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CHAPTER 1 INDUSTRY PROFILE 1.1 Introduction Machine Tools Industry is a strategic industry forms the backbone of many if not most of the major sectors of industrial activity in a country in the traditional manufacturing context. Therefore, a country such as India which is on the threshold of becoming a major global industrial and economic power must have a strong, well-developed, robust and modern machine tool industry to support and assist its manufacturing sector. The machine tool industry in India has played and will continue to play a key role in enhancing competitiveness and enabling development of quality and excellence in the output of the manufacturing industry and of the Indian economy as a whole. In India, the machine tool industry supports the strategic development and growth of the automotive, the white and brown goods, the capital goods industries as well as strategic sectors such as defense, railways, aerospace, etc. Machine tools also contribute to the vibrancy of small and medium scale manufacturing industries, in particular, the millions of job shops in the country. In India, the Rs. 17 billion machine tool industry supports more than Rs.2,000 billion manufacturing sector in the country. The Indian machine tool industry predominantly comprises manufacturers from the small and medium-sized enterprises. There are about 150 major manufacturers in the organized sector. About three-quarters of total machine tool 1

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CHAPTER 1

INDUSTRY PROFILE

1.1 Introduction

Machine Tools Industry is a strategic industry forms the backbone of many if not most

of the major sectors of industrial activity in a country in the traditional manufacturing context.

Therefore, a country such as India which is on the threshold of becoming a major global

industrial and economic power must have a strong, well-developed, robust and modern

machine tool industry to support and assist its manufacturing sector.

The machine tool industry in India has played and will continue to play a key role in

enhancing competitiveness and enabling development of quality and excellence in the output of

the manufacturing industry and of the Indian economy as a whole. In India, the machine tool

industry supports the strategic development and growth of the automotive, the white and brown

goods, the capital goods industries as well as strategic sectors such as defense, railways,

aerospace, etc. Machine tools also contribute to the vibrancy of small and medium scale

manufacturing industries, in particular, the millions of job shops in the country.

In India, the Rs. 17 billion machine tool industry supports more than Rs.2,000 billion

manufacturing sector in the country. The Indian machine tool industry predominantly

comprises manufacturers from the small and medium-sized enterprises. There are about 150

major manufacturers in the organized sector. About three-quarters of total machine tool

production in the country comes out of ISO certified companies that are involved in

manufacturing of metalworking machine tools, manufacturing solutions, accessories, cutting

tools & tooling systems. India-wide, the sector employs 65,000 skilled unskilled persons.

Based on current trends and emerging demands, the computer numerically controlled

(CNC) segment is emerging as a key driver of growth for the machine tool industry in India.

Indian-made machine tools are currently exported to over 55 countries – major ones being

United States, Italy, Brazil, Germany, and the Middle East. Lathes and automats, presses,

Electro-discharge machines and machining centers form the bulk of export orders for Indian

manufacturers. Thus, the Indian machine tool industry has undertaken a long way in the last

Decade since liberalization and economic reforms were ushered in. Now, the industry, which

had a technology dependent status, boasts of successful products out of its own R&D efforts.

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1.2 Historical Background

Early 1950s to mid 1970s, the machine tools industry evolved under an umbrella of

protection in which the growth was based on import substitution. The Government of India set

up the Hindustan Machine Tools (HMT), which provided a nucleus for development of

technological capabilities and skills. It also spearheaded sprouting of several ancillary units in

the private sector by providing support and thus became local suppliers of components.

During the 1950s to mid-1960s, this sector bolstered in confidence and began to absorb

imported technology and manufacture machine tools to specifications given by foreign

collaborators. It also initiated developmental work directed to modifying machine tools and

developing variants of machines for which design had been acquired by the purchase of license.

The next phase of liberalization of policies of the government allowed selective imports

that made it imperative for the domestic industry to catch up with quality specifications of

imported machines, at reduced costs and to adopt best practices for reducing technology gaps.

In the 1980s, the industry developed further and was able to acquire know-how in machine tool

technology in order to reproduce and even develop new machine tools, particularly special

purpose machine tools (SPMs). The national expertise developed over the years provided the

needed human resources to initiate creative modified versions of existing machine tools

manufactured under license, thereby further paving the way towards self-reliance through

aggressive R&D in India.

These efforts resulted in the setting up of several entrepreneurial enterprises that began

manufacturing machine tools leading to increased employment opportunities for engineers and

widening the scope of indigenous R&D projects and development of enhanced technological

capabilities over the next decade. As a result of the various initiations, output of the Indian

machine tool industry, witnessed a meteoric rise from Rs. 29 million in 1970-71 to Rs. 1,185

million a decade later. And by the time of the economic liberalization in 1990-91, turnover of

the industry touched a new high of Rs. 4,135 million. Indian machine tool industry was among

the first industry sectors to be thrown open to global competition in the economic reforms of

the early Nineties. That, however, did not deter the industry, to face the onslaught challenges –

and towards this direction improved features of their machines, enhanced productivity,

increased reliability and performances, and embraced TQM practices.

1.3 Domestic Market

The Indian machine tools industry comprises of around 160 players in the organized

sector and around 400 units in the small ancillary sector. Ten major Indian companies

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constitute almost 70 per cent of the total production. The Government-owned Hindustan

Machine Tools Limited (HMT) alone accounts for nearly 32 per cent of machine tools

manufactured in India. Approximately, 75 per cent of the Indian machine tool producers are

ISO certified. While the large organized players cater to India’s heavy and medium industries,

the small-scale sector meets the demand of ancillary and other units. Many machine tool

manufacturers have also obtained CE Marking certification, in keeping with the requirements

of the European markets. The machine tools industry employs a workforce totaling 65,000

skilled and unskilled personnel. The Indian Machine Tool Manufacturers’ Association

(IMTMA) is the sole voice of the Indian machine tools industry, its membership constituting

over 90 per cent in the country.

1.4 International Trends

Given the buoyant trends in calendar year 2004, the previous worldwide slump in the

global machine tools industry appeared to be a thing of a past. The top 31machine tools

manufacturing countries recorded a turnover of US$ 45.3 billion in2004 – representing a

promising 23 percent growth by value over the previous year. Predictably, some rebounds were

more resilient than others, resulting in few surprises. While Japan increased its lead over

Germany, Taiwan edged past the United States to be among the top five machine tools

manufacturing countries. Italy and China remained in the second and third slot in the last

calendar year. Japan expanded its margin yet again to become the undisputed leader in the

global machine tools industry.

Given the swelling backlog orders for its metal-cutting machine tools, the Japanese

machine tools industry is expected to retain its leadership position. Germany likewise gained a

respectable eight per cent output, while Italy grew by a marginal two percent in 2004. At the

same time Taiwan decisively came out of a slump with a one-third gain in output, China

witnessed a robust 34% boost in its output. In growth terms India was also not far behind. The

Asian manufacturers inched their way up to a 42% share in the total turnover, while the

Europeans, led with a 45 percent share. However, this is still three percent lower than 2003.

The surge in global machine tools exports could not have been more pronounced than in 2004,

with only two countries recording a decline among 31 nations.

1.5 Import Trends

A burgeoning Indian market and a capacity-constrained Indian machine tools industry

resulted in a zoom-phase for importers. Machine tool imports rose by 47 percent to register a

total value of $1.4 billion. With this hike, imports captured nearly 75 % of the Indian market

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share. The bulk of the imports comprised metal-cutting machine tools. And within this segment

machining centers, turning centers and grinding centers formed the largest chunk of imports.

These three machine tool categories captured 40 per cent of the total machine tool imports in

2009.

1.6 Research & Development in Machine Tool Industry

The Indian machine tools are a highly innovative industry. Most of the products

manufactured are through transfer of technology from a technology leader. Usually after

absorption of technology transfer, there always exists a gap where the receiver always ends up

with less technology than the supplier has. Further, the technology leader goes on upgrading

their products and hence Indian companies need to be highly innovative, firstly, to bridge the

gap during the technology transfer and then adapting it to local conditions, tackling problems

thrown up by local materials, labor, market and environment. The role of R&D in India is

slightly different from that in a technology driven country. Its role is to solve problems that

arise in manufacturing since they cannot be solved on the shop floor and that requires special

skills embodied in the R&D department.

Today in India R&D work done by the industry is in isolation. Except for the

automotive component industry, R&D is not generally done in consultation with user sector.

This needs to be changed and more interaction is necessary with the users to bring about

innovative changes and add value to the products. The CII survey has revealed that 60 percent

of the companies have R&D departments and earmark a percentage of their sales towards

R&D. The industry spends on an average 1.9 percent of its sales on R&D, ranging from 0.2

percent to 10 percent in some cases, which is quite satisfactory when compared to the other

sectors of the capital goods industry. However, this is still not enough and more needs to be

done, especially when it comes to high speed flexible machines requiring higher capabilities.

The industry has developed very sophisticated machines thereby proving that the domestic

companies do possess the technical ability and manufacturing capability but lacks the financial

power to pursue these. Only 20 percent of the companies have technological tie-ups.

Most of the lower end machine tools manufacturers develop their own products through

in house innovation and product development. The product development capabilities of this

sector are therefore fairly high. It is also evident that more and more manufacturers are

converting their products from conventional machines to CNC. The industry should spend

more on R&D for the CNC systems and develop indigenous PC based or dedicated CNC

systems so that dependence on foreign sources for supply or servicing can be reduced.

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CHAPTER 2

COMPANY PROFILE

2. a. Background and inception of the company

ACE Designers was set up in 1979 as a machine tool designing Service Company. The

company began its foray into manufacturing of machine tools in 1982 when it was

commissioned to make a range of special purpose import substitution machine tools needed by

the I.C Engine valve industry. Three engineers, Mr.A.V.Sathe, Mr.Shrinivas G.Shirgurkar and

Mr. B. Machado promoted the company as a partnership. Together, they pooled into their new

venture a total of 35 years of machine tool experience, all of it accumulated at the central

manufacturing technology Institute, India’s premier center for manufacturing technology &

machine tool design. The trio began the venture armed with only their experience, design

boards and a few thousands Rupees in a garage.

The first product developed by Ace Designers was Auto Lathe – a multi slide automatic

production turning machine, built on the modular concept around the “component to be

machined” and supplied s a complete machining solution with custom designed work holding

and tooling. This machine became very popular with the auto components and the two- wheeler

industry & the industry leader in its class. Ace started manufacture of CNC machines in 1986

and their first CNC Chucker LC-16 was adjudged the best – designed machine at the IMTEX

86. “Today, Ace Designers are their largest manufacture of CNC Lathes in India with a market

share of 40%.” The product range consist of Slant bed CNC Lathes, CNC Chucker, a twine

spindle CNC Chucker, Auto Lathes and special turning solutions with automatic load unload

systems.

In-line with industry expectations and market trend, the company has set a target of

producing 2,300 machines for the financial year 2010-11 and 3,000 machines for the year

2011-12. In order to achieve targeted sales, the Company has planned for increase in

manpower. Efforts within the industry are now underway to improve the features of CNC

machines, and provide further value additions at lower costs, to meet specific requirements of

users. Since its inception in 1979, Ace Designers has accorded the highest priority on

appropriate, state-of-the-art technology in developing a product portfolio eminently suited for

the needs of the day and anticipating emerging trends. Ace Designers' foray into manufacturing

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took off with SPMs for the engine valve industry, followed by semi-automatic multi-slide

lathes for the automobile industry. These modular machines, known as Auto Lathes, turned out

to be the launching pad for the Company's emergence as a leading manufacturer of CNC

turning machines. In 1986, Ace launched its first CNC Chucker LC-16, adjudged as the best

designed machine introduced at the IMTEX exposition. With a range of turning machines

covering a wide spectrum of applications, Ace now plays a pivotal role in the engineering

industry, especially in the automobile component sector. This role extends far beyond just the

supply of machines to encompass comprehensive tooling solutions and application engineering,

leading to strong and enduring relationships with loyal customers. They have grown with Ace,

just as Ace has grown with them. Underlying the abiding commitment of Ace to customers is

the pursuit of excellence in a fully transparent Endeavour covering all aspects of the

Company’s operations.

2. b. Nature of Business Carried

Ace Designers Ltd is normally manufacture the machine tools and exports the products

overall their markets which are there in India and also across the world. As a result of

continuous expansion, ACE has kept looking for new markets; it began its export of Auto

Lathes with automatic load, unload systems for the bearing industry. A large number of these

machines are in use and regularly exported to Brazil, Egypt, Germany, Spain, UK and USA.

ACE has over 300 CNC Lathes working with international customers in Australia, Brazil,

China, France, Germany, Italy, Middle East, Netherlands, Russia, Thailand, Turkey and UK.

ACE exports machines and have an established distributor network in Australia, Brazil, China,

France, Germany, Italy, Netherlands, Russia, Thailand, Turkey, and UK. Efforts are on way to

set up a distributor networks in USA , South Africa, South East Asia.

2. c. Vision, mission & Quality Policy

These are the main things for the organization so that it can set definite mark for the

organization. In the corporate context, vision refers to an inspirational picture of a future that

can be created, offering clarity amidst confusion, hope against despair, and unity of purpose

amidst diversity of personal causes and mission tells about the activities which are to be good

to reach the goal.

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Vision: - A strategic vision is a road map showing the route a company intends to take in

developing and strengthening its business. It paints the picture of company’s destination and

provides a rationale for going there. The vision statement of Ace Designer Ltd is as follows:

“Large Scale Producer of World Class Machine Tools”

Mission: - The mission is an enduring statement of purpose that distinguishes one business

from other similar firms. Defines current business activities, highlighting boundaries of current

business. Present products and services, Types of customers served. Which conveys who are,

what we do, and why we are here? We will recognize our responsibilities as corporate citizens

to foster progress, to promote general welfare of the society. We will provide an environment

to our staff to grow and advance to prosperity and thus promote a sense of belonging. We will

exceed customer expectations through reliable product, on time delivery, cost effective solution

with an added assurance of prompt service.

Quality policy: - ‘It is our policy to continuously aim at satisfying our customers’ quality

expectations. Our objective is to provide the customers with a reliable product, a cost effective

solution to their needs and to deliver t to them on time with an added assurance of prompt

service. Customer delight, cost effective working, passionately ensuring quality, empowering

people, business ethics & transparency.

2. d. Products Profile

Jobber XL: - Ace Jobber Series are cost effective, fully fledged CNC machines designed

for precision and built to take advantage of CNC features like high rapid rates, cutting

parameters, constant surface speed etc., The machine elements like ball screws, bearings,

CNC systems and drives have been chosen appropriately. The machine is put together by a

dedicated team of skilled craftsmen, under expert technical guidance.

Jobber Junior: - Ace Jobber Series are cost effective, fully fledged CNC machines

designed for precision and built to take advantage of CNC features like high rapid rates, cutting

parameters, constant surface speed etc., The machine elements like ball screws, bearings, CNC

systems and drives have been chosen appropriately. The machine is put together by a dedicated

team of skilled craftsmen, under expert technical guidance.

Super Jobber: - Ace Jobber Series are cost effective, fully fledged CNC machines designed

for precision and built to take advantage of CNC features like high rapid rates, cutting

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parameters, constant surface speed etc., The machine elements like ball screws, bearings, CNC

systems and drives have been chosen appropriately. The machine is put together by a dedicated

team of skilled craftsmen, under expert technical guidance.

Dart: - Dart is a faster version in BT – 30 family with rapid traverse of 60 /48 m / min. Dart

comes with 12 tool disc type tool changer. It has got 8000 rpm direct drive as a standard. Dart

has a chip to chip time of 2.7 seconds. Optional features like higher spindle power, CTS, 16

tools ATC and APC are available.

Spark: - Spark is the smallest machine under BT – 30 series. Table size is of 500 X 330 mm.

It has 6 tools disc type tool changer. This machine is targeted mainly for educational

Institutions small entrepreneurs who are making a shift from conventional machines to CNC

machines. This is the one of the important product in this company.

DTC – 300: - DTC- 300 is the smallest drill tap center available. It has got slightly bigger

table and strokes when compared with Spark. DTC-300 comes with 12 tool disc type tool

changer. This has got higher rapid traverse of 32, 40 m/min as option with higher axes motors.

Options like APC, 16 tool disc type ATC and provision for Index table available.

DDART +: - Dart + is a bigger version of Dart with larger strokes and bigger table when

compared to Dart. (Table size is of 900 X 450 and Stroke of 600 / 450 / 350 mm). It has got a

chip to chip time of 2.9 seconds. Optional features like higher spindle power, CTS, 16 tools

ATC and APC are available. Apart from shuttle type APC rotary type APC are offered.

MCV – 300: - MCV – 300 is the smallest Vertical Machining Center available in BT – 40

ranges. Table size of 600 X 350 mm; Stroke of 350 / 300 / 300 mm. Indirect Drive 6000 rpm is

a standard feature. Rapid traverse of 32 / 32 / 30 m / min. Options such as APC, CTS Index

table interfacing etc are offered.

MCV -300 XL: - MCV – 300 XL is the faster version of MCV – 300. It has got 8000 rpm

direct drive as a standard feature. Rapid traverse is 50 / 50 / 48 m / min. Higher spindle power

of 7.5 / 5.5 Kw is a standard feature. All other options of MCV – 300 such as APC, CTS, Index

table and Rotary table interfacing are offered.

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Winner: - As the name itself says it is really a Winner. Close to 600 Winners are

successfully running continuously in different parts of the country since it was launched.

Feature wise similar to MCV – 300. Table size is of 800 X 400 mm and stroke of 500 / 400 /

350 mm. It is very ideal machine for an Entrepreneur who wants to start new business or to

upgrade from conventional machining to CNC machining.

Winner XL: - Winner XL is a faster version of Winner with higher rapid traverse of 40 m /

min on all the three axes. Spindle speed of 8000 rpm with direct drive and higher power of 7.5 /

5.5 Kw is a standard feature. Options such as CTS can be offered with direct drive.

Challenger+: - Challenger + is a model with 12 tool ATC with servo driven in the BT – 40

group which is quite popular among two wheeler component manufacturing industries. This is

the fastest machine in this range with 50 / 50 / 40 m / min rapid traverse.

2. e. Areas of Operation

Areas of operation is nothing but the company where and which type of business It

has doing. Which type of business it has and where and all the branches were present. The first

product developed by Ace Designers was Auto Lathe – a multi slide automatic production

turning machine, built on the modular concept around the “component to be machined” and

supplied s a complete machining solution with custom designed work holding and tooling. This

machine became very popular with the auto components and the two- wheeler industry & the

industry leader in its class. Ace started manufacture of CNC machines in 1986 and their first

CNC Chucker LC-16 was adjudged the best – designed machine at the IMTEX 86. “Today,

Ace Designers are their largest manufacture of CNC Lathes in India with a market share of

40%.” The product range consist of Slant bed CNC Lathes, CNC Chucker, a twine spindle

CNC Chucker, Auto Lathes and special turning solutions with automatic load unload systems.

As a result of continuous expansion, ACE has kept looking for new markets; it began its

export of Auto Lathes with automatic load, unload systems for the bearing industry. A large

number of these machines are in use and regularly exported to Brazil, Egypt, Germany, Spain,

UK and USA. ACE has over 300 CNC Lathes working with international customers in

Australia, Brazil, China, France, Germany, Italy, Middle East, Netherlands, Russia, Thailand,

Turkey,UK. ACE exports machines have an established distributor network in Australia,

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Brazil, China, France, Germany, Italy, Netherlands, Russia, Thailand, Turkey,UK. Efforts are

on way to set up a distributor networks in USA, South Africa South East Asia.

2. f. Ownership Pattern

Ownership pattern means who are all the owners of the company and if it is depend on

shareholders and other parties then it will give clear details about the investment and the

investors who invested in the company. It is help to understand whom the company belongs

and how the pattern of investment. 100% Shares are held and owned by three directors and

their family members: Mr. A.V.Sathe, Mr.S.G. Shirgurkar Mr. B. Machado Three engineers,

Mr.A.V.Sathe, Mr.Shrinivas G.Shirgurkar and Mr. B.Machado promoted the company as a

partnership. Together, they pooled into their new venture a total of 35 years of machine tool

experience, all of it accumulated at the central manufacturing technology Institute, India’s

premier center for manufacturing technology & machine tool design. The trio began the

venture armed with only their experience, design boards and a few thousands Rupees in a

garage.

2. g. Competitors Information

Competitors are almost everywhere, whether it is a business or anything else.

Competitors will give one kind of motivation to change ourselves and develop innovative

things for the business. Though Ace Designers Ltd machine tool industry is one of the leading

companies not in Karnataka, but also in India. There are many competitors for Ace Designers

Ltd they are: LMW ltd Coimbatore, Tamil Nadu. Lokesh Machines Ltd, Balanagar, Hyderabad.

Askar Micron Private Ltd, Hebbal industrial area Mysore. Bathiboi Ltd, JC Road Bangalore.

Pride Machine tools Pvt Ltd, Peenya indusrial area Bangalore. PMT Ltd, Pune. Macpower

CNC Machines Pvt Ltd, Metoda Rajkot Gujarat. Galaxy Machinery Pvt Ltd, Belgaum ,

Karnataka. Marshall Machines Pvt Ltd, Ludhiana, Punjab. Micron Machine tools Ltd, Mavdi

plot, Rajkot, Gujarat. Miven Machine tools Ltd, Hubli, Karnataka. So the competitors will

have them a lot overall market.

2. h. Infrastructure Facilities

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Infrastructure plays an important role in the organization development. Infrastructure for

any company mainly contains land and building, power supply for the repair, transportation

facility. Storage facility like warehouses and stores many other. All this play an important role

in the overall growth of the organization. Ace Designers Ltd has good infrastructure facilities

which contribute a lot in the success of the company. Infrastructure availability in particular

cover area is of 8- Acre Plot.

Technology: - Modern component production shop with CNC Lathes, Machining Centers,

Precision Grinders. Sheet metal plant with CNC bending machines, shearing machine. Design

facility equipped with CAD infrastructure –Microcadem & Pro E software. Precision testing &

quality control equipment- Laser interferometer, a Roundness Tester, Surface Tester,

Renishaw Ball bar Tester & CMM. Detailed documented manufacture testing & assembly

procedures. State of the art information technology infrastructure consisting of a companywide

LAN, ERP, CRM, Mail servers, SQL server Etc. Al the manufacturing principles & the

marketing offices across the country are networked on a VPN Trained work force with

emphasis on current processing rather than o post-production inspection. Ethical Business

Practices.

Research & Development: - The strong research and development set-up is the backbone

of the Company’s growth. The existing products are continuously improved with user feedback

and new products introduced. The Department of Scientific and Industrial Research, Ministry

of Science and Technology granted in-house R&D unit recognition since 1992. It’s a mate of

pride that ACE does not rely on any technical collaborate and all product development is

internal. The core competence of the company is in converting design concepts into working

products quickly & cost effectively.

2. i. Achievements and Award

The art of accomplishing or finishing, something fruitfully, especially by means of

exertion, skill, practice, or perseverance. Optimism is the faith that leads to achievement.

Nothing can be done without hope and confidence. The starting point of all achievement is

desire. Without continual growth and progress, such words as improvement, achievement, and

success have no meaning. For ACE fulfillment comes only from complete customer

satisfaction and from being a good corporate citizen .OUR strong adherence to the values they

cherish and their relentless pursuit of excellence helped them in receiving various awards. Over

the years, a number of awards have been be reserved on ACE for various achievements. These

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include the development of pioneering process technologies such as flow – line assembly CNC

lathes, which has enabled the company to pass on the cost benefits of mass production to

customers. The numerous accolades ACE have received only serve as reminders of the intense

efforts we have to put in to maintain our position of leadership in serving our customers and

safeguarding the interests of all stakeholders.

1979: Ace designer was set up as a machine tool designing Service Company in 1982

they took up manufacture of special machines for the I.C. Engine Valve Industry. In 1984,

“Ace Auto Lathe” - A multi slide Automatic turning machine for large Volume production is

introduced. Again in 1985, Auto Lathe is established as a production machine of choices in the

two wheeler and auto ancillary sectors. In 1986, Developed CNC machines with different

technology. They got the award in 1987, “Best small scale entrepreneur” – 1st prize National

Award, which was Presented by the President of India. Again in 1988, CNC bags the “most

innovative product” award at INTEC-88 in Coimbatore and in 1989, “Special Recognition

Award” – which was awarded by the KLN Foundation Trust. In 1990, developed an Export

model CNC Lathe. In 1991 they were 2 Plant Inaugurated. In 1992, In house R&D granted

recognition by the department of Scientific & Industrial Research.

In 1994, they established Ace Manufacturing System Ltd. To manufacture Horizontal &

Vertical Machining Centers. In 1995, “Excellence as an Entrepreneur of Karnataka” – which

was awarded by K.S.F.C. In 1996, they established Ace Multi Axes Systems Ltd. And in 1997,

they were again established Plant 3 for sheet metal facilities. In 1998 they introduced Jobber a

Cost effective full-fledged CNC Lathe for job shops at IMTEX 98. In 2000 they acquired an 8

acre plot with 2 manufacturing shops or consolidation of Facilities. In 2003, They Shifted

manufacturing facilities to the new plant. Installed Mazak pallet pool Machining center. In

2004, they Won FIE award for best design for LT-2XL CNC Lathe with sub spindle at IMTEX

04. In 2005, the got the Best supplier Award – which was awarded by Honda Motorcycle &

Scooters India Limited. In 2006, again they got the Productivity Championship Award from

IMTMA – SIEMENS in the model Manufacturing System Redesign. In 2007, “Captain of the

Industry ’’ which was award by Government of Karnataka. And in 2008, Obtained ISO

14001:2004 certifications from TUV, so Ace Designer Ltd achieves with hard efforts.

2. j. Work Flow Model

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Work Flow concepts are closely related to other concepts used to describe

organizational structure, such as silos, functions, teams, projects, policies and hierarchies. In

the 1980s, the term workflow was first used in its modern form in the software industry by

FileNet vice president David Siegel. Workflows may be viewed as one of the primitive

building block of the organizations. The company called its business process automation

software “WorkFlo”. Workflow consists of a sequence of connected steps. Which present the

operation of the company in the form of model of sheet metal cladding in machine tools &

machinery is shown in following chart.

Figure No.2.1a: Workflow Model

Type Of Raw Material

The raw material is the one of the very essential things in manufacturing

process. Without raw material the process cannot moves nicely. The main this sheet metal there

may be find as mainly in 2 types of raw materials. In this type of raw material also found

different categories of raw materials.

CRCA – Cold Rolled Closed Annealed

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Welding

Finishing

Material handling

Fixtures

Type Of Raw Material

Cutting

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In this type of material there may keeps in a particular degree called cooling storage,

and then it will goes to the final particular machines. In this process there is different processes

are coming. Namely, HR coils, Picking plant, cold rocing mill, Annealing line, skin pass,

slitting line, shearing line, finally CR sheet will come arise. There may 4 main categories in

CRCA Sheet. Generally available up to 3.15mm thickness. Commercial Quality Grade, D

Grade Quality, D.D Grade Quality, EDD Grade Quality.

HRCA – Hot Rolled Closed Annealed

In this type of material there may keeps in a particular hot degree called hot storage,

and finally it goes to the particular machines. In this process there is different process are

coming. Namely, Slabs, reheating furnace, roughing mill, stecket mill, shearing line, plates,

packing, and finally dispatch to the particular machines.

Cutting

Cutting is one of the important work flow model in sheet metal cladding. In this process

there is also some different cutting types are come arises.

Shearing: - Length of cutting can be controlled with the help of back gauge and accuracy

will be within + / - 1.0mm/meter.

Notching: - Corner profile cutting can be done with notching machine by using templates or

by marking.

Punching: - Holes and slots can be done with punching machine. Quality and accuracy of

profiles and holes with the above machines are depending on the skill manpower and

repeatability will not be assured.

CNC Laser cutting: - Available to cut up to 16.0mm thickness of ms plate and 8.0mm

thickness of SS depend on capacity. Sheet metal development drawing are made using CAD

software, transfer file to the machine to get the required profile, and an accuracy of cutting of

about +/- 0.01mm/ meter with the above machine. Continuous improvement should be there in

development in the view of decrease cutting operation as well a welding length.

Bending

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There are many types in folding or bending of sheet metal components depending upon

the capacity, quality, quantity requirement & infrastructure type of bending will be selected. As

machine tool component doesn’t have the batch quality as compared to automobile component

we have to go for V-Type punch and die technology for bending. 2 types of V-type ending Air

bending, Bottoming.

Welding

It is process of joining 2 metal parts through melting themselves or welding wire

between them, using the heat generated from an Arc of high electricity between the parts and

the tin of welding torch. So welding is the one of the major process in workflow model.

Finishing

It is the one in which removes the unwanted welded area o improve the Aesthetic of the

sheet metal component and to ensure the good finish like there is no joints in between there. If

there is more welding accumulation on the component first grinding operation is done then

final finishing is done using sandering machine. If bead thickness is small directly it can be

finished with sandering. After finishing operation component will be sent for pre-Treatment

And Painting Or Powder Coating.

Material Handling

Material handling, housekeeping is not directly related to a technical operation, it is

very important for any sheet metal, fabrication industry control quality quantity, handling to

avoid damage and wastage of time. Storage of raw material and process components on

suitable flat racks. Handling of raw material and finished components with designed pallets.

Movement of process and finished components with Hydraulic or battery operated trolleys.

Fixture

In order to join parts successfully in welding application individual parts must be

aligned precisely and held securely in place while welding the component. Important points to

be taken care. Design of fixtures which holds the individual parts in the proper alignment. The

tool must allow for quick and easy loading. It must hold the parts in place securely until they

are welded together.

2. k. Future Growth and Prospectus

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Future growth and prospectus is one of the important aspects in every field of

organization. It is the base for all the company’s activities whatever the functions are doing in

throughout the year. Future growth means what is their expectation in their short term period,

and also long term period what and all goals they want to achieve in a particular time including

some god projects like purchasing the new plant and machineries, new equipments, furniture’s

etc.. Without any future growth they get the difficult to sustain in the market. So all companies

will try their level best to make the maximum output with certain development in their

companies which may effect in positive manner.

Keeping pace with advances in technology, Ace is poised to meet the Challenges of the

future with a product range that offers the best value for the investment Customers make. Up-

to – date, cost effective total turning solutions from Ace help Customers to reach ever higher

levels of productivity and sustain high quality parameters. Ace is committed to an abiding

partnership with customers in exploring wider vistas, whatever the turns. The next move for

ACE is to make cost effective machines with high productivity.

In-line with industry expectations and market trend, the company has set a target of

producing 2,300 machines for the financial year 2010-11 and 3,000 machines for the year

2011-12. In order to achieve targeted sales, the Company has planned for increase in

manpower. The company order book position has touched all time peak 1,100 machines and

the order backlog has exceeded 6 months production. Efforts within the industry are now

underway to improve the features of CNC machines, and provide further value additions at

lower costs, to meet specific requirements of users.

Initiatives are taken to de-bottleneck the production activities. Challenges include

supply chain management: wherein vendors are not geared-up to deliver required quantity with

short lead time. To overcome the situation permanently, the company has planned to go for

backward integration by investing in modern foundry: which will produce required inputs

within a short lead time. Plans are also underway to set up most modern Machine Tool Plant

with all required amenities at Thyamagondlu Hobli, Nelamangla Taluk, Bangalore and some

other places they were found out.

There is a lot of project which may has to be come in the upcoming year therefore the

Ace Designer Ltd Company has well planned their future growth as short term as well as long

period of time. In this way they are working with hand in hand to reach their target which may

thought to do the work in a particular period of time.

CHAPTER - 3

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MCKINSEY’S 7S FRAMEWORK

According to Mc Kinsey’s model , a company’s strategy is only one of the seven

elements in Japanese Management by Richard Pascal and Anthony Athos in 1981. They

had been looking at how Japanese industry had been successful , at the same time

Tom Peters and Robert Walterman were exploring what made a company excellent.

The 7S model was born at a meeting of the four authors in 1978. .

Figure .3.1A: Mckinsey’s 7S Frame Work Model

The above figure 3.1A show Mckinsey’s 7S work model. The first three elements

Strategies, System and Structure are considered as the hardware of the business. The

next four elements Style, Staff, Skills and Shared Values are called as the Software’s of

successes. The McKinsey’s 7S model involves seven interdependent factors which are

categorized as either “hard” or “soft” elements.

The Mc Kinsey’s 7S model involves seven interdependent factors which are categorized

as either “hard” or “soft” elements. The hard elements are Strategy, Structure, and Systems

and the soft elements are shared values, Skill, Style and Staff. Hard elements are easier to

define or identify and management can directly influence them: These are strategy statements;

organization charts and reporting lines; and formal processes and IT systems. “Soft” elements,

on the other hand, can be more difficult to describe, and are less tangible and more influenced

by culture. However, these soft elements are as the hard elements if the organization is going to

be successful. Therefore it is much more difficult to plan or to influence the characteristics of

the soft elements. Although soft factors are below the surface, they can have a great impact of

the heard strategies system of the organization.

3.1 Structure

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Structure is the organizational chart and associated information that shows who reports

to whom and how tasks are both divided up and integrated. In other words, structures describe

the hierarchy of authority and accountability in an organization, the way the organization's

units relate to each other: centralized, functional divisions (top-down); decentralized (the trend

in larger organizations); matrix, network, holding, etc. These relationships are frequently

diagrammed in Organizational charts. Most organizations use some mix of structures -

pyramidal, matrix or networked ones - to accomplish their goals.

Business need to be organized in a specific form of shape that is generally referred to as

organizational structure. Organizations are structured in a variety of ways, dependent on their

objectives and culture. The structure of the company often dictates the way it operates and

performs. Traditionally the businesses have been structured in a hierarchical way with several

divisions and departments, each responsible for a specific task such as human resources

management, production or marketing. Many layers of management controlled the operations,

with each answerable to the upper layer of management. Although this is still the most widely

used organizational structure, the recent trend is increasingly towards a flat structure where the

work is done in teams of specialists rather than fixed departments. The idea is to make the

organization more flexible and devolve the power by empowering the employees and eliminate

the middle management layers.

Organizational structure refers to the way that an organization arranges people and jobs

so that its work can be performed and its goals can be met. When a work group is very small

and face-to-face communication is frequent, formal structure may be unnecessary, but in a

larger organization decisions have to be made about the delegation of various tasks. Thus,

procedures are established that assign responsibilities for various functions. It is these decisions

that determine the organizational structure. In an organization of any size or complexity,

employees' responsibilities typically are defined by what they do, who they report to, and for

managers, who reports to them. Over time these definitions are assigned to positions in the

organization rather than to specific individuals. The relationships among these positions are

illustrated graphically in an organizational chart (see Figures 1a and 1b). The best

organizational structure for any organization depends on many factors including the work it

does; its size in terms of employees, revenue, and the geographic dispersion of its facilities; and

the range of its businesses (the degree to which it is diversified across markets).

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BOARD OF DIRECTORS

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There are multiple structural variations that organizations can take on, but there are a

few basic principles that apply and a small number of common patterns. The following sections

explain these patterns and provide the historical context from which some of them arose. The

first section addresses organizational structure in the twentieth century. The second section

provides additional details of traditional, vertically-arranged organizational structures. This is

followed by descriptions of several alternate organizational structures including those arranged

by product, function, and geographical or product markets. Next is a discussion of combination

structures, or matrix organizations. The discussion concludes by addressing emerging and

potential future organizational structures.

3. 2 Strategy

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MANAGING DIRECTOR

Chief of materials

Chief of designChief of HRChief of finance & project

Recruitment

Chief of development

MANAGING DIRECTOR

Account Heads

Projects

Management Payroll

Training

Costing

Finance

Performance management

Employee payroll

Vendor component

Production of component

Design development

Tool room

Machine assembly

Chief of assembly

Bought outs

R & D

Chief of Technical

Chief of ACG & MR

Chief of information system

Chief of customer services

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Strategy includes purpose, mission, objectives, goals and policies. According to “Peter

Ducker” Strategic management is not a box of an action Plan based on the actual or probable

plans of others tricks or a bundle of techniques. It is analytical thinking and commitment of

resources to action. An action Plan based on the actual or probable plans of others. The set of

decisions and actions that result in the formulation and implementation of plans designed to

achieve a company’s objectives.

Strategic intent is the leveraging of a firm’s internal resources, capabilities and core

competencies to accomplish the firm’s vision, mission and objectives in a competitive

environment. Characteristics of Strategic Decisions require large amounts of the firm’s

resources often affect the firm’s long-term prosperity, usually have multifunctional or multi-

business consequences, Require considering the firm’s external environment. Strategy is the

plan of action an organization prepares in response to, or anticipation of, changes in its external

environment. It deals with essentially three questions. Where the organization is at this moment

in time, where the organization wants to be in a particular length of time, How to get there.

To recognize the responsibilities as corporate senior citizens to faster progress , to

promote general welfare of the society, to provide an environment to the staff to grow and

advance to prosperity and thus provide a sense of belonging . We will exceed customer

expectations through reliable product with timely delivery , cost effective solution with an

added assurance of prompt service.

All company got different strategy. The authors describe strategy as the plan or course

of action in allocating resources to achieve identified goals over time. Ace Designer Ltd

mission is to “We will exceed customer expectations through reliable product, on time delivery,

cost effective solution with an added assurance of prompt service. The quality policy of Ace

Designers Ltd is to have a set of satisfied internal customers, business associates, and society

through excellence in quality products and services and also to achieve safe working conditions

and Eco friendly environment through continuous improvement in the technology and man

power skills. Its strategy is to be committed to the state of the technology, environmental

protection, and safely to operations, social commitment and employee relations.

3. 3 Systems

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System in the 7-S frame work referred to on the all the rules, regulations and

procedures both formal and internal that compliments the organization structure in other words,

it is the equaling of the term “infrastructure” often changes in strategy implemented with some

changes in ‘system’ rather than in organization’s structure.

System refers to the rules and procedures- both formal and informal. System

complements the organizational structure. They are similar to the term infrastructure used in

the earlier section. The daily activities and procedures that staff members engage in to get the

job done. System includes procedure, planning and control systems, costing and capital

budgeting, recruitment, training and development, planning and budgeting, and performance

evolution. Formal and informal procedures that support the strategy and structure (systems are

more powerful than they are given credit). These processes are normally strictly followed and

are designed to achieve maximum effectiveness. Increasingly, the organizations are simplifying

and modernizing their process by innovation and use of new technology to make the decision-

making process quicker.

According to Wikipedia “ system is a set of detailed methods, procedures, and routines

established or formulated to carry out a specific activity, perform a duty, or solve a problem”.

Manic bag have its own system in the organization by giving online test drive option for the

local customers. Company follows a particular process for recruitment that is by inviting

application form for the job. These processes are normally strictly followed and are designed to

achieve maximum effectiveness. Increasingly, the organizations are simplifying and

modernizing their process by innovation and use of new technology to make the decision-

making process quicker. Systems define the flow of  activities involved in the daily operation

of business, including its core processes and its support systems. They refer to the

procedures, processes and routines that are used to manage the organization and characterize

how important work is to be done.

The procedures, processes and routines that characterize how the work should be done:

financial systems; recruiting, promotion and performance appraisal systems; information

systems. The flow of activities involved in the daily operation of a business including its core

process and its support systems. In Ace Designers Ltd, there is a formal flow of communication

in two ways i.e., a top level to bottom level and bottom to top.

3.4 Style/ Culture

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Style is one of the seven levels for manager can use to bring about organization change.

The style of an organization, according to the McKinsey framework, becomes evident though

the patterns of actions taken by member of the top management team over a period of time. The

McKinsey framework considers ‘Style’ as more than the style of top management.

"Style" refers to the cultural style of the organization, how key managers behave in

achieving the organization's goals, how managers collectively spend their time and attention,

and how they use symbolic behavior. How management acts is more important that what

management says. Culture remains an important consideration in the implementation of any

strategy in the organization. the culture of the organization, consisting of two components they

are organizational culture and management styles. style is a way in which something is said,

done, expressed, or performed. How the managers in organizations use style to bring about

change all organizations have their own distinct culture and management style. It includes the

dominant values, beliefs and norms which develop over time and become relatively enduring

features of the organizational life. It entails the way managers interact with the employees and

the way they spend their time.

The businesses have traditionally been influenced by the military style of management

and culture where strict adherence to the upper management and procedures was expected from

the lower – rank employees. However, there have been extensive efforts in the past couple of

decades to change to culture to a more open, innovative and friendly environment with fewer

hierarchies and smaller chain of command. An instrument used by the ancient I writing on

tablets covered with wax, having one of its ends sharp, and the other blunt, and somewhat

expanded, for the purpose of making erasures by smoothing the wax. Organizational reporting

relationship conveys the style.

In Ace Designers Ltd Managers spend time interacting with various employees in

various departments and the participation of workers in management is considered vital.

Workers are represented by their trade union for the purpose of healthy negotiation with

management and women employees are equal opportunity to be part to management through

women welfare association.

3.5 Skill

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"Skills" refer to the dominant distinctive capabilities and competencies of the

personnel or of the organization as a whole. Skill are one of the most crucial attributes or

capabilities or strength of an organization. The term skill includes those characteristics or

distinctive competence which most people use to describe a company. Staff includes the

people/human resource management - processes used to develop managers, specialization

processes, way of shaping basic values of management cadre, ways of introducing young

recruits to the company, ways of helping to manage the careers of employees. Organizations

are made up of humans and it’s the people who make the real difference to the success of the

organization in the increasingly knowledge – based society. Skills refer to the fact that,

employees have the skills needed to carry out the company strategies. Skills of the employees

are improved by giving necessary training to them. Different organization has different set of

skilled employees depending on the nature of business carried. The workers in production

department are skilled in all technical aspect of production process. Informal working

environment created in the organization is a means of bring out the hidden talents and initiative

of workers.

Skills refer to crucial attributes or capabilities of an organization. They are used to

describe that which is found most in the organization. Skills are developed over a period of

time and are a result of the interactions of number of factors. These factors could be personal,

top management, structure, system, etc. Hence when a strategic decision is too made. It is

necessary to build new skills. A skill refers to the fact that employees have the skills needed to

carry out the firm‘s strategies. Skill full employees are the asset of any organization. Skills of

employees may be giving necessary training to them.

Ace Designers has combination of skilled as well as the unskilled labors. Managers like

production, quality manager, accounts manager are highly skilled in the area of their discipline.

In manufacturing department there were labors like educated as ITI background for fitters and

welders where as they have unskilled labors for helping them. Accounting and financial

manager is knowledgeable regarding taxes, duties, transportation charges etc. Overall the

employees are skilled and both on the job and off the job is provided as per the requirements.

3.6 Staff

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People are main asset of the organization. Organization performance is mainly depends

upon individual’s performances who are working in the organization. So Staffing plays

important role by employ right person in right job. Staffing is the process of acquiring human

resources for the organization and assuring that they have the potential to contribute to the

achievements of the organizations goals.

"Staff" refers to the number and types of personnel within the organization and how

companies develop employees and shape basic values. Brawn and Moberly define staffing as

“This implies that it includes two fundamentally different processes”. Staffs includes the

people/human resource management – processes used to develop managers, socialization

processes, and way of shaping basic values of management cadre, ways of introducing young

recruits to the company, ways of helping to manage the careers of employees. Organizations

are made up of humans and it's the people who make the real difference to the success of the

organization in the increasingly knowledge-based society.

The importance of human resources has thus got the central position in the strategy of

the organization, away from the traditional model of capital and land. It is also important for

the organization to instill confidence among the employees about their future in the

organization and future career growth as an incentive for hard work. All leading organizations

put emphasis on hiring the best staff, providing them with rigorous training and mentoring

support, and pushing their staff to limits in achieving professional excellence, and this forms

the basis of these organizations strategy and competitive advantage over their competitors. It is

also important for the organization to instill confidence among the employees about their future

in the organization and future career growth as an incentive for hard work organizations are

made up of humans and it is the people who make the real difference to the success of the

organization in the increasingly knowledge-based society.

Staff are the human resources working in an organization they are responsible for

carrying out various activities of the organization effectively and efficiently. They are

responsible for carrying out various activities of the firm effectively and efficiently. In Ace

Designer Ltd, 547 staff members are working in the firm. In that 32 managerial, 147 are

executives, 103 are operators, 1 engineering trainee, 6 Diploma trainee, 218 are technical , 39

are apprentice trainees , 1 for temporary staff. They are very flexible, dynamic and energetic

and always willing to adapt to changes and align towards the strategic goal of the company.

3.7 Shared Values

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Shared values the centre case of the framework give raise to a certain spirit among

organizational members regarding “who we are and where we are headed” the spirit permeating

in the organization in term is reflected in the values, attitudes and philosophy it its members the

corporate values define the ideas and belief which guide the organizational operation they lay

down the foundation of the organization management philosophy and give raise to a particular

culture.

The super-coordinated goal is analogous to the organization’s purpose. It is a set of

values and aspirations going beyond the formal statement of corporate objectives. They can be

considered as fundamental ideas around which a business is built. Hence, they represent the

main values of the organization. They can also provide the broad notions of future direction.

The organizations with low values and common goals often find their employees

following their own personal goals that may be different or even in conflict with those of the

organization or their fellow colleagues. Under these goals of the company, vision and mission

are specified to the employees. This may be to make money or to achieve excellence in a

particular field. These values and common goals keep the employees working towards a

common destination as a coherent team and are important to keep the team spirit alive.

Shared values are commonly held beliefs, mindsets, and assumptions that shape how

an organization behaves – its corporate culture. Shared values are what engender trust. They

are an interconnecting center of the 7Ss model. Values are the identity by which a company is

known throughout its business areas, what the organization stands for and what it believes in,

it central beliefs and attitudes. These values must be explicitly stated as both corporate

objectives and individual values.

At Ace Designer Ltd each individual department have specific goals and objectives

within the broad framework of its Vision and Mission. They act as the framework for

achievement of organization objectives and goals efficiently and effectively. They are also

bound to follow policies and procedures governed by the state government. All members of the

organization share some common fundamental ideas or guiding concepts around which the

business is built. It must be simple, usually stated at abstract level, have great meaning inside

the organization even though outsiders may not see or understand them.

CHAPTER- 4

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SWOT ANALYSIS

A SWOT analysis is an instrumental framework in Value Based Management. Similarly

Strategy Formulation is very essential to identify the Strength, Weaknesses, Opportunities and

Threats for a particular company. The technique is credited to Albert Humphrey, who led a

convention at Stanford University in the 1960s and 1970s using data from Fortune 500

companies. It involves specifying the objective of the business venture or project and

identifying the internal and external factors that are favorable and unfavorable to achieving that

objective.

Identification of SWOTs is essential because subsequent steps in the process of

planning for achievement of the selected objective may be derived from the SWOTs. Strengths:

attributes of the person or company that is helpful to achieving the objective(s). Weaknesses:

attributes of the person or company that is harmful to achieving the objective(s). Opportunities:

external conditions that is helpful to achieving the objective(s). Threats: external conditions

which could do damage to the objective(s).

Figure 4.1A: SWOT Analysis

The above figure 4.1A shows that SWOT analysis. Every organization has certain

techniques to enhance its production, marketing, financing etc. It will increase the productivity

of the organization. Strengths and Weaknesses are internal value creating (or destroying)

factors such as assets, skills or resources a company has at its disposal relatively to its

competitors. They can be measured using internal assessments or external benchmarking.

Opportunities and Threats are external value creating (or destroying) factors a company cannot

control, but emerge from either the competitive dynamic of the industry/market or from

demographic, economic, political, technical, social, legal or cultural factors.

4.1 Strength

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Situation Analysis

Internal Analysis External Analysis

Strengths Weaknesses Opportunities Threats

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Any existing or potential resources or capability within the organization that provides a

competitive advantage in the market is called strength. Strength in the SWOT Analysis is

attribute or characteristics within the organization that are considered to be important to the

execution and ultimate success of the project. Strength captures the positive aspects internal to

your business, Cost advantage through proprietary know-how, Quality processes and

procedures, Strong brand or reputation. A firm’s strength are its resources and capabilities that

can be used as a basis for developing a competitive advantage examples of such strength

include; patents, strong brand names, good reputation among customers, cost advantages from

proprietary know-how, exclusive access to high grade natural resources, favorable access to

distribution networks.

The Ace Designers Ltd has the ISO certification that is the one of the important

strength. The ISO 9001 and 14001 certified company and ISO 9001 registration means the

certification of company’s quality system by the third party. This is obtained after a successful

onsite audit of the company operation against the requirements of the relevant quality system

by a third party. Another strength is Working on business excellence model instituted by the

EXIM bank for process improvements. Therefore it is help for the company to make trade on

foreign exporters. The labors in this company have good experienced persons which are

necessary engineering knowledge in particular products. Therefore it is increase the company’s

strength ineffective manner. About in product, Ace Designers are manufactures well quality

products. They were measuring the product each and every content while on manufacturing

process. Pollution free environment; continuous improvement of the environmental

performance by minimizing air emissions, fluent generation and better management of solid

and hazardous wastes. About the manpower they were doing continuous training to the workers

therefore their efficiency and knowledge skill will increases in a systematic manner. It will

takes them to better position for employers as well as company will develops. The main

strength o this companies is they fulfills the customers satisfaction with their wants and

demand. The main markets their product based on the customers demand.

4.2 Weaknesses

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A weakness is something a firm lacks, does poorly, or a condition placing it at a

disadvantage. The absence of certain strength may be viewed as weakness. For example, each

of the following may be considered weakness: lack of patent protection, a weak brand name,

poor reputation among customers, high cost structure, and lack of access to the best natural

resources, lack of access to key distribution channels. Your weaknesses are determined through

failures, defeats, losses and inability to match up with the dynamic situation and rapid change.

The weaknesses may be rooted in lack of managerial skills, insufficient quality, technological

backwardness, inadequate systems or processes, slow deliveries, or shortage of resources.

A company’s weakness can relate to inferior or unproven skills, expertise, or

intellectual capital in competitively important areas of the business. Deficiencies in

competitively important physical, organizational, or intangible assets: Missing or competitively

inferior capabilities in key areas. Internal weaknesses are thus shortcomings in a company’s

compliment of resources and represent competitive liabilities. Nearly all companies have

competitive liabilities of one kind or another. In some cases, a weakness may be the flip side

of a strength. Take the case in which a firm has a large amount of manufacturing capacity.

While this capacity may be considered a strength that competitors do not share, it also may be a

considered a weakness if the large investment in manufacturing capacity prevents the firm from

reacting quickly to changes in the strategic environment.

The main weakness of Ace Designers Ltd is that delay in delivery. They manufactures

the tools in a time but they have plenty of orders were comes in to the company. So it will

causes to delays in delivery. Another important weakness of Ace Designer Ltd is high cost of

production. Cost of production is very high due to the raw materials they uses well quality of

materials for their production so it causes high cost of production. Another important weakness

of Ace Designer Ltd is high cost of product is high due to the cost of production. When cost of

production is goes to high then the product cost is automatically increases. The company has

many competitors so they have to make more number of quality products for compete with

them. They can’t do the little bit of negligence in their product competitor will survive the

market.

4.3 Opportunities

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The external environment analysis may reveal certain new opportunities for profit and

growth. Some examples of such opportunities include: an unfulfilled customer need, arrival of

new technologies, loosing of regulations, removal of regulation trade barriers. Any opportunity

is major favorable situation in the firm’s environment. The opportunities are External attractive

factors that represent the reason for an organization to exist and develop. The external

conditions that is helpful to achieving the objective. An opportunity could be: A developing

market such as the Internet, Mergers, joint ventures or strategic alliances, moving into new

market segments that offer improved profits, A new international market, A market vacated by

an ineffective competitor in that region.

Market opportunity is a big factor in shaping a company’s strategy. Indeed, managers

can’t properly tailor strategy to the company’s situation without first identifying its

opportunities and appraising the growth and profit potential each one holds. Depending on the

prevailing circumstances, a company’s opportunities can be plentiful or scarce and can range

from widely attractive interesting to unsuitable. In evaluating a company’s market

opportunities and ranking their attractiveness, managers have to guard against viewing every

industry opportunity as a company opportunity. It is mostly from the external environment, it

may be from the govt. also like low down the trade barriers, increase in subsidies, decrease in

number of quotas for foreign players, the competitors in the market are or less demandable etc.

Ace Designer Ltd has the opportunity for their export market. It means the company

has the opportunity for export the products which they were not exporting some other

countries. These countries were demanding their products t them. They has the opportunity for

entry into smaller segments. It means there were the chances for making the merger or

acquisition to a particular segment. The important opportunity that is high demand for products.

Therefore it will helps to the company that their product will getting good value in the market.

Ace Designer Ltd has another opportunity that is easy availability of technology. Here the

company wills manufactures well quality of products as easy available technology so, it is not

necessary to use highflier technology for them.

4.4 Threats

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Changes in the external environment also may present threat to the firm. Some

examples of such threats include: shifts in consumer tastes away from the firms products,

emergence of substitute products, new regulations, and increased trade barrier. Threats are the

external factors, beyond an organization’s control, which could place the organization mission

or operation at risk. The external conditions which could do damage to the business’s

performance. A threat is a challenge created by an unfavorable trend or development that may

lead to deteriorating revenues or profits.

Globalization and privatization, any sudden change in govt. Policy may have adverse

effect on sales, new interacts from competitors like price and quality, changing market trends,

competition from other models, change in market that is from seller’s market to buyers market.

Emergence of cheaper/better technologies, introduction of better products by rivals, entry of

lower-cost foreign competitors, onerous regulations, rise in interest rates, potential of a hostile

takeover, unfavorable demographic shifts, adverse shifts in foreign exchange rates, political

upheaval in a country. Threats are key impediments to the firm’s current or desired position.

Changes in the external environmental also may present threats to the firm. Threat could be: a

new competitor in your home market, price wars with competitors, and a competitor has a new,

innovative product or service, competitors have superior access to channels of distribution, and

taxation is introduced on your product.

Ace Designer Ltd have the lot of competition. Due to this the company may get the

threats from them. Because the competitors were sells their product with low rate. So, it will

affects to the company. The another important threat of Ace Designer Ltd is that entries of

small players in to the market. The threat is that the customers were concentrating to these

small players for their experience or for their reasonable rates. Ace Designers another threat is

that availability of suppliers were decreased. Due to improper training for suppliers, lack of

knowledge for suppliers in a particular areas etc. Due to inflation product price were increased.

Then money supply will increase in the market. Therefore raw materials cost will increases.

Credit availability will decrease.

From the above discussion we can understand various threats, opportunities, challenges

and weakness of the company. It clearly deals with these attributes of an organization. Because

of the globalization the competition is high. If companies have the ability to identify weakness

and convert this weakness into strengths then only they can survive in the market

CHAPTER: 5

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ANALYSIS OF FINANCIAL STATEMENT

It is analysis of financial statement of a company to assess its financial health and

soundness of its management. Financial statement analysis involves a study of the financial

statements of a company to ascertain its prevailing state of affairs and the reasons therefore.

Such a study would enable the public and investors to ascertain whether one company is more

profitable than the other, and also to state the causes and factors that are probably responsible

for this.

Financial statement Analysis is an analysis which highlights important relationship in

the financial statements. It focuses on evaluation of past operations as revealed be the analysis

of basic statements. Financial statement analysis embraces the methods used in assessing and

interpreting the results of past performance and current financial position as they relate to

particular factors of interest in investment decisions. It is an important means of assessing past

performance and in forecasting and planning future performance.

The process of critical evaluation of the financial information contained in the financial

statements in order to understand and make decisions regarding the operations of the firm are

called financial statement analysis. It is basically a study of relationship among various

financial statements, and the interpretation thereof to gain an insight into the profitability and

operational efficiency of the firm to assess its financial health and future prospects.

The term financial analysis includes both analysis and interpretation the term analysis

means simplification of financial data by methodical classification given in the financial

statements. Interpretation means explaining the meaning and significance of the data. These

two are complimentary to each other. Analysis is useless without interpretation, and

interpretation without analysis is difficult or even impossible. The term financial analysis

includes both analysis and interpretation the term analysis means simplification of financial

data by methodical classification given in the financial statements. Interpretation means

explaining the meaning and significance of the data. These two are complimentary to each

other. Analysis is useless without interpretation, and interpretation without analysis is difficult

or even impossible. Financial statement analysis involves careful selection of data from

financial statements for the primary purpose of forecasting the financial health of the company.

This is accomplished by examining trends in key financial data across companies, and

analyzing key financial ratios.

5.1 Profit And Loss A/C as on 31st March 2010, 2009, 2008

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The profit and loss account is an account which shows the net profit or net loss of a

business for a particular trading period. Having prepared the trading account and ascertained he

gross loss, the trader has to prepare the profit and loss account of his business.

Table 5.2A: Profit And Loss Account as on 31st March 2010

Sales of the company were increased around 11% in2010 compare to 2009. Which

shows company is done well in this period. Whereas 21% decrease when compared with the

year of 2008. And profit before tax of the company was increased around 28% in 2010

compare to 2009. Whereas 68% were decrease when compared with the year of 2008.

5.2 Balance Sheet as on 31st March 2010

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Particulars 31-Mar-10 31-Mar-09 31-Mar-08

Income      

Sales 1,927,024,997 1,741,202,903 2,437,242,014

Other income 35,116,412 27,920,734 129,129,885

Total 1,962,141,409 1,769,123,637 2,566,371,899 LESS : Total Expenditure 1,766,656,741 1,615,153,481 1,970,068,558

Profit before tax 195,484,668 153,970,156 596,303,341

Less : Tax 72,555,777 61,537,010 199,062,061

Profit after tax 122,928,891 92,433,146 397,241,280Less : Prior period expense 15,835,070 - -

Net Profit 107,093,821 92,433,146 397,241,280Add : Balance brought forward from previous year

945,576,829 904,084,016 671,657,918

Profit available for appropriation

     

Less : Appropriation 1,052,670,650 996,517,162 1,068,899,198

Proposed Final dividend      

Tax on dividend 44,550,000 35,640,000 53,460,000

Transfer to General Reserve 7,399,200 6,057,018 9,085,527

Surplus carried to Balance Sheet

10,709,382 9,243,315 39,724,128

  990,012,068 945,576,829 1,068,899,198

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In the organization Balance sheet which gives details about the expenses and the funds

which is borrowed. It contains all the loans and the debtors. But a trader likes to know not only

the net profit or net loss of his business for a certain trading period, but also the financial

position of the business at the end of the period.

Table. 5.2A: Balance Sheet as on 31st march 2010

Particulars 31-Mar-10 31-Mar-09 31-Mar-08

Sources Of Funds      

Shareholders Funds      

Share capital 178,200,000 178,200,000 178,200,000

Reserves and Surplus 1,172,143,583 1,116,998,962 1,066,262,834

Loan Funds      

Secured and Unsecured Loans 48,535,141 234,745,861 19,655,430Deffered Tax Liabilities 19,316,284 29,914,333 23,248,630

Total 1,418,195,008 1,559,859,156 1387366894

Application Of Funds      

Fixed Assets 676,840,578 734,142,047 591,785,511

Capital WIP 9,031,128 29,337,019 40,922,737

Investments 233,720,365 11,894,295 62,901,669

Current Assets      Inventories 417,502,371 533,753,597 511862684

Debtors 353,599,104 255,576,852 459808580Cash and Bank Balance 153,215,425 102,968,897 44,223,138Other current assets 154,648,539

Loans &Advances 308,072,423 195,303,577 73,500,935

Total 1,232,389,323 1,087,602,923 1,244,043,876

LESS : Current liabilities 733,786,386 303,117,128 552,286,899

Net Current Assets 498,602,937 784,485,795 691,756,977

Total 1,418,195,008 1,559,859,156 1,387,366,894

From the above balance sheet we can identify that reserves and surplus of the company

was increased due to the intention of expansion of business. But in case of fixed assets the

value is decreased when compared with the year of 2010. Whereas in current asset there is

increase in the year of 2010 when compared with 2009,2008 year.

5.3 Ratio Analysis

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Ratio is simply one number expressed in terms of another. I is an expression of

relationship spelt out by dividing one figure into another. A Ratio is defined as the indicated

quotient of two mathematical expressions and as the relationship between two or more things.

An Accounting Ratio shows the mathematical relationship between two figures which have

meaningful relations with each other. E.g. Gross Profit and sales, current asset and current

liabilities, etc.,

i. Current Ratio

This ratio is commonly used to perform short-term financial analysis. It indicates the

firm’s ability to promptly meet its current liabilities with its current assets. A relatively high

current ratio indicates that the firm is liquid and has the ability to meet its current liabilities. On

the other hand, relatively low current ratio indicates that the firm will find it difficult to pay its

bill. If the current ratio is 1:1, it means that funds yielded by current asset are just sufficient

to pay the amounts due to various creditors and there will be nothing left to meet the

expenses which are being currently incurred. Thus the ratio should always be more than 1:1.

Normally a current ratio of 2:1 is considered satisfactory.

Current Ratio = Current assets

Current Liabilities

Table 5.3A: Current Ratio

Year Current Asset(Rs. In Crores)

Current Liabilities(Rs. In Crores)

Current Ratio

2007-08 1,244,043,876 552,286,899 2.25

2008-09 1,087,602,923 303,117,128 3.59

2009-10 1,232,389,323 733,786,386 1.68

Current assets include cash, current investments, debtors, inventories, loans and

advances, and prepaid expenses. The current liabilities represent liabilities that are expected to

mature in the next twelve months. The above table is showing current ratio: The current ratio

was 2.25 in the year 2008 which increased to 3.59 1n 2009, and in the year of 2010 the current

ratio is 1.68 which indicates that the company to discharge its current liabilities has slightly

declined over the years.

ii. Quick Ratio

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This is a severe test of liquidity of a company. It shows the ability of a Business to meet

its immediate financial commitments. Liquid assets means all the current assets less

inventories, sticky debts, i.e. such assets as can be ‘quickly’ converted into cash It is used to

supplement the information given by the current ratio. Generally a quick ratio of 1:1 is

considered to represent a satisfactory current financial position

Quick Ratio = Quick Asset / Current Liabilities

Quick Asset= Current Asset – (Stock + Prepaid Expenses)

Table 5.3A: Quick Ratio

Year Quick Asset(Rs In Crores)

Current Liabilities(Rs In Crores)

Quick Ratio

2007-08 732181192 552,286,899 1.32

2008-09 553849326 303,117,128 1.83

2009-10 814886952 733,786,386 1.11

The above table is showing quick ratio: At Ace Designers Ltd the quick ratio in 2008 is1.32

though the ratio is increased in 2009 that is 1.83, similarly in the year of 2010 the quick ratio is

1.11 which was decreased when compared to the previous year.

iii. Absolute Liquidity Ratio

This is also known as super quick ratio or cash ratio. It helps us get an

idea about the absolute liquidity of a concern. An absolute liquidity ratio of 1:2 is considered

satisfactory.

Absolute Liquidity Ratio = Cash+Bank BalanceCurrent Liabilities

Table No.5.4A: Absolute Liquidity Ratio

Year Cash & Bank(Rs In Crores)

Current Liabilities(Rs In Crores)

Absolute Liquidity Ratio

2007-08 44223138 552,286,899 0.08

2008-09 102968897 303,117,128 0.34

2009-10 153215425 733,786,386 0.21

The above table is showing absolute liquidity ratio: The table tells the ratio in the year

2008 is 0.08 which was increased to 0.34 in 2009. Whereas there was a decrease in absolute

liquidity ratio in the year of 2010 the ratio is 0.21 compared to the previous year.

iv. Debtors Turnover Ratio

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This ratio indicates the relationship between net credit sales and trade debtors. It shows

the rate at which case is generated by the turnover of debtors. In other words, this ratio

indicates as to how many days’ average sales are tied up in the amount of debtors. This ratio is

an excellent supplement to the information provided by current ratio.

Debtors Turnover Ratio = Credit Sales Average Debtors

Table 5.5A:Debtors Turnover Ratio

Year Credit Sales Average Debtors Debtors Turnover Ratio

2007-08 2437242014 229904290 10.602008-09 1741202903 127788426 13.622009-10 1927024997 176799552 10.90

The above table is showing debtors turnover ratio: In the year of 2008 the ratio is 10.60, which

is increased to 13.62 in the year of 2009, similarly in 2010 it is again decreased to 10.90 when

compared with the year of 2009.

v. Net Asset Turnover Ratio

Asset is used to generate sales. A firm should manage its assets efficiently to

maximize the sales. A firm’s ability to produce a large volume of sales for a given amount of

assets is the most important aspect of its operating performance.

Net Asset Turnover Ratio= Sales/ Net AssetsTable 5.5A:Net Asset Turnover Ratio

YEAR CREDIT SALES(Rs in crores)

NET ASSET(Rs in crores)

NETASSET TURNOVER RATIO

2007-08 2437242014 1387366894 1.76

2008-09 1741202903 1559859156 1.12

2009-10 1927024997 1418195008 1.36

The table 5.5A showing net asset turnover ratio. In the year of 2008 the ratio is 1.76 which

was decreased in the year of 2009 where as there is increase in the net asset turnover ratio 1.36

when compared with the year of previous year.

Vi. Current Asset Turnover Ratio

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This ratio shows the relationship between a company’s sales and current assets. A

decrease in this ratio is a good indication of the performance of the company.

Current Asset Turnover Ratio = Sales/ Current Asset

Table .5.6A.Current Asset Turnover Ratio

The above table is showing current asset turnover ratio. The current ratio of 2008 is 3.52 which

was decreased to 2.22 in the year of 2009, where as the current ratio again increased to 3.56 in

the year of 2010 when compared with the year of 2009.

vii. Fixed Asset Turnover Ratio

This ratio indicates the efficiency with which the firm is utilizing its investments in

fixed assets such as plant and machinery, land and building etc. Generally speaking, a high

ratio indicates efficient utilization of fixed assets in generating sales and a low ratio may

signify that the firm has an excessive investment in fixed assets.

Fixed Assets Turnover Ratio = Sales/ Net Fixed Assets

Table 5.7A:Fixed Asset Turnover Ratio

Year Fixed Asset(Rs in crores)

Sales(Rs in crores)

Fixed Asset Turover Ratio

2007-08 591785511 2437242014 4.12

2008-09 734142047 1741202903 2.37

2009-10 676840578 1927024997 2.85

The above table showing the fixed asset turnover ratio: The table shows that the

companies ratio in the year of 2008 is 4.12 which is decreased in the year of 2009, it is 2.37.

Where as the ratio in 2010 is 2.37 it means ratio is slightly increased when compared with

previous year.

viii. Gross Profit Ratio

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Year Current Asset(Rs in crore)

Sales Current Asset Turnover Ratio

2007-08 691756977 2437242014 3.52

2008-09 784485795 1741202903 2.22

2009-10 498602937 1927024997 3.86

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This Ratio expresses the relationship between gross profit and sales and is usually

expressed in percentage. Gross Profit Ratio indicates the average margin on the goods sold. It

shows whether the selling prices are adequate or not.

Gross Profit Ratio = Gross Profit X 100Net Sales

Table.5.8A: Gross Profit Turnover Ratio

Year EBIT(Rs in lakhs)

Sales(Rs in lakhs)

Gross Profit Ratio

2007-08 596303341 2437242014 24.46 %

2008-09 153970156 1741202903 8.84 %

2009-10 195484668 1927024997 10.14 %

The above table showing the Gross profit turnover ratio. In this table the ratio in 2008

is 24.46% which is decreased to 8.84% in the year of 2009. Whereas the gross profit again

increased up to 10.14% when compared to the year of 2009.

ix. Net Profit Ratio

This ratio explains per rupee profit generating capacity of sales. If cost f he sales is

lower , then the net profit will be higher and then we divide it with the net sales, the result is

the sale efficiency. Comparison of net profit ratio with other firms in the industry or with the

previous years will indicate the scope for improvement. This will enable the firm to

maximize its efficiency.

Net Profit Ratio = Net Profit After Tax X 100Net Sales

Table 5.9A: Net Profit Ratio

Year Profit After Tax(Rs in crores)

Sales(Rs in crores)

Net Profit Ratio

2007-08 397241280 2437242014 16.29 %2008-09 92433146 1741202903 5.3 %2009-10 107093821 1927024997 5.56 %

The above table showing the Net profit turnover ratio. This table highlights that the net profit

ratio in the year of 2008 is 16.29% which was decreased to 5.3% in the year of 2009 where as it

was increased to 5.56% in the year of 2010 when compared with previous year.

CHAPTER 6

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LEARNING EXPERIENCE

The study was an excellent opportunity to understand an organizational environment

to a great extend. Today the corporate world demands for certain qualities without which facing

the corporate world is a difficult task. Therefore the organizational study has played an

important role in understanding what an organization expects from a new entrant in their

organization. During the study, it had given an opportunity to closely watch the activities of

Ace Designer Ltd. The hierarchy in this organization that is the manner of delegation from one

level to another was clearly understandable. Also helpful to understand the decision making

pattern of the organization.

Every organization has various departments so does Ace Designers Ltd also. The

organization study has helped in going through the different department of Ace Designer Ltd

and understanding the functions of each department, its hierarchy and the manpower involved.

During the period of organization study, processing of machines, finance department, HR

department marketing department, also understood the inter connection between various

departments and how they work towards the achievement of a common organizational

objective in a systematic manner..

Ace Designer Ltd was a good place for an organizational study as it is involved in

various activities from the birth of the product to its distribution. Thus every aspect could be

studied in one single organization. The employees in Ace Designers Ltd were supportive in

conducting the study in the organization. The success of the organization depends on

manager’s activity. So the study enabled we to know how manager how manager has to handle

the employees to get maximum output. The human resources of the company is properly

utilized to get the maximum benefits from them.

We had to do in-plant training for 10 weeks to know the organizational review. It was a

new kind of environment as it was the first time we had been in the company. When we

stepped to the company the environment was completely different as compared to the college

campus. There were a lot of restrictions to be followed while walking inside the company and

even a lot of checking used to go on everyday which showed a lot of discipline and safety on

the part of the organization.

From the SWOT analysis, following things understand: The company has a high

capacity for production: The company has a good quality control lab; the company has good

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control room which manages the production operation from one room withal controlling

systems. This system helped the company to reduce accidents and helped to increase the

capacity utilization. The company is also providing sufficient training facilities to the

employees. The training is given in the company and also through outside training agencies.

The organizational study of Ace Designers Ltd helped to know the fact that employees

are the most difficult to manage. As human beings have emotions the manager has to guide and

train the people in such a manner that they get emotional balance. If the emotions of the

employees are hurt it is very difficult to get maximum productivity from them.

Obtained information regarding the finance department, functions done finance

manager, functions are preparation of final accounts, preparation of bank advice statements,

budget preparation, payroll systems, calculation of attendance bonus, preparation of monthly

journal, ledger and trail balance, auditing preparation of cost sheet etc. Helps to identify the

role of trade unions and their importance in taking decisions in the organization for the benefit

of both parties. Acquired information regarding the human resource department, functions done

by human resource manager, functions included formulation and development of personal

policies, employment of right person in the , training programs, maintain personal records of

each employee etc.

So the company should adopt adequate measure to control the pollution through

pollution control measures. They have provided a lot of incentives to the employees to boost

the motivation of the employees. It is understood that all the activities in the plant and helped

me to relate what we studied in our college with actual working of the organization.

The employees at Ace Designers Ltd are given very good food and pantry facilities too

inside the departments which is necessary to increase the productivity of the employees. The

organizational study of Ace Designers Ltd helped me to know the fact that the company should

adopt environment friendly measures. If it concentrates only on the profit maximization and

keep on disturbing the natural climate, then the company’s operations may be opposed by the

public.

As the part of curriculum in MBA an ‘organization study’ was conducted for a period of

70 days in the Ace Designers Ltd. The in plant training experience was an excellent

opportunity to engage our self in the organization was helped us in understanding an

organizational environment to a great extend. Today the corporate world demands for certain

qualities without which facing the corporate world is a difficult task. Therefore the

organizational study has played an important role in understanding what an organization

expects from a new entrant in their organization. This gave an opportunity to have close look

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on the functioning of an industry otherwise we study theoretically. Studying the profile of the

company, the background has helped to know how an organization is set up considering the

location of plant. This gives students an exposure to the corporate world.

Internal guide gives knowledge about the project format, which are the things to be

properly placed in the project and how it should be placed in a proper manner. Daily it is to go

and meet the internal guide and they use to tell me that before starting any of the matter we

should give a small introduction part of that matter and latter start the main body of the heading

which we mention in the project. They remind that First impression is the best impression so

here tried those things to make the best impression. In the project everything is systematic flow,

it should not lose the link between the different headings in the project and they guide, to make

a systematic project in his guidelines. During this project, many kinds of difficulties were

faced, which help in the future to, net repeat.

In company the external guide gives me relevant information with his busy schedule. He

always co-operate with me for regarding to give the company’s data and several information.

He gets the minimum time for giving the information to me, but still he guides me with lots of

smile. Under his guidelines he guide apart from project how the employees are to be

enthusiastic with their work and how to be behave in company.

This gave an opportunity to have close look on the functioning of an industry otherwise

we study theoretically. Studying the profile of the company, the background has helped to

know how an organization is set up considering the location of plant. This gives students an

exposure to the corporate world.

1) Organization study: - Person enhances his/her knowledge only when exposed to real world

situations and by being exposed to the real conditions is systematic manner. Human beings

understand how to live and face various situations. This is exactly what organization study

helps a student. This organization study has helped me in understanding an organizational

environment to a great extent.

2) Project profit: - Today the corporate world demands for certain qualities without which facing

the corporate world is a hard task. Therefore the organizational study has played an important

role in accepting what a business expects from a new entrant in their trade. During the time of

study, it has learnt about how to make our own sentences and how to uses the information for

improving knowledge. It also implicit that how the tables and diagrams help to understand the

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concepts clearly and easily. It also makes students strong enough to say about the company

without any fear.

3) Plant section: - The organization study was helped in going to the different department of Ace

Designers Ltd and understanding the functions of each department, its hierarchy and the

manpower complex and how the departmental heads manage their duties. During the period of

organization study, it has studied the production, finance, human resource, purchase,

marketing, development, quality management. It also understood the inter connection between

various departments how they work towards the success of a common objective.

4) Process of production: - The Ace Designers Ltd is a manufacturing oriented company. So it

has got an opportunity to closely watch the production process of the organization from the

beginning to the final finished products.

5) SWOT Analysis: - The strength, weakness, opportunities and threats of the Ace Designers Ltd

are identified as was associated with the organization for a period of 70 days of during

organization study. The theories which we study during the course is being nearly put in use in

the organization can be seen during an organization study.

6) Practical analysis: - the learning experience in the Ace Designers Ltd would surely help me in

my future to enter the corporate world with confidence and knowledge of corporate world in a

better manner than just in theory. As a management student it is of great help to gain practical

knowledge through the application of theory learnt in real life. The organization study was a

great practical learning experience for life.

The employees at Ace Designers Ltd are given very good food and pantry facilities too

inside the departments which is necessary to increase the productivity of the employees. The

organizational study of Ace Designers Ltd helped me to know the fact that the company should

adopt environment friendly measures.

This gave an opportunity to have close look on the functioning of an industry otherwise

we study theoretically. Studying the profile of the company, the background has helped

to know how an organization is set up considering the location of plant. This gives students an

exposure to corporate world. It is understood that all the activities in the plant and helped me to

relate what we studied in our college with actual working of the organization.

Every organization has various departments so does The Ace Designers Ltd also. The

project has encouraged in going to different departments of company and understanding of

function of each department. During the period of project, it gives idea of the production

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administrative, finance, quality control department of the company etc and also understood the

inter connection between various departments and how they working towards the achievement

of common organization goal.

It aided to know the structure of the company along with the employee’s

delegation of authority and responsibility. Learned how various department activities

are interrelated in the organization. Obtained information regarding the finance

department, functions done by finance manager.

The functions of finance department are like preparation of final accounts, preparation

of bank statement, budget preparation, calculation of attendance bonus, preparation of monthly

journal, ledger and trail balance, auditing, preparation of cost sheet etc and also acquired

information regarding facilities provided to the employees, customers, shareholders, and public

in large. Bring together information regarding the marketing department, functions done by

marketing manager, functions are providing training programmes to employee, collection of

feed backs, providing information to sales departments about the demands of the product,

monitoring of sales, processing credit proposal for customers, processing and sending replies to

audit queries at the divisional level, liaison with bulk buyers.

Thus 7 S’s i.e. the structure; strategy, system, staff, skills, style and shared value of

company are studied during the project. The Ace Designers Ltd is a good place for an

organizational study as it is involved in various activities from birth to its distribution. Thus

every aspect could be studied in one single organization. The employees in the company were

supportive in conducting the studies in the organization.

The learning experience in Ace Designers Ltd has helped me tremendously and updated

my skill sets and given confidence to enter the corporate world. As a management student it is

of great help to gain practical knowledge through the application of theory learnt in real life.

This in plant training was a great practical learning experience for me which is expected from

industrial study. So the learning experience in the sense the overall view in company’s day to

day activities which were all the aspects to be helped in project to study for me.

CHAPTER: 1

GENERAL INTRODUCTION

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Ace Designer Ltd is engaged in the machine tools business. The company needs huge

inventory and the need of working capital is very high. The company had to maintain a huge

cash and bank balance. The company is having high sales, accordingly all the collections from

agents and debtors were remitted to the bank account daily. Hence the company will be

showing negative working capital, it does not mean the company is at loss. The working capital

meets the short – tm financial requirements of a business enterprise. It is a trading capital, not

retained in the business in a particular form for longer than a year.

The money invested in it changes its form and substance during the normal course of

business operations. The need for maintaining an adequate working capital can hardly be

questioned. Just as circulation blood is very necessary in the human body to maintain life, the

flow of funds is very necessary to maintain business. If it becomes weak, the business can

hardly prosper and survive. The success of a firm depends ultimately, on its ability to generate

cash receipts in excess of distribursements

1. a. Statement of the Problem

The project focuses on study of working capital management of Ace Designers Ltd. The

study gives fair idea of improvement in efficiency of working capital at Peenya Bangalore. An

improved working capital system can be suggested. This will help the Company to raise and

manage working capital efficiently.

1. b. Objective of the Study

The primary objective of the study is to know the importance of the working capital

management in Ace Designers Ltd and the secondary objective of the study are following:

To understand and analyze the working capital position of ACE DESIGNER LTD

To study the efficiency and effectiveness of working capital management of the

company.

To know the changes in working capital.

1. c. Scope of the Study

The scope of the working capital management lies in testing of short term solvency and

on the effectiveness with which the business is conducted. Tests of receivables and inventory

should be regarded primarily as relating to solvency rather than to efficiency. Standards of

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turnover always are held as tentative for the final test of effectiveness of business management.

The study covers in areas in cash, inventory, accounts receivables, financing of working capital

and other related matters. The scope of working capital management deals with testing of short

term solvency and liquidity position of company. It helps n controlling the components of

working capital. It gives an idea of improvement in the efficiency of working capital

management.

The working capital management is critical for all firms, especially for small

undertakings. A small firm may not have investment in fixed assets but it has invested in

current assets. Small firm in India faces a several problem of collecting their debts from

debtors. Thus the study of working capital is important for the successful

conducting of the business.

1. d. Methodology

This project “A Study on Working Capital Management of Ace Designer Ltd” is

considered as analytical research. Analytical Research is defined as the research in which,

researcher has to use facts or information already available, and analyze these to make a critical

evaluation of the facts, figures, data or material.

The project includes finding of primary data and secondary data. It includes surveys and

fact- finding enquiries. The project basically covers description of state of affairs, as it exists at

present. Here, the job done as by using the facts and information already available. The

research is done with an aid of the annual reports the company database textbooks and

observation and interaction being the only source of primary data whatever is used. The same

set of information is analyzed to make the critical evaluation of the material. With the given

nature of research wherein the analysis of the existing set of affairs are used to arrive the effect

of working capital management on the return and profitability of the company. The quality of

the project work depends upon the methodology adopted for the study, which in turn depends

up on the nature of the project work. The main strength of the project report depends on the

process of collecting, synthesizing and analyzing of the information.

Primary Data: The primary data includes the information collected from assistant general

manager, senior manager, DGM, staff and other employees of the company. Primary Data are

those, which are collected fresh and for the first time The primary data were collected by

interaction, discussion with the accounts manager as well as the finance staff and observation

of the activities of the organization. In the course of time , the finance manager and his

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executives, provided very appreciable co-operation during the interaction. Along with this,

informal discussion with other, members involved in the financial activities.

Secondary Data: The company manuals formed the main source of data collection. Annual

reports, magazines, articles, journals, and various financial management books have been

referred for this study. Five ear Balance sheet & Profit & Loss account stated in annual reports

were used for analysis Working Capital & concerned ratios that were used as tools of analysis

based upon the company’s financial position, performance was evaluated suggestions were

made. Regarding financing of working capital both the methods were evaluated by extracting

information from balance sheet for three years, then the best alternative was chosen based on

which the companies position regarding the financing of working capital.

1. e. Limitations of the Study

This survey has tried to collect the best possible information on working

capital management of Ace Designers Ltd, but there are some limitations are there in this report

and it can be improved further. There are in this research because of the following reasons.

1. Non disclosure of facts: It has not been possible to have in depth study because of non-

disclosure of facts by the company on the pretext that it would affect the interest of the

organization. Some of the information will not be disclosed by the company. If they give

relevant facts, the result may be more accurate and relevant. So it is treated as one of the main

limitations of the report.

2. Inadequate Time Period: This survey work has completed within 10 weeks due to time

constraint which is very less for such kinds of the research, due to lack of sufficient time. If it

can be done with the sufficient time, then result may be more accurate and relevant.

3. Scope of the Study is Restricted to 5 Years: The scope of the study of working capital

management is restricted to only for five years. The working capital position is to be finding

out only for five years. It is also one of the limitations of this report.

4. Limited Scope: The scope is limited to Ace Designers Ltd only and it cannot be globalized.

If it can globalize means we can get a lot of information through various sources. It is also one

of the limitations of this report.

5. Lack of expertise and knowledge: The lack of expertise and knowledge of the researcher

may affect the quality of the study. This research is done without much training and also the

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researcher may not have the depth knowledge about research. It is also one of the limitations of

this report.

6. Ratio’s are not Future Indicators: The ratios are calculated from the past

financial statements are no indicators of the future. It is calculated from last five

years. It didn’t given accurate results to the research. It is also one of the limitations of the

research.

Chapter Scheme: In this chapter scheme, the survey has given basic introduction to the project

which is prescribed by Visvesvaraya Technological University, Belgaum for the partial

fulfillment of MBA program.

First Chapter: The first chapter highlights the basic information regarding

project such as statement of the problem, objectives of the study, scope, methodology used in

the research for data collection and sampling technique and also the limitation of the research.

Second Chapter: The second chapter gives a profile on theoretical aspects of the research

topic i.e., working capital. It also consists of important definitions, meaning, needs,

determinants, theories, merits and demerits of the working capital. The Third Chapter

includes the data analysis and interpretation of the data with the help of some statistical tools

like graphs on the findings, which gives the brief idea about the research. All the data collected

with the help of the various sources are analyzed and interpreted in this chapter. The Fourth

chapter encompasses findings from the study and some suggestions for the company; it also

includes the questionnaire used to collect the data and the list of the bibliograph of the study.

Thus the above discussion comprises the basic introduction to the problem, statement

of the problem. It also includes the objectives of the project, research methodology, and data

collection methods, source of data and limitation the study. This gives base to whole project.

CHAPTER 2

CONCEPTUAL FRAMEWORK

2.1 Introduction

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Business activity is dynamic in nature and subject to wide fluctuations. The movement

from the working capital to income and profits and back to working capital is one of the most

vital characteristics to business administration. This is concerned with the expenditure of fund

with hope that they will return, rendering an additional amount called profit. If the operations

of an enterprise are to run smoothly a proper relationship between fixed capital and current

capital must be maintained. Sufficient liquidity must be achieved and maintained to provide

the fund to pay off obligation as they mature. The adequacy of cash and other current assets,

together with their efficient handling, virtual determine the survival or demise of the

enterprises. Working capital management ids an integral part of over all corporate financial

management. For the finance manager who is ready to pay his roll and has a working

knowledge of tools and techniques that he can employ to open a welcome challenge and

opportunity.

2.2 Definition

According to Genestenberg “Working Capital means Current Assets of a company that are

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

inventories, inventories to receivable, receivable to cash.”

According to Westen & Brigham “Working capital refers to a term investment in short term

assets cash, short term securities accounts receivables and inventories.”

2.3 Meaning of Working capital

The term Working capital is commonly used in used for the capital required for day to

day working in a business concern. In general Working capital means the deference between the

current assets and current liabilities. The major current assets are cash, marketable securities,

accounts receivable and inventories. Current liabilities are those liabilities which are intended to

be paid in the ordinary course of business, within a year, out of the current assets or earnings of

the concern. The basic current liabilities are accounts payable, bills payable, bank overdraft and

outstanding expenses.

The goal of working capital management is to manage the firm’s current assets and

liabilities in such a way that a satisfactory level of working capital is maintained. This is so

because if the firm cannot maintain a satisfactory level of working capital, it is likely to become

insolvent and may even be forced into bankruptcy.

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Each of the short term sources of financing must be continuously managed to ensure that

they are obtained and used in the best possible way. The interaction between current assets and

current liabilities is, therefore, the main theme of the theory of working management. The

difference between inflow and outflow of cash is also known as the difference between current

assets and current liabilities. Current assets consists of cash/bank balance, short from

investments, receivables, stocks advance payments etc., current liabilities include creditors, bills

payables, bank overdraft, short term loans etc.

Figure No. No.2.1B: Classification of Working Capital

On the basis of above diagram it is clear that working capital can be classified in to two

types, on the basis of concept and another one is on the basis of time. On the basis of concept it is

divided in to Net Working Capital and gross working capital. On the basis of time divided into

Permanent Working capital and Variable Working Capital. Permanent Working Capital again be

divided into Seasonal and Special Working Capital, and Variable Working Capital is divided into

Initial and Regular Working Capital.

2.4 On The Basis Of Concept

i. Net Working Capital: This is the difference between current assets and current liabilities.

Current Liabilities are those that are expected to mature within an accounting year and include

creditors, bills payable and outstanding expenses. Investment is current assets represent a very

49

On the basis of time

Permanent Working Capital

Gross working Capital

Variable Working Capital

On the basis of concepts

Net Working Capital

Seasonal Working Capital

Working Capital

Initial Working Capital

Special Working Capital

Regular Working Capital

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significant portion of the total investment in assets. In case of public limited companies in India,

current assets constitute around 60% of the total capital employed. Therefore the finance

manager should attention to working capital management.

Working Capital Management is no doubt significant for all firms, but its significance is

enhanced in cases of small firms. A small firm has more investment in current assets than fixed

assets and therefore current assets should be efficiently managed. He working capital needs

increase as the firm grows. As sales grow, the firm needs to invest more in debtors and

inventories. The finance manager should be aware of such needs and finance them quickly.

Current Assets can be finance through long-term and short-term sources. The ratio of

long-term to short-term source will depend on whether the firm is aggressive of conservative. It

the firm is aggressive then it will finance a part of its permanent current assets with short-term

funds. On the other hand, a conservative firm will finance its permanent assets and also a part of

temporary current assets with long-term financing.

ii. Gross Working Capital: This refers to the firm’s investment in current assets. Current

Assets are the assets which can be converted into cash within a short period say, an accounting

year. Current assets include cash, debtors, and bill receivable, short-term securities. Etc.

2.5 On the basis of Time

i. Permanent Working Capital: Permanent Working Capital is permanently locked up in

the circulation of current assets. It covers the minimum amount requested for maintaining the

circulation of current assets. It is the minimum level of current assets. It is permanent in the same

way as the firm’s fixed assets are depending upon the changes in the production and sales, the

need for working capital, over and above permanent working capital, will fluctuates.

ii. Initial Working Capital: At its inception and during the formative period of its

operations a company must have enough cash fund to meet its obligations. The need for initial

working capital is for every company to consolidate its position.

iii. Regular Working Capital: It refers to the minimum amount of liquid capital required

to keep up the circulation of the capital from the cash inventories to account receivable and from

account receivables to back again cash. It consists of adequate cash balance on hand and at bank,

adequate stock of raw materials and finished goods and amount of receivables.

iv. Variable Working Capital: It is the extra working capital needed to support the

changing production and sales activities of the firm. Both kinds of working capital – permanent

and fluctuating are necessary to facilitate production and sales through the operating cycle. It

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refers to the past of the Working Capital that changes with the volume of business; it may be

divided into two classes.

v. Seasonal Working Capital: There is many line of business where the volumes of

operations are different and hence the amount of working capital varies with seasons. The capital

required to meet the seasonal needs of the enterprise knows as Seasonal Working Capital.

vi. Special Working Capital: The capital required to meet any special operations such as

experiments with new products or new techniques of production and making interior advertising

campaign etc, is also known as Special Working Capital.

2.6 Determinants of Working Capital

There are no set rules or formulate to determine the working capital requirements of

firms. A large number of factors, each having a different importance, influence working capital

needs of firms. The importance of factors also changes for a firm over time. Therefore, an

analysis of relevant factors should be made in order to determine total investment in working

capital. The following is the description of factors which generally influence the working

capital requirements of firms.

i. Nature of Business: Working capital requirements of a firm are basically influenced by

the nature of its business. Trading and financial firms have a very small investment in working

capital. Retail store, for example, must carry large store of a variety of goods to satisfy varied

and continuous demands for their customers. A large departmental tore like wall-mart may

carry, say, over 20000items. Some manufacturing business, such as tobacco manufacturer and

construction firms also have to invest substantially in working capital and a nominal amount in

fixed assets.

ii. Market and demand condition: The working capital needs of a firm are related to its

sales. However, it is difficult to precisely determine the relationship between volume of sales

and working capital needs. In practice, current asset will have to be employee before growth

takes place. It is, therefore , necessary to make advance planning of working capital for a

growing firm on a continuous basis. Growing firms may need to invest funds in fixed assets in

order to sustain growing production and sales. This will, in turn, increase investment in current

assets to support enlarged scale of operations.

iii. Technology and manufacturing policy: The manufacturing cycle comprises of the

purchase and use of raw materials and the production of finished goods. Longer the

manufacturing cycle, larger will be the firm’s working capital requirements. For example, the

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manufacturing cycle in the case of a boiler, depending on its size, may range between six to

twenty-four months. On the other hand, the manufacturing cycle of products such as detergent

powder, soaps, chocolate etc. May be a few hours.

iv. Credit Policy: The credit policy of the firm affects the working capital by influencing

the level of debtors. The credit terms to be granted to customers may depend upon the norms of

the industry to which the firms belongs. But a firm has the flexibility of shaping its credit

policy within the constraint of industry norms and practices. The firm should use discretion in

granting credit terms to its customers.

v. Availability of Credit from Suppliers: The working capital requirements of a firm

are also affected by credit terms granted terms granted by its suppliers. A firm will needless

working capital if liberal credit terms are available to it from suppliers. Suppliers credit

finances the firm’s inventories and reduces the cash conversion cycle. In the absence of

supplier’s credit the firm will have to borrow funds for bank.

vi. Operating Efficiency: The operating efficiency of the firm relates to the optimum

utilization of all its resources at minimum costs. The efficiency in controlling operating costs

and utilizing fixed and current assets leads to operating efficiency. The use of working capital

is improved and pace of cash conversion cycle is accelerated with operating efficiency. Better

utilization of resources improves profitability and thus, helps in releasing the pressure on

working capital.

vii. Price Level Changes: The increasing shifts in price level make functions of financial

manager difficult. She should anticipate the effect of price level changes on working capital

requirements of the firm. Generally rising price levels will require a firm to maintain higher

amount of working capital. Same levels of current assets will need increased investment when

prices are increasing.

2.7 Issues in Working Capital Management: Working capital management refers to

the administration of all components of working capital-cash, marketable securities, debtors

and stock and creditors. The financial manager must determine levels and composition of

current assets. He must see that right resources are tapped to finance current assets, and that

current liabilities are paid in time. There many aspects of working capital management which

make it an important function of the financial manager.

Time is one of the important aspect of working capital. Working capital management

requires much of the financial manager’s time. Working capital requires large portion of

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investment in assets. It has great significance for all firms but it is very critical for small firms.

The need for working capital is directly related to the growth of the firm.

2.8 Estimating Working Capital Needs: The most appropriate method of calculating

the working capital needs of a firm is the concept of operating cycle. However, a number of

other methods may be used to determine working capital working capital needs in practice. We

shall illustrate here three approaches which have been successfully applied in practice. To

estimate working capital requirements on the basis of average holding period of current assets

and relating them to costs based on the company’s experience in the previous years. This

method is essentially based on the operating cycle concept. To estimate the working capital

requirements as a ratio of sales on the assumption that current assets change with sales. The

ratio of fixed investment is also one of the tool to estimating working capital.

2.9 Policies for Financing Current Assets: A firm can adopt different financing

policies for the purpose of financial needs of the company. Long term financing, short term

financing and spontaneous financing are the main three types of financial policies are there in

financing current assets. These can be explained as under-

i. Long term financing: The long term financing is one of the important policies for

financing current assets. The sources of long term financing include ordinary share capital,

debentures, long term borrowings from financial institutions and reserves and surplus (retained

earnings).

ii. Short Term Financing: The short term financing is obtained for a period less than one

year. It is arranged in advance from banks and other supplier’s of short term finance in the

money market. Short term finance include working capital funds from banks, public deposits,

commercial paper, factoring of receivable etc.

iii. Spontaneous Financing: Spontaneous financing refers to the automatic sources of

short term funds arising the normal course of business. Trade credit and outstanding expenses

are examples of spontaneous financing. There is no explicit cost of spontaneous financing. A

firm is expected to utilize these sources of finances to the fullest extent. The real choice of

financing current assets, once the spontaneous sources of financing have been fully utilized, is

between the long term and short term sources of financing. The approaches involved in the

estimation of working capital may be studied in three types:

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Matching Approach

The firm can adopt a financial plan which matches the expected life of assets with the

expected life of the source of funds raised to finance assets. Thus, a ten year loan may be raised

to finance a plant with an expected life of ten years. When the firm followes matching

approach, long term finance will be used to finance fixed assets and permanent current assets

and short term financing to finance temporary or variable current aseets. However it should be

realised that exact matching is not possible because of the uncertainty about the expected lives

of assets.

Conservative Approach

A firm in practice may adopt a conservative approach in financing its current asset and

fixed asset. The financing policy of the firm is said to be conservative when it depends more on

long term funds for financing needs. Under a conservative plan, the firm finances its

permanent asset and also a part of temporary current asset with long term financing. In the

periods when the firm has no need for temporary current assets, the idle long term funds can be

invested in the traceable securities to conserve liquidity.

Aggressive Approach

A firm may be aggressive in financing its asset. An aggressive policy is said to be

followed by the firm when it uses more short term financing than warranted by the matching

plan. Under an aggressive policy the firm finances a part of its permanent current assets with

short term financing. Some extremely aggressive firms may even finance a part of their fixed

assets with short term financing. The relatively more use of short term financing makes the

firm more risky.

2.10 Need For Working Capital

Although, fixed capital plays a vital role in the establishment of a firm, the importance of

working capital need not be over emphasized. Working capital is needed to keep the firm

working. From the time the finished goods are purchased for the purpose of resale till they

actually sold out and sales proceeds are realized, the adequate provision for working capital must

be made.

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The need for the working capital arises because of the following points to purchase raw

materials, spare parts and other component parts, to pay wages and salaries and other charges, to

meet over head expenses, to pay selling and distribution expenses, to grant credit facilities to

customers, to hold adequate stock of raw materials finished goods, spare parts, to provide for

contingencies.

2.11 Importance of working capital

Working capital is an investment on current assets. A firm has to maintain adequate

working capital in order to run the business smoothly and efficiently. Working capital should

neither be excess nor deficit. Excess working capital restricts the profitability of a concern by

keeping the funds idle. It results in unnecessary accumulation of stock and thereby causes loss

due to wastage, theft, pilferage etc. Similarly, inadequate working capital prevents a firm from

availing itself of new business opportunities, and also liberal credit terms from suppliers. The

reason most people look of balance sheet is to find out a company’s working capitals position it

tells what would be left if any company raised all of its short term resources and used them to

pay off its short term liabilities. The more working capital the less financial strain a company

experiences on main position is being able to foresee any financial difficulties that may arise,

poor working capital leads to financial pressure on a company.

Thus, adequate working capital plays an important role in the successful operation of

business activities. Importance of working capital can be better understood from the following

points. It protects the solvency of the firm, it enables the firm to get the benefit of cash discounts,

better credit terms to the customers, it helps in achieving stability, easy loans and advances from

banks and other financial institutions, creation of goodwill, improves general morale of

employees, easy execution of rush order sand capacity to hold up inventories.

Ratio Analysis

A ratio is statistical measure to know the relationship between two accounting figures of

a concern relating to different years. The significance of ratio analysis lies in the fact that it

presents on comparative basis and enables the drawing of inference reading the performance of

the firm.

Importance of Ratio Analysis

Liquidity Position: With the help of ratio analysis conclusions can be drawn regarding the

liquidity positions of a firm. A firm can be said to have the ability to meet its short-term

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liabilities if it has a sufficient liquid funds to pay the interest on its short-maturing debt. This

ability is reflected in the liquidity ratios of a firm. The liquidity rations are particularly useful in

credit analysis by banks and other suppliers of short-term loans.

Long-term Solvency: Ratio analysis is equally useful for assessing the long-term financial

viability of a firm. This aspect of the financial position of a borrower is of concern to the long-

term creditors, security analysis, and the present and potential owners of the business. The

long-term solvency is measured by the leverage/capital structure and profitability ratios, which

focus on earning power and operating efficiency.

Operating Efficiency: Yet another dimension of the usefulness of ratio analysis, relevant from

the viewpoint of management, is that it throws light on degree of efficiency in the management

and utilization of its assets. The various activity ratios measure this kind of operational

efficiency.

Overall Profitability: The outside parties, which are interested in one aspect of the financial

position of a firm, the management is constantly concerned about the overall profitability of the

enterprise. That is, they are concerned about the ability of the firm to meet its short-term as

well as long-term obligations to its creditors, to ensure a reasonable return to its owners and

secure optimum utilization of the assets of the firm.

Inter-Firm Comparisons: One of the popular techniques is to compare the ratios of a firm

with the industry average. It should be reasonably expected that the performance of a firm

should be in broad conformity with that of the industry to which it belongs. An inter-firm

comparison would demonstrate the relative position vis-à-vis its competitors.

CHAPTER 3

DATA ANALYSIS AND INTERPRETATION

The term Data means group of a message and understood that represent the

qualitative or quantitative attribute of a variable or set of variables. The results obtained during

the study on Working Capital Management at Ace Designers Ltd is presented and discussed in

this chapter.

3.1 Objective 1

To Study the changes in Working Capital Position of Ace Designers Ltd

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An optimum function of the management and the prime duty of the finance department

as to maintain an optimum level of working capital has got such an important position because

of its nature of revealing the clear cut position of the liquidity of the firm. Though there are

several tools of analyzing working capital, the below mentioned are note worthy. Statement of

changes in working capital. Working capital ratios.

Statement of changes in Working Capital at Ace Designers Ltd

Statement of changes in Working Capital shows the trend to changes in working

Capital. This statement is prepared with the help of current assets and current liabilities of two

Periods. It is comparative statement that is used to calculate increase or decrease in working

Capital. It also indicates the overall effects of the changes, which shows the trend in changes of

working capital and its components.

This is the difference between current assets and current liabilities. Current

Liabilities are those that are expected to mature within an accounting year and include

creditors, bills payable and outstanding expenses. Working Capital Management is no doubt

significant for all firms, but its significance is enhanced in cases of small firms.

Table 3.1B. Statement of Changes in Working Capital For The Year

2005-06 when Compared To 2006-07 (Rs in Crores)

Particular 2005-06 2006-07 Increase Decrease

A. Current AssetInventories 242378637 346747382 104368745

Sundry Debtors 256160049 399955392 143795343

Cash & Bank Balance 221088968 159647129 61441839

Other current asset 55405546 156356444 100950898

Loans & Advances 36668401 67104217 30435816

Total Current Asset 811701601 1129810564

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B. Current Liabilities

Current Liabilities 354080008 431847847 77767839

Provision 100003701 12916417 87087284Total Current Liabilities 454083709 444764264

Net Working capital (A-B) 357617892 685046300

Increase in working capital 327428408 327428408

Total 685046300 685046300 466638086 466638086

Source: Company Annual Report

In the above year 2005-06, there is an increase in the working capital by Rs.

327428408 crores. This is because: As we can see that there is a great increase in

Current Assets of the company, because there is high increase in inventories

Debtors, Other Current Assets of the company. But Cash & Bank Balance decreased.

From the above table it is clear that there is a increase of Rs. 77767839 crores in

the liabilities of the company and also an decrease in the provisions of Rs. 87087284

crores which lead to the increase in working capital.So from all the above calculation

we can see that there is good increase in the working capital. So we can say

that company is more likely to increase their inventory because they thinking it for

the long term perspective.

The net working capital for the year 2005 was Rs. 357617892 crores and for the year

2006 was Rs. 685046300 crores. As compared to year 2005 there was an increase of working

capital of Rs. 327428408 crores. The current assets increased from Rs.811701601 Crores to Rs.

1129810564 crores and current liabilities also decreased form Rs. 454083709 crores to Rs.

444764264 crores during the same period.

Particular 2006-07 2007-08 Increase Decrease

A. Current Asset

Inventories 346747382 511862684 165115302

Sundry Debtors 399955392 45988580 59853188

Cash & Bank Balance 159647129 44223138 115423991

Other current Asset 156356444 154648539 1707905

Loans & Advances 67104217 73500935 6396718

Total Current Asset 1129810564 1244043876

B. Current Liabilities

Current Liabilities 431847847 475969738 44121891

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Provision 12916417 76317161 63400744

Total Current Liabilities 444764264 552286899

Net Working capital (A-B) 685046300 691756977

Increase in working capital 6710677 6710677

Total 552286899 552286899 231365208 231365208

Table 3.2B. Statement of Changes in Working Capital For The Year

2006-07 when Compared To 2007-08 (Rs in Crores)

Source: Company Annual Report

In the above table it is seen that, there is an increase in the working capital by

Rs.6710677 Crores in the year 2006-07, this is because As we can see in the above table, there

has been decrease in other current assets, cash and bank balance. In spite of this, the current

assets have been increased due to the increase in sundry debtors and inventories, loans and

advances. As we can see there is overall increase in current liabilities. This is due to increase in

the current liabilities by Rs. 44121891 crores and increase in the provisions by Rs. 63400744

crores. So as the liabilities have increased this year, there has been an increase in the current

assets, resulting in an increase in working capital.

The net working capital for the year 2007 was Rs. 691756977 crores and for the

year 2006 is Rs. 685046300 crores. As compared to the year 2006 there is an increase of

working capital of Rs 6710677 crores in the year 2007. The current assets increased from Rs.

1129810564 crores to Rs. 1244043876 crores and current liabilities increased form Rs.

444764264 crores to Rs. 552286899 crores during the same period.

Particular 2007-08 2008-09 Increase Decrease

A. Current Asset

Inventories 511862684 533753597 21890913

Sundry Debtors 45988580 255576852 20423178

Cash & Bank Balance 44223138 102968897 58745759

Other current Asset 154648539 - 154648539

Loans & Advances 73500935 195303577 121802642

Total Current Asset 1244043876 1087602923

B. Current LiabilitiesCurrent Liabilities 475969738 235145631 240824107

Provision 76317161 67971497 8355664

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Total Current Liabilities 552286899 303117128

NetWorking capital (A-B) 691756977 784485795

Increase in working capital 92728818 9272818

Total 784485795 784485795 451609085 451609085

Table 3.3B. Statement of Changes in Working Capital For The Year

2007-08 when Compared To 2008-09 (Rs in Crores)

Source: Company Annual Report

From the above table it is clear that in the year 2007-08, there has been an increase in the

working capital of Rs. 92728818 crores. This is because: As we can see that there is a great

increase in the Inventories, cash and bank balance, there is great decrease in debtors, other

current asset. As a result there has been an increase in the overall current assets of the

company. As we can see that there is an decrease of Rs. 240824107 croes in the liabilities of

the company, and there is a decrease in the provisions of Rs. 8355664 crores. So from all the

above calculation we can see that there is an increase in the working capital. So we can say

that company is more likely to increase their inventory from the long term perspective.

The net working capital for the year 2007 was Rs.691756977 crores and for the year

2008 is Rs.78448579 crores. As compared to year 2007 there is an increase in the working

capital of Rs. 92728818. The current assets decreased from Rs. 1244043876 crores to Rs.

1087602923 crores and current liabilities also decreased form Rs.552286899 crores to Rs.

303117128 crores during the same period.

Table 3.4B. Statement of Changes in Working Capital For The Year

2008-09 when Compared To 2009-10 (Rs in Crores)

Particular 2008-09 2009-10 Increase Decrease

A. Current Asset

Inventories 533753597 417502371 116251226

Sundry Debtors 255576852 353599104 98022252

Cash & Bank Balance 102968897 153215425 50246528

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Loans & Advances 195303577 308072423 112768846

Total Current Asset 1087602923 1232389323

B. Current Liabilities

Current Liabilities 235145631 664395332 429249701

Provision 67971497 69391054 1419557

Total Current Liabilities 303117128 733786386

Net Working capital (A-B) 784485795 498602937

Decrease in working capital 285882858 285882858

Total 784485795 784485795 546920484 546920484

Source: Company Annual Report

In the above table it is clear that, there is an decrease in the working capital of Rs.

285882858 crore in the year 2009-10, this is because We can see that the Current Assets of

2010 have been increased due to the increase in sundry debtor’s cash and bank balance and

loans and advances. But there is a decrease in Inventories. It is clear from the above table that

there is a increase in the overall Current Liabilities due to the increase in the current liabilities

and provisions of Rs. 429249701 crores and Rs. 1419557 crores respectively.

The net working capital for the year 2009 was Rs. 784485795 crores and for the

year 2010 is Rs.498602937crores. As compared to year 2009, there is a decrease in the working

capital by Rs. 285882858 millions. The current assets increase from Rs. 1087602923 crores to

Rs. 1232389323 crores and current liabilities increases from Rs.303117128 millions to Rs.

733786386 crores during the same period.

Table 3.5B. Working capital at Ace Designers Ltd under Gross Concept

(Rs in crores)Particulars 2005-06 2006-07 2007-08 2008-09 200-10

Current Assets

Inventories 242378637 346747382 511862684 533753597 417502371

Sundry Debtors 256160049 399955392 45988580 255576852 353599104

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Cash & Bank Balance 221088968 159647129 44223138 102968897 153215425

Other current asset 55405546 156356444 154648539

Loans & Advances 36668401 67104217 73500935 195303577 308072423

Gross working capital 811,701,601 1,129,810,564 1,244,043,876 1,087,602,923 1,232,389,323

The table shows the gross working capital of the firm for five years. As per the analysis it

is understood that in the year 2005-06 the gross working capital was 811,701,601 where in the

next year it increased to 1,129,810,564. The next year also increased up to 1,244,043,876. But

the trend changes and decreases it to 1,087,602,923in the year 2008-09 because of reduction in

other current asset and so on. This shows that gross concept takes into consideration only the

current assets. It indicates that gross working capital is a quantitative concept. Gross concept

does not the liquidity position of the firm.

Net working capital (NWC) represents the excess of current assets over current

liabilities. The greater the amount of net working capital, the greater the liquidity of the firm.

However, the problem of net working capital as the measure of liquidity is that the changes in

net working capital do not necessarily reflect the changes in liquidity of the firm.

Table 3.6B. Working Capital at Ace Designer Ltd. Under Net Concept Particulars 2005-06 2006-07 2007-08 2008-09 200-10

A. Gross working capital

811,701,601 1,129,810,564 1,244,043,876 1,087,602,923 1,232,389,323

B. Current Liabilities

454,083,709 444,764,264 552,286,899 303,117,128 733,786,386

Net working capital (A-B)

357,617,892 685,046,300 691,756,977 784,485,795 498,602,937

The table shows the net working capital includes both current assets and current

liabilities. Unlike gross working capital it indicates qualitative concept by showing the excess

of current asses over current liabilities. It indicates the liquidity position of the firm.

3.2 Objective 2

To Study The Efficiency And Effectiveness Of Working Capital

Management Of The Ace Designers Ltd

Ratio Analysis A ratio analysis is a statistical yardstick that measures the relationship

between the two concerned terms. The important of the ratio analysis lies in the fact that it

presents facts on a competitive basis and enables the drawing of influences regarding the

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performance of the given terms. With the help of ratios the following can be determined. The

overall operating efficiency and performance of the company, The efficiency with which the

firm in utilizing its various assets in generating revenues., The ability to the firm to meet its

current obligations. In other words , Ratio Analysis is the technique of calculation of a number

of accounting ratios from the data found in the financial statements and the comparison of

these ratios of the current year with that of the previous years. A Financial Ratio gives the

analyst a way of making meaningful comparison of a firm’s financial data at different points

in time and with other firms. It allows various aspects of company’s performance from their

own point of view and interest.

Liquidity Ratio

Liquidity ratios are those ratios, which are intended to measure the liquidity or

short term solvency of an enterprise. They indicate whether it will be possible for an enterprise

to meet the short-term obligations out of its short-term resources. Which presumably provide

the source from which these obligations will be met. From these ratios, much insight can be

obtained into the present cash-solvency of the firm and the firm’s ability to remain solvent in

the event of adversity.

i. Current Ratio

This ratio is commonly used to perform short-term financial analysis. It

indicates the firm’s ability to promptly meet its current liabilities with its current assets. A

relatively high current ratio indicates that the firm is liquid and has the ability to meet its

current liabilities. On the other hand, relatively low current ratio indicates that the firm will

find it difficult to pay its bill. If the current ratio is 1:1, it means that funds yielded by current

asset are just sufficient to pay the amounts due to various creditors and there will be nothing

left to meet the expenses which are being currently incurred. Thus the ratio should always be

more than 1:1.Normally a current ratio of 2:1 is considered satisfactory. An indication of

company’s ability to meet short-term debt obligations the higher the ratio the more liquid the co

Current Ratio = Current Assets Current Liabilities

Table 3.6B. Current Ratio (Rs in crores)

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Year Current assets Current Liabilities Ratio

2005-06 811,701,601 454,083,709 1.79:12006-07 1,129,810,564 444,764,264 2.54:1

2007-08 1,244,043,876 552,286,899 2.25:12008-09 1,087,602,923 303,117,128 3.59:12009-10 1,232,389,323 733,786,386 1.68:1

Figure 3.6B. Current Ratio

Source: Data Collected From Companies Annual Report

The above chart shows that the company’s current ratio. The ratio is good in the 3

years when compared with the conventional standard 2:1. Except 2006, 2010 all the three

years ratio is above the 2:1. In the year 2006 and 2010 the current ratio is 1.79 and 1.68 it is

bad , but the company should reach 2:1 to get good commitment to the short-term liabilities.

This indicates that firm’s commitment to meet its short liabilities was good.

ii. Quick Ratio

This is a severe test of liquidity of a company. It shows the ability of a Business to meet its

immediate financial commitments .It is used to supplement the information given by the

current ratio. Generally a quick ratio of 1:1 is considered to represent a satisfactory current

financial position. This ratio is also known as acid-test ratio. An asset is liquid if it can be

converted into cash immediately without loss of value.

Quick ratio= Quick (or liquid) Assets

64

2006 2007 2008 2009 2010

0

0.5

1

1.5

2

2.5

3

3.5

4

1.79000000000001

2.542.25

3.59

1.68000000000001

Ratio

Years

Ratio

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Current Liabilities

Quick Asset= Current Asset – (Stock + Prepaid expenses)Table 3.7B. Quick Ratio

(Rs in crores)

Years Quick assets Current Liabilities Quick Ratio

2005-06 569322964 454,083,709 1.25:1

2006-07 783063182 444,764,264 1.77:12007-08 732181192 552,286,899 1.32:12008-09 553849326 303,117,128 1.82:12009-10 814886952 733,786,386 1.12:1

Figure 3.7B. Quick Ratio

2006 2007 2008 2009 20100

0.5

1

1.5

2

2.5

QUICK RATIO

years

Qui

ck R

atio

Source: Data Collected From Companies Annual Report

The acid test ratio is a rigorous measure of a firm’s ability to service short-term

liabilities. Generally, an acid-test ratio of 1:1 is considered satisfactory as a firm can meet all

current claims. The ratio is good in the five years when compared with the conventional

standard 1:1. In all the five years the ratio is above the 1:1. So we can say that in the recent

five years the company is having higher liquidity position.

Activity Ratios

Activity ratios are used to indicate the efficiency with which assets and resources

of the firm are being utilized. These ratios are known turnover ratios because they indicate the

speed with which assets are being converted or turned over into sales.

i. Working Capital Turnover Ratio This ratio indicates whether or not working capital has been effectively utilized in

making sales. If a firm makes higher volume of sales with relatively small amount of working

capital, it is an indicator of the operating efficiency of the company.

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Working Capital Turnover Ratio = Sales

Working Capital

Table3.8B. Working Capital Turnover Ratio (Rs in crores)

Years Sales Net Working Capital Ratio

2005-06 2,066,403,500 357,617,892 5.772006-07 2,627,953,345 685,046,300 3.842007-08 2,437,242,014 691,756,977 3.522008-09 1,741,202,903 784,485,795 2.222009-10 1,927,024,997 498,602,937 3.87

Figure 3.8B. Working Capital Turnover Ratio

2005-06 2006-07 2007-08 2008-09 2009-100

1

2

3

4

5

6

7

5.77

3.843.52

2.22

3.87

Ratio

YEARS

RATI

O

Source: Data Collected From Companies Annual Report

The table and figure showing the working capital turnover ratio. In the year of 2006

the working capital ratio is 5.2 and the year of 2007,2008,2009,2010 is 3.84, 3.52, 2.22, 3.87

respectively. In this case the company has the good working capital since past five years with

positive manner. The company has to be maintained same kind of standards there is no any

problem in future coming years.

ii. Debtors Turnover Ratio

This ratio indicates the relationship between net credit sales and trade debtors. It shows

the rate at which case is generated by the turnover of debtors. In other words, this ratio

indicates as to how many days’ average sales are tied up in the amount of debtors. This ratio is

an excellent supplement to the information provided by current ratio.

Debtors Turnover Ratio = Credit Sales Average Debtors

Table 3.9B. Debtors Turnover Ratio

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(Rs in crores)

Years Sales Average Debtors Debtors Turnover Ratio2005-06 2,066,403,500 128,080,025 16.132006-07 2,627,953,345 199,977,696 13.142007-08 2,437,242,014 229,904,290 10.602008-09 1,741,202,903 127,788,426 13.632009-10 1,927,024,997 176,799,552 10.90

Figure 3.9B. Debtor Turnover Ratio

16.13

13.1410.6

13.63

10.9

2006

2007

2008

2009

2010

Source: Data Collected From Companies Annual Report

The purpose of this ratio is to discuss the credit collection power and policy of the

firm. The table and figure shows that the debtor turnover ratio had increased in the year 2006

when compared to following years. In the year 2007 saw a sharp decreased in the debtors

turnover ratio compared to the previous year. In 2008 it was decrease when compared to 2007,

and again increased in 2009, but in 2010 the debtors turnover ratio decreased. This ratio

indicates the number of times the debtors are collected in a year. As per the table ratio is

because it indicates the debts are being collected properly.

iii. Current Asset Turnover Ratio

This ratio shows the relationship between a company’s sales and current assets. A decrease in

this ratio is a good indication of the performance of the company. It shows the ability of the

company to realize the cash from debtors as well as the less amount of money blocked in

inventories.

Current Asset Turnover Ratio = Sales Current Asset

Table 3.10B. Current Turnover Ratio

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(Rs in Crores)Years Sales Current Assets Current Turnover

Ratio2005-06 2,066,403,500 811,701,601 2.552006-07 2,627,953,345 1,129,810,564 2.32

2007-08 2,437,242,014 1,244,043,876 1.962008-09 1,741,202,903 1,087,602,923 1.602009-10 1,927,024,997 1,232,389,323 1.57

Figure 3.01B. Showing Current Asset Turnover Ratio

2006 2007 2008 2009 20100

0.5

1

1.5

2

2.5

3

2.552.32

1.96000000000001

1.6 1.75

Curret asset Turnover Ratio

Years

Ratio

Source: Data Collected From Companies Annual Report

This ratio indicates the extent to which the investment in current asset towards sales.

Compared to last year there is a less fluctuation in the current asset ratio. The Ratio has

decreased in the year 2009 from 1.96 to 1.75 indicating the good performance of the company.

It shows the ability of the company to realize the cash from debtors as well as less amount of

money blocked n inventories.

iv Fixed Assets Turnover Ratio

This ratio indicates the efficiency with which the firm is utilizing its investments in

fixed assets such as plant and machinery, land and building etc. Generally speaking, a high

ratio indicates efficient utilization of fixed assets in generating sales and a low ratio may

signify that the firm has an excessive investment in fixed assets.

Fixed Assets Turnover Ratio = Sales Net Fixed Assets

Table 3.10. Fixed Assets Turnover Ratio

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(Rs in crores)Years Sales Fixed Assets Ratio

2005-06 2,066,403,500 274,114,387 7.54

2006-07 2,627,953,345 302,462,400 8.692007-08 2,437,242,014 591,785,511 4.112008-09 1,741,202,903 734,142,047 2.382009-10 1,927,024,997 676,840,578 2.85

Figure 3.11B. Showing Fixed Asset Turnover Ratio

2006 2007 2008 209 20100123456789

10

7.548.69

4.11

2.38 2.85

Source: Data Collected From Companies Annual Report

The ratio indicates the extent to which the investment in fixed asset contributes

towards sales. The standard norm is 5 times. The fixed assets turnover ratio is 7.54 times

in the year 2006 and it is increased to 8.69 times in the year 2007. But in case of

following years the standard time has the beyond the times, it means it is decreased as

compared to the standard time.

v. Cash Turnover RatioCash turnover ratio indicates the relationship between sales and cash. This ratio

indicates the extent to which cash resources are efficiently utilized by the enterprise.

Cash Turn over Ratio = Sales Cash

Table 3.12B. Cash Turnover Ratio (Rs in crores)

Years Sales Cash Cash Turnover Ratio (Times)

2005-06 2,066,403,500 221,088,968 9.35

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2006-07 2,627,953,345 159,647,129 16.46

2007-08 2,437,242,014 44,223,138 55.122008-09 1,741,202,903 102,968,897 16.912009-10 1,927,024,997 153,215,425 12.58

Figure 3.12B. Cash Turnover Ratio

2006 2007 2008 2009 2010

0

10

20

30

40

50

60

9.3500000000000116.46

55.12

16.91

12.58

cash tournover ratio

Years

Ratio

Source: Data Collected From Companies Annual Report

The table and the figure showing the cash turnover ratio. In 2006 it is 9.35and later

it is increased to 16.46. In 2008 cash turnover ratio is become 55.12.The company as a cash

turnover ratio of 12.58 for the year 2010, as compared in a year 2009 hat is 16.91 which

indicates the cash in the firm is being not used efficiently. The sales are increasing as per the

analysis and at the same time the cash is decreasing.

vi. Net Asset Turnover Ratio

Assets are used to generate sales. A firm should manage its assets efficiently to

maximize the sales. Relationship between sales and net assets is called net assets is called net

assets turnover. A firm’s ability to produce a large volume of sales for a given amount of

assets is the most important aspect of its operating performance.

Net Asset Turnover Ratio = Sales Net Assets

Table 3.13B. Net Asset Turnover Ratio (Rs in crores)

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Years Sales Net Assets Net Asset Turnover Ratio

2005-06 2,066,403,500 693,711,046 2.982006-07 2,627,953,345 1,156,041,351 2.282007-08 2,437,242,014 1,387,366,894 1.76

2008-09 1,741,202,903 1,559,859,156 1.122009-10 1,927,024,997 1,418,195,008 1.30

Figure 3.13B. Net Asset Turnover Ratio

2006 2007 2008 2009 20100

0.5

1

1.5

2

2.5

32.98

2.28

1.76

1.121.3 Net Aset Turnover Ratio

Source: Data Collected From Company Annual Report

The table and figure showing the net asset turnover ratio. In 2006 it was 2.98and in

coming years it decreased in slope manner. It decreased to 2.28 in the year 2007. In a year

2008, 2009 also decreased up to 1.76, 1.12 respectively. But in case of year 2010 it is

increased to 1.3. Here the net asset includes the depreciation.

vii. Inventory Working Capital Ratio

This ratio indicates the relationship between inventory and working capital. Percentage

measure of a firm's capability to finance its inventories from its available cash. Numbers lower

than 100 are preferable as they indicate high liquidity. Numbers higher than 100 suggest that

the inventories are too large in relation to the firm's financial strength.

Inventory Working Capital Ratio = Inventory

Net working capital

Table 3.14B. Inventory Working Capital Ratio

(Rs in crores)

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Years Inventory Net working capital Inventory working capitalRatio (Times)

2005-06 242,378,637 357,617,892 0.68

2006-07 346,747,382 685,046,300 0.512007-08 511,862,684 691,756,977 0.742008-09 533,753,597 784,485,795 0.682009-10 417,502,371 498,602,937 0.83

Figure 3.14B. Showing Inventory Turnover Ratio

2006 2007 2008 2009 20100

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

0.68

0.51

0.740000000000004

0.68

0.830000000000001

Inventory working capitalratio

Years

Ratio

Source: Data Collected From Company annual Reports

The table and figure showing the inventoy to working capital ratio. The ratio is

decreasd from 0.68 to 0.51 between the years 2006 to 2007. It increased to 0.74 in the year

2008 and again it is decreased to 0.68 in the year 2009. But next year 2010 it is increased 0.83.

CHAPTER 4

FINDINGS

This chapter consists of major findings of the analysis conducted. The Analysis is made

based on the objectives, which were set before the analysis. This throws the light on the

various aspects of the working capital and how it affects the company. The objectives were

prepare the basis of working capital management of Ace Designers Ltd.

1. The study tells us that there is an increase in working capital management of the

firm over the past five years.

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2. The study found that the overall financial soundness of the company is increasing year by

year so it is the good improvement of company.

3. Companies’ liquidity position is also increasing day by day over the years.

4. The average debtors collection period is in a decreasing trend, which is a good indication

that the receivables are being well managed.

5. The current asset turnover is showing decreasing trend for the first 4 years and later a

increasing trend. The increasing trend shows the company is not managing its current assets

and more money blocked in inventories.

6. The fixed asset turnover ratio is decreased year by year. But there is growth at the last year

2010. It means the company is not utilizing the asset efficiently. It indicates overtrading

and excessive investment in fixed assets. Here the fixed asset does include depreciation.

7. The company’s net asset turnover ratio is comparatively not good with past three years. But

the current years ratio is good. Here the asset does include depreciation. So it is showing a

decreasing trend because wear and tear is reduced.

8. In Ace Designers Ltd debtors turnover ratio was good because of economic condition and

good policy of the company.

9. Company’s Fixed asset turnover ratio I in progressive when compared with previous year

10. Companies’ liquidity position is also increasing day by day over the years. The company

was able turnaround into a profit making unit within a few years.

11. The Ace designers Ltd was maintaining lower cash and bank balance and it has been

increased during the year but in 2008 they has the more cash balance than year of 2008.

12. The inventory is balance is low when compared with the year of 2009.

SUGGESTIONS

From the above analysis of working capital at Ace Designers Ltd, it is clear that the

management of working capital is satisfactory, but still there is some improvements is

required to be made in the company. Following are the some suggestions to improve the

existing system of working capital followed by the company.

1. The company can make an attempt to search new customers using the company’s

products which will add to the total revenue of the company, and also the company

can turnover its amount of working capital invested for more time in a year.

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2. A still better working capital management can raise more profits for the company

taking it to the heights of prosperity, which make to reduce the company’s working

capital.

3. The effort should be made by the company to increase the availability of cash with

an effective control of inflows and outflows.

4. Company should adopt frequent decision making is involved in the management of

working capital; a separate department should be established to assess the

environmental economic trends and their impact on working capital requirements.

5. The company has to reduce its overall cost of production to improve its competitive

strength and efficiency level and profit.

6. The company should find other sources for financing its current assets than bank

borrowings and trade credits.

7. The company is having less liquid cash comparatively. The cash balance is not

enough to pay off the provisions, if there is an immediate obligation to be met. The

company’s net current assets are less comparatively to the total assets of the

company. This reveals the less liquid position and company must consider current

asset management.

8. Ace Designers Ltd current assets as compare to current liability is less, it must

manage its current assets properly. It is advisable to maintain a higher current asset

by recovering from creditors.

9. The current ratio of the firm has been increasing; higher the liquidity, lesser will be

the profitability to the firm. Hence company has to maintain a balance between

liquidity and profitability.

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General Suggestions

Working capital management is an important aspect of financial management and also

the most time consuming job for financial managers. They have to monitor the working capital

as it is continuously absorbing

1. Increasing the price:-Human mentality is very difficult to understand. For

instance if we sell a product at low price no baby will buy because they think

that low price have low quality, the same product if we try to sell at higher

price than people will buy. Because they think higher value means high

quality.

2. Based on the manufactures expectations:-It is widely agreed that the

facilitators were sincere people who were not deliberately faking the results.

Their choice of keys was based on their own expectations. So, like people

tasting foods or purchasing car, their perceptions were misled by their

expectations.

3. Through direct personal experience:-Normally when we are confident

someone is honest and they tell us that they have learned something through

direct personal experience, we feel it must be true. This applies even more so

when we feel us, ourselves have learned something from our own experience.

4. By price reductions:-Many products and services face new competition from

substitutes and from completely new offerings or bundles from industry

outsiders. Since product differences are closed at an increasing speed and

many companies try to win the battle for customers by price reductions,

products and services tend to become commodities.

5. Providing wider choice of prices for products:-Customer behaviour has

become more hybrids now days. On one hand, customers are increasingly

price sensitive – searching for bargains at marketplaces. On the other hand

they enjoy branded and luxury goods. For many offerings the balance of

power shifts towards the customer. Customers are widely aware of their

greater power, which raises their expectations on how companies should care

for them.

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6. Development of a strong relationship:-The development of a strong relationship

between customers and a company could likely prove to be a significant opportunity

for competitive advantage.

7. Customer satisfaction:-Customer satisfaction is the precondition for repeat

purchases and it prevents the customer from telling others about his

disappointing experiences.

8. Creating emotional bond:-The emotional bond which links the customer so

closely to the company that he develops a clear preference for these products or

brands and is even willing to recommend them to others.

9. Understanding customer loyalty:-The customer establishes an equation

between perceived benefits and perceived costs of one product and compares

this to similar equations of other products. Based on this, customer loyalty can

be understood as to how customers feel about a product, service or brand and

whether their perceived total investments with it live up to their expectations.

10. Brand image:-Consumer perceptions will be positively related to brand

image. Brand image has been a common term in marketing research and practice

for half a century.

11. Know about itself and its offerings:-First of all the company has to find out

how itself and its offerings are perceived by the customers. It is essential to

identify what the customer is actually buying and which features are most

important to him. Only this way it is possible to align the internal focus and resources to

the customer’s expectation.

12. Customer expectations:-customer likes and dislikes information is of greater

value if it can be compared to the customers’ perception of competitive

offerings. Not only will this reveal relative strengths and weaknesses, it is also

a valuable source of ideas for improvement.

13. Through research activities:-Any market research activities, it should be

based on careful customer segmentation. Customer groups that differ by frequency

of use, social status, geographical region or other criteria, are likely to

have different expectations and preferences. Hence, they will probably perceive

an offering in different ways.

14. Added values:-Generic products can be made distinct by adding value through

extra features, such as quality or performance enhancements. In terms of

competition with other products and companies, consumers greatly value these

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added benefits when making a purchasing decision, making it important for

manufacturers to understand the notion of a “total package” when marketing to their

customers.

15. The final level of consumer perception involves augmented properties, which

offer less tangible benefits, such as customer assistance, maintenance services,

training, or appealing payment options.

16. Changing Product Strategies:-Products and consumer perceptions are

variable, so changes in strategy may be required to better address customer needs,

technological developments, new laws and regulations, and the overall product

life-cycle.

17. Product development:-By monitoring external conditions and shifting product

development accordingly, a company can better target its consumers and learn to react

to their needs.

18. Measuring Public relation:-customer perception can measure public relations,

public relations messages may not have influence on consumers' knowledge,

and the influence of the messages might not be positive on consumer's

attitude or behavior;

19. Awareness:-Companies should try to make sure that their customers are fully

aware of all the ways their offering can provide value to them. They have to

explain the customer how this particular product can deliver more value than

those from competitors.

20. By solving customer needs or problems:-A common idea of many authors is

that it is not always necessary to deliver the absolutely perfect

customer experience. Instead it is important to solve the customers need or problem in a

matter that is perceived appropriate.

Responsiveness and service quality:-The degree to which the customer feels the actual

marketing campaign addresses the most important issues, Responsiveness and service

quality of any affiliates

21. The more experience the customer accumulates, the more his perceptions will shift from

fact-based judgements to a more general meaning the whole relationship gains

for him. Over time, he puts a stronger focus on the consequence of the

product or service consumption.

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22. Based on competitor offerings:-In the external environment, the offerings of

competitors, with which a customer compares a product or service will change, thus

altering his perception of the best offer around. Another point is that the public

opinion towards certain issues can change.

23. Measurement system:-Any serious effort to manage customer perceptions starts

with a good measurement system. Companies must be truly willing to look at the

whole process of interaction through the customers eyes. For many companies, this

requires a more or less extensive shift in mindset, since most departments from

development to sales will be involved.  

24. Understanding customer important:-Only if a company knows which features of its

products and services or which other points of contact with the customer are considered

most important by the customers, it can develop appropriate strategies.

25. Consumers can evaluate a product along several levels. Customer perception is basic

characteristics are inherent to the generic version of the product and are defined as the

fundamental advantages it can offer to a customer.

26. Power of suggestion:- In the day today life When we form a judgment about

something we have experienced ourselves, like how much we like ice cream, we

naturally assume our judgment is based entirely on our own perception. However if we

have a prior expectation based on what someone has told us or something we have

assumed, that expectation may have a strong influence on our opinion that we don't

recognize. This is sometimes called the "power of suggestion

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CONCLUSION

Working capital may be regarded as lifeblood of a business. It’s effective provision can

do much to ensure the success of a business, while it’s inefficient management can lead not

only to loss of profits but also to the ultimate down fall of what otherwise might be considered

as a promising concern. The working capital finance in Ace Designers Ltd is satisfactory it has

been increasing over the past five years.

If the working capital is more, it is understood that the company is in an advantages

position. The suppliers judge whether to give credit facilities to the company on this basis of

the current assets held by the company, so if the company is holding more current assets the

suppliers will be ready to provide the credit facilities to the company. On the other hand if the

current assets do not yield any returns the amount is blocked in current assets so the

profitability is affected. So the company should maintain balance between current assets and

current liability

In the overall study of the company’s performance in the past six years, it can be

concluded that the company is doing its best with innovative ideas and adopting new

technology to introduce new products with high quality. Since 1987, Ace Designer Limited

has been India’s leading manufacturer of CNC lathes and auto lathes and has been exporting

machines to countries all around the world, including Brazil, Germany, the UK and US. Also,

it is the only Indian company to make machine tools on a conveyor line. It is a company with

raising sales and is running under profit. This is studied and analyzed under the various heads

of ratio analysis. Observations have also been drawn ad suggestions also given. A good co-

ordination and co-operation exist between the union and the management, which when

maintained , forces better functioning of the organization to achieve its long-term objectives

effectively.

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7. Bussiness Research Methods – S.N. Murthy/U.Bhojaanna – Excell

Books/2e/2007.Pp140-159.

8. Marketing Research – Naresh k malhothra – Pearson Education/PHI/5e/2007.Pp

78-99.

9. Crafting and executing strategy by Arthur A. Thompson Jr, A.J.Stickland iii.Ppl

167-179

10. Financial Management- Paresh P Shah- Indian text edition. Pp 153-162

11. Fundamentals of Financial management- James C Van Horne, John m Wachowicz Jr,

Sumithra N Bhaduri. Pp 197-213.

12. Fundamentals of Financial Management- Tenth edition- Bringham & Houston – Thompson,

South western. Pp 562-610

Internet

1. http://www.acedesigners.co.in

2. www.MachineTool Industry.com

3. www.acegroup.com

4.www.ace designers ltd.com

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5. http://www.investopedia.com

6. http://www.wikipedia.org/wiki/working_capital

7. http://www.sutuition.org/2010/02/working _capital_management.html

8. http://www.studyfinance.com/lessons/workcap/

10. http://www.sutuition.org/2010/02/working _capital_management.html

11. http:// www.osi.hu/cpd/policyresources/fmbp/chapter_06_page1_fmbp.html

12. http:// www.planware.org/workingcapital.html

13. . www.rediff.com

14. www.working capital management.com

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APPENDIX-1

Particulars 31-Mar-10 31-Mar-09 31-Mar-08 31-Mar-07 31-Mar-06

Sources Of Funds      

Shareholders Funds      

Share capital 178,200,000 178,200,000 178,200,000 178,200,000 178,200,000

Reserves and Surplus 1,172,143,583 1,116,998,962 1,066,262,834 794,112,608 441,941,104

Loan Funds      Secured and Unsecured Loans

48,535,141 234,745,861 19,655,430 163,157,174 56,060,686

Deffered Tax Liabilities

19,316,284 29,914,333 23,248,630 20,571,569 17,509,257

Total 1,418,195,008 1,559,859,156 1387366894 1,156,041,351 693,711,047

Application Of Funds      Fixed Assets 676,840,578 734,142,047 591,785,511 302,462,400 274,114,387Capital WIP 9,031,128 29,337,019 40,922,737 6,638,356 84,472

Investments 233,720,365 11,894,295 62,901,669 161,894,295 102,634,178

Current Assets      

Inventories 417,502,371 533,753,597 511862684 346,747,382 242,378,637

Debtors 353,599,104 255,576,852 459808580 399,955,392 256,160,049

Cash and Bank Balance

153,215,425 102,968,897 44,223,138 159,647,129 180,349,085

Other current assets 154,648,539 155,732,944 44,860,865

Loans &Advances 308,072,423 195,303,577 73,500,935 67,727,717 36,763,417

Total 1,232,389,323 1,087,602,923 1,244,043,876 1,129,810,564 760,512,053

LESS : Current liabilities

733,786,386 303,117,128 552,286,899 444,764,264 443,634,043

Net Current Assets 498,602,937 784,485,795 691,756,977 685,046,300 316,878,010

Total 1,418,195,008 1,559,859,156 1,387,366,894 1,156,041,351 693,711,047

Balance Sheet Of Ace Designers Ltd For Past Five Years

APPENDIX-2

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PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCHParticulars 31-Mar-10 31-Mar-09 31-Mar-08 31-Mar-07 31-Mar-06

Income      

Sales 1,927,024,997 1,741,202,903 2,437,242,014 2,627,953,345

2,066,403,500

Other income 35,116,412 27,920,734 129,129,885 112,384,605 71,900,562Total 1,962,141,409 1,769,123,637 2,566,371,899 2,740,337,95

02,138,304,062

LESS : Total Expenditure

1,766,656,741 1,615,153,481 1,970,068,558 2,026,322,399

1,558,846,388

Profit before tax 195,484,668 153,970,156 596,303,341 714,015,551 579,457,674Less : Tax 72,555,777 61,537,010 199,062,061 229,768,889 192,653,260Profit after tax 122,928,891 92,433,146 397,241,280 484,246,662 386,804,414Less : Prior period expense

15,835,070 - - - -

Net Profit 107,093,821 92,433,146 397,241,280 484,246,662 386,804,414Add : Balance brought forward from previous year

945,576,829 904,084,016 671,657,918 367,911,080 131,543,010

Profit available for appropriation

     

Less : Appropriation

1,052,670,650 996,517,162 1,068,899,198 852,157,742 518,347,424

Proposed Final dividend

     

Tax on dividend 44,550,000 35,640,000 53,460,000 115,830,000 35,640,000Transfer to General Reserve

7,399,200 6,057,018 9,085,527 16,245,158 4,998,510

Surplus carried to Balance Sheet

10,709,382 9,243,315 39,724,128 48,424,666 38,680,441

  990,012,068 945,576,829 1,068,899,198 852,157,742 518,347,424

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