Caparo Project (Vishal Madan)

8/3/2019 Caparo Project (Vishal Madan)

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A

Project Report

On

.. Caparo Maruti Limited

An Internship Project Report

Submitted in the partial fulfillment of the requirement for the award of the

Degree of Master of Business Administration

2010-2013

Submitted By: Under the Guidance

of:

Vishal Madan Prof. Anoop Pandey

BHARATI VIDYAPEETH UNIVERSITY

INSTITUTE OF MANAGEMENT & RESEARCH, NEW DELHI

An ISO 9001:2000 Certified Institute

A Grade Accreditation by NAAC

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STUDENT UNDERTAKING

This is to certify that I have completed the Internship Project titled

.................................... under the guidance ofMR. ANOOP PANDEY in

the partial fulfillment of the requirement for the award of Master of Business

Administration of Bharati Vidyapeeth University, School of Distance Education. This is

an original piece of work & I have not submitted it earlier elsewhere.

Students Signature

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CERTIFICATE

This is to certify that the internship project titled .................................... is an

academic work done by Vishal Madan submitted in the partial fulfillment of the

requirement for the award of the Degree ofMaster of Business Administration from

Bharati Vidyapeeth University, School of Distance Education, New Delhi under

my guidance & direction. To the best of my knowledge and belief the data &

information presented by him/her in the project has not been submitted earlier.

Prof. Anoop Pandey

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CERTIFICATE

This is to certify that the internship project titled ............................... is an

academic work done by Vishal Madan submitted in the partial fulfillment of the

requirement for the award of the Degree of Master of Business Administration from

Bharati Vidyapeeth University, Puneschool of distance education.

Dr. Sachin. S. Vernekar

(Director)

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ACKNOWLEDGEMENT

This project has been a great source of my learning and it also has been a good

experience as it has made me aware of the professional culture and conduct that exit in

an organization

In the beginning everyone faces difficulties, however, overcoming these difficulties and

completing the project as well as making it a success greatly depends on the

encouragement, inspiration and help given by my guide, company staff members. For

completion of this project various people have put lots of efforts.

I would also like to express my gratitude to Dr. Sachin S. Vernekar (Director B. V. I. M.

R.) and Prof. Anoop Pandey for their cotinuous inspiration, guidance and valuable

suggestions that helped me in every step and guided me when i was in dark and had a

problem, they helped me with suitable guidance and made me capable of overcoming the

problem with great success.

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PREFACE

I have undergone my summer training in the Caparo Maruti Limited which is a part of

Caparo Group and the project assigned to me is on the topic .

The project of Finance Field requires a variety of data and disclosure but due to

corporate policy. The management did not disclose some critical information on the

grounds of secrecy therefore certain facts and figures were not allowed by the

management hence some hypothetical figure is used to make understanding of the

project more clear and to make the complex data more informative.

Caparo Maruti Limited has grown from a scratch to a million rupee brand.

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CHAPTER-I

INTRODUCTION

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1.1OVERVIEW OF COMPANY

Caparo Maruti Limited (CML) is a part of Caparo Group and is a world-class Tier-1

sheet metal stamping, weld assemblies and closures supplier to Maruti Suzuki andGeneral Motors .

The Comapny was formed in 1994 as a joint venture with the major car manufacturer,

Maruti Udyog Limited (Maruti Suzuki India Limited), the production of the company

began in 1996 and today Caparo Maruti Limited operates from 3 sites; Gurgaon, Halol

and Bawal.

In 1968 Lord Paul took out a 5,000 loan and opened Natural Gas Tubes. The company,

based in Huntington in Cambridgeshire, manufactured spiral weld tubes and achieved

first year sales of 14,000. In 2006 Caparo groups sales exceeded 625m.

1.2 HISTORY OF COMPANY

Lord Paul's was born in Jalandhar, Punjab in India where, in 1910, his father started by

making steel buckets, tubs, trunks and agricultural implements, and had a small foundry

at the back of the family home. From this modest undertaking Apeejay Surrendra Group

has grown into one of India's largest family owned industrial groups in a wide range of

industries : steel, engineering, pharmaceuticals, hotels, shipping and tea.

Lord Paul came to Britain in 1966 for medical treatment for his daughter, Ambika. He

remained in England after her tragic death in 1968 and sees all he has created in Caparo

Group as a dedication to her memory. In 1994 Lord Paul took the opportunity to

commemorate the rebuilding of London's Children's Zoo in her name. Whilst receiving

treatment in London, the Zoo became Ambikas favourite destination.

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Thats how the company started and grew from one to hundered and an India person

named Mr. Paul got the name we today know Lord Paul. A man who showed an

Indian family business can grow so wide due to its culture and family ethics

History of Caparo Group

How and what developments are done by caparo group

1968 December 31 Natural gas tubes starts making spiral weld tubes at huntingdon first year sales 14,000.

1975 December 31 begin building the new ngt tredegar site.

1977 June 03 tredegar factory opened by hrh the prince of wales.

1978 November 16 tredegar spiral weld mill opened by late prime minister of india, mrs indira gandhi.

1979 December 31 Caparo group formed as holding company for all our activities.

1980 December 31Acquire control of quoted public company lk industrial investments - becomes caparo

industries.1981 December 31 public takeover bid for cmt

1983 December 31 Public takeover bid for barton group.

1984 December 31 acquire wrexham wire now caparo wire

1985 December 31umb joint company formed with british steel corporation to develop new merchant bar mill atscunthorpe.

1986 December 31 Umb plant opened by the then chancellor of the exchequer, mr nigel lawson.

1988 December 31 acquire bull moose tubes, usa.

1989 December 31 Public takeover bid for armstrong.

1990 June 01 Acquire bock industries, usa.

1991 December 31 Caparo industries goes private. Buy back public 20%.

1993 December 31 Sales now 360m. Record operating profits of 32m.

1994 December 31From a greenfield site caparo ventures into plastics with nupac.caparo opens new steel

pressing plant in dehli, india as a joint venture with leading automotive company. The ambika

paul children's zoo opens. Caparo celebrates 25 years!

1995 December 31 caparo merchant bar invests in a second fully automated steel re-rolling mill.

1997 December 31 Acquire warren tube division, usa.

2001 December 31 2001 summary : caparo hotels acquire bignell park hotel, oxfordshire.

2002 December 312002 summary : caparo engineering india pvt ltd pithampur, new pressing plant commences

production.

2003 December 312003 summary : caparo innovation centre established - a collaboration with the university ofwolverhampton.

2004 December 312004 summary : acquire lipe spain, systems scaffolding and tyco european tubing and steelstrip, caparo steel trading established.caparo maruti, india - halol and bawal plantsestablished. Bull moose tube plant established in casa grande, arizona, usa.

2005 December 31

2005 summary : india:- caparo fasteners constructing new plant in chopanki (rn).caparoengineering expansion in pithampur (np) and new plant in greater noida (up). New caparoindia conference facility in greater noida (up). Caparo wire acquire h.s pitt and fairbright

industries. Cmt engineering's dynamics division, acquire the vibration mounting business ofsilvertown.

2006 February 01inauguration of bawal stampings facility in india by prof. Mervyn king, governor of the bankof england

2006 February 01 creation of vehicle products division

2006 March 13 Caparo vehicle technologies is launched caparo vehicle technologies provides advanced

9
http://www.caparo-tubes.co.uk/http://www.caparo.com/en-gb/divisions/division-overview.aspx?did=2c71fe16-7720-4c9f-b643-b76542aee627&gid=f002c25f-ea68-4a4b-85a7-f96836363fa1http://www.caparo-tubes.co.uk/http://www.cmt-engineering.co.uk/http://www.caparo-wire.co.uk/http://www.cmbplc.co.uk/http://www.cmbplc.co.uk/http://www.bullmoosetubes.com/http://www.cmbplc.co.uk/http://www.bignellparkhotel.co.uk/http://www.caparoengg.com/http://www.caparoengg.com/http://www.wlv.ac.uk/cichttp://www.wlv.ac.uk/cichttp://www.caparo.com/en-gb/divisions/division-overview.aspx?did=9bd0c20e-ea53-4352-8ca1-d550e5cfdc6c&gid=94de1369-70ca-4157-95f2-bf7f90fac9cahttp://www.caparo.com/en-gb/divisions/division-overview.aspx?did=9bd0c20e-ea53-4352-8ca1-d550e5cfdc6c&gid=94de1369-70ca-4157-95f2-bf7f90fac9cahttp://www.caparo.com/en-gb/divisions/division-range.aspx?gid=c070069c-1c6a-40a7-a673-f6a619c11bfbhttp://www.caparo-tubes.co.uk/http://www.caparo.com/en-gb/divisions/division-overview.aspx?did=2c71fe16-7720-4c9f-b643-b76542aee627&gid=f002c25f-ea68-4a4b-85a7-f96836363fa1http://www.caparo-tubes.co.uk/http://www.cmt-engineering.co.uk/http://www.caparo-wire.co.uk/http://www.cmbplc.co.uk/http://www.cmbplc.co.uk/http://www.bullmoosetubes.com/http://www.cmbplc.co.uk/http://www.bignellparkhotel.co.uk/http://www.caparoengg.com/http://www.caparoengg.com/http://www.wlv.ac.uk/cichttp://www.wlv.ac.uk/cichttp://www.caparo.com/en-gb/divisions/division-overview.aspx?did=9bd0c20e-ea53-4352-8ca1-d550e5cfdc6c&gid=94de1369-70ca-4157-95f2-bf7f90fac9cahttp://www.caparo.com/en-gb/divisions/division-overview.aspx?did=9bd0c20e-ea53-4352-8ca1-d550e5cfdc6c&gid=94de1369-70ca-4157-95f2-bf7f90fac9cahttp://www.caparo.com/en-gb/divisions/division-range.aspx?gid=c070069c-1c6a-40a7-a673-f6a619c11bfb


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technology development, materials engineering and design services to mainstreamautomotive, motorsport and aerospace markets.

2006 April 03formation of caparo testing technologies and purchase of controlling interest in materialmeasurements ltd.

2006 April 15 caparo vehicle products acquire ap braking of leamington spa

2006 April 23 Caparo t1 is launched in monaco

2006 May 01 caparo engineering ltd acquire zeus aluminium products, now renamed caparo aluminiumtechnologies

2006 May 01 launch of armacoil wire thread insert by armstrong precision components

2006 August 01 caparo merchant bar invest 6m in modifying two rolling mills

2006 September 01

purchase of bridge aluminium and the formation of caparo aluminium bridge aluminium is thelargest uk aluminium gravity die caster and is a leading supplier of turbocharger and fuelinjection components. Caparo is building caparo aluminium to be a leading global supplier ofhigh quality, specialist aluminium cast components.

2006 October 06development of studio caparo, a bespoke design and manufacturing company, specialising inone-off pieces of furniture

2006 October 09 Mint gallery hosts a one-off exhibition of designs from the established and sons collection

2006 November 01 Caparo t1 makes debuts in america at the sema show

2006 November 03 duke of york launches caparo's 120 acre site in chennai, india

2006 November 23sir nick scheele, former global coo of the ford motor company, joins caparo as non-executive

director

2007 January 18 caparo engineering india pvt ltd. Acquire the sheet metal business of ial

2007 January 25 sunil pahilajani, country head for india, appointed to main board

2007 February 02 caparo precision tubes acquire hayes tubes

2007 June 07 caparo t1 at goodwood

2007 June 15 Caparo engineering acquire polish forging company, bomet

2007 November 01Caparo vehicle components, inc. Is formed which takes caparo into the north americanvehicle market

2008 July 11 Caparo t1 smashes track record at dubai autodrome

INDUSTRY DETAILS

Caparo Maruti Limited is a part of Automotive Industry and manufactures autoparts.

Caparo group is in variety of fields and produces steel parts, automotive parts,

aerospace, investment, construction, defence, etc.

This project is related to automobile company and hence to automobile industry. This

automobile industry is ever growing and despite of market crash the industry hasrecovered soon.

1
http://www.caparo-testing-technologies.co.uk/http://www.caparo-testing-technologies.co.uk/http://www.apbraking.com/http://www.caparo.com/en-gb/divisions/division-overview.aspx?did=28bb0ed5-b6cd-4b79-be78-fe27acd86d78&gid=94de1369-70ca-4157-95f2-bf7f90fac9cahttp://www.caparo.com/en-gb/divisions/division-overview.aspx?did=28bb0ed5-b6cd-4b79-be78-fe27acd86d78&gid=94de1369-70ca-4157-95f2-bf7f90fac9cahttp://www.apc-caparo.com/http://www.caparo.com/en-gb/divisions/division-overview.aspx?did=8040182d-b8ec-4d99-9164-514e07421283&gid=f002c25f-ea68-4a4b-85a7-f96836363fa1http://www.bridgealuminium.com/http://www.studiocaparo.com/http://www.studiocaparo.com/http://www.caparoengg.com/http://www.caparo.com/en-gb/about/board-members.aspxhttp://www.caparo.com/en-gb/about/board-members.aspxhttp://www.caparo.com/en-gb/divisions/division-overview.aspx?did=9bd0c20e-ea53-4352-8ca1-d550e5cfdc6c&gid=94de1369-70ca-4157-95f2-bf7f90fac9cahttp://www.caparo.com/en-gb/news/news-article.asp?nid=53http://www.caparo.com/en-gb/news/news-article.asp?nid=54http://www.caparo.com/en-gb/news/news-article.aspx?nid=b45a7621-9b66-4095-aa38-48a768f14019http://www.caparo-testing-technologies.co.uk/http://www.caparo-testing-technologies.co.uk/http://www.apbraking.com/http://www.caparo.com/en-gb/divisions/division-overview.aspx?did=28bb0ed5-b6cd-4b79-be78-fe27acd86d78&gid=94de1369-70ca-4157-95f2-bf7f90fac9cahttp://www.caparo.com/en-gb/divisions/division-overview.aspx?did=28bb0ed5-b6cd-4b79-be78-fe27acd86d78&gid=94de1369-70ca-4157-95f2-bf7f90fac9cahttp://www.apc-caparo.com/http://www.caparo.com/en-gb/divisions/division-overview.aspx?did=8040182d-b8ec-4d99-9164-514e07421283&gid=f002c25f-ea68-4a4b-85a7-f96836363fa1http://www.bridgealuminium.com/http://www.studiocaparo.com/http://www.studiocaparo.com/http://www.caparoengg.com/http://www.caparo.com/en-gb/about/board-members.aspxhttp://www.caparo.com/en-gb/about/board-members.aspxhttp://www.caparo.com/en-gb/divisions/division-overview.aspx?did=9bd0c20e-ea53-4352-8ca1-d550e5cfdc6c&gid=94de1369-70ca-4157-95f2-bf7f90fac9cahttp://www.caparo.com/en-gb/news/news-article.asp?nid=53http://www.caparo.com/en-gb/news/news-article.asp?nid=54http://www.caparo.com/en-gb/news/news-article.aspx?nid=b45a7621-9b66-4095-aa38-48a768f14019


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Today there have been revolutionery changes in the automobile sector due to growing

prices of fuel more efficient, cost effective ways of production and vehicles are being

formed and upgraded leading to innovative products.

India's passenger car and commercial vehicle manufacturing industry is the seventh

largest in the world, with an annual production of more than 3.7 million units in 2010.

According to recent reports, India is set to overtake Brazil to become the sixth largest

passenger vehicle producer in the world, growing 16-18 per cent to sell around three

million units in the course of 2011-12.

In 2009, India emerged as Asia's fourth largest exporter ofpassenger cars, behind Japan,

South Korea, and Thailand

.

1.3 MISSION STATEMENT

MISSION of Caparo Maruti Limited or the Caparo Group is to delivers excellent

performance through superior employees, quality and advanced technology.

We are guided by our values of leadership, integrity, commitment and excellence.

commitment accepting responsibilities and hold ourselves accountable. providing and

encouraging employee development. excellence eliminates waste and continuous

improvement. embraces team works to deliver superior results. recognizes outstanding

performances. exceeds expectation. leadership takes an active interest in the success of

others. promotes teamwork. sets a positive example. delivers new ideas to our

companies, customers and industries.

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http://en.wikipedia.org/wiki/Asiahttp://en.wikipedia.org/wiki/Automobilehttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/South_Koreahttp://en.wikipedia.org/wiki/Thailandhttp://en.wikipedia.org/wiki/Asiahttp://en.wikipedia.org/wiki/Automobilehttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/South_Koreahttp://en.wikipedia.org/wiki/Thailand


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1.4 FINANCIAL PERFORMANCE

Since establishment of the company the company has grown wider day by day. Caparo

group has grown wider and wider and every year a new company is added in the group.

The company Caparo Maruti Limited was started by Mr. Lord Paul with just a few

thousands of rupees and today the company is a million rupee empire with crores of

rupees as annual profit.

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CHAPTER-II

RESEARCH METHODOLOGY

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2.1 INTRODUCTION OF RESEARCH

Research can be explained as scientific search for knowledge, or as any systematicinvestigation, to establish novel facts, solve new or existing problems, prove new ideas,

or develop new theories, usually using a scientific method. The primary purpose for

research is discovering, interpreting, and the development of methods and systems for

the advancement of human knowledge on a wide variety of scientific matters of our

world and the universe.

Research includes any gathering of data, information and facts for the advancement of

knowledge.

Research is sufficiently objective and systematic to make possible classification,

generalization and verification of the data observed.

Research is discovery of facts, development of facts and verification of facts. Research is

an endeavor to discover intellectual and practical solutions to the problems through the

application of scientific methods to the knowledgeable universe. Research is the process

of which involve defining and redefining problems, hypothesis formulation, organizing

and evaluating data, deriving deductions, inferences and conclusions, after careful

testing.

Research is carried out to settle controversies, contradictions, misunderstanding, and

disputes about the nature of some aspect of the universe it is a systematic way of

knowing more about the world and us. Research can be done in arbitrary in a systematicmanner

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2.2OBJECTIVE OF RESEARCH

1. To better understand the problems so that the question is known

more accurately and appropriately.2. To analyze and provide for the required figure of the arrangement.

3. To understand the basic principles of financial statements and ratio

Analysis.

4. To suggest corrective measure for the acquisition of proper

financial statement and making the budget more appropriately.

2.3 SCOPE OF STUDY

This project work has given me the opportunity to understand theoretical and practical

aspects of business and their financial performance.

It has enabled me to better understanding the corporate environment and made me relate

actual business conditions with it and provides rich insight into what actually goes in the

industrial climate.

This project is on financial management which means it includes working capital

management, cash management, budgeting.

This project study provides an opportunity to understand the basic concept and ideology

of financial management.

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2.4 MANAGERIAL USEFULNESS OF THE STUDY:

This project report is very useful to the organization to compare their financial

performance with budgeted and finding out the reasons for differences and this helps

management to form a much better and reliable and accurate financial projections or

budgets.

This project report provides information on the problems faced by the management of

the company in financial aspects such as maintaining liquidity while paying of the short

term debts, retaining profits while maintaining market value and earning per share.

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CHAPTER-III

CONCEPTUAL DISCUSSIONS

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3.1 FINANCIAL MANAGEMENT

CASH MANAGEMENT

MEANING:-

Cash is the important current assets for the operation of business. Cash is the

basic input needed to keep the business running on a continuous basis .It is also

the ultimate output expected to be realized by selling the services or product

manufacture by the firms. The firm should keep sufficient cash, neither more or

less. Cash shortage will disrupt the firm manufacturing operations. While

excessive cash will simply remain ideal, without contributing anything towards

the firms profitability. Thus a major function of the financial manager is to

maintain a sound cash position.

That is important factor of working capital so in the firm optimum cash balance

will be obtained.

OPTIMUM CASH BALANCE

A firm can maintain a optimum cash balance for transaction purposes. It may

also carry additional cash as a buffer or safety stock the amount of cash balance

will depend on the risk return trade off. It is firms maintains small cash balance

its liquidity position weakens, but its profitability improves the released funds

can be invested in profitable opportunities. When the firms can need cash it can

sell its marketable securities.

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INVENTORY

Inventory is the stock in trade or stock of goods. The word Inventory isunderstood differently by various authors in manufacturing concern .It may

include raw material, work in process and stores etc inventory include:-

a. Raw Material.

b. Work In Progress.

c. Consumables

d. Finished Goods

e. Spares

INVENTORY MANAGEMENT

1. To avoid both over stocking and under stocking of inventory

2. To maintain investments in inventories at the optimum level as required by

the operational and sale activities.

3. To ensure continuous supply of materials, spares, and finished goods so that

production should not suffer at any time and the customers demand should

also be met.

4. To eliminate duplication in ordering or replenishing stocks this is possible

with the help of centralizing purchases.

5. To minimizes losses through deterioration, pilferage, wastages, and

damages.

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6. To ensure perpetual inventory controls so that material shown in stock

ledgers should be actually lying in the stores.

7. To facilitate furnishing of data for short term and long term planning and

controls of inventory.

8. To keep materials cost under control so that they contribute in reducing cost

of production and overall costs

DIFFERENT STOCK LEVELS ARE USED IN INVENTORY

1.MINIMUM STOCK LEVEL:

This represents the quaintness which must be maintained in hand at all times if

stocks are less than the minimum level then the work will stop due to shortage of

materials following factors are taken into account

LEAD TIME: a purchasing firm requires some time to process the order and

time is also required by the supplying firm to execute the order the time taken in

processing the order and then executing it is known as lead time

RATE OF CONSUMPTION: it is also average consumption of materials in the

factory the rate of consumption will be decided on the basis of past experience and

production plans.

NATURE OF MATERIAL: the nature of material also affects the minimum

level if a material is required only against special orders of the customers then minimum

stock will not be required for such material.

FORMULA:

MINIMUM STOCK LEVEL=REORDERING LEVEL-(NORMAL

CONSUMPTION * NORMAL REODER PERIOD)

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2REORDERING LEVEL:

When the quaintness of materials reaches a certain figure then fresh order is sent to

get materials again the order is sent before the materials reach minimum stock level

reordering levels fixed between minimum level and maximum level.

FORMULA:-

REORDERING LEVEL: =MAXIMUM CONSUMPTION - MAXIMUM

REODER PERIOD

3 MAXIMUM LEVEL:

It is the quaintness of materials beyond which a firm should not exceed its stocks if

the quaintness exceeds maximum level limit then it will be over stocking a firms avoid

over stocking because it will be result in high material costs over stocking means

blocking of more capital, more space for storing the materials, more wastages of

material andmore charges of losses from obsolesce maximum stock level depend upon

the following factors:

1 The availability of raw material if the material are available only during seasons then

they will have to be stored for the rest of the period

2 The availability of capital for the purchases of materials.

3 The maximum requirements of materials at any point of time

4 The availability of space for storing the materials

5 The rate of consumption of materials during lead time

6 The cost of maintaining the stores

7 The possibility of fluctuations in prices

8 Restrictions imposed by the government sometimes government fixes the maximum

quantity of materials, which concerns can store.

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FORMULA:-

MAXIMUM STOCK LEVEL=REODERING LEVEL +REODER

QUANINTY (MINIMUM CONSUMPTIN * OREORDERING PERIOD)

4 DANGER LEVEL:

It the level beyond which material should not fall in any case if danger

level arise then immediate steps should be taken to replenish the stocks even if more cost

is incurred in arranging the materials if material are not arranged immediately there is a

possibility of stoppage of work.

FORMULA:-

DANGER LEVEL: AVERAGE CONSUMPTION * MAXIMUM RE ODER

PERIOD FOR EMERGENCY PURCHASE

5 AVERAGE LEVEL: FOLLOWING ARE THE FORMULA OF AVERAGE

STOCK LEVEL.

FORMULA:-

MINIMUM STOCK LEVEL + OF REORDER QUANINTY

ECONOMIC ORDER QUANINTY

ECONOMIC ORDER QUANINTY: A decision about how much to order has

great significance in inventory management the quantity to be purchased should neither

be small or big because costs of buying and carrying materials are very high economic

order quantity is the size of the lot to be purchased which is economically viable this is

the quantity of materials which can be purchased at minimum costs generally economic

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order quantity is the point at which inventory carrying costs are equal to order costs in

this two part will be considered:

1 ORDERING COSTS: these are the costs which are associated with the

purchasing or ordering of materials it will be include: -

Costs of staff posted for ordering of goods a purchase order is this processed and

then placed with suppliers the labor spent on this process is included in ordering costs.

Expenses incurred on transportation of goods purchased.

Inspection costs of incoming materials.

Costs of stationary, typing, postage, telephone charges, etc

These costs are also known as buying costs and will arise only when some

purchased are made the ordering costs are totaled up for the year and then divided by the

number of orders placed each year the planning commission

Of India has estimated these costs between rs.10 to RS. 20 per order.

2.CARRYING COSTS: These are the costs for holding the inventories these

costs will not be incurred if inventories are not carried. These costs included:-

The costs of capital invested in inventories an interest will be paid on the amount

of capital locked up in inventories

Costs of storage which could have been used for other purposes

The loss of materials due to deterioration and obsolescence the materials may

deteriorate with passage of time the loss of obsolesce arise when the material in stock are

not usable because of change in process or product

Insurance costs.

Cost of spoilage in handling of material.

The planning commission of India had estimated these costs between 15per cent to

20per cent of total costs the longer the material kept in stocks the costlier it becomes by

20 per cent every year the ordering costs and carrying costs have a reverse relationship

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the ordering cost goes up with the increase in number of orders placed on the other hand

carrying costs go down per unit with the increase in number of units purchased and

stored

ASSUMPTION OF EOQ:

1` The supply of goods is satisfactory the goods can be purchased whenever these

are needed.

2 The quantity to be purchased by the concern is certain.

3 The prices of goods are stable it result to stabilize carrying costs.

When above mentioned conditions is satisfied economic order quantity

can be calculated with help of the following formula:-

FORMULA:-

EOQ: 2AS/I

A = ANNUAL CONSUMPTION IN RUPEES

S = COST OF PLACING AN ORDER

I = INVENTORY CARRYING COSTS OF ONE UNIT

Working capital management has an important role in the organizationEoq Can Very Helpful In The Workinr Capital Management. It Can Helpful In

Maintain A Proper Record In The Store Departmant In The Store Department

Abc Analysis Technique Will Be Used.

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CHAPTER-IV

DATA ANALYSIS

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Ratios:

Working capital ratios:

this ratio compare the net sales with net working capital the indication given by this ratio

is the number of items working capital is turned around in a particular period the formula

for calculation is as follow:

Working capital turnover ratio: net sales/net working capital

Net working capital: current assets-current liabilities

The higher the ratios the better is the utilization of working capital as well as lower

the investment in working capital however a very high working capital turnover ratios is

a sign of over trading and a firm may face shortage of working capital

Debtors turnover ratio:

this ratio is indicate the credit policy followed by a business this ratio is calculated as

follow:

Debtors turnover ratios: credit sales/average account receivables

Average a/c receivable=opening drs+closing drs/2

Creditors turnover ratio

: This ratio indicates the credit period allowed by the

creditors the calculation is as follow:

Creditors turnover ratio: credit purchase/average accounts payable

Opening crs+opening b/p+closing crs+closing b/p/

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A high turnover ratio indicate that payments to creditors is quite prompt but it also

implies the full advantages of credit allowed by creditors is not taken a low ratio

indicates that payments to creditors is not quite prompt and it needs to be improved.

Inventory turnover ratio:

This ratio establishes relationship between cost of goods sold during a given

period and the average amount of inventory held during that period. The indication given

by this ratio is the number of items finished stock is turned over during a given

accounting period. higher the ratio, the better it is because it shows rapid turnover of

stock. A low turnover ratio is indicates of slow moving stock. The formula for

calculation of this ratio is as follow

Fixed assets turnover ratio:

This ratio indicate the number of times fixed assets are being turned over during a

particular period it is one of the indication of efficiency of using fixed assets in the

business. For manufacturing concerns this ratio is very important. The reason is that like

current assets, fixed assets also contribute towards making sales. A high ratio will

indicate that fixed assets are contributing quite substantially in making sales, while low

ratio indicates that fixed assets are not used efficiently.

The formula for calculating this ratio is as follow:

Fixed assets turnover ratio: sales (net)/ net fixed assets

Net fixed assets = (cost- depreciation)

Sales to capital employed:

This ratio shows the efficiency of capital employed in the business by computing

how many times capital employed is turned over in a given period. The calculation is as

follow:

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Capital turnover ratio: sales/ capital employed

Capital employed (shareholders funds +long term liabilities)

The higher the ratio, the greater are the its.however, a low capital turnover ratio

impulses that sales are not sufficiently made.

Financial ratio:

These ratio are calculated to judge the financial position of a business firm from

long term as well as short term angle the following ratio are included in this category:

Current ratio:

This ratio is also calculated by dividing current sets by current liabilities. This ratio

indicates how many current assets are there as against each rupee of current liabilities.

Current ratio is also known as solvency ratio as it indicates how the expected current

claims are covered by current assets usually the position is covered to be ideal if current

assets are twice as compared to current liabilities however, for proper inference the

composition of current assets should not be overlooked. If majority of current assets is in

the form of inventory even a 2:1 ratio will not result into favorable condition because

inventory is considered to be the liquid assets out of all current assets of a firm.

The current ratio is calculated by using the following formula:

Current ratio: current assets / current liabilities

Current assets include:

Cash, bank balance, short-term investments, bill receivable, debtors, short-term

loans, inventories, and pre paid expenses

Current liabilities include:

Bank overdraft, trade creditors, bills payable, provision for taxation, expenses

outstanding, unclaimed dividends, short term loans, interest outstanding, advance

payments received and portion of debts, expected to mature with in year.

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A very high current ratio may not be indicate a very favorable position because it

means that the excessive investments in current assets is made this will result in decease

in profitability because of large funds blocked in the working capital.

liquid assets /acid test ratio:

As regards the ability to honor day to day commitment liquid ratio is better tool it

is the ratio between liquid assets and liquid liabilities from the balance sheet, liquid

assets are calculated by deducting inventories and pre paid expenses from current assets.

Liquid liabilities are current liabilities less bank overdraft an ideal liquid ratio is

considered as 1:1

The liquid ratio is calculated as follow:

Liquid ratio: liquid current assets /liquid liabilities

proprietary ratio:

it is primarily the ratio between proprietors funds and total assets it indicates the

strength of the funding of the company as a very rough measure it may be suggested that

2/3 rd to of the total assets should be financed by proprietors funds however the

optimum ratio is different in different lines of business a high ratio will definitely

indicates high financial strength but a very high ratio will indicates utilization of external

equities.

Proprietary ratio: proprietors funds/ total assets

Debt equity ratio:

This ratio is calculated to measure the comparative proportions of outsiders funds

and shareholders funds invest in the company the debt equity ratio indicates how many

of this rupees have come borrowing for every rupee of shareholders funds. The

calculation of this ratio is made in the following manner:

Debt equity ratio: long term debts / shareholders funds

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Shareholders funds consists of equity share capital preference share capital and

reserve and surplus a low ratio will indicates that the firm is following a conservative

policy which is quite satisfactory from the creditors angle but a very conservative policy

may not be very much satisfactory for shareholders because the company is sacrificing

the benefits of trading on equity in this case. On the hand a very high Ratio will indicate

a risky situation, as promotion of borrowed funds is quite high.

Capital gearing ratio:

The ratio indicates the proportion between fixed charges, bearing securities and

equity capital. The fixed charges bearing securities include preference capital and

debenture. On the former fixed dividends is payable while on the latter fixed interest is

payable.

Formula for calculation:

Capital gearing ratio: fixed interest bearing securities/equity shareholders

Funds

Company will be a high-geared company, if the major portion of the total capital is

raised through fixed interest bearing securities. On the other hand it will be called as a

geared company if the majority of the funds are raised through equity.

RMCP = average sales*365 raw material stock/ total raw material

consumption*365

WPCP =average work in progress/total cost of production *365

FGCP = average finished goods/ total costs of goods sold *365

RCP = average receivable /total credit

DP = average creditors/total credit purchase*365

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In respect of these formulations the following points are worth noting:

1 The averagevalue in the numerator is the average of opening balance and

closing balance of the respective items. However, if only the closing balance is available,

then even the closing balance may be taken as the average

2 The figure 365 represents number of days in a year. However, there is no hard

and fast rules and sometimes even 360 days are considered.

3 The total figure in the denominator refers to the total value of the items in a

particular year.

4 in the calculation of RMCP, WPCP, FGCP the denominator is calculated at

cost basis and the profit margin has been excluded. The reason being that there is no

investment of funds in profit as such.

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CHAPTER-VI

CONCLUSION, FINDINGS AND

SUGGESTIONS

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SUGGESTIONS

As the Company has faced financial problems such as difficulties in making appropriate

and accurate budgets and then meeting them inspite of market crises, the company

wanted to modify and make the ratios more appropriate and as such which makes

company more profitable and attractive and solvent.

I would like to suggest some measures, these are :

1. To arrange capital by issuing convertible preference shares so that the company

can arrange capital in current year without diluting the rights of equity holders

and also after maturity period it will be converted in to debentures by reducing

capital and increasing liability which will make capital structure strong better

now and in future due to debentures will save on taxes.

2. To arrange for long term loans deposits to strengthen the long-term resources of

the unit to provide necessary margin for working capital.

3. To critically examine the level of current assets held by the organization. It may

be possible that the company may be able to work with lower inventory hence

can save on investment in inventory and can wave off the expenses to maintain

those stock.

4. To calculate all the ratios so that conclusion can be drawn on every step and there

by making the company and management aware of the performance and also

indicating the favorable or unfavorable conditions which can then form part of

financial decisions whether to issue capital or go for bank loan

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APPENDICES

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BIBLIOGRAPHY

1. FINANCIAL MANAGEMENT (ICAI)

2. FINANCIAL MANAGEMENT (I M PANDEY)

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MY LEARNINGS ARE :

I learnt how to grab required information from the bunch of all the collected

data, it made me learn how to use MS WORD, MS EXCEL, collectively.

This Project made me understand the importance of all the small informations

which are duly important but treated as rubbish or unwanted.

The report made me more serious about the day to day information of the

business.

I have learnt how to manage my work under tough situations and bring out best

results from the minute data.

My most important learning is that I have come more closer to the business

environment and now I have become more practical and hard working.

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QUESTIONNAIRE

NAME:

DEPARTMENT: DATE:Ranks order the statement from 1 to 5 questions is on the working capital

management

1 what are the products that you manufacture?

I can manufacture that product which are according to the customer

choice

I can manufacture that are easily convertible into customer preference

I can manufacture that product which are easily transfer to one place to

the another place

I can manufacture that product which are available at a cheap rate

2 What is your average monthly consumption of threads?

I can manufacture high quantity of threads

I can manufacture high quality of threads because today customer want

high quality product

I can manufacture high amount of threads because high quantity can

decrease the transportation cost

I can manufacture the product according to the market demands if the

demand is low than I am not manufacture excess of demands

If prices chances is increase in the future than we can store the some part

of material in the stores

3 How would you estimating the working capital requirements?

I can measure the total cost incurred on material, wages and overheads

I can measure the length of time for which raw materials are to remains

in the stores before they are issued for production

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I can measure the length of sale cycle during which finished goods are to

be kept waiting for sales

I can measure the amount of cash required to pay day to day expenses of

the business

I can measure the credit period expected to be allowed by supplier

4 `How would you the financing of working capital needs?

I can concerns the permanent working capital requirements or the

temporary working capital requirements

I can issue the shares like preference share or equity shares in this the

company can increase the maximum amount of capital

I can issue the debenture also the debenture are generally given floating

charges on the assets of the company

I can used the public deposits because these are fixed deposits accepted

by the company directly from the public

5 How would you analysis and control of the working capital requirements?

I can used the permanent or fixed working capital which is the minimum

amount required to carry out the normal business operations

I can used temporary or seasonal working capital which is required to

meet special exigencies it fluctuates over time

In this one way of analysis and control of the working capital is to finding

the average of maximum and the minimum requirements of current assets

6 How the working capital management policies is profitable for the firms?

In this I can used the dimension 1 is concerned with the formulation of

policies with regard to profitability, risk and liquidity

Than dimension 2 is concerned with the decisions about the compositions

and level of current assets

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Than dimension 3 is concerned with the decisions about the composition

and level of current liabilities

7 why the working capital is redundant or excessive?

I think excessive of working capital means idle funds which earn no

profits for the business

The company can not earn a proper rate of return on its investments

It may result into overall inefficiency in the organization

It may reduce the value working capital is of the shares

When there is excessive working capital, relations with banks, and other

financial institutions may not be maintained

The redundant working capital give rise to speculative transactions

1Why the working capital is inadequate?

It becomes impossible to utilize efficiently the fixed assets due to non

availability of liquid funds

It becomes difficult for the firms to exploit favorable market conditions

and undertake profitable projects due to lack of working capital

It shall not be able to get good credit facilities

The company can also lose its reputations

Documents

Caparo Project (Vishal Madan)