Siri Project on Working-Capital Final

8/13/2019 Siri Project on Working-Capital Final

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A STUDY ON WORKING CAPITAL MANAGEMENT ATLANCO INDUSTRIES

INTRODUCTION TO THE STUDY:

One of the most important areas in

the day to day management of the firm is the management of working capital.

Working capital management is the functional area of finance that covers all the current

accounts of the firm. Working capital management includes the management of all the

types of current assets and current liabilities.

It also includes the decisions as to the

appropriate amount of long term financing used in financing the current

assets of the enterprise. All the current asset decisions are related. Not only are those,

current assets and current liability decisions are interrelated in nature. These

comple interactions are managed using tools of financial analysis.

It is concerned with management of the levelof individual !urrent Assets as well as the management of total working capital. The

management of !urrent Assets is similar to that of "i ed Assets in the sense that in both

cases a firm analyses their effects on its return and risk. The management of "i ed and

!urrent Assets however differs in three important ways. "irst, in managing "i ed Assets

time is a very important factor# conse$uently,discounting and compounding techni$ues

play a significant role in capital budgeting and a minor one in the management of !urrent

Assets. %econd, the large holding of the !urrent Assets, especially cash, strengthens the

firms li$uidity position &and reduces risk' but also reduces the overall profitability. Thus,

a risk(return trade off, is involved in holding !urrent Assets. Third, levels of "i ed as

well as !urrent Assets depend upon e pected sales, but it is only current assets, which

can be ad)usted with sales fluctuations in the short run. Thus, the firm has a greater

degree of fle ibility in managing !urrent Assests.

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NEED FOR THE STUDY:

This pro)ect work is an attempt to getac$uainted with various facts of short(term finance management. This pro)ect work aims

at encompassing working capital management practices that prevail in the organi+ation

upon which the study was undertaken. working capital is the difference between current

assets and current liabilities. Though this concept of working capital is commonly used, it

is an accounting concept with little economic meaning. It makes little sense to say that a

company manages its net working capital. What a company really does is to take

decisions with respect to various current assets and current liabilities. Working capital

management is a significant facet of financial management. In fact, this simply reflects

the repetitive nature of investment commitments with relatively short life e pectancy and

rapid transformation from one investment form to another.

"inancial analysis recogni+es that all working

capital investments do not en)oy the same life e pectancy, nor are they transformed into

useable li$uidity flows at the same speed. There is need to study the factors influencing

the working capital, the components of working capital, level of operations and length of

the operating cycle. onitoring the duration of the operating cycle is an importantingredient of working capital.

OBJECTIVES OF THE STUDY:

The main ob)ectives of the study of Working !apital anagement in -anco

Industries -td. Are as follows

Primary Ob !"#i$!

To study the working capital management in -anco Industries.

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S!"%&'ary Ob !"#i$!(:

To determine the changes in the Working !apital of the "irm over 0 years.

To determine the short term solvency position.

To give suggestions to the !ompany to improve its performance, if any.

SCOPE OF THE STUDY:

The contents of the total evaluation of current

assets and current liabilities and their percentage contribution in the total turnover. The

yearly increase or decrease of current assets or current liabilities in the budget of -ancoIndustries -imited is being reviewed. "rom this one would be in a position to glance the

performance of current assets and current liabilities of the !ompany.

This pro)ect greatly deals with the working

capital re$uirements of -anco Industries -td 1. And emphasi+es on the yearly

composition of Working !apital in the total turnover of the !ompany. This also deals

with key ratios to obtain a clearer picture of different resources available and at the

disposal of the organi+ation, which will enable one to give appropriation suggestion to

the !ompany to improve its performance, if any.

Im)%r#a&"! %* W%r+i&, Ca)i#a-:

Investment in fi ed assets only is not sufficient

to run the business. Therefore working capital or investment in current assets is a must

for the purchase of raw materials and for meeting the day(to(day e penditure on salaries,

wages, rents etc. The main advantages of ade$uate working capital are as follows

If proper cash balance is maintained a !ompany can avail the advantage of cash

discounts by paying cash for the purchase of raw materials in the discount period,

which results in reducing the cost of production.

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Ade$uate working capital creates a sense of security, confidence and loyalty not

only through out the business itself but also its customers, creditors and business

associates.

A firm can raise funds from the market, purchase of goods on credit and borrow

short(term funds from banks etc. If investors and borrowers are confident that

they will get their due interest and payment of principle in time.

!ertain contingencies like financial crises due to heavy losses# business

oscillation etc. can be easily overcome, if the company maintains ade$uate

working capital.

A continuous supply of raw material, research programs, innovation and technical

developments and e pansion programs can successfully be carried out if working

capital is maintained in the business. It will increase the production efficiency,

which in turn increase the efficiency and morale of the employees, lower the cost

and create image in the community.

REVIEW OF LITERATURE:

MEANING OF WORKING CAPITAL:

Working capital in simple terms is the amount

of funds which business concerns have to finance its day(to(day operations. It can also be

regarded as that proportion of company3s total capital which is employed in short(term

operations. Working capital refers to the funds invested in !urrent Assets i.e. Investment

in %tock, %undry 4ebtors, !ash and Other !urrent Assets. !urrent Assets are essential to

use "i ed Assets profitably.

CONCEPTS OF WORKING CAPITAL

Working capital can be defined through its two concepts, namely

&a' 5ross working capital &b' Net working capital.

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Working capital can be classified as ,

&a' permanent working capital

&b' Temporary working capital

P!rma&! W%r+i&, Ca)i#a-:

It also refers to the hardcore working capital. It is that minimum

level of investment in the !urrent Assets that is carried by the business at all times, to carry out

minimum level of its activities.

Amount of

Working

!apital Temporary

"i ed

Time

T!m)%rary W%r+i&, Ca)i#a-:

It refers to that part of total working capital that is re$uired

by a business over and above 8ermanent working capital. It is also called variable

working capital. %ince the volume of Temporary working capital keeps on fluctuating

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arket conditions

!onditions of supply

;usiness cycle

5rowth and e pansion -evels of ta es

4ividend policy

8rice level changes

Operating efficiency

Na#/r! %* #0! b/(i&!((:

The shorter the manufacturing process, the lower is the

re$uirement for the working capital. This is because in such a case inventories have to

be maintained at a low level. -onger the manufacturing process,s the higher would be

the re$uirements of working capital.

This is the reason why highly capital(intensive industries

re$uire a large amount of working capital to run their sophisticated and long

production process. %imilarly, a trading concern re$uires lower working capital than a

manufacturing concern.

Cr!'i# )%-i"y:

The credit policy of the company also determines the

re$uirements of working capital. A company, which allows liberal credit to its

customers, may have higher sales but conse$uently will have large amount of funds

tied up in sundry debtors. %imilarly, a company which has very efficient debt

collection machinery and offers strict credit terms may re$uire less amount of

working capital than the one where debt collection system is not so efficient or where

the credit terms are liberal.

The credibility of a company in the market also has an effect

on the working capital re$uirements.


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material on credit and en)oy many other services also like door delivery, after sales

service etc. This would mean that they can easily have large current liabilities, and

therefore, the re$uired working capital may not be very high.

Ab&%rma- *a"#%r(:

Abnormal factors like strikes and lockouts also re$uire

additional working capital.


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8roduction phase

%torage of the finished products terminating at the time finished

product is sold.

!ash or accounts receivable collection period, which results in, andends at the point of dis(investment of the free capital originally

committed. New li$uid capital then becomes available for productive

reinvestment. When new li$uid capital becomes available for

recommitment to productive activity, a new operating cycle begins

ISSUES IN WORKING CAPITAL MANAGEMENT:

Working capital management refers to the administration of

all aspects of current assets namely cash, marketable securities, debtors and stock and

current liability. The financial manager must determine levels and compositions of

current assets. 7e must see that right sources are tapped to finance current assets and thatcurrent liability paid in time.

There are many aspects of working capital management, which make it an important

function of the financial manager.

Tim!: Working capital management re$uires much of the finance managers time.

I&$!(#m!: Working capital management has great significance for all firms but it3s

very critical for small firms.

Gr%1#0: The need for working capital is directly related to the firm3s growth.

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

S%/r"!( %* 1%r+i&, "a)i#a-

P!rma&! %r *i2!' T!m)%rary %r $ariab-!

*. %hare *.Trade credit

/. 4ebentures /. ;ank loans

2. -ong term public deposits &a' Overdraft

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2. L%&,5#!rm )/b-i" '!)%(i#(:

-ong term public deposits also have become important sources of

long term finance.

6. R!#ai&!' !ar&i&,(:


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F%rm( %* ba&+ *i&a&"!

a7 O$!r 'ra*#

Bnder overdraft facility, the borrower is allowed to withdraw fundsin e cess of the balance in his current account up to a certain specified limit

during a stipulated period. Through overdrawn amount is repayable on demand.

b7 Ca(0 "r!'i#:

The cash credit facility is similar to the O4 facility. Bnder this credit

facility a borrower is allowed to withdraw funds from the bank up to the

sanctioned credit limit.

"7 P/r"0a(! %r 'i("%/i&, %* bi--(:

Bnder the purchase or discounting of bills a borrower can obtain credit

from a bank against its bills. The bank discounts the borrower bills and provides

credit facility to the firm.

'7 L!##!r %* "r!'i#:

The purchaser of goods on credit obtains a letter of credit from a bank.

A bank opens a -C! in favour of a customer to facilitate his purchases of goods. If

the customer does not pay to the supplier within the credit period, the bank makes

the payment under the -C! arrangements.

!7 W%r+i&, "a)i#a- -%a&:

A borrower may sometimes re$uire ad hoc or temporary

accommodation in e cess of sanctioned credit limit to meet unforeseen

contingencies. ;anks provide such accommodation through a Ddemand loan3

account or a separate Dnon(operable3 cash credit account.

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97C%mm!r"ia- )a)!r:

!ommercial paper is a short term unsecured negotiable instrument,

consisting of promissory notes with a fi ed maturity. It is also a source of working capital

finances, popular in India as well as many foreign nations.

7Fa"#%ri&, %* bi--( %* r!"!i$ab-!(:

"actoring is a systematic and sophisticated way to get advances against

receivables. 7ere a firm sells its receivables to a third party called Dfactor3 which is

usually a financial institution or a commercial bank.

The factor purchases these receivables immediately and assumesall credit risks and collection efforts in e change of a factoring commission.

OPERATING CYCLE:

Operating !ycle is the time duration re$uired to convert sales, after the conversion ofresources into inventories, into cash. The operating cycle of a manufacturing company

involves three phases

They are,

Ac$uisition of resources such as raw material, labour, power and fuel etc.

anufacture of the product which includes conversion of raw material into work(

in(progress into finished goods

%ale of the product either for cash or on credit. !redit sales create account

receivable for collection.

The firm is re$uired to invest in current assets for smooth,

uninterrupted functioning. It needs to maintain li$uidity to purchase raw materials and

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DEBTORS MANAGEMENT :


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LAYING DOWN CREDIT POLICY:

The organi+ation specifying applicability of general credit policy i.e., the period

of credit e tendable as a thumb rule would fall short of its effort in controlling the

receivables. The credit policy re$uired to be more selective and should bare the growth,

the recoverability, the product strength, the distribution network etc., in its upper most

mind. The variation in credit policy could also be on customer based. As we would

observe there would be two sets of organi+ations, one looking for a lower margin with

reasonable growth through a conservative credit policy.

The credit policy should not only lay down the period of credit but also a wellthought out procedures for e tending credit in order to prevent or minimi+e the debts

going bad. A systematic evaluation of customers3 credibility, financial.

%trength and their usefulness to the organi+ation in terms of $uantum of sales etc.,

would fetch desired results. The credit policy should specify fairly senior personnel could

take the level of management authori+ed to e tend general credit and instead of

decentrali+ing the power of e tending any further dispensation such decisions, few in

number. 4epending upon the market conditions the policy could also specify incentives

for early payments like cash discounts, so also interest on delayed payments.

MONITORING RECEIVABLES:

onitoring the receivables areas important, if not more, as laying down the credit

policy. It has to be constant and continuous in order to bring down the level of

receivables to an optimum level in conformity with the laid down credit policy of the

organi+ation. When we talk about the monitoring of receivables, two ready indicators are

remembered(a. the collection period and b. the age of the book debts.

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a7 COLLECTION PERIOD:

The collection period would be in terms of number of days average credit sale.

%uch a calculation area wise, marketing personnel wise at fre$uent intervals would

provide information3s for selective credit control. An application of incentive for faster

collection in certain selective areas also would render possible, the collection faster.

b7 AGING OF BOOK DEBTS:

The collection efforts could be intensified on greater analysis of receivables from

the point of view of the number of days it is outstanding. 7igher the number of days the

debt is outstanding, the probability of it becoming doubtful of recovery is higher. @arlier

detection of such outstanding from customers would facilitate taking hard decisions of

stoppage of further sales, in order to minimi+e bad debts. !ollection of book debts )ust as

per credit policy would enable the organi+ation to achieve planned profitability.

It would be an art and efficiency of marketing personnel in an organi+ation, which

enables overall monitoring of receivables effective and to keep at an optimum level.

INVENTORY MANAGEMENT:

Inventories constitute the most significant part of current assets of a

company. Inventory refers to the stock of good yet to be sold by a firm. Inventory

includes raw material, work in progress and finished goods.

Na#/r! %* i&$!%ri!(

The various forms in which inventories e ist in a manufacturing company are

Ra1 ma#!ria-(: ;asic inputs that are converted into finished product through the

manufacturing process. These inventories are purchased and stored for the future

productions.

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STATEMENT OF CHANGES IN WORKING CAPITAL:

This techni$ue helps to analyses changes in working capital

between dates of two balance sheets. The comparison of current assets and current

liabilities as shown in the balance sheet at the beginning and the ending of a specific

period.

RATIO ANALYSIS:

67 C/rr! Ra#i% :

The current ratio establishes the relationship between current assets and current

liabilities. The ob)ective of computing this ratio is to measure the ability of the firm tomeet its short term financial strengthCsolvency of a firm. If a firm having high degree of

li$uidity funds is unnecessarily toed up in current assets. The satisfactory current ratio

/ *. In other words, the ob)ective is to measure the safely margin available for short term

indicators. This ratio is e pressed as under.

!urrent assets

!B


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uick assets

BI!H


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Net assets turnover can be computed simply dividing sales by total assets.

sales

TOTA- A%%@T% TB


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Cr!'i#%r( "%--!"#i%& )!ri%'

INDUSTRY PROFILE

ABOUT THE INDUSTRY

India, in *??6 has become the 6 th largest producer of

cement in the world. This impressive record owes its origin to the progressive of the

government since late : 3s and enabled on assured */L post ta return on Net worth. The

economic reforms of >uly D?* gave a further fillip by abolishing the licensing system for

setting up cement plants. %ince then, innumerable technological development took place

in cement production enabling cost reduction and mass production. The wet kilns of the

late : 3s were replaced by dry kilns which reduced the fuel cost by 2 L. Thermal

efficiency was improved by installing pre(heaters, followed by the addition of pre(

calcinatory. Optimal usage of fuel and power we achieved through computeri+ation and$uality control of raw materials.

In a developing country like India, the re$uirement of

housing and infrastructure is high and so the demand elasticity of cement with respect to

5.4.8 O" *.9L is also high.

P-a /&'!r #0! Gr%/)

The pig iron plant and -AN!O cement plant are two

plants which are presently under the name of Cs -AN!O industrial -imited and

-AN!O construction -imited.

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LANCO PIG5IRON DIVISION

It is located at


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-AN!O Industries limited as setup a 8ortland %lag

!ement &8%!' plant of : , T8A !apacity at


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COMPANY PROFILE

INTRODUCTION

"or a corporation totally itself with a great purpose, it must have courage,

conviction, discipline and endurance $ualities which engender organi+ational growth andall round success.

-AN!O, a name represents a rare synergy of strength in the core industries

sector. "or -AN!O, the great purpose is to build infrastructure strong India. -eaping

tongues of fire, the logo of -AN!O has come to symboli+e the display of a fiery spirit

along a creatively engineered span of operations.

ESTABLSHMENT

The -AN!O 5roup of companies was seeded in *??=. When it is started,

founded by two young technocrats it was with a vision and solution to aspire for youth

and synergies that would make -AN!O a leader in the core sector.

The study foundation of the company is constituted of a dynamic term of

managers# young technocrat3s who are in turn fortified with the e pertise of a term of

highly e perienced professionals. Three youthful technocrat3s %ri -.


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LOCATION

-AN!O Industries limited is a rural based factory sprawling over many areas of

land with deep resources and congenial soil. It is located in


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comple es at -AN!O diverse dimensions of growth is achieved through converging rays

of vision rays of vision creating dimensions.

KALAHASTI CASTING LIMITED

@stablish in *??: and strategically located in alone pro imity to the mini blast

furnace of the pig iron plants it has a clear economics mileage over other castings sites.

The molten metal from the blast cone is directly loosed as basic raw material to produce

graded castings. !ast iron span pipes and iron spun gradually e panded further to meet

the scaring demand of the products. The B8% to the pipe plant will be met through *

W capture power plant.

PIG IRON DIVISION

@stablished in the year of *??2.An I%O(? / !ompany, with a state of the art,

integrated manufacturing facility for pig iron through mini blast furnace route

conforming to the latest international technology with initial capacity of *, , T8A

and subse$uently e panded and moderni+ed to *.:0 -T8A. Its $uality products of %5(

5rade pig iron are being supplied to foundries in the southern India. The uninterrupted

power re$uirement for the energy intensive plant is being met through a /.0 W co(

generation power plant.

CEMENT DIVISION:

@stablished in the year of *??9 the basic raw materials is slag produced in the pig

iron manufacturing process to install the cement plant with a capacity of ? , T8A.

SPUN PIPE DIVISION

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@stablished in *??: and strategically located in lose pro imity to the mini blast

furnace of the pig iron plant, it has a clear economic mileage over other castings sites.

The molten metal from the blast furnace is directly used as basic raw material to produce

graded castings , cast iron pipes and ductile iron pipes with a capacity of ? , T8A.

COKE OVEN DIVISION:

@stablished in / 0 the basic raw materials for the mini blast furnace , the coke

oven plant capacity of ?, plant.

POWER PLANT DIVISION:

It has proposed to setup a power plant of */ W. 8ower plant will be setup in the

e isting land coke oven plant.

Waste heat of flue gas from coke oven will be utili+ed in waste heat recovery

boiler to produce steam.

%team produced in the above process will be utili+ed to run on T.5. %et for

generating power.

8ower generated from the power plant will be used for in E house consumption

and balance power will be fed into the A8%@4; grid.

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ANALYSIS < INTERPRETATION

S#a#!m! %* "0a&,!( i& 1%r+i&, "a)i#a- = 8>>?58>>@ R(7i&7La"(

Par#i"/-ar( 8>>? 8>>@ I&"r!a(! D!"r!a(!

5A. C/rr! A((!#(:

Inventories ?*?6. = * 929.=9 *66/.:= (%undry 4ebtors 9: 9.0? :99:.?/ ?9*.22 (

!ash and ;ank ;alances 20 .9: /90 .2: //??.: (-oan and Advances / : .6/ 0/6*.9= 2*:*./9 (

T%#a- %* C/rr! A((!#( A 6@9867?; 8;6 ;7@9B7 C/rr! Liabi-i#i!(

!urrent -iabilities ?/ /.** * *==.26 ( ?=9./28rovisions 206.6/ 02=./0 ( *=2.=2

T%#a- %* C/rr! Liabi-i#i!( B ?009.02 * :/9.0?Working !apital &A(;' =:90./2 *06: ./6Increasing in working capital 9: 0. * 9: 0. *

Total 6 ?>78 6 ?>78 ?@? 7>? ?@? 7>?

INTERPRETATION:

"rom the above table it could be seen that the working capital of the firm for the year/ = is *06: ./6 whereas for the previous year / : the working capital was =:90./2.

while comparing the working capital for the two years ie / : 1 / =, we find that there

is an increase in the working capital of about 9: 0. *. This was due to increase in the

inventories, sundry debtors, cash 1 bank balances, loan and advances, decrease in current

liabilities and provisions of the firm.

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S#a#!m! %* C0a&,!( i& W%r+i&, Ca)i#a- E 8>> 58>6> R(7i&7La"(

Par#i"/-ar( 8>> 8>6> I&"r!a(! D!"r!a(!

5A. C/rr! A((!#(:

Inventories */ ?/.?* *6629.6= /266./: (%undry 4ebtors ==*6.2* **?99.*9 2*0*.=0!ash and ;ank 6/ .* 2692.99 2 62.09 (

-oan and Advances 0/=?.99 9* :.06 =*:.== (T%#a- %* C/rr! A((!#( A 8;;6;7 @ 9 ?97@ 5 5

B7 C/rr! Liabi-i#i!(!urrent liabilities ?2*?.2= * * =.2= ( :=?

provisions :**.2 ::6.?0 ( 92.90T%#a- %* "/rr! -iabi-i#i!( 6>>9>7;@ 6>@@9799 5 5

Net working capital &A(;' 6; @;79 8 > >7 6 ( (Increasing in working capital =0 6.?* =0 6.?*

T%#a- 8 > >7 6 8 > >7 6 9 ?7 ; 9 ?7 ;

INTERPRETATION:

"rom the above table it could be seen that the working capital of the firm for the year

/ * is /0 ? .0* whereas for the previous year / ? the working capital was *90=9.2.

While comparing the working capital for the two years ie., / ? 1 / * , we find that

there is an increase in the working capital of about =0 6.?* due to increase inventories,

sundry debtors, cash and bank balances and loan and advances and decrease in current

liabilities and provisions.

S#a#!m! %* C0a&,!( i& W%r+i&, Ca)i#a- E 8>6>58>66 R(7i&7La"(

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INTERPRETATION:

"rom the above table it could be seen that the working capital of the firm has shown an

decrease in working capital of about /06=.2* for the year / ** when compared to that of

the previous year / * . This is due to the decrease in inventories, sundry debtors, cash

and bank balances, loan and advances and provisions and increase in current liabilities.

a7 C/rr! Ra#i%

Y!ar C/rr! A((!#( C/rr! Liabi-i#i!( Ra#i%

/ : *=2/*.:9 ?009.02 67 6

/ = /9*?9.=2 * :/9.0? 87

/ ? /99*9.?= * 2 .9=

87;

Par#i"/-ar( 8>6> 8>66 I&"r!a(! D!"r!a(!

5A. C/rr! A((!#(:

Inventories *6629.6= **0*?.*? ( /?*:./?%undry 4ebtors **?99.*9 **=60.= ( */ .29!ash and ;ank 2692.99 *0*9.6/ ( *?6:./6

-oan and Advances 9* :.06 00=*.6: ( 0/9. :T%#a- %* C/rr! A((!#( A 9 ?97@ 9> ;87@@ 5 5

B7 C/rr! Liabi-i#i!(!urrent liabilities * * =.2= 9=02.?6 2/06.66 (

provisions ::6.?0 * 99.:6 ( /?*.:?T%#a- %* "/rr! -iabi-i#i!( 6>@@9799 ? 8>7;@ 5 5

Net working capital &A(;' 8 > >7 6 88 878 ( (Increasing in working capital 8 @796 8 @796 (

T%#a- 8 > >7 6 8 > >7 6 @>87? @>87?

2=


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Y!ar C/rr! A((!#( I&$!%ry ./i"+ A((!#( C/rr! Liabi-i#i!( Ra#i%

/ : *=2/*.:9 ?*?6. = ?*/:.9= ?009.02 >7

/ = /9*?9.=2 * 929.=9 *000?.?: * :/9.0? 67

/ ? /99*9.?= */ ?/.?* *60/6. : * 2 .9= 67

/ * 20?:2.=6 *6629.6= /*02:.29 * ==2.22 67 ?

/ ** 2 69/.== **0*?.*? *=?62.9? :?/ .9= 879

I!r)r!#a#i%&:

The above table shows that the $uick ratio of the firm is in increasing trend ie. .?0, *.60,

*.66, *.?: and /.2? for the year / 9( :, / :( =, / =( ?, / ?(* and / * (**

respectively. This increase in the value of $uick ratio shows that the firm can suffer from

shortage of funds where it has slow(playing, doubtful and long(duration out(standing

book debt.

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"7 CASH RATIO:

Y!ar Ca(0 < Ba&+ C/rr! Liabi-i#i!( Ra#i%

/ : 20 .9: ?009.02 >7>9

/ = /90 .2: * :/9.0? >78

/ ? 6/ .* * 2 .9= >7>

/ * 2692.99 * ==2.22 >796

/ ** *0*9.6/ :?/ .9= >76

I!r)r!#a#i%&:

The above table shows that cash ratio of the firm is in fluctuating rate year by year ie.,

. 2 , ./6, . 6, .2* and .*? for the year / 9( :, / :( =, / =( ?, / ?(* and

/ * (** respectively. This shows the firms li$uidity capacity position on paying the

firms debt.

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'7 N!# W%r+i&, Ca)i#a- Ra#i%:

.

Y!ar N!# W%r+i&, Ca)i#a- N!# a((!#( Ra#i%

/ : =:90./2 *=0/0.: >7 ?9

/ = *06: ./6 /6*0=. = >7; >

/ ? *90=9.2 /92==.20 >7;8

/ * /0 ? .0* /=/2?.?= >7@@

/ ** //06/.0 /::0?. ? >7@6

I!r)r!#a#i%&:

The above table shows that the movement of the net working capital ratio of the firm is in

fluctuating trend year by year ie., .6:2 , .96 , .9/, .== and .=* for the year / 9( :,

/ :( =, / =( ?, / ?(* and / * (** respectively. This fluctuating trend in Net

working capital shows that firms ability on paying its financial obligation is not stable

and this is due to the changes in the net working capital of the firm.

!7 T%#a- A((!#( T/r&%$!r Ra#i%:

6/


43/57

Y!ar Sa-!( T%#a- A((!#( Ra#i%

/ : 2 /?0.9 *=2/*.:9 67;

/ = 29?29.90 /9*?9.=2 67 >/ ? 69290.92 /99*9.?= 67?

/ * 966:*.9* 20?:2.=6 67?

/ ** 9? 0:.?9 2 69/.*= 878;

I!r)r!#a#i%&:

The above table shows that the total asset turnover of the firm has been increasing

from the year / :( = to / * (/ ** from *.6 to /./9. This shows that the firm is

successful in increasing its profits and thereby increasing its assets of its business.

*7 Fi2!' A((!#( T/r&%$!r Ra#i%:

62


44/57

Y!ar Sa-!( Fi2!' A((!#( Ra#i%

/ : 2 /?0.9 /6*/?.:/ 678

/ = 29?29.90 /6?*/.02 67 @

/ ? 69290.92 /:/0 .29 67?>

/ * 966:*.9* /=990.20 878

/ ** 9? 0:.?9 2*/ .2 8786

I!r)r!#a#i%&:

The above table shows that the fi ed asset turnover of the firm has been increasing year

by year ie., *./0 , *.6=, *.: and /./6 for the year / 9( :, / :( =, / =( ? and / ?(

* respectively, wheras for the year / * (** the fi ed assets turnover decreased with the

turnover of /./*. This shows that the firm had established a good relationship between its

net profit and sales and has increased its profitability of the business till / ?(*

compared to the decrease in turnover during / * (**.

,7 N!# Pr%*i# Ra#i%:

66


45/57

Y!ar N!# Pr%*i# Sa-!( Ra#i%

/ : **92.:? 2 /?0.9 97@

/ = /6*:.=? 29?29.90 ;7

/ ? 22?0./ 69290.92 ?798

/ * 2 ::.:: 966:*.9* 7??

/ ** ::00.:9 9? 0:.?9 6678

I!r)r!#a#i%&:

The above table shows that the net profit of the firm has been increasing year by year ie.,

2.=6 , 9.06 and :.2/ for the year / 9( :, / :( = and / =( ? respectively, whereas

for the year / ?(* the net assets of the firm decreased to 6.:: and gradually increased

to **./ in the year / * (**. This shows the firms establishment in maintaining good

relationship between its net profit and sales in increasing its profits.

60


46/57

OPERATING CYCLE CALCULATIONS

RAWMATERIAL CONVERSION PERIOD:

87W%r+ i& )r%"!(( C%&$!r(i%& P!ri%' W%r+ i& )r%"!(( i&$!%ry

5555555555555555555555555555555555555555

"%(# %* )r%'/"#i%& 49;>

Ra1 Ma#!ria- C%&$!r(i%& P!ri%' 8>>? 8>>@ 8>> 8>6> 8>66

a.


47/57

97 Fi&i(0!' ,%%'( C%&$!r(i%& P!ri%' Fi&i(0!' ,%%'( i&$!%ry

5555555555555555555555555555555555555

"%(# %* ,%%'( (%-' 49;>

W%r+ i& Pr%"!(( "%&$!r(i%& )!ri%' 8>>? 8>>@ 8>> 8>6> 8>66a.cost of production 2209./0 2?=0.96 60=:./? 6?:0.*/ 00:2.69

b.cost of production per day ?.2/ **. */.: *2.= *0.6c. .Work in 8rocess inventory =:2. / =: .== ?/:.*: ??=.6= *2?9.6?d. Work in 8rocess inventory holdingdays

9' ? ' ?9' ?8' >'

Fi&i(0!' ,%%'( C%&$!r(i%& P!ri%' 8>>? 8>>@ 8>> 8>6> 8>66a.cost of goods sold /:9.

?

966.60 90?.*9 9 :.22 96 .0=

b.cost of goods sold per day ?./ /*.6 /*.? / ./ /*.2

c."inished goods inventory := ./2

*/02.9* */**.6= =?2.20???.22

d.finished goods inventory holdingdays

@ ' @' ' ' ;'

6:


48/57

D!b#%r(

7 D!b#%r( "%--!"#i%& )!ri%' 5555555555555555555555555555555555555

"r!'i# (a-!( 49;>

D!b#%r( "%--!"#i%& P!ri%' 8>>? 8>>@ 8>> 8>6> 8>66a.credit sales 2 /?0.9 29?29.90 69290.92 966:*.9* 9? 0:.?9

b.sales per day =6.* * /.9 */=.: *:?. *?*.=

c.debtors 9: 9.0? :99:.?/ ==*6.2* **?99.*9 **=60.=

d.debtors outstanding days ? ' ? ' ;@' ;;' ;6'

6=


49/57

"r!'i#%r(

7 Cr!'i#%r( "%--!"#i%& )!ri%' 5555555555555555555555555555555555555

"r!'i# )/r"0a(!( 49;>

"r!'i#%r( "%--!"#i%& P!ri%' 8>>? 8>>@ 8>> 8>6> 8>66a.!redit 8urchases /69 6.6 /??96. * 2?0 =.=? 62?::.*? 6?22 .*?

b.purchase per day 9=.2 =2./ * ?.: *//.* *2:.

c.creditors 969*./ 9?:/.?0 :6/*.9 =2=0./: ? 0/.=2

d.creditors outstanding days ' @ ' ;?' ; ' ;;'

6?


50/57

0


51/57

OPERATING CYCLE CALCULATIONS NUMBER OF DAYS

ITEMS 8>>? 8>>@ 8>> 8>6> 8>66

67Ra1 Ma#!ria- C%&$!r(i%&P!ri%'a.'

97Fi&i(0!' ,%%'( C%&$!r(i%&P!ri%'a.cost of goods sold /:9. ? 966.60 90?.*9 9 :.22 96 .0=

b.cost of goods sold per day ?./ /*.6 /*.? / ./ /*.2

c."inished goods inventory := ./2 */02.9* */**.6= =?2.20???.22

d.finished goods inventoryholding days

@ ' @' ' ' ;'

7"%--!"#i%& P!ri%'a.credit sales 2 /?0.9 29?29.90 69290.92 966:*.9* 9? 0:.?9

b.sales per day =6.* * /.9 */=.: *:?. *?*.=c.debtors 9: 9.0? :99:.?/ ==*6.2* **?99.*9 **=60.=d.debtors outstanding days ? ' ? ' ;@' ;;' ;6'

7Cr!'i#%r( D!*!rra- )!ri%'

a.!redit 8urchases /69 6.6 /??96. * 2?0 =.=? 62?::.*? 6?22 .*?

b.purchase per day 9=.2 =2./ * ?.: *//.* *2:.

c.creditors 969*./ 9?:/.?0 :6/*.9 =2=0./: ? 0/.=2

d.creditors outstanding days ' @ ' ;?' ; ' ;;'

0*


52/57

F/&'*-%1 a&a-y(i( *%r #0! y!ar 8>>?58>>@

S%/r"! %* F/&'( 8>>? 8>>@

67 S0ar! H%-'!r F/&'(

a. %hare !apital * 2?:9.29 2?:9.29

b. 89? 8>> 6@;

0/


53/57

d. !apital Work in 8rogress 09 6. / :06.60

Total fi ed assets /6*/?.:/ /6?*/.02

Investments 9 (((( ((((

C/rr! A((!#(

L%a&( a&' A'$a&"!(

a. Inventories : ?*?6. = * 929.=9

b. %undry 4ebtors = 9: 9.0? :99:.?/

c. !ash 1 ;ank ;alances ? 20 .9: /90 .2:

d. -oans and Advances * / : .6/ 0/6*.9=

T%#a- C/rr! A((!#( 6@9867?; 8;6 ;7@9

C/rr! Liabi-i#i!(

*a. !urrent -iabilities ** ?/ /.** * *==.26

b. 8rovisions 206.6/ 02=./0

T%#a- C/rr! Liabi-i#i!( ;7 9 6>?8;7

N!# W%r+i&, Ca)i#a- @?; 789 6 ?>78

T%#a- 98 >67 > >9@;79;

F/&'*-%1 a&a-y(i( *%r #0! y!ar 8>>@58>>

S%/r"! %* F/&'( 8>>@ 8>>

67 S0ar! H%-'!r F/&'(

a. %hare !apital * 2?:9.29 2?:9.29

b.


54/57

4eferred Ta -iability NetP

((((

**=6.:?

/0:9.?0

T%#a- >9@;79; 9@9;7;;

I7 A))-i"a#i%& *%r F/&'(

Fi2!' A((!#(

a. 5ross ;lack 0 2*=/6.2/ 200*9./2

b. -ess 4epreciation :999./6 ?*/:.==

c. Net ;lock /6*0=. = /92==.20

d. !apital Work in 8rogress :06.60 =9/. *

Total fi ed assets /6?*/.02 /:/0 .29


C/rr! A((!#(

L%a&( a&' A'$a&"!(

a. Inventories : * 929.=9 */ ?/.?*

b. %undry 4ebtors = :99:.?/ ==*6.2*

c. !ash 1 ;ank ;alances ? /90 .2: 6/ .*

d. -oans and Advances * 0/6*.9= 0/=?.99T%#a- C/rr! A((!#( 8;6 ;7@9 8;;6;7 @

C/rr! Liabi-i#i!(

*a. !urrent -iabilities ** * *==.26 ?2*?.2=

b. 8rovisions 02=./0 :**.2

T%#a- C/rr! Liabi-i#i!( 6>?8;7 6>>9>7;@

N!# W%r+i&, Ca)i#a- 6 ?>78 6; @;79

T%#a- >9@;79; 9@9;7;;

06


55/57


56/57

T%#a- C/rr! A((!#( 8;;6;7 @ 9 ?97@

C/rr! Liabi-i#i!(

*a. !urrent -iabilities ** ?2*?.2= * * =.2=

b. 8rovisions :**.2 ::6.?0

T%#a- C/rr! Liabi-i#i!( 6>>9>7;@ 6>@@9799

N!# W%r+i&, Ca)i#a- 6; @;79 8 > >7 6

T%#a- 9@9;7;; 9 ? 7@;

F/&'*-%1 a&a-y(i( *%r #0! y!ar 8>6>58>66

S%/r"! %* F/&'( 8>6> 8>66

67 S0ar! H%-'!r F/&'(

a. %hare !apital * 2?:9.29 2?:9.29

b.


57/57

b. -ess 4epreciation * :26.== **:26.==

c. Net ;lock /=/2?.?= 2 /0?.?=

d. !apital Work in 8rogress 6/0.2: ?6 .2/

Total fi ed assets /=990.20 2*/ .2


C/rr! A((!#(

L%a&( a&' A'$a&"!(

a. Inventories : *6629.6= **0*?.*?

b. %undry 4ebtors = **?99.*9 **=60.=

c. !ash 1 ;ank ;alances ? 2692.99 *0*9.6/

d. -oans and Advances * 9* :.06 00=*.6:

T%#a- C/rr! A((!#( 9 ?97@ 9> ;87@@

C/rr! Liabi-i#i!(

*a. !urrent -iabilities ** * * =.2= 9 02.?6

b. 8rovisions ::6.?0 *== .=?

T%#a- C/rr! Liabi-i#i!( 6>@@9799 ? 9 7@9

N!# W%r+i&, Ca)i#a- 8 > >7 6 88 8@7>

T%#a- 9 ? 7@; 9? 87@6

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