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A STUDY OF THE OPERATING CYCLE AND CASH CYCLE OF STERLITE IND

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    Sterlite Industries India Limited ( SIIL ) is the chief subordinate of Vedanta Resources plc, a diversified and incorporate FTSE 100 metals and excavation company, with chief operations located in India and Australia.

    Sterlite ‘s chief operating companies comprise Hindustan Zinc Limited ( HZL ) for its to the full integrated Zn and lead operations ; Sterlite Industries India Limited ( Sterlite ) and Copper Mines of Tasmania Pty Limited ( CMT ) for its Cu operations in India/Australia ; and Bharat Aluminium Company ( BALCO ) , for its aluminum and alumina operations and Sterlite Energy for its commercial power coevals concern.

    Sterlite is India ‘s largest non-ferrous metals and excavation company and is one of the fastest turning private sector companies. Sterlite is listed on BSE, NSE and NYSE. It was the first Indian Metals & A ; Mining Company to name on the New York Stock Exchange.

    Sterlite has continually demonstrated its ability to present major value making undertakings, offering alone growing at lowest costs and bring forthing superior fiscal returns for its stockholders. At the same clip, it ensures that its enlargement undertakings meet high conservative fiscal norms and do non put an indefensible load on its balance sheet and fiscal resources.

    A bulk of company ‘s operations are certified to the International Standards like ISO 9001, ISO 14001 and OHSAS 18001. SIIL research labs at Tuticorin and Silvassa have been recognized with ISO 17025:2005 enfranchisement from National Accreditation Board for Testing and Calibration Laboratories ( NABL ) . The company is LME approved Cu examiner. Our Cu merchandises meet the demand of Restriction of Hazardous Substances ( RoHS complied ) and certified by Underwriters Laboratories Inc. SIIL ‘s Central lab at Silvassa is a GoI approved R & A ; D research lab. The company has besides won legion awards for safety and environment.

    Sterlite develops and manages a diverse portfolio of excavation and metals concerns to supply attractive returns to its stockholders whilst transporting out its activities in a socially and environmentally responsible mode and making value for the communities where it operates. As one of the largest metals and mining groups in India, Sterlite remains continually committed to pull offing its concern in a socially responsible mode. The direction of environment, employees, wellness and safety and community issues, in regard of its operations is cardinal to the success of company ‘s concern.

    History OF COMPANY

    1986-Sterlite Cables Limited, acquires the Shamsher Sterling Corporation, changes the name to Sterlite Industries ( India ) Limited.

    1988-Sterlite Industries makes an initial public offering of its portions on the Indian stock exchange.

    1991-Sterlite Industries establishes India ‘s first uninterrupted Cu rod works.

    1997-Commissions foremost in private developed Cu smelter in India at Tuticorin in Tamil Nadu.

    1999 -Acquires Copper Mines of Tasmania Pty Ltd.

    -Acquires Thalanga Copper Mines Pty Ltd.

    2005-Expansion of Tuticorin Smelter to 300,000 TPA and Successful ramp up of ISA furnace in a record period of 45 yearss.

    2006-Expansion on Tuticorin smelter to 400 KTPA through advanced debottlenecking.

    2007-Sterlite Industries primary naming on NYSE in June 2007

    VISION & A ; MISSION

    Vision 2015

    To be the universe ‘s prima Cu manufacturer presenting sustainable value to all stakeholders by leveraging engineering and best patterns.

    Mission

    To construct a cognition and procedure driven organisation through TPM

    To make sustainable value through safe, clean and green procedures

    To prolong leading place in domestic and planetary market through market development and client delectation.

    To be the best and most respectable corporate citizen

    To leverage engineering to its full potency across the concern rhythm

    To tackle the profitable and turning CCR/value added merchandise from 240KMT to 600 KMT per annum.

    To accomplish Zero cost and beyond

    To procure natural stuff through long term contracts and confined mines

    AWARDS & A ; RECOGNITIONS

    2009

    “ International Star Award for Quality 2009 ” under Gold class from Business Initiatives Directions, SPAIN. The award will be given to us during 34th International Star for Quality Convention to be held at Geneva during Oct 25-26, 2009.

    Sterlite Manufacturing locations and its Data Center achieves ISO 27001 Certification.

    2008

    CII, Energy Efficient Unit, 2008

    Government of India, National degree award for Export public presentation for 2006-07

    CII – Water Efficient Unit Award, Excellent Water Efficient unit, 2008

    Indian National Suggestion Scheme Association- 10th National Suggestion Summit – I prize in Technical

    Ramkrishna Bajaj National Quality Award, Performance Excellence Trophy, 2008

    Golden Peacock Award for the Environment Management

    OPERATING AND CASH CYCLE

    Operating rhythm and hard currency rhythm are two of import constituents of working capital direction. Together they determine the efficiency of a house sing working capital direction.

    OPERATING Cycle

    Operating rhythm refers to the hold between the purchasing of natural stuffs and the reception of hard currency from gross revenues returns. In other words, runing rhythm refers to the figure of yearss taken for the transition of hard currency to stock list through the transition of histories receivable to hard currency. It indicates towards the clip period for which hard currency is engaged in stock list and histories receivable. If an operating rhythm is long, so there is lower handiness to hard currency for fulfilling liabilities for the short term.

    Operating rhythm takes into consideration the undermentioned elements: histories collectible, hard currency, histories receivable, and stock list replacing.

    Operating rhythm is of two types:

    Gross operating rhythm

    Net operating rhythm

    Gross Operating Cycle

    GOC = RMCP+WICP+FCP+DCP

    RMCP = RAW MATERIAL CONVERSION PERIOD

    = AVERAGE STOCK OF RAW MAERIAL / RAW MATERIAL CONSUMPTION

    WICP = WORK IN PROGRESS CONVERSION Time period

    =AVERAGE STOCK OF WORK IN PROGRESS / TOTAL PRODUCTION COST

    FCP = FINISHED GOODS CONVERSION PERIOD

    =AVERAGE STOCK OF FINISHED GOODS / TOTAL SALES

    DCP = DEBTOR ‘S CONVERSION Time period

    =AVERAGE ACCOUNTS RECEIVABLE / NET CREDIT SALES

    Net OPERATING CYCLE ( NOC )

    NOC = GOC – CCP

    CCP = CREDITOR ‘S CONVERSION Time period

    OR PDP = PAYABLE DERERAL PERIOD

    =AVERAGE PAYABLE / NET CREDIT PURCHASES

    CASH CYCLE

    Cash rhythm is besides termed as net operating rhythm, plus transition rhythm, working capital rhythm or hard currency transition rhythm.

    Cash rhythm is implemented in the fiscal appraisal of a commercial endeavor. The more the figure is increased, the higher is the period for which the hard currency of a commercial entity is engaged in commercial activities and is unaccessible for other maps, for case investings. The hard currency rhythm is interpreted as the figure of yearss between the payment for inputs and acquiring hard currency by gross revenues of trade goods manufactured from that input.

    The cardinal expression that is applied for the computation of hard currency transition rhythm is as follows:

    Cash rhythm = ( Average Stockholding Period ) + ( Average Receivables Processing Period ) – ( Average Payables Processing Period )

    Here

    Average Receivables Processing Period ( in yearss ) = Histories Receivable/Average Daily Credit Gross saless

    Average Stockholding Time period ( in yearss ) = Closing Stock/Average Daily Purchases

    Average Collectible Processing Period ( in yearss ) = Histories Payable/Average Daily Credit Purchases

    A short hard currency rhythm reflects sound direction of working capital. On the other manus, a long hard currency rhythm denotes that capital is occupied when the commercial entity is anticipating its clients to do payments.

    There is ever a chance that a commercial endeavor can confront negative hard currency transition rhythm, in which instance they are acquiring payments from the clients before any payment is made to the providers. Cases of such concern entities are normally those companies, which apply JIT or Just in Time techniques. The more the fabrication process is extended, the higher the sum of hard currency should be kept engaged in stock lists by the company. Likewise, the more clip is taken for the clients for the intent of measure payment, the more is the histories receivable sum. From another point of view, if a company is able to confine the payment for its internal inputs, it can diminish the sum of money required. Put otherwise, the net on the job capital is diminished by histories collectible.

    Analysis

    Working Capital refers to that of house ‘s capital which is required for financing the short term or current assets such as hard currency, debitors, stock list. Fundss, therefore, invested in current assets keep go arounding fast and are being invariably covered into hard currency and this flows out once more in exchange for other current assets. The mean length of clip between when a company purchases points for stock list and when it receives payment for sale of the points. A long operating rhythm tends to harm profitableness by increasing adoption demands and involvement disbursal.

    In instance of STERLITE INDUSTRIES, the Gross Operating Cycle was high in 2005 i.e. it was 72 yearss but in 2006 72 yearss than 79 in 2007 and increase to 81 yearss in 2008 but eventually in 2009 it is 48 yearss which is rather low from ab initio in 2005. This is positive mark as the length of Operating Cycle is diminishing and it is eventually reduced to 48 yearss that means the money is collected easy from debitors within the period of 48 yearss.

    For CASH CYCLE besides the length is reduced in 2009 to 24 yearss from 62 yearss in 2008, 56 yearss in 2007, 37 yearss in 2006 and 36 yearss in 2005. The mean clip taken by a STERLITE INDUSTRIES in change overing ware or natural stuff back into hard currency starts worsening in 2009 which is good index and it means that it is following good recognition policy. A short hard currency rhythm reflects sound direction of working capital. On the other manus, a long hard currency rhythm denotes that capital is occupied when the commercial entity is anticipating its clients to do payments.

    BIBLIOGRAPHY & A ; REFERENCE

    hypertext transfer protocol: //www.moneycontrol.com/company-article/sterliteindustriesindia/news/SII

    hypertext transfer protocol: //www.sterlite-industries.com/about_us/Company_Overview.aspx

    www.business-standard.com/stockpage/stock_details.php? Bachelor of Science

    hypertext transfer protocol: //www.business-standard.com/pdf/sterlite % 20industries-ic-070809.pdf

    hypertext transfer protocol: //finance.mapsofworld.com/corporate-finance/management/operating-cycle-and-cash-cycle.html

    hypertext transfer protocol: //financial-dictionary.thefreedictionary.com/operating+cycle

    Reading:

    Pandey I.M. , Financial Management ; Vikas Publishing House Pvt. Ltd.

    Chandra Prasanna ; Financial Management: Theory and Practice ; Tata Mc

    Graw Hill.

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