Date post: | 01-Jun-2018 |
Category: |
Documents |
Upload: | jithu-jose-parackal |
View: | 216 times |
Download: | 0 times |
of 98
8/9/2019 Thejo Engg-Final OS1
1/98
AN ANALYSIS ON CASH MANAGEMENT OF THEJOENGINEERING LTD
ORGANIZATION STUDY
Submitted to
MAHATMA GANDHI UNIVERSITY, KOTTAYAM
In partial fulfilment of the requirement for the award of
MASTERS DEGREE IN BUSINESS ADMINISTRATION
(2013-2015)
By
REMYA RAJEEV
Register Number: 50738
RAJAGIRI COLLEGE OF SOCIAL SCIENCES
RAJAGIRI P O
KOCHI - 683104
8/9/2019 Thejo Engg-Final OS1
2/98
2 | P a g e
DECLARATION
I, Remya Rajeev, hereby declare that this summer project report titled An Analysis on
Cash management of Thejo Engineering Limitedis prepared in partial fulfillment of the
requirement for the award of Masters degree in business administration during the academic
year 2013-15 by Rajagiri College of Social Sciences, under the guidance of, Dr. Mathew
Joseph (Rajagiri College of Social Sciences).
I also declare that this report has not been submitted in full or part thereof, to any university
or institutions for the award of any degree or diploma.
Kalamassery Remya Rajeev
21-07-2014
8/9/2019 Thejo Engg-Final OS1
3/98
3 | P a g e
ACKNOWLEDGMENT
I express my heartfelt thanks to the Management of THEJO ENGG LTD for giving me agolden opportunity to undergo this organization study & internship in their organization.
I owe my sincere thanks to the head of my institution, Dr. Joseph I. Injodey, for giving me
an opportunity to undergo this organization study.
I consider this as a privilege to express my sincere gratitude to Dr. Mathew Joseph, faculty
guide, Department of Management Studies for his valuable support and suggestion and
guidance during the course of the project.
In preparing this report, I want to give special acknowledgement to Mr. Sanjaya Kumar,
Senior Manager HR, Project Guide, Thejo Engineering Ltd. for his guidance to carry out my
project work and providing me intellectual guidance and assistance.
I thank Almighty for his blessings in completing this project work successfully.
Last but not the least I extend my sincere thanks to my parents, friends and all well-wishers
who have been the back bone in completing this project work in a successful manner.
8/9/2019 Thejo Engg-Final OS1
4/98
4 | P a g e
LIST OF CONTENTS
CHAPTER PARTICULARS PG NO
EXECUTIVE SUMMARY 8
SECTION I PROFILE STUDY OF THE ORGANIZATION 9
1. INDUSTRY PROFILE 10
2. INCORPORATION AND HISTORY OF THE
ORGANIZATION
11
3. VISION/MISSION STATEMENTS 12
4. CORPORATE OFFICE/HEAD QUARTERS,
NUMBER OF UNITS
13
5. CAPITAL STRUCTURE, INITIAL INVESTMENTS,
SHARES
14
6. BUSINESS TURN OVER, PROFIT/LOSS DETAILS,
MARKET SHARE
16
7. ORGANIZATIONAL STRUCTURE/HIERARCHY,
EMPLOYEE STRENGTH
17
8. PRODUCTS/SERVICES 18
9. PRODUCTION PROCESS/BUSINESS & SERVICE
OPERATIONS
21
10. CUSTOMERS/CLIENTS 22
11. FUNCTIONAL DEPARTMENTS, THEIR
ORGANIZATION AND ACTIVITIES
27
8/9/2019 Thejo Engg-Final OS1
5/98
5 | P a g e
12. INNOVATIVE MANAGEMENT PRACTICES 43
13. FUTURE PLANS & BUSINESS
STRATEGY/EXPANSION/DIVERSIFICATION
43
14. SWOT ANALYSIS 45
SECTION II PROBLEM CENTERED STUDY 48
CHAPTER 1. RESEARCH METHODOLOGY 49
CHAPTER 2. DATA ANALYSIS AND PRESENTATION 60
CHAPTER 3. FINDINGS AND CONCLUSION 95
BIBLIOGRAPHY 97
8/9/2019 Thejo Engg-Final OS1
6/98
6 | P a g e
LIST OF TABLES
TABLE NO: TABLE NAME PAGE
NO:
TABLE 1 CAPITAL STRUCTURE 14
TABLE 2 SHAREHOLDING PATTERN 14
TABLE 3 SHAREHOLDING OF PERSONS BELONGING TO THE
CATEGORY "PUBLIC" AND HOLDING MORE THAN
1% OF THE TOTAL NUMBER OF SHARES
15
TABLE 4 TURNOVER OF THE COMPANY 16
TABLE 5 CASHFLOW STATEMENT 61
TABLE 6 CURRENT RATIO 63
TABLE 7 QUICK RATIO 65
TABLE 8 NET WORKING CAPITAL RATIO 66
TABLE 9 INVENTORY TURNOVER RATIO 68
TABLE 10 DEBTORS TURNOVER RATIO 70
TABLE 11 CREDITORS TURNOVER RATIO 71
TABLE 12 FIXED ASSETS TURNOVER RATIO 72
TABLE 13 TOTAL ASSETS TURNOVER RATIO 74
TABLE 14 CAPITAL TURNOVER RATIO 75
TABLE 15 DEBT-EQUITY RATIO 77
TABLE 16 OWNERS FUND TO TOTAL FUND 79
TABLE 17 INTEREST COVERAGE RATIO 80
TABLE 18 EQUITY DIVIDEND COVERAGE RATIO 82
TABLE 19 NET PROFIT RATIO 84TABLE 20 OPERATING PROFIT RATIO 85
TABLE 21 RETURN ON ASSETS 86
TABLE 22 RETURN ON CAPITAL EMPLOYED 88
TABLE 23 RETURN ON NETWORTH 89
TABLE 24 EARNINGS PER SHARE 91
TABLE 25 DIVIDEND PER SHARE 93
8/9/2019 Thejo Engg-Final OS1
7/98
7 | P a g e
LIST OF GRAPHS
TABLE NO: TABLE NAME PAGE
NO:
GRAPH 1 CURRENT RATIO 63
GRAPH 2 QUICK RATIO 65GRAPH 3 NET WORKING CAPITAL RATIO 66
GRAPH 4 INVENTORY TURNOVER RATIO 68
GRAPH 5 DEBTORS TURNOVER RATIO 70
GRAPH 6 CREDITORS TURNOVER RATIO 71
GRAPH 7 FIXED ASSETS TURNOVER RATIO 72
GRAPH 8 TOTAL ASSETS TURNOVER RATIO 74
GRAPH 9 CAPITAL TURNOVER RATIO 75
GRAPH 10 DEBT-EQUITY RATIO 77
GRAPH 11 OWNERS FUND TO TOTAL FUND 79
GRAPH 12 INTEREST COVERAGE RATIO 80GRAPH 13 EQUITY DIVIDEND COVERAGE RATIO 82
GRAPH 14 NET PROFIT RATIO 84
GRAPH 15 OPERATING PROFIT RATIO 85
GRAPH 16 RETURN ON ASSETS 86
GRAPH 17 RETURN ON INVESTMENTS 88
GRAPH 18 RETURN ON NETWORTH 89
GRAPH 19 EARNINGS PER SHARE 91
GRAPH 20 DIVIDEND PER SHARE 93
LIST OF CHARTS
TABLE NO: TABLE NAME PAGE
NO:
CHART 1 ORGANIZATIONAL STRUCTURE OF THE
COMPANY
17
CHART 2 PRODUCTION PROCESS 21
CHART 3 FINANCE DEPARTMENT 27
CHART 4 MATERIALS & STORES DEPARTMENT 28
CHART 5 COD DEPARTMENT 30
CHART 6 EXECUTION & MONITORING DEPARTMENT 31CHART 7 MARKETING DEPARTMENT 34
CHART 8 SALES DEPARTMENT 34
CHART 9 STRUCTURE OF FACTORY 39
CHART 10 TOTAL MAINTENANCE CENTER 41
8/9/2019 Thejo Engg-Final OS1
8/98
8 | P a g e
EXECUTIVE SUMMARY
Bulk material handling is an engineering field that is centered on the design of equipment
used for the handling of dry materials such as ores, coal, cereals, wood chips, sand, gravel
and stone in loose bulk form. It can also relate to the handling of mixed wastes. Thejo
Engineering Ltd is one of Indias major solution providers in bulk material handling,
conveyor systems, mineral processing and corrosion protection sectors. The company
pioneered the cold vulcanizing process in India and over the years has registered a steady and
systematic growth. It is one of the few organizations engaged in the manufacturing, sales and
servicing of specialized engineering products, catering to various segments of bulk materials
handling industry
The study is conducted for Thejo Engineering Ltd on its cash management system. The
objective of the study is to find out the liquidity position of the concern through ratio
analysis, to understand the growth of the company in terms of cash flow statement and make
necessary suggestions to improve the cash position of the company. The research design
adopted for the project is analytical in nature where the facts and information used in the
study are already available and these are analyzed to make critical evaluation of the
performance. The primary data for the study is collected through personal interviews and
discussion with Deputy Manager (Material Planning) and the secondary data is collected
from the annual reports, company website and other books and journals related to the study.
The time period taken for the study has been four years 2009-2013. The tools used in the
analysis are cash flow statement for the study period, ratio analysis and trend analysis. From
the above methods of analysis it is found that the cash management of Thejo Engineering has
been working well within the norms. The major limitation of the study is the lack of adequate
data due to confidentiality of information.
8/9/2019 Thejo Engg-Final OS1
9/98
9 | P a g e
SECTION-I
PROFILE STUDY OF THEORGANIZATION
8/9/2019 Thejo Engg-Final OS1
10/98
10 | P a g e
INDUSTRY PROFILE
Bulk material handlingis anengineering field that is centered on the design of equipment
used for the handling of dry materials such as ores, coal,cereals,wood chips, sand, gravel
and stone in loose bulk form. It can also relate to the handling of mixedwastes.
Bulk material handling systems are typically composed of stationary machinery such
asconveyor belts,screw conveyors,stackers,reclaimers,bucket elevators, truck
dumpers,railcar dumpers or wagon tipplers,ship loaders,hoppers and diverters and various
mobile equipment such asloaders, various shuttles,[
combined with storage facilities such
as stockyards, storage orstockpiles. Advanced bulk material handling systems feature
integrated bulk storage, conveying, and discharge.
The purpose of a bulk material handling facility may be to transport material from one of
several locations (i.e. a source) to an ultimate destination or to process material such as ore in
concentrating andsmelting or handling materials for manufacturing such as logs, wood chips
and sawdust at sawmills and paper mills. Other industries using bulk materials handling
include flour mills and coal fired utility boilers.
Providing storage and inventory control and possibly material blending is usually part of a
bulk material handling system.
.
http://en.wikipedia.org/wiki/Engineeringhttp://en.wikipedia.org/wiki/Cerealhttp://en.wikipedia.org/wiki/Wastehttp://en.wikipedia.org/wiki/Conveyor_belthttp://en.wikipedia.org/wiki/Screw_conveyorhttp://en.wikipedia.org/wiki/Stackerhttp://en.wikipedia.org/wiki/Reclaimerhttp://en.wikipedia.org/wiki/Bucket_elevatorhttp://en.wikipedia.org/wiki/Rotary_car_dumperhttp://en.wikipedia.org/wiki/Shiploaderhttp://en.wikipedia.org/wiki/Chute_(gravity)http://en.wikipedia.org/wiki/Loader_(equipment)http://en.wikipedia.org/wiki/Stockpilehttp://en.wikipedia.org/wiki/Smeltinghttp://en.wikipedia.org/wiki/Smeltinghttp://en.wikipedia.org/wiki/Stockpilehttp://en.wikipedia.org/wiki/Loader_(equipment)http://en.wikipedia.org/wiki/Chute_(gravity)http://en.wikipedia.org/wiki/Shiploaderhttp://en.wikipedia.org/wiki/Rotary_car_dumperhttp://en.wikipedia.org/wiki/Bucket_elevatorhttp://en.wikipedia.org/wiki/Reclaimerhttp://en.wikipedia.org/wiki/Stackerhttp://en.wikipedia.org/wiki/Screw_conveyorhttp://en.wikipedia.org/wiki/Conveyor_belthttp://en.wikipedia.org/wiki/Wastehttp://en.wikipedia.org/wiki/Cerealhttp://en.wikipedia.org/wiki/Engineering8/9/2019 Thejo Engg-Final OS1
11/98
11 | P a g e
INCORPORATION AND HISTORY OF THEJO ENGG LTD
ABOUT THEJO ENGG LTD
Thejo Engineering Ltd. was established in the year 1974, with the objective of being the
torchbearer for the maintenance of Belt Conveyor systems. Thejo pioneered the cold
vulcanizing process in India and over the years have registered a steady and systematic
growth. It is one of the few organizations engaged in the manufacturing, sales and servicing
of specialized engineered products, catering to various segments of bulk materials handling
industry. The organization was founded by Mr.K.J.Joseph and Mr. Thomas John as a
partnership concern in the year 1974, and was subsequently converted to a private limited
company in the year 1986. In 2008, the company was converted to public limited Co and
subsequently in 2012 company was listed in NSE EMERGE platform. Building on the
founders vision and bringing a touch of professionalism to the company isMr. V.A George,
the CEO and President of Thejo Engineering Through commitment to quality and dedicated
service, Thejo has established a coveted clientele which includes all leading Steel Plants,
Mines, Cement & Fertilizer Industries, Thermal Power Stations, and Shipping Ports.
Thejo has grown today into Indias foremost solution provider in bulk material handling,
conveyor systems, mineral processing and corrosion protection sectors. Thejoscommitment
to customers, dedication to deliverables and consistent control over quality has seen the
company grow surely and steadily into a frontrunner in the field, with a market share of over
85percent.
The companys equity shareis listed in new SME platform EMERGE of theNSE.Thejo is
the first SME company to be listed in the EMERGE platform. On February 29Th2012,
Thejo has been awarded a Rating of SE1A by NSIC-CRISIL. CRISIL Research has assigned
a CRISIL SME IER fundamental grade of 'SME 5/5' to Thejo Engineering Ltd (Thejo). The
grade indicates that the company's fundamentals are 'excellent' relative to other SMEs in
India. The company is certified with ISO 9001.Dedicated man power is the key success
behind the company.
8/9/2019 Thejo Engg-Final OS1
12/98
8/9/2019 Thejo Engg-Final OS1
13/98
13 | P a g e
CORPORATE OFFICE/HEAD QUARTERS, NUMBER OF
UNITS
There are four manufacturing units in Chennai and one at Jubail, Saudi Arabia and Zonal &
Branch offices spreading across India.
CORPORATE OFFICE
#41, VDS HOUSE,CATHEDRAL ROAD,CHENNAI
ZONAL OFFICES
1.
EAST ZONE
2.
SOUTH-EAST ZONE
3.
CENTRAL ZONE
4.
SOUTH ZONE
ASSOCIATES
1.
Vadodara(Gujrat)
2. Varanasi(UP)
3. Vasco(Goa)
4. DuPont(USA)
5. African Relining Services-Ghana
6. Losugen-Australia
BRANCHES
1.
Tata Nagar
2. Dhanbad
3. Talcher
4. Shakthi Nagar
5. Nagpur
6. Delhi
7. Korba
8. Chennai
9. Vizag
10.
Ramagundam11.Bellary
8/9/2019 Thejo Engg-Final OS1
14/98
14 | P a g e
CAPITAL STRUCTURE, INITIAL INVESTMENTS, SHARES
BUSINESS TURN OVER, PROFIT/LOSS DETAILS,
MARKET SHARE
CAPITAL STRUCTURE
From
Year
To
Year
Class Of
Share
Authorized
Capital
(Crores)
Issued
Capital
(Crores)
Paid Up
Shares
(Nos)
Paid Up
Face
Value
Paid Up
Capital
(Crores)
2012 2013 Equity Share 2.00 1.72 1716776 10 1.72
2011 2012 Equity Share 2.00 1.18 1184740 10 1.18
TABLE:1Source: Annual reports for the years 2011-12 ,2012-13
SHARE HOLDING PATTERN
The latest three shareholding pattern for the company under two broad categories (Promoter
& Non Promoters)
Share Holding Pattern as on : 31/03/2013
Face Value 10
No. Of Shares % Holding
PROMOTER'S HOLDING
Foreign Promoters 0.00 0.00
Indian Promoters 979920 57.08
Sub Total 979920 57.08
NON PROMOTER'S HOLDING
Institutional Investors
Banks Fin. Inst. and Insurance 288436 16.80
Sub Total 288436 16.80
Other Investors
Private Corporate Bodies 26700 1.56
NRI's/OCB's/Foreign Others 900 0.05
8/9/2019 Thejo Engg-Final OS1
15/98
15 | P a g e
Others 76500 4.46
Sub Total 104100 6.06
General Public 344320 20.06
GRAND TOTAL 1716776.0000 100.00
TABLE: 2
STATEMENT SHOWING SHAREHOLDING OF PERSONS BELONGING TO THE
CATEGORY "PUBLIC" AND HOLDING MORE THAN 1% OF THE TOTAL
NUMBER OF SHARES
Source: www.nseindia.com
Sr.
NoName of the shareholder
Number of
shares held
Shares as a percentage of total number of
shares {i.e., Grand Total (A)+(B)+(C)
indicated in Statement at Para (I)(a) above}
1
Sidbi Trustee Company
Ltd A/C India
Opportunities Fund
317072 9.23
2Emerging India Growth
Fund Cvcf V248400 7.23
3 S P George 124000 3.61
4 Anand T Pethe 62420 1.82
5 Lukose O J 62080 1.81
6 George V A 50000 1.46
7 Idbi Cap MktServ Ltd 225000 6.55
8 Jose Kozhipat 43140 1.26
9 N R Gold Pvt Ltd 37800 1.10
Total 1169912 34.07
TABLE: 3
8/9/2019 Thejo Engg-Final OS1
16/98
8/9/2019 Thejo Engg-Final OS1
17/98
17 | P a g e
ORGANISATIONAL STRUCTURE THEJO ENGINEERING
LIMITED
CHART: 1
BOARD OF
DIRECTORSM.D
DIRECTOR, MARKETING
DGM-MKTNG
CORROSIONPROTECTION
DY- MANAGER
TRANSFER POINTSOLNS
DY MANAGER
WEAR &ABRASION
PROTECTION
SR. ENGG
CONVEYOR CARE
DY MANAGER
DESIGN
V.P
BUSINESS DIVZONE
HEAD,COD
FC-F&A
GM,TMC
DGM, HR&AD
MN
HEAD,
MATERIALS
DIRECTOR
,SALES
SALES &
SERVICES
ZM-CENTRAL
ZM-EAST
ZM-SOUTH
ZM-SOUTHEAST
HEAD. EMD
GM-
OPERATIONS(
8/9/2019 Thejo Engg-Final OS1
18/98
18 | P a g e
PRODUCTS/SERVICES
MAJOR PRODUCTS
1. CONVEYOR CARE
Vulcanizing equipments
Hydraulic machine
Pressure bay machine
9. TRANSFER POINT SOLUTION
Belt cleaners
Titan- heavy duty primary secondary and internal belt scrappers Belt scrappers
Spillage control
FLEXI SEALS
Segmented skirt board sealing system
Skirt rubbers
Impact cushion cradles
HERCULES
Rubber with UHMWPE
Belt tracking systems
SURRACK
1.
Carrying side trackers
2.
Return side trackers
2.
DUST CONTROLDry forging dust suppression for confined space
Dry forging dust suppression for open space
Dusgon-dust suppression of stock piles, haul roads and wagons.
Changing the properties of dusting materials
Formatting a proactive layer over the layer
8/9/2019 Thejo Engg-Final OS1
19/98
19 | P a g e
3. FLOW ENHANCEMENT
G forceair canons
Elastometer free valve construction
300,000 firing guarantee
4. ABRASION& WEAR PROTECTION
Thor-mill liners
Rubber
Alloy steel cast cap
RHINO- liner plates and panels
Rubber
Ceramic
Alloy steel casting
MATROX- Roaching
UHMWPE
TWISTER- cyclone spares
TEIWAR-sheeting
CERALINE-sheeting
5. FILTRATION SPARES
HIPO-diaphragms
Rubber
Larox
Customized
Seals, scrapers, pinch valve sleeves, hose and feed colles
Filter plate rollers
Floatation spares
6. SLURRY HANDLING
ANAKONDA-slurry hose
Rubber with fabric and steel wire reinforcement
Vacuum and gravity application
Customized design
End connectors
8/9/2019 Thejo Engg-Final OS1
20/98
8/9/2019 Thejo Engg-Final OS1
21/98
21 | P a g e
PRODUCTION PROCESS
CHART: 2
Production planning Designing Raw material stores
Mixing
(Banburry)
Technical
(Quality check of batches, Stage-I)
Pre-form(Mill)
Warming&
Quality check Stage -II
1. Calendering
2. Extruder
3. Rotocure
(Hydraulic press)
Trimming
Finished Goods ,Quality check Stage -III &
Client inspection
Dispatch to client site or
factory
Product installation
byThejo Engineers
Inspection
8/9/2019 Thejo Engg-Final OS1
22/98
22 | P a g e
CUSTOMERS/CLIENT
LIST OF MAJOR CLIENTS-IN INDIA
STEEL PLANTS
Bokaro steel plant
Bhilai steel plant
Rourkela steel plant
Durgapur steel plant
Indian Iron &Steel Co Ltd.
Vizag Steel Plant
PRIVATE SECTOR STEEL PLANT
TATA Steel Ltd.
Jindal Steel &Power Ltd.
Jindal South West Ltd.
Essar Steel Ltd
IspatMetalics Ltd.
Sun Flag Iron&Steel Ltd.
THERMAL PLANT
Koradi Thermal power station
Satpura Thermal power station
Chandrapur super Thermal power station
Karnataka power Corporation Ltd
North Chennai Thermal Power station etc.
NATIONAL THERMAL POWER CORPORATION LTD.
Badarpur Thermal Power station
Singrauli Super Thermal Power station
8/9/2019 Thejo Engg-Final OS1
23/98
23 | P a g e
Vindhyachal Super thermal Power station
Rihand Super Thermal Power station
Tanda Super Thermal Power station
Unchchar Thermal Power station
Kahalgaon Super Thermal Power station
Farakah Super Thermal Power station
PORT TRUSTS
Chennai
Mormugao, Goa
Jawaharlal Nehru Porttrust
Paradeep
Vishakapatinam
Tuticorin
CEMENT FACTORIES
Associated Cement Co. Ltd
Cement Corporation of India Ltd
India Cements Ltd
Madras Cements Ltd
Tamilnadu Cement Corporation Ltd
Panyam Cements & Minerals
Coromandel Cement
Priyadarshini Cement
Visaka Cement
Grasim Industries
Ambuja Cements
Vikram Cement
UTLRATECH CEMENTS
Tadipatri
Awarpur
Arakkonam
8/9/2019 Thejo Engg-Final OS1
24/98
24 | P a g e
Rajula
Hirmi
OTHER PRIVATE SECTORS
Lafarge Cements
Diamond Cements Ltd
Zuari Cements
Manikgarh Cement
CHEMICAL PLANTS
Mangalore Chemicals &Fertilizers Ltd
Fertilizers & Chem. Travancore Ltd
Aluminium Industries Ltd.
Southern Petrochemicals Indus Coprn.
Fertilizer Corp of India Ltd
Zuari Agro-Chemicals,Goa
Sindri Fertilizers Corp.
Paradip Phosphates
Oswal Chemicals
IFFCO,Chasnala
FOUNDRIES
Ennore Foundries Ltd
Talcher Super Thermal power station
Ramagundam Super thermal power station
Korba Thermal power station
Simhadhri Thermal power station
PVT SECTOR POWER PLANTS
Tata Power plant-Mumbai
Bharat Aluminium-Captive Power plant
MINES
Tata Steel- Joda mines, Namundi Iron ore mines, Jamadoba Coal mines
8/9/2019 Thejo Engg-Final OS1
25/98
25 | P a g e
West Bokaro Collieries
Hindustan Zinc Ltd- Bhilwara ,Rampura mines, Dariba mines
Kudremukh Iron ore mines Ltd
Neyveli Lignite Corpn Ltd
Hindustan Copper Ltd- Malajkhand,Khetri
STEEL AUTHORITY OF INDIA
Bolani Iron ore mines
Kiriburu Iron ore mines
Meghahatuburu Iron ore project
Barsua Iron ore mines
Gua ore mines
COAL INDIA LTD
Bharat Coaking Coal Ltd
Eastern Coal fields Ltd
Central Coal fields Ltd
South Eastern Coal fields Ltd
Western Coal fields Ltd
Mahanadi Coal fields Ltd
Singareni Collieries Company Ltd
H.M.T Ltd
Visveswaraya Iron & Steel Ltd. (SAIL)
Nelcast Ltd
Grey Iron FoundaryJabalpur
SPACE RESEARCH CENTRES
ISRO
VSSC
DEFENCE
Naval Dockyard-Vizag
8/9/2019 Thejo Engg-Final OS1
26/98
26 | P a g e
ALUMINIUM
National Aluminium Company-Angul, Damanjodi
PVT SECTOR
Bharat Aluminium Company
OEMs
Lakshmi Machine works Ltd
Larsen & Toubro-Material handling division
Thyssen Krupp Industries(Buckau Wolf)
B.M.M
Tata Robin Fraser(TRF)
O&K Orenstein &Koppel(I) Pvt. Ltd
McNally Bharath
MECON Ltd
UB Engineering
FLSmidth Minerals Pvt.Ltd
GEA Energy Systems
8/9/2019 Thejo Engg-Final OS1
27/98
27 | P a g e
FUNCTIONAL DEPARTMENTS, THEIR ORGANIZATION
AND ACTIVITIES
1.
FINANCE DEPARTMENT
Finance department which was once decentralized has been now converted in to a centralized
department for achieving better control of departmental activities. In total there are 10
branches and each of them has one branch accountant. These branches itself are divided into
different zones. The entire branch accountant has to report to Financial Controller at the Head
Office in Chennai.
Mr.Ravikanth is the Finance controller and the company secretary at the corporate office.
.
CHART: 3
In the above figure, left side indicates the service operations and right side indicates
the manufacturing operations.
The main function of the Branch Accountants is to collect the expense sheets, check
transactions; budget details etc from the sites which is obtained from the site
accountants and the Branch Manager have to approve it.
The Branch Accountants has to report the same to the corresponding Zonal
Accountants that is; Thejo is mainly having four zones of operationsEast, South,
Central and Southeast zones.
The main function of Branch Accounts in Charge is to enter the details in accounting
software.
FINANCE
CONTROLLER
SENIOR MANAGER
ZONAL
ACCOUNTANTS
( 4 ZONES)
BRANCH ACCOUNTS
ASST(4 ZONES)
SITE ACCOUNTANTS
ASSISTANT
COMPANYSECRETARY
MANAGER
COSTING(FACTORY)
HEAD FACTORY
ACCOUNTS
ASST MANAGER
ACCOUNTS
(FACTORY)
BRANCH
ACCOUNTSMENTOR
BRANCH ACCOUNTS
ASST
8/9/2019 Thejo Engg-Final OS1
28/98
28 | P a g e
This will be verified by the Branch Accounts Mentors. They also determine the
statutory requirements, other budgets, methods to reduce cost, tax etc.
Zonal Accountants, Branch Accounts Mentors have to report to the Senior Manager
Accounts.
Senior Manager will make the necessary modifications if any.
Factory Accountants will estimate the expenses statement of different departmentslike materials, production and maintenance.
They also enter the same in accounting software.
It is further verified by the Head Factory Accounts. Central excise will take care of it.
Head Factory Accounts and the Senior Manager Accounts will finally report to the
Finance Controller.
2. MATERIALS AND STORES DEPARTMENT
.
CHART: 4
Inventory is an essential part of manufacturing process. Without essential inventory, a
manufacturing or a production unit cannot work efficiently. The materials department meets
these requirements of inventory whenever is needed. Materials and stores department is
divided in to three; raw materials products, engineering products and stores products.
The raw materials will be purchased according to the reorder level of the stock. Whenever the
reorder level is reached a particular amount of stock is purchased. In the case of commonly
HEAD, MATERIALS
DEPT
RAW MATERIALS
STORES AT FACTORYPURCHASE
CORPORATE(CRITICAL
,RUBBER)
FACTORY(ROUTINE
ACTIVITIES)
8/9/2019 Thejo Engg-Final OS1
29/98
29 | P a g e
consumed materials, it will be purchased more or less according to the market conditions. If
the department forecasts any deviation in the price or policies of the government regarding
these materials the purchase decision is changed in according to the situation. The
requirements of the production department and other departments is informed to the materials
department according to the purchase requisition of the departments they order the product.The engineering products are purchased according to the decision of the CEO only. If the
management fined an engineering product is essential to the plant, CEO takes the decision
accordingly. Materials department makes the purchase order and the decisions regarding
stores materials, tools and other spare parts are purchased by materials department whenever
is necessary. Thejo mainly import the materials from Germany, USA, and Brazil etc.
CRITERIA TO SELECT A SUPPLIER
The supplier of the company is selected by certain criteria
The company should be an ISO certified company.
The company should be able to deliver products in time with quality and competitive
price.
Category D companies (without ISO certificate).
3. CORPORATE PLANNING AND ORDER PROCESSING
DEPARTMENT (COD)
COD plays an important role to plan the entire manufacturing process in coordination withMarketing, EMD, TMC, Factory and Projects. When an enquiry is received, the Marketing
Department analyses the enquiry and forward it to the Designing department for making the
drawings. According to the drawings, the Estimation department prepares estimates and
sends it to COD. COD department is headed by Mr.Satheesh.
ROLE OF COD
ORDER PROCESSING
CORPORATE PLANNING
8/9/2019 Thejo Engg-Final OS1
30/98
8/9/2019 Thejo Engg-Final OS1
31/98
31 | P a g e
4. Submission of MIS in the prescribed format.
4. EXECUTION& MONITORING DEPARTMENT (EMD)
STRUCTURE OF EMD
CHART: 6
Execution Monitoring department in Thejo integrate all the services activities and co-ordinate
all the projects works. The major service activities are:
1.
Conveyor Belt Splicing(joint)
Cold process
Hot process
2. Pulley Lagging (cold process)
3.
Conveyor Belt Looping & Laying (Project works)
Mr.Premjit is the Head of this department.
HEAD,EMD
ZONALMANAGERS(4
ZONES)
BRANCH IN
CHARGE
SITE IN CHARGE
TECHNICIANS
BDM
PRODUCTINSTALLATION
ENGINEERS
8/9/2019 Thejo Engg-Final OS1
32/98
32 | P a g e
5.HR DEPARTMENT
The five resources which constitute any organization are man, materials, machine,
market and money. Simultaneously 5 departments are functioning correspondingly for
the effective use of these resources.
5 MS
RESOURCES
5 MS DEPARTMENT
MAN HRD
MACHINE PRODUCTION
MATERIALS PURCHASE/MATERIALS
MONEY FINANCE
MARKET MARKETING
HR department is headed by Mr. Thomas Abraham. The department takes care of
functions starting from recruitment to exit interview and also General administration.
It forecasts the manpower requirements and recruits suitable candidates thru different
sources, right position at right time according to the need of the particular department.
The main functions of this department are:
Recruitment
TrainingInduction & Functional
Performance Appraisal
Career Development Plan
Employee counseling
Compensation and benefits
Welfare activities etc.
8/9/2019 Thejo Engg-Final OS1
33/98
33 | P a g e
The appraisal policy adopted by the HR department is 360 degree appraisal policy which
includes:
(a)
Self appraisal, (b) Peer appraisal and (c) HOD appraisal and apart from these there will
also be a potential appraisal. The promotion policy of the company is based upon
performance of the employee after the completion of minimum of three years experience
in the company. Training need will be analyzed through the appraisal. TNA will be
consolidated and the workers employees are then deputed for suitable training programs.
6. MARKETING AND SALES DEPARTMENT
Marketing and Sales Department integrate all the marketing activities of the product. The
activities of the Marketing Department commences when an enquiry comes from a client.
The marketing department first audits and gives engineering solutions with the help of the
companys engineers. Then based on the solution, necessary products will be designed. Thedesigning department prepares an accurate design according to the client requirements and
then prepares a quotation before giving it to the COD department. The COD department then
analyses and study on the quotation and gives it to the Marketing department and them in turn
forward it to the particular client. Mr. Manoj Joseph is the Director of Marketing and Mr.
Rajesh John is the Director of Sales.
8/9/2019 Thejo Engg-Final OS1
34/98
8/9/2019 Thejo Engg-Final OS1
35/98
35 | P a g e
PRODUCTS
1. CONVEYOR CARE
Vulcanizing equipment
Hydraulic machine
2. TRANSFER POINT SOLUTION
Belt cleaners
Titan- heavy duty primary secondary and internal belt scrappers
Belt scrappers
Spillage control
FLEXI SEAL
Segmented skirt board sealing system
Skirt rubbers
Impact cushion cradles
HERCULES
Rubber with UHMWPE
Belt tracking system
SURRACK
Carrying side tracker
Return side tracker
3. DUST CONTROL
Dry forging dust suppression for confined space
Dry forging dust suppression for open space
Dusgon-dust suppression of stock piles, haul roads and wagons.
Changing the properties of dusting materials
Formatting a proactive layer over the layer
8/9/2019 Thejo Engg-Final OS1
36/98
36 | P a g e
4. FLOW ENHANCEMENT
G forceair canons
Elastometer free valve construction
300,000 firing guarantee
5. ABRASION& WEAR PROTECTION
Thor-mill liners
Rubber
Alloy steel cast cap
RHINO- liner plates and panels
Rubber
Ceramic
Alloy steel casting
MATROX- Roaching
UHMWPE
TWISTER- cyclone spares
TEIWAR-sheeting
CERALINE-sheeting
6. FILTRATION SPARES
HIPO-diaphragms
Rubber
Larox
Customized
Seals, scrapers, pinch valve sleeves, hose and feed colles
Filter plate rollers
Floatation spares
8/9/2019 Thejo Engg-Final OS1
37/98
37 | P a g e
7. SLURRY HANDLING
ANAKONDA-slurry hose
Rubber with fabric and steel wire reinforcement
Vacuum and gravity application
Customized design
End connectors
Lined pipes
-Soft, high abrasion resistant rubber lining polyurethane lined pipe fitting, ceramic coated
pipes
8. CORROSION PROTECTION
Rubber sheeting, primers and adhesives-materials
Site lining
Fabrication and rubber lined supplies
9. CONVEYOR SERVICES
Belt repair-Fabric ply, steel cord
Conveyor pulling
Lagging in-situ: cold process
Project execution &conveyor installation
Belt transition flow
Spillage control
Belt cleaning
Dust suppression
MAJOR ACHIEVEMENTS OF PROJECT DEPARTMENT
Worlds largest pipe conveyor at Vallur Thermal, Tamil Nadu(2012)
Belt width 2400 mm
Indias fastest conveyor belt at Adani West Port,Mundra,Gujarat(2011)
NCTPS Ennore-World Bank and Asian development bank funded project.
Jindal steel and power Ltd,Raigarh
ACC
8/9/2019 Thejo Engg-Final OS1
38/98
38 | P a g e
7. MANUFACTURING UNIT
Mr. Manesh Joseph is the GM. Operation; Head of Factory. The factory is located at Ponneri.
There are five units and a PU unit and R&D lab.
UNIT-1
Production of all main products takes place here and dispatches it after its quality checking.
In unit-I, mixing department, technical department, production department, mould
department and lining department works together for the production of better, good quality
products.
PRODUCTS
Rubber lined pipes and fittings
Rubber lining
Vulcanized natural rubber and synthetic rubber sheets
Pulley lagging
Thor
Material handling hose etc.
Unit-II
Unit-II generally takes care of reconditioning and repair of conveyor belt, production of
pressure bags, HIPO diaphragms, air bags etc. Mr.Arulanand is the in-charge of this unit.
Unit-III
This unit is divided in to three divisions: vulcanizing material department (VMD), Bulk
material handling and Tool room. The production is undertaken according to the need of the
client.
Unit IV
Unit four mainly concentrates on production of solution and adhesives according to the need
of the client.
8/9/2019 Thejo Engg-Final OS1
39/98
39 | P a g e
UNIT V
All lining activity takes place in unit v. The different lining activities are:
Vessel Lining
Pipe Lining
Pulley Lagging(hot process)
STRUCTURE OF THE FACTORY
CHART: 9
GENERALMANAGER-OPERATION
R&D PU UNIT-I UNIT-II UNIT-III UNIT-IV UNIT-V
8/9/2019 Thejo Engg-Final OS1
40/98
40 | P a g e
VARIOUS DEPARTMENTS AT FACTORY
Production Planning
HR and Administration
Materials and stores
Technical
Pre-form
Mixing
Production
Maintenance
Lining
Mould
Design
Quality & Dispatch
POLYURETHANE DEPARTMENT
PU is the next department under manufacturing unit. Poly urethane is a costly, hard material
and is more flexible which lasts long compared to normal rubber materials. In PU department
they produce PU products according to the clients needs. One of the main products is belt
cleaner. Mr. Pradeep Banerjee is the in-charge of this department.
RESEARCH AND DEVELOPMENT
Thejos R&D sector has been the cornerstone for developing products that meets the needs of
customers and society. R&D uses innovative technology to update their existing products and
services and also tries to put forward something new in the market. The R&D team regularly
focuses on market and takes necessary studies according to the market conditions and
competitors strategies. If any quality issue related to any product arises, then proper research
is carried out to rectify the problem. Thejo focuses on R&D with core emphasis on polymeric
science and materials research which made them outsource manufacturer of choice for many
US and European Original Equipment Manufacturers. Along with these, the R&D centre at
Thejo is certified by DSIR which helps it to act as an independent testing
centre.Mr.Gopinathan.C is the General Manager of the department.
8/9/2019 Thejo Engg-Final OS1
41/98
8/9/2019 Thejo Engg-Final OS1
42/98
42 | P a g e
FUNCTIONS OF TMC
Total maintenance of conveyor system
Auditing of conveyor system
Maintenance of cranes
Operations and maintenance of plant
UNDERTAKING PROJECTS
The TMC is now undertaking the following projects:
i. Godavari Power Ispat LTD- Raipur
ii. Sarada Energy Mineral LTD-Raipur
iii. Brahmin River Pellets LTD-Jaipur
iv. Bokaro Steel LTD- Bokaro
v. Orissa Manganese and Minerals LTD- Jamshedpur
vi. Adani Power LTD- Mundra
vii. Essar Steel LTD
viii. Jindal Steel Power LTDBengaluru
8/9/2019 Thejo Engg-Final OS1
43/98
43 | P a g e
INNOVATIVE MANAGEMENT PRACTICES
SAP implementation for the entire organization
By implementing an integrated software-and-service package, we can identify the many
drivers and processes shaping manufacturing performance. We can also automate
procurement transactions, optimize financial margins, and manage suppliers, capital, and
risks.
Manage the entire sales cycle, from order generation to post-sales activities
Optimize procurement and logistics cycles for requisitioning, invoicing, andpayment processing
Leverage predefined processes to improve discrete, process, and repetitive
manufacturing
Establish a network connecting the companys headquarters with subsidiaries and
business partners
Increases finance departments efficiency by automating processes and reporting
functions with accelerated financial closes
FUTURE PLANS & BUSINESS STRATEGY
The Operations & Maintenance under the Total maintenance centre is the major business
strategy adopted by the company. Here the TMC handles:
Conveyor belt maintenance
Entire maintenance of running plant (Mechanical, Civil, Monorail, Loco
,Electrical, Housekeeping)
This is Thejos latest division and there is scope for future expansion.
Overseas expansion which gives Thejo Engineering Ltd an opportunity to tap the
untapped market with huge business potential. The overseas markets where Thejo is
presently concentrating are given below.
8/9/2019 Thejo Engg-Final OS1
44/98
44 | P a g e
Saudi operations
Australia
African markets like Liberia, Ghana
North American markets like Brazil, Chile, Argentina
8/9/2019 Thejo Engg-Final OS1
45/98
45 | P a g e
SWOT ANALYSIS
8/9/2019 Thejo Engg-Final OS1
46/98
46 | P a g e
STRENGTH
Professional Management team
First organization in the field of conveyor belt servicing and related products
manufacturing.
First company in India which is NSE listed under SME Category.
85% market share in servicing.
Wide range of clients in core sector industries.
Thejos own plants of operation and no outsourcing.
ISO 9000, CRISIL Rating
First company in India which introduced the cold vulcanizing process.
Overseas operations:
Thejo Hatcon
Thejo Australia
Provides different kinds of engineering solutions.
Implemented EHS {environmental health and safety} policy.
On the process of implementing SAP.
WEAKNESS
Supply and transportation are subject to various uncertainties and risks, and delays in
delivery or non delivery may result in penalty clause and Thejo is responsible to pay
the client heavy penalties according to the penalty clause agreed.
Agreements with various banks contain restrictive clauses for certain activities and if
Thejo is unable to get their approval, it might restrict their scope of activities.
8/9/2019 Thejo Engg-Final OS1
47/98
47 | P a g e
OPPORTUNITIES
Products and services are intended to core industries, so high opportunities in such
industries.
During the period of sluggishness , any loss of business in installation related work
will be compensated by increased maintenance works as well as maintenance of
existing systems would be given due importance.
Increasing demand for operations and Maintenance service.
Opportunity to tap the untapped market with huge business potential.
THREATS
Competition from parties in unorganized sectors.
Prices of the key raw materials such as natural rubber and synthetic rubber are highly
volatile.
Each of the products is unique and according to customer specifications, so cost of
implementation is very high.
8/9/2019 Thejo Engg-Final OS1
48/98
48 | P a g e
SECTION-II
PROBLEM CENTERED STUDY OF
THE ORGANIZATION
8/9/2019 Thejo Engg-Final OS1
49/98
49 | P a g e
CHAPTER-1
RESEARCH METHODOLOGY OF THE
STUDY
8/9/2019 Thejo Engg-Final OS1
50/98
50 | P a g e
1.1 TITLE OF THE STUDY
ANANALYSIS ON CASH MANAGEMENT OF THEJO ENGINEERING LTD
1.2 OBJECTIVES OF THE STUDY
Primary Objective:
To analyze the cash management of THEJO ENGINEERING LTD.
Secondary Objective:
To find out the liquidity position of the concern through ratio analysis.
To study the growth of THEJO ENGINEERING LTD in terms of cash flow
statement.
To make suggestion and recommendation to improve the cash position of THEJO
ENGINEERING LTD.
1.3RESEARCH DESIGN
The research design used in this project is Analytical in nature the procedure using,
which researcher has to use facts or information already available, and analyze these to make
a critical evaluation of the performance.
1.4DATA COLLECTION
Primary Sources
a. Data are collected through personal interviews and discussion with Finance
Executive.
b. Data are collected through personal interviews and discussion with Material
Planning- Deputy Manager.
8/9/2019 Thejo Engg-Final OS1
51/98
51 | P a g e
Secondary Sources
a. From the annual reports maintained by the company.
b.
Data are collected from the companys website.
c. Books and journals pertaining to the topic.
1.5TOOLS USED IN THE ANALYSIS
Cash flow statement
Ratio analysis.
1.6PERIOD OF STUDY
The present study has taken into account four financial years viz., 2009-2010 to 2012-2013.
8/9/2019 Thejo Engg-Final OS1
52/98
52 | P a g e
1.7 REVIEW OF LITERATURE
MEANING:
Cash is the money which a firm can disburse immediately without any restriction.
The term cash includes coins, currency and cheques held by the firm, and balances in its bank
accounts. Sometimes near-cash items, such as marketable securities or bank times deposits,
are also included in cash. The basic characteristic of near-cash assets is that they can readily
be converted into cash.
FACETS OF CASH MANAGEMENT:
Cash management is concerned with the managing of: (i) Cash flows into and out of
the firm, (ii) Cash flows within the firm, and (iii) Cash balances held by the firm at a point of
time by financing deficit or investing surplus cash. It can be represented by a cash
management cycle. Sales generate cash which has to be disbursed out. The surplus cash has
to be invested while deficit this cycle at a minimum cost. At the same time, it also seeks to
achieve liquidity and control. Cash management assumes more importance than other current
assets because cash is the most significant and the least productive asset that a firms holds.
It is significant because it is used to pay the firms obligations. However, cash is
unproductive. Unlike fixed assets or inventories, it does not produce goods for sale.
Therefore, the aim of cash management is to maintain adequate control over cash position to
keep the firm sufficiently liquid and to use excess cash in some profitable way.
Cash management is also important because it is difficult to predict cash flows
accurately, particularly the inflows, and there is no prefect coincidence between the inflows
and outflows of cash. During some periods, cash outflows will exceed cash inflows, because
payments for taxes, dividends, or seasonal inventory buildup. At other times, cash inflow
will be more than cash payments because there may be large cash sales and debtors may be
realized in large sums promptly. Further, cash management is significant because cashconstitutes the smallest portion of the total current assets, yet managements considerable
8/9/2019 Thejo Engg-Final OS1
53/98
53 | P a g e
time is devoted in managing it. In recent past, a number of innovations have been done in
cash management techniques. An obvious aim of the firm these days is to manage its cash
affairs in such a way as to keep cash balance at a minimum level and to invest the surplus
cash in profitable investment opportunities.
In order to resolve the uncertainty about cash flow prediction and lack of
synchronization between cash receipts and payments, the firm should develop appropriate
strategies for cash management. The firm should evolve strategies for cash management.
The firm should evolve strategies regarding the following four facets of cash management.
Cash planning: Cash inflows and outflows should be planned to project cash surplus
or deficit for each period of the planning period. Cash budget should be prepared for
this purpose.
Managing the cash flows: The firm should decide about the properly managed. The
cash inflows should be accelerated while, as far as possible, the cash outflows should
be decelerated.
Optimum cash level: the firm should decide about the appropriate level of cash
balances. The cost of excess cash and danger of cash deficiency should be matched to
determine the optimum level of cash balances.
Investing surplus cash: The surplus cash balances should be properly invested to
earn profits. The firms should decide about the division of such cash balances
between alternative short-term investment opportunities such as bank deposits,
marketable securities, or inter-corporate lending.
MOTIVES FOR HOLDING CASH
The firms need to hold cash may be attributed to the following three motives:
The transactions motive
The precautionary motive
The speculative motive
8/9/2019 Thejo Engg-Final OS1
54/98
54 | P a g e
TRANSACTION MOTIVE
The transactions motive requires a firm to hold cash to conduct its business in the
ordinary course. The firm needs cash primarily to make payments for purchases, wages and
salaries, other operating expenses, taxes, dividends etc. The need to hold cash would not
arise if there were perfect synchronization between cash receipts and cash payments, i.e.,
enough cash is received when the payment has to be made. But cash receipts and payments
are not perfectly synchronized. For those periods, when cash payments exceed cash receipts,
the firm should maintain some cash balance to be able to make required payments. For
transactions purpose, a firm may invest its cash in marketable securities. Usually, the firm
will purchase securities whose maturity corresponds with some anticipated payments, such as
dividends or taxes in the future. Notice that the transactions motive mainly refers to holding
cash to meet anticipated payments whose timing is not perfectly matched with cash receipts.
PRECAUTIONARY MOTIVE
The precautionary motive is the need to hold cash to meet contingencies in the future.
It provides a cushion or buffer to withstand some unexpected emergency. The precautionary
amount of cash depends upon the predictability of cash flows. If cash flows can be predicted
with accuracy, less cash will be maintained for an emergency. The amount of precautionary
cash is also influenced by the firms ability to borrow at short notice when the need arises.
Stronger the ability of the firm to borrow at short notice less is the need for precautionary
balance. The precautionary balance may be kept in cash and marketable securities.
Marketable securities play an important role here. The amount of cash set aside for
precautionary reasons is not expected to earn anything; the firm should attempt to earn some
profit on it. Such funds should be invested in high-liquid and low-risk marketable securities.
Precautionary balances should, thus, be held more in marketable securities and relatively less
in cash.
SPECULATIVE MOTIVE
The speculative motive relates to the holding of cash for investing in profit-making
opportunity to make profit may arise when the security prices change. The firm will hold
cash, when it is expected that interest rates will rise and security prices will fall. Securitiescan be purchased when the interest rate is expected to fall; the firm will benefit by the
8/9/2019 Thejo Engg-Final OS1
55/98
55 | P a g e
subsequent fall in interest rates and increase in security prices. The firm may also speculate
on materials prices. If it is expected that materials prices will fall, the firm can postpone
materials purchasing and make purchases in future when pric4e actually falls. Some firms
may hold cash for speculative purposes. By and large, business firms do not engage in
speculations. Thus, the primary motives to hold cash and marketable securities are: the
transactions and the precautionary motives.
CASH PLANNING
Cash flows are inseparable parts of the business operations of firms. A firm needs
cash to invest in inventory, receivable and fixed assets and to make payment for operating
expenses in order to maintain growth in sales and earnings. It is possible that firm may be
making adequate profits, but may suffer from the shortage of cash as its growing needs may
be consuming cash very fast. The poor cash position of the firm cash is corrected if its cash
needs are planned in advance. At times, a firm can have excess cash may remain idle.
Again, such excess cash outflows. Such excess cash flows can be anticipated and properly
invested if cash planning is resorted to. Cash planning is a technique to plan and control theuse of cash. It helps to anticipate the future cash flows and needs of the firm and reduces the
possibility of idle cash balances ( which lowers firms profitability )and cash deficits (which
can cause the firms failure).
Cash planning protects the financial condition of the firm by developing a projected
cash statement from a forecast of expected cash inflows and outflows for a given period. The
forecasts may be based on the present operations or the anticipated future operations. Cash
plans are very crucial in developing the overall operating plans of the firm.
Cash planning may be done on daily, weekly or monthly basis. The period and
frequency of cash planning generally depends upon the size of the firm and philosophy of
management. Large firms prepare daily and weekly forecasts. Medium-size firms usually
prepare weekly and monthly forecasts. Small firms may not prepare formal cash forecasts
because of the non-availability of information and small-scale operations. But, if the small
firms prepare cash projections, it is done on monthly basis. As a firm grows and business
operations become complex, cash planning becomes inevitable for its continuing success.
8/9/2019 Thejo Engg-Final OS1
56/98
56 | P a g e
OTHER FACTORS THAT AFFECT THE SIZE OF CASH BALANCE
1. Availability of short-term credit:
To avoid holding unnecessary large balances of cash, most firms attempt to make
arrangements at borrow money is case of unexpected needs. With such an agreement,
the firm normally pays interest only during the period that the money is actually used.
2. Money market rates:
If money will bring a low return a firm may choose not to invest it. Since the loss or profit
is small, it may not be worth the trouble to make the loan. On the other hand, if interest rates
are very high, every extra rupee will be invested.
3. Variation in cash flows:
Some firms experience wide fluctuation in cash flows as a routine matter. A firm with
steady cash flows can maintain a fairly uniform cash balance.
4. Compensating balance:
If a firm has borrowed money from a bank, the loan agreement may require the firm to
maintain a minimum balance of cash in its accounts. This is called compensating balance. In
effect this requires the firm to use the services of bank a guaranteed deposit on which it pays
no interest. The interest free deposit is the banks compensation for its advice and assistance.
CASH MANAGEMENTBASIS STRATEGIES
The management should, after knowing the cash position by means of the cash
budget, work out the basic strategies to be employed to manage its cash.
CASH CYCLE:
The cash cycle refers to the process by which cash is used to purchase materials from which
are produced goods, which are then sold to customers.
8/9/2019 Thejo Engg-Final OS1
57/98
57 | P a g e
Cash cycle=Average age of firms inventory +Days to collect its accounts receivables Days
to pay its accounts payable.
The cash turnover means the numbers of times firms cash is used during each year.
360
Cash turnover = ----------------
Cash cycle
The higher the cash turnover, the less cash the firm requires. The firm should, therefore, try
to maximize the cash turn.
MANAGING COLLECTIONS:
a) Prompt Billing:
By preparing and sending the bills promptly, without a time log between the dispatches
of goods and sending the bills, a firm can ensure earlier remittance.
b) Expeditious collection of cheques:
An important aspect of efficient cash management is to process the cheques receives
very promptly.
c) Concentration Banking:
Instead of a single collection center located at the company headquarters, multiple
collection centers are established. The purpose is to shorten the period between the time
customers mail in their payments and the time when the company has use of the funds are
then to a concentration bankusually a disbursement account.
d) Lock-Box System:
With concentration banking, a collection center receives remittances, processes them
and deposits them in a bank. The purpose is to lock-box system is to eliminate the time
between the receipt of remittances by the company and their deposit in the bank. Thecompany rents a local post office box and authorizes its bank in each of these cities to pick up
8/9/2019 Thejo Engg-Final OS1
58/98
58 | P a g e
remittances in the box. The bank picks up the mail several times a day and deposits the
cheque in the companys accounts. The cheques are recorded and cleared for collection. The
company receives a deposits the cheque in the companys accounts. The cheques are
recorded and cleared for collation. The company receives a deposit slip and a lift of
payments. This procedure frees the company from handling a depositing the cheques.
CONTROL OF DISBURSMENT
a) Stretching Accounts Payable
A firm should pay its accounts payables as late as possible without damaging its credit
standing. It should, however, take advantages of the cash discount available on prompt
payment.
b) Centralized Disbursement
One procedure for rightly controlling disbursements is to centralize payables in to a
single account, presumably at the companys headquarters. Such an arrangement would
enable a firm to delay payments and can serve cash for several reasons. Firstly, it increases
transit time. Secondly, if a firm has a centralized bank account, a relatively smaller total cash
balances will be needed.
c) Bank Draft
Unlike an ordinary cheque, the draft is not payable on demand. When it is presented
to the issuers bank for collection, the bank must present it to the issuer for acceptance. The
funds then are deposited by the issuing firm to cover payments of the draft. But suppliers
prefer cheques. Also, bank imposes a higher service charge to process them since they
require special attention, usually manual.
d) Playing the float
The amount of cheques issued by the firm but not paid for by the bank is referred to as
the payment float. The differences between payment float and collection float are the
net float. So, if a firm enjoys a positive net float, it may issue cheques even if it means
having an ever drown account in its books. Such an action is referred to as playing the
float; within limits a firm can play this game reasonably safely.
Thus management of cash becomes essential and it should be seen to, that neither
excessive nor inadequate cash balances are maintained.
8/9/2019 Thejo Engg-Final OS1
59/98
59 | P a g e
CASH FLOW ANALYSIS
The cash flow analysis is done with the help of cash flow statement. A cash flow
statement is a statement depicting changes in cash position from one period to another. It is
an important planning tool. Cash flow statement gives a clear picture of the source of cash,
the uses of cash and the net changes in cash. The primary purpose of cash flow statement is
to show that as to where from the cash to be acquired and where to use them.
UTILITY OF CASH FLOW ANALYSIS
A Cash flow analysis is an important financial tool for the management. Its chief
advantages are as follows.
(a)Helps in efficient cash management
Cash flow analysis helps in evaluating financial policies and cash position. Cash is the
basis for all operation and hence a projected cash flow statement will enable the
management to plan and co-ordinate the financial operations properly. The management
can know how much cash is needed from which source it will be derived, how much can
be generated, how much can be utilized.
(b)Helps in internal financial management
Cash flow analysis information about funds, which will be available from operations.This will helps the management in repayment of long-term debt, dividend policies etc.
(c)Discloses the movements of Cash
Cash flow statement discloses the complete picture of cash movement. The increase
in and decrease of cash and the reasons therefore can be known. It discloses the
reasons for low cash balance in spite of heavy operation profits on for heavy cash
balance in spite of low profits.
(d)Discloses success or failure of cash planning
The extent of success or failure of cash planning is known by comparing the projected
cash flow statement with the actual cash flow statement and necessary remedial
measures can be taken.
8/9/2019 Thejo Engg-Final OS1
60/98
60 | P a g e
CHAPTER-2PRESENTATION AND ANALYSIS OF
DATA
8/9/2019 Thejo Engg-Final OS1
61/98
61 | P a g e
2.1CASH FLOW STATEMENT
Inflow 2009-2010 2010-2011 2011-2012 2012-2013
Opening balance 18167225 11691544 29693648 33047928
Cash from operation 30812867 35603657 65808370 32293691
Increase in loan funds 36616628 0 167584138 11231917
Sales of Asset 0 60444 530612 31205269
Increase in share capital 1000000 0 0 0
Total 865,596,720 47,355,645 263,616,768 107,778,805
Outflows
Cash outflow from
operation
Purchase of Asset 26289207 15540564 16552286 4060528
Decrease in loan funds 0 3211747 0 0
Closing balance 11691544 29693648 33047927 26655452
Total 37,980,751 48,445,959 49,600,213 30,715,980
TABLE: 5
Inference:
This table shows that the cash flow statements of THEJO ENGINEERING LTD are
to be efficient. The cash inflow of the company is to be increased for year after year. The
fund from operation is also to differ from every year. The company increased their share
capital from 2009-2010 for Rs. 10, 00,000. It was used as efficient for the next year for
decrease their loan amount.
8/9/2019 Thejo Engg-Final OS1
62/98
62 | P a g e
RATIO ANALYSIS:
Ratio Analysis is a powerful tool of financial analysis. A Ratio is defined as the indicated
quotient of two mathematical expressions and as the relationship between two or more
things. In financial analysis, a ratio is used as a benchmark for evaluating the financial
position and performance of a firm. Ratio helps to summarize large quantities of financial
data and to make qualitative judgment about the firms financial performance.
8/9/2019 Thejo Engg-Final OS1
63/98
63 | P a g e
2.2 RATIO ANALYSIS
2.2.1 LIQUIDITY RATIOS
These are ratios which measure a firms ability to meet its maturing short-term obligations.
(a)CURRENT RATIO
Current ratio is a financial ratio that measures whether or not a company has enough
resources to pay its debt over the next business cycle (usually 12 months) by
comparing firm's current assets to its current liabilities.
Acceptable current ratio values vary from industry to industry. Generally, a current
ratio of 2:1 is considered to be acceptable. The higher the current ratio is, the more
capable the company is to pay its obligations. Current ratio is also affected byseasonality.
If current ratio is bellow 1 (current liabilities exceed current assets), then the company
may have problems paying its bills on time. However, low values do not indicate a
critical problem but should concern the management.
Current ratio gives an idea of company's operating efficiency. A high ratio indicates
"safe" liquidity, but also it can be a signal that the company has problems getting paid
on its receivable or have long inventory turnover, both symptoms that the company
may not be efficiently using its current assets.
Current ratio = Current assets/ Current Liabilities
YEAR RATIO REMARKS
2009-10 39.94/15.06=2.65 Liquidity position is
good
201011 52.73/25.01=2.11 good
201112 66.23/53.03=1.25 Satisfactory
201213 90.13/61.79=1.46 Satisfactory
TABLE: 6
8/9/2019 Thejo Engg-Final OS1
64/98
64 | P a g e
GRAPH: 1
INFERENCE:
Since, the current ratios are above 1, the company has a safe liquidity position i.e. the
company can pay off its debt over the next business cycle. During the FY2010 till
FY2011, the ratio is slightly high which can be a signal that the company has
problems getting paid on its receivable or have long inventory turnover, both
symptoms that the company may not be efficiently using its current assets. But during
FY2012 and FY2013, the ratio attained a safe position which indicates the operational
efficiency of the company has improved. Increase in current ratio over a period of
time may suggest improved liquidity of the company or a more conservative approach
to working capital management. A decreasing trend in the current ratio may suggest a
deteriorating liquidity position of the business or a leaner working capital cycle of the
company through the adoption of more efficient management practices.
Traditional manufacturing industries require significant working capital investment in
inventory, trade debtors, cash, etc, and therefore companies operating in such
industries may reasonably be expected to have current ratios of 2 or more. However,
with the advent of just in time management techniques, modern manufacturing
companies have managed to reduce the size of buffer inventory thereby leading to
significant reduction in working capital investment and hence lower current ratios.
0
0.5
1
1.5
2
2.5
3
2009-10 2010 - 11 2011 - 12 2012 - 13
current ratio
current ratio
8/9/2019 Thejo Engg-Final OS1
65/98
65 | P a g e
(b) QUICK RATIO
Quick ratio specifies whether the assets that can be quickly converted into cash are sufficient
to cover current liabilities. Ideally, quick ratio should be 1:1.If quick ratio is higher, company
may keep too much cash on hand or have a problem collecting its accounts receivable. Higher
quick ratio is needed when the company has difficulty borrowing on short-term notes. A
quick ratio higher than 1:1 indicates that the business can meet its current financial
obligations with the available quick funds on hand. A quick ratio lower than 1:1 may indicate
the company relies too much on inventory or other assets to pay its short-term liabilities.
Quick ratio shows the extent of cash and other current assets that are readily convertible into
cash in comparison to the short term obligations of an organization.
Quick Ratio = Quick assets/ Current Liabilities
YEAR RATIO REMARKS
2009-10 33.54/15.06 = 2.22 Liquidity
position is
good
2010-11 44.61/25.01 = 1.78 good
2011-12 54.59/53.03 = 1.03 good
2012-13 77.66/61.79 = 1.26 good
TABLE: 7
8/9/2019 Thejo Engg-Final OS1
66/98
66 | P a g e
GRAPH: 2
INFERENCE:
A quick ratio of 0.5 would suggest that a company is able to settle half of its current liabilities
instantaneously. Quick ratio differs from current ratio in that those current assets that are not
readily convertible into cash are excluded from the calculation such as inventory and deferred
tax credits since conversion of such assets into cash may take considerable time.Thejo
Engineering LTD has quick ratio which ranges from 2.22 maximum during FY2010 and
lowest ratio 1.03 at FY2012. These ratios indicate that the company has a good liquidity
position which indicates the business can meet its current financial obligations with the
available quick funds on hand.
(c)NET WORKING CAPITAL RATIO
There are two concepts of working capital namely gross working capital and net working
capital. Net working capital is the difference between current assets and current liabilities. An
analysis of the net working capital will be very help full for knowing the operational
efficiency of the company.
Net working capital = Current AssetsCurrent Liabilities
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2009-10 2010 11 2011 12 2012 13
Quick ratio
Quick ratio
8/9/2019 Thejo Engg-Final OS1
67/98
67 | P a g e
YEAR RATIO REMARKS
200910 39.94-15.06 =24.88 Good
201011 52.73- 25.01 =
27.72
Good
201112 66.23 -53.03 =
13.20
Good
201213 90.1361.79 =
28.34
Good
TABLE: 8
GRAPH: 3
INFERENCE:
Positive working capital means that the business is able to pay off its short-term liabilities.
Also, a high working capital can be a signal that the company might be able to expand its
operations. Negative working capital means that the business currently is unable to meet its
short-term liabilities with its current assets. Therefore, an immediate increase in sales oradditional capital into the company is necessary in order to continue its operations. Working
0
5
10
15
20
25
30
2009-10 2010 11 2011 12 2012 13
Net W.C ratio
Net W.C ratio
8/9/2019 Thejo Engg-Final OS1
68/98
68 | P a g e
capital also gives an idea of company's efficiency. Money tied up in inventory or accounts
receivable cannot pay off any of the company's short term financial obligations. Therefore,
working capital analysis is very important, but very complex too. For example, an increase in
working capital can be explained by sales increase, but can also be explained by slow
collection or inadequate increase in inventory. Here, it is found that there is an increase in the
working capital ratio.
2.2.2 TURNOVER RATIOS
These are ratioswhich measures the effectiveness with which the firm is using its resources.
(a)INVENTORY TURNOVER RATIO
Inventory Turnover Ratio = Cost Of Goods Sold/ Average Inventory
This ratio indicates how fast inventory is sold. A company with a higher inventory ratio
has better liquidity.Inventory Turnover Ratio measures company's efficiency in turning
its inventory into sales. Its purpose is to measure the liquidity of the inventory.
Inventory Turnover Ratio is figured as "turnover times". Average inventory should be
used for inventory level to minimize the effect of seasonality.
YEAR RATIO REMARKS
2009-10 6409.95/651.98 =
9.83
Average
2010-11 9693.89/726.77 =
13.33
Good
2011-12 11888.53/988.79 =
12.02
Good
2012-13 13420.6/1206.08 =
11.127
Satisfactory
TABLE: 9
8/9/2019 Thejo Engg-Final OS1
69/98
69 | P a g e
GRAPH: 4
INFERENCE:
A low inventory turnover ratio is a signal of inefficiency, since inventory usually has a rate of
return of zero. It also implies either poor sales or excess inventory. A low turnover rate can
indicate poor liquidity, possible overstocking, and obsolescence, but it may also reflect a
planned inventory buildup in the case of material shortages or in anticipation of rapidly rising
prices.
A high inventory turnover ratio implies either strong sales or ineffective buying (the company
buys too often in small quantities, therefore the buying price is higher).A high inventory
turnover ratio can indicate better liquidity, but it can also indicate a shortage or inadequate
inventory levels, which may lead to a loss in business.
High inventory levels are usual unhealthy because they represent an investment with a rate of
return of zero. It also opens the company up to trouble if the prices begin to fall.
Thejo Engineering LTDs inventory turnover ratio is found to increase over the yea rs which
are considered satisfactory.
0
2
4
6
8
10
12
14
2009-10 2010 11 2011 12 2012 13
Inventory turnover rato
Inventory turnover rato
8/9/2019 Thejo Engg-Final OS1
70/98
70 | P a g e
(b)DEBTORS TURNOVER RATIO
Debtors Turnover ratio = Net Credit Sales/ Average debtors
Receivables turnover ratio (also known as debtors turnover ratio) is computed by dividing
the net credit sales during a period by average receivables.
Accounts receivable turnover ratio simply measures how many times the receivables are
collected during a particular period. It is a helpful tool to evaluate the liquidity of receivables.
YEAR RATIO REMARKS
2009-10 65.96/17.33 = 3.81 Low
2010-11 96.20/22.63 = 4.25 Satisfactory
2011-12 117.86/29.46 =4.00 Satisfactory
2012-13 135.49/36.80 = 3.68 Low
TABLE: 10
GRAPH: 5
3.3
3.4
3.5
3.6
3.7
3.8
3.9
4
4.1
4.2
4.3
2009-10 2010 11 2011 12 2012 13
Debtor's Turnover ratio
Debtor's Turnover ratio
8/9/2019 Thejo Engg-Final OS1
71/98
71 | P a g e
INFERENCE:
Generally, a high ratio indicates that the receivables are more liquid and are being collected
promptly. A low ratio is a sign of less liquid receivables and may reduce the true liquidity of
the business in the eyes of the analyst even if the current and quick ratios are satisfactory.
Thejo Engineering LTD is found to have low debtors turnover ratio.
(c)CREDITORS TURNOVER RATIO
A business organization has to pay creditors if it buys goods on credit. Any new creditor will
give us the goods on credit if he knows that we pay our creditors bill within short period of
time. So, for knowing this time period, both parties calculate creditor turnover ratio.
Creditors Turnover Ratio = Net credit purchases/ Average creditors
YEAR RATIO REMARKS
200910 3.84
201011 1.39
201112 3.14
201213 3.23
TABLE: 11
8/9/2019 Thejo Engg-Final OS1
72/98
72 | P a g e
GRAPH: 6
INFERENCE:
Higher creditor turnover ratio is good because it will decrease the average payment period.
The company have low creditors turnover ratio.
(d)FIXED ASSETS TURNOVER RATIO
This ratio is often used as a measure in manufacturing industries, where major purchases
are made for Property, Plant & Equipment to help increase output. When companies
make these large purchases, prudent investors watch this ratio in following years to see
how effective the investment in the fixed assets was.
Fixed Assets Turnover Ratio = Sales/ Net Fixed Assets
Higher the ratio, more efficient is the firm in utilizing its assets.
0
0.5
1
1.5
2
2.5
3
3.5
4
2009 10 2010 11 2011 12 2012 13
Creditor's turnover ratio
Creditor's turnover ratio
8/9/2019 Thejo Engg-Final OS1
73/98
73 | P a g e
YEAR RATIO REMARKS
2009-10 6,432.30/ 889.66=
7.23
Satisfactory
Performance
2010-11 9,521.95/905.54 =
10.51
Good
2011-12 11,536.44/1,132.10
= 10.19
Good
2012-13 13,338.12/1,504.89
= 8.86
Satisfactory
TABLE: 12
GRAPH: 7
INFERENCE:
The fixed-asset turnover ratio measures a companys ability to generate net sales from fixed-
asset investmentsspecifically property, plant and equipment (PP&E) net of depreciation.
A higher fixed-asset turnover ratio shows that the company has been more effective in using
the investment in fixed assets to generate revenues. Thejo Engineering LTD has a satisfactory
0
2
4
6
8
10
12
2009-10 2010 11 2011 12 2012 13
Fixed assets turnover ratio
Fixed assets turnover ratio
8/9/2019 Thejo Engg-Final OS1
74/98
74 | P a g e
FA turnover ratio which indicates that the company is effective in using fixed assets to
generate revenues.
(e)TOTAL ASSTES TURNOVER RATIO
Total Assets Turnover Ratio = Sales / Total Assets
It measures the efficiency of a firm in managing and utilizing its assets.
YEAR RATIO REMARKS
200910 6,432.30/4916.76 =
1.31
Satisfactory
Performance
201011 9,521.95/6211.26 =
1.53
Good
Performance
201112 11,536.44/7,976.04
= 1.45
Good
Performance
201213 13,338.12/11.583.87
= 1.15
Satisfactory
Performance
TABLE: 13
GRAPH: 8
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
2009-10 2010 11 2011 12 2012 13
Total assets turnover ratio
Total assets turnover ratio
8/9/2019 Thejo Engg-Final OS1
75/98
75 | P a g e
INFERENCE:
The lower the total asset turnover ratio, as compared to historical data for the firm and
industry data, the more sluggish the firms sales. This may indicate a problem with one or
more of the asset categories composing total assets inventory, receivables, or fixed assets.
The small business owner should analyze the various asset classes to determine in which
current or fixed asset the problem lies. The problem could be in more than one area of current
or fixed assets. Since current assets also include the liquidity ratios, such as the current and
quick ratios, a problem with the total asset turnover ratio could also be traced back to these
ratios. Many business problems can be traced back to inventory but certainly not all. The firm
could be holding obsolete inventory and not selling inventory fast enough. With regard to
accounts receivable, the firms collection period could be too long and credit accounts may
be on the books too long. Fixed assets, such as plant and equipment, could be sitting idle
instead of being used to their full capacity. All of these issues could lower the total asset
turnover ratio.
(f) CAPITAL TURNOVER RATIO
A ratio of how effectively a publicly-traded company manages the capital invested in it
to produce revenues. It is calculated by taking the total of the companys annual sales
and dividing it by the average stockholder equity, which is the average amount of money
invested in the company. A high ratio indicates that the company is using its capital
well, while a low ratio indicates the opposite. It is also called equity turnover.
Capital Turnover Ratio = Sales/ Capital employed
It measures the efficiency of a company in utilizing its capital for generating sales.
8/9/2019 Thejo Engg-Final OS1
76/98
76 | P a g e
YEAR RATIO REMARKS
2009-10 6,432.30/3,388.07
=1.90
Satisfactory
2010-11 9,521.95/3,690.72
=2.58
Good
2011-12 11,536.44/2,641.67
= 4.37
Good
2012-13 13,338.12/5,334.77
= 2.50
Good
TABLE: 14
GRAPH: 9
INFERENCE:
The ratio is fluctuating towards the end of the study period i.e. during FY2012 the ratio
decreased from 4.37 to 2.50 in FY2013.This indicates that the company is not effectively
utilizing its capital for generating sales.
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2009-10 2010 11 2011 12 2012 13
Capital turunover ratio
Capital turunover ratio
8/9/2019 Thejo Engg-Final OS1
77/98
77 | P a g e
2.2.3 CAPITAL STRUCTURE RATIOS
(a) DEBT-EQUITY RATIO
Debt to equity ratio is a long term solvency ratio that indicates the soundness of long-term
financial policies of the company. It shows the relation between the portion of assets
provided by the stockholders and the portion of assets provided by creditors. Debt to equity
ratio is also known as external-internal equity ratio.
Debt-Equity Ratio=Long term debt/ Shareholders Equity
A ratio of 1:1 is considered safe.
TABLE: 15
YEAR RATIO REMARKS
2009-10 1,993.57/1,394.50 =
1.43
Not safe
2010-11 1,961.45/1,729.27
=1.13
Not safe
2011-12 66.87/2,574.80 =
0.02
Safe
2012-13 13.64/5,331.13
=0.03
Safe
8/9/2019 Thejo Engg-Final OS1
78/98
78 | P a g e
GRAPH: 10
INFERENCE:
A ratio of 1 or 1: 1 means that creditors and stockholders equally contribute to the assets of
the business.
A less than 1 ratio indicates that the portion of assets provided by stockholders is greater than
the portion of assets provided by creditors and a greater than 1 ratio indicates that the portion
of assets provided by creditors is greater than the portion of assets provided by stockholders.
Creditors usually like a low debt to equity ratio because a low ratio (less than 1) is the
indication of greater protection to their money. But stockholders like to get benefit from the
funds provided by the creditors therefore they would like a high debt to equity ratio.
Debt equity ratio varies from industry to industry. Different norms have been developed for
different industries. A ratio that is ideal for one industry may be worrisome for another
industry. A ratio of 1: 1 is normally considered satisfactory for most of the companies.
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
2009-10 2010-11 2011-12 2012-13
Debt-Equity ratio
Debt-Equity ratio
8/9/2019 Thejo Engg-Final OS1
79/98
79 | P a g e
(b)OWNERS FUND TO TOTAL FUND
Owners Fund to Total Fund= Owners Equity/Total Fund
Higher the proportion of owners fund to total fund invested in thebusiness, lower is the
degree of risk.
YEAR RATIO REMARKS
2009-10 1,394.50/3,388.07
=0.41
Risk is more
201011 1,729.27/3,690.72
=0.47
Risk is more
201112 2,574.80/2,641.67
=0.97
Less risk
201213 5,331.13/5.344.77
=0.99
Less risk
TABLE: 16
GRAPH: 11
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
2009-10 2010-11 2011-12 2012-13
Owner's fund to Total fund
Owner's fund to Total fund
8/9/2019 Thejo Engg-Final OS1
80/98
80 | P a g e
INFERENCE:
Higher the proportion of owners fund to total fund invested in the business, lower is the
degree of risk. In the FY2010 and 11 the risk was more due to high proportion of owners
fund to total fund. The ratio came down to safer level during the FY2012 and 13.
2.2.4 COVERAGE RATIOS
(a) INTEREST COVERAGE RATIO
Interest Coverage Ratio, also known as Times Interest Earned Ratio (TIE), states the number
of times a company is capable of bearing its interest expense obligation out of the operating
profits earned during a period.
Interest Coverage Ratio= EBIT/ Interest
This ratio is used to determine how easily a company can pay interest on outstanding debt. A
high ratio indicates its ability to pay interest easily.Interest Coverage Ratio indicates the
capacity of an organization to pay its interest obligations. An interest cover of 2 implies that
the entity has sufficient profitability to bear twice the amount of its current finance cost. The
effect of taxation is normally ignored in the interest cover calculation to facilitate a better
comparison of the contribution of the company's underlying profitability towards meeting its
interest obligations which may be blurred to an extent by the effects of revision in tax rates,
policies and prior period tax adjustments over several accounting periods.
TABLE: 17
YEAR RATIO REMARKS
200910 1,817.79/257.53 =
7.06
Good position
201011 1,652.33/257.32 =
5.96
Good position
201112 855.07/367.07
=2.33
Satisfactory
201213 608.46/380.16
=1.60
Satisfactory
8/9/2019 Thejo Engg-Final OS1
81/98
8/9/2019 Thejo Engg-Final OS1
82/98
82 | P a g e
(b)EQUITY DIVIDEND COVERAGE RATIO
Dividend Coverage Ratio indicates the capacity of an organization to pay dividends out of
profit attributable to the share holders. A dividend cover of 3 implies that a company has
sufficient earnings to pay dividends amounting to 3 times of the present dividend payout
during the period. When calculating dividend coverage for ordinary share capital, it is
necessary to deduct any dividend paid on irredeemable preference shares from the net profit
earned during the accounting period in order to arrive at the earnings attributable to ordinary
share holders. Dividend on redeemable preference shares is already deducted from the
income statement as interest expense (finance cost) and hence no further adjustment is
required in its respect in the dividend cover calculation.
Equity Dividend coverage ratio= Earnings after tax and preference dividend/ Equity
dividend
TABLE: 18
YEAR RATIO REMARKS
200910 226.98/332.80
=6.92
Satisfactory
position
201011 382.96/41.46=9.23 Satisfactory
position
201112 671.83/47.39
=14.18
Satisfactory
position
201213 974.78/85.84
=11.35
Satisfactory
position
8/9/2019 Thejo Engg-Final OS1
83/98
83 | P a g e
GRAPH: 13
INFERENCE:
Dividend Coverage is a measure of the ability of an organization to pay dividends. Although
dividend payments are usually discretionary, companies normally seek to maintain a
reasonable level of dividend payout in line with the market expectations.
Generally, companies would aim to sustain a dividend cover of at least 2 times in order to
avail adequate financing through retained earnings while providing a reasonable cash return
on shareholder's investment. A higher or lower dividend cover may be appropriate depending
on the level of stability in earnings of the organizations.
Dividend cover consistently below 1.5 may suggest that the company might not be able to
maintain