Arvind Bothra Project

8/11/2019 Arvind Bothra Project

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CHAPTER-IV

DATA ANALYSIS AND INTERPRETATION

Every business enterprise needs sufficient funds for its day to day operations.

Working capital is the life blood and nerve center of any business concern. The need and for

working capital arises due to the time gap between the production and realization of the cash

from sales.

The goal of the working capital management is to manage the firms current assets

and current liabilities in such a way that a satisfactory level of working capital is maintained.

The company gives almost attention to its working capital and manages the same in an

efficient manner.

Computation of Working Capital:

The two components of working capital are current assets and current liabilities.

They have a bearing on the cash operating cycle. In order to calculate the working capital

needs what is required is the holding period of various types of inventories, the collection

period, and the credit payment period.

The working capital also defends upon the budgeted level of activity in terms of

production sales. The calculation of working capital is based on the assumption that the

production sales are carried on evenly throughout the year and all costs accrue similar.


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STATEMENT SHOWING WORKING CAPITAL PROFORMA

Particulars Amount in

(Rs.)

Estimation of current assets [A]

(I) Inventories

Raw Materials

Work In Progress

Finished Goods

(II) Debtors

(III) Minimum cash and bank balance

(IV) Payment in advance

Total current Assets [A]

Estimation of current liabilities [B]

I. Creditors

(II) Lag in payment of wages

I. Lag in payment of overheads

II. Other expenses lag

Total current Liabilities [B]

Net Working Capital [A-B]

_

_

_

-

-

XXX

_

_

_

_

XXX

XXX


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LEVELS OF WORKING CAPITAL OF

FROM 2008-09 TO 2012-13

(in lakhs)

Particulars 2007-08 2008-09 2009-10 2010-11 2011-12

Current assets

Stocks 274152852 449178242 50516589 54110919 54802111

Receivables againstsupply of power

Cash and BankBalances

761262 1495095 930517 1571290 1400402

Loans and advances 99255878 73268852 72191998 35849331 39202694

Other current assets 2712014 2721285 3174257 3196430 3209364

Total Current

Assets376882007 526663475 126813361 94727970 98614571

Current liabilities

Short term

borrowings(2859063) 561350 222018 725301 1242639

Trade payables 65708618 86639208 17236488 9027660 8990272

Other Current

Liabilities69953961 61325933 41387220 91302240 94190992

Short term

provisions1045415 2447966 3135526 111558 84357

Total current

liabilities133848930 150974457 61981252 101166759 104508260


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Net working capital

Net working capital

(sources:jindal stainless limited)

From the table it was observed that the size of the current assets is

increasing year to year in connection with sales the Excess of current assets are showing

positive liquidity position of the firm.From the above table it can be said that the level of

current asstes has continously growing in the study period the current assets of jindal

stainless limited increased by 34.46% from 2007-08 to 2011-12 representing 3768,82,007 in

the year 2007-08 went upto 986,14,571 in the year 2011-12. It was decreased to 382.06% ,the

amount of cash and cash equalients are 7,61,262 in the year 2007-08 and it grow upto14,00,402 in the year 2011-12.Hence the company is having suffiecent liquidity position to

maintain its current obligations. The current liabilities are increasing year to year. The

current liabilities were at 1338,48,930 lakhs in the year 2007-08 it was decreased to

1045,08,260 lakhs in the year 2011-12.

The company has been continuously maintaining high level of

positive net working capital in the year 2008-09 3756,89,018 lakhs and in 2011-12 the

working capital position is (58,93,689) it represents the liquidity position of the firm is not

satisfactory and the firm is in maintaining with supply of short term funds the liquidity

position infact is much high whem we understand provisions made by the firm.

GROSS WORKING CAPITAL:

TABLE NO 4.1:GROSS WORKING CAPITAL (IN LAKHS)

PARTICULARS 2007-08 2008-09 2009-10 2010-11 2011-12

Gross working

capital

3768.82 5266.63 1268.13 947.27 986.14

Net working

capital

2430.33 3756.89 64.32 (64.38) (58.93)


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Net working capital = Current Assets Current Liabilities

TABLE 4.2: NET WORKING CAPITAL OF ( in lakhs)

YEAR

TOTAL

CURRENT

ASSETS

TOTAL

CURRENT

LIABILITIES

NET WORKING

CAPITAL

2007-08 3768.82 1338.48 2430.33

2008-09 5266.63 1509.74 3756.89

2009-10 1268.13 619.81 648.32

2010-11 947.27 1011.66 (64.38)

2011-12 986.14 1045.08 (58.93)



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From the table 4.2 the net working capital of jindal stainless.ltd is flucting from 2007-08

to 2011-12 and the net working capital has reached a highest level in year 2008-09 at

375689018 lacs due to increase in current assets. The firm should maintain sufficient

current assets to meet its current liabilities and also it can fulfill the clients of outsiders

which are expected to mature for payment with in an accounting year.

-1000

0

1000

2000

3000

4000

5000

6000

2007-08 2008-09 2009-10 2010-11 2011-12

TOTAL CURRENT ASSETS

TOTAL CURRENT LIABILITIES

NET WORKING CAPITAL


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WORKING CAPITAL TURNOVER RATIO:

It signifies that for an amount of sales, a relative amount of working capital is needed.

If any increase in sales contemplated working capital should be adequate and thus this ratio

helps management to maintain the adequate level of working capital. The ratio measures the

efficiency with which the working capital is being used by a firm. It may thus compute net

working capital turnover by dividing sales by working capital.

Sales

Working capital Turnover Ratio =

Net working capital

TABLE NO.4.3: WORKING CAPITAL TO SALES RATIO (in lakhs)

Year Sales Working Capital

Working capital

turnover ratio

(in times)

2007-08 17896.01 2430.33 7.363

2008-09 19729.84 3756.89 5.251

2009-10 5759.99 648.32 8.88

2010-11 138.71 (64.38) (2.15)

2011-12 5561.28 (58.93) (94.36)



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High working capital turnover ratio indicates the capability oforganization to achieve maximum sales with minimum investment in working capital,

companies working capital turnover ratio shows more than two except for the years

2010-11 and 2011-12.it shows negative during the period 2007-08 and 2009-10 the ratios

shows 7.363 and 8.88 respectively it indicates that the capacity of the company to

achieve maximum sales with minimum investment in working capital,by the end of the

study period it was recorded as negative (94.36) due to proportionate decrease in

working capital and sales.

SALES TO INVENTORY RATIO:

-5000

0

5000

10000

15000

20000

25000

2007-08 2008-09 2009-10 2010-11 2011-12

Sales

Working Capital

Working capital turnover ratio (in

times)


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This ratio reveals the relationship between sales and Inventory. This indicates the

efficiency of the firm in producing and selling its products. It is calculated by dividing the

sales by sales.

TABLE NO.4.4: SALES TO INVENTORY RATIO (in lakhs)

Year Sales InventoryInventory to Sales

Ratio

(in times)

2007-08 17896.01 2741.52 6.527

2008-09 19729.84 4491.78 4.392

2009-10 5759.99 5051.65 11.402

2010-11 138.71 541.10 0.256

2011-12 5561.28 548.02 1.024


0

20004000

6000

8000

10000

12000

14000

16000

18000

20000

2007-08 2008-09 2009-10 2010-11 2011-12

Sales

Inventory

Inventory to Sales Ratio (in

times)


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This ratio shows how rapidly the sales are turning into investing on inventory

.from the table 4.4 the sales to inventory ratio fluctuating between 1.02% to

11.40%,during the study period it was maximum in the year 2009-10 with 11.40% and

minimum in the year 2010-11 with 0.256%, due to more investment on inventory the

ratio recorded as 6.527 by the end of study period

CURRENT ASSETS TURNOVER RATIO:

Current assets turnover ratio is calculate to know the firms efficiency of utilizing the

current assets .current assets includes the assets like inventories, sundry debtors, bills

receivable, cash in hand or bank, marketable securities, prepaid expenses and short term

loans and advances. This ratio includes the efficiency with which current assets turn into

sales. A higher ratio implies a more efficient use of funds thus high turnover ratio indicate to

reduced the lock up of funds in current assets. An analysis of this ratio over a period of time

reflects working capital management of a firm .

Sales

Current assets Turnover Ratio =

Current assets


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TABLE NO.4.5: CURRENT ASSETS TURNOVER RATIO

Year Sales Current Assets

Current Assets

Turnover Ratio

(in times)2007-08 17896.01 3768.82 4.748

2008-09 19729.84 5266.63 3.746

2009-10 5759.99 1268.13 4.542

2010-11 138.71 947.27 0.146

2011-12 5561.28 986.14 5.639


From the table 4.5 it was observed that the current assets turnover ratio fluctuates year

by year from 2007-08 to 2011-12 due to increase in sales volume. It represents that the

% of investment in current assets gradually reduced during the study period. The

current assests turnover ratio of jindal stainless limited is showing highest in the year

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

Sales

Current Assets

Current Assets Turnover

Ratio (in times)


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2011-12 that is 5.639 and 2007-08 it shows 4.748 in 2009-10. And it was recorded least in

the year 2010-11 by 0.146.

CURRENT RATIO:

The current ratio is a measure of the firms` short-term solvency. The higher the

current ratio, the larger is the amount of rupees available per Rupee of current liability, the

more is the firms` ability to meet current obligations and the greater is the safety of funds of

short-term creditors.

Current assets include cash and those assets, which can be converted into cash within

a year, such as Marketable Securities, Debtors and Inventories. Prepaid expenses are also

include in current assets as they represent the payments that will not be made by the firm in

future. Current Liabilities include Creditors, Bill payable, Accrued expenses, Short-term

bank loan, and Income Tax Liability and Long-term debt maturing in the current year. The

current ratio is calculated by dividing current assets by current liabilities.

Current Assets

Current Ratio = ---------------------------

Current Liabilities


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TABLE NO.4.6: CURRENT RATIO (in lakhs)

Year Current Assets Current Liabilities Current Ratio

2007-08 3768.82 1338.48 2.815

2008-09 5266.63 1509.74 3.488

2009-10 1268.13 619.81 2.045

2010-11 947.27 1011.66 0.936

2011-12 986.14 1045.08 0.943

(sources:jindal stainless limited

From the table 4.6 it was identified that the current ratio fluctuates year by year from

2007-08 to 2011-12 that is from 0.9632 to 3.488 .It was 2.815 in the year 2007-08 and

increased to 3.488 in 2008-09 from 2009-10 if we observe the current ratio of jindal

stainless limited decreasing due to sudden increase in current liabilities, it was further

observed that the ratio is highest in 2008-09 with 3.488 due to major investment in

current assets rather than fixed assets

0

1000

2000

3000

4000

5000

6000

2007-08 2008-09 2009-10 2010-11 2011-12

Current Assets

Current Liabilities

Current Ratio


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Company quick ratio is more than ideal ratio in 2009-2010 that is 1.23 and the ratio is least in

2010-2011 that is 0.40due to decrease in liquid assets and especially decrease in cash and

bank balances through out the study period the quick ratio is not satisfactory

STATEMENTS OF CHANGES IN WORKING CAPITAL OF

FOR THE YEAR 2008-09 (in lakhs)

Particulars 2007-08 2008-09 Increase Decrease

CURRENT ASSETS

Stocks 2741.52 4491.78 1750.25

Cash and Bank Balances 7.61 14.95 7.33

Loan and advances 992.55 732.68 259.87

Other current asstes 27.12 27.21 0.09

Total Current Assets 3768.82 5266.63 1497.81

CURRENT LIABILITIES

Current liabilities 1328.03 1485.26 157.22

Provisions 10.45 24.47 14.02

Total Current Liabilities 1338.48 1509.74 171.25

Working capital 2430.33 3756.89

Decrease in Working Capital 1326.55


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2430.33

There is net increase in working capital of 1326 lakhs due to increase in all

current assets; those are inventory, other current assets, cash and bank balance etc.The increase in current assets compensate the simultaneous increase in

current liabilities It results increase in working capital

STATEMENTS OF CHANGES IN WORKING CAPITAL OF FOR THE YEAR 2009-

10


CURRENT ASSETS

Stocks 4491.78 505.16 3986.61


Loans and advances 732.68 721.91 10.76

Other current assets 27.21 31.74 4.52


CURRENT LIABILITIES


Provisions 24.47 31.35 6.87


Working capital 3756.89 648.32 3108.56


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Increase in Working Capital

There is net decrease in working capital of 4405 lakhs due to sharp fall in

inventory and also decrease in other current assets.

The decrease in current assets compensates the simultaneous decrease in

current liabilities. It resulted in decrease in working capital


FOR THE YEAR 2010-11 ( in lakhs)


CURRENT ASSETS

Stocks 505.16 541.10 35.94


Loans and advances 721.91 358.49 363.42

Other current asstes 31.74 31.96 0.22


CURRENT LIABILITIES


Provisions 31.35 1.11 30.23


Working capital 648.32 (64.38) 583.93



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Net decrease in working capital increased and reported a net decrease of

7127 lakhs due to decrease in current assets sharply. Mainly loans and advances which

decreased from 721 lakhs to 358 lakhs.

The decrease in current assets compensates the simultaneous decrease in

current liabilities. It resulted in decrease in working capital

STATEMENTS OF CHANGES IN WORKING CAPITAL OF FOR THE YEAR 2011-

12


CURRENT ASSETS

Stocks 541.10 548.02 6.91

Cash and Bank Balances 15.71 14.001.71

Loans and advances 358.49 392.0233.53

Other current assets 31.96 32.090.12

Total Current Assets 947.27 986.1438.86

CURRENT LIABILITIES


Provisions 1.11 0.84 0.27


Working capital (64.38) (58.93) 5.45



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There is net increase in working capital of 54 lakhs due to increase in

current assets thoses are inventory, loans and advances etc

The increase in current assets compensate the simultaneous increase in

current liabilities It results increase in working capital


FOR THE YEAR 2007-08


CURRENT ASSETS

Stocks 1924.88 2741.52

Cash and Bank Balances 153.26 7.61

Loans and advances 754.76 992.55

Other current assets 28.44 27.12

Total Current Assets 2861.36 3768.82

CURRENT LIABILITIES

Current liabilities

Provisions 9.10 10.45

Total Current Liabilities 1545.98 1338.48

Working capital


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Arvind Bothra Project