A

A

Project Report

ON

Ratio Analysis & Working Capital Management

OF

In Partial Fulfillment of the requirements of

Master in Business Administration (M.B.A.)

Rashtrasant Tukdoji Maharaj, Nagpur University, Nagpur.

Submitted By

NILU MADHUMATKE

MBA (Sem-IV)

Under The Guidance Of

PROF. S. BHOYAR

Department of Management Technical & Research

Natwarlal Maniklal Dalal College, Gondia

2009-10

Certificate

This is to certify that Nilu Madhumatke is student of M.B.A.(sem IV) in the Department of Management Technology & Research Natwarlal Maniklal Dalal College, Gondia of session 2009-10. She has complete her dissertation entitle Ratio Analysis and working capital management of Birla corporation Ltd.

The dissertation is being submitted to Rashtrasant Tukdoji Maharaj Nagpur University in partial fulfillment of the requirement for the Degree of Master in Business Administration.

Co-ordinator Director

Prof. Vijay N. Bidwaikar Y.M. Nasre

Department of Management Department of Management

Technology & Research Technology & Research

N. M. D. collegeN. M. D. college

Gondia Gondia

Certificate

This is to certify that Nilu Madhumatke is student in M.B.A.(sem IV) in the Department of Management Technology & Research Natwarlal Maniklal Dalal College, Gondia of session 2009-10.

She has complete her dissertation entitle Ratio Analysis and working capital management of Birla corporation Ltd.

Date:

Place:

Guided By

PROF. S. BHOYAR

Department of Management

Technology & Research

N.M.D. college

Gondia

Declaration

I Nilu Madhumatke here by declared that the project work entitled Ratio Analysis and working capital of Birla Corporation Ltd. Is the outcome of my own research work based on personal study and has not been submitted previously for award of any degree or diploma to this university.

Date :

Place :

Nilu Madhumatke

Preface

Practice makes more perfect

In the field of management every time there is a requirement of understanding or practical aspect of the organization with managerial mind. There is requirement to go for practical training of any subject supplement to the theoretical knowledge and clarified concept.

The project report includes various ratio of the company and comparison with other Cement industry and analysis on Working Capital Of Company, which provide perfect direction of invest the money. The data collections were by annual report of the different companies, magazines related to the cement association and discussion with concerned employees and experts.

At the end findings and suggestions are reported.

I hope this serves the Purpose.

Acknowledgement

I wish to express our sincere thanks to the honorable director Dr. Y.M.Nasre and the co-ordinator Mr. Vijay N. Bidwaikar of Department of Management Technology & Research Natwarlal Maniklal Dalal College, Gondia for providing us variety of opportunities, infrastructural facilities and inspiration to gather professional knowledge and material without which it would have been impossible to complete this hard work.

I wish to take this opportunity to express my deep gratitude and completely hearted thanks to my project guide PROF. S. BHOYAR for their kindness, encouragement and the valuable time which they have devoted to me. I wish to thank all those, who have helped me in one way or other in bringing out this project report.

Nilu Madhumatke

CH. NO.

PARTICULARS

1

INTRODUCTION OF BIRLA COROPORATION

History & Company profile

Subsidiaries Company

Plants of Cement Production

OBJECTIVES OF BIRLA CORPORATION

Awards & Achievements

2

COMMODITY (CEMENT) PROFILE

Cement

Types of cement

3

HYPOTHESIS

4

RESEARCH METHODOLOGY

5

AND ANALYSIS

Ratios of the Company

Comparison with other Industries

Working Capital Requirement

6

CONCLUSION

7

SUGGESTIONS

8

LIMITATIONS

9

BIBLIOGRPHY

Introduction of Birla Corporation

History of the company

The company was founded by Late Shri G.D.Birla and was incorporated on 25th August 1919, in the name and style of The Birla Jute Manufacturing Company Limited. A man of vision and enterprise, he set up the first Indian Owned Jute Mill near Kolkata which marked not only the birth of the company but also the beginning of the Birla Industrial Group in India. The company grew steadily under his guidance in the earlier years. Thereafter Shri M.P.Birla took over the reins of the company and he helped transform it from a jute mill to a leading multi-product, multi-location corporate with widespread activities.

Today, the product range includes cement, jute goods, vinoleum floor covering, auto trims and steel castings. After the demise of Shri M.P.Birla in 1990, Smt.Priyamvada Birla took over as the Chairman of the company and under her Chairmanship; company crossed the Rs.1, 000 cores plus turnover mark. After the demise of Smt. Priyamvada Birla on 3rd July 2004, Shri R.S.lodha took over as the chairman of the company and under his Chairmanship, company has attained new heights. The name of the company was changed to Birla Corporation Limited with effect from 27th October, 1988 to establish the size, image and conglomerate character of the company.

Credit Rating of the Company

Credit Analysis and Research Limited ( CARE ) has assigned CARE AA rating for the company long and medium term facilities of more than one year tenure and PR 1 + ( PR one plus ) rating for short term bank facilities , aggregating Rs.500 crores. Further, the rating Committee of CARE has re-affirmed PR 1 + rating and CARE AA rating for short term debt and the proposed long term borrowing programme of the company.

Company Profile

Late Shri M.P.Birla Late Smt. Priyamvada Birla

MANAGEMENT

The day- to- day management of the company is being looked after by the Chief Executive Officer, Shri B.R.Nahar who is assisted by a team of highly qualified professional persons.

Former Chairman ED & CEO

Late Shri R.S. Lodha Shri B.R.Nahar

Board of Directors

Shri N.K. Kejriwal Shri Vikram Swarup

Smt Nandini Nopany Shri Anand Bordia

Shri Harsh V. Lodha Shri B.B. Tandon

Shri Pracheta Majumdar Shri D.N.Ghosh

MISSION & VISION

Mission:

To achieve international standards of excellence in all aspect of division and diversified business with focus on customer delight through value of product, Services, cost and reduction.

To maximize creation for wealth and satisfaction for the stakeholder.

To foster a culture of participation and innovation of employee growth and contribution.

To cultivate high standards of business ethics and total Quality Management.

To provide technology and service through sustained research and development.

To attain leadership in developing, adopting and assimilating state-of-art technology for competitive advantage.

Offered full opportunities and challenges to develop individually enabling career growth.

Encouraged to acquire knowledge to meet the challenges of new technologies and business needs in the changing scenario.

Educated and guided to inculcate and practice right values as are nurtured by the organization.

Vision:

A major diversified, transnational, integrated company with leadership and a strong environment conscience playing a national role in cement, Jute, Auto trim, Venolium and public distribution.

OBJECTIVES & OBLIGATIONS

Objectives:

To serve the national interests in the Product and related sectors in accordance and consistent with Government policies.

To earn a reasonable ate of on interest.

To maximize utilization of the existing facilities in order to improve efficiency and increase productivity.

To work towards the achievement of self-sufficiency in the field of cement market by setting up adequate capacity and to build up expertise in lying of crude.

To further enhance distribution network for providing assured service to customers throughout the country through expansion of reseller network as per Marketing Plan/ Government approval.

Obligations:

Towards Customers and Dealers: To provide prompt, courteous and efficient service and quality products at fair and reasonable prices.

Towards Suppliers: To ensure prompt dealings with integrity, impartiality and courtesy and promote ancillary industries.

Towards Employees: Develop their capability and advancement through appropriate training and carrier planning.

Towards Community: To develop techno-economically viable and environment friendly products for the benefit of the people.

SUBSIDIRES COMPANY OF THE BIRLA CROPORATION

CEMENT DIVISION:-

Cement is the primary product of the company and accounts for around 90% of the turnover of the company. The company has seven cement plants at four locations, namely, Satna Cement Works ( SCW ) and Birla Vikas Cement ( BVC ) at Satna (Madhya Pradesh ), Chanderia Cement Works ( CCW ) and Birla Cement Works ( BCW ) at Chanderia ( Rajasthan ), Durgapur Cement Works ( DCW ) and Durga Hitech Cement ( DHC ) at Durgapur ( West Bengal ) and Cement Grinding Unit at Raebareli (Uttar Pradesh). The present installed capacity of cement is 58.80 lac metric tons per annum. Location wise details are given here under:-

Location of Cement Plants in India

STATE

TOWN

UNITS

Madhya Pradesh

Satna

Satna Cement WorksBirla Vikas Cement

Rajasthan

Chanderia

Birla Cement WorksChanderia Cement Works

West Bengal

Durgapur

Durgapur Cement WorksDurga Hitech Cement

Uttar Pradesh

Raebareli

Raebareli Grinding unit

CAPACITY: 5.78 Mill. Ts.

STATE

TOWN

UNITS CAPACITY Mill. Ts

M.P.

Satna

1.55

Rajasthan

Chanderia

2.00

West Bengal

Durgapur

1.60

Uttar Pradesh

Raebareli

0.63

PLANTS OF CEMENT PRODUCTION

Satna Plants:

Total capacity: 15, 50,000 tones.

Chanderia Plants:

Total capacity: 20, 00,000 tones.

Durgapur Plant:

Capacity: 6, 00,000 tones

A new cement plant is established in Durgapur, which is Durgapur High-tech cement.

This plant has the capacity of 10, 00,000 tones of cement production.

Thus total production capacity at Durgapur is 16, 00,000 tones per year.

Raebareli Plant:

Capacity: 6, 30,000 tones

Corporate Social Responsibilities

Educational Activities:-

South Point School, Kolkata, West Bengal

M.P. Birla Foundation Higher Secondary School, Kolkata, West Bengal

M.P. Birla Shiksha Bhawan, Allahabad, Uttar Pradesh

M.P. Birla Industrial Training Institute, Rewa, Madhya Pradesh

Birlapur Vidyalaya, West Bengal

Birla Vikas Vidyalaya, Satna, Madhya Pradesh

School at Chittorgarh, Rajasthan

Sarada Kanya Vidyapith, Barrackpore, West Bengal

M.P. Birla Foundation Veda Sanskrit Pathshala, Bangalore, Karnataka

Medical Activities:-

Bombay Hospital, Mumbai, Maharashtra

Belle Vue Clinic, Kolkata, West Bengal

M.P. Birla Medical Research Centre at Birlapur, West Bengal and Satna, Madhya Pradesh

Birla Vikas Hospital, Satna, Madhya Pradesh

Birlapur Hospital, Birlapur, West Bengal

Dispensary at Allahabad, Uttar Pradesh

Hindustan Medical Institution at Barrackpore, West Bengal

Other Philanthropic Activities:-

M.P. Birla Planetarium, Kolkata, West Bengal

Express Dairy, Behala, Kolkata, West Bengal

Joka Agricultural & Horticultural Society, Joka, West Bengal

SOCIAL SERVICES:-

Water Facilities in Satna & Chanderia.

Roads in Chanderia.

Cleanness Campaign with Zilla Parishad in Chanderia

AWARDS & ACHIEVEMENTS

CAPEXIL Special Export Award every year, since 1990

ISO 9002 certification for Satna Cement Works, Birla Vikas Cement and Durgapur Cement Works.

ISO 9001 - 2000 (QMS) certification for Birla Cement Works, Chanderia Cement Works from BVQI, UK.

IS/ISO 14001 certification in 1999-2000 for Satna Cement Works and Birla Vikas Cement, in 2002-2003 for Birla Cement Works & Chanderia Cement Works for environment management systems.

"Best in Energy Performance" in 1986-87.

"Best in Energy Performance" for Satna Cement Works in 1993-94, 1994-95, 1995-96, 1997-98.

"Best improvement in Thermal Energy Performance" recognition from NCB for Birla Cement Works in 1992-93 and Chanderia Cement Works in 1993-94.

.

"Bhama Shah Samman" from the Rajasthan Government for Educational Activities for Birla Cement Works in 1996-97.

"Excellence in Improving Machinery Health Condition" in 1997.

Ministry of Labour, Government of India, for Birla Cement Works & Chanderia Cement Works in 1998-99 and again in 2001-02.

"Lal Bahadur Shastri Memorial National Award" for Excellent Pollution Control Implementation by Chanderia Cement Works in 2002-03.

COMMODITY PROFILE

Cement: - Cement is often confused with concrete. Cement is finely ground, usually gray colored mineral powder, when mixed with water ,cement acts as glue to bind together the sand, gravel and crushed stone to form concrete ,the most widely used in construction material in the world.

Types of cement

The Plants manufacture varieties of cement, including Ordinary Portland Cement (OPC), 43 &53 grades, fly ash-based Portland Pozzolona Cement (PPC), Portland Slag Cement (PSC) and low alkali Portland cement. Recently, the company has started producing Sulphate Resistant cement (SRC) and it has been well accepted in the market.

The Cement is marketed under the brand names of Birla Cement SAMART, Birla Cement KHAJURAHO, Birla CHETAK, Birla Cement and Birla Premium cement, bringing the product under the common brand of Birla Cement while retaining the niche identity of SAMART for blended cement, i.e. PPC & PSC, for all the units, KHAJURAHO (for the OPC product of Satna) and CHETAK (for the OPC product of Chanderia).

The Division exports large quantities of cement to Nepal, under the brand names of SAMART and KHAJURAHO. BIRLA CEMENT SAMRAT is ideal for mass concrete RCC/ pre stressed/precast structures (for reduced thermal crack), increased water tightness of concrete, increased resistance to sulphate soils and aggressive water, increased resistance to alkali aggregate reaction, besides corrosion and resistance properties.

Different types of cement that are produced in India are:

Ordinary Portland cement (OPC):

OPC, popularly known as grey cement, has 95 per cent clinker and 5 per cent gypsum and other materials. It accounts for 70 per cent of the total consumption.

Portland Pozzolana Cement (PPC):

PPC has 80 per cent clinker, 15 per cent pozzolana and 5 per cent gypsum and accounts for 18 per cent of the total cement consumption. It is manufactured because it uses fly ash/burnt clay/coal waste as the main ingredient.

White Cement:

White cement is basically OPC - clinker using fuel oil (instead of coal) with iron oxide content below 0.4 per cent to ensure whiteness. A special cooling technique is used in its production. It is used to enhance aesthetic value in tiles and flooring. White cement is much more expensive than grey cement.

Portland Blast Furnace Slag Cement (PBFSC):

PBFSC consists of 45 per cent clinker, 50 per cent blast furnace slag and 5 per cent gypsum and accounts for 10 per cent of the total cement consumed. It has a heat of hydration even lower than PPC and is generally used in the construction of dams and similar massive constructions.

Specialized Cement:

Oil Well Cement is made from clinker with special additives to prevent any porosity.

Rapid Hardening Portland cement:

Rapid Hardening Portland Cement is similar to OPC, except that it is ground much finer, so that on casting, the compressible strength increases rapidly.

Water Proof Cement:

Water Proof Cement is similar to OPC, with a small portion of calcium stearate or non- saponifibale oil to impart waterproofing properties.

Portland Pozzolona Cement: -

It is known as strongest cement for strong and durable structures. In Durgapur Hi-tech plant at Durgapur produces Birla Cement Samrat, using high quality clinker, high-quality fly ash from modern power plants and gypsum. This Portland Pozzolana Cement (PPC) brand has all the advantages of 53-Grade Cement.

Portland cement:-

Portland cement is a blend of finely pulverized clinker, produced by burning at high temperature materials containing lime, alumina, iron and silica in pre-determined proportion to give the desired end properties. Normally, Gypsum or its derivatives are added during grinding stage for set control. When mixed with water alone or in combination with sand and stone, it has the property of combining slowly with water to form hard mass.

Raw Materials used in the manufacture of Portland cement:-

The two principal raw materials used in the manufacture of Portland Cement are calcareous material such as limestone, chalk, shells or marl and argillaceous materials such as clay and shale (rich in silica).

Pozzolona:

Pozzolona are amorphous alliaceous and aluminous materials which by itself have no cementations properties but in presence of Calcium Hydroxide liberated by hydration of is cooled and ground to fine power along with small quantity of gypsum (4-5%) to give Portland Cement. OPC reacts chemically with it at ordinary temperatures to form compounds possessing cementations properties.

Portland Pozzolona Cement has two most trusted brands belong to this category:

Birla Cement Samrat

Birla Cement Samrat Premium

Special features:

Higher finesse for improved workability

Resistance to alkali-aggregate reaction

Low heat of Hydration resulting in reduction in cracking

Improved resistance to sulphate attack

Higher long-term strength over OPC

Segregation- free cohesive mix for excellent finish

Lower chloride content to minimize corrosion

Slag:

Slag is a non-metallic product consisting essentially of gases containing silicates, alumino silicate of lime and other bases and is obtained as a byproduct with iron in blast furnace or electric pig iron furnace.

Granulated slag is used in the manufacture of Portland Slag Cement.

Uses of Slag Cement:

Slag Cement can be used for all plain and reinforced concrete construction, mass concreting structures such as dams, reservoirs, swimming pools, river embankment, canal piers, etc. where low heat of hydration and resistance to alkali silica reaction are desired, structure in aggressive environments where chemical and mildly acidic water are encountered (where OPC cannot used), marine construction, dykes, wharves, etc. where sulphatic water is present.

Portland Slag Cement has three brands:

Birla Cement Samrat

Birla Premium Cement

Birla Cement

Special features:-

Higher Compressive Strength

Low Water Absorption

Increased Workability

Low Shrinkage

Sulphate Resistance

Desired durability

Ordinary Portland cement

Brands:

1. Birla Cement Khajurao,

2. Birla Cement Chetak

Special properties of these brands:

Moderate sulphate resistance.

Very low chloride content to avoid corrosion in steel.

Quicker rate of strength development.

Improved workability.

Better surface finish.

Birla Cement Khajuraho/ Chetak-53 Grade Ordinary Portland Cement:

Pre-stressed grinders and electric poles.

For ready-mix concrete.

M 25 and above concrete.

Roads, runways, industrial building, RCC bridges tunnels and high rise buildings.

All types of general constructions.

Birla Cement Khajuraho/Chetak-43 Grade Ordinary Portland cement:-

Brick and stone masonry.

Plastering and flooring.

For ready- mix concrete.

Plain and reinforced cement concrete.

Pre-cast and pre-stressed concrete.

RCC bridges, high-rise buildings and concrete roads.

All types of general constructions.

Plants where it is manufactured:

Satna Cement Works and Birla Vikas Cement, Satna.

Birla Cement Works and Chanderia Cement Works, Chanderia.

Special features of cement manufactured by BCL are :-

Ideal for mass concreting.

Reduced thermal cracks.

Increased water tightness of concrete.

Ideal for plastering.

Greater resistance to sulphate and other aggressive environments.

Greater resistance to alkali- aggressive reaction.

Increased durability.

Standard requirement of various Raw Materials

ParticularStandard requirement

OPC

Clinker - Limestone92-93%

- Iron Ore02-03%

- Gypsum 05%

PPC

Clinker 70%

Gypsum 05%

Fly ash 25%

HYPOTHESIS

A hypothesis is made in order to find out correct explanation of the phenomenon through investigation.

On the basis of hypothesis facts are observed and collected when by verification. In this project the following areas has been formulated:

The management of Long term finance is although a very important but proper management of working capital and ratio analysis is the most important in the company.

It is also a key to success of the overall working of any company.

It is our hypothesis that a Birla Corporation Ltd. has adequate of proper management of working capital.

According to this hypothesis Ratio Analysis and other methods of the analysis of working capital has been used as a measure tool to test the hypothesis.

Research Methodology

For Every Comprehensive research a proper research methodology is indispensable & it has to be properly conceived. The methodology adopted by me is as follows:-

Research Design

Problem Identification

Find out Ratios of Birla Corporation Ltd and compare with other industry in same line of Business.

Find deviation of calculated ratios from standard or Norms

Calculating the working capital requirement of Birla Corporation Ltd.

Information needed

Information about firms assets, liabilities, revenue, expenditure, bankers, investment etc.

Information about firms loan, security, stock level & other financial information.

Data Collection

My data collection source was secondary i.e.

Annual reports of companies

Balance sheet

Profit & Loss Accounts

Analysis & Interpretation

The data collected and analysed subjectively as well as graphically where it is possible. The analysis is based upon available information & interpreted accordingly.

Limitation

My scope of study is limited to the annual reports, Balance sheet of units & number of companies taken for analysis.

RATIO ANALYSIS

Ratio: is the mathematical relationship between two quantities in the form of a fraction or percentage.

Ratio analysis: A Ratio Analysis is essentially concerned with the calculation of relationships which after proper identification and interpretation may provide information about the operations and state of affairs of a business enterprise.

The analysis is used to provide indicators of past performance in terms of critical success factors of a business. This assistance in decision-making reduces reliance on guesswork and intuition and establishes a basis for sound judgment.

Note: A ratio on its own has little or no meaning at all.

Significance of Using Ratios

The significance of a ratio can only truly be appreciated when:

1. It is compared with other ratios in the same set of financial statements.

2. It is compared with the same ratio in previous financial statements (trend analysis).

3. It is compared with a standard of performance (industry average). Such a standard may be either the ratio which represents the typical performance of the trade or industry, or the ratio which represents the target set by management as desirable for the business.

Ratios of Birla Corporation and comparison with the Binani cement and Shree Cement

1) Current Ratio: - The Current Ratio expresses the relationship between the firms current assets and its current liabilities.

Formula: - Current Asset

Current Liability

Unit

2007-08

2008-09

BIRLA

1.18

1.13

BINANI

1.2

1.16

SHREE

2.72

2.28

2007-08 2008-09

Comment:-

Ideal Ratio is 2:1 so,

In Birla corporation, it is 1.18 in 2007-08and, it is 1.13 in 2008-09 which is very low from the ideal ratio, so the company have to reduce their liability otherwise it shows insolvency of the company but in Binani cement the current ratio is 1.2 & 1.16 to 2007-08 & 2008-09 respectively and it is also low from the Birla company and in Shree cement it is over from the ideal ratio. It saws insufficient use of the capital.

Overall the Shree Company is quite good from the other two companies.

2) Quick Ratio:- Measures assets that are quickly converted into cash and they are compared with current liabilities.

Formula:- Current Assets Inventories Loans & Advances

Current Liability Bank Overdraft

Unit

2007-08

2008-09

BIRLA

0.14

0.1

BINANI

0.23

0.22

SHREE

1.33

1.07

2007-08 2008-09

Comment:-

Ideal Ratio is 1:1

In Birla Corporation, Quick Ratio is 0.14 and 0.10 in 2007-08 and 2008-09 respectively which shows the ability of the business to cover its short-term obligations is not good. But in Binani Cement, it is quite good from Birla cement and ultimate Shree Cement which is in good position from these two companies.

3) Proprietor Ratio:- It express the relationship between the propritors fund and total asset of the company.

Formula:- Propritor funds/Equities

Total Assets

Unit

2007-08

2008-09

BIRLA

0.64

0.74

BINANI

0.24

0.24

SHREE

0.38

0.36

2007-08 2008-09

Comment:-

In Birla Corporation Propritor ratio is 0.64 in 2007-08 & 0.74 in2008-09, It means the stake of the propritor in the total asset is good but in binani cement, it is very low. In both the year it is 0.24. And Shree cement shows the 0.38 and 0.36 in consecutive year so it is quite bad position from proprietors point of view.

4) Stock working Capital:- This Ratio expresses the relationship between Stock and working capital of the company.

Formula:- Stock/Inventories

Working Capital

Unit

2007-08

2008-09

BIRLA

1.87

2.43

BINANI

1.43

3.07

SHREE

0.32

0.29

2007-08 2008-09

Comment:-

Ideal Ratio is 1:1

In Birla Company, the ratio is 1.87 and 2.43 times in 2007-08 and 2008-09 respectively which shows value of the stock of the company will be reduced in the near future but in Binani cement, it is very high in 2008 which is not good for the company.In Shree Cement, Both the year it is fanatastic ratio for the company compare to the other two companies.

5) Capital Gearing Ratio:- An investment Ratio that compare the borrowing made by a company with the finance contributed by the shareholders.

Formula:- Preference Share + Long term Borrowings

Equity Share Capital + Reserve Miss. Expenditure

Unit

2007-08

2008-09

BIRLA

0.43

0.27

BINANI

2.29

1.84

SHREE

1.85

1.98

2007-08 2008-09

Comment:-

If this ratio is more then it would be risky for the company because if the sales or revenue companys is low still the company have to pay their intrest. So the capital gearing ratio is good in the birla Coporation but in Shree Cement, it is quite high from the Birla Cor. So the company have to reduce their debt and in Binani Cement, It is very high from other two companies and company have to focous on the Debt.

Ultimate Birla Corporation is in very good postion in this Ratio.

6) Debt Equity Ratio:-This ratio indicates the extent to which debt is covered by shareholders funds. It reflects the relative position of the equity holders and the lenders and indicates the companys policy on the mix of capital funds.

Formula:- Long Term Debts

Shareholders Funds + Long term Debts

Unit

2007-08

2008-09

BIRLA

0.3

0.21

BINANI

0.7

0.65

SHREE

0.66

0.65

2007-08 2008-09

Comment:-

In Birla Corporation,debt equity ratio is 0.3 and 0.21 to 2007 and 2008 respectively which shows extremly good in financial position and companys capital structuer is also strong.but in Binani cement, it is high proportion of the debt which shows financial weekness of the company.but the company was reduce their debt in next year.and in Shree Cement it is not good but still company have to concentrate on the reducing the debt.

Ultimate Birla corporation is good financial strength compare to other two companies.

7) Gross Profit Margin:- It shows the relationship between gross profit of the company and net sales of the company.

Formula:- Gross Profit Margin * 100

Net Sales

Unit

2007-08

2008-09

BIRLA

46.13%

47.03%

BINANI

60.00%

62.45%

SHREE

61.87%

61.31%

2007-08 2008-09

Comment:-

In Birla corporation it is quite same in both the year but it is less from Binani and Shree Cement so the company have to increse their sales part to improve their gross prfoit or the company have to reduce their manufactuer expences in compare to Sales.

8) Operating Cost:- It express the relationship between Operating Cost and net Sales of the Company.

Formula:- Operating Cost * 100

Net Sales

Unit

2007-08

2008-09

BIRLA

68.51%

66.64%

BINANI

66.45%

65.81%

SHREE

74.81%

76.38%

2007-08 2008-09

Comment:-

In Birla Corporation, it is 68.51% and 66.64% in both the 2007 and 2008 year so the company was reduce their opearting expenditure in 2008. And Operating Expenditure is quite same in Binani cement from the birla Cement but it is very high in Shree Cement which ulimate effect to the Net Profit.

9) Administrative Expenditure:- This ratio is made up with two things which is administrative expenditure of the company and net sales of the company.

Formula:- Administrative Expenditure * 100

Net Sales

Unit

2007-08

2008-09

BIRLA

3.00%

2.94%

BINANI

2.66%

2.73%

SHREE

1.96%

1.71%

2007-08 2008-09

10) Selling Expenditure:- This Shows the relationship between selling expenditure and net sales of the company.

Formula:- Selling Expenditure * 100

Net Sales

Unit

2007-08

2008-09

BIRLA

12.73%

12.41%

BINANI

23.91%

23.67%

SHREE

13.65%

15.32%

2007-08 2008-09

Comment:-

In Birla Corporation it is very less in selling expenditure but In Binani it is very high due to they are showing the advertising in media and their brand ambassador is BIG B and Shree Cement the cost is between the both companies.

11) Finance Expenditure:- This ratio express the realtionship between the finance expenditure and net Sales of the copmany.

Formula:- Finance Expenditure * 100

Net Sales

Unit

2007-08

2008-09

BIRLA

1.18%

1.22%

BINANI

4.80%

4.75%

SHREE

0.75%

2.40%

2007-08 2008-09

Comment:-

In Birla Corporation, Finance expenditure is ver less because company have very less borrowings from outside and so the copmany have pay less intrest in the market and company have also no debenture part in capital structure.

12) Net Profit:- This is a widely used measure of performance and is comparable across companies in similar industries. The fact that a business works on a very low margin need not cause alarm because there are some sectors in the industry that work on a basis of high turnover and low margins.

Formula:- Net Profit * 100

Net Sales

Unit

2007-08

2008-09

BIRLA

20.82%

22.81%

BINANI

14.06%

17.96%

SHREE

12.94%

12.60%

2007-08 2008-09

Comment:-

All the three companies increse their profit in the next year except the Shree Cement.Shree cement is reduce their profit by 0.34% and out of all the three companies, Birla Coropration earn higher Net Profit.

13) Net Operating Profit:- It express the relationship between Net Opearting Profit and the net sales of the company.

Formula:- Net Operating Profit * 100

Net Sales

Unit

2007-08

2008-09

BIRLA

33.18%

35.58%

BINANI

34.22%

35.45%

SHREE

44.66%

45.29%

2007-08 2008-09

Comment:-

Net Operating Profit is so good in the Shree Cement compare to the other two companies but the company show the very poor result in net profit so the reason is clear that the opearting cost of the company is so high and the company have to reduce their cost due to increse in the Net profit.

14) Stock Turn Over Ratio:- This ratio measures the stock in relation to turnover in order to determine how often the stock turns over in the business. It indicates the efficiency of the firm in selling its product. It is calculated by dividing the cost of goods sold by the average inventory.

Formula:- Cost of Goods Sold * 100

Average Stock

Unit

2007-08

2008-09

BIRLA

7.57

6.17

BINANI

8.23

3.9

SHREE

5.42

6.8

2007-08 2008-09

Comment: -

In Birla Cement Stock Turnover ratio is 7.57 times in 2007 but it was reduce in the 2008 and it is 6.17 times. So the copmpany have to increse their stock turnover ratio by incresing in the Sales or Cost of goods sold. In Binani cement it is good in 2007 but it drastically change in 2008 and it was not good for the company. But As usally Shree cement was perform good in year to year. The company increse their turn over ration in next year.

Ulitimate Birla corpration is in good position compaire to other two companies.

15) Return on Capital Employed Ratio:- It is the value of the assets that contribute to a companys ability to generate a revenue.

Formula:- NPBT,Intrest & Pref.Dividend * 100

Capital Employed (Fixed Assets + Current Assets Current Liability)

Unit

2007-08

2008-09

BIRLA

46.96%

42.90%

BINANI

17.80%

21.56%

SHREE

13.92%

21.06%

2007-08 2008-09

Comment:-

In Birla corporation, it is 46.96 and 42.90% which is excellent for the company because the assets of the company generate a good revenue for the company compaire to other companies which is very low in this ratio. Both the companies are generate very low revenue.

16) Return On Proprietor Funds:- This Ratio Express the relationship between Proprietors funds and Total assets.

Formula :- NPAT & Interest * 100

Proprietor Funds

Unit

2007-08

2008-09

BIRLA

51.78%

41.26%

BINANI

41.77%

49.14%

SHREE

35.13%

38.70%

2007-08 2008-09

Comment:-

In Birla Corporation the proprietors stake in the total asset of the company is 51.78 and 41.26% in the consecutive year but it is reduce in te next year.In Binani Cement, it is 41.77 and 49.14% and in shree cement, it is 35.13 and 38.70%.In Both Compnies it is increse in the next year.

17) Earning Per Share: - Whatever income remains in the business after all prior claims, other than owners claims (i.e. ordinary dividends) have been paid, will belong to the ordinary shareholders who can then make a decision as to how much of this income they wish to remove from the business in the form of a dividend, and how much they wish to retain in the business.

Formula:- Net Profit After tax Pref.Dividend

Number of Equity Share

Unit

2007-08

2008-09

BIRLA

42.36

51.1

BINANI

4.71

8.66

SHREE

50.81

74.74

2007-08 2008-09

Comment:-

Earning per Share of the all the three companies is shown in the graphical represenatation and at the most the EPS is Shree Cement and secondly, it is Birla corporation.

18) Dividend pay out:- This ratio looks at the dividend payment in relation to net income

Formula:- Dividend Per Equtiy Share

Earning Per Share

Unit

2007-08

2008-09

BIRLA

9.67%

9.16%

BINANI

11.00%

25.00%

SHREE

60.00%

80.00%

2007-08 2008-09

Comment:-

From the investorss pointof view, Shree Cement is very good company because the company provide 60 and 80% Divident pay and this will be banificial for the investors but the Birla Corporation earn more profit although the companys dividend pay out ratio is very low due to reserve their money fo the expansion or any investment.

19) Debtor Turnover:- This ratio Shows that How many days the debtor can pay their debts to the company. So it express the relationship between Avearge Debtors and Daily Avg. Sales.

Formula:- Avarage Debtor

Daily Avarage Sales

Unit

2007-08

2008-09

BIRLA

4.9

5.39

BINANI

Very less

Very less

SHREE

5.94

7.93

2007-08 2008-09

Comment:-

Debtor Turnover Ratio is 4.9 and 5.39 days in Birla Corporation which is very good but in Binani Cement, it is very less of collection period of debt and this ration in Shree Cement is quite high from the Birla corporation but it is also good for the company.

20) Return on equity:- This ratio shows the profit attributable to the amount invested by the owners of the business. It also shows potential investors into the business what they might hope to receive as a return.

Formula:- NPAT Pref.Dividend * 100

Equity Shareholders Funds

Unit

2007-08

2008-09

BIRLA

39.16%

49.00%

BINANI

42.10%

31.74%

SHREE

38.70%

35.13%

2007-08 2008-09

21) Return on investment:- Income is earned by using the assets of a business productively. The more efficient the production, the more profitable the business.

Formula:- After Tax Earning

Total Assets

Unit

2007-08

2008-09

BIRLA

22.41%

19.70%

BINANI

7.62%

9.94%

SHREE

10.31%

10.56%

2007-08 2008-09

Comment:-

In Birla coropration it was very good return on investment which shows in the graph but in Bianani Cement and Shree Cement it was very low ROI.

It means that the manager of the company is not invest the companys fund at proper palce whare the company get more return and this things done in the Binani and Shree Cement but Birla coropraion is good from other two companies.

22) Debt Ratio:- This is the measure of financial strength that reflects the proportion of capital which has been funded by debt, including preference shares.

Formula:- Total Debt

Total Asset

Unit

2007-08

2008-09

BIRLA

54.29%

49.70%

BINANI

76.00%

76.39%

SHREE

70.86%

73.45%

2007-08 2008-09

Comment:-

In Birla Corporation debt proprotion was 54.29% and 49.70% respectinely in 2007 and 2008 which was reduce by company in 2008 and it shows good financial strength. But in Binani And shree cement it was not really good postion it was approxmatiley 70 to 75% which shows financial weekness of the company.

Ultimate Birla Corporation shows good financal postion in the market compaire to the other two companies.

23) Dividend Cover:- This ratio measures the extent of earnings that are being paid out in the form of dividends, i.e. how many times the dividends paid are covered by earnings.

Formula:- Earning Per Share

Dividend Per Share

Unit

2007-08

2008-09

BIRLA

10.34

10.92

BINANI

9.06

4

SHREE

1.67

1.25

2007-08 2008-09

Comment:-

In Birla Corporation dividend cover was 10.34 and 10.92 times which was very high and it means that a larger percentage of earnings are being retained and re-invested in the business but in the Binani Cement, it was 9.06 in the 2007 but it was reduce 4 times and in Shree Cement it was very low so that the company was given larger percentage of earnings to shareholder in terms of the dividend.

Ultimate Companys point of view Birla Corporation is retained their earning for expansion, reinvested in the business so it is good compare to the other companies which shows in the graph.

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.1. Long termfunds are requiredto create production facilities through purchase of fixed assets such as

Plants, machineries, lands, buildings & etc 2. Short term funds are required for the purchase of raw materials, payment of wages, and other day-to-day expenses.

It is otherwise 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.

Concept of working capital

Gross Working Capital = Total of Current Asset

Net Working Capital = Excess of Current Asset over Current Liability

Current Assets

Current Liabilities

Cash in hand / at bank

Bills Receivable

Sundry Debtors

Short term loans

Investors/ stock

Temporary investment

Prepaid expenses

Accrued incomes

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 occurs? 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 you 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 of our business? What is the rate of inventory turnover compared with other companies in your 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 you purchase? What is your firm's payment policy doing to enhance or detract from your credit rating? 5. Accrued expenses and taxes payable: - These are obligations of your 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.

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 eve1nts right from purchase of raw material for cash to the realization of sales in cash is called the operating cycle or working capital cycle.

SHAPE \* MERGEFORMAT

Types of Working Capital:-

SHAPE \* MERGEFORMAT

SIGNIFICANCE OF WORKING CAPITAL:-

SHAPE \* MERGEFORMAT

CALCULATION OF WORKING CAPITAL FOR BIRLA CORPORATION LIMITED

(Rs. in lacks)

YEAR 31.03.06 31.03.07 31.03.08

CURRENT ASSETS

INVENTORIES 10572.33 14258.83 20044.82

SUNDRY DEBTORS 2248.22 2722.47 3171.25

CASH AND BANK 5922.59 3439.42 3135.65

OTHER CURRENT ASSETS 28.38 --- ---

LOANS & ADVANCES 12442.01 30525.34 47311.27

TOTAL CURRENT ASSESTS 31213.53 50946.06 73662.99

LESS:-

CURRENT LIABILITIES AND PROVISIONS

CURRENT LIABILITIES 25753.21 24092.95 30109.32

PROVISION 4489.21 19215.28 35306.92

-------------- -------------- --------------

TOTAL CURRENT LIABILITIES 30242.42 43308.23 65416.24

NET CURRENT ASSETS 971.11 7637.83 8246.75

NET WORKING CAPITAL

0

2000

4000

6000

8000

10000

200620072008

YEAR

AMOUNT(IN

LACKS)

Sources of Additional Working Capital

Sources of additional working capital include the following:

Existing cash reserves

Profits (when you secure it as cash!)

Payables (credit from suppliers)

New equity or loans from shareholders

Bank overdrafts or lines of credit

Long-term loans

Conclusion

The overall performance of Birla Corporation Limited is getting on a good track. The total turnover of the company has registered a growth of 11.27% where as the operating profits for the year were higher by 18.03% mainly on the accounts of increase in the volume or blended cement in the overall cement sales, higher realization and effective cost control measures taken by the company. The profit before tax was up by 19.37% at Rs. 551.18 cores at against Rs. 461.74 cores in the previous year. The cash earning of the company improved substantially to Rs. 501.39 cores as against Rs.179.25 cores in the last financial year. With the increase in capacity on account of expansion projects being undertaken by the company, it is expected that the company would be in a position to maintain the growth in future years.

Company has parked its surplus fund in the various debt schemes of mutual fund. There is an increase of 140% in investment from the previous year. Company is cash rich but as there are expansion and diversification plans under the pipeline, company is not utilizing these funds. For meeting the working capital needs and capacity expansion needs it has borrowed from banks.

The recent boom in the housing, construction and retail sector in India coupled with continued thrust of the Government on infrastructure projects is expected to sustain healthy growth of cement demand. During the year 2007-08, Indian cement industry has registered a growth of 9.34% in terms of cement production. Almost all the major players in the industry including Birla Corporation Ltd have announced substantial increase in capacity and the possibility of oversupply situation cannot be ruled out.

During the year company has embarked upon expansion projects at Satna and Chanderia which would effectively enhance the cement capacity by 1.7 million tones. With the capacitive power plants already in operation and expansion projects under implementation, it is expected that the cement division of the company will do well in the foreseeable future.

The concern about the cement industry is that it is one of the most taxed industries in the country where the government levies and taxes, taken together, constitute over 70% of the ex-factory price. On the top of the above the increase in the cost of coal, railway freight and transportation charge have further added worries of cement manufactures.

Major Findings

1. BCLs NPAT is increasing day by day from last three years and the growth is remarkable.

2. BCL has shown that it is very strong competitor in cement sector of India.

3. Cement can be said as true fruitful business for BCL from last many years.

4. Overall all ratios of the company are good and company need to work with more efficiency.

5. The additional capacity of cement production at Durgapur will create new milestones for the BCL.

6. Lack of advertisement can be said as weak point of the BCL.

7. BCLs investment policies are very much reliable.

8. Position of the stock is increasing per year that is good sign to face the competition coming ahead.

9. Highest ever net profit of Rs. 393.57 cores

10. Highest ever dividend payout of Rs. 36.04 cores

Future of the Cement Industry:

Government policies have affected the growth of cement plants in India in various stages. The control on cement for a long time and then partial decontrol and then total decontrol has contributed to the gradual opening up of the market for cement producers. The consumption of cement is determined by factors influencing the level of housing and industrial construction, irrigation projects, and roads and laying of water supply and drainage pipes etc. The level and growth of GDP and its sectoral composition, capital formation, development expenditure, growth in population, level of urbanization, etc, in turn, determine these factors. But the domestic demand for cement is mainly from the housing activities and infrastructure development.

The government paved the way for the entry of the private sector in road projects. It has amended the National Highway Act to allow private toll collection and identified projects, bridges, expressways and big passes for private construction. The budget gave substantial incentives to private sector construction companies. Ongoing liberalization will lead to an increase in industrial activities and infrastructure development. So it is hoped that Indian cement industry shall boom again in near future.

SUGGESTIONS

The suggestion to the company as follows:

Management of the company should use the corporate strategy.

Management of the company should concentrate on the financial aspects.

Management should utilize all resources properly.

Company should evaluate the current financial position.

For the Inventory Maintenance company should use proficient method.

Management should also focus on research and development.

Company should control manufacturing expenses.

LIMITATIONS

In spite of precautions taken to make the study objective, it cannot be denied that there are certain procedural and technical limitations.

It is not possible to judge all the parameter to evaluate the efficiency in a wide and dynamic area like financial analysis. Some of the limitations of this study are as under:

(a) As the research has taken place in very short tenure, the shortage of time is one of the limitations of this study.

(b) As the report is mainly based on secondary data, limitations of secondary data are the limitations of the study.

Bibliography

The Reference Books Author

Financial ManagementKhan & Jain

Financial ManagementI.M.Pandey

Research MethodologyC.R.Kothari

Cement Manufacturing Association (April-2009)

Websites:-

www.birlacorporation.com

www.stockindia.com

www.cma.co.in

www.scribd.com

www.nse.com

www.bse.com

www.shreecement.com

www.binanicement.com

OPERATING CYCLE

CASH

DEBTORS & BILLS RECEIVABLES

SALES

FINISH GOODS

WORK IN PROGRESS

RAW MATERIAL

TYPES OF WORKING CAPITAL

ON THE BASIS OF B/S CONCEPT

ON THE BASIS OF TIME

GROSS WORKING CAPITAL

NET WORKING CAPITAL

REGULAR WORKING CAPITAL

TEMPORARY WORKING CAPITAL

SEASONAL WORKING CAPITAL

SPECIFIC WORKING CAPITAL

SIGNIFICAN--CE OF WORKING CAPITAL

PAYMENT TO SUPPLIERS

DIVIDEND DISTRIBUTI-ON

INCREASE DEBT CAPACITY

INCREASE IN FIX ASSETS

INCREASE EFFECIENC-Y

EASY LOAN FROM BANKS

_1330798907.