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TERM PAPER OF ACCOUNTING FOR MANAGERS ON JSW STEEL LIMITED
SUBMITTED TO-MISS ANUSHEETAL
SUBMITTED BYMANPREET KAUR REG NO-11010568
JSW Group is one of the fastest growing business conglomerates with a strong presence in the core economic sector. This Sajjan Jindal led enterprise has grown from a steel rolling mill in 1982 to a multi business conglomerate worth US $ 5 billion within a short span of time. As part of the US $ 10 billion O. P. Jindal Group, JSW Group has diversified interests in Steel, Energy, Minerals and Mining, Aluminium, Infrastructure and Logistics, Cement and Information Technology. The Jindal group is a US $ 10 billion conglomerate, which over the last three
decades has emerged as one of India's most dynamic business groups. Founded in 1952 by O.P. Jindal, a first-generation entrepreneur, it is today a leading steel producer, with interests spanning across the spectrum, from mining iron ore, to manufacturing valueadded steel products. Om Prakash Jindal, the group founder, started off in a small village in Haryana by trading in steel pipes. He established a manufacturing plant near Kolkata in 1952, producing steel pipes, bends and sockets. Today, the Jindal group is a multi-billiondollar, multi-location, multi-product business empire. From mining iron ore, the group produces hot-rolled and cold-rolled steel products, high-grade pipes and value-added galvanized items. It has also diversified into a foray of core sector businesses. The Jindal Group has manufacturing outfits across India, US and Indonesia offices across the globe. 'Growth with a social conscience’ has been a way of life for the Jindal group. The group's strength lies in its individual companies, with each one committed to consolidating its strengths and excelling in its chosen field. The core team of the Group comprises the four sons of the founder. Jindal SAW Limited is led by Prithviraj Jindal. Sajjan Jindal has promoted the JSW Group of Companies. Ratan Jindal leads Jindal Stainless Ltd, while Naveen Jindal is at the helm of affairs at Jindal Steel & Power Ltd. The technology-driven group employs large number of people across the globe. O.P. Jindal Group, over the years, has built up a reputation for integrity and dynamism. On its road to growth and expansion,
the Group is also conscious about its responsibility towards environment and social development. Eco-efficiency is a matter of principle. Preventive measures for damage to the environment are taken into account at the planning stage of production and growth. JSW Foundation, an integral part of the Group, is the CSR wing, with a vision to create socio economic difference in the fields of Education, Health and Sports, Community Relationship/Propagation as well as Art, Culture and Heritage.
VISION Global recognition for Quality and Efficiency while nurturing Nature and Society. MISSION Supporting India's growth in Steel Domain with speed & innovation.
CORE VALUES Transparency Strive for Excellence
Dynamism Passion for Learning Jindal South West Holding Ltd. (JSWHL) entered into a Memorandum of Understanding with the Government of Andhra Pradesh (GoAP) on 1st July 2005, for setting up 1.4 mtpa Alumina Refinery and 0.25 mtpa Aluminium Smelter by JSW Group, in the State of Andhra Pradesh, for which the GoAP would provide all necessary support including supply of Bauxite. JSW Aluminium Ltd. (JSWAL) was incorporated on July 08, 2005 as a special purpose vehicle to implement this Project. JSWAL is planning to set up 1.4 mtpa Alumina Refinery Project ( Project) in phase I. Project will be located at S. Kota, Vizianagaram District, in the state of Andhra Pradesh. This location is about 60 km NorthWest of the port city of Visakhapatnam on the East Coast of India. The refinery site is well connected by road, rail, sea and air. The state highway connecting Visakhapatnam to Araku runs adjacent to western side, while an all weather road connecting this State Highway to the National Highway - 43 forms the northern boundary of the Refinery. Boddavaram Station on the Kottavalasa-Kirandul (KK) Line of the East Coast Railway is 2 km from the Refinery Site. The nearest sea ports are Visakhapatnam Port and Gangavaram Port, about 60 km from the refinery site. The nearest airport is Visakhapatnam. Jindal South West Holding Ltd. (JSWHL) entered into a Memorandum of Understanding with the Government of Andhra Pradesh (GoAP) on 1st July 2005, for setting up 1.4 mtpa Alumina Refinery and 0.25 mtpa Aluminium Smelter by JSW Group, in the State of Andhra Pradesh, for which the GoAP would provide all necessary support including supply of Bauxite. JSW Aluminium Ltd. (JSWAL) was incorporated on July 08, 2005 as a special purpose vehicle to implement this Project. JSWAL is planning to set up 1.4 mtpa Alumina Refinery Project ( Project) in phase I.Project will be located at S. Kota, Vizianagaram District, in the state of Andhra Pradesh. This location is about 60 km NorthWest of the port city of Visakhapatnam on the East Coast of India. The refinery site is well connected by road, rail, sea and air. The state highway connecting Visakhapatnam to Araku runs adjacent to western side, while an all weather road connecting this State Highway to the National Highway - 43 forms the northern boundary of the Refinery. Boddavaram Station on the Kottavalasa-Kirandul (KK) Line of the East Coast Railway is 2 km from the Refinery Site. The nearest sea ports are Visakhapatnam Port and Gangavaram Port, about 60 km from the refinery site. The nearest airport is Visakhapatnam.
INTERPETATION
LIQUIDITY POSITION: IT reflects the short term position of the company. Here we consider the current assets and current liabilities of the company. This position is estimated by current assets and current liabilities. There is the increase in working capital as its current assets is increasing as compare to its current liabilities which indicates that the company liquidity position is stable and it can easily meet the day to day expenses . The term liquidity means the ability of the firm to pay its short term obligations as and when these become due for payment. Liquidity ratios are the ratios which are calculated to assess the company’s ability to repay its short term liabilities. Liquidity ratios are also known as short term solvency ratios. SOLVENCY POSITION: It indicates long term position of the company. It includes long term investment & fixed assets & long term liabilities. Here the company long term investment and borrowing is increasing as same as its long term liabilities which clearly indicates that the company is in good position to paid its debt easily but its loans are also increasing that shows that the company has improve more in terms of its borrowing. PROFITABILITY POSITION: It reflects the profitability position o f the company and how the company increases its profits. Here which clearly shows that the company
profitability position is satisfactory? And it has to improve more to interact more to suppliers. Quick ratio is the relationship between liquid assets and current liabilities; this ratio helps to ascertain the short term financial position in a better way. Higher the liquid ratio higher the liquidity. In the above case the company is highly liquid. Debt Equity Ratio:-Debt./Equity Where Debt = (Secured Loan+ Unsecured Loan) Equity = (Sh. Capital+ Reserves & Surplus) This ratio measures the long term financial position of the business. It indicates relationship between owner’s funds and shareholder’s funds. The company in the above case has utilized capital gearing process. It has paid off the loan in 2010 which it had raised in 2009. OVERALL ANALYSIS:After calculating the values of current ratio, quick ratio and absolute liquidity ratioit is clear that the liquidity position of the company is not satisfactory this is because there is increase in current liabilities and decrease in current assets. This means that company is not paying its short-term obligations. In order to pay its short-term obligations they have either increase their current assets or decrease their current liabilities. TURNOVER ACTIVITY RATIO / EFFICIENCY RATIO:These ratios are very important for a concern to judge how well facilities at the disposal of the concern are being used or to measure the effectiveness with which a concern uses its resources at its disposal. In short, these will indicate position of assets usage. These ratios are usually calculated on the basis of sales or cost of sales andare expressed in integers rather than as a percentage. Such ratios should be calculated separately for each type of asset. The greater the ratio more will be the efficiency of asset usage. The lower ratio will reflect the under utilisation of the resources available at the command of the concern. The concern must always plan for efficient use of the assets to increase the overall efficiency. The following are the important turnover activity ratios usually calculated by a concern. Inventory Turnover Ratio:-It denotes the speed at which the inventory will be converted into sales, thereby contributing for the profits of the concern. When all other factors remain constant, greater the turnover of inventory more will be efficiency of its management. Further, it will be higher when sales are maximum and the average inventory is minimum. This ratio establishes relationship between costs of goods sold during a given period and the average amount of inventory held during that period. This ratio is calculated as follows
Profit and loss account
Interpretation: In Trend analysis we look how organization is performing year after year. If any organization is performing well then its good and if not performing well then it is not a good sign for the organization. According to this trend analysis organization is performing well except some areas. Moreover it is good for the organization that it is having increasing trend.
Preparation of fund flow statement What is fund flow statement? A statement which shows the movement of funds into and out of business. In other words a statement of sources and application of funds. The term funds here refer to “Net working Capital” net working capital is calculated by taking out the difference between current assets and current liabilities. Step 1. Collect balance sheet of two periods i.e in this case 2009 and 2010 balance sheet values Are taken.
Step 2. Prepare statement of changes in working capital or schedule of change in working capital. Step 3. Prepare “ Sources and applications of funds statements“. The statement is prepared to find out the sources from which funds are raised by the company and where these funds are applied.
STATEMENT OF CHANGES IN WORKING CAPITAL: As the Current assets are increased then it would eventually lead to increase in working capital, and if the amount of current asstes are decreased then it would directly decrease the working capital. Now we can see in the statement that the S. debtors are increasing to 2585.77 in 2010 and this is directly leading to increase in working capital, the same goes with cash and bank balance , the increase of 4687.69 in 2009 to 4185.76 in 2010 is also decrease the working capital.
CONCLUSION:-
After calculating the values of current ratio, quick ratio and absolute liquidity ratio it is clear that the liquidity position of the company is not satisfactory this is because there is increase in current liabilities and decrease in current assets. This means that company is not paying its short-term obligations. In order to pay its short-term obligations they have either increase their current assets or decrease their current liabilities. Efficiency turnover ratios indicates the position of asset usage of the concern. As these ratios are calculated separately for each type of asset. As per the ratios of inventory turnover it is improving as these ratio shows improvement, so inventory management is
efficient. As for debtor turnover ratio management of receivables is efficiently utilised because there is increase in debtor turnover ratio. There is idle capacity of assets as there is decrease in asset turnover ratio. The capital turnover ratio for the company is very good as there is increase in total profits and for the working capital ratio it is decreasing which means that the working capital is not efficiently utilised in the company. From the above ratios calculated we can say that company’s efficiency ratio is satisfactory. The solvency or leverage ratio of the company is not satisfactory as there is increase in debt equity ratio due to increase in total debts of the company and also propriety ratio is also decreasing year by year due to increase in total assets of the company. Hence it is clear from the figures calculated above that the solvency of the company isnot good as it should be. The profitability ratio measures the overall efficiency of the company. After calculating the values of profitability some ratios are satisfactory while some ratios are unsatisfactory which means that company’s overall efficiency is not satisfactory.
Interpretation: In Trend analysis we look how organization is performing year after year. If any organization is performing well then its good and if not performing well then it is not a good sign for the organization. According to this trend analysis organization is performing okay because in some items the trend is increasing and in others is decreasing. Moreover it is good for the organization that it is having increasing trend in profits.
Interpretation: By cash flow statement's analysis, we come to know about the increase and decrease in current assets and current liabilities and it comes good sign for organization. out by cash from operating activities. In this organization there is less increase in current assets as compare to increase in current liabilities. It is not a good sign for the organization.
SUBMITTED TO-MISS ANUSHEETAL
SUBMITTED BYMANPREET KAUR REG NO-11010568
JSW Group is one of the fastest growing business conglomerates with a strong presence in the core economic sector. This Sajjan Jindal led enterprise has grown from a steel rolling mill in 1982 to a multi business conglomerate worth US $ 5 billion within a short span of time. As part of the US $ 10 billion O. P. Jindal Group, JSW Group has diversified interests in Steel, Energy, Minerals and Mining, Aluminium, Infrastructure and Logistics, Cement and Information Technology. The Jindal group is a US $ 10 billion conglomerate, which over the last three
decades has emerged as one of India's most dynamic business groups. Founded in 1952 by O.P. Jindal, a first-generation entrepreneur, it is today a leading steel producer, with interests spanning across the spectrum, from mining iron ore, to manufacturing valueadded steel products. Om Prakash Jindal, the group founder, started off in a small village in Haryana by trading in steel pipes. He established a manufacturing plant near Kolkata in 1952, producing steel pipes, bends and sockets. Today, the Jindal group is a multi-billiondollar, multi-location, multi-product business empire. From mining iron ore, the group produces hot-rolled and cold-rolled steel products, high-grade pipes and value-added galvanized items. It has also diversified into a foray of core sector businesses. The Jindal Group has manufacturing outfits across India, US and Indonesia offices across the globe. 'Growth with a social conscience’ has been a way of life for the Jindal group. The group's strength lies in its individual companies, with each one committed to consolidating its strengths and excelling in its chosen field. The core team of the Group comprises the four sons of the founder. Jindal SAW Limited is led by Prithviraj Jindal. Sajjan Jindal has promoted the JSW Group of Companies. Ratan Jindal leads Jindal Stainless Ltd, while Naveen Jindal is at the helm of affairs at Jindal Steel & Power Ltd. The technology-driven group employs large number of people across the globe. O.P. Jindal Group, over the years, has built up a reputation for integrity and dynamism. On its road to growth and expansion,
the Group is also conscious about its responsibility towards environment and social development. Eco-efficiency is a matter of principle. Preventive measures for damage to the environment are taken into account at the planning stage of production and growth. JSW Foundation, an integral part of the Group, is the CSR wing, with a vision to create socio economic difference in the fields of Education, Health and Sports, Community Relationship/Propagation as well as Art, Culture and Heritage.
VISION Global recognition for Quality and Efficiency while nurturing Nature and Society. MISSION Supporting India's growth in Steel Domain with speed & innovation.
CORE VALUES Transparency Strive for Excellence
Dynamism Passion for Learning Jindal South West Holding Ltd. (JSWHL) entered into a Memorandum of Understanding with the Government of Andhra Pradesh (GoAP) on 1st July 2005, for setting up 1.4 mtpa Alumina Refinery and 0.25 mtpa Aluminium Smelter by JSW Group, in the State of Andhra Pradesh, for which the GoAP would provide all necessary support including supply of Bauxite. JSW Aluminium Ltd. (JSWAL) was incorporated on July 08, 2005 as a special purpose vehicle to implement this Project. JSWAL is planning to set up 1.4 mtpa Alumina Refinery Project ( Project) in phase I. Project will be located at S. Kota, Vizianagaram District, in the state of Andhra Pradesh. This location is about 60 km NorthWest of the port city of Visakhapatnam on the East Coast of India. The refinery site is well connected by road, rail, sea and air. The state highway connecting Visakhapatnam to Araku runs adjacent to western side, while an all weather road connecting this State Highway to the National Highway - 43 forms the northern boundary of the Refinery. Boddavaram Station on the Kottavalasa-Kirandul (KK) Line of the East Coast Railway is 2 km from the Refinery Site. The nearest sea ports are Visakhapatnam Port and Gangavaram Port, about 60 km from the refinery site. The nearest airport is Visakhapatnam. Jindal South West Holding Ltd. (JSWHL) entered into a Memorandum of Understanding with the Government of Andhra Pradesh (GoAP) on 1st July 2005, for setting up 1.4 mtpa Alumina Refinery and 0.25 mtpa Aluminium Smelter by JSW Group, in the State of Andhra Pradesh, for which the GoAP would provide all necessary support including supply of Bauxite. JSW Aluminium Ltd. (JSWAL) was incorporated on July 08, 2005 as a special purpose vehicle to implement this Project. JSWAL is planning to set up 1.4 mtpa Alumina Refinery Project ( Project) in phase I.Project will be located at S. Kota, Vizianagaram District, in the state of Andhra Pradesh. This location is about 60 km NorthWest of the port city of Visakhapatnam on the East Coast of India. The refinery site is well connected by road, rail, sea and air. The state highway connecting Visakhapatnam to Araku runs adjacent to western side, while an all weather road connecting this State Highway to the National Highway - 43 forms the northern boundary of the Refinery. Boddavaram Station on the Kottavalasa-Kirandul (KK) Line of the East Coast Railway is 2 km from the Refinery Site. The nearest sea ports are Visakhapatnam Port and Gangavaram Port, about 60 km from the refinery site. The nearest airport is Visakhapatnam.
INTERPETATION
LIQUIDITY POSITION: IT reflects the short term position of the company. Here we consider the current assets and current liabilities of the company. This position is estimated by current assets and current liabilities. There is the increase in working capital as its current assets is increasing as compare to its current liabilities which indicates that the company liquidity position is stable and it can easily meet the day to day expenses . The term liquidity means the ability of the firm to pay its short term obligations as and when these become due for payment. Liquidity ratios are the ratios which are calculated to assess the company’s ability to repay its short term liabilities. Liquidity ratios are also known as short term solvency ratios. SOLVENCY POSITION: It indicates long term position of the company. It includes long term investment & fixed assets & long term liabilities. Here the company long term investment and borrowing is increasing as same as its long term liabilities which clearly indicates that the company is in good position to paid its debt easily but its loans are also increasing that shows that the company has improve more in terms of its borrowing. PROFITABILITY POSITION: It reflects the profitability position o f the company and how the company increases its profits. Here which clearly shows that the company
profitability position is satisfactory? And it has to improve more to interact more to suppliers. Quick ratio is the relationship between liquid assets and current liabilities; this ratio helps to ascertain the short term financial position in a better way. Higher the liquid ratio higher the liquidity. In the above case the company is highly liquid. Debt Equity Ratio:-Debt./Equity Where Debt = (Secured Loan+ Unsecured Loan) Equity = (Sh. Capital+ Reserves & Surplus) This ratio measures the long term financial position of the business. It indicates relationship between owner’s funds and shareholder’s funds. The company in the above case has utilized capital gearing process. It has paid off the loan in 2010 which it had raised in 2009. OVERALL ANALYSIS:After calculating the values of current ratio, quick ratio and absolute liquidity ratioit is clear that the liquidity position of the company is not satisfactory this is because there is increase in current liabilities and decrease in current assets. This means that company is not paying its short-term obligations. In order to pay its short-term obligations they have either increase their current assets or decrease their current liabilities. TURNOVER ACTIVITY RATIO / EFFICIENCY RATIO:These ratios are very important for a concern to judge how well facilities at the disposal of the concern are being used or to measure the effectiveness with which a concern uses its resources at its disposal. In short, these will indicate position of assets usage. These ratios are usually calculated on the basis of sales or cost of sales andare expressed in integers rather than as a percentage. Such ratios should be calculated separately for each type of asset. The greater the ratio more will be the efficiency of asset usage. The lower ratio will reflect the under utilisation of the resources available at the command of the concern. The concern must always plan for efficient use of the assets to increase the overall efficiency. The following are the important turnover activity ratios usually calculated by a concern. Inventory Turnover Ratio:-It denotes the speed at which the inventory will be converted into sales, thereby contributing for the profits of the concern. When all other factors remain constant, greater the turnover of inventory more will be efficiency of its management. Further, it will be higher when sales are maximum and the average inventory is minimum. This ratio establishes relationship between costs of goods sold during a given period and the average amount of inventory held during that period. This ratio is calculated as follows
Profit and loss account
Interpretation: In Trend analysis we look how organization is performing year after year. If any organization is performing well then its good and if not performing well then it is not a good sign for the organization. According to this trend analysis organization is performing well except some areas. Moreover it is good for the organization that it is having increasing trend.
Preparation of fund flow statement What is fund flow statement? A statement which shows the movement of funds into and out of business. In other words a statement of sources and application of funds. The term funds here refer to “Net working Capital” net working capital is calculated by taking out the difference between current assets and current liabilities. Step 1. Collect balance sheet of two periods i.e in this case 2009 and 2010 balance sheet values Are taken.
Step 2. Prepare statement of changes in working capital or schedule of change in working capital. Step 3. Prepare “ Sources and applications of funds statements“. The statement is prepared to find out the sources from which funds are raised by the company and where these funds are applied.
STATEMENT OF CHANGES IN WORKING CAPITAL: As the Current assets are increased then it would eventually lead to increase in working capital, and if the amount of current asstes are decreased then it would directly decrease the working capital. Now we can see in the statement that the S. debtors are increasing to 2585.77 in 2010 and this is directly leading to increase in working capital, the same goes with cash and bank balance , the increase of 4687.69 in 2009 to 4185.76 in 2010 is also decrease the working capital.
CONCLUSION:-
After calculating the values of current ratio, quick ratio and absolute liquidity ratio it is clear that the liquidity position of the company is not satisfactory this is because there is increase in current liabilities and decrease in current assets. This means that company is not paying its short-term obligations. In order to pay its short-term obligations they have either increase their current assets or decrease their current liabilities. Efficiency turnover ratios indicates the position of asset usage of the concern. As these ratios are calculated separately for each type of asset. As per the ratios of inventory turnover it is improving as these ratio shows improvement, so inventory management is
efficient. As for debtor turnover ratio management of receivables is efficiently utilised because there is increase in debtor turnover ratio. There is idle capacity of assets as there is decrease in asset turnover ratio. The capital turnover ratio for the company is very good as there is increase in total profits and for the working capital ratio it is decreasing which means that the working capital is not efficiently utilised in the company. From the above ratios calculated we can say that company’s efficiency ratio is satisfactory. The solvency or leverage ratio of the company is not satisfactory as there is increase in debt equity ratio due to increase in total debts of the company and also propriety ratio is also decreasing year by year due to increase in total assets of the company. Hence it is clear from the figures calculated above that the solvency of the company isnot good as it should be. The profitability ratio measures the overall efficiency of the company. After calculating the values of profitability some ratios are satisfactory while some ratios are unsatisfactory which means that company’s overall efficiency is not satisfactory.
Interpretation: In Trend analysis we look how organization is performing year after year. If any organization is performing well then its good and if not performing well then it is not a good sign for the organization. According to this trend analysis organization is performing okay because in some items the trend is increasing and in others is decreasing. Moreover it is good for the organization that it is having increasing trend in profits.
Interpretation: By cash flow statement's analysis, we come to know about the increase and decrease in current assets and current liabilities and it comes good sign for organization. out by cash from operating activities. In this organization there is less increase in current assets as compare to increase in current liabilities. It is not a good sign for the organization.
