a study on cash management-karthi-088001614028

7/29/2019 A Study on Cash Management-karthi-088001614028

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A STUDY ON CASH MANAGEMENT

WITH SPECIAL REFERENCE TO RHYTHM

FASHION PRIVATE LIMITED, TIRUPUR,

TAMILNADU

PROJECT REPORT

Submitted by

K.KARTHI

Register No: 088001614028

in partial fulfillment for the award of the degree

Of

MASTER OF BUSINESS ADMINISTRATION

in

DEPARTMENT OF MANAGEMENT STUDIES

SSM COLLEGE OF ENGINEERING

KOMARAPALAYAM-638183

MAY 2010


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SSM COLLEGE OF ENGINEERING

KOMARAPALAYAM-638183

Department of Management studies

PROJECT WORK

PHASE II

MAY 2010

This is to certify that the project entitled

A STUDY ON CASH MANAGEMENT

WITH SPECIAL REFERENCE TO RHYTHM FASHION PRIVATE

LIMITED, TIRUPUR, TAMILNADU

is the bonafide record of project work done by

K.KARTHI

Register No: 088001614028

of MBA (DEPARTMENT OF MANAGEMENT STUDIES) during the

year 2009-2010.

--------------------- -------------------------

Project Guide Head of the Department

Submitted for the Project Viva-Voce examination held on__________

--------------------------- ----------------

Internal Examiner External Examiner

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DECLARATION

I affirm that the project work title A STUDY ON CASH MANAGEMENT

WITH SPECIAL REFERENCE TO RHYTHM FASHION PRIVATE LIMITED,

TIRUPUR, TAMILNADU being submitted in partial fulfillment for the award of

MASTER OF BUSINESS ADMINISTRATION is the original work carried out by

me. It has not formed the part of any other project work submitted for award of any

degree or diploma, either in this or any other University.

K.KARTHI

088001614028

I certify that the declaration made above by the candidate is true

Mrs. J. Esther Gnanapoo, MBA, M.Phil, Ph.D

Professor,

Department of MBA,

SSM College of Engineering.

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CONTENTS

Chapter

No

Description Page No.

List of Tables viList of Charts viiAbstract viii

1

Introduction

1.1 Introduction of the study

1.2 About the study

1.3 About the Industry

1.4 About the company

1 to 14

1

2

8

10

2

Main theme of the project

2.1 Objectives of the study

2.2 Scope of the study

2.3 Limitations of the study

2.4 Research Methodology

2.5 Review of Literature

15 to 20

15

15

16

16

193 Analysis & Interpretation 21 to 49

4

Findings, Recommendations and Conclusion

4.1 Findings

4.2 Recommendations

4.3 Conclusion

50 to 59

50

58

59AppendicesBibliography

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LIST OF TABLES

LIST OF CHARTS

Table

No.

Particulars PAGE

No.

3.1.1

Common size Balance Sheet statement from the year

2003-04 to 2009-10 22

3.1.2

Common size Profit and Loss account statement from

the year 2003-04 to 2009-10 25

3.2.1 Liquidity ratio from the year 2003-04 to 2009-10 35

3.2.2 Turn over ratio from the year 2003-04 to 2009-10 38

3.2.3

Average Payment & Average Receipts period from the

year 2003-04 to 2009-10 40

3.3 Cash flow statement from the year 2004-2009 433.4 Optimum cash balance from the year 2003-04 to 2009-

10

46

3.5 Correlation test from the year 2003-04 to 2009-10 49

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SYNOPSIS

The study deals with the CASH MANAGEMENT in RHYTHM

FASHION Private Ltd. Garments at Tirupur. This study highlights the concepts of

cash management, its components and the trend and the cash management based on

past six years data. This study also points out the problem faced by the company at the

time of maintaining a proper cash management level. This study also helps the

TableNo.

Particulars PAGENo.

3.1.2 Common size Receipts statement from the year 2003-

04 to 2009-10

28

3.1.2 Common size Payments statement from the year 2003-

04 to 2009-10

30

3.2.1

Liquidity ratio from the year 2003-04 to 2009-1036

3.2.2

Turn over ratio from the year 2003-04 to 2009-1039

3.2.3

Average Payment & Average Receipts period from the

year 2003-04 to 2009-1041

3.4 Optimum cash balance from the year 2003-04 to 2009-

10

47

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company to analyze the financial strength and weakness and to take proper corrective

measures.

The study was carried out using various tools such as common size

statement, Ratio analysis, cash flow statement, Correlation test and optimum cash

balance taking into account the past seven years from 2003-04 to 2009-10. The

duration of the study was seven years.

First chapter includes the introduction to the study, needs for the study of cash

management, Industry profile, company profile, objective of the study, Limitation of

the study, scope of the study and its significance in the introduction to cash

management. The company profile explains the various features of the company like itspresent status in the market, the history and product details.

The second chapter includes objectives, research methodology and analysis.

The study is conducted for some specific purpose termed as objectives. This chapter

contains the scope and limitations of the study. The research methodology part contains

the research design and the tools used for analysis. The research is of analytical type

with the secondary data as data type.

The analysis and interpretation part contains the five accounting and statistical

tools. The secondary data collected are analyzed using the above tools and meaningful

conclusions are drawn.

To analyses the cash management in the company, common size statement, cash

flow statement, optimum cash balance, ratio analysis and correlation test analysis has

been calculated.

The information was collected through both primary and secondary source. The

Primary datas are collected from personal interview secondary datas are collected

from the companys financial records, net etc.,

To study helpful to maintain effective cash management, useful to know about

the liquidity position of the firm, to know the current financial position of the company,

to suggest measures for improving the cash management of the firm effectively.

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payments, collect receivables and manage liquidity. Managing the channels of

collections, payments and accounting information efficiently becomes imperative

with growth in business transaction volumes.

Cash is the most important factor in financial management and current asset for

the operations of the business. Every activity in an enterprise revolves round the cash.

Sound financial management means knowing the firms cash flow, forecasting cash

needs, planning to borrow at the appropriate time and substantiating the firms payable

ability. The term cash includes coins, currency and cheque held by the firm and

balances in its bank accounts. Sometimes near-cash item also included.

Cash management refers to the flow of cash into and out of a business over aperiod of time. The outflow of cash is measured by the money you pay every month to

salaries, suppliers, and creditors. The inflows are the cash you receive from customers,

lenders, and investors.

Cash is the important current asset for the operation of the 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 service or product manufactured

by the firm. The firm should keep sufficient cash, neither more nor less. Cash shortage

will disrupt the firms manufacturing operation while excessive cash will simply

remind idle without contributing anything toward the firms profitability. Thus, a major

function of the financial manager is to maintain a sound cash position.

Cash is the money which a firm can disburse immediately without any

restriction. The term cash includes coins, currency and cheque held by the firm, and

balances in its bank accounts. Sometimes near-cash items, such as marketable securitiesor bank times deposits, are also includes in cash. The basic characteristic of near-cash

assets is that they can readily be converted into cash. Generally, when a firm has excess

cash, it in marketable securities. This kind of investment contributes some profit to the

firm.

Cash management with the managing of cash flow into and out of the firm, cash

flow within the firm, and cash balances held by the firm at a point of times by financing

deficit or investing surplus cash. Sales generated cash which has to be disbursed out.

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product or service of your business. Because it is generated internally, it is

under your control.

2. Investing Cash Flow (Internal)

Investing cash flow is generated internally from non-operating activities. This

component would include investments in plant and equipment or other

fixed assets, nonrecurring gains or losses, or other sources and uses of cash

outside of normal operations.

3. Financing Cash Flow (External)

Financing cash flow is the cash to and from external sources, such as lenders,

investors and shareholders. A new loan, the repayment of a loan, the

issuance of stock and the payment of dividend are some of the activities that

would be included in this section of the cash flow statement.

Cash flow shortages are a challenge for many small businesses. One way to

relieve the pressure for cash is through better management of company receivables.

Here are some ways to tighten control of your cash.

Cash Decision made by a firm are Determining when cash should be obtained,

sources from which cash can be obtained and determining whether marketable

securities are to be purchased.

1.2.1 GOOD CASH MANAGEMENT

Knowing when, where and how companys cash needs will occur. Knowing the

best sources for meeting additional cash needs. Being prepared to meet these needs

when they occur, by keeping good relationships with bankers and other creditors.

The starting point for good cash flow management is developing a cash flow

projection.

Facets of cash management

Cash planning :

Cash inflows and outflows should be planned to project cash surplus or deficit

for each period of planning Period.

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Managing the cash flows :

The flow of cash should be properly managed. The cash inflows should be

accelerated while, as far as possible, the cash outflows should be decelerated.

Optimum cash level :

The firm should decide about the appropriate level of cash balances. the cost of

excess cash and danger of cash deficiency should be matched to determine the optimum

level of cash balances.

Investing surplus cash :

The surplus cash balances should be properly invested to earn profits. The

firm should decide about the division of the such cash balance between alternative

short-term investment opportunities such as bank deposits, marketable securities or

interoperate lending.

1.2.2 CASH MANAGEMENT

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the 16th century cotton was grown in the warmer climes of America and Asia. When

the Romans ruled, wool, leather and linen were the materials used for making clothing

in Europe, while flax was the primary material used in the northern parts of Europe.

During this era, excess cloth was bought by the merchants who visited various

areas to procure these left-over pieces. A variety of processes and innovations were

implemented for the purpose of making clothing during this time. These processes were

dependent on the material being used, but there were three basic steps commonly

employed in making clothing. These steps included preparing material fibers for

the purpose of spinning, knitting and weaving.

During the Industrial Revolution, new machines such as spinning wheels and

handlooms came into the picture. Making clothing material quickly became an

organized industry as compared to the domesticated activity it had been associated

with before. A number of new innovations led to the industrialization of the textile

industry in Great Britain.

Clothing manufactured during the Industrial Revolution formed a big part of

the exports made by Great Britain. They accounted for almost 25% of the total

exports made at that time, doubling in the period between 1701 and 1770.The center of the cotton industry in Great Britain was Lancashire and the

amount exported from 1701 to 1770 had grown ten times. However, wool was the

major export item at this point of time.

In the Industrial Revolution era, a lot of effort was made to increase the speed

of the production through inventions such as the flying shuttle in 1733, the flyer-and-

bobbin system, and the Roller Spinning machine by John Wyatt and Lewis Paul in

1738.Today, modern techniques, electronics and innovation have led to a

competitive, low-priced textile industry offering almost any type of cloth or design a

person could desire. With its low cost labour base, China has come to dominate the

global textile industry

The history of development in World Textile industry was started in Britain

as the spinning and weaving machines were invented in that country.

High production of wool, cotton and silk over the world has boosted the

industry in recent years. Though the industry was started in UK, still in 19th Century

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Finance Requirement

In order to meet ever increasing yarn requirement and increase in price also, the

company keep stock to the turn of Rs.22 Lakes, to meet the market demand. To Cope

with this market the company need financial assistance of Rs.15 Lakes.Still the

growth of turnover is going very fast and achieved a turnover of Rs.8.07 core for the

period April-2006 to Dec-2009. This turnover was achieved without any finance from

any person or authorities such as Bank etc.,

DEMAND & SUPPLY POSITION:

The total demand for garments in the world market is ever growing one and the

share of India in this prime market is 2% and on the uptrend since India is having a

very good opportunity to develop this market especially after the phasing out of quakes

under WTO treaty.

To feed the export market, the company dealt in Raw material requirement part,

which is no doubt, ever increasing.

Expansion Plan

Expansion and modernization of Textile is presently on. The plan envisages

installation of raw materials and Continuous process facilities to produce large

production. Along with, expansion of all department , enhancing the capacity of yarn

Products produce with high quality with reasonable price and capture the market.

The Rhythm Fashion is the largest dealers in Tirupur and surrounding area.

Management and company plans

Today, modern techniques, electronics and innovation

has implement in concern, so our textile industry offering almost any type of

cloth or design a person could desire. With its low cost labour base, possible in

our concern because of new innovation.

The company has strong Research and Development center enabling it to

develop superior products matching customized needs.

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1.4.1 ORAGANISATION CHART

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CHAPTER II

MAIN THEME OF THE STUDY

2.1 MAIN OBJECTIVES OF THE STUDY

The main objectives of the study are,

1. To study the cash position and financial position of the company.

2. To know the liquidity position of the firm.

3. To analyze the cash sales, credit sales, cash payments and cash disbursements

made by the company.

4. To determine the cash inflows and outflows of the company.

5. To know about the optimum cash balance of the company.

2.2 SCOPE OF THE STUDY:

This Study on Cash Management with Special Reference to RHYTHM

FASHION Private Limited, Tripur, Tamil nadu, was for a Period of 7 years from the

year 2003 to 2009.

This study will help the firm in making some financial decisions for future

years.

This study will help the management to decide the cash position in order to

increase the profitability and the value of the firm.

The study clearly explains about at what areas they have to improve their

performance.

It helps in making some reference for its past performance.

2.3 LIMITATIONS OF THE STUDY

The data was obtained from the annual reports of the company so the

reliability of the study depends on the accuracy of information found in the annual

reports.

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Common size statement

Financial statement when read with read with absolute figures is not easily

understandable. They are even misleading. Each item of assets is converted into

percentage to total assets and each item of capital and liabilities is expressed to total

liabilities and capital fund.

Ratio Analysis

Ratio analysis is one of the powerful tools of financial

analysis. It indicates a quantitative relationship between the

figures and group of figures which are used for evaluation

and decision-making. An analysis of financial statement

ratios is imperative.

Cash flow statement

Cash flow statement can be defined as a statement

which summaries sources of cash inflows and uses of cash

outflows of the firm during a particular period of time say as

month or year.

Optimum cash balance

It is determination of optimum level of each of a company; Economic order

quantity is used in the standard inventory situation.

Correlation

Correlation analysis is the statistical tool that describes the degree to which the

variables linearly related to other variables. Two or more variables are said to be

correlated if change in the value of appears to be related as linked with change in the

other correlation.

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Multinational Companies in Bangladesh. Mohiuddin (1983) had conducted a study on

cash budget.

Islam and Rahman (1994) had article on "cash management Trends of theSelected Enterprises in Bangladesh". Optimum working capital enables a business to

have its credit standing and permits the debts payments on the date of its maturity and

helps to keep itself fairly in liquid position which enables the business to attract

borrowing from the banks. It also helps to

maintain all-round efficiency in operations. Of all aspects of financial management,working capital management is the vital one.

A study on cash management of Sakthivelu poly pack, Pollachi in 2003 was

done by Ms.S.Selvanayaki. The main objective was to present the conceptual

framework for working capital and to find out the working capital employed. It is

suggested that the ability of the firm to meet its short-term liabilities is normal and this

practice may be adopted in the future also.

Cash management analysis was done by S.Meena in Palai Andavar Cotton

And Synthetics Ltd., in1990. The main objective was to analyse the cash management

and to highlight the various changes that have been taken place in the management of

cash. Findings of the study were the growth in the cash of the concern and good

liquidity position.

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form. Such converted balance sheet is known as common size statement. Here we are

going to anglicizing the common size statement of profit and loss account and common

size statement of balance sheet.

TABLE 3.1.1 COMMON SIZE STATEMENT SHOWING BALANCE SHEET

FROM THE YEAR 2003-2009

(Rs. in

%)

Year2003-

04

2004-

05

2005-

06

2006-

07

2007-

08

2008-

09

2009-

10

ASSETS

Building 4% 2% 2% 2% 2% 1% 1%

Land 16% 9% 7% 6% 5% 4% 4%

Plant & Machinery 28% 47% 45% 45% 48% 48% 48%

Furniture 2% 1% 1% 1% 1% 1% 1%

Investment 2% 1% 1% 1% 1% 1% 1%

Cash in Hand & Bank 5% 3% 2% 2% 2% 2% 2%

Int. rec. &acc. income 1% 1% 3% 3% 3% 2% 2%

Bills receivables 1% 1% 1% 1% 1% 1% 1%

Debtors 25% 22% 27% 30% 29% 31% 32%

Inventories 17% 12% 10% 10% 9% 9% 8%

TOTAL ASSETS 100% 100% 100% 100% 100% 100% 100%

LIABILITIES

Share capital 43% 31% 30% 26% 31% 32% 33%

Reserve & Surplus 13% 12% 12% 13% 15% 14% 13%

Loans & Advances 16% 24% 24% 26% 20% 17% 13%

Provision for Taxation 2% 2% 4% 6% 4% 4% 4%

Bills Payables 1% 1% 1% 1% 1% 2% 1%

Outstanding Exp. 0% 0% 0% 0% 0% 0% 0%

Creditors 14% 19% 20% 23% 23% 27% 30%

P & L account 10% 11% 9% 6% 6% 5% 7%

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TOTAL LIABILITES 100% 100% 100% 100% 100% 100% 100%

Interpretation:

From the above table it was interpreted that

Assets

Buildings cover a minor portion of total assets. It shows a decreasing trend from

the year 2003-04 to 2009-10, it was 4 % to 1%. From the year 2004-05 to 2007-

09 value was stable, it was 2%. From the2008-09 to 2009-10 value was stable, it

was 1%.

Land covers a small portion of total assets it shows a decreasing trend from the

year 2003-04 to 2009-10; it was 16% to 4%. From the year 2008-09 to 2009-10

value was stable, it was 4%.

Plant and Machinery covers major portion of the total assets. It shows an

increasing trend from the year 2003-04 to 2009-10, it was 28% to 48%. It

covers almost 50% of total assets.

Furniture and Investment covers a 1% of the total assets. It shows decreasing

trend from the year 2003-04 to 2009-10, it was 2% to 1%. From the year 2004-

05 to 2009-10 value was contend it 1%.

Cash in hand covers a tiny portion of the total assets. It shows a decreasing

trend from the year 2003-04 to 2009-10, it was 5% to 2%. From the year 2005-

06 to 2009 value was stable, it was 2%.

Interest received and accrued income covers a small portion of the total assets.

It shows an increasing trend from the year 2003-04 to 2009-10, it was 1% to

2%. From the year 2005-06 to 2007-08 shows increasing trend and also stable,

it was 3%. From the year 2008-09 to 2009-10 it shows decreasing trend and

value also constant, it was 2%

Bills receivable shows a stable trend from the year 2003-04 to 2009-10, it was

1% for all the years.

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Debtors covers a second major portion of the total assets. It shows an

increasing trend from the year 2003-04 to 2009-10, it was 25% to 32%.

An inventory shows a decreasing trend from the year 2003-04 to 2009, it was17% to 8%. Value was stable in the year 2005-06 to 2006-07, it was 10%. 9%

value stable in the year 2007-08 to 2009-10.

Liabilities

Share capital covers major portion of the total liabilities. It shows a decreasing

trend from the year 2003-04 to 2009-10, it was 43% to 33%. From the year

2003-04 to 2006-07 shows decreasing trend, it was 43% to 26%. From the year

2007-08 to 2009-10 it shows increasing trend, it was 31% to 33%.

Reserve and surplus shows a fluctuating trend. From the year 2003-04 to 2009-

10, it was 13% to 13%. From the year 2003-04 to 2004-05 it shows decreasing

trend it was 13% to 12%. Again it shows increasing trend in the year 2006-07 to

2007-08, it was 15%. Again it shows decreasing trend next years.

Loans and advances show a fluctuating trend. From the year 2003-04 to 2006-

07 shows increasing trend, it was 16% to 26%. From the year 2007-08 to 2009-

10 shows decreasing trend 20% to 13%.

Provision and taxation shows an increasing trend from the year 2003-04 to

2009-10, it was 2% to 4%. From the year 2006-07 to 2007-08 shows decreasing

trend it was 6% to 4%. From the year 2007-08 to 2009-10 value was constant it

was 4%.

Bills payable shows a stable value for all years. From the year 2003-04 to 2007-08 value stable, it was 1%. From the year 2007-08 to 2008-09 shows increasing

trend, it was 1% to 2%. Again it decreased 1% to remaining years.

Creditors covers a second major portion of the total liabilities. From the year


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Profit and loss of the concern shows a decreasing trend from the year 2003 to

2009 it was 10% to 7%. From the year 2006-07 to 2007-08 stable value was

6%.

3.1.2 COMMON SIZE STATEMENT SHOWING PROFIT AND LOSS

ACCOUNT FROM THE YEAR 2003-2009

(Rs. In

%)

Year2003-

04

2004-

05

2005-

06

2006-

07

2007-

08

2008-

09

2009-

10Particulars

Receipts

Cash sales 8% 9% 10% 8% 11% 10% 11%Credit sales 63% 72% 76% 80% 80% 81% 81%Closing stock 24% 16% 11% 10% 7% 7% 6%Interest received 3% 2% 1% 1% 1% 1% 1%Commission received 2% 1% 2% 1% 1% 1% 1%Total receipts 100% 100% 100% 100% 100% 100% 100%

Particulars

PaymentsCash purchase 2% 3% 4% 5% 4% 5% 5%Credit purchase 24% 37% 38% 40% 39% 39% 38%Opening stock consumed nil 13% 9% 8% 7% 6% 6%Raw material in store 26% 3% 14% 10% 5% 6% 6%Staff expenses 9% 11% 9% 6% 6% 10% 10%Power and fuel 12% 10% 9% 9% 8% 9% 8%Interest and bank charges 1% 0% 0% 0% 0% 0% 0%Administrative Exp. 8% 6% 4% 3% 3% 3% 3%Other expenses 1% 0% 0% 0% 0% 0% 0%

Depreciation 4% 4% 3% 3% 2% 2% 2%Tax paid 13% 13% 10% 16% 26% 20% 22%Total Expenses 100% 100% 100% 100% 100% 100% 100%

Net profit after tax

(from sales) 20% 18% 12% 6% 5% 5% 6%

Interpretation:

Receipts

Cash sales shows an increasing trend from the year 2003-04 to 2005-06, it was

8% to 10%. It shows a decreasing trend in the year 2005-06 to 2006-07, it was

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10% to 8%. From the year 2006-07 to 2007-08 it shows increasing trend it was

8% to 11%. In the year 2008-09 again shows it a decreasing trend to 10%.

From the year 2003-04 to 2009-10 shows an increasing trend it was 8% to 11%.

Credit sales shows an increasing trend from the year 2003-04 to 2009-10 it was

63% to 81%. A credit sale covers major portion of total receipts.

Closing stock shows a decreasing trend from the year 2003-04 to 2009-10 it was

24% to 6%. In the year 2007-08 to 2008-09 it posses a stable value of 7%.

Interest received shows decreasing trend from the year 2003-04 to 2009-10 it

was 3% to 1%. From the year 2005-06 to 2009-10 stable value it has 1%.

Commission received shows a decreasing value from the year 2003-04 to 2004-

05 it was 2% to 1%. Next year it shows an increasing trend it was 2%. Again it

was decreasing trend in the year 2006-07 it was 1%. From the year 2006-07 to

2009-10 value was stable it was 1%.

Payments

Cash purchase shows increasing trend from the year 2003-04 to 2009-10 it was2% to 5%. Decreasing trend from the year 2006-07 to 2007-08 it was 5% to

4%. Again it was increasing trend from the year 2007-08 to 2008-09 it was 4%

to 5%. Stable value from the year 2008-08 to 2009-10 it was 5%.

Credit purchase shows an increasing trend from the year 2003-04 to 2006-07, it

was 24% to 40%. Showing decreasing trend from the year 2007-08 to 2009-10

it was 39% to 38%.

Opening stock consumed shows a decreasing trend from the year 2003-04 to

2009-10 it was 13% to 6%. From the year 2008-09 to 2009-10 stable value it

was 6%.

Raw material in store shows a decreasing trend from the year 2003-04 to 2004-

05 it was 26%to 3%. Increasing trend in the year 2004-05 to 2005-06 it was 3%

to 14%. Again it shows a decreasing trend from the year 2005-06 to 2009-10 it

was 14% to 6%.

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Staff expenses shows an increasing trend from the year 2003-04 to 2004-05 it

was 9% to 11%. From the year 2005-06 to 2007-08 shows a decreasing trend it

was 9% to 6%. Again it was increasing trend from the year next two years also

stable vale from the year 2008-09 to 2009-10 it was 10%.

Power and fuel shows decreasing trend from the year 2003-04 to 2009-10 it was

12% to 8%.

Interest and bank charges and other expenses for the year 2003-04 1%.

Remaining years it was zero.

Administrative expenses show a decreasing trend from the year 2003-04 to2009-10 it was 8% to 3%. From the year 2006-07 to 2009-10 it was stable value

of 3%.

Depreciation shows decreasing trend from the year 2003-04 to 2009-10 it was

4% to 2%. From the year 2003-04 to 2004-05 value shows constant it was 4%.

From the year 2005-06 to 2006-07 stable value it was 3%. Remaining years

from 2007-08 to 2009-10 shows stable value of 2%.

Tax paid shows stable value from the year 2003-04 to 2004-05 it was 13%.

Decreasing trend from the year 2004-05 to 2005-06 it was 13% to 10%.

Increasing trend from the year 2005-06 to 2009-10 it was 10% to 22%.

Net profit from the sales shows decreasing trend from the year 2003-04 to 2008-

09 it was 20% to5%. It shows increasing trend from the year 2008-09 to 2009-

10 it was 5% to 6%.

3.1.2 CHART SHOWS COMMON SIZE STATEMENT RECEIPTS

FROM THE YEAR 2003-2009

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RECEIPTS 2009-10

Cash sales

11%

Credit sales

81%

Interest received

1%

Commision received

1%

Closing stock

6%

3.1.2 CHART SHOWS COMMON SIZE STATEMENT PAYMENTS FROM

THE YEAR 2003-2009

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PAYMENTS 2003-04

Rawmaterial instore

36%

Staff expenses

12%Power and fuel

16%

Interest and bank

charges

1%

Administrative Exp.

11%

Other expenxes

1%

Deperciation

5%

Tax paid

18%

PAYMENTS 2004-05

Cashpurchase

3%

Credit purchase

37%

Openigstock

consumed

13%

Rawmaterial in

store

3%

Staff expenses

11%

Power and fuel

10%

Interest and bank

charges

0%

Administrative Exp.

6%

Other expenxes

0%

Deperciation

4%

Tax paid

13%

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PAYMENTS 2005-06

Cash purchase

4%

Credit purchase

38%

Openig stock

consumed

9%

Rawmaterial in

store

14%

Staff expenses

9%

Tax paid

10%

Power and fuel

9%

Interest and bank

charges

0%

Administrative Exp.

4%

Other expenxes

0%

Deperciation

3%

PAYMENTS2006-07

Cashpurchase

5%

Credit purchase

40%

Tax paid

16%

Openigstock

consumed

8%

Rawmaterial in

store

10%

Staff expenses6%

Other expenxes

0%

Deperciation

3%

Interest and

bank charges

0%

Power andfuel

9%

Administrative

Exp.

3%

PAYMENTS 2007-08

Cash purchase

4%

Credit purchase

39%

Tax paid

26%

Rawmaterial in

store

5%

Openig stock

consumed

7%Staff expenses

6%

Power and fuel

8%

Interest and

bank charges

0%

Administrative

Exp.

3%

Other expenxes

0%

Deperciation

2%

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PAYMENTS 2008-09

Cash purchase

5%

Credit purchase

39%

Openig stock

consumed

6%

Rawmaterial in

store

6%

Staff expenses

10%

Interest and

bank charges

0%

Power and fuel

9%

Deperciation

2%Tax paid

20%

Other expenxes

0%

Administrative

Exp.

3%

PAYMENTS 2009-10

Cash purchase

5%

Credit purchase

38%

Openig stock

consumed

6%

Rawmaterial in

store

6%

Staff expenses

10%

Interest and

bank charges

0%

Power and fuel

8%

Deperciation

2%Tax paid

22%

Other expenxes

0%

Administrative

Exp.

3%

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3.2 RATIO ANALYSIS

Ratio is powerful tool of working capital management analysis. Ratio is the

numerical of arithmetical relationship between two figures. It is expressed when one

figure is dividend by others.

It summarizes large quantities of financial data and to make quality judgment

about firms financial performance. In financial analysis a ratio is used as a benchmark

for evaluating the financial position and performance of a firm. The absolute

accounting reports do not provide a meaningful understanding in the performance of

the firm. It helps in measuring firms liquidity and its ability to meet current obligations.

It reflects a quantitative relationship in forms of quality judgment.

In this study for assessing the performance of the working capital position, the

technique of ratio analysis has been used. The various ratios used in this study are

3.2.1 LIQUIDITY RATIOS

Current ratio

Current ratio is a measure of firms short terms solvency. It indicates the

availability if current assets in rupees for every one rupees of current liabilities.

Current Assets

Current ratio = -------------------------------------

Current Liabilities

Quick ratio

It establishes a relationship between liquid assets and current liabilities

where an assets can be converted into cash reasonably with out a lose of value.

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Current asset Inventories

Quick ratio = -------------------------------------------

Current liabilities

Absolute Liquidity Ratio (or) Cash position Ratio

It is a variation of quick ratio. When liquidity is highly restricted in

terms of cash and cash equivalents, this ratio calculated. Liquidity relationship

between cash and near cash items on the one hand and immediately obligation

on the others.

Absolute liquid asset (cash)

Absolute Liquidity Ratio = ----------------------------------------Liquid Liabilities

Current Asset to Liquidity Asset Ratio

It relationship between current asset and liquid assets purpose of this

ratio to know about the current asset to liquid assets level.

Current Asset

Current Asset to Liquidity Asset Ratio = ----------------------------

Liquid Asset

TABLE 3.2.1 LIQUIDITY RATIOS FROM THE YEAR 2003-04 TO 2009-10

(In

times)

Liquidity Ratio

2003-

04

2004-

05

2005-

06

2006-

07

2007-

08

2008-

09

2009-

10

Current asset ratio 1.979 1.245 1.441 1.532 1.481 1.317 1.188Quick ratio 2.118 1.305 1.439 1.379 1.359 1.187 1.13Absolute Liquidity Ratio 0.333 0.145 0.113 0.088 0.07 0.08 0.055Current Asset to Liquidity Asset

Ratio 1.588 1.511 1.441 1.393 1.355 1.322 1.284

Interpretation

From the above table was interpreted that

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Current ratio from the year 2003-04 to 2005-06 it shows decreasing trend it was

1.979 to 1.441. From the year 2005-06 to 2006-07 increasing trend it was 1.441

to 1.532. Again it was decreasing trend from the year 2006-07 to 2009-10 it was

shows from 1.532 to 1.188. This is less than standard norm of 2:1. Less than 2:1

ratio indicates concern is not a sound position.

Quick ratio shows a decreasing trend from the year 2003-04 to 2009-10 it was

2.118 to 1.13. Standard norms 1:1. More than 1:1 indicates sound financial

position. Here our firm quick ratio gives better picture of firms ability to meet

its short term debt out of short term assets. Companies were shows sound

financial position.

Liquidity ratio shows decreasing trend from the year 2003-04 to 2009-10 it was

0.333 to 0.055. This is less than standard norm of 0.75:1. It shows concern is

not a sound position.

Current asset to liquidity asset ratio was showing decreasing trend from the year

2003-04 to 2009-10 it was 1.588 to 1.284. Less than standard norms shows firm

hasnt enough cash on hand.

3.2.1 CHART SHOWS LIQUIDITY RATIOS FROM THE YEAR 2003-04 TO

2009-10

3.2.2 TURN OVER RATIO & ASSETS RATIO

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These ratios are very important for a concern to judge how well the disposal of

the concern is being used or to use the effectiveness with which a concern uses its

resources at its disposal. Higher the ratio better the profitability and use of capital.

Debtor Turnover Ratio

This ratio shows whether the debts are properly collected or not. A

business concern generally adopts different methods of sales. One of them is

selling in credit. Goods are sold in credit based on credit policy adopted by the

firm. The ratio calculated as follows

Net Sales

Debtor Turnover Ratio = ----------------------------- Average debtors

Creditors Turn Over Ratio

A Business concern usually purchases raw materials, services and goods

Credit the quantum of payable of a business concern depends upon its purchase

policy, the quality of purchases and suppliers credit policy. creditors turnover

ratio indicates the number of times the payables rotates in a year. The ratio is

calculated as follows:-Net Credit Purchase

Creditors Turn Over Ratio = ----------------------------------------------

Average creditors

Fixed Assets Turnover Ratio:-

The fixed assets turnover ratio is important in the case of manufacturing

concerns because sales are produced but also by amount invested in fixed assets.

The higher the ratio the better is the performance. On the other hand, a low ratio

indicates that fixed assets are not being efficiency utilized. The ratio reveals that

in the earliest years the fixed assets cab be efficiently utilized. But now a days

the fixed assets cannot properly utilized. So the fixed asset turnover ratio is

decreased every year.

Net Sales

Fixed Assets Turnover Ratio = ---------------------------------

Fixed assets

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Total Asset Turn Over Ratio

This ratio is calculated by dividing the net sales by the value of total

assets. A high ratio is an indicator of over trading of total assets while a lowratio is an indicator of over trading of total assets while a low ratio reveals idle

capacity, The traditional standard for the ratio is two times.

Net Sales

Total Asset Turn Over Ratio = ------------------------------

Total Assets

TABLE 3.2.2 TURNOVER RATIO FORM THE YEAR 2003-04 TO 2009-10

(In times)

Turn over ratio

2003-

04

2004-

05

2005-

06

2006-

07

2007-

08

2008-

09

2009-

10

Debtor Turnover Ratio 1.661 2.326 2.394 2.735 3.224 3.115 3.123

Creditors Turn Over Ratio 0.972 1.189 1.399 1.67 1.931 1.59 1.498

Fixed Assets Turnover Ratio 0.939 0.994 1.339 1.684 1.956 2.047 2.168Total Asset Turn Over Ratio 0.481 0.606 0.752 0.918 1.108 1.122 1.191

Interpretation:


Debtor turnover ratio shows increasing trend from the year 2003-04 to 2007-08

it was 1.661 to 3.224. Then it shows decreasing trend from the year 2007-08 to

2008-09 it was 3.224 to 3.115. Thereafter again it was increasing trend from

2008-09 to 2009-10 it was 3.115 to 3.123 so during this period debtors level

was increased it has good for concern.

Creditor turnover ratio shows increasing trend from the year 2003-04 to 2007-

08 it was 0.972 to 1.932. Then it shows decreasing trend from the year 2007-08

to 2009-10 it was 1.59 to 1.498 so during this period creditors level was

increased it shows firm stock consuming level was appreciated.

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Fixed asset turnover ratio shows increasing trend from the 2003-04 to 2009-10

it was 0.939 to 2.168. So it shows net sales level was to be increased than

compare to fixed asset.

From the above table it has been inferred that Total asset turnover ratio shows

increasing trend from the 2003-04 to 2009-10 it was 0.481 to 1.191. So it shows

net sales level was to be increased than compare to total asset.

From the above table it has been inferred that fixed asset to current asset ratio

shows increasing trend from the 2003-04 to 2009-10 it was 0.481 to 1.191. So it

shows net sales level was to be increased than compare to total asset.

3.2.2 CHART SHOWS TURNOVER RATIO FORM THE YEAR 2003-04 TO

2009-10

TURN OVER RATIO FROM THE YEAR

2003-10

0

0.5

1

1.5

2

2.5

3

3.5

2003-

04

2004-

05

2005-

06

2006-

07

2007-

08

2008-

09

2009-

10

YEAR

RATI

Debtor Turnover Ratio

Creditors Turn Over

Ratio

Fixed Assets Turnover

Ratio

Total Asset Turn Over

Ratio

3.2.3 AVERAGE COLLECTION & PAYMENT PERIOD

Average Payment Period

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It relationship between account payable and net credit purchase

multiply with total number of month or total number of days in the year.

Account Payable

Average payment period = -----------------------------*12month

Net credit purchase

Average Collection Period

It relationship between account receivables and net credit sales its

multiply with total number of month or total number of days in the year

Account Receivables

Average collection period = ------------------------------ *12 monthNet credit sales

TABLE 3.2.3 AVERAGE COLLECTION & PAYMENT PERIOD FORM THE

YEAR 2003-04 TO 2009-10

(In months)

Avg. period2003-

04

2004-

05

2005-

06

2006-

07

2007-

08

2008-

09

2009-

10

Avg. payment period (in

months) 8.4 10.1 8.6 7.2 6.2 7.5 8.01Avg. collection period (in

months) 7.2 5.2 5.01 4.4 3.72 3.9 3.8

Interpretation:


Average payment period shows increasing trend from the 2003-04 to 2004-05 it

was 8.4 months to 10.1 months. Then it shows decreasing trend from the year

2004-05 to 2007-08 it was 10.1 months to 6.2 months. Thereafter again it was

shows increasing trend from the year 2007-08 to 2009-10 it was 6.2 months to

8.01 months. High payment period was 10.1 months. Low period month was 6.2

months. The shorter average payment period good for the concern.

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Purchase of Plant and Machine shows decreasing trend from the year 2004 to

2006 it was Rs.25786 to Rs.14548. Then it shows increasing trend from the year

2006 to 2007 it was Rs.14548 to Rs.21229. There after again it was decreasing

trend from the year 2007 to 2009 it was Rs.21229 to Rs.18462. It shows total

value of plant and machine increased every year.

Investment in cash shows increasing trend from the year 2004 to 2005 it was

Rs.324 to Rs.439. Then it shows Decreasing trend from the year 2005 to 2008 it

was Rs.439 to Rs179. There after again it was increasing trend from the year

2008 to 2009 it was Rs.179 to Rs.274. It shows total value of investment

increased every year.

Repayment of loan happened during the year 2007 and 2009 it was Rs.1472 and

Rs.4829.

Closing balance of the concern was increasing trend from the year 2004 to 2009

it was Rs.2245 to Rs.4583.

Opening balance of the concern was increasing trend from the year 2004 to

2009 it was Rs.1933 to Rs.5343.

Capital appreciation shows increasing trend from the year 2004 to 2005 it was

Rs.6780 to Rs.12210. Then it shows decreasing trend from the year 2005 to

2006 it was Rs.12210 to Rs.4000. There after again it was increasing trend from

the year 2006 to 2007 it was Rs.4000 to Rs.17835. decreasing trend from the

year 2007 to 2009 it was Rs.17835 to Rs.5343. It shows total value of capital

appreciation increased every year.

Loans and advances received decreasing trend from the year 2004 to 2006 it

was Rs.11941 to Rs.10001. For the year 2007 and 2009 loan was repaid. In the

year loan received it was Rs.802

Sale of machinery happened in the year 2005 it was Rs.50. Sale of furniture

happened in the year 2008 it was Rs.102.

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INTERPRETATION

Optimum cash balance increasing trend from the year 2003-04 to 2009-10 itwas Rs.189230 to Rs.772923 From year 2003-04 to 2009-10 cash balance is

increased frequently. Highest optimum cash balance in the year of 2008 it was

Rs.7, 72,923. Lowest optimum cash balance in the year of 2003. Over all

optimum cash balance shows increasing trend.

3.4 THE CHART SHOWS OPTIMUM CASH BALANCE FROM THE YEAR

2003-04 to 2009-10

Optimu m C ash B alance From the year

0

100000

200000

300000

400000

500000

600000

700000

800000

900000

1 2 3 4 5 6 7

ye a

Cash

balan

ce

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2003-04 to 2006-07 shows decreasing trend, it was 43% to 26%. From the year


Reserve and surplus shows fluctuating trend. From the year 2003-04 to 2009-10, it was 13% to 13%. From the year 2003-04 to 2004-05 it shows decreasing

trend it was 13% to 12%. Again it shows increasing trend in the year 2006-07 to

2007-08, it was 15%. Again it shows decreasing trend next years.

Loans and advances shows fluctuating trend. From the year 2003-04 to 2006-07

shows increasing trend, it was 16% to 26%. From the year 2007-08 to 2009-10

shows decreasing trend 20% to 13%.

Provision and taxation shows increasing trend from the year 2003-04 to 2009-

10, it was 2% to 4%. From the year 2006-07 to 2007-08 shows decreasing trend

it was 6% to 4%. From the year 2007-08 to 2009-10 value was constant it was

4%.

Bills payable shows stable value for all years. From the year 2003-04 to 2007-

08 value stable, it was 1%. From the year 2007-08 to 2008-09 shows increasing

trend, it was 1% to 2%. Again it decreased 1% to remaining years.

Creditors covers second major portion of the total liabilities. From the year


Profit and loss of the concern shows decreasing trend from the year 2003-04 to


was 6%.

Common size Receipts & Payments

Cash sales shows an increasing trend from the year 2003-04 to 2005-06, it was

8% to 10%. It was decreasing trend in the year 2005-06 to 2006-07, it was 10%

to 8%. From the year 2006-07 to 2007-08 it shows increasing trend it was 8% to

11%. Next year 2008-09 Again it shows decreasing trend it was 10%. From the

year 2003-04 to 2009-10 shows increasing trend it was 8% to 11%.

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Credit sales shows an increasing trend from the year 2003-04 to 2009-10 it was

63% to 81%. Credit sales cover a major portion of total receipts it was almost

above 62% for all years.

Closing stock shows a decreasing trend from the year 2003-04 to 2009-10 it was

24% to 6%. In the year 2007-08 to 2008-09 stable value it was 7%.

Interest received shows a decreasing trend from the year 2003-04 to 2009-10 it

was 2% to 1%. From the year 2005-06 to 2009-10 stable value it has 1%.

Commission received shows decreasing value from the year 2003-04 to 2004-

05 it was 2% to 1%. Next year it was shows increasing trend it was 2%. Again itwas decreasing trend in the year 2006-07 it was 1%. From the year 2006-07 to

2009-10 value was stable it was 1%.

Cash purchase shows increasing trend from the year 2003-04 to 2009-10 it was

2% to 5%. Decreasing trend from the year 2006-07 to 2007-08 it was 5% to

4%. Again it was increasing trend from the year 2007-08 to 2008-09 it was 4%

to 5%. Stable value from the year 2008-08 to 2009-10 it was 5%.

Credit purchase increasing trend from the year 2003-04 to 2006-07, it was 24%

to 40%. Showing decreasing trend from the year 2007-08 to 2009-10 it was

39% to 38%.

Opening stock consumed shows a decreasing trend from the year 2003-04 to


was 6%.

Raw material shows a decreasing trend from the year 2003-04 to 2004-05 it was

26%to 3%. Increasing trend in the year 2004-05 to 2005-06 it was 3% to 14%.

Again it was decreasing trend from the year 2005-06 to 2009-10 it was 14% to

6%.

Staff expenses increasing trend from the year 2003-04 to 2004-05 it was 9% to

11%. Decreasing trend from the year 2005-06 to 2007-08 it was 9% to 6%.

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Again it was increasing trend from the year next two years also stable vale from

the year 2008-09 to 2009-10 it was 10%.

Power and fuel shows decreasing trend from the year 2003-04 to 2009-10 it was12% to 8%.

Interest and bank charges and other expenses for the first year 1%. Remaining

years it was zero.

Administrative expenses shows decreasing trend from the year 2003-04 to

2009-10 it was 8% to 3%. From the year 2006-07 to 2009-10 it was stable value

of 3%.

Depreciation shows decreasing trend from the year 2003-04 to 2009-10 it was

4% to 2%. First two years value is to stable it was 4%. From the year 2005-06

to 2006-07 stable value it was 3%. Remaining years from 2007-08 to 2009-10 it

was stable value of 2%.

Tax paid shows stable value for first two years it was 13%. Decreasing trend

from the year 2004-05 to 2005-06 it was 13% to 10%. Increasing trend from theyear 2005-06 to 2009-10 it was 10% to 22%.

Net profit from the sales shows decreasing trend from the year 2003-04 to 2008-

09 it was 20% to5%. It was increasing trend from the year 2008-09 to 2009-10

it was 5% to 6%.

Ratio analysis

Current ratio from the year 2003-04 to 2005-06 it shows decreasing trend it was

1.979 to 1.441. From the year 2005-06 to 2006-07 increasing trend it was 1.441

to 1.532. Again it was decreasing trend from the year 2006-07 to 2009-10 it was

shows from 1.532 to 1.188. This is less than standard norm of 2:1. Less than 2:1

ratio indicates concern is not a sound position.

Quick ratio shows a decreasing trend from the year 2003-04 to 2009-10 it was

2.118 to 1.13. Standard norms 1:1. More than 1:1 indicates sound financialposition. Here our firm quick ratio gives better picture of firms ability to meet

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its short term debt out of short term assets. Quick ratio shows sound financial

position of a firm.

Liquidity ratio shows decreasing trend from the year 2003-04 to 2009-10 it was0.333 to 0.055. This is less than standard norm of 0.75:1. It shows concern has

not a sound position.

Current asset to liquidity asset ratio was showing decreasing trend from the year

2003-04 to 2009-10 it was 1.588 to 1.284. Less than standard norms shows firm

hasnt enough cash on hand.

Debtor turnover ratio shows increasing trend from the year 2003-04 to 2007-08it was 1.661 to 3.224. Then it shows decreasing trend from the year 2007-08 to

2008-09 it was 3.224 to 3.115. Thereafter again it was increasing trend from

2008-09 to 2009-10 it was 3.115 to 3.123 so during this period debtors level

was increased it has good for concern.

Creditor turnover ratio shows increasing trend from the year 2003-04 to 2007-

08 it was 0.972 to 1.932. Then it shows decreasing trend from the year 2007-08

to 2009-10 it was 1.59 to 1.498 so during this period creditors level wasincreased it shows firm stock consuming level was appreciated.

Fixed asset turnover ratio shows increasing trend from the 2003-04 to 2009-10

it was 0.939 to 2.168. So it shows net sales level was to be increased than

compare to fixed asset.

From the above table it has been inferred that Total asset turnover ratio shows

increasing trend from the 2003-04 to 2009-10 it was 0.481 to 1.191. So it showsnet sales level was to be increased than compare to total asset.

From the above table it has been inferred that fixed asset to current asset ratio

shows increasing trend from the 2003-04 to 2009-10 it was 0.481 to 1.191. So it

shows net sales level was to be increased than compare to total asset.

Average payment period shows increasing trend from the 2003-04 to 2004-05 it

was 8.4 months to 10.1 months. Then it shows decreasing trend from the year2004-05 to 2007-08 it was 10.1 months to 6.2 months. Thereafter again it was

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64

shows increasing trend from the year 2007-08 to 2009-10 it was 6.2 months to

8.01 months. High payment period was 10.1 months. Low period month was 6.2

months. The shorter average payment period good for the concern.

Average collection period shows decreasing trend from the 2003-04 to 2009-10

it was 7.2 month to 3.8 month. Collecting with in short period is good for

concern. Shorter average collection period better for the concern.

Cash flow statement

Cash Purchase of building shows increasing trend from the year 2004 to 2007 it

was Rs.117 to Rs.487. Then it shows Decreasing trend from the year 2007 to

2009 it was Rs.487 to Rs.304. It shows total value of building increased every

year.

Cash Purchase of machinery shows increasing trend from the year 2004 to 2006

it was Rs.842 to Rs.1156. Then it shows Decreasing trend from the year 2006 to

2009 it was Rs.839 to Rs.220. It shows total value of machinery increased every

year.

Cash purchase of Plant and Machine shows decreasing trend from the year 2004

to 2006 it was Rs.25786 to Rs.14548. Then it shows increasing trend from the

year 2006 to 2007 it was Rs.14548 to Rs.21229. There after again it was

decreasing trend from the year 2007 to 2009 it was Rs.21229 to Rs.18462. It

shows total value of plant and machine increased every year.

Cash Investment shows increasing trend from the year 2004 to 2005 it was

Rs.324 to Rs.439. Then it shows Decreasing trend from the year 2005 to 2008 it

was Rs.439 to Rs.179. There after again it was increasing trend from the year

2008 to 2009 it was Rs.179 to Rs.274. It shows total value of investment

increased every year.

Repayment of loan happened during the year 2007 and 2009 it was Rs.1472 and

Rs.4829.

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65

Closing balance of the concern was increasing trend from the year 2004 to 2009

it was Rs.2245 to Rs.4583.

Opening balance of the concern was increasing trend from the year 2004 to2009 it was Rs.1933 to Rs.5343.

Capital appreciation shows increasing trend from the year 2004 to 2005 it was

Rs.6780 to Rs.12210. Then it shows decreasing trend from the year 2005 to

2006 it was Rs.12210 to Rs.4000. There after again it was increasing trend from

the year 2006 to 2007 it was Rs.4000 to Rs.17835. decreasing trend from the

year 2007 to 2009 it was Rs. 17835 to Rs.5343. It shows total value of capital

appreciation increased every year.

Loans and advances received decreasing trend from the year 2004 to 2006 it

was Rs.11941 to Rs.10001. For the year 2007 and 2009 loan was repaid. In the

year loan received it was Rs.802

Sale of machinery happened in the year 2005 it was Rs.50. Sale of furniture

happened in the year 2008 it was Rs.102.

Sash from operation shows decreasing trend from the year 2004 to 2004 it was

Rs.8926 to Rs.2212. It was increasing trend from the year 2004 to 2009 it was

Rs.2212 to Rs.8161 it shows firm generating profit successfully.

Optimum cash balance

Optimum cash balance increasing trend from the year 2003-04 to 2009-10 it

was Rs.189230 to Rs.772923 From year 2003-04 to 2009-10 cash balance is

increased frequently. Highest optimum cash balance in the year of 2008 it wasRs.7, 72,923. Lowest optimum cash balance in the year of 2003. Over all

optimum cash balance shows increasing trend.

Correlation test

It found that receipts and payments. The overall payment of the concern higher

than overall receipts. The total payment of the concern was 502. The total

receipt of the concern was 149. Correlation was to be r=s0.55. The range of

correlation is should be in between of -1 to +1. When r lies between 0.5 to

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0.699 there is moderate degree of correlation. Here our calculated correlation

was moderate.

4.2 SUGGESTIONS

The firm should increase the investment in current asset as the current asset

ratio is not up to the mark. Steps to be take to increase the current assets of the

company to achieve of standard norms.

The concern should concentrate to appreciate the liquidity and absolute liquidity

cash position to meet the firm requirement.

It is necessary that a firm should have sufficient cash for paying its bills on the

due dates to take advantage of trade discounts offered by the suppliers and to

maintain its credit standing.

The company can make necessary steps to accelerate the cash collection. It can

be done by reducing the float involved in conversion of payments into cash.

The company should concentrate to repay the loans and dues to their concerned

parties and banks. Maintaining the decreasing trend of the loans and advance

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The company should make use of credit period to the fullest extent and should

pay only on due date.

Knowing when, where, and how company cash needs will occur, knowing whatthe best sources are for meeting additional cash needs and being prepared to

meet these needs when they occur, by keeping good relationships with bankers

and other creditors.

4.3 CONCLUSION

The study conducted at Rhythm EXPORTS entitled CASH

MANAGEMENT OF RHYTHM FASHION gives a view of analysis and

evaluation of liquidity position of the company. The project done at Rhythm

fashion Pvt. Ltd., Tirupur on Analysis of cash Management was very helpful andInformative. To improve the performance of the company needs to implement new

policies.

The cash management analysis refers to the management of individuals

current assets. Sufficiently liquidity is important and must be achieved and

maintained to provide that funds to pay-off obligation as they arise or mature. The

adequacy of cash and other current assets together with their efficient handling

virtually determine the survival or demise of the company.This analysis and statements are useful to the concern to maintain the

cash position control the shortage of cash and to know about the financial

performance of the company each year. This study useful to the concern to control

the cash flows.. Thus the overall performance of the company in the area of cash

management is satisfactory. The company should enhance its performance for

meeting challenges and exploiting opportunities in the future.

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APPENDIX

PROFIT & LOSS ACCOUNT

Particulars 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

INCOME

Sales 19243672 47528562 91683185 142877561 209776689 261527577 318976518

Closing stock 6612178 9068781 12291874 15343678 16221591 20049914 21143165

other income 1415519 1589562 3151172 3096682 4837415 4273388 5842365

Total Inc. 27271369 58186905 107126231 161317921 230835695 285850879 345962048

EXPENDITURE

Opening stock 6056729 6612178 9068781 12291874 15343678 16221591 20049914

Raw material consumed 4541183 19351928 40163522 68512121 95841518 118727512 139842981

Store consumed 1612878 1663191 13291688 14874347 10193836 17384948 20014462

Staff expenses 2048162 5469569 8753676 9436827 11696927 27256728 33352728

Power and fuel 2918597 4971911 8259668 12969527 18093418 24953921 27838122

Interest and bankcharges 201136 162233 172414 156581 222928 310518 353591

Administrative Exp. 1862182 2826924 3981419 5291171 6541599 7918672 9251728

Other expenses 145628 205529 293588 398878 476911 577210 683071

Depreciation 912621 1841562 2839455 3953472 5010979 6179518 7250472

Tax paid 3053928 6297129 9139411 24352929 56921039 53847528 69352470

Total exp. 23353044 49402154 95963622 152237727 220342833 273378146 327989539

Profit & Loss account 3918325 8784751 11162609 9080194 10492862 12472733 17972509

Total 27271369 58186905 107126231 161317921 230835695 285850879 345962048

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BALANCE SHEET FROM THE YEAR 2003-2009

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

ASSETSFIXED ASSETS

Building 1493916 1611128 1939247 2397389 2883911 2949898 3253436

Land 6226328 7068691 8224906 9063551 9384779 9623412 9843687

Plant & Machinery 11187981 36973668 55368164 69916671 91145451 110897892 129359498

Furniture 806791 1073768 1398813 1511665 1633497 1921782 2043667

Investment 783942 1107893 1546882 1967781 2210977 2389899 2663468

Total Fixes Assets 20498958 47835148 68478012 84857057 107258615 127782883 147163756

CURRENTASSETS

Cash in Hand &Bank 1933412 2244685 2897982 3246897 3126675 5343463 4583498

Interest received &acc. income 459623 1096174 3863781 4356065 4913189 5382160 5246873

Other Cur. asset 643978 1053819 869126 1484648 2119743 2237442 3048438

Debtors 9866471 17113588 33456178 46425518 55719462 72358177 86572571

Inventories 6612178 9068781 12291874 15343678 16221591 20049914 21143165

Total CurrentAssets 19515662 30577047 53378941 70856806 82100660 105371156 120594545

TOTAL ASSETS4001462

07841219

512185695

315571386

318935927

523315403

926775830

1

LIABILITIES

Share capital 17353933 24133789 36343510 40343521 58178143 73453921 88743288

Reserve & Surplus 5313511 9248139 14332412 20151622 29067818 32367142 33741522

Loans & Advances 6571820 18513153 29812133 39813411 38341568 39143110 34313628

Provision forTaxation 913466 1953918 4332415 9152626 8343528 8163518 9451119

Total Fixed Lib. 30152730 53848999 84820470 109461180 133931057 153127691 166249557

CURRENTLIABILITIES

Other cur. liabilities 502046 1038698 340422 1309067 2253189 3941528 4351928

Creditors 5441519 14739747 25533452 35863422 42682167 63612087 79184307

P & L account 3918325 8784751 11162609 9080194 10492862 12472733 17972509

Total current Lib. 9861890 24563196 37036483 46252683 55428218 80026348 101508744

TOTAL

LIABILITES

4001462

0

7841219

5

12185695

3

15571386

3

18935927

5

23315403

9

26775830

1

70


71/78

71

BALANCE SHEET FROM THE YEAR 2003-04 to 2004-05

Particulars 2003-04 2004-05

ASSETS

FIXED ASSETS

Building 1493916 1611128

Land 6226328 7068691

Plant & Machinery 11187981 36973668

Furniture 806791 1073768

Investment 783942 1107893

Total Fixes Assets 20498958 47835148

CURRENT ASSETS

Cash in Hand & Bank 1933412 2244685

Interest received & acc. income 459623 1096174

Other Cur. asset 643978 1053819

Debtors 9866471 17113588

Inventories 6612178 9068781

Total Current Assets 19515662 30577047

TOTAL ASSETS 40014620 78412195

LIABILITIES

Share capital 17353933 24133789

Reserve & Surplus 5313511 9248139

Loans & Advances 6571820 18513153

Provision for Taxation 913466 1953918

Total Fixed Lib. 30152730 53848999

CURRENT LIABILITIES

Other cur. liabilities 502046 1038698

Creditors 5441519 14739747

P & L account 3918325 8784751

Total current Lib. 9861890 24563196

TOTAL LIABILITES 40014620 78412195

71


72/78

72


2004-05 2005-06

ASSETS

FIXED ASSETS

Building 1611128 1939247

Land 7068691 8224906


Furniture 1073768 1398813

Investment 1107893 1546882


CURRENT ASSETS




Debtors 17113588 33456178

Inventories 9068781 12291874


TOTAL ASSETS 78412195 121856953

LIABILITIES

Share capital 24133789 36343510


Loans & Advances 18513153 29812133


Total Fixed Lib. 53848999 84820470

CURRENT LIABILITIES


Creditors 14739747 25533452

P & L account 8784751 11162609




72


73/78

73


ASSETS

FIXED ASSETS

Building 1939247 2397389

Land 8224906 9063551


Furniture 1398813 1511665

Investment 1546882 1967781


CURRENT ASSETS




Debtors 33456178 46425518

Inventories 12291874 15343678


TOTAL ASSETS 121856953 155713863

LIABILITIES

Share capital 36343510 40343521


Loans & Advances 29812133 39813411


Total Fixed Lib. 84820470 109461180

CURRENT LIABILITIES


Creditors 25533452 35863422

P & L account 11162609 9080194




73


74/78


75/78

75

ASSETS

FIXED ASSETS

Building 2397389 2883911Land 9063551 9384779


Furniture 1511665 1633497

Investment 1967781 2210977


CURRENT ASSETS




Debtors 46425518 55719462

Inventories 15343678 16221591


TOTAL ASSETS 155713863 189359275

LIABILITIES

Share capital 40343521 58178143

Reserve & Surplus 20151622 29067818Loans & Advances 39813411 38341568


Total Fixed Lib. 109461180 133931057

CURRENT LIABILITIES


Creditors 35863422 42682167

P & L account 9080194 10492862





ASSETS

75


76/78


77/78

77

Land 9623412 9843687

Plant & Machinery 110897892 129359498

Furniture 1921782 2043667

Investment 2389899 2663468


CURRENT ASSETS




Debtors 72358177 86572571

Inventories 20049914 21143165


TOTAL ASSETS 233154039 267758301

LIABILITIES

Share capital 73453921 88743288


Loans & Advances 39143110 34313628


Total Fixed Lib. 153127691 166249557

CURRENT LIABILITIES


Creditors 63612087 79184307

P & L account 12472733 17972509



BIBLIOGRAPHY

SL. No. Authors Name Book Name &

Publications

1. SHARMA R.K.

SHASHI K. GUPTA

Management Accounting Principles

and Practices, Kalyani Publishers,

77


78/78

78

Seventh Revised Edition, 1996.

2. PANDEY I.M. Financial Management, Vikas

Publishing house Pvt Ltd.,

Eighth Edition, 1997.

3. KHAN M.Y.

JAIN P.K.

Financial Management Tata Mc

Graw Hill Publishing Company Ltd.,

New Delhi, 1997.

4. KOTHARI C.R. Research Methodology methods

Techniques,

Wishwa Prakashan, New Delhi,Second Edition.

5. PILLAI & BHAGAVATHI R.S.N. Management Accounting Sultan

chand & Sons, Second Edition, 2000.

6. PARASANNA CHANDRA FINANCIAL MANAGEMENT

Second Edition.

a study on cash management-karthi-088001614028

Documents