Prime Valves India Ltd

7/29/2019 Prime Valves India Ltd.

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A

RE P O R T

O N

W O R K I N G C A P I T A L

O F

PRIMEVALVESINDIA LTD.

I n P a r t i a l F u l f i l l m e n t o f t h e r e q u i r e m e n t

F o r t h e d e g r e e o f

B a c h e l o r o f B u s i n e s s A d m i n i s t r a t i o n

S U B M I T T E D T O

P R O F : - H A R E S H O Z A ( F A C U L T Y )

V . M . P A T E L C O L L E G E O F M A N A G E M E N T S T U D I E S

G A N A P A T U N I V E R S I T Y ,

K H E R V A

S U B M I T T E D B Y

P A T E L J I G A R . Y

RO L L N O : - 1 1 2

C L A S S : - C

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Shri V. M. Patel Col lege of Management

studies

Ganpat University, Kherva

This is to certify that Mr. Jigar. Y. Patel, student of T.Y.B.B.A Roll

No: - 112 and Exam No: - From V.M. Patel College of Management

s tudies Ganpat universi ty, Kherva has under gone pract ical t raining in

prime valves India l td. I n a rea o f f inanci al ana lysi s a s a par t o f

curriculum.

Date: - Prof. In

charge: -

Place: - Principal: -

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P R E F A C EP R E F A C E

A p r a c t i c a l s t u d y i s i m p o r t a n t p a r t o f T Y B B A p r o g r a m . I t

g i v es u s o p p o r t u n i t y t o r e l a t e t h e o re t i c a l k n o w le d g e w i t h r e a lc o rp o ra t e s i tu a t i o n . I t a l so h e lp s t o i mp r ov e o u r a n a l y t i ca ls k i l l , c o m m u n i c a t i o n s k i l l a n d k n o w l e d g e .

W e h a v e d o n e t h e p r o j ec t o n i n d u st r i a l t r a i n i n g o f P r i m e

v a lv e s I n di a l t d . T h is p r oj e c t i s t o ta l ly b a se d o n s e co n da r y

d a ta . W e g a th e re d i n fo r ma t io n a b ou t f i n a nc e d e pa r tm e nt a n d

o t h e r o r g a n i z a t i o n p r o c e s s f o r m t h e c o m p a n y i t s e l f a n d f o r m t h ei n t e r n e t .

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ACKNOWLEDGEMENT

P r ac t i ca l t r a i n i ng i s one o f t he mos t i mpor t an t r equ i r emen t s i nB .B .A . T hr ou gh t hi s a ck no wl ed gm en t. I e xp re ss o ur s in ce re r

g r a t i t u d e t o w a r d s a l l t h o s e p e o p l e h e l p e d i n t h e p r e p a r a t i o n o f t h i s

p ro j ec t , wh i ch been a l ea r n i ng exp er i ence .

I a m t ha nk fu l t o o wn er s o f t he c om pa ny a nd p ro du ct io n

Manager Mr. AHAD KHAN For s pend i ng h i s va l uab l e t i me wi t h me

a n d p r ov i di n g n e c es s ar y i n fo r ma t io n r e qu i re d . I a m a l so t h an k fu l

Mr. SANJAY BHAI . J f o rf or g ra nt in g m e p er mi ss io n . I a m a ls o

t hankf u l t o s t a f f t he i r co - oper a t i ng behav i o r

We wer e r ea l t hankf u l t o P r o f . K . M. C h u d a s ma f o r p r ov i d i ng

us a l l t he neces s a r y f ac i l i t i e s t o ca r r y ou t ou r p r o j ec t wor ks

I t i s a m a t t e r o f g r a t e p r i v i le g e t o e x p r e ss o u r s i n c e re f e e l in g

t owar ds Prof .Mr. Haresh oza t he i r va l uab l e adv i ce

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Executive summary

A p ra ct ic al t ra in in g i s n ec es sa ry a n d u se fu l s tu d y f or t he

s t u d e n t o f B B A p r a c t i c a l s t u d i e s b y v i s i t i n g c o m p a n y h e l p s s t u d e n tt o l ea rn a bo u t t h e p ro b le m f ac ed i n t he r ea l w o rl d a nd h o w t h e

c o mp a n y t a ki n g c o g ni z an c e o f t h e s i tu a ti o n i n t h e e c on o m y s o ul

t hem.

I n f i n a n c e d e p a r t m e n t I k n o w t h a t t h e p r o c e s s o f t h e w o r k i n g

c a p i t a l o f t h e P r i m e v a l v e s I n d i a l t d . I c a n a l s o k n o w t h a t w h i c h

k i nd o f f ac i l i t i e s p r ov i ded by t he company .

Th i s r epor t bas ed on wha t I s aw , f e l t and exper i ence dur i ng t he

t i m e o f c o m p a n y t r a i n i n g . I n t h e f o l l o w i n g p a g e s I a m p r e s e n t i n g

wha t I l ea r n and exper i ence I under wen t du r i ng my t r a i n i ng .

F r o m t h i s r e p o t I l e a r n t h e s t r a t e g y o f P r im e v a lv e s I n d ia l t d

abou t t he wor k i ng cap i t a l .

F o r m t h i s r e p o t; I k n o w t h a t w h a t i s t h e p r o c e ss o f w o r k in g

cap i t a l

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Index

Pr e f ace .3

Acknowl edgement .4

Execu t i ve s ummar y ..5

No Par t i cu la r s P age n o

1 Gene ra l in f orm at io n 7

1 .1 Hi s t o r y and deve l opmen t 8

1 .2 Bo ard o f d i re c to r s 9

1 .3 O rg an iz at io n s tr uc tu re 1 1

2 Work ing cap i ta l 12

2 .1 in t r odu c t io n 13

2 .2 T yp es o f work ing cap i t a l 14

2 .3 F ac to r s in f lue nc in g wor k in g cap i t a l 17

3 Ca sh m anagem ent 21

3 .1 in t r odu c t io n 22

3 .2 M on it or in g co ll ec t i on a nd r ec ei va bl e 24

4 Cr edi t managem ent 26

4 .1 Cr ed i t po l i c y v a r i ab le s 27

4 .2 Cr ed i t g r an t i ng de c i s ion 28

4 .3 c . a . f i nanc i a l 304 .4 Ne ed o f wor k i ng ca p i t a l 31

4 .5 l i mi t a t ion 33

5 f in din gs 34

6 co nc lus ion 35

7 b ib l iog raph y 36

s

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HH I S T O R YI S T O R Y A N DA N D D E V E L O P M E N TD E V E L O P M E N T

W e a r e p l ea s e d t o i n t ro d u c e o u r se l v es a s m a n uf a c t ur e r s

o f "P RI M E" b ra nd v al v es i n t h e s ma l l - sc al e s e c t o r .

O u r c o m p an y i s e s t a b l i s h e d i n 1 9 7 0 & s u c e ss e s d a y b y d a y i na l l o v e r t h e c o u n t r y w i t h o u r d i s t r i b u t i o n n e t w or k e n s u r i n ge a s y a v a i l a b i l i t y . I t i s o n t h i s f o u n d at i o n t h a t " P R IM E "

r e p u t a t i o n f o r e x c e l l e n c e h a s b u i l t a n i m a g e & w o n

a p p r ec i a b le r e s po n c e f r o m t h e o v e r se a s m a r ke t b y o u r l o c a ld e a l e r . W e m a n u f a c t u r e q u a l i t y v a l v e s o f a l m o s t a l l t y p e f o r

a w i d e s p e c t r u m o f u s e r s i n t he C h e mi ca l s , T h e r m al P o w e r

S t a t i o n s , T e x t i l e s , sp e c t r u m o f u s e r s in t h e C h e mi c a l s , T h e r ma lP o we r S t a t i o n s , Te x t i l es , S u ga r B r e w er i e s & d i s t i l l e r i e s ,

S e w a g e & W a t e r T r e a t m e n t , S h i p y a r d s & M a r i n e M a n a g e m e n t .

T h e s e c r e t o f i t s s u c c e s s i s t h e u n c o m p r o mi s i n g

b u s i n e s s s t a n d a r d s o f i t ' s m a n a g e m e n t s & t h e c o m p a n y ' s

u nr e le n t i n g f o cu s o n q ua l i t y. T h e c o mp an y a ls o h ol d s

D I R E C T O R S O F B O I L E R S M A R K I N G ( I B R A P PR O VE D ) . F u r t h er m o re , i t i s a m a t t e r o f g r ea t p r id e &

h o n o r t o b r i n g i t t o y o u r k i n d n o t i c e t h a t o u r s i s t h e f i r s t

c o m p a n y i n G u j a r a t t o g e t I S : 1 3 0 9 5 - 9 1 m a r k i n B U T T E R F L YV A L V E S .

E a c h p r o d u c t i s m a d e f r o m f i n e s t m a t e r i a l & i s s u b j e c t t os t r i n g e nt , r i g o ro u s c h e c k & i n s pe c t io n s b y q u a l i f i e d e n g i ne e r s

a t e v e r y s t ag e o f m an u f a c tu r e . I f i t d o es n ' t m e as u re u pt o t h e " P R IM E " s t a n da r d s i t i s r e j ec t e d o u t o f h a n d s . T h i sw a y " P R I M E " k n o w s t h a t i t s p r o d u c t w i l l g i v e t h e r e l i a b i l i t y &

l i f e l o n g s e r v i c e s .

BOARD OF DIRECTOR

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M r . A N A N D A . P A T E L

D I R E C T O R S

1 ) M r . Ma n i b ha i V . P a t e l

2 ) M r . A s h i t A . P a t e l

3 ) M r . Pa t e l R a m an b h a i . M

COMPANY SECRATORY

M r s . S h e e t a l A . S h a h

AUDITORS

S . K . M o o n d r a & C o

C h a r t e r e d a c c o u n t a n t s

A h m e d a b a d .

BANKERS

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C o r p o r a t i o n B a n k

REGISTERED OFFICE

2 3 1 2 , h a b i b m a n z i l , k a d i a k u i c o r n e r ,

R e l i e f r o a d , a h m e d a b a d - 3 8 0 0 0 1

( G u j a r a t ) I n d i a .

D E P A R T M E N T A L H E D

P R O D U C T I O N M A N A G E R

M r . A m r u t P a t e l

F I N A N C E M A N A G E R

M r . S u m i t B a i d

M A R K E T I N G M A N A G E R

M r . S h a s h a n k S i l a k r i

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OO RGANIZATIONRGANIZATION SS TRUCTURETRUCTURE

11

SHARE HOLDERS

BOARDS OF DIRECTORS

MANAGING DIRECTOR

Finance

Dept.

Production

Dept.

PersonneD

ept.

Marketing

Dept. PlantDept.

Inchrge

Worker

Agent Engineers

Customer Workman


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INTRODUTIOIN

B u si n es s c a p it a l i s b r oa d ly d i vi d ed i n t o t w o g r ou p s; f i xe dcap i t a l wor k i ng cap i t a l . F i xed cap i t a l r e f e r s t o t he f unds i nves t ed i n

s uch f i xed o r pe r manen t a s s e t s a s l and , bu i l d i ng , mach i ne e t c . wh i l e

w o r k i n g c a p i t a l r e f e r s t o f u n d s l o c k e d u p i n m a t e r i a l s , w o r k i n g i np ro gre ss , f in i sh ed goo ds . R ece iv ab le s and ca sh e t c . s ince t hes e

a s s e t s a r e k n o w n a s c u r r e n t a s s e t s , i n v e r y s i m p l e t e r m w o r k i n g

cap i t a l may be de f i ned as cap i t a l i nves t ed i n cu r r en t a s s e t s

W o r k i n g c a p i t a l m a n a g e m e n t i s c o n c e r n e d w i t h t h e p r o b l e m s

t ha t a ri se i n a tt emp ti ng t o ma na ge t he c ur re nt a ss et s, c ur re ntl i ab i l i t i e s and t he i n t e r r e l a t i ons h i p t ha t ex i s t s be t ween t hem .

T h e t e r m c u r r e n t a s s e t s r e f e r s t o t h o s e a s s e t s w h i c h a r e t h e

o r d i na r y c o u r s e o f b u s i n es s t h a t c a n b e t u r n e d i n t o c a s h w i t h i n o n e

y e a r w i t h o u t d i s t r i b u t i o n t h e f i r m s o p e r a t i o n a n d c o n s i s t s o f c a s h ,i nven t o r y r ece i vab l es and mar ke t ab l e s ecur i t i e s .

T h e t e rm c u rr e nt l ia b il i ti e s a r e t h os e w h ic h a r e i n te n d ed a t

t h ei r i n ce p ti o n t o b e p a id i n o r di n ar y c o u rs e o f b u s in e ss , w i th i n a

ye ar o ut o f C A o r e ar ni ng o f t he f or m a nd c on si st s o f a cc ou ntpa ya b l es bank OD an d ou t s t an d in g expe ns es .

T he w or ki ng c ap it al m an ag em en t i s t hu s c on ce rn ed w it h

m a in t ai n in g a t r ea d o f f b e tw e en p r of i ta b il i ty a n d r i sk a s so c ia t edwi t h i n a f i r m s l eve l o f CA and CL.

T h e b a s i c g o a l o f w o r k i n g c a p i t a l i s t o m a n a g e t h e f o r m s C Aa n d C L s o a s t o a c h i e v e a s a t is f a c to r y l e v e l o f w o r k i n g c a p i t a l . I t i s

n e c e s s a r y b e c a u s e t h e f i r m i s n o t a b l e t o m a i n t a i n t h i s l e v e l i t i s

l i ke l y t o become i ns o l ven t and may even be f o r ced i n t o b ankr up t cy .

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TYPES OF WORKING CAPITAL

Basica l ly two types o f working capi tal are needed in

business:

1 ) P e r m an e n t w o r k i ng c a p i t a l w hi c h i s p e r ma n e n t l y b lo c k e d

i n bus i nes s

2 ) Va r ia b le wor k in g cap i t a l wh ich va r ie s w i t h the

r equ i r emen t o f bus i nes s

14

Working capital

Permanent Variable

Initial w.c Seasonal w.c.Regular w.c Special w.c


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PERMANENT WORKING CAPITAL

I t i s t h e t y p e o f w . c w h i c h i s p e r m a n e n t l o c k e d u p i n c u r r e n t

a s s e t s . S o m e c a s h i s r e q u i r e d t o m a i n t a i n s t o c k s o f r a w m a t e r i a l s ,

f i n i s h e d g o o d a t t h e i r n o r m a l l e v e l , f o r p a r i n g w a g e s a n d s a l a r i e s

r egu l a r l y . Pe r manen t wor k i ng cap i t a l i s o f t wo k i nds .

In i t ia l work ing capi ta l

I n t h e p e r i o d o f i t s o p e r a t i o n , a c o m p a n y m u s t h a v e e n o u g h

m o ne y t o p a y c e rt a in e x p en s es b e fo r e t h e b u si n es s . I n t h e i n i t ia l

y e a r s, b a n k m a y n o t g r a n t l o a n s o r o v e r d ra f t s, d a l e s m a y h a v e t o b e

ma de o n c re di t a nd i t ma y n ec ess ar y t o m ak e p ayme nt t o th e

c r e d i t o r s i m m e d i a t e l y . H e n c e t h e t u r n s w i l l h a v e t o b e s u p p l i e d b y

t he owner s t hems e l ves i n t he i n i t i a l yea r s .

Regu l a r wor k i ng cap i t a l

I t i s t h e w . c r e q u i r e d t o c o n t i n u e t h e r e g u l a r o p e r a t i o n s . I t i s

r e q u i r e d t o m a i n t a i n r e g u l a r s t o c k s o f r a w m a t e r i a l a n d w . i . p a n d

a l s o o f t h e f i n i sh e d g o o d s w h i c h m u s t b e m a i n ta i n e d p e r m a n en t a t a

de f i n i t e l eve l . Regu l a r wor k i ng cap i t a l i s t he exces s o f cu r r en t a s s e t s

ove r cu r r en t l i ab i l i t i e s . I t ens u r es s moot h ope r a t i ons o f t he bus i nes s .

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VAR IAB L EW OR KING C AP IT AL

I T I S T H A T O F W . C W H I C H I S R E Q U I R E D T O M E E T T H E S E A S O N A L N E E D S A S

W E L L A S S P E C I A L N E E D S O F T H E B U S I N E S S . I T I S T H E R E F O R E , S U B D I V I D E D I N T O

T W O P A R T S

SE A S O N A L W O R K I N G C A P I T A L

S O M E B U S I N E S S E N T E R P R I S E R E Q U I R E S A D D I T I O N A L W . C D U R I N G A

P A R T I C U L A R S E A S O N . F O R E X A M P L E , T H E S U G A R M I L L S H A V E T O P U R C H A S E

S U G A R C A N E I N A P A R T I C U L A R S E A S O N A N D H A V E T O E M P L O Y A D D I T I O N A L L A B O R

T O P R O C E S S I T . T H E Y M U S T M E E T T H I S R E Q U I R E M E N T B Y P R O V I D I N G A D D I T I O N A L

F U N D S F O R A T E M P O R A R Y P E R I O D .

SP EC IA L W O R K IN G C A P ITA L

IN A L L E N T E R P R I S E , S O M E U N F O R E S E E N E V E N T S D O O C C U R W H E N E X T R A

F U N D S A R E N E E D E D T O T I D E O V E R S U C H S I T U A T I O N . S O M E O F T H E S E E V E N T S A R E

S U D D E N I N C R E A S E I N D E M A N D F O R T H E F I N A L P R O D U C T ( E . G . W H E N A W A R

B R E A K S O U T ) , D O W N W A R D M O V E M E N T O F P R I C E A N D S A L E S D U R I N G D E P R E S S I O N

N E C E S S I T A T I N G E X T R A W O R K I N G F U N D S , C O N S I D E R A B L E R I S E I N P R I C E O F R A W

M A T E R I A L S O M O R E F U N D S W I L L B E N E E D E D T O M A I N T A I N T H E I R S T O C K A T T H E

N O R M A L L E V E L A N D S T R I K E S O R N A T U R A L C A L A M I T I E S W H I C H A L S O F O R C E T H E

M A N A G E M E N T T O P R O V I D E F O R A D D I T I O N A L F U N D S .

FACTORS INFLUENCING TO WORKING CAPITAL

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F I N A N C I A L G R O W T H : -

T he w or ki ng c ap it al n e ed o f t he f ir m i nc re as e a f in an c ia l

cond i t i on . I t i s d i f f i cu l t t o p r ec i s e l y de t e r t i ne t he r e l a t i ons h i p ben t

vo l ume o f wor k i ng cap i t a l need i n p r ac t i ce cu r r en t a s s e t w i l l have t o

be emplo ye d be fo r e g rowth t ake p lace . I t i s wor k ing ca p i t a l f o r a

g r owi ng on a con t i nues bas i s .

A g r o w i n g f i r m m a y n e e d t o i n v e s t f o n d i n a f i x e d a s s e t s i n

o r d e r t o s u s t a i n i t s g r o w i n g p r o d u c t i o n a n d s a l e s . T h i s w i l l i n t u r n

i nc r eas e i nves t men t i n C . A t o s uppor t en l a r ged s ca l e o f ope r a t i on , i t

s h o u l d b e r e a l i z e d t h a t a g r o w i n g f i r m n e e d f u n d c o n t i n u o u s l y . I t

u s es ex t e r na l s our ce a s we l l a s i n t e r na l s our ce t o mee t i nc r eas e need

o f f un d s s uc h a f ir m f ac e f ur th e r f in a nc ia l p ro bl em w he n i t r es t

s u bs t an t ia l p o rt i on o f i t s p r of i t. I t t h er e fo r e i mp e ra t iv e t h at s u ch

c o mp a n ie s t o f i na n ce t h ei r i n cr e as e n e ed f o r w o r k in g c a p it a l. I d o

p ro per p lan n in g .

I N T E R E S T L E V E L C H A N G E : -

The i nc r eas e s h i f t i n i n t e r es t l eve l makes f unc t i on o f f i nanc i a l

m a n a g e r . H e s h o u l d a n t i c i p a t e t h e e f f e c t o f p r i c e l e v e l c h a n g e o n

w / c r e q u i r e m e n t o f t h e f i r m . T h e I D B I B a n k g i v e s r i g h t t o p u b l i c

s e c t o r b a n k f o r g i v i n g a h i g h e r i n t e r e s t t h e y c o v e r h i g h e r w o r k i n g

c ap it a l e ff ec t o f in cr ea se g en er al in te re st p ri ce s ma y mo ve

d i f f e r e n t l y b y f i r m a s i n d i v i d u a l p r i c e m a y m o v e d i f f e r e n t l y . I t i s

pos s ib l e t ha t s ame f inan c ia l in s t i tu t ion ma y no t a f fec t b y r i s in g

i n t e r e s t w h i l e o t h e r m a y b e b a d l y h i t b y i t . T h u s e f f e c t e d o f r i s i n g

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i n t e r e s t l e v e l w i l l b e d i f f e r e n t f o r d i f f e r e n t f i n a n c i a l i n s t i t u t i o n i t

w i l l f ace no t wor k i ng cap i t a l p r ob l em.

F I R M C R E D I T P O L I C Y : -

T he c re di t p o li c y o f t he f ir m a ff ec te d w or ki ng c a pi ta l b y

i n f l u e n c i n g t h e l e v e l a t a b o o k d e b i t s . T h e t e r m t o b e g r a n t e d t o

c u s t o m e r s m a y d e p e n d u p o n n o r m s o f i n d u s t r y t o w h i c h t h e f i r m

be lo ngs bu t a f i r m h as the f l ex ib i l i t y o f shap ing i t s c red i t po l i c y th i n

t he c on st ra in o f i nd us tr y n o rm s a nd p ra c ti ce t he f ir m s ho u ld b e

d i s c r e t i o n a r y i n g r a n t i n g c u s t o m e r w i l l b e d e t e r m e n t a l t o t h e f i r m

a nd w il l c re a te a p ro b le m o f c ol le ct in g f un ds l at er o n . T he f ir m

s h ou l d p r om p t i n m a ki n g c o ll e ct i on . A h i gh c o ll e ct i on p e ri o d w i ll

m ea n t ie u p o f b oo k d eb ts . S la c k p ro c ed ur e o n c a n i nc re a se t he

change o f bad deb t s .

I n o r d e r t o e n s u r e t h a t u n n e c e s s a r y f u n d a r e n o t t i e d u p i n

book d eb t s t he sh ou l d f o l low a r a t i ona l i z ed c red i t po l i c y bas ed a

c r ed i t s t and i ng o f cus t omer and o t he r r e l evan t f ac t o r .

T h e c r e d i t p o l i c y o f p r i m e v a l v e s I n d i a l t d . I s t h a t t h e

cus t omer wen t . I t i s bas ed on i ns t a l l men t o f l oan g i ven by t hem. The

c re d it p ol ic y i s t he m us t f or t he n t he y p ro vi de m ax im um 3 y ea r

c r ed i t po l i cy upon l oan 10 l ack .

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A V A I L A B I L I T Y O F C R E D I T : -

T h e w o rk i ng c a p it a l r e qu i re m en t o f a f i rm a l so a f fe c te d b y

c r e d i t t e r m g r a n t e d b y i t s c r e d i t o r s , a f i r m w i l l n e e d l e s s w o r m i n g

c a pi t al i f l i be r al c r ed i t f r om a r e a v a il a bi l it y t o i t . S i mi l ar l y t h e

a v a i la b i l i ty o f c r e d i t f r o m b a n k a l s o i n f l u e n ce s t h e w o r k i n g c a p i t a l

n ee d o f t he f ir m. A f ir m. W hi ch c an g et b an k c re di t e as il y o n

f a v o r a b l e c o n d i t i o n s , w i l l o p e r a t e l e s s w o r k i n g c a p i t a l t h a n a f i r m

wi t hou t s uch a f ac i l i t y .

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F I X E D D E P O S I T S : -

Y ou r c om pa ny n ot i nv it ed o r a cc ep te d a ny d ep os it s f ro m

s ha re h ol de rs a n d p ub li c d u ri ng t he y ea r w it hi n t he m ea n in g o f

s ec t i on 58( A) o f t he compan i es ac t , 1956 .

15 t o 45 Days : - 6 .5%

46 t o 179 Days : - 7 .5%

180 t o 2 Year s : - 8 %

2 Year s t o 3 Year s : - 8 .25 %

Mor e t han 3 Year s : - 8 .50 %

D A I L Y S A V I N G A/C: -

12 Mont h = 8 %

24 Mont h = 10 %

S A V I N G A/C: -

5 .25 %

L O A N : -

14% T O 18% t hey cha r ge i n t e r es t

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21


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INTRODUCTION

Cash the mas t l i qu id a sse t s , i f o f v i t a l impor t ant t o thed a il y o p era ti o n o f b u si n es s f i rms w h il e t h e p rop o rt i on o f

c o r p o r a t e a s s e t s h e l d i n t h e f o r m o f c a s h . I t i s v e r y m o s t

i mpo r ta n t o f l i fe b l oo d fo r t h e f i na n ci a l i n st i tu t io n , o f te n

be tween 2% to 4% i t e f f ic ien t management i s crucia l to the

so lvency o f a bus iness because in ve ry impor t an t sense a sh

i n t he l oc al p oi nt f on d f lo w i n b us in es s. I n v ie w o f i ts

i m p o r t a n t i t i s g e n e r a l l y r e f e r r e d t o a s t h e l i f e b l o o d a s a

bus iness enterpr i se .

TR A N S A C T I O N MO T I V E : -

F ir m ne ed c as h t o me et t he ir t ra ns ac ti on n ee d t he

c ol le ct io n o f c as h i s n ot p er fe ct ly s yn ch ro ni ze d w it h t he

d i sbursemen t o f cash , Hence some cash ba lance i s requ i red

are buffer .

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PR E C A U T I O N A R Y MO T I V E: -

There may be some uncer ta in ty magni tude and t iming of

c a sh i n fl o ws f ro m se rv i ce s , s a l e s o f a s se t s a n d i s su an c e o f

squin ty l ikewise there may be uncer ta in ty about cash out f low

an account a of purchase and o ther ob l iga t ion .

SP E C U L A T I V E M O T I V E: -

F ir m w oul d l i ke t o t op pr of it m aki ng o pp or tu ni ty

a r i s ing f rom f luc tua t ion in commodi ty p r i ce . Squ in ty p r i ce

in teres t ra te and fore ign exchange ra te . A cash f i rm i s be t te r

prepared to exploi t such barga ins , Hence f i rm which have

s uc h s pe cu la ti ve l ea r ni ng m ay c ar ry a dd it io na l l iq ui di ty

however fo r mas t f i rms the ir re se rve bo r rowing capac i ty and

marketab le secur i t ies would suff ice to meet the i r specula t ive

need .

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MONITORINGCOLLECTION &

RECEIVABLE

T h e p r i me v a l v e s I n d i a l t d . E nh an ce s t he

e ff ic ie nc y o f c as h m an ag em en t t he f o l lo wi ng s te p i s

t a k i n g .

P R O M P T B I L L I N G : -

I t i s o f c o m m o n k n o w l e d g e t h a t t h e r e i s a t i m e l a g

b e t w e e n t h e w r i t i n g o f c h e q u e & b i l l i n g a n d c o l l e c t i o n o f

m on e y p r ov id i ng d r af t , m ai l , t r an s fe r , A BC b i l l s e t c .

F a c i l i t i e s t o c u s t o m e r s .

E X P E D I T I O N C O L L E C T I O N & C H E Q U E : -

A n e f f i c i e nt i m p or t a n t a s p e c t o f a s h m a n a g e me n t i s

t o p a r t t h e c h e q u e r e c e i v e d v e r y p r o m p t l y . I n a d d i t i o n t o

q u i c k h a n d i n g o f c h e q u e . T h e p r i m e v a l v e s I n d i a l t d .

R e c e i v i n g r e m i t t a n c e f r o m d i f f e r e n t p a s t s o f d i s t r i c t o r

24


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v i l l a g e m i g h t d e c e n t r a l i s t . I t s c o l l e c t i o n s a n d o u t d o w n

t h e d e l a y i n t h e c o n v e r s i o n c h e q u e i n t o c a s h .

C O N T R O L O F P A Y A B L E : -

B y a p r o p e r c o n t r o l o f p a y a b l e t h e P r i me v a l v e s

I n d i a l t d . C o n s e r v e i t s c a s h r e s o u r c e t h e y i n v o l v e t h e

f o l l o w i n g t h i n g .

P a y m e n t a n d t h e i r d i s b u r s e m e n t a r e c e n t r a l i z e d

P a y m e n t a r e m a d e o n l y a s w h e n t h e y f a l l d u e

A rr an ge me nt o f c as h w it h t he pr i me v al v es

I n d i a l t d . T o s e t d u e d a t e s o f t h e i r b i l l s t o m a t c h

w i t h m e b a n k s p e r i o d o f p a c k r e c e i p t s .

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26


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CREDITPOLICY VARIABLE

T he i mp or ta nt d ec is io n o f P RI M E V AL VE S I ND I A

LTD.. C r e d i t p o l i c y i s .

C A S H D I S C O U N T : -

T h e P R I ME V A L V E S I N D I A L T D . . h a s n o t a ny k i nd

o f p o l ic y t o p ro vi de c as h d is co un t , a s i t i s a b an ki ng

f i r m . T h e y h a v e t h e d i r e c t g u i d e l i n e s t o f o l l o w

e s t a b l i s h ed b y PRIME VALVES INDIA LTD. .

C O L L E C T I O N E F F E C T : -

T h e c o l l e c t i o n p r o g r a m o f t h e PRIME VALVES INDIA

LTD. . t he a i me d a t t i me l y c o ll e ct i on o f r e ce i va bl e i s

c o n s i s t i n g o f t h e f o l l o w i n g .

M o n i t o r y t h e y s t a t e o f r e c e i v a b l e

D i s p a t c h o f l e t t e r t o c u s t o m e r w h o s e d u e i s

a p p r o a c h i n g .

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T e l e g r a p h i c a n d t e l e p h o n i c a d v i c e t o

c u s t o m e r s a r o u n d t h e d u e d a t e .

T h r e a t o f l e g a l a c t i o n t o o v e r d u e a c c o u n t s

L e g a l a c t i o n a g a i n s t o v e r d u e a c c o u n t

CREDITGRANTING DECISION

O nc e t h e c r e d i t w or t hi n es s o f a c u st o me r h a s b e en

a s se ss ed t h e n e x t q u es ti on i s s ho ul d t h e c re di t b e

o f f e r e d .

T h e P RI ME VA LVE S IN DI A L TD .. F o l lo ws t he

f o l l o w i n g p a t t e r n o f g r a n t i n g c r e d i t t o t h e c u s t o m e r .

C r e d i t

R e f u s e O f f e r

C r e d i t C r e d i t

C u s t o m e r C u s t o m e r

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P a y D e f a u l t

P r o f i t L o s s

I t i s o bv i ou s f ro m t h e a b o ve f ig ur e t h a t i s t he

e xp e ct e d p r o f i t o f t h e c o u r se o f a c ti o n o f t en c r ed i t i s

p o s i t i v e . I t i s d e s c r i b e d t o e x t e n d c r e d i t o t h e r w i s e n o t .

A l s o t h e f o l l o w i n g a r e t h e s t a n d a r d , w i t h t h e y h a v e

d e c i d e d t o m a k e i n t o c o n s i d e r a t i o n f o r g r a t i n g c r e d i t .

A . R e fe r en c e pr o vi d e by t h e pr o sp e ct i ve c u st o me r s i s

c on su l t ed a nd n ec es sa ry i n t o c on si de ra t i on f or

g r a t i n g c r e d i t .

B . C r e d i t p o l i c i e s n e e d s t a k e a r t i c u l a t e d i n t o e x p l i c i t

t e rm a n d r e vi s e p e r i od ic a l l y i n t he l ig h t o f i n t e rn a l

a n d e x t e r n a l c h a r g e .

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C. A. F INANCIAL

A s t h e a l l - f i n a n c i a l i n s t i t u t i o n l i k e b a n k h a s i t C . A

f i n a n c i a l p o l i c y a s i n d e c i d i n g t h e l e v e l o f c u r r e n t a s s e t s

t h e b a n k h a s f o l l o w i n g t h e p r i n c i p a l p o l i c y o f f l e x i b l e

i t s C . A f r o m t h e f o l l o w i n g s o u r c e s .

RS . IN L A C S

B A N K B A L A N C E 4 5 . 3 8

D E P O S I T F R O M P U B L I C 4 0 . 9 8

L O A N 4 4 . 6 1

C A S H O N H A N D 9 . 0 7

L o n g t e r m f i n a n c i n g i s s u e d t o m e e t f i x e d

r e q u i r e m e n t p e r m a n e n t w o r k i n g c a p i t a l r e q u i r e d a n d

p o s i t i o n o f f l u c t u a t e w o r k i n g c a p i t a l r e q u i r e m e n t

d u r i n g s e a s o n a l u p s w i n g s . S h o r t t e r m f i n a n c i n g i s

d ur in g s ea so na l d ow ns wi ng s ur pl us i s i nv es te d

l i q u i d a s s e t s .

L on g t er m f in an ci ng i s u si ng me et f ix ed a ss et s

r e q u i r e me n t a n d p e r m a n e n t w o r k i n g c a p i t a l

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r e q u i r e m e n t . S h o r t t e r m s f i n a n c i n g w o r k i n g u s e d t o

m e e t f l u c t u a t i n g w o r k i n g c a p i t a l r e q u i r e m e n t .

NEED OF W/C MANAGEMENT

T he n ee d o f W /C t o r un t he b us in es s d ay - t o- da y

a c t i v i t y c a n n o t b e o v e r e m p h a s i z e d . W e w i l l h a v e h a r d i l y

f in d a b us in es s f i r m o r s er v i ce u n i t . W hi ch d oe s n o t

r e q u i r e a n y a m o u n t o f W / C .

W e k n o w t h a t f i r m s a i m a t m a x i m i z a t i o n t h e w e a l t h

o f s h ar e ho l de r w e al t h s h ou l d e ar n s u ff i c i e nt r e tu r n i t s

o p e r a t i o n s .

T h e C ha n go d ar P RI ME V AL VE S I ND IA L TD . I s

o p e r a t i o n w o r k i n g c a p i t a l m a n a g e m e n t f o r t h e f o l l o w i n g

r e a s o n w h i c h s e e m s t h e i m p o r t a n c e o f i t s i n t h e b a n k .

Q U I C K O P E R A T I O N : -

T he W /C m an ag eme nt o f P RI ME VA LV ES I ND IA

LTD. . I s s o s u c h s o u n d t h o s e a r e s u f f i c i e n t t o m e e t i t s

c u r r e n t l i a b i l i t i e s . T h e w o r k i n g c a p i t a l u s e d i n t h e b a n k

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i s m or e r eq ui re me nt s s o t he d ra ft f ac il i t ie s b ec om e

e a s i e r .

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G R O W T H A N D E X P A N S I V E A C T I V I T Y : -

A t p r es en t t he P RI ME V AL VE S I ND IA L TD . I s

g o i n g t o s t o u t i s n e w b r a n c h e s a n d i n c r e a s e t h e c o m p u t e r

b a s e d f a c i l i t i e s w i t h b r a n c h e s b y i n t e r n a l w h i c h s h o w s

t h e e x pa n si on a nd g ro wt h a c t iv it ie s c o ns id e re d b y

m a n a g e m e n t a n d a v a i l a b i l i t y o f s u f f i c i e n t W / C .

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L IMITATION

I t r e s u lt u n n ec e s sa r y a c c um u l at i o n o f i n v en t o ri e s .

T h is c h an g e o f i n ve n to ry w i se h a nd in g w a st e a n d

l o s s e s i n c r e a s e .

I t i s a n i nd ic a t or o f d ef ec t i ve c re d i t p ol ic y a nd

s t a c k c o l l e c t i o n p e r i o d c o n s e q u e n t l y h i g h e r

i n ci de n ce o f b a d d e bt s r es ul t w hi c h a dv e rs el y

a f f e c t e d p r o f i t .

.

I t s t a gn a t es g r o wt h i t b e c om e d i f f i c ul t f o r t h e f i r m

t o u n d e r t a k e p r o f i t a b i l i t y m e a s u r e s .

P a u c i t y o f W / C f u n d s r e n t e r s t h e u n a b l e t o a v a i l a r e

a t t r a c t i v e c r e d i t o p p o r t u n i t i e s .

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FINDINGS

P r im e v a lv e s I n di a l t d . d e f i n es i t s c o rp o ra t e g o a l s f o r

e v er y f i na n ci a l y ea r a n d o n t h e b a s i s o f c o rp o r a t e g o a l s

e v er y i n di v id u a l S B U d e f i n e t h er e a r ea o f c o n t r ib u t i o n

t h a t w i l l a d d v a l u e t o e n h a n c e o v e r a l l c o r p o r a t e g o a l s .

F r o m m y r e s ea r c h o n t h i s o n g o i n g p r o j ec t , w h i c h i s p a r t

o f t h e c o m p a n y s t r a t e g i c d e c i s i o n i t i s c o n c l u d e d t h a t i s a

v e r y i m p o r t a n t p a r t o f a n y i n d u s t ry i n o r d e r t o s u r vi v e i t

s e l f i n t h e m a r ke t a s w e l l a s i n t h i s c o mp e t i t iv e w o r l d .

C o s t r e d u c t i o n i m p l e m e n t e d i n P r i m e v a l v e s I n d i a l t d i n

a h m e d a b a d i s b e i n g p a r t o f e a c h a n d e v e r y d e p a r t m e n t a n d

i s b e i n g w e l l i m p l e m e n t e d . N o t o n l y h a s t h a t i t a l s o s h o w n

g r e a t r e s ul t i n t h e c o m p a n y f i n a nc e p o s i t i on a s w e l l a s t o

r e m a i n s u r v i v e i n t h i s c o m p e t i t i v e w o r l d .

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C O N C L U S I O N

I n t h i s a r e a o f c o m pe t i t i o n a f a s t d e v e l op m e nt e a c h

o n e i s f i g h t i n g t o a c q u i r e i t s r e q u i r e m e n t a n d n e e d s s o a s

P R I M E V A L V E S I N D I A L T D . .

T h e l i b e r a l i z a t i o n g l o b a l i z a t i o n a n i n d u s t r i a l i z a t i o n

p r o c e s s h a s i n c r e a s e t h e n e e d o f b a n k i n g f a c i l i t i e s

P R I M E V A L V E S I N D I A L T D . . H a s j u m p e d i n t o t h i s

r ev o l ut i on w i t h h i s h ol e h e ar te d e f fo r t s & p o w er .

P R I M E V A L V E S I N D I A L T D . . h a s b e e n p r o v i d i n g ..

T h e s u cc es s p r og r es s o f P R I M E V A L V E S I N D I A

L T D . . I s d u e t o e x p a n s i o n o f i t s b r a n c h e s .

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B IBLIOGRAPHY

1 ) F i n a n c e ma n a g e m en t b y f i na n c e d e p a rt m e n t

2 ) F i n a n c e d ep a r t me n t m a n a ge m e n t a n d b y k h an a n d j a i n

Web si te .

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