Thejo Engg-Final OS1

8/9/2019 Thejo Engg-Final OS1

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AN ANALYSIS ON CASH MANAGEMENT OF THEJOENGINEERING LTD

ORGANIZATION STUDY

Submitted to

MAHATMA GANDHI UNIVERSITY, KOTTAYAM

In partial fulfilment of the requirement for the award of

MASTERS DEGREE IN BUSINESS ADMINISTRATION

(2013-2015)

By

REMYA RAJEEV

Register Number: 50738

RAJAGIRI COLLEGE OF SOCIAL SCIENCES

RAJAGIRI P O

KOCHI - 683104


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DECLARATION

I, Remya Rajeev, hereby declare that this summer project report titled An Analysis on

Cash management of Thejo Engineering Limitedis prepared in partial fulfillment of the

requirement for the award of Masters degree in business administration during the academic

year 2013-15 by Rajagiri College of Social Sciences, under the guidance of, Dr. Mathew

Joseph (Rajagiri College of Social Sciences).

I also declare that this report has not been submitted in full or part thereof, to any university

or institutions for the award of any degree or diploma.

Kalamassery Remya Rajeev

21-07-2014


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ACKNOWLEDGMENT

I express my heartfelt thanks to the Management of THEJO ENGG LTD for giving me agolden opportunity to undergo this organization study & internship in their organization.

I owe my sincere thanks to the head of my institution, Dr. Joseph I. Injodey, for giving me

an opportunity to undergo this organization study.

I consider this as a privilege to express my sincere gratitude to Dr. Mathew Joseph, faculty

guide, Department of Management Studies for his valuable support and suggestion and

guidance during the course of the project.

In preparing this report, I want to give special acknowledgement to Mr. Sanjaya Kumar,

Senior Manager HR, Project Guide, Thejo Engineering Ltd. for his guidance to carry out my

project work and providing me intellectual guidance and assistance.

I thank Almighty for his blessings in completing this project work successfully.

Last but not the least I extend my sincere thanks to my parents, friends and all well-wishers

who have been the back bone in completing this project work in a successful manner.


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LIST OF CONTENTS

CHAPTER PARTICULARS PG NO

EXECUTIVE SUMMARY 8

SECTION I PROFILE STUDY OF THE ORGANIZATION 9

1. INDUSTRY PROFILE 10

2. INCORPORATION AND HISTORY OF THE

ORGANIZATION

11

3. VISION/MISSION STATEMENTS 12

4. CORPORATE OFFICE/HEAD QUARTERS,

NUMBER OF UNITS

13

5. CAPITAL STRUCTURE, INITIAL INVESTMENTS,

SHARES

14

6. BUSINESS TURN OVER, PROFIT/LOSS DETAILS,

MARKET SHARE

16

7. ORGANIZATIONAL STRUCTURE/HIERARCHY,

EMPLOYEE STRENGTH

17

8. PRODUCTS/SERVICES 18

9. PRODUCTION PROCESS/BUSINESS & SERVICE

OPERATIONS

21

10. CUSTOMERS/CLIENTS 22

11. FUNCTIONAL DEPARTMENTS, THEIR

ORGANIZATION AND ACTIVITIES

27


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12. INNOVATIVE MANAGEMENT PRACTICES 43

13. FUTURE PLANS & BUSINESS

STRATEGY/EXPANSION/DIVERSIFICATION

43

14. SWOT ANALYSIS 45

SECTION II PROBLEM CENTERED STUDY 48

CHAPTER 1. RESEARCH METHODOLOGY 49

CHAPTER 2. DATA ANALYSIS AND PRESENTATION 60

CHAPTER 3. FINDINGS AND CONCLUSION 95

BIBLIOGRAPHY 97


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LIST OF TABLES

TABLE NO: TABLE NAME PAGE

NO:

TABLE 1 CAPITAL STRUCTURE 14

TABLE 2 SHAREHOLDING PATTERN 14

TABLE 3 SHAREHOLDING OF PERSONS BELONGING TO THE

CATEGORY "PUBLIC" AND HOLDING MORE THAN

1% OF THE TOTAL NUMBER OF SHARES

15

TABLE 4 TURNOVER OF THE COMPANY 16

TABLE 5 CASHFLOW STATEMENT 61

TABLE 6 CURRENT RATIO 63

TABLE 7 QUICK RATIO 65

TABLE 8 NET WORKING CAPITAL RATIO 66

TABLE 9 INVENTORY TURNOVER RATIO 68

TABLE 10 DEBTORS TURNOVER RATIO 70

TABLE 11 CREDITORS TURNOVER RATIO 71

TABLE 12 FIXED ASSETS TURNOVER RATIO 72

TABLE 13 TOTAL ASSETS TURNOVER RATIO 74

TABLE 14 CAPITAL TURNOVER RATIO 75

TABLE 15 DEBT-EQUITY RATIO 77

TABLE 16 OWNERS FUND TO TOTAL FUND 79

TABLE 17 INTEREST COVERAGE RATIO 80

TABLE 18 EQUITY DIVIDEND COVERAGE RATIO 82

TABLE 19 NET PROFIT RATIO 84TABLE 20 OPERATING PROFIT RATIO 85

TABLE 21 RETURN ON ASSETS 86

TABLE 22 RETURN ON CAPITAL EMPLOYED 88

TABLE 23 RETURN ON NETWORTH 89

TABLE 24 EARNINGS PER SHARE 91

TABLE 25 DIVIDEND PER SHARE 93


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LIST OF GRAPHS


NO:

GRAPH 1 CURRENT RATIO 63

GRAPH 2 QUICK RATIO 65GRAPH 3 NET WORKING CAPITAL RATIO 66

GRAPH 4 INVENTORY TURNOVER RATIO 68

GRAPH 5 DEBTORS TURNOVER RATIO 70

GRAPH 6 CREDITORS TURNOVER RATIO 71

GRAPH 7 FIXED ASSETS TURNOVER RATIO 72

GRAPH 8 TOTAL ASSETS TURNOVER RATIO 74

GRAPH 9 CAPITAL TURNOVER RATIO 75

GRAPH 10 DEBT-EQUITY RATIO 77

GRAPH 11 OWNERS FUND TO TOTAL FUND 79

GRAPH 12 INTEREST COVERAGE RATIO 80GRAPH 13 EQUITY DIVIDEND COVERAGE RATIO 82

GRAPH 14 NET PROFIT RATIO 84

GRAPH 15 OPERATING PROFIT RATIO 85

GRAPH 16 RETURN ON ASSETS 86

GRAPH 17 RETURN ON INVESTMENTS 88

GRAPH 18 RETURN ON NETWORTH 89

GRAPH 19 EARNINGS PER SHARE 91

GRAPH 20 DIVIDEND PER SHARE 93

LIST OF CHARTS


NO:

CHART 1 ORGANIZATIONAL STRUCTURE OF THE

COMPANY

17

CHART 2 PRODUCTION PROCESS 21

CHART 3 FINANCE DEPARTMENT 27

CHART 4 MATERIALS & STORES DEPARTMENT 28

CHART 5 COD DEPARTMENT 30

CHART 6 EXECUTION & MONITORING DEPARTMENT 31CHART 7 MARKETING DEPARTMENT 34

CHART 8 SALES DEPARTMENT 34

CHART 9 STRUCTURE OF FACTORY 39

CHART 10 TOTAL MAINTENANCE CENTER 41


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EXECUTIVE SUMMARY

Bulk material handling is an engineering field that is centered on the design of equipment

used for the handling of dry materials such as ores, coal, cereals, wood chips, sand, gravel

and stone in loose bulk form. It can also relate to the handling of mixed wastes. Thejo

Engineering Ltd is one of Indias major solution providers in bulk material handling,

conveyor systems, mineral processing and corrosion protection sectors. The company

pioneered the cold vulcanizing process in India and over the years has registered a steady and

systematic growth. It is one of the few organizations engaged in the manufacturing, sales and

servicing of specialized engineering products, catering to various segments of bulk materials

handling industry

The study is conducted for Thejo Engineering Ltd on its cash management system. The

objective of the study is to find out the liquidity position of the concern through ratio

analysis, to understand the growth of the company in terms of cash flow statement and make

necessary suggestions to improve the cash position of the company. The research design

adopted for the project is analytical in nature where the facts and information used in the

study are already available and these are analyzed to make critical evaluation of the

performance. The primary data for the study is collected through personal interviews and

discussion with Deputy Manager (Material Planning) and the secondary data is collected

from the annual reports, company website and other books and journals related to the study.

The time period taken for the study has been four years 2009-2013. The tools used in the

analysis are cash flow statement for the study period, ratio analysis and trend analysis. From

the above methods of analysis it is found that the cash management of Thejo Engineering has

been working well within the norms. The major limitation of the study is the lack of adequate

data due to confidentiality of information.


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SECTION-I

PROFILE STUDY OF THEORGANIZATION


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INDUSTRY PROFILE

Bulk material handlingis anengineering field that is centered on the design of equipment

used for the handling of dry materials such as ores, coal,cereals,wood chips, sand, gravel

and stone in loose bulk form. It can also relate to the handling of mixedwastes.

Bulk material handling systems are typically composed of stationary machinery such

asconveyor belts,screw conveyors,stackers,reclaimers,bucket elevators, truck

dumpers,railcar dumpers or wagon tipplers,ship loaders,hoppers and diverters and various

mobile equipment such asloaders, various shuttles,[

combined with storage facilities such

as stockyards, storage orstockpiles. Advanced bulk material handling systems feature

integrated bulk storage, conveying, and discharge.

The purpose of a bulk material handling facility may be to transport material from one of

several locations (i.e. a source) to an ultimate destination or to process material such as ore in

concentrating andsmelting or handling materials for manufacturing such as logs, wood chips

and sawdust at sawmills and paper mills. Other industries using bulk materials handling

include flour mills and coal fired utility boilers.

Providing storage and inventory control and possibly material blending is usually part of a

bulk material handling system.

.
http://en.wikipedia.org/wiki/Engineeringhttp://en.wikipedia.org/wiki/Cerealhttp://en.wikipedia.org/wiki/Wastehttp://en.wikipedia.org/wiki/Conveyor_belthttp://en.wikipedia.org/wiki/Screw_conveyorhttp://en.wikipedia.org/wiki/Stackerhttp://en.wikipedia.org/wiki/Reclaimerhttp://en.wikipedia.org/wiki/Bucket_elevatorhttp://en.wikipedia.org/wiki/Rotary_car_dumperhttp://en.wikipedia.org/wiki/Shiploaderhttp://en.wikipedia.org/wiki/Chute_(gravity)http://en.wikipedia.org/wiki/Loader_(equipment)http://en.wikipedia.org/wiki/Stockpilehttp://en.wikipedia.org/wiki/Smeltinghttp://en.wikipedia.org/wiki/Smeltinghttp://en.wikipedia.org/wiki/Stockpilehttp://en.wikipedia.org/wiki/Loader_(equipment)http://en.wikipedia.org/wiki/Chute_(gravity)http://en.wikipedia.org/wiki/Shiploaderhttp://en.wikipedia.org/wiki/Rotary_car_dumperhttp://en.wikipedia.org/wiki/Bucket_elevatorhttp://en.wikipedia.org/wiki/Reclaimerhttp://en.wikipedia.org/wiki/Stackerhttp://en.wikipedia.org/wiki/Screw_conveyorhttp://en.wikipedia.org/wiki/Conveyor_belthttp://en.wikipedia.org/wiki/Wastehttp://en.wikipedia.org/wiki/Cerealhttp://en.wikipedia.org/wiki/Engineering


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INCORPORATION AND HISTORY OF THEJO ENGG LTD

ABOUT THEJO ENGG LTD

Thejo Engineering Ltd. was established in the year 1974, with the objective of being the

torchbearer for the maintenance of Belt Conveyor systems. Thejo pioneered the cold

vulcanizing process in India and over the years have registered a steady and systematic

growth. It is one of the few organizations engaged in the manufacturing, sales and servicing

of specialized engineered products, catering to various segments of bulk materials handling

industry. The organization was founded by Mr.K.J.Joseph and Mr. Thomas John as a

partnership concern in the year 1974, and was subsequently converted to a private limited

company in the year 1986. In 2008, the company was converted to public limited Co and

subsequently in 2012 company was listed in NSE EMERGE platform. Building on the

founders vision and bringing a touch of professionalism to the company isMr. V.A George,

the CEO and President of Thejo Engineering Through commitment to quality and dedicated

service, Thejo has established a coveted clientele which includes all leading Steel Plants,

Mines, Cement & Fertilizer Industries, Thermal Power Stations, and Shipping Ports.

Thejo has grown today into Indias foremost solution provider in bulk material handling,

conveyor systems, mineral processing and corrosion protection sectors. Thejoscommitment

to customers, dedication to deliverables and consistent control over quality has seen the

company grow surely and steadily into a frontrunner in the field, with a market share of over

85percent.

The companys equity shareis listed in new SME platform EMERGE of theNSE.Thejo is

the first SME company to be listed in the EMERGE platform. On February 29Th2012,

Thejo has been awarded a Rating of SE1A by NSIC-CRISIL. CRISIL Research has assigned

a CRISIL SME IER fundamental grade of 'SME 5/5' to Thejo Engineering Ltd (Thejo). The

grade indicates that the company's fundamentals are 'excellent' relative to other SMEs in

India. The company is certified with ISO 9001.Dedicated man power is the key success

behind the company.


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CORPORATE OFFICE/HEAD QUARTERS, NUMBER OF

UNITS

There are four manufacturing units in Chennai and one at Jubail, Saudi Arabia and Zonal &

Branch offices spreading across India.

CORPORATE OFFICE

#41, VDS HOUSE,CATHEDRAL ROAD,CHENNAI

ZONAL OFFICES

1.

EAST ZONE

2.

SOUTH-EAST ZONE

3.

CENTRAL ZONE

4.

SOUTH ZONE

ASSOCIATES

1.

Vadodara(Gujrat)

2. Varanasi(UP)

3. Vasco(Goa)

4. DuPont(USA)

5. African Relining Services-Ghana

6. Losugen-Australia

BRANCHES

1.

Tata Nagar

2. Dhanbad

3. Talcher

4. Shakthi Nagar

5. Nagpur

6. Delhi

7. Korba

8. Chennai

9. Vizag

10.

Ramagundam11.Bellary


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CAPITAL STRUCTURE, INITIAL INVESTMENTS, SHARES

BUSINESS TURN OVER, PROFIT/LOSS DETAILS,

MARKET SHARE

CAPITAL STRUCTURE

From

Year

To

Year

Class Of

Share

Authorized

Capital

(Crores)

Issued

Capital

(Crores)

Paid Up

Shares

(Nos)

Paid Up

Face

Value

Paid Up

Capital

(Crores)

2012 2013 Equity Share 2.00 1.72 1716776 10 1.72

2011 2012 Equity Share 2.00 1.18 1184740 10 1.18

TABLE:1Source: Annual reports for the years 2011-12 ,2012-13

SHARE HOLDING PATTERN

The latest three shareholding pattern for the company under two broad categories (Promoter

& Non Promoters)

Share Holding Pattern as on : 31/03/2013

Face Value 10

No. Of Shares % Holding

PROMOTER'S HOLDING

Foreign Promoters 0.00 0.00

Indian Promoters 979920 57.08

Sub Total 979920 57.08

NON PROMOTER'S HOLDING

Institutional Investors

Banks Fin. Inst. and Insurance 288436 16.80

Sub Total 288436 16.80

Other Investors

Private Corporate Bodies 26700 1.56

NRI's/OCB's/Foreign Others 900 0.05


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Others 76500 4.46

Sub Total 104100 6.06

General Public 344320 20.06

GRAND TOTAL 1716776.0000 100.00

TABLE: 2

STATEMENT SHOWING SHAREHOLDING OF PERSONS BELONGING TO THE

CATEGORY "PUBLIC" AND HOLDING MORE THAN 1% OF THE TOTAL

NUMBER OF SHARES

Source: www.nseindia.com

Sr.

NoName of the shareholder

Number of

shares held

Shares as a percentage of total number of

shares {i.e., Grand Total (A)+(B)+(C)

indicated in Statement at Para (I)(a) above}

1

Sidbi Trustee Company

Ltd A/C India

Opportunities Fund

317072 9.23

2Emerging India Growth

Fund Cvcf V248400 7.23

3 S P George 124000 3.61

4 Anand T Pethe 62420 1.82

5 Lukose O J 62080 1.81

6 George V A 50000 1.46

7 Idbi Cap MktServ Ltd 225000 6.55

8 Jose Kozhipat 43140 1.26

9 N R Gold Pvt Ltd 37800 1.10

Total 1169912 34.07

TABLE: 3


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ORGANISATIONAL STRUCTURE THEJO ENGINEERING

LIMITED

CHART: 1

BOARD OF

DIRECTORSM.D

DIRECTOR, MARKETING

DGM-MKTNG

CORROSIONPROTECTION

DY- MANAGER

TRANSFER POINTSOLNS

DY MANAGER

WEAR &ABRASION

PROTECTION

SR. ENGG

CONVEYOR CARE

DY MANAGER

DESIGN

V.P

BUSINESS DIVZONE

HEAD,COD

FC-F&A

GM,TMC

DGM, HR&AD

MN

HEAD,

MATERIALS

DIRECTOR

,SALES

SALES &

SERVICES

ZM-CENTRAL

ZM-EAST

ZM-SOUTH

ZM-SOUTHEAST

HEAD. EMD

GM-

OPERATIONS(


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PRODUCTS/SERVICES

MAJOR PRODUCTS

1. CONVEYOR CARE

Vulcanizing equipments

Hydraulic machine

Pressure bay machine

9. TRANSFER POINT SOLUTION

Belt cleaners

Titan- heavy duty primary secondary and internal belt scrappers Belt scrappers

Spillage control

FLEXI SEALS

Segmented skirt board sealing system

Skirt rubbers

Impact cushion cradles

HERCULES

Rubber with UHMWPE

Belt tracking systems

SURRACK

1.

Carrying side trackers

2.

Return side trackers

2.

DUST CONTROLDry forging dust suppression for confined space

Dry forging dust suppression for open space

Dusgon-dust suppression of stock piles, haul roads and wagons.

Changing the properties of dusting materials

Formatting a proactive layer over the layer


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3. FLOW ENHANCEMENT

G forceair canons

Elastometer free valve construction

300,000 firing guarantee

4. ABRASION& WEAR PROTECTION

Thor-mill liners

Rubber

Alloy steel cast cap

RHINO- liner plates and panels

Rubber

Ceramic

Alloy steel casting

MATROX- Roaching

UHMWPE

TWISTER- cyclone spares

TEIWAR-sheeting

CERALINE-sheeting

5. FILTRATION SPARES

HIPO-diaphragms

Rubber

Larox

Customized

Seals, scrapers, pinch valve sleeves, hose and feed colles

Filter plate rollers

Floatation spares

6. SLURRY HANDLING

ANAKONDA-slurry hose

Rubber with fabric and steel wire reinforcement

Vacuum and gravity application

Customized design

End connectors


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PRODUCTION PROCESS

CHART: 2

Production planning Designing Raw material stores

Mixing

(Banburry)

Technical

(Quality check of batches, Stage-I)

Pre-form(Mill)

Warming&

Quality check Stage -II

1. Calendering

2. Extruder

3. Rotocure

(Hydraulic press)

Trimming

Finished Goods ,Quality check Stage -III &

Client inspection

Dispatch to client site or

factory

Product installation

byThejo Engineers

Inspection


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CUSTOMERS/CLIENT

LIST OF MAJOR CLIENTS-IN INDIA

STEEL PLANTS

Bokaro steel plant

Bhilai steel plant

Rourkela steel plant

Durgapur steel plant

Indian Iron &Steel Co Ltd.

Vizag Steel Plant

PRIVATE SECTOR STEEL PLANT

TATA Steel Ltd.

Jindal Steel &Power Ltd.

Jindal South West Ltd.

Essar Steel Ltd

IspatMetalics Ltd.

Sun Flag Iron&Steel Ltd.

THERMAL PLANT

Koradi Thermal power station

Satpura Thermal power station

Chandrapur super Thermal power station

Karnataka power Corporation Ltd

North Chennai Thermal Power station etc.

NATIONAL THERMAL POWER CORPORATION LTD.

Badarpur Thermal Power station

Singrauli Super Thermal Power station


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Vindhyachal Super thermal Power station

Rihand Super Thermal Power station

Tanda Super Thermal Power station

Unchchar Thermal Power station

Kahalgaon Super Thermal Power station

Farakah Super Thermal Power station

PORT TRUSTS

Chennai

Mormugao, Goa

Jawaharlal Nehru Porttrust

Paradeep

Vishakapatinam

Tuticorin

CEMENT FACTORIES

Associated Cement Co. Ltd

Cement Corporation of India Ltd

India Cements Ltd

Madras Cements Ltd

Tamilnadu Cement Corporation Ltd

Panyam Cements & Minerals

Coromandel Cement

Priyadarshini Cement

Visaka Cement

Grasim Industries

Ambuja Cements

Vikram Cement

UTLRATECH CEMENTS

Tadipatri

Awarpur

Arakkonam


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Rajula

Hirmi

OTHER PRIVATE SECTORS

Lafarge Cements

Diamond Cements Ltd

Zuari Cements

Manikgarh Cement

CHEMICAL PLANTS

Mangalore Chemicals &Fertilizers Ltd

Fertilizers & Chem. Travancore Ltd

Aluminium Industries Ltd.

Southern Petrochemicals Indus Coprn.

Fertilizer Corp of India Ltd

Zuari Agro-Chemicals,Goa

Sindri Fertilizers Corp.

Paradip Phosphates

Oswal Chemicals

IFFCO,Chasnala

FOUNDRIES

Ennore Foundries Ltd

Talcher Super Thermal power station

Ramagundam Super thermal power station

Korba Thermal power station

Simhadhri Thermal power station

PVT SECTOR POWER PLANTS

Tata Power plant-Mumbai

Bharat Aluminium-Captive Power plant

MINES

Tata Steel- Joda mines, Namundi Iron ore mines, Jamadoba Coal mines


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West Bokaro Collieries

Hindustan Zinc Ltd- Bhilwara ,Rampura mines, Dariba mines

Kudremukh Iron ore mines Ltd

Neyveli Lignite Corpn Ltd

Hindustan Copper Ltd- Malajkhand,Khetri

STEEL AUTHORITY OF INDIA

Bolani Iron ore mines

Kiriburu Iron ore mines

Meghahatuburu Iron ore project

Barsua Iron ore mines

Gua ore mines

COAL INDIA LTD

Bharat Coaking Coal Ltd

Eastern Coal fields Ltd

Central Coal fields Ltd

South Eastern Coal fields Ltd

Western Coal fields Ltd

Mahanadi Coal fields Ltd

Singareni Collieries Company Ltd

H.M.T Ltd

Visveswaraya Iron & Steel Ltd. (SAIL)

Nelcast Ltd

Grey Iron FoundaryJabalpur

SPACE RESEARCH CENTRES

ISRO

VSSC

DEFENCE

Naval Dockyard-Vizag


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ALUMINIUM

National Aluminium Company-Angul, Damanjodi

PVT SECTOR

Bharat Aluminium Company

OEMs

Lakshmi Machine works Ltd

Larsen & Toubro-Material handling division

Thyssen Krupp Industries(Buckau Wolf)

B.M.M

Tata Robin Fraser(TRF)

O&K Orenstein &Koppel(I) Pvt. Ltd

McNally Bharath

MECON Ltd

UB Engineering

FLSmidth Minerals Pvt.Ltd

GEA Energy Systems


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FUNCTIONAL DEPARTMENTS, THEIR ORGANIZATION

AND ACTIVITIES

1.

FINANCE DEPARTMENT

Finance department which was once decentralized has been now converted in to a centralized

department for achieving better control of departmental activities. In total there are 10

branches and each of them has one branch accountant. These branches itself are divided into

different zones. The entire branch accountant has to report to Financial Controller at the Head

Office in Chennai.

Mr.Ravikanth is the Finance controller and the company secretary at the corporate office.

.

CHART: 3

In the above figure, left side indicates the service operations and right side indicates

the manufacturing operations.

The main function of the Branch Accountants is to collect the expense sheets, check

transactions; budget details etc from the sites which is obtained from the site

accountants and the Branch Manager have to approve it.

The Branch Accountants has to report the same to the corresponding Zonal

Accountants that is; Thejo is mainly having four zones of operationsEast, South,

Central and Southeast zones.

The main function of Branch Accounts in Charge is to enter the details in accounting

software.

FINANCE

CONTROLLER

SENIOR MANAGER

ZONAL

ACCOUNTANTS

( 4 ZONES)

BRANCH ACCOUNTS

ASST(4 ZONES)

SITE ACCOUNTANTS

ASSISTANT

COMPANYSECRETARY

MANAGER

COSTING(FACTORY)

HEAD FACTORY

ACCOUNTS

ASST MANAGER

ACCOUNTS

(FACTORY)

BRANCH

ACCOUNTSMENTOR

BRANCH ACCOUNTS

ASST


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This will be verified by the Branch Accounts Mentors. They also determine the

statutory requirements, other budgets, methods to reduce cost, tax etc.

Zonal Accountants, Branch Accounts Mentors have to report to the Senior Manager

Accounts.

Senior Manager will make the necessary modifications if any.

Factory Accountants will estimate the expenses statement of different departmentslike materials, production and maintenance.

They also enter the same in accounting software.

It is further verified by the Head Factory Accounts. Central excise will take care of it.

Head Factory Accounts and the Senior Manager Accounts will finally report to the

Finance Controller.

2. MATERIALS AND STORES DEPARTMENT

.

CHART: 4

Inventory is an essential part of manufacturing process. Without essential inventory, a

manufacturing or a production unit cannot work efficiently. The materials department meets

these requirements of inventory whenever is needed. Materials and stores department is

divided in to three; raw materials products, engineering products and stores products.

The raw materials will be purchased according to the reorder level of the stock. Whenever the

reorder level is reached a particular amount of stock is purchased. In the case of commonly

HEAD, MATERIALS

DEPT

RAW MATERIALS

STORES AT FACTORYPURCHASE

CORPORATE(CRITICAL

,RUBBER)

FACTORY(ROUTINE

ACTIVITIES)


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consumed materials, it will be purchased more or less according to the market conditions. If

the department forecasts any deviation in the price or policies of the government regarding

these materials the purchase decision is changed in according to the situation. The

requirements of the production department and other departments is informed to the materials

department according to the purchase requisition of the departments they order the product.The engineering products are purchased according to the decision of the CEO only. If the

management fined an engineering product is essential to the plant, CEO takes the decision

accordingly. Materials department makes the purchase order and the decisions regarding

stores materials, tools and other spare parts are purchased by materials department whenever

is necessary. Thejo mainly import the materials from Germany, USA, and Brazil etc.

CRITERIA TO SELECT A SUPPLIER

The supplier of the company is selected by certain criteria

The company should be an ISO certified company.

The company should be able to deliver products in time with quality and competitive

price.

Category D companies (without ISO certificate).

3. CORPORATE PLANNING AND ORDER PROCESSING

DEPARTMENT (COD)

COD plays an important role to plan the entire manufacturing process in coordination withMarketing, EMD, TMC, Factory and Projects. When an enquiry is received, the Marketing

Department analyses the enquiry and forward it to the Designing department for making the

drawings. According to the drawings, the Estimation department prepares estimates and

sends it to COD. COD department is headed by Mr.Satheesh.

ROLE OF COD

ORDER PROCESSING

CORPORATE PLANNING


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4. Submission of MIS in the prescribed format.

4. EXECUTION& MONITORING DEPARTMENT (EMD)

STRUCTURE OF EMD

CHART: 6

Execution Monitoring department in Thejo integrate all the services activities and co-ordinate

all the projects works. The major service activities are:

1.

Conveyor Belt Splicing(joint)

Cold process

Hot process

2. Pulley Lagging (cold process)

3.

Conveyor Belt Looping & Laying (Project works)

Mr.Premjit is the Head of this department.

HEAD,EMD

ZONALMANAGERS(4

ZONES)

BRANCH IN

CHARGE

SITE IN CHARGE

TECHNICIANS

BDM

PRODUCTINSTALLATION

ENGINEERS


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5.HR DEPARTMENT

The five resources which constitute any organization are man, materials, machine,

market and money. Simultaneously 5 departments are functioning correspondingly for

the effective use of these resources.

5 MS

RESOURCES

5 MS DEPARTMENT

MAN HRD

MACHINE PRODUCTION

MATERIALS PURCHASE/MATERIALS

MONEY FINANCE

MARKET MARKETING

HR department is headed by Mr. Thomas Abraham. The department takes care of

functions starting from recruitment to exit interview and also General administration.

It forecasts the manpower requirements and recruits suitable candidates thru different

sources, right position at right time according to the need of the particular department.

The main functions of this department are:

Recruitment

TrainingInduction & Functional

Performance Appraisal

Career Development Plan

Employee counseling

Compensation and benefits

Welfare activities etc.


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The appraisal policy adopted by the HR department is 360 degree appraisal policy which

includes:

(a)

Self appraisal, (b) Peer appraisal and (c) HOD appraisal and apart from these there will

also be a potential appraisal. The promotion policy of the company is based upon

performance of the employee after the completion of minimum of three years experience

in the company. Training need will be analyzed through the appraisal. TNA will be

consolidated and the workers employees are then deputed for suitable training programs.

6. MARKETING AND SALES DEPARTMENT

Marketing and Sales Department integrate all the marketing activities of the product. The

activities of the Marketing Department commences when an enquiry comes from a client.

The marketing department first audits and gives engineering solutions with the help of the

companys engineers. Then based on the solution, necessary products will be designed. Thedesigning department prepares an accurate design according to the client requirements and

then prepares a quotation before giving it to the COD department. The COD department then

analyses and study on the quotation and gives it to the Marketing department and them in turn

forward it to the particular client. Mr. Manoj Joseph is the Director of Marketing and Mr.

Rajesh John is the Director of Sales.


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PRODUCTS

1. CONVEYOR CARE

Vulcanizing equipment

Hydraulic machine

2. TRANSFER POINT SOLUTION

Belt cleaners

Titan- heavy duty primary secondary and internal belt scrappers

Belt scrappers

Spillage control

FLEXI SEAL

Segmented skirt board sealing system

Skirt rubbers

Impact cushion cradles

HERCULES

Rubber with UHMWPE

Belt tracking system

SURRACK

Carrying side tracker

Return side tracker

3. DUST CONTROL

Dry forging dust suppression for confined space

Dry forging dust suppression for open space

Dusgon-dust suppression of stock piles, haul roads and wagons.

Changing the properties of dusting materials

Formatting a proactive layer over the layer


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4. FLOW ENHANCEMENT

G forceair canons

Elastometer free valve construction

300,000 firing guarantee

5. ABRASION& WEAR PROTECTION

Thor-mill liners

Rubber

Alloy steel cast cap

RHINO- liner plates and panels

Rubber

Ceramic

Alloy steel casting

MATROX- Roaching

UHMWPE

TWISTER- cyclone spares

TEIWAR-sheeting

CERALINE-sheeting

6. FILTRATION SPARES

HIPO-diaphragms

Rubber

Larox

Customized

Seals, scrapers, pinch valve sleeves, hose and feed colles

Filter plate rollers

Floatation spares


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7. SLURRY HANDLING

ANAKONDA-slurry hose

Rubber with fabric and steel wire reinforcement

Vacuum and gravity application

Customized design

End connectors

Lined pipes

-Soft, high abrasion resistant rubber lining polyurethane lined pipe fitting, ceramic coated

pipes

8. CORROSION PROTECTION

Rubber sheeting, primers and adhesives-materials

Site lining

Fabrication and rubber lined supplies

9. CONVEYOR SERVICES

Belt repair-Fabric ply, steel cord

Conveyor pulling

Lagging in-situ: cold process

Project execution &conveyor installation

Belt transition flow

Spillage control

Belt cleaning

Dust suppression

MAJOR ACHIEVEMENTS OF PROJECT DEPARTMENT

Worlds largest pipe conveyor at Vallur Thermal, Tamil Nadu(2012)

Belt width 2400 mm

Indias fastest conveyor belt at Adani West Port,Mundra,Gujarat(2011)

NCTPS Ennore-World Bank and Asian development bank funded project.

Jindal steel and power Ltd,Raigarh

ACC


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7. MANUFACTURING UNIT

Mr. Manesh Joseph is the GM. Operation; Head of Factory. The factory is located at Ponneri.

There are five units and a PU unit and R&D lab.

UNIT-1

Production of all main products takes place here and dispatches it after its quality checking.

In unit-I, mixing department, technical department, production department, mould

department and lining department works together for the production of better, good quality

products.

PRODUCTS

Rubber lined pipes and fittings

Rubber lining

Vulcanized natural rubber and synthetic rubber sheets

Pulley lagging

Thor

Material handling hose etc.

Unit-II

Unit-II generally takes care of reconditioning and repair of conveyor belt, production of

pressure bags, HIPO diaphragms, air bags etc. Mr.Arulanand is the in-charge of this unit.

Unit-III

This unit is divided in to three divisions: vulcanizing material department (VMD), Bulk

material handling and Tool room. The production is undertaken according to the need of the

client.

Unit IV

Unit four mainly concentrates on production of solution and adhesives according to the need

of the client.


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UNIT V

All lining activity takes place in unit v. The different lining activities are:

Vessel Lining

Pipe Lining

Pulley Lagging(hot process)

STRUCTURE OF THE FACTORY

CHART: 9

GENERALMANAGER-OPERATION

R&D PU UNIT-I UNIT-II UNIT-III UNIT-IV UNIT-V


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VARIOUS DEPARTMENTS AT FACTORY

Production Planning

HR and Administration

Materials and stores

Technical

Pre-form

Mixing

Production

Maintenance

Lining

Mould

Design

Quality & Dispatch

POLYURETHANE DEPARTMENT

PU is the next department under manufacturing unit. Poly urethane is a costly, hard material

and is more flexible which lasts long compared to normal rubber materials. In PU department

they produce PU products according to the clients needs. One of the main products is belt

cleaner. Mr. Pradeep Banerjee is the in-charge of this department.

RESEARCH AND DEVELOPMENT

Thejos R&D sector has been the cornerstone for developing products that meets the needs of

customers and society. R&D uses innovative technology to update their existing products and

services and also tries to put forward something new in the market. The R&D team regularly

focuses on market and takes necessary studies according to the market conditions and

competitors strategies. If any quality issue related to any product arises, then proper research

is carried out to rectify the problem. Thejo focuses on R&D with core emphasis on polymeric

science and materials research which made them outsource manufacturer of choice for many

US and European Original Equipment Manufacturers. Along with these, the R&D centre at

Thejo is certified by DSIR which helps it to act as an independent testing

centre.Mr.Gopinathan.C is the General Manager of the department.


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FUNCTIONS OF TMC

Total maintenance of conveyor system

Auditing of conveyor system

Maintenance of cranes

Operations and maintenance of plant

UNDERTAKING PROJECTS

The TMC is now undertaking the following projects:

i. Godavari Power Ispat LTD- Raipur

ii. Sarada Energy Mineral LTD-Raipur

iii. Brahmin River Pellets LTD-Jaipur

iv. Bokaro Steel LTD- Bokaro

v. Orissa Manganese and Minerals LTD- Jamshedpur

vi. Adani Power LTD- Mundra

vii. Essar Steel LTD

viii. Jindal Steel Power LTDBengaluru


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INNOVATIVE MANAGEMENT PRACTICES

SAP implementation for the entire organization

By implementing an integrated software-and-service package, we can identify the many

drivers and processes shaping manufacturing performance. We can also automate

procurement transactions, optimize financial margins, and manage suppliers, capital, and

risks.

Manage the entire sales cycle, from order generation to post-sales activities

Optimize procurement and logistics cycles for requisitioning, invoicing, andpayment processing

Leverage predefined processes to improve discrete, process, and repetitive

manufacturing

Establish a network connecting the companys headquarters with subsidiaries and

business partners

Increases finance departments efficiency by automating processes and reporting

functions with accelerated financial closes

FUTURE PLANS & BUSINESS STRATEGY

The Operations & Maintenance under the Total maintenance centre is the major business

strategy adopted by the company. Here the TMC handles:

Conveyor belt maintenance

Entire maintenance of running plant (Mechanical, Civil, Monorail, Loco

,Electrical, Housekeeping)

This is Thejos latest division and there is scope for future expansion.

Overseas expansion which gives Thejo Engineering Ltd an opportunity to tap the

untapped market with huge business potential. The overseas markets where Thejo is

presently concentrating are given below.


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Saudi operations

Australia

African markets like Liberia, Ghana

North American markets like Brazil, Chile, Argentina


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SWOT ANALYSIS


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STRENGTH

Professional Management team

First organization in the field of conveyor belt servicing and related products

manufacturing.

First company in India which is NSE listed under SME Category.

85% market share in servicing.

Wide range of clients in core sector industries.

Thejos own plants of operation and no outsourcing.

ISO 9000, CRISIL Rating

First company in India which introduced the cold vulcanizing process.

Overseas operations:

Thejo Hatcon

Thejo Australia

Provides different kinds of engineering solutions.

Implemented EHS {environmental health and safety} policy.

On the process of implementing SAP.

WEAKNESS

Supply and transportation are subject to various uncertainties and risks, and delays in

delivery or non delivery may result in penalty clause and Thejo is responsible to pay

the client heavy penalties according to the penalty clause agreed.

Agreements with various banks contain restrictive clauses for certain activities and if

Thejo is unable to get their approval, it might restrict their scope of activities.


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OPPORTUNITIES

Products and services are intended to core industries, so high opportunities in such

industries.

During the period of sluggishness , any loss of business in installation related work

will be compensated by increased maintenance works as well as maintenance of

existing systems would be given due importance.

Increasing demand for operations and Maintenance service.

Opportunity to tap the untapped market with huge business potential.

THREATS

Competition from parties in unorganized sectors.

Prices of the key raw materials such as natural rubber and synthetic rubber are highly

volatile.

Each of the products is unique and according to customer specifications, so cost of

implementation is very high.


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SECTION-II

PROBLEM CENTERED STUDY OF

THE ORGANIZATION


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CHAPTER-1

RESEARCH METHODOLOGY OF THE

STUDY


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1.1 TITLE OF THE STUDY

ANANALYSIS ON CASH MANAGEMENT OF THEJO ENGINEERING LTD

1.2 OBJECTIVES OF THE STUDY

Primary Objective:

To analyze the cash management of THEJO ENGINEERING LTD.

Secondary Objective:

To find out the liquidity position of the concern through ratio analysis.

To study the growth of THEJO ENGINEERING LTD in terms of cash flow

statement.

To make suggestion and recommendation to improve the cash position of THEJO

ENGINEERING LTD.

1.3RESEARCH DESIGN

The research design used in this project is Analytical in nature the procedure using,

which researcher has to use facts or information already available, and analyze these to make

a critical evaluation of the performance.

1.4DATA COLLECTION

Primary Sources

a. Data are collected through personal interviews and discussion with Finance

Executive.

b. Data are collected through personal interviews and discussion with Material

Planning- Deputy Manager.


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Secondary Sources

a. From the annual reports maintained by the company.

b.

Data are collected from the companys website.

c. Books and journals pertaining to the topic.

1.5TOOLS USED IN THE ANALYSIS

Cash flow statement

Ratio analysis.

1.6PERIOD OF STUDY

The present study has taken into account four financial years viz., 2009-2010 to 2012-2013.


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1.7 REVIEW OF LITERATURE

MEANING:

Cash is the money which a firm can disburse immediately without any restriction.

The term cash includes coins, currency and cheques held by the firm, and balances in its bank

accounts. Sometimes near-cash items, such as marketable securities or bank times deposits,

are also included in cash. The basic characteristic of near-cash assets is that they can readily

be converted into cash.

FACETS OF CASH MANAGEMENT:

Cash management is concerned with the managing of: (i) Cash flows into and out of

the firm, (ii) Cash flows within the firm, and (iii) Cash balances held by the firm at a point of

time by financing deficit or investing surplus cash. It can be represented by a cash

management cycle. Sales generate cash which has to be disbursed out. The surplus cash has

to be invested while deficit this cycle at a minimum cost. At the same time, it also seeks to

achieve liquidity and control. Cash management assumes more importance than other current

assets because cash is the most significant and the least productive asset that a firms holds.

It is significant because it is used to pay the firms obligations. However, cash is

unproductive. Unlike fixed assets or inventories, it does not produce goods for sale.

Therefore, the aim of cash management is to maintain adequate control over cash position to

keep the firm sufficiently liquid and to use excess cash in some profitable way.

Cash management is also important because it is difficult to predict cash flows

accurately, particularly the inflows, and there is no prefect coincidence between the inflows

and outflows of cash. During some periods, cash outflows will exceed cash inflows, because

payments for taxes, dividends, or seasonal inventory buildup. At other times, cash inflow

will be more than cash payments because there may be large cash sales and debtors may be

realized in large sums promptly. Further, cash management is significant because cashconstitutes the smallest portion of the total current assets, yet managements considerable


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time is devoted in managing it. In recent past, a number of innovations have been done in

cash management techniques. An obvious aim of the firm these days is to manage its cash

affairs in such a way as to keep cash balance at a minimum level and to invest the surplus

cash in profitable investment opportunities.

In order to resolve the uncertainty about cash flow prediction and lack of

synchronization between cash receipts and payments, the firm should develop appropriate

strategies for cash management. The firm should evolve strategies for cash management.

The firm should evolve strategies regarding the following four facets of cash management.

Cash planning: Cash inflows and outflows should be planned to project cash surplus

or deficit for each period of the planning period. Cash budget should be prepared for

this purpose.

Managing the cash flows: The firm should decide about the properly managed. The

cash inflows should be accelerated while, as far as possible, the cash outflows should

be decelerated.

Optimum cash level: the firm should decide about the appropriate level of cash

balances. The cost of excess cash and danger of cash deficiency should be matched to

determine the optimum level of cash balances.

Investing surplus cash: The surplus cash balances should be properly invested to

earn profits. The firms should decide about the division of such cash balances

between alternative short-term investment opportunities such as bank deposits,

marketable securities, or inter-corporate lending.

MOTIVES FOR HOLDING CASH

The firms need to hold cash may be attributed to the following three motives:

The transactions motive

The precautionary motive

The speculative motive


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TRANSACTION MOTIVE

The transactions motive requires a firm to hold cash to conduct its business in the

ordinary course. The firm needs cash primarily to make payments for purchases, wages and

salaries, other operating expenses, taxes, dividends etc. The need to hold cash would not

arise if there were perfect synchronization between cash receipts and cash payments, i.e.,

enough cash is received when the payment has to be made. But cash receipts and payments

are not perfectly synchronized. For those periods, when cash payments exceed cash receipts,

the firm should maintain some cash balance to be able to make required payments. For

transactions purpose, a firm may invest its cash in marketable securities. Usually, the firm

will purchase securities whose maturity corresponds with some anticipated payments, such as

dividends or taxes in the future. Notice that the transactions motive mainly refers to holding

cash to meet anticipated payments whose timing is not perfectly matched with cash receipts.

PRECAUTIONARY MOTIVE

The precautionary motive is the need to hold cash to meet contingencies in the future.

It provides a cushion or buffer to withstand some unexpected emergency. The precautionary

amount of cash depends upon the predictability of cash flows. If cash flows can be predicted

with accuracy, less cash will be maintained for an emergency. The amount of precautionary

cash is also influenced by the firms ability to borrow at short notice when the need arises.

Stronger the ability of the firm to borrow at short notice less is the need for precautionary

balance. The precautionary balance may be kept in cash and marketable securities.

Marketable securities play an important role here. The amount of cash set aside for

precautionary reasons is not expected to earn anything; the firm should attempt to earn some

profit on it. Such funds should be invested in high-liquid and low-risk marketable securities.

Precautionary balances should, thus, be held more in marketable securities and relatively less

in cash.

SPECULATIVE MOTIVE

The speculative motive relates to the holding of cash for investing in profit-making

opportunity to make profit may arise when the security prices change. The firm will hold

cash, when it is expected that interest rates will rise and security prices will fall. Securitiescan be purchased when the interest rate is expected to fall; the firm will benefit by the


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subsequent fall in interest rates and increase in security prices. The firm may also speculate

on materials prices. If it is expected that materials prices will fall, the firm can postpone

materials purchasing and make purchases in future when pric4e actually falls. Some firms

may hold cash for speculative purposes. By and large, business firms do not engage in

speculations. Thus, the primary motives to hold cash and marketable securities are: the

transactions and the precautionary motives.

CASH PLANNING

Cash flows are inseparable parts of the business operations of firms. A firm needs

cash to invest in inventory, receivable and fixed assets and to make payment for operating

expenses in order to maintain growth in sales and earnings. It is possible that firm may be

making adequate profits, but may suffer from the shortage of cash as its growing needs may

be consuming cash very fast. The poor cash position of the firm cash is corrected if its cash

needs are planned in advance. At times, a firm can have excess cash may remain idle.

Again, such excess cash outflows. Such excess cash flows can be anticipated and properly

invested if cash planning is resorted to. Cash planning is a technique to plan and control theuse of cash. It helps to anticipate the future cash flows and needs of the firm and reduces the

possibility of idle cash balances ( which lowers firms profitability )and cash deficits (which

can cause the firms failure).

Cash planning protects the financial condition of the firm by developing a projected

cash statement from a forecast of expected cash inflows and outflows for a given period. The

forecasts may be based on the present operations or the anticipated future operations. Cash

plans are very crucial in developing the overall operating plans of the firm.

Cash planning may be done on daily, weekly or monthly basis. The period and

frequency of cash planning generally depends upon the size of the firm and philosophy of

management. Large firms prepare daily and weekly forecasts. Medium-size firms usually

prepare weekly and monthly forecasts. Small firms may not prepare formal cash forecasts

because of the non-availability of information and small-scale operations. But, if the small

firms prepare cash projections, it is done on monthly basis. As a firm grows and business

operations become complex, cash planning becomes inevitable for its continuing success.


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OTHER FACTORS THAT AFFECT THE SIZE OF CASH BALANCE

1. Availability of short-term credit:

To avoid holding unnecessary large balances of cash, most firms attempt to make

arrangements at borrow money is case of unexpected needs. With such an agreement,

the firm normally pays interest only during the period that the money is actually used.

2. Money market rates:

If money will bring a low return a firm may choose not to invest it. Since the loss or profit

is small, it may not be worth the trouble to make the loan. On the other hand, if interest rates

are very high, every extra rupee will be invested.

3. Variation in cash flows:

Some firms experience wide fluctuation in cash flows as a routine matter. A firm with

steady cash flows can maintain a fairly uniform cash balance.

4. Compensating balance:

If a firm has borrowed money from a bank, the loan agreement may require the firm to

maintain a minimum balance of cash in its accounts. This is called compensating balance. In

effect this requires the firm to use the services of bank a guaranteed deposit on which it pays

no interest. The interest free deposit is the banks compensation for its advice and assistance.

CASH MANAGEMENTBASIS STRATEGIES

The management should, after knowing the cash position by means of the cash

budget, work out the basic strategies to be employed to manage its cash.

CASH CYCLE:

The cash cycle refers to the process by which cash is used to purchase materials from which

are produced goods, which are then sold to customers.


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Cash cycle=Average age of firms inventory +Days to collect its accounts receivables Days

to pay its accounts payable.

The cash turnover means the numbers of times firms cash is used during each year.

360

Cash turnover = ----------------

Cash cycle

The higher the cash turnover, the less cash the firm requires. The firm should, therefore, try

to maximize the cash turn.

MANAGING COLLECTIONS:

a) Prompt Billing:

By preparing and sending the bills promptly, without a time log between the dispatches

of goods and sending the bills, a firm can ensure earlier remittance.

b) Expeditious collection of cheques:

An important aspect of efficient cash management is to process the cheques receives

very promptly.

c) Concentration Banking:

Instead of a single collection center located at the company headquarters, multiple

collection centers are established. The purpose is to shorten the period between the time

customers mail in their payments and the time when the company has use of the funds are

then to a concentration bankusually a disbursement account.

d) Lock-Box System:

With concentration banking, a collection center receives remittances, processes them

and deposits them in a bank. The purpose is to lock-box system is to eliminate the time

between the receipt of remittances by the company and their deposit in the bank. Thecompany rents a local post office box and authorizes its bank in each of these cities to pick up


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remittances in the box. The bank picks up the mail several times a day and deposits the

cheque in the companys accounts. The cheques are recorded and cleared for collection. The

company receives a deposits the cheque in the companys accounts. The cheques are

recorded and cleared for collation. The company receives a deposit slip and a lift of

payments. This procedure frees the company from handling a depositing the cheques.

CONTROL OF DISBURSMENT

a) Stretching Accounts Payable

A firm should pay its accounts payables as late as possible without damaging its credit

standing. It should, however, take advantages of the cash discount available on prompt

payment.

b) Centralized Disbursement

One procedure for rightly controlling disbursements is to centralize payables in to a

single account, presumably at the companys headquarters. Such an arrangement would

enable a firm to delay payments and can serve cash for several reasons. Firstly, it increases

transit time. Secondly, if a firm has a centralized bank account, a relatively smaller total cash

balances will be needed.

c) Bank Draft

Unlike an ordinary cheque, the draft is not payable on demand. When it is presented

to the issuers bank for collection, the bank must present it to the issuer for acceptance. The

funds then are deposited by the issuing firm to cover payments of the draft. But suppliers

prefer cheques. Also, bank imposes a higher service charge to process them since they

require special attention, usually manual.

d) Playing the float

The amount of cheques issued by the firm but not paid for by the bank is referred to as

the payment float. The differences between payment float and collection float are the

net float. So, if a firm enjoys a positive net float, it may issue cheques even if it means

having an ever drown account in its books. Such an action is referred to as playing the

float; within limits a firm can play this game reasonably safely.

Thus management of cash becomes essential and it should be seen to, that neither

excessive nor inadequate cash balances are maintained.


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CASH FLOW ANALYSIS

The cash flow analysis is done with the help of cash flow statement. A cash flow

statement is a statement depicting changes in cash position from one period to another. It is

an important planning tool. Cash flow statement gives a clear picture of the source of cash,

the uses of cash and the net changes in cash. The primary purpose of cash flow statement is

to show that as to where from the cash to be acquired and where to use them.

UTILITY OF CASH FLOW ANALYSIS

A Cash flow analysis is an important financial tool for the management. Its chief

advantages are as follows.

(a)Helps in efficient cash management

Cash flow analysis helps in evaluating financial policies and cash position. Cash is the

basis for all operation and hence a projected cash flow statement will enable the

management to plan and co-ordinate the financial operations properly. The management

can know how much cash is needed from which source it will be derived, how much can

be generated, how much can be utilized.

(b)Helps in internal financial management

Cash flow analysis information about funds, which will be available from operations.This will helps the management in repayment of long-term debt, dividend policies etc.

(c)Discloses the movements of Cash

Cash flow statement discloses the complete picture of cash movement. The increase

in and decrease of cash and the reasons therefore can be known. It discloses the

reasons for low cash balance in spite of heavy operation profits on for heavy cash

balance in spite of low profits.

(d)Discloses success or failure of cash planning

The extent of success or failure of cash planning is known by comparing the projected

cash flow statement with the actual cash flow statement and necessary remedial

measures can be taken.


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CHAPTER-2PRESENTATION AND ANALYSIS OF

DATA


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2.1CASH FLOW STATEMENT

Inflow 2009-2010 2010-2011 2011-2012 2012-2013

Opening balance 18167225 11691544 29693648 33047928

Cash from operation 30812867 35603657 65808370 32293691

Increase in loan funds 36616628 0 167584138 11231917

Sales of Asset 0 60444 530612 31205269

Increase in share capital 1000000 0 0 0

Total 865,596,720 47,355,645 263,616,768 107,778,805

Outflows

Cash outflow from

operation

Purchase of Asset 26289207 15540564 16552286 4060528

Decrease in loan funds 0 3211747 0 0

Closing balance 11691544 29693648 33047927 26655452

Total 37,980,751 48,445,959 49,600,213 30,715,980

TABLE: 5

Inference:

This table shows that the cash flow statements of THEJO ENGINEERING LTD are

to be efficient. The cash inflow of the company is to be increased for year after year. The

fund from operation is also to differ from every year. The company increased their share

capital from 2009-2010 for Rs. 10, 00,000. It was used as efficient for the next year for

decrease their loan amount.


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RATIO ANALYSIS:

Ratio Analysis is a powerful tool of financial analysis. A Ratio is defined as the indicated

quotient of two mathematical expressions and as the relationship between two or more

things. In financial analysis, a ratio is used as a benchmark for evaluating the financial

position and performance of a firm. Ratio helps to summarize large quantities of financial

data and to make qualitative judgment about the firms financial performance.


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2.2 RATIO ANALYSIS

2.2.1 LIQUIDITY RATIOS

These are ratios which measure a firms ability to meet its maturing short-term obligations.

(a)CURRENT RATIO

Current ratio is a financial ratio that measures whether or not a company has enough

resources to pay its debt over the next business cycle (usually 12 months) by

comparing firm's current assets to its current liabilities.

Acceptable current ratio values vary from industry to industry. Generally, a current

ratio of 2:1 is considered to be acceptable. The higher the current ratio is, the more

capable the company is to pay its obligations. Current ratio is also affected byseasonality.

If current ratio is bellow 1 (current liabilities exceed current assets), then the company

may have problems paying its bills on time. However, low values do not indicate a

critical problem but should concern the management.

Current ratio gives an idea of company's operating efficiency. A high ratio indicates

"safe" liquidity, but also it can be a signal that the company has problems getting paid

on its receivable or have long inventory turnover, both symptoms that the company

may not be efficiently using its current assets.

Current ratio = Current assets/ Current Liabilities

YEAR RATIO REMARKS

2009-10 39.94/15.06=2.65 Liquidity position is

good

201011 52.73/25.01=2.11 good

201112 66.23/53.03=1.25 Satisfactory

201213 90.13/61.79=1.46 Satisfactory

TABLE: 6


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GRAPH: 1

INFERENCE:

Since, the current ratios are above 1, the company has a safe liquidity position i.e. the

company can pay off its debt over the next business cycle. During the FY2010 till

FY2011, the ratio is slightly high which can be a signal that the company has

problems getting paid on its receivable or have long inventory turnover, both

symptoms that the company may not be efficiently using its current assets. But during

FY2012 and FY2013, the ratio attained a safe position which indicates the operational

efficiency of the company has improved. Increase in current ratio over a period of

time may suggest improved liquidity of the company or a more conservative approach

to working capital management. A decreasing trend in the current ratio may suggest a

deteriorating liquidity position of the business or a leaner working capital cycle of the

company through the adoption of more efficient management practices.

Traditional manufacturing industries require significant working capital investment in

inventory, trade debtors, cash, etc, and therefore companies operating in such

industries may reasonably be expected to have current ratios of 2 or more. However,

with the advent of just in time management techniques, modern manufacturing

companies have managed to reduce the size of buffer inventory thereby leading to

significant reduction in working capital investment and hence lower current ratios.

0

0.5

1

1.5

2

2.5

3

2009-10 2010 - 11 2011 - 12 2012 - 13

current ratio

current ratio


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(b) QUICK RATIO

Quick ratio specifies whether the assets that can be quickly converted into cash are sufficient

to cover current liabilities. Ideally, quick ratio should be 1:1.If quick ratio is higher, company

may keep too much cash on hand or have a problem collecting its accounts receivable. Higher

quick ratio is needed when the company has difficulty borrowing on short-term notes. A

quick ratio higher than 1:1 indicates that the business can meet its current financial

obligations with the available quick funds on hand. A quick ratio lower than 1:1 may indicate

the company relies too much on inventory or other assets to pay its short-term liabilities.

Quick ratio shows the extent of cash and other current assets that are readily convertible into

cash in comparison to the short term obligations of an organization.

Quick Ratio = Quick assets/ Current Liabilities

YEAR RATIO REMARKS

2009-10 33.54/15.06 = 2.22 Liquidity

position is

good

2010-11 44.61/25.01 = 1.78 good

2011-12 54.59/53.03 = 1.03 good

2012-13 77.66/61.79 = 1.26 good

TABLE: 7


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GRAPH: 2

INFERENCE:

A quick ratio of 0.5 would suggest that a company is able to settle half of its current liabilities

instantaneously. Quick ratio differs from current ratio in that those current assets that are not

readily convertible into cash are excluded from the calculation such as inventory and deferred

tax credits since conversion of such assets into cash may take considerable time.Thejo

Engineering LTD has quick ratio which ranges from 2.22 maximum during FY2010 and

lowest ratio 1.03 at FY2012. These ratios indicate that the company has a good liquidity

position which indicates the business can meet its current financial obligations with the

available quick funds on hand.

(c)NET WORKING CAPITAL RATIO

There are two concepts of working capital namely gross working capital and net working

capital. Net working capital is the difference between current assets and current liabilities. An

analysis of the net working capital will be very help full for knowing the operational

efficiency of the company.

Net working capital = Current AssetsCurrent Liabilities

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

2009-10 2010 11 2011 12 2012 13

Quick ratio

Quick ratio


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YEAR RATIO REMARKS

200910 39.94-15.06 =24.88 Good

201011 52.73- 25.01 =

27.72

Good

201112 66.23 -53.03 =

13.20

Good

201213 90.1361.79 =

28.34

Good

TABLE: 8

GRAPH: 3

INFERENCE:

Positive working capital means that the business is able to pay off its short-term liabilities.

Also, a high working capital can be a signal that the company might be able to expand its

operations. Negative working capital means that the business currently is unable to meet its

short-term liabilities with its current assets. Therefore, an immediate increase in sales oradditional capital into the company is necessary in order to continue its operations. Working

0

5

10

15

20

25

30

2009-10 2010 11 2011 12 2012 13

Net W.C ratio

Net W.C ratio


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capital also gives an idea of company's efficiency. Money tied up in inventory or accounts

receivable cannot pay off any of the company's short term financial obligations. Therefore,

working capital analysis is very important, but very complex too. For example, an increase in

working capital can be explained by sales increase, but can also be explained by slow

collection or inadequate increase in inventory. Here, it is found that there is an increase in the

working capital ratio.

2.2.2 TURNOVER RATIOS

These are ratioswhich measures the effectiveness with which the firm is using its resources.

(a)INVENTORY TURNOVER RATIO

Inventory Turnover Ratio = Cost Of Goods Sold/ Average Inventory

This ratio indicates how fast inventory is sold. A company with a higher inventory ratio

has better liquidity.Inventory Turnover Ratio measures company's efficiency in turning

its inventory into sales. Its purpose is to measure the liquidity of the inventory.

Inventory Turnover Ratio is figured as "turnover times". Average inventory should be

used for inventory level to minimize the effect of seasonality.

YEAR RATIO REMARKS

2009-10 6409.95/651.98 =

9.83

Average

2010-11 9693.89/726.77 =

13.33

Good

2011-12 11888.53/988.79 =

12.02

Good

2012-13 13420.6/1206.08 =

11.127

Satisfactory

TABLE: 9


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GRAPH: 4

INFERENCE:

A low inventory turnover ratio is a signal of inefficiency, since inventory usually has a rate of

return of zero. It also implies either poor sales or excess inventory. A low turnover rate can

indicate poor liquidity, possible overstocking, and obsolescence, but it may also reflect a

planned inventory buildup in the case of material shortages or in anticipation of rapidly rising

prices.

A high inventory turnover ratio implies either strong sales or ineffective buying (the company

buys too often in small quantities, therefore the buying price is higher).A high inventory

turnover ratio can indicate better liquidity, but it can also indicate a shortage or inadequate

inventory levels, which may lead to a loss in business.

High inventory levels are usual unhealthy because they represent an investment with a rate of

return of zero. It also opens the company up to trouble if the prices begin to fall.

Thejo Engineering LTDs inventory turnover ratio is found to increase over the yea rs which

are considered satisfactory.

0

2

4

6

8

10

12

14

2009-10 2010 11 2011 12 2012 13

Inventory turnover rato

Inventory turnover rato


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(b)DEBTORS TURNOVER RATIO

Debtors Turnover ratio = Net Credit Sales/ Average debtors

Receivables turnover ratio (also known as debtors turnover ratio) is computed by dividing

the net credit sales during a period by average receivables.

Accounts receivable turnover ratio simply measures how many times the receivables are

collected during a particular period. It is a helpful tool to evaluate the liquidity of receivables.

YEAR RATIO REMARKS

2009-10 65.96/17.33 = 3.81 Low

2010-11 96.20/22.63 = 4.25 Satisfactory

2011-12 117.86/29.46 =4.00 Satisfactory

2012-13 135.49/36.80 = 3.68 Low

TABLE: 10

GRAPH: 5

3.3

3.4

3.5

3.6

3.7

3.8

3.9

4

4.1

4.2

4.3

2009-10 2010 11 2011 12 2012 13

Debtor's Turnover ratio

Debtor's Turnover ratio


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INFERENCE:

Generally, a high ratio indicates that the receivables are more liquid and are being collected

promptly. A low ratio is a sign of less liquid receivables and may reduce the true liquidity of

the business in the eyes of the analyst even if the current and quick ratios are satisfactory.

Thejo Engineering LTD is found to have low debtors turnover ratio.

(c)CREDITORS TURNOVER RATIO

A business organization has to pay creditors if it buys goods on credit. Any new creditor will

give us the goods on credit if he knows that we pay our creditors bill within short period of

time. So, for knowing this time period, both parties calculate creditor turnover ratio.

Creditors Turnover Ratio = Net credit purchases/ Average creditors

YEAR RATIO REMARKS

200910 3.84

201011 1.39

201112 3.14

201213 3.23

TABLE: 11


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GRAPH: 6

INFERENCE:

Higher creditor turnover ratio is good because it will decrease the average payment period.

The company have low creditors turnover ratio.

(d)FIXED ASSETS TURNOVER RATIO

This ratio is often used as a measure in manufacturing industries, where major purchases

are made for Property, Plant & Equipment to help increase output. When companies

make these large purchases, prudent investors watch this ratio in following years to see

how effective the investment in the fixed assets was.

Fixed Assets Turnover Ratio = Sales/ Net Fixed Assets

Higher the ratio, more efficient is the firm in utilizing its assets.

0

0.5

1

1.5

2

2.5

3

3.5

4

2009 10 2010 11 2011 12 2012 13

Creditor's turnover ratio

Creditor's turnover ratio


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YEAR RATIO REMARKS

2009-10 6,432.30/ 889.66=

7.23

Satisfactory

Performance

2010-11 9,521.95/905.54 =

10.51

Good

2011-12 11,536.44/1,132.10

= 10.19

Good

2012-13 13,338.12/1,504.89

= 8.86

Satisfactory

TABLE: 12

GRAPH: 7

INFERENCE:

The fixed-asset turnover ratio measures a companys ability to generate net sales from fixed-

asset investmentsspecifically property, plant and equipment (PP&E) net of depreciation.

A higher fixed-asset turnover ratio shows that the company has been more effective in using

the investment in fixed assets to generate revenues. Thejo Engineering LTD has a satisfactory

0

2

4

6

8

10

12

2009-10 2010 11 2011 12 2012 13

Fixed assets turnover ratio

Fixed assets turnover ratio


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FA turnover ratio which indicates that the company is effective in using fixed assets to

generate revenues.

(e)TOTAL ASSTES TURNOVER RATIO

Total Assets Turnover Ratio = Sales / Total Assets

It measures the efficiency of a firm in managing and utilizing its assets.

YEAR RATIO REMARKS

200910 6,432.30/4916.76 =

1.31

Satisfactory

Performance

201011 9,521.95/6211.26 =

1.53

Good

Performance

201112 11,536.44/7,976.04

= 1.45

Good

Performance

201213 13,338.12/11.583.87

= 1.15

Satisfactory

Performance

TABLE: 13

GRAPH: 8

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

2009-10 2010 11 2011 12 2012 13

Total assets turnover ratio

Total assets turnover ratio


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INFERENCE:

The lower the total asset turnover ratio, as compared to historical data for the firm and

industry data, the more sluggish the firms sales. This may indicate a problem with one or

more of the asset categories composing total assets inventory, receivables, or fixed assets.

The small business owner should analyze the various asset classes to determine in which

current or fixed asset the problem lies. The problem could be in more than one area of current

or fixed assets. Since current assets also include the liquidity ratios, such as the current and

quick ratios, a problem with the total asset turnover ratio could also be traced back to these

ratios. Many business problems can be traced back to inventory but certainly not all. The firm

could be holding obsolete inventory and not selling inventory fast enough. With regard to

accounts receivable, the firms collection period could be too long and credit accounts may

be on the books too long. Fixed assets, such as plant and equipment, could be sitting idle

instead of being used to their full capacity. All of these issues could lower the total asset

turnover ratio.

(f) CAPITAL TURNOVER RATIO

A ratio of how effectively a publicly-traded company manages the capital invested in it

to produce revenues. It is calculated by taking the total of the companys annual sales

and dividing it by the average stockholder equity, which is the average amount of money

invested in the company. A high ratio indicates that the company is using its capital

well, while a low ratio indicates the opposite. It is also called equity turnover.

Capital Turnover Ratio = Sales/ Capital employed

It measures the efficiency of a company in utilizing its capital for generating sales.


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YEAR RATIO REMARKS

2009-10 6,432.30/3,388.07

=1.90

Satisfactory

2010-11 9,521.95/3,690.72

=2.58

Good

2011-12 11,536.44/2,641.67

= 4.37

Good

2012-13 13,338.12/5,334.77

= 2.50

Good

TABLE: 14

GRAPH: 9

INFERENCE:

The ratio is fluctuating towards the end of the study period i.e. during FY2012 the ratio

decreased from 4.37 to 2.50 in FY2013.This indicates that the company is not effectively

utilizing its capital for generating sales.

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

2009-10 2010 11 2011 12 2012 13

Capital turunover ratio

Capital turunover ratio


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2.2.3 CAPITAL STRUCTURE RATIOS

(a) DEBT-EQUITY RATIO

Debt to equity ratio is a long term solvency ratio that indicates the soundness of long-term

financial policies of the company. It shows the relation between the portion of assets

provided by the stockholders and the portion of assets provided by creditors. Debt to equity

ratio is also known as external-internal equity ratio.

Debt-Equity Ratio=Long term debt/ Shareholders Equity

A ratio of 1:1 is considered safe.

TABLE: 15

YEAR RATIO REMARKS

2009-10 1,993.57/1,394.50 =

1.43

Not safe

2010-11 1,961.45/1,729.27

=1.13

Not safe

2011-12 66.87/2,574.80 =

0.02

Safe

2012-13 13.64/5,331.13

=0.03

Safe


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GRAPH: 10

INFERENCE:

A ratio of 1 or 1: 1 means that creditors and stockholders equally contribute to the assets of

the business.

A less than 1 ratio indicates that the portion of assets provided by stockholders is greater than

the portion of assets provided by creditors and a greater than 1 ratio indicates that the portion

of assets provided by creditors is greater than the portion of assets provided by stockholders.

Creditors usually like a low debt to equity ratio because a low ratio (less than 1) is the

indication of greater protection to their money. But stockholders like to get benefit from the

funds provided by the creditors therefore they would like a high debt to equity ratio.

Debt equity ratio varies from industry to industry. Different norms have been developed for

different industries. A ratio that is ideal for one industry may be worrisome for another

industry. A ratio of 1: 1 is normally considered satisfactory for most of the companies.

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

2009-10 2010-11 2011-12 2012-13

Debt-Equity ratio

Debt-Equity ratio


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(b)OWNERS FUND TO TOTAL FUND

Owners Fund to Total Fund= Owners Equity/Total Fund

Higher the proportion of owners fund to total fund invested in thebusiness, lower is the

degree of risk.

YEAR RATIO REMARKS

2009-10 1,394.50/3,388.07

=0.41

Risk is more

201011 1,729.27/3,690.72

=0.47

Risk is more

201112 2,574.80/2,641.67

=0.97

Less risk

201213 5,331.13/5.344.77

=0.99

Less risk

TABLE: 16

GRAPH: 11

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

2009-10 2010-11 2011-12 2012-13

Owner's fund to Total fund

Owner's fund to Total fund


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INFERENCE:

Higher the proportion of owners fund to total fund invested in the business, lower is the

degree of risk. In the FY2010 and 11 the risk was more due to high proportion of owners

fund to total fund. The ratio came down to safer level during the FY2012 and 13.

2.2.4 COVERAGE RATIOS

(a) INTEREST COVERAGE RATIO

Interest Coverage Ratio, also known as Times Interest Earned Ratio (TIE), states the number

of times a company is capable of bearing its interest expense obligation out of the operating

profits earned during a period.

Interest Coverage Ratio= EBIT/ Interest

This ratio is used to determine how easily a company can pay interest on outstanding debt. A

high ratio indicates its ability to pay interest easily.Interest Coverage Ratio indicates the

capacity of an organization to pay its interest obligations. An interest cover of 2 implies that

the entity has sufficient profitability to bear twice the amount of its current finance cost. The

effect of taxation is normally ignored in the interest cover calculation to facilitate a better

comparison of the contribution of the company's underlying profitability towards meeting its

interest obligations which may be blurred to an extent by the effects of revision in tax rates,

policies and prior period tax adjustments over several accounting periods.

TABLE: 17

YEAR RATIO REMARKS

200910 1,817.79/257.53 =

7.06

Good position

201011 1,652.33/257.32 =

5.96

Good position

201112 855.07/367.07

=2.33

Satisfactory

201213 608.46/380.16

=1.60

Satisfactory


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(b)EQUITY DIVIDEND COVERAGE RATIO

Dividend Coverage Ratio indicates the capacity of an organization to pay dividends out of

profit attributable to the share holders. A dividend cover of 3 implies that a company has

sufficient earnings to pay dividends amounting to 3 times of the present dividend payout

during the period. When calculating dividend coverage for ordinary share capital, it is

necessary to deduct any dividend paid on irredeemable preference shares from the net profit

earned during the accounting period in order to arrive at the earnings attributable to ordinary

share holders. Dividend on redeemable preference shares is already deducted from the

income statement as interest expense (finance cost) and hence no further adjustment is

required in its respect in the dividend cover calculation.

Equity Dividend coverage ratio= Earnings after tax and preference dividend/ Equity

dividend

TABLE: 18

YEAR RATIO REMARKS

200910 226.98/332.80

=6.92

Satisfactory

position

201011 382.96/41.46=9.23 Satisfactory

position

201112 671.83/47.39

=14.18

Satisfactory

position

201213 974.78/85.84

=11.35

Satisfactory

position


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GRAPH: 13

INFERENCE:

Dividend Coverage is a measure of the ability of an organization to pay dividends. Although

dividend payments are usually discretionary, companies normally seek to maintain a

reasonable level of dividend payout in line with the market expectations.

Generally, companies would aim to sustain a dividend cover of at least 2 times in order to

avail adequate financing through retained earnings while providing a reasonable cash return

on shareholder's investment. A higher or lower dividend cover may be appropriate depending

on the level of stability in earnings of the organizations.

Dividend cover consistently below 1.5 may suggest that the company might not be able to

maintain

Thejo Engg-Final OS1

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