A STUDY ON WORKING CAPITAL MANAGEMENT IN

COOPER BUSSMANN INDIA PRIVATE LIMITED,

PUDUCHERRY

SUMMER PROJECT REPORT

SUBMITTED BY

S.RAJAN

REGISTER NO. 27348330

UNDER THE GUIDANCE OF

MRS. M. JANAKIRAMA, M.B.A., P.G.D.C.A.,

FACULTY, DEPARTMENT OF MANAGEMENT STUDIES

in partial fullfilment of the award of degreeof

MASTER OF BUSINESS ADMINISTRATION

DEPARTMENT OF MANAGEMENT STUDIES

SRI MANAKULA VINAYAGAR ENGINEERING COLLEGE

PONDICHERRY UNIVERSITY

PUDUCHERRY

SEPTEMBER 2007

SRI MANAKULA VINAYAGAR ENGINEERING COLLEGE

MADAGADIPET, PUDUCHERRY

DEPARTMENT OF MANAGEMENT STUDIES

BONAFIDE CERTIFICATE

This to certify that the project work entitled “A STUDY ABOUT WORKING

CAPTIAL MANAGEMENT IN COOPER BUSSMANN INDIA PRIVATE

LIMITD” is a bonafide work done by S.RAJAN [ REGISTER NO: 27348330 ] in

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

by Pondicherry University during the academic year 2006 – 2008.

GUIDE HEAD OF DEPARTMENT

Submitted for Viva-Voce Examination held on

EXTERNAL EXAMINER

ACKNOWLEDGEMENT

First and foremost, I thank the God for his substantial blessing and mercy at all

stages in the completion of the project.

I take this opportunity to express my deep sense of gratitude to

SHRI.N.KESAVAN, Founder Chairman, SHRI.M.DHANASEKARAN, Managing

Director and SHRI.S.V.SUGUMARAN, Vice-Chairman of our college for their good

wishes for this project.

I express my immense gratitude to my Principal

DR.V.S.K.VENKATACHALAPATHY for his support and encouragement for the

completion of my project.

I extend the immense gratitude to the Head of the Department

Mr.S.JAYAKUMAR for his motivation, inspiration, and encouragement for the

completion for my project.

The valuable and unflinching requital support in this Endeavor

Mrs.M.JANAKIRAMA my internal guide, Department of Management Studies whose

assistance was immeasurable to the completion of this project.

I also thankful to all other faculty members of the department for the constant co-

operations and encouragement in pursuing my project work.

I am sincerely thankful to Mr.ARUMUGAM, Administrator for giving me an

opportunity to do this project work at COOPER BUSSMANN INDIA PRIVATE

LIMITED, SEDHARAPET and for guiding me throughout the project duration.

My heart gratitude to all employees of COOPER BUSSMANN INDIA

PRIVATE LIMITED, Sedharapet for providing me details about the company for the

completion of the project. Last, but not the least, my heart felt gratitude to my parents,

relatives and my friends for their constant encouragement, support, help and valuable

advice to make this project a success.

ABSTRACT

The Project has been done in Cooper Bussmann India Private Limited,

Puducherry. The title of the project is “A Study on the Working Capital Management in

Cooper Bussmann India Private Limited”.

The study starts with an Company’s profile and also the need for study, review of

literature and objectives are set out for the study. Research methodology, Data analysis &

Interpretation, Findings and Suggestions of the study follow.

One of the main areas of the project is the analysis part, where the data are

analyzed & interpreted, to find out the working capital. Some of the tools used in

working capital are regarding to:

Ratio Analysis

Comparative Financial Statements.

Trend Analysis.

And then conclusions, limitations & scope for further study were discussed.

CONTENTS

CHAPTER TITLES PAGE NO.

LIST OF TABLES

LIST OF CHARTS

I

INTRODUCTION

PROFILE OF THE COMPANY

NEED FOR THE STUDY

1

2

6

II REVIEW OF LITERATURE 7

III OBJECTIVES OF THE STUDY 14

IV RESEARCH METHODOLOGY 15

V DATA ANALYSIS AND INTERPRETATION 16

VIFINDINGS OF THE STUDY,

SUGGESTION AND RECOMMENDATIONS

46

47

VII CONCLUSION 48

VIIILIMITATIONS OF THE STUDY

SCOPE FOR THE FUTHER STUDY

49

50

BIBILIOGRAPHY 51

LIST OF TABLES

Table. no Name of Tables Page. no5.1 Current ratio 165.2 Working Capital turnover ratio 185.3 Inventories to current assets 205.4 Cash to Current assets ratio 225.5 Cash to Working capital ratio 245.6 Cash to sales ratio 265.7 Cash ratio 285.8 Current assets to Fixed assets ratio 305.9 Current assets to Total assets ratio 325.10 Working Capital ratio 345.11 Inventories 365.12 Cash/Bank 375.13 Receivable 385.14 Current liabilities 395.15 Bills payable 405.16 Comparative balance sheet (2000&2001) 425.17 Comparative balance sheet (2001&2002) 435.18 Comparative balance sheet (2002 & 2003) 445.19 Comparative balance sheet (2002 &2003) 45

LIST OF CHARTS

Table. no Name of Charts Page. no5.1 Current ratio 175.2 Working Capital turnover ratio 195.3 Inventories to current assets 215.4 Cash to Current assets ratio 235.5 Cash to Working capital ratio 255.6 Cash to sales ratio 275.7 Cash ratio 295.8 Current assets to Fixed assets ratio 31

5.9 Current assets to Total assets ratio 33

CHAPTER I

INTRODUCTION

COMPANY PROFILE

COOPER BUSSMANN INDIA PRIVATE LIMITED

BACKGROUND – COOPER INDUSTRIES

Cooper Industries having their manufacturing excellence and market leading

product. Initially started with a small iron foundry in Ohio, US, Cooper has grown world

wide, diversified over 100 manufacturing bases spread over five continents. The two

businesses segments namely electrical products and Tools & Hardware products are the

best known brands in their industries.

Cooper products known worldwide for its superior quality, reliability and

innovation. Their business divisions are Cooper lighting, Cooper Menvier, Cooper Power

Systems, Cooper Cruise-Hinds, Cooper Power Tools, Cooper Tools and Cooper

Bussmann.

COOPER BUSSMANN

Cooper Bussmann is one of the world’s largest producers of circuit protection and

power quality equipment manufacturing, a wide range of fuses to protect electrical,

electronic and automotive systems globally. It is one of the leading suppliers of circuit

protection Fuses and Gears in the world. Each product is backed by an efficient world

wide distribution network service and technical support. Bussmann circuit protection

solutions comply with the major international standards such as BS, IEC, DIN, and CSA

AND UL. Cooper Bussmann also offers inductors and transformers designed to provide

power quality in electronic applications. One of the principal factories is at Burton near

Leistershire in U.K.

Cooper Bussmann Inc, a company incorporated in the United States of America,

acquired 100% equity in M/s S&S Low Tension Switch Gear Limited vide approval of

Foreign Investment Promotion Board, for Direct Investment in India. The name of the

company was changed to Cooper Bussmann India Private Limited (CBIL).

COOPER BUSSMANN INDIA PRIVATE LIMITED

CBIL is committed to quality products and services is an ISO 9001-2000 certified

company. It has therefore adopted formal quality management systems helping it to

demonstrate its continued ability to look on the ultimate satisfaction of the customers up

keeping standards of ISO 9001-2000 certification.

CBIL has a reputation as a quality supplier and an innovator through its ability to

anticipate customer’s needs with its technology and manufacturing excellence. One of the

key requirements of the European market was that the processes and product should

conform to the European Standard and be certified by the ASTA, a leading electrical

product certifying agency. Hence the company had all the tests done in line with

European requirement for the new Bussmann Range of Products.

PRODUCTS

CBIL manufactures “Bussmann” brand products for local markets and exports them

to UK for further distribution and customer services. Global Brand now locally available.

Bussmann is now setting up new production lines for the export market of Europe and for

world wide distribution. Following are the total circuit protection solutions:

1. One stop shop: full line of products for not only electrical, but also in areas like

electronic, telecom and automotive circuit protection.

2. Voltage range: offers circuit protection solutions in LV, MV and High speed

categories.

3. Types: offers tag type, bolted type, ferrule type, bottle type and square body blade

type constructions.

4. Standards: offers all major global approval and certification standards ASTA, UL,

CE, CSA, IEC, BS, VDE covering British, European & North American Style

fuses

CBIL covers a wide range of applications in the electrical industry including

Industrial general protection, motor protection, Transformer protection, Capacitor

protection, Control switchgear, Semiconductor protection, Power distribution including

house-service and feeder pillar to name a few.

This existing unit has commenced the commercial production during the year 2000.

The following are the products manufactures:

a. NHDIN Indicating Industrial HRC fuse range

b. Medium Voltage DIN fuse range

c. Medium Voltage OIL fuse range

d. European DIN High speed fuse range

NHDIN DUAL INDICATING HRC FUSE RANGE:

This is a new range of industrial fuse links with unique dual indicating

mechanism complying with DIN 43620 dimensional standards and IEC 60269

International electrical standards and the approved to VDE standards, an international

approving agency located in Germany. The dual indicating design mechanism is a

patented design of Bussmann. These fuses are used largely in industrial low voltage

power distribution and Motor protection applications, besides feeder pillar distribution

applications. The protection covers both electrical overloads and short circuits, offered in

all the international sizes and the current range covers 6A to 630A at 500V AC having

utilization protection having full range of breaking capacity of 120KA. Other product

range includes 400 V AC, 690 V AC with insulated lifting tag.

MEDIUM VOLTAGE DIN FUSE RANGE:

This current limiting fuse range comply with DIN 43625 dimensional standards

and IEC 60282 electrical standards having a spring assisted striker mechanism for fail

indication. These are used for back up protection in an medium voltage circuit system.

MEDIUM VOLTAGE OIL FUSE RANGE:

This range of fuses complies with IEC 281 -1 electrical standards and BS 2692 -1

standard. These are designed or use in oil filled switchgear such as Ring main unit panels

used for ring main distribution system. These can be used inside oil filled transformer

tanks where high oil temperatures may be expected. The range planned to be

manufactured is from 7.2 KV to 12 KV covering a current rating of 10A to 140 A and

fitted with striker pin with unique triple seal system ensuring against long term seal

deterioration.

EUROPEAN DIN HIGH SPEED FUSE RANGE:

This range planned to be manufactured complies with DIN 43653 dimensional

standards IEC 60269-4 electrical standards and offered in various sizes from size 000 to

size 4. The immediate range covers the size 1* which has body cross section of 45

*45mm. these are used for protection of semiconductor devices which are sensitive to

over load surges. This fuse is used in majority of Industrial Rectifiers, Rolling stock

rectifiers, Industrial DC and AC drives, AC controllers and many other power electronic

equipments. Bussmann square body fuses are a very attractive solution for high

applications which require a compact design with superior performance.

MARKET

Cooper Bussmann India Private Limited has a large network of distributors and

stockiest for its products:

- North America

- Europe

- Middle East

- Far East

- Australia

The products are being marketed and sales are supported by selling team in all the

above areas.

NEED FOR THE STUDY

Working capital constitutes part of the Crown's investment in a department.

Associated with this is an opportunity cost to the Crown. (Money invested in one area

may "cost" opportunities for investment in other areas.) If a department is operating with

more working capital than is necessary, this over-investment represents an unnecessary

cost to the Crown.

From a department's point of view, excess working capital means operating

inefficiencies. In addition, unnecessary working capital increases the amount of the

capital charge which departments are required to meet from 1 July 1991.

.

CHAPTER II

REVIEW OF LITERATURE

Working capital management involves the relationship between a firm's short-

term assets and its short-term liabilities. The goal of working capital management is to

ensure that a firm is able to continue its operations and that it has sufficient ability to

satisfy both maturing short-term debt and upcoming operational expenses. The

management of working capital involves managing inventories.

Decisions relating to working capital and short term financing are referred to as

working capital management. These involve managing the relationship between a firm's

short-term assets and its short-term liabilities. The goal of Working capital management

is to ensure that the firm is able to continue its operations and that it has sufficient cash

flow to satisfy both maturing short-term debt and upcoming operational expenses.

By definition, Working capital management entails short term decisions -

generally, relating to the next one year period - which are "reversible". These decisions

are therefore not taken on the same basis as Capital Investment Decisions (NPV or

related, as above) rather they will be based on cash flows and / or profitability.

The importance of cash flow is not new to the finance literature. Over twenty

years ago, Largay and Stickney (1980) reported that the then-recent bankruptcy of W.T.

Grant, a nationwide chain of department stores, should have been anticipated because the

corporation had been running a deficit cash flow from operations for 8 of the last 10 years

of its corporate life. As part of a study of the Fortune 500’s financial management

practices, Gilbert and Reichert (1995) find that time value of money cash flow analysis is

used to select projects in 91 percent of the firms. Accounts receivable management

models are used in 59 percent of these firms, while inventory management models were

used in 60 percent of the companies.

Recently, Farragher, Kleiman and Sahu (1999) find that 55 percent of firms in the

S&P Industrial index complete some form of a cash flow assessment, but did not present

insights regarding accounts receivable and inventory management, or variations of any

current account asset or liability accounts across industries.

Theoretical determination of optimal trade credit limits are the

subject of many articles over the years (e.g., Schwartz, 1974 and

scherr, 1996), with scant attention paid to actual accounts receivable

management.

Across a limited sample, weinraub and visscher (1998) observe a

tendency of firms with low levels of current ratios to also have low

levels of current liabilities. Combining accounts receivable and payable

into one issue is hill, satoris, and ferguson’s (1984) finding that payees

define date of payment as the date payment is received, while payors

view payment as the postmark date. Additional WCM insight across

firms, industries, and time is needed! maness and zietlow (2002, pp.

51, 496) presents two models of value creation through effective short-

term financial management activities.

However, these models are generic models and do not consider

unique firm or industry influences. maness and zietlow discuss industry

influences in a short paragraph that includes the observation that “an

industry a company is located in may have more influence on that

company’s fortunes that overall gnp” (2002, p. 507).” In fact, a careful review of

this 627-page textbook finds only sporadic information on actual firm levels of WCM

dimensions, virtually nothing on industry factors except for some boxed items with titles

such as “should a retailer offer an in-house credit card” (p. 128), and nothing on WCM

stability over time. This research will attempt to fill in this void space.

How are the readings connected? If there any other text out there

besides the one in the last paragraph. The first annual cfo working capital

survey, a joint project with rel consultancy group, was published in the june 1997 issue of

cfo. rel is a london, england-based management consulting firm specializing in working

capital issues for its global list of clients. The original survey reports several working

capital benchmarks for public companies using data for 1996. Each company is ranked

against its peers and also against the entire field of 1000 companies. rel continues to

update the original information on an annual basis. The industries that include at least 8

companies over the 1996-2000 periods are listed below. Deleted: represented.

DEFINITION OF WORKING CAPITAL

The term working capital refers to the amount of capital which is readily available

to an organization. That is, working capital is the difference between resources in cash or

readily convertible into cash (Current Assets) and organizational commitments for which

cash will soon be required (Current Liabilities).

Current Assets are resources which are in cash or will soon be converted into cash

in "the ordinary course of business".

Current Liabilities are commitments which will soon require cash settlement in

"the ordinary course of business".

Thus:

WORKING CAPITAL = CURRENT ASSETS - CURRENT LIABILITIES

In a department's Statement of Financial Position, these components of working

capital are reported under the following headings:

CURRENT ASSETS:

Liquid Assets (cash and bank deposits)

Inventory

Debtors and Receivables

CURRENT LIABILITIES:

Bank Overdraft

Creditors and Payables

Other Short Term Liabilities

APPROACHES TO WORKING CAPITAL MANAGEMENT

The objective of working capital management is to maintain the optimum balance

of each of the working capital components. This includes making sure that funds are held

as cash in bank deposits for as long as and in the largest amounts possible, thereby

maximizing the interest earned. However, such cash may more appropriately be

"invested" in other assets or in reducing other liabilities.

Working capital management takes place on two levels:

Ratio analysis can be used to monitor overall trends in working capital and to

identify areas requiring closer management.

The individual components of working capital can be effectively managed by using

various techniques and strategies.

When considering these techniques and strategies, departments need to recognize that

each department has a unique mix of working capital components. The emphasis that

needs to be placed on each component varies according to department. For example,

some departments have significant inventory levels; others have little if any inventory.

Furthermore, working capital management is not an end in itself. It is an integral part

of the department's overall management. The needs of efficient working capital

management must be considered in relation to other aspects of the department's financial

and non-financial performance.

Financial ratio analysis calculates and compares various ratios of amounts and

balances taken from the financial statements.

The main purposes of working capital ratio analysis are:

to indicate working capital management performance; and

to assist in identifying areas requiring closer management.

Three key points need to be taken into account when analyzing financial ratios:

The results are based on highly summarized information. Consequently, situations

which require control might not be apparent, or situations which do not warrant

significant effort might be unnecessarily highlighted;

Different departments face very different situations. Comparisons between them, or

with global "ideal" ratio values, can be misleading;

Ratio analysis is somewhat one-sided; favorable results mean little, whereas

unfavorable results are usually significant.

However, financial ratio analysis is valuable because it raises questions and indicates

directions for more detailed investigation.

The following ratios are of interest to those managing working capital:

working capital ratio;

liquid interval measure;

stock turnover;

debtors ratio;

creditors ratio.

WORKING CAPITAL RATIO

Current Assets

Current Liabilities

The working capital ratio (or current ratio) attempts to measure the level of

liquidity, that is, the level of safety provided by the excess of current assets over current

liabilities.

The "quick ratio" a derivative, excludes inventories from the current assets,

considering only those assets most swiftly realizable. There are also other possible

refinements.

There is no particular benchmark value or range that can be recommended as

suitable for all government departments. However, if a department tracks its own

working capital ratio over a period of time, the trends-the way in which the liquidity is

changing-will become apparent.

LIQUID INTERVAL RATIO

Liquid Assets

Average Operating Expenses

This is another measure of liquidity. It looks at the number of days that liquid

assets (for example, inventory) could service daily operating expenses (including

salaries).

STOCK TURNOVER RATIO

Cost of Sales

Average Stock Level

This ratio applies only to finished goods. It indicates the speed with which

inventory is sold-or, to look at it from the other angle, how long inventory items remain

on the shelves. It can be used for the inventory balance as a whole, for classes of

inventory, or for individual inventory items.

The figure produced by the stock turnover ratio is not important in itself, but the

trend over time is a good indicator of the validity of changes in inventory policies.

In general, a higher turnover ratio indicates that a lower level of investment is

required to serve the department.

Most departments do not hold significant inventories of finished goods, so this

ratio will have only limited relevance.

DEBTOR RATIO

There is a close relationship between debtors and credit sales to third parties (that

is, sales other than to the Crown). If sales increase, debtors will increase, and conversely,

if sales decrease debtors will decrease.

The best way to explain this relationship is to express it as the number of days that

credit sales are carried on the books:

Credit sales per period x days per period

Average Debtors

Where trading terms are 30 days net cash, and customers buy from day-to-day

during the 30 day period and pay 30 days after a statement is rendered, a collection

period of 45 days (the average between 30 and 60 days) would be satisfactory.

If the average collection period extends beyond 60 days, debtors are holding cash

that should have flowed into the department. This means that the department is unable to

satisfy pressing liabilities or to invest that cash.

The debtor ratio does not solve the collection problem, but it acts as an indicator

that an adverse trend is developing. Remedial action can then be instigated.

CREDITOR RATIO

This ratio is much the same as the debtor ratio. It expresses the relationship

between credit purchases and the liability to creditors. It can be stated as the number of

days that credit purchases are carried on the books.

Credit purchase per period x days per period

Average Creditors

CHAPTER III

OBJECTIVES OF THE STUDY

To find whether the company maintains minimum investment in inventory

organized the profitability.

To know whether the company maintain a large size of inventory for efficient and

smooth production and sales operations.

To know how the company maintains its credit policy.

To point out how well the company manage its cash.

To find whether there is proper match between current assets and current

liabilities.

To know the ways and means of financing working capital

Suggestions for the working capital management.

CHAPTER IV

RESEARCH METHODOLOGY

RESEARCH DESIGN

A research design is the arrangement of conditions for collection and analysis of

data in a manner that aims to combine relevance to the research purpose with economy in

procedure.

The formidable problem that follows the task of defining the research problem is

the preparation of the design of the research project, popularly known as the “research

design”. Decisions regarding what, where, when, how much, by what means concerning

an inquiry or a research study constitute a research design.

DATA COLLECTION

SECONDARY DATA

Secondary data means that are already available i.e. they refer to the data which

have already been collected and analyzed by someone else. Secondary data may either be

published data or unpublished data. Usually published data are available in various

publications of the central, state, local governments. Also in technical and trade journals,

books, magazines and newspapers, reports and publications of various associations

connected with business and industry, banks, stock exchanges reports prepared by

research scholars universities in different fields

This study is period for the annual reports and statements of accounts extended

from the years

ANALYTICAL TOOL FOR THE STUDY

During the course of research for the researcher for analysis and interpretation o

data is given below has applied various tools.

Ratios analysis

Comparative balance sheet

Trend analysis

CHAPTER V

DATA ANALYSIS AND INTERPRETATION

LIQUIDITY OF WORKING CAPITAL:

The liquidity position of a firm is largely affected by the liquidity of its

working capital. The appropriate tests of this important feature of working capital

analysis are analysed below.

5.1CURRENT RATIO

YEAR

CURRENT

ASSETS

CURRENT

LIABILITIES

RATIO

( Times )

1999-2000 1259369408 221154699 5.69

2000-2001 1607087538 184830664 8.69

2001-2002 857669926 120407697 7.12

2002-2003 1135662118 112919857 10.05

2003-2004 1049098939 220779845 4.75

Inference:

This ratio is an indicator of the firm’s commitment to meet its short-term

liabilities. The company has not had adequate current assets. An ideal current ratio 2 is

considered as a safe margin of solvency due to the fact that if the current assets are

reduced to half (i.e) instead of 2 then also the creditors will able to get their payments in

full. However a business having seasonal trading activity may show a lower current ratio

at a certain period of the year. A very high current ratio is also not desirable since it

means efficient use of funds. The company is not desirable in efficient use of funds.

Chart 5.1 Current Ratio

5.2WORKING CAPITAL TURNOVER RATIO

YEAR SALES

(Rupees)

WORKING

CAPITAL

(Rupees)

RATIO

( Times )

1999-2000 98492557 1038214709 0.09

2000-2001 136214011 241219109 0.56

2001-2002 148087677 1084194229 0.14

2002-2003 121535360 1022742261 0.12

2003-2004 85410661 828319091 0.10

Inference:

This ratio indicates whether working capital has been effectively utilized in

making sales or not.

From the table it is noted that working capital had some fluctuation in the middle

of the study period, yet the company was able to increase it in the later years.

Hence the turnover indicates that company had utilized its working capital

efficiently and the company can also try to work on this to get more effective values.

Chart 5.2 WORKING CAPITAL TURNOVER RATIO

5.3 INVENTORIES TO CURRENT ASSETS

YEAR INVENTORIES

(Rupees)

CURRENT

ASSETS

(Rupees)

RATIO

( Times )

1999-2000 443218275 1259369408 0.35

2000-2001 4565366544 1607087538 0.28

2001-2002 493646982 857669926 0.41

2002-2003 478946594 1135662118 0.42

2003-2004 453879029 1049098939 0.43

Inference:

From the table it is known that the inventories to current assets ratio also register

a fluctuating trend during the entire study period.

The average ratio is 0.41 times and thus it is found that the investment in

inventories is kept at the considerable level.

Chart 5.3 INVENTORIES TO CURRENT ASSETS

5.4 CASH TO CURRENT ASSETS RATIO

YEAR CASH

(Rupees)

CURRENT

ASSETS

(Rupees)

RATIO

( Times )

1999-2000 472165527 1259369408 0.37

2000-2001 357605655 1607087538 0.22

2001-2002 521248923 857669926 0.43

2002-2003 306643076 1135662118 0.27

2003-2004 241319457 1049098939 0.23

Inference:

From the table shows the details of cash to current assets ratio and registered a

fluctuating trend throughout the study period from 1999 to 2004.

The average cash to current assets is maintained at proper times. Hence we find

that company had moderate level of cash in proportion to current assets.

Chart 5.4 CASH TO CURRENT ASSETS RATIO

5.5 CASH TO WORKING CAPITAL RATIO

YEAR CASH

(Rupees)

WORKING

CAPITAL

(Rupees)

RATIO

( Times )

1999-2000 472165527 1038214709 0.45

2000-2001 357605655 241219109 0.15

2001-2002 521248923 1084194229 0.48

2002-2003 306643076 1022742261 0.29

2003-2004 241319457 828319091 0.29

Inference:

The cash to working capital ratio registered a fluctuating trend during the study

period this is noted from the table.

The average ratio of cash to working capital is balanced. Hence it is found that the

working capital ratio is managed by using the cash & bank balance available in the

company.

Chart 5.5 CASH TO WORKING CAPITAL RATIO

5.6 CASH TO SALES RATIO

YEAR CASH

(Rupees)

SALES

(Rupees)

RATIO

( Times )

1999-2000 472165527 98492557 4.79

2000-2001 357605655 136214011 2.62

2001-2002 521248923 148087677 3.52

2002-2003 306643076 121535360 2.52

2003-2004 241319457 85410661 2.82

Inference:

This is one of the important ratios of controlling cash. A study of cash to sales

ratio will provide a deep insight into the cash balance held in the concerns.

Evident from the table shows cash to sales registered a fluctuating trend

throughout the study period.

Chart 5.6 CASH TO SALES RATIO

5.7 CASH RATIO

YEAR CASH

(Rupees)

CURRENT

LIABILITIES

(Rupees)

RATIO

( Times )

1999-2000 472165527 221154699 2.14

2000-2001 357605655 184830664 1.93

2001-2002 521248923 120407697 4.33

2002-2003 306643076 112919857 2.71

2003-2004 241319457 220779845 10.9

Inference:

From the table it is noted that the cash position of the company is satisfactory as

the average ratio.

It is found that the cash required to meet out the current liabilities is maintained at

a normal level hence its shows that company follows an average policy.

Chart 5.7 CASH RATIO

5.8

CURRENT ASSETS TO FIXED ASSETS RATIO

Inference:

The level of current assets can be measured by using this current asset to fixed

assets ratio.

From the table it is noted that the ratio is between the average ratio and this

indicates the company had a moderate current asset policy throughout the study period.

YEAR

CURRENT

ASSETS

(Rupees)

FIXED

ASSETS

(Rupees)

RATIO

( Times )

1999-2000 1259369408 445335336 2.83

2000-2001 1607087538 445335336 3.61

2001-2002 857669926 298717767 4.03

2002-2003 1135662118 477487671 2.20

2003-2004 1049098939 468492769 2.42

Chart 5.8 CURRENT ASSETS TO FIXED ASSETS RATIO

5.9 CURRENT ASSETS TO TOTAL ASSETS RATIO

YEAR

CURRENT

ASSETS

(Rupees)

TOTAL

ASSETS

(Rupees)

RATIO

( Times )

1999-2000 1259369408 1941885379 0.65

2000-2001 1607087538 1838866594 0.87

2001-2002 857669926 1878097191 0.64

2002-2003 1135662118 1799527219 0.63

2003-2004 1049098939 1711356105 0.61

Inference:

From the table shows the current assets to total assets ratio of the company, which

registered a fluctuating trend throughout the study period.

This ratio implies that company is maintaining a considerable level of current

assets in proportion to total assets.

Chart 5.9 CURRENT ASSETS TO TOTAL ASSETS RATIO

5.10 WORKING CAPITAL RATIO

YEAR

WORKING

CAPITAL

(Rupees)

CURRENT

ASSETS

(Rupees)

RATIO

( Times )

1999-2000 1038214709 1259369408 0.82

2000-2001 241219109 1607087538 0.15

2001-2002 1084194229 857669926 0.90

2002-2003 1022742261 1135662118 0.90

2003-2004 828319091 1049098939 0.78

Inference:

From the table working capital ratio registered a fluctuating trend during the

study period this is noted .

Hence it is found that the working capital ratio is managed by using the cash &

bank balance available in the company.

Chart 5.10 WORKING CAPITAL RATIO

TREND ANALYSIS:

Y = a + bX

Where a = ∑Y ; b = ∑XY n ∑X2

Table – 5.11

INVENTORIES

YEAR X X2Inventories

(Rs )

YXY(Rs)

1999-00 -2 4 4,43,218,275 -8,866,436,550 2000-01 -1 1 4,56,536,544 -4,56,536,544 2001-02 0 0 4,93,646,982 0 2002-03 1 1 4,78,946,594 4,78,946,594

2003-04 2 4 4,53,879,029 9,07,758,058TOTAL 5 10 2,326,227,424 43,731,558

(Source: Annual Report)

a = 2,326,227,424 = 4,65,245,484.8 5

b = 43,731,558 = 4,373,155.8 10

Inventories value in 2004-05 will be about 1,31,19,467.4 lakh.

Table – 5.12

CASH / BANK

YEAR X X2Cash / Bank

(Rs )

YXY(Rs)

1999-00 -2 4 4,72,165,527 -9,44,331,0542000-01 -1 1 3,57,605,655 -3,57,605,6552001-02 0 0 5,21,248,923 02002-03 1 1 3,06,643,076 3,06,643,0762003-04 2 4 2,41,319,457 4,82,638,914TOTAL 5 10 20,92,339,562 11,87,644,681

(Source: Annual Report)

a = 20,92,339,562 = 41,84,667,912.4 5

b = 11,87,644,681 = 11,81,644,681 10

cash/Bank value in 2004-05 will be about 418,46,67,912.4 lakh.

Table – 5.13

RECEIVABLE

YEAR X X2

RECEIVABLE(Rs)

Y XY(Rs)

1999-00 -2 4 3,26,151,232 -65,23,622,4642000-01 -1 1 3,19,961,287 -3,19,961,2872001-02 0 0 2,96,585,354 02002-03 1 1 3,14,999,942 3,14,999,9422003-04 2 4 12,02,157,554 24,04,315,108TOTAL 28 56,005.28 41,322.97

(Source: Annual Report)

a 24,04,315,108 = 8000.75

5

b = 41,322.97 = 1,475.82 28

Sundry Debtors value in 2004-05 will be about 13,904.03 lakh.

Table –5.14

CURRENT LIABILITIES

YEAR X X2Current

Liabilities(Rs)

Y

XY(Rs)

1999-00 -2 4 2,21,154,699 -4,42,309,3982000-01 -1 1 1,84,830,664 -1,84,830,6642001-02 0 0 1,20,407,697 02002-03 1 1 1,12,919,857 1,12,919,8572003-04 2 4 2,20,779,848 4,41,559,696TOTAL 5 10 8,60,092,765 -40,52,660,509(Source: Annual Report)

a = 8,60,092,765 = 17,2018,553 5

b = 40,52,660,509 = 4,05,266,050.9 10

Current liabilities value in 2004-05 will be about 8,01,438,369.33 lakh.

Table – 5.15

BILLS PAYABLE

YEARX X2

BILLS PAYABLE

(Rs )Y

XY(Rs )

1999-00 -2 4 56,677,194 -1,13,354,3882000-01 1 1 1,28,990,900 -1,28,990,9002001-02 0 0 14,045,050 0

2002-03 1 1 1,04,122,991 1,04,122,9912003-04 2 4 67,966,652 1,35,933,304TOTAL 5 10 4,98,208,587 -2,288,993(Source: Annual Report)

a = 4,98,208,587 = 99,641,717.4

5

b = -2,288,993 = -228,899.3 10

Bills Payable value in 2004-05 will be about -6,866,979 lakh.

FINANCIAL STATEMENTS:

The history of financial statement analysis is traced back to the beginning of 20 th

century. The analysis was started in western countries for the use of credit analysis. Till

1914, financial institutions used to rely on the facts of financial statements. But over a

period of time, the need for analysis was felt and a number of techniques were invested

and made use of the purpose of analysis.

The important techniques of analysis and interpretation of financial statements are

listed below

a. Comparatives financial statement

b. Trend analysis

c. Ratio analysis

.

(a). COMPARATIVE FINANCIAL STATEMENT.

This is yet another technique used in financial statement analysis. These

statements summaries and present related data for a number of years, incorporating there

in changes (absolute and relative) in individual items of financial statements. These

statements normally comprise comparative balance sheets, comparative statements of

change in total capital as well as in working capital.

They help in making interfered and inter – firm comparisons and also highlights

the trends in perforanance effeminacy, and financial position.

Table 5.16

COMPARATIVE BALANCESHEET OFTHE COOPER BUSSMANN INDIA PRIVATE LIMITED

AS ON 31st MARCH (2000 AND 2001)

PARTICULARS 2000(Rs)

2001(Rs)

(+) (or) (-)In 2002 over 2001

Amount percentage

ASSETSCURRENT ASSETSStockDepositsBill ReceivableSundry debtorsCash in handCash at bank

443218275 7498550326151226141649658 944331052,36082764

4565365449038550

31996128713608169990721130

12,39142039

13318269154000

-6189945-5567959-371197592799539

3.00%20.54%-1.87%-3.93%-3.93%-3.93%

TOTAL (A) 1249033578 1239142039 -9891539 -9.32%FIXED ASSETSFixed Assets 445335336 445335336 - -

TOTAL (B) 445335336 445335336 - -TOTAL ASSETS(A+B) 1694368914 1684477369 -9891545 -5.837%LIABILITIES:CURRENTLIBILITY:Sundry creditors Bill Payable

16069405290514861

22107922235280109

6038517-55234.782

37.57%-19.01%

TOTAL (C) 306584266 257388031 49196235 -16.04%CAPITAL&RESERVE:CapitalProfit & loss a/c

277556924.6763281556

356772334.5856253602.8

15567388741230204

56%-5.40%

LONGTERM –LOANSLoans 346946162 214063400.7 -58125822 -16.75%TOTAL LIABILTIES 1694368914 1684477369 -9891539 -5.83%

Table 5.17

COMPARATIVE BALANCESHEET OFTHE COOPER BUSSMAN INDIA PRIVATE LIMITED

AS ON 31st MARCH (2001 AND 2002)

PARTICULARS 2001(Rs)

2002(Rs)

(+) (or) (-)In 2002 over 2001

Amount percentage

ASSETSCURRENT ASSETSStockDepositsBills ReceivableSundry debtorsCash in handCash at bank

456536544 9038550

31996128113608169990721130

226802829

49364698212580790

29658535414343964295626428

239066070

+371104383542240

-23375933+7357943

490529812623241

+8.12%+39.10%

-7.30%+5.40%

5.40%5.40%

TOTAL (A) 1239142039 1280945266 41802227 3.37%FIXED ASSETS

Fixed Assets 445335336 447161879 1826543 +4.10%TOTAL(B) 445335336 447161879 1826543 +4.10%TOTAL ASSETS(A+B) 1684477369 1728107145 43369736 +2.59%LIABILITIES:CURRENTLIBILITY:Bills Payable Sundry debtorsProvisions

23528010922107922

-

145140974443822569153914443

-9013913521714647

153914647

-38.31%98.22%

100%

TOTAL 257388031 342877986 85489955 33.25%CAPITAL&RESERVE:CapitalProfit & loss a/c

356772334856253602.8

207784373.9900398953.5

-14898796044145350.6

-41.75%5.1%

LONGTERM –LOANSLoans 214063400 277045831.7 62982431 29.42%

TOTAL LIABILITIES 168447369 1728107145 43629776 2.59%

Table 5.18

COMPARATIVE BALANCESHEET OFTHE COOPER BUSSMAN INDIA PRIVATE LIMITED

AS ON 31st MARCH (2002 AND 2003)

PARTICULARS 2002(Rs)

2003(Rs)

(+) (or) (-)In 2003 over 2002

Amount percentage

ASSETSCURRENT ASSETSStockDepositsBills ReceivableSundry debtorsCash in handCash at bank

49364698212580790

296585354143439354956626428239066070

47894659425871970

3149999999199832261332216

153330539

-147003881329118018414645

-51441320-34294212-85735531

-2.97%105.64%

6.20%-35.82%-33.83%-32.86%

TOTAL (A) 1280945266 1126479640 -154465626 -12.05%

FIXED ASSETSFixed Assets 447161879 468472769 21330890 4.77%TOTAL (B) 447161879 468472769 21330890 4.77%TOTAL ASSETS(A+B) 1728107145 1594972409 -133134690 -12.05%LIABILITIES:CURRENTLIBILITY:Sundry creditors ProvisionBills Payable

43822569-

145140974

5112838768174856

128472622

730581868174856

-16668352

16.67%100%

-11.48%

TOTAL 188963543 247775865 58839322 31.13%CAPITAL&RESERVE:CapitalProfit & loss a/c

769571780461743068

3538428501061528550

-415728930599785482

-54.20%129.89%

LONGTERM –LOANSLoans 307828714 - -307828714 -100%

TOTAL LIABILITIES 1728107145 1594792409 -133314696 -7.71%

Table 5.19

COMPARATIVE BALANCESHEET OFTHE AUROMODE & CO

AS ON 31st MARCH (2003 AND 2004)

PARTICULARS 2003(Rs)

2004(Rs)

(+) (or) (-)In 2004 over 2003

Amount percentage

ASSETSCURRENT ASSETSStockDepositsLoans & AdvancesSundry debtorsCash in handCash at bank

8,35,823.0913,720.0052,150.0042,083.404,012.95

37,136.40

15,35,450.0038,720.0072,632.60

4,78,970.521,321.55

7,11,908.54

+6,99,626.31+25,000.00+20,482.60

+4,36,887.10-2,691.40

+6,74,772.14

+83.70%+182.21%

+39.27+1038.14%

-67.06%+1817.01%

TOTAL (A) 9,84,926.44 28,39,003.21 +18,54,076.77 +188.24%FIXED ASSETSFixed Assets 40,30,052.75 38,82,952.75 -1,47,100.00 -3.65%TOTAL (B) 40,30,052.75 38,82,952.75 -1,47,100.00 -3.65%

INVESTMENT:Investment 1,00,000.00 40,000.00 -60,000.00 -60%TOTAL © 1,00,000.00 40,000.00 -60,000.00 -60%TOTAL ASSETS(A+B+C) 51,14,979.19 67,61,955.96 +16,46,976.77 +32.19%LIABILITIES:CURRENTLIBILITY:Sundry creditors Provision

4,07,343.501,00,350.00

10,91,486.721,94,241.00

+6,84,143.22+93,891.00

+167.95%+93.56%

TOTAL (D) 5,07,693.50 12,85,727.72 +7,78,034.22 +153.24%CAPITAL&RESERVE:CapitalProfit & loss a/c

45,07,285.69-

44,17,978.24-

-89,307.45-

-1.98%-

TOTAL (E) 45,07,285.69 44,17,978.24 -89,307.45 -1.98%

LONGTERM –LOANSLoans 1,00,000.00 10,58,250.00 +9,58,250.00 +958.25%TOTAL (F) 1,00,000.00 10,58,250.00 +9,58,250.00 +958.25%TOTAL LIABILITIES(D+E+F) 51,14,979.19 67,61,955.96 +16,46,976.77 +32.19%

CHAPTER VI

6.1 FINDINGS:

Cash to current assets ratio has huge fluctuations during the period.

Cash position in of the company has uneven trend.

Uneven trend in networking

The company has its working capital ratio has been above the standard norms

during the period 2000-01, 01-02, 02-03.

Liquidity position of the company is satisfied.

Current assets are not properly utilized by the concern towards the turnover.

Working capital turnover ratio in the year 2003 better when compare to the

previous year.

The company has spent huge expenses.

6.2 SUGGESTION:

The cash position of the company has not been properly maintained. So the

company has to make an effort to reduce the expenses and also cash to current

assets ratio.

Company can utilize their assets properly.

Modernized equipments can purchase.

From current ratio, overall ratio was above the accepted norms of 0.5. so the

company has to reduce the overall ratio avoid the unnecessary cash kept in ideal.

Company can properly maintain their debtors to sales turnover ratio.

A Working capital ratio has been maintained below the norms.

CHAPTER VII

CONCUSION

The project report is the apex of the master of business administration course

conducted by the Pondicherry University. The study is conducted at Cooper Bussman

India Private Limited, Setharapet with the title of a study on working capital

management. This study was conducted mainly with help of secondary data obtained

from the unit.

The company should use the minimum investment in inventory to organized it

profitability. Whether the company may invest large size of inventory to the concern.

The efficient and production levels are decreased. So the concern should maintain the

maximum investment in inventory. The company able to achieve the working capital

management objectives in proper way.

CHAPTER VIII

8.1 SCOPE OF THE STUDY

The scope of the present study on composes within its fold a theoretical frame

work of working capital management. In general, analysis of working capital trends,

relationship of working capital to sales, liquidity of working capital, analysis of

management of components of working capital and the management of working capital

finance in the select unit. The period covered by the study in five years from 2000 to

2004.

8.2 LIMITATIONS OF THE STUDY

An account of Shortage of time, money and energy this is confined only to

Cooper Bussmann India Private Limited.

Some data’s are not given because of confidential.

Due to lack of practical knowledge, I am unable to research in an in depth

manner.

BIBILIOGRAPHY

Management accounting - S.N.MAHESHWARY

Financial management - I.M.PANDEY

Research methodology - C.R.KOTHARY

Management accounting - R.S.N.PILLAI

&

BAGAVATHI

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