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PROGRAMME
2009-2010
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
A PROJECT REPORT SUBMITTED IN PARTIAL
FULFILLMENT OF AWARD OF POST GRADUATION
DIPLOMA IN MANAGEMENT.
A study on
Financial Health of
NALCO
By adopting different
financial techniques.
SUBMITTED BY
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
CHITTA RANJAN BEHERA
PGDM 2ND SEMISTER
Enrollment No: 209115
Project Report
On
***********
Submitted by
CHITTA RANJAN BEHERA
Enroll. No: 209115
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
Guided by:
Mr. Ramesh Chandra Joshi
SR.Manager (Finance),
NALCO, Smelter Plant
BONAFIDE CERTIFICATE
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
Dr. Shefali Gautam
Director
Dated :
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
Name Name
Mr. R C Joshi
(Company Guide) (Head, Training Division)
CERTIFICATE
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
learn. He is having positive attitude which will take him in to new heights in his
career.
( R.C.Joshi)
Sr. Manager (Finance)
DECLARATION
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
to any University / Institution for award of any degree, diploma
ACKNOWLEDGEMENT
I would like to express my gratitude to all those who gave me the opportunity to
complete this project. I would like to thank my institute authorities and my internal guide
Prof V.K. Goyal first for providing me the opportunity to work with one of the most
prestigious organization. I want to thank the head of Training Department Mr. D C Das for
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
giving me permission to commence this summer training project in the first instance, to do
the necessary research work and to use departmental data and resources.
I would like to thank Mr. R C Joshi and other executive Mr. B N Behera, Who gave
and confirmed this permission and encourage me to go ahead with my training. I bound to
stimulating suggestions and encouragement helped me in giving the final shape to this
project.
I would like to give a special thanks to my parents, their constant support enable me
Date:
PREFACE
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
Healthy finance is the responsibility of the Company’s top
and fair view of the sound financial stability of the company to the
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
NATIONAL ALUMINIUM COMPANY
LIMITED.
BALANCE SHEET 76
BIBLIOGRAPHY 83
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
INTRODUCTION
For growth and survival of Company’s business in the intense competitive era of
modern product – market technology, environmental turbulence and in the
dynamic and rapid changing competitive pressures in the global market place a
sound financial health of every organization is highly essential.
All these strategic and tactical healthy decision are taken in light of the
change of economic and monetary policy of Government, social & cultural
changes at the regional, National and international level, legal & political changes.
As resources are always scarce and vital, its proper planning and control is
highly essential to achieve the corporate objectives and goals by extending social
benefits to the community, maximizing the wealth of the share holders, keeping
surplus funds for expansion and diversification.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
b) Individual objectives.
COMMON OBJECTIVES:
INDIVIDUAL OBJECTIVES:
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
(IV) SIGNIFICANCE OF STUDY:
A vehicle cannot run without any engine, similarly a business cannot
run without financial analysis. Financial analysis is done to know the following
factors.
1. To read daily transactions.
2. To know the financial position that is where the company stands.
3. To know the profit and loss of the company.
(a) If making profit, where it’s utilized.
(b) If incurring losses, what is the weakness of the company?
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
of the company with request to supply data regarding the procedure and
technique adopted by them for the management of finance.
Interaction was also held with the General Manager (Finance) in order to
supplement the information received. These data have been analyzed with a
view to arrive at conclusions regarding the practice of different methods by the
management for effective control of financial parameters.
(B) EXTERNAL:
The financial data were collected from various sources like:
i) Annual financial report of the company for the five-year period from
1999-00 to 2003-04.
ii) Internal report.
iii) Manual reports regarding management decisions on different financial
aspects.
iv) Printed material carrying the policies of the organization.
SOURCE OF DATA:
3) Balance Sheet
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
3) Budgeting.
4) Inventory Control.
5) Segment analysis.
In the last several years, aluminum has accelerated its applications in a multiple of
sectors by replacing other metals. The demand of aluminum is based on its
enviable combination properties. While rate of growth in other countries is low due
to the fact that they have reached towards the peak, the same in Asia and in
particular India is increasing. Presently the per capita consumption of aluminum in
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
India is only 0.5 kg compared to 32 kg in Japan, 27 kg in USA and 3.6 kg in
Brazil. But with the population growth of 2.5% and per capita income growth as
8%, in a highly optimistic scenario, the per capita consumption figure of aluminum
will grow by 10% in the coming days. Aluminum industry is in the growth period
of life cycle and till another five decades it is predicted that the demand in
aluminum will remain buoyant.
COMPANY PROFILE
ORIGIN-HISTORY OF NALCO
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
in Aluminum metal, but also given the country the technological edge in
productivity. This strategic metal is the best of world metals. The production of
aluminum metal started just a century ago. Though youngest of all metal, there
has been strong demand in the country and international market.
Efficient planning, implementation and monitoring of the project activities as
well as speedy decision making in the organization are responsible for the
success and growth.
The entire paid-up equity capital was held by Central Government.
This was one of the biggest public sector undertakings set up by the
Government in the eighties. Aluminum Pechiney of France, a world leader in
the field, provided the technology and basic engineering for bauxite mines,
alumina refinery and smelter. The complete and firm reliability of project
financing was another hallmark.
The initial total capital cost of Rs.2408 cr. was partly financed by
Rs. 1119 cr. equivalent Euro-dollar loan raised through a consortium of
international banks and the balance RS.1298 cr. coming in from the
Government of India Plan Funds. Ever since the setting up of the company and
commencement of commercial production, the company has been growing by
leaps and bounds including earning a considerable foreign exchange for the
country by export of its products namely Alumina and Aluminum and achieving
a high degree of productivity and efficiency as well as financial performance.
The company has won many laurels including Star Trading House Status,
APEXIL Awards etc. The profit of the company has steadily increased from
Rs.18.92 cr. in 1988-89 to Rs.1564.65 Cr. (PAT) in 2005-06.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
NALCO has chartered a course of international confidence in Indian industrial
capability. NALCO is credited for its well-managed integrated operations in as
many diverse areas as bauxite mining, alumina refinery, aluminum smelting,
power generation and managing port facility. NALCO constantly produced
high quality aluminum products at completive prices for both domestic and
overseas customers and established itself in national and international market in
a short span of time. This in turn, helped in earning precious foreign exchange
and profits for the company brought from its 2nd years of commissioning.
Leveraging the technical collaboration with Aluminum Pechiney of
France, ISO 9002 certification of quality management, LME registration of
products, environment care conforming to ISO 14001, low cost operations,
international base, NALCO has continued to add value and is poised to grow
further. By 1998, the company not only achieved a zero debt status but it has
gone steadily with an internally funded major expansion plan involving an
investment of over Rs.3700 cr.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
Thus, NALCO heralded a new era of Aluminum making in the
country, not only in the use of modern technology but also in production of
world standard aluminum products.
MISSION OF NALCO
OBJECTIVES
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
➢ To have global presence and earn foreign exchange.
➢ To maintain leadership in domestic market.
➢ To maximize return on investment.
➢ To develop a strong R&D base and increase business development activities.
➢ To maximize internal customer satisfaction.
➢ To foster high standards of health, safety and environment friendly products.
➢ To instill financial discipline at all level for achieving cost and budgetary
controls, optimize utilization of working capital and effective cash flow
management.
To promote a result oriented organizational work culture that empowers
employees and helps realization of individual and organizational goals.
NATURE OF ACTIVITIES
The main activities of Nalco are production of alumina and aluminum. For this
the company has the following units of activities:
(A) CORPORATE OFFICE
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
Nalco’s bauxite mining, on Panchpatmali hills of Koraput district in Orissa, is
among the most sophisticated and eco-friendly mining operations to be found
worldwide. Highly mechanized, the open cast bauxite mining of Nalco features
geo-statistics application and computerized mine planning. The transportation
of ore to alumina refinery, located downhill, is done through a 14.6 kilometer
long, single-flight, multi-curve, cable belt conveyor of 1800 tph capacity.
Taking advantage of the topography, this conveyor is an engineering marvel.
Nalco’s bauxite mining facility is capable of producing 48,00,000 tonnes of
bauxite per annum, from a captive deposit of about 310million tones, spread
over 16 square kilometers, with an average overburden thickness of 3 meters.
The capacity of bauxite mining is presently being expanded to 63,00,000 tones
per annum.
Alumina Refinery
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
from process stream, using 3x18.5 mw back pressure turbo generator sets, is yet
another unique feature of the refinery.
Aluminium Smelter
Based on the state-of-art 180 KA
cell technology of Aluminum
Pechiney, the smelter has a capacity
to produce 3,45,000 tones of
Aluminum per annum. Located at
Angul in Orissa, the smelter
complex consists of two pot-lines
with 240 electrolytic pot cells in each, along with integrated facilities for
production of carbon anodes, casting of ingots, sows, billets, strips and wire
rods. The self-reliance of smelter comes from the assured supply of calcined
alumina from the company’s refinery at Damanjodi and 410 mw of
uninterrupted supply of power from the captive power plant located nearby.
Capacity of smelter is presently being expanded to 4,60,000 tpa.
Captive Power Plant
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
computerized data acquisition and process control, automated turbine run-up,
brushless excitation of generators and continuous coal handling systems for
optimum, efficiency and quality in power supply. To meet future needs the
capacity is being expanded to 1200 mw.
(C) PORT FACILITIES
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
utilization of wastes and development of value added products, have been
beneficial to the company’s operation.
Nalco’s collaboration with premier research laboratories of the country
has resulted in several research initiatives in alumina and aluminum.
Development of indigenous technology for production of detergent grade
zeolite has leadership to the establishment of 10,000 tpa Zeolite-A Plant by the
company. Also based on the collaborative research, Nalco has set up facility for
making 26,000 tpa special grade alumina and hydrates.
Development of synthetic granite, wear-resistant ceramics from fly ash and
synthetic wood, ferrite cement, wear-resistant cast iron and micro alloyed steel
from red mud are some of the other achievements on pilot scales. Recovery of
iron from red mud with Romelt process is under feasibility study.
While continuing its R&D efforts in right earnest, the company has
already obtained patents for certain special types of aluminas and hydrates.
ENVIRONMENTAL PROTECTION
Nalco is a responsible steward for the protection and care of the
environment. Use of eco-friendly process, safe handling of materials,
monitoring of occupational health, efforts at greening-of-the-land, preparedness
for disaster management are all integral to the company’s Commitment to
nature and society. Extensive care is taken in the management of fly ash, caustic
red mud and fluoride – the three major pollutants associated with Nalco’s
operations. The highest level of ecological performance is a standard
requirement for the company and the responsibility of the entire workforce. The
ISO 14001 certification of all production units and winning of Indira
Priyadarshini Vrikshamitra Award, a national honour, bear testimony to Nalco’s
concern for environment.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
PRODUCTS
Along with standard aluminum ingots and sows, which are
registered with London Metal Exchange, the Nalco product enjoys world
wide reputation on account of high standard of customer services.
INVENTORY CONTROL
INTRODUCTION:
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
Financial health of Nalco largely depends on good inventory policy. As inventories are the
significant cost element of cost of production, its physical control & price control is essential.
60% of the cost of production is invested in inventories i.e., raw materials, stores & spares,
semi-finished products, intermediary goods. Its theft, wastage, leakage may jeopardize the
long term profitability. Holding too inventories involve insurance cost, storage costs etc.
Inventories constitute the most significant part of current assets of NALCO. It is,
therefore, absolutely imperative to manage inventories efficiently and effectively in order to
avoid unnecessary investment & to have smooth production & sales.
OBJECTIVES OF INVENTORY CONTROL.
INVENTORY TECHNIQUES:
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
NALCO has adopted various techniques for control of inventories. These techniques are:
1) ABC Analysis
2) ECONOMIC ORDER QUANTITY.
3) VED Analysis.
4) Review of slow and non-moving items.
5) Review of obsolete stocks.
1) ABC ANALYSIS:-
The highest value items are classified as ‘A’ category items & kept under tightest possible
control. Items of relatively lesser value are classified as ‘B’ category items & are kept under
reasonable control. Items of relatively least value are grouped under ‘C’ category and kept
under simple control. Experience has shown that almost 10% of the items contribute to
70% of value of consumption which are grouped under ‘A’ category, about 20% of the items
contribute about 20% of value of consumption & are grouped under ‘B’ category &
category ‘C’ covers about 70% of items of materials which contribute only 10% of value of
consumption. The ABC analysis is also known as control by importance & exception (CIE).
2) ECONOMIC ORDER QUANTITY (EOQ) : The quantity to be purchased
should neither be small nor big because costs of buying & carrying materials are very
high. Economic order quantity is the size of the lot to be purchased which is
economically viable. It is the point at which, inventory carrying costs are equal to
order costs.
3) VED Analysis: Vital, Essential & Desirable analysis is used primarily for control
of spare parts. Spare parts of Nalco have been divided into three categories:
i) Vital: The spares, the stock out of which even for a short time will stop
production and where the cost of stock out is very high are known as Vital
spares.
ii) Essential.: The spares, the absence of which cannot be tolerated for more
than a view hours and the cost of lost production is high and which are
essential for the production to continue as known as essential spares.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
iii) Desirable.: The desirable spares are those spares which are needed but their
absence for even a week will not lead to stoppage of production. Some spares
though negligible in monetary value, may be vital for the production to
continue and require constant attention.
4) Review of slow and Non-moving items: Slow moving items are those items
which are not issued regularly or issued at irregular intervals. Consumption of such
items is almost Nil. For example, spares pares may be needed when the machine goes
out of order.
5) Review of obsolete stocks: Obsolete stocks are those items which have become
outdated due to no further use for production purposes.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
Graphical Presentation:-
ANALYSIS:-
1) Bauxite inventory is showing a downward trend even though Bauxite has been
classified as finished goods, the same is not being sold and used for captive consumption
Bauxite may be considered as major raw material for Alumina and accordingly downtrend of
inventory is cause of concern for the company. The company should step up excavation of
Bauxite and keep sufficient inventory at any point of time to avoid stock out position and
thereby loss of production.
2) Zeolite inventory is showing steep increase in trend which clearly shows the demand
for the product is not there and accordingly management should try to explore new market or
make a cost benefit analysis as whether to continue the production or not. The zeolite plant
has already impaired since 2006-07.
The inventory of other finished products as more or less in the comfortable zone.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
Caustic Soda 4000 9422
Cytec 75 16
CGM 30 61
ANALYSIS:-
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
1) Very high inventory of caustic soda, which is more than double of minimum level, is
being maintained by the company. The extra inventory holding has blocked substantial
working capital of the company and also resulting into high carrying cost. Management
should regulate the supply in such a manner so as to maintain inventory at around minimum
level to avoid blocking up of capital and thereby extra carrying cost.
2) Sourcing of coal is the main constraint company is facing in the near past .Even though
the company has long term arrangement of linkage coal with coal companies, the supply is
facing a setback. Because of less availability of linkage coal, management is resorting to
other means of procurement like imported coal, washed coal, e-auction coal at higher price.
Coal being the major source of power for the company, low inventory level in comparison to
minimum level is showing a danger signal. Company should take up at highest level to get
sufficient linkage coal.
ANALYSIS:-
Inventory holding of stores & spares is showing steep increasing trend whereas the
consumption remains more or less constant, considering the inflation. The inventory holding
has gone up from 13 months in 2006-07 to 15% in 2008-09, which clearly shows that the
procurement of inventory is on but consumption is not taking place. Lower consumption of
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
stores & spares with the aging of the plant is giving an indication that preventive maintenance
is not being carried out which may call for a disaster situation for the company in future.
The higher inventory is the cause of concern for the company, as large amount of
working capital is blocked up causing additional financial implication by way of extra
carrying cost. The company shout relook the management of stores & spares inventory.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
INVENTORY OF STORES AND SPARES (REFINARY)
(AFTER WRITE OFF)
GRAPHICAL PRESENTATION:-
ANALYSIS:-
Inventory of stores & spares of refinery division is showing more or less the
same trend as the company as a whole. On analysis, it is seen the refinery division is more or
less maintain inventory of imported items & consumables as per norm except in the year 2006-
07. However, company is holding high inventories of indigenous material which has resulted
in to an additional carrying cost of Rs. 1.36 cr. in 2008-09.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
INVENTORY OF STORES AND SPARES (REFINARY)
(BEFORE WRITE OFF)
Year Year end Yearly Inventory Norm Sort/Excess Extra
inv. Consumpti Holding carrying
on cost (15%)
06-07 91.34 50.28 22 17 {5} 3.14
07-08 104.57 58.36 22 17 {5} 3.64
08-09 117.26 56.46 25 17 {8} 5.64
ANALYSIS:-
The company has a policy of writing off 95% value of the inventory of the items which have
not moved for more than 5 years, since 1998-99. Refinery division has so far written off
37.65 corers of non-moving inventory.
Considering the write off, which is merely a book entry, the actual inventory of
refinery division as 31st march, 2009 stood as Rs. 63.63+37.65 = 101.28 corers. Accordingly,
considering the actual investment on inventory, the inventory holding stood at 25 months.
Even if we consider 15% carrying cost & 17 months consumption as a norm, the additional
financial implication due to higher inventory is Rs. 5.64 cr.
The inventory data clearly shows there is no effective inventory control system
exists in the company.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
2005-2006 67.60 92.16 26.64
2006-2007 66.38 91.34 27.32
2007-2008 68.08 104.57 34.89
2008-2009 63.63 117.26 45.7
Graphical presentation:
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
on but consumption is not taking place and thereby the inventory is showing an
increasing trend resulting into high inventory carrying cost.
RATIO ANALYSIS
Meaning:
Nalco likes to use ratios in its financial analysis because of its close relationship
between two variables. A single ratio in itself shows nothing & does not indicate favorable or
unfavorable condition. It should be compared with some standard to make it meaningful.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
i) Selection of relevant data from the financial statement depending upon the objective
of the analysis.
ii) Comparison of the calculated ratios with the ratios of the same firm in the past or the
ratios developed from projected financial statements or the ratios of some other firm
or the comparison with ratios of the industry to which the firm belongs.
(i) Single absolute ratios:- If single ratios is used one cannot draw any meaningful
conclusion.
(ii) Group ratios:- Group Ratios are more understandable and meaningful. For example,
the ratio of current assets to current liabilities may be supported by the ratio of liquid
liabilities to draw more accurate and specific conclusion.
(iii) Historical comparison:- These ratios are compared over a period of time, it gives
indication of the direction of changes and reflects whether the performance and
financial position of the Company has improved, deteriorated or remained constant
over a period of time.
(iv) Projected ratios:- It can be calculated for future for interpreting and taking corrective
action for improvement in future plans of investment decisions.
1) Accuracy of financial statements :- The ratio are calculated from the data available
in financial statements. The reliability of ratios is linked to the accuracy of
information in these statements. Before calculating ratios one should see whether
proper concepts and conventions have been used for preparing financial statements or
not.
2) Objectives of analysis :- The type of ratios to be calculated will depend upon the
purpose for which these are required. If the purpose is to study current financial
position then ratios relating to current assets and current liabilities will be studied.
The purpose of user is also important for the analysis of ratios. The purpose or object
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
for which ratios are required to be studied should always be kept in mind for studying
various ratios.
4) Use of Standard:- The ratios will give an indication of financial position only when
discussed with reference to certain standards. Unless otherwise these ratios are
compared with certain standards one will not be able to reach at conclusion. These
standards may be rule of thumbs as in case of current ratios and acid-test ratio.
5) Caliber of the Analyst:- The ratios are only the tools analysis and their interpretation
will depend upon caliber and competence of the analyst. He should be familiar with
various financial statements and the significance of changes, etc. A wrong
interpretation may create wave for the concern, since wrong conclusions may lead to
wrong decisions.
6) Ratios provide only a base:- The ratios are only guidelines for the analyst, he should
not base his decisions entirely on them. The interpreter should use the ratios as guide
and may try to solicit any other relevant information which helps in reaching a correct
decision, before reaching final conclusions.
1) Helps in decision making: Financial statements are prepared primarily for decision
making. But the information provided in financial statements is not an end in itself
and no meaningful conclusion can be drawn from these statements alone. Ratio
analysis helps in making decision from the information provided in these financial
statements.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
5) Helps in control: Ratio analysis even helps in making effective control of the
business. Standard ratios can be based upon Performa financial statements and
variance or deviation if any can be found out by comparing the actual with the
standard so as to take a corrective action at the right time.
6) Inter-firm comparison:- Ratios of one Company can be compared with the ratios of
some other selected Companies in the same industry at the same point of time. This
kind of comparison helps in evaluating relative financial position and performance of
the Company.
7) Other uses: There are so many other uses of the ratio analysis. It is an essential part
of budgetary control and standard costing. Ratios are immense importance in the
analysis and interpretation of financial statements as they bring the strength or
weakness of a firm.
1) Limited use of a single ratio: A single ratio usually does not convey much of a
sense. To make a better interpretation a number of ratios have to be calculated which
is likely to confuse the analyst than help him in making any meaningful conclusion.
3) Inherent limitations of accounting: Like financial statements, ratios also suffer from
the inherent weaknesses of accounting records such as their historical nature. Ratios
of the past are not necessarily true indicators of the future.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
statements. But it may be very difficult for an outsider to know about the window
dressing made by a firm.
6) Personal bias: Ratios are means of financial analysis and not an end in itself. Ratios
have to be interpreted in different ways.
7) Un-comparable: Not only industries differ in their nature but also the firms of the
similar business widely differ in their size and accounting procedure etc. It makes
comparison of ratios difficult and misleading. Moreover comparisons are made
difficult due to difference in definition of various financial terms used in the ratio
analysis.
8) Absolute figure distortive: Ratios devoid of absolute figures may prove distortive as
ratio analysis is primarily a quantitative analysis and not a qualitative analysis.
9) Price level changes: While making ratio analysis, no consideration is made to the
changes in price levels and this makes the interpretation of ratios invalid.
10) Ratios no substitutes: Ratios analysis is merely a tool of financial statements. Hence
ratios become useless if separated from the statements from which they are computed.
CLASSIFICATION OF RATIOS :-
B) Leverage Ratios.
C) Activity Ratios.
D) Profitability Ratios.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
NALCO’S FIVE YEARS FINANCIAL PERFORMANCE AT A GLANCE:
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
Sl. No. Particulars 04-05 05-06 06-07 07-08 08-09
A. Income Statement
1. Export 2200 2306 2586 2134 2071
2. Domestic Sales 2220 3018 3929 3340 3446
3. Gross Sales 4420 5324 6515 5474 551
4. Less: Excise duty 316 435 575 485 8
5. Net Sale 4104 4889 5940 4989 423
6. Other income: 5095
7. Operating 174 101 103 146
8. Non operating 77 132 311 441 96
9. Operating expenses 1965 2311 2412 2822 400
10. Operating profit 2313 2679 3631 2313 3431
11. Earnings before Interest, 2390 2811 3942 2754 1760
Depreciation, Taxes 2160
12. Interest & financing charges 61 2
13. Earning before dep. & taxes 2329 2811 3942 2752 4
14. Depreciation &Amortization 459 381 322 285 2156
15. Profit Before Taxes 1870 2430 3620 2467 229
16. Prov. For tax 635 868 1239 835 1927
17. Net profit 1235 1562 2381 1632 655
B. Balance Sheet 1272
18. Equity Capital 644 644 644 644
19. Reserves & Surplus 4054 5249 7051 8230 644
20. Net worth 4698 5893 7695 8874 9125
21. Loans outstanding 0.00 0.00 9769
22. Net fixed Assets 4139 3944 3711 3531
23. Net Current Assets 1005 2357 3755 3500 4032
24. Capital Employed 5144 6301 7466 7031 2596
Ratios 6628
C. 25. Operating profit margin 56.36 54.81 61.12 46.36
26. Net Profit margin 30.09 31.96 40.09 32.71 34.53
27. Return on cap. Employed 24.01 24.79 31.89 23.21 25
28. Return of net worth 26.29 26.51 30.95 18.39 19
29. Debt Equity 13
D. Others
30. Book value per share of 72.91 91.46 119.43 137.73
Rs.10 each 151.60
31. Earnings per share (in Rs.) 19.17 24.25 36.96 25.33
32. Dividend declared (%) 40 50 75 60 19.75
50
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
A) LIQUIDITY RATIOS:
Liquidity ratio is one of the important tools of finance department of every
organization. Liquidity ratios measure the ability of the Company to meet its current
obligations i.e. ability to pay its obligations as and when they become due. In fact analysis of
liquidity needs the preparation of cash budgets , cash and funds flow statements .The failure
of a company to meet its obligations due to lack of sufficient liquidity will result in a poor
credit worthiness, loss of creditors worthiness, or even in legal tangles resulting in the closure
of the company. A very high degree of liquidity is also bad. Ideal assets earn nothing, so it is
necessary to strike a proper balance between high liquidity and lack of liquidity. The
liquidity ratios are classified into:-
1) Current Ratio.
2) Quick Ratio or Acid –Test Ratio
1) CURRENT RATIO:
The current ratio is calculated by dividing the total current assets by total current liabilities.
Current Assets
Current ratio =
Current Liabilities
Current ratio may be defined as the relationship between current assets and current
liabilities .This ratio also known as working capital ratio is a measure of general liquidity &
most widely used to make the analysis of a short-term financial position or liquidity position
of the firm.
Current assets include cash and those assets, which can be converted into cash within
a year such as marketable securities, debtors and inventories, bills receivable and prepaid
expenses. All obligations maturing within a year are included in current liabilities. Current
liabilities include creditors, Bills payable accrued expenses, short-term bank loans. Income –
tax liabilities and long-term debt maturing in the current year.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
CURRENT ASSETS CURRENT LIABILITIES
1) Cash in hand 1) Outstanding Expenses
2) Cash at Bank 2) Bills payable
3) Marketable Securities 3) Sundry creditors
4) Short term investments 4) Short term advances
5) Bills receivable 5) Income tax payable
6) Sundry Debtors 6) Dividends payable
7) Inventories 7) Bank overdraft
8) Work in process 8) Accrued expenses and
other obligations maturing in current year
9) Prepaid expenses and others which
Can be converted into Cash within a year
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
The current ratios of NALCO from the year 2006-07to 2008-09 are as
follows:
ANALYS
IS:- The current ratio in the year 2006-07 was 4.08 which got reduced to 3.27 in
2007-08 and 2.34 in 2008-09. The reduction in current ratio was mainly because of
ongoing expansion activities , the funding of which is made internally. Since the
current ratio is more than 2:1, company is liquid enough and can meet its short term liability
on maturity.
Quick Assets
Quick Ratio = -------------------------
Current Liabilities
Acid test or quick ratio is a more rigorous test of liquidity than the current ratio. The
term ‘’Liquidity” refers to the ability of a firm to pay its short-term obligations as and
when they become due. Quick ratio may be defined as the relationship between quick
liquid assets and current or liquid liabilities. An asset is liquid if it can be converted
into cash immediately or reasonably soon without a loss of value. Cash in hand and
cash at bank are the most liquid assets. The other assets, which can be included in the
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
liquid assets, are bills receivable, sundry debtors, marketable securities and short-term
or temporary investments.
Quick Assets are those assets which are converted into cash immediately for example
cash, debtors, bills receivables, and marketable securities.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
ANALYSIS:- The quick ratio in the year 2006-07 was 3.46 which was
reduced to 2.83 in 2007-08 and further reduced to 1.91 in 2008-09. The reducing trend of
ratio is mainly because of ongoing expansion activities. Since the company’s quick ratio is
more than 1:1, it clearly indicates that the company is liquid enough and can meet its short
term liability on maturity.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
B) LEVERAGE RATIO:
Leverage ratio judges the long-term financial position of the company. This ratio
indicates an ideal mix of debt and equity in financing the company’s assets or it shows the
proportion of Debt and Equity in financing of the firm. The funds which are provided by the
long-term creditors and the owners are to meet the short term as well as long-term
borrowings .and the repayment of fixed Interest costs.
The leverage ratios are classified into:-
1) Debt-Equity Ratio:
Debt-equity is calculated by dividing Total debt by Total equity.
Total Debt
Debt -Equity Ratio = -------------------------
Total Equity
The debt equity ratio describes the lenders contributions for each rupee of the owner’s
contribution. A ratio of 1:1 may be usually considered satisfactory although the norm of such
ratio is 2:1. The higher the ratio the greater will be the risk to the creditors and too dependent
on long term debts by the firm. A lower ratio reviles a high margin of safety to the creditors
and a relatively high stake of the owners in the capital structures of the firm.
ANALYSIS:-
NALCO is a very cash rich company and the only public sector company
having zero debt. The capital base of the company is 644.31 Cr against reserve and surplus of
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
9125.50 cr. The idle debt equity ratio is 2:1. The company’s debt equity ratio is very low
which indicates, for long time the company has not gone for expansion activities and retained
the surplus profit as reserves & surplus. Also, the present expansion activities are done
through internal fund.
The company’s balance sheet is so strong that they can bargain loan at a much
cheaper rate. Therefore, it is advisable for the company to borrow for expansion activities at
lower cost of capital & invest the surplus fund at higher rate of interest. The borrowing will
also give income tax benefit to the company.
The Interest- Coverage Ratio of NALCO from the year 2006-07 to 2008- 09
is as follows: -
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
ANALYSIS:- The interest coverage ratio has come down from 3232 in 2006-07 to 480 in
2008-09. Even though the interest coverage ratio has been calculated, it is meaningless to
read the ratio as the company has hardly any borrowings.
Activity Ratios measures the efficiency of effectiveness with which a firm manage
and utilizes its assets. Activity ratios thus involve a relationship between sales & assets.
These ratios are also called turnover ratios because they indicate the speed with which assets
are converted or turned over into sales.
The Inventory turnover ratio is calculated by diving cost of goods sold by average
inventory.
Cost of goods sold Sales –Gross Profit
Inventory Ratio = Average Inventory =
---------------
Average
Inventory
Every firm has to maintain certain level of inventory of finished goods so as to be able to
meet the requirement of the business. But the level of inventory should neither be too high
nor too low. Inventory Turnover ratio indicates the number of times the stock has been turned
over during the period and evaluates the efficiency with which a firm is able to manage its
inventory. This ratio measures how fast the inventory is moving through the company and
generating sales in a year. Generally a high Inventory turnover is an indicative of good
inventory management, where as a low Inventory turnover is a danger signal from company
point of view because it cannot meet customers demand in time of urgency. A high level of
sluggish inventory amounts to unnecessary tie up funds reduced profits and increased cost,
rental of space, possible deterioration of Inventories and so on.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
2006-07 2007=08 2008=09
The inventory Turnover Ratio of NALCO from the year 2006-07 to 2008-
09 is as follows:
ANALYSIS:- The inventory turnover ratio for 2006-07 was 9.35 which has reduced to
7.26 in 2007-08 and further reduced to 6.05 in 2008-09. The Inventory turnover ratio of the
company is too low which indicates high inventory holding of the company.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
The Days of Inventory Holdings of NALCO from the year 2006-07 to
2008-09 are as follows:
2006-07 2007-08 2008-09
ANALYSIS:- The inventory holding days has gone up from 39 days in 2006-07 to 54 days
in 2008-09 which indicates high holding of inventory and consequential higher carrying cost.
Total sales
Debtor’s Turn over = ----------------
Debtors
This ratio indicates the number of times debtors are converted into sales during a year. The
higher the value of debtor’s turnover, the more efficient is the management of credit and a
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
symbol of quick collection of cash from debtor’s. A low ratio reflects the payment by debtors
is being delayed.
Debtor turnover ratio from the 2006-07 to 2008-09
ANALYSIS-
According to above chart we find out that company has failure in collection of cash from
debtor, which will be affected to company’s working capital. Company collcted more cash
(Rs.174 cr) from debtors in 2006-07. But it reduced to (Rs.105 cr) in 2007-08 and again it
increased to (Rs.117 cr) in 2008-09. This information intimates to us that company has
collected more cash in 2006-07 and after decreasing collection of cash in 2007-08, it again
little bit increased in collection of cash during 2008-09.
Average collection 2 3 3
period
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
ANALYSIS-
According to above chart we found that company collect cash from debtors in 2 days in
2006-07 and in 2007-08 &2008-09 company collected cash in 3 days. This intimates that in
2006-07 company has collected quick cash from debtor. The delay in collection of cash due
to bad debt. The company is in monopoly market and all the export sales are against letter of
credit which gets collected within 3 days. Similarly all domestic sales are either against sight
L.C or against 30 days usance L.C. The sales policy clearly shows the credit sales by the
company, is only to the extent of 30 days usance period in case of domestic sales, which is
negligible in comparison to total turnover.
3) Fixed Assets Turnover Ratio:
It is calculated by diving Days in a year by Debtors turnover ratio
Net sales
Fixed Asset Turnover Ratio =
Net fixed Assets
This ratio measures sales per rupee of investment in fixed assets. The
ability of a company is judged from the volume of sales generation from a given
amount of investment in fixed assets. This ratio measures the efficiency of sale
with which fixed assets are employed. A high ratio indicates a high degree of
efficiency of management in asset utilization and a low ratio reflects inefficient
use of assets .The concept of fixed assets is always net of depreciation.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
Net fixed 3710.88 3530.95 4031.54
assets
ANALYSIS:- The fixed assets turnover ratio is consistently decreasing from 1.6 in 2006-
07 to 1.41 in 2008-09. The company’s assets are continuously increasing by taking up
expansion activities and corresponding sales is also keeping pace with increase in
assets.
Fixed asset turnover ratio in 2006-07 was 1.60 which has reduced to 1.41 in 2007-08 and
further reduced to 1.26 in 2008-09. The reduction in ratio is mainly due to lower realization
and increase in asset of the company due to expansion activities.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
The total assets turnover ratio is a significant ratio since it shows the firm’s ability of
generating sales from all the financial resources committed to the company. As this ratio
increases there is more revenue generated per rupee of total investment in assets.
The total assets turnover ratios of NALCO from the year 2006-07
to 2008-09 are as follows:
Rs in corers
2006-07 2007-08 2008-09
ANALYSIS:-
The total asset turnover ratio in 2006-07 was 0.62 which has reduced to 0.45 in 2007-08 and
further reduced to 0.44 in 2008-09. The reduction in ratio is mainly due to lower realization
and increase in asset of the company due to expansion activities.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
company. Besides management, the company, creditors and owners are also interested in
the profitability of the firm.
PAT
Net Profit Ratio = ---------------------
Sales
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
This ratio measures the company’s ability to turn each rupee of sale into net profit. If the net
margin is inadequate the company will fail to achieve satisfactory returns on shareholders
fund. A high net margin ratio ensures adequate return to shareholders and it remains in an
advantageous position to survive in the face of falling sells prices, rising costs of productions
or declining demand.
The Net Profit turnover ratios of NALCO from the year 2006-07
to 2008-09 are as follows:
2006-07 2007-08 2008-09
ANALYSIS:- NALCO is one of the lowest cost producer of alumina and aluminum in Asia.
The net profit margin in 2006-07 was 40% which has reduced to 33% in 2007-08 and 25% in
2008-09. The net profit ratio has come down due to lower realization. Even though, the net
profit ratio showing a decreasing trend. It is showing a phenomenal net profit ratio of 25%.
Operating profit
Operating Profit Ratio = -----------------------
Net Sales
Operating profit = Net sales – Indirect Expenses
This ratio measures the relationship between Operating profits and Sales. Operating profit
expresses the amount of operating profit for each rupee of sale. A high Operating Profit Ratio
is a good simple of sound management and a low ratio indicates a deficiency of management.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
The Operating Profit turnover ratios of NALCO from the year 2006-07 to
2008-09 are as follows:
Rs in corers
2006-07 2007-08 2008-09
Net Profit
Return on Capital Employed ratios = ----------------
Capital Employed
It establishes a relationship between Net Profit and Capital employed. This ratio
shows how well the resources of a company are being used efficiently by the management. It
measures the overall performance of the Company. The higher the ratio the more efficiently
the funds are used and better is the management and a low ratio indicates the in efficiency of
management.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
The Return on Capital Employed ratios of NALCO from the year 2006-07
to 2008-09 is as follows:
2006-07 2007-08 2008-09
ANALYSIS:- Aluminum industry is basically cyclical in nature. The prices were peaked
during 2006-07 and showing downward trend since 2007-08. The return on capital employed
in 2006-07 was 32% which has reduced to 23% in 2007-08 & 19% in 2008-09. Even 19%
Return on capital employed is very good in context of aluminum industry which clearly
indicates the company is doing exceedingly well.
This ratio shows the relationship between Net profit and funds provided by the owner.
It measures how well firm has used the resources of the owner and also it reviles whether the
firm has a reasonable profit to its equity shareholders or not. The Shareholders equity or net
worth includes paid up share capital, share premium, reserves and surplus less accumulated
losses. It can also be found out by subtracting total liabilities from total asset. The higher the
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
ratio the greater will be the return to the owner and vice versa. This ratio is of great interest to
the prospective share holders and to the management because it reveals the relative
performance and the strength of the company in attracting future investment for its
expansion.
The Return on Net Worth ratios of NALCO from the year 2006-07 to
2008-09 are as follows:
ANALYSIS:- Aluminum industry is basically cyclical in nature. The prices were peaked
during 2006-07 and showing downward trend since 2007-08. The return on capital employed
in 2006-07 was 31% which has reduced to 18% in 2007-08 & 13% in 2008-09. Even 13%
Return on capital employed is very good in context of aluminum industry which clearly
indicates the company is doing exceedingly well.
NET SALES
Working Capital Turnover Ratio = ---------------------
NET WORKING CAPITAL
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
Net working capital = Current Asset – Current Liability
The working capital turnover ratios of NALCO from the year 2006-07 to
2008-09 are as follows:
ANALYSIS:- The company has sanctioned working capital loan of Rs. 100 cr but the
company is not utilizing the limit due to excessive cash surplus. It would always be better for
the company to opt for working capital loan instead of using own fund for better financial
management. The working capital turnover ratio in 2008-09 has gone up from 1.42 in 2007-
08 to 1.96 in 2008-09 due to very high cash and bank balance as on 31st march, 2009.
EARNING PER SHARE:-
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
Issued, subscribed & paid up capital
No. of equity shares = -----------------------------------------------
Face value of shares
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
The Earning per share of NALCO from the year 2006-07 to 2008-09 are as
follows:
ANALYSIS:- The Earning per share in 2006-07 was Rs.36.96 which has come down to
Rs. 19.75 in 2008-09. The reason of fall in Earning per share is mainly due to fall in profit
because of downward in alumina & aluminum prices.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
during a specified period of time. Such a statement enumerates net effects of the
various business transaction on cash and its equivalents and takes into account
receipts and disbursements of cash. A cash flow statement summarizes the
cause of changes in cash position of a business enterprise between dates of two
balance sheets. According to AS-3 (Revised), an enterprise should prepare a
cash flow statement and should present it for each period for which financial
statements are prepared. The terms cash, cash equivalents and cash flows are
used in this statement in the following meanings:-
Cash equivalents:- are short term, highly liquid investment that are
readily convertible into known amounts of cash and which are subject to an
insignificant risk of changes in value. Cash equivalents are held for the purpose
of meeting short-term cash commitments rather than for investment or other
purposes. For an investment to qualify as cash equivalent, it must be readily
convertible to a known amount of cash and be subject to an insignificant risk of
change in value. Therefore an investment normally qualifies as a cash
equivalent only when it has a short-maturity, of say, three months or less from
the date of acquisition. Investments in shares are excluded from cash
equivalents unless they are, in substance, cash equivalents: for example,
preference shares of a company acquired shortly before their specified
redemption date (provided there is only an significant risk of failure of the
company to repay the amount at maturity).
Cash Flows:- are inflows of cash and cash equivalents. Flow of cash is said to
have taken place when any transaction makes changes in the amount of cash
and cash equivalents available before happening of the transaction. If the effect
of transaction results in the increase of cash and its equivalents, it is called an
inflow (source) and if it results in the decrease of total cash, it is known as
outflow (use) of cash.
Cash Flow Statement of, "NALCO" for the year ending 31st march
2007,2008,2009
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
Year ended Year ended Year ended
31st 31st 31st
march,2007 march,2008 march,2009
(A) Cash flow from Operating Activities
Net Profit before tax and Extraordinary Income 3620.40 2466.58 1927.16
Adjustment for:
Depreciation 321.15 285.44 272.96
Interest & financing charges 1.12 1.54 3.96
Provision(net) 8.18 8.44 55.10
Claims/recoverable written off 1.38 0.58 0.14
Stores & spares 3.90 18.90 6.72
Exchange variation gain -1.18 -6.31
Loss/profit on sale of asset(net) -0.98 0.11 -0.04
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
(F)Cash & cash equivalents-closing balance 3686.53 3516.46 2869.04
CONCLUSION
PRODUCTION
The company has exceeded the target set for production of Alumina &
Aluminium for the year 2008-09. The Aluminium smelter have achieved the
highest ever cast metal production since section with capacity utilization of
106%. The bauxite production has improved compared to previous year though
still below the rated capacity.
MARKETING
The company has achieved the highest ever sale of metal, rolled products &
special grade Alumina/hydrate during the year. The company is already listed in
London Metal Exchange. The domestic sales of metal are affected from the
smelter plant at Angul and 9 stockyards at Kolkata, Baddy, Jeypore,
Fariddabad, Biswandi, Silwasa, Banagalore, Chennai & Bishakhapatnam.
FINANCE
The company has achieved a turnover of Rs. 5517 cr. As against the turnover of
Rs. 5474 cr. During the previous year profit after tax stands at Rs. 1272 cr. as
against 1632 cr. in the previous year. The decline in the sales realization and net
profit during the year, compared to previous year is mainly due to lower sales
realization from export of metal which has partly compensated by substantial
depreciation of Rupee against US dollars. The company has achieved an export
earnings of 2071 cr. as against 2135 cr. achieved during the previous year. The
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
Earning per share has come down from Rs. 25.32 last year to 19.75 in current
year.
Foreign exchange earnings of the company for the year are Rs. 2097cr. in
previous year. Foreign exchange output of the company for this year is 618 cr.
as against 702 cr. in the previous year.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
PROFIT AND LOSS ACCOUNT OF NALCO FOR THE YEAR ENDED 31ST MARCH
2007,2008,2009
PARTICULARS 2006-07 2007-08 2008-09
INCOME:
Gross sales 6514.51 5474.45 5517.52
Less: excise duty 547.32 485.65 423.00
Net sales 5940.19 4988.65 5094.52
Finished goods internally consumed/capitalized 12.35 31.65 26.44
Other income 401.65 554.77 495.84
TOTAL 6354.19 5575.22 5616.80
EXPENDITURE
Decretion/accretion to stock of finished/intermediary -15.13 -21.85 -85.35
products/work in progress
Raw materials 557.59 574.36 696.76
Power & fuel 851.02 994.69 1311.55
Repair & maintenance 230.34 231.54 250.52
Other manufacturing expenses 152.66 163.82 174.98
Employees remuneration & benefits 392.88 552.97 771.06
Administrative expenses 85.37 106.74 103.33
Other expenses 72.55 113.97 123.10
Selling & distribution expenses 76.98 84.74 84.33
Interest & financing charges 1.12 1.51 3.96
Provisions 5.25 -0.35 -3.23
Depreciations 317.13 281.10 272.44
TOTAL 2727.76 3083.24 3703.45
APPROPRIATIONS
Interim dividend 322.15 289.94 225.51
Proposed final dividend 161.08 96.65 96.65
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
SIGNIFICANT ACCOUNTING POLICIES
1.1 Basis of Accounting:
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
1.3.1 All fixed assets are stated at historical cost less depreciation. Cost
includes all direct expenditure of acquisition, attributable borrowing cost and
net of Cenvat credit, wherever applicable.
1.3.3 Fixed assets acquired out of financial grant from Government are shown
at cost by crediting the grant-in-aid received to Capital Reserve. Equivalent
amount of depreciation provided on such assets each year is transferred from
Capital Reserve to Profit & Loss Account.
1.3.4 Insurance spares valuing more that Rs. 1 Lakh per unit are capitalized
with the related fixed assets.
1.3.6 Fixed assets retired from active use and held for disposal are stated at
lower of net book value and estimated net realizable value.
1.4 Investments:
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
1.5 Inventories:
1.5.1 Raw materials, stores and spares are valued at monthly weighted average cost
net of cenvat credit wherever applicable. Shortage of coal up to 1% is treated as
abnormal loss.
1.5.2 Work in process is valued at lower of cost and net realizable value. Cost is
ascertained on the basis of annual average cost of material, appropriate share of
labour and related overheads.
1.5.3 Finished goods are valued at lower of cost and net realizable value Cost is
determined on the basis of material cost plus appropriate share of labour, related
overheads and duties.
1.5.4 Intermediary products viz. Anodes are valued at cost, anode butts and anode
rejects are valued at lower of realizable value or 45% of direct material cost.
1.5.6 Inventory stores and spares, other than insurance spares identified as not
moved for more that 5 years is valued at 5% of the cost.
1.6 Provisions
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
1.7.1 Monetary assets and liabilities related to foreign currency transactions
remaining unsettled are translated at year-end rates.
1.1.1 Certain Assets at Port Facilities are depreciated at rates calculated on the
basis of balance lease period of land belonging to the Port Authority on which
these assets are installed
1.1.2 Assets costing Rs.5000/- of less individually are depreciated fully in the
year in which they are put on use.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
1.1.3 Assets on land not owned by the Company are depreciated over a period
of five years.
1.3.1 Sales include excise duty and are net of rebates and price concessions.
Sales in the domestic market are recognized at the time of dispatch of materials
to the buyers. Export sales are recognized on issue of bill of lading.
1.3.2 Claims and interest receivables are accounted for in the Profit and Loss
Account based on certainty of their realization.
1.3.3 Export incentives in the form of duty credit on exports made during the
year, under Duty Entitlement Pass Book (DEPB) scheme are accounted for on
accrual basis after providing for expected shortfall in realization based on last
sale.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
1.4 Repairs and Replacements.
Port relining expenses are charged to Profit & Loss Account as and when
incurred
1.5 Employee Benefits :
Research expenditure is charged to Profit & Loss Account in the year in which
incurred. Development expenditure except of capital nature is charged to Profit
& Loss Account in the year incurred after setting off of incidental income, if
any.
1.7 Borrowing Cost :
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
tax assets and liabilities are measured using the tax rates and tax laws that have
been enacted or substantively enacted by the Balance Sheet date.
BIBLIOGRAPHY
(WWW.NALCO.CO.IN)
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.
Final Dissertation of Summer Internship Topic: By Chitta Ranjan Behera Dated SIMS
Ghaziabad.