The various varieties of cement handled are:
33 Grade Ordinary Portland Cement (OPC) 43 Grade Ordinary Portland Cement (OPC) PPC (Portland Pozzolona Cement)
Assistant Manager-Plant reports to Manager Commercial for Packing Plant Activities.
Cement Dispatch Section:
Cement dis patch section receives dis patch instruction for Regional Marketing Office, Chandigarh and also from Shimla. The trucks registered with authorized trans porters enter the factory gate with Loading Advice cum gate Pass. The Truck¶s Gross weight is taken at the Exit Gate by electronic weigh bridge and finally an Excise Invoice is issued to the truck driver. The de partmental head re ports to Manager Commer cial. THE CIVIL DEPARTMENT
In cement industry the maintenance and a pplications of Refractories in kiln and its auxiliary units are one of the most im portant jo b. It is the refractory, which is su b ject to all sort of, processes and o perational conditions like high tem perature, a brasion, alkalis, chemicals, thermal shocks, mechanical shocks etc. And protects the metallic body of the units. Due to this fact a strict adherence with the quality of the refractory at every ste p from recei pt to its a pplication is of paramount im portance. In the organization the civil de partment does the com plete dealing with the refractory and is also res ponsi b le for all civil related jo bs in the factory and colony. Deputy Manager-Civil who reports to Manager-Maintenance coordinates the departmental activities. MAINTENANCE INSPECTION PLANNING & SYSTEMS (MIPS)
As the name suggests the main function of the de partment is pre paring and planning for carrying out various ins pection, maintenance jo b and to p record and u pdate the ins pection results. Ins pection/Maintenance planning is based u pon the diagnosis of change in behavior pattern of sound, tem perature, heat, vi bration, viscosity etc. 32
MIPS de partment also coordinates in planning the maintenance activities of various de partments so as to get o ptimum utilization of sto ppage duration. MIPS also carries out the down tile analysis of main equi pment.
GENERAL STORES The general stores is the de partment which is involved in making the balanced and timely flow of materials, s pares, tools and equi pment. General Stores also arranges for the dis posal of the scra p and unwanted materials. De puty Manager who re ports to Works Manager coordinates the activities of the de partment.
INFORMATION SYSTEM DEPARTMENT The functions of Information System De partment is to:
1.Transformation of EDP to Decision Su pport System 2. O ptimize End User Com puting to increase the Individual Productivity 3. Ca pture Processing and Sharing of Information from the Net 4. In House Develo p ment & De ployment of A pplication Packages 5. Data base Maintenance & Administration Hardware Setup y
U NIX based RISC Server.
y
Win-NT based Intel Servers
y
Microsoft Exchange Server P I, P II, P III & P IV PCs
: 135
Software Setup
O perating System: U NIX SVR 4, Win - NT 4.0, Win ± 95 & Win - 98 Oracle 8 I, Develo per 2000, Microsoft Exchange 5.5. MS-OFFICE ± 97 Office XP
33
Intra-plant Connectivity
All plants, RMOs, Head Office is connected through INSAT- 3B services provided by TataNet. Connectivity to the external World is through IIS, Head Office.
34
MARKETING
ACC Range of cement and blended cements are marketed through a network of 12 regional marketing offices, several area offices and warehouses. A countrywide network of a bout 11,000 stock lists who, in turn, are assisted by the su b- dealer's back this. Suc h an all- pervasive marketing network has an ena bled ACC to consolidate itself with a national presence. And the customer is assured of being a ble to get quality ACC products when and where he wants them. Com plementing this is a unique customer services cell com prising qualified civil engineers, which assist and advice customers with prior and post sales services. This service begins with selection of ty pe and grade of cement (where a pplica b le) to trou ble shooting and on site assistance. Kee ping pace with changing times, and an ever- growing need for s pecialized services, ACC has been offering its marketing ex pertise and distri bution facilities to other producers in cement and related areas. However, a precondition of all such agreement is quality control su pervision to be carried out by an ACC ex pert located at the franchisee's plant. Currently, ACC has franchising agreements for cement marketing with Alcon Cement Com pany, Goa and Cochin cement Ltd., Cochin. ACC also ex ports cement to SAARC Nations, es pecially Ne pal and Bangladesh on a regular basis. Besides ordinary Portland cements, these ex ports include custom- tailored cements.
HUMAN RESOURCES DEPARTMENT The basic o b ject of setting u p Human Resour ce De partment is to provide in puts to the em ployees for his o ptimum level of efficiency. It includes looking after various HR related functions such as training & develo p ment, performance and potential a ppraisal, planning and allocation of man power, industrial relations including negotiations and dealing with staff functions such as transfer, promotion, disci plinary action, grievance handling etc. De partment is also res ponsi ble for providing welfare amenities/facilities to em ployees, dealing with land matters, community develo p ment, colony administration etc. Various details of personnel policies are readily availa ble with HR de partment. Manager-HR & Admn. Coordinates the activities of the de partment. Manager-HR & Admn. Coordinates the activities of the de partment. 35
Manpower Arrangement: The total man power em ployed at ACC, Gagal Cement works are divided into 2 categories. Management Staff is governed by Conduct Rules framed by the com pany whereas Non-Management Staff is governed by Standing Orders certified under the Industrial Em p loyment (Standing Orders) Act, 1946 `
M ANPOWER
Non-Mgmt Staff
Mgmt. Staff
TM - Top Management WM -Works Manager E4 - Sr. Manager E3 - Manager E2 Deputy Manager E1 Assistant Manager
MONTHLY PAID
DAILY PAID
Gr ades
TC
Grades A B C
36
I II III IV
TOTAL PRODUCTIVE MAINTENANCE
ACC Gagal Cement Works has continuously tried to im prove u pon its o perational productivity through world class plant management practices known as Total Productive Maintenance (TPM). TPM is the integration of the basic functions of Production and Maintenance allowing the em ployees to jointly take the res ponsi bility for, and ownershi p of their work processes and equi pment. It aims to maximize Overall Equi pment Effectiveness (OEE). It esta blishes and promotes a systematic a pproach to achieve o perational excellence through autonomous working. TPM involves all em p loyees at all levels in every function of its im plementation. The most im portant point a bout TPM is that it continuously encourages all the em ployees to undertake continuous im provement of all work-related processes and th systems by ado pting a proactive pro b lem solving a pproach. 15 of every month is the day for TPM gate Meeting. We are striving towards following goals using TPM: y
y
Zero Breakdown Zero Accident
y
Zero Defect
y
Zero Waste
y
Zero Inventory
SAFETY Gagal Cement Work constantly kee ps a vigil on the safe practices of doing work and in this regard ex pects the same from all its em ployees. The following ta ble presents the ex pectations from both the partici pants in this regard. De puty Manager-Safety coordinates all activities related to safety at works. Besides day to day safety functioning, safety committee meets once in every month. The committee consists of equal num ber of re presentatives form management and wage board em ployees.
37
All em ployees working inside the factory are required to wear helmets, safety shoes and other safety gadgets. Other regular safety activities include monthly Gate Meeting, on first of every month, Nukkad Drama, Quiz & Slogan Com petition cele bration of National Safety Day etc.
OUR SAFETY COMMITMENT MANAGEMENT
EMPLOYEES
1. Provide Safe working
The care of oneself and colleague
Condition
2.Provide system for the safe control
Immediately re port any unsafe
of work
condition/hazard
3. Su pply information on work
Look out for hazards and potential dangers
hazard
to self and others
4. Arrange adequate training and
Do not take any short ± cuts
instrucyion in safe working practices
5.Make a ppro priate protective clothing and equi pment availa ble
6. Punish peo ple violating instructions on safety and health
Know the safety guidelines and follow working instructions
Always use safety equi pment indicated and provided
38
FINANCE DEPARTMENT Introduction: Finance de partment plays a major role in the working of any organization as for all pur pose, money is required, which is arranged, procured and dis bursed as the finance de partment. They only make budget go for cost control and maintain to o ptimum balance of cash for smooth o perations. As such the finance de partment in Gagal cement works is looking after only some of the as pects like payment for rawmaterial pur chased, cost control and insurance as pects of the unit. All recei pts for cement sold is received by Regional office at Chandigarh and fund financed by unit for different payment from its R.O.
Hierarchy of the finance department:
It is a line organization having a full-fledged de partment to manage the finance budget, costing and other matter of this de partment. The ACC Gagal cement works president has to manage two de partments mainly i.e. works and finance.
39
President
General Manager
Assistant Manager
Senior Officer (Cash)
Senior Officer
Senior Officer
(Costs)
Clerks Fixed Asset Cost Employee Salary Transportation Cash
40
FINANCE DEPARTMENT Account Section:
The accounts section deals all the general accounting, em ployee payroll, billing and matter related to taxation etc. The de partment activities are coordinate by Assistant Manager-Accounts that re port to Manager-Finance. Cost Section
The Cost Section does Accounting relating to pre paration of Monthly Cost Data and Bill Provisioning.Assistant Manager-Cost coordinates the de partmental activities and re p orts to Manager-Finance. 1. GEERAL OR ACCOUNTS SECTION
Accounting Procedure: The accounting procedure of ACC Gagal cement works is not a new com plicated one. They follow a standardized rule of making entries in there books of accounts or posting or making their trial balance, Gagal cement works unit make its Trial Balance in the monthly basis transaction and rent it to the Head Office. Head Office pre pares final accounts for all units not individual unit. Gagal cement works follows the following procedure: Step1: The quotations are called for acquiring or procuring the particular assets, raw material fuel etc. Step2: After then estimate decide/fixed through CESS.
(CAPITAL EXPENDITURE SECTION SCHEME) Step3: After then allocation of budget for different requirements. Step4: Then order re place, R.M/Assets be procured, ins pected (G.R.No) by the concerned de partment. Step5: Then GR No. After quality check etc. is sent to finance de partment where the cashier makes the payment. Step6: The ledger de partment de bits this in the books.
41
Step7: Finally at the wish of finance de partment assets is charged and declared free.
FINANCE MANAGER Finance Manager is totally res ponsi ble for all activities to payment/recei pts of cash and fund Management of the unit. His decision on payment will be final as personal manual, account manual directives laid by the organization. Under Finance Manager the financial activities is disci plined in the manner as per smooth functionary of all activities of payment such as salary and wages, payment to sundry creditors which include all pretty payments to local contractors, re purations, workers and officers of all grade in working unit. In detail it can be said that under finance manager their will be payment of salary and wages, allocation of various financial activities such as dis bursement of cash by cashier, the payment like contractors bill, local bill, raw material bill, stores and s pares payment of raw material and packing material, traveling bills, outstation allowances. All the various mislenious payments sanctioned are being made. The financial activities are on summation of in puts information system de partment (I.S.D.) provides various financial, cosying out puts availa ble on daily re port, weakly re port and monthly re ports. It also provides information like cash payment, voucher, cash recei pt voucher, and various ty pes of bills also. Various ty pe inventory out put summary of transaction bills of out p ut (local, contractor,raw material etc.) various ty pe of finance ledgers of the month and monthly trial balance. Account staff to routs all payment in account de partment:-
1. To verify the correction of payment 2. To sanction the payment to:a) Staff
b) Officer c) Management
FINANCIAL MANAGEMENT PREPAPER Payroll
of em ployee. 42
Accounting of sales.
Financial accounts.
Su pply bills.
Material Accounting.
COST SECTION: The Cost Section is a branch of accounting and has been develo ped due to limitations of financial accounting. Financial accounting is primarily concerned with record kee ping directed towards the pre paration of profit and loss account and balance sheet. It provides information regarding the profit and loss that the business enter prise is making and also its financial position on a particular date. The information concerning the business enter prise is hel pful to the management to control in a general way the major function of business viz., finance, administration, production and distri bution but details regarding o perating efficiency of these divisions are lacking. Infect, the develo pment in the field of cost accounting is so quick and fields covered by it are ex panding so much in magnitude that it becomes difficult for the management to lay down management policies, to guide the management decisions or evaluate o perating management performance with the information provided by financial accounting.
OBJECTIVES OF COST ACCOUNTING. The o b jective of cost accounting are ascertainment of cost, fixation of selling price, pro per recording and re presentation of cost, data to the management for measuring efficiency and for cost control. The aim is to know the methods by which ex penditure on materials, wages and overhead is recorded, classified and allocated so that the cost of products and services may be accurately ascertained, these cost may be related to sales and profita bility may be determined. Yet with the develo p ment of business and industry. Its o b jectives are changing day by day. The following are the main o b jectives of cost accounting. a) To ascertain the cost per unit of the different products manufactured by a Business concern.
43
b) To provides a correct analysis of cost both by processors or o perations and the different elements of cost. C) To provides requisite data and serve as a guide to price fixing of products manufactured or served rendered. d) To ascertain the profita bility of each of the products and advise the management as to how these profits can be maximizes. e) To reveal sour ces of economy by installing and im plementing a system of cost control for materials, la bor and overheads. f) To advise management on future ex pansion policies and pro posed ca pital projects. g) To hel p in the pre paration of budgets and im plementation of budgetary control. h) To guide management in the formulation and im plementation of incentive bonus plans based on productivity and cost savings. i) To su pply useful data to the management to take various financial decisions such as introduction of new products re placement of la bor by machine etc. j) To hel p in su pervising the working of punched card accounting or data processing through com puters. k) To organize the internal audit systems to ensure effective working of different de partment. l) To organize cost reduction program with the hel p of different de partment Managers. COST SHEET OR STATEMENT OF COST
Cost sheet is a statement designed to show out put of a particular accounting period along with break- u p of costs. The data incor porated in cost sheet are collected from various statement of accounts which have been written in cost accounts, either day ± by ± day or regular records. There is no fixed form for pre paration of cost sheet but in order to make the cost sheet useful it is generally presented in columnar form. The columns are for the total cost of current period, per unit for the current period, total cost and per unit cost for a period and so on. Cost sheet is a memorandum statement. Therefore, it does not from part of dou ble entry cost accounting records. Ins pite of this, the relationshi p b etween cost sheet and financial accounts, which are maintained on dou ble entry system, is very im portant as cost sheet derives its data from financial accounting. 44
SPECIMEN OF STATEMENTS OF COST UNITS:TOTAL COST
COST PER UNIT
PARTICULR
(RS.)
(RS.)
DIRECT MATERIAL
XXX
XXX
DIRECT LABOUR
XXX
XXX
DIRECT EXPENSES
XXX
XXX
PRIME COST
XXX
XXX
ADD: WORKS OVER HEAD
XXX
XXX
WORKS COST
XXX
XXX
ADD: ADMINISTRATION OVER HEAD
XXX
XXX
COST OF PRODUCTION
XXX
XXX
ADD: SELLING AND DISTRIBUTION OVER HEAD
XXX
XXX
TOTAL COST OR COST OF SALES
XXX
XXX
TREATEMENT OF STOCK:
Stock requires s pecial treatment while pre paring a cost sheet. Stock may be of raw materials, work-in- progress and finished goods.
STOCK OF RAW MATERIALS:
If o pening stock of raw materials, pur chased of raw materials and closing stock of raw materials are given, then with the hel p of the following raw materials consumed can be calculated as : RS. O pening stock of raw materials Add: Pur chase of raw Materials
x
x
x
x
x
x
____________
45
Less: Closing stock of Raw Materials
x
x
x
x
x
x
____________ Cost of Raw Materials consumed
x
x
x
_____________
STOCK OF WORK ±IN-PROGRESS: Work ± in- progress means units on which some work has been done but which are not yet com plete. Work-in- progress is valued at prime costs or work cost basis, but the latter is preferred. If it is valued at works or factory cost then o pening and closing cost may will be adjusted as follows: Prime cost
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
Add: Factory overhead incurred Add: work-in- progress ( beginning)
Less: work-in- progress (closing) Factory or works cost
x
Stock of Finished Goods:
If o pening and closing stock of finished stocks are also given, and then these must be adjusted before calculating cost of goods sold as under : Cost of Production
x
x
x
x
x
x
x
x
x
x
x
x
x
x
Add: O pening stock of finished goods
Less: closing stock of finished goods Cost of goods sold
46
x
STATEMENT SHOWING COST OF CLINKER MANUFACTURE
PARTICULARS RAW MATERIAL:
Lime stone PURCHASED IRON ORE Pur chased Quartzite (corrective materials)
OWN QUARTZITE
Other Raw Materials (shale) FUEL : COAL
Coke POWER : PURCHASED OWN GENERATION DIESEL COST OF CLINKER
47
AMOUNT (RS.)
STATEMENT SHOWING COST OF CEMENT GROUNDS
PARTICULARS
AMOUNT (RS.)
COST DATA Materials consumed : CLINKER PURCHASED GYPSUM FLY ASH Cost Of Cement Ground
STATEMENT SHOWING COST OF CEMENT PACKEDAND LOADED
PARTICULARS COST DATA PACKAGING AND LOADING COST EXCLUDING PACKAGING MATERIALS Packing material cost : HDPE Bags (High Density Polythene)
COST OF PRODUCTION
TOOLS AND TECHNIQUES OF COST CONTRL
Budgetary control
Standard costing 48
AMOUNT(RS.)
Standardization of product and tools and equi pment¶s
Im provement in design
Material control
La bor control
Overhead control
Production
planning and control
Automation
O peration resear ch
Market resear ch
Planning
in control of finance
WAYS OF ACKIEVING COST REDUCTION
(In Gagal Cement Works (ACCLtd.) Barmana, Bilas p ur)
Reducing set- u p- time.
Eliminating material handling activities.
Choosing an insertion process.
Using
common com ponents.
Choosing best quality of raw material at reasona ble price.
Reducing idle time.
FINANCIAL CONDITION OF ACC SHARE CAPITAL st
Issued ca pital and su bscri bed ca pital as a Decem ber 31 ,2008 increased to Rs.187.88 crore as against Rs. 187.83 crore as at the end of previous year primarily on account of exer cise of conversion o ption by the FCC Bond Holder.
RESERVE AND SURPLUS 49
st
Reserve and sur plus as at Decem ber 31 2008 stood at Rs.4739.85 c rore as com pared to Rs.3964.78 c rore as at the end of previous year. The increase is mainly on the account of retained profits.
LOAN FUND st There has been a increase in loan fund to Rs.482.03 crore as at Decem ber 31 2008 as com pare to Rs.314.70 crore as at the end of previous year.
FIXED ASSETS st
Net fixed assets including ca pital work in progress as at Decem ber 31 2008 was Rs.3469.70 crore as com pared to Rs.3314.72 crore as at the end of previous year.
INVESTMENT st
Total amount of investment as at Decem ber 31 2008 was Rs. 679.08 c rore as com pared st to Rs.844.98 crore as at Decem ber 31 2007.
DEFFERED TAX LIABILITIES st
Deffered tax lia bilities provision outstanding as at Decem ber 31 2008 was Rs.1777.36 crore as com pare to Rs.1554.92 crore as at the end of previous year.
NET CURRENT ASSETS st
Net current assets decreased to Rs.138.99 crore as at Decem ber 31 2008 from Rs.7.26 crore as at Decem ber 31st 2007.
50
FINANCIAL HIGHLIGHTS 2008 ± 2009 (ACC). 2008
2007
PARTICULAR
(in crore)
(in crore)
Gross Revenue
8548.48
8025.81
Profit/(Loss) before tax and exce ptional items
1687.74
1717.18
Exce ptional Items
48.86
213.11
Profit/(Loss) after tax and exce ptional items
1212.79
1438.59
Dividends
439.14
438.92
Ca pital Em ployed
5745.55
4790.57
Net Worth
4927.73
4152.71
Borrowings
482.03
306.41
De bt: Equity Ratio
0.10
0.07
Book Value Per Share at Period End
262.56
221.33
Basic Earning per Share
64.63
76.75
Dividend Per Share
20.00
20.00
Em ployee(Num ber)
9557
10,032
Shareholder(Num ber)
1,55,813
1,27,476
51
Profit and Loss Account of the year 2008-07 S.No.
Particulars
2008
2007
(in Crore)
( in crore)
1.
Rated Ca pacity
226
224
2.
Production
208
199
3.
Gross revenue(including Excise Duty)
8548
8026
4.
Em ployees Cost
413
353
5.
Mfg. and other Ex pences
6114
5576
6.
De preciation
294
305
7.
Interest Ex pences
40
74
8.
Provision for tax
524
492
9.
Income(4-5 to 9)
1163
1226
10.
Per centage of Gross Revenue
13.62
15.27
11.
Par Share
62.02
65.32
12.
Dividend
439
439
13.
Retained Profit (10-13)
724
787
52
BALANCE SHEET AS AT DECEMBER 31, 2006 S.no
PARTICULAR
2008
2007
(in crore)
(in crore)
1.
Cash and securties
984
743
2.
Receive bles and Inventories
1751
1460
3.
Less: Current Li balities
2741
2221
4.
Total(1+2+3)
(6)
(18)
4.
Net Block
5073
3964
5.
Investments
679
845
6.
Other Non Current Assets
--.
--
7.
Tola Assets less Current Li balities
5746
4769
8.
Deferred Tax Li balities
336
332
9.
Borrowings
482
306
10.
Reserves and Sur plus
4740
3965
11.
Share Ca pital
188
188
NEEDS OF STUDY The study in itself a pro blem of how best to manage ca pital of a com pany i.e. ACC Ltd. Therefore, needs for conducting the study are as follows:-
1. Due to time between production and sales, every com pany has to maintain a su bstantial portion of working ca pital to run its o peration smoothly. 2. In case of manufacturing com panies it is required to maintain a bout 40% - 50% of their ca pital as current and remaining in the form of fixed assets for the large scale production of product. So, every manufacturing com pany needs to arrange required working ca pital.
53
3. Investment in current assets and the level of current lia bilities have to geared quickly to change in sales. To be sure, fixed assets investment and long term financial position are also res ponsive to variation in sales.
OBJECTIVE OF THE STUDY The o b jectives aim to highlight the reasons how im portant is the financial system and financial statement for an organization or com pany. There are various o b jectives of the study are as follows:
1. To study liquidity of the firm 2. To study long term financial position 3. T study the short term financial position 4. Earning per share
RESEARCH METHODOLOGY Our Resear ch project has a s pecified framework for collecting the data in an effect manner. Such framework is called ³Resear ch Design´. The resear ch process which was followed by our consisted of following ste ps:
Defining the problem & Research objectives:The dfinition of pro blem includes the study of financial system in ACC Ltd GAGAL CEMENT WORKS.
Developing The Research Plan: It is very im portant to resear ching anything we must know a bout the it`s main sour ces where we get the main information regarding the resear ch plan. The develo pment of resear ch plan has following ste ps:
54
Data Sources: There are two ty pes of data were taken into consideration i.e. Secondary data and primary data. The secondary data has been used to make the analysis because we have no much sufficient time and resour ces to collect the primary data.
Secondary Data: Secondary data is that data which is collected for other pur pose. This is indirect collection of data from sour ces containing past or recent past information like annual re ports, balance sheet, books, news pa pers and magazines etc.
Collecting The Information: For this tesear ch methodology, we were collecting information with the hel p of annual re ports, balance sheets and other com panies pu blications.
Analyse The Information: In this resear ch methodology the next ste p is to extract the pertinent finding from the collected data. We ta bulated this collected data and develo p the means of analyzing the data. There are so many tools for financial analysis but we mainly concentrate on the RATIO Analysis and su pportive information taken from the other means i.e. com parative financial statements with its major com ponents viz. common size statement, com parative financial statement.
DESIGN OF STUDY The finance has an im portant im pact on the working of an industry or organization. So it becomes significant to note that the money makes the money. Money plays an im portant role to run the business smoothly. So it needs a sound planning of finance arrangement and pre paration of financial statement. The design of study is therefore significant to know the financial arrangement and working of ca pital in the production organization or com pany like ACC Gagal Cement Works (Barmana). It is therefore with this point of view the present study has been undertaken as present training re p ort.
55
RATIO ANALYSIS MEANING OF RATIO:Ratio Analysis is one of the most powerful tool of financial analysis. It is the process of esta blishing and inter preting various ratios. It the hel p of ratios that the financial statements can be analysed more clearly and decisions made from such analysis.
USE OF RATIOS:The use of ratio analysis is not confined to financial manager only. There are different parties interested in ratio analysis for knowing the financial position of firm for different pur poses. In view of various users of ratios, there are many ty pe of ratios which can be calculated from the information given in the financial statements. The particular pur poses of user determines the particular ratios that might be used for financial analysis.
RATIO ANALYSIS OF ACC GAGAL CEMENT WORKS LTD:ANALYSIS OF SHORT TERM FINANCIAL POSITION OR TEST OF LIQUIDITY: The short term creditors of the com pany like su ppliers of goods of credit and commer cial banks providing short term loans are primarily interested to knowing the com pany`s a bility to meets its current or short term o bligations as and when those become due. The short term o bligation of a firm can be met only when there are sufficient liquid assets. Therefore a firm must ensure that it does not suffer from lack of liquidity or there ca pacity to pay its current o bligations. If a firm fails to meet such current o bligations due to lack of good liquidity position, its goodwill in the market is likely to be affe cted beyond re pair. It will result in a loss of creditor`s confidence in a firm may causes even closure of the firm. Even a very high degree of liquidity is not is not good for a firm because such a situation re presents unnecessarily excessive funds of the firm being tiedu p in current assets. Therefore, it is a very im portant to pro per balance in regards to the liquidity of the firm.
56
COMMENTS ON FINANCIAL POSITION OF THE ACC WITH THE HELP OF RATIOS: SHORT TERM FINANCIAL POSITION:y
LIQUIDITY RATIOS:
CURRENT RATIO:CURRENT RATIO=CURRENT ASSETS/CURRENT LIABILITIES
CURRENT ASSETS
=2735.20Cr.
CURRENT LIABILITIES = 2741.29Cr. CURRENT RATIO
= 1:1( approx)
INTERPRETATION OF CURRENT RATIO: Current Ratio is an indicator of the firm¶s liquidity and its a b ility to pay its current o bligations in time when they become due. As a convention the minimum of µtwo to one ratio¶ is referred to as a banker¶s rule of thum b. Current Ratio of ACC Ltd. is 1:1. it is matter of concern. As a manufa cturing concern there is more investment in the ca pital goods but current assets also to be increased accordingly to im prove the current ratio. A business with heavy investment in fixed assets may be successful even the ratio is low.
QUICK RATIO:QUICK RATIO=QUICK ASSETS/CURRENT LIABILITIES QUICK ASSETS=Cash in Hand and in bank + B/R + Sundry De btors + Marketa ble Securities+ tem porary Invesments
QUICK ASSETS
CURRENT LIABILITIES QUICK RATIO
= 1349.33Cr. = 2741.29Cr. = 0.50:1
57
INTERPRETATION OF QUICK RATIO: Usually, a high acid test ratio is an introduction that the firm is liquid and has the a bility to meet its current or liquid lia bilities in time and on the other hand a low q uick ratio re presents that the firm¶s liquidity position is not good.
As a rule of thum b quick ratio of 1:1 is considered satisfactory. But quick ratio of ACC of ACC Ltd. is 0.50:1 it is low, com pany should take necessary ste ps to im prove this.
ABSOLUTE LIQUID RATIO: ABSOLUTE QUICK RATIO = ABSOLUTE LIQUID ASSETS/
/CURRENT ASSETS OR = CASH & BANK + SHORT TERM
SEC./CURRENT ASSETS LIQUID ASSETS CURRENT ASSETS
= 991.48Cr = 2741.29Cr.
ABSOLUTE LIQUID RATIO = 0.36 0.361:1
INTERPRETATION OF ABSOLUTE QUICK RATIO: A bsolute quick ratio is also im portant tool. It shows the relation of a bsolute liquid assets with current lia bilities. Rule of thum b for this ratio is 1:2. In regards of ACC Ltd this ratio is quite low high. Management should gave attention in this context.
CURRENT ASSETS MOVEMENT OR EFFICIENCY/ACTIVITY RATIO: y
INVENTORY TURNOVER RATIO:
INVENTORY TURNOVER RATIO = NET SALES / AVG. STOCK AT COST
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NET SALES
= 7,308.62 Cr.
AVG. STOCK
= 762.06
INVENTORY TURNOVER RATIO = 9.6 9.6times INTERPRETATION OF INVENTORY TURNOVER RATIO:
Inventory turnover ratio is concerned with the maintenance of level of inventory of finished goods so as to be a ble to meet the requirements of the business. Level of inventory should neither be too high nor too low. Inventory turnover ratio indicates the num ber of time the stock has been turned over during the period. In the context of ACC Ltd. is manufa cturing com pany the inventory turnover ratio is good and shows their good efficiency to manage their inventory. their inventory. Inventory Conversion Period=Days in year/Inventory
Turnover Ratio Turnover Ratio
= 365/9.6 = 38.02 38.02 days OR 38 days
INTERPRETATION OF INVENTORY CONVERSION PERIOD: This shows the time taken to clear the stocks. Stock of the com pany cleared more than five times in the year. It shows their good management of the stores. This is good as a manufacturing concern.
DEBTORS
TURNOVER RATIO:
DEBTORS TURNOVER RATIO= NET CREDIT ANNUAL SALES
OR ANN OR ANNUAL TOTAL SALES/ AVERAGE TRADE DEBTORS
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TOTAL SALES
= 7308.62Cr.
AVG. DEBTORS = 299.73Cr. DEBTORS TURNOVER RATIO = 24.38times.
INTERPRETATION OF DEBTOR TURNOVER RATIO: De btor Turnover Ratio indicates the num ber of times the de btors are turned over during a year. De btors turnover ratio of ACC Ltd. is higher it shows more efficient management of de of de btors.
AVERAGE COLLECTION PERIOD = NO.OF WORKING DAYS/
DEBTORS TURNOVE RRATIO = 365 365//24.98 = 14.9 Days or 15 15 days
INTERPRETATION OF AVERAGE COLLECTION PERIOD RATIO: The average collection period ratio re presents the average num ber of days for which a firm has to wait before its receiva bles are converted into cash. Average collection period of the of the ACC Ltd. shows their efficiency for de for de bt collection and shows their credit terms & policy towards de btors.
WORKING CAPITAL TURNOVER RATIO: SALES/ NET WORKING CAPITAL WORKING CAPITAL TURNOVER RATIO= SALES/ NET SALES
= Rs. 7308.62Cr.
NET WORKING CAPITAL = Rs. 2747Cr. WORKING CAPITAL TURNOVER RATIO = 2.66 times
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INTERPRETATION OF WORKING CAPITAL TURNOVER RATIO: Working ca pital Turnover Ratio indicates the num ber of times the working ca pital is turned over during a year. Working ca pital turnover ratio of ACC Ltd. is higher it shows more efficient management of Working ca pital.
ANALYSIS OF LONG TERM FINANCIAL POSITION OR SOLVENCY: The term solvency refers to the a bility of a concern to meet its long term o bligation. The long term inde btedness of a firm include de bentures holders, financial institution providing medium and long term loans and other creditors selling goods on installment basis. Long term solvency ratios indicate a firm a bility to meet the fixed the interest and costs and re payments schedule associated with its long term borrowings.
(1). DEBT EQUITY RATIO: Debt Equity Ratio = Outside Funds/Shareholders Fund
Outsiders Funds = 482.03Cr. Shareholders Funds = 4927.73 Cr.. Therefore Debt Equity RATIO = 0.10:1
INTERPRETATION OF DEBT EQUITY RATIO: This ratio calculated to measure the extend to which de bt financial has been used in business. Being a manufacturing concern there is more investment in the ca pital goods. Lower of ratio gives the higher margin of safety. There is no standard norm or rule of thum b regarding the ratio. It de pends u pon the policy of the com pany. There no much more risk in the com panies o peration. Therefore they rely on the shareholders funds.
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(2). TOTAL DEBT TO CAPITAL EMPLOYED RATIO: TOTAL DEBT TO CAPITAL EMPLOYED RATIO=
TOTAL DEBT / TOTAL CAPITALISATION X 100 = 817.82/4927.73 X 100 = 16.5%
INTERPRETATION OF CAPITALISATION RATIO:
FUNDED
DEBT
TO
TOTAL
Though there is no rule of thum b b ut still lesser the reliance on outsiders the better it will be ACC Ltd. can raise funds from the outside sour ces as there is enough sco pe.
(3).PROPREITORY OR EQUITY RATIO: PROPREITORY OR EQUITY RATIO=SHAREHOLDERS FU NDS/
TOTAL ASSETS X 100 SHAREHOLDER FU NDS = 4927.73 Cr.. TOTAL ASSETS =
5,745.55
Cr .
PROPREITORY OR EQUITY RATIO=85.7%
INTERPRETATION OF PROPREITORY OR EQUITY RATIO: As equity ratio re presents the relationshi p of owners fund to total assets. In ACC Ltd. there is high ratio it indicates better is long term solvency of the com pany.
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EARNING PER SHARE: Earnings per Share - [EPS] 2008
(I) Net Profit as per Profit and Loss Account ........................Rs. 1,212.79 Cr. Adjustment for the pur pose of Diluted EPS«««««««« Interest on Foreign Currency Converti ble Bonds «««««.. Less: Tax on a bove ««««««««««««««««. Profit for Diluted Earnings per Share .....................................Rs. 1,212.79Cr.
(II) Weighted average num ber of equity shares for Earnings per Share com putation Shares for Basic Earnings per Share .............................Rs. 18,76,45,744Cr. Add: Potential equity shares on exer cise of o ption of ESOS«. Rs.2,83,742Cr. Num ber of Shares for Diluted Earnings per Share .......... Rs.18,79,29,486Cr. (III) Earnings per Share (Weighted Average) Basic .................................................................... Rs.64.63 Diluted ..................................................................Rs. 64.53
INTERPRETATION OF EARNING PER SHARE: One of the main party interested in the ratio analysis is the shareholders are the real owners of the com pany. Earning per share is more im portant for shareholders because they were the risk taker. In the ACC Ltd. face value of share is Rs.10 and earning per share is Rs.64.63 this shows their good and sound financial position.
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FINANCIAL POSITION OF THE COMPANY: SHORT TERM FINANCIAL POSITION: The short term financial position of the com pany is good enough. Current Assets of the com pany in the year 2008 is Rs.2735.20Cr.where as the Current Lia bilities is Rs.2741.29Cr. Current Ratio is 1:1. Com pany needs bit im provement in it so that to make it 2:1. Short term liquidity position is also good as the acid test ratio is 0.50:1. Com pany needs bit im provement to make it 1:1. Turnover Ratio of the com pany reflects their good and sound position. Stock turnover over ratio is 9.6 times. It is good that they clear their stock more than 5 times in the year. De btors and creditors turnover ratio also show positive results in their efficiency.
LONG TERM FINANCIAL POSTION: Long term financial policy is not as better as it should be. No dou bt com pany ado pted very nice policy of financing fixed assets from the long term fixed assets and the long term lia bilities. Rest payment is made in cash, there by leading to reduction of the amount of cash. De bt ± equity ratio also gives the same picture. It should be near to one as possi ble. But it is not than one in every year. Not only but also showing the increasing trends. This is not a good sign. Pro prietary ratio is 85.7%, it is good, and it is 50% or more than it.
Earning per share is the one of most im portant factor. Shareholders are the main stakeholders of the com pany they judge the com panies performance on the basis of earning per share & dividend declared by the com pany. In the accounting year 2007 com panies earning per share is Rs.76.75. Dividend paid for the current year is Rs.20 per share.
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LIMITATIONS OF THE STUDY Exce pt the su preme power, the Almighty, no one is im pecca ble and prowess enough to accom plish anything without any faults and limitations. A resear ch is no exce ption. No study is devoid of certain shortcomings. Some pro blems encountered in this study are under mentioned: y
y
y
y
Some officers were too busy to give a sincere res ponse to investigators & hence their res ponse may not relate to real picture. Manager some time denied disclosing some im portant financial matters, which can be hel pful in this study. The time period given to me for the com pletion of the project was short in such a short s pan of time it is difficult to com plete any project in detail. Some information related to the study, which had been collected from the com pany was rounded off because of some influence.
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FINDINGS SHORT TERM FINANCIAL POSITION:
The short term financial position of the com pany is not good enough. Current Assets of the com pany in the year 2008 is Rs.2735.20Cr where as the Current Lia bilities is Rs.2741.29Cr.
Current Ratio is 1:1. Com pany needs bit im provement in it so that to make it 2:1.
Short term liquidity position is also good as the acid test ratio is 0.50:1. Com pany needs bit im provement to make it 1:1.
Turnover Ratio of the com pany reflects their good and sound position. Stock turnover over ratio is 9.6 times. It is good that they clear their stock more than 5 times in the year. De btors and creditors turnover ratio also show positive results in their efficiency. LONG TERM FINANCIAL POSTION
Long term financial policy is not as good as it should be. No dou bt com pany ado pted very nice policy of financing fixed assets from the long term fixed assets and the long term lia bilities. Rest payment is made in cash, there by leading to reduction of the amount of cash.
De bt ± equity ratio also gives the same picture. It should be near to one as possi ble. But it is not than one in every year. Not only but also showing the increasing trends. This is not a good sign.
Pro prietary ratio is 85.7%, it is good, and it is 50% or more than it.
Earning per share is the one of most im portant factor.
Shareholders are the main stakeholders of the com pany they judge the com panies performance on the basis of earning per share & dividend declared.
In the accounting year 2007 com panies earning per share is Rs.76.75. Dividend paid for the current year is Rs.20 per share.
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RECOMMENDATIONS\SUGGESTIONS
Com pany is not utilizing its resour ces u p to the maximum
Customer base remains the same
SAP is not im plemented pro perly as the em ployees are not trained to use the same
Com pany is not looking for increase in the plant ca pacity.
Im plementation of new p olicies by Holcim is distur bing the workfor ce in ada pting to the new work-culture.
The com pany is more de pendent on outsider¶s fund.
Current Ratio is 1:1. Com pany needs bit im provement in it so that to make it 2:1.
Long term financial policy is not as good as it should be. No dou bt com pany ado pted very nice policy of financing fixed assets from the long term fixed assets and the long term lia bilities. Rest payment is made in cash, there by leading to reduction of the amount of cash.
The short term financial position of the com pany is not good enough. Current Assets of the com pany in the year 2008 is Rs.2735.20Cr where as the Current Lia bilities is Rs.2741.29Cr.
High
em ployee turnover rate. The other cement industries are paying good salaries to em ployees as com pare to ACC LIMITED that is why em ployees are leaving the com pany.
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POLICY IMPLICATIONS Some suggestions that I have given to the com pany and following are the result of those suggestions are as follows; y
y
y
y
I suggest them to increase the promotion of Health and Safety at Work, including the prevention of occu pational risks and it is in the process. I suggest them to increase the ca pacity of plant as it a long term process so com pany officials said they put that point in the annual board meeting so it is in the process. Current Ratio of the com pany is 1:1.so I suggest them to increase that to 2:1 and they are working u pon it. Com pany is not s pending so much on the R & D so I suggest them to increase the same and the com pany said that they will think to allocate more finance in the budget of the com pany.
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