Working Capital Project

MSRMI

MS RAMAIAH MANAGEMENT INSTITUTE

A Project report On

WORKING CAPITAL MANAGEMENT at

Bharat Coking Coal Limited

(A subsidiary of coal India limited)

Dhanbad, Jharkhand

Under the guidance of: Mr. B.K.Parui

Mgr. (Fin.) Cost &Budget

N.N. MUKHOPADHYA Chief Manager. (F)/TS to D (F)

Submitted by: Koushik Gupta

PGDM (AIMA) 2010-12

AIMA Registration no.42120451 COLLEGE Registration no.102133

BHARAT COKING COAL LIMITED

MSRMI

DECLARATION

I, undersigned Mr.Koushik Gupta hereby declare that the project report

entitled “WORKING CAPITAL MANAGEMENT” under the guidance of

Mr. J.P.Bhagat submitted in partial fulfillment of the requirements for

the award of the degree of Post Graduate Diploma in Management,

from MS RAMAIAH MANAGEMENT INSTITUTE is my original work –

research study – Carried out during 4TH JULY, 2011 to 13th AUGUST,

2011 and not submitted for the award of any other

degree/diploma/fellowship or other similar titles or prizes to any other

institution/organization or university by any other person.

Place: - Dhanbad Name of Candidate:-

Date: - 13.08.2011 KOUSHIK GUPTA AIMA Registration no.42120451 COLLEGE Registration no.102133


MSRMI

ACKNOWLEDGEMENT

Words are indeed inadequate to convey my deep sense of gratitude to all those who have helped me in completing this summer project to the best of my ability. Being a part of this project has certainly been a unique and a very productive experience on my part.

I am really thankful to, Mr.J.P.Bhagat (General Manager Finance CA & T) for making all kinds of arrangements to carry the project successfully and for guiding and helping me to solve all kinds of quarries regarding the project work. His systematic way of working and incomparable guidance has inspired the pace of the project to a great extent.

I would also like to thank my mentor and project – coordinator, Mr. Shyam Agarwal for assigning me a project of such a great learning experience and acquainting me with real life project financing and appraisal.

I am very grateful to Mr. Anupam Narula, Dean of MS RAMAIAH MANAGEMENT INSTITUTE Who has given me the opportunity to do this project in the Bharat Coking Coal Ltd. and very thankful to all lecturers of MIMS for their useful guidance and advise.

This project would not have been successful without the help of Mr.P.Banarjee (General Manager Finance, Fund) & Mr.P.K.Chakraborty (Chief General Manager Finance) of Bharat coking Coal Ltd.

Last but not least I would like to thank all the employees of Bharat coking Coal Ltd. who have directly or indirectly helped me with their moral support for the completion of my project.

KOUSHIK GUPTA


MSRMI

PREFACE

“Practice makes it more perfect”

In the field of management every time there is a requirement of

understanding or practical aspect of the organization with managerial

mind. There is requirement to go for practical training of any subject

supplement to the theoretical knowledge and clarified concept.

It is more applicable in the field of the management

especially a professional course like Post Graduate Diploma in

Management from MS RAMAIAH MANAGEMENT INSTITUTE has

prescribed 6 week of practical training & a project report during the 3RD

Sem. as a part of PGDM programmers my training at the Bharat coking

Coal Limited is to comply with this requirements also.

The project report on Working Capital Of Company, which

provide perfect direction of invest the money. The data collections were

by annual report of the different companies, magazines related to the

cement association and discussion with concerned employees and

experts.

At the end findings and suggestions are reported.

I hope this serves the Purpose.


MSRMI

Section 1

INTRODUCTION

Introduction of Coal India Limited

India is the 3rd largest coal producing country. Coal India Limited is the coal producing

company in India.


MSRMI Coal India Limited

Contributes around 85% of Coal Production in India.

It is the largest company in the World in terms of coal production.

Employs nearly 4 lakh persons and is the largest corporate employer in the

country.

It is one of the largest companies in the country, turnover being around Rs.

521.88 billion in 2010-11

It is one of the largest tax payer companies in the country; the provision on

account of Income Tax for the financial year 2009-10 was made for Rs. 43.42

billion.

Functions

Broad Functions

Laying down policies

Formulating long and short term strategies.

Monitoring the functions of the subsidiary companies.

Laying down system and procedures.

Assisting the subsidiary companies to achieve their objectives.

Coordination with ministry of coal, ministry of railways, planning commission

and other ministries.

Specific Functions

Pricing and distribution of coal

Coal supply agreements

Consumer services through regional offices

Negotiations of wages


MSRMI Executive cadre control – recruitment, promotion/postings. Pay/perks etc.

Foreign collaboration.

Introduction of new technology

R&D activities

Mobilization of resources – long term and short term

Accounting policies

Background History

1774 Warren Hastings initiates Commercial coal mining at Raniganj (West Bengal)

1815-1820 First Shaft Mine opened at Raniganj.

1835 Carr, Tagore & Company takes over the Raniganj Coal Mines

1843Bengal Coal Company takes over Raniganj Coal Mines and others; is first Joint Stock


MSRMI Coal Company in India.

Upto 1900 Minimal development; River transportation used to transport coal to Calcutta; railway

lines at Calcutta leads to expansion of Coal Production.

Early 1900s Capacity at 6 million tones per annum

1955-56 Focus on Coal industry; capacity up to 38.4 Million ones.

1956 National Coal Development Corporation (NCDC) formed to explore and expend coal

mining in public Sector.

1972Coking Coal Industry Nationalized, Bharat Coking Coal Limited formed to manage

operations of all Coking Coal mines in Jharia Coalfield.

1973Non-coking coal nationalized; coal Mine Authority Limited set up to mange these

mines; NCDC operations bought under the ambit of CMAL.

1975

Coal India Limited formed as holding Company with 5 subsidiaries viz. Bharat Coking

Coal Limited (BCCL), Central Coalfield Limited (CCL), Western Coalfield Limited (WCL),

Eastern Coalfields Limited (ECL) and Central Mine Planning and Design Institute

Limited (CMPDIL).

1985 Northern Coalfields Limited (NCL) and south Eastern Coalfields Limited (SECL) carved

out of CCL and WCL.

1992 Mahanadi Coalfield Limited (MCL) formed out of SECL to manage the Talcher and IB

valley Coalfields in Orissa.

2000 De-regulation of Coal pricing and distribution of coal.

2007Coal India & four of its Subsidiaries, viz, NCL, SECL, MCL, WCL was accorded coveted

“Mini Ratna” Status.

Board of Directors


MSRMI

Permanent Invitee

Company Profile

Date of Incorporation:

Coal India Limited was formed as holding Company with 5 subsidiaries on 21.10.1975.

Corporate Status:


MSRMI The Company is incorporated under the Companies 1956 and is wholly owned by the

Government of India (GOI)

Business:

Engaged in the mining of coal, based products mining consultancy.

Wholly Owned Subsidiaries: Eastern Coalfields Ltd.

Bharat Coking Coal Ltd.

Central Coalfields Ltd.

Northern Coalfields Ltd.

Western Coalfields Ltd.

South Eastern Coalfields Ltd.

Mahanadi Coalfields Ltd. and

Central Mine Planning & Design Institute Ltd.

North Eastern Coalfields in directly under

Coal India ltd

Overseas subsidiary: Coal India Africana Limitada

Registered Office: Coal Bhavan,

10 Netaji Subhas Road,

Kolkata – 700 001(West Bengal, Kolkata)

COAL INDIA & ITS SUBSIDIARIES


Southeastern

Coalfields Ltd. Bilaspur

North

Coalfields Ltd. Singrauli

Western

Coalfields Ltd.

Nagpur

MSRMI

LIMITED


(A subsidiary of coal India limited)


COAL INDIA KOLKATA

Bharat Coking

Coal Ltd.

Dhanbad

Eastern Coalfields Ltd. Assansol

Central

Coalfield Limited Ranchi

Central Mine Planning & Design Institute Ltd. Ranchi.

Mahanadi Coalfields Ltd Sambalpur

MSRMI

MISSION

The mission of Bharat Coking Coal Limited (BCCL) is to produce and market the

planned quantity of coal and coal products efficiently and economically with due

regard to safety, conservation and quality.

VISION

The vision of Bharat Coking Coal Limited (BCCL) is to be the leading player in

metallurgical coal production having an organization and culture committed towards

sustainable growth through best practices from mine to market.

Introduction of BCCL

BCCL produces coking coal for steel plants and non coking coal for the power sector

and other industries, from its open-cast and underground mines. It is only source for

prime coking coal in the country for supply to steel plants; as such it does not have

any domestic competitor. However, since the supply of coking coal by BCCL is BHARAT COKING COAL LIMITED

MSRMI significantly less than the demand, coking coal is imported by steel sector and other

industries from outside the country. The company has 214 small coking coal mines in

Jharia & Raniganj Coalfields taken over by GOI on 16th Oct; 1971. It was incorporated

in January, 1972 under Companies Act. The company became a subsidiary of Coal

India Ltd on 1-1-1975.

As a result of hike in price of coking coal in the international market in the recent past

rendering the important coal costlier than domestic coal, there is no perceptible

threat to the company of losing market demand at present as well as in near future.

BCCL coal commands significant premium among non-core sector consumers. In order

to internalize the same, BCCL introduced a transparent and fair mechanism marking

coal to such consumers through e-auction in 2004-05. as a result of first six auction

carried out, there was a significant gain over the notified price of coal.

Product & ServicesCOKING COAL :These coals, when heated in the absence of air, form coherent beads, free from volatiles, with

Strong and porous mass, called coke.

These have coking properties Mainly used in steel making and metallurgical industries Also used for hard coke manufacturing

SEMI COKING COAL: These coals, when heated in the absence of air, form coherent beads not strong enough to be directly


MSRMI fed into the blast furnace. Such coals are blended with coking coal in adequate proportion to make coke.

These have comparatively less coking properties than coking coal Mainly used as blend-able coal in steel making, merchant coke manufacturing and other metallurgical

industries

NLW COKING COAL: This coal is not used in metallurgical industries. Because of higher ash content, this coal is not acceptable for washing in washeries. This coal is used for power utilities and non-core sector consumers.

NON-COKING COAL: These are coals without coking properties.

Mainly used as thermal grade coal for power generation Also used for cement, fertilizer, glass, ceramic, paper, chemical and brick manufacturing, and for other

heating purposes

HARD COAL: Hard coke is formed from coking / semi-coking coal through the process of carbonization.

Mainly used in metallurgical industries Also used in industrial plants utilizing furnaces

WASHED AND BENEFICIATED COAL: These coals have undergone the process of coal washing or coal beneficiation, resulting in value addition of coal due to reduction in ash percentage.

Used in manufacturing of hard coke for steel making Beneficiated and washed non-coking coal is used mainly for power generation Beneficiated non-coking coal is used by cement, sponge iron and other industrial plants

MIDDLINGS: Middlings are by-products of the three stage coal washing / beneficiation process, as a fraction of feed raw coal.

Used for power generation Also used by domestic fuel plants, brick manufacturing units, cement plants, industrial plants, etc.

REJECTS: Rejects are the product of coal beneficiation process after separation of cleans and / or middlings, as a fraction of feed raw coal.

Used for Fluidized Bed Combustion (FBC) Boilers for power generation, road repairs, briquette (domestic BHARAT COKING COAL LIMITED

MSRMI

fuel) making, land filling, etc.

CIL COKE / LTC COKE: CIL Coke / LTC Coke is a smokeless, environment friendly product of the Dankuni Coal Complex, obtained through low temperature carbonization.

Used in furnaces and kilns of industrial units Also used as domestic fuel by halwais, hotels, etc.

COAL FINES / COKE FINES: These are the screened fractions of feed raw coal and LTC coke / CIL Coke respectively, obtained from the Dankuni Coal Complex and other coke oven plants.

Used in industrial furnaces as well as for domestic purposes

TAR / HEAVY OIL / LIGHT OIL / SOFT PITCH: These are products from Dankuni Coal Complex using low temperature carbonization of non-coking coal in vertical retorts.

Used in furnaces and boilers of industrial plants as well as power houses, oil, dye, pharmaceutical industries, etc.

GRADATION OF COAL

A. COKING COAL

Grade Parameter

Steel – I Ash not exceeding 15%

Steel – II Ash exceeding 15% but not exceeding 18 %


MSRMI

Washery – I Ash exceeding 18% but not exceeding 21 %

Washery – II Ash exceeding 21% but not exceeding 24 %

Washery – III Ash exceeding 24% but not exceeding 28 %

Washery – IV Ash exceeding 28% but not exceeding 35 %

B. SEMI COKING COAL

Grade Parameter

Semi Coking – I Ash + moisture not exceeding 19 %

Semi Coking – IIAsh + moisture exceeding 19 % but not exceeding 24

%

C. NON-COKING COAL

Grade UHV RANGE (KCALS/KG)

A Exceeding 6200

B Exceeding 5600 but not exceeding 6200

C Exceeding 4940 but not exceeding 5600

D Exceeding 4200 but not exceeding 4940

E Exceeding 3360 but not exceeding 4200


MSRMI

F Exceeding 2400 but not exceeding 3360

G Exceeding 1300 but not exceeding 2400

D. HARD COKE

Grade Ash %

By Product Premium Not exceeding 25 %

By Product Ordinary Exceeding 25 % but not exceeding 30 %

Beehive Premium Not exceeding 27 %

Beehive Superior Exceeding 27 % but not exceeding 31 %

Beehive Ordinary Exceeding 31 % but not exceeding 36 %

SUITABILITY OF COAL

E. HARD COKE

Industry Type of Coal Required

Steel makingCoking and semi-coking coal, direct feed and washed; blendable coal; low ash % Assam and Ranigunj coal


MSRMI

Steel making, sponge iron industryNon-coking coal of high Initial Deformation Temperature (IDT) (>1200 degrees Celsius)

Cokeries / coke oven plants Coking and semi-coking coal

Briquette making / domestic fuel makingSemi-coking and non-coking coal; middling & rejects of washeries

Special Smokeless Fuel (SSF) Semi-coking coal of Coking Index 8 – 10

Power sectorNon-coking coal; middlings of coking coal washeries; washed coal of non-coking coal washeries

Cement sector Non-coking coal; middlings of coking coal washeries

Glass and potteries Long Flame non-coking coal

Cast iron castings Hard coke

Steel castings Non-coking coal

Bricks Non-coking coal; middlings of coking coal washeries

Old boilers Superior grades of non-coking coal

Halwais, domestic use, hotels, etc. Non-coking coal; CIL Coke / LTC Coke

Areas


MSRMI

Washery


BARORA

BLOCK II

GOVIINDPUR

KATRAS

SIJUA

BASTACOLLA

LODNAC. V. AREA

KUSUNDA

P. B. AREA

KUSTORE

E. JHARIA

W. JHARIA

MSRMI BCCL WASHERIES

Introduction :

Coal Washing is a process of separation mainly based on difference in Specific Gravity of Coal and associated impurities like Shale, Sand & Stones etc so that we get relatively pure marketable coal without changing its physical properties.

The Washed Coking Coal is meant for Steel Plants. The Washed Power Coal/Washed Non-Coking Coal/Middlings is dispatched to various Power Houses.

Washing Process:

Washery System of Washing

Dugda-II HM Cyclone (13-0.5mm), Flotation (-0.5mm)

Bhojudih Deshaling Jig (75-0mm), HM Bath (75-25mm), Batac Jig (25-0.5mm), Flotation (-0.5mm)

Patherdih Deshaling Jig(75-0mm), HM Bath(75-13mm), HM Cyclone (13-0.5mm)

Sudamdih 2 Stage HM Cyclone (37-0.5mm), Flotation (-0.5mm)

Moonidih 2 Stage HM Cyclone (30-0.5mm),W/O Cyclone(-0.5mm)

Mohuda HM Cyclone (25-0.5mm), Flotation (-0.5mm)

Madhuban Batac Jig (13-0.5mm), Flotation(-0.5mm)

Details of Existing Washeries :

S. No.

Name of Washery Year of CommissioningOperable Capacity

MTY

A. Coking Coal:1 Dugda-II 1968 2.00

2 Bhojudih 1962 1.70

3 Patherdih 1964 1.60

5 Moonidih 1983 1.60

4 Sudamdih 1981 1.60

6 Mohuda 1990 0.63

7 Madhuban 1998 2.50

TOTAL (Coking Coal) 11.63

B. Non-Coking Coal:

1 Dugda – I 1961/1998 1.00

TOTAL (Non-Coking Coal) 1.00

GRAND TOTAL 12.63


MSRMI

Remarks:

Dugda-I stopped since Oct.'96 for safety reasons and its Sink Up gradation Section is being used for production of washed power coal w.e.f. '98.

Madhuban Washery was originally designed for washing Coking Coal. Due to non-availability of Coking Coal because of stoppage of Block-II OCP, the Washery was temporarily converted for Washing Non-Coking Coal which has been reverted back to washing coking coal again from October 2008.

Modernization of Washeries:

►Revival Plan of BCCL provides Rs. 125 Crores for Renovation of Washeries.

► Study was undertaken by CMPDI for performance improvement.► In the 1st Phase, the Revival Schemes involving an expenditure of Rs. 54.80 Crores has

been approved by BCCL Board for Dugda-I, Dugda-II, Bhojudih, Sudamdih, Moonidih & Mohuda Washeries and they are under various stages of implementation.


MSRMI

Reasons for loss/sickness

1. Legacy from the takeover:

*Huge manpower:

When all take over completed, B.C.C.L. inherited a huge manpower which was very much disproportionate to that of production because the manpower with the company was much higher than required for production. This resulted in increment of cost of Production but the revenues were the sales. Thus company started incurring losses since inception.

Year 2006-07 2007-08 2008-09

2009-10 2010-11

Manpower 87146 83578 80051 72465 67934

*Non-productive unit:-

Many non-productive units were added to the company during the take over, this gradually started burdening the company economically especially on account of surplus, under employed manpower and huge maintenance cost. This acted as a fuel to the fire of losses.

2. Difficult mining condition:

A. Underground

* Low evacuation capacities – shaft mining:-

Shaft mining is a extract the coal. Since the mine is very deep so evacuating the coal is very difficult as the mine in very deep. The company does not have modern mechanization so evacuating capacities and 100%.

Therefore, because of low capacities incurring machinery results in increase machinery result in more cost and the production is comparatively less. This results in increase in fixed cost and in turn the company faces losses.


MSRMI

*Costly sand stowing operation@ Rs 300/Te:-

Whenever a mine is made it is very much necessary for to fill the vacant portion with sand or any other thing. If this is not done so then land may subside. If in the land there is a connecting road or rehabilitation or any public property it cannot be left to subside. At this position sand stowing comes into action and this method is very costly as costs Rs.300 per tone. This method is does not add to production but rather increases cost of the production which the company cannot bear.

*High pumping cost (25T water/T of coal):-

When a mine is made there are a number of ways by which water can enter into the mine, like boring rain, holes and sometimes there is underground water which comes out during mining. It stops the production, therefore, pumping out is a costly affair and adds to the cost of production, and therefore, again it adds to the losses.

Fires, unstable working &surface constraints:-

When the coal is excavated in the mine it is kept there for some time to transport. Since coal is made of carbon it suffers from from spontaneous heating and catches fire and gets destroyed. There are also other ways of fire. There were about 72-73 fire at the time of nationalization. The company could control only 5-6 fire as it is difficult to control. Thus it reduces production but not the cost.

Inside the mine it is very difficult to work due to various reasons like hot temperature, darkness, moving inside the mine etc. due to these reasons the workers face a lot of problems in doing their work which results in dissatisfaction of work, low O.M.S. and increase in cost.

Sometimes the company faces the problem of selective mining to avoid displacement of rehabilitation, destruction of public property and so on .These problems are called surface constraints .Because of all these problems the company has to leave the coal there, like in the case of Jharia mines. These problems reduce the production and the revenues are not enhanced resulting in more losses.

B.OPENCAST


MSRMI Dense population impedes acquisition of land:-

In case of opencast mining the mine is very deep i.e. the coal is found nearer to the surface, so in this situation the earth over is taken out and then the coal is excavated .This requires a huge area on the surface .But in the area of dense population the acquisition of land becomes difficult as the company is unable to pay any compensation for displacement. There some government laws also acting to protect public areas .Due to these constraints the company cannot increase the production easily, thus can’t earn the revenue.

Restricts operations to smaller patches with low capacity HEMM: Dense population makes the company work in small opencast mines .The company has to use heavy electrical mining machinery and the cost of these is very high .But the machinery required doing a particular task ,works lower than its actual capacity. The working any lower capacity leads to low productivity of equipment and high cost of mining.

*Requires large rehandling of OB due to non-availability of non- coal bearing land:-

It is generally found that there non-coal bearing land near by the mine these areas generally have rehabilitation or any road etc. In this case there is huge rehandling of over burden (OB).This is so because if there is a non coal rearing land near the mine just after the evacuation then it is transferred to the coal yard or to other places.

In situation like this huge dumpers have to be used to keep the coal after crossing the non coal bearing area. This, in return increases the cost due to heavy machinery use and rehandling.

3. Non availability of land:

Physical possession of acquired land has remained a cause of concern for the company. The production of the company faces constraints due to dense population in the jharia coal fields. The matter has repeatedly been pursued with MOC (ministry of coal) and state government. A few examples of such cases are:-

Diversion of Dumra- tundu road:

About 46 lakhs of prime coal beneath this road is blocked and under threat of getting destroyed due to fire. The road is unsafe due to advancing fire; immediate action is required for this road to B.C.C.L.

Physical possession of acquired land in kenduadih:-


MSRMI Physical possession of acquired land in subsidiaries prone areas of kenduadih held up due to non- vacation 5000 families and encroaches residing in this area even after order of Supreme Court due to law and order problem. Above are the examples which depicts that the coal is either not excavated or may get destroyed due to fire. Thus this problem reducing the production indirectly.

4. Hike in salary & wages incommensurate to paying capacity: In B.C.C.L. there has been constantly pay revision done which led to increment of salaries and wages. But all these revision were adding to the cost of production only as the production did not increase because of low O.M.S. Thus it was out of company’s capacity to pay more but half to pay because government laws and to preserve industrial harmony. It was almost implementable on a stand alone basis.

5. Impact of loss:- Foregoing replacement of worn out equipment:-

Everybody needs to do capital expenditure. B.C.C.L. engaged in excavation of coal so its need huge machinery thus requires capital investment. But the company was in such bad position that it could not even pay for depreciation. So the fund could not accumulate fund for further investment which led to use of old worn out machinery. Due to the use of such kind of machinery the production capacity was reduced but the cost was same.

6. Problem in working capital:-

The shortage of working capital was rendering the incapable of paying for the procurement of critical items of stores and spares which was affecting adversely the production and safety. Fund crunch leading to staggering payment of salary and wages & backlog of welfare amenities ultimately resulting in disenchantment & despair among the workers. Delay in payment to various input providers i.e., suppliers and contractors, which degrade the brand value of the company & resulted in shortage of supplier & contractors. There is backlog in the payment of statutory dues.

Current scenario of B.C.C.L.


MSRMI Sri Tapas Kumar Lahiry elevated as Chairman cum Managing Director, Bharat Coking Coal Limited (B.C.C.L.) with effect from 1st November 2008. In 2005-06 the company reported profit of Rs. 203 crores for the first time in its history. The company adopted a Revival plan. According to that plan, it is expected that negative net worth shall be wiped out and turn positive in 2013-14. Therefore there are different strategies of revival plan which B.C.C.L. has adopted.

STRATEGIES OF REVIVAL PLAN

EQUIPMENT H/HEMM.


STRATEGIC PLAN

INITIATIVES

Deployment of H/HEMM in patches

E-AUCTION

Modernization of washeries

& UG mines

Replacement of worn out equipment

HEMM

Closure of 24 loss making UG mines &

manpower rationalization

Implementation of quick yielding OC project

MSRMI 1. STRATEGIC INITIATIVE -1-REPLACEMENT OF WORN OUT EQUIPMENT H/HEMM.

The company was continuously suffering from ageing of machinery beyond the rated life due to shortage of cash. B.C.C.l. requires mainly HEMMs like shovels, dumphers etc. It also resulted in the less production as the equipment work in the lower capacity. By identifying this problem the company decided to replace the worn out machinery and buy the new one. By taking these decisions there was a twin benefit unit.

1. Firstly, since, the new machines would work in full capacity, so the number of machine required was less in number.

2. Secondly, since, the new machinery work in full capacity, the production would increase.

The major benefit was that the cost reduced and production also increased which helped the company to earn more revenue. This is one helping hand in bringing the company in profit in 2005-06.

STRATEGIC INITIATIVE-2-DEPLOYMENT OF H/HEMM IN PATCHES

The second initiative which the company took was the deployment of HEMMs. Now the company identified the HEMM which are not working in full capacity. These low capacity machineries were transferred to the smaller open cast mines where they can perform well. Company also started hiring of HEMMs to smaller patches to reduce capital expenditure of purchasing the same. This hiring resulted in higher production without increasing the cost. Thus it added profitability.

Strategic initiative -3- implementation of quick yielding OC project:-

The third initiative which was taken was to identify the quick yielding open cast projects. It is sometimes seen that the coal is very near to the surface .BCCL tried to find out such projects and work on it .This will not only reduce the cost of mining but also increase the production . Here an interesting thing is that the cost of production in this case reduces a lot which is great support of the company .It helps in earning more revenues at lesser cost. It also helped in the proper utilization of manpower which in turn reduces the burden of payment of wages and salaries on the company.

Strategic initiative-4-closure of 24 loss making UG mines & manpower rationalization:


MSRMI

As against the proposed closure of 41 loss making mines earlier, the modified proposal envisage closure of 24 loss making mines during the period spread over 06-07 to 11-12. This decision was taken to reduce the cost and also the losses of the company. The closure of 24 mines is being spread over the projected years.

Because it can’t done at a single moment. If done so then there will huge unemployment of manpower. Since it is a government organization, so it cannot retrench employees. So it is being implemented slowly. As mentioned earlier that due to closure of mines the burden of manpower is going to increase for the company. To solve this, the company reduced its intake of more employees and tried to place the employees of closed mines into the new project of small OC mines as mentioned in earlier strategic steps. In this table one can see that in near future the manpower of the company will reduced.

Thus by analyzing the above tables we can infer that the manpower will reduce and also the losses making mines will be closed. This will reduce the cost of the company a lot as there will be less payment of salaries and wages. It will also help to reduce the losses of the company by closing of the mines. The closure of the loss making mines will reduce the fixed cost of the company as the cost of HEMMs will be less.

Strategic initiative-5- Modernization of UG mines and washeries:

Since inception of the company was earning losses. The company was using old machinery which is now out dated. The working condition of the UG mines was very poor. This gave rise to dissatisfaction of the employees and they turned unproductive BHARAT COKING COAL LIMITED

Particulars 06-07 actual

07-08 actual

08-09 actual

09-10 actual

10-11 actual

Op. manpower 87146 80051 76565 72465 71195

Reduction (-) retirement (+)

other means VRS total

3611

51

3622

3791

-

3791

4364

-

4364

4396

-

4396

4818

-

4818

Intake(+) 94 964 878 300 300

Closing manpower

83568 80051 76565 72469 67934

MSRMI which gave low OMS this added to the burden of cost for the company. Due to the use of this machinery the production of was not up to the mark and cost was the same rather more in some mines. Analyzing the problem company decided to improve the working condition of workers by bringing modern machinery and more safety and comfortable job & comfortable working for the employees.

This generated the satisfaction of job and high OMS which increased the production at lower cost. It helped in increment of revenues which helped in bringing profits example – procurement of long wall machinery.

Strategic initiative -6: E-Auction:

E-auction is the most recent and modern step taken by the company. E-auction is basically selling coal through internet. This gave the company a global exposure and a more standard market. In E-auction the company could sell the coal at higher prices than expected because of auction. This gave more revenues to the company for the same amount of production. If we opt for the viral marketing we can reduce the cost easily. Thus there were more revenues at lesser marketing cost which proved profitable. The following table shows the gain over the notified prices i.e., B.C.C.L. could sell coal at higher prices than it could sell in domestic market.

Chronology of performance after revival plan

Year Manpower Production Profit/loss (


Item 06-07 07-08 08-09 09-10 10-11

Qty sold/lifted(LT) 22.79 22.97 24.06 30.00 33.39

Add gain over notified price (Rs cr)

99.6 92.6 95.61 177.30 297.49

MSRMI (lakhs tone) in lakhs)

2006-07 87146 242.05 4958

2007-08 83578 252.16 8681

2008-09 80051 255.13 -138047

2009-10 76369 275.14 79419

2010-11 64186 290.07 109369

From the above table we can see that after revival plan B.C.C.L. continuously, earning

profit, reducing manpower and increasing production.

So it’s a good sign for the company

*Two reasons for making loss in the year 2008-09:

1. Huge payment of Rs 1600 crores arrears.

2. Loss in production due to bandhs on 88 days (called by both Maoist as well as

political outfits).

Section 2 BHARAT COKING COAL LIMITED

MSRMI

CONCEPTUAL FRRMEWORK OF

WORKING CAPITAL MANAGEMENT

WORKING CAPITAL

Capital required for a business can be classified under two main categories via,


MSRMI

1) Fixed Capital

2) Working Capital

Every business needs funds for two purposes for its establishment and to carry

out its day- to-day operations. Long terms funds are required to create

production facilities through purchase of fixed assets such as p&m, land,

building, furniture, etc. Investments in these assets represent that part of

firm’s capital which is blocked on permanent or fixed basis and is called fixed

capital. Funds are also needed for short-term purposes for the purchase of raw

material, payment of wages and other day – to- day expenses etc.

Working Capital is that portion of a business concern’s total capital, which is employed in term of operations. Without working capital, fixed capital would be idle and ineffectual.

A number of definitions have been formulated: perhaps the most widely acceptable would be;

“WORKING CAPITAL represents the excess of CURRENT ASSETS over CURRENT LIABILITIES”

The same may be designated in the following equation:

WORKING CAPITAL= CURRENT ASSETS – CURRENT LIABILITIES:

Funds thus invested in current assets keep revolving fast and are being constantly converted in to cash and this cash flows out again in exchange for other current assets. Thus it is known as revolving or circulating capital or short term capital.

CONCEPT OF WORKING CAPITAL

There are two concepts of working capital:


MSRMI

1. Gross working capital

2. Net working capital

The gross working capital is the capital invested in the total current assets of the

enterprises current assets are those

Assets which can convert in to cash within a short period normally one accounting

year.

CONSTITUENTS OF CURRENT ASSETS

1) Cash in hand and cash at bank

2) Bills receivables

3) Sundry debtors

4) Short term loans and advances.

5) Inventories of stock as:

a. Raw material

b. Work in process

c. Stores and spares

d. Finished goods

6. Temporary investment of surplus funds.

7. Prepaid expenses

8. Accrued incomes.


MSRMI

9. Marketable securities.

In a narrow sense, the term working capital refers to the net working. Net

working capital is the excess of current assets over current liability, or, say:

NET WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITIES.

Net working capital can be positive or negative. When the current assets

exceeds the current liabilities are more than the current assets. Current

liabilities are those liabilities, which are intended to be paid in the ordinary

course of business within a short period of normally one accounting year out of

the current assts or the income business.

CONSTITUENTS OF CURRENT LIABILITIES

1. Accrued or outstanding expenses.

2. Short term loans, advances and deposits.

3. Dividends payable.

4. Bank overdraft.

5. Provision for taxation , if it does not amt. to app. Of profit.

6. Bills payable.

7. Sundry creditors.

The gross working capital concept is financial or going concern concept whereas net

working capital is an accounting concept of working capital. Both the concepts have

their own merits.


MSRMI

The gross concept is sometimes preferred to the concept of working capital for the

following reasons:

1. It enables the enterprise to provide correct amount of working capital at

correct time.

2. Every management is more interested in total current assets with which it has

to operate then the source from where it is made available.

3. It take into consideration of the fact every increase in the funds of the

enterprise would increase its working capital.

4. This concept is also useful in determining the rate of return on investments in

working capital. The net working capital concept, however, is also important for

following reasons:

It is qualitative concept, which indicates the firm’s ability to meet to

its operating expenses and short-term liabilities.

IT indicates the margin of protection available to the short term

creditors.

It is an indicator of the financial soundness of enterprises.

It suggests the need of financing a part of working capital

requirement out of the permanent sources of funds.


MSRMI

TYPES OF WORKING CAPITAL:-

Working Capital may be classified in to two ways:-

a) On the basis of concept.b) On the basis of time.

TYPES OF WORKING CAPITAL

Permanent or Fixed Working Capital:-

Permanent or Fixed Working capital is the minimum amount which is required to ensure effective utilization of fixed facilities and for maintaining the circulation of current assets. There is always a minimum level of current assets that is continuously required by the enterprise to carry out its normal business operation. For example every firm has to maintain minimum level of raw materials, work in process, furnished goods and cash balance. The minimum level of current assets is called permanent or fixed working capital as their part of working capital is permanently blocked in current assets. With the growth of business there is an increase in current assets.


TYPES OF WORKING CAPITAL

ON THE BASIS OF B/S CONCEPT

GROSS WORKING CAPITAL

NET WORKING CAPITAL

ON THE BASIS OF TIME

FIXED WORKING CAAPITAL

TEMPORARY WORKING CAPITAL

SEASONAL WORKING CAPITAL

SPECIFIC WORKING CAPITAL

MSRMI Temporary or Variable Working Capital:-

Temporary or Variable Working Capital is the amount of working capital that is required to meet the seasonal demands and some special exigencies. Variable working capital can be further classified as:-

a) Seasonal Working Capital.

b) Special Working Capital.

Most of the enterprises have to provide additional working capital to meet the special and seasonal needs. The capital required to meet the seasonal needs of enterprise is called Seasonal working capital. Special working capital is the part of working capital which is required to meet the special exigencies such as part of working capital which is required to meet special exigencies such as launching of extensive marketing campaigns for conducting research etc. is called Special working capital.

IMPORTANCE OR ADVANTAGE OF ADEQUATE

WORKING CAPITAL

SOLVENCY OF THE BUSINESS: Adequate working capital helps in

maintaining the solvency of the business by providing uninterrupted of

production.

Goodwill: Sufficient amount of working capital enables a firm to make

prompt payments and makes and maintain the goodwill.

Easy loans: Adequate working capital leads to high solvency and credit

standing can arrange loans from banks and other on easy and favorable terms.

Cash Discounts: Adequate working capital also enables a concern to avail

cash discounts on the purchases and hence reduces cost.

Regular Supply of Raw Material: Sufficient working capital ensures regular

supply of raw material and continuous production.


MSRMI

Regular Payment of Salaries, Wages And Other Day TO Day

Commitments: It leads to the satisfaction of the employees and raises the

morale of its employees, increases their efficiency, reduces wastage and costs

and enhances production and profits.

Exploitation Of Favorable Market Conditions : If a firm is having

adequate working capital then it can exploit the favourable market conditions

such as purchasing its requirements in bulk when the prices are lower and

holdings its inventories for higher prices.

Ability To Face Crises : A concern can face the situation during the

depression.

Quick And Regular Return On Investments : Sufficient working capital

enables a concern to pay quick and regular of dividends to its investors and

gains confidence of the investors and can raise more funds in future.

High Morale : Adequate working capital brings an environment of securities,

confidence, high morale which results in overall efficiency in a business.

EXCESS OR INADEQUATE WORKING CAPITAL

Every business concern should have adequate amount of working capital to run its

business operations. It should have neither redundant or excess working capital

nor inadequate nor shortages of working capital. Both excess as well as short

working capital positions are bad for any business. However, it is the inadequate

working capital which is more dangerous from the point of view of the firm.

DISADVANTAGES OF REDUNDANT OR EXCESSIVE

WORKING CAPITAL


MSRMI

1. Excessive working capital means ideal funds which earn no profit for the

firm and business cannot earn the required rate of return on its investments.

2. Redundant working capital leads to unnecessary purchasing and

accumulation of inventories.

3. Excessive working capital implies excessive debtors and defective credit

policy which causes higher incidence of bad debts.

4. It may reduce the overall efficiency of the business.

5. If a firm is having excessive working capital then the relations with banks

and other financial institution may not be maintained.

6. Due to lower rate of return n investments, the values of shares may also

fall.

7. The redundant working capital gives rise to speculative transactions

DISADVANTAGES OF INADEQUATE WORKING

CAPITAL

Every business needs some amounts of working capital. The need for working capital

arises due to the time gap between production and realization of cash from sales.

There is an operating cycle involved in sales and realization of cash. There are time

gaps in purchase of raw material and production; production and sales; and

realization of cash.

Thus working capital is needed for the following purposes:

· For the purpose of raw material, components and spares.

· To pay wages and salaries


MSRMI

· To incur day-to-day expenses and overload costs such as office expenses.

· To meet the selling costs as packing, advertising, etc.

· To provide credit facilities to the customer.

· To maintain the inventories of the raw material, work-in-progress, stores and

spares and finished stock.

For studying the need of working capital in a business, one has to study the

business under varying circumstances such as a new concern requires a lot of

funds to meet its initial requirements such as promotion and formation etc. These

expenses are called preliminary expenses and are capitalized. The amount needed

for working capital depends upon the size of the company and ambitions of its

promoters. Greater the size of the business unit, generally larger will be the

requirements of the working capital.

The requirement of the working capital goes on increasing with the growth and

expensing of the business till it gains maturity. At maturity the amount of working

capital required is called normal working capital.

There are others factors also influence the need of working capital in a business.

FACTORS DETERMINING THE WORKING CAPITAL

REQUIREMENTS

1. NATURE OF BUSINESS: The requirements of working is very limited in

public utility undertakings such as electricity, water supply and railways

because they offer cash sale only and supply services not products, and no

funds are tied up in inventories and receivables. On the other hand the

trading and financial firms requires less investment in fixed assets but have

to invest large amt. of working capital along with fixed investments. BHARAT COKING COAL LIMITED

MSRMI

2. SIZE OF THE BUSINESS: Greater the size of the business, greater is

the requirement of working capital.

3. PRODUCTION POLICY: If the policy is to keep production steady by

accumulating inventories it will require higher working capital.

4. LENGTH OF PRDUCTION CYCLE: The longer the manufacturing time

the raw material and other supplies have to be carried for a longer in the

process with progressive increment of labor and service costs before the final

product is obtained. So working capital is directly proportional to the length

of the manufacturing process.

5. SEASONALS VARIATIONS: Generally, during the busy season, a firm

requires larger working capital than in slack season.

6. WORKING CAPITAL CYCLE: The speed with which the working cycle

completes one cycle determines the requirements of working capital. Longer

the cycle larger is the requirement of working capital.

7. RATE OF STOCK TURNOVER: There is an inverse co-relationship

between the question of working capital and the velocity or speed with which

the sales are affected. A firm having a high rate of stock turnover wuill needs


CASH

RAW MATERIALS

WIPFINISHED GODS

BOOK DEBTS

MSRMI

lower amt. of working capital as compared to a firm having a low rate of

turnover.

8. CREDIT POLICY: A concern that purchases its requirements on credit

and sales its product / services on cash requires lesser amt. of working

capital and vice-versa.

9. BUSINESS CYCLE: In period of boom, when the business is

prosperous, there is need for larger amt. of working capital due to rise in

sales, rise in prices, optimistic expansion of business, etc. On the contrary in

time of depression, the business contracts, sales decline, difficulties are

faced in collection from debtor and the firm may have a large amt. of

working capital.

10. RATE OF GROWTH OF BUSINESS: In faster growing concern, we

shall require large amt. of working capital.

11. EARNING CAPACITY AND DIVIDEND POLICY: Some firms have

more earning capacity than other due to quality of their products, monopoly

conditions, etc. Such firms may generate cash profits from operations and

contribute to their working capital. The dividend policy also affects the

requirement of working capital. A firm maintaining a steady high rate of cash

dividend irrespective of its profits needs working capital than the firm that

retains larger part of its profits and does not pay so high rate of cash

dividend.

12. PRICE LEVEL CHANGES: Changes in the price level also affect the

working capital requirements. Generally rise in prices leads to increase in

working capital.

Others FACTORS: These are:


MSRMI

1. Operating efficiency.

2. Management ability.

3. Irregularities of supply.

4. Import policy.

5. Asset structure.

6. Importance of labour.

7. Banking facilities, etc.

MANAGEMENT OF WORKING CAPITAL

Management of working capital is concerned with the problem that arises in

attempting to manage the current assets, current liabilities. The basic goal of

working capital management is to manage the current assets and current

liabilities of a firm in such a way that a satisfactory level of working capital is

maintained, i.e. it is neither adequate nor excessive as both the situations are

bad for any firm. There should be no shortage of funds and also no working

capital should be ideal. WORKING CAPITAL MANAGEMENT POLICES of a firm has

a great on its probability, liquidity and structural health of the organization. So

working capital management is three dimensional in nature as

1. It concerned with the formulation of policies with regard to profitability,

liquidity and risk.

2. It is concerned with the decision about the composition and level of current

assets.

3. It is concerned with the decision about the composition and level of current

liabilities.


MSRMI

WORKING CAPITAL ANALYSIS

As we know working capital is the life blood and the centre of a business.

Adequate amount of working capital is very much essential for the smooth

running of the business. And the most important part is the efficient

management of working capital in right time. The liquidity position of the firm is

totally effected by the management of working capital. So, a study of changes in

the uses and sources of working capital is necessary to evaluate the efficiency

with which the working capital is employed in a business. This involves the need

of working capital analysis.

The analysis of working capital can be conducted through a number of devices,

such as:

1. Ratio analysis.

2. Fund flow analysis.

3. Budgeting.

1. RATIO ANALYSIS


MSRMI

A ratio is a simple arithmetical expression one number to another. The

technique of ratio analysis can be employed for measuring short-term liquidity

or working capital position of a firm. The following ratios can be calculated for

these purposes:

1. Current ratio.

2. Quick ratio

3. Absolute liquid ratio

4. Inventory turnover.

5. Receivables turnover.

6. Payable turnover ratio.

7. Working capital turnover ratio.

8. Working capital leverage

9. Ratio of current liabilities to tangible net worth.

2. FUND FLOW ANALYSIS

Fund flow analysis is a technical device designated to the study the source from

which additional funds were derived and the use to which these sources were

put. The fund flow analysis consists of:

a. Preparing schedule of changes of working capital


MSRMI

b. Statement of sources and application of funds.

It is an effective management tool to study the changes in financial position

(working capital) business enterprise between beginning and ending of the

financial dates.

3. WORKING CAPITAL BUDGET

A budget is a financial and / or quantitative expression of business plans and

polices to be pursued in the future period time. Working capital budget as a part

of the total budge ting process of a business is prepared estimating future long

term and short term working capital needs and sources to finance them, and

then comparing the budgeted figures with actual performance for calculating

the variances, if any, so that corrective actions may be taken in future. He

objective working capital budget is to ensure availability of funds as and

needed, and to ensure effective utilization of these resources. The successful

implementation of working capital budget involves the preparing of separate

budget for each element of working capital, such as, cash, inventories and

receivables etc.


MSRMI

Section 3

RESEARCH METHODOLOGY

Research Methodology


MSRMI For Every Comprehensive research a proper research methodology is indispenensable & it has to be properly conceived. The methodology adopted by me is as follows:-

Research Design

Problem Identification

@ Find out Ratios related to working capital management of BCCL and compare with last 2 years.

@ Find deviation of calculated from standard or Norms

@ Calculating the working capital requirement of Bharat Coking Coal Ltd.

Information needed

@ Information about firm’s assets, liabilities, revenue, expenditure, bankers, investment etc.@ Information about firm’s loan, security, stock level & other financial information.

Data Collection

My data collection source was secondary i.e.

@ Annual reports of companies

@ Balance sheet

@ Profit & Loss Accounts

Analysis & Interpretation

The data collected and analysed subjectively as well as graphically where it is possible. The analysis is based upon available information & interpreted accordingly.

Conclusion

On the basis of analysis conclusion has been drawn.

Suggestion

Suggestion has been given in order to improve performance of the firm.

Limitation

My scope of study is limited to the annual reports, Balance sheet of units for analysis


MSRMI

Section 4

ANALYSIS OF WORKING CAPITAL

MANAGEMENT OF


BALANCESHEET Rs (in lakhs)


MSRMI PATICULARS 2006-07 2007-08 2008-09 2009-10 2010-11

SOURSES OF FUNDS:SHAREHOLDERS FUND:SHARE CAPITAL 211800 211800 211800 211800 211800.00RESERVES AND SURPLUSSUB TOTAL 211800 211800 211800 211800 211800.00

LOAN FUNDS:SECURED 30784.23 20843.16 11826.7 33946.16 3259.7UNSECURED 157620.1 108330 108330 108329.98 108330SUB TOTAL 188404.4 129173.1 120156.7 142276.14 111589.7TOTAL 400204.4 340973.1 331956.7 354076.14 323389.56

APPLICATION OF FUNDS:FIXED ASSETS:GROSS BLOCK 372797.5 385584.4 391474.6 408879.58 436019.96LESS: DEPRICIATION 260545.9 273094 278134 286242.37 300377.81NET BLOCK 112251.6 112490.4 113340.6 122637.21 135642.15CAPITAL WORK IN PROGRESS

8399.24 5407.66 9138.47 8304.24 8345.70

SUB TOTAL 120650.9 117898.1 122479 130941.45 143987.85

INVESTMENT 12470.4 11084.8 9699.2 8313.6 6928.00

INVENTORIES 52189.14 57352.91 70725.53 93890.02 111236.22SUNDRY DEBTORS 8617.47 5144.03 18682.5 39380.24 61813.50CASH AND BANK BALANCES 96097.25 77289.22 91088.72 92302.76 130683.59LOANS $ ADVANCES 16329.25 17978.53 22070.92 31950.62 29736.02SUB TOTAL 173233.1 157764.7 202567.7 257523.64 333469.33

LESS: CURRENT LIABILITY&PR

585327.3 639235 834296.4 794790.34 803714.85

NET CURRENT ASSETS -412094 -481470.3

-631729 -537266.7 -470245.52

MISC. EXPTPROFIT AND LOSS A/CS 679177.3 693460.5 831507.2 752087.79 642719.23TOTAL 400204.4 340973.1 331956.7 354076.14 323389.56

Profit and loss account Rs ( lakhs )


MSRMI Particulars

2006-07 2007-08 2008-09 2009-10 2010-11

INCOME:

Sales of coal, coke, etc.

287919.8 295478 339913.2 461933.67 615711.23

Coal issued for other purposes per contra 67775.9 68588.2 75532.07 68355.31 93809.90

Other receipts 40026.91 27937.6 69167.31 50536.63 30755.98

Accretion in stock 554.77 4962.42 11857.14 26809.03 17389.26

Total 396277.4 396966 496469.72 607634.64 757666.37

EXPENDITURE:

Decretion in stock --- --- ----- ----------

Purchase/transfer of coal/coke etc. --- --- ---- ---- -----

Internal consumption of coal per contra

65319.64 66071.3 73232.72 66193079 93317.74

Employees remuneration & benefits

175151.5 188518 276118.98 264274.59 302312.58

Impact of arrear wages under NCWA VII

--- --- --- ----

------

Impact of arrear adhoc/IR exe. & non-exe.

32346.1

Consumption of stores & spare parts

32064.86 23346.1 83895.16 39124.98 43796.58

Power & fuel23270.86 33015.8 37548.98 30600.21 21781.36

Differential tariff--- 23346.6 23414.38

Repairs (Purchased) 4945.45 --- 5623.64 7071.88 7926.54

Contractual expenditure 16845.28 4944.75 29475.38 37818.66 64335.17


MSRMI Particulars

2006-07 2007-08 2008-09 2009-10 2010-11

Social overheads (Includes free issue of coal to employees)

24480.5 25688.7 30550.41 34071.91 34304.63

Interest 7885.74 9347.2 7842.76 6659058 4201.68

Depreciation 14267.22 17550 16005.93 17103.50 17245.59

Impairment of assets2053.98 330.53 296.24 -3535.72 823.40

Provision229.58 170.25 273.7 779.57 127.88

Other expenditure27576.91 28747.1 43322.43 38679.74 54884.36

Total expenditure 393892 453759 627600.71 538842.69 646832.11

Add/less: OBR adj:1781.97 -3321.77 5214.94 -10963.49 2056.53

Net total expenditure 395673.5 450437 632815.65 527879.20 648888.64

Profit/loss(-) for the year 603.89 -53470.7 -

136345.9379755.44 108777.73

Fringe benefit tax-272.82 -1043.64 -347.83 ---- 26.30

Prior period adj.4626.93 13885.6 -1352.95 -362.32 590.83

Waiver of apex interest --- 49290.2 -----

Total profit4958.4 8681.35 -

138046.71

Balance loss(-) brought forward from last year’s accounts

-684136 -679177 -693460.5 -831507.21 -752087.79

Transitional prov. As per rev. AS 15 --- -22944.6 ----

Loss(-)carried forward to balance sheet

-679177 -693461 -831507.21

-752087.79

-642719.23

Line graph showing Profit and Loss of BCCL


PROFIT AND LOSS

4958.5 8681.35

-138046.71

79419.42

109368.56

-200000

-150000

-100000

-50000

0

50000

100000

150000

2006-07 2007-08 2008-09 2009-10 2010-11

YEARS

Series1

MSRMI From 2006-2011

The Company has earned a profit of Rs.1087.78 crore in 2010-2011 against a profit of

Rs.794.19 crore for the previous year.

*Two reasons for making huge loss in the year 2008-09:

1. Huge payment of Rs 1600 crore arrears.

2. Loss in production due to bandhs on 88 days (called by both Maoist as well as

political outfits).

ANALYSIS OF SHORT – TERM FINANCIAL POSITION OR TEST OF LIQUIDITY

The short –term creditors of a company such as suppliers of goods of credit and commercial banks

short-term loans are primarily interested to know the ability of a firm to meet its obligations in

time. The short term obligations of a firm can be met in time only when it is having sufficient

liquid assets. So to with the confidence of investors, creditors, the smooth functioning of the firm

and the efficient use of fixed assets the liquid position of the firm must be strong. But a very high BHARAT COKING COAL LIMITED

RS. (

In la

khs)

MSRMI

degree of liquidity of the firm being tied – up in current assets. Therefore, it is important proper

balance in regard to the liquidity of the firm. Two types of ratios can be calculated for measuring

short-term financial position or short-term solvency position of the firm.

1. Liquidity ratios.

2. Current assets movements ‘ratios.

A) LIQUIDITY RATIOS

Liquidity refers to the ability of a firm to meet its current obligations as and when these become

due. The short-term obligations are met by realizing amounts from current, floating or circulating

assts. The current assets should either be liquid or near about liquidity. These should be convertible

in cash for paying obligations of short-term nature. The sufficiency or insufficiency of current

assets should be assessed by comparing them with short-term liabilities. If current assets can pay

off the current liabilities then the liquidity position is satisfactory. On the other hand, if the current

liabilities cannot be met out of the current assets then the liquidity position is bad. To measure the

liquidity of a firm, the following ratios can be calculated:

1. CURRENT RATIO

2. QUICK RATIO

3. ABSOLUTE LIQUID RATIO

1. CURRENT RATIO

Current Ratio, also known as working capital ratio is a measure of general liquidity and its most

widely used to make the analysis of short-term financial position or liquidity of a firm. It is defined

as the relation between current assets and current liabilities. Thus,

CURRENT RATIO = CURRENT ASSETS

CURRENT LIABILITES

The two components of this ratio are:

1) CURRENT ASSETS

2) CURRENT LIABILITES


MSRMI

Current assets include cash, marketable securities, bill receivables, sundry debtors, inventories and

work-in-progresses. Current liabilities include outstanding expenses, bill payable, dividend payable

etc.

A relatively high current ratio is an indication that the firm is liquid and has the ability to pay its

current obligations in time. On the hand a low current ratio represents that the liquidity position of

the firm is not good and the firm shall not be able to pay its current liabilities in time. A ratio equal

or near to the rule of thumb of 2:1 i.e. current assets double the current liabilities is considered to

be satisfactory.

WITH INTERNAL CURRENT LIABILITY

WITHOUT INTERNAL CURRENT LIABILITY

YEAR CURRENT RATIO CURRENT RATIO

2010-2011

2009 - 2010 32.40%

2008 - 2009 24.28%

2007-2008 24.48%

2006 -2007


Working Capital Project

Documents

largest coal

ministry of coal

project work

terms of coal production

project coordinator

summer project

field of management

working capital management