rasu in final3

CHAPTER - I1.1 INTRODUCTION

Working capital management is the part of financial management. In working capital management, management of cash, management of inventory, management of debtor and creditor will include. The study of working capital behavior occupies an important place in financial management. The earlier emphasis of financial management was more on a long-term financial decision. Working capital management, which is concerned with short term financial decision, appears to have been relatively neglected in the literature of finance.The developing economies generally face the problem of inefficient utilization of Resources available to them. Capital is the scarce productive resource in such economies and hence a proper utilization of these resources promotes the rate of growth, cuts down the cost of production and above all, improves the efficiency of the productivity system. Fixed capital and working capital are the dominant contributors to the capital of a developing country. Fixed capital investment generates productive capacity, whereas working capital makes the utilization of that capacity possible.Working capital management (WCM) is the management of short-term financing requirements of a firm. This includes maintaining optimum balance of working capital components receivables, inventory and payables and using the cash efficiently for day-to-day operations. Optimization of working capital balance means minimizing the working capital requirements and realizing maximum possible revenues. Efficient WCM increases firms free cash flow, which in turn increases the firms growth opportunities and return to shareholders. Even though firms traditionally are focused on long term capital budgeting and capital structure, the recent trend is that many companies across different industries focus on WCM efficiency.There is much evidence in the financial literature that present the importance of WCM. Results of empirical analysis show that there is statistical evidence for a strong relationship between the firms profitability and its WCM efficiency. However the study undertaken based on the data from CFO magazine on the rankings of firms on WCM efficiency reveals that the measures of WCM efficiency vary across different industries. The study also gives significant evidence that issues of WCM are different for different industries and firms from different industry sectors adopt different approaches to working capital management. Firms follow an appropriate working capital management approach that is favorable to their industry. Firms in an industry that has less competition would focus on minimizing the receivable to increase the cash flow. For firms in industry where there are large numbers of suppliers of materials, the focus would be on maximizing the payable. The Telecommunication industry is characterized by high intensive working capital requirements and high competition because of rapid technology changes, which make the WCM crucial to bring attractive earnings to shareholders. The study undertaken based on the data from CFO magazine on the rakings of firms on WCM efficiency gives statistical evidence that telecommunication industry showed.

Working Capital Management ConceptsThe working capital meets the short-term financial requirements of a business enterprise. It is the investment required for running day-to-day business. It is the result of the time lag between the expenditure for the purchase of raw materials and the collection for the sales of finished products. The components of working capital are inventories, accounts to be paid to suppliers, and payments to be received from customers after sales. Financing is needed for receivables and inventories net of payables. The proportions of these components in the working capital change from time to time during the trade cycle. The working capital requirements decide the liquidity and profitability of a firm and hence affect the financing and investing decisions. Lesser requirement of working capital leads to less need for financing and less cost of capital and hence availability of more cash for shareholders. However the lesser working capital may lead to lost sales and thus may affect the profitability. The management of working capital by managing the proportions of the WCM components is important to the financial health of businesses from all industries. To reduce accounts receivable, a firm may have strict collections policies and limited sales credits to its customers. This would increase cash inflow. However the strict collection policies and lesser sales credits would lead to lost sales thus reducing the profits. Maximizing account payables by having longer credits from the suppliers also has the chance of getting poor quality materials from supplier that would ultimately affect the profitability. Minimizing inventory may lead to lost sales by stock-outs.

The working capital management should aim at having balanced; optimal proportions of the WCM components to achieve maximum profit and cash flow.

1.2 OBJECTIVES OF THE STUDYPrimary objective To study about the Working capital management and Ratio Analysis in Neyveli Lignite Corporation Limited.Secondary objectives To analyze the working capital requirement of Neyveli Lignite Corporation Limited for the period 2008-09 to 2012-13. To analyze the changes in working capital. To analyze and evaluate liquidity position of the company. To analyze and evaluate the profitability position of the company. To analyze and evaluate the level of current asset and current liability.

1.3 SCOPE OF THE STUDY

This study is about the ratio analysis of WORKING CAPITAL MANAGEMENT, which is a part of financial analysis. Ratio analysis is perhaps the first financial tool developed to analyze and interpret the financial statement and is still used widely for this purpose. The company to understand its own position over time.

The present and potential investors, outside parties such as the creditors, debtors, government and many more to get an idea of the overall performance of the firm.

Ratio analysis is the specific area of finance dealing with the financial decision corporations make, and the tools and analysis used to make the decisions.

It may divide as long-term and short-term decisions and techniques.

1.4 NEED FOR THE STUDY

To know the companys working capital. To pay wages and salaries. To incur day to day expenses. To maintain inventories of raw materials, work in progress and finished goods. Gives a company the ability to meet its current liabilities.

1.5 RESEARCH METHODOLOGY

The term Research refers to the systematic method consisting of enunciating the problem, formulating a hypothesis, collecting the data, analyzing the facts and reaching certain conclusions either in the form of solutions towards the concerned problem or in certain generalized form of some theoretical formulation.

RESEARCH DESIGN:Research design is the blue print for doing the research. It is the arrangement of conditions for collection and analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure.This is an empirical study based on the financial information contained in the annual reports of NLC. The study adopts descriptive methodology for evaluating the financial performance of the organization.

A study on financial performance of Neyveli Lignite Corporation Limited has been made by calculating various ratios. The data for such analysis have been extracted from the financial statements. These ratios have been interpreted and conclusions have been drawn. Based on which, suggestion have been made to improve the financial performance of Neyveli Lignite Corporation Limited.

CONCEPT OF WORKING CAPITAL1. Gross Working Capital 2. Net Working CapitalGROSS WORKING CAPITALIt refers to the firms investment in total current or circulating assets. According to this concept, the working capital refers to the firms total investment in current assets. Current assets mean assets which can be converted into cash within an accounting year. Current assets include cash and bank balance, bills receivable, sundry debtors, inventory, prepaid expenses.NET WORKING CAPITAL:According to this concept the working capital refers to the difference between current assets and current liabilities. Current liabilities refer to the claims of outsiders which are expected to mature for payment within an accounting year. Net working capital can be positive or negative. Positive Networking capital arises when current assets exceed current liabilities. Negative net working capital occurs when current liabilities are in excess of current assets.

PERIOD OF STUDYThe period of the study for project work is 6 month. TOOLS USEDThe data collected are analyzed with the help of the following tools Ratio Analysis Comparative Statement Of Working Capital Common Size Balance sheet. DATA COLLECTION:SECONDARY DATA:The secondary data on the other hand are those which have already been collected by someone else. The analysis of working capital management of the organization necessitates accurate and reliable data. Therefore the sources for collecting the data include secondary data.For the purpose of the study available secondary data is used. The Annual Reports of the company for the past five years (i.e.) F.Y.2008-09 to F.Y.2012-13 constituted the basis of the study. For the purpose of Analysis, Financial statements viz.., Fund Flow Statements and Financial Ratios relating to working capital on specific current assets were used. Information collected from the above source helped the researcher to conduct the study successfully.

PLAN OF ANALYSIS:The study is made only by using accounting ratios, comparative statements and average performance. It is basically a common size statement analysis. The five years gross and net working capitals are obtained. The percentage shares of the components of working capital are compared to that of the standard norms and deviations if any are described as either favorable or unfavorable.

Diagrammatic presentations of statistical data are exhibited through bar diagrams, Pie Charts for analysis of data for better understanding.SIGNIFICANCE OF THE STUDYThe working capital of an organization is the lifeblood, which flows through the veins and arteries. It gives courage and moral to the brain (management) and the muscles (personnel). It digests to the best degree, the raw material used, by its constant and regular flow and returns to the heart (cash flow) for another journey. Hence when working capital is lacking or slow, the financial bodies have value only as a junk.Funds are needed for short term purposes, viz., for purchases of raw material payments of wages and other day to day business expenses. Many a times, in the event of failure of a business concern, the shortage of working capital is given out as its main cause. But in ultimate analysis, it may be the mismanagement of resources of the firm that could have converted the otherwise successful business, an unsuccessful one. A firm can exist and survive without making profit but cannot survive without working capital funds.Working capital has acquired a great significance and a sound position for the twin objects of Profitability and Liquidity. It consumes a great deal of time to increase profitability as well as to maintain proper liquidity at minimum risk. So the effective management of working capital is the primary means of achieving the firms goal of adequate liquidity, which helps to measure the degree of protection against problems that might cause a shortage of funds. Essentially, the efficient management of working capital minimizes risk in the repayment of its sources of finance, thereby contributing to the maximization of firms value.The present study on working capital management of Neyveli Lignite Corporation Ltd enables the organization to efficiently manage its working capital components and achieve the goal of maximizing the value of the organization.

1.6 LIMITATIONS OF THE STUDY

The working capital analysis is based on the annual reports published by the organization. Thus the reliability of the analysis is depending on the data provided in the balance sheets. The study on working capital management is confined to a period of 5 years, i.e., from 2008-2009 to 2012-2013 due to time constraints. The study is based on secondary data and not on the basis of primary data. The study is based on the accounting standards and not based on the economic condition.

CHAPTER I12.1 COMPANY PROFILENeyveli Lignite Corporation is a large-scale business organization with its core activities of lignite mining and power generation in Neyveli.NLC is a profitable business entity with the firm of running business for more than 50 year. In the year 2006, it celebrated its golden jubilee. The occurrence of lignite in neyveli, district of Tamilnadu first became known in 1934 the than government of madras took up regular exploration the 1943 to democrat the extant of the field. Meaning operation (mine) commenced in May 1957.Neyveli Lignite Corporation limited (NLC Ltd) was register as a company on 14th November 1956 under companies act 1956. The mining operations in mine-I were formally inaugurated on 20th may 1957 by the then prime minister pandit Jawaharlal Nehru of the total deposits of 37154 million tones (as on 1.4.2005) of lignite in India, neyveli has a geological minable reserves of 2194 million tonnes. In Tamilnadu, Jayamkondacholapuran, Mannargudi and east and Jammu &Kashmir are the other states in which lignite resources were identified. The lignite occurrence depths vary from 200 to 300 meters deeper.The major lignite deposits in India are in the status of Tamilnadu, Rajasthan, Gujarat, Jammu and Kashmir, and Kerala. About 82% of the lignite reserves in the country are in Tamilnadu and puducherry. Neyveli is endowed with proven existence of 4150 million tones of lignite in an area of 480sq.km.Today Mine-I and II and IA are producing 24 Million Tons per annum. Neyveli opens cast Lignite Mines are the first of its kind, which have obtained ISO 9001:2000(Quality Management system). ISO 14001:20004 (Environment Management System) and implemented the integrated Management System comprising Quality, Environment and safety standards. The basic industries on which Neyveli Thrives are The lignite mines(I,II,IA) and Thermal power stations (I,II&IEXP`N) one of The largest open cost mines, with very large machinery The lignite mines is an engineering marvel since The entire Township has been built for The purpose of employees of The corporation The other sources of economic activity are The support service to The Township This includes contracts with The NLC Shops private hospitals in The periphery school etc.. There are also a lot of mining industries that have been developed in The last Two decades .A fertilizer B&S plant That was owned by Neyveli Lignite corporation was closed few year backLignite Deposit in Neyveli Lignite is the younger offspring of the coal family. It is a fossil fuel belonging to the Miocene age (25 million years). Popularly known as Brown Coal, lignite is tan brown in color, light to handle and brittle in nature. This fuel is born from vegetable matter having undergone bio-chemical decay to the stage of peat (rotten wood) and then metamorphosed to lignite under the pressure of the soil above through floods, movements of the earths crust and dehydration when the pressure of the lignite, particularly the horizontal thrust is further increased, lignite is made more dense, less volumetric and becomes coal as such. The lignite mined at Neyveli varies in color from brown to dark brown and has a non-bonded granular structure. Microscopic studies of these sections prepared from bulk samples of lignite indicate that the fuel is composed of a wide variety of plant ingredients, mainly of coniferous nature.Vision To emerge as a leading Mining and Power Company, continue to be a socially responsible company and strive for operational excellence in Mining and Exploration.Mission Strive towards greater cost competitiveness and work towards continued financial strength. Continually imbibe best practices from the best Indian and International Organizations engaged in Power Generation and Mining. Be a preferred employer by offering attractive avenues of career growth and excellent work environment and by developing human resources to match international standards. Play an active role in society and be sensitive to emerging environmental issues.Neyveli, the home of the Neyveli Lignite Corporation Ltd., is today Indias Energy Bridge to the 21st century and a fulfillment of Pandit Nehrus vision. Incidentally, PanditNehru and NLC share a common birthday (14.11.1956) and NLC Ltd., is celebrated the year (2006) as the Golden Jubilee Year.

HUMAN RESOURCE With a view to develop and maintain harmonious relationships at workplace and striking a balance between organizational goals and individual goals, our Company continues to have good HR practices and recognize the huge potential of its human resource. The thrust on achieving higher growth coupled with optimal utilization of manpower continued. The focus on improving productivity and adoption of best practices in every area was relentlessly pursued. Efforts for active participation by employees has been at the core HR initiative and interventions. The total manpower of our company as on 01.01.2014 was 17,364.HIGHLIGHTS OF NEYVELI LIGNITE CORPORATION LIMITED Highest overburden removal and lignite production in any year since inception. All time high generation and export of power. Lignite production from Mine-II highest in any year since inception. Highest ever lignite production from Barsingsar Mine. Highest ever generation and export of power from TPS-II & TPS-I Expansion. More than 90% Plant Load Factor achieved by TPS-I expansion. The authorized share capital has been Rs.2000 crores and the issue and past share capital to Rs.1677.71 crores

CORPORATE SOCIAL RESPONSIBILITY:Our company, as a socially responsible corporate citizen, has been carrying out development works in the surrounding villages, right from its inception.An Annual CSR budget of not less than 1% of the profit after tax has been created by our company and the CSR projects are monitored periodically by a Sub- committee of Board of Director. Our Board of Directors has sanctioned Rs. 14.11crore as budget for CSR projects for the year 2013-14.Base line survey is conducted by our Company before commencement of any Projects.Times frames and various milestones are fixed before commencement of any Project. Initiatives of State Governments/Central Governments Departments/Agencies are dovetailed/synergized with the CSR activity of our Company.The CSR expenditure of our company for the year 2012-13 is Rs. 14.26crore.

5 YEARS PERFORMANCE AT A GLANCE PHYSICAL PARTICULARSUNIT2012-132011-122010-112009-102008-09

PRODUCTION

Lignite

Mine-ILT79.6077.3483.0591.5990.40

Mine-IALT29.4028.7727.1927.1130.56

Mine-IILT139.44130.96117.11104.4391.09

Barsingsar MineLT13.798.834.090.251.02

TOTALLT262.23245.90231.44223.38213.07

Power

T.P.S.-I-Gross MU 4035.433987.853878.654114.443577.49

-Net MU3569.443510.553400.543630.133141.03

T.P.S.-I Expn.-Gross MU3319.773042.682997.042979.433126.05

-Net MU3035.582809.972743.442720.122858.42

T.P.S.-II-Gross MU11238.0911087.6510739.7810559.699064.44

-Net MU10152.1610018.969701.519549.998172.14

Barsingsar T.P.S.-Gross MU1280.85617.68265.612.480.00

-Net MU1118.40514.29193.452.480.00

T.P.S.-II Expn.-Gross MU28.2053.580.000.000.00

-Net MU19.8139.340.000.000.00

TOTAL-Gross MU19902.3418789.4417881.0817656.0415767.98

-Net MU17895.3916893.1116038.9415902.7214171.59

SALES

LigniteLT27.5627.1821.6821.6921.35

PowerMU16841.5115810.6714971.2614828.2213204.05

2.3 REVIEW OF LITERATUREThere is no unanimity in the definition of the working capital. There are as many definitions of the concepts as there are many authors on financial management, some of the definitions are reproduced below:Working Capital is the excess of current assets over current liabilitiesHarry G. Guthman and Herbert E. Dougall.Most commonly, working capital is defined as the excess of current assets of a business (Cash, Accounts Receivable Inventories) over current items owned to employees and others (such as salaries, wages Accounts Payable owned to the Government.) Dr. Colin Park and Prof. GladsonCurrent Assets by definitions are assets normally converted into cash within one year. Working capital management usually concerned to involve the administration of these assets namely cash and marketable securities, receivables and inventories. James C. van HorneOf these definitions, net working capital concept is more popular and has pragmatic value. Economists like Lineout Sailors approve of the net working capital on the following grounds:a. It enables the creditors and investors to judge the financial soundness of the enterprise.b. The excess of the current assets over current liabilities is the only amount that can rely upon to meet contingencies and emergencies.c. The comparison of two concerns having the same amount of current assets can be done only with the help of these concepts. Banerjee study on corporate liquidity and profitability Banerjee (1982) conducted a study on the corporate liquidity and profitability. The study related to the period 1970-71 to 1977-78. The purpose of the study was to analyses the trend in the liquidity position and their relationship with the profitability in the medium and large public limited companies in India. The study concluded that for some industry group risk in liquidity will lead to risk in profitability and vice versa, there are other factors where increase in liquidity is associated with a decline in profitability.Hampton view on adequacy on current assets and risk posed by current liabilitiesAccording to Hampton (1983) the working capital management is the functional area of finance that covers all the current accounts of the firm. It is concerned with the adequacy of current assets as well as the level of risk posed by current liabilities. He also viewed that the firms policies for managing its working capital should be designed to achieve three goals such as adequate liquidity minimization of risk and contribute to minimizing firm value.Know ,Scoh , Martin and Petty view on managing the investmentsAccording to Know, Scoh, Martin and Petty (1983) working capital management involves managing the firms liquidity, managing the firms investments in current assets and its use of current assets was found to reduce the firms risk of liquidity at the expenses of lowering its overall rate of return on its investment in assets. Furthermore the use of long term sources of financing was found to enhance the firms liquidity, which reduces the rate of return on assets.Sarma and Reddy study on liquidity position of Nizam Sugar Factories limitedSarma and Reddy (1985) made a study on the liquidity position of Nizam Sugar Factories Limited (NSF) during the year 1972-73 and 1981-82 to identify the factors influencing the liquidity position of the firm with respect to input and output as well.Pradhan study on describing the demand for working capital and its various componentsPradhan (1986) in his work on working capital management of Nepal Enterprise used econometric models to describe the demand for working capital and its various components. Using regression and coefficient of variation, it is used to find holding costs also.Reddy study on maintaining the liquidity and sufficient amount of net working capitalReddy (1988) in his study stressed that the co-operative sugar mills did not manage working capital properly. The study concludes that sustained efforts have to be made to maintain liquidity and sufficient amount of net working capital in order to avoid the potential danger of technical insolvency. The problem of management of working capital was also traced to be seasonal character of raw material.

CHAPTER IIIDATA ANALYSIS AND INTERPRETATION

This chapter deals with the study of working capital management of Neyveli Lignite Corporation Limited. The tools used for the study are common size statements and ratio analysis.GROSS WORKING CAPITAL:The Gross Working Capital of Neyveli Lignite Corporation Limited registered trend during the entire period of the last five years of study. It has gone up to from Rs.7586.18 crores in 2008-09 to Rs. 8123.14crores in 2012-13.

TABLE 3.1.1STATEMENT OF GROSS WORKING CAPITAL (Rs. In Crores)COMPONENTS OF CURRENT ASSETS2008-20092009-20102010-20112011-20122012-2013

Inventories535.85502.96491.711506.19683.72

Sundry Debtors781.441611.622202.393647.033800.27

Cash and Bank balance5482.194823.634420.733329.102866.64

Other current Assets189.48164.56177.48156.24162.24

Loans and Advances597.22581.59559.81406.80610.27

TOTAL CURRENT ASSETS7586.187684.367852.128045.868123.14

Source: Compiled from the Annual Reports of NLC Ltd. Gross working capital includes various current assets such as inventory, sundry debtors, cash and bank balances and loans and advances. The position of gross working capital, the components of gross working capital and their percentage in the total assets are shown in Table-1The components of Current Liabilities and their percentage in the total Current Liabilities are shown in Table-2.

TABLE-3.1.2CURRENT LIABILITIES AND PROVISIONS Rs. In CroresSTATEMENT OF CURRENT LIABILITIES2008-092009-102010-112011-122012-13

A. Current liabilities1. Sundry creditors and accrued expenses2. Mine closure3. Capital works and purchases4. Other liabilities5. Unutilised revenue grant6. Unclaimed dividend7. Staff security deposit8. Interest accrued but not duea. Neyveli Bondsb. Calyon Bankc. KfW734.16

399.20471.41431.348.350.630.01

9.872.771.161175.70

491.40426.60276.876.211.280.01

9.870.961.011103.33

108.94482.94222.043.940.860.01

9.871.171.01252.34

18.87198.85198.454.780.930.01

9.872.181.05266.59

19.80221.45221.456.991.270.01

9.991.91.03

B. Provision for1. Accrued earned leave2. Half pay leave3. Short-term benefit of earned leave4. Short-term benefit of half pay leave

5. Gratuity6. Contingencies7. Postretirement medical benefit8. Loss on assets9. Proposed final dividend10. Proposed final dividend tax96.0649.183.46

1.48203.7735.1310.15

0.86335.5457.03143.4170.333.43

1.95141.3744.8211.48

0.86167.7727.8696.0630.354.36

2.570.0054.8212.45

0.86385.8762.60

120.6854.3610.69

4.2158.2046.6014.98

1.00469.7676.2190.660.005.58

3.7342.0584.8817.21

0.41301.9951.33

TOTAL1834.043003.192836.141544.021348.32

Source: Compiled from the Annual Reports of NLC Ltd..From the Previous Table, it is inferred that the current liability of NLC show a mixed trend. It was low in 2008-09 i.e. Rs. 1834.04 Crores but gradually raised to Rs. 1348.32Crores in 2012-13.

TABLE -3.1.3COMPONENTS OF CURRENT ASSETS 2008-09(Rs. In Crores)COMPONENTS OF CURRENT ASSETS2008-09PERCENTAGE

Inventories535.857.06

Sundry Debtors781.4410.3

Cash and Bank balance5482.1972.26

Other current Assets189.482.49

Loans and Advances597.227.87

TOTAL CURRENT ASSETS7586.18100

Source: Compiled from the Annual Reports of NLC Ltd.CHART - 3.1.3COMPONENTS OF CURRENT ASSETS 2008-09








Source: Compiled from the Annual Reports of NLC Ltd.

CHART - 3.1.4COMPONENTS OF CURRENT ASSETS 2009-10


Inventories491.716

Sundry Debtors2202.3928

Cash and Bank balance4423.9957

Other current Assets177.492

Loans and Advances560.057


Source: Compiled from the Annual Reports of NLC Ltd.CHART - 3.1.5COMPONENTS OF CURRENT ASSETS 2010-11

TABLE 3.1.6COMPONENTS OF CURRENT ASSETS 2011-12(Rs. In Crores)COMPONENTS OF CURRENT ASSETS2011-12PERCENTAGE







Source: Compiled from the Annual Reports of NLC Ltd

CHART - 3.1.6COMPONENTS OF CURRENT ASSETS 2011-12

TABLE 3.1.7COMPONENTS OF CURRENT ASSETS 2012-13(Rs. In Crores)COMPONENTS OF CURRENT ASSETS2012-13PERCENTAGE







Source: Compiled from the Annual Reports of NLC LtdCHART - 3.1.7COMPONENTS OF CURRENT ASSETS 2012-13

TABLE 3.1.8COMPONENTS OF CURRENT LIABILITIES 2008-09(Rs. In Crores)COMPONENTS OF CURRENT LIABILITIES 2008-09Rs. In CroresPERCENTAGE

Sundry Creditors734.1625.69

Capital Works & Purchases471.4116.5

Mine Closure399.2013.97

Other Liabilities459.3216.07

Provisions792.6627.74

Total Current Liabilities2856.75100

Source: Compiled from the Annual Reports of NLC Ltd.CHART 3.1.8COMPONENTS OF CURRENT LIABILITIES 2008-09


Sundry Creditors1175.7039

Capital Works & Purchases426.6014

Mine Closure491.4017

Other Liabilities276.879

Provisions613.2821




Sundry Creditors1108.8039

Capital Works & Purchases721.4726

Mine Closure108.944

Other Liabilities225.158

Provisions649.9423










Source: Compiled from the Annual Reports of NLC Ltd.TABLE 3.1.11COMPONENTS OF CURRENT LIABILITIES 2011-12








Source: Compiled from the Annual Reports of NLC Ltd.TABLE 3.1.12COMPONENTS OF CURRENT LIABILITIES 2012-13

CALCULATION OF NET WORKING CAPITAL

Net working capital is a qualitative concept. It indicates the liquidity position of the firm and suggests the extent to which working capital needs may be financed by permanent source of funds.Net working Capital = Current Asset Current Liabilities.

TABLE 3.1.13CALCULATION OF NET WORKING CAPITAL

Rs.in CroreYEARSCURRENT ASSETSCURRENT LIABILITIESNET WORKING CAPITAL

2008-20097586.182856.754729.43

2009-20107684.362983.854700.51

2010-20117852.122567.195284.93

2011-20128148.562760.955387.61

2012-20138314.652784.345530.34


CHART 3.1.13NET WORKING CAPITAL

RATIO ANALYSISRatio Analysis is a powerful tool of Financial Analysis. Ratio Analysis of business enterprises centers on efforts to drive quantitative measures or guides concerning the expected capacity of the firm to meet its future financial obligations or expectations. The ratio analysis facilitates a firm to consider the time dimensions into account i.e., whether the financial position of a firm is showing any improvement or deteriorating over years.Ratio is known as one number expressed in terms of another, it is an expression of relationship spelt out by dividing one figures into the other.TYPES OF RATIOSRatios are classified in broad groups. They are as follows: Liquidity Ratios. Leverage Ratios. Activity ratios. Profitability Ratios.

LIQUIDITY RATIOLiquidity ratios derive a picture of the capacity of a firm to meet its short term obligations out of its short term resources. These ratios constitute ratio-analysis of the short-term financial position. Liquidity ratios, by establishing a relationship between cash and other current assets to current obligations, provide a quick measure of liquidity.The most common ratios which indicate the Liquidity are: Current Ratio Quick Ratio Cash Position Ratio

CURRENT RATIOCurrent Ratio is the relationship between the total current assets and current liabilities. It is the ratio of the current assets and current liabilities and is found out by dividing the current assets by the current liabilities. As the ratio is connected with the working capital [Current Assets Current Liabilities] and it is also called working capital ratio. Current ratio is the indicator of short term liquidity position of a firm. CurrentAssetsCurrent Ratio = ----------------------- CurrentLiabilitie

TABLE 3.1.14Current Ratio(Rs. in crores)YearCurrentAssetsCurrent LiabilitiesRatio

2008-097557.072851.562.6

2009-107684.362541.853.02

2010-117855.632567.193.06

2011-128148.562760.952.95

2012-137630.932228.553.42

Source: Compiled from the Annual Reports of NLC Ltd.CHART 3.1.14Current Ratio

INTERPRETATIONThe calculated current ratio of the company was decrease from the 3.42:1 for the year 2012-13 to3.06:1 for the year 2010-11 and then 3.02:1 for the year 2009-10 and always maintained more than the standard current ratio is 3:1. The current asset of the company increased from 7557.07crore to 7630.93crore due to increase in cash and bank balance has a main constituent of current asset. Hence the liquidity of the company is high for the period under the review from the current ratio point of view.QUICK RATIOIt is also a tool of testing the liquidity of an organization. This ratio is also called as Liquid Ratio (or) Acid test ratio. Acid Test Ratio or Liquid Ratio is concerned with the relationship between Liquid Assets and Current Liabilities. Quick Ratio is an Indicator of Short term solvency of the company. LiquidAssetsQuick Ratio = ----------------------CurrentLiabilitiesTABLE 3.1.15Quick Ratio(Rs. in crores)YearQuickAssetsCurrentLiabilitiesRatio

2008-097021.222851.562.4

2009-106075.022541.852.39

2010-117114.83.2567.192.77

2011-127771.532559.793.04

2012-137630.932228.553.42

Source: Compiled from the Annual Reports of NLC LtdCHART 3.1.15Quick Ratio

INTERPRETATIONThe calculated quick ratio or liquid ratio decreases from3.42:1 in 2012-13 to 3.04:1 in the year 2011-12 and 2.77 in 2010-11. So the standard quick ratio is 2:1, the quick ratio of the company is always on the higher side when compared to the standard ratio. It shows the company is having higher liquid asset when compared to current liability. Hence the company is having higher liquidity for the period under the study from the quick ratio point of view.CASH POSITION RATIO:Cash Ratio measures the relationship between cash and near cash items on one hand and immediately maturing obligations on the other. This test is rigorous measure of a firms liquidity position. It is also called as absolute liquid ratio. Cash + Marketable Securities Cash position Ratio = ------------------------------------------ Current Liabilities

TABLE 3.1.16CASH POSITION Ratio(Rs. in crores)YearCash +MarketableSecurityCurrentLiabilitiesRatio

2008-095452.202851.561.91

2009-104823.632541.851.89

2010-114420.732567.191.72

2011-124415.552559.791.72

2012-133406.842784.341.22

Source: Compiled from the Annual Reports of NLC Ltd.CHART 3.1.16CASH POSITION RATIO

INTERPRETATIONGenerally, ideal absolute liquid ratio of 1:1 is said to be satisfactory. The calculated cash ratios are varying from 1.91:1 for the year 2008-09 to 1.89:1 for 2009-10 and then to 1.72 for 2010-11. Cash ratios are calculated for maintaining higher than the standard ratio. A cash ratio greater than 1.0 means that there is more than enough cash on hand. It is vivid from the above analysis that the company has sufficient high liquid funds to meet its current obligations. Hence the company is having very high liquidity from cash ratio point of view.

LEVERAGE RATIOS

Leverage Ratios measure the contribution of financing by owners compared with financing provided by the outsiders. Leverage Ratios also provide some measure of the risk of debt financing by the calculation of the coverage of fixed charges. Leverage has a much more important bearing on profitability than does Liquidity.The most common Ratios used are: Debt-Equity Ratio Interest Coverage Ratio Proprietary Ratio

DEBT EQUITY RATIODebt Equity Ratio is determined to ascertain the soundness of the long-term financial position of the company. The investor may take Debt-Equity ratio as satisfactory if shareholders Funds are equal to Outsiders Funds. This ratio indicates the extent to which the firm depends upon outsiders for its existence. Outsiders FundDebt Equity Ratio = ----------------------------Shareholders Fund

TABLE 3.1.17Debt Equity Ratio(Rs. in crores)YearOutsidersFundShareholdersFundRatio

2008-093100.009412.780.32

2009-103237.5010093.150.32

2010-113147.5011174.480.28

2011-124957.7612609.960.39

2012-137351.5913081.260.56

Source: Compiled from the Annual Reports of NLC Ltd.CHART - 3.1.17Debt Equity Ratio

INTERPRETATIONThe calculated debt equity ratio has been increased from 0.56 in the year 2012-13 to 0.39 in the year 2011-12. The resource and surplus of the firm shows `an increasing trend from 3100.00 crore to 7351.59 crore in 2008-13 and also outsiders funds such as secured loans and unsecured loans are increased because of the expansion projects.INTEREST COVERAGE RATIOInterest Coverage Ratio is also known as Fixed charges cover. This ratio established the relationship between EBIT and fixed interest charges. Interest coverage ratio measures the ability of the company to meet interest commitments.It also highlights the ability of the firm to raise additional funds in future. Higher the ratio, better is the position of long-term creditors and the companys risk is lesser.Earnings before Depreciation, Interest and TaxInterest Coverage Ratio= ------------------------------------------------------------- InterestTABLE 3.1.18Interest Coverage Ratio(Rs. in crores)YearEBITInterestRatio

2008-091486.378.15182.37

2009-101889.1633.5856.26

2010-112259.98159.0714.18

2011-122050.76376.475.45

2012-132045.66193.3910.57


CHART 3.1.18Interest Coverage Ratio

INTERPRETATIONThe calculated interest coverage ratios from 2008-09 to 2012-13 are appears to be the average of around 182 and it is 10 for the year 2008-09 and it is 182 for the year 2008-10. This is due to low interest is to be covered and higher earnings of the company But in 2010-11 interest charged is very high when compared to rest of the years so the interest coverage ratio is reduced to 14.18.The higher interest coverage ratio indicates more solvency to the company and the company can very well cover the interest payments on its long term debt..PROPRIETARY RATIO:This ratio relates the shareholders funds to total assets. It throws light on the general financial strength of the company. It is of greater importance to the creditors since it enables to find out the proportion of shareholders funds in the total assets of the business. A high Proprietary Ratio indicates relatively secure position to the creditors in the event of liquidation. A low proprietary ratio will include greater risk to the creditors. Shareholders FundProprietary Ratio = ------------------------------ Total AssetsTABLE 3.1.19ProprietAry Ratio(Rs. in crores)YearShareholdersTotal AssetsRatio

Fund

2008-099469.2317049.90.55

2009-1010093.1514972.460.67

2010-1111174.4815757.950.70

2011-124488.911295.900.29

2012-1313081.2623217.190.56


CHART 3.1.19ProprietAry Ratio

INTERPRETATIONThe calculated proprietary ratio are varying from 0.56 for 2012-13 and then decrease to 0.55 for the year 2008-09The decrease in ratio is because of purchase of some special mining equipment during the year 2008-09. The total asset of the company has been increased from 17049.9in 2008-09 to 23217.19in 2012-13. In 2010-11proprietory ratio increase by 0.70 The higher ratio indicate more security to the creditors and relatively secure position of the company in the event of liquidation.ACTIVITY RATIOS:An activity ratio measures the effectiveness of the employment of resources. These ratios not only analyze the use of the total resources of the firm but also the use of the components of the total assets. Activity Ratios involve a relationship between assets and sales. Several Activity Ratios can be calculated to judge the effectiveness of asset utilization.Some of these ratios are: Debtors turnover ratio. Fixed assets turnover ratio. Working capital turnover ratio. Capital turnover ratio.DEBTORS TURNOVER RATIODebtors constitute an important constituent of current assets and therefore the quality of debtors to a great extent determines a firms liquidity.This ratio indicates the efficiency of the staff entrusted with the collection of book debts. The higher the ratio, the better it is.

Net SalesDebtors Turnover Ratio = ---------------- Debtors

Table 3.1.20Debtors Turnover Ratio(Rs. in Crores)YearNet SalesDebtorsRatio

2008-093354.91781.444.29

2009-104121.031611.622.56

2010-113949.082202.391.79

2011-124489.462503.451.79

2012-13 5590.973800.271.47

Source: Compiled from the Annual Reports of NLC Ltd.CHART 3.1.20Debtors Turnover Ratio

INTERPRETATIONThe calculated debtors turnover ratio increased from 4.29 in 2008-09 to 2.56 in 2009-10 and the decreases from there to 1.79 in 2010-11. It indicates the company has taken efficient debt management

FIXED ASSET TURNOVER RATIOFixed Asset Turnover Ratio indicates the extent to which the investment in fixed assets contributes towards sales. A highest ratio is an indication of greater efficiency in the utilization of fixed assets. Fixed asset of the company are land and building, Plant and machinery etc.Cost of Goods SoldFixed Asset Turnover Ratio = ---------------------------Fixed AssetTABLE 3.1.21Fixed Asset Turnover (Rs. in crores)YearCost ofGoods SoldFixed AssetsRatio

2008-092623.344503.040.58

2009-102231.875238.800.43

2010-113302.424990.150.66

2011-124488.918515.840.53

2012-135590.0714902.540.37


CHART 3.1.21Fixed Asset Turnover Ratio

INTERPRETATIONThe fixed asset turnover ratios for the period under study are very less when compared to standard ratio of 5. NLC being an integrated complex having capital intensive mining and power industry, investment in fixed asset is high and the ratio indicates the lesser ability of the company to generate sales from the investment in the fixed assets. Higher ratio will help in improving the profitability of the company.WORKING CAPITAL TURNOVER RATIOThe ratio of cost of goods sold to Net working capital is determined in order to test the efficiency with which net working capital is utilized. It indicates whether the business is being operated on a small or large amount of Net working capital in relation to sales.A high working capital turnover may be the result of favorable turnover of inventories and receivables whereas; a low turnover of net working capital results in slow turnover of inventories and receivables. Cost of Goods Sold Working Capital Turnover Ratio = ----------------------- Working CapitalTable 3.1.22Working Capital Turnover RATIO(Rs. in crores)YearCost ofGoods SoldWorkingCapitalRatio

2008-092623.344705.510.55

2009-102231.0874681.170.48

2010-113302.422584.051.28

2011-123129.755387.610.58

2012-13 3581.015530.340.64

Source: Compiled from the Annual Reports of NLC Ltd.CHART 3.1.22Working Capital Turnover RATIO

INTERPRETATIONThe working capital turnover ratios show a Decreasing trend from 0.55 the year 2008-09 to 0.48 for the year 2009-10 and has shown some improvement during 2008-09. The decreasing trend of the working capital turnover ratio indicates the companys ability to generate sales was decreasing up to 2009-10 and has shown a sign of reversal in 2010-11. It means utilization working capital in generating sales has started increasing from 2007-08 and continued in 2012-13. Working capital turnover ratio is high in 2012-13 when compared with other year because of mine closure and provision of gratuity CAPITAL TURNOVER RATIOCapital Turnover Ratio indicates the extent to which capital employed contributes towards sales. High ratio signifies that there exists efficient utilization of the capital employed by the firm Cost of Goods SoldCapital Turnover Ratio = -------------------------- Capital EmployedTable 3.1.23Capital Turnover Ratio(Rs. in crores)YearCost of Goods SoldCapital EmployedRatio

2008-092623.349303.620.28

2009-102231.8711166.880.20

2010-113302.4211621.000.28

2011-123129.75177330.17

2012-133581.01173640.20

Source: Compiled from the Annual Reports of NLC Ltd.CHART 3.1.23Capital Turnover Ratio

INTERPRETATIONThe calculated capital turnover ratio was 0.28 for the year 2008-09 it decreased to 0.02 in 2009-10 and then increased to 0.28in 2010-11. It indicates the effective utilization of the capital employed by the company to generate sales has decreased from the year 2008-09 to 2009-10 and increased in the latter years from 2010-11 to 2012-13.

PROFITABILITY RATIOS:Profitability ratios are calculated to measure the operating efficiency of the company. Profitability Ratios are designed to highlight the end-result of business activities. Profitability ratios can be determined on the basis of Sales or Investment. Profitability Ratios indicates the profitability i.e., the ability of the firm to earn profit.The important ratios are:

Net profit ratio. Return on net worth. Return on capital employed. Gross profit ratio.NET PROFIT RATIO:Net Profit Ratio is the ratio of Net Income or Profit after Taxes to Net sales. It indicates with portion of sales is left to the proprietors after all costs, charges and expenses; have been deducted. It is extremely useful to the firm being an indication of cost control and sales promotion. Net profit Ratio is a guide as to the efficiency or otherwise of operating the firm.Net profit ratio is widely used as a measure of over-all profitability and is very useful to the proprietors. Higher the ratio better is the operational efficiency of the company.Net ProfitNet Profit Ratio = --------------SalesTable 3.1.24Net profit Ratio(Rs. in crores)YearNet ProfitSalesRatio

2008-09821.093354.910.24

2009-101247.464121.030.30

2010-111298.283949.080.32

2011-124488.911295.900.29

2012-135590.0713081.260.42


CHART 3.1.24Net profit Ratio

INTERPRETATIONThe calculated net profit ratio of the company was 0.24 for 2008-09 and decreased to 0.3 for the year 2009-10 due to fall in net profit from Rs821.09Cr for 2008-09 to Rs1247.46 Cr for 2009-10 and has shown a sign of improvement in 2010-11 to 0 32. It decreased to 0.29for 2011-12 due to fall in net profit to Rs 1298.68 Cr due to Provision for gratuity of Rs 4488.91 Cr . The reduction in the sales turnover during the year 2012-13 as compared to previous year 2009-10 was due to the adjustment of mine closure cost amounting to Rs 340.72 crore in the sale income of 2012-13.and Ministry of coal revised downward in view of the reduction in mine closure cost for the above period as stated the excess liability created in the earlier years amounting to Rs 382.45 crore has been withdrawn and included in other income.

RETURN ON NET WORTHReturn on net worth is desired to work out the profitability of the company from the shareholders point of view, because the shareholders are interested in total income after tax including net Non-operating Income.Profit after taxReturn on Net worth = -------------------Net worthTable 3.1.25Return on Net worth(Rs. in crores)YearProfitafter taxNet worthRatio

2008-09821.099412.780.08

2009-101247.4610225.600.12

2010-111298.2811121.400.11

2011-121411.3311989.570.12

2012-131459.7512925.150.11


CHART 4.1.25Return on Net worth

INTERPRETATION The calculated return on net worth was high at 0.08 in the year 2008-09 and slowly decreased to 0.12 in 2009-10 and increased to 0.11 in 2010-11 and then decreased to 0.12 in the year 2011-12. The decrease in trend on return on net worth was due tom fall in profit from 821.09 crore for 2008-09 to 1247.46crore in 2010-11. The decrease in returns on net worth for the year 2011-12 is 0.12 due to provision for gratuity and mine closure to extent of rupees1298.28crore further decrease in return on net worth in 2012-13 is 0.11 is due to The board of Directors of the company has recommended a dividend of 23% for the year 2010-11 (previous year 20%) the total outgo on account of the dividend including distribution tax will be Rs 448.47 Crore (previous year Rs 391.91Crore) RETURN ON CAPITAL EMPLOYEDReturn on Capital Employed Ratio shows the overall efficiency of the firm. This ratio is the indicator of profitability of a firm. The profit being the net result of all operations, the return on capital employed expresses all efficiency the Inefficiency of a business collectivity and thus it is a dependable basis for judging its overall efficiency or inefficiency.

Profit after TaxReturn on Capital Employed = ----------------------- Capital EmployedTable 3.1.26Return on Capital Employed(Rs. in crores)YearProfitafter taxCapital employedRatio

2008-092231.875238.80 0.43

2009-103302.424990.15 0.66

2010-111298.3311621.000.11

2011-121411.33177330.07

2012-131459.75173640.08

CHART 3.26Return on Capital Employed

INTERPRETATIONThe calculated return on capital employed ratio is 0.43 in 2008-09 and slowly increased to 0.66 in 2009-10 and decreased to 0.11 in 2010-11 and then decreased to 0.07 in 2011-12. The decrease in trend on return on capital was due to fall in net profit from Rs 2231.87 Cr for 2008-09 to Rs 4488.91Cr in 2010-11. The reason for decrease in return on capital for 2010-11 is due to provision for gratuity and mine closure to an extent of Rs1298.33Cr and in 2012-13 return on capital is stable because little increase in profit leads to increase in capital works and purchases up to 1459.75Cr when compared to last year .

GROSS PROFIT RATIO:Gross profit ratio is the ratio of gross profit to net sales expressed as a percentage representing the percentage of gross profits earned on sales. An increase in gross profit ratio may reflect an increase in the sale price of goods sold without any corresponding increase in costs, a decrease in cost without its impact on the sale price of goods. Low gross profit ratio may indicate un-favorable purchasing and mark-up policies. Gross ProfitGross Profit Ratio = ------------------- SalesTABLE 3.1.27Gross Profit Ratio(Rs. in crores)YearGross ProfitSalesRatio

2008-091486.373354.910.49

2009-101889.164121.030.46

2010-112259.983949.080.57

2011-121905.744866.850.39

2012-131886.315590.070.33

Source: Compiled from the Annual Reports of NLC Ltd.CHART 3.1.27Gross Profit Ratio

INTERPRETATIONThe gross profit ratio for 2012-13 is the lowest during the period under the study. The gross profit shows a fluctuating trend. The declining trend in gross profit ratio is due to reduction in operating profit. The operating expense was 1886.31crore during the year 2012-13 it was considerably high when compared to other years, in 2012-13 gross profit increase to due to overburden removal of 1886.31LM3 from all mines of the company put together so the gross profit also increased so gross profit ratio increased by 0.33.

TABLE 3.2.1SCHEDULE OF CHANGES IN WORKING CAPITAL

CURRENT ASSETS2007-082008-09INCREASEDECREASE

INVENTORIES448.05535.8587.8

SUNDRY DEBTORS218.83781.44562.61

CASH & BANK BALANCES4749.565452.2702.64

OTHER CURRENT ASSETS159.67189.4729.8

LOANS & ADVANCES307.64598.11290.47

TOTAL (A)5883.757557.071673.32

CURRENT LIABILITIES2007-082008-09

CURRENT LIABILITIES1465.962058.9592.94

PROVISIONS368.08792.66424.58

TOTAL (B)1834.042851.561017.52

WORKING CAPITAL (A-B)4049.714705.51655.8

INCREASE IN WORKING CAPITAL655.8--655.8

TOTAL 4705.514705.51655.8655.8

INTERPRETATIONSchedule of Changes in Working Capital, when compared between 2008-09 and 2009-10 It is stated that,

IN CURRENT ASSETS Inventories increases by Rs. 87.8 Crores. Debtors increases by Rs. 562.61 Crores. Cash and Bank Balance increases by Rs. 702.64 Crores. Other Current Assets increases by Rs. 29.8Crores. Loans and advances increases by Rs. 290.47 Crores

IN CURRENT LIABILITIES & PROVISIONS Current Liabilities increases by Rs. 592.94 Crores. Provisions increases by Rs. 424.58 Crores.

SCHEDULE OF CHANGES IN WORKING CAPITAL Increase in Working capital Rs. 655.8 Crores.



INVENTORIES535.85502.9632.89

SUNDRY DEBTORS781.441611.62830.18



LOANS & ADVANCES598.11581.5916.52

TOTAL (A)7557.077684.36830.18702.89



PROVISIONS792.66613.28179.38

TOTAL (B)2851.563003.19331.01179.38

WORKING CAPITAL (A-B)4681.174705.51523.51499.17

INCREASE IN WORKING CAPITAL24.3424.34

TOTAL4705.514705.51523.51523.51

INTERPRETATIONSchedule of changes in working capital, when compared between 2008-09 and 2009-10. It is stated that,IN CURRENT ASSETS: Inventories Decreases by Rs. 32.89 Crores. Debtors increases by Rs. 830.18 Crores. Cash and Bank Balance Decreases by Rs.628.57 Crores. Other Current Assets Decreases by Rs. 24.91 Crores. Loans and Advances Decreases by Rs. 16.52 Crores.IN CURRENT LIABILITIES & PROVISIONS: Current Liabilities increases by Rs. 331.01Crores. Provisions Decreases by Rs. 179.38 Crores.SCHEDULE OF CHANGES IN WORKING CAPITAL Increase in working capital Rs. 24.34 Crores.



INVENTORIES502.96491.7111.25

SUNDRY DEBTORS1611.622202.39590.77



LOANS & ADVANCES581.59559.8121.78

TOTAL (A)7684.367852.12603.69435.93



PROVISIONS613.28649.9436.66

TOTAL (B)3003.192584.0536.66455.8



T0TAL5268.075268.07567.03567.03

INTERPRETATIONSchedule of changes in working capital, when compared between 2009-10 and 2010-11. It is stated that,IN CURRENT ASSETS: Inventories decreases by Rs. 11.25 Crores. Debtors increases by Rs. 590.77 Crores. Cash and Bank Balance decreases by Rs.402.9 Crores. Other Current Assets increases by Rs. 12.92 Crores. Loans and Advances decreases by Rs. 21.78 Crores.IN CURRENT LIABILITIES & PROVISIONS: Current Liabilities decreases by Rs. 455.8Crores. Provisions increases by Rs. 36.66Crores.SCHEDULE OF CHANGES IN WORKING CAPITAL Increase in working capital Rs. 547.16Crores.

\

TABLE NO-3.2.4SCHEDULE OF CHANGES IN WORKING CAPITAL


INVENTORIES491.71506.1914.48

SUNDRY DEBTORS2202.393647.031444.64



LOANS & ADVANCES559.81406.80153.01

TOTAL (A)7852.128148.561541.081265.88



PROVISIONS649.94798.49148.55

TOTAL (B)2584.052760.95176.9



TOTAL5387.615387.611364.181364.18

INTERPRETATIONSchedule of changes in working capital, when compared between 2009-10 and 2010-11. It is stated that,IN CURRENT ASSETS: Inventories increases by Rs. 14.48 Crores. Debtors increases by Rs. 1444.64 Crores. Cash and Bank Balance Decreases by Rs.1091.63 Crores. Other Current Assets increases by Rs. 81.96 Crores. Loans and Advances Decreases by Rs. 153.01Crores.IN CURRENT LIABILITIES & PROVISIONS: Current Liabilities increases by Rs. 28.35Crores. Provisions increases by Rs. 148.55 Crores.SCHEDULE OF CHANGES IN WORKING CAPITAL Increase in working capital Rs. 98.3 crores

TABLE NO-3.2.5SCHEDULE OF CHANGES IN WORKING CAPITAL


INVENTORIES1506.19683.72822.47

SUNDRY DEBTORS3647.033800.27153.24



LOANS & ADVANCES406.80610.276.0

TOTAL (A)8045..868123.14235.21284.93

CURRENT LIABILITIES2011-122012-13INCREASEDECREASE


PROVISIONS798.49555.79242.7

TOTAL (B)2760.952357.44403.51



TOTAL 5765.75765.7881.42881.42

INTERPRETATIONSchedule of changes in working capital, when compared between 2011-12 and 2012-13. It is stated that,IN CURRENT ASSETS: Inventories Decreases by Rs. 822.47Crores. Debtors increases by Rs. 153.24Crores. Cash and Bank Balance Decreases by Rs.462.46Crores. Other Current Assets increases by Rs. 81.96Crores. Loans and Advances Decreases by Rs. 6.01Crores.IN CURRENT LIABILITIES & PROVISIONS: Current Liabilities decreases by Rs. 160.81Crores. Provisions decreases by Rs. 242.7Crores.SCHEDULE OF CHANGES IN WORKING CAPITAL Increase in working capital Rs. 646.22crores

TABLE - 3.2.6CURRENT ASSETS AND LIABILITIES OF NLC Ltd..Rs. In CroresPARTICULARS2008-092009-102010-112011-122012-13(+)/(-)

Inventories536503492506.19683.72134

Debtors78116122202364738002034

Cash and Bank Balance545248244420332928661871

Other Current Assets189165177156162-26


Creditors73411761103259277857

Work in Progress471421483198221390

Other Liabilities454277222251383-33

Provisions793613650798555522

INTERPRETATIONChanges in Current Assets and Current Liabilities, when compared between 2008-09 and 2012-13, It is stated that,

IN CURRENT ASSETS: Inventories increases by Rs. 134 Crores in 2012-13 compared to base year 2008-09 it is a normal increase @ 10% p.a. Debtors decreases by Rs. 2034 Crores due to reduction in power tariff by CERC norms and parameters and adjustment relating to earlier year sales. Cash and Bank Balance increases by Rs. 1871 Crores due to increase in Secured and Unsecured Loans for our expansion project, the amount is invested in bank and utilizing the fund day by day. Accumulation of Reserve from our profit. Other Current Assets decreases by Rs 26 Crores it is a normal decrease. Loans and Advances increases by Rs.221.81 Crores it is a normal increase.

IN CURRENT LIABILITIES & PROVISIONS: Sundry Creditors increases by Rs857 Crores, due to our expansion projects, it is a normal increase. Work in Progress increases by Rs. 390 Crores due to our expansion projects in Rajasthan, Mine-II Expansion and Thermal-II Expansion, it is a normal increase. Other liabilities is decreases by Rs 33 Crores due to our expansion projects in Rajasthan, Mine-II Expansion and Thermal-II Expansion,it is a normal decrease. Provisions are increases by Rs.522, due to final dividend declared in the earlier years but, in current year interim dividend paid partly. A contingency provision also increases.

CHAPTER IV4.1 FINDINGSThe study of working capital and its management in Neyveli Lignite Corporation Limireveals the following: The net working capital of the company has shown an increasing trend as against Rs.4729.43 in 2008-09 it has grown to Rs.5530.34crores in 2012-13 thus it has increased from 2.6 to 3.42 times during the period of study. The increasing working capital is due to increase in the current assets without a corresponding increase in current liabilities. The current ratio of 2:1 indicates that the pattern of companys financial structure is sound. The Current ratio ranges from 2.6 to 3.42 average of current ratio is 3.06 compared to the fixed norms. The liquidity position of the concern is good. The information given above reveals that quick ratio of NLC Ltd fluctuate between 2.4 and 3.42 during the whole period of study its clearly indicates the concern has the ability to maintain its liquidity positions in better manner. The ideal absolute liquid ratio of 1:1 is said to be satisfactory. The calculated cash ratios are varying from 1.91:1 for the year 2008-09 to 1.89:1 for 2009-10 and then to 1.72 for 2010-11. The calculated debt equity ratio has been increased from 0.56 in the year 2012-13 to 0.39 in the year 2011-12. The resource and surplus of the firm shows `an increasing trend from 3100.00crore to 7351.59crore in 2008-13, so increased expansion projects. The interest coverage ratio is reduced to 14.18.The higher interest coverage ratio indicates more solvency to the company and the company can very well cover the interest payments on its long term debt. To calculated proprietory ratio are varying from 0.56 for 2012-13 and then decrease to 0.55 for the year 2008-09. The decrease in ratio is because of purchase of some special mining equipment during the year 2008-09. The calculated debtors turnover ratio increased from 4.29 in 2008-09 to 2.56 in 2009-10 and the decreases from there to 1.79 in 2010-11. It indicates the company has taken efficient debt management The working capital turnover ratio shows a decreasing trend from 0.55 the year 2008-09 to 0.48 for the year 2009-10 and has shown some improvement during 2012-13. The calculated capital turnover ratio was 0.28 for the year 2008-09 it decreased to 0.02 in 2009-10 and then increased to 0.28in 2010-11. It indicates the effective utilization of the capital employed by the company to generate sales has decreased from the year 2008-09 to 2009-10 and increased in the latter years from 2010-11 to 2012-13. The calculated net profit ratio of the company was 0.24 for 2008-09 and decreased to 0.3 for the year 2009-10 due to fall in net profit from Rs821.09Cr for 2008-09 to Rs1247.46 Cr for 2009-10 and has shown a sign of improvement in 2012-13 to 0 32. The calculated capital turnover ratio was 0.20 for the year 2008-09and increased by 0.28 in 2012-13 it shows the effective utilization of the capital employed by the company to generate sales. Working capital turnover ratio of average 0.70.for the period from 2008-2009 to 2012-2013. It indicates that the ratio ranges between0.55 to 0.64. Schedule of changes in working capital, when compared between 2011-12 and 2012-13. It is stated that, Debtors increases by Rs.153.24Crores, Other Current Assets increases by Rs.81.96Crores, Current Liabilities decreases by Rs.160.81Crores, Provisions decreases by Rs.242.7Crores, Increase in working capital Rs.646.22crores.

4.2 SUGGESTIONS AND RECOMMENDATIONS

To earn more profit the amount invested in current assets should be reduced by way of reducing the quantum of inventories and debtors. Asset utilization is goodmore efforts should be taken to achieve efficient utilization of assets to earn more profit. The members may aware that power generation is very necessary for infrastructure development. NLC plays important role in the countrys development. NLC may take necessary efforts to increase its capacities. Development of participative culture and improve involvement of workmen and others to be maintain conducive industrial climate for improving the productivity and growth. New initiatives are being taken by the Government to streamline this sector in order to achieve the ultimate object of Power to all. NLC should are strive hard to generate power at affordable cost.

4.3 CONCLUSIONSThe analysis of working capital of Neyveli Lignite Corporation Limited, Neyveli reveals effective position also of the companys working capital policy. Financial position of the company is well and good for the past 5 years. Liquidity position of the company is excellent. The company can still improve its working capital position by implementing the suggestion made in this report.Schedule of changes in working capital i.e. Increase or Decrease in Working Capital during the period of study shows increases in working capital.Hence, it is concluded that the companys financial position is at high level and Working capital is being managed effectively.

4.4 BIBLIOGRAPHY1. AnnualReports (2008-09 to 2012-13) collected from the library of Neyveli Lignite Corporation Limited., Neyveli. 2. I.M.Pandey sixth edition Financial Management, Prentice hall of India pvt.ltd.3. Prasanna Chandra-seventh edition, Financial Management- McGraw-hill publication.4. T.S. Reddy & Y. HariPra5. sad Ready Financial and Management Accounting Margham publishers, Chennai.6. AswathDamodaran Corporate Finance 2nd Edition, wiley India (P) Ltd New Delhi, 2008.7. Man Mohan and Shiv. N. Goyal Six Edition (1995), Principles of Management Accounting SahityaBhawan Publications, Agra-282 003, PP. 388-415, 416-507.8. S.N. Maheswari Management Accounting Sultan chand& Co., New Delhi.9. Referral Website: www.nlcindia.comwww.moneycontrol.comwww.Zenmoney.com

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rasu in final3

Documents

capital management wcm

capital structure

management of cash

management of inventory

fixed capital investment

management of debtor

long term capital budgeting

measures of wcm efficiency