SCHOOL OF MANAGEMENTRESEARCH PROJECT

(MBA IVth Semester)

WORKING CAPITAL MANAGEMENT OF

ICICI PRUDENTIAL LIFE INSURANCE

This Research Project is submitted for the partial fulfillment of MBA at

School of Management.

Project Guide: Submitted By:

Ruchi Sagar Aruna Bhatti

(2011PGMB015)

SCHOOL OF MANAGEMENT

BAHRA UNIVERSITY

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CERTIFICATE OF COMPLETION

This is to certify that Ms. Aruna Bhatti, a

student of Master of Business Administration, Bahra

University, has worked under my Supervision to complete

his Project Report Working Capital Management Of ICICI

Prudential Life Insurance.

The work done is original and outcome of his

sincere efforts and University is satisfied with the work done

by him and recommend the same to be forward for

evaluation.

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Declaration

I hereby declare that the final Project Report “Working Capital Management Of

ICICI Prudential Life Insurance” submitted in partial fulfillment of the award for the

degree of Master of Business Administration (MBA) to Bahra University, is one of my original work and

not submitted to any other Degree/Diploma, fellowship or other similar title.

Name:- Aruna Bhatti

Univ. Roll:- 2011PGMB015

Date:-

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Acknowledgement

With immense gratitude I acknowledge all those, whose guidance & encouragement served

as a platform to stand firmly and complete the project successfully. On such an occasion, I would like to

thank all the people who helped me reach this milestone with relative ease.

I express my sincere thanks to my project guide Miss Ruchi Sagar for her wholehearted

support, inspiring guidance and encouragement throughout the project work.

I express my sincere thanks to my faculty guide, Mr. Karan Gupta for his guidance, moral

support and continuous encouragement throughout the project.

I also thank Faculty of School Of Management (Bahra University) for their guidance,

support and understanding. Finally I thank all my friends for their indirect support in completing this

project.

Aruna Bhatti

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CONTENTS

PART- A

1. INTRODUCTION. 2. OBJECTIVES AND SCOPE. 3. METHODOLOGY.

PART- B

4. PROFILE OF THE COMPANY. 5. THEORETICAL PROSPECTIVE.

PART- C6. ANALYSIS OF COMPANY.

PART- D

7. FINDINGS AND CONCLUSIONS.8. RECOMMENDATIONS.

PART- E

9. LIMITATION

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10. REFRENCES

I NTRODUCTION

1.1RELVANCE OF THE STUDY: -

Change is a global law of nature. The global economy is changing very fast and we in India

are part of it. Indian economy has witnessed a vast change during the last decade and

present decade. Since independence a wall was built around economy to protest the Indian

companies. This wall was continued to exist till 1991. The new economic policy which came

into force in the year of 1991 change of the whole scenario. The days of license and permit

are gone. The blanket of protectisum is no more. The Indian companies have already their

tails on fire. The foreign tigers are already trooping in to Indian market and the battle of

royal are already began in the field of business. Competition already increases its hand by

manifold due to liberalization and globalization of economy. The slogan ‘liberalize perish’ is

the buzzword of the presents days.

The importance of the working capital management for any kind of business can be very well

known from the following in view of the changing of business.

In the resent business working capital management covers following areas.

1. Management of Cash .

2. Inventory Management

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3. Management of Receivables.

4. Cash Flow management.

OBJECTIVES OF THE STUDY: -

1.) Identify the trends for last five years.

2.) To know the ability of the ICICI PRUDENTIAL to meet its current liabilities.

3.) To determine the working capital position of the Company.

4.) To know the efficiency with which the organization is utilizing its various assets in generating

sale revenue.

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SCOPE OF THE STUDY: -

1.) AREA COVERED: -

It covers the financial function of ICICI PRUDENTIAL

2.) PERIOD COVERED: -

The study covered 5 years from 2008 to 2012 to have a comprehensive picture.

3.) It helps to understand present position.

METHODOLOGY

A.) RESEARCH DESIGN: -

The study was descriptive in nature, in that an attempt was made to

evaluate the performance of the Company.

B.) SOURCE OF DATA: -

Only secondary data has been collected for the purpose of the study.

The secondary data analyst to extract of financial statement from the company records to a

possible extent for the period of 5 years starting from 2008 to 2011-12.

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C.) Ratio analysis is used for data analysis and interpretation

COMPANY PROFILE

ICICI Prudential Life Insurance

ICICI Prudential Life Insurance is a joint venture between the ICICI Group and Prudential plc, of

the UK. ICICI started off its operations in 1955 with providing finance for industrial development,

and since then it has diversified into housing finance, consumer finance, mutual funds to being a

Virtual Universal Bank and its latest venture Life Insurance. ICICI Prudential Life Insurance

Company Limited was incorporated on July 20, 2000. The authorized capital of the company is

Rs.2300 Million and the paid up capital is Rs. 1500 Million. The Company is a joint venture of ICICI

(74%) and prudential plc UK (26%).

The Company was granted Certificate of Registration for carrying out Life Insurance business, by

the Insurance Regulatory and Development Authority on November 24, 2000. It commenced

commercial operations on December 19, 2000, becoming one of the first few private sector

players to enter the liberalized arena. 

The Company is now operational in Mumbai, New Delhi, Pune, Chennai, Kolkata, Bangalore,

Chandigarh, Ahmedabad, Hyderabad, Lucknow, Nasik, Jaipur, Cochin, Meerut, Mangalore and

Ludhiana.

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Till March 31,2002 the Company has issued 100,000 polices translating into a Premium Income of

around Rs. 1,200 Million and a sum assured of over Rs.15,000 Million. 

The Company recognizes that the driving force for gaining sustainable competitive advantage in

this business is superior customer experience and investment behind the brand. The Company

aims to achieve this by striving to provide world class service levels through constant innovation

in products, distribution channels and technology based delivery. The Company has already taken

significant steps to achieve this goal..

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Sponsors

ICICI Ltd was established in 1955 by the World Bank, the Government of India and the Indian

Industry, to promote industrial development of India by providing project and corporate finance

to Indian industry.

Since inception, ICICI has grown from a development bank to a financial conglomerate and has

become one of the largest public financial institutions in India. ICICI has financed all major sectors

of the economy, covering 6,848 companies and 16,851 projects. In the fiscal year 2000-2001, ICICI

had disbursed a total of Rs 319.65 billion.

ICICI has now developed a whole range of activities to become a Universal Bank. Some of ICICI's

spectrum of activities include: 

* Commercial Banking - ICICI Bank, India's first internet bank. 

* Information Technology - ICICI Infotech, transaction processing, software development 

* Investment Banking - ICICI Securities, one of the key players in the Indian Capital Markets 

* Mutual Fund - Prudential ICICI AMC, leading private sector mutual fund player in India 

* Venture Capital - ICICI Venture, leading private equity investor with focus on IT and HealthCare 

* Retail Services - ICICI PFS, Marketing and Distribution of Retail Asset Products 

* Distribution - ICICI Capital, Distribution and Servicing of Retail Liability Products 

ICICI is listed on the Indian Stock Exchanges and on the New York Stock Exchange (NYSE). On

September 22, 1999, it became the first Indian company to be listed on the NYSE (symbol: IC and

IC.D). This has been followed by the listing of ICICI Bank on NYSE (symbol: IBN) on March 28,

2000.

Prudential plc:  

Prudential plc was founded in 1848. Since then it has grown to become one of the largest

providers of a wide range of savings products for the individual including life insurance, pensions,

annuities, unit trusts and personal banking. It has a presence in over 15 countries, and caters to

the financial needs of over 10 million customers. It manages assets of over US$ 259 billion

(Rupees 11,39,600 crores approx.) as of December 31, 1999. Prudential plc. has had its presence

in Asia for the past 75 years catering to over 1 million customers across 11 Asian countries. 

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Prudential is the largest life insurance company in the United Kingdom (Source : S&P's UK Life

Financial Digest, 1998). Asia has always been an important region for Prudential and it has had a

presence in Asia for over 75 years. In fact Prudential's first overseas operation was in India, way

back in 1923 to establish Life and General Branch agencies.

ICICI and Prudential came together in 1993 to provide mutual fund products in India and today

are the largest private sector mutual fund company in India. The two companies bring together

two of the strongest financial service brands in Asia known for their professionalism, excellent

quality of service and long term commitment to YOU. 

Management

The ICICI Prudential Life Insurance Company Limited Management team comprises reputed

people from the finance industry both from India and abroad.

Ms Shikha Sharma, Managing Director & CEO 

Mr N. S. Kannan, Executive Director 

Mr Bhargav Dasgupta, Executive Director 

Ms Anita Pai, EVP – Customer Service & Technology

Mr Azim Mithani, Chief Actuary 

Mr Puneet Nanda, Chief Investments Officer 

Mr Binayak Dutta, Chief – Sales and distribution

Mr. Puneet Nanda Chief Investment OfficerICICI PrudentialLife Insurance Company Limited

Products Offered by ICICI Prudential Life Insurance 12

Endowment Plans

ICICI Pru Save n Protect

ICICI Pru Assure Invest

Money Back Policy Plan

ICICI Pru Cashbak (Anticipated Endowment Assurance)

Retirement Plans

ICICI Pru Forever Life

ICICI Pru Reassure

ICICI Pru ForeverLife (Deferred Pension)

ICICI Pru LifeLink pension plan

ICICI Pru Lifetime

Children's Plan

ICICI Smart Kid PLan

Term Plan

Protection Plan

ICICI Pru LifeGuard Single Premium

LifeGuard Level Term Assurance with Return of Premium

ICICI Pru LifeGuard Level Term Assurance

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THEORETICAL PROSPECTIVE

Capital required for a business can be classified under two main categories

1. Fixed Capital.

2. Working Capital.

Every business needs funds for two purposes-for its establishment and to carry out its day-

to-day operations. Long term funds are required to create production facilities through purchase

of fixed assets such as plant and machinery, land ,building ,furniture, etc. Investments in these

assets represents that part of firm’s capital which is blocked on a permanent or fixed basis and is

called fixed capital. Funds are also needed for short term purposes for the purchases of raw

materials, payment of wages and other day-to-day expenses, etc. These funds are known as

working capital. In simple words working capital refers to that part of the firm’s capital which is

required for financing short term or current assets such as cash, marketable securities ,debtors

and inventories. Funds , thus ,invested in current assets keep revolving fast and are being

constantly converted into cash and this cash flow out again in exchange for other current assets.

Hence, it is also known as revolving or circulating capital or short – term capital.

In the words of Shubin, “Working capital is the amount of funds necessary to cover the cost of

operating enterprise.”

According to Genestenberg, “Circulating capital means current assets of a company that are

changed in the ordinary course of business from one to another, as for example , from cash to

inventories, inventories to receivables, receivables to cash.”

Concepts of working Capital :-

There are two concepts of working capital:

1. Balance Sheet Concept.

2. Operating Cycle or Circular Flow Concept.

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(1)Balance Sheet Concept:

There are two interpretations of working capital under the balance sheet concept:

(i) Gross Working Capital.

(ii) Net Working Capital.

In the broad sense, the term working capital refers to the gross working capital and represents the

amount of funds invested in current assets. Thus the gross working capital is the capital invested in

the total current assets of the enterprises. Current assets are those assets which in the ordinary

course of business can be converted into cash within a short period of normally one accounting

year. Examples of current assets are:

Constituents of current Assets

1 Cash in hand and bank balances.

2 Bills receivables.

3 Sundry debtors (less provision for bad debts).

4 Short-term loans and advances.

5 Inventories of stocks, as :

(a) Raw materials.

(b) Work – in – progress.

(c) Stores and spares.

(d) finished goods.

6 Temporary Investments of surplus funds.

7 Prepaid expense.

8 Accrued incomes.

In a narrow sense, the term working capital refers to the net working capital.

Net working capital is the excess of current assets over current liabilities, or say:

Net Working Capital = Current Assets - Current Liabilities

Net working capital may be positive or may be positive or negative. When the current assets

exceeds current liabilities the working capital is positive and the negative working capital results

when the current liabilities are more than the current assets .Current liabilities are those liabilities

which are intended to be paid in the ordinary course of business within a short period of normally

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one accounting year out of the current assets or the income of the business. Examples of current

liabilities are :

Constituents of current Assets

1 Outstanding Expenses.

2 Bills Payable.

3 Sundry Creditors or Accounts Payable

4 Short-term loans and advances.

5 Dividends Payables

6 Bank Overdraft

7 Provision for Taxation, if it does not amount to appropriation of

profit

The gross working capital concept is financial or going concern concept whereas net working

capital is an accounting concept. These two concepts of working capital are not exclusive, rather

both have their own merits. The gross concept is sometimes preferred to the net concept of

Working Capital for the following reasons:

(1) It enables the enterprise to provide correct amount of Working Capital at the right

time.

(2) Every management is more interested in the total current assets with which it has to

operate than the source from where it is made available.

(3) The gross concept takes into consideration the fact that every increase in the funds of the

enterprise would increase its Working Capital.

(4) The gross concept of Working Capital is more useful in determining the rate of return on

investments in Working Capital.

The net working capital concept, however, is also important for the following reasons:

(1) It is qualitative concept which indicates the firm’s ability to meet its operating expenses

and short term liabilities.

(2) It indicates the margin of protection available to the short term creditors, i.e., the excess

of current assets over current liabilities.

(3) It is an indicator of the financial soundness of an enterprise.16

(4) It suggests the need for financing a part of the working capital requirements out of

sources of funds.

To conclude, it may be said that ,both , gross and net ,concepts of working capital are

important aspects of working capital management. The net concept of working capital may

be suitable for proprietory form orgainsations such as sole-trader or partnership firms. But

the gross concept of working capital is very suitable to the company form of organization

where there is a divorce between ownership, management and control.

However , it may be clear that as per the general practice, net working capital is referred to

simply as working capital.

Classification Or Kinds of Working Capital

(1) Permanent or Fixed working capital:

Kinds of working capital

On the basis of concept

On the basis of Time

Gross working capital

Net working capital

Permanent working capital

Temporary or Variable

working capital

Regular working capital

Reserve working capital

Seasonal working capital

Special working capital

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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 which is continuously required

by the enterprise to carry out its normal business operations. For example, every firm has

to maintain a minimum level of raw material, work in progress, finished goods and cash

balance. This minimum level of current assets is called permanent or fixed working capital

as this part of capital as this part of capital is permanently blocked in current assets .As the

business grows, the requirements of permanent working capital also increases due to the

increase in the current assets .The permanent working capital can further be classified as

regular working capital and reserve working capital required to ensure circulation of

current assets from cash to inventories, from inventories to receivable and from

receivables to cash and so on. Reserve working capital is the excess amount over the

requirement for regular working capital which may be provided for contingencies that may

arise at unstated periods such as strikes, rise in price, depression, etc.

2). Temporary or Variable Working Capital:

Temporary or variable working capital is the amount of working capital which is

required to meet the seasonal demands and some special exigencies. Variable working

capital can be further classified as seasonal working capital and special working capital.

Most of the enterprises have to provide additional working capital to meet the seasonal

and special needs. The capital required to meet the seasonal needs of the enterprise is

called seasonal working capital. Special working capital is that part of working capital

which is required to meet special exigencies such as launching of extensive marketing

campaigns for conducting research ,etc.

Temporary working capital differs from permanent working capital in the sense

that it is required for short periods and cannot be permanently employed gainfully in the

business. Figures given below show the difference between permanent and temporary

working capital.

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Importance or advantages of adequate working capital :-

Working capital is the life blood and nerve centre of a business. Just as

circulation of blood is essential in the human body for maintaining life, working capital is very

essential to maintaiSn the smooth running of a business. No business can run successfully

without an adequate amount of working capital. The main advantages of maintaining adequate

amount of working capital are as follows:

(1) Solvency of the business : Adequate working capital helps in maintaining solvency of

the business by providing uninterrupted flow production.

(1) Goodwill: Sufficient working capital enables a business concern to make prompt

payments and hence helps in creating and maintaining goodwill.

(2) Easy loans : A concern having adequate working capital, high solvency and good credit

standing can arrange loans from banks and others on easy and favourable terms.

(3)Cash discounts : Adequate working capital also enables a concern to avail cash discount

on the purchases and hences it reduces costs.

(4)Regular payment of salaries , wages and other day-to-day commitments: A company

which has ample working capital can make regular payment of salaries, wages and other

day-to-day commitments which raises the morale of its employees, increase their

efficiency , reduces wastages and costs and enhances production and profits.

(5)Regular Supply of raw materials: - Sufficient working capital ensure regular supply of

raw material and continuous production.

(6)Exploitation of Favorable market conditions: Only concern with adequate working

capital can exploit favorable market conditions such as purchasing is requirements in

bulk when the price are lower and by holding its inventories for higher prices.

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(7) Ability to face crisis: Adequate working capital enables a concern to face business crisis

in emergencies such as depression because during such periods, generally, there is much

pressure on working capital.

(8) Quick and regular return on investment: Every investor wants a quick and

regular return on his investment .Sufficiency of working capital enables a concern to pay

quick and regular dividends to its investors as there may not be much pressure to plough

back profits.

(9) High morale: Adequacy of working capital creates an environment of security,

confidence, high morale and creates overall efficiency in business.

Excess or inadequate working capital :-

Every business concern should have adequate working capital to run its

business operations. It should have neither redundant or excess working capital nor

inadequate or shortage of working capital. Both excess as well as short working capital

positions are bad for any business. However, out of the two, it is the inadequacy of working

capital which is more dangerous from the point of view of firm.

Disadvantages of redundant or excessive working capital :-

(1) Excessive working capital means idle funds which earn no profits for the business and

hence business cannot earn a proper rate or return on its investments.

(2) When there is a redundant working capital, it may lead to unnecessary purchasing and

accumulation of inventories causing more chances of theft, waste and losses.

(3) Excessive working capital implies excessive debtors and defective credit policy which

may cause higher incidence of bad debts.

(4) It may result into overall inefficiency in the organization.

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(5) When there is excessive working capital, relations with banks and other financial

institutions may not be maintained.

(6) Due to low rate of return on investment, the value of shares may also fall.

(7) The redundant working capital gives rise to speculative transactions.

Disadvantages or Dangers of inadequate working capital:-

(1)A concern which has inadequate working capital cannot pay its short-term liabilities in

time. Thus, it will lose its reputation and shall not be able to get good credit facilities.

(2)It cannot buy its requirements in bulk and cannot avail of discounts, etc.

(3)It becomes difficult for the firm to exploit favorable market conditions and undertake

profitable projects due to lack of working capital.

(4)The firm cannot pay day to day expenses of its operations and it creates inefficiencies,

increases costs and reduces the profits of the business.

(5)It becomes impossible to utilize efficiently the fixed assets due to non availability of liquid

funds.

(6)The rate of return on investments also falls with the shortage of working capital.

Factors Determining the Working Capital Requirements:-

The working capital requirement of a concern depend upon a large number of

factors such as nature and size of business, the character of their operations, the length of

operating cycle, the rate of stock turnover and the state of economic situation. It is not

possible to rank them because all such factors are of different importance and the influence

of individual factors changes for a firm over time. However the following are important

factors generally influencing the working capital requirements.

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(1) Nature Or Character Of Business :-

The working capital requirements of a firm basically depend upon the nature of its

business. Public utility undertakings like Electricity, Water Supply and Railways need very

limited working capital because they offer cash sales only and supply services, not products

and as such no funds are tied up in inventories and receivables. On the other hand trading

and financial firms require less investment in fixed assets but have to invest large amount in

current assets like inventories, receivables and cash; as such they need large amount of

working capital. The manufacturing undertakings also require sizable working capital

alongwith fixed investments. Generally speaking it may be said that public utility

undertakings require small amount of working capital, trading and financial firms require

relatively very large amount, whereas manufacturing undertakings require sizable working

capital between these two extremes.

(2) Size Of Business / Scale of Operations :-

The working capital requirement of a concern are directly influenced by the size of

its business which may be measured in terms of scale of operations. Greater the size of a

business unit, generally larger will be the requirements of working capital. However, in some

cases even a smaller concern may need more working capital due to high overheads charges,

inefficient use of available resources and other economic disadvantages of small size.

(3) Production policy: -

In certain industries the demand is subject to wide fluctuations due to seasonal

variations. The requirement of working capital, in such cases, depend upon the production

policy. The production could be kept either steady by accumulating inventories during slack

periods with a view to meet high demand during the peak season or the production could be

curtailed during the slack season and increased during the peak season. If the policy is to

keep production steady by accumulating inventories it will require higher working capital.

(4)Manufacturing Process / Length of 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, larger the amount of working capital required. The longer the

manufacturing time the raw materials and other supplies have to be carried for a longer

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period in the process with progressive increment of labour and services cost before the

finished product finally obtained.

(5) Seasonal variations :-

In the certain industries the raw material is not available through the whole year

they have to buy raw material in bulk during the season to ensure an uninterrupted flow and

process them during the entire yea .A huge amount is thus blocked in the form of material

inventories during such seasons , which gives rise to more working capital requirements.

(6) Working Capital Cycle :-

In a manufacturing concern, the working capital cycle start with the purchase of raw

material and end with the realization of cash from the sale of finished products. This cycle

involve purchase of raw material and stores , its conversion into stock of finished goods

through work in progress with progressive increment of labour and service cost , conversion

of finished stock into sales , debtors and receivables and ultimately realization of cash and

this cycle continue again from the cash to purchase of raw material and so on.

Debtors (Receivable

s)

Raw Materials

Cash

FinishedGoods

Work –In- Progress

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( Working Capital /Operating Cycle of a Manufacturing Concern)

The speed with which the working capital completes one cycle determines the requirements

of working capital- longer the cycle larger is the requirements of working capital.

The gross operating cycle of a firm is equal to the length of the inventories and receivables

conversion periods. Thus

Gross Operating Cycle = RMCP + WIPCP +FGCP + RCP

Where

RMCP = Raw Material Conversion Period

WIPCP = Work In Process Conversion Period

FGCP = Finished Goods Conversion Period

RCP = Receivables Conversion Period

However a firm may acquire some resources on credit and thus deffer payments for certain

period. In that case, net operating cycle period can be calculated as follows:

Further following formulas can be used to determine the conversion periods :

Average Stock Of Raw Materials

(1) Raw Material Conversion Period = _____________________________

Raw Material Consumption Per day.

Average Stock Of Work In Progress

(1) Work In Progress Conversion Period= ____________________________

Total Cost Of Production Per Day

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Net Operating Cycle Period=Gross Operating Cycle Period-Payable Deferal Period

Average Stock Of Finished Goods

(4) Finished Goods Conversion Period = _____________________________

Total Cost Of Sales Per Day

Average Accounts Receivables

(2) Receivables Conversion Period = ________________________________

Net Credit Sales Per Day

Average Payables

(5) Payables Deferral Period = __________________________

Net Credit Purchases Per Day

Factor Determining working capital Requirements

1 Nature or Character of Business.

2 Size of Business / Scale Of Operations.

3 Production Policy.

4 Manufacturing Process /Length Of Production Cycle.

5 Seasonal Variations.

6 Working Capital Cycle.

7 Rate Of Stock Turnover.

8 Credit Policy.

9 Business Cycle.

10 Rate of Growth of Business.

11 Earning Capacity and Dividend Policy.

12 Price Level Changes

13 Other Factors

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(7) Rate Of Stock Turnover: -

There is a high degree of inverse co-relationship between the quantum of working

capital and the velocity or speed with which the sales are affected. A firm having a high rate

of stock turnover will need lower amount of working capital as compared to a firm having a

low rate of turnover. For example, in case of precious stone dealers, the turnover is very

slow. They have to maintain a large variety of stocks and the movement of stocks is very

slow. Thus, the working capital requirements of such a dealer shall be higher than that of a

provision store.

(8) Credit Policy : -

The credit policy of a concern in its dealings with debtors and creditors influence

considerably the requirements of working capital. A concern that purchases its requirements

on credit and sells its products / services on cash require lesser amount of working capital.

On the other hand a concern buying its requirements for cash and allowing credit to its

customers, shall need larger amount of working capital as huge amount of funds are bound

to be tied up in debtors or bills receivables.

(9)Business cycle: -

Business cycle refers to alternate expansion and contraction in general business

activity. In a period of boom i.e. when the business is prosperous, there is a need of larger

amount of working capital due to increase in sales, rise in sales , rise in prices , optimistic

expansion of business , etc. On the contrary in the times of depression i.e. when there is a

down swing of the cycle , the business contracts, sales decline, difficulties are faced in

collections from debtors and firms may have a large amount of working capital lying idle.

(10) Rate of Growth of Business :-

The working capital requirements of a concern increase with the growth and

expansion of its activities. Although, it is difficult to determine the relationship between the

growth in the volume of business and the growth in the working capital of a business, yet it

may be concluded that for normal rate of expansion in the volume of business, we may have

retained profits to provide for more working capital but in fast growing concerns, we shall

require larger amount of working capital.

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(11) Earning Capacity and Dividend Policy: -

Some firms have more earning capacity than others due to quality of their products,

monopoly conditions, etc. Such firms with high earning capacity may generate cash profits

from operations and contribute to their working capital. The dividend policy of a concern

also influences the requirements of its working capital. A firm that maintains a steady high

rate of cash dividend irrespective of its generation of profits needs more working capital

than the firm that retains larger part of its profits and does not pay so high rate of cash

dividend.

(12) Price Level changes :-

Changes in the price level also affect the working capital requirements. Generally,

the rising prices will require the firm to maintain larger amount of working capital as more

funds will be required to maintain the same current assets. The affect of rising prices may be

different for different firms. Some firms may be affected much while others may not be

affected at all by the rise in prices.

(13) Other Factors :-

Certain other factors such as operating efficiency , management ability ,

irregularities of supply, import policy, asset structure, importance of labour, banking

facilities, etc. also influences the requirements of working capital.

Financing of Working Capital

The working capital requirements of a concern can be classified as follow:-

Permanent or Fixed working capital requirements.

Temporary or Variable working capital requirements.

In any concern, a part of working capital investment are as permanent investments

in fixed assets. This is so because there is always a minimum level of current assets which is

continuously required by the enterprises 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 asset

give rise to permanent or fixed working capital as this part of working capital is permanently

blocked in current assets.

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Similarly, some amount of working capital may be required to meet the seasonal demands

and some special exigencies such as rise in prices, strikes etc. This proportion of working

capital give rise to temporary or variable working capital which cannot be permanently

employed gainfully in business.

The fixed proportion of working capital should be generally financed from the fixed

capital resources while the temporary working capital requirements of a concern may

be met from the short term sources of capital.

The various sources for the financing of working capital are as follows:

Sources of working Capital

Sources of Working Capital

Permanent or Fixed Temporary or Variable

Shares Debentures Public DepositsPloughing back of profits.Loan from financial institution.

Commercial Banks.Indigenous Bankers.Trade CreditorsInstallment CreditAdvances Accounts Receivables.Accrued ExpensesCommercial

Papers.

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Forecast / Estimate of Working Capital Requirements:-

“Working Capital is the life blood and controlling nerve centre of a business.” No

business can be successfully run without an adequate amount of working capital. To avoid

the shortage of working capital at once, an estimate of working capital requirements should

be made in advance so that arrangements can made to procure adequate working capital.

But estimate of working capital. But estimation of requirements is not an easy task and

organization, the following factors have to be taken into consideration while making an

estimate of working capital requirements.

Factors Requiring Consideration While Estimating Working Capital:

1 Total Costs incurred on materials ,wages and overheads.

2 The length of time for which raw materials are to remain in stores

before they are issed for production.

3 The length of production cycle or work –in-process, i.e., the time

taken for conversion of raw materials into finished goods.

4 The length of sales cycle during which finished goods are to be kept

waiting to sales.

5 The average period of credit allowed to customers.

6 The amount of cash required to pay day to day expenses of the

business.

7 The average amount of cash required to make advance payments.

8 The average credit period expected to be allowed by suppliers.

9 Time lag in the payment of wages and other expenses.

29

Working Capital Management

(Cash , Receivables & Inventory Management)

MANAGEMENT OF CASH

Cash is one of the current assets of a business. It is needed at all times to keep the business

going. A business concern should always keep sufficient cash for meeting its obligations. Any

shortage of cash will hamper the operations of a concern and any excess of it will be

unproductive . Cash is most unproductive of all the assets. While fixed assets like machinery,

plant ,etc. and current assets such as inventory will help the business in increasing its

earning capacity, cash in hand will not add anything to the concern. It is in this context that

cash management has assumed much importance.

Cash Management :

The cash management has assumed importance because it is the most Significant of all

the current assets. Cash management deals with the following:-

(1) Cash inflows and outflows.

(2) Cash flows within the firm

(3) Cash balance help by the firm at a point of time.

Cash management needs strategies to deal with various facets of cash . Following are some of

its facets:-

(1)Cash Planning :-

Cash planning is a technique to plan and control the use of cash. A projected cash

flow statement may be prepared , based on present business operations and anticipated

future activities. The cash inflows from various sources may be anticipated and cash

outflows will determine the possible uses of cash.

(2) Cash Forecast and Budgeting :-

A cash budget is most important device for the control of receipt and payments of

cash . A cash budget is an estimate of cash receipts and disbursements during a future

period of time. It is analysis of flow of cash in a business over a future , short or long period

of time. It is a forecast of expected cash intake and outlay.

Both short and long term forecasts may be made with the help of following methods:

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(2)Receipt and Disbursements Method :

In this method the receipts and payments of cash are estimated. The cash receipts

may be from cash sales, collections from debtors ,sale of fixed assets, receipts of dividend

or other incomes of all the items; it is difficult to forecast sales.

Receivables Management

Meaning of Receivables ;-

Receivables represents amounts owed to the firm as a result of sales of goods or

services in the ordinary course of business. Theses are claims of the firm against its

customers and form part of its current assets. Receivables are also known as accounts

receivables , trade receivables , customer receivables or book debts. The receivables are

carried for the customers. The period of credit and extent of receivables depends upon the

credit policy followed by the firm. The purpose of maintaining or investing in receivables is

to meet competition , and to increase the sales and profits.

Costs of Maintaining Receivables

The allowing of credit to customers means giving of funds for the customer’s use.

The concern incurs the following costs on maintaining receivables.

(1)Cost of financing receivables :-

When goods and services are provided on credit concern’s capital is allowed to be

used by the customers. The receivables are financed from the funds supplied by

shareholders for long term financing and through retained earnings . The concern incurs

some cost for collecting funds which finance receivables.

(2)Cost of Collection :-

A proper collection of receivables is essential for receivables management. The

customers who do not pay the money during a stipulated credit period are sent reminders

for early payments . Some persons may have to be sent for collecting these amounts. In

some cases legal recourse may have to be taken for collecting receivables. All these costs

are known as collection costs which a concern is generally required to incur.

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(3)Bad Debts :-

Some customers may fail to pay the amounts due towards them. The amounts

which the customers fail to pay are known as bad debts. Though a concern may be able to

reduce bad debts through efficient collection machinery but one cannot altogether rule out

this cost.

FACTORS INFLUENCING THE SIZE OF RECEIVABLES

Besides sales, a number of other factors also influence the size of receivables. The

following factors directly and indirectly affect the size of receivables.

Factors influencing the size of receivables

1

Size of Credit Sales.

2

Credit Policies.

3

Terms of Trade.

4

Expansion Plans.

5

Relation with Profits.

6

Credit Collection.

7

Habits of Customers.

(1)Size of Credit Sales : -

The volume of credit sales is the first factor which increases or decreases the size of

receivables. If a concern sells only on cash basis, as then there will be no receivables. The

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higher the part of credit sales out of total sales , figures of receivables will also be more or

vice versa.

(2)Credit Policies: -

A firm with conservative credit policy will have a low size of receivables while a

firm with liberal credit policy will be increasing this figure. The vigour with which the

concern collects the receivables also affects its receivables. If collections are prompt then

even if credit is liberally extended the size of receivables will remain under control. In case

receivables remain outstanding for a longer period, there is always a possibility of bad

debts.

(3)Terms of Trade: -

The size of receivables also depends upon the term of trade. The period of credit

allowed and rates of discount given are linked with receivables. If credit period allowed is

more then receivables will also be more. Sometimes trade policies of competitors have to

be followed otherwise it becomes difficult to expand the sales. The terms once followed

cannot be changed without adversely affecting sales opportunities.

(4)Expansion Plans: -

When a concern wants to expand its activities, it will have to enter new markets. To

attract customers, it will give incentives in the form of credit facilities. The periods of credit

can be reduced when the firm is able to get permanent customers. In the early stages of

expansion more credit becomes essential and size of receivables will be more.

(5)Relation with profits: -

The credit policies is followed with a view to increase sales. When sales increase

beyond a certain level the additional costs incurred are less than the increase in revenues.

It will be beneficial to increase sales beyond a point because it will bring more profits. The

increase in profits will be followed by an increase in the size of receivables or vice – versa.

(6)Credit Collection Efforts: -

The collection of credit should be streamlined. The customers should be sent

periodical reminders if they fail to pay in time. On the other hand , if adequate attention is

not paid towards credit collection then the concern can land itself in a serious financial

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problem. An efficient credit collection machinery will reduce the size of receivables. If

these efforts are slower then outstanding amounts will be more.

(7)Habits of customers: -

The paying habits of customers also have a bearing on the size of receivables. The

customers may be in the delaying payments even though they are financially sound. The

concern should remain in touch with such customers and should make them realize the

urgency needs.

MEANING AND OBJECTIVES OF RECEIVABLES MANAGEMENT

Receivables management is the process of making decisions relating to investment

in trade debtors. Certain investment in receivables is necessary to increase the sales and

the profits of a firm. But at the same time investment in this asset involves cost

consideration also. Further is always a risk of bad debts too. Thus , the objective of

receivables management is to take a sound decision as regards investment in debtors.

DIMENSIONS OF RECEIVABLES MANAGEMENT

Receivables management involves the careful consideration of the following

aspects:

(1) Forming of Credit Policy.

(2) Executing the Credit Policy

(3) Formulating and executing collection policy.

INVENTORY MANAGEMENT

INTRODUCTION :-

Every enterprise needs inventory for smooth running of its activities. It serve as a

link between production and distribution processes. There is ,generally, a time lag between

the recognition of a need and its fulfillment . The greater the time – lag , the higher the

requirements for inventory . The unforeseen fluctuations in demand and supply of goods

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also necessitate the need for inventory. It also provides a cushion for future price

fluctuations.

The investment in inventories constitutes the most significant part of current assets /

working capital in most of the undertakings. Thus , it is very essential to have proper

control and management of inventories. The purpose of inventory management is to

ensure availability of materials in sufficient quantity as and when required and also to

minimize investment in inventories.

MEANING AND NATURE OF INVENTORIES:-

In a manufacturing concern, inventory may include raw materials, work in process

and stores, stock of finished goods.

Spares

Finished Goods

Consum-ables

Work –in-

Progress

Raw Material

Inven-tory

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Tools and Techniques of Inventory Management :-

Effective Inventory Management requires an effective control system for

inventories. A proper inventory control not only helps in solving the acute problem of

liquidity but also increase profits and causes substantial reduction in the working capital of

the concern. The following are the important tools and techniques of inventory

management and control:-

Techniques of Inventory Management

1. Determination of Stock levels.

2. Determination of Safety Stocks.

3. Selecting a proper system of ordering for inventory.

4. Determination of Economic ordering Quantity.

5. ABC Analysis.

6. VED Analysis.

7. Inventory Turnover Ratios.

8. Aging Schedule of Inventories.

9. Classification and codification of inventories.

10. Preparation of Inventory Reports.

11. Lead Time.

12. Perpetual Inventory System.

13. JIT Control System.

The analysis of working capital can be conducted through a no. of devices, such

as:-

(A) Ratio Analysis.

36

(A)The following Ratios may be calculated for this purpose :-

(1) Current Ratio.

(2) Acid Test Ratio.

(3) Absolute Liquid Ratio.

(4) Inventory Turnover Ratio.

(5) Receivables Turnover Ratio.

(6) Payable Turnover Ratio.

(7) Working Capital Turnover Ratio.

(8) Ratio of current liabilities to tangible net worth .

1.) CURRENT RATIO: -

It indicates the firm’s commitment to meet its short-term liabilities. An ideal current

ratio is 2:1. If the ratio is more the capital is unnecessary locked in current assets. It give

the solvency position of the firm. If the ratio is less than 2 it show the danger signal to the

management.

2.) QUICK RATIO : -

Quick ratio may be defined as the relationship between quick assets and current

liabilities. An asset is said to be liquid/quick if it can be converted in cash within a short

period of time without loss of value. In that sense, cash-in-hand and cash-at-bank are the

most quick assets. The ideal ratio is 1:1.

3.) SUPER QUICK RATIO : -

It includes cash-in-hand and cash-at-bank and marketable securities. The acceptable

norm of this ratio is 50% or1: 2.The ratio is the most vigorous measure of the firm

liquidity positions. However it is not widely used in practice.

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4.) WORKING CAPITAL TURNOVER RATIO:-

This ratio indicates the velocity of the utilization of net working capital. This ratio

indicates the number of times the working capital is turned over in the course of a year.

In the other words we can say this ratio indicate whether the working capital has been

effectively utilized in making sales with small amount of working capital the company

higher volume of sales indicates the operational efficiency of the company.

5.) DEBTOER TURNOVER RATIO: -

Debtor constitute an important portion of current assets. Therefore the quality of

debtors determines the liquidity of the firm. Higher turnover indicates the liquidity

position of the firm. It also indicates the generation of bad debts.

6.) DEBTORS COLLECTION PERIOD: -

The ratio indicates the debt have been collected in time it give the average collection

period. It is helpful to find out the borrowers in collecting the money in the reasonable

time. If the collection period increase it will result in greater blockage of funds in

debtors. In general the amount of receivable should not exceed 3 to 4 month credit sales

7.) CREDITORS TURNOVER RATIO: -

It is similar to Debtors turnover ratio, it indicates speed in which in which payment

credit purchase. It also gives information about how the credit limit is properly utilized.

8.) STOCK TURNOVER RATIO: -

It indicates whether the investment in inventory is efficiently or not. It is also

helpful to control the inventory with in the limit. Inventory indicates raw material, work

in progress and finished goods. It signifies the liquidity of the inventory. High turnover

indicates brick sales. It also measures to discover the possible trouble in the firm of over

stocking or over valuation.

As per general guideline: -

38

Raw material 2 to 4 month consumption should not exceed.

Work-in-progress 15 to 30 days cost of should not exceed.

Finished goods 2 to 3 month sales.

LIMITATIONS OF RATIO ANALYSIS: -

Though ratios are simple to calculate and easy to

understand, they must be use very carefully if due care is not taken they might confuse

rather than clarify the situations. Ratios never provide a definite answer to financial

problems. There is always a question of judgment as to what significance should be given to

the figures. So that one must rely upon one’s own good sense in making ratio analysis and an

analysis must use this technique keeping in mind the following shortcomings of this

technique.

1.) LIMITED USE OF A SINGLE RATIO : -

Ratio can be useful only when they are computed in

sufficient larger number. A single ratio would not be able to convey anything. At the same

time if too many ratios are calculated, they likely confuse instead of revealing any meaningful

conclusion.

2.) LACK OF ADEQUATE STANDARADS: -

There are no well accepted standards or rules of

thumb for all ratios which can be accepted as norms. It renders interpretation of the ratios

difficult.

3.) LAW OF QUALITATIVE ANALYSIS OF THE PROBLEM : -

Ratio Analysis gives only a good

basis for quantitative analysis of financial problems. But it suffers from qualitative aspects.

4.) EFFECT OF INHERENT LIMITATION OF ACCOUNTING : -

39

Because ratios are computed from

historical accounting records they press their elimination’s and weakness as accounting

records process. Ratios of the past are not necessarily true indicators of the future.

5.) ARITHMETICAL WINDOW DRESSING : -

The term window dressing means manipulation of

accounts in a way as to conceal vital fact and present financial statements in a way to show a

better position than what is actually,

On account of such situation presence of particular ratio may not be a definite indicator of

good or bad management.

6.) PAST IS NOT INDICATOR OF FUTURE : -

It is not always possible to make future estimates

on the basis of the past, as it always does not come true.

7.) EFFECT TO PERSONAL ABILITY AID BASIS TO THE ANALYST: -

Ratios are only mean of financial analysis and not an end in itself. Ratios have

to be interpreted and different people may interpret the same ratio in different ways.

8.) BACKGROUND IS OVERLOOKED : -

When inter-firm comparisons are made on the basis of

ratio analysis and differ substantial in size, age and nature of the product. Ratio analysis can

not give satisfactory results, as these factors are not considered here.

9.) NO ALLOWANCE FOR CHANGE IN PRICE LEVEL: -

While making comparisons of

ratios, no allowance for change in price is made. A change in the price level can seriously

affect the validity of comparison of ratio computed for different time periods.

10.) DIFFERENCE IN DEFINATIONS: -

Comparisons are also made difficult, due to

difference in definitions of various financial firms. The terms like gross profit, net profit,

40

operating profit etc. have no precise definition and well-accepted procedure for their

computation.

10.) LIMITED USES : -

Ratio Analysis is not a substitute for several

Judgments rather are a hopeful tool to aid in applying judgment to otherwise complex

situations. So conclusions drawn with the help of ratios shared verified with other

techniques too.

11.) NO FIXED STANDARDS : -

No fixed standards can be laid down for ideal ratios, for

example current ratio is generally considered to be ideal if current assets are twice the

current liabilities. However, in case of those conclusions, which have adequate

arrangements, it may be perfectly ideal if the current assets are equal to current liabilities.

12.) RATIO’S NO SUBSTITUTES : -

While making ratio analysis, it is merely a tool of

financial statements. Hence, ratios become useless if separated from the statement from

which they are computed.

STANDARDS OF COMPARISION: -

The ratio analysis involves comparison for a useful

interpretation of the financial statement. A single ratio does not indicate favorable or

unfavorable condition. It should be compared its standard. Standard of comparison may

consist of: -

1.) Ratios calculated from the past financial statement of same firm.

2.) Ratio developed using the Companyed performa financial statement of same firm.

3.) Ratios of some selected firm especially a most progressive and successful one at the point

of time.

4.) Ratios of the industries to which the firm belongs.

41

DATA ANALYSIS AND INTERPRATION

1. TOTAL REVENUE:- 2. NET SALESYEARS Rs. in millions2008 3,893.322009 4,365.462010 4,819.142011 5,730.202012 6,006.10

3. CURRENT ASSETS : - 4. LIQUID ASSETS: -

5. CURRENT LIABILITIES: - 6. AVERAGE INVENTORY: -

YEARS Rs in millions2008 634.962009 778.152010 836.412011 1055.022012 1146.88

7. DEBTORS: 8. NET WORKING CAPITAL: -

YEARS Rs in millions2008 3,871.962009 4,245.612010 4,777.062011 5,624.132012 5,939.12

YEARS Rs in millions2008 684.072009 730.42010 1392.712011 1328.142012 1305.48

YEARS Rs in millions2008 1,397.062009 1,461.112010 2,203.972011 2,322.822012 2290.30

YEARS Rs in millions2008 426.062009 506.6852010 569.132011 649.7252011 708.26

YEARS Rs in millions

2008 762.12009 682.962010 1367.562011 1267.82012 1143.88

YEARS Rs in millions2008 657.292009 711.452010 956.562011 1,253.052012 1,235.80

42

Data interpretation and ratio analysis: -

III. TURNOVER RATIOS: -

(1) WORKING CAPITAL TURNOVER RATIO:-

The above table indicates that the working capital turnover is showing working capital to sales. In the year 2012 there is a increase in working capital turnover, more over there is a steep decline in working capital turnover.

(3) DEBTORS TURNOVER RATIO :-

Net Sales/Average Working Capital

YearsNet sales

Working Capital

Working Capital Turnover

2008 3,871.96 671.05 5.72009 4,245.61 722.5 5.872010 4777.06 1045.03 4.52011 5,624.13 1156.415 4.82012 5,939.12 1143.42 5.16

YearsTotal sales

Average debtors

debtors turnover

2008 3,871.96 657.29 5.892009 4,245.61 684.37 6.22010 4,777.06 834.00 5.732011 5,624.13 1104.80 5.092012 5939.12 1244.42 4.78

Total Sales / Average Account Receivable

43

The above table shows that debt turnover ratio is hovering around 6.2-4 times of net sales which

is considered good but it must not be very high as this shows firms inability to sell on credit basis.

(3)AVERAGE COLLECTION PERIOD :

Average collection period of debtors is increasing year by year from 2009-10 due to increase in amount of debtors during the period.

CURRENT ASSETS TURNOVER RATIO

Number of working days/ Debtors Turnover Ratio

YearsDebtor

Turnover

No. of Working

days

Average collection

period(in days)

2008 5.89 360 612009 6.2 360 582010 5.73 360 62.82011 5.09 360 702012 4.78 360 75

Net Sales / Current Assets

YearsTotal sales

Current Assets CATR

2008 3,871.96 1397.06 2.872009 4,245.61 1461.11 2.772010 4,777.06 2203.97 2.902011 5,624.13 2322.82 2.162012 5,939.12 2290.30 2.42

44

The above table shows that current assets turnover ratio is satisfactory. Although it is fluctuating a bit but as sales are twice to current assets the situation is o.k.

(5) INVENTORY TURNOVER RIATIO:-

The above table indicates that the inventory turnover ratio is stable around 8-9 which is considered as good indicating that stocks are being turned into finished goods frequently. It is also a sign of efficient management. However inventory level should not be very low as it

can lead to idealness of assets resulting in inefficiency.

(6) INVENTORY CONVERTION PERIOD:-

Net Sales / Average Inventory

Years Total sales

Avg inventory

Inventory turnover

ratio2008 3871.96 426.06 9.092009 4245.61 506.68 8.382010 4777.06 569.13 8.392011 5624.13 649.73 8.662012 5939.12 708.26 8.39

Days in a Year / Inventory Turnover Ratio

45

The above table indicates that with decreasing in the inventory ratio the conversion of inventory is increasing it is due to high stock of inventory

(7) NET PROFIT RATIO:-

Net Profit/Net Sales * 100

Years

Days in year

Inventory Turnover ratio

Inventory conversion period

(In days) 2008 365 9.09 40.15401542009 365 8.38 43.556085922010 365 8.39 43.504171632011 365 8.66 42.1478062012 365 8.39 43.50417163

YearsNet

Profit SalesN.P.

Ratio2008 524.77 3,871.96 13.552009 626.63 4,245.61 14.752010 815.47 4,777.06 172011 1,057.45 5,624.13 18.82012 944.83 5,939.12 15.9

46

The above table indicates that the net profit has increased in almost all the years

and a sharp surge in net profit took place during 2010-11 due to decrease in operating

expenses and company also experienced increase in its sales, non operating income also

contributed towards net profit.

Altogether it was due to organizations ability to decrease its operating expenses

that led to increase in its net profits.

IV. SHORT TERM FINANCIAL POSITION OR TEST OF LIQUIDITY: -

(1) CURRENT RATIO:-

Current Assets / Current Liabilities

The above table indicates that the current ratio of the Company is good as per the standard 2:1. it is evident from current ratio that the organization can pay its current liabilities

efficiently. It is not very high which shows that debtors are under control.

(2) QUICK / ACID TEST / LIQUID RATIO:-

YearsCurrent Assets

Current Liabilities

Current Ratio

2008 1,397.06 634.96 2.2:12009 1461.11 778.15 1.88:12010 2203.97 836.41 2.63:12011 2,322.82 1,055.02 2.2:12012 2290.30 1,146.88 1.99:1

47

Liquid Assets / Current Liabilities

The above table indicates that the quick ratio is hovering around 1-1.66 which is considered to b satisfactory also the organizations debt turnover ratio is good hence its good but it must be seen that money docent remain locked in debtors as it gives a false impression of healthy

liquid assets.

Schedule Of Changes In Working Capital

YearsLiquid Assets

Current Liabilities

Liquid Ratio

2008 684.07 634.96 1.07:12009 730.4 778.15 0.94:12010 1392.71 836.41 1.66:12011 1328.14 1,055.02 1.26:12012 1305.48 1,146.88 1.14:1

48

         

Particulars 2011 2012

Effect on Working Capital

Increase Decrease

Current Assets        

Inventories 702.03 714.5 12.47  

Debtors 1253.05 1235.8   17.25

Cash & Bank Balance 75.09 69.68   5.41

Loans & Advances 292.65 270.32   22.33

Total Current Assets 2322.82 2290.3    

Current Liabilities        

Creditors 821.62 725.45 96.17  

Other Current Liabilities 100.56 85.07 15.49  

Provisions 132.84 336.34   203.5

 Total current Liabilities 1055.02 1146.88    

Net working capital 1267.8 1143.42    

Net Decrease in working capital   124.38 124.38  

Total 1267.8 1267.8    

FINDINGS AND CONCULSIONS:-

49

1. Gross sales increased by 5.7% from Rs5,624.13 million in 2010-11 to Rs. 5,939.12 million

in 2011-12.

2. Total Revenue increased(net) grew by 5.7% from Rs.5562.0 million in 2010-11 to Rs.

5877.9 million in 2011-12

3. Current ratio is satisfactory so that company is able its short term liability comfortably.

4. The overall working capital condition of the concern is satisfactory.

SUGGESTION1. Need of reducing avg collection period.2. Net profit to sales margin is of bit concern so need of paying attention is here.

50

LIMITATIONS OF STUDY: -

1.) Due to time constrain the limited data only considered for the analysis and

interpretation.

2.) We can apply only limited tools for analysis and interpretation.

3.) For the analysis and interpretation only five years data are available. On the basis of

these data we are unable to come to conclusion.

The analysis and interpretation is only on the basis of information furnished by

management. If the information was window dressing the entire result may go wrong

51

REFRENCES

Management Accounting by R.K Sharma, Shashi K. Gupta.

Financial Management by I.M. Panday

Advance Accounting by R.L. Gupta

www.iciciprulife.com Company reports and annual accounts.

www.wikipedia.com

www.investopedia.com

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