The Working Capital Ratio of GIL for the preceding 5 years stands as under : (Rs Crore)

Current Assets Inventory Sundry Debtors

March 07

March 08

March 09

March 10

March 11

155.51 92.53

197.71 156.4

93.56 161

134.77 110.87

185.09 127.75

Cash & Bank 5.29 Balance Total Current 253.33 Assets Current Liabilities Working Capital Ratio 1.11 228.26

3.11

2.42

14.75

44.11

357.22

256.98

260.39

356.95

293.72

185.28

253.39

394.94

1.22

1.39

1.03

0.90

This ratio indicates that the company has fairly enough short term assets to cover its short term debt.However, this includes Inventory, and a more stringent indicator that determines whether a firm has enough short-term assets to cover its immediate liabilities without selling inventory is the acid-test ratio is far more strenuous than the working capital ratio, primarily because the working capital ratio allows for the inclusion of inventory assetswhich is calculated by

The Acid Test Ratio of GIL for the preceding 5 years stands as under : March 07 97.82 March 08 159.51 March 09 163.42 March 10 125.62 March 11 171.86

Current Assets (Excluding Inventory) Current Liabilities Acid Test/Quick Ratio

228.26 0.43

293.72 0.54

185.28 0.88

253.39 0.49

394.94 0.44

This ratio indicates that the company is not heavily dependent on its inventory. Despite recent recession and increase in costs, the company has managed to maintain its position and has been focusing hard on cost reduction and operational efficiency improvement initiatives, which included reduction in the net working capital employed and reduction in the variable costs of production which have been yielding good results.

Changes to be made in the strategy adopted by GIL 1. Gains or losses on settled contracts is recognized in the profit and loss account. Futures contracts not settled as on the Balance Sheet date are marked to market and losses, if any, are recognized in the profit and loss account, whereas, the unrealized profit is ignored. receivables/realizations. 2. There could be an over-supply situation in the market, which can put pressure on margins, if new capacity additions announced earlier go on stream. Hence it is advisable to enhance the capacity gradually depending upon the demand and market conditions, instead of at a stretch. 3. Speciality products which improve margin and strengthen the companys position should be identified and focused thereon. 4. Due consideration to be given to Macro economic factors including economic and political developments, natural calamities which affect the industrial sector and This does not give a true and correct picture of

Legislative changes also impact business performance and relative competitiveness of the businesses. 5. Continuous focus on specialty fatty acids and their co products, which will improve its leadership position in terms of market share as also profitability.