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The interaction between current assets and current liabilities is therefore, in other
words, the goal of working capital management is to manage the current assets, and
current liabilities in such a way that an acceptable level of net working capital is
maintained.
CONCEPT OF WORKING CAPITAL:
There are two concepts of working capital
1. Gross Working Capital
2. Net Working Capital
Public limited enterprises have not always given enough attention to the
problems of the working capital planning. The assured availability of even current
finance through budgetary support usually makes them lack not only in there working
capital policy intermediate planned level of individuals, current assets are not only
subjected to rigors exercise.
needs careful
By business magazines
Due to Cost and Time constraint this study has been minimized to
Working Capital management aspects only.
CEMENT INDUSTRY
There is hardly any other product that has so greatly contributed to the
growth of modern human civilization as Cement. The massive urban infrastructure
that we see today across the world would have been unthinkable without cement.
Cement is the root substance that has given the essential element of strength and
durability to our houses, schools, offices and other buildings so that we can occupy
them with peace of mind.
The word Cement literally means a substance that can bind material together and can
acquire strength on hardening. The cement as we know today is a specialized building
material which is a result of various innovations over the past and is made in
sophisticated manufacturing facilities.
The Eddystone Lighthouse
In eighteenth century England, John Smeaton, a British engineer, was assigned the
task of re-constructing the Eddystone Lighthouse, a structure that had witnessed
repeated structural failure. In 1756, Smeaton conducted a number of experiments that
led to the discovery that cement made from limestone containing a considerable
proportion of clay would harden under water. Based on this discovery, Smeaton
rebuilt this lighthouse in 1759 and this time, it stood strong for 126 years.
Subsequently, until the early part of the nineteenth century, large quantities of natural
cement was used, that was made with a combination of naturally occurring lime and
clay.
The first patent for cement
In 1824, Joseph Aspdin, a British mason obtained a patent on his hydraulic cement
formula that closely resembled the modern cement as we know today. He called this
cement Portland Cement, and it was made through the proportionate mixing, burning
and the subsequent grinding of a combination of clay and limestone.
Cement as we know today
Cement went through many more improvements and developments in the nineteenth
and twentieth centuries. The industrial revolution and the subsequent development of
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the rotary kiln paved the way for huge and sophisticated cement manufacturing plants.
These plants possess the capability of a homogenous mixing and intense heating of
the raw material thus vastly improving the quality of the cement produced. The
sophisticated quality-testing equipment employed by modern cement plants further
helps in ensuring the quality of the cement produced.
Types of Cement, their Composition and Uses: There are 25+ compositions in the
market. Below are main compositions in the market.
Types of Cement
Composition
Purpose
Attains high strength
in early days it is used
in concrete where
form works are
removed at an early
stage.
Manufactured by reducing
tricalcium aluminate
Used in works is to be
completed in very
short period and
concreting in static
and running water
It is used in massive
concrete construction
like gravity dams
It is used in
construction exposed
to severe sulphate
action by water and
soil in places like
canals linings,
culverts, retaining
walls, siphons etc.,
It is used in works
where concrete is
subjected to high
temperatures, frost,
and acidic action.
White Cement
Coloured cement
Pozzolanic Cement
At Present China, India positioned first and second places in highest cement
producers in the world.
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At Present China, India positioned first and second places in highest cement
consumers in the world.
11
Manufacturing of the cement was first started in madras in 1904. A real beginning
was, however, made in 1912-1930 when three companies were formed. By the time
the plant started, there were 21 factories with an annually capacity of 3.28 million
tones. The government had a complete control on the production, distribution and
price of cement and this damped the growth of the cement industry. In 1997, the
government announced that 12 percent post tax returned on net worth was fairy
enough and retention prices would be fixed to ensure it. This provided an initial
momentum for investment in the industry. The real impetus was provided when
partial decontrol was announced in 1982. Under this policy, all existing cement units
were required to give up to 66.6 percent of there installed capacity as levy at
controlled price. The balance production was treated non levy cement and was
allowed to be sold in the market at the ruling prices.
An event of significant importance from the long term point of view has been
the process of consolidation and measures and acquisitions witnessed in the cement
industry during recent period. The leaders are now finding economical to accrue an
existing under utilized/ill-managed company rather than to float a new company.
The Indian cement industry is the 2nd largest market after China, accounting for about
8% of the total global production. It had a total cement manufacturing capacity of
375-390 million tonnes (MT) as of financial year ended 2014-15.
Cement is a cyclical commodity with a high correlation with GDP. The housing sector
is the biggest demand driver of cement, accounting for about two-thirds of the total
consumption. The other major consumers of cement include infrastructure,
commercial construction and industrial construction.
The cement industry capacity doubled in the last decade, with about 70 million tonnes
added in the last three years alone. Though India has witnessed sustained growth in
cement consumption since 2001, the growth has slowed down in the last 3-4 years.
This has been on account of a slump in housing, infrastructure and commercial sector.
The gap in the pace between capacity additions and actual demand has led to a excess
capacity situation in the industry, resulting in sub-optimal utilisation rates.
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Moreover, the per capita consumption of cement in India still remains substantially
low at about 195 kg when compared with the world average which stands at about
520 kg. This underlines the tremendous scope for growth in the Indian cement
industry in the long term.
Cement, being a bulk commodity, is a freight intensive industry and transporting it
over long distances can prove to be uneconomical. This has resulted in cement being
largely a regional play with the industry divided into five main regions viz. north,
south, west, east and the central region. The Southern region of India has the highest
installed capacity, accounting for about one-third of the country's total installed
cement capacity.
During the financial year 2014-15 (FY15), India's cement industry grew by about
5.6% year-on-year (YoY) as compared to 3.1% YoY growth in the financial year
2013-14 (FY14). The growth was supported by pre-election spending and delayed
monsoon in the first half of the fiscal. During the second half, the demand was
impacted by low government spending and less demand from real estate and
construction projects, and slow revival in infrastructure spending. The cement
industry capacity utilisation rate stood at around 71%.
compared to the burden in the other countries making the Indian cement industry
internationally uncompetitive.
2. POOR QUALITY OF COAL
Coal is an important input in the cement industry and accounts for 15 20 %
of cash expenses in the manufacture of cement. On an average 250kg of coal is
required to produce 1 tone of cement. Coal in India has to be moved over long
distances of 1000 to 12000 km to some plants in north, south and west India. There is
a severe shortage of coal in the cement industry. The quality of coal supplied to
cement units is also highly unsatisfactory as only D , E & F grades of coal are
supplied to these units. The ash cement in Indian coal is very high and this restricts
production. To meet the twin problems of shortage of coal and poor quality of coal
(due to high ash contents), the emphasis on imports of coal is now increasing.
However this option in addition to involving expenditure of foreign exchange
resources, also places those cement plants disadvantage which are located far from
ports as they have to incur extra costs for doubling handling and freight.
3. THE POWER SHORTAGE
Power is another important requirement and along with coal forms 40 percent
of the total cost. Power cuts, unsteady and inadequate power supply from state
electricity boards have created serious problems for cement units. This is all the more
so as the production of cement is a continues process requiring uninterrupted power
supply to operate efficiently. To cope with the problem of power shortage, cement
companies have been obliged is to make heavy investments in captive power
generation and also auxiliary generation in wind forms, particularly in plants located
in coastal areas.
4. TRANSPORTATION PROBLEMS
Transportation costs make up around 20 percent of the total cement price. The
industry predominately depends on railways, but due to shortage of wagons, cement
despatches by railway declined over the years. The Indian railway has introduced
Own your wagon scheme where in cement companies have been allowed to
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purchase wagons. This has lead to some marginal improvement and has enabled the
cement companies to tide over distribution bottlenecks.
80.3 percent.
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The year was 1938. It was a time when the reverberations of the Industrial
Revolution had not yet reached the interiors of South India. Despite scarce capital and
resources, Mr. P A C Ramaswamy Raja setup the first spinning mill at Rajapalayam,
which later became the focal point of the Ramco Group. His sharp focus on
technology and quality has inspired a generation of entrepreneurs and formed the
basis for the collective vision of the Group.
Today, under the stewardship of the current Chairman Mr. P R Ramasubrahmaneya
Rajha, the Ramco Group has expanded into a USD 1 Billion industrial conglomerate
with interests spanning cotton and synthetic yarn, cement, building products, software
solutions, wind-energy, bio-technology and more. The Group has become one of the
most reputed business houses in India and has achieved international recognition for
its quality products and services.
Offerings
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Geographical Markets
Yarn
Yarn
Yarn
India
Japan, Korea, Hong
Kong, Thailand,
Vietnam, Malaysia,
Singapore, Sri Lanka,
India & Dominican
Republic
Africa, US, Canada, Asia
Pacific, Europe, Middle
East & India
Japan, Korea, Malaysia,
Indonesia, Hong Kong,
India & Thailand
India, European & Gulf
countries
Korea, Japan, India &
China
India
India, Italy & Far East
markets
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Grinding Units:
Packing Terminals:
Jayanthipuram Unit:
In 1986 the company ventured into the second unit Jayanthipuram in Andhra
Pradesh 75 km from Vijayawada towards Hyderabad with an investment of Rs. 100
crores per manufacture of 7.50 lakh tones of cement per annum. This plant was
commissioned in 1986 six months a head of schedule plans.
The Ramco Cements Limited (formerly Madras Cements Limited) is Ramco
groups of most ambitious diversification had. It is a profitable company today. Two
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were process plans were setup in 1987 with a capacity of 600 tones to produce
Portland cement.
In the 70s totals with over was made to the dry process of
manufacture. The single largest dry kiln in India at the time of its establishment.
With a capacity of 1200 tones was installed at Ramaswamy Rajanagar in
Tamilnadu, for the first time in India, over the years the plant has modified and
updated with pre calciner technology. This has increased the capacity by 115% in
1993. Ramco group has setup its second and Indias most technologically advanced
cement unit which started its production in 1987 jayanthipuram, Krishna district and
Andhra Pradesh with 1.1 million tones per annum in 2016 it has the capacity of 3.65
million tones per annum.
This is the first factory in India to be totally computerized. It is one of the
most sophisticated plants in India with full computer controlled special software of
F.L.Smiths and Fuzzy logic system from DENMARK for Kiln control. This flagship
company of Ramco producer of market cement with the bondman Ramco. The two
plants have combined capacity of 1.5 million tones per annum. It is very clear that
sales revenue is increasing steadily year after year indicated the efficient performance
of the company.
1992:
The Ramco Cements Limited (formerly Madras Cements Limited) always
believes that blended cement is best suited for many applications and by far much
better than graded OPC. MCL is the pioneer in promoting the Portland Pozzolana
cement and have established a firm market preference in Tamil Nadu and Kerala for
the last 30 years.
MCL is the first cement company in Andhra Pradesh to manufacture PPC and
the product is well established in Andhra Pradesh. Today 70 to 80% of the cement
production from Jayanthipuram cement plant is PPC.
It started producing POZZALONA PORTLAND CEMENT by adding Fly
ash from 1992. The initial blending was 10% of Fly ash. This was gradually
increased, at present it is blending with 30% of Fly ash. Fly ash Handling System was
installed in 1992 with an investment if Rs.1.00 Crore.
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1994-95
The Kiln was gradually upgraded from 2,300 TPD in 1986 to 2,700 TPD in
1994 and to 3,200 TPD in 1995. During this period, Raw Mill and Coal Mill were
also upgraded from 220 to 240 TPH and 26 to 30 TPH respectively.
Horizontal Impact Crusher (HIC), was installed in 1995, in Cement Mill
Circuit to increase the output from 125 TPH to 180 TPH and the Cement Mill was
optimized in 1996. With this, the capacity has been increased to 11 lakh tones per
annum.
The Plant has Electrostatic Precipitators(ESP), and dedusting bag houses to
ensure clean and pollution free environment.
India generates about 70 million tones of Fly ash and 10 million tones of slag
annually. Disposal of Fly ash and Slag poses a problem to the environment. Concern
for environment and ecology is percolating very fast into customer awareness globally
an thereby a check on eco-hostile products is becoming an imperative exercise. Both
Central and State Govts. Are strongly propagating to use these products in cement
manufacture.
A working group has ben constituted by the Govt. of Andhra Pradesh to study
the generation and disposal of fly ash and BF slag. Based on the recommendations of
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the working group, the Govt. of Andhra Pradesh had issued a G.O. instructing all the
Govt. departments for utilization of 100% Pozzolana / slag cement, within a period of
five years.
In line with the policies of the Govt. and our philosophy of using otherwise
non-usable materials like fly ash and slag to produce value added blended cement and
thereby conserve limestone and other minerals like coal etc, and also to save energy
apart from being eco-friendly and creating clean atmosphere by reducing carbon
dioxide emission into atmosphere, we ventured into manufacturing of Blended
Cement and are therefore proud of serving our nation by preserving minerals and
maintaining clean atmosphere for our future generations.
MISSION STATEMENT OF THE RAMCO CEMENTS LTD
To continuously improve productivity through quality, technology renewal
and customer-focused operations.
To seek green field location for growth on the basis of developed synergy of
the existing operation.
To continuously seek the quality enhancement in product processes and
responses to various stake holders.
To update management practices continuously and maintain a professional
management culture.
To conserve, protect and enhance quality of life for our employees and
community.
To preserve the credence in our motto OUR REAL RESOURCES ARE THE
HUMAN ASSETS.
ACHIEVEMENTS:
Has been winning many National / State level awards in the areas of :
Energy conservation
Tax compliance
Return to investors
Corporate Excellence
Safety
Quality Circles
Environment protection
ISO 9001 Certification for RRN/JPM/ALA/RMC Plants
ISO 14001 Certification for Alathiyur
ENERGY CONSERVATION:
Introduction of CFG Cooler in I grate during Kiln up gradation. Thermal
Energy Consumption has reduced from 760 to 720 KCL per kg. of Clinker.
Variable frequency drive in Cooler I grate fans were installed to minimize the power
consumption and to have a stable operation of Cooler.
The constitution of Energy Conservation Cell and Fuel Conservation Cell
has resulted in reduction of overall power consumption from 96 units per tone of
cement in 91-92 to 76-71 in units at present, there by saving the energy. These
committees are continuously monitoring the power and fuel consumption to achieve
better results in future.
This plant is started producing POZZALONA PORTLAND CEMENT by
adding Fly-Ash from 1982. The Fly ash addition increased to 30% to the extent of 2
in 2004. TRCL adopted unique grinding method using state-of-the-art machinery
from Germany to save power and to ensure quality.
philosophy of using otherwise non-usable materials like fly ash and slag to produce
value added blended cement and there by conserve our limestone and other minerals
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like coal etc., and also save and other minerals likecoal etc., and also save energy
apart from being eco-friendly and creating clean atmosphere by reducing Carbon
dioxide emission into atmosphere.
ISO CERTIFICATION:
The Ramco Cements Limited (formerly Madras Cements Limited), Jayanthipuram
unit got ISO 9002 certification in May, 1998. It is not maintaining the ISO standards
and also tries to improve upon it day by day in order to equip itself for ISO 14000
certification.
A stacker reclaimer for pre blending and continuous flow silo for blending.
Five stage per heater for their mail efficiency per calcinatory for efficient use
of low grade coal.
X-ray analyzer for quality control on line process computerized control for
consistent quality.
POLLUTION CONTROL
In the present context of improved cement process technology, pollution
control equipments have become vital process equipments apart from controlling
pollution.
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CONTROL :
The Ramco Cements Limited total process is supervised and controlled
by a computer which helps the operator for better and quicker control and
monitoring of various process parameters which in terms helps in achieving
optimum performance of all equipment including ESPs.
MONITORING :
To number of high volume samplers are installed about kilometer from
the meter of the plant or two at two different locations which are the diagonally
opposite to monitor the ambient air quality. Stack emission levies are being
monitored every for the night and reports submitted to pollution control board
regularly.
loans side the side the plant and on roads during days.
THE EQUIPMENT AVAILABLE AT M.C.L:
TO CONTROL POLLUTION
SUPPLIERS
flakt India
fls/l&t
fls/l&t
flakt India
flakt India
IAEC
It needs some basic input a from the flint which are connected to the
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Coating formation in klin this is very steady and uniform which improve the
brick lining life and improves the klin availability.
Quality: clinker quality is very good, thus the cement quality is very high.
AFFORESTATION:
They have started a forestation drive right from the beginning of the project
structure stage. They have so far planted 16,000 trees consisting of neem, gulmour
etc. and our nursing 2000 saplings. They will add 2000 trees every year, this will
transform the land space into lush green which was dry and baron when we started the
project.
ALTERNATIVE FUEL:
Trails are under way to utilize alternative fuels like rice husk, ground nut,
shells, coconut shells, waste oil sledge etc., to minimize the consumption of
conventional fuels like coal in order to conserve its consumption and there by
increasing its life coal availability besides maintaining pollution free atmosphere.
HRD AND WELFARE MEASURES:
The co and the group believe in the infinite potential of human research pro
active personnel policies ensure group performance equality circles, suggestions,
schemes and training and development programs are given primary importance not
only for workers and staff, but also for there families.
The company has some unique welfare measures like holiday homes for
employees, person for workers and Own your home scheme.
SOME
OF
THE
IMPORTANT
SERVICES
RAMCO
GROUP
UNDERTAKEN.
HAS
Chinnaih
vidyalaya
P.A.C.R.
raju
matriculation
higher
secondary school.
Plans are on to build a hospital in rajayapalem equipped with the most
advanced medical facilities. The primary aim of this hospital would be to provide free
medical to the worker scheme of the society.
In order to give impetus to ecology development a senor horticulturist is being
appointed his services will be extended to the farmers of near by villages to help them
in going various fruit and vegetation using hybrid varieties.
We are going a head shortly for massive a forestation of 150acres of our land located
at the entrance of our factory premises.
MARKETING :
RAMCO cement has been a national wide dealer, network based on the
respite, trust and mutual understanding business understandings. It is having 850
dealer in A.P., 1400 dealers in kerala and Tamilnadu. A total care in being taken care
to ensure that a pollution free atmosphere in all the factories.
organization. The quality circle movement has taken deep roots and their all 11
quality circles functioning in Jayanthipuram Unit at present.
The company believes in the infinite potential of human resources. This forms
the guiding principle behind all HRD and management activities. The company
improvement.
presented for excellence achieved the major activated concentrated in south India.
Now the company looking for to start three more units with total outlay of Rs. 275
crores.
ORGANIZATION STRUCTURE
Organization structure is a basic frame within which the managers decision
making behaviors takes place.
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FINANCIAL MANAGEMENT
Financial management is broadly concerned with the acquisition and use of
funds
FINANCE FUNCTIONS
The functions of raising funds, investing them in assets and distributing
returns earned from those assets to shareholders are respectively known as financing,
investment and dividend decisions.
A firm performs finance functions simultaneously and continuously in the
normal course of he business. Finance functions call for skilful planning, control and
execution of a firms activities.
INVESTEMENT DECISIONS:
Investment decisions or capital budgeting involves the decisions of capital
or commitment of funds to long-term assets.
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the measurement of a cut-off rate against that the prospective return of new
investments could be compared
FINANCING DECISIONS:
These decisions are used as to when, where and how to acquire funds to
meet the firms investment needs. The central issue before the finance manger is to
determine the proportion of equity and debt. The mix of debt and equity is known as
the firms capital structure.
DIVIDEND DECISIONS:
The financial manager must decide whether the firm should distribute all
profits or retain them or distribute a portion and retain the balance. The optimum
dividend policy is one that maximises the market value of the firms shares.
34
35
CURRENT ASSETS:
1. Cash and Bank Balances
2. Short term Loans & Advances
3. Bills Receivables
4. Sundry Debtors
5. Inventories such as,
Raw materials
Work-in-progress
Finished Goods
6. Prepaid Expenses
7. Accrued Incomes
8. Money receivables within 12 months
The term working capital refers to the networking capital. Networking capital is
the excess of current assets over current liabilities. Current liabilities are those
liabilities, which are intended to be paid in the ordinary course of business within a
short period of normally one accounting year.
CURRENT LIABILITIES:
1. Bills Payable
2. Sundry Creditors
3. Accounts Payable
4. Short term Borrowings
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5. Dividends Payable
6. Stationary Liabilities
7. Accrued on Outstanding Expenses
8. Bank Overdraft
9. Provident fund due
10. Any other Payment due within 12 months
about this cycle is that the turnover or velocity of resources through this loop is very
high related to the other inflows and outflows of the cash account.
The basic goal of working capital management is to manage each of the funds
current assets and current liabilities in such a way that an acceptable level of
networking capital is always maintained in the business.
38
39
mature for payment with an accounting year and include creditors, bills payables and
outstanding expenses.
Net working capital can be positive or negative. A positive net working
capital will arise when current assets exceeds current liabilities. It is a quantitative
concept. It
a) Indicate the liquidity position of the firm and
b) Suggests the extent to which working capital needs may be financed
by permanent sources of funds.
TYPES OF WORKING CAPITAL:
Working capital can be classified into two categories i.e.
1. Permanent Working Capital
2. Temporary or Variable Working Capital
Permanent Working Capital:
It is the minimum amount of investment in all current assets which is required at
all times to carry out minimum level of business activities. Tandon Committee has
reserved to this type of working capital as Core Current Assets.
40
41
facilities are offered to it by the suppliers. The amount of cash discount reduces the
cost of purchase.
42
Goodwill:
because there is no delay in getting loans from banks and others on easy and favorable
terms.
Regular supply of raw materials:
that would enable a business to serve satisfactory the needs of its customers. That is it
ensures regular supply of raw materials and continuous production.
Expansion of Markets:
favorable market condition. That is purchasing its requirements in bulk when prices
are lower and holding its inventories for higher.
Increase Productivity:
needs and it is in position to face all situations in the production process. It will
maintain sufficient levels of raw materials for continuous production. It will cause to
increases the productivity.
Research Programs:
looks for new research and development programs. At the same time the firms go for
searching new technical developments and production methodologies, to get more
profits.
High Morale:
Its low liquidity may lead to low profitability. In the same way, low
profitability results in low liquidity.
44
45
In industries where raw materials are bulky and best purchasable in large
quantities such as cement or where labour stoppage is frequent large amount of
working capital is required.
7. Growth and Expansion:
Growing concern requires more working capital than those that are static. It is
logical to expect larger amount of working capital in a growing concern to meet its
growing needs of funds.
8. Business Cycle Fluctuations:
Working capital is required more during boom period and lesser in depression
period.
46
Dividend policy and working capital are interrelated. Management takes a view of
current assets before declaring a dividend.
3. Retained Profits:
Accumulated large profits are also considered to be a good source of financing
long-term working capital requirements. It is the best and the cheapest source of
finance. It creates no change in future profits.
4. Sale of Fixed Assets:
If there is any idle fixed assets in the firm can be sold out and the proceeds may be
utilized for financing the working capital requirements.
5. Term Loans:
Mid term and long-term loans for a period above 3 years provide import sources
of working capital such term loans can be borrowed from the special financial
institutions such as IDBI, IFCI, and LIC etc.
SOURCES OF SHORT-TERM WORKING CAPITAL:
The sources of short-term working capital may be classified in to two heads.
I.
Internal Sources
II. External Sources
INTERNAL SOURCES:
Under this category the sources of working capital are tapped from within the
internal sources are depreciation funds, provision for taxation and accrued expenses.
Depreciation Fund:
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Credit Papers:
Bills payable or promissory notes discounted from bankers for meeting short-term
capital by the drawer.
Bank Credit:
49
The greater part of the working capital is supplied by commercial banks to their
customers through direct advances in the shape of loans, cash credit of overdraft and
through discounting the credit, papers, e.g. bill-payable and promissory notes etc.
Customer Credit:
Advances may also be obtained from customers against the contracts entered
into by the enterprise such advances are generally asked for, by the companys
manufacturing large plants and machinery involving longer time in completing the
process of manufacturing e.g. , ship building industries. The amount can be used for
purchasing raw materials, paying wages and so on.
Public Deposits:
Most of the companies in recent years depend on this source to meet their working
capital requirements. Under the Companies Act 1956 a company is authorized to raise
funds equal to 25% of paid up capital and free reserves by this source.
Government Assistance:
Central and State Government of the country provide short-term finance to
industries or business by allowing tax concessions, sanctioning direct loans or grants
to industries or a class of industries to assist their production programs etc.
STANDARDS OF WORKING CAPITAL MANAGEMENT:
I.
II.
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cash.
Minimum possible inventory turnover-Turnover norms are
fixed.
Whether adequate credit on favorable terms is obtained from
suppliers.
Whether reasonable credit is extended to customers as a sales
sales.
Norms are laid down for average age of receivables, collection
period.
Proportion of goods in process and finished goods to new
51
Creditors dividend by annual credit purchase and the resultant figure is multiplied by
365. This ratio indicates how many days of credit are being obtained from the
suppliers.
OPERATING CYCLE:
There is a difference between current and fixed assets in terms of their
liquidity. A firm requires many years to recover the initial investment in fixed assets
such as plant and machinery or land and buildings. on the contrary, investment in
current assets such as inventories and debtors is realized during the firms operating
cycle.
Operating cycle is the time duration required to convert sales, after the
conversion of resources into inventories into cash. The operating cycle of a
manufacturing company involves three phases:
Sales
Acquisition of resources:
Manufacture of the product: It includes conversion of raw material into workin-progress into finished goods.
Sale of the product either for cash or on credit. Credit sales create account
Finished
Goods receivable for collection.
Cash
Manufacturing
52
Procurement of
Raw Materials
53
Previous
Current
Effect
of
Changes in
Year
Year
Working
Capital___
Increase
Decrease_
Current Assets
Cash & Bank Balances
****
****
****
****
Inventory (Stock)
****
****
****
****
Bills Receivables
****
****
****
****
Debtors
****
****
****
****
Prepaid Expenses
****
****
****
****
Marketable Securities
****
****
****
****
TOTAL (A)
****
****
Bills Payables
****
****
****
****
Creditors
****
****
****
****
Bank Overdraft
****
****
****
****
Outstanding Expenses
****
****
****
****
****
* * * *_
****
****
TOTAL (B)
****
****
Current Liabilities:
****
****
Increase / Decrease in
Working Capital
****
****
****
****
54
___________________
****
** * *
CHANGE IN W.C
PARTICULARS
31-3-2011
31-3-2012
Increase
Inventories
392.28
491.09
98.81
Trade Receivables
175.13
207.94
32.81
40.01
47.49
7.48
317.63
289.63
925.05
1036.15
338.3
613.19
Trade Payables
139.52
93.93
45.59
839.46
671.97
167.49
121.14
126.23
1438.42
1505.32
-513.37
-469.17
Decrease
A.CURRENT ASSETS
28
B.CURRENT LIABILITIES
TOTAL
NET WORKING CAPITAL(A-B)
Increase in Net working capital
Total
274.89
5.09
44.2
-469.17
55
44.2
-469.17
352.18
352.18
INTERPRETATION:
The above table shows comparison between current Assets and current
Liabilities pertaining to 2011-12 which results in change in working capital.
In the year 2011-12 the working capital increased 44.2 Crores Indian Rupees
due to some following reasons. Increase in current assets like Inventories, Trade
Receivables and Cash and Bank Balances rather than last year. In Current liabilities
company reduced Trade Payables, Other Current Liabilities but Short Term
Borrowings increased by 274.49 Crores Indian Rupees comparing with last year. So
the firm net working capital is not increased that much expected. So the company
need to reduce short term Borrowings.
56
CHANGE IN W.C
PARTICULARS
31-3-2012
31-3-2013
Increase
Decrease
Inventories
491.09
594.75
103.66
Trade Receivables
207.94
301.43
93.49
47.49
53.96
6.47
289.63
278.58
10.2
1036.15
1238.92
613.19
588.08
Trade Payables
93.93
143.08
49.15
671.97
734.35
62.38
126.23
146.89
20.66
1505.32
1612.4
-469.17
-373.48
A.CURRENT ASSETS
11.05
10.2
B.CURRENT LIABILITIES
TOTAL
NET WORKING CAPITAL(A-B)
Increase in Net working capital
Total
25.11
95.69
-373.48
57
95.69
-373.48
238.93
238.93
INTERPRETATION:
The above table shows comparison between current Assets and current Liabilities
pertaining to 2012-13 which results in change in working capital.
In the year 2012-13 the working capital increased 95.69 Crores Indian Rupees due to
some following reasons. Increase in current assets like Inventories, Trade Receivables
and Cash and Bank Balances rather than last year. But in the current liabilities Trade
Payables, Other Current Liabilities, Short Term Provisions increased compared with
last year. These are the reasons drag the net working capital performance.
58
CHANGE IN W.C
31-32013
PARTICULARS
A.CURRENT ASSETS
Inventories
594.75
685.53
90.78
Trade Receivables
301.43
303.96
2.53
53.96
44.61
9.35
278.58
206.59
71.99
10.2
8.85
1.35
1238.92
1249.54
588.08
723.62
135.54
Trade Payables
143.08
175.92
32.84
734.35
740.92
6.57
146.89
64.22
1612.4
1704.68
-373.48
-455.14
TOTAL
NET WORKING CAPITAL(A-B)
Decrease in Net working capital
Total
-373.48
59
82.67
81.66
81.66
-373.48
257.64
257.64
INTERPRETATION:
The above table shows comparison between current Assets and current Liabilities
pertaining to 2013-14 which results in change in working capital.
In the year 2013-14 the working capital decreased 81.66 Crores Indian Rupees due to
some following reasons. Decrease in current assets like Short Term Loans and
Advances, Cash and Bank Balances rather than last year along with bad performance
in Trade Receivables. Current liabilities like Short Term Borrowings, Trade Payables,
and Other Current Liabilities, increased compared with last year. These are the
reasons drag the net working capital performance into negative.
60
CHANGE IN W.C
31-32014
31-32015
Inventories
685.53
520.58
Trade Receivables
303.96
380.22
76.26
44.61
61.85
17.24
206.59
149.09
57.5
8.85
4.56
4.29
1249.54
1116.3
723.62
553.61
Trade Payables
175.92
229.49
740.92
560.91
64.22
79.41
1704.68
1423.42
-455.14
-307.12
148.02
Total
-307.12
PARTICULARS
Increase
Decrease
A.CURRENT ASSETS
164.95
B.CURRENT LIABILITIES
TOTAL
61
170.01
53.57
180.01
15.19
148.02
-307.12
443.52
443.52
INTERPRETATION:
The above table shows comparison between current Assets and current Liabilities
pertaining to 2014-15 which results in change in working capital.
In the year 2014-15 the working capital increased 148.02 Crores Indian
Rupees due to following reasons. Increase in current assets like Trade Receivables
and Cash and Bank Balances rather than last year. In Current liabilities company
reduced Short Term Borrowings, Other Current Liabilities but Trade Payables
increased by 53.57 Crores Indian Rupees comparing with last year. So this is good
sign for the company reducing current liabilities.
62
CHANGE IN W.C
PARTICULARS
31-3-2015
31-3-2016
Increase
Inventories
520.58
549.02
28.44
Trade Receivables
380.22
468.48
88.26
61.85
90.77
28.92
149.09
192.11
43.02
4.56
1.68
1116.3
1302.06
553.61
701.66
Trade Payables
229.49
209.1
20.39
560.91
547.06
13.85
79.41
26.56
52.85
1423.42
1484.38
-307.12
-182.32
Decrease
A.CURRENT ASSETS
2.88
B.CURRENT LIABILITIES
TOTAL
NET WORKING CAPITAL(A-B)
Increase in Net working capital
Total
148.05
124.8
-182.32
63
124.8
-182.32
275.73
275.73
INTERPRETATION:
The above table shows comparison between current Assets and current Liabilities
pertaining to 2015-16 which results in change in working capital.
In the year 2015-16 the working capital increased 124.8 Crores Indian Rupees
due to following reasons. All over performance is good in current assets increased all
the areas except other current Assets. In Current liabilities Short Term Borrowings
only element performance is not good compare with last year. Compare need to
reduce current liabilities.
64
LIQUIDITY RATIOS
The Liquidity Ratios reveals the liquidity position of The Ramco Cements Ltd.
The Liquidity Ratios includes:
Current Ratio
CURRENT RATIO:
Current Ratio explains the relationship between the current assets and current
liabilities and also reveals the amount of current assets needed to pay current
liabilities.
CURRENT RATIO = CURRENT ASSETS/ CURRENT LIABILITIES
Years
Current Assets
Current Liabilities
Ratio
2011-2012
1036.15
1505.32
0.69
2012-2013
1238.92
1612.4
0.77
2013-2014
1249.54
1704.68
0.73
2014-2015
1116.3
1423.42
0.78
2015-2016
1302.06
1484.38
0.88
INTERPRETATION:
The actual standard ratio of current ratio is 2:1. It indicates that current
assets double the current liabilities are considered to be god sign. The higher value of
current ratio indicates more liquid of the firms ability to pay its current obligation in
time. Companys Current ratio is increased from 0.69 to 0.88 (from 2012 to 2016) but
this is below the standard. It indicates an unsatisfactory liquidity position of the
company during the years of study.
65
Current Ratio
Current Ratio
0.69
2011-2012
0.77
0.73
2012-2013
2013-2014
66
0.78
2014-2015
0.88
2015-2016
LIQUIDRATIO:
Liquid ratio is also called acid-test ratio, establishes the relationship between
liquid, assets and current liabilities. As asset is liquid it can be converted into cash
immediately or reasonably soon without a loss of value. The liquid ratio is found out
by dividing liquid assets by current liabilities.
LIQUID RATIO=LIQUID ASSETS/CURRENT LIABILITIES
LIQUID ASSETS=CURRENT ASSETS-INVENTORIES
Years
Liquid Assets
Current Liabilities
Ratio
2011-2012
545.06
1505.32
0.36
2012-2013
644.17
1612.4
0.40
2013-2014
564.01
1704.68
0.33
2014-2015
595.72
1423.42
0.42
2015-2016
753.04
1484.38
0.51
INTERPRETATION:
The standard ratio of liquid ratio is 1:1. The companys liquid ratio is
increased year to year from 2012 to 2016. The quick ratio maintained by the company
is satisfactory because it is reached the standard ratio i.e., 1:1. But in the year 2012
and 2016 quick ratio maintained by the company is not satisfactory because it is not
reaching rapidly the standard ratio i.e., 1:1. The current quick ratio is 0.51.
67
Quick Ratio
Quick Ratio
0.51
0.36
2011-2012
0.42
0.4
0.33
2012-2013
2013-2014
68
2014-2015
2015-2016
Year
Sales
Working Capital
Ratio
2011-12
3,256.58
-469.17
-6.94
2012-13
3,872.66
-373.48
-10.37
2013-14
3,769.23
-455.14
-8.28
2014-15
3,731.77
-307.12
-12.15
2015-16
3,687.09
-182.32
-20.22
INTERPRETATION:
The working capital turnover ratio for the year 2011-2012 is -6.94 but it was
increased in the year 2012-2013 is -10.37 and in the year 2013-14 the ratio is -8.28 in
the year 2014-2015 the ratio is -12.15 in the year 2015-2016 the ratio is -20.22. A
negative working capital turnover ratio is typically meaningless and cannot be
compared across companies.
69
2012-13
-6.94
-10.37
2013-14
2014-15
2015-16
-8.28
-12.15
-20.22
70
Year
Sales
Cash
Ratio
2011-12
3,256.58
47.49
68.57
2012-13
3,872.66
53.96
71.77
2013-14
3,769.23
44.61
84.49
2014-15
3,731.77
61.85
60.34
2015-16
3,687.09
90.77
40.62
INTERPRETATION:
The cash turnover ratio for the year 2011-2012 is 68.57 but it was increased in
the year 2012-2013 is 71.77 and in the year 2013-2014 the ratio is 84.49 in the year
2014-2015 the ratio is 60.34 in the year 2015-2016 the ratio is 40.62.The firm cash
turnover has been very effectively utilized.
71
71.77
60.34
40.62
2011-12
2012-13
2013-14
72
2014-15
2015-16
Year
Gross Operating
Cycle
2011-12
433.65
78.49
355.17
2012-13
438.05
98.55
339.50
2013-14
392.25
93.11
299.14
2014-15
316.40
123.08
193.31
2015-16
383.58
128.43
255.15
INTERPRETATION:
Performance of Net operating cycle in 2011-12 is 355.17. In 2012-13 it is improved to
399.50. In 2013-14 it is improved to 299.14. In 2014-2015 it shown best performance
with 193.31. In 2015-16 Net Operating cycle is 255.15. Over all the company
improved Net operating cycle from 355.17 to 255.15. But it is not enough to improve
the operating cycle. Company has to show better performance in gross operating
cycle.
73
339.50
299.14
255.15
193.31
2011-12
2012-13
2013-14
74
2014-15
2015-16
PARTICULARS
31-32011
CURRENT ASSETS
925.05
TREND
CURRENT
LIABILITIES
TREND
NET WORKING
CAPITAL
TREND
31-32015
31-32016
1116.3
1302.06
112.01
133.93
135.08
120.67
140.75
1438.42 1505.32
1612.4
100
31-32012
31-32013
31-32014
100
104.65
112.09
118.51
98.96
103.19
-513.37
-469.17
-373.48
-455.14
-307.12
-182.32
100
91.39
72.75
88.66
59.82
35.51
INTERPRETATION:
In The Ramco cements Ltd the pace of improvement in the indices of current
assets is lesser than that of the current liabilities throughout the study period under
observation. The net working capital indices also confirm it. The Ramco Cements Ltd
could not enjoy positive net working capital throughout the period under reference.
But the company net working capital had fluctuated very intensively and trying to
increase its Net Working Capital. At the end of 2016, Ramco Cements Ltd had
negative working capital, as current liabilities were 1484.38 Crores Indian Rupees
while total current assets were only 1302.06 Crores Indian Rupees. The fact that the
company has negative working capital could indicate that the company will have
problems in expanding. However, negative working capital in and of itself is not
necessarily bad, and could indicate that the company is very efficient at turning over
inventory, or that the company has large financial subsidiaries.
75
FINDINGS
It is found that cash reserve position in the company is very low which may
create shortage funds in the short term.
The analysis of data financial reports shows that the company is having
Negative Net Working Capital every year. It includes that company maintain
lesser current assets over current liabilities. This indicates The Ramco
Cements Ltd have shortage of working capital.
It is identified that the company Debtors position is unstable.
It is observed that the company improving its Net Working Capital from 201314 Onwards. Its a positive sign.
Company need to reduce its gross operating cycle period. and company have
good at payable period improved from 78.49 days to 128.43 during last five
years.
76
SUGGESTIONS
It is suggested to the company to increase the current assets and to reinvest the
funds is other productive way.
It is suggested to the company to maintain the good position current assets and
current liabilities for the solvencies of the business.
77
BIBLIOGRAPHY
FINANCIAL MANAGEMENT
NAME OF THE
AUTHOR
I.M.PANDEY
PUBLISHER
VIKAS PUBLISHING
HOUSE PVT.,LTD.,
FINANCIAL MANAGEMENT
TATA MC GRAWHILL
FINANCIAL MANAGEMENT
PRASANNA CHANDRA
TATA MC GRAWHILL
OTHER SOURCES
ANNUAL REPORTS OF RAMCO CEMENTS LIMITED
WEBSITES
www.ramcocements.com
http://www.cmaindia.org/
http://www.ibef.org/industry/cement-india.aspx
78