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Chapter 1
              Introduction to Topic




1.1. INTRODUCTION
Working capital, also known as "WC", is a financial metric which represents operating

liquidity available to a business. Along with fixed assets such as plant and equipment,

working capital is considered a part of operating capital. It is calculated as current

assets minus current liabilities. If current assets are less than current liabilities, an entity

has a working capital deficiency, also called a working capital deficit. Net working

capital is working capital minus cash (which is a current asset) and minus interest

bearing liabilities (i.e. short term debt). It is a derivation of working capital, that is

commonly used in valuation techniques such as DCFs (Discounted cash flows).

Working Capital = Current Assets − Current Liabilities

A company can be endowed with assets and profitability but short of liquidity if its assets

cannot readily be converted into cash. Positive working capital is required to ensure that

a firm is able to continue its operations and that it has sufficient funds to satisfy both

maturing short-term debt and upcoming operational expenses. The management of

working capital involves managing inventories, accounts receivable and payable and

cash.

Decisions relating to working capital and short term financing are referred to as working

capital management. These involve managing the relationship between a firm's short-

term assets and its short-term liabilities. The goal of working capital management is to

ensure that the firm is able to continue its operations and that it has sufficient cash flow

to satisfy both maturing short-term debt and upcoming operational expenses.

Decision criteria

By definition, working capital management entails short term decisions - generally,

relating to the next one year period - which are "reversible". These decisions are
therefore not taken on the same basis as Capital Investment Decisions (NPV or related,

as above) rather they will be based on cash flows and / or profitability.

   •   One measure of cash flow is provided by the cash conversion cycle - the net

       number of days from the outlay of cash for raw material to receiving payment

       from the customer. As a management tool, this metric makes explicit the inter-

       relatedness of decisions relating to inventories, accounts receivable and payable,

       and cash. Because this number effectively corresponds to the time that the firm's

       cash is tied up in operations and unavailable for other activities, management

       generally aims at a low net count.

   •   In this context, the most useful measure of profitability is Return on capital

       (ROC). The result is shown as a percentage, determined by dividing relevant

       income for the 12 months by capital employed; Return on equity (ROE) shows

       this result for the firm's shareholders. Firm value is enhanced when, and if, the

       return on capital, which results from working capital management, exceeds the

       cost of capital, which results from capital investment decisions as above. ROC

       measures are therefore useful as a management tool, in that they link short-term

       policy with long-term decision making. See Economic value added (EVA).

Management of working capital

Guided by the above criteria, management will use a combination of policies and

techniques for the management of working capital. These policies aim at managing the

current assets (generally cash and cash equivalents, inventories and debtors) and the

short term financing, such that cash flows and returns are acceptable.
•   Cash management. Identify the cash balance which allows for the business to

      meet day to day expenses, but reduces cash holding costs.

  •   Inventory management. Identify the level of inventory which allows for

      uninterrupted production but reduces the investment in raw materials - and

      minimizes reordering costs - and hence increases cash flow; see Supply chain

      management; Just In Time (JIT); Economic order quantity (EOQ); Economic

      production quantity

  •   Debtors management. Identify the appropriate credit policy, i.e. credit terms

      which will attract customers, such that any impact on cash flows and the cash

      conversion cycle will be offset by increased revenue and hence Return on

      Capital (or vice versa); see Discounts and allowances.

  •   Short term financing. Identify the appropriate source of financing, given the

      cash conversion cycle: the inventory is ideally financed by credit granted by the

      supplier; however, it may be necessary to utilize a bank loan (or overdraft), or to

      "convert debtors to cash" through "factoring".




KINDS OF WORKING CAPITAL
Source: www.ushamartin.com




Composition of Working Capital:
Current Assets:                       Current Liabilities:

1. Stock of Inventory:                1. Accounts Payable:

  Raw Material, Work in Progress,       Sundry Creditors, Bills Payable.
  Finished Goods.

2. Accounts Receivable:               2. Short-term borrowings.

  Sundry Debtors, Bills Receivable.
3. Short-term loans & advances.          3. Outstanding Expenses

4. Short-term investments.               4. Provision for Taxation or Tax

                                            Payable.
5. Prepaid expenses.                     5. Dividends Payable.

6. Accrued or Outstanding Income.        6. Short-term dues to employees.

7. Cash in Hand.                         7. Bank Overdraft.

8. Cash at Bank.                         8. Minority Interest.




1.2. OBJECTIVE OF THE STUDY
The objective of the Thesis is to study the different components of current assets and

liabilities and the extent of funds tied up in each the trend of changes of each

component to find out the relationship between working capital and profitability To find

out the impact of Working Capital on Economic Value Addition to the stake holder




1. To set up the required fund for running the operating activities of the

  firm.

2. To forecast the required amount of gross & net working capital with
individual breakup of the components.

3. To fix up the optimum level of working capital & to change the same

  according to the need of the situation.

4. To take care for maintaining the liquidity position of the firm up to the   desired level.

5. To increase the profitability of the firm by striking a balance between

liquidity&profitability.




1.3. IMPORTANCE OF THE STUDY


The importance working capital in any business can hardly be over-emphasized. To run

a business smoothly & efficiently, it is essential to have an adequate amount of working

capital. Followings are the advantages that a business firm gets for having adequate

amount of working capital or the working capital facilitates a business in the following

way:

1. Constant supply of raw material.

2. Constant supply of saleable product.

3. Regular payment of operating expenses.

4. Provide adequate solvency to the business.

5. Opportunity of getting loans.
6. Increase in Goodwill.

7. Possibility of getting cash discount.

8. Helps the business to solving the crisis situations.

9. Exploitation of favorable market conditions.

10. Increase in efficiency & productivity.

11. Increase in profitability.

12. Regular payment of Dividend.

13. Research & development.

14. High morale of employees.

It is also to be noted that excess of working capital is a vice for a firm like inadequacy of

working capital. Excess working capital blocks huge amount capital in a firm which

remains idle for longer period & gives no return to the business.
1.5 METHODOLOGY OF THE STUDY
1.5.1. TYPE OF RESEARCH
This thesis “A Study on Working Capital Management & Profitability Analysis of

Usha Martin Ltd” is an analytical research.

Analytical Research is defined as the research in which, researcher has to use facts or

information already available, and analyze these to make a critical evaluation of the

facts, figures, data or material.

The thesis includes finding of primary data and secondary data. It includes surveys and

fact-finding enquiries. So, the project basically covers description of state of affairs, as it

exists at present. Here in this case, the researcher does not have control over the

variables. Here, the job done as a researcher is to use the facts and information already

available. The research is done with the aid of the annual reports, the company

database textbooks and the observation and interaction being the only source of

primary data whatever is used. The same set of information is analyzed to make the

critical evaluation of the material.

With the given nature of research this is an analytical type of research wherein the

analysis of the existing set of affairs are used to arrive the effect of working capital

management         on     the       return   and     profitability   of    the     company.
1.5.2. INSTRUMENTATION TECHNIQUES

 The techniques used for the collections of the financial statements, data and other

 information as follows. The primary data were collected by interaction and observation.

 The secondary data were collected from the published annual reports, budgeted

 manuals and the audited balance sheet and profit and loss account, database of      the

 company.




 1.5.3. ACTUAL COLLECTION OF DATA
 The thesis makes use of both the primary as well as secondary data.

 Primary data were collected by observation and interaction. In the course of time, the

 finance manager and his executives, the purchase manager and his executives and the

 store manager and his executives provided very appreciable co-operation during the

 interaction.

 As for the secondary data, the various published materials were used along with the

 database. The annual reports, fact-sheets, budgeted manuals and the audited balance

 sheet and profit and loss account, accounting and financial database of the company.




 1.5.4. TOOLS USED FOR ANALYSIS OF DATA
 The data were analyzed using the following financial tools and techniques
 · Ratio analysis
 · ABC analysis
· Statement of changes in working capital


1.5.5. OTHER SOFTWARE USED FOR DATA ANALYSIS
 The application software used for the typing of data, analysis of data, and presentations

 of different charts, tables, graphs etc is Microsoft Word and Excel. MS Excel made a

 very handy tool for the analysis of the data. It was rigorously made use of during the

 calculation and comparisons among the data, graphical and tabular presentation,

 calculation of various ratios, their analysis




 1.6. LIMITATION OF THE STUDY

     •   The analysis is limited to just 4 years. The study conducted deals only with

         impact of working capital on profitability without taking into consideration the risk

         I involved.
•   The study conducted throws light only on the impact of working capital on a

    minuscule part of strategic management namely EVA.

•   The figures and facts claimed in the annual reports and in other forms are taken

    a




                       .
Chapter -2
                        Literature Review




REVIEW OF LITERATURE



Sam D'Costa wrote an article “Working Capital – a Tool to Judge your Company’s

Efficiency” on the subject of


The most repeated maxim amongst financial managers       is "Cash is the lifeblood of

business". A business owner always look that his cash flow to business is smooth and
use it for generating profit. When a business is running smoothly and taking in profit,

then it will undoubtedly have cash surpluses. If your business      does not have cash

surplus, expect to go out of the business.

1. Cash Flow forecasting is what working capital management is all about. Your forecast

should include factors like fluctuating market cycles, unforeseen events, loss of

customers and your competitor's strategy. Also, unforeseen demands and its effect on

your        business        all       need         to       be        factored        in.

2. There is nothing wrong with putting together a contingency plans just in case of

unexpected events. It's true that market leaders manage uncertainty much better than in

years past, but you really should have risk management procedures for your company

as insurance.


Steve Bush wrote an article “Commercial Loans and Working Capital Financing

Special Reports” on the subject of

A prudent approach to working capital management is becoming more difficult for most

commercial borrowers. Commercial loans have always been more complicated than

realized by most business owners. Recent financing difficulties involving commercial

mortgages, SBA loans and business cash advances have added significantly to the

complexity of the entire commercial lending process.

This article will provide a brief overview describing some of the business financing

resources which should be thoroughly evaluated by commercial borrowers as part of

their prudent approach to successful working capital funding. All of the recommended

sources are free and available online. Business owners should contact the author

directly or use one of the leading internet search engines to locate the most appropriate
sites.




Jamie Liddell wrote a article “Making the Link Between P2P and Working Capital

to       Create   a   Robust    Governance       Framework”     on    the    subjectof

How changes made to cope with adversity can prove advantageous in other areas of

the organization. One of the lesser-trumpeted consequences of the credit crunch has

been a renewed (and some might say long overdue) attention paid to working capital

management: with liquidity the watchword organizations have been scrambling to

release potentially significant sums tied up in their P2P and O2C processes, with every

saving going some distance to staving off a potentially business-critical shortage of

cash. But while the short-term benefits of such new-found C-level interest in such

processes can be summed up by the bottom line, longer-term the ramifications could be

a lot more profound – and positive – thanks to the enhanced governance frameworks

resulting from companies' increased attention to detail.


Stephen Bush wrote a article “Commercial Loan Help for Avoiding Problem

Working Capital Lenders” on the subject of

Avoiding critical problems is vital for a small business owner seeking help with

commercial loans. Successful working capital management especially requires that

problem lenders be avoided for business loans and commercial mortgage financing.

One of the most serious commercial loan situations is a small business commercial

lender that causes problems for their commercial borrowers on a repeating basis.

Commercial borrowers should be prepared to avoid certain problematic commercial
lenders unless alternative working capital loan options are impossible.



This article will not name specific lenders to avoid. However, we will describe the

importance of avoiding "problem commercial lenders". Key examples will be provided to

illustrate why prudent commercial borrowers should be prepared to avoid a wide variety

of existing commercial lenders when seeking viable commercial mortgage and small

business                               financing                              strategies.



Suzanne wrote a article “Working Capital: the Life Blood of Business” on the subject of

Successful business thrives on smooth cash flow. This is no jargon but a simple truth oft

repeated and realized by the financial managers around. The top priority of any small

business is to stay solvent and ensure the availability of adequate working capital. This

capital is utilized for the payment of rent, payroll, and other operating costs as is

involved in the various stages of production and services. Irrespective of the success of

any business, there is always a possibility of scarcity of funds on account of some

unexpected circumstances. Herein arises the need for securing adequate fund to

manage all your business obligations and provide enough financial security for the

future as well.

Lack of adequate expendable cash makes it difficult for an organization to meet day-to-

day expenses. Since businesses always run the risk of unexpected expenses, it

becomes even more important to secure some fund in order to avoid unpleasant

circumstances
Stephen Bush wrote an article “Working Capital Financing Success with Realistic Choices”

on the subject of Being realistic when seeking new working capital financing and

commercial loans should be a key goal for all commercial borrowers. Business owners

should be prepared to encounter stark changes impacting most business financing and

working capital loans. Although it is very likely that either the terms or kind of financing

will be different from previous commercial financing arrangements, with proper

preparation most business owners will still be able to obtain new financing despite these

new and difficult challenges.

In view of volatile conditions which have recently impacted credit markets, this will not

be a simple task. The extensive misinformation and confusion that there has been about

business financing and working capital availability illustrates a common example of the

problem. One of the most difficult challenges for commercial borrowers is obtaining

more accurate information about what is realistically possible.

Terry H. Hill wrote an article “Making Your Working Capital Work” on the subject of

The more rapidly that your business expands, the greater the need for working capital

becomes. If you have insufficient working capital – the money necessary to keep your

business


   Functioning – your enterprise is doomed to fail. Many businesses, that are profitable

on-paper, are forced to "close their doors" due to their inability to meet short-term debts

when they come due. However, by implementing sound working capital management

strategies, your enterprise can flourish; in other words, your assets are working for you!
At one time or another, most businesses have the need to borrow money in order to

finance their growth. The ability to obtain a loan is based on the credit worthiness of a

business. The two major factors that determine credit worthiness are the existence and

extent of collateral and the liquidity of the business. Your company's balance sheet is

used to assess both of these factors.          On your balance sheet, working capital

represents the difference between current assets and current liabilities — the capital

that you currently have to finance operations.



Stephen Bush wrote a article “Avoid Key Credit Card Processing and Working

Capital Mistakes” the subject of


Although it will not be easy, avoiding key credit card processing and business cash

advance mistakes is likely to eliminate business finance problems that often have

disastrous consequences. The use of proper precautions is likely to produce improved

working capital management results.



In our experience, the potential difficulties involving factors discussed below are more

serious and common than most business owners expect. While we will not be

addressing all possible merchant cash advance and working capital loan mistakes in

this article, we will include several of the most severe issues to anticipate.

The immediate impact is a sudden influx of inexperienced residential mortgage brokers

and lenders attempting to provide working capital management advice for credit card

processing and business cash advance services. As we have written about extensively,

business financing is infinitely more complex than residential financing.
GAUTAM KOPPALA wrote a article “Working Capital from Pome by Gautam Koppala”

on the subject of


The management of short-term assets, also known as working capital assets, is a very,

very important management function. As we will see, mismanagement of these assets,

particularly inventories and accounts receivable, can consume resources that would

otherwise be used to support and strengthen the business. It is important to recognize

that management of these assets is a comprehensive function. One cannot focus on

only one of these asset categories at a time.


We will also see that there is a direct relationship between the management of short-

term assets and the management of short-term liabilities. As we noted earlier, financial

transactions that affect one part of the Balance Sheet ultimately affect another part,

because the Balance Sheet always balances. Understanding the other side of the

Balance Sheet effect helps us understand the impact of management actions




Steve Bush      wrote a article “Working Capital Loans and How to Avoid Fake

Articles” on the subject of


In a recent commercial loan report, we described the increasing use of fake articles

about working capital loans on a variety of internet sites. In our prior AEX Commercial

Financing article, we provided two practical strategies to avoid the publishers of fictitious

information concerning commercial mortgages and other business financing. To avoid

repetition, please contact us directly regarding recommendations which were previously

discussed. In the current report we will provide more detailed suggestions for avoiding
this growing problem.



The use of reputable publication sites is an effective and important way to avoid fake

articles about business cash advances and commercial real estate loans. Such sites will

employ their best efforts to eliminate articles for which the author does not have

ownership rights. These responsible and high-quality sites will require review of articles

by a human editor prior to publication


Steve Selengut      wrote an article “Investment Performance Analysis Using the

Working Capital Asset Allocation Model”2008 on the subject of


The use of Issue Breadth and 52-week High/Low statistics for navigating the sea of

uncertainty, and Peak-to-Peak interest rate and market cycle analysis are much more

useful as performance expectation barometers than the DJIA was ever meant to be.

When did it become vogue to think of Investment Portfolios as sprinters in a twelve-

month race with a nebulous array of indices and averages? Why are the Masters of the

Universe rolling on the floor in laughter? They can visualize your annual performance

agitation ritual producing fee generating transactions in all conceivable directions. An

unhappy investor is Wall Street's best friend, and by emphasizing short-term results in a

super bowlesque environment, they guarantee that the vast majority of investors will be

unhappy          about          something,          all        of         the        time.



Your portfolio should be as unique as you are, and I contend that a portfolio of individual

securities rather than a shopping cart full of one-size-fits-all consumer products is much

easier to understand and to manage. You just need to focus on two longer-range
objectives: (1) Growing productive Working Capital, and (2) Increasing Base Income.

Neither objective is directly related to the market averages, interest rate movements, or

the                                    calendar                                     year.



Alfred Anderson wrote an article “Manage Working Capital With Cash Advance” 2006 on

the subject of

The success of an organization depends on how effectively its working capital is

managed. Day to day operational expenses pertaining to advertising, salaries, rent etc.

needs to be met on a regular basis and thus proper management of working capital is

essential. Managing working capital typically refers to strategies being implemented to

maintain the requisite amount of operating liquidity on a day to day basis. This involves

management of a company’s short term assets and liabilities to ensure sufficient cash

flow   to    satisfy   short    term    debt    and    other    operational   expenses.



Working capital decisions are short term which is based on cash flows and profitability

of a business. Hence measurement and estimation of the profitability is vital. Cash flows

can be measured with the help of cash conversion cycle i.e. the time required to convert

raw materials into finished products which is then converted into sales.



Michael Koslow wrote a book “Your Success: It’s All About Working Capital Strategy” on

the subject of
This area of finance allows companies to obtain working capital for their business by

releasing liquidity tied up in assets. Asset-based lending is growing faster than general

lending because it is generally less risky, according to Paul Hancock, a managing

director in asset-based lending at JPMorgan, as told to The Financial Times.

"Both the securitization and traditional leveraged loan markets have been significantly

less active, and businesses are increasingly considering alternatives for their funding

needs," Hancock says. "In times of economic uncertainty and earnings volatility,

companies can sometimes find it easier to manage their finances with their balance

sheet rather than earnings or cash flow covenants."




James Leong wrote a book “Managing Working Capital” on the subject of

Accounting defines working capital as Current Assets less Current Liabilities. It is also

known as Net Current Assets. Current assets are those which are considered liquid and

are convertible or expected to be realizable in cash within a period of 12 months from

the date of the financial report. Common examples include cash, inventories, accounts

receivables, prepayments and marketable securities. Current liabilities are those which

are expected to be repaid within a period of 12 months. Examples include bank

overdraft, short term borrowings, accounts payables and accrued expenses.




Operationally, working capital indicates the ability of the company to finance its current

operations and to meet obligations when they mature. It measures the companys ability

to pay daily bills from a liquidity

standpoint.
Peter Kennedy wrote a article “Government bond Markets: Shaw Capital

Management February Newsletter”          on the subject of

Shaw Capital Management Korea February Newsletter: There was always the risk that

the funding requirements resulting from recent policies, and particularly from the

measures to counter the latest recession, would prove to be a massive burden for the

global bond markets, and this has now proved to be the case. The Dubai government

appears to have been rescued by help from Abu Dhabi; but it is still not clear whether

there will be help for Greece and other periphery countries of the euro-zone that are in

difficulties, and doubts have also been expressed about countries outside the euro-

zone, including the UK, if central banks do not implement "exit strategies" carefully, and

credible plans to reduce the massive fiscal deficits are not introduced fairly quickly.

Capital Management Korea February Newsletter: Debt issuance rose to over $2 trillion

in 2009 to finance this deficit, and to replace maturing bonds; and the latest decision to

take advantage of the unexpected windfall from the repayment of bank bail-out funds

that are no longer needed to provide new resources for job creation is a clear indication

that there are no plans to take early action to reduce the deficit.

Marciano Guerrero wrote a article “Working Capital And Current Ratio - 2 Useful

Measures Of Liquidity And Solvency” on the subject of

The Balance Sheet is one of the four required financial statements that accountants

prepare for business owners and managers. This statement shows the assets, liabilities,

and the owner's equity (capital).
The balance sheet is a reflection of the Accounting Equation (Assets = Liabilities +

Owner's Equity). The accounting equation is a simple-minded equality. It informs the

reader of the balance sheet to whom the assets (left side of the equation) belong: the

creditors (liabilities) and the owner (owner's equity).

So, in all businesses, the two parties that can claim ownership of the assets are

creditors and the owner. And in the case of a corporation 'the owner' will be many and

are called shareholders.

Stan Prokop wrote a article “How Does My DSO Affect Cash Flow and Working

Capital” on the subject of

Most business owners and financial managers know the importance of their investment

in accounts receivable. The method by which the largest corporations in the world, and

a small company measure collection activity, is called DSO, or ‘Collection Period ‘. DSO

stands              for            DAILY                  SALES            OUTSTANDING

Business owners can calculate this number very quickly, and we recommend it be done

regularly, typically monthly, quarterly, and certainly annually. It’s a great business

measurement of your success, and lenders also focus in on this number also.

We point out that the DSO calculation is a reflection of one point in time – that’s why it is

important to monitor the overall trend of DSO on a longer term basis. Naturally all good

businesses age their receivables, so they know how old they are and focus on past due

accounts.



Jeff Bross wrote an article “Accounts Receivable Factoring Can Be A Powerful

Working Capital Tool” on the subject of
The way factoring receivables works is the factoring company (factor), provides cash for

your invoices after you invoice your customers. Many factoring companies use the term

purchase your receivables, but in reality they are really just advancing funds against

your receivables as the primary collateral for the transaction. True no recourse factoring

is not very common these days as most companies that need factoring do not want a

factor calling customers for collections and payments. So if the factor sets your

discount fee at 2.5%, the factor keeps 2.5% of the invoice total as their fee for providing

the funds immediately. Most factoring companies will advance 80% to 90% of the total

up front, and then provide your business the remaining amount 20% to 10%, less your

discount fee, once the invoice is paid by your customer.


You are normally given up to 90 days for payment to arrive and if the payment does not

arrive the factor will come back you for collection. It's important to keep in mind that

today's factoring is mostly full recourse so you will need to manage the relationship with

your customers and make sure payments still arrive within a reasonable time period.




DR.R.SRINIVASAN wrote a article “WORKING CAPITAL FINANCING –BOON TO

BUSINESS” on the subject of

It is widely accepted that every successful business must have a strong working capital

position. It is in this context; an attempt was made to explain the concept and various

determinative factors influencing net current assets below:

Gross working capital refers to working capital as the total of current assets. That is to

say,      Gross       working        capital      =        Total     current       assets.
Net working capital refers to working capital as excess of current assets over current

liabilities. In other words net working capital refers to current assets financed by long

term funds or capital employed of the business.

Accordingly, Net working capital = Current assets – Current liabilities

The net working capital position of the firm is an imperative contemplation, as this will

determine the firm’s profitability and risk. Here the profitability refers to profits after

expenses and risk refers to the probability that a firm will become technically insolvent

where it will be unable to meet obligations when they become due for payment.




Steve Jones wrote an article “Finance for Working Capital - Bank Overdrafts”2004on the

subject of

This is the most common form of finance used to fund working capital and the one with

which most business owners are familiar. This is where the bank account is allowed to

go overdrawn up to a pre-agreed limit.

Overdrafts are straightforward to arrange and are provided by most banks. The limit will

be set at a figure appropriate for the business and at a level where the bank considers

the risk to be acceptable. The actual amount available will therefore vary significantly

from business to business. Security may or may not be required A rapidly expanding

business could easily out grow its overdraft facility and find itself constantly close to the

agreed borrowing limit. As there will always be a finite amount of money
that a lender can provide, this in itself may be a restricting factor in the growth of the

business. In this situation it will be necessary to consider and explore other types of

finance.




Stan Prokop wrote a article “How Do Banks Exert Control And Influence On

Business Loan And Working Capital Facilities “2010-06-17 on the subject of

This is because when a customer has to service the additional non- bank debt they

might be unable to service the banks loans. Banks have very well known and published

cash flow ration and they want to ensure their customers can meet these rations on the

bank debt. Naturally if a bank feels comfortable with a customer growth and cash flow

profits they are much more likely to approve a third party financing . If they aren’t

comfortable they may ask the company to at lease temporarily defer bonuses,

dividends, or, in the case of a public company, a stock repurchase.

Bankers of course usually know the company very well, as a relationship and financial

history has developed over the years. They will often want to have input into the

company’s growth direction in an effort to ensure the customer is not going down a path

that in their opinion, might lead to liquidity loss or profitability loss

Jackie Johnson wrote a article “How Accounts Receivable Factoring Can Solve

Your Working Capital Issues”2008 on the subject of
The beauty of using this cash flow tool comes in the simplicity of it all. They purchase an

invoice from you at a rate that is discounted from the true invoice value. This discount

allows them to make a profit when the original customer settles the invoice, which is

their motivation for engaging in the transaction. The benefit for selling the invoice comes

in receiving the money immediately, which can negate any potential difficulty that may

be arising from a lack of cash flow. Again, using the skills and knowledge of companies

who perform accounts receivable factoring services can ensure the liquidity of many

firms, even in the most troublesome of times.



The firm who sells the invoice may be the one who benefits the most but it is clear that

the factor is doing a great level of business too. If they have enough cash to cater for

their own short term needs as well as having money left over, it makes sense to have

this excess money working for them. The guaranteed profit that arises from the discount

applied to the invoice rate ensures the firm will receive more money in the future, which

can help a business plan ahead.



Jason Hulott wrote a article “Short term Business Loans: Feasible way to raise

working capital”2005on the subject of

With assist of short term business loans people can avail easy case for any of their

business and other purposes. It may include anything like pay off salary & wages of

employees, business promotional expenses, purchasing a land for office premises,

paying due taxes, buying new machinery, and advertisement expenses, office interior

expenses etc. There is no restriction over the usage of loan amount.
These loans are unsecured in nature that avails you money in the ranges of £1000 to

£25000 for the term period of 1 to 10 years. You may have complete freedom to select

the amount range as per your convenience and repaying capability. You can avail this

loan facility at any stage of your business. But, keep in mind that never make delays in

payment as it cause high penalty charges. Plus, timely repayment of money can also

assist you in strengthen your financial position.

Terry Cartwright      wrote a article “Cash Flow Management of Debtors And

Creditors In A Credit Crunch”      on the subject of

The objective is to obtain payment from customers as fast as possible improving cash

flow and minimizing the risk of bad debts and not being paid at all.

Payment terms offered to customers should be clearly stated and fixed as standard

accounting figures according to the amount of funding the business is prepared to offer

its clients. Because that is exactly what credit terms to customers is, free cash funding

in          exchange              for            eventual         sales          income.

Consideration should be given to using a cash discount system to encourage sales

invoices to be paid faster. In some businesses it would be appropriate to obtain up front

deposits and scheduled payments. Review this practise to obtain a greater proportion of

payments                faster              to              improve             liquidity.



American Journal of Business on An Analysis of Working Capital Management

Results across Industries

Firms are able to reduce financing costs and/or increase the funds available for

expansion by minimizing the amount of funds tied up in current assets. We provide
insights into the performance of surveyed firms across key components of working

capital management by using the CFO magazines annual Working Capital Management

Survey. We discover that significant differences exist between industries in working

capital measures across time. In addition, we discover that these measures for working

capital change significantly within industries across time.



The IUP Journal of Accounting Research and Audit Practices on Inventory and

working capital Management: An Empirical Analysis

The working capital management refers to the management of working capital, or

precisely to the management of current assets. A firm’s working capital consists of its

investments in current assets, which includes short-term assets—cash and bank

balance, inventories, receivable and marketable securities. Therefore, the working

capital management refers to the management of the levels of all these individual

current assets. On the other hand, inventory, which is one of the important elements of

current assets, reflects the investment of a firm’s fund. Hence, it is necessary to

efficiently manage inventories in order to avoid unnecessary investments. A firm, which

neglects the management of inventories, will have to face serious problems relating to

long-term profitability and may fail to survive. With the help of better inventory

management, a firm can reduce the levels of inventories to a considerable degree e.g.,

10 to 20% without any adverse effect on production and sales.

European Financial Management, on International working capital practices in the

UK
A new order depletes that inventory significantly. Although payments from Medicare and

other carriers may lag, expenses including loan repayment, must be paid and inventory

replenished. However, additional credit is not available until the existing line has been

repaid. Consequently, unless you have established a credit line sufficient to meet the

cash flow requirements you might need in the future, loans won’t work because they do

not fluctuate with your revenue cycle or expand with your growth




Journal of International Business Studies on An International Study of

Management Perceptions of the working capital Process

Working capital literature is rather limited and the process of managing short‐term

resources is not understood well by he academicians. In contrast the corporate

managers are continuously involved in the working capital decision-making process, but

their perspective is limited to the practice of their firm. In order to fill this gap in the

working capital literature, a study of management perceptions of the working capital

process was undertaken. A survey was used to collect the information from the sample

of marketing, production, and financial executives in large corporations in Belgium,

France, India and United States. The study intercepts management ranking of working

capital objectives and indicates the need to improve finacial planning models to include

explicitly short–run objectives; further, predictability of cash inflows and outflows is

examined and the potential factors affecting the predictability are evaluated
Studies in Agricultural Economics on The interpretation of ccc and its elements,

working capital management

Those literary sources, which are about the interpretation of the working capital in a

context with the financing strategies of the companies, about the related financial

indices, and the counting methodological questions of all these, could not be called

poor, nor unified. The deficiency of defining the concepts that give the theoretical basis

and their vocational tenability, the controversial interpretation and the unclearness of the

related methodological questions creates several problems. The problematic concepts

are working capital net working capital, the circulation of current assets and working

capital management etc. The root of the problems could be found on the other hand in

the unclearness of the theoretical contexts, in the deficiency and vocational tenability of

the defining of the related concepts and categories. We define the concepts of working

capital, net working capital based on the results of our several years of research work.

30Journal of Business Finance & Accounting on Does working capital

Management Affect Profitability of Belgian Firms

The relation between working capital management and corporate profitablity is

investigated for a sample of 1,009 large Belgian non-financial firms for the 1992-1996

period. Trade credit policy and inventory policy are measured by number of days

accounts receivable, accounts payable and inventories, and the cash conversion cycle

is used as a comprehensive measure of working capital management. The results

suggest that managers can increase corporate profitability by reducing the number of

days accounts receivable and inventories. Less profitable firms wait longer to pay their

bills.
31Policy Research working Paper Series on Why liberalization alone has not

improved agricultural productivity in Zambia: the role of asset ownership and

working capital constraints

The authors use a large panel data set from Zambia to examine factors that could

explain the relatively lackluster performance of the country's agricultural sector after

liberalization. Zambia's liberalization significantly opened the economy but failed to alter

the structure of production or helps realize efficiency gains. They reach two main

conclusions. First, not owning productive assets (in Zambia, draft animals and

implements) limits improvements in agricultural productivity and household welfare.

Owning oxen increases income directly, allows farmers to till their fields efficiently when

rain is delayed, increases the area cultivated, and improves access to credit and

fertilizer markets. Second, the authors reject the hypothesis that the application of

fertilizer is unprofitable because of high input prices. Rather, fertilizer use appears to

have declined because of constraints on supplies, which government intervention

exacerbated instead of alleviating.

32PR NEWSWIRE           , Published a article on the subject of             Equity Indexed

Annuities have a place in many people's retirement accounts. Unfortunately, they

aren't as well known as variable or fixed annuities and customers and sales reps often

overlook them because of lack of awareness. Equity indexed annuities provide a

method of fighting inflation, participating in the market and still remaining risk free.



Equity indexed annuities are a blend of the fixed annuity and the variable annuity. They

offer a base interest rate the company guarantees regardless of market conditions. In
this way, they're much like the fixed annuity. They also track a specific equity index,

such as the S&P 500, and give a percentage of the growth to the policyholder if the

market increases. The percentage varies from policy to policy.



There are difference in the percentage you receive and differences in caps. A cap on

the percentage is the highest amount the policyholder gets regardless of the market

conditions. Sometimes caps are as low as 8 to 10 percent



PR Newswire published a article .        on the subject of Ten papers present recent

research in the field of financial planning and forecasting. Journal of Economic

Literature.


An Empirical Examination of The Intraday Return Volatility Process (S.

Rahman, K.P. Ang). The Valuation of New Product Introduction Under

Uncertain Competition: A Real Option Approach (S.-S. Chen, et al.). Earnings,

Dividends, and Equity Value of Multinational Firms (A. Riah-Belkaoui).

Benford's Law and Its Application in Financial Fraud Detection (K. Kumar, S.

Bhattacharya). Estimation of the Degree of Integration in the U.S. Maturity

Rates Using Semi parametric Techniques (L. Gil-Alana). On Country-Fund

Price Behavior-An Empirical Analysis of Co integrating Factors (T. Chiang, D.

Kim). Strategic Capital Budgeting: the Abandonment Option with Political Risk

(E. Clark). Time Series Model Complexity and Firm Valuation: the Case of AR1

Firms Versus Non-AR1 Firms (B.-H. Bao, D.-H. Bao). Debt Covenant Violation

and the Value Relevance of Accounting Information (W. Cready, et al.). What's
Next: Merger in the Lebanese Banking Sector (A. Charbaji).




 PR Newswire published a article on the subject of Usually owning to the fact that

 the debtor has a regular and consistent job, you as the judgment recovery specialist

 can garnish the wages relatively quickly, in such a way that the debtor is able to

 sustain his lifestyle at the same time is able to pay the judgment amount, provided that

 there no other garnishments with a higher priority than yours, levied on him. However,

 there is a high possibility of the debtor quitting his job, right after he is served with the

 wage garnishment notice. If, in case, this happens its back to square one for you, as

 judgment recovery professional.

 Generally, debtors or defendants who fend for themselves and have a home based

 business; it becomes excessively harder for the judgment recovery specialist to

 recover the judgment owed. When such a case arises, special tools like an

 assignment order of third party levies are used by the judgment recovery specialist.

 These will be discussed at length in other articles on judgment recovery, once I am

 done with them.




Infiniti Research Limited, published a article on the subject of
The reputed Las Vegas financial planners can perform proper analysis and make proper

recommendations on every major asset class. They not only make recommendations

depending on the bonds and stocks but also on several other aspects. These planners

include the natural resources, commodities, currencies and real estates. The

experienced planners know how these investments would be taxed. They can

determine the way in which they are to be used within investment portfolio for achieving

the long term as well as the short term goal of their clients.



A person who wants to get the best wealth management should contact a private wealth

manager than contacting the retail brokerage firms. The private wealth management

firms have a financial team and make sure that all investments have a proper

consistency. They provide the planning through the account of his lawyer or his client.

These firms coordinate all wealth of a person as they consider coordinated approach as

the best approach for financial services.

Decision Resources, , Pages: 23 publised a article on the subject of


The Federal Reserve can control interest rates by expanding or contracting the quantity

of money. It can control the financial markets with its “Open Market Operations.” It can

create new money to increase its member's bank reserves at any time. It can negotiate

with foreign banks on monetary policies without congressional approval or knowledge.

And it can do all of this with virtually no oversight by any elected representative of the

people. Even the Government Accounting Office responsible for auditing all government

agencies, has no auditing authority over the Federal Reserve, a private corporation not

a government agency
Without the ability to judge the cost of capital by the true market value of interest rates,

determined by the availability of savings for investing and future consumption, no free

market can correctly judge its financial health. These false signals along with

government regulations are what create booms and busts in our economy, not free

market actions.




    Espicom Business Intelligence Ltd, May , published a article on the subject of


    The core idea of retirement planning is to save enough money for your old age days

   and a smart investment plan made by a financial consultant will also be able to

   ensure that your old age is the golden period of your life financially. Property is one

   of the biggest assets you can have financially and making good money out of

   investments and savings is possible by employing independent broker dealers that

   can guide you to converting your property into an investment that delivers high

   returns. Investing in the right insurance policies can also save your money efficiently

   especially in areas like auto insurance or health insurance where without a good

   insurance a lot of your money might get spent for the smallest hiccups in your

   personal health.



   Wealth is the one language that everyone understands across the world and

   maintaining this wealth is essential if you want yourself to have an open

   communication with a good life.
Report from the India Press Release brought to you by the Hindustan Times

MUMBAI, India, -


The Bombay Stock Exchange of India made the following corporate announcement:

Ranbaxy Laboratories Ltd., has informed BSE that Basics GmbH (Basics) based in

Leverkusen Germany, a wholly owned subsidiary of the Company on February 13,

2007, has announced that the Company's products has been selected by 16 Allgemeine

Ortskrankenkassen (AOK), Germany's largest General Local Health Insurance, for

listing. Basics/Ranbaxy is the only Indian Company in the AOK list. This new

agreement, listing specific products, is the first of its kind.


The Star (South Africa) published a article on the subject of In 1933, by Executive

Order of the President (FDR), all Americans were required to surrender their gold to the

government. This took away our right to trade in the most respected of all possible

commodities used to secure value in our economic exchanges. Not only did government

confiscate our gold, they also prohibited redemption of U.S. Dollars for gold by any

American. Of course, the international bankers were still allowed to exchange dollars for

gold. Now you know where our gold went. FDR pulled the plug on value-backed money

for American enterprise, dooming free market capitalism to a slow and painful death.

In 1971, President Nixon reneged on the “Breton Woods Accord” removing the

international gold redemption for the U.S. dollar. Unfortunately, it was too late. It is

probable that the international bankers already own most of what was our country's

gold. No longer would our dollars be backed by anything other than our central bankers

and government's “Good Faith.” No free market can exist without the right to exchange

productive value for productive value.
Ankit Agarwal on January         published a article in Finance Friday on the subject

of

Its a new year and a economically promising one at that. However, the stock markets

have been playing a see-saw ride for some time now with no major fluctuations.Sectoral

Investing has lost its flavor for some time now but analyzing a particular sector still helps

one shortlist the stocks to invest in. Recently, we had covered a discussion on the IT

Sector’s position in the Stock Market. One other sector that looks set for some real

action is the HealthCare sector. The Health Care sector picked up some real peace

during the last year after March where the BSE HealthCare dropped to its maximum

low(CY 09) and from then on, it has been only an uphill journey. A look at the charts of

the BSE Healthcare index is a good indicator of the good run the Healthcare based

stocks have had in the Indian Stock Markets.




Cheng F. Lee November Wrote a book                 “Advances in financial planning and

forecasting, Volume 11” on the subject of


This paper presents a comprehensive analysis of the distributional and time-series

properties of intraday returns. The purpose is to determine whether a GARCH model

that allows for time variance in a process can adequately represent intraday return

volatility.


This paper investigates how a stochastic competition process in a two-factor real option

model could affect the value of future product development opportunities. Our results

also indicate that product development opportunities are more valuable
This paper develops and tests a valuation model, whose main prediction is that equity

value is a function of earnings, dividends and book value, where the function depends

on the relative level of multi nationality.


This paper has discussed Bedford’s law, which explains that the leading (first or

leftmost) digit in a series of natural numbers is not evenly distributed among the digits 1

to 9. The main purpose of this study actually seeks to explore a new methodological

approach to data mining that can be of some real practical value; especially to the

auditors and forensic accountants in detecting financial frauds.

Alice C. Lee, John C. Lee, Cheng F. Lee Wrote a book                   “Financial analysis,

planning & forecasting: theory and application” on the subject of

Based on the authors' extensive teaching, research and business experiences, this

book reviews, discusses and integrates both theoretical and practical aspects of

financial planning and forecasting. The book is divided into six parts: Information and

Methodology for Financial Analysis, Alternative Finance Theories and Their Application,

Capital   Budgeting      and    Leasing       Decisions,   Corporate   Policies   and   Their

Interrelationships, Short-term Financial Decisions, Financial Planning and Forecasting,

and Overview. The theories used in this book are pre-Modigliani Miller Theorem,

Modigliani Miller Theorem, Capital Asset Pricing Model and Arbitrage Pricing Theory,

and Option Pricing Theory. The interrelationships among these theories are carefully

analyzed. Meaningful real-world examples of using these theories are discussed step-

by-step, with relevant data and methodology.

Sue Nugus Wrote a book                    “Financial planning using Excel: forecasting

planning and budgeting techniques”on the subject of
This book covers all aspects of budget preparation, from designing and creating a

budgetary control system, consolidating data and working with spreadsheets.

Now fully updated to include the latest version of Excel, Excel 2007 and for easy

budgeting now with access to an online resource of worked examples and spreadsheet

templates. The book shows how things are done in Excel 2003 and Excel 2007 to ease

transition from the previous version to the new version. Now in full colour throughout to

aid quick understanding through numerous color screen shots.

For those who use Excel on a daily basis in budget planning, this book is a must. It

contains a wealth of practical examples, tips, new techniques all designed to help

quickly exploit and master Excel to its full advantage and therefore use spreadsheets for

more effective management accounting in your firm.
Chapter 3
  Company profile
Of usha martin
COMPANY PROFILE
3.1. EXECUTIVE SUMMARY



Started in 1961 in Ranchi, Jharkhand as a wire, rope manufacturing company, today the

Usha Martin Group is an Rs.3000 Crore conglomerate with a global presence. The

group has set new standards in the manufacture of wire rope, bright bars, steel wires,

specialty wires,   wire ropes, strand, conveyor cord, wire drawing and cable

machinery. With continuous growth in both the domestic and international markets,

Usha Martin, the Group’s flagship company has emerged as India’s largest and the

world’s second largest steel wire rope manufacturer.

For Usha Martin, the path to sustainable growth was long; the management constantly

tried out innovative business practices. With initiative to diversify the customer base by

venturing into the international markets, moving up the value chain and fully integrating

its business process to maximize stakeholder value.
In 1979, the company set up a steel plant with wire rod rolling mill at Jamshedpur, to

benefit from business integration. This ensured a steady supply of steel for the

manufacture of value added products. Today, the Jamshedpur unit has a truly

integrated specialty steel manufacturing facility of 400,000 MT per annum. Out of

which, about 50% is consumed internally by its plant in Ranchi, Hoshiarpur & Bangkok,

producing steel wire, steel strand, steel cords, bright bar and steel wire ropes. All its

manufacturing facilities are ISO 9000 certified and the steel plant was India’s first to

receive the TPM Excellence Award from JIPM, Japan.

With local success come global aspirations. Currently, the company has overseas

manufacturing operations in Thailand, UK, USA and Dubai. Besides a vast network of

distribution centres and marketing offices spread across the globe to support an ever

growing worldwide customer base. The company exports over 60% of the wire rope

output and about 20% of the total wire rods produced.

Usha Martin’s future plans are focused on its operation in Jharkhand – a state rich in

mineral resources. Future priorities include product mix enrichment, cost reduction and

infrastructural improvements. Already flourishing in its recent foray into mining

operations, the company is planning to invest in its iron ore and coal mines, sinter plant,

pellet plant, power plants, while also enhancing its steel

making and value added products capacity with an investment of Rs.2,100 crore. What

set Usha Martin apart is its unwavering commitment to social responsibility. For over

three decades the company has invested ample man-hours and capital on community

development projects for integrated prosperity in rural Jharkhand, through a CSR arm,

Krishi Gram Vikas Kendra (KGVK).
This NGO undertakes various development initiatives, following a model of Total Village

Management (TVM). Focusing on key areas like Watershed development, agricultural

productivity, better health practices and education, empowering women and

encouraging micro enterprise. In recognition to its effort Usha Martin has been awarded

the prestigious TERI Award for Corporate Social Responsibility in 2006.

Today Usha Martin is the only company globally having an integrated model on the

upstream, beginning with iron ore and coal mining, power generationand going down to

deep sea oil and gas exploration, providing anchoring and   mooring solutions.




3.2. HISTORICAL BACKGROUND:

Mr. B.K. Jhawar, the Chairman, established Usha Martin Limited in 1960 with the Wire

Ropes Plant, Ranchi. The firm was initially called Usha Martin Black as it started with
collaboration between M/S Martin Black, Scotland and Usha Automobile & Engineering

Pvt. Ltd., Calcutta in 1960.

1960 - The Company was incorporated as Usha Martin Black (Wire Ropes) limited

having its wire rope plant at Ranchi. The name was changed to Usha Martin Black Ltd.

in 1979 and further changed to Usha Martin Industries Ltd. (UMIL) in 1983.

1965 - UMIL promoted Usha Ismal Ltd. (UIL) in collaboration with CCL Systems Ltd of

UK for the manufacture of fittings and accessories, equipment for pre-stressed concrete

system, wire ropes and wire ropes splicing equipment at Ranchi. UIL merged with UMIL

in 1990 and became a division of the company.

1969- It backed Usha Breco Ltd. To design, construct and erect Ropeways.

1971 - UMIL promoted Usha Alloy Steels Limited (UASL) for the manufacture of billets

at Jamshedpur. UASL merged with UMIL in 1988.

1975 - UASL acquired an ongoing rolling mill at Agra.

1975 - UMIL set up its Machinery Division at Bangalore for the manufacture of Wire

Drawing and allied machines in technical collaboration with Marshall Richards Barcro

Limited (MRB) of UK.

The collaboration with Martin Black broke up in 1975 and the company was hence

called Usha Martin Industries.

The company set up an electrical furnace steel plant at Jamshedpur in 1973, followed

by a rod mill in 1976.

1979 - In order to obtain steady supply of wire rods for its wire rope plant, UASL set up

a Wire Rod Rolling Mill at Jamshedpur.
1980- It promoted Usha Siam Steel Industries Ltd, Thailand to produce wire, wire ropes

& auto control cables. It set special products division to produce Hi-Tech Wire Cables.

1987- UMIL, along with Bihar State Electronics Development Corporation, promoted

Usha Beltron Ltd. (UBL) in collaboration with AEG KABEL of Germany for the

manufacture of Jelly Filled Telephone Cables.

1994- It set up Software Division to provide IT Solution for communication application

and Usha Martin Ltd, a distribution center at Glasgow, UK.

1997 - UMIL merged with UBL w.e.f 1st October 1997.

1999- Usha Martin Ltd. Merged with Usha Beltron Group and was renamed as Wire and

Wire Rope Division within which following six companies are included: JFTC-Ranchi,

Wire And Wire Rope Division - Ranchi, Usha Ismal Division – Ranchi, Usha Alloys &

Steel –Jamshedpur, Usha Machinery Division – Bangalore and Rod-Mill Division – Agra

2000 - Acquisition of specialty wire rope manufacturing plant in UK “BruntonShaw”.

2000 - Commissioning of 25 MW thermal power plants for captive consumption.

2001 – Commissioning of 2nd SMS to enhance capacity and produce quality specialty

steel.

2003 - Usha Beltron Ltd Changed its name to “Usha Martin Limited (UML). UML created

Fine Cord Plasticized coated Fine wires, household wire, Polymer coated wire, Fine

Ropes & Bright Bars manufacturing facilities in Tatisilwai- Ranchi
3.3. Achievements



        •   UML is the 2nd largest wire and rope manufacturer in the world and has the

            largest variety in South East Asia.




        •   It is multi product, diversified engineering conglomerate with 10 production

            units in India,1 in Thailand,1 in UK and 1 in Dubai.




        •   It is saving valuable foreign exchange by exporting by exporting its

            products to 42 countries like USA, Africa and Middle East, conforming to

            the strictest product quality standards.




        •   It got the ISO 9000 Certification by BVQI in 1994.
•   ICICI (BCB) did the business process re-engineering in 1996 and line

    system was set up to enhance performance.




•   With the modern concepts like TPM, value engineering, QC, suggestions

    scheme, customer satisfaction and human resource development, UML is

    trying to reach unparalleled heights.




•   UML is serving through a leading daily “Prabhat Khabar”, Krishi Gram

    Vikas Kendra, Usha Martin Technical Institute.




        HEAD OFFICE:

           Usha Martin Limited

           Mangal Kalash, 3rd floor

           2-A Shakespeare Sarani

           KOLKATA-71

       PLANT LOCATION:

           Usha Martin Limited

           Wire Ropes & Specialty Products Division

           Tatisilwai, Ranchi,
Jharkhand- 835103




3.4. VISION:
   • In our chosen business, we shall retain market leadership in India and shall be
       globally competitive through customer orientation and excellence in quality,

       innovation and technology.




MISSION
   •   Enriching lives

We will do our best to provide quality product and services, which will improve the

lifestyle of our users.

   •   Quality is our first priority

We aim to achieve customer satisfaction by providing quality products. No sale is good

sale unless it fulfills our customer expectations.

   •   Our word is our bound
Our dealers are our partners. We endeavor to practice this golden rule in all our

 relations with others.

    •   Integrity is our commitment

 The conduct of our company’s affairs must be pursued in a manner that command

 respect for honesty and integrity.

 TPM POLICY:

    •   It is our policy to induce change in all employees by delegation, empowerment

        and motivation to achieve total participation towards zero accident, zero defects

        and zero failure.




3.5. TRADE PROFILE
 Business Excellence
 UML is the 2nd largest wire and rope manufacturer in the world and has the largest

 variety in South East Asia. It is multi product, diversified engineering conglomerate with
10 production units in India, 1 in Thailand, 1 in UK and 1 in Dubai. It is saving valuable

foreign exchange by exporting its products to 42 countries like USA, Africa and Middle

East, conforming to the strictest product quality standards. It got the ISO 9000

Certification by BVQI in 1994.ICICI (BCB) did the business process re-engineering in

1996 and line system was set up to enhance performance. With the modern concepts

like TPM, value engineering, QC, suggestions scheme, customer satisfaction and

human resource development, UML is trying to reach unparalleled heights. UML is

serving through a leading daily “Prabhat Khabar”, Krishi Gram Vikas Kendra, Usha

Martin Technical Institute.

Areas of business

Group companies:

   •   Usha Siam Steel Industries Public Company Ltd., Thailand (USSIL)

   •   European Management & Marine Corporation Ltd., Aberdeen, UK (EMM)

   •   Brunton Shaw Ltd., Nottinghamshire, UK (BSRL)

   •   Usha Martin Cables Ltd., Silvasa, Bangalore, India (UCL)




Distribution centers:

UM International Ltd. at Glasgow, Houston, Johannesburg, Copenhagen and Dubai UM

Singapore Ltd.




Services:
•   Usha Breco Ltd. (Usha Martin Industries & British Ropeway Engineering Ltd.)

   •   Usha Martin Ventures Ltd.

Steel division

A backward integration initiative, the Usha Alloys & Steels Division (UASD) at

Jamshedpur is one of the largest amongst secondary steel manufacturers of specialty

steel long products in India. With ISO 9002 certified facilities, UASD has pioneered the

unique process of steel making through mini blast furnace-arc furnace route, which

ensures superior quality of steel at a lower cost. UASD serves a range of industries like

automobile, general engineering, fasteners, railways, defense and power.

Machinery division

This ISO 9001 unit was set up in 1974 at Bangalore to manufacture Wire Drawing and

allied machines. Over the years, the division has added a wide range of Wire, Wire

Rope and Cable machinery to its product range and is now the leader in this field in

India. The division started with technical collaboration with M/s Marshall Richards

Barcro of UK and subsequently has collaborated with internationally reputed firms like

De-Angeli Industries SPA, Italy, Stolberger Maschinenfabrik, Germany, Hi-Draw

Machinery Ltd, UK and Redaelli Techna Meccanica, Italy. A facility in Ranchi has also

been created for manufacturing machines required for Wire Drawing and Stranding

Applications.




Usha Ismal Division
This unit, having manufacturing unit in Ranchi (Eastern India), is the leader in the field

of pre-stressing equipment & accessories and also executes pre-stressing job on

turnkey basis. Besides, it provides services for jointing of reinforcement bars by

mechanical splicing. All major civil contractors of National Highway Authority of India,

Indian Railways and PWD are regular users of these products and services. It also

offers hydraulic presses & accessories for manufacturing mechanically spliced wire rope

slings, machines for proof load testing of wire rope slings, and die-less hand operated

hydraulic crimping tools. These products find wide application with Steel Plants, Port

Trusts, Oil Sector, Heavy Engineering Industry, Electricity Boards, Electrical Contractors

and Factories etc.




Cables Division under UM Cables

The Cable Division of Usha Martin Limited has emerged as a leading manufacturer of

jelly-filled underground & fiber optic telecommunication cables in India. The

sophisticated manufacturing facilities are located in Silbasa. The company integrates

technology from KABEL RHEYDT (formerly AEG KABLE), GERMANY, a member of

Alcatel Group - is rated as one of the most efficient plants in the country and a

benchmark in the industry. The Plant includes computer - controlled critical equipments,

imported from International Leaders in cable technology.

Wire and Wire Ropes Division
The ISO 9001-certified 100,000 MT / annum-manufacturing facilities at Ranchi (Eastern

India) is 2nd largest producer of ropes in the world. Since its inception, the division has

continuously developed and expanded its range of product offerings and is considered a

pioneer in certain classes of products in India. Steel wire ropes manufactured by the

division find wide applications in oil exploration, mining, elevators, Crane, fishing,

construction, load transportation and general engineering sectors. It find varied use in

different parts of the world known for their excellent quality, long life and low

maintenance, and are the preferred choice of customers across nations. Ropes, ranging

from 2 mm to 100 mm diameter find varied applications. The wide ranges of products

are used in underground mining, surface mining, mooring, onshore and offshore drilling,

fishing, elevators, cranes, aerial haulage and track installations besides various general

engineering applications. Pre-stretched ropes, locked coil wire ropes and spiral strands

made in Usha Martin are used in suspension bridges, antenna masts etc.

Backed by a strong international distribution network our ropes have found a place in

different corners of the world.




Sources of Raw Materials

Raw materials      sources

Steel Wire Rod (90% - 96%) UMIL, Jamshedpur

Steel Wire Rod (4% - 10%) Imported from Germany, Japan, etc.

Fibre Core    M/s. Chotanagpur Wire Rope

Other Raw material (Zinc) M/s. Hindustan Zinc & Other
Supplies 25% & balance is Reported

Finished Products

Rope- General engineering rope, Flattened strand, Elevator rope, Non-             rotating rope,

finished rope, Mining rope, Hyplex rope, Locked coil winding, Track rope.

Wire- Auto spoke, Cycle spoke, PC Strand, Rolling shutter, ACSR, PC wire Indexed &

plain.

Fine Cord

Usha Martin, extended vast experience in rope making technology towards

manufacturing of Fine Cords. Usha Martin Fine Cords find application as the inner

element for the Automotive Control Cables and also in boring applications and as Pull

Cord cables for laying of Television cables.




Size range

The size range for overall diameter of finished cords is 1.20mm to 6.00mm.

Low relaxation prestressed concrete (LRPC) Strands

In keeping with the demands of the international market, we have introduced Low

Relaxation Prestressed Concrete (LRPC) Strands for the construction industry in 2001.

A steel member that is prestressed and embedded in concrete loses the initially applied

stress exponentially with the passage of time. The single most important factor

attributing to this loss in stress relaxation property of the steel itself. By treating the steel

through a thermo mechanical process known as stabilizing, the propensity of the steel to
"relax” under a stressed condition is controlled to a great extent. Some of the main

advantages that our customers derive by using low relaxation strands are listed below

* Up to 10% reduction in steel requirement possible

* Reduction in concrete requirement due to reduced size of structural members

* Hot stretch process used during the manufacture of LRPC strands produces a nearly

straight strand, thereby eliminating necessity for extra post straightening treatment.

* Saving in number of anchorages, ducts, sheathings, wedges and labour resulting in

overall reduction of project cost

Applications

Pre-stressed concrete girders for road, river & railway bridges and flyovers, pre-

stressed concrete domes, slabs, silos, hangars, aqua ducts, viaducts & railway

sleepers.

Patenting & Galvanizing facility

* 50ft electrically fired furnace with inline cleaning, coating, galvanizing

facilities.

* 30ft propane fired LeFour furnace with inline cleaning, coating, and

galvanizing facilities.

* 30ft propane fired rod DSW patenting furnace

* Galvanizing plants of different capacities

* Stress relieving facilities for wires and strands

* Annealing furnaces (bell type)
* Vacuuann ealing furnace

* PLC driven automatic pickling plant

* manually operated pickling plant

Quality & Testing

Wires and Strands hold a premier position in the domestic market and are also exported

to different part of the world. Used for different purposes across a gamut of industries,

our wires and strands are continuously put through rigorous and demanding conditions.

To ensure that our offerings match the international standards, we have set high internal

quality standards. Plant located at Ranchi has been awarded ISO 9001 due to our

emphasis on maintaining global quality standards.

  Wires confirm to various specifications such as



* IS Specifications

* JIS Specifications

* British Specifications

* ASTM Specifications

* DIN Specifications

Aerial Ropes

UML is the undisputed leaders in the domestic Aerial Rope sector. Their product

offerings include Aerial haulage ropes, material handling ropes, rope for passenger

ropeways and other track ropes. Ropes are renowned for their low maintenance, long

life, excellent quality and strength.
Size range

The size range generally preferred for such ropes is

* 19mm to 38mm5

Steel cord for conveyor belts

Conveyor belts - one of the most popular means for bulk material handling - finds

widespread application in mines, cement and coal industries, ports & terminals, power

stations etc. When reinforced with steel cord these belts last longer, allow higher

operating speeds and offer better shock and rupture resistance than conventional fiber

reinforced belts. In addition, very low elongation and absence of creep, makes steel

cord the ideal reinforcement for long haul, high strength belts (from 500 to 2000 N per

mm of belt width).

In March 2003, the US $ 300 million Usha Martin Group, entered into a Joint Venture

with Gustav Wolf, Germany for production of Steel Cords for Conveyor Belts at a

special facility set-up adjacent to the main Wire & Wire Rope plant at Ranchi and known

as Gustav Wolf Specialty Cords Limited. Gustav Wolf, Germany is one of the global

pioneers in producing Steel Cord for Conveyor belts with decades of experience behind

them and with all major Conveyor Belt manufacturers on their customer list.

Through effective synergy of years of conveyor belt experience of Gustav Wolf with

rope making expertise of Usha Martin, we have become the pioneer and the only

producer of Steel Cords for Conveyor Belts in this country. With state-of-art machinery

and latest technology from Gustav Wolf, our cords provide an optimized high tensile yet

flexible reinforcement to the Conveyor Belts and enables reliable and high capacity

Conveyor Systems to be used. Our flexibility to supply in ready-to-fit spools as well as in
giant master spools, gives our customers the option to procure in exact lengths, thus

reducing operational cost and downtime.



Major customers of Usha Martin

Eastern Region—

  a. Indian Ropeway & Corporation Ltd.

  b. OTIS India Ltd.

  c. Philips India Ltd.

  d. SAIL

  e. HEC, Ranchi

  f. TISCO, Jamshedpur

  g. MCL, Talchar

  i. CCL, Ranchi

Western Region-

   •   ONGC

   •   Jindal Strips Ltd.

   •   Essar Steels, Surat

   •   Reliance Infrastructure.

   •   Nuclear Power Corporation of India, Tarapur

   •   Western Coal Fields
Northern Region—

    •   BHEL Panipat

    •   Hindustan Copper Ltd.

    •   Maruti Udyog Ltd.

    •   Hindustan Electronics Ltd.

 Southern Region—

    •   L&T Ltd.

    •   KONE Elevator, Chennai

    •   Johnson Lifts Pvt. Ltd., Chennai

    •   KEC International Ltd., Amateur

    •   United Marine Traders.




3.6. COMPETITORS

DOMESTIC –

 Fort Williams, Kolkata

 TATA SSL, Mumbai
Bharat Wire Ropes, Maharashtra

South Indian Wire Ropes, Maharashtra

JCT Ltd., Punjab

Naveen Wire Ropes, Pathankot

Orient Wire Ropes, Indore

Asian Wire Ropes, A.P.

GLOBAL—

KISSWIRE, Korea

Austria draught, Austria

Caser, Germany

John Shaw, England

Redaelli, Ital
Bridan, Ger


3.7. BOARD OF DIRECTORS

Mr. B.K Jhawar – Chairman
Mr. Prashant Jhawar – Vice Chairman
Mr. Brij Kr. Jhawar – Director
Mr. U.V. Rao – Director
Mr. N.J. Jhaveri -- Director
Mr. A.K. Chaudhuri – Director
Mr. Suresh Neotia – Director
Mr. Ashok Basu – Director
Mr. Sudhir Dole – ICICI nominee director
Mr. Rajeev Jhawar – Managing Director
 Dr. P. Bhattacharya – Jt. Managing Director




3.8. GOVERNMENT POLICIES


 RELATED ACTS:
 Factories Act (1948)

 Objectives:

 The Factories Act provides for the health, safety, welfare, service conditions and other

 aspects of workers in factories. The Act is enforced by the State Government who frame

 rules   that     ensure   that   local   conditions   are   reflected   in   enforcement.

 The Act as amended in 1987 also regulates the safeguards to be adopted for the use

 and handling of hazardous substances.

 Applicability:

 The Factories Act extends to whole of India and is applicable to all 'factories'

 including government factories.
It applies to all factories employing more than 10 people and working with the aid of

power or employing 20 people and working without the aid of power. Factory however

does not include a mine

Covered under the mines Act, 1952, a mobile unit of the armed forces, a railway shed or

a hotel, restaurant or eating place. The act covers all workers employed in the factory

premises or precincts directly or through an agency including a contractor, involved in

any manufacture




Minimum Wages Act (1948)

Object of the Act- to Provide for fixing minimum rates of wages in certain Employment.

The object of the Act is to ensure the welfare of the workers in a competitive market by

fixing the minimum rates of wages in certain employments.

Article 39 states that the State shall, in particular, direct its policy towards securing (a)

that the citizen, men and women equally shall have the right to an adequate livelihood

and (b) that there is equal pay for equal work for both men and women.

Article 43 states that the State shall endeavour, by suitable legislation or economic

organisation or in any other way, to give all workers, agricultural, industrial or otherwise,

work, a living wage, conditions of work ensuring a decent standard of life and full

enjoyment of leisure, and social and cultural opportunities.

Employees’ Provident Fund Act (1952)
The Employees’ Provident Fund and Provision Fund and Miscellaneous Provision Act,

1952 provides for institution of compulsory provident funds for employees in Factories

and other establishment. The purpose is to make some provisions for the future of the

industrial worker after he retires or for his dependents in case of his early death. It

applies to all factories and other establishment of any notified industry if the number of

employees is 20 or more than 20.

Under this scheme, a stipulated amount {12%(current)} is deducted from the

employees’ salary & contributed towards the fund. This amount is decided by the

government. The employer also contributes an equal amount to the fund.




Employees’ State Insurance Act (1948)

The Government of India passed ‘Employees’ State Insurance Act, at April 1948. It was

designed to provide cash benefits in the case of Sickness, Maternity and Employment

Injury, payment in the form of pension of dependents of workers who dies, the family

gets employment injury and medical benefits.



Contribution periods and benefit period:

Workers, covered under the ESI Act, are required to pay contribution towards the

scheme on a monthly basis contribution period means a six-month time span from 1

April to 30 October and 1 November to 31 March. Thus, in a financial year there are two

contribution periods of six months duration. Cash benefits under the scheme are
generally linked with contribution paid. The benefit period starts their months after the

closure of a contribution period.

Contribution period corresponding benefit period:

1 April to 30 September     1 January to 30 June of the following year

1 October to 31 march       18 July to 31 December

Registration:

Simultaneously with his or her entry into employment in a covered factory or

establishment, an employee is required to fill in a declaration form. The employee is

then allotted a registration number, which distinguishes and identifies the person for the

purposes of the scheme. A person is registered once and only upon his entry in

insurable employment. But recent SC’s judgment in Balakrishna v ESIC has held that a

worker covered under the act would be entitled to benefit from the date of his

employment and not from the date of registration after contribution by the employer.

Bonus Act (1975)

It is a part of profit linked with productivity given annually to the employees. Every

employee receiving wages up to Rs.3500/month

is entitled to bonus every accounting year. Every factory wherein 10 or more persons

are employed with the aid of power or an establishment in which 20 or more persons

are employed without the aid of power on any day during an accounting year.

Minimum Bonus -- 8.33% of wage.

Maximum Bonus -- 20% of wage / Rs.7200
3.9. Social Commitment through Krishi Gram Vikas Kendra




Management commitment and support since 1977

"in every village where hunger persists, human being must be empowered to discover.

Their own vision expresses their own leadership, create their own solutions and work

together to achieve their own success"



KGVK Activities

•     augmenting       water      resources      through      watershed       management

• sustainable income generation through cottage industries & live       stock management

• capacity building through "agivika research & training center"

• health & family welfare programmes

• women empowerment thru "swashakti" programme

KGVK projects

In partnership with grass root civic society, corporate and government

• India canada environment facility (icef) project - for water      resources conservation

& conjunctive utilization for environmental restoration (project cost rs 10.0 cr)




• ICICI - cini project - for primary health services at the grass root level project cost rs.

2.0 cr)
• project with us aid along with cepda - for training barefoot workers in villages for

making them 1st point of contact in village health services




• Projects with govt of India for water shed, women empowerment, education etc.




• Total projects worth Rs.18 cr in hand
Chapter 4:

                     Data analysis

                    And

                    Interpretation




4.1GENERAL INDICATORS

COMPONENTS OF CURRENT ASSETS

Current assets means assets that will either be used up or converted into cash within a

year's time or normal operating cycle of the business whichever is longer. They include

cash and bank balances, marketable securities, inventory of raw materials, semi-

finished and finished goods, debtors, bills receivables and pre-paid expenses.

TABLE 4.1.1: COMPONENTS OF CURRENT ASSETS
current assets               2004-05   2005-06    2006-07   2007-08


Inventories                  2840534 2621667      3390551 5324181


Sundry debtors               2513970 1982492      2269104 2563505


cash and bank balance        389655    517489     370805    463607


other current assets         195738    225640     260942    340486


Loans and advance            2108995 1648665      2119931 4024216


Total current assets         8048892 6995953      8411333 12715995


increase/decrease in CA                -1052939   1415380 4304662


(%)increase/decrease in CA             -13.08%    20.23%    51.17%
Source: www.econpapers.repec.org.com




COMPONENTS OF CURRENT LIABILITIES
Current liabilities are those liabilities or obligations, which are expected to mature in the

next twelve months. They include short-term loans and advances, accounts payable /

sundry creditors, provision for taxation, outstanding expenses and dividend payable.




              TABLE4.1.2: CURRENT LIABILITIES

Particulars                          Amount in (Rs)


                                     2004-05     2005-06     2006-07     2007-08


Sundry creditors                     1431326     1701248     1940128     5175146


Advances from customers              74406       70772       95418       106193


Unclaimed dividends                  2982        2797        2983        3152


Others Liabilities                   2894347     1994670     2574014     3325085


Provisions                           176380      210109      262565      381723


Total Current Liabilities            4579441     3979596     4875108     8991299


Increase/Decrease in CL              -           (599845)    895512      4116191


(%)Increase/Decrease in CL                       _           22.50%      84%
Source:www.econpapers.repec.org.com




NET WORKING CAPITAL

Net working capital (NWC) represents the excess of current assets over current

liabilities. The greater the amount of net working capital, the greater the liquidity of the

firm. However, the problem of net working capital as the measure of liquidity is that the
change in net working capital does not necessarily reflect the change in liquidity of the

firm




TABLE 4.1.3: NET OPERATING CYCLE

       NET WORKING CAPITAL


       Particulars                      Amount (Rs)


                                        2004-05 2005-06     2006-07 2007-08


       Total CA                         8048892 6995953 8411333 12715995


       Total CL                         4598033 3979596 4875108 8991299


       Net Working Capital(NWC)         3450859 3016357 3536225 3724696


       Increase/Decrease in NWC          -        (434502) 519868        188471


       (%)increase/decrease in NWC           -    (12.59)% 17.20%        5.32%




Significance:


Working capital during 2006 was negative but as on 2007 it has increased upto 17.20%

but again there was drastically fall during 2008 i.e.5.32% the reason of this fall was

increase in current liability was twice of increase in current assets.
OPERATING CYCLE

The operating cycle represents the time taken for cash spent on raw materials to come

back to the business in the form of cash from collection of sale proceeds.

In case of a manufacturing firm, the following are the sequence of events, which is

termed as operating cycle of the manufacturing firm.

.Conversion of cash into raw materials

Conversion of raw materials in WIP

Conversion of WIP into finished goods

Conversion of finished goods into Accounts receivables

Conversion of accounts receivables into cash

.The term cash or operating cycle contains the length of time necessary to complete the

following cycle events:

Conversion of cash into inventory

Conversion of inventory into receivable

Conversion of receivable into cash




                    TABLE 4.1.4: NET OPERATING CYCLE

PARTCULARS                                        2005-06    2006-07    2007-08
Raw material conversion period                     46         52          107


Work in progress conversion period                 18         24          24



Finished goods conversion period                   84         112         123


Debtors conversion period                          52         52          50


Operating Cycle                                    200        240         304


Payable deferral period / Credit Period*           119        113         207


Net Operating Cycle (in days)                      81         127         97




.Credit Period: This includes advances from customers. The company as a conscious

decision on policy solicits for advances for all the special orders to take care of the cost

of the materials to be procured.
Source: www.themanagementor.com




4.2.LIQUIDITY ANALYSIS

CURRENT         RATIO:
The current ratio is an indicator of the firm's commitment to meet its short-term

liabilities. The current ratio is an index of the concern's financial stability since it shows

the extent of working capital, which is the amount by which the current assets exceed

the current liabilities. A very high current ratio would indicate inadequate employment

of funds while a poor current ratio is a danger signal to the management. It shows that

business is trading beyond its resources.

CURRENT RATIO -This ratio tells about the relationship between current assets and
current liabilities of a business .The formula for calculating the ratio is:

          CURRENT RATIO =          CURRENT ASSETS
                                     CURRENT LIABILITIES



Current assets include those assets which can be converted into cash within a year’s

time and current liabilities include those liabilities which are repayable in a year’s time.

Current Asset

Item having a life of one year or less, or the normal Operating Cycle of the business,

whichever is greater. For example, if a construction company's operating cycle is three

years because it is engaged in long-term construction activities, it would show as

current assets items having up to a three-year life. However, in almost all cases, the

one-year cutoff is used. Examples of current assets are cash, marketable securities,

inventory, and prepaid expenses.

Current    Assets = Cash in hand + cash at bank + B/R + short term

investments(marketable securities) + debtors + (debtors-provision) + stock (stock of

finished goods + stocks of raw material + work in progress) + prepaid expenses.
Current Liabilities = Bank overdraft + B/P + creditors + provision for taxation +

proposed dividends + unclaimed dividends + outstanding expenses + loans payable

within a year.




TABLE4.2.1: CURRENT RATIO
Particulars                   YEAR



                              2004-05   2005-06   2006-07   2007-08



Current Assets


Inventories                   2840534   2621667   3390551   5324181


Sundry Debtors                2513970   1982492   2269104   2563505


Cash          &Bank
                              389655    517489    370805    463607
Balance


Other         Current
                              195738    225640    260942    340486
Assets


Loans& Advances               2108995   1648665   2119931   4024216


Total                   (a)   8048892   6995953   8411333   12715995




Current

Liabilities


Liabilities                   4421653   3769487   4612543   8609576


Provisions                    176380    210109    262565    381723


Total                   (b)   4598033   3979596   4875108   8991299
Current Ratio      (a/b) 1.75            1.76              1.73            1.41




Significance:


This ratio is used to assess the firm’s ability to meet its short term liabilities on time.

According to accounting principle, a current ratio of 2:1 is supposed to be an ideal ratio.

It means that current assets of a business should, at least, be twice of its current

liabilities. The higher the ratio, the better it is, because the firm will be able to pay its

current liabilities more easily. The reason of assuming 2:1 as the ideal ratio is that the

current assets include such assets as stock, debtors etc., from which full amount cannot

be realized in case of need. Hence, even if half the amount is realized from the current

assets on time, the firm can still meet its current liabilities in full.

Status of Current ratio of UML - With the help of graph and the available data of

Usha Martin Ltd we can see that the ratio of 1.75:1 was stagnant for two consecutive

financial year and during 4th financial year i.e. during 2007-08 the current ratio fall to
1.41:1 .The reason of fall in current ratio is because of increase in current liabilities

during this financial period we can see that the current assets has also increase but the

increase in creditors as well as other liability the current ratio decrease .Thus during

slow down of market also the company’s current ratio was positive .During 2008 the

debtors, loans and advances increases but the increase in current liabilities was approx.

double of 2007.




QUICK RATIO

Quick ratio is a refinement over current ratio as it shows the instant ability to meet the

current liabilities. Liquid assets means all the current assets less inventories, sticky

debts, etc., i.e. such assets as can be ‘quickly’ converted into cash. The general norm

for a healthy quick ratio is 1:1. This ratio is also known as acid-test ratio.

Quick ratio indicates whether the firm is in position to pay its current liabilities within a

month or immediately. As such, the quick ratio is calculated by dividing liquid assets

(quick current ratio) by current liabilities:-

Quick Ratio or Acid Test Ratio =            liquid assets
                                 Current liabilities



‘Liquid assets’ means those which will yield cash very shortly. All current assets except

stock and prepaid expenses are include in liquid assets. Stock is excluded from liquid

assets because it has to be sold before it can be converted into cash. Prepaid expenses
too are excluded from the list of liquid assets because they are not expected to be

converted into cash. Liquid assets thus include cash, debtors, bills receivable and short

term securities.




TABLE 4.2.2: QUICK RATIO
Particulars               Year


                          2004-05    2005-06   2006-07   2007-08


Liquid assets


Sundry Debtors            2513970    1982492   2269104   2563505


Cash &Bank Balance        389655     517489    370805    463607


Other Current Assets      195738     225640    260942    340486


Loans& Advances           2108995    1648665   2119931   4024216


Total                  (a) 5208358   4374286   5020782   7391814




Current Liabilities


Liabilities               4421653    3769487   4612543   8609576


Provisions                176380     210109    262565    381723


Total                  (b) 4598033   3979596   4875108   8991299




quick ratio (a/b)         1.13       1.10      1.03      0.82
Significance:


An ideal quick ratio is said to be 1:1. If it is more, it is considered to be better. The idea

is that for every rupee of current liabilities, there should at least be one rupee of liquid

assets. This ratio is a better test of short term financial position of the company than the

current ratio, as it considers only those assets which can be easily and readily

converted into cash. Stock is not included in liquid assets as it may take a lot of time

before           it          is          converted            into           cash.




The liquidity of Usha Martin

The liquidity of Usha Martin is favorable but during 2007-08 the ratio is in a dangerous

situation as we can see that the quick ratio is0.82:1 that means the company is unable

to meet its liability at a very short period and the reason is that during this financial year

the demand of the product decreased and therefore the amount of inventorywas quiet

high and so the company was unable to meet its short term liability at a very short

period.




4.3. ACTIVIT RATIOS
WORKING CAPITAL TURN OVER RATIO:

This ratio indicates whether or not working capital has been effectively utilized in making

sales. If a firm makes higher volume of sales with relatively small amount of working

capital, it is an indicator of the operating efficiency of the company.

WORKING CAPITAL TURNOVER RATIO-This ratio shows therelationship between

sales and working capital. This ratio shows the number of times the working capital

results in sales.

   Working capital turnover ratio=            Net Sales
                                    Net         Working          Capital

    TABLE 4.3.1: WORKING CAPITAL TURNOVER

RATIO




PARTICULARS                    YEAR


                               2004-05    2005-06   2006-07 2007-08


NET SALES (A)                  11898717 12352083 14086047 16558987




CURRENT ASSETS (a)             8048892 6995953 8411333 12715995


CURRENT LIABILITIES (b)        4598033 3979596 4875108 8991299


NET WORKING CAPITAL (a- 3450859 3016357 3536225 3724696
b) (B)




W.CTURNOVER RATIO (A/B) 3.44:1            4.09:1     3.98:1     4.44:1




Significance:


This ratio is of particular importance in non-manufacturing concerns where current

assets play a major role in generating sales. In other words it shows the number of

times working capital has been rotated in producing sales. A high working capital

turnover ratio shows efficient use of working capital and quick turnover of current assets

like stocks and debtors. A low turnover indicates under utilization of working capital.

However, a very high turnover ratio of working capital is also dangerous, as it sign of

over- trading, i.e., doing business with too little working capital.

Status of working capital turnover ratio of UML- during 2004-05 the turnover was

3.44:1 but in 2005-06 it increases upto 4.09:1 which was the good significance and
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Working capital management

  • 1. Chapter 1 Introduction to Topic 1.1. INTRODUCTION
  • 2. Working capital, also known as "WC", is a financial metric which represents operating liquidity available to a business. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. It is calculated as current assets minus current liabilities. If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit. Net working capital is working capital minus cash (which is a current asset) and minus interest bearing liabilities (i.e. short term debt). It is a derivation of working capital, that is commonly used in valuation techniques such as DCFs (Discounted cash flows). Working Capital = Current Assets − Current Liabilities A company can be endowed with assets and profitability but short of liquidity if its assets cannot readily be converted into cash. Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses. The management of working capital involves managing inventories, accounts receivable and payable and cash. Decisions relating to working capital and short term financing are referred to as working capital management. These involve managing the relationship between a firm's short- term assets and its short-term liabilities. The goal of working capital management is to ensure that the firm is able to continue its operations and that it has sufficient cash flow to satisfy both maturing short-term debt and upcoming operational expenses. Decision criteria By definition, working capital management entails short term decisions - generally, relating to the next one year period - which are "reversible". These decisions are
  • 3. therefore not taken on the same basis as Capital Investment Decisions (NPV or related, as above) rather they will be based on cash flows and / or profitability. • One measure of cash flow is provided by the cash conversion cycle - the net number of days from the outlay of cash for raw material to receiving payment from the customer. As a management tool, this metric makes explicit the inter- relatedness of decisions relating to inventories, accounts receivable and payable, and cash. Because this number effectively corresponds to the time that the firm's cash is tied up in operations and unavailable for other activities, management generally aims at a low net count. • In this context, the most useful measure of profitability is Return on capital (ROC). The result is shown as a percentage, determined by dividing relevant income for the 12 months by capital employed; Return on equity (ROE) shows this result for the firm's shareholders. Firm value is enhanced when, and if, the return on capital, which results from working capital management, exceeds the cost of capital, which results from capital investment decisions as above. ROC measures are therefore useful as a management tool, in that they link short-term policy with long-term decision making. See Economic value added (EVA). Management of working capital Guided by the above criteria, management will use a combination of policies and techniques for the management of working capital. These policies aim at managing the current assets (generally cash and cash equivalents, inventories and debtors) and the short term financing, such that cash flows and returns are acceptable.
  • 4. Cash management. Identify the cash balance which allows for the business to meet day to day expenses, but reduces cash holding costs. • Inventory management. Identify the level of inventory which allows for uninterrupted production but reduces the investment in raw materials - and minimizes reordering costs - and hence increases cash flow; see Supply chain management; Just In Time (JIT); Economic order quantity (EOQ); Economic production quantity • Debtors management. Identify the appropriate credit policy, i.e. credit terms which will attract customers, such that any impact on cash flows and the cash conversion cycle will be offset by increased revenue and hence Return on Capital (or vice versa); see Discounts and allowances. • Short term financing. Identify the appropriate source of financing, given the cash conversion cycle: the inventory is ideally financed by credit granted by the supplier; however, it may be necessary to utilize a bank loan (or overdraft), or to "convert debtors to cash" through "factoring". KINDS OF WORKING CAPITAL
  • 5. Source: www.ushamartin.com Composition of Working Capital: Current Assets: Current Liabilities: 1. Stock of Inventory: 1. Accounts Payable: Raw Material, Work in Progress, Sundry Creditors, Bills Payable. Finished Goods. 2. Accounts Receivable: 2. Short-term borrowings. Sundry Debtors, Bills Receivable.
  • 6. 3. Short-term loans & advances. 3. Outstanding Expenses 4. Short-term investments. 4. Provision for Taxation or Tax Payable. 5. Prepaid expenses. 5. Dividends Payable. 6. Accrued or Outstanding Income. 6. Short-term dues to employees. 7. Cash in Hand. 7. Bank Overdraft. 8. Cash at Bank. 8. Minority Interest. 1.2. OBJECTIVE OF THE STUDY The objective of the Thesis is to study the different components of current assets and liabilities and the extent of funds tied up in each the trend of changes of each component to find out the relationship between working capital and profitability To find out the impact of Working Capital on Economic Value Addition to the stake holder 1. To set up the required fund for running the operating activities of the firm. 2. To forecast the required amount of gross & net working capital with
  • 7. individual breakup of the components. 3. To fix up the optimum level of working capital & to change the same according to the need of the situation. 4. To take care for maintaining the liquidity position of the firm up to the desired level. 5. To increase the profitability of the firm by striking a balance between liquidity&profitability. 1.3. IMPORTANCE OF THE STUDY The importance working capital in any business can hardly be over-emphasized. To run a business smoothly & efficiently, it is essential to have an adequate amount of working capital. Followings are the advantages that a business firm gets for having adequate amount of working capital or the working capital facilitates a business in the following way: 1. Constant supply of raw material. 2. Constant supply of saleable product. 3. Regular payment of operating expenses. 4. Provide adequate solvency to the business. 5. Opportunity of getting loans.
  • 8. 6. Increase in Goodwill. 7. Possibility of getting cash discount. 8. Helps the business to solving the crisis situations. 9. Exploitation of favorable market conditions. 10. Increase in efficiency & productivity. 11. Increase in profitability. 12. Regular payment of Dividend. 13. Research & development. 14. High morale of employees. It is also to be noted that excess of working capital is a vice for a firm like inadequacy of working capital. Excess working capital blocks huge amount capital in a firm which remains idle for longer period & gives no return to the business.
  • 9. 1.5 METHODOLOGY OF THE STUDY 1.5.1. TYPE OF RESEARCH This thesis “A Study on Working Capital Management & Profitability Analysis of Usha Martin Ltd” is an analytical research. Analytical Research is defined as the research in which, researcher has to use facts or information already available, and analyze these to make a critical evaluation of the facts, figures, data or material. The thesis includes finding of primary data and secondary data. It includes surveys and fact-finding enquiries. So, the project basically covers description of state of affairs, as it exists at present. Here in this case, the researcher does not have control over the variables. Here, the job done as a researcher is to use the facts and information already available. The research is done with the aid of the annual reports, the company database textbooks and the observation and interaction being the only source of primary data whatever is used. The same set of information is analyzed to make the critical evaluation of the material. With the given nature of research this is an analytical type of research wherein the analysis of the existing set of affairs are used to arrive the effect of working capital management on the return and profitability of the company.
  • 10. 1.5.2. INSTRUMENTATION TECHNIQUES The techniques used for the collections of the financial statements, data and other information as follows. The primary data were collected by interaction and observation. The secondary data were collected from the published annual reports, budgeted manuals and the audited balance sheet and profit and loss account, database of the company. 1.5.3. ACTUAL COLLECTION OF DATA The thesis makes use of both the primary as well as secondary data. Primary data were collected by observation and interaction. In the course of time, the finance manager and his executives, the purchase manager and his executives and the store manager and his executives provided very appreciable co-operation during the interaction. As for the secondary data, the various published materials were used along with the database. The annual reports, fact-sheets, budgeted manuals and the audited balance sheet and profit and loss account, accounting and financial database of the company. 1.5.4. TOOLS USED FOR ANALYSIS OF DATA The data were analyzed using the following financial tools and techniques · Ratio analysis · ABC analysis
  • 11. · Statement of changes in working capital 1.5.5. OTHER SOFTWARE USED FOR DATA ANALYSIS The application software used for the typing of data, analysis of data, and presentations of different charts, tables, graphs etc is Microsoft Word and Excel. MS Excel made a very handy tool for the analysis of the data. It was rigorously made use of during the calculation and comparisons among the data, graphical and tabular presentation, calculation of various ratios, their analysis 1.6. LIMITATION OF THE STUDY • The analysis is limited to just 4 years. The study conducted deals only with impact of working capital on profitability without taking into consideration the risk I involved.
  • 12. The study conducted throws light only on the impact of working capital on a minuscule part of strategic management namely EVA. • The figures and facts claimed in the annual reports and in other forms are taken a .
  • 13. Chapter -2 Literature Review REVIEW OF LITERATURE Sam D'Costa wrote an article “Working Capital – a Tool to Judge your Company’s Efficiency” on the subject of The most repeated maxim amongst financial managers is "Cash is the lifeblood of business". A business owner always look that his cash flow to business is smooth and
  • 14. use it for generating profit. When a business is running smoothly and taking in profit, then it will undoubtedly have cash surpluses. If your business does not have cash surplus, expect to go out of the business. 1. Cash Flow forecasting is what working capital management is all about. Your forecast should include factors like fluctuating market cycles, unforeseen events, loss of customers and your competitor's strategy. Also, unforeseen demands and its effect on your business all need to be factored in. 2. There is nothing wrong with putting together a contingency plans just in case of unexpected events. It's true that market leaders manage uncertainty much better than in years past, but you really should have risk management procedures for your company as insurance. Steve Bush wrote an article “Commercial Loans and Working Capital Financing Special Reports” on the subject of A prudent approach to working capital management is becoming more difficult for most commercial borrowers. Commercial loans have always been more complicated than realized by most business owners. Recent financing difficulties involving commercial mortgages, SBA loans and business cash advances have added significantly to the complexity of the entire commercial lending process. This article will provide a brief overview describing some of the business financing resources which should be thoroughly evaluated by commercial borrowers as part of their prudent approach to successful working capital funding. All of the recommended sources are free and available online. Business owners should contact the author directly or use one of the leading internet search engines to locate the most appropriate
  • 15. sites. Jamie Liddell wrote a article “Making the Link Between P2P and Working Capital to Create a Robust Governance Framework” on the subjectof How changes made to cope with adversity can prove advantageous in other areas of the organization. One of the lesser-trumpeted consequences of the credit crunch has been a renewed (and some might say long overdue) attention paid to working capital management: with liquidity the watchword organizations have been scrambling to release potentially significant sums tied up in their P2P and O2C processes, with every saving going some distance to staving off a potentially business-critical shortage of cash. But while the short-term benefits of such new-found C-level interest in such processes can be summed up by the bottom line, longer-term the ramifications could be a lot more profound – and positive – thanks to the enhanced governance frameworks resulting from companies' increased attention to detail. Stephen Bush wrote a article “Commercial Loan Help for Avoiding Problem Working Capital Lenders” on the subject of Avoiding critical problems is vital for a small business owner seeking help with commercial loans. Successful working capital management especially requires that problem lenders be avoided for business loans and commercial mortgage financing. One of the most serious commercial loan situations is a small business commercial lender that causes problems for their commercial borrowers on a repeating basis. Commercial borrowers should be prepared to avoid certain problematic commercial
  • 16. lenders unless alternative working capital loan options are impossible. This article will not name specific lenders to avoid. However, we will describe the importance of avoiding "problem commercial lenders". Key examples will be provided to illustrate why prudent commercial borrowers should be prepared to avoid a wide variety of existing commercial lenders when seeking viable commercial mortgage and small business financing strategies. Suzanne wrote a article “Working Capital: the Life Blood of Business” on the subject of Successful business thrives on smooth cash flow. This is no jargon but a simple truth oft repeated and realized by the financial managers around. The top priority of any small business is to stay solvent and ensure the availability of adequate working capital. This capital is utilized for the payment of rent, payroll, and other operating costs as is involved in the various stages of production and services. Irrespective of the success of any business, there is always a possibility of scarcity of funds on account of some unexpected circumstances. Herein arises the need for securing adequate fund to manage all your business obligations and provide enough financial security for the future as well. Lack of adequate expendable cash makes it difficult for an organization to meet day-to- day expenses. Since businesses always run the risk of unexpected expenses, it becomes even more important to secure some fund in order to avoid unpleasant circumstances
  • 17. Stephen Bush wrote an article “Working Capital Financing Success with Realistic Choices” on the subject of Being realistic when seeking new working capital financing and commercial loans should be a key goal for all commercial borrowers. Business owners should be prepared to encounter stark changes impacting most business financing and working capital loans. Although it is very likely that either the terms or kind of financing will be different from previous commercial financing arrangements, with proper preparation most business owners will still be able to obtain new financing despite these new and difficult challenges. In view of volatile conditions which have recently impacted credit markets, this will not be a simple task. The extensive misinformation and confusion that there has been about business financing and working capital availability illustrates a common example of the problem. One of the most difficult challenges for commercial borrowers is obtaining more accurate information about what is realistically possible. Terry H. Hill wrote an article “Making Your Working Capital Work” on the subject of The more rapidly that your business expands, the greater the need for working capital becomes. If you have insufficient working capital – the money necessary to keep your business Functioning – your enterprise is doomed to fail. Many businesses, that are profitable on-paper, are forced to "close their doors" due to their inability to meet short-term debts when they come due. However, by implementing sound working capital management strategies, your enterprise can flourish; in other words, your assets are working for you!
  • 18. At one time or another, most businesses have the need to borrow money in order to finance their growth. The ability to obtain a loan is based on the credit worthiness of a business. The two major factors that determine credit worthiness are the existence and extent of collateral and the liquidity of the business. Your company's balance sheet is used to assess both of these factors. On your balance sheet, working capital represents the difference between current assets and current liabilities — the capital that you currently have to finance operations. Stephen Bush wrote a article “Avoid Key Credit Card Processing and Working Capital Mistakes” the subject of Although it will not be easy, avoiding key credit card processing and business cash advance mistakes is likely to eliminate business finance problems that often have disastrous consequences. The use of proper precautions is likely to produce improved working capital management results. In our experience, the potential difficulties involving factors discussed below are more serious and common than most business owners expect. While we will not be addressing all possible merchant cash advance and working capital loan mistakes in this article, we will include several of the most severe issues to anticipate. The immediate impact is a sudden influx of inexperienced residential mortgage brokers and lenders attempting to provide working capital management advice for credit card processing and business cash advance services. As we have written about extensively, business financing is infinitely more complex than residential financing.
  • 19. GAUTAM KOPPALA wrote a article “Working Capital from Pome by Gautam Koppala” on the subject of The management of short-term assets, also known as working capital assets, is a very, very important management function. As we will see, mismanagement of these assets, particularly inventories and accounts receivable, can consume resources that would otherwise be used to support and strengthen the business. It is important to recognize that management of these assets is a comprehensive function. One cannot focus on only one of these asset categories at a time. We will also see that there is a direct relationship between the management of short- term assets and the management of short-term liabilities. As we noted earlier, financial transactions that affect one part of the Balance Sheet ultimately affect another part, because the Balance Sheet always balances. Understanding the other side of the Balance Sheet effect helps us understand the impact of management actions Steve Bush wrote a article “Working Capital Loans and How to Avoid Fake Articles” on the subject of In a recent commercial loan report, we described the increasing use of fake articles about working capital loans on a variety of internet sites. In our prior AEX Commercial Financing article, we provided two practical strategies to avoid the publishers of fictitious information concerning commercial mortgages and other business financing. To avoid repetition, please contact us directly regarding recommendations which were previously discussed. In the current report we will provide more detailed suggestions for avoiding
  • 20. this growing problem. The use of reputable publication sites is an effective and important way to avoid fake articles about business cash advances and commercial real estate loans. Such sites will employ their best efforts to eliminate articles for which the author does not have ownership rights. These responsible and high-quality sites will require review of articles by a human editor prior to publication Steve Selengut wrote an article “Investment Performance Analysis Using the Working Capital Asset Allocation Model”2008 on the subject of The use of Issue Breadth and 52-week High/Low statistics for navigating the sea of uncertainty, and Peak-to-Peak interest rate and market cycle analysis are much more useful as performance expectation barometers than the DJIA was ever meant to be. When did it become vogue to think of Investment Portfolios as sprinters in a twelve- month race with a nebulous array of indices and averages? Why are the Masters of the Universe rolling on the floor in laughter? They can visualize your annual performance agitation ritual producing fee generating transactions in all conceivable directions. An unhappy investor is Wall Street's best friend, and by emphasizing short-term results in a super bowlesque environment, they guarantee that the vast majority of investors will be unhappy about something, all of the time. Your portfolio should be as unique as you are, and I contend that a portfolio of individual securities rather than a shopping cart full of one-size-fits-all consumer products is much easier to understand and to manage. You just need to focus on two longer-range
  • 21. objectives: (1) Growing productive Working Capital, and (2) Increasing Base Income. Neither objective is directly related to the market averages, interest rate movements, or the calendar year. Alfred Anderson wrote an article “Manage Working Capital With Cash Advance” 2006 on the subject of The success of an organization depends on how effectively its working capital is managed. Day to day operational expenses pertaining to advertising, salaries, rent etc. needs to be met on a regular basis and thus proper management of working capital is essential. Managing working capital typically refers to strategies being implemented to maintain the requisite amount of operating liquidity on a day to day basis. This involves management of a company’s short term assets and liabilities to ensure sufficient cash flow to satisfy short term debt and other operational expenses. Working capital decisions are short term which is based on cash flows and profitability of a business. Hence measurement and estimation of the profitability is vital. Cash flows can be measured with the help of cash conversion cycle i.e. the time required to convert raw materials into finished products which is then converted into sales. Michael Koslow wrote a book “Your Success: It’s All About Working Capital Strategy” on the subject of
  • 22. This area of finance allows companies to obtain working capital for their business by releasing liquidity tied up in assets. Asset-based lending is growing faster than general lending because it is generally less risky, according to Paul Hancock, a managing director in asset-based lending at JPMorgan, as told to The Financial Times. "Both the securitization and traditional leveraged loan markets have been significantly less active, and businesses are increasingly considering alternatives for their funding needs," Hancock says. "In times of economic uncertainty and earnings volatility, companies can sometimes find it easier to manage their finances with their balance sheet rather than earnings or cash flow covenants." James Leong wrote a book “Managing Working Capital” on the subject of Accounting defines working capital as Current Assets less Current Liabilities. It is also known as Net Current Assets. Current assets are those which are considered liquid and are convertible or expected to be realizable in cash within a period of 12 months from the date of the financial report. Common examples include cash, inventories, accounts receivables, prepayments and marketable securities. Current liabilities are those which are expected to be repaid within a period of 12 months. Examples include bank overdraft, short term borrowings, accounts payables and accrued expenses. Operationally, working capital indicates the ability of the company to finance its current operations and to meet obligations when they mature. It measures the companys ability to pay daily bills from a liquidity standpoint.
  • 23. Peter Kennedy wrote a article “Government bond Markets: Shaw Capital Management February Newsletter” on the subject of Shaw Capital Management Korea February Newsletter: There was always the risk that the funding requirements resulting from recent policies, and particularly from the measures to counter the latest recession, would prove to be a massive burden for the global bond markets, and this has now proved to be the case. The Dubai government appears to have been rescued by help from Abu Dhabi; but it is still not clear whether there will be help for Greece and other periphery countries of the euro-zone that are in difficulties, and doubts have also been expressed about countries outside the euro- zone, including the UK, if central banks do not implement "exit strategies" carefully, and credible plans to reduce the massive fiscal deficits are not introduced fairly quickly. Capital Management Korea February Newsletter: Debt issuance rose to over $2 trillion in 2009 to finance this deficit, and to replace maturing bonds; and the latest decision to take advantage of the unexpected windfall from the repayment of bank bail-out funds that are no longer needed to provide new resources for job creation is a clear indication that there are no plans to take early action to reduce the deficit. Marciano Guerrero wrote a article “Working Capital And Current Ratio - 2 Useful Measures Of Liquidity And Solvency” on the subject of The Balance Sheet is one of the four required financial statements that accountants prepare for business owners and managers. This statement shows the assets, liabilities, and the owner's equity (capital).
  • 24. The balance sheet is a reflection of the Accounting Equation (Assets = Liabilities + Owner's Equity). The accounting equation is a simple-minded equality. It informs the reader of the balance sheet to whom the assets (left side of the equation) belong: the creditors (liabilities) and the owner (owner's equity). So, in all businesses, the two parties that can claim ownership of the assets are creditors and the owner. And in the case of a corporation 'the owner' will be many and are called shareholders. Stan Prokop wrote a article “How Does My DSO Affect Cash Flow and Working Capital” on the subject of Most business owners and financial managers know the importance of their investment in accounts receivable. The method by which the largest corporations in the world, and a small company measure collection activity, is called DSO, or ‘Collection Period ‘. DSO stands for DAILY SALES OUTSTANDING Business owners can calculate this number very quickly, and we recommend it be done regularly, typically monthly, quarterly, and certainly annually. It’s a great business measurement of your success, and lenders also focus in on this number also. We point out that the DSO calculation is a reflection of one point in time – that’s why it is important to monitor the overall trend of DSO on a longer term basis. Naturally all good businesses age their receivables, so they know how old they are and focus on past due accounts. Jeff Bross wrote an article “Accounts Receivable Factoring Can Be A Powerful Working Capital Tool” on the subject of
  • 25. The way factoring receivables works is the factoring company (factor), provides cash for your invoices after you invoice your customers. Many factoring companies use the term purchase your receivables, but in reality they are really just advancing funds against your receivables as the primary collateral for the transaction. True no recourse factoring is not very common these days as most companies that need factoring do not want a factor calling customers for collections and payments. So if the factor sets your discount fee at 2.5%, the factor keeps 2.5% of the invoice total as their fee for providing the funds immediately. Most factoring companies will advance 80% to 90% of the total up front, and then provide your business the remaining amount 20% to 10%, less your discount fee, once the invoice is paid by your customer. You are normally given up to 90 days for payment to arrive and if the payment does not arrive the factor will come back you for collection. It's important to keep in mind that today's factoring is mostly full recourse so you will need to manage the relationship with your customers and make sure payments still arrive within a reasonable time period. DR.R.SRINIVASAN wrote a article “WORKING CAPITAL FINANCING –BOON TO BUSINESS” on the subject of It is widely accepted that every successful business must have a strong working capital position. It is in this context; an attempt was made to explain the concept and various determinative factors influencing net current assets below: Gross working capital refers to working capital as the total of current assets. That is to say, Gross working capital = Total current assets.
  • 26. Net working capital refers to working capital as excess of current assets over current liabilities. In other words net working capital refers to current assets financed by long term funds or capital employed of the business. Accordingly, Net working capital = Current assets – Current liabilities The net working capital position of the firm is an imperative contemplation, as this will determine the firm’s profitability and risk. Here the profitability refers to profits after expenses and risk refers to the probability that a firm will become technically insolvent where it will be unable to meet obligations when they become due for payment. Steve Jones wrote an article “Finance for Working Capital - Bank Overdrafts”2004on the subject of This is the most common form of finance used to fund working capital and the one with which most business owners are familiar. This is where the bank account is allowed to go overdrawn up to a pre-agreed limit. Overdrafts are straightforward to arrange and are provided by most banks. The limit will be set at a figure appropriate for the business and at a level where the bank considers the risk to be acceptable. The actual amount available will therefore vary significantly from business to business. Security may or may not be required A rapidly expanding business could easily out grow its overdraft facility and find itself constantly close to the agreed borrowing limit. As there will always be a finite amount of money
  • 27. that a lender can provide, this in itself may be a restricting factor in the growth of the business. In this situation it will be necessary to consider and explore other types of finance. Stan Prokop wrote a article “How Do Banks Exert Control And Influence On Business Loan And Working Capital Facilities “2010-06-17 on the subject of This is because when a customer has to service the additional non- bank debt they might be unable to service the banks loans. Banks have very well known and published cash flow ration and they want to ensure their customers can meet these rations on the bank debt. Naturally if a bank feels comfortable with a customer growth and cash flow profits they are much more likely to approve a third party financing . If they aren’t comfortable they may ask the company to at lease temporarily defer bonuses, dividends, or, in the case of a public company, a stock repurchase. Bankers of course usually know the company very well, as a relationship and financial history has developed over the years. They will often want to have input into the company’s growth direction in an effort to ensure the customer is not going down a path that in their opinion, might lead to liquidity loss or profitability loss Jackie Johnson wrote a article “How Accounts Receivable Factoring Can Solve Your Working Capital Issues”2008 on the subject of
  • 28. The beauty of using this cash flow tool comes in the simplicity of it all. They purchase an invoice from you at a rate that is discounted from the true invoice value. This discount allows them to make a profit when the original customer settles the invoice, which is their motivation for engaging in the transaction. The benefit for selling the invoice comes in receiving the money immediately, which can negate any potential difficulty that may be arising from a lack of cash flow. Again, using the skills and knowledge of companies who perform accounts receivable factoring services can ensure the liquidity of many firms, even in the most troublesome of times. The firm who sells the invoice may be the one who benefits the most but it is clear that the factor is doing a great level of business too. If they have enough cash to cater for their own short term needs as well as having money left over, it makes sense to have this excess money working for them. The guaranteed profit that arises from the discount applied to the invoice rate ensures the firm will receive more money in the future, which can help a business plan ahead. Jason Hulott wrote a article “Short term Business Loans: Feasible way to raise working capital”2005on the subject of With assist of short term business loans people can avail easy case for any of their business and other purposes. It may include anything like pay off salary & wages of employees, business promotional expenses, purchasing a land for office premises, paying due taxes, buying new machinery, and advertisement expenses, office interior expenses etc. There is no restriction over the usage of loan amount.
  • 29. These loans are unsecured in nature that avails you money in the ranges of £1000 to £25000 for the term period of 1 to 10 years. You may have complete freedom to select the amount range as per your convenience and repaying capability. You can avail this loan facility at any stage of your business. But, keep in mind that never make delays in payment as it cause high penalty charges. Plus, timely repayment of money can also assist you in strengthen your financial position. Terry Cartwright wrote a article “Cash Flow Management of Debtors And Creditors In A Credit Crunch” on the subject of The objective is to obtain payment from customers as fast as possible improving cash flow and minimizing the risk of bad debts and not being paid at all. Payment terms offered to customers should be clearly stated and fixed as standard accounting figures according to the amount of funding the business is prepared to offer its clients. Because that is exactly what credit terms to customers is, free cash funding in exchange for eventual sales income. Consideration should be given to using a cash discount system to encourage sales invoices to be paid faster. In some businesses it would be appropriate to obtain up front deposits and scheduled payments. Review this practise to obtain a greater proportion of payments faster to improve liquidity. American Journal of Business on An Analysis of Working Capital Management Results across Industries Firms are able to reduce financing costs and/or increase the funds available for expansion by minimizing the amount of funds tied up in current assets. We provide
  • 30. insights into the performance of surveyed firms across key components of working capital management by using the CFO magazines annual Working Capital Management Survey. We discover that significant differences exist between industries in working capital measures across time. In addition, we discover that these measures for working capital change significantly within industries across time. The IUP Journal of Accounting Research and Audit Practices on Inventory and working capital Management: An Empirical Analysis The working capital management refers to the management of working capital, or precisely to the management of current assets. A firm’s working capital consists of its investments in current assets, which includes short-term assets—cash and bank balance, inventories, receivable and marketable securities. Therefore, the working capital management refers to the management of the levels of all these individual current assets. On the other hand, inventory, which is one of the important elements of current assets, reflects the investment of a firm’s fund. Hence, it is necessary to efficiently manage inventories in order to avoid unnecessary investments. A firm, which neglects the management of inventories, will have to face serious problems relating to long-term profitability and may fail to survive. With the help of better inventory management, a firm can reduce the levels of inventories to a considerable degree e.g., 10 to 20% without any adverse effect on production and sales. European Financial Management, on International working capital practices in the UK
  • 31. A new order depletes that inventory significantly. Although payments from Medicare and other carriers may lag, expenses including loan repayment, must be paid and inventory replenished. However, additional credit is not available until the existing line has been repaid. Consequently, unless you have established a credit line sufficient to meet the cash flow requirements you might need in the future, loans won’t work because they do not fluctuate with your revenue cycle or expand with your growth Journal of International Business Studies on An International Study of Management Perceptions of the working capital Process Working capital literature is rather limited and the process of managing short‐term resources is not understood well by he academicians. In contrast the corporate managers are continuously involved in the working capital decision-making process, but their perspective is limited to the practice of their firm. In order to fill this gap in the working capital literature, a study of management perceptions of the working capital process was undertaken. A survey was used to collect the information from the sample of marketing, production, and financial executives in large corporations in Belgium, France, India and United States. The study intercepts management ranking of working capital objectives and indicates the need to improve finacial planning models to include explicitly short–run objectives; further, predictability of cash inflows and outflows is examined and the potential factors affecting the predictability are evaluated
  • 32. Studies in Agricultural Economics on The interpretation of ccc and its elements, working capital management Those literary sources, which are about the interpretation of the working capital in a context with the financing strategies of the companies, about the related financial indices, and the counting methodological questions of all these, could not be called poor, nor unified. The deficiency of defining the concepts that give the theoretical basis and their vocational tenability, the controversial interpretation and the unclearness of the related methodological questions creates several problems. The problematic concepts are working capital net working capital, the circulation of current assets and working capital management etc. The root of the problems could be found on the other hand in the unclearness of the theoretical contexts, in the deficiency and vocational tenability of the defining of the related concepts and categories. We define the concepts of working capital, net working capital based on the results of our several years of research work. 30Journal of Business Finance & Accounting on Does working capital Management Affect Profitability of Belgian Firms The relation between working capital management and corporate profitablity is investigated for a sample of 1,009 large Belgian non-financial firms for the 1992-1996 period. Trade credit policy and inventory policy are measured by number of days accounts receivable, accounts payable and inventories, and the cash conversion cycle is used as a comprehensive measure of working capital management. The results suggest that managers can increase corporate profitability by reducing the number of days accounts receivable and inventories. Less profitable firms wait longer to pay their bills.
  • 33. 31Policy Research working Paper Series on Why liberalization alone has not improved agricultural productivity in Zambia: the role of asset ownership and working capital constraints The authors use a large panel data set from Zambia to examine factors that could explain the relatively lackluster performance of the country's agricultural sector after liberalization. Zambia's liberalization significantly opened the economy but failed to alter the structure of production or helps realize efficiency gains. They reach two main conclusions. First, not owning productive assets (in Zambia, draft animals and implements) limits improvements in agricultural productivity and household welfare. Owning oxen increases income directly, allows farmers to till their fields efficiently when rain is delayed, increases the area cultivated, and improves access to credit and fertilizer markets. Second, the authors reject the hypothesis that the application of fertilizer is unprofitable because of high input prices. Rather, fertilizer use appears to have declined because of constraints on supplies, which government intervention exacerbated instead of alleviating. 32PR NEWSWIRE , Published a article on the subject of Equity Indexed Annuities have a place in many people's retirement accounts. Unfortunately, they aren't as well known as variable or fixed annuities and customers and sales reps often overlook them because of lack of awareness. Equity indexed annuities provide a method of fighting inflation, participating in the market and still remaining risk free. Equity indexed annuities are a blend of the fixed annuity and the variable annuity. They offer a base interest rate the company guarantees regardless of market conditions. In
  • 34. this way, they're much like the fixed annuity. They also track a specific equity index, such as the S&P 500, and give a percentage of the growth to the policyholder if the market increases. The percentage varies from policy to policy. There are difference in the percentage you receive and differences in caps. A cap on the percentage is the highest amount the policyholder gets regardless of the market conditions. Sometimes caps are as low as 8 to 10 percent PR Newswire published a article . on the subject of Ten papers present recent research in the field of financial planning and forecasting. Journal of Economic Literature. An Empirical Examination of The Intraday Return Volatility Process (S. Rahman, K.P. Ang). The Valuation of New Product Introduction Under Uncertain Competition: A Real Option Approach (S.-S. Chen, et al.). Earnings, Dividends, and Equity Value of Multinational Firms (A. Riah-Belkaoui). Benford's Law and Its Application in Financial Fraud Detection (K. Kumar, S. Bhattacharya). Estimation of the Degree of Integration in the U.S. Maturity Rates Using Semi parametric Techniques (L. Gil-Alana). On Country-Fund Price Behavior-An Empirical Analysis of Co integrating Factors (T. Chiang, D. Kim). Strategic Capital Budgeting: the Abandonment Option with Political Risk (E. Clark). Time Series Model Complexity and Firm Valuation: the Case of AR1 Firms Versus Non-AR1 Firms (B.-H. Bao, D.-H. Bao). Debt Covenant Violation and the Value Relevance of Accounting Information (W. Cready, et al.). What's
  • 35. Next: Merger in the Lebanese Banking Sector (A. Charbaji). PR Newswire published a article on the subject of Usually owning to the fact that the debtor has a regular and consistent job, you as the judgment recovery specialist can garnish the wages relatively quickly, in such a way that the debtor is able to sustain his lifestyle at the same time is able to pay the judgment amount, provided that there no other garnishments with a higher priority than yours, levied on him. However, there is a high possibility of the debtor quitting his job, right after he is served with the wage garnishment notice. If, in case, this happens its back to square one for you, as judgment recovery professional. Generally, debtors or defendants who fend for themselves and have a home based business; it becomes excessively harder for the judgment recovery specialist to recover the judgment owed. When such a case arises, special tools like an assignment order of third party levies are used by the judgment recovery specialist. These will be discussed at length in other articles on judgment recovery, once I am done with them. Infiniti Research Limited, published a article on the subject of
  • 36. The reputed Las Vegas financial planners can perform proper analysis and make proper recommendations on every major asset class. They not only make recommendations depending on the bonds and stocks but also on several other aspects. These planners include the natural resources, commodities, currencies and real estates. The experienced planners know how these investments would be taxed. They can determine the way in which they are to be used within investment portfolio for achieving the long term as well as the short term goal of their clients. A person who wants to get the best wealth management should contact a private wealth manager than contacting the retail brokerage firms. The private wealth management firms have a financial team and make sure that all investments have a proper consistency. They provide the planning through the account of his lawyer or his client. These firms coordinate all wealth of a person as they consider coordinated approach as the best approach for financial services. Decision Resources, , Pages: 23 publised a article on the subject of The Federal Reserve can control interest rates by expanding or contracting the quantity of money. It can control the financial markets with its “Open Market Operations.” It can create new money to increase its member's bank reserves at any time. It can negotiate with foreign banks on monetary policies without congressional approval or knowledge. And it can do all of this with virtually no oversight by any elected representative of the people. Even the Government Accounting Office responsible for auditing all government agencies, has no auditing authority over the Federal Reserve, a private corporation not a government agency
  • 37. Without the ability to judge the cost of capital by the true market value of interest rates, determined by the availability of savings for investing and future consumption, no free market can correctly judge its financial health. These false signals along with government regulations are what create booms and busts in our economy, not free market actions. Espicom Business Intelligence Ltd, May , published a article on the subject of The core idea of retirement planning is to save enough money for your old age days and a smart investment plan made by a financial consultant will also be able to ensure that your old age is the golden period of your life financially. Property is one of the biggest assets you can have financially and making good money out of investments and savings is possible by employing independent broker dealers that can guide you to converting your property into an investment that delivers high returns. Investing in the right insurance policies can also save your money efficiently especially in areas like auto insurance or health insurance where without a good insurance a lot of your money might get spent for the smallest hiccups in your personal health. Wealth is the one language that everyone understands across the world and maintaining this wealth is essential if you want yourself to have an open communication with a good life.
  • 38. Report from the India Press Release brought to you by the Hindustan Times MUMBAI, India, - The Bombay Stock Exchange of India made the following corporate announcement: Ranbaxy Laboratories Ltd., has informed BSE that Basics GmbH (Basics) based in Leverkusen Germany, a wholly owned subsidiary of the Company on February 13, 2007, has announced that the Company's products has been selected by 16 Allgemeine Ortskrankenkassen (AOK), Germany's largest General Local Health Insurance, for listing. Basics/Ranbaxy is the only Indian Company in the AOK list. This new agreement, listing specific products, is the first of its kind. The Star (South Africa) published a article on the subject of In 1933, by Executive Order of the President (FDR), all Americans were required to surrender their gold to the government. This took away our right to trade in the most respected of all possible commodities used to secure value in our economic exchanges. Not only did government confiscate our gold, they also prohibited redemption of U.S. Dollars for gold by any American. Of course, the international bankers were still allowed to exchange dollars for gold. Now you know where our gold went. FDR pulled the plug on value-backed money for American enterprise, dooming free market capitalism to a slow and painful death. In 1971, President Nixon reneged on the “Breton Woods Accord” removing the international gold redemption for the U.S. dollar. Unfortunately, it was too late. It is probable that the international bankers already own most of what was our country's gold. No longer would our dollars be backed by anything other than our central bankers and government's “Good Faith.” No free market can exist without the right to exchange productive value for productive value.
  • 39. Ankit Agarwal on January published a article in Finance Friday on the subject of Its a new year and a economically promising one at that. However, the stock markets have been playing a see-saw ride for some time now with no major fluctuations.Sectoral Investing has lost its flavor for some time now but analyzing a particular sector still helps one shortlist the stocks to invest in. Recently, we had covered a discussion on the IT Sector’s position in the Stock Market. One other sector that looks set for some real action is the HealthCare sector. The Health Care sector picked up some real peace during the last year after March where the BSE HealthCare dropped to its maximum low(CY 09) and from then on, it has been only an uphill journey. A look at the charts of the BSE Healthcare index is a good indicator of the good run the Healthcare based stocks have had in the Indian Stock Markets. Cheng F. Lee November Wrote a book “Advances in financial planning and forecasting, Volume 11” on the subject of This paper presents a comprehensive analysis of the distributional and time-series properties of intraday returns. The purpose is to determine whether a GARCH model that allows for time variance in a process can adequately represent intraday return volatility. This paper investigates how a stochastic competition process in a two-factor real option model could affect the value of future product development opportunities. Our results also indicate that product development opportunities are more valuable
  • 40. This paper develops and tests a valuation model, whose main prediction is that equity value is a function of earnings, dividends and book value, where the function depends on the relative level of multi nationality. This paper has discussed Bedford’s law, which explains that the leading (first or leftmost) digit in a series of natural numbers is not evenly distributed among the digits 1 to 9. The main purpose of this study actually seeks to explore a new methodological approach to data mining that can be of some real practical value; especially to the auditors and forensic accountants in detecting financial frauds. Alice C. Lee, John C. Lee, Cheng F. Lee Wrote a book “Financial analysis, planning & forecasting: theory and application” on the subject of Based on the authors' extensive teaching, research and business experiences, this book reviews, discusses and integrates both theoretical and practical aspects of financial planning and forecasting. The book is divided into six parts: Information and Methodology for Financial Analysis, Alternative Finance Theories and Their Application, Capital Budgeting and Leasing Decisions, Corporate Policies and Their Interrelationships, Short-term Financial Decisions, Financial Planning and Forecasting, and Overview. The theories used in this book are pre-Modigliani Miller Theorem, Modigliani Miller Theorem, Capital Asset Pricing Model and Arbitrage Pricing Theory, and Option Pricing Theory. The interrelationships among these theories are carefully analyzed. Meaningful real-world examples of using these theories are discussed step- by-step, with relevant data and methodology. Sue Nugus Wrote a book “Financial planning using Excel: forecasting planning and budgeting techniques”on the subject of
  • 41. This book covers all aspects of budget preparation, from designing and creating a budgetary control system, consolidating data and working with spreadsheets. Now fully updated to include the latest version of Excel, Excel 2007 and for easy budgeting now with access to an online resource of worked examples and spreadsheet templates. The book shows how things are done in Excel 2003 and Excel 2007 to ease transition from the previous version to the new version. Now in full colour throughout to aid quick understanding through numerous color screen shots. For those who use Excel on a daily basis in budget planning, this book is a must. It contains a wealth of practical examples, tips, new techniques all designed to help quickly exploit and master Excel to its full advantage and therefore use spreadsheets for more effective management accounting in your firm.
  • 42. Chapter 3 Company profile Of usha martin
  • 43. COMPANY PROFILE 3.1. EXECUTIVE SUMMARY Started in 1961 in Ranchi, Jharkhand as a wire, rope manufacturing company, today the Usha Martin Group is an Rs.3000 Crore conglomerate with a global presence. The group has set new standards in the manufacture of wire rope, bright bars, steel wires, specialty wires, wire ropes, strand, conveyor cord, wire drawing and cable machinery. With continuous growth in both the domestic and international markets, Usha Martin, the Group’s flagship company has emerged as India’s largest and the world’s second largest steel wire rope manufacturer. For Usha Martin, the path to sustainable growth was long; the management constantly tried out innovative business practices. With initiative to diversify the customer base by venturing into the international markets, moving up the value chain and fully integrating its business process to maximize stakeholder value.
  • 44. In 1979, the company set up a steel plant with wire rod rolling mill at Jamshedpur, to benefit from business integration. This ensured a steady supply of steel for the manufacture of value added products. Today, the Jamshedpur unit has a truly integrated specialty steel manufacturing facility of 400,000 MT per annum. Out of which, about 50% is consumed internally by its plant in Ranchi, Hoshiarpur & Bangkok, producing steel wire, steel strand, steel cords, bright bar and steel wire ropes. All its manufacturing facilities are ISO 9000 certified and the steel plant was India’s first to receive the TPM Excellence Award from JIPM, Japan. With local success come global aspirations. Currently, the company has overseas manufacturing operations in Thailand, UK, USA and Dubai. Besides a vast network of distribution centres and marketing offices spread across the globe to support an ever growing worldwide customer base. The company exports over 60% of the wire rope output and about 20% of the total wire rods produced. Usha Martin’s future plans are focused on its operation in Jharkhand – a state rich in mineral resources. Future priorities include product mix enrichment, cost reduction and infrastructural improvements. Already flourishing in its recent foray into mining operations, the company is planning to invest in its iron ore and coal mines, sinter plant, pellet plant, power plants, while also enhancing its steel making and value added products capacity with an investment of Rs.2,100 crore. What set Usha Martin apart is its unwavering commitment to social responsibility. For over three decades the company has invested ample man-hours and capital on community development projects for integrated prosperity in rural Jharkhand, through a CSR arm, Krishi Gram Vikas Kendra (KGVK).
  • 45. This NGO undertakes various development initiatives, following a model of Total Village Management (TVM). Focusing on key areas like Watershed development, agricultural productivity, better health practices and education, empowering women and encouraging micro enterprise. In recognition to its effort Usha Martin has been awarded the prestigious TERI Award for Corporate Social Responsibility in 2006. Today Usha Martin is the only company globally having an integrated model on the upstream, beginning with iron ore and coal mining, power generationand going down to deep sea oil and gas exploration, providing anchoring and mooring solutions. 3.2. HISTORICAL BACKGROUND: Mr. B.K. Jhawar, the Chairman, established Usha Martin Limited in 1960 with the Wire Ropes Plant, Ranchi. The firm was initially called Usha Martin Black as it started with
  • 46. collaboration between M/S Martin Black, Scotland and Usha Automobile & Engineering Pvt. Ltd., Calcutta in 1960. 1960 - The Company was incorporated as Usha Martin Black (Wire Ropes) limited having its wire rope plant at Ranchi. The name was changed to Usha Martin Black Ltd. in 1979 and further changed to Usha Martin Industries Ltd. (UMIL) in 1983. 1965 - UMIL promoted Usha Ismal Ltd. (UIL) in collaboration with CCL Systems Ltd of UK for the manufacture of fittings and accessories, equipment for pre-stressed concrete system, wire ropes and wire ropes splicing equipment at Ranchi. UIL merged with UMIL in 1990 and became a division of the company. 1969- It backed Usha Breco Ltd. To design, construct and erect Ropeways. 1971 - UMIL promoted Usha Alloy Steels Limited (UASL) for the manufacture of billets at Jamshedpur. UASL merged with UMIL in 1988. 1975 - UASL acquired an ongoing rolling mill at Agra. 1975 - UMIL set up its Machinery Division at Bangalore for the manufacture of Wire Drawing and allied machines in technical collaboration with Marshall Richards Barcro Limited (MRB) of UK. The collaboration with Martin Black broke up in 1975 and the company was hence called Usha Martin Industries. The company set up an electrical furnace steel plant at Jamshedpur in 1973, followed by a rod mill in 1976. 1979 - In order to obtain steady supply of wire rods for its wire rope plant, UASL set up a Wire Rod Rolling Mill at Jamshedpur.
  • 47. 1980- It promoted Usha Siam Steel Industries Ltd, Thailand to produce wire, wire ropes & auto control cables. It set special products division to produce Hi-Tech Wire Cables. 1987- UMIL, along with Bihar State Electronics Development Corporation, promoted Usha Beltron Ltd. (UBL) in collaboration with AEG KABEL of Germany for the manufacture of Jelly Filled Telephone Cables. 1994- It set up Software Division to provide IT Solution for communication application and Usha Martin Ltd, a distribution center at Glasgow, UK. 1997 - UMIL merged with UBL w.e.f 1st October 1997. 1999- Usha Martin Ltd. Merged with Usha Beltron Group and was renamed as Wire and Wire Rope Division within which following six companies are included: JFTC-Ranchi, Wire And Wire Rope Division - Ranchi, Usha Ismal Division – Ranchi, Usha Alloys & Steel –Jamshedpur, Usha Machinery Division – Bangalore and Rod-Mill Division – Agra 2000 - Acquisition of specialty wire rope manufacturing plant in UK “BruntonShaw”. 2000 - Commissioning of 25 MW thermal power plants for captive consumption. 2001 – Commissioning of 2nd SMS to enhance capacity and produce quality specialty steel. 2003 - Usha Beltron Ltd Changed its name to “Usha Martin Limited (UML). UML created Fine Cord Plasticized coated Fine wires, household wire, Polymer coated wire, Fine Ropes & Bright Bars manufacturing facilities in Tatisilwai- Ranchi
  • 48. 3.3. Achievements • UML is the 2nd largest wire and rope manufacturer in the world and has the largest variety in South East Asia. • It is multi product, diversified engineering conglomerate with 10 production units in India,1 in Thailand,1 in UK and 1 in Dubai. • It is saving valuable foreign exchange by exporting by exporting its products to 42 countries like USA, Africa and Middle East, conforming to the strictest product quality standards. • It got the ISO 9000 Certification by BVQI in 1994.
  • 49. ICICI (BCB) did the business process re-engineering in 1996 and line system was set up to enhance performance. • With the modern concepts like TPM, value engineering, QC, suggestions scheme, customer satisfaction and human resource development, UML is trying to reach unparalleled heights. • UML is serving through a leading daily “Prabhat Khabar”, Krishi Gram Vikas Kendra, Usha Martin Technical Institute. HEAD OFFICE: Usha Martin Limited Mangal Kalash, 3rd floor 2-A Shakespeare Sarani KOLKATA-71 PLANT LOCATION: Usha Martin Limited Wire Ropes & Specialty Products Division Tatisilwai, Ranchi,
  • 50. Jharkhand- 835103 3.4. VISION: • In our chosen business, we shall retain market leadership in India and shall be globally competitive through customer orientation and excellence in quality, innovation and technology. MISSION • Enriching lives We will do our best to provide quality product and services, which will improve the lifestyle of our users. • Quality is our first priority We aim to achieve customer satisfaction by providing quality products. No sale is good sale unless it fulfills our customer expectations. • Our word is our bound
  • 51. Our dealers are our partners. We endeavor to practice this golden rule in all our relations with others. • Integrity is our commitment The conduct of our company’s affairs must be pursued in a manner that command respect for honesty and integrity. TPM POLICY: • It is our policy to induce change in all employees by delegation, empowerment and motivation to achieve total participation towards zero accident, zero defects and zero failure. 3.5. TRADE PROFILE Business Excellence UML is the 2nd largest wire and rope manufacturer in the world and has the largest variety in South East Asia. It is multi product, diversified engineering conglomerate with
  • 52. 10 production units in India, 1 in Thailand, 1 in UK and 1 in Dubai. It is saving valuable foreign exchange by exporting its products to 42 countries like USA, Africa and Middle East, conforming to the strictest product quality standards. It got the ISO 9000 Certification by BVQI in 1994.ICICI (BCB) did the business process re-engineering in 1996 and line system was set up to enhance performance. With the modern concepts like TPM, value engineering, QC, suggestions scheme, customer satisfaction and human resource development, UML is trying to reach unparalleled heights. UML is serving through a leading daily “Prabhat Khabar”, Krishi Gram Vikas Kendra, Usha Martin Technical Institute. Areas of business Group companies: • Usha Siam Steel Industries Public Company Ltd., Thailand (USSIL) • European Management & Marine Corporation Ltd., Aberdeen, UK (EMM) • Brunton Shaw Ltd., Nottinghamshire, UK (BSRL) • Usha Martin Cables Ltd., Silvasa, Bangalore, India (UCL) Distribution centers: UM International Ltd. at Glasgow, Houston, Johannesburg, Copenhagen and Dubai UM Singapore Ltd. Services:
  • 53. Usha Breco Ltd. (Usha Martin Industries & British Ropeway Engineering Ltd.) • Usha Martin Ventures Ltd. Steel division A backward integration initiative, the Usha Alloys & Steels Division (UASD) at Jamshedpur is one of the largest amongst secondary steel manufacturers of specialty steel long products in India. With ISO 9002 certified facilities, UASD has pioneered the unique process of steel making through mini blast furnace-arc furnace route, which ensures superior quality of steel at a lower cost. UASD serves a range of industries like automobile, general engineering, fasteners, railways, defense and power. Machinery division This ISO 9001 unit was set up in 1974 at Bangalore to manufacture Wire Drawing and allied machines. Over the years, the division has added a wide range of Wire, Wire Rope and Cable machinery to its product range and is now the leader in this field in India. The division started with technical collaboration with M/s Marshall Richards Barcro of UK and subsequently has collaborated with internationally reputed firms like De-Angeli Industries SPA, Italy, Stolberger Maschinenfabrik, Germany, Hi-Draw Machinery Ltd, UK and Redaelli Techna Meccanica, Italy. A facility in Ranchi has also been created for manufacturing machines required for Wire Drawing and Stranding Applications. Usha Ismal Division
  • 54. This unit, having manufacturing unit in Ranchi (Eastern India), is the leader in the field of pre-stressing equipment & accessories and also executes pre-stressing job on turnkey basis. Besides, it provides services for jointing of reinforcement bars by mechanical splicing. All major civil contractors of National Highway Authority of India, Indian Railways and PWD are regular users of these products and services. It also offers hydraulic presses & accessories for manufacturing mechanically spliced wire rope slings, machines for proof load testing of wire rope slings, and die-less hand operated hydraulic crimping tools. These products find wide application with Steel Plants, Port Trusts, Oil Sector, Heavy Engineering Industry, Electricity Boards, Electrical Contractors and Factories etc. Cables Division under UM Cables The Cable Division of Usha Martin Limited has emerged as a leading manufacturer of jelly-filled underground & fiber optic telecommunication cables in India. The sophisticated manufacturing facilities are located in Silbasa. The company integrates technology from KABEL RHEYDT (formerly AEG KABLE), GERMANY, a member of Alcatel Group - is rated as one of the most efficient plants in the country and a benchmark in the industry. The Plant includes computer - controlled critical equipments, imported from International Leaders in cable technology. Wire and Wire Ropes Division
  • 55. The ISO 9001-certified 100,000 MT / annum-manufacturing facilities at Ranchi (Eastern India) is 2nd largest producer of ropes in the world. Since its inception, the division has continuously developed and expanded its range of product offerings and is considered a pioneer in certain classes of products in India. Steel wire ropes manufactured by the division find wide applications in oil exploration, mining, elevators, Crane, fishing, construction, load transportation and general engineering sectors. It find varied use in different parts of the world known for their excellent quality, long life and low maintenance, and are the preferred choice of customers across nations. Ropes, ranging from 2 mm to 100 mm diameter find varied applications. The wide ranges of products are used in underground mining, surface mining, mooring, onshore and offshore drilling, fishing, elevators, cranes, aerial haulage and track installations besides various general engineering applications. Pre-stretched ropes, locked coil wire ropes and spiral strands made in Usha Martin are used in suspension bridges, antenna masts etc. Backed by a strong international distribution network our ropes have found a place in different corners of the world. Sources of Raw Materials Raw materials sources Steel Wire Rod (90% - 96%) UMIL, Jamshedpur Steel Wire Rod (4% - 10%) Imported from Germany, Japan, etc. Fibre Core M/s. Chotanagpur Wire Rope Other Raw material (Zinc) M/s. Hindustan Zinc & Other
  • 56. Supplies 25% & balance is Reported Finished Products Rope- General engineering rope, Flattened strand, Elevator rope, Non- rotating rope, finished rope, Mining rope, Hyplex rope, Locked coil winding, Track rope. Wire- Auto spoke, Cycle spoke, PC Strand, Rolling shutter, ACSR, PC wire Indexed & plain. Fine Cord Usha Martin, extended vast experience in rope making technology towards manufacturing of Fine Cords. Usha Martin Fine Cords find application as the inner element for the Automotive Control Cables and also in boring applications and as Pull Cord cables for laying of Television cables. Size range The size range for overall diameter of finished cords is 1.20mm to 6.00mm. Low relaxation prestressed concrete (LRPC) Strands In keeping with the demands of the international market, we have introduced Low Relaxation Prestressed Concrete (LRPC) Strands for the construction industry in 2001. A steel member that is prestressed and embedded in concrete loses the initially applied stress exponentially with the passage of time. The single most important factor attributing to this loss in stress relaxation property of the steel itself. By treating the steel through a thermo mechanical process known as stabilizing, the propensity of the steel to
  • 57. "relax” under a stressed condition is controlled to a great extent. Some of the main advantages that our customers derive by using low relaxation strands are listed below * Up to 10% reduction in steel requirement possible * Reduction in concrete requirement due to reduced size of structural members * Hot stretch process used during the manufacture of LRPC strands produces a nearly straight strand, thereby eliminating necessity for extra post straightening treatment. * Saving in number of anchorages, ducts, sheathings, wedges and labour resulting in overall reduction of project cost Applications Pre-stressed concrete girders for road, river & railway bridges and flyovers, pre- stressed concrete domes, slabs, silos, hangars, aqua ducts, viaducts & railway sleepers. Patenting & Galvanizing facility * 50ft electrically fired furnace with inline cleaning, coating, galvanizing facilities. * 30ft propane fired LeFour furnace with inline cleaning, coating, and galvanizing facilities. * 30ft propane fired rod DSW patenting furnace * Galvanizing plants of different capacities * Stress relieving facilities for wires and strands * Annealing furnaces (bell type)
  • 58. * Vacuuann ealing furnace * PLC driven automatic pickling plant * manually operated pickling plant Quality & Testing Wires and Strands hold a premier position in the domestic market and are also exported to different part of the world. Used for different purposes across a gamut of industries, our wires and strands are continuously put through rigorous and demanding conditions. To ensure that our offerings match the international standards, we have set high internal quality standards. Plant located at Ranchi has been awarded ISO 9001 due to our emphasis on maintaining global quality standards. Wires confirm to various specifications such as * IS Specifications * JIS Specifications * British Specifications * ASTM Specifications * DIN Specifications Aerial Ropes UML is the undisputed leaders in the domestic Aerial Rope sector. Their product offerings include Aerial haulage ropes, material handling ropes, rope for passenger ropeways and other track ropes. Ropes are renowned for their low maintenance, long life, excellent quality and strength.
  • 59. Size range The size range generally preferred for such ropes is * 19mm to 38mm5 Steel cord for conveyor belts Conveyor belts - one of the most popular means for bulk material handling - finds widespread application in mines, cement and coal industries, ports & terminals, power stations etc. When reinforced with steel cord these belts last longer, allow higher operating speeds and offer better shock and rupture resistance than conventional fiber reinforced belts. In addition, very low elongation and absence of creep, makes steel cord the ideal reinforcement for long haul, high strength belts (from 500 to 2000 N per mm of belt width). In March 2003, the US $ 300 million Usha Martin Group, entered into a Joint Venture with Gustav Wolf, Germany for production of Steel Cords for Conveyor Belts at a special facility set-up adjacent to the main Wire & Wire Rope plant at Ranchi and known as Gustav Wolf Specialty Cords Limited. Gustav Wolf, Germany is one of the global pioneers in producing Steel Cord for Conveyor belts with decades of experience behind them and with all major Conveyor Belt manufacturers on their customer list. Through effective synergy of years of conveyor belt experience of Gustav Wolf with rope making expertise of Usha Martin, we have become the pioneer and the only producer of Steel Cords for Conveyor Belts in this country. With state-of-art machinery and latest technology from Gustav Wolf, our cords provide an optimized high tensile yet flexible reinforcement to the Conveyor Belts and enables reliable and high capacity Conveyor Systems to be used. Our flexibility to supply in ready-to-fit spools as well as in
  • 60. giant master spools, gives our customers the option to procure in exact lengths, thus reducing operational cost and downtime. Major customers of Usha Martin Eastern Region— a. Indian Ropeway & Corporation Ltd. b. OTIS India Ltd. c. Philips India Ltd. d. SAIL e. HEC, Ranchi f. TISCO, Jamshedpur g. MCL, Talchar i. CCL, Ranchi Western Region- • ONGC • Jindal Strips Ltd. • Essar Steels, Surat • Reliance Infrastructure. • Nuclear Power Corporation of India, Tarapur • Western Coal Fields
  • 61. Northern Region— • BHEL Panipat • Hindustan Copper Ltd. • Maruti Udyog Ltd. • Hindustan Electronics Ltd. Southern Region— • L&T Ltd. • KONE Elevator, Chennai • Johnson Lifts Pvt. Ltd., Chennai • KEC International Ltd., Amateur • United Marine Traders. 3.6. COMPETITORS DOMESTIC – Fort Williams, Kolkata TATA SSL, Mumbai
  • 62. Bharat Wire Ropes, Maharashtra South Indian Wire Ropes, Maharashtra JCT Ltd., Punjab Naveen Wire Ropes, Pathankot Orient Wire Ropes, Indore Asian Wire Ropes, A.P. GLOBAL— KISSWIRE, Korea Austria draught, Austria Caser, Germany John Shaw, England Redaelli, Ital Bridan, Ger 3.7. BOARD OF DIRECTORS Mr. B.K Jhawar – Chairman Mr. Prashant Jhawar – Vice Chairman Mr. Brij Kr. Jhawar – Director Mr. U.V. Rao – Director Mr. N.J. Jhaveri -- Director Mr. A.K. Chaudhuri – Director Mr. Suresh Neotia – Director Mr. Ashok Basu – Director Mr. Sudhir Dole – ICICI nominee director
  • 63. Mr. Rajeev Jhawar – Managing Director Dr. P. Bhattacharya – Jt. Managing Director 3.8. GOVERNMENT POLICIES RELATED ACTS: Factories Act (1948) Objectives: The Factories Act provides for the health, safety, welfare, service conditions and other aspects of workers in factories. The Act is enforced by the State Government who frame rules that ensure that local conditions are reflected in enforcement. The Act as amended in 1987 also regulates the safeguards to be adopted for the use and handling of hazardous substances. Applicability: The Factories Act extends to whole of India and is applicable to all 'factories' including government factories.
  • 64. It applies to all factories employing more than 10 people and working with the aid of power or employing 20 people and working without the aid of power. Factory however does not include a mine Covered under the mines Act, 1952, a mobile unit of the armed forces, a railway shed or a hotel, restaurant or eating place. The act covers all workers employed in the factory premises or precincts directly or through an agency including a contractor, involved in any manufacture Minimum Wages Act (1948) Object of the Act- to Provide for fixing minimum rates of wages in certain Employment. The object of the Act is to ensure the welfare of the workers in a competitive market by fixing the minimum rates of wages in certain employments. Article 39 states that the State shall, in particular, direct its policy towards securing (a) that the citizen, men and women equally shall have the right to an adequate livelihood and (b) that there is equal pay for equal work for both men and women. Article 43 states that the State shall endeavour, by suitable legislation or economic organisation or in any other way, to give all workers, agricultural, industrial or otherwise, work, a living wage, conditions of work ensuring a decent standard of life and full enjoyment of leisure, and social and cultural opportunities. Employees’ Provident Fund Act (1952)
  • 65. The Employees’ Provident Fund and Provision Fund and Miscellaneous Provision Act, 1952 provides for institution of compulsory provident funds for employees in Factories and other establishment. The purpose is to make some provisions for the future of the industrial worker after he retires or for his dependents in case of his early death. It applies to all factories and other establishment of any notified industry if the number of employees is 20 or more than 20. Under this scheme, a stipulated amount {12%(current)} is deducted from the employees’ salary & contributed towards the fund. This amount is decided by the government. The employer also contributes an equal amount to the fund. Employees’ State Insurance Act (1948) The Government of India passed ‘Employees’ State Insurance Act, at April 1948. It was designed to provide cash benefits in the case of Sickness, Maternity and Employment Injury, payment in the form of pension of dependents of workers who dies, the family gets employment injury and medical benefits. Contribution periods and benefit period: Workers, covered under the ESI Act, are required to pay contribution towards the scheme on a monthly basis contribution period means a six-month time span from 1 April to 30 October and 1 November to 31 March. Thus, in a financial year there are two contribution periods of six months duration. Cash benefits under the scheme are
  • 66. generally linked with contribution paid. The benefit period starts their months after the closure of a contribution period. Contribution period corresponding benefit period: 1 April to 30 September 1 January to 30 June of the following year 1 October to 31 march 18 July to 31 December Registration: Simultaneously with his or her entry into employment in a covered factory or establishment, an employee is required to fill in a declaration form. The employee is then allotted a registration number, which distinguishes and identifies the person for the purposes of the scheme. A person is registered once and only upon his entry in insurable employment. But recent SC’s judgment in Balakrishna v ESIC has held that a worker covered under the act would be entitled to benefit from the date of his employment and not from the date of registration after contribution by the employer. Bonus Act (1975) It is a part of profit linked with productivity given annually to the employees. Every employee receiving wages up to Rs.3500/month is entitled to bonus every accounting year. Every factory wherein 10 or more persons are employed with the aid of power or an establishment in which 20 or more persons are employed without the aid of power on any day during an accounting year. Minimum Bonus -- 8.33% of wage. Maximum Bonus -- 20% of wage / Rs.7200
  • 67. 3.9. Social Commitment through Krishi Gram Vikas Kendra Management commitment and support since 1977 "in every village where hunger persists, human being must be empowered to discover. Their own vision expresses their own leadership, create their own solutions and work together to achieve their own success" KGVK Activities • augmenting water resources through watershed management • sustainable income generation through cottage industries & live stock management • capacity building through "agivika research & training center" • health & family welfare programmes • women empowerment thru "swashakti" programme KGVK projects In partnership with grass root civic society, corporate and government • India canada environment facility (icef) project - for water resources conservation & conjunctive utilization for environmental restoration (project cost rs 10.0 cr) • ICICI - cini project - for primary health services at the grass root level project cost rs. 2.0 cr)
  • 68. • project with us aid along with cepda - for training barefoot workers in villages for making them 1st point of contact in village health services • Projects with govt of India for water shed, women empowerment, education etc. • Total projects worth Rs.18 cr in hand
  • 69. Chapter 4: Data analysis And Interpretation 4.1GENERAL INDICATORS COMPONENTS OF CURRENT ASSETS Current assets means assets that will either be used up or converted into cash within a year's time or normal operating cycle of the business whichever is longer. They include cash and bank balances, marketable securities, inventory of raw materials, semi- finished and finished goods, debtors, bills receivables and pre-paid expenses. TABLE 4.1.1: COMPONENTS OF CURRENT ASSETS
  • 70. current assets 2004-05 2005-06 2006-07 2007-08 Inventories 2840534 2621667 3390551 5324181 Sundry debtors 2513970 1982492 2269104 2563505 cash and bank balance 389655 517489 370805 463607 other current assets 195738 225640 260942 340486 Loans and advance 2108995 1648665 2119931 4024216 Total current assets 8048892 6995953 8411333 12715995 increase/decrease in CA -1052939 1415380 4304662 (%)increase/decrease in CA -13.08% 20.23% 51.17%
  • 72. Current liabilities are those liabilities or obligations, which are expected to mature in the next twelve months. They include short-term loans and advances, accounts payable / sundry creditors, provision for taxation, outstanding expenses and dividend payable. TABLE4.1.2: CURRENT LIABILITIES Particulars Amount in (Rs) 2004-05 2005-06 2006-07 2007-08 Sundry creditors 1431326 1701248 1940128 5175146 Advances from customers 74406 70772 95418 106193 Unclaimed dividends 2982 2797 2983 3152 Others Liabilities 2894347 1994670 2574014 3325085 Provisions 176380 210109 262565 381723 Total Current Liabilities 4579441 3979596 4875108 8991299 Increase/Decrease in CL - (599845) 895512 4116191 (%)Increase/Decrease in CL _ 22.50% 84%
  • 73. Source:www.econpapers.repec.org.com NET WORKING CAPITAL Net working capital (NWC) represents the excess of current assets over current liabilities. The greater the amount of net working capital, the greater the liquidity of the firm. However, the problem of net working capital as the measure of liquidity is that the
  • 74. change in net working capital does not necessarily reflect the change in liquidity of the firm TABLE 4.1.3: NET OPERATING CYCLE NET WORKING CAPITAL Particulars Amount (Rs) 2004-05 2005-06 2006-07 2007-08 Total CA 8048892 6995953 8411333 12715995 Total CL 4598033 3979596 4875108 8991299 Net Working Capital(NWC) 3450859 3016357 3536225 3724696 Increase/Decrease in NWC - (434502) 519868 188471 (%)increase/decrease in NWC - (12.59)% 17.20% 5.32% Significance: Working capital during 2006 was negative but as on 2007 it has increased upto 17.20% but again there was drastically fall during 2008 i.e.5.32% the reason of this fall was increase in current liability was twice of increase in current assets.
  • 75. OPERATING CYCLE The operating cycle represents the time taken for cash spent on raw materials to come back to the business in the form of cash from collection of sale proceeds. In case of a manufacturing firm, the following are the sequence of events, which is termed as operating cycle of the manufacturing firm. .Conversion of cash into raw materials Conversion of raw materials in WIP Conversion of WIP into finished goods Conversion of finished goods into Accounts receivables Conversion of accounts receivables into cash .The term cash or operating cycle contains the length of time necessary to complete the following cycle events: Conversion of cash into inventory Conversion of inventory into receivable Conversion of receivable into cash TABLE 4.1.4: NET OPERATING CYCLE PARTCULARS 2005-06 2006-07 2007-08
  • 76. Raw material conversion period 46 52 107 Work in progress conversion period 18 24 24 Finished goods conversion period 84 112 123 Debtors conversion period 52 52 50 Operating Cycle 200 240 304 Payable deferral period / Credit Period* 119 113 207 Net Operating Cycle (in days) 81 127 97 .Credit Period: This includes advances from customers. The company as a conscious decision on policy solicits for advances for all the special orders to take care of the cost of the materials to be procured.
  • 78. The current ratio is an indicator of the firm's commitment to meet its short-term liabilities. The current ratio is an index of the concern's financial stability since it shows the extent of working capital, which is the amount by which the current assets exceed the current liabilities. A very high current ratio would indicate inadequate employment of funds while a poor current ratio is a danger signal to the management. It shows that business is trading beyond its resources. CURRENT RATIO -This ratio tells about the relationship between current assets and current liabilities of a business .The formula for calculating the ratio is: CURRENT RATIO = CURRENT ASSETS CURRENT LIABILITIES Current assets include those assets which can be converted into cash within a year’s time and current liabilities include those liabilities which are repayable in a year’s time. Current Asset Item having a life of one year or less, or the normal Operating Cycle of the business, whichever is greater. For example, if a construction company's operating cycle is three years because it is engaged in long-term construction activities, it would show as current assets items having up to a three-year life. However, in almost all cases, the one-year cutoff is used. Examples of current assets are cash, marketable securities, inventory, and prepaid expenses. Current Assets = Cash in hand + cash at bank + B/R + short term investments(marketable securities) + debtors + (debtors-provision) + stock (stock of finished goods + stocks of raw material + work in progress) + prepaid expenses.
  • 79. Current Liabilities = Bank overdraft + B/P + creditors + provision for taxation + proposed dividends + unclaimed dividends + outstanding expenses + loans payable within a year. TABLE4.2.1: CURRENT RATIO
  • 80. Particulars YEAR 2004-05 2005-06 2006-07 2007-08 Current Assets Inventories 2840534 2621667 3390551 5324181 Sundry Debtors 2513970 1982492 2269104 2563505 Cash &Bank 389655 517489 370805 463607 Balance Other Current 195738 225640 260942 340486 Assets Loans& Advances 2108995 1648665 2119931 4024216 Total (a) 8048892 6995953 8411333 12715995 Current Liabilities Liabilities 4421653 3769487 4612543 8609576 Provisions 176380 210109 262565 381723 Total (b) 4598033 3979596 4875108 8991299
  • 81. Current Ratio (a/b) 1.75 1.76 1.73 1.41 Significance: This ratio is used to assess the firm’s ability to meet its short term liabilities on time. According to accounting principle, a current ratio of 2:1 is supposed to be an ideal ratio. It means that current assets of a business should, at least, be twice of its current liabilities. The higher the ratio, the better it is, because the firm will be able to pay its current liabilities more easily. The reason of assuming 2:1 as the ideal ratio is that the current assets include such assets as stock, debtors etc., from which full amount cannot be realized in case of need. Hence, even if half the amount is realized from the current assets on time, the firm can still meet its current liabilities in full. Status of Current ratio of UML - With the help of graph and the available data of Usha Martin Ltd we can see that the ratio of 1.75:1 was stagnant for two consecutive financial year and during 4th financial year i.e. during 2007-08 the current ratio fall to
  • 82. 1.41:1 .The reason of fall in current ratio is because of increase in current liabilities during this financial period we can see that the current assets has also increase but the increase in creditors as well as other liability the current ratio decrease .Thus during slow down of market also the company’s current ratio was positive .During 2008 the debtors, loans and advances increases but the increase in current liabilities was approx. double of 2007. QUICK RATIO Quick ratio is a refinement over current ratio as it shows the instant ability to meet the current liabilities. Liquid assets means all the current assets less inventories, sticky debts, etc., i.e. such assets as can be ‘quickly’ converted into cash. The general norm for a healthy quick ratio is 1:1. This ratio is also known as acid-test ratio. Quick ratio indicates whether the firm is in position to pay its current liabilities within a month or immediately. As such, the quick ratio is calculated by dividing liquid assets (quick current ratio) by current liabilities:- Quick Ratio or Acid Test Ratio = liquid assets Current liabilities ‘Liquid assets’ means those which will yield cash very shortly. All current assets except stock and prepaid expenses are include in liquid assets. Stock is excluded from liquid assets because it has to be sold before it can be converted into cash. Prepaid expenses
  • 83. too are excluded from the list of liquid assets because they are not expected to be converted into cash. Liquid assets thus include cash, debtors, bills receivable and short term securities. TABLE 4.2.2: QUICK RATIO
  • 84. Particulars Year 2004-05 2005-06 2006-07 2007-08 Liquid assets Sundry Debtors 2513970 1982492 2269104 2563505 Cash &Bank Balance 389655 517489 370805 463607 Other Current Assets 195738 225640 260942 340486 Loans& Advances 2108995 1648665 2119931 4024216 Total (a) 5208358 4374286 5020782 7391814 Current Liabilities Liabilities 4421653 3769487 4612543 8609576 Provisions 176380 210109 262565 381723 Total (b) 4598033 3979596 4875108 8991299 quick ratio (a/b) 1.13 1.10 1.03 0.82
  • 85. Significance: An ideal quick ratio is said to be 1:1. If it is more, it is considered to be better. The idea is that for every rupee of current liabilities, there should at least be one rupee of liquid assets. This ratio is a better test of short term financial position of the company than the current ratio, as it considers only those assets which can be easily and readily converted into cash. Stock is not included in liquid assets as it may take a lot of time before it is converted into cash. The liquidity of Usha Martin The liquidity of Usha Martin is favorable but during 2007-08 the ratio is in a dangerous situation as we can see that the quick ratio is0.82:1 that means the company is unable to meet its liability at a very short period and the reason is that during this financial year the demand of the product decreased and therefore the amount of inventorywas quiet high and so the company was unable to meet its short term liability at a very short period. 4.3. ACTIVIT RATIOS
  • 86. WORKING CAPITAL TURN OVER RATIO: This ratio indicates whether or not working capital has been effectively utilized in making sales. If a firm makes higher volume of sales with relatively small amount of working capital, it is an indicator of the operating efficiency of the company. WORKING CAPITAL TURNOVER RATIO-This ratio shows therelationship between sales and working capital. This ratio shows the number of times the working capital results in sales. Working capital turnover ratio= Net Sales Net Working Capital TABLE 4.3.1: WORKING CAPITAL TURNOVER RATIO PARTICULARS YEAR 2004-05 2005-06 2006-07 2007-08 NET SALES (A) 11898717 12352083 14086047 16558987 CURRENT ASSETS (a) 8048892 6995953 8411333 12715995 CURRENT LIABILITIES (b) 4598033 3979596 4875108 8991299 NET WORKING CAPITAL (a- 3450859 3016357 3536225 3724696
  • 87. b) (B) W.CTURNOVER RATIO (A/B) 3.44:1 4.09:1 3.98:1 4.44:1 Significance: This ratio is of particular importance in non-manufacturing concerns where current assets play a major role in generating sales. In other words it shows the number of times working capital has been rotated in producing sales. A high working capital turnover ratio shows efficient use of working capital and quick turnover of current assets like stocks and debtors. A low turnover indicates under utilization of working capital. However, a very high turnover ratio of working capital is also dangerous, as it sign of over- trading, i.e., doing business with too little working capital. Status of working capital turnover ratio of UML- during 2004-05 the turnover was 3.44:1 but in 2005-06 it increases upto 4.09:1 which was the good significance and