A PROJECT REPORT ON “RATIO ANALYSIS OF NORTHERN COALFIELDS LIMITED” AT NORTHERN COALFIELDS LIMITED SINGRAULI Submitted to SINHGAD INSTITUTE OF BUSINESS ADMINISTRATION & RESEARCH In Partial Fulfillment of Requirements for the Award of Post Graduate Diploma in Management BY SHRAWAN KUMAR DWIVEDI PGDM (Finance) IIIrd Semester Under the Guidance of PROF. SIDDHARTH KARALE ACADEMIC YEAR 2009-2011 SINHGAD INSTITUTE OF BUSINESS ADMINISTRATION & RESEARCH S.No. 40/4A + 4B/ 1, Near PMC Octroi Post, Kondhwa- Saswad Road, Kondhwa (Bk.), Pune – 411048
This Report is dealt with the ratio analysis of the Northern Coalfields limited which is a subsidiary company of Coal India Limited.I did my summer internship with this company and this analysis is done by me as a part of my PGDM course curriculum.
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A PROJECT REPORT ON
“RATIO ANALYSIS OF NORTHERN COALFIELDS LIMITED”
AT
NORTHERN COALFIELDS LIMITED SINGRAULI
Submitted to SINHGAD INSTITUTE OF BUSINESS ADMINISTRATION & RESEARCH
In Partial Fulfillment of Requirements
for the Award of Post Graduate Diploma in Management
BY SHRAWAN KUMAR DWIVEDI
PGDM (Finance) IIIrd Semester
Under the Guidance of PROF. SIDDHARTH KARALE
ACADEMIC YEAR 2009-2011
SINHGAD INSTITUTE OF BUSINESS ADMINISTRATION & RESEARCH S.No. 40/4A + 4B/ 1, Near PMC Octroi Post, Kondhwa- Saswad Road,
India is the third largest coal producer in the world and the eighth largest importer. With annual production of 310 million tonnes and imports of almost 25 million tonnes, coal provides one-third of energy supply in India. The Indian government forecasts huge increases in electricity capacity based on coal, and a financially viable electricity industry will be necessary to support reforms in the coal industry. This report describes the Indian coal sector, and comments on government policies and the performance of India's largely state-owned coal companies. There is a substantial need for reforms in India's coal sector to improve efficiency and competitiveness.
With the growth of the Indian economy due to various factors like Industralization, Growth of Infrastructure, Institutional Development etc. the power is going to be the main key for any development so the Coal is wodely used by the power industries for generating the power.
Financial statement analysis is important to board of the Directors, Managers, Payers, Lenders, and others who make judgments about the financial health of organizations. One widely accepted method of assessing financial statements is ratio analysis, which uses data from the balance sheet and income statement to produce values that have easily interpreted financial meaning. The purpose of this project was to get awareness about how an organization works.
The project was carried out for study and analyzing the financial condition of Northern Coalfields Limited with special reference of Jayant Project. It was done to know that what is the current financial scenario of the company. In this project report I have made Ratio Analysis for analyzing that that what are the different ratios available in the organization and what is current growth comparing to the last year.
Chapter I Introduction 1.1 Introduction of the topic 9 1.2 Objectives of the study 11 1.3 Significance of te Study 11 1.4 Limitations & Future Scope 11
Chapter II Research Methodology 12
Chapter III Organizational Profile 14 3.1 About the Organization 16 3.2 Vision, Mission of the Organization 19
3.3 Historical Background of the Organization 20
3.4 Different Departments of the Organization 21
3.5 Organizational Structure of the Organization 23
3.6 Current Status of the Organization 26 3.7 Future Plans of the Organization 29 3.8 Awards and Achievements 30
Chapter IV Data Analysis 31
Chapter V Summary & Conclusions 45 5.1 Major Findings & Suggestions 46 5.2 Conclusions 47
TABLE NO. TITLE OF THE TABLE PAGE NO. Table no. 3.1 Projects of NCL 17 Table no. 3.2 Coal Resources in Northern
Coalfields Limited
26
Table no. 3.3 Payment to Central/ State Exchequer
44
LIST OF FIGURES
LIST OF FIGURES
TABLE NO. TITLE OF THE FIGURE PAGE NO. Figure no. 3.1 Consumer Profile 22 Figure no. 3.2 Cost of Production 27 Figure no. 3.3 Status of Outstanding Dues 28 Figure no. 3.4 Comparison of the
To analyze the financial position of NORTHERN COALFIELDS LIMITED, different tools are used, of Ratio Analysis. Financial analysis involves the use of various financial statements. These statements do several things. First the balance sheet and the second is income statement.
The Balance sheet summarizes the assets, liabilities, and owner’s equity of a business at a point in time, while the income statement summarizes revenues and expenses of a firm over a particular period of time. A conceptual framework for financial analysis provides the analyst with an interlocking means for structuring the analysis.
A financial ratio (or accounting ratio) is a relative magnitude of two selected numerical values taken from an enterprise's financial statements. Often used in accounting, there are many standard ratios used to try to evaluate the overall financial condition of a corporation or other organization. Financial ratios may be used by managers within a firm, by current and potential shareholders (owners) of a firm, and by a firm's creditors. Security analysts use financial ratios to compare the strengths and weaknesses in various companies. If shares in a company are traded in a financial market, the market price of the shares is used in certain financial ratios.
Values used in calculating financial ratios are taken from the balance sheet, income statement, statement of cash flows or (sometimes) the statement of retained earnings. These comprise the firm's "accounting statements" or financial statements. The statements' data is based on the accounting method and accounting standards used by the organization.
Financial ratios quantify many aspects of a business and are an integral part of financial statement analysis. Financial ratios are categorized according to the financial aspect of the business which the ratio measures. Liquidity ratios measure the availability of cash to pay debt. Activity ratios measure how quickly a firm converts non-cash assets to cash assets. Debt ratios measure the firm's ability to repay long-term debt.Profitability ratios measure the firm's use of its assets and control of its expenses to generate an acceptable rate of return. Market ratios measure investor response to owning a company's stock and also the cost of issuing stock.
Financial ratios allow for comparisons
• between companies • between industries • between different time periods for one company • between a single company and its industry average
Ratios generally hold no meaning unless they are benchmarked against something else, like past performance or another company. Thus, the ratios of firms in different industries, which face different risks, capital requirements, and competition are usually hard to compare.
To get awareness about the financial techniques. To find out NCL’s ability to meet the current obligation. To analyze the financial statement of NCL. To understand how effectively NCL utilizes its assets in producing Coal.
1.3 Significance of the study:
The present study dealt with the current financial status of the Northern Coalfields
Limited. It provides a broad view regarding Coal Production in NCL as well as in India. And this
project also tells, what is the current financial condition of the NCL in India? And How they are
contributing towards the coal production?
. In this context, we will address the following questions:
1. To analyze the current financial condition of NCL, Singrauli
2. To know the contribution of the NCL in the Indian Coal Industry.
1.4 Limitations & Future Scope:
Limitations :
Less response by some of the staff members Due to new in the department some of the staff members not provided some kind of information.
Problems in collection of the data of past years because the database is maintained by the headquarter and they don’t allow to provide these information to the outsiders.
Two months period for understanding all the working procedure of any particular organization is not sufficient.
Scope :
In this project I have done the financial analysis of the company so the scope of the study is that this report can be used as a financial statement of the company. This report shows different financial aspects of the Northen Coalfields Limited. This report also contains the information related the various projects run by the NCL and what is their contribution in Coal production.
“Be the leading energy supplier in the country, through best practices from mine to market.”
MISSION
“The mission of Coal India Limited is to produce and market the planned quantity of coal and coal products efficiently and economically with due regard to safety, conservation, quality and environment.”
3.3 Historical background of Singrauli Coalfields – A Retrospect
Singrauli Coalfields is located in the northern most part of sone-Mahanadi master basin and covers an area of 2202 Sq. Km. in M.P. and U.P. States. Discovery of coal in Singrauli coalfields dates back to 1840 when Capt. Wroughton located the occurrence of coal near surface in the vicinity of Kota Dist. Mirzapur (presently known as Shaktinagar, Dist. Sonebhadra, UP). Primitive mining was reported even before 1857. In those days coal was transported by bullock carts and camel to Mirzapur for use in steamers on the Ganges. In the outcrop region of Kota seam near Kota Basti – Shaktinagar, where mining was being done through inclines and subsequently there was fire in the incline. A temple has been built near that site with the name of ‘Jwalamukhi’ (the name probably derived from the fire emanating from the incline mouth). Due to poor quality of coal as well as poor communication the coal from this coalfield could not compete in the market with
good quality coal available from Bihar and Bengal coalfields with
better communication and transport facilities and hence mining activities ceased very quickly.
Subsequently this coalfield was surveyed and explored by various Geologists namely
Smith (1857), Mellet (1872), Roberts (1885), Oldham (1894), Sinor (1923), and Fax (1934) etc. GeologistsF. Ahmed mapped the area in details in (1948-1953) and recommended detailed drilling and investigations. In pursuance of this, GSI took up regional drilling in northern part of the coalfields in 1958. As a sequel to these investigations by GSI thick coal seams containing inferior grade coal were discovered. Erstwhile NCDC (in association with GSI and IBM carried out detailed drilling after 1958.
The first major industrial activity was started in this area with the construction of Rihand Dam in 1954 for tapping hydel power. It was beyond the imagination of anybody to foresee at that point of time that this hydel project, which resulted in converting an area of about 487 sq. Km. into Govind Ballabh Pant Sagar (with a water capacity of about 10.44
cu. Km) will come handy in developing a network of Thermal and Super Thermal Power Plants, thus bestowing upon this most neglected area, the honour of becoming country’s power capital.
With the increase in demand of coal and also with an objective to conserve the better quality coal in terms of CoalmMines (Conservation & Safety) Act, 1952 and rules 1954, the development & exploitation of outlying coalfields gained importance since 2nd plan period (1956-61). NDNC was formed in 1956 with one of the objectives to develop outlying coalfields. Systematic coal mining was first started in 1964 by erstwhile NCDC. The coalfield was under command area of NCDC from 1962-73, under CMAL upto 1975 and then under CCL from 1975-85. In November 1985 the area became Northern Coalfields Limited with Headquarters at Singrauli. Since then this coalfield has witnessed tremendous growth and has now developed in as one of the largest coal power complexes of the world.
3.4 Different Departments of the organization
Materials Management Sales and Quality Control Industrial Engeneering Department Personnel Department Finance Department Project & planning
Explored area of the Moher Basin of Singrauli Coalfields is about 210 Sq. Km. Presently the coal mining activities are done over an area of about 100 Sq. Km. At present NCL produces only power grade coal through 10 nos. mechanised opencast mines
located in M.P. (about 81% of Prod.) and U.P. State (about 19% of Prod.) Since incption, NCL has shown overall growth in all spheres.\ Coal production increased from 13.4 MT (1986-87) to 63.65 MT (2008-09). Overburden removal increased from 42.4 M. CuM. (1986-87) to 202.75 M.CuM. (2008-09). The profit (Before tax) of NCL grown from Rs. 74.70 Crores (1986-87) to Rs. 3131.01 crores
(2008-09). NCL is presently the highest profit earning company of CIL. In NCL there is:
• A Central Fire Station • A Central workshop besides workshops in each project • A Central Hospital (150 beds) besides 10 dispensaries and 2 other hospitals • Total Employees as on 30th Nov.’09 are 16261 (1305 officers and 14956 staff/workman)
Cordial relations between trade unions and management
Coal Resources in Northern Coalfields Limited
Category wise, Depth wise and state wise Geological Reserves of Non Coking Coal in Singrauli Coalfields
Sub Total MP 5366 6013 2037 12417 *** *** UP *** *** 0-300 866 196 0 1062 Total 6232 6209 2037 13478 Table No. 3.2
Special Features of NCL
Mining Operations
Fully mechanised Opencast mines. Largest Electric Rope Shovel 20 CuM. Largest Dragline 24/96 (24 Cum. Bucket) Largest Rear Dumper 170T
28 | P a g e
Consumers’ Satisfaction
Supply of sized coal through CHP Electronically Weighed Coal Supplies Despatch through Merry-Go
Other Specialties
All employee’s salaries and wages are paid through Bank. Payment to all vendors through cheque with Bank name & Account Number Literacy of workforce, Free LPG to Employees, School Bus for Children, Supply of Drinking water Housing Satisfaction – 100% Land oustees Employed in NCl 25.92% of total workman (Land ous
Investment Current Assets , Loans & Advances: Debtors Inventories Cash & Bank Balances Loans& Advances Other current Assets Cost of Removal of Over Burden Total Current Assets, Loans & Advances Less: Current Liabilities & Provisions: Net Current Assets Misc. Expenditure
1) CURRENT RATIO: Meaning: Current ratio may be defined as the relationship between current assets and current liabilities. This ratio is also known as working capital ratio, is measure of general liquidity and mostly used to make the analysis of a short-term financial position or liquidity of a firm. The rule of thumb for current Ratio is 2:1 which is considered as strong financial position of the company. Current ratio = Current Assets Current Liabilities Calculation :
Year 2010 2009 Current assets
39935.57 38026.00
Current liabilities
23696.97 21686.07
Ratio 1.69:1 1.75:1 Interpretation: In 2009 current ratio was 1.75 which is decreased to 1.69 in the year 2010. As compared to last year Current Assets has increased because of increase in Inventories, Cash and Bank balance and other Current Assets but Current Ratio has decreased because of excess advance received from debtor , decrease in Cost of Removal of over burden, and increase in current liability .
2) QUICK / ACID TEST/ LIQUID RATIO : Meaning:
Quick ratio is more rigorous test of liquidity than the current ratio. The term liquidity refers to the ability to pay its short term obligations as and when they become due. As a rule of thumb quick ratio of 1:1 is considered satisfactory.
Quick ratio 0.14:1 0.07:1 Interpretation: In 2009 quick ratio was 0.07 which has increased to 0.14 in 2010. Quick assets has increased by 133% and Current liabilities has increased only by 9% Due to which quick ratio has increased by 100%. The management has taken a great effort in maintaining high quick assets as compared to last year.
3) STOCK TURN OVER OR INVENTORY TURN OVER RATIO : Meaning : Every firm has to maintain a certain amount of inventory of finished goods so as to meet the requirement of business. But the level of inventory should neither be too high nor too low. Because it is harmful to hold more inventory as amount of capital is blocked in it and some cost is involved in it. Inventory turn over ratio measure the speed with which stock is converted into sales. Usually high inventory ratio indicates an efficient management of inventory because more frequently stocks are sold ; the lesser amount of money is required to finance the inventory. Where as low inventory turn over ratio indicates the inefficient management of inventory. A low inventory turn over implies over investment in inventories. Inventory turn over ratio = Cost of good sold Average inventory Cost of goods sold = Opening Stock+ Purchase + Direct Expenses - Closing Stock Average inventory = Opening stock + Closing stock
TOTAL 490.11 265.99 756.10 656.72 225.97 882.69 843.93 214.41 1058.33
Table No. 3.3
The above chart shows the detailed Statement of the payment of the taxes to the Madhya Pradesh Government and Uttar Pradesh Government. The Coal belt of the NCL is situated in two states M.P. and U.P. so the NCL pay taxes to both government acoordingly.
5.1 Major Findings & Suggestions I came across following suggestions and findings during undergoing the project work on topic
“FINANCIAL ANALYSIS OF NORTHERN COALFIELDS LIMITED”.
1. In NCL the coordination among the various sections of the Finance & Accounts
department is very nice, as the Finance & Accounts department is a big department
consisting of near about 32 sections. It is the work force of the Finance & Accounts
department, which makes it possible.
2. In the NCL there not to create debtors they generally deal with first to receive the cash
or cheque, and then they supply the finished material.
3. In the NCL there working capital management is very good, they use the IBS (ERP
system) to manage the over all activity.
4. During the study I find that their is no huge variation in budget decided and the actual
one.
5. The taxation policy is to be made flexible because of which bulkiness of the work is to
be removed.
6. The tendering process time is to be minimized so that the current market price benefits
if any can be availed.
7. Monthly return filling is not on line process, hence sales and excise department face
problem.
8. Online inventory valuation can be implemented.
9. The departmental policies is to made flexible which leads to decrease in the work flow
process as well as it leads in better profits.
10. Some The staff members of the NCL are lack of the Computer knowledge. During my internship I observed that the employees don’t have the necessary training to do the job efficiently and properly. So I think the management should arrange special training for educating them. Proper distribution of work leads to success in every organization. Proper distribution of work prevents the employee from over and under work situation. So for a smooth running of an organization proper distribution of work is the hint to be followed. During my internship I observed that there was no proper distribution of work in the organization. So ln this case the organization would not be able to utilize their energy. So their should be proper distribution of work
5.2 Conclusion After analyzing the different Ratios of the Northern Coalfields Limited I found that the Company is really in Good financial condition because the management has taken a great effort in managing the funds like acquiring and allocation of the funds, optimum utilization of the available resources.The analysis shows that the profitability of the company is increases as compared to the last years due to high production and sells with lesser expenses. The organization is in sound position which is good for the company, stakeholders as well as the Country also.Good financial position not just beneficial for the company stake holders but it helps to improves the GDP as well as the per capita income of the entire country.
As compared to the last year Current ratio is decreased due to increase in Inventories, Cash and Bank
balance and other Current Assets. If we talk about the Quick Ratio then In 2009 it was 0.07 which has
increased to 0.14 in 2010. The management has taken a great effort in maintaining high quick assets as
compared to last year. The company has sound position to meet its non-operating expenses and also
enough capable to pay taxes and royalty to the government. The net profit of the company has been
increased by 6.55% as compared to last year. Net profit of the project has been increased due to increase
in sales/ production, reduction in cost per tonnes, and better control on operating expenses. The net profit
of the project reveals sound business of the project and strong financial position.
It is currently in good financial condition and it is continuously trying to implement new tools and
techniques to improve its productivity as well as profitability.
Thanks a lot for going through my project. Feel free to Contact me anytime for further queries and any help regarding this project or any other topic related to the Finance. All the best for your bright future. And one thing always keep in mind that smart work always pays, so work smartly. Thanks & Regards, Shrawan Kumar Dwivedi +91 81791 30135 [email protected][email protected] You can also catch me on Facebook at http://www.facebook.com/#!/shrawan.dwivedi