TERM PAPER

OF
ACCOUNTING FOR MANAGERS
ON JSW STEEL LIMITED

SUBMITTED TO-MISS ANUSHEETAL

SUBMITTED BY-

MANPREET 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 value-
added 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-billion-
dollar, 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 North-
West 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 North-
West 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.