A STUDY ON RATIO ANALYSIS

AT
RASTRIYA ISPAT NIGAM LIMITED
VISAKHAPATNAM

A Project report submitted in partial fulfillment of the requirements for the award of
`

MASTER OF BUSINESS ADMINISTRATION

By

EMANY VSNV CHANDRA Regd.No. 096G1E0010

Under the esteemed g !d"n#e $%

Sr!&K&SANYASI RAO
ASST& GENERAL MANAGER '()A* V!s"+h","tn"m Stee- P-"nt V!s"+h","tn"m Pr$.e#t G !de

VARAHA LAKSHMI NARASIMHA S/AMY EDU0ATIONAL TRUST GROUP O( INSTITUTIONS1 NARAVA 2334566

0ERTI(I0ATE O( PRO7E0T GUIDE IN

1

RASTRIYA ISPAT NIGAM LIMITED

This is to certify that EMANY VSNV !AN"#A the project report entitled a study on RATIO ANALYSIS !n RASTRIYA ISPAT NIGAM LIMITED is a bonafide wor$ done and submitted in partial fulfillment of the requirement for the award of Master of %usiness Administration by #e&d' No& 096G1E0010 under my &uidance ( super)ision durin& the period 3856252363 to 6953652366' St"t!$n: V!s"+h","tn"m D"te * +,-.+-/.++

K&SANYASI RAO ASST& GENERAL MANAGER '()A* RASTRIYA ISPAT NIGAM LIMITED V!s"+h","tn"m Stee- P-"nt

DE0LARATION

01 EMANY VSNV 0HANDRA here by solemnly declare that the project report entitled a study on the R"t!$ An"-ys!s& Submitted by me is a bonifide wor$ done and it is not submitted to any other uni)ersity or published anytime before' This project wor$ is in partial fulfillment of the requirements for the award of the M"ster $% B s!ness Adm!n!str"t!$n from VARAHA LAKSHMI NARASIMHA S/AMY EDU0ATIONAL TRUST GROUP O( INSTITUTIONS1 NARAVA&

P-"#e: VISAKHAPATNAM D"te: 6;53652366

EMANY VSNV 0HANDRA

A0KNO/LEDGEMENT
The satisfaction that accompanies the successful completion of any tas$ would be incomplete with out mentionin& people who made it possible and whose encoura&ement and constant &uidance crowned my effort with success' 0 wish to e2press my deep sense of &ratitude to Dr P SRINIVAS RAO1 DIRE0TOR1 VARAHA LAKSHMI NARASIMHA S/AMY EDU0ATIONAL TRUST<S GROUP O( INSTITUTIONS for permittin& me to do the project' 0 am &rateful to e2ternal project &uide SRI K&SANYASI RAO and 0 am also than$ful to SRI G&TRINADHA RAO1 DEPUTY MANAGER1 HRD ) PRO7E0T /ORKS !n VISHAKAPATNAM STEEL PLANT for his co-operation and in pro)idin& the information of the company needed by me' 0 especially than$ all those who ha)e helped me directly or indirectly' 0 e2press my profound than$s to my affectionate parents for their constant encoura&ement throu&hout my educational career'

'EMANY VSNV 0HANDRA*

0HAPTER 6

GENERAL INTRODU0TION
The end products of the business transactions are the 3inancial Statements comprisin& the position statement or %alance Sheet and the 0ncome Statement or Profit and 4oss Account' 3inancial statements are the basics for the decision ma$in& by the Mana&ement and as well as all other Sta$eholder who are interested in the affairs of the firm such as in)estors1 creditors 1 customers 1suppliers 1 financial institutions 1 employees 1potential in)estors 1 &o)t'1 and the &eneral public' 0n this project an attempt is made to $now the financial performance of RASHTRIYA ISPAT NIGAM LIMITED1 VISAKHAPATNAM STEEL PLANT throu&h #atio Analysis'

OB7E0TIVES O( THE STUDY:

The main objecti)e of the study is to apply theoretical concepts to the practical situations of #0N4 so as to compare and correlate the actual achie)ements with a theoretical conclusion' The main objecti)es of the study are* To $now the e2tent to which #0N45VSP is efficiently utili6in& its sources to its operations' To study the efficiency of o)erall operations' To analy6e the financial position of the #0N45VSP' To understand the capital structure of the #0N45VSP throu&h calculatin& of le)era&e ratios' To $now the profitability of the #0N45VSP throu&h calculation of profitability ratios' To &i)e appropriate su&&estions to the best performance of the or&ani6ation' 6

METHODOLOGY O( THE STUDY:

Methodolo&y is a systematic procedure of collectin& information in order to analy6e and )erify a phenomenon' principle sources' They are* 6& 2& 6& Pr!m"ry D"t": 0t is the information collected directly with out any references' 0n this study it is &athered throu&h inter)iews with concerned officers and staff1 either indi)idually or collecti)ely1 sum of the information has been )erified or supplemented with personal obser)ation conductin& personal inter)iews with the concerned officers of 3inance "epartment of Visa$hapatnam Steel Plant' 2& Se#$nd"ry D"t": The Secondary "ata was collected from already published sources such as1 Pamphlets of Annual #eports1 #eturns and 0nternal #ecords1 reference from Te2t %oo$s and 7ournals relatin& to 3inancial Mana&ement' The data collection includes* Pr!m"ry D"t" Se#$nd"ry D"t" The collection of information is from two

(a) (b)

ollection of required data from Annual #eports of Visa$hapatnam Steel Plant' #eference from Te2t %oo$s and 7ournals relatin& to 3inancial Mana&ement'

LIMITATIONS O( THE STUDY:

Thou&h the project is completed successfully a few limitations may be there'

Since the procedure and polices of the company will not

allow to disclose some confidential financial information1 the project has to be completed with the a)ailable data &i)en to us'

The study is carried basin& on the information and

documents pro)ided by the or&ani6ation and based on the interaction with the )arious employees of the respecti)e departments'

Analysis is limited to the results of #0N45VSP and not

compared to industry standards 5 results' "ata in some of the ratios has been directly ta$en from the prepared reports of #0N4 due to non-disclosure of input data due to confidentiality'

0HAPTER5II

DEVELOPMENT O( STEEL INDUSTRY IN INDIA:

7apan remained the lar&est e2porter of semi-finished and finished steel products in /../ followed by #ussia and 8$raine' 9ther si&nificant recent de)elopments in The "e)elopment of Steel 0ndustry in 0ndia should be )iewed in conjunction with the type and system of :o)ernment that has been rulin& the country' !owe)er1 its production in si&nificant quantity started only after +;..' The &rowth of steel industry can be studied by di)idin& the period into pre and post independence era' %y +;<.1 the total installed capacity of in&ot steel production was +'< million tons per year' 0n a short span of about = decades or so the capacity was increased ++ folds to about +> MT by the ;.?s'

+'+

Gr$=th $% Stee- Ind stry:

The &rowth in a chronolo&ical order is depicted below*

S No +' /' =' A' <' >' ,' @'

Year +@=. +@,A +@;; +;.> +;++ +;+@ +;A.-+;<. +;<+-+;<>

:rowth 9sier Marshall heather constructed the first manufacturin& plant at port-motor in Madras Presidency' 7ames Ers$in founded the %en&al 3rame Bor$s' 7amshedji TATA initiated the scheme for an inte&rated Steel Plant 3ormation of T0S 9 T0S 9 started production T0S 9 was founded 3ormation of My sore 0ron and Steel initiated at %hadra)athi in Carnata$a' 3irst 3i)e-Year Plan - The !industan Steel 4imited D!S4E was born in the year +;<A with decision of settin& up three plants each with + million tones in&ot steel per year at

10

#our$ela1 %hilai1 and "ur&apur' T0S 9 started its ;' +;<>-+;>+ e2pansion pro&rammed' Second 3i)e-Year Plan - A bold decision was ta$en up to increase the in&ot steel output in 0ndia to > million tones per year and its production at #ou$ema1 %hilai and +.' ++' +/' +=' +;>+-+;>> +;>A +;>>-+;>; +;>;-+;,A "ur&apur Steel Plant started' Third 3i)e-Year Plan F "urin& the plan the three Steel Plants under !S4 ( T0S 9 were e2panded' %o$aro Steel Plant came into e2istence #ecession Period F Till the e2pansion pro&rams were acti)ely e2isted durin& this period 3ourth 3i)e-Year Plan F Salem Steel Plant started' 4icenses were &i)en for settin& up of many Mini Steel Plants and re-rollin& mills :o)ernment of 0ndia' Plants in south are each in Visa$hapatnam and Carnata$a' SA04 +A' +;,A-+;,; was formed durin& this period on /Ath 7anuary +;,=' 3ifth 3i)e-Year Plan F The idea of settin& up the fifth inte&rated Steel Plant1 the first re-based plant at Visa$hapatnam too$ a definite shape' At the end of the 3ifth 3i)e-Year Plan the total installed capacity from si2 +<' +>' +;,;-+;@. +;@.-+;@< inte&rated plants was up to +.'> million tons' Annual Plan - The Erstwhile So)iet 8nion a&reed to help in settin& up the Visa$hapatnam Steel Plant' Si2th 3i)e-Year Plan F Bor$ on Visa$hapatnam Steel Plant started with a bi& ban& and top priority was accorded to start the plant' Schemes for moderni6ation of %hilai Steel Plant1 #our$ela Steel Plant1 "ur&apur steel plant and T0S 9 were initiated' apacity at the end of Si2th 3i)eYear Plan from si2 inte&rated plants stood ++'<. million +,' +;@<-+;;+ tons' Se)enth 3i)e-Year Plan F E2pansion wor$s at %hilai and %o$aro Steel Plant completed' Pro&ress of Visa$hapatnam Steel Plant pic$ed up and the nationali6ed concept has been introduced to commission the plant with =. MT liquid steel +@' +;;/-+;;, capacities by +;;.' Ei&ht 3i)e-Year Plans F The Visa$hapatnam Steel Plant was commissioned in +;;/' The cost of plant has become 11

around @,<< cores' Visa$hapatnam Steel Plant started the production and moderni6ation of other steel plants is also +;' +;;,-/../ duly en&a&ed' Ninth 3i)e-Year Plant F #estructurin& of Visa$hapatnam Steel Plant and other public sector underta$in&s'

/.

/../-/..,

Tenth 3i)e-Year Plan FSteel industry re&isters a &rowth of ;';G'Visa$hapatnam steel plant has hi&h re&ime tar&ets and achie)ed the best of them'

(!rst (!>e5Ye"r P-"n

'6496 t$ 6498*:

No new steel plant came up1 as the first plan was mainly a&riculture oriented' !owe)er1 00S 9 was allowed to e2pand form +MT5year to / MT5year of in&ots1 and from .'< MT5year to +'. MT5year of steel' And1 the 3irst 3i)e-Year Plan contemplated a new Steel Plant to be erected in Public Sector' Thus the !industan Steel 4imited D!S4E was born on +; th 7an +;<A with the decision of settin& up three steel plants each with one million tons in&ot steel per year at #our$ela1 %hilai and "ur&apur' Thou&h T0S 9 and 00S 9 were scheduled to e2pand1 T0S 9 started its e2pansion pro&ram'

Se#$nd %!>e5ye"r ,-"n '6498 t$ 6486*:

"urin& this period1 additional steel producin& capacity was added and a decision was ta$en to increase the in&ot steel output in 0ndia to > million tons per year' The three one million ton steel plant one each at #our$ela1 %hilai and "ur&apur

12

were completed durin& this period' They started production durin& the end of this plan'

The salient features are &i)en below*

Plant apacity #SP %SP "SP 4ocation Sundar&arh1 9rissa "ur&apur1 M'P' %urdwan1 B'%' ollaboration :ermany 8'S'S'# 8C Production DTonsE ,/.1... ,,.1... @..1...

0n addition to the abo)e %SP and "SP each were ha)in& the capacity to produce =..1... tons of pi& iron for sale'

Th!rd %!>e5ye"r ,-"n '6486 t$ 6488*:

"urin& this period1 the three steel plants under !S41 T0S 91 and 00S 9 were e2panded as shown below' !owe)er1 these could be completed only by +;>@ F +;>;'

#ecession Period D+;>> F +;>;E*

The amblin& e2pansion pro&ram ta$en up durin& the Third 3i)e-Year Plan could not be completed durin& that period' All the e2pansion pro&rams were acti)ely e2ecuted durin& this period

($ rth (!>e5Ye"r P-"n '6484 ? 64;@*:

%alancin& facilities were incorporated in all the steel plants' Salem Steel Plant wor$ was ta$en up durin& this period' 4icenses were &i)en for settin& up of many Mini Steel Plants and #ollin& Mills' :o)ernment accepted the idea of settin& up two more Steel Plants in the South one at Visa$hapatnam and other at !ospet in Carnata$a' %oth of them were en)isa&ed to produce plain low arbon Steel Products

13

initially with a capacity of / MT5year of in&ots' Steel authority of 0ndia 4td'1 was also formed durin& this period on /nd 7an +;,=' problems of 0ron and Steel 0ndustry' entral #esearch and "e)elopment 9r&ani6ation was set up in 7une1 +;,= to tac$le the research and de)elopment

(!%th (!>e5Ye"r P-"n '64;@ t$ 64;4*:

Bor$ on Salem project pro&ressed well' %o$aro with +', MT capacities started in 3eb +;,@' The e2pansions of %hilai Steel Plant form /'< MT to A MT and %o$aro from +', MT to A'. MT pic$ed up momentum' The idea of settin& up the < th inte&rated steel plant at Vi6a& too$ a definite shape' %y the end of fifth fi)e-year plan the total installed capacity from si2 inte&rated plants was +.'> MT5year' Annual plans +;,; to +;@.* )arious plans named abo)e were re)iewed and the pro&ress on different plants consolidated' So)iet F 8nion has a&reed to help in settin& up the Vi6a& steel plant'

S!Ath (!>e5Ye"r P-"n '64B3 ? 64B9*:

Bor$ in e2pansion of %hilai and %o$aro Plant was pro&ressed' %o$aroHs intermediate sta&e of /'< MT completed' Many of the units were commissioned e'&' aE Salem steel plant was commissioned bE on =+';'@+ wor$ on Vi6a& Steel Plant started with a ban& and cE top priority was accorded to moderni6e the plant at T0S 9' Schemes for moderni6ation of %SP1 #SP1 "SP1 and 00S 9 were initiated at the end of si2th fi)e-year plan' The capacity from si2 inte&rated steel plants stood at ++'<> MT'

Se>enth (!>e5Ye"r P-"n '64B9 t$ 6446*:

Almost all the units in the e2pansion wor$ of %hilai and %o$aro to A MT completed' Pro&ress of Vi6a& Steel Plant pic$ed up and the rationali6ed concept has been introduced to commission the plant with = MT liquid steel capacities by +;;.'

E!ghth (!>e5Ye"r P-"n '6442 t$ 644;*:

14

All units of Vi6a& Steel Plant were commissioned by 7uly1 +;;/' :o)ernment of 0ndia has &i)en permission to set up Mini Steel Plants in Pri)ate Sectors'

N!nth (!>e5Ye"r P-"n '644B t$ 2332*:

National "e)elopment

ouncil under

entral :o)ernment has deposited #s'

@<;'/.. corers in ninth fi)e year plan that tar&ets an o)erall >'<G &rowth &ross domestic production and will necessitate a ,G &rowth in the remainin& years of plan'

G-$C"- S#en"r!$:
As per 00S0 0n March /..< Borld rude Steel output was ;/'@MT when compared to rude Steel producer in /..< also March /..A D@,'/ MTE1 the chan&e in percenta&e was >'<G' hina remained the world?s lar&est @th position D@'@MTE 8SA remained the lar&est importer of semi-finished and finished steel products in /../ followed by hina and :ermany' the &lobal steel scenario ha)e been* 8nder the auspices of the 9E " D9r&ani6ation for Economic o-operation ( "e)elopmentE the ne&otiations amon& the major steel producin& countries for a Steel Subsidy A&reement DSSAE held in /..= with the objecti)e to a&ree on a complete ne&otiatin& te2t for the SSA by the middle of /..A' 0t also set subsidies for the Steel 0ndustry of a ceilin& of .'<G of the )alue of production to be used e2clusi)ely for #esearch ( "e)elopment' The &lobal economy witnessed a &radual reco)ery from late /..= onwards' hina has become one of the major factors currently dri)in& the world economy' 15 D/,'<MTE followed by 7apan D;'>MTE and 8SA D@'+MTE' 0ndia occupied the

 As a result of these economic de)elopments 00S0 has projected an increase by >'/G or <= million metric tones in /..A in the &lobal consumption of finished steel products' 00S0 has split the &rowth into two separate areas1 hina and the #est of the Borld D#9BE' Steel consumption in hina has been estimated to increase by +='+G or =+ met in /..A' 8SA has repealed the safe&uard measures on import of steel as a result of a rulin&1 by a BT9 "ispute #esolution Panel1 which held these measures to be ille&al under the BT9 re&ime'

Present S#en"r!$ $% Ind!"n Stee- Ind stry:

0ndia is uniquely placed to become a )ery lar&e producer and consumer of finished steel products in the world' Substantial reser)es of hi&h &rade iron ore1 low wa&e rates1 technical and mana&erial s$ills of a hi&h order ha)e all enabled 0ndia to &ain this stature1 by becomin& +.th lar&est producer of steel in the world' 8nfortunately for the 0ndian steel industry1 the price and distribution controls to which it was subjected till about economic liberali6ation process be&an in the early +;;.?s did not permit the lar&e inte&rated steel plants to moderni6e their steel manufacturin& facilities or to up&rade their technolo&ies to the state of art le)els from time to time'

Bith the economic liberali6ation that was initiated in +;;/1 0ndian Steel 0ndustry has to accept the ine)itable i'e' to appreciate the implications of low import duty rated1 face forei&n competition and some how impro)e its stren&ths and competiti)e ed&e to produce &ood quality products at lower prices and learn to sur)i)e in the mar$et place' 3ollowin& liberali6ation1 the steel 0ndustry is well set on the path of &lobali6ation' The dynamics of the Borld Steel 0ndustry has a close relation with 0ndian steel 0ndustry' Presently in 0ndia1 Steel products are bein& produced from four different sources )i6'1

16

 0nte&rated Steel Plants Mini Steel Plants #e-rollin& Mills Alloy ( Special Steel Plants

0nte&rated Steel Plants ha)e lar&er capacity and produce Steel from basic raw materials and the other three cate&ories mentioned are characteri6ed by low in)estment and low brea$-e)en point'

0h"r"#ter!st!#s $% Integr"ted Stee- P-"nts:

They ha)e lar&e capacities' !i&hly capital intensi)e' They ha)e lon& &estation period' 4abour intensi)e' They would ha)e all facilities includin& raw materials resources1 water supply1 power supply1 testin& and inspection facilities1 township facilities1 medical1 educational and recreational etc' 0nter dependency of all the processin& units on the proceedin& and succeedin& units in the path of materials flow' A potential source for earnin& forei&n e2chan&e throu&h e2ports' They ser)e as centers for the de)elopment of ancillary industries' They are major consumer of refractory materials'

The !ntegr"ted Stee- P-"nts !n Ind!" "re:

#our$ela Steel Plant 17

 %hilai Steel Plant %o$aro Steel Plant "ur&apur Steel Plant 0ndian 0ron and Steel ompany D00S 9E Tata 0ron and Steel ompany DT0S 9E Visa$hapatnam Steel Plant DVSPE

EA!m P$-!#y '23325233;*:

To facilitate sustained &rowth in e2ports to attain a share of +G of &lobal merchandise trade' To stimulate sustained economic &rowth by pro)idin& access to essential raw materials1 intermediates1 components1 consumables and capital &oods required for au&mentin& production and pro)idin& ser)ices' To enhance the technolo&ical stren&th and efficiency of 0ndian a&riculture1 industry and ser)ices1 thereby impro)in& their competiti)e stren&th while &eneratin& new employment opportunities1 and to encoura&e the attainment of internationally accepted standards of quality' To pro)ide consumers with &ood quality &oods and ser)ices at internationally competiti)e prices while at the same creatin& a le)el playin& field for the domestic producers

The Ne= Ind str!"- P$-!#y Reg!me:

The New 0ndustrial policy has opened up the iron and steel sector for pri)ate in)estment by DaE #emo)in& it from the list of industries reser)ed for public sector and DbE E2emptin& it from compulsory licensin&' 18

0mports of forei&n technolo&y as well as forei&n direct in)estment are freely permitted up to certain limits under an automatic route' Ministry of Steel plays the role of facilitator1 pro)idin& broad directions and assistance to new and e2istin& steel plants1 in the liberali6ed scenario'

The Gr$=th Pr$%!-e:

STEEL:
The liberali6ation of industrial policy and other initiati)es ta$en by the :o)ernment ha)e &i)en a definite impetus for entry1 participation and &rowth of the pri)ate sector in the steel industry' Bhile the e2istin& units are bein& moderni6ed5e2panded1 a lar&e number of new5&reen field steel plants ha)e also come up in different parts of the country based on modern1 cost effecti)e1 state of-the-art technolo&ies'

At present1 total DcrudeE steel ma$in& capacity is o)er =A million tons and 0ndia1 the @th lar&est producer of steel in the world1 has to its credit1 the capability to produce a )ariety of &rades and that too1 of international quality standards' As per the ratin&s of the presti&ious IBorld Steel "ynamicsJ1 0ndian !# products are classified in the Tier 00 cate&ory quality products- a major reason behind their acceptance in the world mar$et' E81 7apan has qualified for the top slot1 while countries li$e South Corea1 8SA share the same class as 0ndia'

0n pi& iron also1 the &rowth has been substantial' Prior to +;;+1 there was only one unit in the secondary sector' Post liberali6ation1 the A030s has sanctioned /+ new projects with a total capacity of appro2 ='; million tones' 9f these1 +> units ha)e already been commissioned' The production of millions in /../-.n ton=' "urin& the year /..=-.A1 the production of Pi& 0ron was <'//+ million tones'

19

M"r+et S#en"r!$:
After liberali6ation1 with hu&e scale addition to steel ma$in& capacity' Apparent consumption of steel increased from +A'@A million tons in +;;+-;/ to =.'/>< million tons in /..=-.A' The production of steel in /..=-.A is =>'+;= million tons as a&ainst =='>, million tons in /../-.= thereby re&isterin& ,'<G &rowth' The demand of steel has been firmed up both at home as well as internationally' Efforts are bein& made to boost demand particularly in rural areas and also to increase e2ports'

Pr$d #t!$n:
Steel industry was de-licensed and decontrolled in +;;+ and +;;/ respecti)ely' 0ndia is the @th lar&est producer of steel in the world' 0n /..=-.A1 finished steel production was =>'+;= million tones' Pi& iron production in /..=-.A was <'//+ million tons' Spon&e iron production was @'.@< million tons durin& /..=-/..A' The annual &rowth rate of crude steel production in /../-/..= was @G and in /..=-/..A was >G' 4ast A years production performance is as under*-

Dem"nd ? A>"!-"C!-!ty Pr$.e#t!$n:

20

 "emand- A)ailability of iron and steel in the country is projected by Ministry of Steel annually' :aps in A)ailability are met mostly throu&h imports' 0nterface with consumers by way of Steel onsumer ouncil e2ists1 which is conducted on re&ular basis' 0nterface helps in redressin& a)ailability problems1 complaints related to quality'

Pr!#!ng ) D!str!C t!$n

Price re&ulation of iron ( steel was abolished on +>'+'+;;/' "istribution controls on iron ( steel remo)ed e2cept < priority sectors1 )i6' "efence1 #ailways1 Small Scale 0ndustries En&ineerin& :oods and North Eastern re&ion' Allocation to priority sectors is made by Ministry of Steel' :o)ernment has no control o)er prices of 0ron ( Steel' 9pen mar$et prices are &enerally on rise' Price increases of late ha)e ta$en place mostly in lon& products than flat products' orporations1 E2porters of

Im,$rts $% Ir$n ) Stee-:

0ron ( Steel are freely importable as per the e2tant policy' 0ndia has been annually importin& around /'.< Million Tones of Steel'

21

 0mport duty on se)eral raw materials used by the steel sector li$e non-co$in& coal1 met co$e and nic$el has been reduced to <G' 0mport duty on co$in& coal has been reduced to KNil?'

EA,$rts $% Ir$n ) Stee-:

0ron ( Steel are freely e2portable and 0ndia is a net e2porter of steel' Ad)ance 4icensin& Scheme allows duty free import of raw materials for e2ports' "uty Entitlement Pass %oo$ Scheme D"EP%E also facilitates e2ports' The :o)ernment has temporarily suspended the "EP% on iron ( Steel ( ferroalloys w'e'f /,th March /..A as a measure to increase 0ron ( Steel a)ailability in the domestic mar$et' Steel E2porter?s 3orum has been set up to boost steel e2ports' An Anti "umpin& "irectorate has been set up under the Ministry of ommerce with adequate power to fi&ht trade actions while remainin& within the BT9 framewor$'

0 st$ms D ty:
The pea$ rate of last < years' ustom "uty has been reducin& sharply durin& the

0n the interim bud&et for /..A-.<1 announced in

7anuary?/..A the pea$ rate was reduced from /<G to /.G' 0n /..A the ustoms "uty on carbon steel items and pi& iron was further reduced to <G' The custom duty on scrap was nil' 0mport duty on co$in& coal has been reduced to Knil?1 and on metallur&ical co$e reduced to <G'

EA#!se D ty:

22

The :o)ernment has ta$en a number of steps to ensure the a)ailability of iron and steel items which inter-alias includes reduction in E2cise "uty by +>G with addition to Educational ess /G on +>G'

Le>!es $n Ir$n ) Stee-:

D( LEVY:
This was a le)y started for fundin& moderni6ation1 e2pansion and de)elopment of steel sector' The fund1 inter-alias1 supports* +E apital e2penditure for moderni6ation1 rehabilitation1 renewal ( replacement of 0nte&rated Steel /E #esearch ( "e)elopment =E #ebates to SS0 orporations AE E2penditure on E#8 of 7P S"3 le)y was abolished on /+'A';A abinet decided that corpus could be recycled for loans to Main producers 0nterest on loans to Main Producers is set aside for promotion of #(" on steel etc' An Empowered this sector' ommittee has been set up to &uide the #(" effort in plants' di)ersification1

23

0HAPTER5III

0OMPANY PRO(ILE
The :o)ernment of 0ndia has decided to set up an inte&rated Steel Plant at Visa$hapatnam to meet the &rowin& domestic needs of steel' Visa$hapatnam Steel

24

Plant was the effect of the persistent demands and mass mo)ements' 0t is another step towards increasin& the country?s steel production' The decision of the :o)ernment to set up an inte&rated steel plant was laid down by the then Prime Minister Smt' 0ndira :andhi' The Prime Minister laid the foundation stone on /.th 7anuary +;,+' The consultant1 M5s M N "astur ( o DP)tE 4td' submitted a techno-

economic feasibility report in 3ebruary +;,/1 and detailed project report for the plant1 with an annual capacity of ='A million tones of liquid steel' The :o)ernment of 0ndia and 8SS# si&ned an a&reement on +/th 7une +;,; for the co-operation in settin& up ='A million tones inte&rated Steel Plant' The project was estimated to cost to #s'=1 @;,'/@ crores based on prices as on Ath Luarter of +;@+'!owe)er1 on completion of the construction and commissionin& of the whole Plant in +;;/1 the cost escalated to #s'@1 ,<< crores based on prices as on /nd Luarter of +;;A' 8nli$e other inte&rated Steel Plants in 0ndia1 Visa$hapatnam Steel Plant is one of the most modern steel plants in the country' The plant was dedicated to the nation on +st Au&ust +;;/ by the then Prime Minister1 Sri'P'V'Narasimha #ao' New technolo&y1 lar&e-scale computeri6ation and automation etc1 are incorporated in the Plant at the international le)els and attain such labour producti)ity1 the or&ani6ational manpower has been rationali6ed' The manpower in the VSP has been limited to+,1 <.. employees' The plant has the capacity of producin& ='. million tones of liquid steel and /'><> million tones of saleable steel' 0t has set up two major %last 3urnaces1 the :oda)ari and the Crishna1 which are the en)y of any modern steel ma$in& comple2' The economy of a nation depends on core sector industries li$e iron and steel' Steel is the basic input for construction1 machines buildin& and transport industries' Ceepin& in )iew the importance of steel the followin& inte&rated steel plant with 25

forei&n collaborations was constructed in the public sector in the post independence era'

ORGANIDATION 0HART

CHAIRMAN CUM MANAGING DIRECTOR

"irector D3inanceE E" D3inanceE ompany Secretary A:M D0nt' AuditE

"irector D ommercialE E" DMME Addl' :M DM$t&E Addl' :M DM$t&E - Ser)ices ( E2ports

"irector DPersonnelE ":M DM(!SE 05 :M DP(AE Addl' :M DP(0#E ":M DTr&E ":M D!#"E ":M D4e&al AffairsE :M DBor$sE

"irector D9perationsE E" DMaint'E

"irector DVi&ilanceE Addl' :M DVi&'E

Addl' :M DLAT"E Addl' :M DAudio ( TelcoE Addl' :M DSer)icesE Addl' :M DSteelE Addl' :M D 1S( E

:M DMaint'E Addl' :M D #(#ME ":M DSystemE :M D"(EE( 05 PE S

A M D ordonE

VISION:
To be a continuously &rowin& world-class company' Be shall* !arness our &rowth potential and sustain profitable &rowth'

26

 "eli)er hi&h quality and cost competiti)e products and be the first choice of customers' reate an inspirin& wor$ en)ironment to unleash the creati)e ener&y of people'

Achie)e e2cellence in enterprise mana&ement' %e a respected corporate citi6en1 ensure clean and &reen en)ironment and de)elop )ibrant communities around us'

M!ss!$n:
To attain +> million tone liquid steel capacity throu&h technolo&ical up -&radation1 operational efficiency and e2pansion1 to produce steel at international standards of cost and quality1 and to meet the aspirations of the sta$eholders'

0$re V"- es:

ommitment ustomer satisfaction ontinuous impro)ement oncern of en)ironment reati)ity and inno)ation&

BRIE( IDEA ABOUT STEEL MAKING PRO0ESS

The modern era in steel ma$in& be&an with the introduction of !enry %essemerHs ( %essemer process in the late +@<.?s' This enabled steel to be produced

27

in lar&e quantities cheaply1 so that Mild Steel is now used for most purposes for which wrou&ht iron was formerly used' This was only the first of a number of methods of steel production' The :ilchrist-Thomas process Dor basic %essemer processE was an impro)ement to the %essemer process1 linin& the con)erter with a basic material to remo)e phosphorus' Another was the Siemens-Martin process of open hearth steelma$in& which li$e the :ilchrist-Thomas process complemented1 rather than replaced1 the ori&inal %essemer process' These were rendered obsolete by the 4in6-"onawit6 process of basic o2y&en steel ma$in&1 de)eloped in the +;<.?s1 and other o2y&en steelma$in& processes' 9ne third of worldHs steel is currently produced in hina' Arcelor-Mittal is howe)er the production' Bhite-hot steel pourin& out of an electric arc furnace'

HRD POLICY
focus

%last furnaces ha)e been used for two millennia to produce pi& iron1 a crucial step in the steel production process1 from iron ore by combinin& fuel1 charcoal1 and air' Modern methods use co$e instead of charcoal1 which has pro)en to be a &reat deal

competence needs #e)olution' more efficient and is creditin& with 0dentifyin& contributin& to the %ritish 0ndustrial
9nce the iron is refined1 con)erters are used to create steel from the iron' "urin& the late +;th and early /.th century there were many widely used methods such as the %essemer process and the Siemens-Martin process' inputs !owe)er1 basic o2y&en Pro)idin& trainin& steelma$in&1 in which pure o2y&en is fed to the furnace to limit impurities1 has &enerally replaced these older systems' Electric arc furnaces are a common method of reprocessin& scrap metal to create new steel' They can also be used for con)ertin& pi& iron to steel1 but they use a &reat deal of electricity Dabout AA. $Bh per metric tonE1 and are thus &enerally only economical when there is a plentiful supply of cheap electricity'

Monitorin& trainin& effecti)eness

reatin& learnin& en)ironment

3acilitatin& Self "e)elopment1 inno)ati)eness ( self e2pression

Enablin& employees to assume hi&her responsibility

28

29

HUMAN RESOUR0ES
HRD PHILOSOPHY IN VISAKHAPATNAM STEEL PLANT
Employees of the or&ani6ation are &reatest and most )aluable resources' Bhole on the one hand1 !#" should appropriately harness the employee potential for the attainment of the company objecti)es1 the company on the other1 as its corporate responsibility1 should create an enablin& climate where in human talent &ets the best opportunity for self e2pression1 all round de)elopment and fulfillment' People are more than mere resources and therefore it will be the company?s sincere endea)or to treat people with all the respect and that is warranted when employees are seen as more mere instrumentalities' !#" as a mana&ement function will be &i)en a place of strate&ic priority1 alon& with function li$e production1 maintenance1 materials on finance in the o)erall scheme of mana&ement action in the company' !#" does not refer to trainin& alone1 nor it is just a new name for trainin&' 0n #0N45VSP !#" refers to creati)e and inno)ati)e initiati)es in se)eral mana&ement functions for the de)elopment and &rowth of employees !#" should e)entually be a core philosophy of all mana&ement actions and should not remain merely a departmental 5 sectional acti)ity' All functional and di)isional heads responsible for )arious acti)ities of the company will imbibe the !#" spirit and suitability inte&rate !#" into their plans1 decisions and actions

30

HRD OC.e#t!>es $% V!s"+h","tn"m Stee- P-"nt:

To pro)ide initially a suitable match between employee competence le)el and company?s wor$ requirements To foster an appropriate climate and culture which nurtures employee competence and adequate moti)ational le)els for the application of their abilities to assi&ned jobs5roles with required commitment' To enable employees see$ &reater identification with the company by fusin& mana&ement decisions and actions with the requisite care1 concern and de)elopmental approach' To initially enable the employees and the or&ani6ation achie)e its mission and objecti)es and business &oals throu&h !#"'

OHSAS5 6B336 0ert!%!#"t!$n:

0t is widely reco&ni6ed that the wor$ itself and the wor$ en)ironment are factors are paramount importance for health and well-bein& of the wor$in& and &eneral population' Most industrial jobs are inherently associate with certain wor$in& conditions which are inimical to health and wor$ers e2posed to them sooner or later succumb to their ad)erse influence unless adequately protected' The principles of occupational ris$ mana&ement may be the same in de)eloped and de)elopin& countries' !owe)er1 there can be a wide di)ersity in practice' A major trend in the re&ulation of industrial ris$s to human health and the en)ironment is the pro)ision of rele)ant information to all sta$eholders and ris$ bearers' The %ritish Standard 0nstitute D%S0E* 9ccupational !ealth and Safety Assessment Series D9!SASE specification pro)ide theoretical insi&hts to enable an or&ani6ation to control its occupational health and safety D9!(SE ris$s and impro)e its performance'

31

Visa$hapatnam Steel Plant DVi6a& SteelE is an 0S9 ;..+1 0S9 +A..+1 and 9!SAS +@..+1 certified public sector or&ani6ation in 0ndia' 0t is the only steel plant in 0ndia1 had all the three certificates' This paper re)iews $ey aspects li$e ha6ard identification and ris$ assessmentD!0#AE carried out in <. departments for physical1 chemical and %iolo&ical ha6ards1 ris$ control measures ta$en1 dissemination of occupational ris$ mana&ement information to +,1... wor$force as a part of 9!SAS +@..+ certification process' Be summari6e the role of occupational health ser)ices department in ha6ard identification1 ris$ assessment and ris$ control at )arious wor$in& en)ironments with an emphasis on continual impro)ement and occupational ris$ mana&ement'

OC.e#t!>es:
E2pand plant capacity to >'=mT by /..@-.; with the mission to e2pand further in subsequent phases as per the corporate plan Sustain &ross mar&in to turno)er ration M /<G %e amon&st top fi)e lowest steel producers in the world by /..;-+. Achie)e hi&her le)els of customer satisfaction than competitors %e reco&ni6ed as an e2cellent business or&ani6ation by /..@-.; 0nstill ri&ht attitude amon&st employees and facilitate them to e2cel in their professional1 personal and social life'

E "-!ty P$-!#y:
Employees of Visa$hapatnam Steel Plant are committed to supply their customers? quality products and ser)ices' To accomplish this Visa$hapatnam Steel Plant will* Manufacture products as per specification and standards a&reed with the customer'

32

 3ollow clearly documented procedures for achie)in& e2pected quality standard of products and ser)ices' ontinuously stri)e to impro)e quality of all material1 processes and products'

Maintain an enablin& en)ironment1 which encoura&es acti)es in)ol)ement of all employees to pursue continuous impro)ement of quality'

Te#hn$-$g!#"- H!gh-!ghts $% VSP:

3irst shore based inte&rated steel plant' Selecti)e crushin& with pneumatic separation of coal blend' , Meter tall o$e 9)ens' "ry Luenchin& of hot co$e and production of steam and power from hot inert &ases' %ase-mi2 yard for the Sinter Plant' =/.. cu' m %last 3urnace ha)in& belled-less top equipment with con)eyor char&in&' :ranulation of +..G molten sla& at the ast !ouse' %'3' top pressure reco)ery turbine for power &eneration' "esulphuri6ation facilities for pre-treatment of hot metal' Sub lance measurement of dynamic blowin& control with computer' +..G continuous castin& of liquid steel' !i&h capacity1 hi&h speed1 computer controlled multi-line mills' 8se of on-line heat treatment ITemp coreJ processes for reinforcement bars' 8se of No twist rollin& and controlled coolin& IStelmoreJ of wire rods' 0ncorporation of peripheral yard for incomin& and out&oin& materials' 33

 3irst inte&rated steel plant to recei)e 0S9 ;../ certification for all its products'

M".$r s$ r#es $% R"= M"ter!"-s:

0ron 9re lumps ( fines %3 4ime Stone SMS 4ime Stone %3 "olomite SMS "olomite Man&anese 9re %oiler oal o$in& oal Bater supply Power supply Medium coo$in& coal %ailadilla1 M'P 7a&&ayyapeta1 A'P 8AE "ubai Madharam1 A'P hipuripalli1 A'P Talcher1 9rissa Australia Yeluru canal1 Andhra Pradesh apti)e power plant :idi5Swan&5#ajarappa5Car&il

M".$r Un!ts:
ANN8A4 AP' DK...TE /1/>+ <1/<> =1A.. =1... ,+. @<. @<.

"EPA#TMENTS 9CE 9VE#NS S0NTE# P4ANT %4AST 38#NA E STEE4 ME4T S!9P 4MMM B#M MMSM

8N0TS D='. MT STA:EE = %atteries each of >, o)ens ( , Mts !ei&ht / Sinter machines of =+/ Sqm &rate area each / 3urnaces of =/.. cu m )olume each = 4" on)erters each of +<. um' Volume and si6e A strand bloom casters A Stand finishin& Mill / 2 +. Stand finishin& Mill > Stand finishin& Mill

St"t!st!#"- In%$rm"t!$n: MANPO/ER PRO(ILE ? GRO/TH PATTERNS

34

YEA# =+-=-+;;, =+-=-+;;@ =+-=-+;;; =+-=-/... =+-=-/..+ =+-=-/../ =+-=-/..= =+-=-/..A =+-=-/..< =+-=-/..> =+-=-/.., =+-=-/..@ =+-=-/..; =+-=-/.+.

ENE 8T0VES />+, />+, />+, />@= A./, A/.= A=.@ A<== A<+/ A>/; A>,A A;>, </+@ </>=

N9N-ENE 8T0VES +A<,. +A<,/ +A.@, +=<;= +=+.A +/@/= +/<@> +//// +/+.+ ++;=/ ++,/, ++AA; +/.., +/<>,

MAN PO/ER PRO(ILE

35

16000 14000 12000 10000 8000 6000 4000 2000 0 EXECUTIVES NONEXECUTIVES

31-3-1997 31-3-1998 31-3-1999 31-3-2000 31-3-2001 31-3-2002 31-3-2003 31-3-2004 31-3-2005 31-3-2006 31-3-2007 31/03/2008 31/03/2009 31/03/2010

Error* #eference source not foundE

"-!%!#"t!$n Pr$%!-e "s $n F6&3F&2363:

En&ineerin& "iploma :rad5P: 4iterates 0T0

-+A'=AG -+.'==G
-++'><G -/A'==G -=;'=<G
E ngineering D iplom a G raduation/P G IT I iterate!

36

DIVISION5/ISE MAN PO/ER:

Bor$s Projects Mines -/'+AG -+=',/G 9thers -@/'.=G -/'+.G
" o r#! P ro $e %t! & in e ! ' t( e r!

A/ARDS:
+' 0S9 ;../ for SMS and all the down stream units F a unique distinction in the steel industry' /' 0ndira Priya "arshini Vri$sha Mitra award +;;/-;=1 Nehru memorial national award for pollution control +;;/-;= ( +;;=-;A' =' A' <' >' ,' @' ;' +.' EEP e2port e2cellence award F +;;A-;<' 00 DSouthern #e&ionE ener&y conser)ation award F +;;<-+;;>' ontinuously &rowin& peacoc$ D+st pri6eE national quality award F +;;>' Steel ministries trophy I%est safety performance F +;;>'J 00M national quality commitment award F +;;,' :old star award for e2cellent performance in producti)ity' 8dyo& e2cellence &old medal for e2cellence in steel plant' E2cellence award for out standin& performance in producti)ity mana&ement1 quality and inno)ation' ++' +/' +=' +A' 0SPAT Sura$sha Puras$ar D+st pri6eE for lar&est accident free period +;;+-;A' PM Trophy for the year /../-.= as the %est 0nte&rated Steel Plant Borld quality commitment international star award in /..A ll-:% National Award in /..< 37

+<' +>' +,' +@' +;' /.'

Safety inno)ation award in /..> 9r&ani6ational e2cellence award in /..> National Ener&y onser)ation Award in /..> Enterprise E2cellence Award F /.., Viswa$arma #ashtriya Puras$ar F /.., %est Luality ircles implementin& 9r&ani6ation Award -/..,

Em,-$yee !n>$->ement ) Pr$#ess !m,r$>ements:

The ima&ination and creati)ity of employees ha)e always been $ey success factors for the company' Employees of #0N4 ha)e always been at the forefront in contributin& ideas for process impro)ements' by employees in process impro)ements' Voluntary in)ol)ement of employees in A/<+ quality circles projects is a testimony of the interest e2hibited

S"%ety ) He"-th:
Safety and health of employees has always been the prime concern in the plant and all efforts ha)e been made to le)era&e upon the safety initiati)es to ma2imi6e employee morale and satisfaction' These initiati)es ha)e yielded positi)e results with a +='==G reduction in reportable accidents when compared to year /..,-.@'

0$r,$r"te S$#!"- Res,$ns!C!-!ty:

#0N4 continues to contribute in the area of D S#E' community calamities' health care1 people care1 orporate Social #esponsibility de)elopment1 cultural

S# acti)ities in #0N4 focus mainly on En)ironmental care1 education1 peripheral

efflorescence1 acti)ities as a responsible corporate citi6en and help durin& natural

38

0HAPTER5IV

0$n#e,t "- (r"me /$r+

39

(!n"n#!"- R"t!$ An"-ys!s

Intr$d #t!$n:
The traditional financial statements comprisin& the balance sheet and the profit and loss account are pro)in& the information related to the financial operation of the firm' They pro)ide some e2tremely useful information that mirrors the financial position on a particular date in terms of the structure of assets1 liabilities and owner?s equity and so on' The profit and loss account shows the results of operations durin& a certain period of time in terms of the re)enues obtained and the cost incurred durin& the year' Therefore1 much can be learnt about a firm from a careful e2amination of its financial statements' 8sers of financial statements can &et further insi&ht about financial stren&ths and wea$nesses of the firm if they properly analy6e information reported in these statements' Mana&ement should be particularly interested in $nowin& financial wea$ness of the firm to ta$e suitable correcti)e actions' The future plans of the firm should be laid down in )iew of the firm?s financial stren&ths and wea$nesses' Thus1 financial analysis is the startin& point for ma$in& plans1 before usin& any sophisticated forecastin& and plannin& procedures' 8nderstandin& the past is a pre-requisite for anticipatin& the future'

R"t!$ An"-ys!s 5 Intr$d #t!$n:

#ation analysis is a widely F used tool of financial analysis' 0t is used to interpret the financial statements so that the stren&ths and wea$nesses of the firm as well as its historical performance and current financial condition can be determined' A ratio is defined as Ithe indicated quotient of two mathematical e2pressionsJ and as the Ithe relationship between two or more thin&sJ' 0t is a benchmar$ for e)aluatin& the financial position and performance of a firm'

40

The term ratio refers to the numerical or quantitati)e relationship between two items5)ariables' This relationship can be e2pressed as* +' Percenta&es1 say1 Net Profits are /<G of Sales Dassumin& Net Profit of #s'/<1... and Sales of #s'+1..1...E1 /' 3raction DNet profit is +5Ath of SalesE and =' Proportion of numbers Dthe relationship between Net profits and Sales is +*AE' These alternati)e methods of e2pressin& items1 which are related to each other1 are1 for purpose of financial analysis1 referred to as ratio analysis' 0t should be noted that computin& the ratios does not add any information already inherent in the abo)e fi&ures of profits and sales' Bhat the ratios do is that they re)eal the relationship in a more meanin&ful way so as to enable us to draw conclusions from them' The rationale of ratio analysis lies in the fact that it ma$es related information comparable' A sin&le fi&ure by itself has no meanin& but when e2pressed in terms of a related fi&ure1 it yields si&nificant inferences' 3or instance1 the fact that the Net profits of a firm amount to1 say #s' Ten 4a$hs throws no li&ht on its adequacy or otherwise' The fi&ure of Net profit has to be considered in relation to other )ariables' !ow does it stand in relation to salesO 0f1 therefore1 Net profits are shown in terms of their relationship with items such as Sales1 Assets1 apital employed1 Equity capital and so on1 meanin&ful conclusions can be drawn re&ardin& their adequacy' To carry the abo)e e2ample further1 assumin& the capital employed to be #s'<. la$h and #s'+.. la$h1 the Net profit are /.G and +.G each respecti)ely' #atio analysis1 thus1 as a quantitati)e tool1 enables analysts to draw quantitati)e answers to questions such asP are the Net profits adequateO Are the assets bein& used efficientlyO 0s the firm sol)entO an the firm meet its current obli&ations and so onO

R"t!$ An"-ys!s 5 Im,$rt"n#e:

41

As a tool of financial mana&ement1 ratios are of crucial si&nificance' The importance of ratio analysis lies in the fact that presents facts on a comparati)e basis and enables the drawin& inference re&ardin& the performance of a firm' #atio analysis is rele)ant in assessin& the performance of a firm in respect to the followin& aspects' +' /' =' A' <' >' 4iquidity position 4on&-term sol)ency 9perational efficiency 9)erall profitability 0nter-firm comparison1 and Trend analysis

6&

L!G !d!ty ,$s!t!$n:5

Bith the help of ratio analysis conclusions can be drawn re&ardin& the liquidity position of a firm' The liquidity position of a firm would be satisfactory if it is able to meet its current obli&ations when they become due' A firm can be said to ha)e the ability to meet its short-term liabilities if it has sufficient liquid funds to pay the interest on its short-maturin& debt usually within a year as well as to repay the principal' This ability is reflected in the liquidity ratio of a firm' The liquidity ratios are particularly useful in credit analysis by ban$s and other suppliers of short-term loans' ratios include The ratio' ommon liquidity ash flow urrent ratio1 Luic$ ratio and The operatin&

2&

L$ng5term s$->en#y:5
#atio analysis is equally useful for assessin& the lon&-term financial )iability of a firm' This aspect of the financial position of a borrower is of concern to the lon&-term creditors1 security analysts and the present and potential owners of a business' The lon&-term sol)ency is measured by the le)era&e5capital structure and profitability ratios1 which focus on earnin& power and operatin& efficiency' #atio analysis re)eals the stren&th and wea$nesses of a firm in this respect' The le)era&e ratios1 for instance1 will indicate whether a firm has a reasonable proportion of )arious sources of finance or if it is hea)ily loaded

42

proportion of )arious sources of finance or if it is hea)ily loaded with debt in which case its sol)ency is e2posed to serious strain' Similarly the )arious profitability ratios would re)eal whether or not the firm is able to offer adequate return to its consistent with the ris$ in)ol)ed' 0t includes "ebt-equity ratio1 ash co)era&e ratio1 the times interest earned ratio etc'

F& O,er"t!ng E%%!#!en#y:5

Another dimension of the usefulness of the ratio analysis1 rele)ant from the )iew point of mana&ement1 is that it throws li&ht on the de&ree of efficiency in the mana&ement and utili6ation of its assets' measure this $ind of operational efficiency' The )arious acti)ity ratios

@&

O>er"-- Pr$%!t"C!-!ty:5
8nli$e the outside parties1 which are interested in one aspect of financial position of a firm1 the mana&ement is constantly concerned about the o)er-all profitability of the enterprise' That is1 they are concerned about the ability of the firm to meet its short-term as well as lon&-term obli&ations to its creditors1 to ensure a reasonable return to its owners and secure optimum utili6ation of the assets of the firm' This is possible if an inte&rated )iew is ta$en and all the ratios are considered to&ether'

9&

Inter5%!rm 0$m,"r!s$n:5
#atio analysis not only throws li&ht on the financial position of a firm but also ser)es as a steppin& stone to remedial measures' This is made possible due to inter-firm comparison and comparison with industry a)era&es' A sin&le fi&ure of a particular ratio is meanin&less unless it is related to some standard or norm' 9ne of the popular techniques is to compare the ratios of a firm with the industry a)era&e' An inter-firm comparison would demonstrate the firm?s position )is-Q-)is its competitors'

8&

Trend An"-ys!s:5

43

#atio analysis enables a firm to ta$e the time dimension into account' 0n other words1 whether the financial position of a firm is impro)in& or deterioratin& o)er the years' This is made possible by the use of trend analysis' The si&nificance of a trend analysis of ratios lies in the fact that the analysis can $now the direction of mo)ement1 i'e'1 whether the mo)ement is fa)orable or unfa)orable' 3or e2ample1 the ratio may be low as compared to the norm but the trend may be upward' 9n the other hand1 thou&h the present le)el may be satisfactory but the trend may be a declinin& one'

R"t!$ An"-ys!s5L!m!t"t!$ns:
#atio Analysis is a widely used tool of financial analysis' Yet1 it suffers from )arious limitations' The operational implication of this is that while usin& ratios1 the conclusions should not be ta$en on their face )alue' Some of the limitations1 which characteri6e ratio analysis1 are i' ii' iii' "ifficulty in comparison' 0mpact of 0nflation1 and onceptual "i)ersity

!&

D!%%!# -ty !n #$m,"r!s$n:5

9ne serious limitation of ratio analysis arises out of the difficulty associated with there comparability' by )arious firms'

9ne technique that is employed is inter-firm

comparison' %ut such comparison is )itiated by different procedures adopted "ifferences in basis of in)entory )aluation De'&'*- last in first out1 a)era&e cost and costEP

"ifferent depreciation methods Di'e' strai&ht line Vs' written down basisEP

Estimated wor$in& life of assets1 particularly of plant and equipmentP Amorti6ation of deferred re)enue e2penditure such as preliminary e2penditure and discount on issue of sharesP

44

apitali6ation of leaseP Treatment of e2traordinary items of income and e2penditureP and so on'

Secondly1 apart from different accountin& procedures1 companies may ha)e different accountin& procedures1 implyin& differences in the composition of assets1 particularly current assets' 3or these reasons1 the ratios of two firms may not be strictly comparable'

!!&

Im,"#t $% In%-"t!$n:5
The second major limitation of the ratio analysis is associated with price le)el chan&es' This is a wea$ness of the traditional financial statements1 which are based on historical cost' An implication of this feature of the financial statements as re&ards ratio analysis is that assets acquired at different periods are1 in effect1 shown at different prices in the balance sheet1 as they are not adjusted for chan&es in the price le)el' As a result1 ratio analysis will not be strictly comparable'

!!!&

0$n#e,t "- D!>ers!ty: 5

The factor that influences the usefulness of ratios is that there is difference of opinion re&ardin& the )arious concepts used to compute the ratios' There is always room for di)ersity of opinion as to what constitutes shareholderRs equity1 debt1 assets1 profit and so on' 3inally1 ratios are only a post-mortem analysis of what has happened between two balance sheet dates' 3or one thin& the position in the interim period is not re)ealed by ratio analysis' Moreo)er1 they &i)e no clue about the future' 0n brief1 ratio analysis suffers from some serious limitations' The analysis should not be carried away by its o)er simplified nature1 easy computation with hi&h de&ree of precision' The reliability and si&nificance attached to ratios will lar&ely depend upon the quality of data on which they

45

are based' They are as &ood as the data itself1 ne)ertheless1 they are an important tool of financial analysis'

R"t!$ An"-ys!s5G !de-!nes t$ se:

The calculation of ratios may not be a difficult tas$ but their use is not easy' The information on which these are based1 the constraints of financial statements1 objecti)es for usin& them1 the caliber of the analyst1 etc1 are important factors1 which influence the use of ratios' 3ollowin& &uidelines5factors may be $ept in mind in interpretin& )arious ratios' The reliability of ratio is lin$ed to the accuracy of information in financial statements' %efore calculatin& ratios one should see whether proper concepts and con)entions are used for preparin& financial statements of not' The purpose of the user is also important for the analysis of ratios' A creditor1 a ban$er1 an in)estor1 a shareholder1 all has different objects for studyin& ratios' The purpose DorE object for which ratios are required to be studied should always be $ept in mind for studyin& )arious ratios' "ifferent objects may require the study of different ratios' Another precaution in ratio analysis is the proper selection of appropriate ratios' The ratios should match the purpose for which these are required'

R"t!$ An"-ys!s50$n#- s!$n:

alculatin& a lar&e number of ratios without determinin& their need in the present conte2t may confuse the thin&s instead of sol)in& them' 9nly those ratios should be selected which can throw proper li&ht on the matter to be discussed' 8nless otherwise the ratios calculated are compared with certain standards one will not be reach at conclusions' These standards may be a rule of thumb as in current ratio D/*+E1 may be industry standards1 may be projected ratios etc' 46

The comparison of calculated ratios with the standards will help the analyst in formin& his opinion about financial situation of the concern'

The ratios are only the tools of analysis but their interpretation will depend upon the caliber and competence of the analyst' !e should be familiar with )arious financial statements and the si&nificance of chan&es etc'

A wron& interpretation may create ha)oc for the concern since wron& conclusions may lead to wron& decisions' The utility of ratios is lin$ed with e2pertise of the analyst'

The ratios are only &uidelines for the analystP he should not base his decisions entirely on them' !e should study any other rele)ant information1 situation in the concern1 &eneral economic en)ironment etc'1 before reachin& final conclusions' The study of ratios in isolation may not always pro)e useful' The

interpretation should use the ratios as &uide and may try to solicit any other rele)ant information which helps is reachin& a correct decision'

R"t!$ An"-ys!s5Ty,es:
Se)eral ratios1 calculated from the accountin& data1 can be &rouped into )arious classes accordin& to financial acti)ity or function to be e)aluated' As stated earlier1 the parties interested in financial analysis are short-term and lon&-term creditors1 owners and mana&ement' Short-term creditorsR main interest is in the liquidity position or the short-term sol)ency of the firm' 4on&-term creditorsR1 on the other hand1 are more interested in the lon&-term sol)ency and profitability of the firm' Similarly1 owners concentrate on the firm?s profitability and financial condition' Mana&ement is interested in e)aluatin& e)ery aspect of the firm?s performance' They ha)e to protect the interests of all parties and see that the firm &rows profitably' 0n )iew of the requirements of the )arious users of ratios1 we may classify them into the followin& four important cate&ories*

47

 40L80"0TY #AT09S 4EVE#A:E #AT09S A T0V0TY #AT09S P#930TA%040TY #AT09S

LIEUIDITY RATIOS:
0t is e2tremely essential for a firm to be able to meet its obli&ations as they become due' 4iquidity ratios measure the firm?s ability to meet current obli&ations'

0n fact1 analysis of liquidity needs the preparation of cash bud&ets and cash and 3und 3low statementsP but liquidity ratios1 by establishin& a relationship between cash and other current assets to current obli&ations pro)ided a quic$ measure of liquidity' A firm should ensure that it does not suffer from lac$ of liquidity1 and also that it does not ha)e e2cess liquidity' The failure of a company to meet its obli&ations due to lac$ of sufficient liquidity1 will result in a poor creditworthiness1 loss of creditorsR confidence1 or e)en in le&al tan&les resultin& in the closure of the company' A )ery hi&h de&ree of liquidity is also badP idle assets earn nothin&' The firm?s funds will be unnecessarily tied up in current assets' Therefore1 it is necessary to stri$e a proper balance between hi&h liquidity and lac$ of liquidity' The most common ratios1 which indicate the e2tent of liquidity or lac$ of it1 are* +' 8##ENT #AT09

/' L80 C #AT09 =' AS! #AT09

6&

0URRENT RATIO:
The current ratio is calculated by di)idin& current assets by current liabilities'

48

urrent assets urrent #atio S urrent liabilities

urrent assets include cash and those assets1 which can be con)erted into cash within a year1 such as Mar$etable Securities1 "ebtors and 0n)entories' be made by the firm in future' debt maturin& in the current year' urrent 4iabilities include Prepaid e2penses are also include in current assets as they represent the payments that will not reditors1 %ill payable1 Accrued e2penses1 Short-term ban$ loan1 and 0ncome Ta2 4iability and 4on&-term

The current ratio is a measure of the firmsR short-term sol)ency' The hi&her the current ratio1 the lar&er is the amount of rupees a)ailable per #upee of current liability1 the more is the firmsR ability to meet current obli&ations and the &reater is the safety of funds of short-term creditors'

2&

EUI0K RATIO:
The Luic$ ratio is calculated by di)idin& quic$ assets by quic$ liabilities' Luic$ assets

Luic$ #atio S Luic$ liabilities Luic$ assets or 4iquid assets mean those assets which are immediately con)ertible into cash without much loss' All current assets e2cept prepaid e2penses and in)entories are cate&ori6ed in liquid assets' Luic$ liabilities means those liabilities1 which are payable within a short period' Normally1 %an$ o)erdraft and ash credit facility1 if they become permanent mode of financin& are in quic$ liabilities'

As this ratio concentrates on cash1 mar$etable securities and recei)ables in relation to current obli&ation1 it pro)ides a more penetratin& measure of liquidity than current ratio'

49

F&

0ASH RATIO:
The cash ratio is calculated by di)idin& cash T mar$etable securities by

current liabilities ash #atio S ash T Mar$etable Securities urrent liabilities Since cash is most liquid asset1 a financial analyst may e2amine cash ratio and its equi)alent to current liabilities' Trade in)estment or mar$etable securities are equi)alent of cashP therefore1 they may be included in the computation of cash ratio'

LEVERAGE RATIOS:
The short-term creditors li$e ban$ers and suppliers of raw material are more concerned with the firmsR current debt-payin& ability' 9n the other hand1 lon&-term creditors li$e debenture holders1 financial institutions etc'1 are more concerned with the firmsR lon&-term financial stren&th' 0n fact1 a firm should ha)e stron& short-as well as lon&-term financial position' To jud&e the lon&-term financial position of the firm1 financial le)era&e1 or apital structure1 ratios are calculated' These ratios indicate mi2 of funds pro)ided by owners and lenders' As a &eneral rule1 there should be an appro2imate mi2 of debt and owner?s equity in financin& the firmsR assets' The manner in which assets are financed has a number of implications' 3irst1 between debt and equity1 debt is more ris$y from the firmsR point of )iew' The firm has a le&al obli&ation to pay interest on debt holders1 irrespecti)e of the profits made or losses incurred by the firm' 0f the firm fails to debt holders in time1 they can ta$e le&al action a&ainst it to &et payment and in e2treme cases1 can force the firm into liquidation' Secondly1 use of debt is ad)anta&eous for shareholders in two ways* a' They can retain control of the firm with a limited sta$e and

50

b' Their earnin&s will be ma&nified1 when the firm earns a rate of return on the total capital employed hi&her than the interest rate on the borrowin& funds' The process of ma&nifyin& the shareholders return throu&h the use of debt is called Ifinancial le)era&eJ or Ifinancial &earin&J or Itradin& on equityJ'

4e)era&e ratios may be calculated from the balance sheet to determine the proportion of debt in total financin&' Many )ariations of these ratios e2istP but all these ratios indicate the same thin&-the e2tent to which the firm has relied on debt in financin& assets' 4e)era&e ratios are also computed from the profit and loss items by determinin& the e2tent to which operatin& profits are sufficient to co)er the fi2ed char&es'

DEBT ? EEUITY RATIO:

The relationship describin& the lender contribution for each rupee of the owner?s contribution is called "E%T-EL80TY #AT09' "E%T F EL80TY "E%T "ebt-Equity #atio S EL80TY #AT09 is directly computed by the followin& formula'

PROPRIETARY RATIO:
This ratio states relationship between share capital and total assets' Proprietor?s equity represents equity share capital1 preference share capital and reser)es and surplus' The latter ratio is also called capital employed to total assets' EL80TY S!A#E AP0TA4 Proprietary #atio S T9TA4 TAN:0%4E ASSETS

51

P#9P#0ET9#S EL80TY D9#E T9TA4 TAN:0%4E ASSETS

INTEREST 0OVERAGE RATIO:

This ratio indicates the e2tent to which earnin&s can decline without resultant financial hardship to the firm because of its inability to meet annual interest cost' 3or e2ample1 co)era&e of < times means that a fall in earnin&s unto D+5< th E le)el would be tolerable1 as earnin&s to ser)ice interest on debt capital would be sufficiently a)ailable' This ratio is measured ad follows* 0nterest o)era&e #atio S E%0T --------------------------------0NTE#EST !A#:ES

(IHED ASSETS TO NET /ORTH:

This ratio indicates the e2tent to which Equity capital is in)ested in the net fi2ed assets' 0t is e2pressed as follows* 30NE" ASSETS 3i2ed Assets To Net Borth S NET B9#T! Net Borth is represented by Equity Share apital plus #eser)es and Surpluses' 0f the fi2ed assets are more than the Net Borth1 difficulties may arise1 as the depreciation will reduce profit' This also means that creditors ha)e contributed to fi2ed assets' The hi&her this ratio1 the less will be the protection to creditors' 0f this ratio is too hi&h1 the firm may find itself handicapped1 as too much capital is tied up in fi2ed assets but not circulatin&'

A0TIVITY RATIOS:
52

3unds creditors and owners are in)ested in )arious assets to &enerate sales and profits' The better the mana&ement of assets1 the lar&er the amount of sales' Acti)ity ratios are employed to e)aluate the efficiency with which the firm mana&ers and utili6es its assets' These ratios are also called Turno)er #atios because they indicate the speed with which assets are bein& con)erted or turned o)er into sales' Acti)ity ratios1 thus1 in)ol)e a relationship between sales and assets' A proper balance between sales and assets &enerally reflects that assets are mana&ed well' Se)eral acti)ity ratios can be calculated to jud&e the effecti)eness of asset utili6ation'

INVENTORY TURNOVER RATIO:

0n)entory turno)er ratio indicates the efficiency of the firm in producin& and sellin& its products' 0t is calculated by di)idin& the cost of &oods sold by the a)era&e in)entory'

The a)era&e in)entory is the a)era&e of openin& and closin& balance of in)entory' 0n a manufacturin& company in)entory of finished &oods is used to calculate in)entory turno)er' ost of &oods sold 0n)entory Turno)er #atio S A)era&e in)entory

DEBTORS TURNOVER RATIO:

A firm sells &oods for cash and credit' number of companies' redit is used mar$etin& tool by a

Bhen the firm e2tends credits to its customers1 debtors

Daccounts recei)ablesE are created in the firmsR accounts' The debtors are e2pected to

53

be con)erted into cash o)er a short period and1 therefore1 are included in current assets' The liquidity position of the firm depends on the quality of debtors to a &reater e2tent' "ebtors turno)er ratio indicates the )elocity of debt collection of a firm' 8n simple wards it indicates the number of times a)era&e debtors are turned o)er durin& a year' redit Sales "ebtors Turno)er #atio S -------------------------------A)&' Accounts #ecei)able

(IHED ASSETS TURNOVER RATIO:

The fi2ed assets turno)er ratio measures the efficiency with which the firm is utili6in& its in)estments in fi2ed assets1 such as land1 buildin&1 plant and machinery1 furniture1 etc' 0t also indicates the adequacy of sales in relation to the in)estment in fi2ed assets' The fi2ed assets turno)er ratio is sales di)ided by net fi2ed assets' The firm assets turno)er ratio should be compared with past and future ratios and also with ratio of similar firms and the industry a)era&e' The hi&h fi2ed assets turno)er ratio indicates efficient utili6ation of fi2ed assets in &eneratin& sales1 while low ratio indicates inefficient mana&ement and utili6ation of fi2ed assets' This ratio indicates the e2tent to which the debts ha)e been collected in time' The debt collection period indicates the a)era&e debt collection period' This ratio is a &ood indicator to the lenders of the firm1 because it e2plains to them whether their borrower is collectin& from its debt in time' An increase in this period indicates bloc$a&e of funds in debtors'

Sales 3i2ed Assets Turno)er #atio S Net fi2ed assets

54

/ORKING 0APITAL TURNOVER RATIO:

Bor$in& capital turno)er ratio indicates the )elocity of the utili6ation of net wor$in& capital' This ratio indicates the number of times the wor$in& capital is turned o)er in the course of a year' This ratio measures the efficiency with which the wor$in& capital is bein& used by a firm' A hi&her ratio indicates efficient utili6ation of wor$in& capital and low ratio indicates otherwise' %ut a )ery hi&h wor$in& capital turno)er ratio is not a &ood situation for any firm and hence care must be ta$en while interpretin& the ratio' Ma$in& of comparati)e and Trend Analysis can at best use this ratio for different firms in the same industry and for )arious periods' This can be calculated as follows* Sales Bor$in& apital Turno)er #atio S Net Bor$in& apital Net Bor$in& apital S urrent Assets - urrent 4iabilities DE2cludin& short-term ban$ %orrowin&sE

PRO(ITABILITY RATIOS:
A company should earn profits to Sur)i)e and :row o)er a lon& period of time' Profits are essential1 but it would be wron& to assume that e)ery action initiated by mana&ement of a company should be aimed at ma2imi6in& profits1 irrespecti)e of social consequences'

Profit is the difference between re)enues and e2penses o)er a period of time Dusually a yearE' Profit is the ultimate I9utputJ of a company1 and it will ha)e no future if it fails to ma$e sufficient profits' Therefore1 the financial mana&er should continuously e)aluate to the efficiency of the company in term of profits' The profitability ratios are calculated to measure the operatin& efficiency of the company' profitability of the firm' %esides mana&ement of the company1 creditors and owners are also interested in the reditors want to &et interest and repayment of principle re&ularly' 9wners want to &et a required rate of return on their in)estment' This is possible only when the company earns enou&h profits'

55

:enerally two major types of profitability ratios are calculated' PRO(ITABILITY IN RELATION TO SALES PRO(ITABILITY IN RELATION TO INVESTMENT

PRO(ITABILITY RATIOS IN RELATION TO SALES

+' :#9SS P#930T MA#:0N /' AS! MA#:0N

=' 9PE#AT0N: MA#:0N A' NET P#930T #AT09

6&

GROSS PRO(IT MARGIN:

:ross profit mar&in reflects the efficiency with which the mana&ement produces each unit of product' This ratio indicates the a)era&e spread between the cost of &oods sold and the sales re)enue'

This shows profits relati)e to sales after the deduction of production costs1 and indicates the relation between Production costs and sellin& price' A hi&h &ross profit mar&in relati)e to the industry a)era&e implies that the firm is able to produce at relati)ely lower cost'

A hi&h &ross profit mar&in ratio is a si&n of &ood mana&ement' A &ross mar&in ratio may increase due to any of the followin& factors' i' ii' iii' !i&her sales prices1 cost of &oods sold remainin& constant1 4ower cost of &oods sold1 sales prices remainin& constant1 A combination of )ariations in sales prices and costs1 the mar&in widenin&1 and

56

i)'

0ncreases in the proportionate )olume of hi&her mar&in items'

The analysis of these factors will re)eal to the mana&ement that how a depressed &ross profit mar&in can be impro)ed' A low &ross profit mar&in may reflect hi&her cost of &oods sold due to the firmsR inability to purchase raw materials at fa)orable terms1 inefficient utili6ation of plant and machinery1 resultin& in hi&her cost of production' The ratio will also be low due to fall in prices in the mar$et1 or mar$et reduction in sellin& price by the firm in an attempt to obtain lar&e sales )olume1 the cost of &oods sold remainin& unchan&ed' The financial mana&er must be able to detect the causes of a fallin& &ross mar&in and initiate action to impro)e the situation' Sales F ost of &oods sold D9rE :ross profit :ross Profit Mar&in #atio S Sales

Net Pr$%!t M"rg!n R"t!$:

Net profit is obtained when operation e2penses1 interest and ta2es are subtracted from the &ross profit' 0f the non-operatin& income fi&ure is substantial1 it may be e2cluded from PAT to see profitability arisin& directly from sales' Net profit mar&in ratio establishes a relationship between net profit and sales and indicated mana&ement?s efficiency in manufacturin&1 administerin& and sellin& the products' This ratio is the o)erall measure of the firmsR ability to turn each rupee sales into net profit' 0f the net mar&in is inadequate1 the firm will fail to achie)e satisfactory return on shareholderRs funds' This ratio also indicates the firmsR capacity to withstand in ad)erse economic conditions' A firm with a hi&h net mar&in ratio would be in an ad)anta&eous position to sur)i)e in the case of fallin& sellin& prices1 risin& costs of production or declinin& demand for the product' 0t would really be difficult for a low net mar&in firm to withstand these ad)ersities' Similarly1 a firm hi&her net profit mar&in can ma$e better 57

use of fa)orable condition1 such as risin& sellin& pricesP fall in costs of production or increasin& demand for the product' Such a firm will be able to accelerate its profits at a faster rate than a firm with a low net profit mar&in will' An analyst will be able to interpret the firm?s profitability more meanin&fully if he5she e)aluates both the ratios-&ross mar&in and net mar&in-jointly' To illustrate1 if the &ross profit mar&in has increased o)er years1 but the net profit mar&in has either remained constant or declined1 or has not increased as fast as the &ross mar&in1 this implies that the operatin& e2penses relati)e to sales ha)e been increasin&' decline due to fall in sales price or increase in the cost of production' Profit after Ta2 Net Profit Mar&in #atio S Sales The increasin& e2penses should be identified and controlled' :ross profit mar&in may

0ASH MARGIN RATIO:

ash profit e2cludes depreciation' 0t means Net profit after interests and ta2es but before depreciation' This ratio indicates the relationship between the profit1 which accrues in cash and sales' :reater percenta&e indicates better position and Vice-Versa as it shows the correct profit earned by the firm'

This ratio is e2pressed as cash profit to sales' ash profit ash Mar&in #atio S Sales N +..

OPERATING MARGIN RATIO:

9peratin& mar&in ratio is also $nown as 9peratin& Net profit ratio' 0t is the ratio of operatin& profit to sales' This ratio establishes the relationship between the total cost incurred and sales' 9peratin& profit is the Net profit after depreciation but

58

%efore 0nterests and Ta2es' The purpose of computin& this ratio is to find out the o)erall operational efficiency of the business concern' operations per rupee of sales' This ratio is e2pressed as operatin& profit to sales' 0t measures the const of

9PE#AT0N: MA#:0N #AT09 S

9peratin& profit Sales

N+..

PRO(ITABILITY RATIOS IN RELATION TO INVESTMENT:

+' #ET8#N 9N 0NVESTMENT /' #ET8#N 9N NET B9#T! =' #ET8#N 9N AP0TA4 A' #ET8#N 9N :#9SS %49 C

RETURN ON INVESTMENT:
The term in)estment refers to Total Assets' The funds employed in Net assets are $nown as apital Employed' Net assets equal net fi2ed assets plus current assets minus urrent liabilities e2cludin& %an$ loans' Alternati)ely1 apital employed in equal to Net worth plus total debt' The con)entional approach of calculatin& return on in)estment D#90E is to di)ide PAT by 0n)estment' 0n)estment represents pool of funds supplied by shareholders and lenders1 while PAT represents residual income of shareholdersP therefore1 it is conceptually unsound to use PAT in the calculation of #90' Also1 as discussed earlier1 PAT is affected by capital structure' efficiency of firms' E%0T D+-TE 0t is1 therefore more appropriate to use one of the followin& measures of #90 for comparin& the operatin&

59

#90 DorE #9TA S Total Assets E%0T D+-TE #90 DorE #9NA S NET Assets

Bhere #9TA and #9NA respecti)ely #eturn on Total assets and #eturn on Net assets'

#9NA is equi)alent of #eturn on apital Employed'

RETURN ON NET /ORTH:

NET Borth is also $nown proprietors Net apital Employed' The #eturn

should be calculated with reference to profits belon&in& to shareholders1 and therefore1 profit shall be Net profit after interest and ta2' The profit for this purpose will include e)en non-tradin& profit' This is &i)en as follows*

Net profit after interest ( ta2 #ET8#N 9N NET B9#T! S ---------------------------------------U+.. Shareholders funds

RETURN ON 0APITAL:
The #9 E is the second type of #90' The term capital employed refers to lon&-term funds supplied by the creditors and owners of the fund' 0t can be computed

60

in two ways' 3irst1 it is equal to non-current liabilities Dlon&-term liabilitiesE plus owner?s equity' Alternati)ely1 it is equi)alent to Net Bor$in& apital plus 3i2ed Assets' Thus1 the apital Employed pro)ides a basis to test the profitability related to the sources of lon&-term funds' A comparison of this ratio with similar firms1 with the industry a)era&e and o)ertime would pro)ide sufficient insi&ht into how efficiency the lon&-term funds of owners and creditors are bein& used' The hi&her the ratio1 the more efficient is the use of apital Employed' NET P#930T A3TE# TAN5E%0T #9 E S N +.. A)era&e Total apital Employed

RETURN ON GROSS BLO0K:

This ratio establishes a relationship between net profit and &ross fi2ed assets' This ratio emphasi6es the profit on in)estment in 3i2ed Assets' This ratio is e2pressed as follows* Net profit #ET8#N 9N :#9SS %49 C S :ross %loc$ N +..

NET P#930T is profit before Ta2' :ross %loc$ means :ross fi2ed assets i'e'1 3i2ed assets before deductin& depreciation'

61

0HAPTER5V

DATA ANALYSIA ) INTERPRETATION

R"t!$ "n"-ys!s !n VSPIRINL

62

L!G !d!ty r"t!$s:

urrent assets urrent ratioS ------------------------------------------urrent liabilities

TABLE SHO/S YEAR /ISE 0URRENT RATIO

D#s' 0n roresE Particulars 0n)entory Sundry debtors ash ( ban$ 9ther Assets 4oans ( ad)ances urrent assets urrent liabilities urrent ratios /..<-.> +/+>'A< +><'>< <>/+',. +@A'=> +.>='@A @/</'.. +<@,'@> <'/. /..>-., +/.='/A /+>'@. ,+;A'>@ =+A'A@ +<+@';. +.AA@'+. /+.A'=. A';, /..,-.@ +,>+'+< ;='A+ ,>;;'++ /;/'A= +;<@'A; ++@.A'>. =+;+'>/ =',. /..@-.; =/+<'/@ +;+'/, >>/A'+, /<@';+ +<>;'>; ++@<;'=/ A+@+'=/ /'@A /..;+. /A<+'</ +@+'+@ <A+<'<A +=,'A. +=><'./ ;<<.'>> A=.,'@A /'/+

12000 10000 8000 6000 4000 2000 0 Current assets Current l a! l t es

INTEPRETATION:
2005-06 2006-07 2007-08 2008-09 2009-10 The current ratio durin& the study period that is from /..<- /..> to /..;/.+.1 it has been obser)e that 1in the year /..< to /..> it is )ery hi&h that is <'/.' The current ratio has been decreasin&1 but the company is able to maintain hi&her current ratio than that of ideal ratio'

63

 As the current ratio is hi&her than the ideal current ratio1 the liquidity position is said to be &ood'

LIEUIDIEUI0K RATIO:
4iquid assets 4iquid ratio S --------------------------urrent liabilities

TABLE SHO/ING YEAR /ISE LIEUID RATIOS

D#s in roresE P"rt!# -"rs Sundry debtors ash ( ban$ 9ther assets 4oans ( ad)ances L!G !d "ssets 0 rrent -!"C!-!t!es L!G !d r"t!$ 12000 10000 8000 6000 4000 2000 0 2005-06 2006-07 2007-08 2008-09 2009-10 " #u $ assets Current l a! l t es 2339538 +><'>< <>/+',. +@A'=> +.>='@A ,.=<'<< +<@,'@> @&@F 233853; /+>'@. ,+;A'>@ =+A'A@ +<+@';. ;/AA'@> /+.A'=. @&F4 233;53B ;='A+ ,>;;'++ /;/'A= +;<@'A; +..A='AA =+;+'>/ F&6@ 233B534 +;+'/, >>/A'+, /<@';+ +<>;'>; @>AA'.A A+@+'=/ 2&38 2334563 +@+'+@ <A+<'<A +=,'A. +=><'./ ,.;;'+A A=.,'@A 6&89

INTERPRETATION:
0t has been obser)ed that the quic$ ratio of VSP is hi&h compared with ideal ratio'

64

 As the quic$ ratio durin& the period of study is hi&her than that of then ideal ratio1 the liquidity position is )ery &ood'

ABSOLUTE LIEUIDI 0ASH RATIO:

A%S948TE ASSETS Absolute liquid5 cash ratio* -------------------------------------8##ENT 40A%040T0ES

TABLE SHO/ING YEAR /ISE ABSOLUTE LIEUID RATIO 'Rs& !n #r$res* P"rt!# -"rs ash ( ban$ Absolute Assets urrent liabilities ABSOLUTE LIEUID RATIO 2339538 <>/+',. <>/+',. +<@,'@> F&9 233853; ,+;A'>@ ,+;A'>@ /+.A'=. F&@2 233;53B ,>;;'++ ,>;;'++ =+;+'>/ 2&@6 233B534 >>/A'+, >>/A'+, A+@+'=/ 6&9B 2334563 <A+<'<A <A+<'<A A=.,'@A 6&28

8000 7000 6000 5000 4000 3000 2000 1000 0 2005-06 2006-07 2007-08 2008-09 2009-10
0deal #atio .*<*+

Cas% & !an' (!s)lute (ssets Current l a! l t es (*SO"UTE "I+UI, -(TIO

INTERPRETATION:

65

The absolute liquid5 cash ratio of VSP is more than the ideal ratio' 0t means the company is enjoyin& hi&h liquidity and secured position'

LEVERAGE RATIO:
9utsider?s funds "ebt Equity #atio S---------------------------------------Shareholders? funds

TABLE SHO/ING YEAR /ISE DEBT EEUITY RATIO

'Rs& !n #r$res* ,"rt!# -"rs Secured loans 8nsecured loans 9utsiders funds Shareholders funds "ebt equity ratio 2339538 +,='@, =>;'AA <A='=+ @+,=', .'+= 233853; >.A'A< =+/'<+ ;+>';> ;<=@'/ .'+; 233;53B ==/',@ +.,';< AA.',= ++A@+'.A .'.@ 233B534 ;.,',/ +..'.A +..,',> +/A+;';+ .'+> 2334563 A.,'/@ @/<'/, +/=='<< +/@@<'.. .'+;

14000 12000 10000 8000 6000 4000 2000 0 2005-06 2006-07 2007-08 2008-09 2009-10 Outs $ers .un$s S%are%)l$ers .un$s

INTERPRETATION:
ompany is less dependent on outsiders funds'

0ts capital base is hi&h and stron&' 66

 0t can be concluded that the company is maintainin& less percent of debt in its capital structure'

INTEREST 0OVERAGE RATIO:

E%0T 0nterest co)era&e ratioS--------------------------------------30NE" 0NTE#EST

TABLE SHO/ING YEAR /ISE INTEREST 0OVERAGE RATIO

'Rs& !n #r$res* PARTICULARS E%0T 3i2ed interest Interest 0$>er"ge R"t!$ 2005-06 +;/.'<, =+'.> 86&BF 2006-07 //,.',> A@'A/ @8&43 2007-08 =./>';= =+'<, 49&BB 2008-09 /++A'.> @@'+A 2F&44 2009-10 +=/<'/. +;',> 8;&38

3500 3000 2500 2000 1500 1000 500 0 2005-06 2006-07 2007-08 2008-09 2009-10 E*IT / 0e$ nterest rate Interest C)1era2e -at )

67

INTERPRETATION:
ompany?s 0nterest satisfactory' 0t indicates that &reater ability of the firm to handle fi2ed char&es' !i&h interest co)era&e ratio does not indicate unutili6ed debt capacity in case of #0N41 since the company is ha)in& its own funds' o)era&e #atio is )ery hi&h and e2traordinarily

PROPRIETARY RATIO:

Share holders funds Proprietary ratioS----------------------------------------Total assets

TABLE SHO/ING THAT YEAR /ISE PROPRIETARY RATIO

D#s'in roresE PARTI0ULARS Share holders funds Total assets Pr$,r!et"ry R"t!$ 2339538 ,@/,'=+ +.<+';; ,@G 233853; ,@/,'=+ +/@=<'@ ,AG 233;53B ,@/,'=/ +</,>'<+ ,<G 233B534 ,@/,'=/ +,,=='A= ,;G 2334563 ,@/,'=+ +@</='/+ A/G

68

20000 15000 10000 5000 0 S%are %)l$ers .un$s T)tal asse ts 3-O3-IET(-4 -(TIO

2005-06 2006-07 2007-08 2008-09 2009-10

INTERPRETATION:
Proprietary ratio is a test of lon& term financial position' E2cept for the year /..;-+.1 all other years showin& hi&her ratio1 this indicates sound lon& term financial position' 0t is also indicatin& the sufficient use is bein& made of equity to finance the business'

SOLVEN0Y RATIO:
Total 4iabilities of outsiders Sol)ency ratio S------------------------------------------Total assets

TABLE SHO/ING YEAR /ISE SOLVEN0Y RATIO:

69

D#s' 0n roresE PARTI0ULARS Secured loans 8nsecured loans T$t"- -!"C!-!t!es t$ $ ts!ders T$t"- "ssets S$->en#y r"t!$ 2339538 +,='@, =>;'AA <A='=+ +.<++'.. 9&6J 233853; >.A'A< =+/'<+ ;+>';> +/@=<'@ ;&6J 233;53B ==/'.@ +.,';< AA.',= +</,>'<+ 2&BJ 233B534 ;.,',/ +..'.A +..,',> +,,=='A= 9&8BJ 2334563 A.,'/@ @/<'/, ><.'<@ +@<//';> F&96J

20000 15000 10000 5000 0 T)tal l a! l t es t) )uts $ers T)tal assets

2005-06 2006-07 2007-08 2008-09 2009-10

INTERPRETATION:
Sol)ency ratio of VSP ltd durin& the year /..>-., is hi&h as compared to other years'

0t sol)ency ratio is stable for last three years' 0t indicates the the sol)ency position of
VSP ltd is more satisfactory'

(UNDED DEBT TO TOTAL 0APITALIDATION:

38N"E" "E%T 3unded "ebt To Total apitali6ation S-------------------------------------T9TA4 AP0TA40VAT09N

70

TABLE SHO/ING YEAR5/ISE (UNDED DEBT TO TOTAL 0APITALIDATION RATIO D#s' in croresE

P"rt!# -"rs Secured loans 8nsecured loans 3unded debtDAE Total 3unds D%E Total capitali6ation DA5%E

2339538 +,='@, =>;'AA <A='=+ @+,=',. >'>.G

233853; >.A'A< =/+'<+ ;+>';> ;<=@'/. ;'>.G

233;53B ==/',@ +.,';< AA.',= ++A@+'.A ='@.G

233B534 ;.,',/ +..'.A +..,',> +/A+;';+ @G

2334563 A.,'/@ @/<'/, +/=/'<< +/@@< ;'<.G

14000 12000 10000 8000 6000 4000 2000 0 2005-06 2006-07 2007-08 2008-09 2009-10 Se5ure$ l)ans Unse5ure$ l)ans /un$e$ $e!t6(7 S%are %)l$er .un$s 6*7 T)tal 5a8 tal 9at )n 6(:*7

INTERPRETATION:

71

 "urin& the year /..;-+.1 the funded debt to total capitali6ation is ;G'0t is hi&h as compared to other periods but in the real sense it is quite low' There is enou&h scope for the company to raise lon& term loans from outsiders'

A0TIVITY RATIO:
INVENTORY TURNOVER RATIO:
NET SA4ES 0n)entory Turno)er #atio S----------------------------AV: 0NVENT9#Y

TABLE SHO/ING YEAR /ISE INVENTORY TURNOVER RATIO

D#s' in croresE
PARTICULARS Net sales A)& in)entory 0n)entory Turno)er #atio 2005-06 ,=.<',+ +/=>';; <';+ Times 2006-07 ,;=/'>> +/+.'@. >'<< Times 2007-08 ;.@@'=, +A@/'/. >'+= Times 2008-09 ;+/@'=@ +>//'+A <'>/ Times 200910 ;@.;'+< /@=='A. ='A> Times

72

10000 8000 6000 Net sales 4000 2000 0 2005-06 2006-07 2007-08 2008-09 2009-10 (12 n1ent)r;

INTERPRETATION:
The 0n)entory Turn 9)er #atio durin& the year /..;-+. was ='A> Normally hi&her the ratio indicates the better in)entory mana&ement' !i&her ratio also indicates that the company is not able to met the customers demand properly'

INVENTORY 0ONVERSION PERIOD:

No of wor$in& days 0n)entory on)ersion Period S--------------------------------------------0n)entory turno)er ratio

TABLE SHO/ING YEAR /ISE INVENTORY 0ONVERSION PERIOD

'Rs& !n #r$res*
P"rt!# -"rs 2339538 233853; 233;53B 233B534 2334563

73

No' of wor$in& days 0n)entory turno)er ratio 0n)entory con)ersion period

=>< <';+ >/ days

=>< >'<< <> days

=>< >'+= >. days

=>< >'@< <= days

=>< ,'/A <. days

400 300 200 100 0 2005- 2006- 2007- 2008- 200906 07 08 09 10

N)<). =)r' n2 $a;s N)<). =)r' n2 $a;s In1ent)r; turn)1er rat )

INTERPRETATION:
The in)entory con)ersion period durin& /..;-/.+. is <. days' 0t means that the in)entory has been disposed off or sold on an a)era&e of once in e)ery <. days'

DEBTORS TURN OVER RATIO

Net credit annual sales "ebtors Turn 9)er #atio S -----------------------------------A)era&e trade debtors

TABLE SHO/ING YEAR /ISE DEBTORS TURN OVER RATIO 'Rs& !n #r$res*
P"rt!# -"r 2339538 A' net sales ,=.<',+ b' a)era&e trade debtors +.,'A@ 233853; ,;=/'>> +;+'<A 233;53B ;.@@'=, +<<'+.< 233B534 ;+/@'=@ +A/'=A 2334563 ;@.;'+< +@>'/=

74

debtor turn o)er ratio

>@ times

A+ times

<; times

>A times

<= times

12000 10000 8000 6000 4000 2000 0 2005-06 2006-07 2007-08 2008-09 2009-10 !< a1era2e tra$e $e!t)rs (< net sales

INTERPRETATION:
The debtor turno)er ratio for the year /..;-+. is <A 0t can be concluded that the mana&ement is efficient in con)ertin& the debtors into cash

AVERAGE 0OLLE0TION PERIOD:

No of Bor$in& "ays A)era&e ollection Period S -------------------------------------------"ebtor?s turno)er ratio

TABLE SHO/ING YEAR /ISE AVERAGE 0OLLE0TION PERIOD

'Rs& !n #r$res*
PARTI0ULARS No of wor$in& days 2339538 =>< 233853; =>< 233;53B =>< 233B534 =>< 2334563 =><

75

"ebtors turno)er ratio A)&'collection period

>.';, < days

A+'A@ ; days

<@'<; > days

<<'>@ > days

>,'+/ < days

100> 80> 60> 40> 20> 0> 2005-06 2006-07 2007-08 2008-09 2009-10 ,e!t)rs t)urn)1er rat ) N) ). =)r' n2 $a;s

INTERPRETATION:
The a)& collection period durin& the year /..;-+.1 is < days* it represents the a)&' no of days for which the firm has to wait before its recei)ables are con)erted into cash' "urin& the period of study it has been obser)ed that debt collection period )aries from < to ; days !owe)er1 the a)&' collection period durin& different periods is quite low' 0t indicates the better quality of debtors and the efficiency of the debt collection department'

/ORKING 0APITAL TURNOVER RATIO:

Net sales Bor$in& capital turno)er ratio S ------------------------------------------------Bor$in& capital

76

TABLE SHO/ING YEAR /ISE /ORKING 0APITAL TURNOVER RATIO

'Rs& !n #r$res*
PARTI0ULARS a'net sales b' net wor$in& capital Bor$in& capital turno)er ratioDa5bE 2339538 ,=.<',+ >>>A'+A +'+. times 233853; ,;=/'>> @=A='@ .';< times 233;53B ;.@@'=, @>+/';, +'.< times 233B534 ;+/@'=@ ,>,@'.. +'+@ times 2334563 ;@.;'+< </A/'@/ +'@, times

10000 5000 0 2005- 2006- 2007- 2008- 200906 07 08 09 10 a<net sales a<net sales !< net =)r' n2 5a8 tal

INTERPRETATION:
The wor$in& capital turno)er ratio durin& the year /..;-+. i +'@, times' 0t shows that only +'.< of net current assets are used to &enerate + rupee of sales' The hi&her wor$in& capital ratio indicates that the efficient utili6ation of wor$in& capital'

77

PRO(ITABILITY RATIOS:
GROSS PRO(IT RATIO:
:ross profit :ross profit ratio S ---------------------------------U+.. Net sales TABLE SHO/ING YEAR /ISE GROSS PRO(IT RATIO

'Rs& !n #r$res*
PARTI0ULARS a' &ross profit b' net sales :ross profit ratioDa5bE 2339538 +;/+'.. ,=+A'.. />'=.G 233853; //,+'.. ,;=='.. /@',.G 233;53B =./,'.. ;.@@'.. =='=.G 233B534 /++<'.. ;+/@'.. /='/.G 2334563 +=/>'.. ;@.;'.. +='>.G

12000 10000 8000 6000 4000 2000 0 2005-06 2006-07 2007-08 2008-09 2009-10 a<2r)ss 8r). t !< net sales

INTERPRETATION:
0t has been obser)ed that the &ross profit ratio is in increasin& tread upto /..,.@ and it is decreasin& from /..@-.;

78

 Sales are in increasin& trend but the profit ratio is decreasin&' 0t is due to increased cost of production'

OPERATING PRO(IT RATIO:

9peratin& profit 9peratin& profit ratio S ----------------------------------------U+.. Sales TABLE SHO/ING YEAR /ISE OPERATING PRO(IT RATIO

'Rs& !n #r$res*
PARTI0ULARS 9peratin& profit Net Sales O,er"t!ng ,r$%!t r"t!$ 2339538 /.++'/+ ,=+A'.. 2;&93J 233853; /==;'/+ ,;=='.. 24&93J 233;53B ==/<'+; ;.@@'.. F8&83J 233B534 A;@@'+/ ;+/@'.. 9@&;3J 2334563 /A<.'<. ;@.;'.. 29&33J

10000 8000 6000 4000 2000 0 2005-06 2006-07 2007-08 2008-09 2009-10 O8erat n2 8r). t Sales O8erat n2 8r). t rat )

INTERPRETATION:
ompany recorded hi&her operatin& profit durin& /..@-.; and in other years1 it is more or less recorded same trends' 0t is indicates1 the company?s operational efficiency'

79

NET PRO(IT RATIO:

Net profit Net profit ratio S ----------------------------------------U+.. Sales

TABLE SHO/ING YEAR /ISE NET PRO(IT RATIO

D#s' in croresE
PARTI0ULARS A'net profit %' net sales Net profit ratioDA5%E 2339538 +/</'=, ,=.<',+ +,'+AG 233853; +=>='A= ,;=/'>> +,'+@G 233;53B +;A/',A ;.@@'=, /+G 233B534 +==<'<, ;+/@'=@ +A'>=G 2334563 ,;>'>, ;@.;'+< @'+/G

12000 10000 8000 6000 4000 2000 0 2005-06 2006-07 2007-08 2008-09 2009-10 (<net 8r). t *< net sales

INTERPRETATION:
Net profit is in decline position from /..@-.; in comparati)e with /..,-.@' Main attributable reason for the declinin& the profit is o)erall &lobal meltdown E)en in ad)erse mar$et conditions1 the company is able to earn net profits'

80

PRO(ITABILITY RATIOS BASED ON INVESTMENT:

RETURN ON SHAREHOLDERS INVESTMENT: Net Profit DAfter 0nterest ( Ta2E #9 0S ----------------------------------------------------2 +.. Share !olders 3unds

TABLE SHO/ING YEAR /ISE RATIOS BASED ON INVESTMENT

D#s' in croresE
PARTI0ULARS A'net profit %'share holders funds Ret rn $n !n>estment'AIB* 2339538 +/</'=, @+,=', 69&F2J 233853; +=>='A= ;<=@'/ 6@&24J 233;53B +;A/',A ++A@+'.A 68&42J 233B534 +==<'<, +/A+;';+ 63&;9J 2334563 ,;>'+. +/@@< 8&6BJ

14000 12000 10000 8000 6000 4000 2000 0 2005- 2006- 2007- 2008- 200906 07 08 09 10 -eturn )n n1est?ent6(/*7 *<s%are %)l$ers .un$s (<net sales

INTERPRETATION:
!i&hest return on in)estment was recorded in /..,-.@'

81

 0t has been obser)ed that the #90 is fluctuatin& from year to year' More reser)es and surplus funds ha)e been di)erted to e2pansion acti)ities

RETURN ON EEUITY 0APITAL:

Net profit Dafter interest ( ta2E #eturn on equity capital S -------------------------------------------Equity capital

TABLE SHO/ING YEAR /ISE RETURN ON EEUITY 0APITAL

D#s' in croresE
PARTI0ULARS A'net profit %'equity share capital #eturn on equity capital 2339538 +/</'=, A@;.'.. /<'>+ 233853; +=>='A= A@;.'.. /,'@@ 233;53B +;A/',A A@;.'.. =;',= 233B534 +==<'<, A@;.'.. /,'=+ 2334563 ,;>'>, A@;.'.. +>'/;

100> 80> 60> 40> 20> 0> 2005-06 2006-07 2007-08 2008-09 2009-10 *<e#u t; s%are 5a8 tal (<net 8r). t

INTERPRETATION:
Equity share capital is constant in in all the year whereas net profit is fluctuatin&'

82

 E)en thou&h the return on equity capital is in decreasin& position1 the rate of return in comparison with the mar$etin& conditions is )ery satisfactory' :lobal mar$et conditions1 increasin& in operatin& costs1 decrease in net profits are the main reasons for the recordin& of low ratio'

EARNING PER SHARE:

Earnin& a)ailable to equity share holders Earnin& Per Share S -----------------------------------------------No' of equity shares

TABLE SHO/ING YEAR /ISE EARNING PER SHARE D#s' in croresE

PARTI0ULARS Earnin& a)ailable to equity shareholders No' of equity shares Din crsE E"rn!ng ,er sh"re 2339538 +/</'=, A'@; 298&62 233853; +=>='A= A'@; 2;B&BF 233;53B +;A/',A A'@; F4;&F3 233B534 +.;<'.. A'@; 22F&4F 2334563 <<>'@; A'@; 66F&B4

2000 1500 1000 500 0 2005- 2006- 2007- 2008- 200906 07 08 09 10

Earn n2 a1a la!le t) e#u t; s%are%)l$ers N)<). e#u t; s%ares Earn n2 a1a la!le t) e#u t; s%are%)l$ers Earn n2 8er s%are

INTERPRETATION:
The earnin&s per share is declinin& year by year' The least rate of return is ++'A.G

83

 Since the company is in e2pansion acti)ity1 the future earnin&s per share will increase'

RETURN ON 0APITAL EMPLOYED:

Net profit #eturn on capital employed S ----------------------------------------apital employed

TABLE SHO/ING YEAR /ISE RETURN ON 0APITAL EMPLOYED

D#s' in croresE
PARTI0ULARS A'net profit %'capital employed Dincl' term depositsE Ret rn $n #",!t"em,-$yed 2339538 +/</'=, @A;='.. 6@&B3J 233853; +=>='A= ;A/,'.. 6@&93J 233;53B +;A/',A ;;=<'.. 64&99J 233B534 +==<'<, ,@;/'.. 6;&33J 2334563 ,;>'>, <A,>'.. 6@&83J

100> 80> 60> 40> 20> 0> 2005-06 2006-07 2007-08 2008-09 2009-10 -etur )n 5a8 tal e?8l);e$ *<5a8 tal e?8l);e$ (<net 8r). t

INTERPRETATION:
E)en thou&h the return on capital employed is declinin&1 but it is satisfactory1 considerin& the present mar$et conditions and from the security point of )iew' 84

0HAPTER5VI

85

SUMMARY:
Visa$hapatnam Steel Plant was founded on /.th 7an ?,+ but became fully operational on +st Au& ?;/' VSP is the first shore based inte&rated steel plant with new technolo&y1 lar&e scale computeri6ation and automation' The or&ani6ational manpower has been rationali6ed to operate it at international le)els of efficiency and to attain international labor producti)ity' The production1 commercial and financial performance has been impro)in& with the passa&e of years' The financial analysis of VSP by the use of )arious techniques i'e' #atio1 ash flow analysis shows that* +E /E =E AE <E >E ,E The liquidity position of the company is e2cellent' The company is 6ero debt5low debit company' The net worth of VSP is satisfactory 0t is noted that the in)entory le)el is increasin&' The profitability ratio is in decline state 4iquidity position of VSP is )ery &ood' The company has accumulated funds which are a)ailable for e2pandin& business operations and e2pansion wor$s' @E Security to share holders is e)isa&ed

86

SUGGESTIONS
The followin& su&&estions will impro)e the financial position of the VSP'

PRODU0TION
+E Need for continuous up &radation of technolo&y for impro)in& the processes' /E Effort should be made at cost sa)in&s particularly in spares and ener&y consumption' =E 8sin& the natural &as reser)es of C: basin1 !ot metal production capacity can be enhanced with the present %3 facility with ne&li&ible in)estment'

(INAN0E
+E 0mpro)in& financial le)era&e ratio for better returns'

PERSONNEL:
+E #ationali6ation of e2istin& man-power with effecti)e trainin& for future e2pansion of the plant' /E =E 0mpro)in& efficiency throu&h better !#" pro&rams' Pro)idin& better moti)ation'

87

AE

Stri)in& towards becomin& the most chosen employer'

MARKETING
+E ontinuously monitorin& the indi&enous sale1 e2port sale ratio to capture the best of mar$ets' /E =E 0ncreasin& the net reali6ation by sellin& in the most profitable re&ion' 0dentifyin& new mar$ets and new application of the company?s product' AE 0mpro)in& reali6ation by identifyin& )alue added products and pro)idin& feedbac$ to production department' <E Value added products Dhi&h )alue itemsE are to be produced instead of sellin& semi-finished products in order to increase profit mar&in'

88

BIBLIOGRAPHY
BOOKS:
+' (!n"n#!"- M"n"gement: The$ry ) Pr"#t!#e '@th Ed!t!$n* E gene (& Br!gh"m "nd M!#h"e- 0& Gerh"rdt

2& E-ements $% M"n"gement A##$ nt!ng Les-!e 0h"d=!#+

=' Pr!n#!,-es $% 0$r,$r"te (!n"n#e ';th Ed!t!$n* R!#h"rd Ber+-ey Ste="rt Myers

@& A##$ nt!ng ) (!n"n#e %$r M"n"gers B"rry 7& 0$$,er

/EBSITES
htt,:II>!K"gstee-&#$m htt,:II===&!nd!"nstee-&#$m htt,:II===&Cee5!nd!"&n!#&!n&#$m htt,:II===&"ns=er&#$m 89