannot

create it unless you know how

His words breathe the spirit with the Crompton Greaves industrial journey began. And this

spirit has continued through the passage of time. CG Ltd. An ISO 9001 certified company was

established in 1966 with its registered office at worli in Mumbai. As a part of diversification activity,

CG PLANT-M7. started another unit at Mandideep in 1969, to manufacture Electric motors ranging

from fractional horsepower to motor up 20HP. Under the leadership of Shri Gautam Thapar CG

PLANT-M7 Was started in Mandideep Crompton Greaves Electric Company is the pioneer in India

in the manufacture of quality equipments like AC and DC electric motors, generators, welding

equipments, controls equipments transformers etc.

The company started with manufacture of AC Motors in 1984. Today CG M7 manufacturers

diversified product range consisting of AC Motors, AC Generators, Transformers, DC Motors and

Electronic Equipments. The M7 in Mandideep, Crompton Greaves Electric Company Limited is a

subsidiary of Crompton Greaves Electric Company Limited. It manufactures AC Motors and AC

Generators.


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EMPLOYEES PROFILE

KEC Ltd. has a strong employee base. It has maintained fully trained and experienced workers. It

values its employees and the employees are considered the real Asset of the company.

The employees are very hard working and dedicated towards the growth of the company. The

employee base can be depicted based on the number of employees in each section.

SECTION NO. OF EMPLOYEES

Canteen 09

Central Planning Dept. 05

Production Dept. 32

Engineering Dept. 13

Finance Dept. 14

Forwarding Dept. 03

General Stores 12

MED 03

Marketing Dept. 07

Packing Dept. 32

MMD and MSD 17

Personnel Dept. 04

Quality Assurance Dept. 73

Reception 01

----------

229


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0

MILESTONES IN THE HISTORY OF KEC

1966 ---- CG established at Mumbai.

1948 -- A new era opens for Indian CG PLANT-M7produces the countrys very first

AC Motors

1954 ---- Impatient for progress, the company gets into product diversification producing its first

transformers.

1956 ---- First transformer manufactured.

1958 --- A critical power situation inspires production of the countrys first

transformers.

1963 ---- The patient of breakdown continues. DC motors and DC generators roll off the

assembly line.

1965 ---- Market demand increases. Indias first motorized gear unit joins the CG PLANT-M7

product range.

1966 ---- Intensive research and development sets the pace for production of the first induction

heating equipment.

1982 ---- New collaborations. Better products. Thyristor, Converters, made in collaboration with

Thorn EMI, U.K.

1987 ---- Introduction of CNC systems and factory automation.


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1989 ---- More collaboration. More products. With Fuji of Japan for investors and with Toshiba of

Japan for UPS

1991 ----Toyo Denki collaboration for motors and generators up to 10MW/ MVA. Production of

technologically advanced large DC motors and large AC machines in collaboration with AEG

Daimler Benz of Germany up to 20MW

1992 ---- The company starts production of Hi- Tech CRT based CNC systems.

1993 ---- Cropmton Greaves Electric becomes the first company in India to receive ISO 9001

certification for its entire product range and for all its manufacturing units.

1995 ---- Took over Voltas Transformer and started manufacturing plant at Tumkur for

Manufacturing units

1996 ---- Celebrated Golden jubilee and started manufacture of wind turbine.

2001 ---- Company restructure.

2002 ---- First test lab was started at Tumkur.

2003 ---- Received NVLAP certificate test lab.

2004 ---- Customer Excellence Certificate.

COLLABORATION

CG provides the latest technology products to customers. Towards this, it has entered into

collaboration with foreign companies apart from indigenous research and development efforts. Some

of the major collaboration is:


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AC induction motors ---- AEG, Germany

AC generators ---- AEG, Germany

Cast resin transformer ----- OCREV, Italy

Inverters ----- Fuji Electric, Japan

Vector control inverters ---- University of Wuppertal, Germany

Uninterruptible power systems ---- Toshiba Corporation, Japan

CNC Controls ---- ADOLPH numerical controls.

Ltd, UK

Transformers ---- Peebles Electric Ltd.

Wind turbine generators ---- Wind energy group, UK.

CG PRODUCTS AND SEVICES

Power Systems Industrial Systems Consumer Products

Transformers and Motors: High/Low VoltageAC&DC

Fans


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Reactors

Switchgear

Products-

MV/HV/EHV/UHV

Generators/Alternators Appliances

nstrument

Transformers-

MV/HV/EHV/UHV

ractionMotors/Alternators/Control

Electrics

Lighting

Power Quality

Solutions

FHP/Commercial Motors Pumps

T&D

Systems/Engineering

Solutions

Railway Signaling andCoach Applications

Home Automation

Protection Control &

Automation

Drives and Automation Integrated Security Systems

Services for Power

Systems

Stampings andLaminations

Wiring Accessories

Transformer &

Switchgear

Components

Services for IndustrialSystems

LV Switches & Panel Products

ORGANISATION SET UP OF CGL

BOARD OF DIRECTORS

The Board of Directors is vested with the responsibility of guiding and reviewing the Company`soverall Management philosophy and direction; and, influencing the CG Group`s Global footprintand business perspective across all its companies worldwide.

Gautam Thapar - Chairman


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4

Sudhir M Trehan - Vice Chairman

Laurent Demortier - CEO and Managing Director

Scott Bayman Independent Director on the Board

Dr. Omkar Goswami Independent Director on the Board

B Hariharan Non-Executive Director

Sanjay Labroo Independent Director on the Board

Dr Colette Lewiner Independent Director on the Board

Suresh Prabhu Independent Director on the Board

Meher Pudumjee Independent Director on the Board

Satya Pal Talwar Independent Director on the Board

Dr. Valentin von Massow Independent Director on the Board

BANKERS

Bank of Maharashtra

Canara BankCorporation Bank

Credit Agricole CIB

ICICI Bank Ltd

IDBI Bank

Royal Bank of Scotland

Standard Chartered Bank

State Bank of India

Union Bank of India

Yes Bank Ltd

REGISTERED OFFICE

C G House 6th Floor,Dr Annie Besant Road Worli,Mumbai,Maharashtra-400030Phone : 91-22-24237777Fax : 91-22-24237788


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FACTORY

CG Energy Management Ltd

CG PPI Adhesive Products Ltd

CG-ZIV Power Automation Products Ltd

CG PLANT-M7

The CG PLANT-M7, Mandideep was founded on 2ndmarch 1969 and is situated on Mandideep-

580030. It covers 110 acres, which presents a gigantic picture. Crompton Greaves Plant Motor

Division is also known, as M7. It is mainly concerned with production whereas CG PLANT-M7

looks carries out all other activities. The main branch is at Mumbai. The board of Directors at

Mumbai formulates all the policies and plans.

CG has been brought into existence to overcome financial problems which are the results of

accumulated losses of 30 crores because of heavy competition. Performance of CG PLANT-M7 has

been disappointing as concerned to the financial year 1997-1998. This unit is the only one unit that

seems to be contributing to the profits in terms of turnover, which is the highest among all over units

of CG group. The production activity is carried out throughout the year in this unit.

QUALITY POLICY

The quality price of CG shall be to design, manufacture and market at competitive prices,

products of such quality, which results in customer satisfaction, quality reputation and market

leadership.

VISSION

"To Create Lasting Value"

We strive to create lasting value for all our stakeholders through extraordinary efforts. With

integrity, imagination and respect for individuals.
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Lasting to us means timeless - value that will endure, regardless of changes in our businesses,

people, markets or geographies. By constantly setting and redefining the gold standard in every

business we operate in, we will create enduring value for our employees, customers, partners,

shareholders and society.

For our employees - valuein the form of professional growth, through an enabling workenvironment, knowledge sharing, implementation of best practices and growth in their personal life.

For our customers- valuethrough quality products and services, understanding of their needs and

proactively providing solutions, and contributing to their business growth.

For our partners - valuethrough building mutually beneficial long term relationships, knowledge

sharing and support, and helping them optimise their business potential.

For our shareholders - value through a high return on investment, a profitable and sustainable

growth platform, and developing the spirit of enterprise.

For society - value by focusing on the development needs of the communities we engage with,

adopting responsible business practices, and making a sustained effort to preserve the environment.

VALUES

Integrity. Imagination. Individual

Integrity - in both personal and professional relationships

Following ethical business practices

Honouring our commitments to all stakeholders

Being open and sincere in all our dealings

Being accountable and taking ownership

Providing genuine value through our products and services

Imagination - that drives our actions

Constantly searching for "the new" in all spheres

(be it products, processes, markets, geographies)

Encouraging and implementing original ideas and "out-of-the-box" thinking

Being agile and responsive to change


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Leveraging knowledge and technology to drive innovation

Individual - a commitment to valuing people

Respect for individuals and recognising their contribution

Being fair, offering equal opportunity

Encouraging openness and freedom of expression

Ensuring prompt response to issues and concerns

Empowering and stimulating employees to realise their potentia

MISSION

"To achieve a Group turnover of US$ 10 bn and a market capitalisation of US$ 25 bn by 2013

through a focus on profitability."

"To become one of the most admired Indian transnational business houses by 2015."

By 2015, our Group will be recognised and admired in the world community. We will set

benchmarks and be the gold standard in every business we operate in.

We will be a Group that combines the best of the old and the new: respect for people and

relationships, integrity, our pioneering spirit and performance orientation.

In our businesses, we will:

aggressively seek opportunities for profitable growth and creation of long term

investment value

be a leader in the domestic market

establish a significant global footprint

use technology as an asset and to our advantage

We will be admired for our people orientation: strong relationships with our employees and business

partners, and a preferred employer status for our work culture, respect for people and learning

opportunities.

We will be respected for being a good corporate citizen by adhering to best governance practices,

and fulfilling our responsibility to society by engaging positively with our communities.

GUIDING PRINCIPLES

Innovate continuously to excel in design and manufacturing.

Development products required by market.


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Manufacture products of highest quality

Focus on customer in all actions.

Respond promptly to customer needs.

Deliver supplies on time every time.

Treat each other with trust and respect to build a team.

Develop people by training and delegation.

Adopt process-oriented thinking, continuous improvement, and management by facts

priority.

Reduce costs constantly to remain competitive.

Earn enough profits to fund growth and diversification.

Offer goods and services at competitive prices.

Look upon dealers, suppliers and business associates as partners.

Maintain safe, clean and healthy environment.

Conduct business in a socially responsible manner.

HODS OF CROPMTON GREAVES LIMITED,

M7 PLANT

CEO - G. THAPAR

PERSONNEL - SOFIYA ANJUM

PRODUCTION - A.B.JOSHI

- D.S.WODEYAR

FINANCE - K.SHRIDHAR

MARKETING - V.RAMPRASAD

ENGINEERING - D.A.DESAI

MMD - ASHOK KADAKOLI

MED & MSD - S.V.PUROHIT

CEN.PLANNING - A.B.JOSHI


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9

ORGANISATION STRUCTURE OF CG PLANT M7

MANDIDEEP

Chief Executive

Deputy General Manager

ProductionDepartment(SeniorManager)

FinanceDepartment(SeniorManager)

CentralPlanning(AssistantManager)

Stores(junior

Manager)

EngineeringDepartment(SeniorManager)

QualityAssuranceDepartment(SeniorManager)

Marketing(Deputy

Manager)

M.M.D(Assistant

Manager)


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0

MANPOWER IN CG PLANT M7

AS on 01-05-2007

Table:

1

Besides

these

perman

ent employees, around 81 trainees are recruited and contract Labour are hired only for some specific

purposes and in never employed in production or feeder shops.

Officers cadre is divided into 2 categories.

1. Junior officers from the grade from 5 to 7

Junior officer 1: Grade 5



2. Senior officers from the grade from 8 to 9

Officer: Grade 8

Senior Officer: Grade 9

The manager cadre is classified as follows from grade 10 to 16

Assistant Manager - Grade 10

Deputy Manager - Grade 11

Manager - Grade 12

Deputy Senior Manager - Grade 13

Senior manager - Grade 14

Deputy General Manager - Grade 15

General Manager - Grade 16

Human Resource Total Members

Daily rated employees (DREs) From grade1 to 8

432

Monthly rated employees (MREs) Fromgrade 1 to 7

45

Officers, Engineers and above From grade8 to 16

85

Total 562


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PRODUCT PROFILE

AC Generator AC motor

`

DC Motor Traction Equipment

We design and manufacture our products according to the standards of :


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2

ISO (International Organization for Standardization)

IEC (International Electro technical Commission)

BIS (Bureau of Indian Standards)

BSI (British Standards Institution)

JEM(Japan Electrical Manufactures Association)

PERSONNEL DEPARTMENT

CG Company recognizes its employees as its most important asset for its continued growth. Human

resources management in CGL shall striver to ensure continuous organizational growth by nurturing

the strengths of its employees and providing the environment and opportunity for every individual to

rise to his/her highest potential, identity and achieve his/her personal goal within the framework of

organizational, social and natural objectives. To achieve this following sections are formed to

perform the various functions including, Positive Motivation, Preparation and maintenance of

quality plans with aid of systems, procedures and work instructions published collectively in quality

manuals.

Scope: Personnel Department is applicable to personal welfare safety and security.

Responsibility of Personnel Department:

Implementation and maintenance of various functions is the responsibilities of the Head of

Department (HOD) with appropriate duties assigned to section in charges (SIC) and staff.

Functions:

The Main functions of Personnel Department are:

HOD-PERSONAL AND INDUSTRIAL RELATIONS:

To ensure that harmonious relations exists between workers and management

To ensure safe working conditions and to provide safety equipments. To Co-ordinate security and vigilance activities

Manpower planning accountability.


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ORGANISATION CHART OF PERSONNEL DEPARTMENT

HOD

SICTRAINING

IN CHARGE

CANTEEN

DEPARTMENT

ASSISTANT

SECURITY

OFFICER

WELFARE

OFFICER

IND.REL

OFFICER

AMBULANC

E ROOM

TIME

OFFICE I.C


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4

MARKETING DEPARTMENT

Success of any product totally depends on HO it is marked and positioned din the market.

Marketing department is on of the important functional divisions of KEC UNIT-II, which is

basically, identifies and meets the needs of customers profitably. The people in the marketing

department are responsible for the growth of a business concern because they come in direct contact

with the customers who now are considered as King of the market as it is a buyers market and no

more a sellers market.

As marketing departments basic principle is to take care of the customers to achieve way

they have divided their department in to there sections such as :

Marketing

Customer Service

Communication

Marketing is further having its subgroups i.e. technical group, which does the job of tendering or

equally handling Execution, is planning group.

The network of marketing department has all over India at 28 branches known as sales

office/branches.

The function of this division in CG PLANT-M7 starts to determine the needs of the customers their

documents concurrently then accurately to communicate then to various departments.

Marketing:-

When a branch office in any part of its network receives an order in case of special product (i.e. as

per customer requirements) it sends an order acceptance copy i.e. duly verified by the sales

engineering of that branch to the tendering group where this OA copy is examined and sent to

planning department and further forwarded engineering department for design and development of

special product who prepares its engineering


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specification and sends it to the purchase department if any new or additional components are regard

to the production department. The marketing department based on the demand contacts the materials

management department issues materials on the amount and the type of material, which required.

Based on the amount required the department based on the demand contacts the materials

management department issued materials on the amount required the production scheduling, routing

and the like has to be carried out.

CG PLANT-M7 is planning turnover is 100 crores for last year achieved to the 84 crore. This

planning for turnover is 110 crores.

AC-Generator Marketing:-

In case of AC-Generator the final customer is directly purchase through Manufacture of

Branch office or Dealer.

The O.E.M. (Original Equipment Manufacturers) who in turn places the purchase order to the

branch office, the order acceptance form along with desired specifications is studied. Carefully in the

marketing department and if found possible for production is immediately informed to the O.E.M the

information is also forwarded to the production units

AC Motor Marketing:-

The customer decided the rating of a motor required and approaches to the dealer, the dealer

in turn acceptance and passes it on to the branch office which prepares an order acceptance and

passes to customers and another to the unit of the production otherwise customer is directly contact

through the marketing department.

The order acceptance is then separated into the one for standard products and other for

special products. The special products requirements have to be discussed with the engineering

department and then accepted.


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6

CREDIT POLICY:

Generally CG PLANT-M7 does not follow the policy. But sometimes the credit is issued to a

particular customer depending on the volume of the purchase, the type of a customer CG PLANT-

M7 has a credit policy extending to a maximum of 30 days.

Objectives:

The objectives of marketing department are to achieve customer satisfaction with quality

products, price, and delivery in time, and presale service after sale service, maintain brand image and

earn profit for further diversification.

COMPETITIORS

1. Organized sector

BHEL

ASEA

KIRLOSKAR Ltd.

Bharat Bijli ltd.

Asian Brawn Boweri Ltd (ABB Ltd.)

General Electrical Company Ltd.

Jyoti Ltd.

Unorganized Sector:

Mainly cottage industries.

Direct Customers.

OEMs (Original Equipment Manufacturers)

OEAs (Original Equipment Assemblers)

Government organization (Railway, Airports)

Indian Defense

Indian Railways

Other Industries


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7

ORGANISATION CHART OF MARKETING

MATERIAL MANAGEMENT DEPARTMENT

Objectives:

To provide components can service for manufacturing as required by others functional

divisions.

Scope:

GROUP ACM SIC WESTAND EAST

JMU

SIC NORTHAND SOUTH

RNA

SIC PING &

EXECN RPK

FIC GKN

SIC AKN

SIC PING& EXEN

SGM

GROUP ACG

OD

ARKETING


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To plan and procure materials confirming to specifications through adequate selection of sub

contractor.

To feed the materials to the production division at required schedules at an economic cost.

Functions:-

Work out material requirement based on sales requisite plan (SRP), Sales constancy plan

(SCP) and Critical credit requirement (CCR)

To exercise purchase order as per procedure.

To plan for non-production item based on purchase requisitions to materials management

division.

To finalize terms of purchase.

Job Description and Responsibility

To maintain and direct the organization, which is adequate to perform material management

functions.

To define the duties and responsibilities of MMD and to ensure that they carried out

effectively.

To plan for realistic purchase budget.

To manage obsolete surplus and scrap material.

SICS:

To plan the material requirement

To order material and on approved suppliers and supply in the quantity necessary to satisfy

marketing requirement.

To monitor the material recipient as per delivery schedule indicated in purchase order and co-

coordinating with supplier.

To monitor the material release for production in accordance with SRP/SCP/CCP.

FICS

To plan the materials requirement.

To order material and on approved supplied and supply in the quantity necessary to satisfy

marketing requirement.


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9

To monitor the material release for production in accordance with SRP/SCP/CCP

To follow with supplier for supplier for supplying, required material at required time of

manufacturing.

To keep the manufacturing division and other functional divisions other than the

manufacturing informed of related activities to facilitate overall coordination related

activities include information regarding material availability supplier training programs

reasoning for user training for supplier products etc.

To determine the need of stock replacement through use of daily material receipt perpetual

inventory.

To monitor and reconcile materials issued to suppliers.

ORGANIZATION CHART OF MMD


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FINANCE DEPARTMENT

Finance department is the blood of any business organization to survive. Any organization

handicapped by finance will never complete an ultimately results in failure and a burden to

economy. Finance department is concerned with planning and controlling of company financial

resources.

The company policy is formulated and credit worthiness of the customer is evaluated audits such as

cash audit, internal audit, cost audit is done per month. In the finance department of CG M7, there

are 26 staff members contributing towards the effective functioning of the department.

ORGANISATIONAL HIERARCHY OF FINANCE DEPARTMENT

CEO HOD

MMD

ACMS3

SICSHOP3

OFFICEASSISTANT

SIC SHOP V

ACG

FICEXECUTIVE

SHOPS


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CG is characterized by the fact that all the collaboration are sent to corporate office at Mumbai and

the expenditure of the particular day are sent to the unit as per the requirement of the units.

FUNCTIONS:-

FINANCING FUNCTIONS

It includes cash payments, receipts, bank receipts and payments.

CREDIT MANAGEMENT:

Due to the competition, now a days credit is a means to achieve the target without credit sale any

organizational can fulfill their targets.

COSTING

Costing relates to calculation of production cost per unit and it tries to minimize the cost of

production and helps in the function of pricing with marketing department.

AUDITS:-

Audit is a way to confirm about the accountancy of the functions and records of all over activities. It

has employed cost Audit and Internal Audit etc.

CORPORATE FINANCE

CHIEF EXECUTIVE

GRADE 8 AND ABOVE

M.R.Es up to GRADE 7


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2

RECORDING AND MAINTAINING OF ACCOUNTS:-

These are the present and future reference of the companys financial position. These are useful for

Shareholders, Creditors, Suppliers, and Bankers etc.

BANKERS OF CG

CG PLANT-M7 has the following Bankers:

Bank of Maharashtra

Canara Bank

Corporation Bank

ICICI Bank Ltd

IDBI Bank

State Bank of India

Union Bank of India

Yes Bank Ltd

Financial Institutions:

Following are the financial Institutions of CG PLANT-M7:

1. Industrial Credit & Investment Corporation of India (ICICI)

2. Industrial Development Bank of India (IDBI)

3. Axis Bank

CG production per month is worth 10 crores. But now it attempting to rise to Rs 11 to 11.5

crores, the raw materials is steel and copper. These are procured from steel Authority of India

Ltd., and Hindustan Copper Ltd. 1% of the total turnover is used for welfare expenses and

6% of total turnover is used for salary or expenditure.

On an average the CG is paying Rs.150 lakhs as excise duty/month, 6% of total turnover is

given as salary and 1% of the total turnover is spent on welfare activities. The method of

depreciation followed is straight-line method. The company has adopted FIFO method for costing.

Listing on Stock exchanges:

NSE, (CROMPGREAV)

BSE(500093)


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ENGINEERING DEPARTMENT

Quality Policy of Engineering:

The quality policy of CGL shall be continuously improving the quality management system in

design, manufacture, market and service at competitive prices. Product of such quality, resulting in

customer satisfaction, quality, reputation and market leadership, The role of engineering department

is to design and develop products and components taking into consideration the cost, product ability,

usability, and maintenance of the product.

Scope:

Applicable to quality objectives identified for improvement in design and development ofproducts manufactured CGL.

Responsibility:

The head of the engineering department is responsible for receiving the objectives.

Procedure:

Objectives shall be derived from the organizational quality policy and need to meet customer

and product requirement.

Quality objectives by engineering department will lead to

Simplification in design

Standardization of components

Reduction in reworking of design

Reduction cost of production.


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4

For achieving or reworking quality objectives appropriate statistical quality control technique

shall be used.

Functions:

Preparation revision and release of engineering and electrical specifications.

Preparation, revision and control of drawings and release of material risk.

Validation of design of products.

Effective implementation of the design changes.

PRODUCTION DEPARTMENT

In many manufacturing unit production department forms the most important department of all the

whole running of the unit depends upon this department the proper and timely functioning of this

department helps in products reaching the customers end at right time. Slight difference in timing

and quality upsets the cycle. Thus the production department we can say is the heart of the firm.

CGL philosophy has always been to excel in what one knows best in the process of

development. CGL has laid great emphasis on adopting technology to suit the environment in which

it has to operate CGL production process are continuously of upgraded from time to time by the

latest technology.

Objectives:

To follow up the production schedule as per the plan.

To maintain the close and coordinated relationship with other department.

To upgrade technical efficiency of production.

CGL there is six shops in this department all of which have got different functions to

perform. The product moves from first to sixth shop and then to the dispatch.

H.O.D Production heads the production department with a total shop of 600.The whole shop is divided into among six shops.

The department is divided into 2 groups.

1. Feeder shop (Shop I and Shop II)

2. Assembly Shop (Shop III and Shop V)


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3. Shop IV is used as Research and Development Center is also called as Invotech

Center and Shop VI is painting section.

Brief description of shops:

SHOP I:

The matching functions are carried out in this shop which has 5 lines engaged in production

namely welding section, sub assembly, labor section, tools and jigs crib and tool room.

There are totally 80 machines and 100 workers in shop I. The raw materials arrived in this

shop where the metal drilling, milling and shaft fixing is done and sent to the next process. The

winding are also done in the shop I.

Here the process of BodiesKH 100 to LD 225 frames.

CoversKH 63 to LD 225 frame.

ShaftKH 63 to LD 180 frame.

Gear casesMGH 100 to MGH 225 frame.

Gears/pinions for Geared motors are done and also undertake manufacturing JIGS and FIXTURES

and DIE-CASTING dies.

ROTOR SUB ASSEMBLY:

Rotor is the static part in the ACMs and dynamic that is moving in the ACGs. The rotor

goes through the following process.

1) Sinking:

The roots are treated in the solution for convenience of inserting the shaft so that they expand

and make it easy for insertion of the shaft.

2) Turning:

The correct turning and made according to the specification.

3) Fan Shop Drilling:


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6

This is the process where in the fan is to be fixed and for this purpose drilling is done and

then locks are fixed for safety.

4) Balancing:

This step involves balancing the rotor properly.

WINDING:

Winding is the most important functional part of the machine. It has to be done manually and

precisely. This is the only process, which is totally manual. The motor is wound with correct rating

wires.

SHOP II

Shop II is die cast shop. Here in this shop only die-casting is done. That is the shapes of body

and nameplates final shape. The shop II has two machines, one for nameplate pressing and another

for body.

It houses the router section, here stampings are received and die casting of the metal

stamping is carried in a furnace heated at 675 degrees Celsius 755 degree Celsius

ROTOR SECTION:

Here processing of rotor sub assembling for KH 63 to 180 frames, SD 71 flange machine is

undertaken.

DIE-CASTING SECTION:

Here die-casting for motor for 63 to 225 frame motors and die-casting of bodies, flanges,

covers, and terminal boxes from KH 63 to 10 frames.

SHOP-III

This shop can be called as assembly shop because the products here will get upto 90% only,

final finishing will be at this stage.

The assembling of motors of the frame size motors are assembled in this shop in three

different assembly lines namely:

The non-standard line for custom mode and is operated manually.


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7

The standard line for this standard motor is also called verticals assembly line where the

motors are assembled mechanically by various stations in the machines acquired for the

specific purposes.

The export line is where the motors have to be exported assembled with due care and is done

manually. After assembling the motors they are sent to the painting section, which is housed

in the same shop.

SHOP IV:

It works as research and development center for the company. It keeps its eye on the changes

that are taking place in the electrical world and tries to adopt those changes in their

manufacturing process. So it acts as research and development in the company.

SHOP V:

Here assembling of medium and large motors generators and MGUs under separate bays

like ACM bay, ACG bay and MGUU bay.

Product Rating

A.C Motors Frame 200 to 225 15 KW to 75 K W

A.C Generator Frame and

180 & 250

DS-DL-CMA 2.5KVA to 90KVA

Motorized gear units 90 to 225 0.75 KW to 22 KW

Painting and testing is also done here.

SHOP VI:

In this section, components used in the motors are pre treated and painted.

CGL has to its credit the pioneering of the latest technology called Unibake system. Earlier

this system was applied to all the products but recently it has been restricted only for export orders.

The domestic products are painted in conventional manner.


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ORGANISATION CHART OF FEEDER SHOPS

CG PLANT-M7 has its corporate and marketing office at Mumbai. National Offices are divided into

4 zones.

1. North Zone : Delhi, Ludhiana, and Jaipur

2. East Zone : Kolkatta, Jamshedpur, Guwahati, Bhubaneshwar and Ranchi.

3. West Zone : Mumbai, Nagpur, Pune, Ahmedabad, Surat and Indore.

4. South Zone : Chennai, Coimbatore, Cochin, Hyderabad, Bangalore, Belgaum, Pondichery

CEO

HOD

Production

SICFEEDER SHOPS

FIC, TROOMAND TCRIB

FIC, Shaft

Body

FIC DIE

CASTING

FIC

SHOP6


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9

QUALITY ASSURANCE

Quality is the fitness to end-use, it is all persuasive. In this modern and competitive world

each and every company is trying hard to introduce to quality and every defect free product CGL has

a full fledge quality assurance department headed by highly qualified professionals committed to

developing products that keep phase with the changing desires and needs of the consumers. Quality

plays important role in CGL because its products are used for industrial customer applications.

Hence it must satisfy and come up to the customer expectations.

Objective:

The role of QA division is to assist all functional division in achieving and maintaining level

of specified quality requirement economically.

This unit being ISO-9001, certified unit, has to follow the stringent quality specification. This

department facilitates the total quality management (TQM) in all the departments, by adopting

process controls at all stages.

The quality assurance department follows a definite set of systems and procedures, which are

incorporated in the manuals. The manuals are drafted to the lines of the standards as specified by the

ISO-9000 series of clause for quality documentation.

Functions:

The functional responsibilities of different sections of QA divisions are as follows: Releasing of accepted products for further process.

Evaluating quality rating of suppliers.

Generation of NC reports for analysis/ review and initiating corrective action and preventive

action.

Quality information and reporting.

Maintaining documents and records as per procedures.

FEEDER SHOPS QA:

Feeder shops QA is responsible for:


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0

Inspection/ Testing of parts, sub assembly as per appropriate quality plan/ documents

procedures/ inspection plans other documents.

Ensuring proper identification and inspection status.

Updating, revising inspection plans procedure as and when found necessary.

Generation of Non-conformance reports for analysis, revive and collective action, preventive

action.

Ensuring that calibrated instruments are used for measurements and coordinating with

calibration section for periodic calibration.

FINAL INSPECTION AND TESTING

Conduction routing/ type/ engineering tests on products to specified requirements as per documented

procedures:

Maintaining test records and providing test certificates.

Ensuring tested products and conforming to specified requirements and complete in all

respects.

Providing inspection/ tests stating for confirming products.

Providing engineering test results for design modification where necessary.

Assisting in customer inspection

QUALITY LABORATORY:

Periodic calibration of instruments as per documented process.

Arranging for repair/ rectification/ disposal of measuring instruments.

Planning for new instruments/ organizing calibration function from external agencies.

Maintaining documents/ records as per procedures.

QUALITY SYSTEMS:

Maintaining quality systems as per ISO 9001-2000

Assisting HOD QA for conduction quality related training programs.


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Analysis and reporting of customer complaints internal non-conformance reports.

Conducting systems audits, monitoring corrective actions, preventive actions.

Implementing of corrective actions and preventive actions.

ORGANIZATION CHART OF QUALITY ASSURANCE

`

FIC-FinalInspection& Testing

Shop 3

FICFinalinspection &Testing &Customer

Inspection Shop5

FICCustomer

Inspection

FICWinding

Inspection

FIC-QA Lab

FIC-Winding

Inspection

SIC-QA IMI 7Feeder Shop

QA (Shop 1&2)

SIC FinalInspection &Testing Shop5 7

QA Lab

SIC-Final

Inspection Shop 3

FIC-QS

CEO

HOD Q.A

FIC-QA IMI FIC Shop 1

& 2 QA

FIC-Shop 6QA


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2

PROCESS FLOW CHART

cuuu

MMD

Planning & Procurement of material

Engineering

-Release of specification

Personnel &Computer- SupportingServices

Stores-Recei t & Issueof materials

Central Planning

-Scheduling

QA-Supporting

Services

MSD-Supporting

Services

Production-Feeder Shop 1,2,&6

-Product shop 3&5

MED

-Supportingservices

Packing & Forwarding

After Sales & services

Marketing

-EnquryHandling-Order execution-Customer Feedback

Customer

-Requirements


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COMPUTER DIVISION

We are into technology revolution where process and manual jobs have been atomized or

computerized. So getting along with revolution CGL has also steeped into the field of computers and

has computerized its various departments of the unit.

Objective:

The computer division is responsible for software developments, maintenance of computer

hardware accessories, using appropriate methods.

Scope:

This is applicable to all the functions performed by the computer divisions of CG PLANT-

M7, Mandideep.

The head of computer division has overall responsibility and delegate works to other staff as

appropriate.

FUNCTIONS:

Maintenance of computer hardware accessories:

User department raises requisition for hardware breakdown. The call is attended

enclosed after acknowledge for the user.

Preventive maintenance of computers and accessories:

Preventive maintenance is carried out for computer hardware every half yearly and

every quarterly and updated in the history card. This activity is acknowledged with

the preventive maintenance sticker and stuck on the computer accessories.

Software Revalidation:

Software revalidation is done annually as per the procedure defined in software

revalidation and records are maintained.

BackUps:

Regular backup is ensured department wise as per the procedure defined.

Document Control:

Records files are updated and maintained in the document control register.


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4

GENERAL FUNCTIONS:

Computer department works as a supporting device for all department and all the functional

activities like payroll preparation and accounts receivables management is done with the help of

computer department. In production field, it will help in planning, investment management etc. The

company also has CMAN and ERP procedure to strengthen their production activities.

ORGANIZATION OF COMPUTER DEPARTMENT

CENTRAL PLANNING

Objective:

To describe the quality management system process & procedures followed in production

department.

are/Electrical

nance

FIC-SoftwareDevelopment/Maintenance

SIC-SoftwareDevelopment/RevalidationMaintenance

SIC-SoftwareDevlopment/modification/H

eardware/Backup

HOD CD

CEO


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Scope:

Applicable to Central Planning Department.

To demonstrate product manufactured meets requirements by following applicable process.

For effective application, implementation, continued improvement in the different areas of

work.

Approach:

Activities in the department are carried out with required resources. Resources include

Building, Personnel, Manufacturing equipments, Test equipment etc. the available resources are

managed to make quality products. The department, Organization, Process & Other activities

followed for QMS requirements is given.

Functions:

Release of material against SR/SCP to all departments.

Plan on basis of material availability.

Sub-contract is given.

Re-planning of material against the non-conformance.

Maintain of product identification and tractability.

Corrective action.

Maintain quality records.

ORGANISATION CHART OF CENTRAL PLANNING


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6

MANUFACTURING ENGINEERING DEPARTMENT

(MED)

Functions:

CEO

HOD CP

SIC-Planning SIC-componentmanufacturing/sub

contract FIC

FIC-Assembly

planning

FIC-Die-casting& Rotor

sub- assembly

FUC-Sub

contract

FIC-

Records


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7

Preparation general assembly drawings of jigs, fixtures, dies, tooling, storage devices &

gauges.

Recession of drawing with design changes.

Coordinating with production for finalizing the manufacturing process.

Preparation of process sheets.

Job Responsibilities: HOD

Overall administration of MED.

Development around organization to achieve the required objectives of the department.

Coordinate with other department to carry out the department activities.

Monitor the activities of the department through proper documentation.

Planning & procurement of Capital equipment.

Establish quality objective for the department function.

Design of jigs/ fixtures/ tooling.

Determining and defining of process for manufacturing activities process sheets.

Assisting process determination at supplier for component machining activities & release of

process sheets wherever required.

Organizing for procurement of capital required for manufacturing activities.

ORGANISATIONAL CHART OF MED


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GENERAL STORES

To describe the process and procedure followed in stores department. A guide for effective,

ORGANIZATION CHART OF STORES

CEO

HOD MED

SIC MED

FICJigs/Fixtures/Dies & Tooling &

Preparation & Release of Process Sheets


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9

Objective:

The role of stores is to maintain accountability of the materials received, stored and issued as

per the specified requirements.

Scope: Applicable to stores activities.

Responsibility:

The head of stores division is responsible for overall function of the stores with duties

delegated to SIC/FIC as applicable.

Functions:

Receive material as per delivery Chilean/ Invoice/ Credit Reports.

Ensure identification, inspection status, and supplier identification on the components vendor

code/ material code in the delivery challan/ invoice.

DUTIES AND RESPONSIBILITIES OF HOD:

Overall administration of stores.

Establishment of inventory norms & controls.

Establishing & maintaining quality systems in stores division.

DUTIES & RESPONSIBILITIES OF SIC STORES:

Overall administration of stores.

Ensuring that all components / products received in stores are inspected and tested as per the

applicable specification/procedures.

Ensure receipt, storage & issue of materials.

DUTIES AND RESPONSIBILITIES OF FIC STORES

Receive and stores materials as per delivery Challan/ Invoice/ Audit reports.

Ensure identification & inspection status for the components/ products.

Preparation of receipt memos.

Storing of outstanding in specified areas like mobile racks/ pallets etc.,

Issue of materials to shops/ suppliers as per indents.

CEO HOD Stores SIC Stores


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0

INTRODUCTION

Financial Ratios are used in the evaluation of the financial condition and profitability of a company.

The ratios are calculated from the financial information provided in the balance sheet and income

statements. While analyzing the financial statements you should keep in mind the

principles/practices that accountants use in preparing statements to examine at the financial

condition and preference of a company.

RATIO ANALYSIS

Ratio Analysis is one of the techniques of financial analysis where ratios are used as a

yardstick for evaluating the financial condition and performance of a firm. Analysis and


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interpretation of various accounting ratios gives a skilled and experienced analyst a better

understanding of the financial condition and performance of the firm.

MEANING AND DEFINITION:-

A ratio is a simple arithmetic expression of the relationship of one number to another.

Ratio is relationships expressed in mathematical terms between figures which are connected with

each other in some manner.

DEFINITION:-

Ratio analysis is defined as, The systematic use of ratios to interpret the financial statements so that

the strengths and weaknesses of the firm as well as its historical performance and current financial

condition can be determined.

This relationship can be expressed as: 1) Percentages:-For example, Assuming

that net profits of Rs 25,000 and Sales of Rs 1,00,000. Then the net profits are 25% of sales. 2)

Fraction:-net profit is of sales. 3) Proportion:-the relationship between net profits and sales is

1:4.

To take managerial decision the ratio of such items reveals the soundness of financial

position. Such information will be useful for creditors, shareholders management and all other

people who deal with company.

IMPORTANCE OR SIGNIFICANCE OF RATIO ANALYSIS:

The ratio analysis is one of the most powerful tools of financial analysis. It is used as

a device to analyze and interprets the financial health of enterprise. Just like a doctor examines his

patient by recording his body temperature, blood pressure etc. before making his conclusion

regarding the illness and before giving his treatment, a financial analyst analyses the financial

statements with various tools of analysis before commenting upon the financial health or weaknesses

of an enterprise. Following are the uses of ratio analysis:

Liquidity position

Long term solvency

Operating efficiency


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2

Overall profitability

Inter firm comparison

Trend analysis.

Liquidity Position

With the help of ratio analysis conclusions can be drawn regarding the liquidity

position of a firm. It would be satisfactory if it is able to meet its current obligations when they

become due. A firm can be said to have the ability to meet its short term liabilities if it has sufficient

liquid funds to pay the interest on its short maturing debt usually within a year as well as to repay the

principal. This ability is reflected in the liquidity ratios of a firm. The liquidity ratios are particularly

useful in credit analysis by banks and other suppliers of short term loans.

Long term solvency:

Ratio analysis is equally useful for assessing the long term financial viability of a

firm. This aspect of the financial position of a borrower is of concern to the long term creditors,

security analysts and the present and potential owners of a business. The long term solvency is

measured by the leverage/capital structure and profitability

ratios which focus on earning power and operating efficiency. Ratio analysis reveals the strengths

and weakness of a firm in this respect.

Operating efficiency

Yet another dimension of the usefulness of the ratio analysis, relevant from the

viewpoint of management, is that it throws light on the degree of efficiency in the management and

utilization of its assets. The various activity ratios measure this kind of operational efficiency. In

fact, the solvency of a firm is, in the ultimate analysis, dependent upon the sales revenues generated

by the use of its assets total as well as its components.

Overall profitability:

Unlike the outside parties which are interested in one aspect of the financial position

of a firm, the management is constantly concerned about the overall profitability of the enterprise.

That is, they are concerned about the ability of the firm to meet its short term as well as long term

obligations to its creditors, to ensure a reasonable return to its owners and secure optimum utilization


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of the assets of the firm. This is possible if an integrated view is taken and all the ratios are

considered together.

Inter- firm comparison

Ratio analysis not only throws light on the financial position of a firm but also serves

as a stepping stone to remedial measures. This is made possible due to inter-firm comparison and

comparison with industry averages. A single figure of a particular ratio is meaningless unless it is

related to some standard or norm. One of the popular techniques is to compare the ratios of a firm

with the industry average. It should be reasonably expected that the performance of a firm should be

in broad conformity with that of the industry to which it belongs. An inter-firm comparison would

demonstrate the firms position vis--vis its competitors.

Trend Analysis

Finally, ratio analysis enables a firm to take the time dimension into account. In other

words, whether the financial position of a firm is improving or

deteriorating over the years. This is made possible by the use of trend analysis. The significance of a

trend analysis of ratios lies in the fact that the analysts can know the direction of movement, that is,

whether the movement is favorable or unfavorable. For example, the ratio may be low as compared

to the norm but the trend may be upward. On the other hand, though the present level may be

satisfactory but the trend may be a declining one.

LIMITATION OF RATIO ANALYSIS:-

Ratio analysis is a widely used tool of financial analysis. Though ratios are simple to calculate and

easy to understand, they suffer from some serious limitations:

Limited use of Single Ratio:-

A single ratio usually does not convey much of a sense. To make a better

interpretation a number of ratios have to be calculated which is likely to confuse the analyst than

help him in making any meaningful conclusion.

Lack of Adequate Standards:-

There are no well accepted standards or rules of thumb for all ratios which can

be accepted as norms. It renders interpretation of the ratio difficult.

Change Of Accounting Procedure:-


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4

Change in accounting procedure by a firm often makes ratio analysis misleading

e.g. a change in the valuation of methods of inventories, from FIFO to LIFO increases the cost of

sales and reduces considerably the value of closing stocks which makes stock turnover ratio to be

lucrative and an unfavorable gross profit ratio.

Window Dressing:-

Financial statements can easily can be window dressed to present a better picture

of its financial and profitability position to outsiders. Hence one has to be very careful in making a

decision from ratios calculated from such financial statements. But it may be very difficult for an

outsider to know about the window dressing made by a firm.

Personal Bias:-

Ratio is only means of financial analysis and not an end in itself. Ratios have to be

interpreted and different people may interpret the same ratio in different ways.

Incomparable:-

Not only industries differ in their nature but also the firms of the similar business widely

differ in their size and accounting procedure etc.. It makes comparison of ratios difficult and

misleading. Moreover, comparisons are made difficult due to differences in definitions of various

financial terms used in the ratio analysis.

Absolute Figures Distortive:-

Ratios devoid of absolute figures may prove distortive as ratio analysis is primarily a

quantitative analysis and not a qualitative analysis.

Price Level Changes:-

While making ratio analysis, no consideration is made to the changes in price levels and

this makes the interpretation of ratios invalid.

Ratios No Substitutes:-

Ratio analysis is merely a tool of financial statements. Hence, ratios become useless if

separated from the statements from which they are computed.

CLASSIFICATION OF RATIOS:

1) LIQUIDITY RATIO


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Current Ratio

Quick Acid Ratio

2) CAPITAL STRUCTURE RATIO

Debt-equity Ratio

Proprietary Ratio.

Interest Coverage Ratio

3) ACTIVITY RATIO:

Inventory Turnover Ratio

Debtors Turnover Ratio

Creditors Turnover Ratio

Capital Turnover Ratio

Working Capital Turnover Ratio

Fixed Assets Turnover

4) PROFITABILITY RATIO:

Gross Profit Ratio

Net Profit Ratio

Operating Profit Ratio

Operating Expenses Ratio Or Operating Ratio

Return on Investment Ratio

Liquidity Ratios:

These ratios are also termed as working capital or short term solvency ratio. The

importance of adequate liquidity in the sense of the ability of a firm to meet current/short term

obligations when they become due for payment can hardly be overstressed. In fact, liquidity is a

prerequisite for the very survival of a firm. The short term creditors of the firm are interested in the


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short term solvency or liquidity of a firm. But liquidity implies, from the viewpoint of utilization of

the funds of the firm that funds are idle or they earn very little

Leverage/capital structure ratios:

The second category of financial ratios is leverage or capital structure ratios. These ratios

explain how the capital structure of a firm is made up or the debt-equity mix adopted by the firm.

The long term solvency ratio of a firm can be examined by using leverage or capital structure ratios.

The leverage or capital structure ratios may be defined as financial ratios which throw light on the

long term solvency of a firm as reflected in its ability to assure the long term creditors with regard

to: (1) Periodic payment of interest

during the period of the loan and (2) Repayment of principal on maturity or in pre determined

instalments at due dates.

Activity Ratios:

Activity ratios are concerned with measuring the efficiency in asset management. These

ratios are also called efficiency ratios or assets utilization ratios. The efficiency with which the assets

are used would be reflected in the speed and rapidity with which assets are converted into sales. The

greater is the rate of turnover or conversion, the more efficient is the utilization/management, other

things being equal. For this reason, such ratios are also designated as turnover ratios.

Profitability Ratios:

Profitability is indication of the efficiency with which the operations of the business are

carried on. Poor operational performance may indicate poor sales and hence poor profits. A lower

profitability may arise due to the lack of control over the expenses. Bankers, financial institutions

and other creditors look at the profitability ratios as an indicator whether or not the firm earns

substantially more than it pays interest for the use of borrowed funds and whether ultimate

repayment of their debt appears reasonably certain. The Management of the firm is naturally eager to

measure its operating efficiency of a firm and its ability to ensure adequate return to its shareholders

depends ultimately on the profits earned by it. The profitability of a firm can be measured by its

profitability ratios.

In other words, the profitability ratios are designed to provide answers to questions

such as: (1) Is the profit earned by the firm adequate? (2) What rate of return does it represent? (3)


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What is the rate of profit for various divisions and segments of the firm? (4) What is the rate of

return to equity holder?

1) CURRENT RATIO:

This ratio is an indicator of firms commitment to meet its short - term liabilities. Higher

ratio, better the coverage. 2:1 ratio is treated as standard ratio. This ratio is also called as solvency /

working capital ratio.

The current ratio is the ratio of the current assets and current liabilities. It is calculated by

dividing current assets by current liabilities.

Formula:

Current Ratio= Current assetsCurrent liabilities

Table-1

(Amount in Lakhs)

Year 2004-05 2005-06 2006-07 2007-08

Current Assets 14,11,798 17,37,753 24,09,647 31,59,775

Current

Liabilities

12,86,103 15,76,507 18,05,200 22,14,785

Current Ratio 1.09 1.10 1.33 1.43

SOURCE: ANNUAL REPORTS OF COMPANY


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Interpretation: - The current ratio of last four years is less than ideal ratio 2:1, i.e. fluctuating. This

indicates that firms commitment to meet its short liabilities was not so good. In 2007 -08 and 2006-

07 the current ratios are good compare to 2004-05, 2005-06.

2) QUICK / ACID TEST / LIQUID RATIO:

Liquid ratio is indication of availability of quick assets to honor its immediate claims.

Higher the ratio betters the coverage. And the standard ratio is 1:1.An asset is liquid if is can be

converted into cash immediately without loss of value. Hence cash is most liquid assets after assets

which are considered to be relatively liquid are; Debtors balance, marketable securities etc.

inventories considered to be less liquid therefore they require some time form relishing into cash and

their value also has tendency to fluctuate.

Formula:

Quick ratio = Current Assets- Inventories / Current LiabilitiesTable-2 (Amount in Lakhs)

Year 2004-05 2005-06 2006-07 2007-08

Quick Assets 12,84,269 15,19,792 21,79,920 27,03,911

Current

Liabilities

12,86,103 15,76,507 18,05,200 22,14,785

Quick Ratio .99 .96 1.20 1.22


0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

2004-05 2005-06 2006-07 2007-08

Current Ratios

Times


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Interpretation:The ideal ratio is 1:1. The quick ratio is also fluctuating. In 2007-08 the ratio is

satisfactory because it is higher than 1. And it is also good in 2006-07 and 2007-08.Because it is

more than 1.But it has decreased in 2005-06 and 2004-05 i.e. 0.96 and 0.99 respectively. Overall the

quick ratio is satisfactory, means liquidity position of the company is good.

CASH RATIO:

An asset which converts suddenly without doubtful is called as cash ratios. Here cash balance

included trade investment or marketable securities that are equivalent to cash.

Formula:

Cash Ratio=Cash +Marketable Securities /Current Liabilities.

Table- 3: ( Amount in lakhs)Year 2004-05 2005-06 2006-07 2007-08

Cash+

marketable

securities

2,17,773 1,39,434 4,13,668 5,24,749

Current

Liabilities

12,86,103 17,37,753 18,05,200 22,14,785

Cash Ratio .17 .08 .22 .23


0

0.5

1

1.5

2004-05 2005-06 2006-07 2007-08

Quick Ratio

Times


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Interpretation: In Cash ratio there is no standard ratios for maintained the cash balance because

now a days nothing to be worried about the lack of cash if the company has reserve borrowingpower for its day to days activities. Holding of Cash in the year 2007-08 was 23% of current

liabilities in the 2005-06 it came down to 8%, in the 2006-07 it again increased to 23%.

INTERVAL MEASURES RATIO: The ratio which assesses a firms ability to meet its regular

cash expenses is the interval measures. An interval measure relates to liquid asset and average daily

operating cash flows.

Formula:

Interval Measure ratio = current assets-inventories/average daily operating expenses /360

Table-4 (Amount in lakhs)

Year 2004-05 2005-06 2006-07 2007-08

Current asset

inventories

12,84,269 15,19,792 21,79,920 27,03,911

Average daily

operating exp

585 644 762 919

Interval

Measures

2,195 2,360 2,860 2,942


0

0.05

0.1

0.15

0.2

0.25

2004-05 2005-06 2006-07 2007-08

Cash Ratio

Percent


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Interpretation: Interval measure is said to be good if No of days are sufficient liquid asset to

finance its operations. This chart Indicates that CGL have sufficient Liquid assets to finance its

operations for 2942 days even though it does not receive any cash for 2942 days.

LEVERAGE RATIO

LEVERAGE RATIO is also called as capital structure ratio. It relates to the study of various

types of capital structure of firm. The long- term solvency of a company can be examined by using

leverages or capital structure ratios. These ratios are for long-term creditors to judge the long-term

financial strength of the company.

THE DIFFERENT LEVERAGE RATIOS ARE:

1. Debt Equity Ratio

2. Proprietary Ratio

3. Interest Coverage Ratio

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2004-05 2005-06 2006-07 2007-08

Interval Measures

Days


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1) DEBT RATIO

Debt ratios are use to analyze the long term solvency of firm. It is the proportion of the interest

bearing debt in the capital structure. Debt ratio is calculated by total debt by total debt by capital

employed or net asset of the firm.

Formula:

Total debt /Total debt +Net worth


Year 2004-05 2005-06 2006-07 2007-08

Long term debt 2,03,121 1,93,574 3,16,343 4,41,152

Shareholders

Funds

13,11,350 13,01,803 11,08,229 12,52,506

Debt-equity

ratio

.15 .14 .28 .35



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Interpretation:The debt ratio for the 2007-08 was .35 or 35% of the capital employed. It indicates

owners have provide the remaining finance that is 1-35=65% of capital employed. From above

analysis the firm has lower risk in the year 2004-05 & 2005-06.But afterwards it has increased its

risk in the year 2006-07 &2007-08.

2) DEBT-EQUITY RATIO

It measures the relation between debt and equity in the capital structure of the firm. In other

words, this ratio shows the relationship between the borrowed capital and owners capital.

Formula:

Debt equity ratio= Long term debt/Net worth


Year 2004-05 2005-06 2006-07 2007-08

Long term

debt

2,03,121 1,93,574 3,16,343 4,41,152

Net worth 11,08,229 11,08,229 11,08,229 12,52,506Debt-Equity

Ratio

.18 .17 .28 .35


0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

2004-05 2005-06 2006-07 2007-08

Debt Ratio

Percentage


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Interpretation:- The ratio is high in 2007-08. It shows that a large share of financing by the

creditors of the firm and it is more risky to the creditors. In 2004-05 and 2005-06 it has declined to

.18 and 0.17 respectively. In 2005-06 and 2006-07 the ratio is low i.e., 0.18 and 0.17. It indicates

th

financial analysis of cg

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