working capital management at bharat coking coal limite1

7/30/2019 Working Capital Management at Bharat Coking Coal Limite1

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WORKING CAPITAL MANAGEMENT AT BHARAT COKING COAL LIMITED, DHANBAD2 0 1 2

MBA K C COLLEGE OF ENGINEERING & IT NAWANSHAHR (PB)(PTU KAPURTHALA) 1

CHAPTER-1

INTRODUCTIONBRIEF PROFILE OF THE COMPANY

ABOUT BHARAT COKING COAL LIMITED (BCCL)

1.1Picture of Coal Drilling Employee of BCCL

Bharat Coking Coal Limited (BCCL) is a Public Sector Undertaking

engaged in mining of coal and allied activities.

It occupies an important place in as much as it produces bulk of the coking

coal mined in the country. BCCL meets almost 50% of the total prime

coking coal requirement of the integrated steel sector.


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BCCL was incorporated in January, 1972 to operate coking coal mines (214

Nos) operating in the Jharia & Raniganj Coalfields, taken over by the Govt.

of India on 16th Oct,1971 to ensure planned development of the scarce

coking coal resources in the country.Currently, the Company operates 81 coal mines which include 40

underground, 18 opencast & 23 mixed mines as on 01.04.2010.

The Company also runs 6 coking coal washeries, 2 non-coking coal

washeries.

The mines are grouped into 13 areas for administrative convenience.

The total manpower as on 1.4.05 was 92,268 and as on 01.03.2010 are

72,222.

India is the 3rd

largest coal producing country. Coal India Limited is the coal

producing company in India.

Coal India Limited

Contributes around 85% of Coal Production in India.

It is the largest company in the World in terms of coal production.

Employs nearly 4 lacks persons and is the largest corporate employer in thecountry.

It is one of the largest companies in the country, turnover being around Rs.

521.88 billion in 2010-11.

It is one of the largest tax payer companies in the country; the provision on

account of Income Tax for the financial year 2009-10 was made for Rs.

43.42 billion.


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Background History

1774Warren Hastings initiates Commercial coal mining at Raniganj

(West Bengal)

1815-1820 First Shaft Mine opened at Raniganj.

Upto 1900

Minimal development; River transportation used to transport coal

to Calcutta; railway lines at Calcutta leads to expansion of Coal

Production.

1972

Coking Coal Industry Nationalized, Bharat Coking Coal Limited

formed to manage operations of all Coking Coal mines in Jharia

Coalfield.

1975

Coal India Limited formed as holding Company with 5

subsidiaries viz. Bharat Coking Coal Limited (BCCL), Central

Coalfield Limited (CCL), Western Coalfield Limited (WCL),

Eastern Coalfields Limited (ECL) and Central Mine Planning and

Design Institute Limited (CMPDIL).

1985

Northern Coalfields Limited (NCL) and south Eastern Coalfields

Limited (SECL) carved out of CCL and WCL.

1992Mahanadi Coalfield Limited (MCL) formed out of SECL to

manage the Talcher and IB valley Coalfields in Orissa.

2000 De-regulation of Coal pricing and distribution of coal.

2007Coal India & four of its Subsidiaries, viz, NCL, SECL, MCL,

WCL was accorded coveted Mini Ratna Status.

1.1Table of Background History


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BOARD OF DIRECTORS

1.2 Pictures of Board of Director


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ORGANISATION CHART

1.1Chart of Board of Director

1.2Charts of Director (Tech) P&P


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1.3Charts of Director (Personnel)

1.4Charts of Director (Tech.) OP


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1.5Charts of Director (Finance)

Company Profile

Date of Incorporation:-Coal India Limited was formed as holding Company

with 5 subsidiaries on 21.10.1975.

Corporate Status:-The Company is incorporated under the Companies 1956 andis wholly owned by the Government of India (GOI).

Business:-Engaged in the mining of coal, based products mining consultancy.

Wholly Owned Subsidiaries

Eastern Coalfields Ltd.

Bharat Cooking Coal Ltd.

Central Coalfields Ltd.

Northern Coalfields Ltd.

Western Coalfields Ltd.

South Eastern Coalfields Ltd.

Mahanadi Coalfields Ltd.


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Central Mine Planning & Design Institute Ltd.

North Eastern Coalfields in directly under Coal India Ltd.

Overseas subsidiary: Coal India Africana Limited

Registered Office: Coal Bhawan, 10 Netaji Subhas Road,

Kolkata 700001(West Bengal, Kolkata)

Coal I ndia & I ts Subsidiaries

1.1Diagram of Coal India & Its Subsidiaries

Coal Ind ia

Kolkata

Sou t h Easter nCoalfields Ltd

BilaspurNo r th

Coalf ields Ltd .Singrauli

Easte rn Coalf ields

Ltd . Assansol

Centra l M inePlann ing &

Design Inst i t uteLtd . Ranchi.

M ahanad i

Coalfields LtdSambalpur

Cent ral Coalf ieldLtd. Ranchi

Bharat Coking

Coa l Ltd .Dhanbad

WesternCoalfields

Ltd. Nagpur


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BHARAT COKI NG COAL LI MI TED (A subsidiary of coal India limited)

1.3Picture of Late Coal India Employee

Mission:-The mission of Bharat Coking Coal Limited (BCCL) is to produce and

market the planned quantity of coal and coal products efficiently and economically

with due regard to safety, conservation and quality.

Vision:-The vision of Bharat Coking Coal Limited (BCCL) is to be the leading

player in metallurgical coal production having an organization and culture

committed towards sustainable growth through best practices from mine to market.

Product & Services

Coking Coal: These coals, when heated in the absence of air, form coherent

beads, free from volatiles, with strong and porous mass, called coke.

These have coking properties.

Mainly used in steel making and metallurgical industries.


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Also used for hard coke manufacturing.

Semi Coking Coal: These coals, when heated in the absence of air, form

coherent beads not strong enough to be directly fed into the blast furnace. Such

coals are blended with coking coal in adequate proportion to make coke. These

have comparatively less coking properties than coking coal mainly used as blend-

able coal in steel making, merchant coke manufacturing and other metallurgical

industries.

NLW Coking Coal:-This coal is not used in metallurgical industries because of

higher ash content; this coal is not acceptable for washing in washeries. This coal

is used for power utilities and non-core sector consumers.

Non- Coking Coal: - These are coals without coking properties.

Mainly used as thermal grade coal for power generation.

Also used for cement, fertilizer, glass, ceramic, paper, chemical and brick

manufacturing, and for other heating purposes.

Hard Coal: - Hard coke is formed from coking / semi-coking coal through the

process of carbonization.

Mainly used in metallurgical industries.

Also used in industrial plants utilizing furnaces.


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Area

1.2Diagram of Coal India Area

BARORA

BLOCK II

GOVIINDPUR

KATRAS

SIJUA

BASTACOLLA

LODNA

C. V. AREA

KUSUNDA

P. B. AREA

KUSTORE

E. JHARIA

W. JHARIA


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CHAPTER-2

OBJECTIVE OFTHE STUDY

To find out the efficiency of Inventory management in Bharat Coking

Coal Limited (BCCL) Dhanbad.

To have a practical experience of the functioning of the Finance

Department of a coal producing company.

To study how finance management practices plays an important role in

supporting other activities of an organization.

To gain an in-depth knowledge of the tricks of faster conversion of

inventories into cash in Bharat Coking Coal Limited (BCCL) Dhanbad.

To find out the role of finance manger in the organization.


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LIMITATIONS

Following limitations were encountered while preparing this project:

Limited data:-This project has completed with annual reports; it just

constitutes one part of data collection i.e. secondary. There were limitations

for primary data collection because of confidentiality.

Limited period:-This project is based on five year annual reports.

Conclusions and recommendations are based on such limited data. The trend

of last five year may or may not reflect the real working capital position of

the company.

Limited area:-Also it was difficult to collect the data regarding the

competitors and their financial information. Industry figures were also

difficult to get.

Method of data collection was through personal interview and therefore

bias becomes a major limitation.


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REVIEW THE

LITERATURE

Generally working capital refers to a companys investment in current assets

cash, short term securities, accounts receivable and inventories. However

for the purposes of working capital management, the more descriptive term

is net working capital, which refers to the current assets minus current

liabilities, which are typically accounts payee and other obligations due

within one year. It is also explained as follows: current assets, commonly

called working capital, represents the portion of investment that circulates

from one form to another in the ordinary conduct of business. (Gitman

2003). This idea embraces the recurring transaction from cash to inventories

to receivables and back to cash. As cash substitutes, marketable securities

are considered part of working capital.

Flibeck and kruegen (2005) defined working capital management as

follows. It is the difference between resources in cash or readily

convertible into cash (current assets) and organizational commitments for

which cash soon are required current liabilities.

The importance of working capital is defined by wild, subramanyam, and

halsy (2004, p519), as follows: it is important as a measure of liquid asset

that provide a safety cushion to creditors. It is also important in measuring

the liquid reserves available to meet contingencies and uncertaintiessurrounding a companys balance of cash and out flows.

Working capital budget and capital structure are components of corporate

finance. Capital budget and capital structure concerns rising and

management long term capital. On the other hand, working capital,


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including asset and current liabilities, is the source of short term capital.

(Chiou etal, 2006).

According to Weston & Brigham - Working capital refers to a firms

investment in short term assets, such as cash amounts receivables,inventories etc.

Working capital means current assets. - Mead, Baker and Malott

The sum of the current assets is the working capital of the business-J.S.Mill

According to shubin, Working capital is the amount of funds necessary to

cover the cost of operating the enterprise.

According to Hoagland, Working capital is descriptive of that capital

which is not fixed. But, the more common use of working capital is to

consider it as the difference between the book value of the current assets and

the current liabilities.

Working Capital = Current AssetsCurrent Liabilities

Conceptual Framework of Working Capital Management

Working Capital.

Concept of Working capital.

Working Capital Management.

Types of Working Capital.

Factors Determining of Working.

Estimate of Working Capital Requirement.

Financing of Working Capital.

Management of Inventory.Management of Cash.

Management of Receivable.

Operation Cycle


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What is Working Capital?

Fixed Capital is that part of which is required for the purchase of fixed

assets like Land and Building , Plant and machinery etc. The fixed capital

provides the basic means for the business to earn its return... But by

themselves, these fixed assets would not produce anything. For instance, to

operate the machines, we require men, materials, power, tools, accessories etc.

These factors involve expenses. In addition, we have to maintain certain

current assets like stocks, stores, equipments, etc. All these require enough

resources to keep the wheels of the business in motion. Therefore, in addition

to the amount of fixed capital every business whether new or growing

requires Working Capital. Working Capital is that portion of a business

concerns total capital, which is employed in term of operations. Without

working capital, fixed capital would be idle and ineffectual.

The same may be designated in the following equation:

2.1 Table of Formula of Working Capital

Funds thus invested in current assets keep revolving fast and are being constantly

converted in to cash and this cash flows out again in exchange for other current

assets. Thus it is known as revolving or circulating capital or short term capital.

Two Concept of Working Capital

a. Gross Working Capital.b. Net Working Capital.

Gross working capital: - Gross working capital is the total of all current assets.

Net working capital: - Net working capital is the difference between current

assets and current liabilities. Though the later concept of working capital is

Working Capital = Current Assets Current Liabilities


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commonly used it is an accounting concept with little sense to say that a firm

manages its net working capital. What a firm really does is to take decisions with

respect to various current assets and current liabilities. The constituents of current

assets and current liabilities are shown in table A.

Table A: Constituents of Current Assets and Current Liabilities

Part A: Current Assets

Inventories Raw materials and components, Work in progress,

Finished goods, other.

Trade Debtors.

Loans and Advances.

Investments.

Cash and Bank balance.

PartB: Current Liabilities

Sundry Creditors.

Trade Advances.

Borrowings.

Provisions.

Working Capital Management

Working Capital Management refers to management of current assets and current

liabilities. The major thrust of course is on the management of current assets this is

understandable because current liabilities arise in the context of current assets.

Working Capital Management is a significant fact of financial management.

Types of Working Capital

Working Capital may be classified in to two ways:-

On the basis of concept.

On the basis of time.


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Types of Working Capital

2.1Diagram of Working Capital

Permanent or Fixed Working Capital:-Permanent or Fixed Working

capital is the minimum amount which is required to ensure effective

utilization of fixed facilities and for maintaining the circulation of current

assets. There is always a minimum level of current assets that is

continuously required by the enterprise to carry out its normal business

operation. For example every firm has to maintain minimum level of raw

materials, work in process, furnished goods and cash balance. The minimum

level of current assets is called permanent or fixed working capital as their

part of working capital is permanently blocked in current assets. With the

growth of business there is an increase in current assets.

TYPES OF

WORKINGCAPITAL

ON THE BASIS OFB/ S CON CEPT

GROSSWORKINGCAPITAL

NET WORKINGCAPITAL

ON THE BASIS OFTIME

REGULARWORKINGCAPITAL

TEM PORARYWORKINGCAPITAL

SEASONALWORKINGCAPITAL

SPECIFICWORKINGCAPITAL


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Temporary or Variable Working Capital:-Temporary or Variable

Working Capital is the amount of working capital that is required to meet

the seasonal demands and some special exigencies. Variable working capital

can be further classified as:-

Seasonal Working Capital.

Special Working Capital.

Most of the enterprises have to provide additional working capital to meet the

special and seasonal needs. The capital required to meet the seasonal needs of

enterprise is called Seasonal working capital. Special working capital is the

part of working capital which is required to meet the special exigencies such as

part of working capital which is required to meet special exigencies such as

launching of extensive marketing campaigns for conducting research etc. is

called Special working capital.

Factors Determining working capital Requirements:-

The Major determinants of the proportion of fixed to working capital are as

follows:

Nature of Business:-Business units selling service (like public utilities)

instead of a commodity have little need for working capital, as they have

little demand for large inventories. Generally they operate in cash and

prepay basis. But trading concerns (merchandising companies) make a

greater use of working capital, since inventory represents a major item of

investment.

Size of Business: The working capital requirements of a concern are

directly influenced by the size of the business which may be measured in

terms of scale of operations. Greater the size of a business unit generally

larger will be the requirement of working capital.


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Production Policy:-In certain industries the demand is subject to wide

fluctuation due to seasonal variation. The requirement of working capital, in

such cases depends upon the production policy. The production could be

kept either steady by accumulating inventories during slack period with a

view to meet high demand during the peak season or the production could

be curtailed during the slack season and increased during peak season.

Manufacturing Process/ Length of the production cycle:-In

manufacturing business, the requirements of working capital increase in

direct proportion to length of manufacturing process, longer the process

period of manufacture, longer is the amount of working capital required.

The longer the manufacturing time, the raw materials and other supplies

have to be carried for a longer period in the process with progressive

increment of labor and service costs before the finished product is finally

obtained.

Working Capital Cycle:- In manufacturing concern, working capital

cycle starts with the purchase of raw materials and ends with realization of

cash from the sale of finished goods. The cycle involves the purchase of rawmaterials and ends with the realization of cash from the sale of finished

products.

Market Condition:-The degree of competition prevailing in the market

places has an important bearing on working capital needs. When

competition keen, a larger inventory of finished goods is required to

promptly serve customer who may not be inclined to wait because other

manufacturers are ready to meet their needs, further, generous credit terms

may have to be offered to attract customers in a highly competitive market.

Credit Policy:-The credit policy is concerned in its dealings with debtors

and creditors influence considerably the requirements of the working


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capital. A concern that purchases its requirements on credit and sells its

products/services on cash requires lesser amount of working capital.

Business Cycle:-Business Cycle refers to alternate expansion and

contraction in general business activities. In a period of born i.e. when the

business is prosperous there is a need for larger amount of working capital

due to increase in sales, rise in prices, optimistic expansion of business etc.

On the country at the time of depression i.e. when there is a down swing of

the cycle, business contracts, sales decline, difficulties are faced in

collections from debtors and firms may have a large amount of working

capital lying ideal.

Rate of Growth Of business:-The working capital requirements of a

concern increase with the growth and expansion of its business activities.

Although it is difficult to determine the relation between growth in the

volume of the business and in the growth of the working capital of the

business, yet it may be concluded that for normal rate of expansion in the

volume of the business, we may have retained profits to provide for more

working capital but in the first growing concerns, we shall require largeramount of capital.

Earning Capacity and Dividend policy:-Some firms have more earning

capacity than others due to the quality of their products, monopoly

conditions etc. Such firms with high earning capacity may generate cash

profits from operations and contribute to their capital. The dividend policy

of a concern also influences the requirements of the working capital.

Price Level Changes:-Changes in the prices level also effects the

working capital requirements. Generally the rising prices will require the

firm to maintain larger amount of working capital as more funds will require

maintaining the same current assets. The effect of rising prices may be


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different for different firms. Some firms may be affected much while some

other may not be affected at all by the rise in prices.

Financing of Working Capital

The working capital requirements of a business concern can be classified as:

Permanent or Fixed working capital requirements.

Temporary to variable capital requirements: -In concern, a part of working

capital investments are as permanent investment in fixed assets. This is so

because there always a minimum level of current assets which are

continuously required by the enterprise to carry out its day-to-day business

operations and this minimum cannot be expected to reduce at any time. This

minimum level of current assets gives rise to permanent or fixed working

capital as this part of working capital is permanently blocked in current

assets. The various sources for the financing of working capital are:-

Permanent or Fixed Sources of Working Capital

Shares.

Debentures.

Public Deposits.

Loans from financial institutions.

Temporary or Variable Sources of Working Capital

Commercial banks

Indigenous bankers

Trade creditors

Installment credit

Advances

Accounts receivable- credit/factoring

Accrued expenses


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Commercial paper

Commercial banks are the most important sources of short term capital. The major

portions of working capital loans are provided by commercial banks. They provide

of wide variety of loans tailored to meet the specific requirements of a concern.The different forms in which the banks normally provide loans and advances are

as follows:-

Loans

Cash credits

Overdrafts

Purchasing and discounting of bills

In addition to the above mentioned forms of direct finance, commercial banks

help their customers in obtaining credit form their suppliers through the letter of

credit arrangements. It is always a test to the prudence of a financial manager to

obtain the correct amount of working capital at the right time, at a reasonable

cost and at the most favorable terms.

Management of inventory

Management of Cash

Management of Receivables

Management of Inventory

Inventories constitute the most significant part of current assets of a large

majority of companies in India. On an average, inventories are approximately 60

% of current assets in public limited companies in India. Because of the large

size of inventories maintained by firms maintained by firms, a considerable

amount of funds is required to be committed to them.

Management of Cash

Cash is the important current asset for the operation of the business. Cash is the

basic input needed to keep the business running in the continuous basis, it is also


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the ultimate output expected to be realized by selling or product manufactured by

the firm. The firm should keep sufficient cash neither more nor less.

Management of Receivable

A sound managerial control requires proper management of liquid assets and

inventory. These assets are a part of working capital of the business. An efficient

use of financial resources is necessary to avoid financial distress. Receivables

result from credit sales. A concern is required to allow credit sales in order to

expand its sales volume.

Operating Cycle

Operating cycle refers to the time duration required to convert sales, after the

conversion of recourses into inventories, into cash .the operating cycle of a

manufacturing company like BCCL includes:

Accusation of resources such as raw materials, labor, power and fuel etc.

Manufacture of the product which includes conversion of materials into

work-in-progress into finished goods.

Sale of the product either for cash or on credit. Credit sales create accountreceivables for collection.


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Operating Cycle

2.2Diagram of Operating Cycle

Components of Working Capital are calculated as follows

Materials Storage Period=Average Stock of Raw Materials/Average

Cost of Raw Material Consumption per day.

W-I-P Holding Period=Average W-I-P in Inventory/Average Cost of

Production per day.

Stores and Spares Conversion Period= Average Stock of Stores and

Spares/ Average Consumption per day.

Debtors Collection Period=Average Book Debts/Average Credit Sales

per day.

2.2Table of Formula of Working Capital

CASH

RAW

M ATERIALS

W IPFINISHE

D GODS

BOOK

DEBTS


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CHAPTER-3

RESEARCHMETHODOLOGY

Research Methodology

For Every Comprehensive research a proper research methodology is in

dispensable& it has to be properly conceived. The methodology adopted by me

is as follows:-

Research Design

Problem Identification

Find out Ratios related to working capital management of BCCL and

compare with last 2 years.

Find deviation of calculated from standard or Norms.

Calculating the working capital requirement of Bharat Coking Coal 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

Primary Data:-This data had been collected through meetings and interviews

with various managers and employees of the finance department of BCCL. At the

same time I had visited various other departments for collection of data. The

departments that had been visited are as follows:-


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Main Cash Department

Billing and Operation Department

Excise Department.

Sales Department

Secondary Data: - Apart from the primary data certain secondary data were

required for this project. Following are the sources of secondary data we collect

are as follows:

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.

Conclusion:-On the basis of analysis conclusion has been drawn.

Suggestion:-Suggestion has been given in order to improve performance of the

firm.

Limitation:-My scope of study is limited to the annual reports, Balance sheet ofunits for analysis.


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CHAPTER-4

DATA ANALYSIS&INTERPRETATION

Analysis of Working Capital Management of BCCL

Working CapitalCurrent RatioAcid-Test RatioDebtors Turn Over Ratio Inventory Turn Over RatioNet Working Capital RatioDebt Collection Ratio

4.1 Table of Working Capital Management of BCCL


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BALANCESH EET Rs (in Lakh)

As the Year 2006-2011

PATICULARS 2006-07 2007-08 2008-09 2009-10 2010-11SOURSES OF FUNDS:SHAREHOLDERS FUND:

SHARE CAPITAL 211800 211800 211800 211800 211800.00

RESERVES AND SURPLUS

SUB TOTAL 211800 211800 211800 211800 211800.00

LOAN FUNDS:

SECURED 30784.23 20843.16 11826.7 33946.16 3259.7UNSECURED 157620.1 108330 108330 108329.98 108330

SUB TOTAL 188404.4 129173.1 120156.7 142276.14 111589.7

TOTAL 400204.4 340973.1 331956.7 354076.14 323389.56

APPLICATION OF FUNDS:FIXED ASSETS:

GROSS BLOCK 372797.5 385584.4 391474.6 408879.58 436019.96LESS: DEPRICIATION 260545.9 273094 278134 286242.37 300377.81NET BLOCK 112251.6 112490.4 113340.6 122637.21 135642.15

CAPITAL WORK INPROGRESS

8399.24 5407.66 9138.47 8304.24 8345.70

SUB TOTAL 120650.9 117898.1 122479 130941.45 143987.85

INVESTMENT 12470.4 11084.8 9699.2 8313.6 6928.00

INVENTORIES 52189.14 57352.91 70725.53 93890.02 111236.22

SUNDRY DEBTORS 8617.47 5144.03 18682.5 39380.24 61813.50CASH AND BANK BALANCES 96097.25 77289.22 91088.72 92302.76 130683.59

LOANS $ ADVANCES 16329.25 17978.53 22070.92 31950.62 29736.02

SUB TOTAL 173233.1 157764.7 202567.7 257523.64 333469.33

LESS: CURRENTLIABILITY&PR

585327.3 639235 834296.4 794790.34 803714.85

NET CURRENT ASSETS -412094 -481470.3 -631729 -537266.7 -470245.52

MISC. EXPTPROFIT AND LOSS A/CS 679177.3 693460.5 831507.2 752087.79 642719.23

TOTAL 400204.4 340973.1 331956.7 354076.14 323389.56

4.2 Table of Balance sheet of BCCL from 2006-2011


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Profi t and Loss Account Rs (Lahk )

For the Year Ended 2006-2011

Particulars

2 0 0 6 - 0 7 2 0 0 7 - 0 8 2 0 0 8 - 0 9 2 0 0 9 - 1 0 2 0 1 0 - 1 1

I NCOME:

Sales of coal, coke,etc. 287919.8 295478 339913.2

461933.67 615711.23Coal issued for othe rpurposes per contra 67775.9 68588.2 75532.07 68355.31 93809.90Other receipts 40026.91 27937.6 69167.31 50536.63 30755.98Accretion in stock 554.77 4962.42 11857.14 26809.03 17389.26Total 396277.4 396966 496469.72 607634.64 757666.37

EXPENDI TURE:

Discret ion in stock - - - - - - - - - - - - - - - -

- - - - -

Purchase/ transfer ofcoal/ coke etc. - - - - - - - - - - - - - - - - - - -

I nternal consumptionof coal per contra 6 5 3 1 9 . 6 4 6 6 0 7 1 . 3 7 3 2 3 2 . 7 2 6 6 1 9 3 0 7 9 9 3 3 1 7 . 7 4

Employeesremunera tion &benefits

1 7 5 1 5 1 . 5 1 8 8 5 1 8 2 7 6 1 1 8 . 9 8 2 6 4 2 7 4 . 5 9 3 0 2 3 1 2 . 5 8

I mpact of arrearw ages under NCW A

VI I

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

- - - - - -

I mpact of arrearadhoc/ I R exe. & non-

exe.

3 2 3 4 6 . 1

Consumption of store s& spare parts 3 2 0 6 4 . 8 6 2 3 3 4 6 . 1 8 3 8 9 5 . 1 6 3 9 1 2 4 . 9 8 4 3 7 9 6 . 5 8

Power & fuel2 3 2 7 0 . 8 6 3 3 0 1 5 . 8 3 7 5 4 8 . 9 8 3 0 6 0 0 . 2 1 2 1 7 8 1 . 3 6

Differential tariff- - - 2 3 3 4 6 . 6 2 3 4 1 4 . 3 8


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Particulars2 0 0 6 - 0 7 2 0 0 7 - 0 8 2 0 0 8 - 0 9 2 0 0 9 - 1 0 2 0 1 0 - 1 1

Repairs (Purchased)4 9 4 5 . 4 5 - - - 5 6 2 3 . 6 4 7 0 7 1 . 8 8 7 9 2 6 . 5 4

Contractualexpenditure 1 6 8 4 5 . 2 8 4 9 4 4 .7 5 2 9 4 7 5 . 3 8 3 7 8 1 8 . 6 6 6 4 3 3 5 . 1 7

Social overhead s

( I ncludes free issue ofcoal to employees)

2 4 4 8 0 . 5 2 5 6 8 8 . 7 3 0 5 5 0 . 4 1 3 4 0 7 1 . 9 1 3 4 3 0 4 . 6 3

I nterest7 8 8 5 . 7 4 9 3 4 7 . 2 7 8 4 2 . 7 6 6 6 5 9 0 5 8 4 2 0 1 . 6 8

Depreciation1 4 2 6 7 . 2 2 1 7 5 5 0 1 6 0 0 5 . 9 3 1 7 1 0 3 . 5 0 1 7 2 4 5 . 5 9

Impairment of assets2 0 5 3 . 9 8 3 3 0 .5 3 2 9 6 . 2 4 - 3 5 3 5 . 7 2 8 2 3 . 4 0

Provision2 2 9 . 5 8 1 7 0 . 2 5 2 7 3 . 7 7 7 9 . 5 7 1 2 7 . 8 8

Other expenditure2 7 5 7 6 . 9 1 2 8 7 4 7 . 1 4 3 3 2 2 . 4 3 3 8 6 7 9 . 7 4 5 4 8 8 4 . 3 6

Total expenditure3 9 3 8 9 2 4 5 3 7 5 9 6 2 7 6 0 0 . 7 1 5 3 8 8 4 2 . 6 9 6 4 6 8 3 2 . 1 1

Add/ less: OBR adj:1 7 8 1 . 9 7 - 3 3 2 1 . 7 7 5 2 1 4 . 9 4 - 1 0 9 6 3 . 4 9 2 0 5 6 . 5 3

Net total expenditure3 9 5 6 7 3 . 5 4 5 0 4 3 7 6 3 2 8 1 5 . 6 5 5 2 7 8 7 9 . 2 0 6 4 8 8 8 8 . 6 4

Profi t/ loss( - ) for the

year 6 0 3 . 8 9 - 5 3 4 7 0 . 7 -

1 3 6 3 4 5 . 9 3

79755.44 1087S77.73

Fringe benefit tax- 2 7 2 . 8 2 - 1 0 4 3 . 6 4 - 3 4 7 . 8 3 - - - - 2 6 . 3 0

Prior period adj.4 6 2 6 . 9 3 1 3 8 8 5 . 6 - 1 3 5 2 . 9 5 - 3 6 2 . 3 2 5 9 0 . 8 3

Wa iver of apexinterest - - - 4 9 2 9 0 . 2 - - - - -

Total profit4 9 5 8 . 4 8 6 8 1 . 3 5 -

1 3 8 0 4 6 . 7 1

Balance loss( -)brought forw ard from

last years accounts

- 6 8 4 1 3 6 - 6 7 9 1 7 7 - 6 9 3 4 6 0 . 5 - 8 3 1 5 0 7 . 2 1 - 7 5 2 0 8 7 . 7 9

Transitional prov. Asper rev. AS 15 - - - - 2 2 9 4 4 . 6 - - - -

Loss( -) carried forwardto balance sheet - 6 7 9 1 7 7 - 6 9 3 4 6 1 -

8 3 1 5 0 7 . 2 1

- 7 5 2 0 8 7 . 7 9

- 6 4 2 7 1 9 . 2 3

4.3Table of Profit & Loss Account of BCCL from 2006-2011


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Current Ratio

It is also known as working capital ratio. It is a measure of short-term financial

strength of the business and shows whether the business will be able to meet its

current liabilities as when they mature. Current Assets including assets which can

be converted in to cash easily and it like market securities debtors, inventory,

prepaid expenses etc. Current Liabilities included creditors, bills payable, accrual

expenses, short term bank loan, income tax liabilities and long term debt maturity

in current year. In short it can be said as all obligations within a year are included

in current liabilities. Current ratio is a measure of the firms short term solvency.

It indicates the availability of current assets in rupee of current liabilities. As aconventional rule, a current ratio should be or slightly more. It focuses the strong

of weak position of the company.

=

For the year:

2 0 1 0 2 0 1 1 =

= 0.41

2 0 0 9 2 0 1 0 = ,,

,,= 0.32

2 0 0 8 2 0 0 9 = ,,

,,= 0.24

4.4 Table of Current Ratio


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4.1Diagram of Current Ratio

Interpretation:-It is generally believed that 2:1 ratio shows a comfortable

working capital position. The tendon committee appointed by RBI had wide

recommended a current ratio of 2:1.Company doesnt maintain this ratio but

trying to increase it year by year. A current ratio is 0.41 in the 2010-2011. But in

the previous year the ratio is 0.32:1 so we can say that the company doesnt have

comfortable working capital position previous year but the company is trying to

increase its current ratio.

Acid Test Ratio

The measure of absolute liquidity may be obtained only cash and bank balance as

well as only ready marketable security with liquid liabilities. This is every

existing standard of liquidity and it is satisfaction if the ratio is 1.50:1.

0

0.05

0. 1

0.15

0. 2

0.25

0. 3

0.35

0. 4

0.45

2010-2011 2009-2010 2008-2009

CU RREN T RATIO

2010-2011

2009-2010

2008-2009


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= .

.

For the year

2 0 1 0 2 0 1 1 =

= 0.276

2 0 0 9 2 0 1 0 = ,, ,,

,,= 0.205

2 0 0 8 2 0 0 9 = ,, ,,

,,= 0.158

4.5Table of Acid Test Ratio

4.2Diagram of Acid Test Ratio

Interpretation:-Acid-test ratio is near to one in current year that is 0.276 as

compare to 0.205 in the previous year. Over all the acid-test ratio of last year &

this year is not very satisfactory so we can conclude that the absolute liquidity of

the Bharat Coking coal ltd. is in favor.

0

0.05

0. 1

0.15

0. 2

0.25

0. 3

2010-2011 2009-2010 2008-2009

ACID - TEST RATIO

2010-2011

2009-2010

2008-2009


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Debtors Turnover Ratio

This ratio shows the proportion of sales to average receivables. It shows the

efficiency of the collection policy of the firm. The higher the ratio, the less

satisfactory position of the firm. Higher ratio indicates weak collection policy of

the firm.

2 0 1 0 2 0 1 1 =

= 12.168 Times

2 0 0 9 2 0 1 0 =

= 15.911 Times

2 0 0 9 2 0 1 0 = ,,,

,,,= 7.102 Times

4.6 Table of Debtors Turnover Ratio

4.3Diagram of Debtors Turnover Ratio

0

2

4

6

8

10

12

14

16

2010-2011 2009-2010 2008-2009

D EBTORS TU RN O V ER RATIO

2010-2011

2009-2010

2008-2009

=


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Interpretation:-We know that the higher Debtors turnover ratio is not good for

the firm. The lesser the period of the collection the better policy of collection of

the company. In the year 2010-11 it is 12.168 days to collect the debts. So we can

say that the collection policy of the company is excellent that they recover their

debts near to half of month. But we also consider that in previous year this is

15.911 days so we can say that the company has to maintain this ratio.

Inventory Turnover Ratio

This ratio is also known as stock turnover ratio. The number of times the

average stock is turnover during the year is known as stock turnover. It is

computed by deciding the sales by the inventory. The ratio is important in joining

the ability of management which it can move the stock.

=

For the year2 0 1 0 2 0 1 1 =

= 6.00 times

2 0 0 9 2 0 1 0 = .

.= 5.61 times

2 0 0 8 2 0 0 9 = ,,,

,,,= 5.25 times

4.7Table of Inventory Turnover Ratio


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4.4 Diagram of Inventory Turnover Ratio

Interpretation:-Higher the ratio more profitability the business would be. The

ratio is joining the ability of management with which it can move the stock.

Inventory turnover ratio is highest in the year 2010-11 is 6.00 as compare to

current year it is 5.61 which is little bit lower than previous year but it is obvious

that in heavy industries like Bharat Coking coal ltd., it is not a huge difference.

Net Working Capital Turnover RatioNet working capital turnover ratio is obtained by net working capital joining to

sales. The excess of current assets over current liabilities is called working

capital. It is found for measuring firm liquidity. It also measures the firm potential

reserve of funds.

4.8

5

5.2

5.4

5 .6

5 .8

6

2010-2011 2009-2010 2008-2009

IN VEN TORY TU RNO V ER RATIO

2010-2011

2009-2010

2008-2009


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=

For the year

2 0 1 0 2 0 1 1 =

= -1.30 times

2 0 0 9 2 0 1 0 =

,,= -0.85 times

2 0 0 8 2 0 0 9 = ,,,

,,, = -0.58 times

4.8Table of Net Working Capital Ratio

4.5 Diagram of Net Working Capital Ratio

Interpretation:-As per the balance sheet data of the creditor, the working capital

turnover ratio is different for the different years. The ratio is -1.30 in 2010-11 and

-0.85 in 2009-10. So it means that higher the ratio better the working capital

condition of the company. BCCL having a negative ratio in both years so it shows

not the sound position of the company.

-1.4

-1.2

-1

-0.8

-0.6

-0.4

-0.2

0

2010-2011 2009-2010 2008-2009

N ET W O RKIN G CAPITAL TU RN OV ER RATIO

2010-2011

2009-2010

2008-2009


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Debt Collection Period

The Debt Collection shows the number of days taken to collect the debts of credit

sales. It shows the efficiency and collection policy of the company. The ratio is

computed by dividing the Debtors turnover ratio in to 365 days.

=

For the year

2 0 1 0 2 0 1 1 = . = 29.99 days

2 0 0 9 2 0 1 0 =

.= 22.94 days

2 0 0 8 2 0 0 9 =

.= 51.40 days

4.9Table of Debt Collection Period


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4.6 Diagram of Debt Collection Period

Interpretation:-The collection period is highest in 2008-09 is 51.40 days as

compare to low in the year 2010-11 is 29.99 days only. This shows the

improvement in collection policy of the Bharat Coking Coal Limited. So it is very

important for any company to collect the debs which this company does very

well.

0

10

20

30

40

50

60

2010-2011 2009-2010 2008-2009

D EBT CO LLECTIO N PERIO D

2010-2011

2009-2010

2008-2009


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CHAPTER-5

FINDINGSCurrent liabilities and provisions of BCCL and complete synchronization

and coordination among the working capital components which shall

contribute to optimum level of operations.

The huge inventory is a great concern for BCCL and it needs properprocurement and management.

Working capital of the company was negative. It shows that liquidity

position of the company is not good.

Current assets components show sundry debtors which were the major part

in current assets. It shows that the inefficient receivables collection

management.

Inventory was supporting to sales, thus inventory turnover ratio was

increasing, but company increased the raw material holding period.


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RECOMMENDATION & SUGGESTION

The recommendation & suggestion for effective management of working capital

at BHARAT COKING COAL LTD. are given bellow:

For inventory, in order to improve the position, BCCL can reduce the level

of stocks by resorting to phased production i.e. producing according to

requirement and disposing off or recycling the unserviceable inventories.

However, the low turnover of stock may also be due to problems with

generation of sales Inventory management is a great concern for BCCL

especially stores and spares. The purchase manager should take proper

steps for procurement of inventories.

The BCCL must take certain steps to decrease the working capital cycle.

One way can be better management of inventories.

The BCCL is suggested to maintain a balance in capacities,

synchronization of various inputs availability of some materials or parts

which are not easily available.

The plant should maintain inventory at an optimum level rather than a very

optimistic level.

The procurement for materials requisition processing should be reduced soas to minimize the lead time.

Company should take control on debtors collection period which is major

part of current assets.


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CHAPTER-6

BIBLIOGRAPHY

The Reference Books Author

Financial Management Khan & Jain

Financial Management I.M.Pandey

Research Methodology C.R.Kothari

BCCL last 3 year annual reports

Websitebccl.cmpdi.co.in/

www.coalindia.in/

And help from:

Google search engine


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Persons

Sri Sheo Nandan Sah (Father)

Sri R.N.Vishwakarama (Sr. Manager (Mining), HRD Department)

Mr. Chandan Kumar Gupta (Brother)

Mr. Rajnish Kumar Gupta (Brother)

Sri Mahesh Gupta (Uncle)

Sri A.K.GUPTA (AFM Block II Area)

Sri B.K.Parui (C/B HOD)

Sri A.K.Murati (GM Finance )

Sri S.S.Nair Principal of KCSMCA (EX)

Mrs. Shelly Rekhi Sharma Principal of KCSMCA

Mr. Sachin Verma HOD of MBA

Mr. Parminder Singh HOD of BCA

Ms. Pallvi Dhingra Lecturer of KCSMCA

Mrs. Jagmeet Kaur Lecturer of KCSMCA

Ms. Cherry Wadwa IIC KC Group of Institution Punjab

Mr. Wasdev Sah

Ms. Meenu Bansal Lecturer of KCSMCA

Mr. Karun Aggarwal Lecturer of KCSMCA


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Annexur eBHARAT COKING COAL LIMITED

BALANCE SHEET AS AT 31ST MARCH, 2011(Rs. In Lacks) in Lakh

As at As at

Sch. 31st March, 2011 31st March, 2010

I. SOURCES OF FUNDS :

Shareholder's Fund:

Share Capital A 211800.00 211800.00

Reserve & Surplus B

211800.00 211800.00

Loan Funds:

Secured C 3259.58 33946.16

Unsecured D 108329.98 108329.98

111589.56 142276.14323389.56 354076.14

II. APPLICATION OF FUNDS :

A. FixedAssets:

GrossBlock E 436019.96 408879.58

Less: Depreciation& Impairment 300377.81 286242.37

Net Block 135642.15 122637.21

B. Capital Work-in-Progress 8345.70 8304.24

(Net of provisions) 143987.85 130941.45

Investments F 6928.00 8313.60

Current Assets, Loans& Advances:

Inventories G 111236.22 93890.02

Sundry Debtors H 61813.50 39380.24

Cash & Bank Balances I 130683.59 92302.76

Loans & Advances J 29736.02 31950.62

333469.33 257523.64

Less: Current Liabilities & Provisions K 803714.85 794790.34

Net Current Assets-470245.52

-537266.70

Profit & Loss Account 642719.23 752087.79

323389.56 354076.14


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BHARAT COKING COAL LIMITED

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED ON 31ST MARCH' 2011

in Lakh

Sch. For the For the

Year ended on

Year ended

on

INCOME :31st Mar '

2 0 1 1

31st Mar '

2 0 1 0

Sale of Coal, Coke etc 1 615711.23 461933.67

Coal, Coke issued for other purposes per contra 2 93809.90 68355.31

Other Receipts 3 30755.98 50536.63

Accretion in Stock 4 17389.26 26809.03

757666.37 607634.64

EXPENDITURE :

Discretion in Stock 4 0.00 0.00

Internal consumption of Coal, Coke per contra 93317.74 66193.79Employees Remuneration & Benefits 5 302312.58 264274.59

Consumption of Stores & Spare Parts 6 43796.58 39124.98

Power & Fuel 7 21781.36 30600.21

Repairs(Purchased) 8 7926.54 7071.88

Contractual Expenditure 9 64335.17 37818.66

Social Overhead(includes Free issue of Coal) 10 34304.63 34071.91

Interest 11 4201.68 6659.58

Depreciation 17245.59 17103.50

Impairment of Assets 823.40 -3535.72

Mines Closure 1764.60 0.00

Provisions 12 127.88 779.57

Other Expenditure 13 54894.36 38679.74

Total Expenditure 646832.11 538842.69

Add/Less : OBR Adjustment 2056.53 -10963.49

Net Total Expenditure 648888.64 527879.20

Profit/Loss(-) for the year 108777.73 79755.44

Fringe Benefit Tax 0.00 26.30

Prior period Adjustment 14 590.83 -362.32

109368.56 79419.42

Loss (-) brought forward from last year Account -752087.79-831507.21

Loss (-) Carried forward to Balance Sheet -642719.23-752087.79

working capital management at bharat coking coal limite1

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