VIP Call Girl Service Andheri West ⚡ 9920725232 What It Takes To Be The Best ...
working capital management
1. SUMMER TRAINING PROJECT
ON
WORKING CAPITAL MANAGEMENT
OF
HINDALCO INDUSTRIES LTD
I.P.E.M. GZB
A PROJECT REPORT SUBMITTED IN PARTIAL FULFILLMENT OF THE
REQUIREMENT FOR THE AWARD OF
MASTER DEGREE IN BUSINESS ADMINISTRATION
(Affiliation)
TO
U.P.T.U. LUCKNOW
SUBMITTED BY—
OM PRAKASH MAURYA
(0911470065)
1
2. PREFACE
Summer training is an integral part of our academic curriculum.During the training a student gets
an opportunity to understand the practical aspect of theory. Training makes the concept clearer.
This project report is outcome of the summer training that we have undergone at
Hindalco Industries limited for the partial fulfillment of master‟s of business Administration.The
topic allotted to me by the company is “working capital of Hindalco”. The project emphasizes on
the financing mix of the company. We have tried to our best to make a good report. However no
one can claim perfection in it‟s entirely. So we apologize for the discrepancy, if any, crept in.
preparation of project requires perseverance, initiatives, proper guidance and direction. So it‟s
mandatory to take the aid of various departments
2
3. Acknowledgment
In an organization, be one man working in isolation can achieve it an industry, a school or
society, no outcomes. It‟s always a group and achieving the outcome in totality. It is the outcome
of all the guidance and support that I received from this organization.
I would like to thank Mr. S.K. Das, G.M.(Training) for having arrangement our training in this
organization
I would like to thank Mr. Gopal purohit, General Manager (fin. & A/Cs) for giving me a
chance to work with this organization and for extending words of encouragement and wisdom. I
am also thankful to Mr. Vineet Bhatnagar, Assistant General Manager(Accounts).
In the last I would like to thank Prof .Dinesh C .Vasistha (Director) and my project guide
Dr.Chhaya Tyagi for her valuable guidance and constant encouragement have helped us
tremendously in the completion of this project.
Last but not the least we would like to thanks our teachers without whose feedback and
encouragement, this project would not has been possible. Their help has gone a long way in
successful completion of our project.
(OM PRAKASH MAURYA)
(0911470065)
3
4. DECLARATION
I hereby declare that the project entitled on the Working capital management of Hindalco
Industries Limited Renukoot submitted to the IPEM, Ghaziabad in partial fulfillment of the
degree of Master OF Business Administration (MBA) is my original and not submitted for award
of any other degree, diploma or other similar award.
Date:-
Place :- OM PRAKASH MAURYA
(911470065)
4
7. TABLE OF CONTENTS
TITLE PAGE
NO.
Preface ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,2
Acknowledgement ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,3
Declaration ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,4
Certificates ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
TABLE OF CONTENT ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,7
PART-1
INTRODUCTION AND BRIF HISTORY ………………………………..8
ORGANIZATION STRUCTURE ………………………………………..19
VISION AND MISSION ………………………………………………….21
PERFORMANCE …………………………………………………………24
PRODUCT AND SERVICES …………………………………………….30
PART-2
SWOT ANALYSIS ……………………………………………………….36
SCOPE AND OBJECTIVES OF RESEARCH ………………………….38
RESEARCH MEHEDOLOGY …………………………………………...39
FINDINGS AND OBSARVATION ……………………………………...87
CONCLUSIONS …………………………………………………………..99
RECOMONDATION AND SUGGESTION ……………………………100
PROBLEM AND LIMITATION ………………………………………...102
BIBLIOGRAPHY
………………………………………………………...103
7
9. History of the organization
Hindalco Industries Limited, the metals flagship company of the Aditya Birla Group, is an
industry leader in aluminium and copper. A metals powerhouse with a consolidated turnover in
excess of US$ 14 billion, Hindalco is the world's largest aluminium rolling company and one of
the biggest producers of primary aluminium in Asia. Its Copper smelter is the world's largest
custom smelter at a single location.
Established in 1958, Hindalco commissioned its aluminium facility at Renukoot in Eastern U.P.
in 1962. Later acquisitions and mergers, with Indal, Birla Copper and the Nifty and Mt.Gordon
copper mines in Australia, strengthened the company's position in value-added alumina,
aluminium and copper products, with vertical integration through access to captive copper
concentrates.
In 2007, the acquisition of Novelis Inc. a world leader in aluminium rolling and can recycling,
marked a significant milestone in the history of the aluminium industry in India. With Novelis
under its fold Hindalco ranks among the global top five aluminium majors, as an integrated
producer with lowcost alumina and aluminium facilities combined with high-end rolling
capabilities and a global footprint in 12 countries outside India. Its combined turnover of US$ 14
billion places it in the Fortune 500 league.
In May 2007, Novelis became a Hindalco subsidiary with the completion of the acquisition
process. The transaction makes Hindalco the world's largest aluminium rolling company and one
of the biggest producers of primary aluminium in Asia, as well as being India's leading copper
producer.
9
10. Company Profile
THE SAGA OF RENUKOOT
HINDALCO Industries Ltd., one of the major producers of Primary Aluminium Metal and Semis
in the country, is the biggest industrial enterprise of Uttar Pradesh. It is a public limited company
in the private sector having about 39000 share holders. It is the largest integrated aluminium
plant in India with all its production facilities viz. alumina, aluminium and fabrication located at
Renukoot near Rihand Dam in Sonbhadra (U.P.). Hindalco Power Division is situated at
Renusagar about 35 Kms. from Renukoot. In September 1959, an Industrial License was granted
by the Government for setting up an integrated aluminium plant at Renukoot,
10
11. with an initial installed capacity of 20,000 M.T. The construction work was completed within 18
months, a record for a major job of this kind. The dream of the great visionary Syt. G.D. Birla to
locate an aluminium plant near Rihand Power House came true. The Late Prime Minister Pt.
Jawaharlal Nehru formally inaugurated the plant in January 1963. Going round the extensive
works, Panditji saw his dream of a brighter future of India take shape before his eyes. From the
modest beginning in 1962, Hindalco has now become an industrial giant with a capacity to
produce 2,42,000 tones of aluminium per annum.
Renukoot, a fast growing and thriving industrial township, which is one humming with activities,
and providing all the basics amenities of modern life to the inhabitants, was once a wild and
desolate jungle infested by animals. From being one of the most backward areas of U.P.. it has
carved a place for itself on the industrial map of India and the world. Lying in the foothills of the
Vindhya range, Renukoot is about 160 Kms. from Varanasi and 154 Kms. from Mirzapur. There
is a direct train between Amritsar to Tatanagar and Ranchi via Renukoot. This apart Renukoot is
also connected with
11
12. Calcutta by train, directly. Facing the giant man-made biggest artificial lake Govind Ballabh Pant
Sagar, Renukoot is a picturesque township unscarred by the ravages of industrialisation.
EXPANSION AND MODERNISATION
Hindalco is India's largest Aluminium producer with a Primary Aluminium Smelting capacity of
242,000 MTPA. The company's integrated operations include Power Generation Capacity of 612
MW and a 450,000 MTPA Alumina Refinery. Hindalco's semi fabrication facilities comprise of
Rolled products 80,000 MTPA, Redraw Rods 40,000 MTPA and Extrusions 13,700 MTPA.
The company has opted for induction of the most modern technology and has undertaken
comprehensive modernisation over the past years. It includes commissioning of two Gas
Suspension Claciners, three high efficiency PF/Fluidised Bed Boilers with co-generation facility
and Micro Processors based Pot Control System. The Rodding Room facilities have also been
modernised. In the semi-fabrication, a state-of-the-art Vertical Billet Casting and Slab Casting
12
13. facility have been installed. A new Rolling Mill has been commissioned and the existing Mills
have undergone a
comprehensive modernisation. Hindalco has also installed a Roll Former, a Cut to Length Line, a
Rewind Line and Tension Leveler in Rolling Mills.
Hindalco's products are well accepted in the domestic as well as international markets. The
company's metal is accepted for delivery under the High Grade Primary Aluminium Contract on
the London Metal Exchange. The Company's export efforts have led to recognition as a 'Star
Trading House'. Hindalco is an ISO 9002 Company and has also received ISO 14001
Certification for its entire operations including Power Plant and Mines. As a part of its
diversification programme, a 5,000 MTPA Aluminium Foil Plant and an Aluminium Alloy
Wheel Plant of 300,000 w.p.a. capacity has been set up at Silvassa.
13
14. BROWNFIELD EXPANSION
To further augment its presence in the aluminium sector, Hindalco has initiated work on a brown
field expansion at Renukoot. The expansion will increase Smelting capacity by 100,000 MTPA
to 342,000 MTPA. Aluminium refining capacity will be raised by 210,000 MTPA to 660,000
MTPA. Power Generation capacity will augmented by 150 MW to 769 MW.
ACQUISITION OF INDAL
Hindalco has also acquired aluminium major - INDAL. Hindalco's holding in INDAL now
stands at 74.62%. India strength in Aluminium and downstream aluminium products admirably
dovetails Hindalco's unmatched presence in metal and collectively commands the highest meal
capacity in the entire South East region.
MISCELLANEOUS INFORMATION
In 1962 when production started, the Company had on its roll about 900 staff and workmen and
the present strength of employees is about 14000. The Principal Office and Works is located at
Renukoot and there are Zonal Sales Offices at Bangalore, Mumbai, Delhi, and Calcutta. The
Company is managed by a Board of Directors and other senior executives.
14
15. Financial information
The company has annual sales of $ 5 billion and employs 13,675 people and is listed on Forbes
2000. A metals powerhouse with a turnover of US$ 14 billion, Hindalco is the world's largest
aluminium rolling company and one of the biggest producers of primary aluminium in Asia. On
February 11, 2007, the company entered into an agreement to acquire the Canadian company
Novelis for U$6 billion, making the combined entity the world's largest rolled-aluminium
producer. On May 15, 2007, the acquisition was completed with Novelis shareholders receiving
$44.93 per outstanding share of common stock.
Hindalco, through its wholly-owned subsidiary AV Metals Inc., acquired 75,415,536 common
shares of Novelis, representing 100 percent of the issued and outstanding common shares.
Immediately after closing, AV Metals Inc. transferred the common shares of Novelis to its
wholly-owned subsidiary AV Aluminum Inc.
On February 11, 2007, the company entered into an agreement to acquire the Canadian company
Novelis for U$6 billion, making the combined entity the world's largest rolled-aluminium
producer. On May 15, 2007, the acquisition was completed with Novelis shareholders receiving
$44.93 per outstanding share of common stock.
Hindalco, through its wholly-owned subsidiary AV Metals Inc., acquired 75,415,536 common
shares of Novelis, representing 100 percent of the issued and outstanding common shares.
Immediately after closing, AV Metals Inc. transferred the common shares of Novelis to its
wholly-owned subsidiary AV Aluminum Inc.
15
16. Hindalco's businesses
Hindalco in India enjoys a leadership position in aluminium and copper. The company's
aluminium units across the country encompass the entire gamut of operations from bauxite
mining, alumina refining, aluminium smelting to downstream rolling, extrusions, foils and alloy
wheels, along with captive power plants and coal mines. The Birla Copper unit produces copper
cathodes, continuous cast copper rods along with other by-products, including gold, silver and
DAP fertilisers.
All of Hindalco's units are ISO 9001:2000, ISO 14001:2004 and OHSAS 18001
certified. The Renukoot and Taloja units have gone a step further with an Integrated
Management System (IMS), combining ISO 9001, ISO 14001 and OHSAS 18001 into one
Business Excellence Model.The company has been accorded the Star Trading House status in
India. Its aluminium metal is accepted for delivery under the High Grade Aluminium Contract on
the LME (London Metal Exchange), while its copper quality standards are also internationally
recognised and registered on the LME with
Grade “A” accreditation.
Aluminium
Hindalco is the world's largest aluminium rolling company and one of the biggest producers of
primary aluminium in Asia. In India, Hindalco enjoys a leadership position in speciality alumina,
primary aluminium and downstream products. Hindalco's major products include standard and
speciality grade aluminas and hydrates, aluminium ingots, billets, wire rods, flat rolled products,
extrusions, foil and alloy wheels.
16
17. Copper
Hindalco's Birla Copper unit at Dahej in Gujarat is the world's largest single location custom
copper smelter with 500,000 tpa capacity. The plant is backed by captive power plants, oxygen
plants, as also by product facilities for fertilisers and precious metals. A captive jetty with cargo
handling capacity of over four million tpa, facilitates easy input of copper concentrate and other
imported raw materials
Mines
The two copper mines in Australia were acquired in 2003. Bi rla Nifty mine consists of an open-
pit mine, heap leach pads and a solvent extraction and electrowinning (SXEW) processing plant,
which produces copper cathode. Birla Nifty's copper cathode capacity is 25,000 tpa.
17
18. PLANTLAYOUT
1-ASSEMBLY
2- “ N S
3- “
4-SAFETY OFFICE ADM.OFFICE
5- “ ASSEMBLY POINT MAIN GATE
6- “
7- “
I.T
8- “ BOUXITE FIRE
DEP.
COAL TIPPLER
P COAL YARD SEFTY&HRD
FIRST AID
O
T CASTER
R BO BULLET
O C IL CASTING
O
ER
O L
COGEN.
D
P
M M
I O
P R
L
T
L O
L CARBON
BF R
D
PLANT
A D
O
B .FURNACE BF O
N I
W M
L N WORK SHOP
T BF
Train. Cent.
S A
G
PPT GSC E
| H
B
CANTEEN
II GSC
WASHER CYOLITE POTROOM COMP.
AREA
CAST HOUSE QQ STORE
DESIGN OFFICE
TO MUD YARD PETROL PUMP
DESPOSAL
–
PLANT II-STORE PROJECT .DIV GAS YARD
ASSEMLY POINT
LIME PLANT –DIGESTION
R BAUXITE TIPPLER
18
19. Organization Structure
Board of directors:
: Mr. Kumar Mangalam Birla, Chairman
:: Mrs. Rajashree Birla
:: Mr. C. M. Maniar
:: Mr. E. B. Desai
:: Mr. S. S. Kothari
:: Mr. M. M. Bhagat
:: Mr. K. N. Bhandari
:: Mr. AK. Agarwala
:: Mr. N.J. Jhaveri
:: Mr.Debu Bhattacharya, Managing Director
Chief Financial Officer:
:: Mr. S. Talukdar, President and Chief Financial Officer
Company Secretary:
: Mr. Anil Malik
Business / Unit heads:
:: Mr. Shashi K. Maudgal, Chief Marketing Officer
:: Mr. Shankar Ray, President, Chemicals & Intl. Trade
19
20. :: Mr. Satish M Bhatia, President, Foil & Wheel
:: Mr. R. S. Dhulkhed, Head Operations
:: Mr. D.K. Kohly, Chief Officer Operations, Renukoot Unit
:: Mr. V S Kasbekar, Executive President - Copper
Aditya Aluminium:
: Mr. S. N. Bontha, CEO
Utkal Alumina International Ltd:
: Mr. H. R. Pattanayak, MD & CEO
Novelis Inc:
: Ms. Martha Finn Brooks, President & CO
Aditya Birla Minerals Limited:
: Mr. D. Bhattacharya, Chairman
Company Secretary
: Mr. Peter Torre
20
21. Mission and Vision
Company’s Mission
"TO PURSUE THE CREATION OF VALUE FOR OUR CUSTOMERS, SHARE HOLDERS,
EMPLOYEES AND SOCIETY AT LARGE"
Company’s Vision
"TO STRENGTHEN OUR POSITION AS A PREMIUM ALUMINUM COMPANY, SUSTAINING
DOMESTIC LEADERSHIP AND GLOBAL COMPETITIVENESS THROUGH INNOVATION, QUALITY
AND VALUE ADDED GROWTH"
21
22. Our Values
Integrity
Honesty in every action.
Commitment
On the foundation of integrity, doing whatever it takes to deliver, as promised.
Passion
Missionary zeal arising out of an emotional engagement with work.
Seamlessness
Thinking and working together across functional silos, hierarchy levels, businesses and
geographies.
Speed
Responding to stakeholders with a sense of urgene
22
23. Global Vision and Indian Value
A US $28 billion corporation with a market cap of US $31.5 billion and in the league of Fortune
500, the Aditya Birla Group is anchored by an extraordinary force of 100,000 employees,
belonging to 25 different nationalities. In India, the Group has been adjudged "The Best
Employer in India and among the top 20 in Asia" by the Hewitt-Economic Times and Wall
Street Journal Study 2007. Over 50 per cent of its revenues flow from its overseas operations.
The Group operates in 20 c /ountries: India, Thailand, Laos, Indonesia, Philippines, Egypt,
China, Canada, Australia, USA, UK, Germany, Hungary, Brazil, Italy, France, Luxembourg,
Switzerland, Malaysia and Korea
23
24. PERFORMANCE
Hindalco Industries Ltd, an Aditya Birla Group company, today announced its unaudited
financial results for the quarter ended June 30, 2010.
Its performance in the quarter has been significantly better than the comparable quarter in the
previous year. Net sales at Rs.5,178 crore in Q1 FY11 were up 33% over Q1 FY10, driven by
higher volumes, better product/geographic mix and improved realisation. Additionally its low
cost advantage, arising from integration and captive coal for own power generation for the
Hirakud smelter, cushioned the adverse impact of spiralling cost escalations of crude and crude
derivatives as well as purchased coal for Renukoot and plummeting copper TcRc
The company also benefitted from higher aluminium LME and better by-product realisation in
its copper business. Other income and interest/ financing charges were constrained by lower
returns on investment and lower average interest rate respectively.
Profit before tax is higher by 12% at Rs.673 crore vis-a-vis Rs.600 crore in Q1 FY10. Net profit
is at Rs.534 crore as against Rs.481 crore in Q1 FY10.
Business segment results
Of the total revenues of Rs.5, 178 crore, aluminium business contributed Rs.1, 867 crore with an
EBIT of Rs.552 crore. Aluminium sales were higher on the back of higher volume, better mix,
along with better LME compared to Q1 FY10. These benefits were eroded partly by the
appreciating Rupee and higher energy cost. The increase of 32% in revenue translated into an
EBIT gain of 21% at Rs.552 crore in Q1 FY11 from Rs.455 crore in Q1 FY10.
In the copper business, revenues were higher at Rs.3, 314 crore up by 34% from Rs.2, 479 crore
in Q1 FY10, mainly on account of higher copper LME. However, the copper business being a
custom smelting operation, with offset hedging program, was not significantly impacted by the
gain or loss on changes in LME. Lower TcRc, higher energy cost and appreciating Rupee dented
the margins, despite better efficiencies and improved mix. The copper business performance is to
be seen in the light of planned shutdown of a smelter for 24 days in April 2010. The results of
copper business, adjusted for this shutdown, are superior compared to Q1 FY10.
In the copper business, revenues were higher at Rs.3, 314 crore up by 34% from Rs.2, 479 crore
in Q1 FY10, mainly on account of higher copper LME. However, the copper business being a
custom smelting operation, with offset hedging program, was not significantly impacted by the
gain or loss
24
25. on changes in LME. Lower TcRc, higher energy cost and appreciating Rupee dented the
margins, despite better efficiencies and improved mix. The copper business performance is to be
seen in the light of planned shutdown of a smelter for 24 days in April 2010. The results of
copper business, adjusted for this shutdown, are superior compared to Q1 FY10.
Hirakud outage: Operations of the aluminium smelter at Hirakud have been affected in July 2010
due to continuous bad weather with heavy rains and lightning. A team of experts have now
completed the assessment of the situation and have formulated an action plan for quick revival of
operations as well as certain remedial actions for the future. In line with the action plan currently
under implementation, electrolytic cells taken out of circuit will be restarted in a phased manner.
This exercise is expected to be completed by end-August 2010.
As a consequence of this unforeseen outage, the Hirakud aluminium production is expected to be
lower by around 20,000MT for the current fiscal. Efforts are being made to contain the impact of
the loss by appropriate management action to optimise profitability across all other business
segments of the company. The company has a comprehensive mega insurance policy which
covers property damage and business interruptions.
Strategic initiatives Utkal Alumina International Limited [UAIL]: UAIL, which is a 100%
subsidiary of Hindalco, is setting up a 1.5mtpa alumina refinery in Rayagada district of Orissa.
The project will feed the alumina requirements of the Mahan and the Aditya smelters presently
under construction.
Hindalco has successfully achieved the financial closure of UAIL with the signing of a common
loan agreement of Rs.4, 906 crore on July 28, 2010. This constitutes the entire debt requirement
of the project. The loan documents were signed in Bhubaneswar by a group of 28 banks. The
syndication is led by IDBI Bank with SBI Caps and The Royal Bank of Scotland NV as joint
arrangers and book runners.
The equity requirement for this project has already been tied up. This project is expandable to
3mtpa at relatively lower incremental capital cost. This is a significant milestone in Hindalco's
strategy to grow its alumina capacity and play the entire value chain in aluminium.
25
26. PROGRESS MILESTONE OF HINDALCO
YEAR MILESTONE
1958 Date of registration.
1962 Alumina production started
capacity 20,000 TPA.
1963 Properzi wire rod mill commissioned.
1964 Aluminium production capacity
expanded to 40,000 TPA.
1967 Renusagar power plant commissioned
with 65.7MW capacity.
Aluminium production capacity
Expanded to 60,000 TPA
Properzy mill no. 2, extrusions
Press 2&3 commissioned.
1968 Aluminium production capacity
expanded to 80,000 TPA
1972 Aluminium production capacity
expanded to 95,000 TPA.
26
27. 1981 Aluminium production capacity
expanded to 1,20,000 TPA
Third generator at renusager
commissioned
1986 Alumina production capacity
expanded to 3,00,000 TPA
1991 Aluminium production capacity
expanded to 1,50,000 TPA
1992 Davy cold mill commissioned .
1993 Alumina production capacity
expanded to 3,50,000 TPA
1996 Continuous ingot casting
machine installed.
Aluminium production capacity
To 2,10,000 TPA
27
28. 1997 Blis hot & cold mills revamped
co -generation power plant of
37 MW commissioned.
1998 Aluminium prodyctin capacity
Expaded to 2, 42, 000 TPA
1999 Wheel plant commissioned
at Silvasa
2000 Acquisition of INDAL .
2001 Brownfield expansion at an outly of
Rs 1800 crore –9th ,10th & 11th pot
Line commissioned .
2002 Birla copper is registered on
London metal exchange ,
28
29. approved as grade „A „
2003 Alumina capacity increased
to 6,60,000 TPY and Aluminium
3,50,000 TPY .
2004 Alumina capecity increased to
7,50,000 TPY and aluminum
2005 3,50 ,000 TPY .
2006 Hindalco in a joint venture with Almex
USA Inc.
2007 The award was received by Mrs.
Rajashree Birla Chairperson, Aditya
Birla Center for Community Initiatives
and Rural Development,
2008 The president of India Mrs Pratibha Patil,
the much coverted totary international polio
eradication champion Award on Mrs Rajashree Birla.
29
31. key products and
company locations capacities Country
brands
Birla Copper Copper cathodes ** Dahej 250,000 India
(Hindalco (Gujarat) tpa
Industries continuous cast copper 97,200
Ltd.) rods tpa
sulphuric acid 735,000
tpa
phosphoric acid 180,000
tpa
gold (Birla Gold) 26 tpa
Silver (Birla Silver) 200 tpa
NPK complexes (Birla 400,000
Balwan) tpa
Hindalco copper cathodes (Birla 25,000 Australia
Industries Nifty Pty. Ltd.) tpa*
Ltd. (Aditya power (Birla Mt. 21 mw Australia
Birla Gordon Pty. Ltd.)
Minerals
Ltd.)
* since scaled down to 25,000 tpa
** Brownfield expansion will be completed in
July 2005, under commissioning, after which
the copper cathode capacity will increase to
5,00,000 tpa and sulphuric acid to 14,50,000
tpa.
company key products and brands capacities country
Grasim white cement Birla White 400,000 India
Industries tpa
Ltd. grey cement Birla Plus, Birla 13.12 mn
Super tpa
Shree Birla Ready Mix Kamal 1.08 mn India
Digvijay tpa
31
32. UltraTech ordinary 17 million India
Cement portland cement, tpa
Ltd. portland blast
furnace slag
cement, portland
pozzolana cement
and grey
portland cement
company key products and brands capacities Country
Grasim caustic soda 190,800 India
Industries tpa
Ltd.
Aditya caustic soda 58400 mt India
Birla Nuvo liquid chlorine 50340 mt
Ltd. hydrochloric acid 5475 mt
key products and
Company Capacities Country
brands
Essel Mining & nitrogen gas 10 million SM3 India
Industries Ltd
32
33. key products and
Company capacities Country
brands
PSI Data Systems Ltd. IT solutions (banking, India
(subsidiary of Aditya Birla finance and
Nuvo Ltd.) insurance)
key
products Capacitie
Company Country
and s
brands
BPO TransWorks BPO / India
Information ITES
Services Pvt. Ltd.
(subsidiary of
Aditya Birla Nuvo
Ltd.)
33
34. company key products and brands Country
Birla Sun Life financial services India
Global
Birla Sun Life insurance solutions
Insurance
Company Ltd
Birla Sun Life mutual funds
Asset
Management
Company
Ltd.
Birla Sun Life investment planning
Distribution services
Company
Ltd.
Birla non-life insurance advisory
Insurance services
Advisory
Services Ltd
34
35. Key products
company capacities Country
and brands
35
36. SWOT ANALYSIS
STRENGTH
Global brand image.
Cost effective product.
Sound financial position
A high degree quality consciousness is the core competence of the company; ISO9001
and ISO14001 have added more prestige to the company.
Integrated production facilities at Renusagar power plant.
Company has a well established distribution network, covering a geographically wide
scattered market.
A number of Brownfield and Greenfield projects.
Industrial peace as, there has been no major strike in last 22 year.
A well focused human resources development.
Serves maximum customer satisfaction.
WEAKNESS;
Present production capacity is not adequate to meet the rising high demand.
Technology is not upgraded compare to global giants in aluminum industry.
36
37. OPPORTUNITY
R&D collaboration with universities and other organization.
More emphasis on down stream production of value added products.
Recycling should be adopted as routine production.
Raising more finance for more merger & acquisition for consolidating position in the
global market.
Aluminum continues to be strong with a growth in transportation sector 16%,
construction 15%, passenger‟s car 25% and two heeler segments 14% respectively during
FY‟07.
THREATS;
Strong domestic and global competitors, such as TATA, PASCO, MITTLE, ESSAR,
BALCO, NALCO etc.
Innovative revaluation in plastic and steel industry.
Reduce in exude duty.
Fall in price of aluminum in neighbouring countries.
37
38. OBJECTIVE OF STUDY
To find out the different components of current assets and current liabilities
of HINDALCO LIMITED.
To find out how the different components of working capital are managed at
HINDALCO LIMITED .
To know the approaches of working capital used in HINDALCO LIMITED.
To know how the different financial departments are dealing with the
working capital.
The raw materials that are used in HINDALCO LIMITED.
To know about the strength, weakness, opportunity, and threat of
HINDALCO LIMITED Cement.
Operating cycle of HINDALCO LIMITED.
To know the products manufactured by HINDALCO LIMITED.
To know about the cash management in HINDALCO LIMITED.
To know about the types of customers of HINDALCO LIMITED.
To know about the financial position of HINDALCO LIMITED.
38
40. Research Methodology is a way to systematically solve the research problem. It may be
understood as the science of studying how research is done scientifically. In it we study the
various steps that are generally adopted by a researcher in studying his research problem
along with the logic behind them. It is necessary for the researcher to know not only the
research methods/techniques but also the methodology.
This study will be based on :
1. Secondary Research
2. Primary Research
Data Collection
Since research is combination of secondary data collection through desk research and
primary data through the author of this study collected the information from the personal
interviews of the member of financial department of the firm.
Secondary Data:
All relevant information connected with this study was assembled from following sources:-
Foreign and Indian Books.
Banking and Financial Journals.
Through website.
Primary Research:
To evaluate various attributes needed to conduct this study questionnaire was designed in
line with the objectives of study i.e., to study following Data:
Balance Sheet
Profit and Loss Account
Cash Flow Statement
Data Interpretation and Analysis
The data collected from secondary
40
41. sources was assembled, screened, sorted,
Evaluated in line with the objectives of the study and has been incorporated in
this Project. The data collected from the Balance Sheet, Profit and Loss Account,
and Cash Flow Statement and through interview was mostly qualitative in nature.
While critically analyzing the role of Budgetary Control Department in the maximization of the
profits of the company, we have deeply analyzing the different parameters of controlling the cash
management and inventory management with the help of operating cycle time, ABC & XYZ
analysis and other methods of controlling the inventory apart from the determination of
Economic order quantity and other factors which can‟t be ignored while analyzing the cash &
inventory management system in the company. For this, we have taken the full advantages of the
computerized cash management & material management systems which help us to exactly
determined the requirement of the raw & packaging material, stores & spares, according to the
production planning for the we take the following data:
i.. Actual requirement as per rolling production programme.
ii. Last year consumption.
iii Cash & credit sales of last year.
iv. Cash & credit purchase of last year.
Data Collection
Since research is combination of secondary data collection through desk research and
primary data through the author of this study collected the information from the personal
interviews of the member of financial department of the firm.
41
42. Hindalco businesses — Share of net sales value 2008-2009
Working structure of finance Department
42
43. WORKING CAPITAL OF FINANCE DEPARTMENT
Joint executive president
(commerce and finance)
Vice President
(Finance & A/C)
General Manger
Deputy Manger
Assistant Manger
Account Officer
Assistant A/C Officer
Sr. Assistant
Assistant
43
44. WORKING CAPITAL
Working capital refers to the amount of capital, which is readily available to an organization.
That is, working capital is the difference between readily convertible into cash (current Assets
are resources, which are readily convertible into soon be required (current Liabilities). In cash or
will soon be converted into cash in “the ordinary course of business”.
Thus:
(WORKING CAPITAL = CURRENT ASSSETS –CURRENT LIABLITIES)
In a department’s statement of financial position, thus components of working
capital are reported under the following headings:
CURRENT ASSETS:
This is any cash or assets that can be quickly tuned into cash. This includes prepaid expenses,
accounts receivable, most securities and your inventory.
Liquid Assets (cash and bank deposits)
Inventory
Debtors and Receivables
44
45. CHARACERISTIS OF CURRRENT ASSETS
In the management of working capital two characteristics of current assets must be in born in
mind.
Short Life Span
Swift Transformation into other assets forms
Current Assets have a Short Life Span. Cash balance may be held idle for a week or two
accounts receivable may have a Life Span of 30 to 60 days, and investment may be held for 30
to100 days. The Life span of current assets depends upon the time required in the activities of
procurement, production, sales and collection and degree of synchronization among them. Each
current asset is swiftly transformed into other assets form. Cash is used for acquiring raw
material, raw materials are transformed into finished goods, finished-good generally sold on
credit, are congener ate cash.
45
46. CURRENT ASSETS CYCLE
FINISHED
GOODS
WORK-IN-
ACCOUNTS
PROGRESS
RECEIVABLE
WAGES, SALARIES,
FACTORY
OVERHEADS
RAW
MATERIAL
CASH SUPPLIERS
46
47. . The cycle transformation shows:
The Life Span of working capital components and their swift transformation from are form into
another has certain implications.
Decisions relating to working capital management are repetitive and frequent.
The different between profit and present value is insignificant.
The close interaction among working capital components implies that efficient management of
one components i.e. if the firm has a large accumulation of finished goods inventory, it may have
to provide more liberal credit terms or show laxity in credit collection. Another example if the
firm has a cash crunch it may have to offer generous discount.
CURRENT LIABILITIES: This is a Liability in the immediate future. This is including
wages, taxes and accounts payable.
Bank Overdraft
Creditors Payables
Other Short Term Liabilities
47
48. PURPOSE OF WORKING CAPITAL
For the purchases of raw material, components and spares.
To incur day-to-day expenses and overhead costs such as fuel, power and
office expenses, etc.
To meet the selling costs as packing, advertising etc.
To provide credit facility to the customers.
To maintain the inventories of raw materials, work-in-progress, stores and
spares and finished stock.
To pay wages and salaries.
CLASSIFICATION OF WORKING CAPITAL
Working capital may be classified in two ways:-
On the basis of concept
On the basis of time
48
49. CLASSIFICATION OF WC
ON THE BASIS ON THE BASIS OF
OF CONCEPT TIME
GROSS WC NET WC
PERMANENT TEMPORARY
WC WC
REGULAR RESERVE
WC WC
SEASONAL SPECIAL
WC WC
ON THE BASIS OF CONCEPT:-
There are two concepts of working capital-
Gross Working Capital
Net working capital
49
50. GROSS WORKING CAPITAL
Gross working capital refers to the firm‟s investment in current assets. Current assets are assets,
which can be converted into cash with in an accounting year. The main components of current
assets are cash, debtors, marketable securities and stock.
The Gross Working Capital concept focuses attention on two aspect of
current asset management.
Optimum investment in current assets
Financing of current assets
The consideration of level of investment in current asset should be to avoid two danger points:
excessive and inadequate investment in current assets. Investment in current assets should be just
adequate, not more nor less to the needs of business firm. Excessive investment in current assets
should be avoided as its Impairs firm‟s profitability. On the other hand inadequate amount of
working capital can threaten solvency of the firm.
Net Working Capital
Net working capital refers to the difference between current assets
and current liabilities. Current liabilities are those claims of outsiders, which are
expected to mature for payment with in an accounting year. Current liabilities include creditors;
bills payable and
50
51. outstanding expenses. Net working capital is a qualitative concept. It indicate the liquidity
position of the firm and suggests the extend to which working capital needs may be financed by
permanent
source of funds as share, debenture, long-term debts etc. Its cover the question of judicial mix of
long and short-term funds for financing current assets. In order to protect their interests, short-
term creditors like a company to maintain a positive NWC. Conventionally the ratio of current
assets and Current liabilities is 2:1. A negative Net working capital means a negative liquidity,
which may prove to be harmful to company‟s solvency, and makes it unsafe and unsound.
On the basis of time: -
On the basis of time, we may be classified as:
Permanent working capital
Temporary or variable working capital
PERMANENT WORKING CAPITAL
Permanent of fixed working capital is the minimum amount, which required ensuring effective
utilization of fixed facilities and for maintaining the circulation of current assets. There is always
a minimum level of current assets, which is consciously required by the enterprise to carry out
normal business operations. Every firm has to maintain a minimum level of raw materials, work-
in-progress,
51
52. finished goods and cash balances. This minimum level of current assets is called permanent or
fixed working capital as this part of capital is permanently blocked in current assets.
CHARACTERISTICS OF PERMANENT WORKING CAPITAL
Amount of permanent working capital remains in the business is one form or the other. The
supplier of such working capital should not accept its return during the lifetime of the firm.
It grows with the size of the firm.
Permanent working capital is permanently needed for the business.
TEMPORARY VARIABLE WORKING CAPITAL
Temporary working capital is the extra working capital needed to support the changing
production and sales activity of the firm.The amount of temporary working capital keeps on
fluctuating on time to time on the basis of business activities. In other words it represents the
additional current assets required at different time during the operating year. For example, extra
inventory of finished goods will have to be maintained to support the peak period of sales and
investment in receivable may also increase during such period. On the other hand investment in
raw material, WIP and finished goods will fall if the market is in depression period.The amount
over and above permanent working capital is temporarily variable or fluctuating. The position of
the required WC is needed to meet fluctuation in demand consequent upon changes in production
and sales, as a result of seasonal changes. Suppliers of total WC can expect its return during off-
seasons when the firm does not require it. Hence total WC is generally financed from short-term
sources of finance such as bank credit etc.
52
53. Amount
Temporary Assets
OF
WC Permanent Assets
Time
Permanente and Temporary Working Capital (WC) of a Stable Firm
It is shown in the above diagram that permanent WC is stable while temporary WC is fluctuating
and increasing and decreasing in accordance with seasonal demands.
In the case of an expanding firm the permanent WC line may not be horizontal. This is because
the demand for permanent CA might be increasing (or decreasing) to support a rising level of
activities. In that case line should be raising one as follows:
Both kind of Working Capital is necessary to facilitate the sales process through the operating
cycle. Temporary WC is created to meet liquidity requirement that are of purely transient nature
53
55. Need for Working Capital:-
The basic objective of financial management is to maximize shareholder‟s wealth. For this it is
necessary to generate sufficient profits. The extent to it, which the profit can be, earn, largely
depend on the magnitude of sales. However sales do not convert into cash instantly. There is
invariable the time gap between the sale of goods and receipt of cash. There is, therefore, a need
for working capital in the form of CA to deal with the problem arising. Out of the lack of
immediate realization of cash again goods sold. Therefore, sufficient WC is necessary to sustain
sales activity. The operating cycle can be said to be at the heart of the need for WC. The
continuing flow from cash to suppliers, to inventory, to account receivables and back into cash is
known as operating cycle.The operating cycle of a manufacturing Company involves three
phases:
Acquisition of resources – such as raw materials, labor, power and fuel etc.
Manufacturing of product – Which includes conversion of raw material into WIP
into finished goods?
Sale of the product – either on cash or on credit. Credit sales create account receivable
for collection.
55
56. PURCHASE PAYMENT CREDIT SALE COLLECTION
(RMCP+WIPCP+FGCP) RECEIVABLE
(Inventory Conversion)
Period Conversion Period
Payables Net Operating Cycles
Gross Operating Cycles
The following table shows the determination of Length of Opreting
Cycle
WORKING CAPITAL CYCLE
Working capital cycle indicate the length of time between a company‟s paying for material,
entering into stock and receiving the cash form sales of finished goods. It can be determined by
adding the number of days required for each stage in the cycle. For example, Hindalco company
hold raw material on an average for 120 days; it gets credit from supplier for 30 days, production
process needs 30 days, finished goods for held for 60 days and credit extended to debtor. The
total of all these, 240 days, i.e., 120+30+30+60 days is the total working capital cycle. The
determination of working capital cycle helps in forecast, control and management of working
56
57. capital. The duration of working capital cycle may very depending on the nature of business. The
operation cycle (working capital) consists of the following events, which continue throughout the
life business.
Conversion of cash in to raw material
Conversion of raw materials in to work-in-progress;
Conversion of work-in-progress in to finish goods
Conversion of finished goods stock into account receivable through
sales.
Conversion of account receivables into cash;
There are two elements in the business cycle that absorb cash- INVENTORY (stock and work-
in-progress) and RECEIVABLE (Debtors owing you money). The main sources of cash are
PAYABLES (your creditors) and EQUITY AND LOANS.
57
58. Each component of working capital (namely inventory, receivables and payables) has two
dimensions... TIME ... and MONEY. When it comes to managing working capital - TIME IS
MONEY. If you can get money to move faster around the cycle (e.g. collect monies due from
debtors more quickly) or reduce the amount of money tied up (e.g. reduce inventory levels
relative to sales), the business will generate more cash or it will need to borrow less money to
fund working capital. As a consequence, you could reduce the cost of bank interest or you'll have
additional free money available to support additional sales growth or investment. Similarly, if
you can negotiate improved terms with supplier‟s e.g. get longer credit or an increased credit
limit, you effectively create free finance to help fund future sales.
IF YOU THEN
58
59. Collect receivables(Debtors) faster You release cash from the
cycle
Collect receivables(Debtors) slower Your receivables soak up
cash
Get better credit(in terms of duration OR You increase your cash
amount) from supplies resources
Shift inventory(stocks) faster You free up cash
Move inventory(stocks) slower
It can be tempting to pay cash, it available, for fixed assets computer, plant, vehicles etc. If you
do pay cash, remember that this is now longer available for working capital. Therefore, if cash is
tight,
consider other ways of financing capital 8investment- loans, equity, leasing etc. similarly, if you
pay dividends or increase drawings, these ate cash outflows and, like water flowing downs a
plughole, they remove liquidity from the business.
Comparative Working Capital Statement of Hindalco Industries
As per Financial Statement of Company up to 31 March 2010
Sched 31-
ules 031-3-10 31-03-09 31-03-08 31-03-07 31-03-06 31-03-05 03-
59
70. 7
2270.2
Employed Benefits 5 1874.16
8311.
Total 9060.09 12841.41 9531.66 78 1
Working capital mangement
Efficient management of working capital is extremely important to any organization. Holding
too much working capital is inefficient, holding too little is dangerous to the organization‟s
survival.
70
71. Working capital is the everyday term for what accountants call net current assets. The working
capital figure is the total of current assets minus the total of current liabilities. The main current
assets are stock, debtors and cash. The current liabilities are creditors and accrued expenses. The
key factor in the word "Current" is that they are expected to turn into cash, or be paid from cash,
within twelve months.As a general rule the organization wants as little money tied up in working
capital as possible. However, there are always trade-off. The most obvious problem is running
out of cash so you cannot pay the wages, or being unable to provide a service because you have
run out of a vital resource: for example, a meals service being unable to produce the required
number of meals because they did not have enough foodstuffs in stock. Each of the areas of
working capital has different problems and these are discussed separately in the following
sections:
Stock control
Debtor control
Cash flow management guidelines
Creditor control
In order to assess whether you have a "safe" amount of working capital there
are two important calculations you can make:
71
72. The Current Ratio
The Current Ratio is the relationship between the total current assets and the total current
liabilities. Generally speaking a service organization should have about £1.25 current assets for
every £1 of current liabilities. If there are significant trading operations such as shops or mail
order selling then the ratio should be closer to £2 of current assets for every £1 of current
liabilities.
The Quick Ratio or "Acid Test"
The Quick Ratio is the relationship between the total of debtors and cash compared with current
liabilities. Generally the debtors and cash together should approximately equal the current
liabilities.
Cash flow management
Cash flow management is about achieving maximum effectiveness of cash receipts and
payments.
Motives of holding cash:
A distinguishing features of cash as an asset is that it does not earn any substantial return for the
business. Even though firm hold cash for following motives:
72
73. 1. Transaction Motive –
This refers to the holding of cash to meet routine cash requirement to finance. The
transactions, which a firm carries on in the ordinary course of business.
2. Precautionary motive –
This implies the needs to hold cash to meet unpredictable obligations. Thus it provides a
cushion against unpredictable contingencies such as strike, sharp increase in raw
materials in prices. If a firm can borrow at short notice to pay them unforeseen
contingency, it will need to maintain relatively small balances and vise-versa.
3. Speculative Motives –
It refers to the desire of a firm to take advantage of opportunities which present
themselves at unexpected movements and which are typically outside the normal course
of business.
4. Compensatory motive –
Bank provides certain services to their clients free of charge. They, therefore, usually
require client to keep minimum cash balance with them, which helps them to earn interest
and thus compensate them for the free service so provided.
Objective of Cash Management:
There are two basic objectives of Cash Management
(a) To meet the cash disbursement needs as per the payment schedule
(b) To minimize the amount locked up as cash balances.
These are conflicting and mutually contradictory and the task of cash management is to reconcile
them.
73
74. (a) Meeting cash disbursement:
This is the first basic objective of cash management. According to this, the firm should have
sufficient cash to meet the various requirement of the firm at different time period. Cash has
been
described as “Oil to lubricate the ever turning wheels of business, without it the process grinds to
a stop”.
(b) Minimizing funds locked up as cash balances:
This is the second basic objective of cash management. In this process the finance Manager is
confronted with two conflicting aspects. A higher cash balance ensures power savings with all its
advantages. But this will result in a large balance of cash remaining idle. Low level of cash
balance may result in failure of the firm to meet the payment schedule. The Finance Manager
should, therefore, try to have an optimum cash balance.
The aim is to strike a balance between:
Putting money to work for the charity
so it returns a satisfactory yield from deposit accounts or short-term investments
Ensuring cash is available when needed
to pay the day-to-day running expenses of the organization, and also the fairly
predictable "lump-sum" amounts - replacement of computing equipment, for example.
74
75. Managing your cash balances is the most important part of working capital management.
If an organization runs out of cash resources it will have to stop operating immediately.
There may not even be the money to pay the salaries at the end of the month, and the
banks might
have started dishonoring cheques. Furthermore, the trustees or directors could stand
charged with wrongful or fraudulent trading, which could entail personal liability or even
imprisonment.
Financial difficulties: how to recognize and avoid
Here are a few guidelines to help you mange your cash flow more effectively:
Collect money from debtors as
quickly as possible, whilst exercising tact.
Centralize payments and streamline procedures for different functional areas such as
accounts payable and payroll, by using (for example) BACS payment methods. This is
quicker, more secure and cheaper than cheques.
Develop close partnerships with customers and suppliers to negotiate mutually beneficial
payment policies.
75
76. Consolidate banking relationships by choosing banks that can offer customized cash
management services: for example, handling appeal monies. You will get advice from
banking experts and save on bank charges.
Develop accurate cash flow forecasting techniques and models that are linked to budgets
and strategic plans
Conduct regular reviews of the cash situation to ensure that the cash balances are
approximately the same as in the budget, and analyze any significant variations from
budget.
Ensure appropriate use of current technology: for example, telephone and Internet
banking, as these are quicker and cheaper.
Ensure that investing, borrowing, payment and other financial transactions are properly
authorized so as to avoid any improper use of the organization's cash.
If the organization has too much liquidity in the long term, it may well be invested in
fairly low return areas, such as bank deposit accounts. Long-term surplus cash should be
invested in making the organization grow. You might, perhaps, be able to fund additional
resources to help you fund-raise. Alternatively, you might be able to develop an
additional area of expertise.
76
77. Cash Flow Forecasts (also called Cash Budgets)
Cash flow forecasts are a powerful management tool to help identify future deficits or
surpluses in liquidity. They can help you spot cash problems and opportunities. You
should normally forecast your cash flow at least monthly and in a year in advance. You
should also make sure the trustees have copies.
Model cash flow forecast
The cash flow statement represents movements in cash held at the bank.
Creating a cash flow forecast
Gets your staff to contribute their ideas derived from their own forecasts. For example, in a care
home, the person responsible for ordering dressings will know what they expect to order each
month and what the costs will be. These can then be combined into the master cash budget. It is
important that your staff accept the need for this, as otherwise the budget will bear little
resemblance to reality.
Using a cash flow forecast
77
78. Once the budget has been completed it is important to check it against the actual figures
regularly and find out why any variances are occurring. If this is not done the figures can drift
further and further from the plan. Also, there is a risk that the current year's budget will be used
as a basis for the following year, resulting in even more inaccuracy.
Once you can see the pattern over the year you can start to work on smoothing out any crises in
cash flow. For example, Fixed Asset purchases:
Could these be postponed for a few months?
Paid for by instalment?
Does the cash position mean you simply cannot fund a new contract you were negotiating for? If
so, can you negotiate for more advance or staged payments?
At the very least, you will now have a picture to present to your bank manager. However,
although it is vital to keep a close eye on the cash position, if it is a daily battle to survive then
the whole operation of the organization may need to be reviewed.
RATIOS OF WORKING CAPAITAL
(RATIO OF 2010)
RATIO
Ratio is an expression of one number in relation to another. It is one of the methods of analyzing
financial statement. Ratio analysis facilitates the presentation of the information statement of
78
79. financial statement in simplified, concise and summarized from ratio are the systematic
numerical calculation of the relation of one fact with other to measure the profitability,
operational efficiency and financial soundness of the business.
The following ratio may be calculated for the purpose of analyzing the working capital of
Hindalco.
Current Ratio
Quick Ratio
Cash Ratio
Leverage Ratio
Turnover Ratio
CURRENT RATIO current Assets
Current Ratio =
Current laibilitie
This ratio is representation of firm‟s current position of meeting the short-term obligations. It is
generally accepted that current assets should be two- time the current liability, and then only
realization from current assets to sufficient to pay the current liabilities in time and enable the
enterprise to meet the day-to-day expenses.
Year Current Assets Current Liabilities Ratio
79
80. 2010 174456.02 38007.88 4.58
2009 81021.2 40368.85 2.00
2008 100536.60 31527.28 3.18
2007 71245.67 25181.93 2.82
2006 41215.30 10757.96 3.83
2005 33252.00 8540.29 3.89
Interpretation:
The ideal current ratio is 2:1. Hence the liquidity position of the Hindalco for the years
(2005,2006,2007,2008,and 2010) is gone well and satisfactory. In this years 2009 the current
Ratio is 2.00 this unsatisfactory for Hindalco.
Quick Ratio
Quick Ratio = Liquid Asset
Current liabilities
Liquid Assets = Total current Assets-Inventory
Quick ratio of 1:1 is usually considered favorable.
Year Liquid Assets Current Liabilities Ratio(LA/CL)
2010 27537.63 38007.88 0.724524230
2009 34630.26 40368.85 0.857846086
80
81. 2008 32076.61 31527.28 1.017423958
2007 21019.07 25181.93 0.834688604
2006 17169.02 10757.96 1.595936404
2005 17751.29 8540.29 2.078534804
Interpretation:
The ideal liquidity Ratio is 1. Hence, Liquidity position of Hindalco for years is quite
satisfactory but, in the year 2007,2009,2010, Quick ratio is 0.83,0.85,0.72, which is not
satisfactory figure.
CASH RATIO:
The cash ratio measures the absolute liquidity of the business. This ratio considers only the
absolute liquidity available with the firm. This ratio is calculated as-
Cash Ratio = cash + MKT. Securities
Current Liabilities
Current Liabilities
81
82. Year Cash+Mkt.Securities Current Liabilities Ratio(CMS/cl)
2010 97396.00 38007.88 2.56252124
2009 79879.66 40368.85 1.97874499
2008 10757.52 31527.28 0.34121307
2007 5112.41 25181.93 0.20301899
2006 3848.48 10757.96 0.35773325
2005 4657.05 8540.29 0.54530349
INTERPRETATION
The cash position of the company for the year 2005 is 0.54 and it shows the well cash position of
the company, but in two years(2006 and 2007) decreases continuously. How ever in financila
year 2008,2009 to 2010 it show the improvement in cash position of the company.
Inventory turnover Ratio:
This ratio indicates whether investment in inventory is efficiently used or not. It therefore
explains whether investment is with in proper limits or not.
This ratio is calculated as following-
82
83. Inventory turn over ratio = Cost of good sold
Average inventory
The guide line for inventory are given bellow
The raw material should not exceed 2-4 month consumption of the year.
The finished goods should not exceed 2-3 month sales.
Work-in-progress should not exceed 15-30 days cost of sales.
Year Cost of Good sold Average inventory Ratio(Cgs/AI)
2010 186171.31 47276.09 3.937
2009 106344.45 42052.01 2.53
2008 91188.11 32348.03 2.818969501
2007 75410.05 17529.3 4.301943033
2006 50344.32 10967.83 4.590180555
2005 39563.97 6896.99 5.736411101
Interpretation:
83
84. The turnover inventory ratio shows the liquidity of the inventory. A high inventory turnover
ratio indicates brisk sales. In the year 2009 and 2008 decrease in the inventory turnover ratio but
some increase of ratio 2010(compare 2008, 2009)
Working capital Turnover Ratio:
This ratio indicates whether the working capital has been effectively utilized or not in making
sales. Working capital is computed by deducting current liabilities from the current assets. A
careful handing of the short-term assets and funds will mean a reducation in the amount of
capital employed thereby improving turnover.
This ratio computed as following-
Working capital Turnover ratio = sales
Working capital
Year Sales Working capital Ratio(s/wc)
2010 192010 40508.81 4.7400513
2009 183129 37414 4.8946650
2008 113964 41500 2.7461204
2007 95231 19582 4.8631906
2006 68199 18325 3.7216371
2005 55024 19223 2.8624044
Interpretation:
84
