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2.3.7 ROE………………………………………………………..10
3.2.1 Supplier…………………………………………………….16
3.2.4 Inventory…………………………………………………...22
3.2.5 Producer……………………………………………………23
3.2.8 Customer……………………………………………………30
3.2.9 Sales…………………………………………………………32
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4.0 Annexure…………………………………………………………………...33
5.0 Bibliography………………………………………………………………..36
2
Company profile
ADDRESS:
Unit- I
Dhiraj Intermediate Private Limited.
Mfg.: Inorganic Pigment & Chemicals
Plot no.297/5-10,2nd Phase,
G.I.D.C., Vapi-396195.
(Gujarat) India.
Unit- II
Dhiraj Intermediate Private Limited.
Mfg.: 3,3DCB Chemicals
Plot no.3104/1, 2 & 8, 4th Phase,
G.I.D.C., Vapi-396195.
(Gujarat) India.
(Group of Company)
1. Sun Colors and Chemicals
2. Sun Bright Pigments Pvt. Ltd.
3. Blaze Pigments Pvt. Ltd.
4. Brighton Inorganic Pvt. Ltd.
5. Brighton Pigments Pvt. Ltd.
In group sun colors and chemical was established in 1988.it produce pigments. It is
very old company. Sun Bright Pigment Pvt Ltd was established in 2000. it also
produce pigment. Blaze Pigment Pvt Ltd was established in 2005. Its purpose is to
produce raw materials by owns to Increase Company’s independence. Brighton
Inorganic Pvt Ltd was established in 1992 & Brighton Pigment Pvt Ltd was
established in 2006. The purposes of this company are backward integration. So group
together achieves the goal.
3
MISSION:
Expand Production capacity up to 1000 tone per month up to end of the Financial
Year 2007-08
Expansion:
Unit – III in vapi under construction for 250 M ton per month, will be start in next
year
Unit – IV in Nagpur under construction for 300 M ton per month, will be start in next
year
.
COMPANY PRODUCT:
1) Middle chrome.
2) Lemon chrome.
3) Scarlet chrome.
4) Zinc chrome.
5) Prime rose chrome.
4
Financial Analysis
So rather analyzing single ratio, if we use system like The DuPont system,
common size analysis. We will have clear picture of company’s performance in its
true colors. In this project financial analysis is done by DuPont system to find out
ROE.
The DuPont Model is a technique that can be used to analyze the profitability
of a company using traditional performance management tools. To enable this, the
DuPont Model integrates element of the income statement with those of balance
sheet.
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The DuPont Model
Sales
Profit Margin
Cost of Goods Sold
Profit before interest
& tax
Direct & Indirect
Expense Interest Coverage
Tax Coverage
Lands
Buildings Equity
Machinery
Equipment Equity Multiplier
Intangible
Total Asset
Return On Equity
6
Usage of the DuPont system:
The model can be used any department or by the sales department to
examine or demonstrate why a given ROE was earned.
Compare a firm with its colleagues.
Analyze changes over time.
Teach people a basic understanding how they can have an impact on the
company result.
Show the impact of professionalizing departments function.
Limitation:
Based on accounting numbers, which are basically not reliable.
Garbage in, garbage out.
Assumption:
Accounting numbers are reliable.
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The DuPont analysis of Dhiraj Intermediates Pvt Ltd.
As we have shown in the DuPont model, below formulas are used to find out
ROE of Dhiraj Intermediate Pvt Ltd. Table 1 in annexure has year-wise necessary
data to calculate all required ratios. Table 2 in annexure has listed year-wise
calculated ratios for reference. Let us analyze the movement in different ratios.
Profit After Tax Profit Before Tax Profit Before interest & Tax
Net Profit Margin = --------------------- X ---------------------------------X
-----------------------
Profit Before Tax Profit Before Interest & Tax Sales
Return on Equity = Net Profit Margin X Total Asset Turnover X Equity Multiplier
Tax coverage
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Interest coverage
Ratio has decreased first that indicate decrease use of external funds. Then
increase over time that indicates increasing use of external fund. The company has
large financial charges. It should be improve by proper capital structure planning.
Break-even analysis of optimum capital structure can be useful tool.
9
Profit margin is an indicator of a company's pricing policies and its ability to
control costs. Differences in competitive strategy and product mix because profit
margin to vary among different companies.Ratio is negative that indicate company in
loss. Then increase that indicate increase in profit margin. Then further decrease that
indicates increasing operating expenses. Employing costing method it is possible to
find out major expenditure. Because batch manufacturing companies like Dhiraj
Intermediate Pvt Ltd has necessary to have accurate costing. So each batch production
can be priced appropriately and profitable deal can be located easily. Even
departments operating can be improved to reduce cost.
Ratio is positive and rises across time, it is a good sign that operating
management is going well. Management is producing sales and controlling cost such
that the “bottom line” is growing.
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Total Asset Turnover
When this ratio rises across time, it is good sign that asset management is going well.
A rising ratio means that the firm is able to produce more and more sales from its
asset. In
other
words, the
firm is
becoming more efficient in using its assets. Different industries have different level of
total asset turnover that indicate efficient asset management. Therefore, an industry
average is often needed to interpret this ratio. Most manufacturing firms have TATs
ranging from 1X to 2X. if the ratio is too high, it can mean that the firm is not
adequately replacing its assets and this would be a sign for poor management. Total
asset turnover has improved that indicate better utilization of asset.
Equity Multiplier
11
This ratio should not be increasing across time because an increase means that
more and more debt is being used to finance the firm. Debt requires fixed payments
of principle and interest. If this payment is not made, the firm can be forced into
bankruptcy. Therefore, high levels of debt (and correspondingly high equity
multiplier) represent poor capital structure management. Across a significant cross
section of industrial firms, the equity multiplier tends to stay within the range of 2 to
3 times. An EM above 3 is thus likely to be a cause for concern. As we have shown
above interest coverage ratio also indicate that same action.
ROE
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Return on equity represents the profitability of funds invested by the owners
of the firm. All firms should attempt to make ROE as high as possible over long-term.
ROE can be high for the wrong reason however. For example, when ROE is high
because the equity multiplier is high, this means that high returns are really coming
from overuse of debt which can spell trouble for the firm. Most of ROE should be
produced by high ROI, PM and TAT and not from EM.
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Supply Chain Management
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
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Supply chain management (SCM) is the process of planning, implementing, and
controlling the operations of the supply chain with the purpose to satisfy customer
requirements as efficiently as possible. Supply chain management spans all movement
and storage of raw materials, work-in-process inventory, and finished goods from
point-of-origin to point-of-consumption.
One could suggest other key critical supply business processes combining these
processes.
b) Procurement process
Strategic plans are developed with suppliers to support the manufacturing flow
management process and development of new products. In firms where operations
extend globally, sourcing should be managed on a global basis. The desired outcome
is a win-win relationship, where both parties benefit, and reduction times in the design
cycle and product development is achieved. Also, the purchasing function develops
rapid communication systems, such as electronic data interchange (EDI) and Internet
linkages to transfer possible requirements more rapidly. Activities related to obtaining
products and materials from outside suppliers. This requires performing resource
planning, supply sourcing, negotiation, order placement, inbound transportation,
storage and handling and quality assurance. Also, includes the responsibility to
coordinate with suppliers in scheduling, supply continuity, hedging, and research to
new sources or programs.
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Here, customers and suppliers must be united into the product development process,
thus to reduce time to market. As product life cycles shorten, the appropriate products
must be developed and successfully launched in ever shorter time-schedules to remain
competitive. Managers of the product development and commercialization process
must:
e) Physical distribution
f) Outsourcing/partnerships
This is not just outsourcing the procurement of materials and components, but also
outsourcing of services that traditionally have been provided in-house. The logic of
this trend is that the company will increasingly focus on those activities in the value
chain where it has a distinctive advantage and everything else it will outsource. This
movement has been particularly evident in logistics where the provision of transport,
warehousing and inventory control is increasingly subcontracted to specialists or
logistics partners. Also, to manage and control this network of partners and suppliers
requires a blend of both central and local involvement. Hence, strategic decisions
need to be taken centrally with the monitoring and control of supplier performance
and day-to-day liaison with logistics partners being best managed at a local level.
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g) Performance measurement
Experts found a strong relationship from the largest arcs of supplier and customer
integration to market share and profitability. By taking advantage of supplier
capabilities and emphasizing a long-term supply chain perspective in customer
relationships can be both correlated with firm performance. As logistics competency
becomes a more critical factor in creating and maintaining competitive advantage,
logistics measurement becomes increasingly important because the difference
between profitable and unprofitable operations becomes narrower. Firms engaging in
comprehensive performance measurement realized improvements in overall
productivity. According to experts internal measures are generally collected and
analyzed by the firm including
1. Cost
2. Customer Service
3. Productivity measures
4. Asset measurement, and
5. Quality.
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Supply chain management of Dhiraj Intermediates Pvt Ltd:
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
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Supplier:
South Africa
Supplier
Haidarabad Maharastra
Ankaleshvar Daman
Vapi
1) Litharge.
2) Sodium dichromate.
3) Nitric Acid.
4) Sodium Molibdate
5) Costic soda Flakes
6) Soda Ash
7) Rare earth floried
8) Sodium silicate
9) Aluminium sulphet
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Raw Material consumed:
Material Consumed:
Materials consumed are in tone. It is raw material used for production per
month. From the graph we can know that which material use how much. It produces
600 tone output of pigment. So material consumed is 650 tones.
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Yearly consumption:
21
Lead / Litharge / Lead Nitrate:
Sodium Dichromate:
22
Nitric Acid:
23
Sodium Molybdate:
Other:
24
Inventory:
Inventory control helps to strike an optimum balance between these opposing costs
and thereby ensure availability of required items at minimum total cost to the
company.
Re-order level:
Dhiraj Intermediates Pvt Ltd has suppliers from all over India and some are out of
India. So re-order level for different supply is different. Company maintains the stock
of raw material 1000 tones. When stock reduces to 600 tones re-order is given. If the
suppliers are in Gujarat then materials receive within 2 days. If the suppliers are from
out of Gujarat then materials receive within 4 days. And if the suppliers are from the
out of country then it is 3 month process.
Here special standard are decided for raw materials. Before unload goods laboratory
test are done. If it match with predefine standard then unload the goods. Otherwise
return.
The mode of transport company uses are truck, train, ship etc. local supplier uses
trucks because it is easy available and cheap for them. For import goods the mode of
transport is ship.
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Producer:
Brighton
Chemical Sun colors
Pvt Ltd Dhiraj & Chemical
Intermediate Pvt Ltd
Pvt Ltd
Unit 1
Blaze Pigment
Dhiraj-Unit 2 Pvt Ltd
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Production process:
Solution
Mix
Add
chemical
Filter process
Washing
Wet cake
Dry
Pulverize
Pack
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Company has very efficient production process. Company is working on batch
production. In batch production there is standard decided for batch so as per that
standard production is done.
Batch production is very efficient for company because production is as per predefine
standard. Different customer wants different standard of pigment so as per demanded
standard production is done.
It is pull base process. Customer gives order for pigment. They give order with
specific standard. So production is done as per standard. In rest of month production
is done as per predefine standard and stock for sale. So production is continuous
during the year.
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Production:
29
Lemon Chrome:
Middle Chrome:
30
Scarlet Chrome:
31
Finished goods:
1) Middle chrome.
2) Lemon chrome.
3) Scarlet chrome.
4) Zinc chrome.
5) Prime rose chrome.
Customer:
32
Asian Paint
Customer
DIC Ltd
Burger
Paint
Sudarshan
Chemical
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Packing Specification:
Company pack it’s product with standard of 25 kg per bag with liner. Company has
different packing specification for export and local customer.
Quality Analysis:
34
Sales:
35
Annexure
Table 1
Table 2
36
Table 3
Table 4
Production:
Items 2002 2003 2004
Lemon Chrome 157990 229850 455857
Middle Chrome 220835 509900 908500
Scarlet Chrome 239095 308999 408231
Prime Rose Chrome 22900 8600 10500
Mixed Chrome 27175 36625 42568
Other 20250 16725 30879
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Table 5
Sales:
38
Bibliography
http//www.google.com
http//www.wikipidia.com
Operations Management
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