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A
SUMMER TRAINING REPORT
ON
FINANCIAL PERFORMANCE REVIEW
AT
RUBAMIN LIMITED
Submitted By: Guided By:
BHUMIT SHAH MRS. KOMAL PATEL
MBA- II ASST. PROFESSOR
ACADEMIC YEAR
2010-2012
SUBMITTED TO:
K.N.V. INSTITUTE OF BUSINESS MANAGEMENT
RAJKOT
AFFILIATED TO:
GUJARAT TECHNOLOGICAL UNIVERSITY
AHMEDABAD
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K.N.V INSTITUTE OF BUSINESS MANAGEMENT
B/H KHIRASARA POLICE STATION
KALAVAD ROAD, METODA
RAJKOT
CERTIFICATE
I hereby certify that Mr/Ms BHUMIT SHAH student of MBA Sem - III has completed project
work entitled at RUBAMIN LIMITED under my guidance.
As per my knowledge this is his original work based on available data and for partial
fulfilment of MBA programme.
Date: - Name: - MRS. KOMAL PATEL
(Project Guide Name)
Signature: -
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DECLARATION
I undersigned BHUMIT SHAH a student of MBA 3rd semester declare that I have prepared
this project report on “FINANCIAL PERFORMANCE REVIEW" at “RUBAMIN LIMITED”
under Mr/Ms (Name of person who guided you at company) and by Mr (Name of faculty) of
KNV Institute of Business Management - Rajkot
I also declare that this project report is my own preparation and not copied from anywhere
else.
This is in accordance with syllabus & guidelines of GTU.
(Signature)
___________
Student's Name: BHUMIT SHAH
Roll No.:2053
Date:
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ACKNOWLEDGEMENT:
Now, a day’s getting a practical knowledge is an important thing but more important
is the support, guidance and motivation provided by the different persons of different status
and section.
The successful completion of any task would be incomplete without acknowledging
people who helped me make it possible. I take this opportunity to express my appreciation
and gratitude to all these who helped me in completing this project.
I would like to heartily thankful Our Dean Mr. M. K Sharma Sir who has providing
opportunity and constant encouragement to prepare this project report.
I would like to thankful Mrs. Komal Patel for providing guidance to prepare this
project report.
I would like to thankful Mr. Rajesh Palkar Sir (Head of HR Department) for
permitting me for Sumer Internship Programme.
I would like to thankful Mr. Nilesh Mistry (Head of Finance Department) and Mr.
Ajay Upadhaya, for helping in the field work.
I would like to thankful Mr. Milind Thakkar (Head of Taxation Dept.), Mr. Sanjay
Shah and Mr. Kamlesh Ajmeri for giving us the Knowledge for the Company Profile.
Lastly, I would like to thankful Mr. Ruchir Patel for providing constant support and
guidance for making this report successful.
BHUMIT SHAH
MBA – II
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INDEX
SR NO.
PARTICULARS PAGE
1 Executive Summary
2 Introduction
(a) Overview of Industry
(b) Company Details
3 Organizational Study
� Marketing Department study
� Purchase Department
� Operations Department Study
� Human Resource Department Study
� Finance department
4 Chapter Based on Topic
� Ratio Analysis
� House Property
� Working Capital
5 Recommendation / Suggestion
6 Conclusion
7 Bibliography
8 Certificate
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EXECUTIVE SUMMARY:
The Summary includes concise but complete description of the market, market
need how we propose to satisfy that need and the projected financial rewards.
Mission statement:
The Enterprise:
The Rubamin is a closely held Private limited company the company commenced
operation in 1988 with manufacture of Zinc Oxide and has over the years, diversified in
cobalt and copper metals in 1988.we have been profitable in each of our first two years of
operation and have established a strong relationship with numerous distributors
throughout the south and India. We have established work ethic and pride in providing
high quality product at very competitive price. We have been quite successful at this by
concentrating on a relatively small number of components type. Financial result of the last
two years is as follows:
Financial History 2010 2011
Revenue 22197.31 27623.89
Profit Before Tax 85.26 902.10
PBT % 0.38% 3.27%
Net Profit 85.26 756.35
Rubamin is one of the Leading Producers of Zinc Oxide and Cobalt compounds in
the country with its product having wide application across varied user industries. The
company's management is well qualified and experienced and has developed strong
research and development team to continuously improve its process efficiency. Despite
established track record in the business, rubamin has little control on realization due to
commoditized nature of products.
Rubamin Limited has a two decade old successful track record of producing
metallurgical product. It has successfully serviced customers in India and across the globe
over this long period of time. A key success of the organisation has been its ability to
anticipate market needs and invest accordingly. At all times the quality and delivery of the
company has been continuously good, earning it the loyalty of large and important
customer.
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Inter National Operation: (UAE and Democratic republic of Congo):
• Rubaco SPRL, DR Congo and Rubamin SPRL are the wholly owned subsidiaries
of Rubamin FZC, UAE (trading unit) which in turn is a subsidiary of Rubamin
Limited. Rubaco SPRL, DR Congo, Rubamin SPRL are head quarter in
Lubumbashi, which is the capital of the Katanga province.
• Rubaco SPRL formed in the year 2004 is involved in Mineral exploration and
Mining of Minerals.
• Rubamin SPRL is the manufacturing company primarily focused on the
manufacturing operation based on pyrometallurgy technique.
• The group has strength of over 150 employees in DR Congo including Geologist,
Mining / Mechanical / Civil Engineers, Metallurgists, Scientist, Chemicals,
Surveyors, Accountants and others.
Share Holding Pattern as on 31.01.2011:
Name of the Share holder % holding
Shri Atul Dalmioa and Relatives 50.09%
Shri Anil R Patel and Relatives 33.42%
India Advantage Fund (ICICI Venture) 15.40%
Employees and others 0.73%
Associates companies 0.36%
TOTAL 100.00%
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NAME OF THE COMPANY:
Rubamin Private Limited
TYPE OF THE BUSINESS:
Manufacturing/Exporter
CORPORATE OFFICE:
2nd Floor Synergy House,
N/R, Genda Circle,
Subhanpura,
Baroda-390 023
GUJARAT (INDIA)
PHONE:
91 265 22 82 078 / 079 / 080 / 081 / 082
FAX:
91 265 22 82 077
E-MAIL:
BOARD OF DIRECTOR:
Mr. Atul Dalmia....... Chairman
Mr. Anil Patel.......... Managing Director
Mr. Ajit Kapadia...... Independent Director
Dr. Radhanath Prasad...Independent Director
Mr. Naren Aneja....... Independent Director
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BANKERS:
HDFC Bank
State Bank of India
Bank of Baroda
Standard Charted Bank
AUDITORS:
Deloitte Haskins and sells,
Chartered Accountant,
31, Nutan Bharat Society,
Alkapuri, Vadodara – 390007
MISION:
We shall strive to become a global player in our chosen fields of operations and shall aim at
total customer satisfaction”.
VISION:
To be internationally Competitive in Cobalt, select non-ferrous metals & compounds.
OBJECTIVE:
“To manufacture World class Tyre Industry”.
POLICY:
To meet customer expectations of high quality products, in the stipulated time
frame and as per their satisfaction.
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HISTORY
Rubamin is a rapidly growing organization having operations in India and D. R.
Congo. Its operations include Mineral Exploration, Metal Extraction as well as Metal
Compounds manufacturing. Going into the year 2008-2009, Rubamin will foray into
Recycling of Spent Catalyst to produce non-ferrous metals such as Copper, Cobalt, Nickel,
Molybdenum, Manganese, Vanadium and Tungsten as well as Recycling of Zinc bearing
secondary material. The businesses are grouped as under:
Rubamin Limited:
• Cobalt Metal & salts
• Zinc Oxide
• Recycling
• Mineral Exploration
• Copper Manufacturing
It has 5 manufacturing sites in India
and over 5000 Sq. Kms of different mineral
concessions in D. R. Congo, most of which
are located in mineral rich Katanga
province.
Rubamin has commenced the commercial production of Copper Blister at its
Greenfield manufacturing facility at Likasi, D. R. Congo in May 2008.
It is the largest manufacturer of Zinc Oxide in India and is one of the only two
manufacturers of Cobalt metal in India.
Rubamin has appointed Chemlock Metals Corp. as its global distributor for Cobalt
Metal and compounds, Zinc Oxide and Zinc compounds, Molybdenum compounds, and
Cadmium compound.
The three businesses of Rubamin group are run as separate Strategic Business
Units and Profit centres. These are supported by centralised corporate functions like H.R.,
Projects, MIS as well as Finance & Accounts.
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ICICI Ventures, one of the leading Private Equity companies in India has taken a
strategic stake in Rubamin in July 2007.
Rubamin is committed to excellence in all its endeavours, with an unwavering focus
on Customer Delight.
EHS:
Rubamin is committed to excellence in Environment, Health and Safety (EHS)
through continual improvement of our awareness, understanding and performance. Our
goal is to protect the environment and the health & safety of all employees and community
where we operate.
It is our endeavour that there should be no adverse environmental impact from our
operations and business practices and that we strictly control work related injuries &
illness.
All employees are imparted safety training at induction as well as periodically
thereafter. Regular medical checkups for employees are also carried out. A system of work
permits, job safety analysis, and independent third-party safety audits ensures that we
employ the best practices available for conducting our operations safely.
CORE PURPOSE AND CORE VALUES:
Core Purpose:
The Joy of Creating an Institution
Core Values:
Growth, Dynamism and Speed
Learning Organization that Supports Individual
Growth.
Winning - Never Giving Up
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COBALT OPERATION:
We are the leading producer of Cobalt metal and Cobalt salts in India. Our core
activity comprises of processing and recovery of Cobalt Metal, Cobalt salts, Nickel Metal,
Nickel Salts, Copper Metal and Copper Sulphate from Cobalt bearing ores, concentrates
and other Cobalt-Nickel-Copper containing recyclable materials.
QUALITY ASSURANCE:
• We are an ISO 9001 (2000) accredited manufacture of zinc Oxide, Cobalt, Nickel
and copper.
• We have well defined and stringent checks for raw material, work in process and
finished goods.
• We have a world class Quality Assurance Laboratory with competent staff equipped
with latest Analytical Instruments, some of them are:
1. Inductive Coupled Plasma (ICP)
2. Atomic Absorption
3. Spectrophotometers
4. Flame Photometer
5. UV-Visible Spectrophotometer
6. Surface Area Analyzer
7. Auto Titrator
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RESEARCH AND DEVELOPMENT:
The corporate technology centre of the company - has a modern laboratory, and a
team of well qualified personnel. It develops new processes and new products, carries out
process engineering, and trouble shoots various technical problems of the company. As a
part of its responsibility, the centre also examines various environmental issues, and
recommends solution.
The centre focuses on unit operations and processes for leaching, purification, solid
- liquid separation, solvent extraction, electro-winning and environmental remediation in
the field of hydrometallurgy. It has also started activities in the area of pyrometallurgy and
geology, catering to the need of the company in India and in Democratic Republic of
Congo.
The centre is recognized by Department of Scientific & Industrial Research, Ministry
of Science & Technology, Government of India, New Delhi. It is also recognized by MS
University, Vadodara, India as centre of Excellence for students working for doctorate
degree.
We also have a pilot plant replicating with the processing plant to conduct trial runs
before implementing them on a commercial scale.
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ZINC OXIDE OPERATION:
Rubamin Limited is the leading manufacturer and exporter of Zinc Oxide in India.
We have five manufacturing facilities offering almost all grades of Zinc Oxide.
HALOL:
This facility uses Calcinations Process for manufacturing Zinc Oxide. It is situated at Halol,
an industrial town in Gujarat, located 32 km north-east of Vadodara.
DAMAN UNIT I AND II:
We have two separate French Process units in the Union Territory of Daman & Diu.
Situated on the west coast of India, they are three hours drive from Mumbai and 13 Kms
from the nearest Railway Station of Vapi.
NANDESARI UNIT I:
This unique chemical process zinc oxide unit has been commissioned at Nandesari,
Gujarat in January 2009. The unit is an extension of Rubamin's Hydrometallurgy
capabilities and delivers value added products through finer process controls. The
complete process know-how and technology has been developed in-house at Rubamin.
.
NANDESARI UNIT II:
This unit has been recently commissioned in February 2009 at Nandesari Gujarat for
production of zinc oxide for use as Nutritional Additive in Feed Premixes.
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GRADE AND APPLICATIONS:
Rubamin is the largest Zinc Oxide producer in India. We make over 20,000 tons
annually and continue to expand rapidly. We also produce other zinc based chemicals
such as Zinc Carbonate and Zinc Sulphate.
We are also one of the most versatile Zinc Oxide manufacturers in the world and
make almost all the grades commonly used, which are as follows:
Zinc Oxide – 99.5% or 99.7% - White Seal
Also known as – Red Seal, French Process, Rubber Grade, etc.
White Seal is produced by using Zinc Dross in a process known as the French process. It
is widely used in the rubber industry especially the tyre industry. Our products are used by
Global Majors such as Bridgestone and almost or major tyre manufactures.
Zinc Oxide – 99.9% - Gold Seal
Also known as – Pharma Grade, Metal Grade, IP/USP/BP Grade
Gold Seal is the purest form of Zinc Oxide made from pure Zinc Metal. Unlike many other
manufacturers we make our Zinc Oxide from Special High Grade Zinc Metal. This ensures
very low impurities. This grade is widely used in the Pharma industry and all other
applications where you need the best quality of Zinc Oxide.
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Zinc Oxide – 99% - Yellow Seal
Also known as – Calcined Grade, Hydroxide Grade, Wet Process, etc.
Yellow Seal Zinc Oxide is made from Calcining Zinc Hydroxide. This provides low heavy
metal content and is widely used in the tyre, rubber and ceramic industry.
Zinc Oxide – Active
Also known as – High Surface Area (HSA) Zinc Oxide
Zinc Oxide – Active has a fine particle size, good dispersion characteristics and a slow
settling rate. It is used in Latex compounding, for goods manufactured with translucent and
transparent rubber.
Zinc Carbonate (Precipitation Route)
Made from chemical precipitation our zinc carbonate is superior due to product
morphology, uniform precipitates and finer particle size. Our Zinc Carbonate finds usage in
Catalyst and Rubber applications.
Zinc Oxide – 72% / 75% - Feed Grade
This is used as Nutritional Additive in Feed Premixes and for our European customers; we
can certify the product in line with the various European Commission Directives.
We shall be pleased to furnish detailed specifications of various Grades upon
receiving request from our valued customers.
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RUBAMIN AT GLOBAL LEVEL:
CONGO OPERATION:
To be an Indo-Congolese company, that plays an important role in the development
of the Congolese economy by creating wealth for all its stake holders.
Rubaco SPRL, D.R. Congo and Rubamin SPRL, D.R. Congo are the wholly
owned subsidiaries of Rubamin FZC, U.A.E., which in turn is a subsidiary of Rubamin
Limited, India. Rubaco SPRL, D.R. Congo and Rubamin SPRL, D.R. Congo is head-
quartered in Lubumbashi, which is the Capital of the Katanga province.
Rubaco SPRL, formed in the year 2004, is involved in mineral exploration and
mining of minerals.
Rubamin SPRL is the manufacturing company, primarily focused on the
manufacturing operations based on Pyrometallurgy technique.
The group has strength of over 150 employees in D. R. Congo including Geologists,
Mining / Mechanical / Civil Engineers, Metallurgists, Scientists, Chemists, Surveyors,
Accountants and others.
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MANUFACTURING:
Rubamin SPRL is the manufacturing company in Likasi, Katanga Province, D.R.
Congo, primarily focused on the manufacturing operations based on Pyrometallurgy.
Products:
• Cobalt Concentrate 1000MT per annum on
100% cobalt basis.
• Copper Blister 7500MT per annum on 90%
copper basis.
A state-of-the-art green field manufacturing facility has been commissioned at
Likasi, Katanga Province. The first phase commercial production has commenced from
May 2008. The company is planning a phase-wise capacity expansion of upto 20,000MT
of copper and 2,000MT of cobalt.
MINERAL EXPLORATION AND MINING:
Rubaco SPRL has 20 exploration mineral concessions.
Rubaco SPRL, formed in the year 2004, is involved in mineral exploration and
mining of minerals. The company has Permissions for Research (PRs) for over 2500 sq
kms of mineral concessions most of which are in Katanga Province of D.R. Congo. These
mining concessions are rich in copper, cobalt, gold, diamond, iron and other minerals.
Please see attached file for details of 20 PRs.
Rubaco SPRL has charted an aggressive exploration program on these
concessions in next three years.
We are looking for Joint Venture partners having expertise in exploration and mining
for joint exploration and mining of select concessions.
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OUR BUSINESS INTEREST:
• Strategic partnership for mineral concessions in D.R. Congo
• Private equity funding for exploration, exploitation and manufacturing
activities at D.R. Congo
• Supply of mining equipments and machineries for our operations in D.R. Congo
• Orders for execution of excavation, over burden removal and mining work on
contract basis
• Buying Copper Blister
• Supplying Copper Ore in D.R. Congo (Malachite with min. 20 % Cu)
• Supplying Cobalt Ore in D.R. Congo (Heterogeneity with min. 3 % Co)
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OVERALL ORGANIZATION CHART:
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SWOT ANALYSIS:
A SWOT analysis generates information that is helpful in matching an organization’s
or a group’s goals, programs, and capacities to the social environment in which they
operate. It is an instrument within strategic planning. When combined with a dialogue, it is
a participatory process.
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Strength:
• Largest presence in Congo.
• Powerful leader in India in Zinc Oxide and Cobalt.
• Strong Entries Barriers.
• Use of Latest Technology.
• Availability of Trained Man Power.
• Zinc Oxide is itself a specific Brand name.
• We make all grades of Zinc using all kind of Raw Material.
Weakness:
• Location not Ideal for Chemical Plant.
• India is not right place for this type Product.
• The size of the Market is not large.
• Sometimes there is difficult to collect the raw material.
Opportunity:
• We have Exploration area in Cobalt and copper in Congo.
• Our Product are move into Value Added Product e.g. Battery Material.
• Indian Market is not matured.
Threats:
• Availability of Cobalt is biggest Threat for our Company.
• Availability of Skilled Man Power and Attribution
• The growth of China is also great threat
• Price of Copper and Cobalt are sometimes creating threat for us.
• Environmental issues are also creating threat for us.
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ORGANISATION CHART OF MARKETING DEPARTMENT:
Chief Operating Officer
(COO)
Manager
(Sourcing)
Commercial Sourcing
Officer
Manager
(Export)
Sr. Officer
(Export)
Business Development
Manager
Commercial Officer
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PRODUCT AND APPLICATION:
We offer a number of Cobalt, Copper, Nickel, Manganese and Molybdenum
Products with wide applications. We can also offer customized products to meet the
specific requirements of our customers.
No. Products Specification Applications
1
Ammonium
Molybdate
Min 56% Mo
·Dyes
·Pigments
·Catalysts
·Smoke
Suppresant
2
Cobalt
Carbonate
Min 46% Co
· Animal Feed
· Ceramics &
Pigments
3
Cobalt Cathode
Min. 99.8% Co
· Super Alloys,
HSS
· Investment
Casting
· Paints as drier
· Cobalt Salts
· Catalyst
· Magnets
4
Cobalt Oxide
Min 71% Co
· Pigments &
Colours
· Glass
· Battery
5
Cobalt Sulphate
Heptahydrate
Min. 21% Co
· Animal Feed as
micronutrient
· Dyes
· Anodising
· Copper
Electrowinning
· Paint Drier
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6
Copper Metal
99.95% purity
· Electrical
· Chemical
· Alloys
7
Copper Sulphate
Min. 24.5% Cu
· Animal Feed
· Fertilizers
· Dyes
· Paint Drier
· Fine Chemicals
8
Manganese
Sulphate
min 31% Mn
· Animal Feed
· Paint Driers
· Micro Nutrients
· Agrochemcials
9
Manganese
Sulphate
Solution
Min.27%
MnSO4 + B83
· Agreochemicals
Intermediate
10
Nickel Metal
99.8% purity
· Steel
· Casting
· Catalysts
· Chemicals
· Electroplating
11
Sodium Sulphate
98.5% purity
· Paper
· Dyes
· Detergents
· Glass
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Competitors List:
The Rubamin Limited Manufacturing Industry in India is fragmented and has many small
Players. Most of the incumbents do not have facilities approved by stable long term
customers. High working capital requirement is a barrier to entry in this business. The main
competitors of the Rubamin Limited are as Follows:
Sr. No. Competitor’ s Name
(Zinc Oxide)
Approximate Capacity
(MTp.a)
1 Nav Bharat Metalic Oxide 6000
2 Transpek 6000
3 Pondy Oxide And Chemicals 4800
4 Upper India Chemicals 4800
5 Mittal Pigments Pvt. Ltd. 3600
6 Liuzhou Zinc (Chinese Player) 5000
7 Umicore Group (Europe) 5000
8 U.S. Zinc (U.S. Market) 5200
Sr. No. Competitor’ s Name
(Cobalt and copper)
Approximate Capacity
(MTp.a)
1 OM Group 8170
2 Falconbridge 5021
3 Norilsk 4748
4 Chambishi 3648
5 International Cobalt Compant Inc. 3391
6 OM Group (Finland) 4798
7 Sherritt International Corporation (Canada) 5000
8 BHP Billiton (Australia) 5000
9 Jinchuan (China) 15000
10 Sterlite Copper Industry 4900
11 Hindalco 5000
12 SWIL 4897
13 Hindustan Copper 4500
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Customers Profile:
About the 40% of the product of Rubamin Limited is used for the Production of the Tyres
and Rubber Industries and the balance is consumed by Ceramics, Paints and other
Industries. For Rubamin Automobiles, Tyres and the Rubber Industry account for about
30% of its production at Daman and around 90% of its production at Halol. The main
customers of Rubamin Limited are as follows:
Sr. No. Customer’s Name
(Zinc Oxide)
Industry
1 MRF Limited Tyre Manufacturing
2 Bridgestone India Pvt. Ltd. Tyre Manufacturing
3 Apollo Tyres Limited Tyre Manufacturing
4 CEAT Limited Tyre Manufacturing
5 Videocon Glass Industries Limited Glass Manufacturing
6 Explorer SRL (Italy) Minerals and Compounds (Ceramics)
7 RAK Ceramics (Dubai) Ceramics Manufacturing
8 Star Chemicals (Australia) Chemicals Manufacturing
9 CEAT (Sri Lanka) Tyre Manufacturing
10 Jasol (New Zealand) Plastic Manufacturing
Sr. No. Customer’s Name
(Cobalt and Copper)
Industry
1 Sandvik Group Tolling
2 Lona Industries Pigments and Dye stuff
3 Laxminarayan Traders Trading
4 Narayan Industries Dyes and Intermediaries
5 Parswanath Industries Dyes and Intermediaries
6 Codelco (Chile) Copper Manufacturing
7 Phelps Dodge (USA) Copper Manufacturing
8 LA Chemicals Chemicals
9 Patcham Ltd. Paints and Adhesives
10 Kosheri Trader catering to Batteries, Alloy &
Chemicals industries
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Mode of Entry:
Different modes are used by Rubamin Limited which are as follows:
• Meeting Customer
• Launching New Products
• Advertisements
• Trade Fare Attending
• Floating information to trade organization
• By Phone calling to customer for the Interview
• Fax, E-mail and Internet
Customer Relationship System:
Customers are the key and one of the most important factors of any business because
without the Customer the business cannot run successfully. That’s why the
Customer is called “KING” of the Market.
The various aspects covered under the customer relationship system by Rubamin
Limited for Example:
• Price
• Quality
• Packaging
• Delivery on time
• Attending Complains
Pricing:
There are mainly two method of pricing which the Rubamin Limited basically used. They
are Formula Based and Spot Based.
Formula based pricing used for the regular customer (repeated order). In this
method the price for domestic product are charged according to HZL (Hindustan Zinc
Limited). Price for international product are charged according to LME (London Metal
Exchange).
Spot based pricing used for the small customer who gives ordered frequently. Here
the prices are charged on the bases of the current price which are available in the market.
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Distribution Channel:
Distribution Channel is the thing through which the product is available for their users and
customers. The Distribution Channel of the Rubamin Limited is as follows:
Manufacturer -------------------> Agent ----------------------> Customer.
Distribution Network:
The Distribution Network is the network where the Agent are distribute the products to their
customer directly. Rubamin Limited has Distribution Network in the Places like Bombay,
Banglore, Delhi, Daman, and Puna.
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ORGANIZATION CHART OF PURCHASE DEPARTMENT:
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BASIC OVERVIEW FOR PURCHASE:
There are Five Categories of Purchases being handled by Purchase dept. The same are
as follows:
� Project Purchases
� Capital Purchases
� Revenue Purchases
� Job Work
� Service orders
Present Purchase Procedure:
Purchase Order:
In case of Raw Material, CSP and Packing Material items are covered under Approved
suppliers List. Appproved Supplier list for process Chemicals, packing materials and major
CSP items is updated periodically.
Purchase orders are authorized as per authorization level defined in system.
Manager level - Upto Rs. 10,000/-
� DGM Level - Up to Rs. 100,000/- ,
� G.M-Commercial - Upto Rs. 5 Lacs
� Managing Director – > 5 Lac to Rs.10 Lac
� CFO & MD – More than Rs. 10 Lacs
Purchase Order and Amendment:
Once purchase order is prepared and authorized in the system, purchase order
amendment is possible in the system. Purchase order amendment can be carried out by
the generator of the purchase order. In case of purchase order amendment approval, level
wise financial limit of authorization is inbuilt in the SAP System which is same as that of
P.O authorization.
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Purchase Procedure:
Company has a centralized purchase department at Baroda. All the purchases are made
from the Baroda for other locations.
� The following system is adopted for inviting quotations:
� - Basic value upto Rs.1000 : Cash Purchase or P.O
� - Basic value Rs.1001 to Rs.5000 : One quotation
� - Basic value Rs.5001 to Rs.30,000 : Two quotations
� - Basic value >Rs.30,000 : Three quotations
Exceptions to above system:
- Public sector undertaking suppliers like oil companies etc.
- OEM suppliers of spares
- Authorised Dealer
- Proprietory item
- Single source due to scarcity of material/ Emergency Purchases
- Office equipment
Purchase of process Chemicals:
Chemicals are purchased from the approved suppliers normally. Considering the
requirement of the chemicals company is entering into periodic Rate Contract wherever
feasible. Orders are placed on the basis of material availability and rates.
Purchase of Packing Material:
Packing material is purchased from the regular suppliers at the same rates or different rate
based on fluctuation in raw material prices.
Purchase of CSP Material:
CSP materials are procured by preparing purchase order based on Auto Purchase
Requisition generated in the system or individual P.R’S. Considering the value of the
purchase of CSP material, decision is taken whether to float the enquiries or to purchase it
on repeat order basis .
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Purchase of Material for CONGO:
Material purchased for CONGO is based on the purchase requisitions provided to the
purchase department from CONGO. On the basis of the PR, inquiries are floated to the
various suppliers. Cost comparative statement is prepared on the basis of quotations
received. Further negotiations are made for the discounts or other terms. Purchase orders
are prepared on the basis of the final negotiated terms. Direct purchase orders are also
prepared on the basis of previous purchase. All the purchases are treated as revenue
purchase.
Purchase System encompasses the following functions:
Purchase Requisition Generation (PR):
Purchase Requisition is an internal document raised by the different users / departments to
the Purchase Department. It specifies their needs and the Schedule Dates by which they
require the materials. Purchase Requisition can be either entered by the user, or
automatically generated on the basis of the re-order level of an item.
User Initiated Purchase Requisitions
User initiated Purchase Requisition is based on the user needs. User can raise the
Purchase Requisitions for an item at any time.
Automatic Generation of Purchase Requisition
Purchase Requisition will be generated automatically based on the stock available in the
inventory. Whenever the stock goes below re-order level for an item, List Purchase
Requisition will be generated for that item. User can select items to generate Purchase
Requisition.
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Closing of Purchase Requisition
Closing of Purchase Requisition will be done in two cases. In the first case, Purchase
Requisition will be treated as closed when total quantity in Purchase Requisition has been
ordered. Such closing will be done automatically by the system. Second case will be of
short closing of the Purchase Requisition. Short closing will be required when the total
quantity has not been order and the user does not require the remaining quantity to be
ordered. Short closing has to be done by the user.
Service Contract:
Service Contract is the agreement between Contractor and Buyer. It contains the Item
Definition and Rate, Taxes, Transportation and other charges and all the commercial terms
and conditions. Rate Contract can be for the quantity and / or for a period of time. Rate
Contract can be renewed after the expiry of the contract.
Renewal of Service Contract
The Service Contract can be renewed after the expiry date. In this case based on the
original Service Contract new contract will be prepared.
Termination of Service Contract
Service Contract can be terminated. No further Order can be raised against the contract
after the termination.
Service Contract Amendment
In case, a Service Contract with a Vendor requires any changes due to any reasons like
change in taxes or terms and conditions, then a new Service Contract is required to be
prepared. This type of amendments can be handled through this option, which provides
previous Service Contract information to relate with amended Service Contract.
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Purchase Order (PO):
Purchase Order is the most important document of the Purchase System. It is generated
by the Purchase Department and sent to the vendor. Purchase Order basically provides
the information about the quantity of goods required to be supplied according to
specifications and specified terms and conditions. Modification of Purchase Order will be
allowed. However, modification can not be done after the Purchase Order has been
authorized.
Preparation of Purchase Order:
Following types of Purchase Order can be prepared:
Purchase Order through Purchase Requisition
This is used to prepare Purchase Order based on the Purchase Requisitions. This is
useful to keep track of the Purchases made against the requirements raised by the user.
Modification of Purchase Order will be allowed. However, modification can not be done
after the Purchase Order has been authorized.
Direct Purchase Order
This order can be made without a Purchase Requisition
Service Order
This facility is provided to keep account and record of services.
Closing of Purchase Order
This Process will take place automatically when it is completely satisfied i.e. for all items of
the Purchase Order is received. Order can be short closed if total quantity is not received
because of any dispute or the pending quantity is not required.
Cancellation of Purchase Order
Purchase Order can be cancelled if no material has been received against that Purchase
Order. Cancelled Purchase Order can be reopened.
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VENDOR REGISTRATION AND SELECTION
1. Scope:
Vendors of raw materials, consumables and service contractors.
2. Responsibility
Chief Business Manager - Main Raw Material
DGM Commercial - Process Chemicals, Packing Material, Spares, Consumables and
Others.
3. Description:
1.1 Vendors shall be evaluated on their competency primarily by way of
correspondence, references, company profile and personal discussions if required.
Initially, 2-3 trial orders are placed to assess the suppliers competency and
reliability. If found suitable then a vendor registration form (as per enclosed format)
is sent for registration of vendor.
1.2 Vendor Registration: Following information is sought from the vendor for
registration.
a) Facilities like Plant & Machinery, Quality Control Systems, Storage & Delivery
Systems, Tool room facilities, Material handling systems.
b) Product & Service offered.
c) Professional and Technical skills available.
d) Commercial and Credit Terms.
1.3 If the vendor is approved, he is included in the approved vendor list. The approved
vendor list is updated as and when new vendor is added.
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4. Records:
- Vendor Registration Records
- Approved Vendor List
Selecting capable vendors is one of the most important responsibilities of the purchase
department. If a right supplier is selected, then competitive pricing reliable quality, on time
delivery, good technical service and other goals of purchasing are easily achieved.
All potential vendors are required to apply on the specified “Vendor Registration
Application” be prepared category wise. After careful scrutiny of the details submitted by
Vendors, a visit to the premises of the details submitted by vendors, a visit to the premises
of the vendor if felt necessary is made. The trial orders can be placed with prior approval
of the section Head/HOD (Purchase).
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PREPARED BY: BHUMIT SHAH Page 43
ORGANIZATION CHART OF PRODUCTION DEPARTMENT:
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COBALT PROCESS:
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The process is based on hydrometallurgy having the following process steps:
• Reduction Leaching.
• Filtration to separate insoluble’s from dissolved metallic’s.
• Solvent extraction to separate associated metallic (Nickel & Copper) from Cobalt.
• Electro winning of pure Cobalt sulphate solution to produce electrolytic grade Cobalt
metal of min. 99.80 % purity.
• Electro winning of pure Nickel sulphate solution to produce electrolytic grade Nickel
Metal of 99.8% purity.
• Evaporation / precipitation of pure Cobalt sulphate solution to produce Cobalt salts.
Tolls Used for Material Handling:
Rubamin Limited Used Following tools for the transferring the material from one place to
another place for their production purpose they are as follows:
• Hand Pallet Truck
• Crain
• Hoist
• Lifts
• Forclip
Storage of Material:
Whenever the material are coming from outside, first of all the person who ordered the
material will take the gate pass and then after the material are store in the factory at
storage room. After that the material are goes for the inspection and then after they are
registered in the GRN (Goods Received Note). Finally the material are goes in the custody
of the users.
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PREPARED BY: BHUMIT SHAH Page 47
ORGANISATION CHART OF HR DEPARTMENT:
DGM (HR)
Halol Manager
HR (P & A)
Executive Officer
Daman Executive
Officer
Assistant
VP
AGM (P & A)
Nandesari Plant N1, N2
Executive
Officer
Assistant
DGM (HR) Admin Officer
Corporate (Payroll)
Assistant
Manager
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HUMAN RESOURCE DEPARTMENT:
Auto Attendance System:
• P & A Department shall issue punching card to new joining employees.
• All the Employees required flashing their identity card at the time of Entry and Exit.
• Employees are required to show his Identity card once to installed machine.
• It will take your attendance in system and will give beep sound and employees
name and card no. will appear on screen of equipment for individual employee’s
attendance.
• In case of lost of card, new card will provided by company on chargeable basis.
Lunch and Tiffin Facilities:
• On chargeable basis employees can get their Tiffin/Lunch through Receptionist.
• Company is providing Lunch/Dinner through main security gate in case of when
employees perform over time duty in 1st shift or 2nd shift. In such cases individual
employees has to book their Tiffin at Receptionist.
Festivals and Holidays:
• The Festivals and Holidays declared by the company shall be made applicable to all
class of employees including staff, workman and Executive.
• The trainees appointed by the company weather in terms of management trainee
under statutory provision of Apprentice Act 1961 shall also be entitled to avail
benefit of festival holiday.
Late Coming Norms:
• Late Coming of more than 10 minutes after schedule duty hours will be treated as
Half Leave.
• Maximum 10 minutes late coming in thrice in a month is allowed.
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Early Going Norms:
• Employees are allowed two and Half hours early going once in a month.
• More than one time early going shall be considered as a half day leave for each
early going.
• For claiming short leave employees need to fill up personal Gate Pass (Green
Card) and it should be signed by recommending Authority.
• In case of early going for official work outside the factory premises, employees need
to fill up official Gate Pass (Yellow Card) and it should be signed by recommending
Authority.
Overtime:
• If employees performs their minimum 2 hours duty after their schedule working
hours for any productive purpose he shall be eligible for claiming overtime payment
as per company prescribed guideline.
Leave Without Pay:
• When an employee exhaust his leave or is not entitled to enjoy any leave for
whatever reason, he can apply for LWP which the management can absolute grant.
Labour Relation:
• The company possesses various labour relation activities. It doesn’t have any
union, it also possesses harmony, and the company gives all statutory payments
scale and other benefits.
Labour Welfare:
• Insurance Policy for labour, personal Accident, Mediclaim and Life Insurance.
• Group Gratuity Policy.
• Statutory Payments like PF, ESI, Bonus, and LTA.
• Uniform and Safety related items.
• Transport related facility from plant to head office and same as, in also shift.
• Loan policy is allotted, but only for genuine reason.
• Gift for a self marriage Rupees 2500.
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Recruitment Process:
There are basically three types of process through which the company recruits the
employees. They are as follows:
• Walking Interview
• Campus Interview
• Employment Exchange
Other process for the recruitment is through Directors approval for new Position. (Fresh
Requirement) For Replacement no Director approval is required. Only Vice President,
Chief Business Manager has authority for replacement. Medical fitness is must required
before joining. Cross reference checking if required. After completion of interview offer
letter to be issued. At the time of joining Appointment letter is to be issued.
Recruitment Sources:
There are mainly three types of recruitment sources which the Rubamin Limited used are
as follows:
• Internal Sources
• External Sources
• Modern Sources
Promotion:
In Rubamin Limited the Promotion is based on the retirement of employees or the vacant
position is available in the organization. But the main criteria of promotion are:
• Retirement of Employees
• Depends on Working ability
• Growth of the Company
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Safety Measures:
There are many safety measures which the company possesses during work:
• Personal protective Equipments
• Work Permit
• Suitable Fire Extenuation
• Assembly Point to main Gate
• Centre safety committee meetings, Research and action
• Safety Shoes
• Helmet
• Glows
• Mask
• Glass for Eyes
Applicability of Laws:
• Factories Act 1948
• Employment State Insurance Act 1948
• Minimum Wages Act 1948
• Payment of wages Act 1936
• Employees Provision Fund Act 1952
• Payment of Bonus Act 1956
• Employment Exchange Act 1959
• Apprentice Act 1961
• Payment of Gratuity Act 1972
• Equal Remuneration Act 1976
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PREPARED BY: BHUMIT SHAH Page 53
ORGANIZATION CHART OF FINANCE DEPARTMENT:
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FINANCE DEPARTMENT:
When it comes to the overall scope and duties of a finance department, there are
many functions to be fulfilled. For the most part, the duties include all things related to
budgeting. From appropriations to control of expenditure and auditing duties, the finance
department of any given company has an array of duties.
Evolution of the Finance Department:
With each passing year a finance company evolves into an entity that is responsible for
increasing the company (and shareholder’s value). This is done by the implementation of
strategy. If you are looking for additional information on the roles and responsibilities of a
finance department then you might consider doing an Internet search on a specific
company’s finance department or do a simple Internet search on the traditional versus the
modern duties of a finance department. You can also go to your local community college
and speak with a business professor.
Functions of a Finance Department:
A finance department basically has three main functions:
• To provide strategic financial support regarding operational and general business
planning
• To provide daily financial services functions
• To meet and surpass the internal and external needs and financial reporting
requirements of the company at large
The finance department generally focuses on providing relevant information necessary
for upper level management. Such information is crucial in determining how a company
can make better financial decisions.
When it comes to reviewing a company’s overall practices and efforts, the finance
department is key. A finance department will work cohesively with the company to build a
corporate environment that will be able to use the financial resources of the company in
order to ensure that the desired level of customer satisfaction is met.
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MAIN FUNCTION OF FINANCE DEPARTMENT:
• Preparation of budget, appropriation of accounts, re-appropriations, surrender and
savings.
• Control of expenditure and ways & means position.
• Audit
• Treasury administration
• Administration of Taxes i.e. Sales Tax, Entertainment Tax, Luxury Tax and Entry Tax
etc.
• Service Conditions including Freedom Fighters Pensions.
• Resource mobilization through loans, Institutional Finance, Small Savings, Credit
and Investment and public debt.
• Financial concurrence and advice.
• Compilation of Codes, Rules and procedures concerning financial transactions and
having bearing on State finance and their implementation.
• Safety and investment of funds from consolidated funds, contingency fund and
public account.
• Contract, recovery and refund of revenue etc.
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RATIO ANALYSIS:
Meaning:
Relationship between various related items in the financial statements are established, they
can provide useful clue to gauge accurately the financial health and ability of business to
make profit. This relationship between the two related items of financial statement is known
as ratios. It is a mathematical yardstick that measures the relationship between two figures.
Ratio analysis is process of comparison of one figure with another and the
interpretation of the ratios to know the strengths and weakness if the firm’s operations and of
its financial position. Ratio analysis helps various interested parties like prospective investors,
creditors, banks, and employees etc. to draw useful classification of accounting ratio.
Utility of the ratio analysis:
The use of the ratio was started by banks for ascertaining the liquidity and profitability of
companies business for the purpose of advancing loans to them. It gradually became popular
and other creditors began to use them profitably. Now even the investors calculate ratios from
the published accounts of the company in order to have an idea about the solvency and
profitability of the company before investing their savings. The ratio analysis provides useful
data to the management, which would help them in taking important policy decisions. Diverse
groups of people make use or ratios, to determine a p\particular aspect of the financial
position of the company, in which they are interested.
(1) profitability:
Useful information about the trend of profitability is available from profitability ratios. The gross
profit ratio, net profit ratio and ratio of return on investment give a good idea of the profitability
of business. On the basis of these ratios, investors get an idea about the overall efficiency of
business, the management gets an idea about the efficiency of managers and bank as well as
other creditors draw useful conclusions about repaying capacity if the borrowers.
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(2) Liquidity:
In fact, the use of ratios was made initially to ascertain the liquidity of business. The current
ratio, liquid ratio, and acid test ratio will tell whether the business will be able to meet its
current liability as and when they mature. Bank and other lenders will be able to conclude
from these ratios whether the firm will be able to pay regularly the interest and loan
instalments.
(3) Efficiency:
The turnover ratios are excellent guides to measure the efficiency of managers. E.g. the stock
turnover will indicate how efficiently the sale is being made, the debtor’s turnover will indicate
the efficiency of collection department and assets turnover shows the efficiency with which the
assets are used in business. All such ratios related to sales present a good picture of the
success or otherwise of the business.
(4) Inter-firm comparison:
The absolute ratio of the firm is not of much use, unless they are compared with similar ratios
of other firms belonging to the same industry. This is inter-firm comparison, which shows the
strength and weakness of the firm as compared to other firms and will indicate corrective
measures.
(5) Indicate trend:
The ratio of the last three to five years will indicate the trend in the respective fields. For
example, the current ratio of a firm is lower than the industry average, but if the ratios of last
five years show an improving trend, it is an encouraging trade. Reverse may also be true. A
particular ratio of a company for one year may compare favourably with industry average but,
if its trend shows a deteriorating position, it is not desirable. Only ratio analysis will provide
this information.
(6) Useful for budgetary control:
Regular budgetary reports are prepared in a business where the system of budgetary control
is in use. If various ratios are presented in these reports, it will give a fairly good idea about
various aspects of financial position.
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(7) Useful for decision – making:
Ratio guides the management in making some of the important decisions. Suppose the
liquidity ratios show liquid funds. Even for capital expenditure decisions, the ratio of return
on investment will guide the management. The efficiency of various departments can be
judged on the basis of their profitability ratios and efficiency of each department can thus
be determined.
Advantages of Ratio Analysis:
Ratio analysis is very important and useful tool for financial analysis. It serves many
purposes and is helpful not only for internal management but also for prospective
investors, creditors, and other outsiders. The following are the important uses of Ratio
Analysis:
• It is an important and useful tool to check upon the efficiency with which the
working capital is being used in a business enterprise. Efficient Management of
Working Capital.
• It helps the management of business concern in evaluating its financial position
and efficiency of performance.
• It serves as assort of health test of a business firm, because with the help of this
analysis financial managers can determine weather the firm is financially healthy
or not.
• A ratio analysis covering a number of past accounting periods clearly has shown
the trend of changes in the business position. The progress or downfall of a
business concern is clearly indicated by this analysis. Use to measure the trend
of the business.
• It helps in making financial estimate for the future. It helps the task of managerial
control to a great extent.
• It helps the credit suppliers and investors in evaluating a business firm as a
desirable debtor or as a potential investment outlet.
• It serves as an instrument for testing management efficiency.
• It provides a useful tool for decision on certain policy matters.
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Limitations of Ratio Analysis:
• Single year’s ratios have limited utility because the utility of ratios computed
from the financial statements of one year only is obviously limited. They must be
compared with the past results of the company as also with the results of other
business firms in the same industry.
• The use of one ratio misleading because one ratio used without reference to
other ratios may be misleading. If some conclusions are to be drawn, then the
combined effect of a few related ratios must be considered.
• There is a practically no standard ratio against which the actual performance
can be compared. The satisfactory level of various ratios may differ from one
industry to another only because circumstances differ from industry to industry
and even from firm to firm.
• In ratio analysis other numbers of factors such as general economic conditions
and competition, local factors and the policy adopted by the management are
also important. Hence, before giving any opinion all factors must be kept in
mind.
• It must be remembered that accounting ratios are only a preliminary step in
investigation. Hence, before taking any action on the basis of accounting ratios
based on these figures would give misleading results.
• If in the use of ratios, the manager remains rigid and stocks to them, it will lead
to dangerous situation.
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TYPES OF RATIO:
[A] Profitability Ratios:
• Gross Profit Ratio
• Net Profit Ratio
[B] Liquidity Ratios:
• Current Ratio
• Quick Ratio
[C] Activity Ratios:
• Assets Turnover Ratio
1. net asset turnover ratio
2. total asset turnover ratio
3. fixed asset turnover ratio
• Inventory Turnover Ratio
• Debtors Turnover Ratio
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SU0MMARY OF RATIO:
Sr. No Ratio 2011 2010
1 Gross Profit Ratio 12.47 10.10
2 Net Profit Ratio 2.74 0.39
3 Current Ratio 1.41 1.59
4 Quick Ratio 1.03 1.18
5 Inventory Ratio 5.41 4.11
6 Interest Coverage (Expenses) Ratio 2.48 1.69
7 Fixed Asset Turnover Ratio 4.6 3.21
8 Debt Equity Ratio 1.39 1.65
9 Debtor turnover Ratio 5.13 (70 Days) 5.38 (67 Days)
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[A] Gross Profit Ratio:
It is a ratio expressing relationship between Gross Profits earned to Net Sales. It is a
useful indication of the profitability of business. i.e., If Net sales are Rs.4, 00,000 and
Gross Profit is Rs. 1, 00,000 then the Gross Profit ratio is 25%.
GPR = GROSS PROFIT x 100
SALES
This ratio is usually expressed as a percentage. A ratio of 25% shows that for sales of
every Rs.100, a margin of 25 rupees is available from which operating expenses of
business are to be recovered. The ratio shows whether the mark-up obtained on cost
of production is sufficient. There is no standard showing reasonableness of gross profit
ratio. However, it must be enough to cover its operating expenses. In many industries,
there are more or less recognized gross profit ratios and the business should strive to
maintain this standard.
If this ratio is low, it is indicates that the cost of sales is high or that the purchasing is
inefficient. Alternatively, it may also mean that due to depression, the selling price is
reduced but there may be no corresponding reduction in cost of sales. In such a case,
the management must investigate the causes and try to bring up this ratio.
YEAR G.P / SALES *100 GPR
2010-11 3443.78 / 27623.89 *100 12.47%
2009-10 2206 / 21839.71 *100 10.10%
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Interpretation:
The Gross Profit ratio reflects the efficiency with the firms produces or purchases the
goods. Given the constant level of selling price, cost price & raw material the gross
profit is generally increasing it means the selling price is high as compare to the cost
price. In year 2010-11 gross profit ratio is 12.47% which is nearly same as in previous
year, so this high ratio of gross profit to sales is a sign of good management as it
implies that the cost of production.
[B] Net Profit Ratio:
The ratio is valuable for the purpose of ascertaining the over-all profitability of business
and shows the efficiency or otherwise of operating the business. It is the reverse of the
operating ratio. It is calculated as follows.
NPR = NET PROFIT x 100
SLAES
Suppose the net profit of the business after taxes is Rs.80, 000 and sales are Rs. 5,
00,000 then the Net Profit Ratio will be:
Net Profit Ratio =80,000/500,000*100=16%
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Generally, the ratio is computed on the basis of net profit earned from operation of
business and non-operating expenses and incomes are excluded. i.e. income from
investment of surplus funds of business is non-operating income and so it is to be
excluded. Loss on sale of asset (furniture) is non-trading loss and it is not taken into
account. Generally, tax is deducted from profit while calculating this ratio.
This ratio indicates what portion of sales revenue is left to the proprietors after all
operating expenses are met. The higher this ratio, the better will be the profitability. In
order to have a better idea of profitability, the gross profit ratio and net profit ratio may
be simultaneously considered. If the Gross Profit is increasing over last five years, but
the net profit is declining, it indicates that administrative expenses are slowly rising.
YEAR NET PROFIT / SALES *100 NPR
2010-11 756.35 / 27623.89 *100 2.74%
2009-10 85.25 / 21839.71 *100 0.39%
Interpretation:
This ratio shows that the valuable for the purpose of ascertaining the overall profitability
of the firm & business. But in the year 2010-11 the Net Profit is high as compare to
last year because variable & fixed expenses is less as compared of the other income.
In year net profit ratio is 2.74:1 which is high as compared to last year ratio which was
0.39. So this shows result that this year net profit margin got increased.
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[C] Current Ratio:
This most widely used ratio shows the proportion of current assets to current liabilities.
It is also known as ‘Working Capital Ratio’ as it is a measure of working capital
available at a particular time. The ratio is obtained by dividing current assets by the
current liabilities. It is a measure of short-term financial strength of the business and
shows whether the business will be able to meet its current liabilities, as and when they
mature. A liability which will mature within a period of 12 months is a current liability. It
is generally belief that 2:1 ratio shows a comfortable working capital position.
CURRENT RATIO = CURRENT ASSET
CURRENT LIABILITY
Suppose, the current assets are worth Rs.2,00,000 and current liabilities are
Rs.1,00,000,then the current ratio will be as under:
Current Ratio = 2, 00,000 / 1, 00,000 = 2 or 2:1
It means that for every Rs.1 of current liability, there is available Rs. 2 in current assets
to meet the current liabilities.
Current Assets =Cash &Bank balance + Stock + Debtors + B/R + Prepaid
Expenses +Investments+ readily convertible into cash+ Loan & Advances.
Current assets are in the form of cash or can be readily converted into cash within a
short time.
Current Liabilities =Creditors + B/P + Bank O/D + Unclaimed dividend +
Outstanding expenses + Provision for taxation + Proposed dividend.
YEAR CA / CL C.R
2010-11 18961.17 / 13415.96 1.41
2009-10 20543.93 / 12923.82 1.59
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Interpretation:
As in year 2010-11 Curent Ratio Is 1.41 wich Is considère satisfactory but as compare to
last year i.e., 2009-10 It has 1.59. So 2010-11 Curent ratio Is showing slight less ability to
met its Curent obligation as compare to last year. This ratio is increasing last year but it is
not ideal. But is able to meet its obligation on time.
[D] Quick Ratio or Acid-Test Ratio:
The measure of absolute liquidity may be obtained by comparing only cash and bank
Balance as well as readily marketable securities with liquid liabilities. This is a very
Exacting standard of liquidity and it is satisfactory if the ratio is 0.5: 1.It is computed By
dividing the value of quick assets by liquid liabilities. Quick assets do not include Both
stock and debtors, because payments from debtors would not generally be Received
Immediately when liquid liabilities are to be paid. Thus the quick assets Comprise only
Cash balance, bank balance & readily marketable securities only. Some Writers call this
ratio as Absolute Liquidity Ratio, (or Absolute Cash Ratio)
. CURRENT ASSETS – STOCK
QUICK RATIO = --------------------------------------------------------------------
CURRENT LIABILITIES
OR
ACID TEST RATIO = QUICK ASSETS
LIQUID LIABILITY
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Suppose the company has cash on hand Rs.10,000,Bank balance Rs.45,000 and
readily marketable securities Rs.25,000.It means that its quick assets are worth
Rs.80,000.If the liquid liabilities are Rs.1,20,000 then the acid-test ratio will be:
Acid-test Ratio = 80,000/1, 20,000 =2/3 =0.67:1
It means that quick Assets are 2/3rd of Quick Liabilities.
YEAR CA – STOCK / CL Q. R
2010-11 18961.17 – 5105.80 / 13415.96 1.03
2009-10 20543.93 – 5310.86 / 12923.82 1.18
Interpretation: -
Quick ratio of year 2010-11 is 1.03:1, which is less than quick ratio of last year i.e., 1.18:1.
Which represent that company having less liquidity and can’t pay out their current liabilities
and also not paying debt. Quick Ratio of 1.03:1 is not considered to be a satisfactory ratio.
However, this traditional rule should not be used Bindley since the firm having quick ratio is
more than 1. So, It means to quick ratio is very near to the ideal one.
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[E] Fixed Asset Turnover Ratio:
Fixed Assets turnover indicates the efficiency with which firm uses all its assets to
generate sales.
CURRENT ASSETS – STOCK
FIXED ASEET TURNOVER RATIO = --------------------------------------------------------------
CURRENT LIABILITIES
YEAR Sales / NFA FAR
2010-11 27623 / 6806 4.06
2009-10 21839 / 6793.22 3.21
Interpretation:
In Assets Turnover Ratio of 09-10 is 4.06 indicates that is producing of rupees of
sales for one rupee of capital employed in Net Assets & this ratio is generally increase
which a good sign for the company.
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[F] Inventory (Stock) Turnover Ratio:
The number of times the average stock is turned over during the year is known as
Stock Turnover or Inventory Turnover. It is computed by dividing the cost of goods sold
by the average stock in the business. Average Stock is the average of opening and
closing stock of the year. If however, the monthly figures of the stocks are available, the
average monthly stock will give a better turnover ratio.
SALES
INVENTORY TURNOVER RATIO = --------------------------------------
INVENTORY
Suppose, Opening stock is Rs.70,000 and Closing Stock is Rs.80,000,Cost of Sales
Rs.3,00,000,Sales Rs.5,00,000 and Gross Profit Rs.2,00,000. Then this ratio will be
computed as under.
Therefore, Average Stock =70,000+80,000/2 = 1, 50,000/2 = 7500 and Cost of Goods Sold
=5, 00,000(Sales) – 2, 00,000(G.P) = 3, 00,000
Stock Turnover Ratio = 3, 00,000 / 75,000 = 4 times.
This ratio signifies that the average stock is turned over four times during the year. If
figures for cost of goods sold are not available, then the ratio may be calculated on the
basis of the sales. The ratio is very important in judging the ability of management with
which it can move the stock. The higher the turnover ratio, the more profitable the
business would be. The firm in such a case will be able to trade on a smaller margin of
gross profit. A low turnover indicates accumulation of slow-moving, absolute and
low-quality goods, which is a danger signal to the management. Turnover is computed
by dividing the cost of goods sold
by the average inventory. The cost of goods sold means sales minus gross profit. The
ratio indicates how fast inventory is sold.
PREPARED BY: BHUMIT SHAH Page 70
YEAR SALES / INVENTORY ITR.
2010-11 27623.89 / 5105.80 5.41
2009-10 21839.71 / 5310 4.11
Interprétation :
In year 2010-11 the ratio is 5.41:1 which is more as compared to last year which is 4.11:1.
So it is considered that this time company has high inventories in store which signify that
inventory of this year sells slight frequently and efficiently as compared to last year.
[G] Debtor Turnover Ratio:
Debtor turnover ratio the analysais of This ratio suppléments the information Regarding
the liquidity of one item of Current assets of the firm. The ratios masures How rapidly
recevables are collected.
The ratio shows the number of days taken to collect the dues of credit sales. The firm
sells goods for cash & credit. Debtors are convertible into cash over long periods which
include current assets.
PREPARED BY: BHUMIT SHAH Page 71
The debtors’ turnover suggests the number of times the amount of credit sale is
collected during the year, while debtors ratio indicates the number of days during which
the dues for credit sales are collected. Suppose the debtors ratio is 60 days, it means
that debtors pay their dues for credit sales after 60 days of making the sales. It means
that during the year the collection for credit sales is made 6 times during the year (360
days /60 days) = 6.
SALES
DEBTOR TURNOVER RATIO = --------------------------------------
DEBTOR
Where Average Debtors = Opening Debtors + Closing Debtors / 2.
YEAR SALES / CD * DAYS DTR
2010-11 29190.75 / 5688.45 * 360 70 Days
2009-10 21839.71 / 4057.31 * 360 67 Days
PREPARED BY: BHUMIT SHAH Page 72
Interpretation:
In this ratio indicates the quality of debtors & the credit collection effort or the
experience. It indicates the speed which the debtors are converted into cash in a each
year. In the ratio is decrease so collection of money for debtors easily. In 2010-11
Debtor turnover ratio Is 70 Days per year which Is High as Compare to last year i.e., 67
Days per year. So Current year Debtor Turnover Is indicative of shorter time-lag
between credit sales and cash collection as compared to last year.
PREPARED BY: BHUMIT SHAH Page 73
INCOME FROM HOUSE PROPERTY:
From this we can understand the income which falls under the head Income from
the house Property”. The scope of the income charged under this head is defined by the
section 22 of the Income tax Act and the computation of income falling under this head is
governed by section 23 to 27.
Three conditions are to be satisfied for the property income to be taxable under this
head.
• The property should consist of building or land appurtenant thereto.
• The assesses should be the owner of the company.
• The property should not be used by the owner for the purpose of any business or
profession carried on by him, the profits of which are chargeable to income tax.
PROPERTY INCOME EXEMPT FROM TAX:
Some income form house properties are exempt tax. They are neither taxable nor
included in the total income of the assesses for the rate purpose. These are:
• Income from a farm house [ section 2(1A ) (C) and section 10 (1) ]
• Annual value of the place in the occupation of an ex-ruler [ section 10 (19 A)
• Property income of the local authority. [ section 10 (20) ]
• Property income of an approved scientific research association [ section 10 (21) ]
• Property income of an education institution and hospital [ section 10 (23 C) ]
• Property income of registered trade union. [ section 10 (24) ]
• Income from property held for charitable purpose. [ section 11 ]
• Property income of political party. [ section 13 A ]
• Income from property used for own business profession. [section 22 ]
• Annual value of self occupied property.
PREPARED BY: BHUMIT SHAH Page 74
1. Statement of Income from Let-out Property for any purpose.
Particular Rs.
Amount
(Rs.)
Step-1
Expected rent xxxx
Whichever is higher > Standard rent
(i) Municipal Value xxx
(ii) Fair rent xxx
Step-2
Actual rent received xxxx
Annual rent received xxx
Less: (i) Unrealized rent xxx
(ii) Vacancy loss xxx
Note: 1 If step-2 > step-1
Gross Annual value - Step-2
Note: 2 If step-2 < step-1
Step No 3 is applicable
Step-3
Expected rent xxx
Less: Vacancy loss xxx xxxx
Gross annual value xxxx
Less: Municipal tax paid by owner xxxx
Net Annual value xxxx
Less: Deduction under section 24
(i) Standard Deduction xxxx
( 30% of NAV )
(ii) Interest on Housing Loan [ No Limit ] xxxx
Income from Let-out Property xxxx
[ Answer nil, (-)ve, (+)ve. ]
PREPARED BY: BHUMIT SHAH Page 75
2. Statement of Income from Self Occupied Property for Own Residence.
Particular
Amount
(Rs.)
Net Annual value Nil
Less: Deduction Under section 24
Less: Interest on Housing loan xxx
Income from Self Occupied Property xxx
[ Answer nil, or Negative ]
INTEREST ON HOUSING LOAN:
• If Loan is taken before 1-04-99, Maximum Deduction = 30000
• If Loan is taken on or after 1-0499
o If loan is taken for purchase, Maximum Deduction =150000
o If Loan is taken for Repair, Renewal or Reconstruction, Maximum
Deduction = 30000
o If Loan is taken for construction and construction is completed within 3 years
from the date of Borrowing, Maximum Deduction = 150000 but if construction
is not completed within 3 years, Maximum deduction is 30000.
PREPARED BY: BHUMIT SHAH Page 76
3. Income from Deemed to be Let-out Property.
When assesses has more than one house for own Residence, one house is to be
considered as a Self Occupied and remaining house considered as deemed to be Let out
property.
Particular
Rs. Amount
(Rs.)
Expected rent xxxx
Whichever is Higher > Standard rent
(i) Municipal Value xxx
(ii) fair rent xxx
Gross Annual Value xxxx
Less: Municipal tax paid by Owner xxx
Net Annual Value xxxx
Less: Deduction under section 24
(i) standard Deduction Xxx
[ 30% of NAV ]
(ii) interest on Housing Loan Xxx
[ No Limit ]
Income from Deemed to be Let Out Property. xxxx
PREPARED BY: BHUMIT SHAH Page 77
4. Statement of income from partly let-out and partly self occupied property.
( one house is self occupied for few month and let-out for remaining period )
Particular
Rs Amount
(Rs)
Step 1
Expected Rent xxxx
Whichever is Higher > Standard rent
(i) Municipal value xxx
(ii) fair rent xxx xxxx
Step-2
Actual rent Received xxxx
Rent receivable excluding SOP xxx
Less: (i) Unrealized rent xxx
(ii) Vacancy Loss xxx
Note: 1 If Step-2 > Step-1
Gross Annual value is Step-2
Note: 2 If step-2 < Step-1
Step No 3 is applicable.
Step-3
Expected rent xxx
Less: Vacancy Loss xxx xxx
Gross Annual Value xxxx
Less: Municipal Tax paid by Owner xxx
Net Annual Value xxxx
Less: Deduction under section 24
(i) Standard Deduction xxx
[ 30% of NAV ]
(ii) Interest on Housing Loan xxx
[ No Limit ]
Income from Partly LOP and Partly SOP xxxx
PREPARED BY: BHUMIT SHAH Page 78
Interest on loan:
Interest for pre-Construction Period:
[A] Interest for Current year:
• If Loan is repaid in Last year Current year Interest is not applicable.
• If Loan is repaid in next year full current year interest is Applicable.
• If Loan is repaid in current previous year Interest for current year from 1-04-2008 to
date of repayment.
• If Loan is still outstanding full current year Interest is Applicable.
[B] Interest for Pre-Construction period:
When date of Borrowing, Amount of Borrowing, Rate of Interest and loan is taken for
construction of House.
• Date of Borrowing
• Date of Repayment
• Date of completion of construction
• 31-03 Prior
Pre-Construction period:
Date of Borrowing to Date of Repayment
Or
31-03 Prior
[Whichever is earlier]
Note: Deduction will be available in 5 year from the previous year in which Construction is
completed.
PREPARED BY: BHUMIT SHAH Page 79
EXAMPLE:
During the financial year 2011-2012 Mrs. Dalmia received sum of Rs. 25000 per month by
letting out the Premises at 29, Charotar Society, Office: Old Padra road Baroda.
CALCULATION OF INCOME FROM HOUSE PROPERTY:
Particular Amount (Rs.)
Rent received @25000 p.m 300000
Less: House Tax 4808
Annual Value 295192
Less: Deduction under section 24 88558
Net Taxable Property 206634
EXAMPLE:
Vishnu has two houses both of which are Self occupied Property. The particulars of the
house for the P.Y 2010-11 are as under.
Particular House-I House-II
M.V Per Annum 400000 600000
F.R Per Annum 300000 700000
S.R Per Annum 360000 740000
Date of Completion 31-03-05 31-03-08
Municipal tax paid 10% 9%
Interest on borrowed money 175000 250000
Compute Vishnu’s income from House Property for A.Y 2011-12 and suggest which house
should be opted by Vishnu to be assessed as SOP so that his tax liability is minimum.
PREPARED BY: BHUMIT SHAH Page 80
ANSWER:
Computation of Income from House Property of Vishnu for the A.Y 2011-12
Let us first calculate the income from each house property assuming that they are deemed
to be let out.
Particular House-I House-II
Step-1. M.V or F.R Whichever is Higher 400000 700000
Step-2. I or S.R Whichever is Lower 360000 700000
Step-3. II is GAV 360000 700000
Less: Municipal Tax Paid by Owner 40000 54000
Net Annual Value 320000 646000
Deduction:
30% of NAV 96000 193800
Int. on Borrowed Money 175000 250000
Income from House Property 49000 202200
Option-I (House-I is SOP and House-II is DLOP):
If House-I is opted as SOP, the income from House Property should be:
Particulars Amounts in Rs.
House-I SOP (Loss representing interest on
borrowed capital restricted to 150000)
(150000)
House-II DLOP 202200
Income from House Property 52200
Option-II (House-I is DLOP and House-II is SOP):
If House-II is opted as SOP, the income from House Property should be:
Particulars Amount in Rs.
House-I DLOP 49000
House-II SOP (Loss representing interest on
borrowed capital restricted to 150000)
(150000)
Income from House Property 101000
PREPARED BY: BHUMIT SHAH Page 81
Since Option-II is more beneficial, Vishnu should opt to treat House-II as a SOP and
House-I is DLOP. His Loss for house property would be Rs. 101000 for the A.Y 2011-12.
This Loss can be carried to the next year for set off against income from house property
for that year.
EXAMPLE:
Rajesh own a house in Hyderabad during the P.Y 2010-11. 3/4th portion of the property is
SOP and 1/4th portion was LOP for residential purpose at a rent of Rs. 12000 p.m. the
tenant vacated the property on February 28th, 2011. The property was vacant during
March, 2011 could not be realized in spite of the owner effort. All the condition prescribed
under the rule 4 is satisfied.
Municipal value of the property is Rs. 400000 p.a. Fair rent is Rs. 440000 p.a. and
standard rent is Rs. 480000. He paid Municipal tax @ 10% of M.V. during the year. A loan
of Rs. 3000000 was taken by him during the year 2005 for acquiring the property. Interest
on loan paid during the previous year 2010-111 was Rs. 148000. Compute Rajesh’s
income from House property for the A.Y 2011-12.
ANSWER:
There are two units of the house. Unit-1 with 3/4th area is used by Rajesh for SOP
throughout the year and no benefit is derived from that unit. Hence it will be treated as
SOP and its value is nil. Unit-2 with 1/4th area is LOP during the previous year and its
annual value has to be determined as per section 23 (1).
PREPARED BY: BHUMIT SHAH Page 82
Computation of Income from house property of Mr. Rajesh for the A.Y 2011-12
Particular Unit-1 (3/4th) SOP Amount in Rs.
Net annual Value NIL
Less: Deduction u/s 24
3/4th of 148000 111000
Income from Unit-1 (111000)
Particular Unit-II (1/4th) LOP Amount in Rs.
Step-1 M.V and F.R Whichever is higher 110000
Step-2 1 and S.R Whichever is Lower 110000
Step-3 Actual rent received
(12000 x 9)
108000
GAV: (Step-3 is lower than Step-2) 108000
Less: Municipal tax paid by owner
1/4th of (10% 400000)
10000
Net Annual Value 98000
Less: Deduction
30% of the NAV 29400
Interest on Loan 3700
Income from Unit-2 31600
PREPARED BY: BHUMIT SHAH Page 83
WORKING CAPITAL:
INTRODUCTION:
The term working capital is commonly used for the capital required for day-to-day working
in a business concern, such as for purchasing raw material, for meeting day-to-day
expenditure on salaries, wages, rents rates, advertising etc. But there is much
disagreement among various financial authorities (Financiers, accountants, businessmen
and economists) as to the exact meaning of the term working capital.
DEFINITION AND CLASSIFICATION OF WORKING CAPITAL:
Working capital refers to the circulating capital required to meet the day to day operations
of a business firm. Working capital may be defined by various authors as follows:
• According to Weston & Brigham - “Working capital refers to a firm’s investment in
short term assets, such as cash amounts receivables, inventories etc.
• Working capital means current assets. —Mead, Baker and Malott
• “The sum of the current assets is the working capital of the business” —J.S.Mill
Working capital is defined as “the excess of current assets over current liabilities and
provisions”. But as per accounting terminology, it is difference between the inflow and
outflow of funds. In the Annual Survey of Industries (1961), working capital is defined to
include “Stocks of materials, fuels, semi-finished goods including work-in-progress and
finished goods and by-products; cash in hand and bank and the algebraic sum of sundry
creditors as represented by (a) outstanding factory payments e.g. rent, wages, interest and
dividend; b) purchase of goods and services; c) short-term loans and advances and
sundry debtors comprising amounts due to the factory on account of sale of goods and
services and advances towards tax payments”.
PREPARED BY: BHUMIT SHAH Page 84
The term “working capital” is often referred to “circulating capital” which is frequently used
to denote those assets which are changed with relative speed from one form to another
i.e., starting from cash, changing to raw materials, converting into work-in-progress and
finished products, sale of finished products and ending with realization of cash from
debtors.
DETERMINANTS OF WORKING CAPITAL:
The factors influencing the working capital decisions of a firm may be classified as two
groups, such as internal factors and external factors.
The internal factors includes, nature of business size of business, firm’s product
policy, credit policy, dividend policy, and access to money and capital markets, growth and
expansion of business etc.
The external factors include business fluctuations, changes in the technology,
infrastructural facilities, import policy and the taxation policy etc. These factors are
discussed in brief in the following lines.
I. Internal Factors:
1. Nature and size of the business:
The working capital requirements of a firm are basically influenced by the nature and size
of the business. Size may be measured in terms of the scale of operations. A firm with
larger scale of operations will need more working capital than a small firm. Similarly, the
nature of the business - influence the working capital decisions. Trading and financial firms
have less investment in fixed assets. But require a large sum of money to be invested in
working capital. Retail stores, business units require larger amount of working capital,
whereas, public utilities need less working capital and more funds to invest in fixed assets.
PREPARED BY: BHUMIT SHAH Page 85
2. Firm’s production policy:
The firm’s production policy (manufacturing cycle) is an important factor to decide the
working capital requirement of a firm. The production cycle starts with the purchase and
use of raw material and completes with the production of finished goods. On the other
hand production policy is uniform production policy or seasonal production policy etc., also
influences the working capital decisions. Larger the manufacturing cycle and uniform
production policy – larger will be the requirement of working capital. The working capital
requirement will be higher with varying production schedules in accordance with the
changing demand.
3. Firm’s credit policy:
The credit policy of a firm influences credit policy of working capital. A firm following liberal
credit policy to all customers requires funds. On the other hand, the firm adopting strict
credit policy and grant credit facilities to few potential customers will require less amount of
working capital.
4. Availability of credit:
The working capital requirements of a firm are also affected by credit terms granted by its
suppliers – i.e. creditors. A firm will need less working capital if liberal credit terms are
available to it. Similarly, the availability of credit from banks also influences the working
capital needs of the firm. A firm, which can get bank credit easily on favourable conditions,
will be operated with less working capital than a firm without such a facility.
5. Growth and expansion of business:
Working capital requirement of a business firm tend to increase in correspondence with
growth in sales volume and fixed assets. A growing firm may need funds to invest in fixed
assets in order to sustain its growing production and sales. This will, in turn, increase
investment in current assets to support increased scale of operations. Thus, a growing firm
needs additional funds continuously.
PREPARED BY: BHUMIT SHAH Page 86
6. Profit margin and dividend policy:
The magnitude of working capital in a firm is dependent upon its profit margin and dividend
policy. A high net profit margin contributes towards the working capital pool. To the extent
the net profit has been earned in cash, it becomes a source of working capital. This
depends upon the dividend policy of the firm. Distribution of high proportion of profits in the
form of cash dividends results in a drain on cash resources and thus reduces company’s
working capital to that extent. The working capital position of the firm is strengthened if the
management follows conservative dividend policy and vice versa.
7. Operating efficiency of the firm:
Operating efficiency means the optimum utilization of a firm’s resources at minimum cost.
If a firm successfully controls operating cost, it will be able to improve net profit margin
which, will, in turn, release greater funds for working capital purposes.
8. Coordinating activities in firm:
The working capital requirements of a firm are depend upon the co-ordination between
production and distribution activities. The greater and effective the co-ordinations, the
pressure on the working capital will be minimized. In the absence of co-ordination, demand
for working capital is reduced.
II. External Factors:
1. Business fluctuations:
Most firms experience fluctuations in demand for their products and services. These
business variations affect the working capital requirements. When there is an upward
swing in the economy, sales will increase, correspondingly, the firm’s investment in
inventories and book debts will also increase. Under boom, additional investment in fixed
assets may be made by some firms to increase their productive capacity. This act of the
firm will require additional funds. On the other hand when, there is a decline in economy,
sales will come down and consequently the conditions, the firm try to reduce their short-
term borrowings. Similarly the seasonal fluctuations may also affect the requirement of
working capital of a firm.
PREPARED BY: BHUMIT SHAH Page 87
2. Changes in the technology:
The technological changes and developments in the area of production can have
immediate effects on the need for working capital. If the firm wish to install a new machine
in the place of old system, the new system can utilize less expensive raw materials, the
inventory needs may be reduced there by working capital needs.
3. Import policy:
Import policy of the Government may also effect the levels of working capital of a firm
since they have to arrange funds for importing goods at specified times.
4. Infrastructural facilities:
The firms may require additional funds to maintain the levels of inventory and other current
assets, when there are good infrastructural facilities in the company like transportation and
communications
.
5. Taxation policy:
The tax policies of the Government will influence the working capital decisions. If the
Government follows regressive taxation policy, i.e. imposing heavy tax burdens on
business firms, they are left with very little profits for distribution and retention purpose.
Consequently the firm has to borrow additional funds to meet their increased working
capital needs. When there is a liberalized tax policy, the pressure on working capital
requirement is minimized.
Thus the working capital requirements of a firm are influenced by the internal and
external factors.
PREPARED BY: BHUMIT SHAH Page 88
STATEMENT OF WORKING CAPITAL:
PARTICULAR
Rs Amt.
(In Lacs)
CURRENT ASSETS:
Stock of Raw Material:
(For month’s consumption)
Xxx
Stock of work-in-progress:
(For month’s consumption)
Xxx
Raw material xx
Wages xx
Overhead xx
Stock of Finished Goods:
(For month’s consumption)
Xxx
Raw material xx
Wages xx
Overhead xx
Debtors:
(For month’s sales)
Xxx
Raw material xx
Wages xx
Overhead xx
Prepaid Expenses Xxx
Cash Xxx
Other Current Assets Xxx
TOTAL CURRENT ASSETS XXX
LESS CURRENT LIABILITIES:
Creditors
(For the purchase of raw material)
xx
Outstanding expenses xx
Bills payable xx
Bank Overdraft xx
TOTAL CURRENT LIABILITIES XXX
NET WORKING CAPITAL XXX
PREPARED BY: BHUMIT SHAH Page 89
STATEMENT SHOWING WORKING CAPITAL:
PARTICULAR 2010-11
(In Lacs)
2009-10
(In Lacs)
CURRENT ASSETS:
Inventories 5105.80 5310.86
Debtors 5688.44 4057.31
Cash and Bank 1787.79 4488.46
Loans and Advances 6379.12 6687.30
TOTAL CURRENT ASSETS 18961.15 20543.93
LESS CURRENT LIABILITIES:
Current Liabilities 2439.83 2064.64
TOTAL WORKING CAPITAL 16521.32 18479.29
NOTES:
INVENTORIES:
PARTICULAR 2010-11
(In Lacs)
2009-10
(In Lacs)
Raw Material 1588.25 1911.66
Work-In-Progress 2396.89 2152.02
Finished Goods 833.96 1120.80
Consumables Stores 286.70 126.39
TOTAL INVENTORY 5105.80 5310.86
2. CURRENT LIABILITIES:
PARTICULAR 2010-11
(In Lacs)
2009-10
(In Lacs)
Due to MSMED Units 0.89 1.89
Others 1584.74 1452.82
Subsidiary Companies NIL NIL
Advance from Customers 351.47 53.92
Others Liabilities 502.74 556.02
TOTAL CURRENT LIABILITIES 2439.83 2064.64
PREPARED BY: BHUMIT SHAH Page 90
Comments on Working Capital:
Raw Material:
The basic raw material required by RL are zinc Dross, Zinc Hydroxide and cobalt ore.
The former is easily available in domestic as well as international market while the later is
being completely imported by the company. Presently, RL procures Zinc Dross from Saan
Scrap Trading Co. ltd., Indian Steel Corporation limited and Rahul Enterprise. As far as
Cobalt Ore is concerned the company procures it from the International market mainly
from its subsidiary rubamin FZC, UAE and Glencode Inds AG. The suppliers of the
company are reliable and the company is dealing them for the past 4 to 5 years.
During F.Y’10 the company maintained holding levels at 1.30 months for imported RM and
1.59 months for indigenously procured RM, which may be considered acceptable. During
F.Y’11, higher sales towards year end resulted into lower inventory levels.
For the year 2011- 12 with increased level of activity and for smooth functioning company
is estimating to maintain holding levels for imported raw material at 1.50 months and for
raw material procured indigenously at about 1.25.
Stock in Process:
The SIP level was at 1.00 months which is considered normal; the same is estimated /
projected to continue at 1.00 month. Considering the stage of manufacturing the average
SIP holding estimated at 1.00 month is considered reasonable and acceptable.
Finished Goods:
Finished goods level was at 0.34 month as on 31. 03. 2011 but for our assessment we has
considered at level of 0.50 month as company is about to open their depots warehouse at
chilli, Baltimore (USA) and Rotterdam. Thus the estimated levels are acceptable.
PREPARED BY: BHUMIT SHAH Page 91
Receivables:
The receivables level has been assumed 2.00 months for export receivables and 2.75
months for domestic receivables. The company proposed to give 2.50 months time to
attract buyers for the same. Higher receivables level has become norm of the business,
which is intended by the unit to stay in competition. In view of these receivables holding
levels has been estimated at 2.00 months in lien with its business trends.
During the year 2011-12 the company has estimated export and domestic receivables at
2.00 months and 2.75 months level respectively which is acceptable in consideration with
past trends.
Sundry Creditors:
As per the past trends, the company gets 0.70 to 0.80 months time to make payment to its
suppliers. Earlier the company was producing RM through usance LC. However, since
2008-09 it has started procuring raw material through sight LCs. It may be mentioned that
approximately 50% of the total raw material requires is imported. Out of the imported RM
portion, 85-90% is proposed to be procured under sight LC. As far as the domestic RM
procurement is concerned the company either has to furnish advance payment or procure
it on cash basis. Hence, the average sundry creditors holding level has been estimated
projected at 0.75 month, which is considered reasonable.
PREPARED BY: BHUMIT SHAH Page 92
SIGNIFICANCE OF ACCONTING POLICY:
Basis of Accounting:
The financial statement has been prepared under the historical cost convention on accrual
basis of accounting and in accordance with Generally Accepted Accounting Principal in
India (GAAP) and the provision of the Companies Act, 1956.
Revenue Recognition:
Revenue is recognized when it is earned and no significant uncertainty exists as to its
realization or collection.
Gross Sales are inclusive of income from Job work and excise duty, net of trade discount
and value added tax. Excise duty is presented as a reduction from Gross Sales in the
Profit & Loss Account.
Fixed Asset:
Fixed asset are stated at cost net of CENVET credit if any after reducing accumulated
depreciation until the date of the Balance Sheet. Direct cost are capitalized until the assets
are ready for use and include financing costs relating to any borrowing attributable to
acquisition. Capital work in progress include the cost of fixed asset that are not yet ready
for the intended use, advances paid to acquire fixed assets and the cost of assets not put
to use before the balance sheet date.
Inventories:
Inventories are valued at cost or net realizable value, whichever is lower. The basis of
determining cost for various categories of inventories is as follows:
PREPARED BY: BHUMIT SHAH Page 93
1 Raw Material At cost on Moving Average Price basis
2 Other Raw Material, Fuel
and Packing Material
At cost on Moving Average Price basis
3 Material in transit Actual Cost
4 Work in Progress At cost on Moving Average Price basis, Cost
include material cost plus appropriate share
of labor and manufacturing overheads
5 Finished Goods At cost on Moving Average Price basis, Cost
include material cost plus appropriate share
of labor and manufacturing overheads and
excise duty
6 Consumables, Store and
spares
At cost on Moving Average Price basis
Investments:
Investments are classified as long term or current in accordance with Accounting Standard
13 on Accounting for Investments. Long term Investments are shown at cost. However,
when there is decline other than temporary in the value of a long term investments the
carrying amounts is reduced to recognize the decline.
Borrowing Cost:
Borrowing cost that is the acquisition, construction or production of qualifying assets is
capitalized as part of such assets. A qualifying asset is an asset that necessarily takes a
substantial period of time to get ready for its intended use.
Foreign Exchange Transaction:
Transaction in foreign currencies is accounted at the prevailing rate of exchange on the
date of the transaction.
Monetary items denomination in foreign currencies is restated at the prevailing rate of
exchange at the balance sheet date. All gain and Loss arising out of fluctuation in
exchange rates are accounted for in the Profit and Loss Accounts.
PREPARED BY: BHUMIT SHAH Page 94
Employee Benefit:
Short term employee benefit (which are payable within twelve month) are measured at
cost.
Long term employee benefit (After the end of Twelve month) and post employment benefit
(payable after the completion of the employment) are measured on a discounted basis by
the Projected Unit Credit Method on the basis of annual third party actuarial valuation.
Contribution to the Provident Fund are made in accordance with the rule of the
government Provident fund as required by statutes
Taxes on Income:
Income taxes are accounted for in accordance with Accounting Standard AS-22 on
Accounting for taxes on income. Income taxes comprise both current and deferred tax
.
Current taxes is measured at the amount expected to be paid to/recovered from the
revenue authorities, using applicable tax rates and laws.
The carrying amount of deferred tax assets at each balance sheet date is reduced to the
extent that it is no longer reasonably certain that sufficient future taxable income will be
available against which the deferred tax assets can be realized.
Provision and contingent Liabilities:
The company recognizes a provision when there is a present obligation as a result of a
past event that probably requires an outflow of resources and a reliable estimate can be
made of the amount of the obligation. A disclosure for a contingent liability is made when
there is a possible obligation or a present obligation that may but probably will not require
an outflow of resources. Where there is possible obligation or a present obligation that the
likelihood of outflow of resources is remote, no provision or disclosure is made.
Government Grant:
Central and State Subsidy and Laboratory Subsidy received for setting up unit in the
specified backward area is credited to Capital Reserve Account.
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Prior Period Adjustments:
All identifiable items of income and expenditure pertaining to prior period are accounted
through “Prior Period Adjustments Account”.
Impairment of Assets:
The company assesses at each Balance Sheet date whether there is any indication that
an assets may be impaired. If any such indication exists, the company estimates the
recoverable amount of the assets. If such recoverable amount of the assets or the
recoverable amount of cash generating unit to which the asset belongs is less than its
carrying amount, the carrying amount is reduced to its recoverable amount. The reduction
is treated as an impairment loss and is recognized in the Profit and Loss Account. If at the
Balance Sheet date, there is an indication that if a previously assessed impairment loss no
longer exists, the recoverable amounts are reassessed and the assets is reflected at the
recoverable amount.
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RECOMMENDATIONS / SUGGETIONS:
The Major expenses of the company were manufacturing experiences which includes Consumption of raw material, freight and duties and repairs and Maintenance. Out of this costs Repair and Maintenance is one of the controllable cost which can be reduced by the company. By proper utilization of its Plant and Machineries it can not only reduce its cost but also avoid shutdowns.
Many types of machinery were put down as an idle. They can be utilized by giving it to other companies on rent or other consideration. By this way company can earn some more amount of profit.
• Should try to reduce raw materials and finished goods period by reducing inventory level. Should try having to collect debtors quickly.
• Control the inventory level. It should increase CA and decreases the level of CL, because the quick ratio taking too much time. Organization should examine the quick ratio because it is more than 1:1.
• Should concentrate more on inventory or we can say that stock, because in the CA, inventory's demand has higher position.
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CONCLUSION:
� It was great experience for me to have training at the company like RUBAMIN
LIMITED. I learned those skills, which are needed in any management student.
� Management of RUBAMIN LIMITED is good and having capable employees to make it
number one Cobalt and Zinc oxide manufacturing company in India.
� All the departments are doing their work in a professional manner and all the
employees are of cooperative in nature. I have not faced any difficulties in getting any
data. They are always ready to help you.
� At this stage, now I am having clear picture of what are the activities of the different
departments.
� During my training period I have visited the Different Departments of the Company but
the Survey Completed on Finance Department.
� Lastly, it was the great experience for me. I learned many things during this training
period, which I might not learn if I was not at RUBAMIN LIMITED.
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WEBSITE:
www.rubamin.com
OTHER SOURCES:
• Company Broacher
• Annual Reports
• Past Reports
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