ACC Cements

SUMMER TRAINING PROJECT REPORT ON WORKING CAPITAL MANAGEMENT IN ACC LTD GAGAL CEMENT WORKS

SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF DEGREE OF MASTER OF BUSINESS ADMINISTRATION (M.B.A.) (2006-2008)

PROJECT GUIDE :

SUBMITTED BY :

MR. SANJAY JOHARY MANAGER FINANCE GAGAL CEMENT WORKS BARMANA (ACC LTD.)

ANURAG SHARMA M.B.A. 2 ND YEAR ROLL NO :COLLAGE – 04/06 H.P.U. – 597

SESSION (2006-2008) INSTITUTE OF ENGINEERING AND EMERGING TECHNOLOGY BADDI

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GAGAL CEMENT WORKS P.O.BARMANA, BILASPUR HIMACHAL PRADESH 174013

THE ASSOCIATED CEMENT COS. LTD.

INDEX 2

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ACKNOWLEDGEMENT UNDERTAKING PREFACE HISTORY OF INDUSTRY ASSOCIATED CEMENT COMPANY LIMITED CORPORATE PROFILE OF ACC LTD. ACC FOUNDATION ENVIRONMENTAL POLICY OF ACC LTD. MISSION & VISION OF ACC LTD. PERFORMANCE AND EVENTS ARTICHETS OF SUCCESS GAGAL CEMENT WORKS INTRODUCTION GEOGRAPHICAL DETAIL CONTRIBUTION TO GOVERNMENT QUALITY POLICY ENVIRONMENTAL POLICY PRODUCTION SYSTEM IN GAGAL CEMENT WORKS MANUFACTURING PROCESS POWER CEMENT PLANT DEPARTMENTATION FINANCE DEPARTMENT ACCOUNTING SECTION COST SECTION ANALYSIS OF WORKING CAPITAL RATIO ANALYSIS FUND FLOW ANALYSIS WORKING CAPITAL BUDGET NEED AND OBJECTIVE OF STUDY RESERCH METHODOLOGY DESIGN OF STUDY BIBLIOGRAPHY • • • • • •

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ACKNOWLEDGEMENT 3

I offer my gratitude to those who have spend their precious time, curiosity and continued encouragement through study and for  the fulfillment of my SUMMER TRAINING IN GAGAL CEMENT WORKS( ACC LTD.) DISTT – BILASPUR (H.P). I would like to thanks Mr. Sanjay Johari (Manager Finance) and Sunil Gupta ( Asst. Manager Finance) at Barmana allowing me to undertake training in their renowned organization and permitting to work on Analysis of Working capital at this company. I will indebted toward Mr. Sunil Gupta and his staff for co-operative guidance and helping me to find out relationship between books and its practical application and to learn a lot about different aspects of the company. Under their guidance I succeeded in doing my summer training program.

ANURAG SHARMA

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UNDERTAKING 4 

I Anurag Sharma do here by declare that the training report on study conducted on “Working capital analysis” in GAGAL CEMENT WORKS Barmana submitted by me in the partial fulfillment of M.B.A. (Master of Business Administration) Himachal Pradesh University, Shimla is the original work. What ever Data has been disclosed in the report are authentic to the best of my knowledge. I have not submitted this training report to any other university ever before.

ANURAG SHARMA M.B.A. FINANCE IEET (BADDI)

PREFACE 5 

As a matter of Knowing how things look like in practical sense every M.B.A. student has to undergo training in an approved business organization for the tenure of not less than six weeks. I got a chance to seek more and more knowledge under the guidance of professional managers. On the completion of M.B.A. Degree students have hand on experience that will help for facing challenging jobs under such competitive environment. During the training tenure I visited various departments of  GAGAL CEMENT WORKS to study their process of functioning & organization structure. I have completed my project successfully in “The study of working capital analysis” under  the guidance of Mr. Sunil Gupta (Asst. Manager Finance). During the above course tenure Mr. Narender Kumar  (Salary Officer) helped me for getting knowledge concerning with taxation and specially I would like to thank Mr. Sanjay Johary for allowing me to work in finance department.

HISTORY OF ACC LTD. The history of cement industry is the story of civilization from primitive caves of prehistoric times to the skyscrapers of the modern age. It is said that the use of cement is from period use of fire Egyptians utilize gypsum plaster as cementing material as early as 3000 BC in building their monuments. 6 

Material cement has existed the roman empire joseph Arpdin invited Portland cement in 1824 after the discovery of  hydraulic properties of time, patented his product which was call Portland cement. Portland stone which is lime stone quarried on Portland bill in dorsed, England. Modern cement is outcome of  effort of chemist’s technologist and architects. Cement is binding agent having hydraulic properties, which after hydration gives the setting properties strengthening concrete. Intergrading, clinker, gypsum, and pozzolanic material in a proper ratio to get protland pozzolane cement manufacture cement. Cement essentially made up of material containing calcium silicon, aluminum and iron. Limestone, marl and chalk are major  source of clay shale, quartzite, bauxite iron ore provide silicon, aluminum and components. MAJOR COMPANIES IN THE CEMENT INDUSTRY ARE:     

The Associated Cement Companies Ltd. Birla Group Larsen and Turbo J.K.Group India Cement Gujrat Ambuja

CORPORATE PROFILE OF ACC LTD. ACC is a very fond acronym in India, often assuming synonimity with cement . With a annual cement capacity of  over 12 million tones, the company’s operation are spread regional marketing offices, several area offices, and a dedicated band of people from all corners of India. Thus in 7 

industrial backdrop of India ACC stands for multi-product, multi-unit company. The companies various businesses are supported by a powerful, in-house research and technology backup facilitythe only one of its kind in the Indian cement industry. ACC has also extended its services to overseas, to the middle East, Africa and South America, where it has provided technical and management consultancy to a variety of  consumers, and also helps in the operational maintenance of  cement plants abroad. In addition to its modernization and expansion, ACC has earmarked on an all round internal improvement program through introduction of various world class benchmarking and total productivity maintenance practices. Through an organization wide business process engineering, it has able to achieve revenue enhancement and cost savings by optimally aligning business practices with customer needs. It would also result in further simplification of the internal management processes and delayering and decentralization for fast decision making purposes. Today, ACC stands poised to enter the new millennium, ready to seize the opportunities and face the challenges that lie ahead. With more than six decades of experience ACC has a rare perspective of sound business strategies, with which ACC in poised to maintain its leadership in cement industry.

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A GLANCE ON THE HISTORY ON SUCCESS The Associated cement company Ltd. is known for the largest manufacturer of cement. So it comes under the leading companies in India for producing more than 1/4th of national output. ACC Ltd. company was duly registered under Indian 8

companies Act 1956, having its registered office at cement house, 121 maharishi Karv road, Mumbai-400020. It has 14 cement plants spread all over the country and has various subsidiaries and other overseas projects. Each business is concerned with the objective of rising business through customer satisfaction and continuous improvement in quality of  the product. Initially when cement was introduced in 1914, south India industry Ltd. started first cement plant near Madras.This plant was closed down after a few months due to shortage of  labors and lack of knowledge in manufacturing of cement. It has modernization and expansion projects at lakheri in Rajasthan and Bargarh and has one project for additional capacity at new wadi in Karnataka. In 1936 with the effort of Mr. Dinshaw a group of  companies formed Associated companies Ltd. In 2005 Holcim group of swizerland made take over of ACC Ltd. and this time whole management of ACC Ltd. is in the hands of  Holcim groups chairman MR. M.L.NARULA.

ACC FOUNDATION Many men of outstand initiative and foresight contributed towords the development of cement industry in India. About 71 years ago in 1936 a number of companies belonging to the house of Tata Khatias and Kellick, Nixon combined to from “The Associated Cement Companies Ltd.” great industrialist and

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patriot Mr. F.E.Dinhsaw was mainly responsible into a single organization. The objective of this merger was not to attain monopolistic position but to make and deliver cement as cheaply as possible. Mr. Dinshaw added for new factories in ACC group from 1929 to 1936. During Second World War, the cement was delivered as essential commodities under the defenses of Indian Rule and though under price and distribution control. The cement industry gets further impetus under the leadership of ACC. ENVIRONMRNTAL POLICY OF ACC LTD. •

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Ensure continual improvement in environment performance by carrying out periodic review of action plan. Prevent pollution and minimize fugitive emissions. Comply with all applicable legal and regulatory reguirements. Create environmental awareness among employee and community at large. Minimize the waste generation at source reutilize the work if generated. Conserve energy and mineral resource.

MISSION AND VISION OF ACC LTD. QUALITY:- To make continuous improvement in the quality of  our product and services and add some essential features for  customer satisfaction and ensure their supply at fair prices. PROFITABILITY:- To achieve fair and reasonable return on capital employed by making optimum utilization of available 10

resources and increasing productivity & effectiveness throughout the company. RESPONSIBILITY:- To fulfill our obligation to society, specifically in the area of rural development and in safeguarding. LEADERSHIP:- Maintain our leadership of the Indian cement industry through the country modernization and expansion of  our manufacturing facilities and activities and through the establishment of a wide and efficient marketing network. GROWTH:- Ensure a steady growth of business by strengthening our position in the cement sector. EQUITY:- Promote and maintain fair industrial relation and environment for the effective involvement, welfare and development of staff at all levels.

VISION OF ACC IS TO BE A WORLD CLASS CORPORATION WITH DIVERSE BUSINESS BUILT AROUND ACC’sunita CORE COMPETENCIES AND KNOWLEDGE BASE IN CEMENT REFACTOREIES ADVANCED MATERIAL ENGINEERING GEOLOGY MINING AND RESEARCH.

PERFORMANCE AND EVENTS •

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Change of name to ACC Limited with effect from september1,2006. Production and sale of cement touched an all-time high of  18.73 million tones and 18.86 million tones respectively during the year 2006, growth of 10% and 8% respectively as compared to the corresponding previous period. 11

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Total group income for the year 2006 at Rs.5976 crore, up 28% over the corresponding previous period. Profit before Exceptional items and tax for the year ended December 31,2006 for the group was Rs1464 crore as against Rs435 crore in the nine months period ended December 31,2005. Profit after Tax for the year ended December 31,2006 for  the group was Rs 1240 crore as against Rs514 crore in the nine months period ended December 31,2005. Augmentation of cement grinding capacities at Tikaria, Kymore, Wadi, Sindri and Madukkarai. Modernization and expansion projects at Lakheri and Bargarh. Project for additional capacity at New Wadi in Karnataka. Captive power generating capacities being added at Lakheri, Kymore, Bargarh and Wadi. Increased focus on ready Mix Concrete business-major  growth plans finalized. Technical Support Services centre to achieve technical excellence in plant operations and project management. ACC pledges support to the national effort against HIV/AIDS. Synergies with HOLCIM further strengthened during the year.

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Region (North)

GAGAL

Region (East)

TIKARIA

LAKHERI 

DCW  SIND RI  KYMORE 

CHAIBAS   A BARGARH 

CHANDA

JAMUL

Region (South West)

WADI 

MADUKKARAI 

ARTICHETS OF SUCCESS. 13

NO

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

NAME OF DIRECTOR

NATIONALITY

MR.N.S.SEKHARIA (CHAIRMAN)

INDIAN SWISS

MR.PAUL HUGENTOBLER

(DEPUTY CHAIRMAN)

INDIAN Mr. M.L.NARULA

(MANAGING DIRECTOR)

INDIAN MR.A.L.KAPUR

INDIAN MR.S.M.PALIA

INDIAN MR.NARESH CHANDRA

SWISS MR.MARKUS AKERMAN

INDIAN MR.D.K.MEHTROTRA

INDIAN MR.R.A.SHAH

INDIAN Dr.NIRMALYA KUMAR

INDIAN MR.SHAILESH HARIBHAKTI

INDIAN MR.ANIL SINGHVI

INDIAN MR.A.K.JAIN

(WHOLETIME DIRECTOR)

GAGAL CEMENT WORKS INTRODUCTION 14 

Gagal Cement Works implemented & obtained ISO14001 Environment System, ISO9001:2000 Quality Management System & OHSAS18001 Occupational Health and Safety Management System Certification. The Gagal Cement Works was set up in the year 1984 wit the aim to serve the market of Himachal Pradesh, Punjab, Uttaranchal, Utter  Pradesh and Jammu & Kashmir. ACC was the first to put up large scale industry house in a backward area of Himachal Pradesh. Gagal-1 unit started with an annual capacity of 0.56 Million Tones(with one kiln of 1700 TPD). TPD). Gagal-11 unit of 1 Million Tone capacity (with one kiln of 3300 TPD) was installed in 1994-1995. Today Gagal Cement Works has risen to produce 3.2 million tones of blended cement and is like to increase to 4.0 Million Tones in the current financial year 2005 to 2006.Gagal Cement Works is market leader in northern region and maintains its market share in all strategic markets.GCW is the largest cement unit in this entire Zone. There is four other  major cement manufactures from Himachal Pradesh, Punjab and Rajasthan who are his competitors. ACC cement has very strong brand image, trusted by generation for consistent and and durable cement quality, fair business and practice and long association with dealers and customers are the principal factor  which provide us competitive advantages over the other brand. ACC unique R & D support and business policy, differentiate it from its competitors.

GEOGRAPHICAL DETAILS Among the largest private sector companies, ACC is the only company to set up a cement plant in 1982 in backward designated area at Barmana, Distt. Bilaspur (HP) and started production with effect from 12th March 1984. 15 

Barmana is 18 kms north to Bilaspur. The National Highway No.21 connecting Ambala in Haryana and Manali in H.P. passes through Gagal Cement Works and its colony. The colony is at latitude 31.5-degree north and 77degree East Longitude. The total land acquired for the factory, colony and mining area is 2319.10 bighas. Factory covers covers 365 bighas, the colony covers 345 bighas and the mining area is about1633 bighas. The topography of the area around the worksis mount-ainous. Mean maximum temperature of the area goes upto 45 degree Celsius in the month of June and the minimum temper- ature upto 3-degree in the month of December. The work has generated direct and indirect employment to the scale of nearly 12000.

Near by Towns:Bilaspur  Sunder Nagar  Mandi

CONTRIBUTION TO GOVERNMENT Annual contribution to center government by way of taxes, duties is 155 crore out of which for Himachal Government is 100 16 

crore. And along with this it is also helping Govt. as its social responsibility. The company has constructed a Govt. degree college; it is spending money on schools, hospital and on other works of public welfare.

GAGAL CEMENT WORKS-AN UNRELENTLESS PURSUIT TOWARDS EXCELLENCE Gagal Cement Works is committed to deliver quality products to the customers. Gagal Cement Works has to its credit many a prestigious certifications like IS/ISO 9002, ISO 14001 for  environmental management system and OHSAS 18001 for  adopting high class measures in the sphere of  Occupational Health and Workers Safety in the manufacturing of  cement.

QUALITY POLICY • • • •

•

Build Quality In Do not Sort Bad Quality Out Quality Improvement is Limitless and therefore Continuous Concern for Quality is for Entire Organization and Not Just for Product Satisfy Customer Fully and Continuously

GAGAL CEMENT WORKS- A SYSTEMATIC APPROACH FOR CLEANER WORLD ACC GAGAL Cement Works is the first point in Himachal Pradesh to have EMS certificate. The Bureau of Indian standards awarded this certificate to the works in March 1999. The certificate has resulted in batter understanding among all the employees, of overall environmental issues related to the 17 

plant. The main feature of EMS at Gagal is total involvement of  employees. EMS is a program of continuous environmental improvement following a well-defined sequence of steps drawn from the established project management practice and routinely applied in business environment.

ENVIRONMENTAL POLICY • •

• • •

Prevent pollution and minimize fugitive emissions Comply with all applicable legal and regulatory requirements Conserve water, energy and natural resources Minimize waste generation and utilize the same Create environmental awareness and provide clean and safe environment to employees and community at large

PRODUCTION SYSTEM IN GAGAL UNIT Main Raw Material • • • • • •

Limestone Quartzite Iron Ore Shale Gypsum Fly Ash

MANUFACTURING PROCESS The Gagal Cement Works is based on the most modern process of ceme cement nt manu manufac factur turin ing g namel namely y a dry proces process s suspe suspensi nsion on preheated kiln with precalcener. The limestone is crushed in the 18

crusher. It is than grinding in Raw Mill along with Shale and Iron Ore to fine power. The grinding material is blended to a uniform consistency and fed to the kiln system pulverized Coal in the kiln system to heat the material to a temperature of 1500 degree Celsius. The material undergoes a series of chemical reaction to form a Clinker. The clinker is cooled in the Clinker Cooler and stored in the Clinker silos. It is extracted from the Silos and integrated integrated along with Gypsum and Pozzolanaic Pozzolanaic material material to form Portl Portlan and d Pozz Pozzoi oian ana a cemen cement. t. The The cemen cementt is store stored d in ceme cement nt silos. It is packed in 50-kg bags by automatic packing machine, loade loaded d in truck trucks s by auto auto load loaders ers and and vario various us cons consum umpt ptio ion n center in Himachal Pradesh as well as the neighbouring states of Punjab, Haryana and J&K.

POWER The co. met 54% power requirement through captive generation. Cost of captive power generation was 34% lower as compare to grid power. In keeping with its policy of maximizing its captive power capability. It It is also the process of increasing its thermal capt captiv ive e powe powerr gene genera rati tion on capa capaci city ty by anot anothe herr 45 MW. MW. The The company has already achieved significant reduction in cost in specific area like fuel, power and manpower. manpower. The drives for cost reduction will be further insified all area of operations. operations.

DEPARTMENTATION QUARRY DEPARTMENT 19

The Quarry Department is mainly concerned with the maintenance of Mines at ACC Barmana. The sub-departments namely MINE; ELECTRICAL, GARAGE, CRUSHER, STACKER & RECLAIMER support the Quarry department.

MINES Gagal lime Stone Mine is captive mine of o f M/S ACC Ltd., Gagal Cement Works. The mining lease lease covers an area of 265.97 hectares. Presently the mine is one of  the largest mine of northern India and is fully mechanized by Heavy Earth Moving Equipment's.

LIME STONE AND COAL HANDLING SECTION LIMESTONE The crushed limestone is received from Gagal Quarry with the help of a series of belt conveyer and stacked in stockpile with the help of stackers.

COAL Coal is used as a fuel for firing in the Kiln. Gagal Cement Works receives coal from different collieries of CCC, ECL and NEC by rail upto Kiratpur Sahib.

LABORATORY DEPARTMENT Laboratory department in coordination with other departments carries our regular quality control functions. Quality and 20

process control measures are exercised at each and every stage of process. Inspection and procurement of raw materials, its testing, quality control of input materials, intermediate products at different level of process and final product that is cement are done as per procedures. Inspections and Test Records are maintained in the Laboratory as per the scheme of testing and inspection. The departmental activities are coordinated by Deputy Manager-QPC who reports to Manager- Production.

Gagal Works laboratory has three sections: 1. Chemical Chemical & Instrumentati Instrumentation on laboratory laboratory 2. Physi Physica call Laborat Laboratory ory 3. Site Site Labo Laborat ratory ory

PROCESS DEPARTMENT The Process department guides the operations in maintaining proce process ss param paramete eters rs so that that pr prod oduc uctio tion n is withi within n the the desir desired ed rang range e of qual qualit ity y para parame mete ters rs..

The The pr proc oces ess s para parame mete ters rs are are

arriv arrived ed at after after disc discuss ussio ions ns with with the the Depar Departm tmen ental tal Heads Heads of  various sections (Raw Mill, Cement Mills & Laboratory) Manager – Production, coordinates the departmental activities.

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RAW MILL Activity of Raw Mill starts from feeding Raw Material (limestone, Quartzite and Iron Ore) to the Mills and ends at filling the Raw Meal to Silos.

RAW RAW MATERIAL FEED FEEDING ING Lime stone feeding to Raw Mills/Roller Mills is through the sequence of belt conveyors conveyors to different Hoppers. Hoppers. Feed size of  limestone is 90 mm and Mills Scale, Shale feeding is from the Gantry to the respective Hoppers Hoppers through sequence of belt conveyors. Shale feeding is through Reclaimed or Pay Loader.

RAW MILL Two close circuits two chamber Ball Mills are performing the grinding of limestone and Additive mix. Raw Mill is a tube construction of thick MS plate with steel lines and compartments are separated by diaphragm for improving the retention time and transfer of materials in second for further  grinding. Mill is charged with hyper steel balls. Raw material is first fed to Tertiary Crusher (Single Rotor Reversible Impact Crusher) which reduces the size of Mix. After crushing the mix the material is fed to Ball Mill where fine grinding takes place. The finer product is separated by Air Separator and is fed to the blending silos and the coarse material is fed back to the Mill Inlet.

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VERTICAL ROLLER MILL (VRM) In VRM Section the material is directly fed into Mill through the fee feed belt elt for grinding. The ground ound mater terial is sto stored in continuous flow silos from where it is fed to the Kiln. VRM utilizes hot air from the kiln exhaust for drying the Raw Mix Deputy

Manager

–

VRM,

who

reports

to

Manager 

(Maintenance) coordinates the departmental activities

KILN DEPARTMENT Kiln Department functions are categorized under two heads, Manager (Maintenance) is responsible for the maintenance of  all equipment and Manager (Production) is responsible for  the Clinker Production and its quality parameters. Gagal Cement Work has two rotary kilns. Kiln no 1 is having 3 streams coupled with 2 four stage and 1 five stage preheater with 2 precalciners, DDF and MFC. Kilns No 2 are having twin stream 5 stage preheater with precalciners. Pulverized coal is used as a fuel for  calcination. The Clinker is discharged to horizontal grate cooler  and is stored either in Silos or in stockpiles.

CEMENT MILLS MI LLS DEPARTMENT DEPARTMENT The basic function of the department is to grind the required ratio of clinker and gypsum in the manufacture of OPC and clinker, Gypsum and CCP/fly ash for the manufacture of PPC with the help of 4 ball Mills for cement grinding. 23

PRE GRINDING UNIT Roller Press is the pre-grinding unit for Cement Mills 1 & 2. In Roller Press two rollers are arranged in horizontal fashion. One is fixed and other has a hydraulic thrust arrangement for  horizontal movement. The clinker is fed vertically down ward between the rollers and gets crushed by the hydraulic pressure arrangement The product, which is in flakes, is fed to the Ball Mill with other additives for finished grinding.

FINISHED GRINDING Fini Finish shed ed gr grin indi ding ng is perf perfor orme med d in Ball Ball Mill Mills. s.

Ball Ball Mill Mill is a

rotating shell divided into two chambers fitted with shell liners for shell shell pr prote otecti ction on and and char charge ged d with with gr grin indi ding ng medi media a to the the required volume. The impact and friction between the grinding media and material perform grinding. grinding. Out put from the ball Mills is fed to the dynamic separator where the coarse and fines of  specific sizes are separated. The coarse is again conveyed to the Ball Ball Mill Mill for furt further her grind grindin ing. g. The The fines fines are are conv conveye eyed d to cement silos through a series of elevators and air slides. In order to get the desired specific surface for cement the RPM of  separator is varied accordingly? The departmental activities are coordinated by Dy. Manager-Plant who reports to Manager (Maintenance).

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ELCTRICAL AND INSTRUMENTATION (E & I) DEPARTMENT The primary function of the E & I department is to maintain all E & I equipment in the plant to provide the necessary service to ensure the smooth operation of all E 8 & I equipment.

ELECTRICAL Electri Electrical cal equipm equipment ent mainly mainly compris comprising ing transfor transformer mers, s, HT/LT HT/LT motors, DC Motors, switch gears, power distributor system and factory and residential colony lighting Besides the above E & I department is also responsible for the main mainten tenan ance ce if the elect electri rical cal insta install llati ation ons s of the colo colony ny.. The The department CO-ordinates with the other relevant departments for proper utilization of the Grid & DG power.

INSTRUMENTATION Instrumentation system can be effectively termed as the nervous system of the plant. With the recent advanced in technology instrumentation has become one of the most important aspect of cement manufacturing industry. Almost all the monitoring and controlling parameters are now available I the Central Control Room (CCR) for operators to run the plant efficiently. Accuracy and degree of control has increased manifold due to the latest instrumentation control systems. Dy. Dy. Mana Manager ger (Ele (Electr ctric ical al)) and and Dy. Dy. Mana Manager ger (Inst (Instru rume menta ntati tion on)) repor reportt to Mana Manager ger (E & I) for elec electri trical cal and and instr instrum umen entat tatio ion n activities. 25 

WORK SHOP Following activities are carried out in the workshop department: 1. Departm Department ental al maintenanc maintenance e Activit Activities ies 2. Mainten Maintenanc ance e of Gear Boxes Boxes 3. Compres Compressor sors s & PD PD Blow Blowers ers 4. Wate Waterr Pump Pumps s 5. Vari Variou ous s equi equipm pmen entt at Ramba ambagh gh Pump Pump Hous ouse, Filte ilterr and and Sewage Water Treatment plants. The The depa departm rtment ental al acti activi viti ties es are are coor coordi dinat nated ed by Dy. Dy. Manag Manager  er  (Plant) who reports to Manager (Maintenance).

COMMERCIAL DEPARTMENT Procurement Section This section looks after that equipment, tools and other requisite item items s are are made made avai availa labl ble e to diff differ eren entt depa depart rtme ment nts s in time time.. Deputy

Mana Manag ger-Pur -Purc chase ase

who

repor ports

to

Sr.

Managerer-

Commercial coordinates the departmental activities.

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Packing House Department Packing plant is the place where cement is packed & dispatched to variou various s locat locatio ions ns..

Gagal Gagal Cement Cement Works Works packin packing g

department has six silos with total storage capacity of  35200 tonnes. There are three Rotary Packer in Gagal I packing packing plant with a capacity capacity of 100m TPH each and two electronic rotary packers in Gagal II packing pant with a capacit capacity y of 180 TPM each. each. All the the packers packers have trucktruckloading loading facility because the cement form Gagal works to different locations by road.

The various varieties of cement handled are 33 Grade Ordinary Portland Cement (OPC) 43 Grade Ordinary Portland Cement (OPC) PPC (Portland Pozzolona Cement) Assistant Manager-Plant reports to Manager Commercial for  Packing Plant Activities.

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Cement Dispatch Section Cement dispatch section receives dispatch instruction for  Regional Marketing Office, Chandigarh and also from Shimla. The trucks registered with authorized transporters enter the factory gate with Loading Advice cum gate Pass. Pass . The Truck’s Truck’s Gross weight is taken at the Exit Gate by electronic weighbridge and finally an Excise Invoice is issued to the truck driver d river.. The departmental head reports to Manager Commercial.

THE CIVIL DEPARTMENT In ceme cement nt indus ndustr try y the the maint ainte enanc nance e and and appl appliicati cation ons s of  Refractories in kiln and its auxiliary units are one of the most important job. It is the refractory, which is subject to all sort of, processe processes s and operatio operational nal conditi conditions ons like like high high temper temperatur ature, e, abrasion, alkalis, chemicals, thermal shocks, mechanical shocks etc. And protects protects the metallic metallic body of the units. units. Due to this fact fact a strict adherence with the quality of the refractory refractory at every step from receip receiptt to its applic applicati ation on is of paramou paramount nt importan importance. ce. In the organization the civil department does the complete dealing with the refractory and is also responsible for all civil related  jobs in the factory and colony. Deputy Manager-Civil who reports to Manager-Maintenance coordinates the departmental activities.

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MAINTENANCE INSPECTION PLANNING & SYSTEMS (MIPS) As the name suggests the main function of the department is prepa prepari ring ng and and plan planni ning ng for carry carryin ing g out out vario various us inspec inspecti tion on,, main mainten tenan ance ce job job and top top recor record d and upda update te the the insp inspect ectio ion n resul results. ts. Insp Inspect ectio ion/ n/Ma Main inte tenan nance ce plan planni ning ng is based based upon upon the the diagnosis of change in behavior pattern of sound, temperature, heat, vibration, viscosity etc.

MIPS department also coordinates in planning the maintenance act activiti vitie es of vari arious departm artmen entts so as to get optimum utilization of stoppage duration. MIPS also carries out the down tile analysis of main equipment.

GENERAL STORES The The gene genera rall stor stores es is the the depa depart rtme ment nt wh whic ich h is invo involv lved ed in making the balanced and timely flow of materials, spares, tools and equipment. General Stores also arranges for the disposal of  the scrap and unwanted materials. Deputy

Manager

who

reports

to

Works

Manager 

coordinates the activities of the department.

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INFORMATION SYSTEM DEPARTMENT The functions of Information System Department is to: 1.Transformation of EDP to Decision Support System 2. Opti Optimi mize ze End End User User Comp Comput utin ing g to incr increas ease e the the Indi Indivi vidu dual al Productivity 3. Capture Processing and Sharing of Information from the Net 4. In

House

Development

&

Deployment

of

Application

Packages 5. Database Maintenance Maintenance & Administrati Administration on

Hardware Setup •

UNIX based RISC Server.

•

Win-NT based Intel Servers

•

Microsoft Exchange Server 

P I, P II, P III & P IV PCs

:

Software Setup Operating System: UNIX SVR 4, Win - NT 4.0, Win – 95 & Win - 98 Oracle 8 I, Developer 2000, Microsoft Exchange 5.5. MS-OFFICE  – 97 Office XP

Intra-plant Connectivity All plants, RMOs, Head Office is connected through INSAT- 3B services provided by TataNet. TataNet. Connectivity to the external World is through IIS, Head Office. 30

MARKETING ACC ACC Rang Range e of ceme cement nt and and blen blende ded d ceme cement nts s are are mark market eted ed through a network network of 12 regional marketing offices, several area offices and warehouses. A countrywide countrywide network of about 11,000 stock lists who, in turn, are assisted by the sub- dealer's back this. Such an all-pervasive marketing network has an enabled ACC ACC to conso consoli lida date te itsel itselff with with a natio nationa nall prese presence nce.. And And the the customer is assured of being able to get quality ACC products when and where he wants them. Complementing this is a unique customer services cell cell comp compri risin sing g qual qualif ifie ied d civi civill engi enginee neers rs,, wh which ich assis assistt and and advi advice ce cust custom omer ers s with with pr prio iorr and and post post sale sales s serv servic ices es.. This This serv servic ice e begi begins ns with with sele select ctio ion n of type type and and gr grad ade e of ceme cement nt (where applicable) to trouble - shooting and on site assistance. Keeping pace with changing times, and an ever- growing need need for for spec specia iali lize zed d serv servic ices es,, ACC has has been een offe offeri ring ng its marketing expertise and distribution facilities to other producers in cement and related areas. However, a precondition of all such agreement is quality control supervision to be carried out by an ACC expert located at the franchisee's plant. Currently, ACC has fran franch chis isin ing g agre agreem emen ents ts for for ceme cement nt mark market etin ing g with with Alco Alcon n Cement Company, Goa and Cochin cement Ltd., Cochin. ACC also exports cement to SAARC Nations, especially Nepal and Bangladesh on a regular basis.

31

HUMAN RESOURCES DEPARTMENT The basic object of setting up Human Resource Department is to prov pr ovid ide e inpu inputs ts to the the empl employ oyee ees s for for his his opti optimu mum m leve levell of  efficiency. efficiency. It includes includes looking looking after various HR related functions functions such such as traini training ng & devel developm opment ent,, perfo perform rmanc ance e and and poten potentia tiall appra apprais isal, al, plan planni ning ng and allo allocat catio ion n of manp manpow ower er,, indu industr stria iall relations including negotiations and dealing with staff functions such such as transf transfer er,, pr prom omoti otion, on, disc discip ipli linar nary y acti action on,, grieva grievance nce handl handlin ing g etc. etc. Depar Departm tmen entt is also also resp respons onsib ible le for pr provi ovidi ding ng welf welfar are e ameni amenitie ties/ s/fac facil ilit ities ies to empl employe oyees es,, deali dealing ng with with land land matters matters,, commun community ity develop developmen ment, t, colony colony admini administr strati ation on etc. Various details of personnel policies are readily available with HR department. Manager-HR & Admn. Admn. Coordinates the activities of the department.

Mana Manag ger-HR -HR

&

Admn.

Coor oordinate nates s

the

activ tivitie ties

of

the

department.

32

FINANCE DEPARTMENT Introduction: Finance department plays a major role in the work wo rkin ing g of any any or orga gani niza zati tion on as for for allall-pu purp rpos ose, e, mone money y is requi require red, d, wh whic ich h is arran arrange ged, d, pr proc ocur ured ed and and disb disbur ursed sed as the finance department. They only make budget go for cost control and maintain to optimum balance of cash for smooth operations. As such such the the fina financ nce e depa depart rtme ment nt in Gaga Gagall ceme cement nt wor orks ks is lookin king after ter only some ome of the the aspe aspect cts s like paym ayment for  for  rawmaterial purchased, cost control and insurance aspects of  the unit. All receipts for cement sold is received by Regional office office at Chan Chandi diga garh rh and and fund fund fina financ nced ed by unit unit for diffe differe rent nt payment from its R.O.

Hierarchy of the finance department: It is a line organization having a full-fledged department to manage the finance budget, costing and other  matter of this department. The ACC Gagal cement works president has to manage two departments mainly i.e. works and Finance President

Manager Finance

Assistant Manager Senior Officer (Cost)

Senior Officer (Assets)

Senior Officer (Cash)

Clerks Fixed Asset Cost

Employee salary

Transportation

33

FINANCE DEPARTMENT Account Section The accounts section deals all the general accounting, employee payroll, billing and matter related to taxation etc. The department activiti activities es are coordin coordinate ate by Assista Assistant nt Manager Manager-Acc -Account ounts s that that report to Manager-Finance.

Cost Section The Cost Cost Section Section does Account Accounting ing relati relating ng to prepar preparatio ation n of  Monthly Cost Data and Bill Provisioning.Assistant Manager-Cost coordinates coordinates the departmental departmental activities and reports to ManagerManagerFinance.

GEERAL OR ACCOUNTS SECTION Accounting Procedure The accounting procedure of ACC Gagal cement works is not a new complicated one. They follow a standardized rule of  making entries in there books of accounts or posting or making thei theirr tria triall bala balanc nce, e, Gaga Gagall ceme cement nt wo work rks s unit unit make make its its Tr Tria iall Balance in the monthly basis transaction and rent it to the Head Office Office.. Head Head Offi Office ce pr prepa epare res s final final accou accounts nts for for all all unit units s not not individual unit.

34 

Gagal cement works follows the following procedure

Step1: Step1: The quotations are called for acquiring or procuring the particular assets, raw material fuel etc.

Step2: After then estimate decide/fixed through CESS. CESS. (CAPITAL EXPENDITURE SECTION SCHEME) Step3: After then allocation of budget for different requirements.

Step4: Then order re place, R.M/Assets be procured, inspected (G.R.No) by the concerned department.

Step5: Then GR No. After quality check etc. is sent to finance department where the cashier makes the payment.

Step6: The ledger department debits this in the books.

Step Step7: 7: Fina Finall lly y at the wish wish of fina finance nce depar departm tment ent asset assets s is charged and declared free.

35 

FINANCE MANAGER Finance Manager is totally responsible for all activities to payment/receipts of cash and fund Management of the unit. His decision on payment will be final as personal manual, account manu manual al dire direct ctiv ives es laid laid by the the or orga gani niza zati tion on.. Unde Underr Fina Financ nce e Manager the financial activities is disciplined in the manner as per smoo smooth th funct functio iona nary ry of all all acti activi viti ties es of paym payment ent such such as salary and wages, payment to sundry creditors which include all pretty payments to local contractors, repurations, workers and officers of all grade in working unit. In detail it can be said that under finance manager their  will will be paym paymen entt of sala salary ry and and wage wages, s, allo alloca cati tion on of vari variou ous s financial activities such as disbursement of cash by cashier, the payment like contractors bill, local bill, raw material bill, stores and and spar spares es paym paymen entt of raw raw mate materi rial al and and pack packin ing g mate materi rial al,, traveling bills, outstation allowances. All the various mislenious payments sanctioned are being made. The financial activities are on summation of inputs information system department (I.S.D.) provides various financial, cosying outputs outputs availab available le on daily daily report, report, weakly report report and monthl monthly y reports. It also provides information like cash payment, voucher, cash receipt voucher, and various types of bills also. Various type invent inventory ory output output summar summary y of transac transaction tion bills bills of output output (loca (local, l, contr contrac actor tor,r ,raw aw mater materia iall etc.) etc.) vario various us type type of finan finance ce ledgers of the month and monthly trial balance. Account staff to routs all payment in account department:To section the payment to staff,officer,mgt & to verify correction 36 

FINANCIAL MANAGEMENT PREPAPER 

Payroll of employee.



Accounting of sales.



Financial accounts.



Supply bills.



Material Accounting.

COST SECTION The The Cost Cost Sect Sectio ion n is a br bran anch ch of acco accoun unti ting ng and and has has been been developed due to limitations of financial accounting. Financial accounting is primarily concerned with record keeping directed towards the preparation of profit and loss account and balance sheet. It provides information regarding the profit and loss that the business enterprise is making and also its financial position on a particular date. The information concerning the business enterprise is helpful to the management to control in a general way the major function of business viz., finance, administration, produc producti tion on and distr distrib ibuti ution on but but detai details ls rega regard rdin ing g opera operati ting ng efficiency of these divisions are lacking. Infect, the development in the field of cost accounting is so quick and fields covered by it are expanding so much in magnitude that it becomes difficult for the management to lay down management policies, to guide the management decisions or evaluate operating management perf perfor orma manc nce e

with

the

info inform rmat atio ion n

prov pr oviided ded

by

fina financ nciial

accounting.  . 37 

SUMMARY OF WORKING CAPITAL ANALYSIS UNDER RATIO ANALYSIS FUND FLOW ANALYSIS WORKING CAPITAL BUDGET

38

39

It is stated in the diagram how company has spent its earning during 2006:The diagram contains the following items:1. COAL AND OIL :- It is treated under direct expenses and its cost is all about Rs.541.68 crore and it is 8.02% of the total cost and shown in TRADING A/C.

2. TAXES AND DUTIES :- It includes various taxes like corporate tax, sale tax etc. and duties like custom duty, excise duty etc. and its cost is all about Rs.1263.04 crore and it is 18.70% of the total cost and being an indirect expenses is treated under PROFIT AND LOSS A/C.

3. EMPLOYEE COST:- A company has to bear cost in account of services rendered by its employee is called employee cost. Employee costs are in form of wages, salary, provident fund and other perks and allowances and these cost are all about 318.02 crore. it is 4.71% of the total cost and treated under TRADING AND PROFIT & LOSS A/C.

4. TRADING PURCHASE :- Trading purchase includes raw material purchased by the company and is used for getting output of the company. its cost is all about 53.42 crore and it is 0.79% of the total cost of the company.

5. REPAIR AND MAINTANANCE:- A company has to bear  repair and maintenance cost of machinery, building, furniture, tools and equipments. It is treated as indirect expenses and shown in PROFIT AND LOSS A/C. its cost is all about 265.48 crore. It is 3.93% of total cost of the company.

40

6. DIVIDEND:- A company has to pay dividend to equity and preference shareholders for their amount invested in the company. Company has paid Rs 322.04 crore as dividend in 2006 and it is 4.76% of total cost. It is shown in PROFIT AND LOSS A/C.

7. POWER COST:- Electricity which is consumed for the purpose production called power cost. A company has to bear  power cost at about 430.98 crore and it is 6.38% of the total cost. It is treated as direct expenses and shown in TRADING A/C.

8. FREIGHT AND TRANSPORTATION AND OTHER CHARGES:- A company has to bear cost of carrying goods from one place to another place and loading and unloading the goods called freight and transportation and other charges. It is treated as indirect expanses and shown in PROFIT AND LOSS A/C. its cost 983.39 crore and it is 14.56% of the total cost.

9. DEPRECIATION :- It is gradual decrease in the value of  fixed assets like machinery, building, furniture, tools and equipments etc.it is treated as an indirect expanses and shown in PROFIT AND LOSS A/C. it’s cost is all about 254.25 crore and it is 3.76% of the total cost.

10. INTEREST ON BORROWING:- A company has to pay interest on borrowing for long term and short term basis. It is treated as an indirect expanses and shown in PROFIT & LOSS A/C. it’s cost is all about 52.03 crore and it is 0.77% of the total cost.

11. RETAINED PROFIT:- Some times a company adopts a policy of ploughing back of profit for further investment called retained profit. It is shown in the liabilities side of balance sheet. Its cost is all about 909.80 crore and it is 13.47% of the total cost.

41

12. SELLING EXPENSES AND OTHER CHARGES :Those expenses are related with the sale of output in the market called selling expanses and these are treated as an indirect expenses and shown in PROFIT AND LOSS A/C. these cost are all about 368.13 crore and it is 5.45% of the total cost.

13. MANUFACTURING AND OTHER EXPANSES:- Those expanses which are related with production of commodity it is treated as direct expanses and shown in TRADING A/C. it cost is all about 318.50 crore and and it is 4.71 % of total cost.

42

COMPOSITE BALANCE SHEET OF ACC LTD. AS ON 31-12-2005 & 31-12-2006 LIABILITIES

2005

2005

2006

185.54

RESERVES & SURPLUSES 

FIXED ASSETS  LESS: 2955.16  1951.21 DEPRECIATION  NET BLOCK 

4816.25  -  1893.76  2922.49

4628.64 -  1722.29 2906.35 

LOAN FUND

771.16 

473.42 

215.68 

DEPOSITS 

144.82 

1071.42  CAPITAL WORK IN  PROGRESS  104.75  INVESTMENT  (LONG TERM) 300.38  INVENTORIES 

503.54

293.75 

624.13

600.95 

1024.73 913.28 

SUNDRY DEBTORS  213.96 

199.17 

620.17 

102.79

502.28 

CASH & BANK  BALANCES  OTHER CURRENT   ASSETS 

16.13

31.49

LOAN’S AND  ADVANCES 

631.85 

486.76 

0.94

6.41

SHARE CAPITAL 187.76 

DEFFERRED TAX LIABILITIES  320.72  CURRENT  LIABILITIES 

PROVISIONS 

TOTAL

2006

316.77 

ASSETS

MISC. EXPENDITURE  5906.63 4843.35 TOTAL

5906.63 4843.35  

43

WORKING CAPITAL ANALYSIS CAN BE STUDIED UNDER THE FOLLOWING THREE HEADS:1.

RATIO ANALYSIS :- Under the ratio analysis It is urgent to find out short term ratios that will effect working capital of every company

2.

FUND FLOW ANALYSIS :- Under the fund flow analysis it is urgent to find out changing in working capital and its operation and sources and application of  funds.

3.

WORKIN WORKING G CAPITA CAPITAL L BUDGET BUDGET :- I t helps in forecasting the short term requirement for every company.

44 

WORKING CAPITAL INTRODUCTION:Working capital refers to that part of  firms capital which is required for financing short term or  current Assets such as cash, debtors, marketable security and inventories. Thus funds invested in current assets keep revolving fast and are being constantly converted in cash and this cash flows out again in exchange for other current assets. It is also known as revolving or circulating capital or short term capital.

CONCEPTS OF WORKING CAPITAL :1. BALANC BALANCE E SHEET SHEET CONCE CONCEPT PT 2. OPERATING CYCLE CONCEPT

1.BALANCE SHEET CONCEPT:(a) Gross working capital:The capital which is invested in total current assets of the enterprise.current assets are those assets that can be converted into cash with in tenure of one year. CURRENT ASSETS= Inventory + sundry debtors+ cash & bank balances + other current assets +loans & advances = 624.13 + 213.96 + 620.17 + 16.13 + 531.85 = 2006.24 crore

45 

(b) Net working capital:Net working capital is the excess of current assets over current liabilities Net working capital=current assets-current liabilities = 2006.24—1024.73 = 981.51 crore ( Note:- Provision is not treated as current liability)

2. OPERATING CYCLE CONCEPT:-

46 

DEBTO -RS

CASH

RAW MATER -IALS

SALES

FINISHED GOODS

WORK IN PROGR -ESS

WORKING CAPITAL CYCLE : CIRCULAR FLOW CAPITAL

CONVERSION PROCESS:It starts with purchase of  raw material and other resources and ends with the realization of cash from the sale of finished goods. Initially a company has to purchase raw material and it is put into process called work in process and got result as output “stock of finished goods and this output is ready for sale and becomes debtors and ultimately realization of cash and this cycle continuous again from cash to purchase of raw material and so on. GROSS OPERATING CYCLE = RMCP + WIPCP + FGCP 47 

(1)Raw material conversion period (RMCP):Average stock of raw material____  Raw material consumption per day Average stock of raw material := opening Raw material + Closing raw material 2 = 362.06 + 410.43 2 = 386.245 crore Raw material consumption per day :Total consumption during the year  No of days in a year  = 674.87/365 = 1.85 crore RMCP

= 386.245/1.85 = 208.78 Days (App. 209 days)

(2) Work in process conversion period (WIPCP):Average stock of work in progress Total cost of production per day Average stock of work in progress :Opening W.I.P. + Closing W.I.P 2 =167.47 + 149.72 2 = 158.95 Crore Total cost of production per day = Actual production / 365 = 275.56/365 = 0.75 crore = 158.95/0.75 WIPCP = 211.93 Days

(3) Finished goods conversion period (F.G.C.P.):Average stock of finished goods Total cost of sale per day Average stock of finished goods :Opening F.G. + Closing F.G. 2 =71.42 + 63.98 48

Total cost of sale per day

F.G.C.P. F.G.C.P.

`

2 = 67.70 crore = Total cost of sale / 365 = 4415.51 / 365 = 12.09 crore = 67.70 / 12.09 = 5.596 days

(4) Receivable conversion period :Average Accounts Receivables Net credit sales per day Average Accounts Accounts Receivables Receivables = opening opening A.R + Closing Closing A.R 2 = 199.17 + 213.96 2 = 206.565 crore Net credir sales per day = 5803.48/365 = 15.89 crore R.C.P = 206.565/15.89 R.C.P = 13 days

(5) Payables deferral period:Average payables Net credit purchase per day Average payables = opening payables + closing payables 2 = 103.78 + 120.05 2 = 111.915 crore Net credit purchase per day = Net credit purchase / 365 = 1473.37 / 365 = 4.037 crore P.D.P = 111.915 / 4.037 P.D.P = 28 days

GROSS OPERATING CYCLE:RMCP + WIPCP + FGCP + R.C.P. = 209 + 212 + 6 + 13 = 440 Days

NET OPERATING CYCLE:49

= GROSS OPERATING CYCLE—PAYABLES DEFFERAL PERIOD = 440--28 = 412 Days

INTERPRETATION :Funds invested in current Assets keep revolving fast and are being constantly converted into cash and this cash flows out again in exchange for other current assets hence it is known as revolving or circulating or operating cycle. The whole circulating capital cycle will be finished in 412 days or  App. 14 months.

RATIO A Ratio is a simple arithmetical expression of the relationship of  one number to another. In simple language ratio is one number  expressed in terms of another and can be worked out by dividing one number into the others. A Ratio is known as a symptom like blood pressure, the pulse rate or the temperature of an individual. Example=current assets/current liabilities .

RATIO ANALYSES 50

A Ratio analyses is one of the most powerful tools of financial analyses. it is used as device to analyze and interpret the financial help of enterprise. Just like a doctor examines his patient by recording his body temperature, blood pressure etc before his conclusion regarding the illness and before giving him treatment. With the help of ratio analyses one can measure the financial condition of the firm and point out whether the condition is strong good or poor. one can arrive at a decision of  how the performance of a firm is deteriorating and can find out short term financial position or liquidity position and suggest what a company must do for improving its working capital.

THE VARIOUS RATIOS THAT EFFECTS THE WOKING CAPITAL OF A COMPANY DISCUSSED AS BELOW:1.CURRENT RATIO:CURRENT ASSETS___  CURRENT LIABILITIES As given: Current assets = Inventories + sundry debtors + cash & bank balance + other current assets =624.13 + 213.96 + 620.17 + 16.13 + 531.85 = 2006.24 crore Current liabilities = sundry creditors + outstanding interest + investor education & protection fund + sundry deposits + Employees =854.48 + 12.94 + 11.08 + 62.76 + 17.23 + 66.24 = 1024.73 crore. CURRENT RATIO = 2006.24/1024.73 =1.958:1 INTERPRETATION:The above calculated current ratio is indicating us that the ACC Ltd. company is liquid and has the ability to pay its current obligations in time as and when they become due. As a convention 2:1 is considered as a banker’s rule of thumb and current ratio of ACC Ltd. Company stands at 1.958:1 and it is near about 2 that is why company is running in strong position. Because of ultimate ratio there may be fast moving stocks and debtors may go up because debt collection has become satisfactory and with the increase in cash & bank 51

balances may be used in further investment. Hence the working capital of a company would be increased because of having sufficient fund.

2. QUICK OR ACID TEST OR LIQUID RATIO:QUICK ASSETS______  CURRENT LIABILITIES QUICK ASSETS = Current Assets – ( inventories + prepaid exp.) = 2006.24 – ( 624.13 + 6.02 ) =1376.09 crore CURRENT LIABILITIES = 1024.73 crore QUICK RATIO = 1376.09/1024.73 = 1.343:1 INTERPRETATION:The above calculated quick ratio is indicating us that the ACC Ltd. company is moving in the brighter side of life in this competitive era and has got sufficient fund to meet its current obligations. As a convention 1:1 is considered as a rule of thumb and quick ratio of ACC Ltd. company stands at 1.343:1 and there is an increase of about 0.343 and having a good sign for companies name, fame and reputation. The position of quick assets like cash & bank balance and debtors is much strong as compared to current liabilities.

3.ABSOLUTE LIQUID RATIO OR CASH RATIO:ABSOLUTE LIQUID ASSETS CURRENT LIABILITIES =620.17/1024.73 =0.61:1

INTERPRETATION:52

A.L.R represents conversion of some items into cash rapidly and involves cash in hand, cash at bank and marketable securities. The accepted norms for this ratio is 50% or 0.5:1 or 1:2 and the absolute liquid ratio of ACC Ltd. stands at 0.61:1 which is more than 0.5. Hence it is good symbol for company to meet its day to day expenses and to promote saving. 4. (a) INVENTORY TURNOVER RATIO:COST OF GOODS SOLD AVERAGE STOCK C.O.G.S. = Net Sale — Gross profit = 5803.48 – 1756.10 = 4047.38 crore AVERAGE STOCK = Opening stock + closing stock 2 = 600.95 + 624.13 2 =612.54 crore Inventory Turnover Ratio = 4047.38/612.54 Curr Curren entt year year I.T. I.T.R. R.(2 (200 006) 6) = 6.61 6.61 Time Times s Previou Previous s year I.T.R. I.T.R.(200 (2005) 5) = 5.60 Times Times (b) INVENTORY CONVERSION PERIOD:DAYS IN A YEAR (365)________  INVENTORY TURNOVER RATIO = 365/6.61 Current year (2006) = 55.22 DAYS (App. 55 days ) Previous year(2005) = 65.17 DAYS (App. 65 days )

INTERPRETATION:Inventory turnover ratio measures the velocity of conversion of stock into sale. Usually the previous year inventory turnover ratio was 5.60 times which is less than current year inventory turnover ratio that is 6.61 times. Thus this high stock velocity indicates efficient management of inventory because more frequently the stocks are sold, the lesser amount of money is required to finance the inventory. Sometimes a high inventory turnover may be the result of a very low level of  inventory which results in shortage of goods in relation to 53

demand. An inventory turnover ratio should not be too high and too low and ACC Ltd. inventory turnover ratio falls in medium category. The current year inventory conversion period is 55 days which is less than previous year and thus a company has converted its inventory into cash with in a short period of time. 4.(a) DEBTORS TURNOVER RATIO:-

CURRENT YEAR (2006) PREVIOUS YEAR (2005)

TOTAL SALE DEBTORS = 5803.48/213.96 = 27.12 times = 14.29 times

(b) AVERAGE COLLECTION PERIOD:DAYS IN A YEAR (365) DEBTORS TURNOVER RATIO = 365/27.12 CURRENT YEAR (2006) = 13.46 DAYS PREVIOUS YEAR (2005) = 25.54 DAYS INTERPRETATION:Debtors turnover ratio indicates the number of times the debtors are turned over during a year. Recently debtors turnover ratio has been increased from 14.29 times to 27.12 times. Thus the higher value of debtor turnover  represents sufficient management over a company and having less chances of becoming bad debts and results to increase in sale of commodities and received cash may be used for  production purpose and funds flows in smooth way. At presently average collection period is 13 days which is less than 25 days of previous year. Hence the time taken by ACC Ltd. to convert its debtors into cash has been minimized. 5. (a) CREDITORS TURNOVER RATIO :Net credit annual purchase Average trade creditor  Net credit annual purchase = Purchase + raw material + packing material = 53.42 + 1216.55 + 203.40 = 1473.37 crore Average trade creditor = 103.78 + 120.05 2 54 

= 111.915 crore C.T.R. =1473.37/111.915 Curr Curren entt year year (200 (2006) 6) = 13.1 13.165 65 Time Times s Previ Previou ous s year year (2005 (2005)) = 10 Time Times s (b) AVERAGE PAYMENT PREIOD:-

Current year (2006) Previous year (2005)

NO OF WORKING DAYS C.T.R. = 365/13.165 = 27.73 Days = 36 Days

INTERPRETATION:Those person who supply goods to company are called creditors and they are interested in finding out how much time the company will take in repaying its creditors. The creditors turnover ratio has been increased from 10 to 13 times and company got itself capable of purchasing raw material on time and on the other hand suppliers can get payment in spite of delivering goods as fast as possible. Thus it is a good sign for both company and suppliers. The average payment period has been decreased from 36 days to 28 days and this will help in running operating cycle very smoothly.

6. WORKING CAPITAL TURNOVER RATIO:COST OF SALE_____________  AVERAGE WORKING CAPITAL Cost of sale = C.O.G.S. + selling & distribution expanses = 4047.38 + 368.13 = 4415.51 crore Average working capital = opening W.C. + closing W.C. 2 = 507.88 + 981.51 2 55 

= 744.695 Working capital turnover ratio = 4415.51/744.695 = 5.93 Times INTERPRETATION:Working capital turnover ratio indicates the velocity of the utilization of net working capital. This ratio indicates the no. of times the working capital is turned over in the course of a year. It measures the efficiency with which the working capital is being used by a company. The cost incurred on sale can be compensated by using working capital at 5.93 times by ACC LTD COMPANY. 7. WORKING CAPITAL LEVERAGE :% CHANGE IN RETURN ON INVESTMENT % CHANGE IN CURRENT ASSETS Return on investment (2006) = 38% Return on investment (2005) = 18% % change in ROI = 38-18 18 = 1.11% CURRENT ASSESTS(2006) = 2006.24 CURRENT ASSESTS(2005) = 1421.16 % CHANGE IN C.A = 2006.24-1421.16 1421.16 = 0.41% WORKING CAPITAL LEVERAGE = 1.11/ 0.41 = 2.7

INTERPRETATION :Working capital leverage measure the impact of a change in current assets on change in investment. Here % change in current assets 0.41% has been calculated while as % change in investment is 1.11%. so company can use amount drawn for 2.7 Times in order to reach on return on investment. 8.RATIO OF CURRENT LIABILITIES TO TANGIBLE NET WORTH 56 

CURRENT LIABILITIES__  TANGIBLE NET WORTH = 1024.73/3141.98 = 0.326: 1 INTERPRETATION:From the above calculated figure is indicating us that a company has sufficient tangible worth for  meeting its current liabilities with out interrupting circulating capital. Here net worth is 1/3rd of current liabilities and showing company moving on the right direction and having different sources of generating finance.

FUND FLOW ANALYSES A fund flow analysis is a technical device used to study the sources from which additional funds were derived and the use to which these sources were put. It is an effective management tool to study changes in the working capital of business enterprises between beginning and ending financial statements dates. The fund flow analysis consists of: 1. Preparing Preparing schedule schedule of change in in working working capital. capital. 2. State State of sources sources and appli applicati cation on of funds. funds.

FLOW OF FUNDS ?

NO

CURRENT ASSETS

CURRENT LIABILITIES

YES  YES YES

YES

57 

NON-CURRENT ASSETS

NON-CURRENT LIABILITIES

NO

STATEMENT OR SCHEDULE OF CHANGE IN WORKING CAPITAL:Working capital means the excess of current assets over current liabilities. There are following four rules to kept in mind while preparing schedule of change in working capital given as under :1. An increase in current assets increases working capital. 2. A decrease decrease in current current assets assets decreases decreases working working capital. capital. 3. An increase increase in current current liabiliti liabilities es decreases decreases working working capital. capital. 4. A decrease decrease in current current liabilities liabilities increases increases working working capital. capital.

STATEMENT OF SCHDULE OF CHANGE IN WORKING CAPITAL OF ACC LTD COMPANY

58

P AR ARTICULA RS RS

P RE RE VI VIO US Y EA EA R CU CURRE NT Y EA EA R IN INCRE AS AS E

DE CR CRE AS AS E

CURRENT ASSETS:CA S H IN HA ND

0. 7

2. 48

1.78

CA S H A T B A NK

102. 09

617. 69

515. 6

S UNDRY DEB TORS

199. 17

213. 96

14.79

LOAN & ADVANCES:P RE PA ID E XP E NS ES OTHE R A DV A NCE S

8. 61

6. 02

478. 15

525. 83

47.68

2. 59

6

OTHER CURRENT ASSETS:A CCRUE D INTE RE ST

1. 5

7. 5

29. 99

8. 63

600. 95

624. 13

1421. 16

2006. 23

S UNDRY LIAB ILITIE S

913. 28

10 1 024. 73

111. 45

P ROVIS IONS

316. 77

502. 28

185. 51

1230. 05 05

1527. 01

W ORK ING CA P ITA L

191. 11

479. 23

NET INCRE AS E IN W ORKING CA PITA L

288. 12

OTHE R INV E NTORY TOTA L CURRE NT A S S E TS

21. 36 23.18

CURRENT LIABILITIES: -

TOTA L CURRE NT NT LIA BI BILITIE S

479. 23

288. 12 479. 23

609.03

609. 12

INTERPRETATION:Statement of changes in working capital is prepared to show the changes in the working capital between the two balance sheet dates. The difference is recorded for each individual current assets & current liabilities. If we talk about current assets like cash & bank balances, sundry debtors, inventory and other current assets have left positive effect on working capital except only prepaid expenses. On the other hand all current liabilities have shown increase in balances with comparing from the previous balances. The ACC working capital has been increased from 191.11 crore to 479.23 crore, hence company has found net increase in working capital as amount as 288.12 crore. It is good sign for companies’ short term financial health.

CALCULATION OF FUNDS FROM OPERATION RESERVE IN THE BEGINNING ( 1-1-2006) RESERVE AT THE END ( 31-12-2006)

1951.21 2955.16 59

PROFIT FOR THE YEAR(2955.16-1951.21) ADD : DEPRICIATION ( 1893.76-1722.29) ADD : TO WRITTEN OFF MISC. EXPENCES

1003.95 171.47 5.47

FUNDS FROM OPERATION

1180.89

INTERPRETATION:After finding out changes in working capital a company is required to find out funds from operation for which all items that are already debited in profit & loss account must be added in the net difference of reserve & surpluses of current & previous year because these all items are treated as loss for company and on the other hand those items are credited in profit & loss account must be deducted in the net difference of reserve & surpluses. From the above calculations it is found that profit for the year is 1003.95 crore and change in deprecation is 171.47 crore and written off  misc. expenses is 5.47 hence company has derived funds from its operation near about to 1180.89 crore.

NOTES:CALCULATION OF REPAYMENT OF LOAN LOAN FUNDS IN THE BEGINNING OF 2006 = 1071.42 LOAN FUNDS IN THE END OF 2006

=

771.16

REPAYMENT OF LOAN DURING THE YEAR = 300.26 ( 1071.42-771.16)

FUND FLOW STATEMENT OF ACC L.T.D. COMPANY AS ON 31-12-2006 FUNDS FROM OPERATION ISSUE OF SHARE CAPITAL

1180.89 RE REPAYMENT OF LOAN 2.22 PURCHASE OF FIXED ASSETS

300.26 187.61 60

CASH RECEIVED FROM DEPOSITS NET DEFFERED TAX LIABILITIES

TOTAL

40.07 NET INCREASE INCREASE IN WORKING WORKING CAPITAL 20.34 PURCHASE OF INVESTMENT CAPITAL WORK IN PROGRESS

1243.52 TOTAL

288.12 209.79 257.74

1243.52

INTERPRETATION:The fund flow statement is a statement which shows the movement of funds and is a report of the financial operations of a company. It indicates various means by which funds were obtained during the particular period and the ways in which these funds were employed. Flow of funds is not possible when both accounts are current or non current (fixed) because current assets remain same as current liabilities but when one account is current and other is non current than there is perfect flow of funds. From the above prepared fund flow statement o9f ACC company it is find out that the company has issued further share capital of about 2.22 crore and treated as soures of company because it will generate funds for company. Company has minimized its long term funds that will treated as repayment of loan it is indicating out flow of funds for company and shown on application side of fund flow statement. Company has generate funds from its operations and treated as sources. The company has received cash from its deposits near about to 40.07 crore. And deferred tax liability amounted to 20.34 crore is our source. Company has made additional purchase of fixed assets amounting to 187.61 crore it is out flow of cash for  company and increase in working capital & capital work in progress should be treated as out going of funds.

WORKING CAPITAL BUDGET A Budget is a financial or quantitative expression of business plans and policies to be persuade in the future period of time. Working capital budget is a process of estimating working capital needs and the sources to finance them and then 61

comparing the budgeted figure with the actual performance and if necessary to take corrective actions in future and its objective to ensure effective utilization of resources. STATEM STATEMENT ENT SHOWIN SHOWING G NET NET WORKIN WORKING G CAPIT CAPITAL AL REQUIR REQUIREME EMENT NT

AMOUNT AMOUNT

CURRENT ASSETS:Stock of raw material (4104300000 * 209/365)

2350133424.00

Stock of work in progress (1497200000 * 212/365)

869606575.00

Stock of finished goods ( 639800000 * 6/365)

10517260.00

Amount blocked in debtors at sale ( 2139600000 * 13/365)

76204932.00 3306462191.00

LESS : CURRENT LIABILITIES :Sundry Creditors (8544800000 * 28/365)

655491507.00

Net working capital required (C.A – C.L)

2650970684.00

INTERPRETATION:By preparing working capital budget it is find out that total working capital required should be near about to 265.09 crore for ACC LTD. Company in forthcoming year and net increase in working capital is 288.12 crore has been calculated by preparing schedule of change in working capital with comparing current figures with previous figures.

NEEDS OF STUDY The study in itself a problem of how best to manage capital of a company i.e. ACC Ltd. Therefore, needs for conducting the study are as follows:62

1. Due to time between between production production and and sales, sales, every every company has maintain a substantial portion of working capital to run its operation smoothly. 2. In case of manufacturing companies it is required to maintain about 40% - 50% of their capital as current and remaining in the forma of fixed assets for the large scale production of product. So, every manufacturing company needs to arrange required working capital. 3. investment in current assets represents a substantial portion of total investment. 4. investment investment in current current assets assets and the level level of current current liabilities have to be geared quickly to change in sales, to be sure, fixed asets investment and long term financial position are also responsive to variation in sales.

OBJECTIVE OF THE STUDY The objectives aim is to highlight the reasons how important is the financial system and financial statement for an organization or company. There are various objectives of the study are as follows: 1. To study study liqu liquidi idity ty of the the firm. firm. 2. To study smoothly flow of funds and its application 3. To estimate estimate working working capital capital requirem requirement ent in future future 4. To study study short term financial financial position position

RESEARCH METHODOLOGY Our research project has a specified framework for collecting the data in an effective manner. Such framework is called

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“Research Design”. The research process which was followed by our consisted of following steps: Defining the problem & Research Objectives:- The definition of  problem includes the study of financial system in ACC Ltd. GAGAL CEMENT WORKS. Developing The Research Plan:- It is very important to research anything we must know about the it’s main sources where we get the main information regarding the research plan the development of research plan has following steps:Data Sources:- There are two types of data were taken into consideration i.e. Secondary data and primary data. The secondary data has been used to make the analysis because we have no much sufficient time and resources to collect the primary data. Secondary data:- secondary data is that data which is collected for other purpose. This is indirect collection of data from sources containing past or recent past information like annual report, balance sheet, books, newspapers and magazines etc. Collecting the information:-For this research methodology, we were collecting information with the help annual reports, balance sheet and other companies publications. Analyse the information :- In this research methodology the next step is to extract the pertinent finding from the collected data. We tabulated this collected dada and develop the means of  analyzing the data. There are so many tools for financial analysis but we mainly concentrate on the RATIO analysis and supportive information taken from the other means i.e. comparative financial statement with its major components viz. common size statement, comparative financial statement.

BIBLIOGRAPHY •

71ST ANNUAL RE REPORT (A (ACC LT LTD.)

2004 004-200 -2005 5 2005-2006 64 

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• •

FINANCIAL MANAGEMENT MANAGEMENT ACCOUNTING WEBSITE

SHASHI. K. GUPTA I.M. PANDEY SHARMA & GUPTA www.accltd.com

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