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EXECUTIVE SUMMARY…
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Study OBJECTIVES
Each and every firm has got a specified source of funds. The
objectives of the study comes out to be enhancing one's
knowledge by analyzing how a firm like RSP with limited
amount of funds has been progressing by a better fund
management.
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Sources of information
1. Primary data
2. Secondary data
1. Primary data :
Primary data are those data collected from individual official
guides view from organizations these data are collected
through personnel interview observation of records, ledger, file,
etc, collection of those data is time consuming but these are
most important and reliable.
2. Secondary data:
Secondary data are those data which are already gathered
and available. There may be internal source within plant;
externally that source may include book, periodicals, published
report, data service, annual reports.
For collections of secondary data following are considered:-
• Books on subject
• Published reports relevant to the subject
• Commercial data
• Files
• Published Records of the plant
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Sample design
In this study, the samples of four financial years 2004-05 to
2007-08 are taken from in Rourkela steel plant, Rourkela. in this
study I am using secondary data for collecting the valuable
information. The sources of secondary data for the study are
the balance sheet and their related schedules of the plant four
financial years 2004-05 to 2007-08 of Rourkela. Globally, the
steel production is close to 28 million tone and growing at the
rate of 5-6 % every year. The main demand creators for Steel
Industry are Automobile industry, Construction Industry,
Infrastructure Industry, Oil and Gas Industry, and Container
Industry. New innovations are also taking place in Steel Industry
for cost minimization and at the same time production
maximization. Some of the cutting edge technologies that are
being implemented in this industry are thin-slab casting,
making of steel through the use of electric furnace, vacuum
degassing, etc.
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RINL, while the other major producers are ESSAR, ISPAT and JVSL.
A credit Suisse Group study states that India steel consumption will
continue to grow by 16 percent annually till by 2012, fuelled by
demand for construction projects worth US s 1 Trillion
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Vision statement:
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fully integrated iron and steel maker, producing both basic and
special steels for domestic construction, engineering, power,
railway, automotive and defense industries and for sale in
export markets. SAIL manufactures and sells a broad range of
steel products, including hot and cold rolled sheets and coils,
galvanized sheets, electrical sheets, structural’s, railway
products, plates, bars and rods, stainless steel and other alloy
steels. SAIL produces iron and steel at five integrated plants
and three special steel plants, located principally in the eastern
and central regions of India and situated close to domestic
sources of raw materials, including the Company's iron ore,
limestone and dolomite mines. The company has the distinction
of being India's largest producer of iron ore and of having the
country's second largest mines network. This gives SAIL a
competitive edge in terms of captive availability of iron ore,
lime.
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Steel in Ranchi
Management and Training Institute in Ranchi
SAIL Safety Organization
Environment Management Division in Kolkata
Growth Division in Kolkata
Central power Training institute in Rourkela
PRODUCTION:
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SAIL IN FUTURE
As the largest steel producer in the country, Steel Authority of
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ROURKELA STEEL
PLANT
The Govt, of India under the ablest leadership of the then Prime
Minister Pt. Jawaharlal Nehru, decided to set up large Steel
Plants by the Govt, itself after the general election of 1952.
Rourkela and its adjacent areas are rich in iron ores, manganese,
dolomite and limestone's, the basic materials for production of
iron and steel. Considering Rourkela to be best place for a steel
plant, the survey work was completed in the year 1954.
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The extension work of the plant was over by the year 1968. A
circular welding pipe plant and special plate plant were set up in
the decade of seventies for production of different ready-made
materials. To avoid scarcity of power supply the plant set up a
power plant by itself with a capacity of 120 M.W. The power
plant is able to cater the requirement of power supply from the
year 1986.
The materials being produced from the Steel Plant are steel in
gots, iron sheets, ultra thin plates, electric steel plates, cold
rolled coils, hot rolled coils, tin plates and different kinds of pipes
etc. The byproducts of the plant are fertilizer "Sona", bitumen
and benjol etc.
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defence sector.
6.RSP has the distinction of being the unique steel plant in
india with an integrated Fertilizer Complex.
7. It has two captive power plant(CPP) with a generation
capacity of around 120 mw.
The steel plant is well connected with rail and road. The nearest
railway station is Rourkela railway station of the S.E railways
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Products Applications
HR Coils LPG Cylinders, automobile, railway
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Semi-Finished Products
The company produces semifinished
products, including blooms, billets and
slabs, which are converted into
finished products in the company's
processing plant and, to a lesser
extent, sold to rerollers for conversion
to finished products.
Plates
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Cash
Sales tax and excise
Pay section
Claims and frights
Stock verification
Works modernization and expansion
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GOAL SETTING:-
The major reforms and interventions at Rourkela Steel Plant are
aimed at
enhancing the motivation of the employees and addressing all
HRD issues that generally hamper performance and progress.
The ten priorities, spelled out in the mission are :-
Employee motivation and employee pride.
Leadership practice
Environment relations and organizational image.
Plant maintenance and equipment health.
Small investment schemes for maintaining current
operations.
Sustained operation and consistent production.
Strengthening secondary streams of cash generation.
Operational and purchase cost reduction.
Sustaining the benefits of operation Vijay the turnaround
project of RSP.
Enhancing Gross Margin and Net sales realization
VALUE
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GOVERNMENT POLICIES:-
SAIL has been one of the navartnas of the PSU. So the
government has been keen towards the growth in this sector.
The government is revising its policies from time to time to help
revive the steel industry in India. We can site the government
initiative to increase the consumption of steel in the
construction sector in India. The housing construction that
constitutes about 3-5% of GDP in developed countries, in India
it is just about 1%. In order to produce it the government has
announced several schemes such as Valmiki Ambedkar Awas
Yojna, Indira Awas Yojana, Birla Awas Yojana, through NGOs and
self - help groups, etc. apart from it the development of national
highway development programme will also increase the
demand of steel.The iron and steel sector has received various
incentives to promote exports in the current EXIM policy (2002-
2007). First the quantitative restrictions on exports have been
removed except in the case of a few sensitive items. Second
the setting up of overseas banking units in special Economic
Zones has been permitted. Third the duty matters.
GOVERNMENT POLICIES:-
SAIL has been one of the navartnas of the PSU. So the
government has been keen towards the growth in this sector.
The government is revising its policies from time to time to help
revive the steel industry in India. We can site the government
initiative to increase the consumption of steel in the
construction sector in India. The housing construction that
constitutes about 3-5% of GDP in developed countries, in India
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It was the first steel plant in Asia and third in the world
to have introduced LD steel making technology when it was
I it's nascent state of development.
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SOCIAL RESPONSIBILITY:-
Caring, sharing and spreading smiles—
Taking a unique step forward, the Steel Plant has set up the
Institute for Periphery Development that is functioning as the
nerve centre of all the activities taken up under periphery
development. Villagers from nearby areas are being trained in
various income generation activities in this Institute. Adoption of
18 villages as Model Steel Villages is another significant stride
taken up by Rourkela Steel Plant to create sustainable models
of economic development. The objective of Rourkela Steel
Plant, which is 'Spreading Samridhi', finds its true expression in
the myriad activities taken up by the Steel Plant for the people
living in its periphery.
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PARTNERS IN PROGRESS
Rourkela steel plant has always treated the small scale
industries (SSI) as its partners in progress. An exclusive wing-
peripheral industries and vendor Development (PIVD) has been
set up in RSP under its Materials Management Department for
catering to the development needs of local SSI units.
THE PICTUREQUE STEEL TOWNSHIP With the sincere efforts
being made to beautify the steel township and upgrade the
facilities today the steel city of Rourkela can be considered
as one of the modern industrial townships. A number of
aesthetically designed and artistically crafted monuments have
been grace of the sylvan surroundings significantly, but have
also showcased the innovation usage of steel for creating
objects of art. The Indira Gandhi Park of RSP is another effort
made by the plant to showcase nature in all its glory and
grandeur, right at centre of the steel city.
RONMECREATING A HEALTHY ENVINT
Rourkela Steel plant 's concern for a healthy environment is
symbolized by its medical and Health Services. Ispat General
Hospital (IGHI), a 685 bed hospital run by RSP for its
employees is a premier medical centre in the eastern region.
A wide network of medical services provides adequate health
care to the employees. In IGH the doctors to bed ratio is
1:4.8 and the occupancy is 87%.
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INTERPRETATION:-
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INTERPRETATION:-
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INTERPRETATION:
• Production has shown gradual increase over
two years but it downfall in 2008-09.
• Production of saleable steel was 1615839
tonnes in 2005-06 and it decreased to 1988570
tonnes in 2008-09
• This indicates that demand for saleable steel
has decreased.
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The above analysis shows that although manpower resource has decreased over the
four years ,there is increase in production since 2005-06.Thus it is conluded that
there is improvement of machinery and advancement in technology in Rourkela
Steel Plant.
INTRODUCATION
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Cash in hand
Cash at Bank
Marketable securities
Short term investments
Bills receivable
Sundry Debtors
Inventories
Work in process
CURRENT LIABILITIES
Current liabilities are those claims of outsiders, which are
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Nature of business
Trading and financial firms have a small investment in
fixed assets, but require a large sum of money to be in
working capital. Some manufacturing businesses, such as
tobacco and construction firms, also have to invest
substantially in working capital and a nominal amount in
fixed The working capital requirements of a firm are
basically influence by the nature of its business, assets. In
contrast public utilities may have limited need for working
capital and have to invest abundantly in fixed assets.
Seasonality of operations
Firms which have marked seasonality in their operation
usually have - highly fluctuating working capital
requirement. The sale of ceiling fans reaches a peak
during the summer months and drops sharply during the
winter period. The working capital need of such a firm is
likely to increase considerably in summer month and
decrease significantly during the winter period. On the
other hand a firm manufacturing a * product like lamps
which have fairly even sales round the year tends to have
stable working capital needs.
Production policy
firm marked by pronounced seasonal fluctuation in its
sales may pursue a production policy which may reduce
the sharp variation in working capital requirements.
Market conditions:-
The degree of competition prevailing in the market place
has an important bearing on working capital needs. When
competition is keen , a larger inventory of finished goods is
required to promptly serve customers who may not be
inclined to wait because other manufacturer are ready to
meet their needs. Further generous credit terms may have
to be offered to attract customers in a highly competitive
market. Thus working capital need tend to be high
because of greater investment in finished goods inventory
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financing.
• Financing of working capital
After determining the level of working capital, a firm has to
decide how it is to be financed. The need for financing
arises mainly became the investment in working
capital/current assets, that is, raw materials, work-in-
process, finished goods and receivables typically
fluctuations during the year.
• Trade credit:
Trade credit refers to the credit extended by the supplier
of goods and services in the normal course of
transaction/business/sale of the firm. According to trade
practices cash is not paid immediately for purchases but
after an agreed period of time. Thus, deferral payment of
trade credit represents a source of finance for credit
purchase.
• Bank Credit:
Bank credit is the primary institutional source of working
capital finance in India. In fact, it represents the most
important source for financing of current assets.
• Forms of Credit: Working capital finance is
provided by banks in five ways :
Cash credit/overdraft
Loans
purchase/discount bills
letter of credit
working capital loans
1. Cash credit/overdrafts:
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2. Loans:
Under this arrangement, the entire amount of borrowing is
credited to the current account of the borrower or released in
cash. The borrower has to pay interest on the total amount. The
loans are repayable or demand or in periodic installments. They
can also be renewed from time to time.
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(Rs in crores)
INTERPRETATION:-
• Cash is the most important liquid asset of the business.
Any firm
should keep sufficient liquid asset for day to day operation.
• There has been continuous increase in the cash and bank
balance of
RSP for 3 consecutive years i.e from 2006-07 to 2008-
09.
• The increasing trend has been over 9% in all the 3
years when
compared to the previous years.
• In 2006-07, it has increased to 18.79 crores i.e an increase
of 9.12%
compared to 2005-06 whereas in 2007-08, it has increased
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to 20.66
crores i.e an increase of 9.95% and in 2008-09 .there is
8.61% increase compared to 2007-08.
• From the above analysis it can be inferred that the
liquidity position of
RSP is very strong.
INVENTORIES:-
(Rs in crores)
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SUNDRY DEBTORS:-
(Rs in crores)
YEAR 2005-06 2006-07 2007-08 2008-09
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INTERPRETATION:-
• Sundry debtors have shown a downfall in 2006-07
compared to 2005-06 i.e from 14.6 crores to 12.96 crores.
Thus it can be inferred that credit sales of RSP has
decreased.
• However for the next years, sundry debtors have shown a
downfall i.e from 12.96 crores it has decreased to 11.66
crores and in next it has increased to 13.32crores.
• Thus,there is a downfall in 2 consecutive year and it has
increased in last year i.e 2008-09.which indicates increase
in defective products of RSP,which normally calls for credit
sales
(Rs in crores)
YEAR 2005-06 2006-07 2007-08 2008-09
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Note: loans & advances fig. are taken from balance sheet.
INTERPRETATION:-
• Loans and advances play a major role in current asset of RSP after
inventories.
• It has shown a gradual rise from 2005-06 to 2007-08 and
becomes zero in 2008-09
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INTERPRETATION:-
• The current assets have continuously increased in all the year from
2005-06 to 2008-09.
• The increase in current assets is more in 2008-09 compared to
other
years.
• All the elements of the current asset have increased in 2008-
09
except other current assets.
• This increase has been mainly due to the huge rise in inventory in
2008-09 specially finished and semi-finished products.
SUNDRY CREDITORS:-
(Rs in crores)
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Note: sundry creditors fig. are taken from balance sheet of RSP.
INTERPRETATION:-
• Sundry creditors have shown a increase in two consecutive year.
• However, for the next two years, there is rise in sundry creditors
but in last year i.e 2008-09 there is a downfall, which is a bad
sign as inventories are not financed by these creditors.
• Thus, it can be inferred that the creditworthiness of the RSP has
decreased.
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INTERPRETATION:-
• Security and other deposits are obligatory deposits of outside
parties, which are necessary for the company to keep as
guarantee.
PROVISIONS
(Rs in crores)
YEAR 2005-06 2006-07 2007-08 2008-09
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INTERPRETATION:-
• Provisions are deferred payments due to employees etc. either
to be paid at the time of final decision or terminal point as the
case may be.
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INTERPRETATION:-
• Other current liabilities show a fluctuating trend. It was 160.77 crores
in 2005-06 then it decreased to 159.58 crores in 2006-07. In the next
year it increased and then it has again decreased in 2008-09.
• These are the liabilities of unusual nature which may occur one time as
the case may be.
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INTERPRETATION:-
• The current liabilities show an upward trend from year 2004-05 to
2007-08. This is because sundry creditors has increased which
means creditworthiness of the company has increased.
• In 2005-06, the increase in current liabilities has mainly due to rise in
other current liabilities which has increased by 26.24%.
• The rise in current liabilities is more in the year 2007-08 compared to
other years because there is mammoth rise in provision in that year.
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061:-
PARTICULARS 2005- 2006-07 INCREA DECREA
SE IN SE IN
06 W.C W.C
A.CURRENT ASSETS
CASH AND BANK 17.22 18.79 1.57
BALANCES
RAW MATERIALS 122.61 174.56 51.95
STORES AND SPARES 202.08 278.67 76.59
FINISHED AND SEMI 393.42 424.33 30.91
FINISHED PRODUCTS
SUNDRY DEBTORS 14.60 12.96 1.64
LOANS AND ADVANCES 212.72 230.94 18.22
OTHER CURRENT ASSETS 2.47 1.83 0.64
TOTAL CURRENT ASSETS 965.12 1142.08
(A)
B.CURRENT LIABILITIES
SUNDRY CREDITORS 233.04 292.23 59.19
SECURITY AND OTHER 27.08 32.72 5.64
DEPOSITS
OTHER CURRENT 160.77 159.58 1.19
LIABILITIES
PROVISIONS 49.57 80.06 30.49
TOTAL CURRENT 470.46 564.59
LIABILITIES(B)
WORKING CAPITAL (A)-(B) 494.66 577.49
ADD:NET CURRENT 404.53 552.34 147.81
ASSET RELATING TO
RSP IN CMO'S BOOKS
TOTAL WORKING 899.19 1129.83
CAPITAL
INCREASE IN W.C 230.64 230.64
NET TOTAL 1129.8 1129.83 328.24 328.24
3
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INTERPRETATION:-
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INTERPRETATION:-
• Net working capital shows an upward trend in 2005-06 and 2006-07.
However, there is a sudden downfall in 2007-08 i.e from 1129.83 crores,
it has reached to 1020.84 crores.
• This downfall is mainly due to increase in the items of the current
liabilities ie provision. Although working capital has decreased in 2007-
08, there is increase in sales as well as profit in the same year.
• Thus, it can be inferred that there has been proper utilization of raw
material.
Introduction:
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OPERATING CYCLE
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account of RSP.
INTERPRETATION:-
• The raw material conversion period of RSP is consistent
over the last four years.
• In 2005-06, the raw material conversion period was 26
days i.e the
average time taken to convert raw material into work in
progress was 26days.
• In the next year, the raw material conversion period has
decreased to 25 days.
• However, in 2007-08 it has increased to 27days. And in
2008-09, it has decreased to 23 days.
• This has happened because both average stock of raw
increased but the increase in raw material conversion period
is much less than the increase in stock of raw material.
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files of RSP.
INTERPRETATION:-
• Work in progress conversion period is the average time
taken to
complete semi-finished work in progress.
• Work in progress conversion period has increased for next
years i.e in
2006-07, it increased to reach 36 days. The upward trend
doesn’t continued in 2007-08 and the work in progress
conversion period in 2007-08 reached to 31days.
• Again in the next year, it decreased to reach 21 days.
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INTERPRETATION:-
• The finished goods conversion period is the average
time taken to sell finished products.
• In 2005-06, the average time taken to sell finished
products was 34 days. In 2006-07, it increased to reach
37 days and in 2007-08, it further decreased to reach
31 days.
• However, in 2008-09, the time taken to sell finished
products decreased to 31 days.
INTERPRETATION:-
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CALCULAT
I ON OF
CREDITORS DEFERRAL PERIOD OF ROURKELAVSTEEL PLANT
DEFINITION:
Creditor deferral period (CDP) =Creditors deferral period
(CDP) is the average time taken by the firms in paying
its suppliers (creditors).creditors deferral period is
calculated as
FORMULA :-
Average Creditor
Credit purchase per day
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INTERPRETATION:-
• Creditor's deferral period is the average time taken by RSP
in paying its creditors.
• The creditor's deferral period of RSP was 63 days in 2005-
06. In 2006-07,it shows a huge downfall to reach 55 days
and it increased to 58days.
• However, in the next year, the creditor's deferral period
shows a huge decrease and the average time taken by RSP
in paying its creditors is 41 days.
A. RAW MATERIAL 26 25 27 23
CONVERSION PERIOD
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B. WORK IN 34 36 31 21
PROCESS
CONVERSION
PERIOD
C. FINISHED GOODS 34 36 31 30
CONVERSION PERIOD
D. INVENTORY 94 97 89 74
CONVERSION
PERIOD=(A+B+C)
E. DEBTORS CONVERSION 5 4 3 3
PERIOD
F. GROSS 99 100 92 77
OPERATING
CYCLE=(D+E)
G.CREDITORS 63 55 58 41
DEFERRAL PERIOD
H.NET OPERATING 36 45 34 36
CYCLE=(F-G)
INTERPRETATION:-
• Net operating cycle is the net time interval between cash
collection from sale of the product and cash payments for
resources acquired by the firm.
• The speed with which operating cycle completes one cycle
determines the requirement of the working capital.
• If working capital increases, it means there is further need
for negotiated working capital.
• Here, in case of RSP, the net working capital in 2005-06
was 36 days.
• However in the next year it jumped to 45 days. This has
happened
because there was increase in all the components of the
inventory
conversion period i.e raw material conversion period, work in
process conversion period and finished goods conversion period
have increased in 2006-07. Also creditor’s deferral period has
shown a sharp fall.
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LIMITATIONS:
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CURRENT RATIO:-
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Current assets -
inventories
Acid test ratio =
-----------------------------------------------------------
Current liabilities
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INTERPRETATION:-
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FORMULA:-
Cost of
sales
Working capital turnover ratio = ------------
Net working capital
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INTERPRETATION:-
FORMULA:-
Cost of goods
sold
Inventory turnover ratio= ------------------------
Average inventory
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INTERPRETATION:-
• The inventory turnover ratio measures the velocity of
conversion of stock into sales.
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RECOMMENDATION
There is huge demand for steel products all over the world.
SAIL and RSP being major producer of steel products should
enhance its production capacity.
Marketing organization should scientifically organize its
marketing network so that synchronization takes between
production and sales.
Cost of production of RSP is going on increasing day by day.
Though high rate of raw material is major reason, huge
manpower cost is also contributing to the cost of
production. In this scenario, reduction of manpower is
essential.
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CONCLUSION
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BIBLIOGRAPHY
Data Sources:
Annual reports of RSP from year 2005-06, 2006-07,
2007-08, 2008-09
Published report relevant to the
subject.
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Commercial data
Files
Published record of the plant
Websites:
• www.worldsteeldynamics.com
• www.globalsteelconsultants.com
• www.sail.co.in
• www.steelworld.com
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