Year    2012       INTRODUCTION TO       OIL AND GAS CORPORATION1      LIMITED (ONGC)                  1.1                ...
INTRODUCTION1.1    HISTORY OF ONGC1947-1960During the pre-independence period, the Assam Oil Company in the north-eastern ...
A delegation under the leadership of Mr. K D Malviya, the then Minister of NaturalResources, visited several European coun...
After 1990The liberalized economic policy, adopted by the Government of India in July 1991,sought toderegulate and de-lice...
1.2 BASIC INFORMATION    Company name: Oil & Natural Gas Corporation Limited.    Incorporation year: 1959    Ownership:...
   Striving for customer delight through quality products and services1.3.3 INTEGRATED IN ENERGY BUSINESS      Provide v...
   Crossed the landmark of earning Net Profit exceeding Rs.10, 000 Core, and       the first to do so among all Indian Co...
1.4       ASSETS/BASINS/PLANTS/INSTITUTES       Assets/Plants         Mumbai High Asset, Mumbai         Neelam & Heera ...
 Region    Mumbai Region, Mumbai    W est ern R egi on, Ba roda    Eastern Region, Nazira    Southern Region, Chennai...
   Chief Employee Relations, Dehradun     Chief Security, New Delhi     Company Secretary, New Delhi     Chief Marketi...
ONGC OFFICE ALL OVER INDIA    (DRAW NO.1 ONDC OFFICE ALL OVER INDIA)                      11
The Road AheadONGC is entering LNG (re-gasification), Petrochemicals, power generation, as wellas crude and gas shipping, ...
1.6    SUBSIDIARIES AND JOINT VENTURE1.6.1 SUBSIDIARIES1.6.1.1 ONGC Videsh Ltd.(OVL)ONGC Videsh ltd is the wholly subsidia...
1.6.1.2 Mangalore Refinery and Petrochemicals Ltd (MRPL)MRPL, a subsidiary of ONGC has turned back to a profit making comp...
1.6.2.1 Petro net MHB LimitedONGC has acquired 23% equity in Petro net MHB Ltd, which is successfullyoperating the 362.3km...
1.6.1 ONGC GROUP OF COMPANIES      (DRAW NO: 2ONGC GROUP OF COMPANIES)                        16
1.7 BOARD OF DIRECTORS   Mr. R.S.Sharma   Chairman & Managing Director   Mr.D.K.Sharaf Director (Finance)   Dr.A.K.Bal...
1.8 ONGC Organogram      (Crc structure)(DRAW NO:3 ONGC STRUCTURE)            18
1.9 ABOUT MEHSANA ASSET:Mehsana asset is the largest oil production onshore asset. mehsana tectonic block isfairly well ex...
The mehsana project came into 7th nov 1967 when it has bifurcated from Ahmadabadto facilitate administrative & operational...
Year    2012a       BRIEF OVERVIEW OF FINANCE       DEPARTMENT2                         •MEHSANA FINANCE                  ...
2.1) MEHSANA FINANCE DEPARTMENT                             STRUCTURE                           GENERALMANAGER(           ...
2.2) INTRODUCTION OF VARIOUS FINANCESECTIONS2.2.1 BUDGET SECTION:IntroductionUnder the guidance of Mr. Vishal sir. I came ...
logging department etc. according their future needs and at last the club it in to theactual budget.2.2.2 CASH AND BANK SE...
Miscellaneous payments the scope of Pre-audit also includes scrutiny of receipts ofthe corporation. Activities normally re...
   Inter unit transfers and deputations to/from the Company.      Tax Deducted at Source deductions and deposits      A...
2.3.6 Corporate taxIn view of loss during the year under review, the company has not provided for anytax liability this ye...
Year    2012           BALANCESHEET                ANALYSIS3                             •INTRODUCTION TO                 ...
3.1      INTRODUCTION TO BALANCESHEETA balance sheet is a list of assets and liabilities and claims of a business at somes...
3.2 BALANCE SHEET             BALANCE SHEET OF ONGCAS ON 31ST MARCHBalance Sheet                    ------------------- in...
Capital Work in   65,354.44   56,073.25    52,923.19 41,154.63 37,794.16ProgressInvestments       5,332.84    5,772.03    ...
INTERPRETATION:-   The balance sheet is the statement showing the increase or decrease in the     assets and liabilities....
INVESTMENT CHART:-                                    Investments        6,000.00              5,899.50                   ...
Year    2012       PROFIT AND        LOSS         ACCOUNT       ANALYSIS4                         •INTRODUCTION TO PROFIT ...
4.1) INTRODUCTION TO PROFIT AND LOSSACCOUNTThe Profit & Loss account is also known as the income statement. It can be defi...
4.2 )PROFIT & LOSS ACCOUNTProfit & Loss account               ------------------- in Rs. Cr. -------------------          ...
Per share data (annualised)Shares in issue (lakhs) 85,554.90     21,388.73      21,388.73     21,388.73    21,388.73Earnin...
INTERPRETATION:-The profit and loss account of the company shows the overall income andexpenditure, made by the company in...
Year    2012           THEORETICAL BACKGROUND             OF WORKING CAPITAL                MANAGEMENT5                   ...
5 .1 MEANING OF WORKING CAPITAL:-In simple words working capital means that which is issued to carry out the day to dayope...
5.2 CONCEPT OF WORKING CAPITAL5.2.1 Gross Working CapitalIt is simply called working capital refers to the firm‟s investme...
For hear ONGC purchase raw material as a plastic for manufacturing pipes inparticular season and have to employ additional...
5.4.1 OPERATING CYCLE“Operating cycle is the time duration requires for converting sales intocash after the conversion of ...
If the length of the operating cycle has short length period then less working capital isrequired. So working capital requ...
5.5. DETERMINENTS OF WORKING CAPITALFollowings are the main determinants of working capital.5.5.1      Nature and Size of ...
5.5.4    Production Policy:Production policy also determines the working capital level of a firm. If the firm hassteady pr...
5.5.8 Price Level Changes:Changes in the price level also effects the working capital requirements. Generally,the rising p...
cannot be specified uniquely. In case of uncertainty, the outlay on current assetsshould consist of base component meant t...
5.7.2.2 CONSERVATIVE APPROACHIn this approach there is more reliance on long-term financing in comparison to short-term fi...
5.8 WORKING CAPITAL ANALYSIS5.8.1. ANALYSIS ON THE BASIS OF SCHEDULE OF CHANGES INWORKING CAPITALSCHEDULE OF CHANGES IN WO...
(RS. Cr)PARTICULARS         2009             2008              INCREASE          DECREASECURRENT ASSETS:Inventories       ...
(Rs.cr)PARTICULARS       2008          2007            INCREASE    DECREASECURRENTASSETS:Inventories       3,480.64      3...
Year    2012             MANAGEMENT OF               INVENTORY6                         •NATURE OF INVENTORIES            ...
6 MANAGEMENT OF INVENTORYInventory is very important part of current assets. Approximately 60% part of currentassets is in...
6.3) ANALYSIS OF EFFICIENCY OF INVENTORYMANAGEMENT IN ONGCINVENTORY TURNOVER RATIOIt indicates the number of times the sto...
Inventory Turnover Ratio:                                                                                    (Rs.cr)Partic...
Year    2012               RATIO ANALYSIS7                             •UTILITY OF RATIO ANALYSIS                       7....
7. RATIO ANALYSISRatio analysis is a widely used tool for financial analysis. It is defined as thesystematic use of ratio ...
7.1.1) ProfitabilityUseful information about the trend of profitability is available from the profitabilityratios. The gro...
7.2) CLASSIFICATION OF RATIORatios can be classified into four broad groups:-7.2.1. Liquidity Ratio7.2.2. Leverage / Capit...
Current assets:                                                                                  (Rs. in cr)Particulars   ...
Current Ratio        1.6                                     1.56       1.55        1.5                           1.45    ...
7.2.1.2) Acid Test / Quick RatioThe Acid test ratio is the ratio between quick current assets and current liabilities andi...
Quick Ratio:                                                                                                (Rs.cr) Partic...
7.2.2) CAPITAL STRUCTURE/LEVERAGE RATIOThe second category of financial ratios is leverage or capital structure ratios.The...
Debt Ratio:                                                                                               (Rs.cr)Particula...
7.2.2.2) Debt-Equity RatioThe ratio establishes a relationship between long term debts and shareholders‟ funds.It reflects...
Debt-Equity Ratio:                                                                                  (Rs.cr)Particulars    ...
7.2.2.3) Capital Employed to Net worth Ratio:There is yet another alternative way of expressing the basic relationship bet...
Capital Employed to Net worth Ratio:                                                                                    (R...
financial analysis of ongc Final project
financial analysis of ongc Final project
financial analysis of ongc Final project
financial analysis of ongc Final project
financial analysis of ongc Final project
financial analysis of ongc Final project
financial analysis of ongc Final project
financial analysis of ongc Final project
financial analysis of ongc Final project
financial analysis of ongc Final project
financial analysis of ongc Final project
financial analysis of ongc Final project
financial analysis of ongc Final project
financial analysis of ongc Final project
financial analysis of ongc Final project
financial analysis of ongc Final project
financial analysis of ongc Final project
financial analysis of ongc Final project
financial analysis of ongc Final project
financial analysis of ongc Final project
financial analysis of ongc Final project
financial analysis of ongc Final project
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financial analysis of ongc Final project

  1. 1. Year 2012 INTRODUCTION TO OIL AND GAS CORPORATION1 LIMITED (ONGC) 1.1 • HISTORY OF ONGC 1.2 • BASIC INFORMATION • ONGC VISION AND MISSION 1.3 STATEMENT • ASSETS/BASINS/PLANTS/INSTITUTE 1.4 1.5 • SWOT ANALYSIS OF ONGC • SUBSIDIARIES AND JOINT 1.6 VENTURE 1.7 • BOARD OF DIRECTORS 1.8 • ONGC STRUCTURE • ABOUT MEHSANA ASSET 1.9 1 OIL AND NATURAL GAS CORPORATION LTD
  2. 2. INTRODUCTION1.1 HISTORY OF ONGC1947-1960During the pre-independence period, the Assam Oil Company in the north-eastern andAttack Oil company in north-western part of the undivided India were the only oilcompanies producing oil in the country, with minimal exploration input. The majorpart of Indian sedimentary basins was deemed to be unfit for development of oil andgas resources.After independence, the national Government realized the importance oiland gas for rapid industrial development and its strategic role in defence.Consequently, while framing the Industrial Policy Statement of 1948, thedevelopment of petroleum industry in the country was considered to be ofutmost necessity.Until 1955, private oil companies mainly carried out exploration of hydrocarbonresources of India. In Assam, the Assam Oil Company was producing oil at Digboi(discovered in 1889) and the Oil India Ltd. (a 50% joint venture betweenGovernment of India and Burmah Oil Company) was engaged in developingtwo newly discovered large fields Naharkatiya and Moran in Assam. In WestBengal, the Indo-Stan vac Petroleum project (a joint venture between Government ofIndia and Standard Vacuum Oil Company of USA) was engaged in explorationwork. The vast sedimentary tract in other parts of India and adjoiningoffshore remained largely unexplored.In 1955, Government of India decided to develop the oil and natural gas resources inthe various regions of the country as part of the Public Sector development. With thisobjective, an Oil and Natural Gas Directorate was set up towards the end of 1955, as asubordinate office under the then Ministry of Natural Resources and ScientificResearch. The department was constituted with a nucleus of geoscientists from theGeological survey of India. 2
  3. 3. A delegation under the leadership of Mr. K D Malviya, the then Minister of NaturalResources, visited several European countries to study the status of oil industry inthose countries and to facilitate the training of Indian professionals for exploringpotential oil and gas reserves. Foreign experts from USA, West Germany, Romaniaand erstwhile U.S.S.R visited India and helped the government with their expertise.Finally, the visiting Soviet experts drew up a detailed plan for geological andgeophysical surveys and drilling operations to be carried out in the 2nd Five YearPlan (1956-57 to 1960-61).In October 1959, the Commission was converted into a statutory body by an act of theIndian Parliament, which enhanced powers of the commission further. The mainfunctions of the Oland Natural Gas Commission subject to the provisions of the Actwere "to plan, promote, organize and implement programs for development ofPetroleum Resources and the production and sale of petroleum and petroleumproducts produced by it, and to perform such other functions as the CentralGovernment may, from time to time, assign to it ". The act further outlined theactivities and steps to be taken by ONGC in fulfilling its mandate.1961-1990Since its inception, ONGC has been instrumental in transforming the countrys limitedupstream sector into a large viable playing field, with its activities spread throughoutIndia and significantly in overseas territories. In the inland areas, ONGC not onlyfound new resources in Assam but also established new oil province in Cambay basin(Gujarat), while adding new petroliferous areas in the Assam-Arakan Fold Belt andEast coast basins (both inland and offshore).ONGC went offshore in early 70s and discovered a giant oil field in the form ofBombay High, now known as Mumbai High. This discovery, along with subsequentdiscoveries of huge oil and gas fields in Western offshore changed the oil scenario ofthe country. Subsequently, over 5 billion tonnes of hydrocarbons, which were presentin the country, were discovered. The most important contribution of ONGC, however,is its self-reliance and development of core competence in E&P activities at a globallycompetitive level. 3
  4. 4. After 1990The liberalized economic policy, adopted by the Government of India in July 1991,sought toderegulate and de-licenses the core sectors (including petroleum sector) withpartial disinvestments of government equity in Public Sector Undertakings and othermeasures. As consequence thereof, ONGC was re-organized as a limited Companyunder the Company‟s Act, 1956 in February 1994.After the conversion of business of the erstwhile Oil & Natural Gas Commission tothat of Oil & Natural Gas Corporation Limited in 1993, the Government disinvested 2per cent of itsshares through competitive bidding. Subsequently, ONGC expanded itsequity by another 2 per cent by offering shares to its employees.During March 1999, ONGC, Indian Oil Corporation (IOC) - a downstream giant andGas Authority of India Limited (GAIL) - the only gas marketing company, agreed tohave crossholding in each others stock. This paved the way for long-term strategicalliances both for the domestic and overseas business opportunities in the energyvalue chain, amongst themselves. Consequent to this the Government sold off 10 percent of its share holding in ONGC to IOC and 2.5 per cent to GAIL. With this, theGovernment holding in ONGC come down to 84.11 per cent.In the year 2002-03, after taking over MRPL from the A V Birla Group, ONGCdiversified into the downstream sector. ONGC will soon be entering into the retailingbusiness. ONGC has also entered the global field through its subsidiary, ONGCVidesh Ltd. (OVL). ONGC has made major investment in Vietnam, Sakhalin Sudanand earned its first hydrocarbon revenue from its investment in Vietnam. 4
  5. 5. 1.2 BASIC INFORMATION  Company name: Oil & Natural Gas Corporation Limited.  Incorporation year: 1959  Ownership: Central Govt. – Commercial Enterprises.  Main Activity: Exploration & Production of Oil and Gas  Registered office: jeevan bharti tower-2,124-indian chowk, Connaught place, new delhi-110001  Address: ONGC limited KDMbhavan palavasana near palavasna chokdi mehsana  Bankers: state bank of India1.3 ONGC VISION AND MISSION STATEMENT1.3.1 COMPANY’S VISION“To be a world class Oil & Gas Company Integrated in energy business withdominant Indian leadership and global presence.”Motto“Provide quality services with efficiency and transparency.”1.3.2 MISSIONWorld Class  Dedication towards leveraging competitive advantages in R&D and technology with involved people.  Imbibing high standards of business ethics and organizational values.  Abiding commitment to health, safety and environment to enrich quality of community life.  Fostering a culture of trust, openness and mutual concern to make working stimulating & challenging experience for our people. 5
  6. 6.  Striving for customer delight through quality products and services1.3.3 INTEGRATED IN ENERGY BUSINESS  Provide value linkages in other sectors of energy business.  Create growth opportunities and maximize shareholder value.  Dominant Indian Leadership  Retain dominant position in Indian Petroleum sector and enhance Indias energy availability1.3.4 STRATEGIC VISION: 2001-2020To focus on core business of E&P, ONGC has set strategic objectives of:  Doubling reserves (i.e. accreting 6 billion tones of O+OEG).  Improving average recovery from 28 per cent to 40 per cent.  Tie-up 20 MMTPA of equity Hydrocarbon from abroad.  The focus of management will be to monetize the money.1.3.5 GLOBAL RANKING  It is Asia‟s best Oil & Gas Company, as per a recent survey conducted by US- based magazine „Global Finance‟.  It is placed at the top of all indian corporte listed in forbes 400 global corporate (rank 133 rd) and financial times global 500(rank 326th),by market capitalization.  It is recognized as the Most Valuable Indian Corporate, by Market Capitalization, Net Worth and Net Profits, in current listings of Economic Times 500 (4th time in a row), Business Today 500, Business Baron 500 and Business Week.  It is targeting to have all its installations (offshore and onshore) accredited (certified) by March 2005. This will make ONGC the only company in the world in this regard.  It owns and operates more than 11000 kilo meters of pipelines in India, including nearly 3200kilometers of sub-sea pipelines. No other company in India operates even 50 per cent of this route length. 6
  7. 7.  Crossed the landmark of earning Net Profit exceeding Rs.10, 000 Core, and the first to do so among all Indian Corporate, and a remarkable Net Profit to Revenue ratio of 29.8 per cent. The growth in ONGCs profits is not solely due to deregulation in crude prices in India, as deregulation has affected all the oil companies, upstream as well as downstream, but it is only ONGC which has exhibited such a performance (of doubling turnover and profits). Has paid the highest-ever dividend in the Indian corporate history.  Its 10 per cent equity sale (Indias highest-ever equity offer) received unprecedented Global Investor recognition. This was a landmark in Indian equity market, establishing beyond doubt, the respect ONGCs professional management commands among the global investor community. According to a report published in The Asian Wall Street Journal (Hong Kong),ONGCs Public Issue brought in 20 Foreign Institutional Investors (FII‟s) to India, as (it was reported), they could not ignore the company representing Indias energy security.1.3.6 Ongc’s pioneering effortsOngc is the only fully integrated petroleum company in india, operating along theentire hydrocarbon value chain:  Holds largest share (57.2%) of hydrocarbon acreages in India.  Contributes over 84% of India‟s oil &gas production.  Every sixth LPG cylinder comes from ONGC.  About one-tenth of Indian refining capacity.  Created a record of sorts by turning Mangalore Refinery in petrochemicals limited around from being a stretcher case for referral to BIFR to among the BSE top 30, within year.  Owns 23% OF Mangalore-Hasan-Bangalore product pipeline (MHBPL), connecting MRPL to the Karnataka hinterland 7
  8. 8. 1.4 ASSETS/BASINS/PLANTS/INSTITUTES  Assets/Plants  Mumbai High Asset, Mumbai  Neelam & Heera Asset Mumbai  Bassein & Satellite Asset, Mumbai  Uran Plant, Uran  Hazira Plant, Hazira  Ahmedabad Asset, Ahmedabad  Ankleshwar Asset, Ankleshwar  Mehsana Asset, Mehsana  Rajamundry Asset, Rajamundry  Karaikal Asset, Karaikal  Assam Asset, Assam  Tripura Asset, Agartala  Basins  Western Offshore Basin, Mumbai  Western Onshore Basin, Baroda  K. G. Basin, Rajahmundry  Cauvery Basin, Chennai  Assam & Assam-Ark an Basin, Jorhat  CBM- BPM Basin, Kolkata  Frontier Basin, Dehradun  Plants  Uran Plant, Uran  Hazira Plant, Hazira 8
  9. 9.  Region Mumbai Region, Mumbai W est ern R egi on, Ba roda Eastern Region, Nazira Southern Region, Chennai Central Region, Kolkata Institutes Keshava Deva Malaviya Insti. of Petroleum Exploration (KDMIPE),Dehradun Institute of Drilling Tech., (IDT), Dehradun Institute of Reservoir Studies, Ahmedabad Institute of Oil & Gas Production Tech., Navi Mumbai Institute of Engineering & Ocean Tech.,, Navi Mumbai Geo-data Processing & Interpretation Center (GEOPIC), Dehradun ONGC Academy, Dehradun Institute of Petroleum Safety, Health & Envi. Management, Goa Institute of Biotechnology & Geotectonic Studies, Jorha School of Maintenance Practices, Baroda Regional Training Insti., Navi Mumbai, Chennai, Sivasagar & Baroda  Services Chief Drilling Services, Mumbai Chief Well Services , New Delhi Chief Geo-Physical Services, Dehradun Chief Logging Services, Mumbai Chief Engineering Services, Mumbai Chief Offshore Logistics, Mumbai Chief Technical Services, Dehradun Chief Info-com Services, New Delhi Chief Corporate Planning, New Delhi Chief Human Resource Development, Dehradun 9
  10. 10.  Chief Employee Relations, Dehradun  Chief Security, New Delhi  Company Secretary, New Delhi  Chief Marketing, New Delhi  Head Corporate Affairs & Co-ordination, New Delhi  Head Corporate Communication, New Delhi  Chief Material Management, Dehradun  Chief Health, Safety & Environment, Mumbai  Head Legal, New Delhi  Chief Medical, Dehradun  Chief Internal audit, New Delhi  Head Commercial, New Delhi  Chief Exploration & Development, Dehradun 1.5 SWOT ANALYSIS OF ONGC1) STRENGTHS  O.N.G.C LTD is perceived to be the leader in oil production industry.  It has a very efficient and professional management team.  Being an international company has sufficient resources and capital to invest.  O.N.G.C has ISO-9001 & ISO 14001 registration.2) WEAKNESS  O.N.G.C is facing difficulties to produce oil from aging reservoirs. 3) OPPURTUNITY  Energy utilization of buried coal resource (700 -1700M), estimated 63BT – Equivalent to15000 BCM. 4) THREATS  Security of personnel & property especially crude oil continues to be a cause of concern in certain area.  Some exploration Campaign Company involves high technology, high technology, high investment and high risks. 10
  11. 11. ONGC OFFICE ALL OVER INDIA (DRAW NO.1 ONDC OFFICE ALL OVER INDIA) 11
  12. 12. The Road AheadONGC is entering LNG (re-gasification), Petrochemicals, power generation, as wellas crude and gas shipping, to have presence along the entire hydrocarbon value chain.While remaining focused on the core business of Oil & Gas E&P, it is also looking atthe future promoting and applied R&D in alternate fuels (which can be commerciallybrought to marked).these efforts in integration are basically to exploit the corecompetency of the organization knowledge of hydrocarbon, gained over the fivedecades.New BusinessONGC has also ventured in Coal Bed Methane (CBM) and Underground CoalGasification (UCG); CBM production would commence in 2006-07 and UCG in2008-09.ONGC is also looking at Gas Hydrates, as it is one possible source that could makeIndia self sufficient in energy, on a sustained basis. 12
  13. 13. 1.6 SUBSIDIARIES AND JOINT VENTURE1.6.1 SUBSIDIARIES1.6.1.1 ONGC Videsh Ltd.(OVL)ONGC Videsh ltd is the wholly subsidiary of ONGC”OVL is the first Indian company to produce oil & gas overseas.”OVL today is the “Second largest E&P Company in India”, second only to ONGCinters of Oil & Gas reserves. It has 12 overseas assets and is actively seeking moreopportunities. OVL‟s efforts have been supported wholeheartedly by the Govt. ofIndia, which has allowed OVL single window clearance for overseas upstreamprojects irrespective of investments involved.OVL has been designated as the Indian Nodal Agency for overseas petroleumbusiness and is maintained as a permanent participant in all concerned bilateralinteraction and joint working groups of Govt. of India. The strategic objective ofparent company ONGC and the Govt of India provide the basis for the strategicdirection of OVL. Taking into account the industry environment and other influencingfactors, both internal and external, strategic direction has been formulated, which isre-evaluated on a continuous basis given the rapidly changing nature of the globalpetroleum industry to better adapt to the scenario.The functional directors of ONGC serve as the directors on the OVL board as well,thus inducing cohesion of the corporate objectives and goal congruence in bothorganizations.OVL follows meritocracy and draws its human resource from the parent company,were the functional directors are consulted for selection. The finance for the operationis provided by ONGC in form of Loans, interest free advances and equity. 13
  14. 14. 1.6.1.2 Mangalore Refinery and Petrochemicals Ltd (MRPL)MRPL, a subsidiary of ONGC has turned back to a profit making company just inthe3rd after ONGC management control. ONGC‟s shareholding has increased from51%to 71.62% in June –July 2003 through the buy-back of lenders equity at par, under themutually agreed Debt Restructuring Package.MRPL has showed excellent performance in the very first year of its operation assubsidiary of ONGC. The performance in 2003-04 under all parameters was betterthan the projection made at the time of the acquisition. It earned net profit of Rs,4594.15 million as against a net loss of Rs.4118.06 million in previous year. MRPL isno longer a potentially sick company as its accumulated losses have gone down below50% of the net worth on 31st March 2004. MRPL was awarded highest „Five Star‟rating the British Safety Council. It is the third refinery in India to get this prestigiouscertification.Equity shares of MRPL are now traded under‟ A‟ category of Mumbai StockExchange (BSE) from 1st March 2004. The Market capitalization of MRPL on theBSEtouched Rs.100 billion mark on 7Th January, 2004.MRPL exported products (Motor Spirit, Naphtha, Reformate, HSD, ATF, FO, LSHS)worth Rs.44720 million during the year (up 133.77% from Rs.19130 million) and hasemerged as the second largest export of petroleum products.MRPL has entered in MOU with ONGC for purchase of Mumbai High Crude at arm‟slength price.1.6.2 JOINT VENTURESP1.6.2.1 Petro net LNG Ltd.(PIL)Petro net LNG Ltd, a joint venture co-promoted by ONGC completed t heconstruction of India first LNG terminal at Dahej on time, and the facility wasdedicated to the nation on 9th February, 2004. Commercial sale of re-gasified LNGfrom Dahej terminal has already commenced. PLL also achieved financial closure. 14
  15. 15. 1.6.2.1 Petro net MHB LimitedONGC has acquired 23% equity in Petro net MHB Ltd, which is successfullyoperating the 362.3km product pipeline from Mangalore (MRPL) to Bangalore viaHassan.1.6.2.3 ONGC International Private Limited (ONGIO)This 50-50 JV with Indian Oil Corporation Ltd (IOCL),in corporate on 8th June 2001has incurred cumulative loss of Rs. 30.1 million till 31 st March, 2004. Givenlukewarm co- promoter support, it was decided by the ONGC Board ofDirector to withdraw from the JV which is to be dissolved. However, theDepartment of Company Affair has not accepted application to wind up theONGIO under section 560 of the Companies Act 1956, on the ground that ithad carried on business during the year 2003-04. Hence, it will continue to exitwithout any activities till it is finally wound up.1.6.2.4 Pawan Hans Helicopters Ltd. (PHHL)ONGC invested in 21.5% of equity capital of PHHL which provides Helicopterservices primarily to ONGC. 15
  16. 16. 1.6.1 ONGC GROUP OF COMPANIES (DRAW NO: 2ONGC GROUP OF COMPANIES) 16
  17. 17. 1.7 BOARD OF DIRECTORS  Mr. R.S.Sharma  Chairman & Managing Director  Mr.D.K.Sharaf Director (Finance)  Dr.A.K.Balyan Director (HR)  Mr.A.K.Hazarika Director (Onshore)  Mr.N.K.Mitra Director (Offshore)  Mr.P.K.Deb Director  Mr. Sunjoy Joshi Director  Mr.M.M.ChitaleDirector  Mr.Rajesh V. Shah Director  Mr. U. Sundararajan Director  Mr.N.K.Nayyar Director  Mr.P.K.Sinha Director 17
  18. 18. 1.8 ONGC Organogram (Crc structure)(DRAW NO:3 ONGC STRUCTURE) 18
  19. 19. 1.9 ABOUT MEHSANA ASSET:Mehsana asset is the largest oil production onshore asset. mehsana tectonic block isfairly well exploration productive block of north combat with nearly four decadesexploration history. The exploration, development & exploration activities are beingundertaken in asset intended. The earliest success was achieved in 1967 withdiscovery of north kadi field, largest oil block of mehasana block. Oil in mehsanablock is heavy as well as light.The oil field with low gravity API gravity & high viscosity are santhal, balol, andbecharaji & lanva. Oil field with moderate API gravity is north kadi, shobhasan,jotana,nandasan, linch & langnaj.Mehsana block encompasses 6000square kilometres. Exploration success for large &small fields came about simultaneously in the first decades. So far 28 filed have beendiscovered. The peak production was achieved in the 22nd year of it existence. Thedecline has been arrested & now production has been increasing from 1999. Therevival has achieved through better reservoir management, implementation ofdifferent IOR & EOR.Exploration today‟s focused on subtle traps of & small amplitude entrapmentsituation. Current effort is best with problem related to shield of middle scone marketespecially thick coals, which tends to mask seismic reflection from deeper section.The major oil field of mehsana asset have been operating for last 25 year.80% of welloperate of artificial lift. About 400 works over operation are carried ot every year.Despite problems related to aging, asset has between able to pag down the sick wellinventory well under control.As a mehsana of build up to date for future coal bed methane exploration, a number ofcoal cores have taken from shobhasan filed as a part of R & D efforts, this howeverwill go a long way in chalking out strategy for CBM exploration. Two wells drilledfor underground coal gasification in mehsana city were evaluated for utilityexploration of UCG. it is estimated that the asset has 63 billons tones of local reservesat the depth of 700 to 1700 masters with expected producible energy of 15000 BCM. 19
  20. 20. The mehsana project came into 7th nov 1967 when it has bifurcated from Ahmadabadto facilitate administrative & operational convenience.  First well drilled mehsana structure-1 spudded on 20-04-1964.  First oil well drilled-mehsana 2. Deepest well drilled south warasan-I depth 5000M>  Oldest formation encountered granite basement well serau east-I.  Deepest oil zone drilled -2198-2208m well mehsana –II.  Shallowest oil zone drilled 1790-1794m well langhanaj-II  First hydrocarbon bearing filed mnsa-II  First EOR scheme balol instu combustion pilot project 15.03.1990  First coal bed methane exploration well shobhasan 17.02.1991. 20
  21. 21. Year 2012a BRIEF OVERVIEW OF FINANCE DEPARTMENT2 •MEHSANA FINANCE DEPARTMENT STRUCTURE 2.1 •INTRODUCTION OF VARIOUS FINANCE SECTIONS 2.2 •FINANCIAL INFORMATION OF THE COMPANY 2.3 21 OIL AND NATURAL GAS CORPORATION LTD
  22. 22. 2.1) MEHSANA FINANCE DEPARTMENT STRUCTURE GENERALMANAGER( F&A)) CHIEFMANAGER(F&A) INCHARG INCHARG INCHARG INCHARGINCHARG INCHARG ECOSTIN INCHARG ECENTR E ECASH/B EPREAUD EBUDGE G/WELLS IT T E PCS ALA/C ASSETA/C ANK /IUT (DRAW NO:4 MEHSANA FINANCE DEPARTMENT STRUCTURE) 22
  23. 23. 2.2) INTRODUCTION OF VARIOUS FINANCESECTIONS2.2.1 BUDGET SECTION:IntroductionUnder the guidance of Mr. Vishal sir. I came to realize the importance of budgeting.In ONGC, the budget section plays a very important and crucial role. The reason isthat whenever there is requirement of any kind of material or service, properarrangement of fund is required and for that purpose budgeting is done. Due torestriction on number of pages for project report, every detail of budget is notcovered.Budgetary controls – definitionBudgetary control is a technique whereby actual utilization is comparedwith budgets to make the budget an effective financial control tool. Anydifferences/ variances are the responsibility of k e y individuals who can eitherexercise control action or revise the original budgets after providing necessaryjustifications to the top management. Budgetary control is defined by the Institute ofCost and Management Accountants (CIMA) as: The establishment of budgets relatingthe responsibilities of executives to the requirements of a policy, and the continuouscomparison of actual results with budgeted results, either to secure by individualaction the objective of that policy, or to provide a basis for its revisionBudgeting Process in ONGCGeneral Functioning or System or working of F&A department (especially in respectof Budgeting)Before moving forward it is important to know about the Budget Software known asBudget Manual which is used for the budget data entry prior uploading of final datainto SAPThe method use by ONGC is ACTIVITY BASE BUDGET. This budget done by thevarious departments like drilling department, surface department, MM department, 23
  24. 24. logging department etc. according their future needs and at last the club it in to theactual budget.2.2.2 CASH AND BANK SECTIONThis section is responsible for the receipts and payments either in cash or cheque orby any other form. This section is also responsible for the custody of cash, documentsin respect of investments of corporation money and other important documents. Majoractivities perform by cash & bank section  Cash withdrawal from bank.  Cash payments and receipts.  Payments and receipts(other than cash)  Cheque management  Regular payments on behalf of employees.  Remittance of tax deducted at source.  Dispatch of released payments.  Liquidity for cast and fund management.  MIS activities.  In ONGC the vendors payments are done by the Mumbai headquarter  And employees salaries are done by the Dehradun headquarter.  Various fees for issuing tender forms to our suppliers are collected by cash and bank section.  Earnest money deposit(EMD)  Security deposit (SD)2.2.3 PRE AUDIT SECTIONThis section is also known as accounts payable section. The section is divided intotwo parts – one is pre-audit supply cell and other is pre-audit service contract cell.Pre-audit is also known as voucher-audit or administrative audit and denotes scrutiny&examination, before releasing the payments. Types of Bills:  Supplier‟s Bills  Contractor‟s Bills 24
  25. 25. Miscellaneous payments the scope of Pre-audit also includes scrutiny of receipts ofthe corporation. Activities normally regarded as pre-audit receipt-accounting forincoming cash, such as:  Initial public offering (IPO)  Bank drafts/banker‟s cheque  Bank guarantees.  Receipts of FDR kept as security deposits with GEB, irrigation department. Logistics invoice verification (LIV) with the integrated network of SAP being used during verification find out any error in the documents before payments are made and deal with it.2.2.4 PERSONAL CLAIM SECTIONThis section deals with policies, procedures, controls, roles and responsibilities relatedto accounting for employee related payments, recoveries, corresponding statutorypayments &compliances. The process explained in this section covers paymentsto/recoveries from:  Regular employees of ONGC;  Graduate Engineering Trainees (GET)/Management Trainees (MT)  Retired employees; andTerm based employees, (for example employees on deputation)Payments to regularemployees include monthly salary payments, off-cycle payments (for example holidayhome, briefcase payments etc.), loans & advances. GET/MT are paid as per theirterms of employment. Retired employees are paid medical expense reimbursements asper HR policy. Recoveries from regular employees include House Rent Recovery(HRR), Association of Scientific and Technical Officers (ASTO) union recoveries,recoveries of loans &advances etc.Main Role of PCS Section  Updating employee payroll data at the time of joining.  Accounting of various employee related payments.  Accounting for full & final settlement on separation of employees.  Payment to retired employees. 25
  26. 26.  Inter unit transfers and deputations to/from the Company.  Tax Deducted at Source deductions and deposits  Accounting for retirement benefits and related employee benefits.2.3) FINANCIAL INFORMATION OF THE COMPANY2.3.1 Accounting policiesThe company follows the accrual method of accounting. The company has followedthe entire applicable accounting standards mad mandatory by institute of charteredaccountants of India.2.3.2 Equity capitalThe fully paid up equity capital of the company was as. During the year under reviewthere was no change in the equity capital structure of there is no issued preferencecapital in sterling ceramic ltd. There is no warrant waiting to be covered into equity.Nearly percent of company equity is comprised of bonus shares. The company lastmade a bonus issue in issuing two bonus shares for one share held in the company.2.3.3 LoansOil and natural gas corporation ltd loan fund decreased form in the previous year toduring the year. During the current year the ratio of secured long term funds totangible net worth increased to in the previous year.2.3.4 Fixed assetsThe gross and net block of the company as on were and respectively. Plant andmachinery constituted of the gross block and net block respectively.2.3.5 DepreciationDepreciation accounted for in the current year compared to in the previous yearcompared to in the previous year. There is no change in the accounting policy fordepreciation over the last year. 26
  27. 27. 2.3.6 Corporate taxIn view of loss during the year under review, the company has not provided for anytax liability this year also.2.3.7 DebtorsDuring the year under the review the sundry debtors were compared to in the previousyear representing of sales compared to of sales In the previous year. The sundrydebtors are net of provision for doubtful debts of the increase in sundry debtors aredue to market conditions.2.3.8 InventoriesInventories decreased from in the previous year to during the current year to duringthe current year. Of this finished goods, raw material and spares inventory of stock inprocess however increased.2.3.9 Working capitalThe working capital gap during the current year was lower at which is lower than intha previous year. The working capital of is founded by bank borrowing to the extentof and the balance is founded out of company‟s own resource. Each rupee of workingcapital generated of gross turnover in the current year compared to in the previousyear. Oil and natural gas corporation ltd shall continue to make to further improveworking capital management by stricter control over inventories and book debts.2.3.10 ReservesOil and natural gas corporation ltd reserves stood at as on nearly per cent of thecompany‟s reserves were earned. Per cent comprised capital reserves. There were norevaluation reserves as on. During the year under review a Sam of representing items. 27
  28. 28. Year 2012 BALANCESHEET ANALYSIS3 •INTRODUCTION TO BALANCESHEET 3.1 •BALANCE SHEET 3.2 28 OIL AND NATURAL GAS CORPORATION LTD
  29. 29. 3.1 INTRODUCTION TO BALANCESHEETA balance sheet is a list of assets and liabilities and claims of a business at somespecific point of time and is prepared from an adjusted Trial Balance. It shows thefinancial position of a business by detailing the source of funds and utilization ofthese funds. Balance Sheet shows the assets and liabilities grouped, properlyclassified and arranged in a specific manner.USES OF BALANCE SHEET  It enables us to ascertain the proprietary interest of a person or business organization.  It enables us to calculate the actual capital employed in the business.  The lender can ascertain the financial position of the business.  It may serve as the basis for determining purchase consideration of the business.  Different ratio can be calculated from the Balance Sheet and these ratios can be utilized for better management of the business.LIMITATION OF BALANCE SHEET  Fixed assets are shown in the Balance Sheet as historical costless depreciation up-to-date. A conventional Balance Sheet can not reflect the true value of these assets. Again intangible assets are shown in the Balance Sheet at book values which may bear no relationship to the market values.  Sometimes, balance sheet contains some assets which c o m m a n d n o market value such as expense, debenture discount etc. the inclusion of these assets unduly inflate the total value of assets.  The balance sheet can not reflect the value of certain factors such as skill and loyalty of staff. 29
  30. 30. 3.2 BALANCE SHEET BALANCE SHEET OF ONGCAS ON 31ST MARCHBalance Sheet ------------------- in Rs. Cr. ------------------- Mar 11 Mar 10 Mar 09 Mar 08 Mar 07 12 mths 12 mths 12 mths 12 mths 12 mthsSources Of FundsTotal Share 4,277.76 2,138.89 2,138.89 2,138.89 2,138.89CapitalEquity Share 4,277.76 2,138.89 2,138.89 2,138.89 2,138.89CapitalShare 0.00 0.00 0.00 0.00 0.00ApplicationMoneyPreference 0.00 0.00 0.00 0.00 0.00Share CapitalReserves 93,226.67 85,143.72 76,596.53 68,478.51 59,785.04Revaluation 0.00 0.00 0.00 0.00 0.00ReservesNetworth 97,504.43 87,282.61 78,735.42 70,617.40 61,923.93Secured Loans 0.00 0.00 0.00 0.00 0.00Unsecured 17,564.26 16,405.64 16,035.70 12,482.71 15,109.07LoansTotal Debt 17,564.26 16,405.64 16,035.70 12,482.71 15,109.07Total Liabilities 115,068.69 103,688.25 94,771.12 83,100.11 77,033.00Application Of FundsGross Block 80,938.60 71,553.78 61,355.61 57,463.78 52,038.07Less: Accum. 62,299.05 55,905.28 50,941.23 46,945.77 43,198.95DepreciationNet Block 18,639.55 15,648.50 10,414.38 10,518.01 8,839.12 30
  31. 31. Capital Work in 65,354.44 56,073.25 52,923.19 41,154.63 37,794.16ProgressInvestments 5,332.84 5,772.03 5,090.32 5,899.50 5,702.05Inventories 4,118.98 4,678.57 4,060.67 3,480.64 3,033.76Sundry Debtors 3,845.90 3,058.64 4,083.80 4,360.37 2,759.44Cash and Bank 356.55 282.85 161.48 269.22 27.42BalanceTotal Current 8,321.43 8,020.06 8,305.95 8,110.23 5,820.62AssetsLoans and 64,693.91 63,721.90 55,964.02 38,906.53 58,710.79AdvancesFixed Deposits 22,090.00 17,948.18 18,934.74 22,148.43 19,253.37Total CA, Loans 95,105.34 89,690.14 83,204.71 69,165.19 83,784.78& AdvancesDeffered Credit 0.00 0.00 0.00 0.00 0.00Current 35,384.31 27,244.53 26,854.11 22,482.94 19,835.99LiabilitiesProvisions 34,775.19 37,092.46 30,657.98 21,828.17 39,765.20Total CL & 70,159.50 64,336.99 57,512.09 44,311.11 59,601.19ProvisionsNet Current 24,945.84 25,353.15 25,692.62 24,854.08 24,183.59AssetsMiscellaneous 796.03 841.32 650.61 673.90 514.06ExpensesTotal Assets 115,068.70 103,688.25 94,771.12 83,100.12 77,032.98Contingent 38,979.63 39,178.54 36,024.57 26,006.73 34,157.17LiabilitiesBook Value (Rs) 113.97 408.08 368.12 330.16 289.52 Table no:1 31
  32. 32. INTERPRETATION:-  The balance sheet is the statement showing the increase or decrease in the assets and liabilities. This indicates the change in capital structure as well as increase or decrease in assets.  Owner‟s fund increases by 2138.87 Crore in 2011 as compared to base year 2007. The reserves & surplus is also get increase in last four years very rapidly. It increases by 33441.63 Crore in 2011 as compared to base year 2007.  Proportion of the debt in capital structure is decrease that is in2007borrowing debt is 15,109.07 Crore and in 2008 debt is 12,482.71 Crore. So, it is decrease by 96.43.after next three year continues increase.  The balance sheet also shows the balance of assets and other investment made by the company. The gross fixed assets are increased in 2008 by 1678.90 Crore as compared to previous year 2007.  The investment is also increase in 2008 by 197.45 Crore as compared to previous year. After the investment is also decreases in 2009 by 800.18 crore as compared to previous year. And in 2010 it is increase than 2009 after than it is a decrease in 2011 by439.19 crore. The overall inventory turnover ratio shows the good position of the company is good.  We also conclude that the liquid position of the company is good because Current Assets are increase year by year. 32
  33. 33. INVESTMENT CHART:- Investments 6,000.00 5,899.50 5,772.03 5,800.00 5,702.05 5,600.00 5,400.00 5,332.84 5,200.00 Investments 5,090.32 5,000.00 4,800.00 4,600.00 2007 2008 2009 2010 2011 Chart no:1 INTERPRETATION:- The investment is also increase in 2008 by 197.45 Crore as compared to previous year. After the investment is also decreases in 2009 by 800.18 crore as compared to previous year. And in 2010 it is increase than 2009 after than it is a decrease in 2011 by439.19 crore as compare to previous year. The overall inventory turnover ratio shows the good position of the company is good. 33
  34. 34. Year 2012 PROFIT AND LOSS ACCOUNT ANALYSIS4 •INTRODUCTION TO PROFIT AND LOSSACCOUNT 4.1 •PROFIT & LOSS ACCOUNT 4.2 34 OIL AND NATURAL GAS CORPORATION LTD
  35. 35. 4.1) INTRODUCTION TO PROFIT AND LOSSACCOUNTThe Profit & Loss account is also known as the income statement. It can be defined asa report that summaries the revenues and expenses of an accounting period to reflectthe changes in various critical areas of firm‟s operation. It is of greatest interest andimport and importance to end-users of accounting statements because it enables themto ascertain whether the business operations have been profitable or not during thatparticular period.The important destination between the balance sheet and income statement is for aperiod of one year. The two broad categories of item shown in the income statementare revenue and expenses. Revenues derived from a company‟s operation saymanufacturing and selling products. During transaction business has also incurredrevenues other than main business operation. Expenses are occurred in day-to-daytransactions.Here, expenses regarding manufacturing activities, office and administrative expensesare considered. By deducting total expenses from total revenue we get profitand by deducting total revenue from total expenses we get total loss. Income taxamount is also decided by profit that incurred in business with help of this statement. 35
  36. 36. 4.2 )PROFIT & LOSS ACCOUNTProfit & Loss account ------------------- in Rs. Cr. ------------------- Mar 11 Mar 10 Mar 09 Mar 08 Mar 07 12 mths 12 mths 12 mths 12 mths 12 mthsIncomeSales Turnover 66,487.19 60,470.18 64,342.28 60,466.48 57,190.17Excise Duty 322.85 218.41 338.29 401.38 276.73Net Sales 66,164.34 60,251.77 64,003.99 60,065.10 56,913.44Other Income 5,028.07 3,615.96 4,085.59 4,228.63 3,107.05Stock Adjustments 12.91 118.04 81.10 114.11 -19.73Total Income 71,205.32 63,985.77 68,170.68 64,407.84 60,000.76ExpenditureRaw Materials 2,790.68 2,431.88 10,905.51 8,424.32 8,177.22Power & Fuel Cost 285.60 260.38 270.79 317.15 320.28Employee Cost 6,445.18 5,618.16 4,536.80 5,843.27 3,974.79Other 32,098.77 26,652.82 19,578.49 17,184.51 15,616.76ManufacturingExpensesSelling and Admin -16,565.10 - -4,470.78 -2,328.21 -560.70Expenses 13,243.69Miscellaneous 492.78 947.65 1,011.04 983.74 1,079.27ExpensesPreoperative Exp 0.00 0.00 0.00 0.00 0.00CapitalisedTotal Expenses 25,547.91 22,667.20 31,831.85 30,424.78 28,607.62 Mar 11 Mar 10 Mar 09 Mar 08 Mar 07 12 mths 12 mths 12 mths 12 mths 12 mthsOperating Profit 40,629.34 37,702.61 32,253.24 29,754.43 28,286.09PBDIT 45,657.41 41,318.57 36,338.83 33,983.06 31,393.14Interest 11,133.34 11,276.89 8,485.40 5,016.88 3,724.81PBDT 34,524.07 30,041.68 27,853.43 28,966.18 27,668.33Depreciation 6,835.01 5,242.66 4,355.62 3,915.77 3,292.80Other Written Off 0.00 0.00 0.00 0.00 0.00Profit Before Tax 27,689.06 24,799.02 23,497.81 25,050.41 24,375.53Extra-ordinary items 547.70 183.99 790.68 607.25 -564.27PBT (Post Extra-ord 28,236.76 24,983.01 24,288.49 25,657.66 23,811.26Items)Tax 9,177.53 8,258.73 8,437.78 8,941.85 8,041.02Reported Net 18,924.00 16,767.56 16,126.32 16,701.65 15,642.92Profit(PAT)Total Value Addition 22,757.23 20,235.33 20,926.34 22,000.46 20,430.40Preference Dividend 0.00 0.00 0.00 0.00 0.00Equity Dividend 7,486.05 7,058.28 6,844.39 6,844.39 6,630.51Corporate Dividend 1,215.65 1,161.56 1,163.20 1,163.20 1,012.51Tax 36
  37. 37. Per share data (annualised)Shares in issue (lakhs) 85,554.90 21,388.73 21,388.73 21,388.73 21,388.73Earning Per Share 22.12 78.39 75.40 78.09 73.14(Rs)Equity Dividend (%) 335.00 330.00 320.00 320.00 310.00Book Value (Rs) 113.97 408.08 368.12 330.16 289.52 Table no:2 PAT CHART :- Rs. cr PAT 18,924.00 20,000.00 16,701.65 16,767.56 15,642.92 16,126.32 15,000.00 10,000.00 pat 5,000.00 0.00 2007 2008 2009 2010 2011 Chart no:2 37
  38. 38. INTERPRETATION:-The profit and loss account of the company shows the overall income andexpenditure, made by the company in a particular time period. The difference betweenthe debit and credit side of the P&L account, shows the net profit or net loss.Here, the profit and loss account of the company shows the satisfactory level but ascompared to previous year the expenses of the company is increases. Here thesales turnover is increase year by year. The operating income in 2010 is 60,470.18and now it is increase by 6017.01 Crore Rs. in 2011. So, by this way the netprofit of the company is increase by 2156.44 in 2011 as compared to previous year.While on the other side the expenditure shows the expenses meet by the company in aparticular period. The expenditure met by the company is highest in 2009, while inother year the expenditure of the company are increases. T h e overall analysis ofthe expenditure side of the company shows the average increase in expenses of thecompany.After analyzing the income and expenditure side of the company, there is differencebetween both sides which is known as the net profit / loss. The net profit of thecompany shows an overall increase year by year. In 2007 it is 15,642.92Crore Rs. andnow itis increasing and in 2011 it is 18,924.00 Cr. 38
  39. 39. Year 2012 THEORETICAL BACKGROUND OF WORKING CAPITAL MANAGEMENT5 •MEANING OF WORKING CAPITAL 5.1 •CONCEPT OF WORKING CAPITAL 5.2 •TYPES OF WORKING CAPITAL 5.3 •NEED FOR WORKING CAPITAL 5.4 •DETERMINENTS OF WORKING CAPITAL 5.5 •MEANING AND NATURE OF WORKING 5.6 CAPITAL MANAGEMENT •WORKING CAPITAL ANALYSIS 5.7 39 OIL AND NATURAL GAS CORPORATION LTD
  40. 40. 5 .1 MEANING OF WORKING CAPITAL:-In simple words working capital means that which is issued to carry out the day to dayoperations of a business. Capital required for a business can be classified under twomain categories  Fixed capital  Working capitalEvery business needs funds for two purposes, for its establishment and to carry on itsday to day operations. Long term funds are required to create production facilitiesthrough purchase of fixed assets such as plant and machinery, land, building, furnitureetc. Investment in these assets represents that part of firm capital, which is blocked ona permanent or fixed basis called fixed capital. Funds are also needed for short termpurposes i.e. for the purchase of raw material, payment of wages and other day to dayoperations of business. These funds are known as working capital. In other words,working capital refers to that firm‟s Capital, which is required for short – term assetsor current assets. Funds thus invested in current assets keep revolving last and beingconstantly converted into cash and this cash flow is again converted into other currentassts. Hence it is known as circulating or short – term capital. 40
  41. 41. 5.2 CONCEPT OF WORKING CAPITAL5.2.1 Gross Working CapitalIt is simply called working capital refers to the firm‟s investment in current assets sothe total current assets of the firm are known as gross working capital.5.2.1 Net Working CapitalIt represents the difference between current assets and current liabilities. Net workingcapital may be positive or negative. Positive net working capital is that when currentassets are more than current liabilities. But when current liabilities become more thancurrent assets than it is negative working capital.In brief we can say that working capital is too much necessary for the smoothfunctioning and proper utilization of fixed assets.5.3 TYPES OF WORKING CAPITAL5.3.1 Permanent Working Capital:As the operating cycle is a continuous process so the need for working capital alsoarises continuously. But the magnitude of current assets needed is not always same; itincreases and decreases over time. However there is always a minimum level ofcurrent assets. This level is known as permanent or fixed working capital.In ONGC maintain the Permanent working capital of the raw material as a 1/3 of totalraw material and 10% work in process and finished goods of the total production.20% cash balance maintain as permanent in the profit.5.3.2 Temporary Working Capital:The extra working capital needed to support the changing production and salesactivities, is called variable or functioning or temporary working capital. 41
  42. 42. For hear ONGC purchase raw material as a plastic for manufacturing pipes inparticular season and have to employ additional labour to process it. They must meetthis requirement for providing additional funds. Another aspect of temporary workingcapital. Last year suddenly increase the demand of final product so at that time requireextra fund it‟s called the special working capital.Temporary working capital differs from permanent working capital in the sense that isrequired for short periods and cannot be permanently employed gainfully in thebusiness. This can Be shown in the following diagram:-Amount Of Working Capital Temporary capital Permanent Capital Time (DRAW NO: 5 TEMPORARY WORKING CAPITAL)5.4 NEED FOR WORKING CAPITALThe need for working capital cannot be overemphasized. The need of working capitalarises due to the time gap between production and realization of cash from sales. Sothe working capital or investment in current assets becomes necessary need forworking capital. It arises due to following reasons:- 42
  43. 43. 5.4.1 OPERATING CYCLE“Operating cycle is the time duration requires for converting sales intocash after the conversion of resources into inventories.”First of all a firm purchase Raw Material, then after some processing it is convertedinto work–in–progress and after this further processing is done to convert work–in–progress in finished goods. After the raw material is converted into finished goods,sales are made. Sales are no always full cash sales; there are credit sales also. Thesecredit sales after some period are converted into cash. So the whole process takes thetime. This time taken is known as the length of operating cycle. So operating cyclesincludes:- 1. Raw Material conversion period (RMCP) 2. Work–in – progress conversion period (WIPCP) 3. Finished goods conversion period (FCP) 4. Debtors Conversion period (DCP)So operating cycle can be known as following:- Raw Material Work in Progress Cash Collection from Debtors Sales Finished Goods Credit Sales Cash Sales (DRAW NO:6 OPERATING CYCLE) 43
  44. 44. If the length of the operating cycle has short length period then less working capital isrequired. So working capital requirement is directly related with operating cycle.Operating cycle may be of two types 1. Gross Operating cycle 2. Net operating cycle1. Gross Operating cycleGross Operating cycle is the total time period from the conversion of Raw Materialinto finished goods and finished goods into sales and then sales into cash. GOC =RMCP + WIPCP + FCP + DCP2. Net Operating CycleAs we provide period to debtors for the payments, our creditors also provide period tous for payment to them. So this reduces our requirement of working capital. This alsoaffects the operating cycle. Operating cycle‟s length reduces with so many days asprovided by the creditors to us. The difference between gross operating cycle andperiod allowed by the creditors for payment is known as net operating cycle NOC = GOC – CPP5.4.2 WORKING CAPITAL REQUIREMENT FOR THE ANTICIPATEDNEEDS FOR FUTUREThese needs may be of Raw Material or Finished Goods. Sometimes because of non-availability of Raw Material or due to seasonal availability of Raw Material someadvances stock of Raw Material becomes necessary for company. In the similar waydue to sudden arise of demand of finished goods in future more finished goods arekept in stock. For both reasons more working capital is required because funds will beinvolve in these safeties stocks. 44
  45. 45. 5.5. DETERMINENTS OF WORKING CAPITALFollowings are the main determinants of working capital.5.5.1 Nature and Size of Business :The working capital of a firm basically depends upon nature of its business for e.g.Public utility undertakings like electricity; water supply needs very less workingcapital because offer only cash sales whereas trading & financial firms have a veryless investment in fixed assets but require a large sum of money invested in workingcapital.The size of business also determines working capital requirement and it may bemeasured in terms of scale of operations. Greater the size of operation, larger will berequirement of working capital. Hear ONGC company for manufacturing products notto the service so require to working capital high in compare to public ltd. Company.5.5.2 Manufacturing Cycle:The manufacturing cycle also creates the need of working capital. Manufacturingcycle starts with the purchase and use of Raw Material and completes with theproduction of finished goods. If the manufacturing cycle will be longer more workingcapital will be required or vice versa.In oil and gas corporation ltd. Production Cycle works better and manufacturingprocess works fast, so no other costs are incurred in the time of production.5.5.3 Seasonal variation:In certain industries like ONGC raw material is not available throughout the year.They have to buy raw material in bulk during the season to ensure an uninterruptedflow and process them during the year. Generally, during the busy season, a firmrequires large working capital than in the slack season. 45
  46. 46. 5.5.4 Production Policy:Production policy also determines the working capital level of a firm. If the firm hassteady production policy, it may require need of continuous working capital. But ifthe firms adopt a fluctuating production policy means to produce more during the leaddemand season then the more working capital may require at that time but not in otherperiod during a financial year. So the different productions policy arise different typeof need of working capital.If the policy is to keep production steady by accumulate inventories it will requirehigher working capital.Oil and gas corporation ltd‟s Production policy is not steady so Requirement ofworking capital is less.5.5.5 Firm’s Credit Policy:The firm‟s credit policy directly affects the working capital requirement. If the firmhas liberal credit policy, hence the more credit period will be provided to the debtorsso this will lead to more working capital requirement. With the liberal credit policyoperating cycle length increases and vice versa.Oil and gas corporation ltd Credit Policy for collection toward the debtor for giving 2or 3 weeks for credit sales in the limit of 2 lakh. Above the 2 lakh give credit for 1month.5.5.6 Sales Growth:Working capital requirement is directly related with sales growth. If the sales aregrowing, more working capital will be needed due to arises need of more RawMaterial, finished goods and credit sales. Hear, ONGC Sales growth is increase inyear by year so require more working capital.5.5.7 Business Cycle:Business cycle refers to alternate expansion and contraction in general business. In aperiod of boom, larger amount of working capital is required where as in a period ofdepression lesser amount of working capital is required. ONGC Position is growthstage. So require working capital is high. 46
  47. 47. 5.5.8 Price Level Changes:Changes in the price level also effects the working capital requirements. Generally,the rising prices will require the firm to maintain larger amount of working capital asmore funds will be required to maintain the same current assets.5.5.9 Other Factors:Certain other factors such as operating efficiency, management ability, irregularitiesof supply, import policy, asset structure, importance of labour, banking facilities, timelag. Etc. also influence the requirement of working capital.So these are the main determinants of working capital. The importance of influence ofthese determinants on working capital may differ from firm to firm5.6 MEANING AND NATURE OF WORKING CAPITALMANAGEMENTThe management of working capital is concerned with two problems that arise inattempting to manage the current assets, current liabilities and the inter relationshipthat asserts between them.The basic goal is working capital management is to manage current assets and currentliabilities of a firm in such a way that a satisfactory of optimum level of workingcapital is maintained i.e. it is neither inadequate nor excessive. This is so because bothinadequate as well as excessive working capital position is bad for business.5.7 MAJOR DECISIONS IN WORKING CAPITALMANAGEMENTThere are two major decisions management relating to working capital management:- 1. What should be ratio of current assets to sales? 2. What should be the appropriate mix of short term financing and long term financing for financing these current assets?5.7.1 Current assets in relation to salesIf the firm can forecast accurately the factors, which effect the working capital, theinvestment in current assets, can be designed uniquely? When uncertaintycharacteristics the above factors, as it usually does the investment in current assets 47
  48. 48. cannot be specified uniquely. In case of uncertainty, the outlay on current assetsshould consist of base component meant to meet normal requirement and a safetycomponent meant to cope with unusual requirement. The safety component dependsupon low conservative or aggressive in the current assets policy of a firm. If the firmpurchases a very conservative current asset policy it would carry a high level ofcurrent assets in relation to sales. If a firm adopts a moderate current assets policy itwould carry moderate level of current assets in relation to sales, finally is a firmfollows a highly aggressive current assets policy, it would carry a low level of currentassets in relation to sales.5.7.2 Determining a Short Term and Long Term Financing Mix for Financing ofcurrent assetsThere are three approaches in this regard, which are discussed below:5.7.2.1 HEDGING APPROACHThis approach is also called matching approach. In this approach there is a propermatching of expected life of asset with the duration of fund. Usually, according to thisapproach long-term sources are used for financing permanent current assets and fixedassets & short-term sources are used for financing temporary current assets: Temporary current assets Short term financing Assets Permanent current assets Long term financing Fixed Assets Term financing Time DRAW NO:7 HEDGING APPROACH 48
  49. 49. 5.7.2.2 CONSERVATIVE APPROACHIn this approach there is more reliance on long-term financing in comparison to short-term financing. Even some part of the temporary current comparison to finance fromlong-term sources because long-term sources are less risky in comparison to short-term source Temporary Current Assets Short-term financing Assets Permanent Current Assets Long-term financing Fixed Assets Time (DRAW NO:8 CONSERVATIVE APPROACH)5.7.2.3 AGGRESSIVE APPROACHIn this approach there is more reliance on short term financing and even a part ofpermanent current assets is financed from short-term finance. Temporary current assets Short term financing Assets Permanent current assets Long term financing Fixed Assets Time (DRAW NO:9 AGGRESSIVE APPROACH)In Oil and gas corporation ltd, the current assets are financed from short term sourcesas well as long term sources, so they follow conservative approach. 49
  50. 50. 5.8 WORKING CAPITAL ANALYSIS5.8.1. ANALYSIS ON THE BASIS OF SCHEDULE OF CHANGES INWORKING CAPITALSCHEDULE OF CHANGES IN WORKING CAPITAL (RS.cr)PARTICULARS 2011 2010 INCREASE DECREASECURRENTASSETS:Inventories 4,118.98 4,678.57 5559.59S. debtors 3,845.90 3,058.64 787.26Cash & Bank 356.55 73.7 282.85BalancesLoans & 64,693.91 63,721.90 972.01AdvancesTotal current 73,015.34 71741.96assets (A)CURRENTLIABILITIES:Liabilities& 70,159.50 64,336.99 5822.51provisionTotal current 70,159.50 64,336.99liabilities (B)Working capital 2855.84 7404.97(A-B)Net increase in 7655.48working capitalFOR YEARS 2011 AND 2010As we have a look on the schedule of changes in working capital for the companyover the years 2010 and 2011, we find that, among in current assets, Loan &Advances, sundry debtors and Cash &Bank Balance have shown increment from year2010 to year 2011. The inventories have got decreased in the same years. Among thecurrent liabilities, liabilities& Provision have increase. So the overall net workingcapital has decreased. 50
  51. 51. (RS. Cr)PARTICULARS 2009 2008 INCREASE DECREASECURRENT ASSETS:Inventories 4,060.67 3,480.64 580.03S. debtors 4,083.80 4,360.37 276.57Cash & Bank 107.74 161.48 269.22BalancesLoans & Advances 55,964.02 38,906.53 17057.49Total current 64269.97 47016.76assets (A)CURRENTLIABILITIES:Liabilities& 13200.98 57,512.09 44,311.11provisionTotal current 57,512.09 44,311.11liabilities (B)Working capital 6757.88 2705.65(A-B)Net increase in 30838.5working capitalFOR YEARS 2009 AND 2008As we have a look on the schedule of changes in working capital for the companyover the years 2008 and 2009, we find that, among in current assets, Loan &Advances, and Cash &Bank Balance, inventories have shown increment from year2008 to year 2009. The sundry debtors have got decreased in the same years. Amongthe current liabilities, liabilities& Provision have increase. So the overall net workingcapital has increase. 51
  52. 52. (Rs.cr)PARTICULARS 2008 2007 INCREASE DECREASECURRENTASSETS:Inventories 3,480.64 3,033.76 446.88S. debtors 4,360.37 2,759.44 1600.93Cash & Bank 241.8 269.22 27.42BalancesLoans & 38,906.53 58,710.79 19804.26AdvancesTotal current 47016.76 64531.41assets (A)CURRENTLIABILITIES:Liabilities& 59,601.19 15290.08 44,311.11provisionTotal current 59,601.19 44,311.11liabilities (B)Working capital 2705.65 4930.22(A-B)Net increase in 2047.81working capitalFOR YEARS 2007 AND 2008As we have a look on the schedule of changes in working capital for the companyover the years 2007 and 2008, we find that, among in current assets, sundry debtors,Cash &Bank Balance, inventories have shown increment from year 2007 to year2008. The Loan & Advances and have got decreased in the same years. Among thecurrent liabilities, liabilities& Provision have decrease. So the overall net workingcapital has decrease. 52
  53. 53. Year 2012 MANAGEMENT OF INVENTORY6 •NATURE OF INVENTORIES 6.1 •OBJECTIVES OF INVENTORY 6.2 MANAGEMAENT •ANALYSIS OF EFFICIENCY OF 6.3 INVENTORY MANAGEMENT IN ONGC 53 OIL AND NATURAL GAS CORPORATION LTD
  54. 54. 6 MANAGEMENT OF INVENTORYInventory is very important part of current assets. Approximately 60% part of currentassets is inventories. So the proper management of inventory is required forsuccessful working capital management. As the larger amount of funds is involved inthe inventories, so it must be carried with care for proper utilization of funds.6.1) Nature of InventoriesIn inventories we include:(a) Raw Material: There are those basic inputs which are converted into work-in- progress after the manufacturing process. ONGC purchased Raw materials as a Rough Plastic for production and storage purpose.(b) Work-in-Progress: These inventories are semi-manufactured products. These products are those which are ready for sale. Product as a pipes, pumps,etc.(c) Finished Goods: These are completely manufactured products. These products are those which are ready for sale. In ongc finished product of pipe, pumps and etc. Here is one another type of inventory also which is not directly related with production but facilitate in production process. These inventories are known as supplies. Cleaning material, oil, fuel, electric tube etc are the supplies.6.2) OBJECTIVES OF INVENTORY MANAGEMENTThere are so many objectives of inventory management. These objectives may differfrom firm to firm. The main objectives of inventory management are:  To make adequate investment in inventories so that funds can be best utilized.  Smooth production in present and future.  Time availability of inventories.  Smooth and uninterrupted sale processes.  Minimize the cost related with inventories.  To meet the future price change.  To get adequate return on investment. 54
  55. 55. 6.3) ANALYSIS OF EFFICIENCY OF INVENTORYMANAGEMENT IN ONGCINVENTORY TURNOVER RATIOIt indicates the number of times the stock has been turned over during the period andevaluates the efficiency with which the firm is to manage inventory. A high inventoryturnover indicates efficient management of inventory because more frequently thestocks are sold; the lesser amount of money is required to finance the inventory.Formula: Cost of Goods sold/ Average inventoryCost of Goods Sold (COGS) ------------------- in Rs. Cr. -------------------Particular 2010-11 2009-10 2008-09 2007-08 2006-07Sales 66164.34 60251.77 64003.99 60065.10 56913.44Gross Profit 45657.41 41318.57 36338.83 33983.06 31393.14COGS 20506.93 18933.20 27665.16 26082.04 25520.30Average Inventory: (Rs.cr)Particular 2010-11 2009-10 2008-09 2007-08 2006-07Opening Stock 4678.57 4060.67 3480.64 3033.76 2512.34Closing Stock 4118.98 4678.57 4060.67 3480.64 3033.76Average Inventory 4398.78 4369.62 3770.66 3257.2 2923.05 55
  56. 56. Inventory Turnover Ratio: (Rs.cr)Particular 2010-11 2009-10 2008-09 2007-08 2006-07COGS 20506.93 18933.20 27665.16 26082.04 25520.30Avg. Inventory 4398.05 4369.62 3770.66 3257.2 2923.05Inventory Turnover 4.66 4.33 7.34 8.00 8.73Ratio Table no:3 Inventory Turnover Ratio 8.73 9 7.34 8 8 7 6 4.66 4.33 5 4 3 Inventory 2 Turnover 1 Ratio 0 2010-11 2009-10 2008-09 2007-08 2006-07 Chart no:3Analysis:  The inventory turnover ratio is increasing in the year 2007 after next year in 2008 and 2009 and 2010 it is consistently decreasing. Which indicates that its performance in terms of generating cash flow is decreasing in this year because the companies‟ cash flow has blocked in inventories? However, in 2011 the ratio increased by 0.33 than previous year, which is a positive sign. 56
  57. 57. Year 2012 RATIO ANALYSIS7 •UTILITY OF RATIO ANALYSIS 7.1 •CLASSIFICATION OF RATIO 7.2 57 OIL AND NATURAL GAS CORPORATION LTD
  58. 58. 7. RATIO ANALYSISRatio analysis is a widely used tool for financial analysis. It is defined as thesystematic use of ratio to interpret the financial statement, so that the strength andweakness of a firm as well as its historical performance and current financialcondition can be determined. The term ration refers to the numerical and quantitativerelationship between two items/variables. The relationship can be expressed as:-1. Percentage2. Fraction3. P roport i on of num bersThe rational of ratio analysis lies in the fact that it makes related informationcomparable. A single figure by itself has no meaning but when expressed interms of a related figure, it yields significant inferences.Ratio analysis thus, a quantitative tool enables analysis todraw quantitative answerssuch as:-  Is the net profit adequate?  Are the assets being used efficiently?  Is the firm solvent?  Can the firm meet its current obligations and so on?7.1) UTILITY OF RATIO ANALYSISThe use of ratio was started by banks for ascertaining the liquidity and profitability ofthe company‟s business for the purpose of advancing loan to them. It graduallybecome popular and other creditors began tousl e them profitably. Now even theinvestor calculates ratio from t he published account of the company before investingtheir savings. The ratio analysis provides useful information to management, whichwould help them in taking important policy decision. Diverse group of people makeuse of ratios, to determine the particular aspect of the financial position of thecompany, in which they are interested. 58
  59. 59. 7.1.1) ProfitabilityUseful information about the trend of profitability is available from the profitabilityratios. The gross profit ratio, net profit ratio and ratio of return on investment give agood idea of profitability of business.7.1.2) LiquidityIn fact, the use of this ratio is to ascertain the liquidity of the busi ness. T he currentratio and liquid ratio will tell whether the business will be able to meet its currentliabilities as and when they mature.7.1.3) EfficiencyThe turnover ratio are excellent guides to measures the efficiency of managers. Fore.g. the stock turnover will indicate how efficiency the sales are being made, thedebtors turnover shows the efficiency of collection department and assets are used inbusiness.7.1.4) Inter- firm comparisonThe absolute ratio of the firm are not of much use, unless they are compared withsimilar ratio of other firm belongs to the same industries.7.1.5) Indicate TrendThe ratio of the last three to five years will indicate the trend in the respective fields.7.1.6) Useful for budgetary ControlRegular budgetary reports are prepared in business where the system of budgetarycontrol in use. If various ratios are prepared in these reports, it will give a fairly goodidea about various aspect of financial position.7.1.7) Useful for decision makingRatios guide the management in making some of the important decision. 59
  60. 60. 7.2) CLASSIFICATION OF RATIORatios can be classified into four broad groups:-7.2.1. Liquidity Ratio7.2.2. Leverage / Capital structure Ratio7.2.3. Profitability Ratio7.2.4. Activity / Efficiency Ratio7.2.1) LIQUIDITY RATIOSLiquidity is the most important factor in successful financial management. Afirm should have enough money to meets its short-term liabilities, as and when theybecome due for payment. If affirm fails to meet its short term liabilities frequently, itsprestige and creditworthiness would be adversely affected. A very high degree ofliquidity is also bad; idle assets earn nothing. Therefore it is necessary to strike aproper balance between high liquidity and lack of Liquidity.7.2.1.1) Current Ratio:This most widely used ratio shows the proportion of current assets to currentliabilities. It is also known as „Working Capital Ratio‟. It is a measure of short termfinancial strength of business a n d shows whether the business will able to meet itscurrent liabilities. Generally, it is believed that ratio of 2:1 is good and shows acomfortable working capital position. But this ratio i s differing company bycompany. The formula for calculating these ratios as under:- Current Ratio = Current Assets Current Liabilities 60
  61. 61. Current assets: (Rs. in cr)Particulars 2010-11 2009-10 2008-09 2007-08 2006-07Inventories 4118.98 4678.57 4060.67 3480.64 3033.76Debtors 3845.90 3058.64 4083.80 4360.37 2759.44Cash / bank balance 356.55 282.85 161.48 269.22 27.22Loans / Adv. 64693.91 63721.90 55964.02 38906.53 58710.79Fixed Deposites 22090 17948.18 18934074 22148.43 19253.37Total Current Assets 95105.34 89690.14 83204.71 69165.19 83784.78Current liabilities: (Rs.cr)Particulars 2010-11 2009-10 2008-09 2007-08 2006-07Liabilities 35384.31 27244.53 26854.71 22482.94 19835.99Provisions 34775.19 37092.46 30657.98 21828.17 39765.20Total Current 70159.50 64336.99 57512.09 44311.11 59601.19LiabilitiesCurrent Ratio: (RS .cr)Particular 2010-11 2009-10 2008-09 2007-08 2006-07Current Assets 95105.34 89690.14 83204.71 69165.19 83784.78Current Liabilities 70159.50 64336.99 57512.09 44311.11 59601.19Current Ratio 1.36 1.39 1.45 1.56 1.41 Table no:4 61
  62. 62. Current Ratio 1.6 1.56 1.55 1.5 1.45 1.41 1.45 1.39 1.36 Current 1.4 Ratio 1.35 1.3 1.25 2010-11 2009-10 2008-09 2007-08 2006-07 Chart no:4 INTERPRETATION:- This calculation implies that the fluctuation in the current ratio. As compared to previous year the current year‟s ratio shows the better liquidity position. In 2007 this ratio is 1.41:1 and in 2008 the ratio is 1.56:1 which shows increase in liquidity. The reason behind that cash balance and receivable is increasing. But after next three year the ratio is contently decrease. 62
  63. 63. 7.2.1.2) Acid Test / Quick RatioThe Acid test ratio is the ratio between quick current assets and current liabilities andis calculated by dividing the quick assets by the liquid liabilities. Most people believethat liquid ratio is acid test ratio, but sometimes business is able to repay its liquidquick assets. The reason behind that is emergency requirement cash and businesscannot get it from debtors, so quick assets include cash balance +investmentcertificate that can be immediately transferable into cash. The satisfactory ratio is 1:1but lower limit is 0.5:1. Here quick assets do not include stock. Quick Ratio = Quick Assets (Current assets–Inventories) Current LiabilitiesQuick Assets: (Rs.cr)Particulars 2010-11 2009-10 2008-09 2007-08 2006-07Total Current 95105.34 89690.14 83204.71 69165.19 83784.78 AssetsInventories 4118.98 4678.57 4060.67 3480.64 3033.76Quick Assets 90986.36 85011.57 79144.04 65684.55 80751.02Quick liabilities: (Rs.cr)Particulars 2010-11 2009-10 2008-09 2007-08 2006-07Total Quick Liabilities 70159.50 64336.99 57512.09 44311.11 59601.19 63
  64. 64. Quick Ratio: (Rs.cr) Particulars 2010-11 2009-10 2008-09 2007-08 2006-07 Quick assets 90986.36 85011.57 79144.04 65684.55 80751.02 Quick liabilities 70159.50 64336.99 57512.09 44311.11 59601.19 Quick Ratio 1.30 1.32 1.38 1.48 1.35 Table no:5 Quick ratio 1.48 1.5 1.45 1.38 1.4 1.35 1.35 1.32 1.3 Quick ratio 1.3 1.25 1.2 2010-11 2009-10 2008-09 2007-08 2006-07 Chart no:5 INTERPRETATION:-  So, as per the current year ratio of the company is up to some extent satisfactory. This ratio shows the repay ability of the company which is satisfactory as per lower level all over the year. As compared to previous year in current year it is not good. In 2009-10 it is 1.32:1 and in current year it is 1.30:1. 64
  65. 65. 7.2.2) CAPITAL STRUCTURE/LEVERAGE RATIOThe second category of financial ratios is leverage or capital structure ratios.The long term creditors would judge the soundness of a firm on the basis of the longterm financial strength measured in terms of its ability to pay the interestregularly as well as repay the instalment of the principal of due dates or inone lump sum at the time of maturity.7.2.2.1) Debt Ratio:Debt Ratio may be used to analyze the long-term solvency of a firm. The firm may beinterested in knowing the proportion of the interest-bearing debt (also called fundeddebt) in the capital structure. Debt ratio= Total debt Capital EmployedCapital employed = Share Holders’ Funds + Total DebtTotal Debts: (Rs.cr)Particulars 2010-11 2009-10 2008-09 2007-08 2006-07Secured Loans - - - - -Unsecured Loans 17564.26 16405.64 16035.70 12482.71 15109.07Total Debts 17564.26 16405.64 16035.70 12482.71 15109.07Capital Employed: (Rs.cr)Particulars 2010-11 2009-10 2008-09 2007-08 2006-07Share Holders’ 97504.43 87282.61 78735.42 70617.40 61923.93fundsTotal Debts 17564.26 16405.64 16035.70 12482.71 15109.07Capital 115068.69 103688.25 94771.12 83100.11 77033.00Employed 65
  66. 66. Debt Ratio: (Rs.cr)Particulars 2010-11 2009-10 2008-09 2007-08 2006-07TD 17564.26 16405.64 16035.70 12482.71 15109.07CE 115068.69 103688.25 94771.12 83100.11 77033.00Debt Ratio: 0.15 0.16 0.17 0.15 0.20 Table no: 6 Debt Ratio 0.2 0.2 0.17 0.16 0.15 0.15 0.15 0.1 Debt 0.05 Ratio: 0 2010-11 2009-10 2008-09 2007-08 2006-07 Chart no:6 INTERPRETATION:-  The debt ratio is continuously decreasing from 2009 to 2011. Because increase in CE more than total debt. In ONGC Company Capital Employed is more than the Total debts. So the ratio is decreasing from 0.16 to 0.15. 66
  67. 67. 7.2.2.2) Debt-Equity RatioThe ratio establishes a relationship between long term debts and shareholders‟ funds.It reflects the relative claims of creditors and shareholders against the assets of thefirm and in other terms it indicates the relative proportion of debt and equity infinancing the assets of the firm.Debt equity ratio= Long term Debt Shareholders’ funds Long-Term Debt (Rs.cr)Particulars 2010-11 2009-10 2008-09 2007-08 2006-07Secured Loans - - - - -Unsecured Loans 17564.26 16405.64 16035.70 12482.71 15109.07Total 17564.26 16405.64 16035.70 12482.71 15109.07 Shareholders Fund: (Rs.cr)Particulars 2010-11 2009-10 2008-09 2007-08 2006-07Share Capital 4277.76 2138.89 2138.89 2138.89 2138.89Reserves and 93226.67 85143.72 76596.42 68478.51 59785.04SurplusTotal 97504.43 87282.61 78735.42 70617.40 61923.93 67
  68. 68. Debt-Equity Ratio: (Rs.cr)Particulars 2010-11 2009-10 2008-09 2007-08 2006-07Total Long- 17564.26 16405.64 16035.70 12482.71 15109.07term DebtTotal Share 97504.43 87282.61 78735.42 70617.40 61923.93holders FundDebt-Equity 0.18 0.19 0.20 0.18 0.24Ratio Table no:7 Debt-Equity Ratio 0.24 0.25 0.2 0.18 0.19 0.18 0.2 0.15 Debt-Equity 0.1 Ratio 0.05 0 2010-11 2009-10 2008-09 2007-08 2006-07 Chart no:7 INTERPRETATION:-  The ONGC has debt equity ratio indicate, numerator is an equity part while denominator is a debt part. So we can easily say that equity part is more than debt part. 68
  69. 69. 7.2.2.3) Capital Employed to Net worth Ratio:There is yet another alternative way of expressing the basic relationship between debtand equity. One may want to know: How much funds are being contributed togetherby lenders and owners for each rupee of the owners‟ contribution?Formula: Capital Employed (C.E.) Net worth (N.W.)Capital Employed: (Rs.cr)Particulars 2010-11 2009-10 2008-09 2007-08 2006-07Share Holders’ 97504.43 87282.61 78735.42 70617.40 61923.93fundsTotal Debts 17564.26 16405.64 16035.70 12482.71 15109.07C.E. 115068.69 103688.25 94771.12 83100.11 77033.00Net Worth: (Rs.cr)Particulars 2010-11 2009-10 2008-09 2007-08 2006-07Share Capital 4277.76 2138.89 2138.89 2138.89 2138.89Reserves and 93226.67 85143.72 76596.42 68478.51 59785.04SurplusTotal 97504.43 87282.61 78735.42 70617.40 61923.93 69
  70. 70. Capital Employed to Net worth Ratio: (Rs.cr) 2010-11 2009-10 2008-09 2007-08 2006-07ParticularsC.E. 115068.69 103688.25 94771.12 83100.11 77033.00NW 97504.43 87282.61 78735.42 70617.40 61923.93Capital 1.18 1.19 1.20 1.18 1.24Employed toNet worth Ratio Table no: 8 Capital Employed to Net worth Ratio 1.24 1.24 1.22 1.2 1.2 1.19 1.18 Capital 1.18 Emplo 1.18 yed to 1.16 Net worth 1.14 Ratio 2010-11 2009-10 2008-09 2007-08 2006-07 Chart no: 8 INTERPRETATION:-  From the above graph, we can say that in the company, total external contribution is increasing year by year. The ratio increases after the year by year from 1.18 to 1.20 due to increase in C.E. The Reason of increment is Capital Employed is more than the Net Worth. But unfortunately in 2010 and 2011 the capital employed to net worth ratio is decrease. 70

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