Working capital management

WORKING CAPITAL MANAGEMENT

ASIAN PAINTS LIMITED

BY-Gopal Kumar

13DM041

IMIS,Bhubaneswar

Asian Paints Limited is an Indian chemicals company headquartered in Mumbai, India. Asian Paints Ltd is India's largest paint company and Asia's third largest paint company with a turnover of Rs 96.32 billion. Operations in 22 countries .

http://en.wikipedia.org/wiki/Chemical

http://en.wikipedia.org/wiki/Mumbai

As we see in above graph that current asset & current liability has an increasing trend. Which shows that company’s current ratio is increasing. Company should aim to keep the current ratio minimum of 0.6:1,for an uninterrupted production. Above graph also depicts that the company’s liquidity position is good due to its increasing current ratio

Mar '13 Mar '12 Mar '11 Mar '10 Mar '09

Total Current Assets

3,563.15

2,937.79

1,994.24

1,591.29

1,547.71

Current Liabilities

2,466.85

2,262.21

1,759.27

1,469.08

1,105.72

WC1,096.3

0 675.58 234.97 122.21 441.99

The working capital first decreased in the FY 09-10 then there has been an increasing trend in working capital with the increasing trend in sales. Which shows that company is good position.

Return On Assets=Net Earning/Total Assets

LIQUIDITY RATIOS:-QUICK RATIOS=(Cash & Equivalent+Short Term Investment+Account Recivables)/CL

QUICK RATIO Mar

'13

QUICK RATIO Mar

'12

QUICK RATIO Mar

'11

QUICK RATIO Mar

'10

QUICK RATIO Mar

'09

Se-ries1

0.816239333563046

0.748666127371022

0.915584304853718

0.857352901135405

0.775205296096661

0.05

0.15

0.25

0.35

0.45

0.55

0.65

0.75

0.85

0.95

Quick Ratio

Axis Title

Cash Ratio=Cash & Equivalent/CL

Cash Ratio Mar

'13

Cash Ratio Mar

'12

Cash Ratio Mar

'11

Cash Ratio Mar

'10

Cash Ratio Mar

'09

Se-ries1

0.42 0.40 0.58 0.49 0.26

0.05

0.15

0.25

0.35

0.45

0.55

0.65

0.42 0.40

0.58

0.49

0.26

Cash Ratio

Axis Title

Current Ratio=CA/CL

Though the company’s sales has shown an increasing trend . There is a fall in liquidity position . Which shows that company is able to manage its day to day activities with less cash balance . Which of course can be taken as company has a goodwill in the market

Current Ratio Mar

'13

Current Ratio Mar

'12

Current Ratio Mar

'11

Current Ratio Mar

'10

Current Ratio Mar

'09

Se-ries1

1.4444129152563

1.29863717338355

1.13356107931131

1.08318811773355

1.39973049234888

0.10

0.50

0.90

1.30

Current Ratio

Axis Title

PROFITABILITY RATIO:Return On Assets=Net Earning/Total Assets

The return on asset has first shown an increasing trend 2009-2010,then it has shown an decreasing trend

Return On Assets Mar

'13


'12


'11


'10


'09

Se-ries1

NaN NaN NaN NaN NaN

Se-ries2

0.30653075035953

0.316847974567221

0.348195907853618

0.435151407739985

0.265823426529112

0.0250.0750.1250.1750.2250.2750.3250.3750.4250.475

Return On Assets

Axis Title

Return On Equity=Net Earning/Owner's Equity

Return On Equity Mar

'13


'12


'11


'10


'09

Series1 12.0884070058382

10.6399082568807

9.18838615512927

9.21507506255213

4.37322768974145

1.00

3.00

5.00

7.00

9.00

11.00

13.00

Return On Equity

Axis Title

The return on equity has shown an increasing trend which shows that the company is in good position.

Gross Margin=(Sales-COGS)/Sales

Gross Margin Mar '13





Series1 0.134523752226019

0.133799902020576

0.1436369796987 0.160325734775283

0.124227087017501

0.01

0.03

0.05

0.07

0.09

0.11

0.13

0.15

0.17

Gross Margin

Return On Sales=Net Earning/Sales

Return On Sales Mar '13





Series1 0.101468844482754

0.102036572319813

0.110196161295122

0.127285687542301

0.073084595750612

0.01

0.03

0.05

0.07

0.09

0.11

0.13

Return On Sales

The overall profitability position of th company is good with a increasing sales and is able to manage the company with less working capital

AGGRESSIVE

Advantages: i) Less chance of bad debts ii) Recover money more quickly and thereby reducing the Cash Conversion Cycle.

Disadvantages: i) Customers may object and the firm may lose sales/customers ii) Expensive Strategy as we have to call customers again and again or send them letters several times.

CONCLUSION

As per the study of different ratios .we can conclude that Asian paints is a profit making company with a very less working capital . Though the company sales is increasing , the company is able to manage its day to day activities with less working capital which shows that the company is able to purchase its raw material in credit . This shows that company has built its good goodwill in the market.

THANK YOU

Business

Working capital management