Working Capital Management at Bharat Coking Coal Limite1

WORKING CAPITAL MANAGEMENT AT BHARAT COKING COAL LIMITED, DHANBAD
2 0 1 2

MBA K C COLLEGE OF ENGINEERING & IT NAWANSHAHR (PB)(PTU KAPURTHALA)
1

CHAPTER-1
INTRODUCTION

BRIEF PROFILE OF THE COMPANY

ABOUT BHARAT COKING COAL LIMITED (BCCL)

1.1 Picture of Coal Drilling Employee of BCCL

Bharat Coking Coal Limited (BCCL) is a Public Sector Undertaking
engaged in mining of coal and allied activities.
It occupies an important place in as much as it produces bulk of the coking
coal mined in the country. BCCL meets almost 50% of the total prime
coking coal requirement of the integrated steel sector.
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2

BCCL was incorporated in January, 1972 to operate coking coal mines (214
Nos) operating in the Jharia & Raniganj Coalfields, taken over by the Govt.
of India on 16th Oct,1971 to ensure planned development of the scarce
coking coal resources in the country.
Currently, the Company operates 81 coal mines which include 40
underground, 18 opencast & 23 mixed mines as on 01.04.2010.
The Company also runs 6 coking coal washeries, 2 non-coking coal
washeries.
The mines are grouped into 13 areas for administrative convenience.
The total manpower as on 1.4.05 was 92,268 and as on 01.03.2010 are
72,222.
India is the 3
rd
largest coal producing country. Coal India Limited is the coal
producing company in India.
Coal India Limited
Contributes around 85% of Coal Production in India.
It is the largest company in the World in terms of coal production.
Employs nearly 4 lacks persons and is the largest corporate employer in the
country.
It is one of the largest companies in the country, turnover being around Rs.
521.88 billion in 2010-11.
It is one of the largest tax payer companies in the country; the provision on
account of Income Tax for the financial year 2009-10 was made for Rs.
43.42 billion.

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3

Background History
1774
Warren Hastings initiates Commercial coal mining at Raniganj
(West Bengal)
1815-1820 First Shaft Mine opened at Raniganj.
Upto 1900
Minimal development; River transportation used to transport coal
to Calcutta; railway lines at Calcutta leads to expansion of Coal
Production.
1972
Coking Coal Industry Nationalized, Bharat Coking Coal Limited
formed to manage operations of all Coking Coal mines in Jharia
Coalfield.
1975
Coal India Limited formed as holding Company with 5
subsidiaries viz. Bharat Coking Coal Limited (BCCL), Central
Coalfield Limited (CCL), Western Coalfield Limited (WCL),
Eastern Coalfields Limited (ECL) and Central Mine Planning and
Design Institute Limited (CMPDIL).
1985
Northern Coalfields Limited (NCL) and south Eastern Coalfields
Limited (SECL) carved out of CCL and WCL.
1992
Mahanadi Coalfield Limited (MCL) formed out of SECL to
manage the Talcher and IB valley Coalfields in Orissa.
2000 De-regulation of Coal pricing and distribution of coal.
2007
Coal India & four of its Subsidiaries, viz, NCL, SECL, MCL,
WCL was accorded coveted Mini Ratna Status.

1.1 Table of Background History

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BOARD OF DIRECTORS

1.2 Pictures of Board of Director

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ORGANISATION CHART

1.1 Chart of Board of Director

1.2 Charts of Director (Tech) P&P

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1.3 Charts of Director (Personnel)

1.4 Charts of Director (Tech.) OP

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1.5 Charts of Director (Finance)

Company Profile
Date of Incorporation:-Coal India Limited was formed as holding Company
with 5 subsidiaries on 21.10.1975.
Corporate Status:-The Company is incorporated under the Companies 1956 and
is wholly owned by the Government of India (GOI).
Business:-Engaged in the mining of coal, based products mining consultancy.
Wholly Owned Subsidiaries
Eastern Coalfields Ltd.
Bharat Cooking Coal Ltd.
Central Coalfields Ltd.
Northern Coalfields Ltd.
Western Coalfields Ltd.
South Eastern Coalfields Ltd.
Mahanadi Coalfields Ltd.
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Central Mine Planning & Design Institute Ltd.
North Eastern Coalfields in directly under Coal India Ltd.
Overseas subsidiary: Coal India Africana Limited
Registered Office: Coal Bhawan, 10 Netaji Subhas Road,
Kolkata 700001(West Bengal, Kolkata)
Coal I ndia & I t s Subsidiaries

1.1 Diagram of Coal India & Its Subsidiaries
Coal Indi a
Ko l kat a
Sout h East er n
Coal f i el ds Lt d
Bi l aspur
Nor t h
Coal f i el ds Lt d.
Si ngr aul i
East er n Coal f i el ds
Lt d. Assansol
Cent r al M i ne
Pl anni ng &
Desi gn Inst i t ut e
Lt d. Ranchi .
M ahanadi
Coal f i el ds Lt d
Sambal pur
Cent r al Coal f i el d
Lt d. Ranchi
Bhar at Coki ng
Coal Lt d.
Dhanbad
West er n
Coal f i el ds
Lt d. Nagpur
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BHARAT COKI NG COAL LI MI TED
(A subsidiary of coal India limited)

1.3 Picture of Late Coal India Employee
Mission:-The mission of Bharat Coking Coal Limited (BCCL) is to produce and
market the planned quantity of coal and coal products efficiently and economically
with due regard to safety, conservation and quality.
Vision:-The vision of Bharat Coking Coal Limited (BCCL) is to be the leading
player in metallurgical coal production having an organization and culture
committed towards sustainable growth through best practices from mine to market.
Product & Services
Coking Coal: These coals, when heated in the absence of air, form coherent
beads, free from volatiles, with strong and porous mass, called coke.
These have coking properties.
Mainly used in steel making and metallurgical industries.
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Also used for hard coke manufacturing.
Semi Coking Coal: These coals, when heated in the absence of air, form
coherent beads not strong enough to be directly fed into the blast furnace. Such
coals are blended with coking coal in adequate proportion to make coke. These
have comparatively less coking properties than coking coal mainly used as blend-
able coal in steel making, merchant coke manufacturing and other metallurgical
industries.
NLW Coking Coal:-This coal is not used in metallurgical industries because of
higher ash content; this coal is not acceptable for washing in washeries. This coal
is used for power utilities and non-core sector consumers.
Non- Coking Coal: - These are coals without coking properties.
Mainly used as thermal grade coal for power generation.
Also used for cement, fertilizer, glass, ceramic, paper, chemical and brick
manufacturing, and for other heating purposes.
Hard Coal: - Hard coke is formed from coking / semi-coking coal through the
process of carbonization.
Mainly used in metallurgical industries.
Also used in industrial plants utilizing furnaces.

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Area

1.2 Diagram of Coal India Area
BARORA
BLOCK II
GOVIINDPUR
KATRAS
SIJUA
BASTACOLLA
LODNA
C. V. AREA
KUSUNDA
P. B. AREA
KUSTORE
E. JHARIA
W. JHARIA
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CHAPTER-2
OBJECTIVE OF
THE STUDY

To find out the efficiency of Inventory management in Bharat Coking
Coal Limited (BCCL) Dhanbad.

To have a practical experience of the functioning of the Finance
Department of a coal producing company.

To study how finance management practices plays an important role in
supporting other activities of an organization.

To gain an in-depth knowledge of the tricks of faster conversion of
inventories into cash in Bharat Coking Coal Limited (BCCL) Dhanbad.

To find out the role of finance manger in the organization.

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LIMITATIONS

Following limitations were encountered while preparing this project:

Limited data:-This project has completed with annual reports; it just
constitutes one part of data collection i.e. secondary. There were limitations
for primary data collection because of confidentiality.

Limited period:-This project is based on five year annual reports.
Conclusions and recommendations are based on such limited data. The trend
of last five year may or may not reflect the real working capital position of
the company.

Limited area:-Also it was difficult to collect the data regarding the
competitors and their financial information. Industry figures were also
difficult to get.

Method of data collection was through personal interview and therefore
bias becomes a major limitation.

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REVIEW THE
LITERATURE

Generally working capital refers to a companys investment in current assets
cash, short term securities, accounts receivable and inventories. However
for the purposes of working capital management, the more descriptive term
is net working capital, which refers to the current assets minus current
liabilities, which are typically accounts payee and other obligations due
within one year. It is also explained as follows: current assets, commonly
called working capital, represents the portion of investment that circulates
from one form to another in the ordinary conduct of business. (Gitman
2003). This idea embraces the recurring transaction from cash to inventories
to receivables and back to cash. As cash substitutes, marketable securities
are considered part of working capital.
Flibeck and kruegen (2005) defined working capital management as
follows. It is the difference between resources in cash or readily
convertible into cash (current assets) and organizational commitments for
which cash soon are required current liabilities.
The importance of working capital is defined by wild, subramanyam, and
halsy (2004, p519), as follows: it is important as a measure of liquid asset
that provide a safety cushion to creditors. It is also important in measuring
the liquid reserves available to meet contingencies and uncertainties
surrounding a companys balance of cash and out flows.
Working capital budget and capital structure are components of corporate
finance. Capital budget and capital structure concerns rising and
management long term capital. On the other hand, working capital,
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including asset and current liabilities, is the source of short term capital.
(Chiou etal, 2006).
According to Weston & Brigham - Working capital refers to a firms
investment in short term assets, such as cash amounts receivables,
inventories etc.
Working capital means current assets. - Mead, Baker and Malott
The sum of the current assets is the working capital of the business-J.S.Mill
According to shubin, Working capital is the amount of funds necessary to
cover the cost of operating the enterprise.
According to Hoagland, Working capital is descriptive of that capital
which is not fixed. But, the more common use of working capital is to
consider it as the difference between the book value of the current assets and
the current liabilities.
Working Capital = Current AssetsCurrent Liabilities

Conceptual Framework of Working Capital Management

Working Capital.
Concept of Working capital.
Working Capital Management.
Types of Working Capital.
Factors Determining of Working.
Estimate of Working Capital Requirement.
Financing of Working Capital.
Management of Inventory.
Management of Cash.
Management of Receivable.
Operation Cycle

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What is Working Capital?

Fixed Capital is that part of which is required for the purchase of fixed
assets like Land and Building , Plant and machinery etc. The fixed capital
provides the basic means for the business to earn its return... But by
themselves, these fixed assets would not produce anything. For instance, to
operate the machines, we require men, materials, power, tools, accessories etc.
These factors involve expenses. In addition, we have to maintain certain
current assets like stocks, stores, equipments, etc. All these require enough
resources to keep the wheels of the business in motion. Therefore, in addition
to the amount of fixed capital every business whether new or growing
requires Working Capital. Working Capital is that portion of a business
concerns total capital, which is employed in term of operations. Without
working capital, fixed capital would be idle and ineffectual.
The same may be designated in the following equation:

2.1 Table of Formula of Working Capital

Funds thus invested in current assets keep revolving fast and are being constantly
converted in to cash and this cash flows out again in exchange for other current
assets. Thus it is known as revolving or circulating capital or short term capital.
Two Concept of Working Capital

a. Gross Working Capital.
b. Net Working Capital.
Gross working capital: - Gross working capital is the total of all current assets.
Net working capital: - Net working capital is the difference between current
assets and current liabilities. Though the later concept of working capital is

Working Capital = Current Assets Current Liabilities

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commonly used it is an accounting concept with little sense to say that a firm
manages its net working capital. What a firm really does is to take decisions with
respect to various current assets and current liabilities. The constituents of current
assets and current liabilities are shown in table A.
Table A: Constituents of Current Assets and Current Liabilities
Part A: Current Assets
Inventories Raw materials and components, Work in progress,
Finished goods, other.
Trade Debtors.
Loans and Advances.
Investments.
Cash and Bank balance.
PartB: Current Liabilities
Sundry Creditors.
Trade Advances.
Borrowings.
Provisions.
Working Capital Management

Working Capital Management refers to management of current assets and current
liabilities. The major thrust of course is on the management of current assets this is
understandable because current liabilities arise in the context of current assets.
Working Capital Management is a significant fact of financial management.

Types of Working Capital

Working Capital may be classified in to two ways:-
On the basis of concept.
On the basis of time.
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Types of Working Capital

2.1 Diagram of Working Capital

Permanent or Fixed Working Capital:-Permanent or Fixed Working
capital is the minimum amount which is required to ensure effective
utilization of fixed facilities and for maintaining the circulation of current
assets. There is always a minimum level of current assets that is
continuously required by the enterprise to carry out its normal business
operation. For example every firm has to maintain minimum level of raw
materials, work in process, furnished goods and cash balance. The minimum
level of current assets is called permanent or fixed working capital as their
part of working capital is permanently blocked in current assets. With the
growth of business there is an increase in current assets.
TYPES OF
WORKING
CAPITAL
ON THE BASIS OF
B/ S CONCEPT
GROSS
WORKING
CAPITAL
NET WORKING
CAPITAL
ON THE BASIS OF
TIM E
REGULAR
WORKING
CAPITAL
TEM PORARY
WORKING
CAPITAL
SEASONAL
WORKING
CAPITAL
SPECIFIC
WORKING
CAPITAL
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Temporary or Variable Working Capital:-Temporary or Variable
Working Capital is the amount of working capital that is required to meet
the seasonal demands and some special exigencies. Variable working capital
can be further classified as:-
Seasonal Working Capital.
Special Working Capital.
Most of the enterprises have to provide additional working capital to meet the
special and seasonal needs. The capital required to meet the seasonal needs of
enterprise is called Seasonal working capital. Special working capital is the
part of working capital which is required to meet the special exigencies such as
part of working capital which is required to meet special exigencies such as
launching of extensive marketing campaigns for conducting research etc. is
called Special working capital.
Factors Determining working capital Requirements:-
The Major determinants of the proportion of fixed to working capital are as
follows:
Nature of Business:-Business units selling service (like public utilities)
instead of a commodity have little need for working capital, as they have
little demand for large inventories. Generally they operate in cash and
prepay basis. But trading concerns (merchandising companies) make a
greater use of working capital, since inventory represents a major item of
investment.
Size of Business: The working capital requirements of a concern are
directly influenced by the size of the business which may be measured in
terms of scale of operations. Greater the size of a business unit generally
larger will be the requirement of working capital.
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Production Policy:-In certain industries the demand is subject to wide
fluctuation due to seasonal variation. The requirement of working capital, in
such cases depends upon the production policy. The production could be
kept either steady by accumulating inventories during slack period with a
view to meet high demand during the peak season or the production could
be curtailed during the slack season and increased during peak season.
Manufacturing Process/ Length of the production cycle:-In
manufacturing business, the requirements of working capital increase in
direct proportion to length of manufacturing process, longer the process
period of manufacture, longer is the amount of working capital required.
The longer the manufacturing time, the raw materials and other supplies
have to be carried for a longer period in the process with progressive
increment of labor and service costs before the finished product is finally
obtained.
Working Capital Cycle:- In manufacturing concern, working capital
cycle starts with the purchase of raw materials and ends with realization of
cash from the sale of finished goods. The cycle involves the purchase of raw
materials and ends with the realization of cash from the sale of finished
products.
Market Condition:-The degree of competition prevailing in the market
places has an important bearing on working capital needs. When
competition keen, a larger inventory of finished goods is required to
promptly serve customer who may not be inclined to wait because other
manufacturers are ready to meet their needs, further, generous credit terms
may have to be offered to attract customers in a highly competitive market.
Credit Policy:-The credit policy is concerned in its dealings with debtors
and creditors influence considerably the requirements of the working
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capital. A concern that purchases its requirements on credit and sells its
products/services on cash requires lesser amount of working capital.
Business Cycle:-Business Cycle refers to alternate expansion and
contraction in general business activities. In a period of born i.e. when the
business is prosperous there is a need for larger amount of working capital
due to increase in sales, rise in prices, optimistic expansion of business etc.
On the country at the time of depression i.e. when there is a down swing of
the cycle, business contracts, sales decline, difficulties are faced in
collections from debtors and firms may have a large amount of working
capital lying ideal.
Rate of Growth Of business:-The working capital requirements of a
concern increase with the growth and expansion of its business activities.
Although it is difficult to determine the relation between growth in the
volume of the business and in the growth of the working capital of the
business, yet it may be concluded that for normal rate of expansion in the
volume of the business, we may have retained profits to provide for more
working capital but in the first growing concerns, we shall require larger
amount of capital.
Earning Capacity and Dividend policy:-Some firms have more earning
capacity than others due to the quality of their products, monopoly
conditions etc. Such firms with high earning capacity may generate cash
profits from operations and contribute to their capital. The dividend policy
of a concern also influences the requirements of the working capital.
Price Level Changes:-Changes in the prices level also effects the
working capital requirements. Generally the rising prices will require the
firm to maintain larger amount of working capital as more funds will require
maintaining the same current assets. The effect of rising prices may be
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different for different firms. Some firms may be affected much while some
other may not be affected at all by the rise in prices.
Financing of Working Capital

The working capital requirements of a business concern can be classified as:
Permanent or Fixed working capital requirements.
Temporary to variable capital requirements: -In concern, a part of working
capital investments are as permanent investment in fixed assets. This is so
because there always a minimum level of current assets which are
continuously required by the enterprise to carry out its day-to-day business
operations and this minimum cannot be expected to reduce at any time. This
minimum level of current assets gives rise to permanent or fixed working
capital as this part of working capital is permanently blocked in current
assets. The various sources for the financing of working capital are:-
Permanent or Fixed Sources of Working Capital

Shares.
Debentures.
Public Deposits.
Loans from financial institutions.
Temporary or Variable Sources of Working Capital

Commercial banks
Indigenous bankers
Trade creditors
Installment credit
Advances
Accounts receivable- credit/factoring
Accrued expenses
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Commercial paper
Commercial banks are the most important sources of short term capital. The major
portions of working capital loans are provided by commercial banks. They provide
of wide variety of loans tailored to meet the specific requirements of a concern.
The different forms in which the banks normally provide loans and advances are
as follows:-
Loans
Cash credits
Overdrafts
Purchasing and discounting of bills
In addition to the above mentioned forms of direct finance, commercial banks
help their customers in obtaining credit form their suppliers through the letter of
credit arrangements. It is always a test to the prudence of a financial manager to
obtain the correct amount of working capital at the right time, at a reasonable
cost and at the most favorable terms.
Management of inventory
Management of Cash
Management of Receivables
Management of Inventory

Inventories constitute the most significant part of current assets of a large
majority of companies in India. On an average, inventories are approximately 60
% of current assets in public limited companies in India. Because of the large
size of inventories maintained by firms maintained by firms, a considerable
amount of funds is required to be committed to them.
Management of Cash

Cash is the important current asset for the operation of the business. Cash is the
basic input needed to keep the business running in the continuous basis, it is also
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the ultimate output expected to be realized by selling or product manufactured by
the firm. The firm should keep sufficient cash neither more nor less.
Management of Receivable

A sound managerial control requires proper management of liquid assets and
inventory. These assets are a part of working capital of the business. An efficient
use of financial resources is necessary to avoid financial distress. Receivables
result from credit sales. A concern is required to allow credit sales in order to
expand its sales volume.
Operating Cycle

Operating cycle refers to the time duration required to convert sales, after the
conversion of recourses into inventories, into cash .the operating cycle of a
manufacturing company like BCCL includes:
Accusation of resources such as raw materials, labor, power and fuel etc.
Manufacture of the product which includes conversion of materials into
work-in-progress into finished goods.
Sale of the product either for cash or on credit. Credit sales create account
receivables for collection.

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Operating Cycle

2.2 Diagram of Operating Cycle

Components of Working Capital are calculated as follows

Materials Storage Period=Average Stock of Raw Materials/Average
Cost of Raw Material Consumption per day.

W-I-P Holding Period=Average W-I-P in Inventory/Average Cost of
Production per day.

Stores and Spares Conversion Period= Average Stock of Stores and
Spares/ Average Consumption per day.

Debtors Collection Period=Average Book Debts/Average Credit Sales
per day.

2.2 Table of Formula of Working Capital
CASH
RAW
M ATERIALS
WIP
FINISHE
D GODS
BOOK
DEBTS
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CHAPTER-3
RESEARCH
METHODOLOGY

Research Methodology
For Every Comprehensive research a proper research methodology is in
dispensable& it has to be properly conceived. The methodology adopted by me
is as follows:-
Research Design
Problem Identification
Find out Ratios related to working capital management of BCCL and
compare with last 2 years.
Find deviation of calculated from standard or Norms.
Calculating the working capital requirement of Bharat Coking Coal Ltd.
information needed.
Information about firms assets, liabilities, revenue, expenditure, bankers,
investment etc.
Information about firms loan, security, stock level & other financial
information.
Data Collection
Primary Data:-This data had been collected through meetings and interviews
with various managers and employees of the finance department of BCCL. At the
same time I had visited various other departments for collection of data. The
departments that had been visited are as follows:-
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Main Cash Department
Billing and Operation Department
Excise Department.
Sales Department
Secondary Data: - Apart from the primary data certain secondary data were
required for this project. Following are the sources of secondary data we collect
are as follows:
Annual reports of companies
Balance sheet
Profit & Loss Accounts
Analysis & Interpretation:-The data collected and analysed subjectively as
well as graphically where it is possible. The analysis is based upon available
information & interpreted accordingly.
Conclusion:-On the basis of analysis conclusion has been drawn.
Suggestion:-Suggestion has been given in order to improve performance of the
firm.
Limitation:-My scope of study is limited to the annual reports, Balance sheet of
units for analysis.

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CHAPTER-4
DATA ANALYSIS
&
INTERPRETATION
Analysis of Working Capital Management of BCCL

Working Capital
Current Ratio
Acid-Test Ratio
Debtors Turn Over Ratio
Inventory Turn Over Ratio
Net Working Capital Ratio
Debt Collection Ratio

4.1 Table of Working Capital Management of BCCL

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BALANCESHEET Rs (i n Lakh)
As the Year 2006-2011
PATICULARS 2006-07 2007-08 2008-09 2009-10 2010-11
SOURSES OF FUNDS:

SHAREHOLDERS FUND:

SHARE CAPITAL

211800 211800 211800 211800 211800.00
RESERVES AND SURPLUS

SUB TOTAL 211800 211800 211800 211800 211800.00

LOAN FUNDS:
SECURED 30784.23 20843.16 11826.7 33946.16 3259.7
UNSECURED

157620.1 108330 108330 108329.98 108330
SUB TOTAL 188404.4 129173.1 120156.7 142276.14 111589.7
TOTAL 400204.4 340973.1 331956.7 354076.14 323389.56

APPLICATION OF FUNDS:

FIXED ASSETS:
GROSS BLOCK

372797.5 385584.4 391474.6 408879.58 436019.96
LESS: DEPRICIATION

260545.9 273094 278134 286242.37 300377.81
NET BLOCK

112251.6 112490.4 113340.6 122637.21 135642.15
CAPITAL WORK IN
PROGRESS

8399.24 5407.66 9138.47 8304.24 8345.70
SUB TOTAL 120650.9 117898.1 122479 130941.45 143987.85

INVESTMENT 12470.4 11084.8 9699.2 8313.6 6928.00

INVENTORIES

52189.14 57352.91 70725.53 93890.02 111236.22
SUNDRY DEBTORS 8617.47 5144.03 18682.5 39380.24 61813.50
CASH AND BANK BALANCES

96097.25 77289.22 91088.72 92302.76 130683.59
LOANS $ ADVANCES 16329.25 17978.53 22070.92 31950.62 29736.02
SUB TOTAL 173233.1 157764.7 202567.7 257523.64 333469.33

LESS: CURRENT
LIABILITY&PR

585327.3 639235 834296.4 794790.34 803714.85
NET CURRENT ASSETS -412094 -481470.3 -631729 -537266.7 -470245.52
MISC. EXPT

PROFIT AND LOSS A/CS 679177.3 693460.5 831507.2 752087.79 642719.23
TOTAL 400204.4 340973.1 331956.7 354076.14 323389.56

4.2 Table of Balance sheet of BCCL from 2006-2011

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Pr ofi t and Loss Account Rs (Lahk)
For t he Year Ended 2006-2011
Part iculars
20 06- 0 7 20 07 - 08 2 008 - 09 20 09- 1 0 201 0- 11
I NCOME:

Sales of coal, coke,
et c.

287919.8

295478

339913.2
461933.67 615711.23
Coal issued for other
purposes per cont ra

67775.9

68588.2

75532.07
68355.31 93809.90
Other receipt s
40026.91 27937.6 69167.31
50536.63 30755.98
Accret ion in stock
554.77 4962.42 11857.14
26809.03 17389.26
Total
396277.4 396966 496469.72
607634.64 757666.37

EXPENDI TURE:

Discret ion in stock - - - - - - - - - - - - - - - -
- - - - -
Purchase/ transfer of
coal/ coke et c. - - - - - - - - - - - - - -
- - - - -
I nternal consumption
of coal per cont ra 65 319 .64 66 071.3 7 3232. 72 66 193079 933 17 .74

Employees
remunerat ion &
benefit s
17 515 1.5 18 8518 2 76118 .98 26 4274. 59 302 31 2.5 8

I mpact of arrear
wages under NCWA
VI I
- - - - - - - - - - - - -
- - - - - -
I mpact of arrear
adhoc/ I R exe. & non-
exe.
3 23 46. 1

Consumpt ion of stores
& spare part s 32 064 .86 23 346.1 8 3895. 16 39 124.9 8

437 96 .58

Power & fuel
23 270 .86 33 015.8 3 7548. 98 30 600.2 1

217 81 .36

Different ial tariff
- - - 23 346.6 2 3414. 38
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Part iculars
20 06- 0 7 20 07 - 08 2 008 - 09 20 09- 1 0 201 0- 11
Repairs ( Purchased)
49 45. 45 - - - 5 623 .64 70 71. 88 792 6.54

Contractual
expenditure 16 845 .28 49 44 .75 2 9475. 38 37 818.6 6 643 35 .17
Social overheads
( I ncludes free issue of
coal to employees)
24 480 .5 25 688.7 3 0550. 41 34 071.9 1 343 04 .63
I nterest
78 85. 74 93 47 .2 7 842 .76 66 59058 420 1.68
Depreciat ion
14 267 .22 17 550 1 6005. 93 17 103.5 0 172 45 .59
Impairment of assets
20 53. 98 33 0.5 3 2 96. 24 - 35 35. 72 823 .40
Provision
22 9.5 8 17 0.2 5 2 73. 7 77 9.5 7 127 .88
Other expenditure
27 576 .91 28 747.1 4 3322. 43 38 679.7 4 548 84 .36
Total expendi ture
39 389 2 45 3759 6 27600 .71 53 8842. 69 646 83 2.1 1
Add/ less: OBR adj :
17 81. 97 - 33 21 .77 5 214 .94 - 10 963 .49 205 6.53
Net total expenditure
39 567 3.5 45 0437 6 32815 .65 52 7879. 20 648 88 8.6 4

Profit/ loss( - ) for the
year 60 3.8 9 - 53 470.7 -
1 36345 .93
79 755.4 4 108 7S77. 73
Fri nge benefit tax
- 27 2.8 2 - 10 43 .64 - 3 47. 83 - - - - 26. 30
Prior period adj .
46 26. 93 13 885.6 - 1 352 .95 - 36 2.3 2 590 .83
Waiver of apex
interest - - - 49 290.2 - - - - -

Total profit
49 58. 4 86 81 .35 -
1 38046 .71

Balance loss( - )
brought forward from
last years account s
- 68 413 6 - 67 9177 - 6 93460 .5 - 83 150 7.2 1

- 7 52 087 .79
Transit ional prov. As
per rev. AS 1 5 - - - - 22 944.6 - - - -

Loss( - ) carried forward
t o balance sheet - 67 917 7 - 69 3461 -
8 31507 .21
- 75 208 7.7 9
- 6 42 719 .23

4.3 Table of Profit & Loss Account of BCCL from 2006-2011
2 0 1 2

32

Current Ratio

It is also known as working capital ratio. It is a measure of short-term financial
strength of the business and shows whether the business will be able to meet its
current liabilities as when they mature. Current Assets including assets which can
be converted in to cash easily and it like market securities debtors, inventory,
prepaid expenses etc. Current Liabilities included creditors, bills payable, accrual
expenses, short term bank loan, income tax liabilities and long term debt maturity
in current year. In short it can be said as all obligations within a year are included
in current liabilities. Current ratio is a measure of the firms short term solvency.
It indicates the availability of current assets in rupee of current liabilities. As a
conventional rule, a current ratio should be or slightly more. It focuses the strong
of weak position of the company.

Current Rattu =
Current Assests
Current Ltabtltttes

For the year:
2010 201 1 =
33346933000
80371485000
= 0.41

2009 201 0 =
257523,64,000
794790,34,000
= 0.32

2008 200 9 =
202567,67,000
834296,43,000
= 0.24

4.4 Table of Current Ratio

2 0 1 2

33

4.1 Diagram of Current Ratio

Interpretation:-It is generally believed that 2:1 ratio shows a comfortable
working capital position. The tendon committee appointed by RBI had wide
recommended a current ratio of 2:1.Company doesnt maintain this ratio but
trying to increase it year by year. A current ratio is 0.41 in the 2010-2011. But in
the previous year the ratio is 0.32:1 so we can say that the company doesnt have
comfortable working capital position previous year but the company is trying to
increase its current ratio.
Acid Test Ratio

The measure of absolute liquidity may be obtained only cash and bank balance as
well as only ready marketable security with liquid liabilities. This is every
existing standard of liquidity and it is satisfaction if the ratio is 1.50:1.
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
2010-2011 2009-2010 2008-2009
CURRENT RATI O
2010- 2011
2009- 2010
2008- 2009

2 0 1 2

34

Atd Test Rattu =
C. A Inventury
C. L

For the year
2010 2011 =
33346933000 11123622000
80371485000
= 0.276

2009 2010 =
257523,64,000 93890,02,000
794790,34,000
= 0.205

2008 2009 =
202567,67,000 70725,53,000
834296,43,000
= 0.158

4.5 Table of Acid Test Ratio

4.2 Diagram of Acid Test Ratio

Interpretation:-Acid-test ratio is near to one in current year that is 0.276 as
compare to 0.205 in the previous year. Over all the acid-test ratio of last year &
this year is not very satisfactory so we can conclude that the absolute liquidity of
the Bharat Coking coal ltd. is in favor.
0
0.05
0. 1
0.15
0. 2
0.25
0. 3
2010- 2011 2009-2010 2008-2009
ACI D - TEST RATI O
2010-2011
2009-2010
2008-2009
2 0 1 2

35
Debtors Turnover Ratio
This ratio shows the proportion of sales to average receivables. It shows the
efficiency of the collection policy of the firm. The higher the ratio, the less
satisfactory position of the firm. Higher ratio indicates weak collection policy of
the firm.

2010 2011 =
61571123000
5059687000
= 12.168 Times
2009 2010 =
46193367000
2903137000
= 15.911 Times
2009 2010 =
36,46,72,78394
5,13,47,00000
= 7.102 Times

4.6 Table of Debtors Turnover Ratio

4.3 Diagram of Debtors Turnover Ratio
0
2
4
6
8
10
12
14
16
2010-2011 2009- 2010 2008-2009
DEBTORS TURNOVER RATI O
2010-2011
2009-2010
2008-2009

Debturs Turnuver Rattu =
Credtt Sales
Auunt Reetvable

2 0 1 2

36

Interpretation:-We know that the higher Debtors turnover ratio is not good for
the firm. The lesser the period of the collection the better policy of collection of
the company. In the year 2010-11 it is 12.168 days to collect the debts. So we can
say that the collection policy of the company is excellent that they recover their
debts near to half of month. But we also consider that in previous year this is
15.911 days so we can say that the company has to maintain this ratio.
Inventory Turnover Ratio

This ratio is also known as stock turnover ratio. The number of times the
average stock is turnover during the year is known as stock turnover. It is
computed by deciding the sales by the inventory. The ratio is important in joining
the ability of management which it can move the stock.

Invertury Turnuver Rattu =
Net Sales
Average Inventury

For the year
2 010 2011 =
61571123000
10256312000
= 6.00 times
2 009 2010 =
461933.67
82307.775
= 5.61 times
2 008 2009 =
37,13,28,70000
7,07,25,53000
= 5.25 times

4.7 Table of Inventory Turnover Ratio

2 0 1 2

37

4.4 Diagram of Inventory Turnover Ratio

Interpretation:-Higher the ratio more profitability the business would be. The
ratio is joining the ability of management with which it can move the stock.
Inventory turnover ratio is highest in the year 2010-11 is 6.00 as compare to
current year it is 5.61 which is little bit lower than previous year but it is obvious
that in heavy industries like Bharat Coking coal ltd., it is not a huge difference.

Net Working Capital Turnover Ratio
Net working capital turnover ratio is obtained by net working capital joining to
sales. The excess of current assets over current liabilities is called working
capital. It is found for measuring firm liquidity. It also measures the firm potential
reserve of funds.
4.8
5
5.2
5.4
5.6
5.8
6
2010-2011 2009- 2010 2008- 2009
I NVENTORY TURNOVER RATI O
2010- 2011
2009- 2010
2008- 2009
2 0 1 2

38

Net Wurhtng Capttal Turnuver Rattu =
Sales
Net Wurhtng Capttal

For the year
201 0 20 11 =
61571123000
-47024552000
= -1.30 times
200 9 20 10 =
46193367000
-53,72,6670000
= -0.85 times
200 8 20 09 =
37,13,28,70000
-63,17,28,76000
= -0.58 times

4.8 Table of Net Working Capital Ratio

4.5 Diagram of Net Working Capital Ratio

Interpretation:-As per the balance sheet data of the creditor, the working capital
turnover ratio is different for the different years. The ratio is -1.30 in 2010-11 and
-0.85 in 2009-10. So it means that higher the ratio better the working capital
condition of the company. BCCL having a negative ratio in both years so it shows
not the sound position of the company.

-1.4
-1.2
-1
-0.8
-0.6
-0.4
-0.2
0
2010-2011 2009- 2010 2008-2009
NET WORKI NG CAPI TAL TURNOVER RATI O
2010-2011
2009-2010
2008-2009
2 0 1 2

39

Debt Collection Period

The Debt Collection shows the number of days taken to collect the debts of credit
sales. It shows the efficiency and collection policy of the company. The ratio is
computed by dividing the Debtors turnover ratio in to 365 days.

Debt Cullettun Pertud =
35 days
Debtur
i
s Turnuver Rattu

For the year
2010 2011 =
365 days
12.168
= 29.99 days
2009 2010 =
365 days
15.911
= 22.94 days
2008 2009 =
365 days
7.10
= 51.40 days

4.9 Table of Debt Collection Period

2 0 1 2

40

4.6 Diagram of Debt Collection Period
Interpretation:-The collection period is highest in 2008-09 is 51.40 days as
compare to low in the year 2010-11 is 29.99 days only. This shows the
improvement in collection policy of the Bharat Coking Coal Limited. So it is very
important for any company to collect the debs which this company does very
well.

0
10
20
30
40
50
60
2010- 2011 2009- 2010 2008- 2009
DEBT COLLECTION PERI OD
2010-2011
2009-2010
2008-2009
2 0 1 2

41

CHAPTER-5
FINDINGS

Current liabilities and provisions of BCCL and complete synchronization
and coordination among the working capital components which shall
contribute to optimum level of operations.

The huge inventory is a great concern for BCCL and it needs proper
procurement and management.

Working capital of the company was negative. It shows that liquidity
position of the company is not good.

Current assets components show sundry debtors which were the major part
in current assets. It shows that the inefficient receivables collection
management.

Inventory was supporting to sales, thus inventory turnover ratio was
increasing, but company increased the raw material holding period.

2 0 1 2

42

RECOMMENDATION & SUGGESTION

The recommendation & suggestion for effective management of working capital
at BHARAT COKING COAL LTD. are given bellow:

For inventory, in order to improve the position, BCCL can reduce the level
of stocks by resorting to phased production i.e. producing according to
requirement and disposing off or recycling the unserviceable inventories.
However, the low turnover of stock may also be due to problems with
generation of sales Inventory management is a great concern for BCCL
especially stores and spares. The purchase manager should take proper
steps for procurement of inventories.

The BCCL must take certain steps to decrease the working capital cycle.
One way can be better management of inventories.

The BCCL is suggested to maintain a balance in capacities,
synchronization of various inputs availability of some materials or parts
which are not easily available.

The plant should maintain inventory at an optimum level rather than a very
optimistic level.

The procurement for materials requisition processing should be reduced so
as to minimize the lead time.

Company should take control on debtors collection period which is major
part of current assets.
2 0 1 2

43

CHAPTER-6
BIBLIOGRAPHY

The Reference Books Author
Financial Management Khan & Jain
Financial Management I.M.Pandey
Research Methodology C.R.Kothari
BCCL last 3 year annual reports

Website
bccl.cmpdi.co.in/

www.coalindia.in/

And help from:

Google search engine

2 0 1 2

44

Persons

Sri Sheo Nandan Sah (Father)

Sri R.N.Vishwakarama (Sr. Manager (Mining), HRD Department)

Mr. Chandan Kumar Gupta (Brother)

Mr. Rajnish Kumar Gupta (Brother)

Sri Mahesh Gupta (Uncle)

Sri A.K.GUPTA (AFM Block II Area)

Sri B.K.Parui (C/B HOD)

Sri A.K.Murati (GM Finance )

Sri S.S.Nair Principal of KCSMCA (EX)

Mrs. Shelly Rekhi Sharma Principal of KCSMCA

Mr. Sachin Verma HOD of MBA

Mr. Parminder Singh HOD of BCA

Ms. Pallvi Dhingra Lecturer of KCSMCA

Mrs. Jagmeet Kaur Lecturer of KCSMCA

Ms. Cherry Wadwa IIC KC Group of Institution Punjab

Mr. Wasdev Sah

Ms. Meenu Bansal Lecturer of KCSMCA

Mr. Karun Aggarwal Lecturer of KCSMCA

2 0 1 2

45

Annexur e
BHARAT COKING COAL LIMITED

BALANCE SHEET AS AT 31ST MARCH, 2011

(Rs. In Lacks) in Lakh

As at

As at

Sch. 31st March, 2011 31st March, 2010

I. SOURCES OF FUNDS :
Shareholder's Fund:
Share Capital A 211800.00

211800.00

Reserve & Surplus B

211800.00 211800.00
Loan Funds:

Secured

C 3259.58

33946.16

Unsecured D 108329.98 108329.98

111589.56 142276.14

323389.56 354076.14
II. APPLICATION OF FUNDS :

A. Fixed
Assets:
Gross
Block E 436019.96 408879.58
Less: Depreciation& Impairment

300377.81 286242.37
Net Block

135642.15 122637.21
B. Capital Work-in-Progress

8345.70

8304.24

(Net of provisions)

143987.85 130941.45

Investments F 6928.00 8313.60

Current Assets, Loans& Advances:

Inventories G 111236.22 93890.02
Sundry Debtors H 61813.50 39380.24
Cash & Bank Balances I 130683.59 92302.76
Loans & Advances J 29736.02

31950.62

333469.33 257523.64
Less: Current Liabilities & Provisions K 803714.85 794790.34
Net Current Assets

-
470245.52
-
537266.70
Profit & Loss Account 642719.23 752087.79

323389.56

354076.14

2 0 1 2

46

BHARAT COKING COAL LIMITED

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED ON 31ST MARCH' 2011
in Lakh
Sch. For t he

For t he
Year ended on

Year ended
on
INCOME :
3 1 st Mar'
2 0 1 1

3 1st Mar'
2 01 0
Sale of Coal, Coke etc 1 615711.23 461933.67
Coal, Coke issued for other purposes per contra

2 93809.90

68355.31
Other Receipts

3 30755.98

50536.63
Accretion in Stock 4 17389.26 26809.03
757666.37 607634.64
EXPENDITURE :

Discretion in Stock 4 0.00 0.00
Internal consumption of Coal, Coke per contra 93317.74 66193.79
Employees Remuneration & Benefits 5 302312.58 264274.59
Consumption of Stores & Spare Parts

6 43796.58

39124.98
Power & Fuel 7 21781.36 30600.21
Repairs(Purchased) 8 7926.54 7071.88
Contractual Expenditure 9 64335.17 37818.66
Social Overhead(includes Free issue of Coal) 10 34304.63 34071.91
Interest

11 4201.68

6659.58
Depreciation 17245.59 17103.50
Impairment of Assets 823.40 -3535.72
Mines Closure 1764.60 0.00
Provisions 12 127.88 779.57
Other Expenditure 13 54894.36 38679.74

Total Expenditure 646832.11 538842.69
Add/Less : OBR Adjustment 2056.53 -10963.49
Net Total Expenditure 648888.64 527879.20
Profit/Loss(-) for the year 108777.73 79755.44
Fringe Benefit Tax

0.00

26.30
Prior period Adjustment 14 590.83 -362.32
109368.56 79419.42
Loss (-) brought forward from last year Account -752087.79
-
831507.21
Loss (-) Carried forward to Balance Sheet -642719.23

-
752087.79

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