A Summer Training Report On

“FINANCIAL RATIO ANALYSIS”“FINANCIAL RATIO ANALYSIS”

A Report Submitted to Mahamaya Technical University, Noida

In partial fulfilment for the award of Degree of

MASTER OF BUSINESS ADMINISTRATION

By

Suraj Kumar Vishwakarma Roll No:-1015370031

Session: 2010 –12Semester – III

Under the Supervision and guidance of

Mr.A.K,PrasadChief Finance Manager

Northern Coalfield Limited

Skyline Institute Of Engineering & Technology

1

Plot No - 3, Knowledge Park – II, Greater Noida

Gautam Buddha Nagar – 201 306 (UP)

2

3

DECLARATION

This is to declare that I, SURAJ KUMAR VISHWAKARMA student of Master in

Business Administration (Course Period 2010-2012), SKYLINE INSTITUTE OF

ENGINEERING AND TECHNOLOGY,GREATER NOIDA , have given original data and

information to the best of my knowledge in the project report titled “FINANCIAL RATIO

ANALYSIS” under the guidance of our Prof. SARVENDU TIWARI and that, no part of this

information has been used for any other assignment but for the partial fulfillment of the

requirement towards the completion of the said course.

I have prepared this report independently and I have gathered all the relevant information

personally. I have prepared this project for partial fulfillment of M.B.A.(Finance) Post

Graduate Course.

I also agree in principle not to share the vital information with any other person outside

the organization and will not submit the project report to any other university.

SURAJ KUMAR VISHWAKARMA

ACKNOWLEDGEMENT4

I am very much obliged and indebted to Mr. Ajay Singh (Area Training Officer) in Northern

Coalfield Limited (Nigahi Project) for his approval and valuable suggestions to take up the project.

I express my deep sense of gratitude to Mr. Prem Prakash (Accounts Officer Finance) for his

valuable suggestions, consistent help and personal interest during my project work.

I am very pleased to express my deep sense of gratitude to my Director Mr.Shakti Prakash,

coordinator, guide Prof. Sarvendu Tiwari for his consistent encouragement. I shall forever cherish my

association with his for exuberant encouragement, perennial approachability, absolute freedom of thought and

action I have enjoyed during the course of the project.

Suraj Kumar Vishwakarma

MBA (Finance)

5

DECLARATION

I hereby declare that the project titled “RATIO ANALYSIS OF NORTHERN COALFIELDS LIMITED”

is an original piece of research work carried out by me under the guidance and supervision of

Prof. SARVENDU TIWARI . The information has been collected from genuine & authentic sources. The

work has been submitted in partial fulfillment of the requirement of MBA.

SURAJ KUMAR VISHWAKARMA

MBA (Finance)

INDEX

6

S.No. TOPIC PAGE No.

01 INTRODUCTION TO PROJECT

02 OBJECTIVE OF THE STUDY

03 COMPANY PROFILE

04 THEORATICAL BACKGROUND

05 RESEARCH METHODOLOGY

06 ORGANIZATIONAL STRUCTURE

07 DATA ANALYSIS & INTERPRETATION

08 FINDINGS

09 SUGGESTIONS

10 CONCLUSION

11 BIBLIOGRAPHY

12 ANNEXURE

7

EXECUTIVE SUMMARY

8

India is the third largest coal producer in the world and the eighth largest importer. With annual

production of 310 million tonnes and imports of almost 25 million tonnes, coal provides one-third of energy

supply in India. The Indian government forecasts huge increases in electricity capacity based on coal, and a

financially viable electricity industry will be necessary to support reforms in the coal industry. This report

describes the Indian coal sector, and comments on government policies and the performance of India's largely

state-owned coal companies. There is a substantial need for reforms in India's coal sector to improve efficiency

and competitiveness.

With the growth of the Indian economy due to various factors like Industrialization, Growth of Infrastructure,

Institutional Development etc. the power is going to be the main key for any development so the Coal is widely

used by the power industries for generating the power.

Financial statement analysis is important to board of the Directors, Managers, Payers, Lenders, and others who

make judgments about the financial health of organizations. One widely accepted method of assessing financial

statements is ratio analysis, which uses data from the balance sheet and income statement to produce values that

have easily interpreted financial meaning. The purpose of this project was to get awareness about how an

organization works.

The project was carried out for study and analyzing the financial condition of Northern Coalfields Limited with

special reference of Nigahi Project. It was done to know that what the current financial scenario of the company

is. In this project report I have made Ratio Analysis for analyzing that that what are the different ratios available

in the organization and what is current growth comparing to the last year.

9

01.

INTRODUCTION TO THE PROJECT

10

INTRODUCTION OF THE TOPIC

To analyze the financial position of NORTHERN COALFIELDS LIMITED, different tools are

used, of Ratio Analysis. Financial analysis involves the use of various financial statements. These statements do

several things. First the balance sheet and the second is income statement.The Balance sheet summarizes the

assets, liabilities, and owner’s equity of a business at a point in time, while the income statement summarizes

revenues and expenses of a firm over a particular period of time. A conceptual framework for financial analysis

provides the analyst with an interlocking means for structuring the analysis.

A financial ratio (or accounting ratio) is a relative magnitude of two selected numerical values

taken from an enterprise's financial statements. Often used in accounting, there are many standard ratios used to

try to evaluate the overall financial condition of a corporation or other organization. Financial ratios may be

used by managers within a firm, by current and potential shareholders (owners) of a firm, and by a firm's

creditors. Security analysts use financial ratios to compare the strengths and weaknesses in various companies.

If shares in a company are traded in a financial market, the market price of the shares is used in certain

Financial ratios.Values used in calculating financial ratios are taken from the balance sheet, income statement,

statement of cash flows or (sometimes) the statement of retained earnings. These comprise the firm's

"accounting statements" or financial statements. The statements' data is based on the accounting method and

accounting standards used by the organization.

11

Financial ratios quantify many aspects of a business and are an integral part of financial

statement analysis. Financial ratios are categorized according to the financial aspect of the

business which the ratio measures. Liquidity ratios measure the availability of cash to pay debt.

Activity ratios measure how quickly a firm converts non-cash assets to cash assets. Debt ratios

measure the firm's ability to repay long-term debt.Profitability ratios measure the firm's use of

its assets and control of its expenses to generate an acceptable rate of return. Market ratios

measure investor response to owning a company's stock and also the cost of issuing stock.

Financial ratios allow for comp

arisons

between companies

between industries

between different time periods for one company

between a single company and its industry average

Ratios generally hold no meaning unless they are benchmarked against something else, like past

performance or another company. Thus, the ratios of firms in different industries, which face

different risks, capital requirements, and competition are usually hard to compare.

12

13

02.

OBJECTIVE OF THE STUDY

14

THE OBJECTIVE OF THE SUMMER TRAINING ARE AS FOLLOWS:-

To study of the various Financial Ratio based on Publish Record of Company (2009 to 2011).

To evaluate the financial position of the organization on the basis of Financial Ratios.

To get well acquainted with the practical approach and use of Ratio Analysis.

To understand with the help of Financial Variables/ Ratio how effectively

NORTHERN COALFIELDS LIMITED utilizes its assets in producing Coal.

15

SCOPES OF THE PROJECT

The study of Financial Variables / Ratio Analysis in base on annual report of the company

for the years 2009 to 2011. Whenever necessary other references of similar companies (Coal

India) are cited in support of analysis .It scope is as defined below ;-

1. To study of the various Financial Ratios based on publish record of company.

2. To evaluate the financial position of the organisaton on the basis of Financial Ratios.

3. To understand with the help of financial variable how effectively NCL utilizes its assets

in producing Coal.

4. To get well acquainted with the practical approach and use of ratio analysis.

16

03.

COMPANY PROFILE

17

About the Company

Northern Coalfields Limited (NCL) – A Profile

NCL is a subsidiary of Coal India Limited (CIL). It was

founded in the year (1984). Earlier it was a subsidiary of Central

Coalfields Limited (CCL). It is among the top PSU's in India.

NCL is the only subsidiary of CIL producing 100% of coal from opencast mines. There is steep

rise in the coal demand on NCL to meet the power and energy needs of the country . (44.43MT

in 2002-03 to 78.44MT in 2011-12). The major demand of coal on NCL is from power sector,

which contributes more than 96% of the total demand.

The CILs production level in the year 2011-12 is projected as 619.67 million tones out of which

18

NCLs contribution will be 78 million tonnes.

In NCL there are four existing & completed projects with production capacity of 20.00MTpa ,

six ongoing projects recently approved with the sanctioned capacity of 57.50 mtpa. Two new

expansion projects are awaiting Government approval , and one extension project is under

formulation .

The NCL supplies coal to

pithead power plants of national

thermal power corporation

(NTPC), Uttar Pradesh rajya

vidyut utpadan nigam Ltd

(UPRVUNL) and Renupower

division of M/s. Hindalco

Industries having installed

capacity of 11155MW. NCL is also supplying coal to power plants of rajasthan state Electricity

Board and Delhi Vidyut Board (DVB) and to other industries like Aluminium (Hindalco),

Chemicals etc.

In December 2008, NCL achieved its company-wide ISO 9001:2000 certification. It is also

preparing to implement a company-level Integrated Management System to simultaneously

19

comply with ISO 9001, ISO 14001, OHSAS 18001, and SA 8000; which will cover all its

mining establishments, other support units, and all headquarters function .

Projects of NCL

*

Jhingurda Project will exhaust by 2011-12

Table no. 3.1

20

Sl. No.

Project Existing Capacity (MT)Incremental/

New

Total Actual08-09

Production (MT)

Target09-10

11-12

1 Amlori Expansion

4.00 6.00 10.00 5.28 5.50 8.50

2 Bina Extension

4.50 1.50 6.00 5.44 5.50 6.00

3 Block B - 3.50 3.50 3.50 3.00 3.004 Dudhichua

Expansion10.00 5.00 15.00 13.27 12.75 15.00

5 Jayant Expansion

10.00 5.00 15.00 13.02 12.75 15.00

6 Jhingurda 3.00 - 3.00 3.86 4.00 -7 Kakri

Extension3.00 - 3.00 2.93 3.00 3.00

8 Khadia Expansion

4.00 6.00 10.00 3.68 4.00 8.00

9 Krishnashila - 4.00 4.00 1.08 3.00 4.0010 Nigahi

Expansion10.00 5.00 15.00 11.66 13.00 15.00

48.50 36.00 84.50Grand Total

84.50-3.00* = 81.50

63.65 66.50 78.00

The area of Singrauli Coalfields is about 2202 Sq.Km. The coalfield can be divided into two

basins, viz. Moher sub-basin (312 Sq.Km.) and Singrauli Main basin (1890 Sq.Km.). Major part

of the Moher sub-basin lies in the Singrauli district of Madhya Pradesh and a small part lies in

the Sonebhadra district of Uttar Pradesh. Singrauli main basin lies in the western part of the

coalfield and is largely unexplored. The present coal mining activities and future blocks are

concentrated in Moher sub-basin. The exploration carried out by GSI/NCDC/CMPDI has

proved abundant resource of power gradecoal in the area. This in conjunction with easy water resource from

Govind Ballabh Pant Sagar makes this

region an ideal location for high capacity

pithead power plants. The coal

supplies from NCL has made it

possible to produce about 10515 MW of electricity from

pithead power plants of National

Thermal Power Corporation (NTPC), Uttar Pradesh Rajya

Vidyut Utpadan Nigam Ltd

(UPRVUNL) and Renupower division of M/s. Hindalco

Industries. The region is now called the

"Power capital of India". The ultimate capacity of power generation of these power plants is

13295 MW and NCL is fully prepared to meet the increased demand of coal for the purpose. In 21

addition, NCL is also supplying coal to power plants of Rajasthan Rajya Vidyut Utpadan

Nigam Ltd, Delhi Vidyut Board (DVB) and Hariyana State Electricity Board.

NCL, through its community development programmes,

has significantly contributed towards

improvement and development of the area. It is helping

local tribal, non-tribal and project-

affected persons in overall improvement of quality of their

life through self-employments

schemes, imparting education and providing health care.

NCL is the only subsidiary of CIL prroducing 100% of

coal from opencast mines. There is

steep rise in the coal demand on NCL

to meet the power and energy needs of the

country. (44.43 MT in 2002-03 to 78.44

MT in 2011-12). The major demand of

coal on NCL is from power sector, which

contributes moe than 96% of the total

demand. The CIL’s production level in the year 2011 – 12 is projected as 619.67 million tonnes

out of which NCL’s contribution will be 78 million tonnes

22

In NCL there are four existing & completed projects with production capacity of 20.00 Mtpa,

six ongoing projects recently approved with the sanctioned capacity of 57.50 mtpa. Two new

Expansion Projects are awaiting Government approval, and one extension project is under

formulation. The additional production capacity of the three new projects is 11.00 mtpa.

The NCL supplies coal to pithead power plants of National Thermal Power Corporation

(NTPC), Uttar Pradesh Rajya Vidyut Utpadan Nigam Ltd. (UPRVUNL) and Renupower

division of M/s. Hindalco Industries having installed generating capacity of 11155 MW. NCL is

also supplying coal to power plants of Rajasthan State Electricity Board and Delhi Vidyut

Board (DVB) and to other industries like Aluminium (Hindalco), Chemicals etc.

23

VISION

“Be

the leading energy

supplier in the country,

through best practices

from mine to market.”

24

MISSION

“The mission of Coal India Limited

is to produce and market the planned

quantity of coal and coal products efficiently

and economically with due regard to safety,

conservation, quality and environment.”

25

04.THEORATICAL BACKGROUND

26

Historical background of Singrauli Coalfields – A Retrospect

Singrauli Coalfields is located in the northern most part of sone-Mahanadi master basin

and covers an area of 2202 Sq. Km. in M.P. and U.P. States. Discovery of coal in

Singrauli coalfields dates back to 1840 when Capt. Wroughton located the occurrence of

coal near surface in the vicinity of Kota Dist. Mirzapur (presently known as Shaktinagar, Dist. Sonebhadra, UP). Primitive mining was reported even before 1857. In those days coal was transported by bullock carts and camel to Mirzapur for use in steamers on the Ganges. In the

outcrop region of Kota seam near Kota Basti – Shaktinagar, where mining was being done through inclines and subsequently there was fire in the incline.

A temple has been built near that site with the name of ‘Jwalamukhi’ (the name probably

derived from the fire emanating from the incline mouth). Due to poor quality of coal as

well as poor communication the coal from this coalfield could not compete in the market

with good quality coal available from Bihar and Bengal coalfields with better

communication and transport facilities and hence mining activities ceased very quickly.

27

Subsequently this coalfield was surveyed and explored by various Geologists namely

Smith (1857), Mellet (1872), Roberts (1885), Oldham (1894), Sinor (1923), and Fax

(1934) etc. GeologistsF. Ahmed mapped the area in details in (1948-1953) and

recommended detailed drilling and investigations. In pursuance of this, GSI took up

regional drilling in northern part of the coalfields in 1958. As a sequel to these

investigations by GSI thick coal seams containing inferior grade coal were discovered.

Erstwhile NCDC (in association with GSI and IBM carried out detailed drilling after

1958.

28

The first major industrial activity was started in this area with the construction of Rihand

Dam in 1954 for tapping hydel power. It was beyond the imagination of anybody to

foresee at that point of time that this hydel project, which resulted in converting an area of

about 487 sq. Km. into Govind Ballabh Pant Sagar (with a water capacity of about 10.44

cu. Km) will come handy in developing a network of Thermal and Super Thermal Power

Plants, thus bestowing upon this most neglected area, the honour of becoming country’s

power capital.

29

With the increase in demand of coal and also with an objective to conserve the better

quality coal in terms of CoalmMines (Conservation & Safety) Act, 1952 and rules 1954,

the development & exploitation of outlying coalfields gained importance since 2nd plan

period (1956-61). NDNC was formed in 1956 with one of the objectives to develop

outlying coalfields. Systematic coal mining was first started in 1964 by erstwhile NCDC.

The coalfield was under command area of NCDC from 1962-73, under CMAL upto 1975

and then under CCL from 1975-85. In November 1985 the area became Northern

Coalfields Limited with Headquarters at Singrauli. Since then this coalfield has witnessed

tremendous growth and has now developed in as one of the largest coal power complexes

of the world.

30

05.

RESEARCH

METHODOLOGY

RESEARCH METHODOLOGY:

31

Research in common parlance refers to a search for knowledge. One can also

define research as a scientific and systematic search for pertinent information on a

specific topic.

Research methodology is a way to systematically solve the research problem. Research

methodology just does not deal research method but also consider the logic behind the method.

It facilitates the researcher with reason for evaluating the research problem.

DEFINATION OF RESEARCH:

According to Redman and Mory:-

“Research is systematized effort to gain new knowledge”.

According to Clifford Woody:-

“Research comprises defining and redefining problems, formulating hypothesis or suggested solutions,

collecting organizing and evaluating data , making deductions and reaching conclusions and at last carefully

testing the conclusions to determine whether they fit the formulating hypothesis”.

32

The research is done through :

Journals : I have used the the organizational journals published by the company for

collecting the data.

Annual Reports : Annual reports are the best way to collect the information about the

company. If we are going to conduct any research work in the field of Finance then we

must should have to refer the company’s Annual Report.

Plant visit : By visiting the Plant I came to know that what is the real scenario, what is

the position of the company? How the work flows ? etc. then I collected the relavent

information which I was needed to complete my project.

Personal discussion and interaction : I have Discussed with the concerned people and

thus collected information for the research.

The data collected for the project was in the form of written as well as verbal information

regarding ratio analysis of the organization.

Primary data:

The information about the organization is gathered from the discussion with the

33

employees/staff and from the website of the company.

Secondary data:

The secondary data collected-

The balance sheets as on the date of 31st march of the year (2009-2010, 2010-2011)

The methodology of this study has been adopted on the following basis:

• Study of various journals, notes and books.

• Study through websites.

• Collection of primary and secondary data records of the organization.

• Analysis of the collected data for its application.

34

06.

ORGANIZATIONALSTRUCTURE

ORGANIZATIONAL STRUCTURE35

36

Subsidiary Companies of Coal India Limited

37

LIMITATIONS

Limitations:

38

Less response by some of the staff members.

Due to new in the department some of the staff members have not provided some

kind of information.

Problems in collection of the data of past years because the database is maintained

by the headquarter and they don’t allow to provide these information to the

outsiders.

Time constraint in data collection.

Generally the organization does not allow outsiders to conduct any study or

research work in the organization. Therefore, get the project done in the

organization it self was very difficult.

Due to confidentiality some important information, which are important for the

project, could not be collected.

Some of the information is lack of accuracy, due to whish approximately values

where used for the analysis. Hence, the result also revel approximate values.

39

07.DATA ANALYSIS

&

DATA

INTERPRETATION

CALCULATION & INTERPRETATION OF RATIOS

40

• CURRENT RATIO:

Meaning:

Current ratio may be defined as the relationship between current assets and current

liabilities. This ratio is also known as working capital ratio, is measure of general

liquidity and mostly used to make the analysis of a short-term financial position or

liquidity of a firm. The rule of thumb for current Ratio is 2:1 which is considered

as strong financial position of the company.

Current ratio = Current Assets

Current Liabilities

Calculation:

Year 2010 2009

41

Current assets

39935.57 38026.00

Current liabilities

23696.97 38026.00

Ratio 1.69:1 1.75:1

Interpretation:

42

Ratio

20102009

As a rule, the current ratio with 2:1 (or) more is considered as satisfactory position

of the firm. Which indicate that current assets should be twice as compared to the current

liabilities. So in that organization the current ratio is very high that will not indicate a

favourable position. As it means that there is excessive investment in current assets is made.

This will result in decreasing in profitability due to blocking of large funds in working capital.

• QUICK / ACID TEST/ LIQUID RATIO :

Meaning:

Quick ratio is more rigorous test of liquidity than the current ratio. The

term liquidity refers to the ability to pay its short term obligations as and when

they become due. As a rule of thumb quick ratio of 1:1 is considered

satisfactory.

Quick Ratio = Quick/ liquid Assets

Current liabilities

Calculation :

Year 2010 2009

Quick assets

3406.48 1458.94

43

Current liabilities

23696.97 21686.07

Quick ratio

0.14:1 0.07:1

44

Quick Ratio

20102009

Interpretation:

It indicates high ability to pay. The above table and diagram shows the liquid ratio

during the study period except in the 3rd Quarter is more than the normal (i.e.) 1:1.It was 6.00 in

the 1st Quarter and reached the highest in 2nd Quarter to 6.98 and then came down to 5.75 in the

3rd Quarter.

Hence the firm is controlling its stock position because there linear relationship between current

ratio and liquid ratio.

• STOCK TURN OVER OR INVENTORY TURN OVER RATIO :

Meaning :

Every firm has to maintain a certain amount of inventory of finished goods so as

to meet the requirement of business. But the level of inventory should neither be

too high nor too low. Because it is harmful to hold more inventory as amount of

capital is blocked in it and some cost is involved in it.45

Inventory turn over ratio measure the speed with which stock is converted into

sales. Usually high inventory ratio indicates an efficient management of inventory

because more frequently stocks are sold ; the lesser amount of money is required

to finance the inventory. Where as low inventory turn over ratio indicates the

inefficient management of inventory. A low inventory turn over implies over

investment in inventories.

Inventory turnover ratio = Cost of goods sold

Average inventory

Cost of goods sold = Opening Stock+ Purchase + Direct Expenses - Closing Stock

Average inventory = Opening stock + Closing stock

2

46

Calculation :

Year 2010 2009

COGS 57147.72 50738.36

Avg.

inventory

6294.25

5

4994.18

Ratio 9.08

Times

10.16Times

47

Ratio

20102009

Interpretation:

The cost of goods sold means sales minus gross profit. The ratio indicates how fast

inventory is sold. A high ratio is good from the viewpoint of liquidity and vice versa.

A low ratio would signify the inventory does not sell fast and stays on the shelf or in

the warehouse for a longtime. So here the company’s inventory position is good. In the

first quarter the company’s inventory position is good but in second and third quarter it is

reduced.

DEBTOR TURN OVER RATIO:48

Meaning:

A concern may sell goods on cash as well as on credit. The volume of sales can be

increased by adopting liberal credit policy. But liberal credit policy may result in

tying up substantial funds of a firm in form of trade debtors. Trade debtors are

expected to be converted into cash within short period and are included in current

assets.

Debtors velocity indicates the number of times the debtors are turned over during a year.

Higher the value of debtor turnover the more efficient is the management of

debtors/sales

and vice versa.

Debtor turnover ratio = Net credit sales

Average debtors

Average debtors = Opening Debtor + closing Debtor

2

Calculation :

Year 2010 200949

Sales 135235.59 123719.15

Debtor Nil 219.19

Ratio Nil 564 Times

NOTES: Debtor in the year 2010 is -594.18 because of excess advance

received from

customer therefore debtor is considered nil.

Ratio

20102009

50

Interpretation:

Debtor turn over ratio in the year 2009 is extremely high i.e 564 times . The ratio

is too high because the entire sale done by the project is according to the

agreement with customer. The debtor shown on the closing day of financial year is

not received by the customer because customer has time to pay his liability in near

future. So the project is not worried about the Bad debts.

• GROSS PROFIT RATIO:

Meaning:

The gross profit ratio indicates the extent to which selling prices of goods per unit

may decline without resulting in losses on operations of a firm. It reflects the

efficiency with which a firm produces its products. Gross profit should be

adequate to cover the operating expenses and to provide for fixed charges,

dividends and accumulation of reserves.

51

Gross profit ratio = Gross profit * 100

Net Sales

Gross Profit = Sales- Cost of goods sold

Calculation :

Year 2010 2009

Gross

profit

78087.87 72980.79

Net sales 135235.59 123719.15

Ratio 58 % 59 %

52

Ratio

20102009

53

Interpretation:

A high ratio of gross profit to sales is a sign of good management as it implies that the

cost of production of the firm is relatively low. On other hand, relatively low gross profit

ratio is defiently a danger signal of rise in cost of production or inferior quality of product

or lack of demand to the product.

54

• OPERATING RATIO:

Meaning:

Operating ratio establishes the relationship between cost of goods sold and other

operating expenses on the one hand and sales on the other hand. Operating ratio

indicates the percentage of net sales that is consumed by operating cost. Higher the

operating ratio is less favourable for the company because it would have small

margin to cover interest, income tax , dividend and reserve.

Operating ratio = Operating Cost * 100

Net Sales

Calculation:

YEAR 2010 2009

Operating Cost 59747.87 55732.5455

Net Sales 135235.59 123719.15

Ratio 44.18% 45.05%

Interpretation:

56

Ratio

20102009

The operating profit ratio is used to measure the relationship between net profits

and sales of a firm. Depending on the concept, it will decide. Operating profit is the profit

arising out of business operations on

• NET PROFIT RATIO:

Meaning:

Net profit ratios establish a relationship between net profit after tax and sales and

indicate the efficiency of the management in controlling the expenses of the

company

Net profit ratio = Net profit after tax * 100

Net sales

Calculation:

Year 2010 2009

Net profit 82105.48 67010.72

57

Net sales 135235.59 123719.15

Ratio 60.71% 54.16%

58

Ratio

20102009

Interpretation:

The net profit ratio is the overall measure of the firm’s ability to turn each rupee of income from

services in net profit. If the net margin is inadequate the firm will fail to achieve return on

shareholder’s funds. High net profit ratio will help the firm service in the fall of income from

services, rise in cost of production or declining demand.

Net profit of the project has been increased due to increase in sales/ production, reduction in

cost per tones, and better control on operating expenses. The net profit of the project reveals

sound business of the project and strong financial position

59

• WORKING CAPITAL TURNOVER RATIO:

Meaning:

Working capital turnover ratio indicates the velocity of the utilization of net

working capital. This ratio indicates the number of times the working capital is

turned over in the course of a year. This ratio measures the efficiency with which

the working capital is being used by a firm. A higher ratio indicates efficient

utilization of working and low ratio indicates otherwise. But a very high working

capital turnover ratio is not a good situation for any firm and must be taken while interpreting

the ratio.

Working Capital Turnover Ratio = Cost of Sales

60

Net working capital

Calculation:

YEAR 2010 2009

COGS* 57147.72 50738.36

WORKING CAP. 16238.6 16339.93

RATIO 3.52 times 3.11 times

* COGS: - Cost of Goods Sold

61

Ratio

20102009

Interpretation:

In the year 2009 ratio was 3.11 times which is increased to 3.52 times in the

62

year 2010. As compared to last year working capital has been utilized very

efficiently. In 2010, the reciprocal of this ratio( 1/3.52=0.284) shows that for

sales of RS 1 company requires 28 paisa as working capital. This ratio is very

helpful to forecast the working capital requirement on the basis of sales.

• CREDITOR TURNOVER RATIO:

63

Meaning:

In the course of business operations, a firm has to make credit purchases

and incur short-term liabilities. A supplier of goods i.e, creditors is always

interested to know how much time the firm is likely to take in repaying its

trade creditors. It shows the speed at which payments are made to the

supplier for purchase made from them. It is a relation between net credit

purchase and average creditors. Higher creditor turnover ratio or lower

credit period enjoyed signifies that the creditors are being paid promptly.

Creditors turnover ratio = Net Credit Purchases

Average creditors

Average creditors = opening creditors + closing creditors

2

64

Calculation:

YEAR 2010 2009

CREDIT

PURCHASE

38301.77 39152.12

AVG.

CREDITORS

22691.52 21686.07

RATIO 1.69 times 1.81times

Credit purchase include consumption of stores and spares, social overhead, power & fuel,

repairs& contractual expenses.

65

Interpretation:

A high creditor’s turnover ratio indicates that creditors not paid in time while a low ratio gives

an idea that the business is not taking full advantages of credit period allowed by the creditors.

Since creditors turnover ratio has decreased from 1.81 times to 1.69 times which represents that

creditors are paid in time. It’s a good sign for the company

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Ratio

20102009

Northern Coalfields Limited, NIGAHI PROJECT

Balance Sheet AS on 31st March 2009-2010

ParticularsMar'10 Mar'09

Liabilities12 Months 12 Months

Share Capital6,316.36 6,316.36

Reserves & Surplus10,744.36 8,920.86

Net Worth17,060.72 15,237.22

Secured Loans0.00 0.00

Unsecured Loans1,464.30 1,786.62

TOTAL LIABILITIES18,525.02 17,023.85

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Assets

Gross Block376.63 368.92

(-) Acc. Depreciation283.23 273.95

Net Block93.40 94.97

Capital Work in Progress.17.84 5.99

Investments.6,316.57 6,316.36

Inventories26.59 19.52

Sundry Debtors0.00 0.02

Cash And Bank9,133.36 6,462.76

Loans And Advances8,380.19 9,354.33

Total Current Assets17,540.14 15,836.64

Current Liabilities4,763.78 4,521.26

Provisions679.14 708.85

Total Current Liabilities5,442.93 5,230.11

NET CURRENT ASSETS12,097.21 10,606.53

Misc. Expenses0.00 0.00

TOTAL ASSETS (A+B+C+D+E)18,525.02 17,023.85

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED31ST MARCH 2010-2009

68

69

INCOME:

Sales

Coal issued for other purposes

Accretion/ Decretion in Stock

Workshop jobs for own purposes

Other income

EXPENDITURE:

Consumption of Stores & Spares

Employees Remuneration & Benefits

Social Overhead

Power & Fuel

Repairs

Contractual Expenses

Miscellaneous Expenses

Overburden Removal Adjustment –Existing Mines

Total Expenditure

GROSS OPERATING PROFIT/ LOSS

Interest

Financial/Commitment Charges

Depreciation

Provisions

135235.59

0.00

2292.77

0.00

7511.49

145039.85

19900.27

13336.93

3459.46

3814.22

4090.72

7037.10

5471.05

2638.12

59747.87

85291.88

192.86

175.76

2856.35

111.87

123719.15

0.00

854.39

0.00

4735.80

129309.34

20644.35

16093.00

3392.10

3903.61

5392.11

5819.95

6196.99

5709.57

55732.54

73576.80

324.94

312.29

5853.00

268.48

Write Off

PROFIT / LOSS FOR THE YEAR

Overburden Removal Adjust. For Closed Mines

Provision written Back

Prior Period Adjustment

Extra Ordinary Items

PROFIT / LOSS BEFORE TAXATION

Provision for income tax for earlier years

PROFIT AFTER TAX

Provision for Dividend on Preference Shares

Provision for proposed Dividend of Equity shares

Provision for income tax on proposed Dividend

Net profit After Tax & Proposed Dividend

Retained Profit After Trans. To Reserve

BALANCE CARRIED TO BALANCE SHEET

0.00

81955.14

0.00

131.65

18.69

0.00

82105.48

0.00

82105.48

0.00

0.00

0.00

82105.48

82105.48

82105.48

0.00

66818.09

0.00

29.04

163.59

0.00

67010.72

0.00

67010.72

0.00

0.00

0.00

67010.72

67010.72

67010.72

08.

FINDINGS

FINDINGS

I came across following suggestions and findings during undergoing the project work on

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topic “FINANCIAL ANALYSIS OF NORTHERN COALFIELDS LIMITED”.

• In NCL the coordination among the various sections of the Finance & Accounts

department is very nice, as the Finance & Accounts department is a big department

consisting of near about 32 sections. It is the work force of the Finance & Accounts

department, which makes it possible.

• In the NCL there not to create debtors they generally deal with first to receive the cash

or cheque, and then they supply the finished material.

• In the NCL there working capital management is very good, they use the IBS (ERP

system) to manage the overall activity.

• During the study I find that there is no huge variation in budget decided and the actual

one.

• The taxation policy is to be made flexible because of which bulkiness of the work is to

be removed.

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• The tendering process time is to be minimized so that the current market price benefits

if any can be availed.

• Monthly return filling is not on line process, hence sales and excise department face

problem.

• Online inventory valuation can be implemented.

• The departmental policies is to made flexible which leads to decrease in the work flow

process as well as it leads in better profits.

• Some the staff members of the NCL are lack of the Computer knowledge. During my

internship I observed that the employees don’t have the necessary training to do the

job efficiently and properly. So I think the management should arrange special training

for educating them. Proper distribution of work leads to success in every organization.

• Proper distribution of work prevents the employee from over and under work situation.

So for a smooth running of an organization proper distribution of work is the hint to be

followed. During my internship I observed that there was no proper distribution of

• work in the organization. So in this case the organization would not be able to utilize

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their energy. So there should be proper distribution of work

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09.

SUGGESTIONS

74

SUGGESTIONS

75

10.CONCLUSION

76

CONCLUSION

After analyzing the different Ratios of the Northern Coalfields Limited I found that the

company is really in Good financial condition because:-

o the management has taken a great effort in managing the funds like acquiring and allocation of the

funds, optimum utilization of the available resources.

o The analysis shows that the profitability of the company is increases as compared to the last years due to

high production and sells with lesser expenses.

.o The organization is in sound position which is good for the company, stakeholders as well as the

o Country also. Good financial position not just beneficial for the company stake holders but it helps to

improve the GDP as well as the per capita income of the entire country.

o As compared to the last year Current ratio is decreased due to increase in Inventories, Cash and Bank

balance and other Current Assets.

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o The net profit of the company has been increased by 6.55% as compared to last year. Net profit of the

project has been increased due to increase in sales/ production, reduction in cost per tones, and better

control on operating expenses. The net profit of the project reveals sound business of the project and

strong financial position.

o If we talk about the Quick Ratio then in 2009 it was 0.07 which has increased to 0.14 in 2010. The

o management has taken a great effort in maintaining high quick assets as compared to last year. The

company has sound position to meet its non-operating expenses and also enough capable to pay taxes

and royalty to the government.

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11.

BIBLIOGRAPHY

79

BIBLIOGRAPHY:

• Published books:

• Ajay K Ghose, Mining, Challenges of the 21st century, 2000

International Energy Agency Coal in the energy supply of India, 2002

• C.R. Kothari, Research methodology-methods and techniques, New Age International

Publishers, New Delhi 1985, second edition.

• Text book of coal (Indian context) first edition (2000) by D. Chandra, R.M. Singh & M.P.

Singh

• Anubhuti Ranjan Prasad, Coal industry of India, 1986

Ashish Publishing House

• Journals/Periodical:: • KHANIJ URJA, Volume No. 48, September 2009• KHANIJ URJA, Volume No. 52, January 2010• NCL DIARY, Published by the organization every year

Online published material on the World Wide Web:

• URL : http://www.coalindia.nic.in June 05, 2010 • URL : http://www.ncl.nic.in

June 05, 2010

• URL : http://www.wikipedia.nic.inJune 07, 2010

• URL : http://www.geologydata.infoJuly 15, 201

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12.

ANNEXURE

81

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