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INTRODUCTION
Finance is a scare resource and it to be managed efficiently for the successful functioning of an
enterprise. Inefficient financial management has resulted in failure of many businesses
organization. Irrespective of any in difference in structure ownership and size, the finance
organizations of enterprise caught to be capable of ensuring that the various finance functions
planning and controlling are carried out at the highest degree of efficiency.
It is the lifeblood of every business activity without which the wheels of modern business
organizations system cannot be greased. Thus the finance function assumes an important
role in affairs of business management. The profitability and suitability of the business depends
upon the manner how finance and the function are performed and related with other business
functions.
Finance has to be systematically controlled and regulated so that it may be contribute to
different functions of business administration such as purchasing production and marketing. It
is difficult to aggregate the finance functions from that of general business management. Simply
finance intertwined with every business functions.
Before the turn of the present century finance was studies as part of economics. It was onlybusiness of the present century that corporation finance evolved as a separate subject with special
emphasis on the study capital market. The term corporate finance was used to describe what is
known in the academic world as financial management.
AN OVER VIEW OF WORKING CAPITAL
Now-a-days management of Working Capital has to be recognized as one of the basic future of
financial management, for successful conduct of business activities.
Working Capital management has become more and more important due to already shift towards
closer internal financial control. The main objective of working capital management thus, us to
ensure smooth functioning of the business and to gets timely funds sufficiently. In the opinion of
Zenoff and Zwick, Proper management of Working Capital is very important for the
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success of an enterprise. It aims at protecting the purchasing power of asset and maximizing the
return on investment .
The effective management of working capital involves the balancing of current assets and
current liabilities in order ensure a reasonable margin of safety. In other words it is to manage
each of the firm's current assets and current liabilities in such away that an acceptable level of net
working capital is maintained.
Working Capital management has been looked upon as the driving seat of financial manger.
Constant Management is required to maintain appropriate levels in the various working capital
accounts. The importance that has been a given in economically advanced countries, was not
seriously considered and applied to many of the industries in India
Working Capital management has assumed great importance in recent times due to the
professionalism that has been brought into organization , in financial management of the
business enterprises. The theoretical frame of working capital management and its application in
the selected sugar factories is the subject matter of this chapter.
DEFINITION OF WORKING CAPITAL
Working Capital sometimes called as Net Working Capital is represented by the excess of
current assets over the current liabilities and identified the relatively liquid portion to total
enterprise capital which constitutes a margin of buffer for maturing obligations within the
ordinary operating cycle of the business.
'Working Capital is a excess of current assets over current liabilities'
Like the broader concept to capital there is no universally accepted definition for Working
Capital.
The following are some definitions of this group:
Working Capital means Current Assets
-MEAD, BAKER, MALOTT-
The sum of the Current Assets in the Working Capital of a Business.
-J.S.MILL-
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Any acquisition of funds of which increase the Current Assets increase Working Capital also,
for the are one and the same
-BONNEVILE-
Working Capital refers to a firm's investment in short-term Assets like cash, short term
securities, Account receivables and inventories.
-WESTON&BRIGHAM-
In the Narrow sense, the working capital id regarded as the Excess of Current assets over
current liabilities. This is the definition used by most financial experts and authors rephrasing
the accounting phase of finance.
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OBJECTIVES OF THE STUDY
In this chapter, objectives of the study and methodology employed are discusses in following
paragraph the methodology includes various items like sources of data, methods of data
collection significance of the study and limitations of the study.
To study the existing system of the working capital management in IOCL
To examine the feasibility of present system of managing working capital in most
effective manner.
The analyze the financial performance of the company using working capital
To give some pertinent suggestion to the management of IOCL about the working capital
management.
NEED FOR THE STUDY
The most important functions of the business firm are production, marketing finance. It is
very difficult to separate finance functions from production, marketing and other functions. The
functions of raising funds, investing them in assets and distributing returns earned from assets to
share holders are respectively known as financing, investing and dividend decisions. In doing
so, a firm attempts to balance cash inflow and outflows. Finance function call for skillful
planning control and execution of firm's activities.
Hence, the study is taken to analyze the firm's activities through Working Capital
Management.
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LIMITATIONS OF THE STUDY
Every study is conducted under some limitations. This study is not exception the main
limitations are.
The study is conducted by a student of K.U University for the purpose of fulfillment of
the condition stipulated by the University for the Completion the course. So the study
may not fulfill all the requirement of a detail investigation.
This is a study conducted with in a period of Severn weeks in total.
During this limited period of the study. It may not be a detailed, full-fledged and
utilitarian in all respects.
The study was conducted with the data available and the analysis was made accordingly.
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METHODOLOGY OF THE STUDY
The following methodology has been used to the carryout the present study "Working Capital
Management in IOCL". To carry out the present study, both primary and secondary data have
been used. Primary data have been collected from officers and staff of finance and accounts
department of IOCL.
Secondary data on the other hand form the printed material of the company balance sheets and
profits and loss account of the year from 2006-2010 of IOCL, cashbooks, debtors ledgers and
stock registers, annual reports. Article from the journal "The Management Accounting book",
text books etc.
RESEARCH METHODOLOGY
Data collection:
The methodology of the study interrelations is to understand the procedural aspects of
INDIAN OIL CORPORATION LTD and than to proceed with analysis of the financial
performance.
Primary Data:
Personal Interview was held with key personnel of finance department.
Secondary Data:
Published annual reports for 5 years (2005-06 to 2009-10).
Web Site www. IOCL.com . Newspapers like Ennadu, The Hindu Etc.
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RESEARCH TOOLS:
1. Statement of changes in working capital.
2. Trend Analysis.
A) Capital trend.
B) Sales trend.
C) PBT trend.
D) PAT trend.
3. Ratio Analysis.
A) Liquidity Ratios
B) Activity Ratios
C) Assets Turnover Ratios.
METHODOLOGY
The methodology to be followed here is -
Preparation of numeric data tables with data of accounting year wise factors of ratios with
calculated ratios.
Graphical presentation of the ratios indicating changes.
Interpretation with the help of numeric and graphical presentation.
Opinion based on result on result of the analysis with conclusion.
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Company Profile
Indian Oil Corporation Limited
Indian Oil Corporation Ltd. (IndianOil) is the largest commercial enterprise in
India, and the only Indian presence in the Fortune magazines global 500 listing
of the worlds largest corporations, with a ranking of 226 for fiscal 2001. In the
Forbes International 500 list of the largest companies outside US, IndianOil is
ranked 112 and tops the four Indian companies in the listing. In addition to being
the largest national oil company in the Asia Pacific region, IndianOil has also been
ranked First in Petroleum Trading among the 15 national oil companies in the
region in the 2001 Industry Perception Survey conducted by Applied Trading
Systems, Singapore. Indian Refineries Ltd. And Indian Oil Company Ltd. were set
up in 1958 and 1959 respectively, to build national competence in the oil refining
and marketing business. On 1st September 1964, these two companies were
merged to form Indian Oil Corporation Ltd. IndianOil owns and operates seven ofthe countrys 18 refineries, at Digboi, Panipat, with a combined capacity of 38.15
million metric tones per annum (MMTPA). A new MMTPA grassroots refinery is
being set up at Paradip in Orissa. In addition, IndianOil has two subsidiary
companies, Chennai Petroleum Corporation Ltd. And Bongaigaon Refinery and
Petrochemicals Ltd., with a combined refining capacity of 9.35 MMTPA, thereby
raising its total refining capacity to 47.50 MMTPA, the highest in the country
today. IndianOil has the countrys largest network to crude and product pipelines,
with a combined length of 6,523 km and a capacity of 43.45 MMTPA. With sales
of 47.17 million metric tones in 2001-02, IndianOil holds over 53% of the
petroleum products market share in India.
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Its extensive network of over 22,000 sales points is backed for supplies by 182
bulk storage points and 78 Indane bottling plants. 92 Aviation Fuel Stations cater
to the Aviation Industry, defence as well as civil.
IBP Co. Limited, a stand-alone marketing company and a subsidiary of IndianOil,
has a nationwide network of over 1,550 retail outlets.
IndianOils Research and Development Centre has been engaged in world-class
research in tribology (lubricants formulation), refinery processes and pipeline
transportation. The Centre has developed over 2000 lubricant and grease
formulations, and obtained approvals of original equipment manufactures in Indiaand abroad.
A wholly owned subsidiary, Indian Oil blending Ltd., manufactures over 450
grades of the countrys leading R brand of lubricants and greases. In pursuit of its
Vision of becoming a major, diversified, transnational, integrated energy
company, with national leadership and a strong environment conscience, playing a
national role in oil security and public distribution, IndianOil is proactively
identifying and developing business opportunities in Exploration & Production
(E&P), Gas and Gas-to-Liquid, Petrochemicals, Power, Information Technology &
Communications, Collaborative R&D, Exports, Shipping, Training & Consultancy,
Engineering & Construction, and Transnational Operations. Twelve joint Ventures
are now operational in partnership with some of the leading international and
Indian companies;
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Avi-Oil (India) Pvt. Ltd. With NYCOSA, France, and Balmer Lawrie & Co.
for manufacturing and marketing Defence and civil aviation lubricants and
specialties.
The cover depicts a bird, symbolizing IndianOil, breaking through barriers
to seek new horizons.
It is a quest marked by immense possibilities a quest for progress through
pursuit of new opportunities.
The colour blue signifies the vast expanse of a new world, and is a tangible
expression of widening horizons.
Indian Oiltanking Ltd., with Oiltanking (India) GmbH, Germany, for
infrastructure development and terminalling services.
Petronet India Ltd. (PIL), a consortium of oil companies and financial
institutions, for petroleum product pipeline projects.
Petronet Vadinar-Kandla Ltd., as a subsidiary of PIL, for Vadinar-Kandla
product pipeline.
Petronet Chennai-Trichy-Madurai Ltd., also as a subsidiary of PIL, for
Chennai-Trichy-Madurai product pipeline.
IndianOil is marketing diesel fuel additives for automobiles in collaboration with
Elf Antar, France.
IndianOil Air BP are collaborating in aviation fueling business.
IndianOils investments in creation of assets will exceed Rs. 40,000/- Crore over
the decade beginning 1997. These investments, substantially funded from internal
resources, will result in expansion and modernisation of existing capacities, as well
as creation of state-of-the-art facilities.
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IndianOil is an academy company with 18training centers. The IndianOil
Institute of Petroleum Management (IIPM), Gurgaon, serves as an apex training
and consultancy institute and conducts management development programmes in
association with reputed national and international institutes.
IndianOil Management Centre for Learning (IMCL) recently set up in Mumbai
will facilitate in upgrading the functional knowledge and skills of the employees
and also impart behavioural training.
For the past two decades, IndianOil has been lending its expertise to several
countries in areas of refining, marketing, transportation, training and R&D. Theseinclude Sri Lanka, Kuwait, Bahrain, Iraq, AbuDhabi, Tanzania, Ethiopias, Algeria,
Nigeria, Nepal, Bhutan, Maldives, Malaysia and Zambia.
IndianOils commitment to quality, safety, health and environment is reflected in
the series of national and international certifications and awards earned over the
years.
The 17th largest petroleum company in the world, IndianOil, is now emerging as a
transnational energy conglomerate. From the icy slopes of Leh in the Himalayas to
Kanyakumari where the Bays of Bengal and the Arabian Sea join the Indian
Ocean, and from the Single Buoy Mooring at Salaya in the West to the
Monasteries at Tawang in the East, IndianOil lives in every heart and in every part
of India.
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GLOBAL RANKING
Indian Oil Corporation maintained its position as the sole Indian presence in the
Fortune Global 500 listing of the worlds largest corporations for the eighth year
in succession. In the latest ranking released by the Fortune magazine for the year
2001, Indian Oil Corporation is ranked 226 against the ranking of 209 last year.
The lower ranking is mainly due to the diminished value of Rupee as compared to
the US $ by 5.65% for the period under review. As per the Fortune listing, amongst
the 269 largest petroleum-refining companies in the world, IndianOil is ranked 17,
a step above last years position of 18.
In the list of Forbes International 500 Companies outside the US, IndianOil
retains its last year ranking of 112, and tops the list among the four Indian
corporates appearing in the listing.
In addition to the Fortune and Forbes rankings, Indian Oil Corporation has been
ranked First in Petroleum Trading among the 15 National Oil Companies in the
Asia Pacific Region in the 2001 Industry Perception Survey conducted by Applied
Trading Systems, Singapore.
FINANCIAL REVIEW
TURNOVER
The turnover of Indian Oil Corporation for the year ended 31.03.2002 was Rs.
114,864 Crore as compared to Rs. 117,371 Crore in the previous year. The
reduction in turnover is mainly on account of reduced sale of crude and product to
other Oil Marketing Companies.
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Further, the inland sales volume reduced by 0.63 million metric tones, from 47.80
million metric tones in 2000-01 to 47.17 million metric tones during 2001-02,
registering a decline of 1.32%. The reduction in sales is mainly due to lower off-
take of HSD, SKO and Naptha consequent to slow down of economy.
PROFIT BEFORE TAX
The Corporation recorded the highest ever Profit Before Tax of Rs. 4,599 Crore
during the current year as against Rs. 2,962 Crore in 2000-01, registering a growth
of 55%. The increase in Profit Before Tax is mainly on account of settlement of
Pool claims pertaining to previous year.
PROVISION FOR TAXATION
a) Current Tax
An amount of Rs. 977 Crore has been provided towards Current Tax considering
the applicable Income Tax rates, as against Rs. 242 Crore provided during 2000-
01. The effective tax rate for the current financial year works out to 21.68% as
against 8.18% in 2000-01. The increase in effective tax rate is due to provision of
tax during the current year at normal rates of tax due to higher profits as compared
to provision at MAT (Minimum Alternative Tax) rate in the previous year.
b) Deferred Tax
In compliance of Accounting Standard-22 on Accounting for Taxes on Income
issued by The Institute of Chartered Accountants of India, the Corporation has
(i) Provided accumulated Deferred Tax Liability as on 01.04.2001 amounting to
Rs. 2,688 Crore with a corresponding charge to General Reserve having no impact
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on current year profits.
(ii) Provided Deferred Tax Liability for financial year ended 31.03.2002
amounting to Rs. 717 Crore and accordingly Profit has been reduced by the same
amount.
PROFIT AFTER TAX
Profit After Tax has improved from Rs. 2,720 Crore in 2000-01 to Rs. 2,885 Crore
during current financial year, registering a growth of 6%.
DEPRECIATION
Consequent to increased capitalization of fixed assets, deprecation for the year
2001-02 was Rs. 1,392 Crore as against Rs. 1,224 Crore for the year 2001-02.
INTEREST (NET)
Interest Expenditure (net) decreased from Rs. 1,174 Crore during 2000-01 to Rs.
882 Crore for the current year. The decrease is mainly due to reduction in short
term loans and decrease in overall cost of borrowings.
BORROWINGS
The borrowings of the Indian Oil Corporation have also reduced from Rs. 20,636
Crore as on 31.03.2001 to Rs. 19,070 Crore as on 31.03.2002. The Total Debt to
Equity ratio as on 31.03.2002 works out to 1.25:1 as against 1.29:1 as on
31.03.2001 and long Term Debt to Equity ratio stands at 0048:1 as on 31.03.2002
as against.0.40:1 as on 31.03.2001.
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Outlets and 19 SKO / LDO Dealerships during the year, raising their total number
to 7,870 and 3,455 respectively. This includes 80 jubilee Retail Outlets.
CUSTOMER SERVICE
In Indian Oil Corporations pursuit to provide better services, IVSR based
complaint tracking and redressal system for customers was launched in 33 Indane
Area Offices. Further, in order to provide value added services to monitoring
public, Indian Oil Corporation, in association with State Bank of India, launched
the SBI-Indian Oil Co-branded pre-paid card called Smart Gold for customers to
avail of products and services at IndianOil retail outlets. Indian Oil Corporationintroduced 35 ATMs at retail outlets during the year in various parts of the country,
thereby bringing the total number of ATMs installed to 57. The IndianOil-
Citibank co-branded credit card has reached a membership of 1.48 lakh as on
31.03.2002.
Indian Oil Corporation, in association with Chennai based Sundaram Finance ltd.,
also launched Power Plus Fleet Card for transport fleet operators.
INDANE COOKING GAS
During the year, Indian Oil Corporation enrolled 26 lakh Indane customers, and the
cumulative Indane consumer population reached 322 lakh.
The number of Indane distributorships commissioned during the year was 457
raising the total number of distributors to 3,881. During the year, seven new Indane
Bottling Plants were commissioned, thus raising the total number of Indane
Bottling Plants to 78 and the total bottling capacity to 32.21 metric tones per
annum.
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AVIATION
Indian Oil Corporation continued to be market leader in Aviation Fuel supply
business with a market share of 67.9%. The entire Aviation Fuel requirements of
Indian Navy and Indian Army, and over 87% requirement of Indian Air Force was
met by IOCL. The major requirements of other market segments like Indian
Airlines were catered to by Indian Oil Corporation. IOCL commissioned a state-of-
the-art Hydrant Refuelling System at Netaji Subhas Chandra Bose Airport in
Kolkata during the year for use of Industry. As part of customer service initiatives
Indian Oil Corporation has developed a user-friendly IndianOil Aviation web pageon Internet, providing information on ruling prices, service network, aviation
highlights, and information on products available location-wise.
Indian Oil Corporation organized the 11th International Aviation Conference at
Hyderabad, which was attended by representative of major international airlines,
IATA, aviation equipment manufactures and Government.
LUBRICANTS
Indian Oil Corporation produced 3.96 lakh metric tones of lubes and 0.13 lakh
tonne of grease during the year. In spite of depressed market conditions, Indian Oil
Corporation improved its market share in finished lubricants. 36 R bazaar-on-
wheels were added to penetrate the bazaar trade. 24 R stockists (auto) and 11 R
stockists (industrial) were commissioned during the year to give a thrust to
lubricant sales. During the year, R lubricants were launched in Bangladesh and Sri
Lanka.
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SPECIALITIES
Indian Oil Corporation introduced four new products, viz., Needle Coke (Guwahati
Refinery), Microcrystalline Wax (Haldia Refinery), and Polymer Grade Hexane
and Butene-2 (Gujarat Refinery) in the market as import substitutes.
SHIPPING
149 product import tankers, 11 product tankers and 444 crude import tankers were
handled during the year.
QUALITY ASSURANCE
IOCL consistently accorded top priority on Quality Assurance for its products and
services. IndianOil continues to be the market leader for testing petroleums
products by providing the largest network of testing facilities. More than 2 lakh
samples were tested in its 37 laboratories located across the country. During the
year, a mobile laboratory was added at Patna, taking the number of mobilelaboratories to 23. Laboratory Information Management System was successfully
commissioned in a few IndianOil laboratories with the Laboratory Documentation
and Management System software developed by the Quality Control Department
of Marketing Division.
INTERNATIONAL TRADE
Indian Oil Corporation arranged import of crude oil, petroleum products and
lubricants for meeting the countrys requirements through a carefully selected
diversified mix of supply sources and also exported petroleum products during
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2001-02 as detailed hereunder:
Quantity(MMT) Value (Rs. Crore)Imports
Crude Oil - 47.98 38,910.15
Petroleum Products, including for
Nepal Oil Corporation 2.282,506.80
Lube Base Oils / Lubricants / Additives 0.02 51.30
Exports
Petroleum Products 0.21 203.41
Lubricants 1,382 MT 4.28
Bitumen 2,574 MT 2.09
RESEARCH & DEVELOPMENT
During 2001-02, Indian Oil Corporations R&D Centre focused on
commercializations of already developed technologies, development of innovative
and cost-effective technologies with reduced gestation period, and specialized
technical services to operating divisions of the Corporation. During 2001-02,
IndianOils R&D Centre developed 80 formulations, which include 42 new
product formulations: 32 product formulations got approval from various national
and international original equipment manufacturers and 14 products got American
Petroleum Institute (API) certification while field trials on 12 new products were
conducted. Intellectual Property Rights activities of the R&D Centre led to grant of19 patents, including 10 Indian, seven US, One Canadian and one European. 11
new patents were field, which include four in India, three in US and one each in
Europe, China and Brazil.
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The efforts of the R&D Centre in proprietary additive development resulted in the
synthesis of an EP Additive and Friction Modifier and its production on
commercial scale at Taloja Additive Complex in Maharashtra. The Oilivorous-S
Technology developed jointly with Tata Energy Research Institute for safe
disposal of oil sludge has been put on field trial at Barauni and Mathura refineries.
A multi-functional additive for MS was developed for improving the quality of
fuel. Another breakthrough was the development of a process to improve
deodorisation and dry point of MTO at Panipat Refinery. As further advancement
in Bitumen technology, a high performance binder known as Crumb RubberModified Bitumen was developed and commercialized.
In refining technology, technologies developed earlier have moved up on the
commercialization process chain during the year. These include INDALIN Process
for conversion of olefinic petroleum fractions into LPG and aromatics, LOTUS-24,
which is under field trial at Mathura Refinery, and IMAX Additive for
maximization of LPG yield, plant trial for which has been completed at Gujarat
Refinery. Other breakthroughs include development of LPG-MAX, a new process
for LPG maximization and continuous film contractor based process for removal of
Mercaptan from LPG.
The Instrumented Pig developed jointly by R&D Centre and Bhaba Atomic
Research Centre, Mumbai, has completed field trials and is ready for
commercialization.
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INFORMATION SYSTEMS
Indian Oil Corporation aims at maintaining its leadership in the Indian
hydrocarbon industry by assimilation of emerging Information Technology and
web-enabled business solutions for integrating and optimizing the Corporations
hydrocarbon supply chain. Indian Oil Corporation is focusing on total customer
delight through value-added IT solutions, with emphasis on centralized control and
decentralized response.
PROJECT MANTHAN
As part of the on-going ERP (Enterprise Resource Planning) implementation
across the corporation under Project Manthan, 12 units have gone live on the latest,
state-of-the-art SAP r/3 software system on New Year Day (01.01.2002) and three
more on 01.07.2002, without any disruption in operations at any of the units.
Earlier, Indian Oil Corporations R&D Centre at Faridabad became the maiden
unit to Golive on SAP in August 2001, followed by IndianOil Institute of
Petroleum Management (IIPM) at Gurgaon in October 2001.
The laboratory Information Management System package was also implemented
at Panipat Refinery in March 2001 and at R&D Centre in August 2001.
A-30 A-31 Construction of the Data Communication Centre, the electronic and
communication hub of the project, at IIPM campus is in progress. It will not only
host SAP Production System (including Database Servers, Application Servers and
Storage Libraries) but also form the nucleus of a wide Area Network linking all
locations of Indian Oil Corporation through an extensive and robust
communication network using V-SATs, leased lines, ISDN / PSTN dial-up lines,
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radio / wireless links and the Optical Fibre Cable communication system of
Pipelines Division.
Project Manthan is also in an advanced stage of customizing Add-On software
packages in core business areas like demand forecasting; crude allocation to
refineries, distribution planning for finished products; transportation scheduling;
optimizing refinery operations and product mix solutions; and planning; optimizing
and scheduling of the Corporations profitable lubricants business.
HUMAN RESOURCES
EMPLOYEE PROFILE
The human resources in Indian Oil Corporation was 31,675 strong as on
31.03.2002, of which 9,728 are in the Officers cadre and 21,947 are in the Staff
cadre. There are 5,672 employees from SC category and 2,097 from ST category.
The SC and ST employees constitute 24.53% of the total employees strength.
There are 2,387 women employees, out of whom 692 are in the Officers carde and
1,695 in Staff cadre. The women employees constitute 7.54% of total employees
strength.
WELFARE OF EMPLOYEES
IndianOil Corporation continued its endeavour to upgrade facilities and promote
the welfare of employees. With a view to promote employees welfare, Indian Oil
Corporation brought about improvements in policies concerning medical facilities,
allowances at remote locations, Productivity Incentive Scheme and post-retirement
medical facilities.
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WELFARE OF WEAKER SECTIONS
Indian Oil Corporation has been diligently following the Presidential Directives
and various instructions / guidelines issued by the Government of India regarding
reservation in Services for SCs / STs/ OBCs/ Physically Handicapped/ Ex-
servicemen, etc. Sincere efforts have been made to recruit reserved category
candidates as per the Governments instructions. It has been the endeavour of your
Corporation to utilise 25% of Community Development Funds towards Special
Component Plan (SCP) and Tribal Sub Plan (TSP) for meeting the needs of weaker
sections. Status on Implementation of Disabilities Act, 1995 Before the enactmentof the Act, Indian Oil Corporation had been extending reservation for physically
handicapped persons in recruitment to the posts in Group C & D. With the
enactment of the act, w.e.f. 07.02.1996, the reservation for physically handicapped
persons has been extended to the posts in Group A & B as well. Indian Oil
Corporation has been implementing the provision of 3% reservations for physically
handicapped and disabled persons in letter and spirit. Besides, various concessions
and relaxataions are being extended to physically handicapped persons in
recruitment. Presidential Directives regarding Representation of SCs and STs
Officials dealing with the subject are given training as required so as to enable
them to update their knowledge on the subject and perform their job effectively.
Liaison Officers have been appointed at various locations/ units/ installations all
over the country to ensure implementation of Government Directives.
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In accordance with para-29 of the Draft Presidential Directives, a note about the
Corporations activities having direct relevance to advancement of SC / ST
category of employees along with statistics relating to presentation of SCs / STs, in
the prescribed proformae Appendices VII(A) and VII(B) is placed as
Annexure-2. In accordance with the revised instructions of the Government of
India.
THE INDIAN OIL FOUNDATION
As part of the Corporate Mission to help enrich the quality of life of the
community and preserve ecological balance and heritage, Indian Oil
Corporation has set up The IndianOil Foundation as a non-profit Trust to protect,
preserve and promote our national heritage and culture, in collaboration with the
Archaeological Survey of India and the National Culture Fund of the Ministry of
Culture.
The Indian Oil Foundation will adopt at least one heritage site in every State and
Union Territory. Archaeological works will be funded by the IndianOil Foundation
to the Archaeological Survey of India through the National Culture Fund. Five
prestigious sites have been identified, viz., Qutb Minar, Delhi; Khajuraho, Madhya
Pradesh; Hampi, Karnataka; Kanheri Caves, Maharashtra; and Konarak, Orissa.
The IndianOil Foundation will develop world-class facilities and conveniences for
visitors. Indian Oil Corporation will provide refueling facilities for travelers and
also undertake community development in the neighborhood.
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IOBL earned a Net Profit of Rs. 6.86 Crore and declared a Dividend of 30% for the
year 2001-02. The production for the year 2001-02 was 226 TMT, attaining a
capacity utilization of 95%.
CHENNAI PETROLEUM CORPN. LTD.
The annual Accounts and Directors Report of Chennai Petroleum Corporation
Ltd. (CPCL), a subsidiary of the Corporation, are annexed. CPCL earned a Net
Profit of Rs. 63.71 Crore on a Turnover of Rs. 6,175 Crore and declared a
Dividend of 20% for the year 2001-02.
BONGAIGAON REFINERY & PETROCHEM
The Annual Accounts and Inrectors Report of Bongaigaon Refinery &
Petrochemicals Ltd. (BRPL), a subsidiary of the Corporation, are annexed. BRPL
incurred a loss of Rs. 198.61 Crore on a Turnover of Rs. 1,195 Crore during the
year 2001-02.
IBP Co. LIMITED
The Annual Accounts and Directors Report of IBP Co. Limited, a subsidiary of
the Corporation, are annexured. IBP Co. Limited earned a Net Profit of Rs. 195.79
Crore on a turnover of Rs. 8,453 Crore and declared a Dividend of 100% for the
year 2001-02
.
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CONCPTUAL FRAMEWORK OF WORKING CAPITAL:
Working Capital sometimes called as Net Working Capital is represented by the excess of
current assets over the current liabilities and identified the relatively liquid portion to total
enterprise capital which constitutes a margin of buffer for maturing obligations within the
ordinary operating cycle of the business.
'Working Capital is a excess of current assets over current liabilities'.
CONCEPT OF WORKIGN CAPITAL:
There are two concepts of working capital such as
Gross Concept
Net Concept
GROSS WORKING CAPITAL: (GWC)
The gross working capital simply called as working capital, refers to the firm's investment
in current assets. Current assets are the assets which can be converted into cash within an
accounting year (or operating cycle) and include cash, short-term securities, debtors, bills
receivables, inventories and prepaid expenses.
Gross Working Capital = Total of Current Assets
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WORKING CAPITAL:
The term working capital refers to the capital required for day to day
operations of a business enterprise. It is represented by excess of current assets,
over Current liabilities. It is necessary for any organization to run successfully its
affairs ,to provide for adequate working capital.
ADVANTAGES OF ADEQUATE WORKING CAPITAL
Working capital is the lifeblood and nerve center of business. Just as
circulations of blood is essential in the human body for maintaining life,working
capital is very essential to maintain the smooth running of abusiness. No business
can run successfully without an adequate amount of working capital. The main
advantages of maintaining adequateamount of working capital are as follows:
1. Solvency of the business: Adequate working capital helps inmaintaining
solvency of the business by providing uninterrupted flow of production.
2. Goodwill: sufficient working capital enables a business concern to Make
prompt payments and hence helps in creating and maintaining Goodwill.
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3. Easy loans: a concern hacking adequate working capital, high Solvency and
good credit standing can arrange loans from banks and others on easy and
favorable terms.
4. Cash Discounts: Adequate working capital also enables a concern to avail cash
discounts on the purchases and hence it reduces costs.
5. Regular payments: Regular payments of salaries, wages and other day- To-day
commitments company, which has sample working capital, can make regular
payment of salaries. Wages and other day-to-day commitments. Which raise the
morale of its employees, increase their Efficiency, reduce wastage's and costs and
enhances production and profits.
6. Regular supply of raw materials: Sufficient working capital ensures regular
supply of raw materials and continues production.
7. Ability to face Crisis: Adequate working capital enables a concern to face
business crisis in emergencies such depression because during such periods.
Generally, there is much pressure on working capital.
8. Quick and Regular return on Investments: Every investor wants a quick
and regular return on investments. Sufficient of working capital enables a
concern to pay quick and regular dividends to its investors, as their may not
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be much pressure to plough back profits. this gains the confidence of its
investors and creates a favorable market to raise additional funds in the
future.
9. High morale: Adequacy of working capital creates an environment of
security, confidence and high morale creates over all efficiency in a
business.
DISADVANTAGES OF EXCESSIVE WORKING CAPITAL:
Every business concern should have adequate working capital to run its
business operations. it should have neither redundant or excessive working capital
nor inadequate shortage of working capital. Both excessive as well as short
working capital positions are bad for any business.
1. Excessive working capital means idle funds which earn no profits for the
business and hence the business cannot earn a proper rate of return on its
investments.
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2.
3. When there is redudant working capital,it may lead to unnecessary
purchesing and accumulation of inventories casuing more chances of theft
waste and losses.
4. Excessive working capital implies excessive debtors and defective credit
policy, which may it may cause higher incidence of bad debts.
It may result into overall inefficiency in the organization.
When there is an excesses working capital relation with the banks
and other financial institutions may not be rnaintained.
Due to low rate of return on investments the value of shares may also fall.
DISADVANTAGES OF INADEQUATE WORKING CAPITAL
1. A concern, which has inadequate working capital, cannot pay its short term
liabilities in time. Thus it will loose its reputation and shall not be able to get
good credit facilities.
2. It cannot buy its requirements in bulk can cannot avail of discounts etc.
3. It becomes difficult for the firm to exploit favorable market conditions and
undertaken profitable due to lack of working capital.
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By neglecting this, many ventures run into financial difficulties in their early
operating years, the rather casual approach to assessment of working capital needs
during the periods when industry and business functioned in a sellers market could
be understand as at the banker was willing to absorb all shock of fluctuations in
project operations by providing ready funds to meet emergency needs. The
position has undergone radical change. The banker can no longer be taken for
granted and in the absence oil proper estimation of working capital needs, the
project may have to face serious financial problems.
2. Position of Business Cycle:
Movements of the business cycle bring about shifts in working capital
position. The upward wing is associated with spurt in sales and increase in levels
of inventories and book debts. There could be a cash shortage and borrowing may
become necessary. On he other hand, when there is a downswing, the level of
inventories and book debts may fall, but revenues also fall, while certain categories
of costs remain fixed and cash shortage right still be felt.
3. Nature of Business:
The nature of business has an important bearing on its working capital
needs, some ventures like retail stores, construction companies etc. require an
abundance of working capital.
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In other cases such as power generations and supply, the current assets playa minor
and secondary role.
4. The manufacturing cycle:
A longer manufacturing cycle between the raw material purchase and the
completion of he manufacturing process will obviously mean larger tie up of funds
to meet increased working capital needs. In such cases management should try to
increase the rate of production and reduce the cycle time and thus cut down
working capital requirement. This can be achieved through process changes or
through effective organization and coordination at all levels of enterprise activity.
Frequent changes in setups, waiting for materials, tools or instructions and
accumulations of working progress result in extending the time cycle and blocking
more funds. Organized negotiations with suppliers for attractive credit terms and
retention of their continued confidence by the settlement of bills on agreed dated
can also help reduce working capital requirements.
5. Credit Terms to Customers:
The credit terms to customers influence the working capital level by
determining the level of investment in book debts. Management has to decide on
suitable credit policy relevant to each customer based on the merits of his case.
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Unduly liable credit policies and permissive attitude in the matter of collections of
outstanding can lock up funds that would be other wise be available for operating
needs.
6. Vagaries in supply of Raw Materials:
The sources of certain raw materials are few and irregular and pore problems
in the matter of procurement and holding, using up more funds. Materials that are
available only in certain seasons have to be obtained and stored in advance. The
working capital requirements in such instances will show seasonal fluctuations.
7. Shifts in Demand for Products:
Some manufactured products are subject to seasonal fluctuations in sales. In
order to utilize the capacity to the maximum possible extent, steady production
may have to be maintained, through the demand for finished products may very
from time to time. Finished goods inventories will therefore accumulate during off
season, requiring increased amounts of working capital to support higher levels of
inventory. Financial planning will have to provide for these funds, requirements
associated with steady, production and seasonal sales.
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8. Production Polices:
To tackle the problem of having to find funds to support the increasing
finished goods inventory levels until they are sold during the peak seasons, some
companies diversify and produce other products that are in demand, enabling
manufacture of the main product to follow the seasonal pattern of its demand.
9. Competitive Conditions:
In a competitive market, winnings and maintaining customers goodwill will
involve additional costs and present a variety of working capital problems.
To offer the customer the benefit of choice, a variety of products will have to
be manufactured and stocked. This would mean higher levels of inventories in all
stages and, therefore, additional working capital funds. More generous credit
terms may have to be extended and the investments in accounts receivables may
have to be higher, requiring additional funds. The degree of completion is thus an
important factor influencing working capital requirements.
10. Growth and Expansion Programs:
As business grows, additional working capital has to be found. In fact, the
need for increased working capital does not follow the growth in business activity,
but preceded it.
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Advance planning of working capital is thus a continuing necessity for
Owning concern. Or else, the company may have substantial earnings but little
cash. With fast growth, they may be under constant pressure for raising external
funds in addition to the internal generation. Forward planning and continuous
review, therefore, are very essential for such companies.
11. Profit Levels:
By the very nature of things, some enterprises generate high margins
compared to others. The product category and the firms position in the market
may have given these advantages. Others have to struggle in a highly competitive
environment. But, profits cannot be considered as available cash at the end of the
period. Even as the companies operations are in progress, cash is used up for
augmenting stocks, book debts and fixed assets. Elaborate planning and
projections of expected activities and cash flows, at short intervals, assume
importance. To meet anticipated deficits, sources of funds will have to be
identified and where surpluses are expected, suitable applications will have to be
planned.
12. Taxation:
Tax liability is an inescapable element in working capital planning. It is a
short term liability payable in cash.
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Advance taxes may have to be remitted in installments, on the basis of estimated
profits. Periods of high taxation impose additional strain on working capital.
To able to get the best out of the available tax incentives, the finance manager has
to draw up the operating plans of the company in advance and utilize the resources
for research and development, exports or other purposes which promise tax
benefits and promote the companies earnings.
13. Dividend Policy:
Management has to preserve cash resources but at the same time, it a cannot
fail to satisfy investor expectations. Market prestige for the shares of the company
has also lobe nurtured and maintained in its long run interests. During periods of
low profits, maintenances of steady dividends will involve draining of resources
but may be needed to preserve the companies Image.
14. Reserves Policy:
One of the cherished goal of enterprise management is to build up adequate
reserves out of profits the urge to retain profits may act as a major constraint on the
dividend policy, the funds position being given higher priority over dividend
policy.
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15. Depreciation Policy:
Depreciation policy determines he amount to be provided as, depreciation on the
various categories of fixed assets. The depreciation charges do not involve any
cash outflow. Enhanced rated of depreciation have the effect of reducing profits
correspondingly, which in turn can help in holding back distribution of dividends.
This process conserves cash. Depreciation polices. Thus exert influence on the
status of working capital in the enterprises from time to time.
16. Price Level Changes:
Rapidly rising prices create the need for more funds for maintaining the
present volume of activity for same levels of inventories, higher cash outlays are
needed.
In an inflationary set up, even operating expenses will grow for given levels
of activity. Some companies may be able to compensate part of these cost
increases through increases in prices for their products.
The implications of changing price levels on working capital position will
vary from company to company depending on the nature of the company.
17. Operating Efficiency:
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WORKING CAPITAL MANAGEMENT:
Working capital management involves the relationship between 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 up coming operational
expenses.
The management of working capital involves managing inventories,
accounts receivable and payable and cash.
Why firms hold cash:
The finance profession recognizes the three primary reasons offered by
economist JOHN Maynard Keynes to explain why firms hold cash. The three
reasons are for the purpose of speculation, for the purpose of precaution, and for
making transactions. All three of these reasons from the need for companies to
process liquidity.
CONCEPTS OF WORKING CAPITAL:
There are two concepts of working capital:
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(i) Gross working capital
(ii) Net working capita
In the broad sense, the term working capital refers to the gross working
capital and represents the amount of funds invested in current assets. Current assets
are those assets, which in the ordinary course of business can be converted into
cash within a short period if normally one accounting year.
In a narrow sense, the term working capital refers to the net working capital.
Net working capital is the excess of current assets over current liabilities.
Net working capital may be positive or negative. When the current assets
exceed the current liabilities, the working capital is positive and the negative
working capital results when the current liabilities are more than the current assets.
The Gross working capital concept in financial or going concern concept
whereas net working capital is an accounting concept of working capital. These
two concepts of working capital are not exclusive; rather both have their own
merits.
Working Capital = Current Assets Current Liabilities
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Gross concept is very suitable to the company form of organization where
there is divorce between ownership, management and control. The net concept may
be suitable only for proprietary form of organization such as sole-trader or
partnership firms. However, it may be made clear that as per the general net
working capital is referred to simply as working capital.
TYPE OF WORKING CAPITAL
There are varying concepts or perceptions of working capital, which haverelevance to specific situations.
KINDS OF WORKING CAPITAL
WORKING CAPITAL
On the basis of Concept On the Basis of Time
Gross Net Permanent (or) Fixed Temporary(or)
Working Capital Working Capital working capitalvariable
Working capital
Regular ReserveWorking capital Working capital
Seasonal specialWorking Capital Working Capital
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1. GROSS WORKING CAPITAL:
Gross working capital is represents by the sum total of all current assets of
the enterprise. Enough funds will have to be provided to sustain the movement of
raw materials through the work.
But short term financing is more risky than long term financing. In process
to the finished goods stage and then to accounts receivables and up to the
realization of cash.
In other words, the funds needed would total up to the constituent
components, namely stock of raw materials and minimal cash and bank balances,
constituting working capital. In managing gross working capital, the shifts in
investment in current assets are under constant review, close attention and prompt
correction. Excessive investment in current assets is to be carefully avoided, as
otherwise profits would be adversely affected.
2. NET WORKING CAPITAL:
Net working capital is the difference between the current assets and current
liabilities. While current assets are short term assets that are expected to get
converted in to cash within one year, current liabilities are short term liabilities
that are expect to fall due or mature for payment in a short period, generally within
a year, and represent short term sources of funds. The concept of net working
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capital, as the excess of current assets over current liabilities, highlights the
character of he sources from which the funds have been obtained to support that
portion of current assets in excess of current liabilities. This part of working
capital may be provided by way of share capital, from internal source such as
reserves or plough back of profits or from external sources in the form of long-
term borrowings. There are two implications.
The management has to examine what proportion of the current assets has
to be financed by permanent capital and long-term borrowings. Then there is the
eagerness of short term creditors to verify whether the total current assets,
representing ultimate source of funds for the recovery of their dues, maintains a
convincing level above the total current liabilities or obligations. A judicious
policy of mixing long term and permanent as distinct from short term sources
should be formulate to finance investment in current assets.
3. PERMANENT WORKING CAPITAL:
In actual operation of typical going concern, the current assets and each
component of it, are subject to continuous and rapid pace of replacement. Over a
period of time, there is a constant or minimum level, below, which the total
investment in current assets does not fall.
This minimum level of current assets can be called as the hared core or fixed or
constant or permanent working capital and should normally be financed by long
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term debt and equity. Recognizing this, the matching principle of financing is
interpreted to indicate that the fixed assets and permanent working capital should
be financed by long term sources of funds and that the variable working capital
should be financed with sort term sources of funds.
4. VARIABLE WORKING CAPITAL:
Seasonal fluctuations in a business are a common features n many cases.
The amount of funds needed over and above the fixed working capital to take care
of such seasonal shifts constitutes the variable working capital. These are also
referred to as fluctuating temporary working capital and may be financed by short
term sources of appropriate amount and duration. In fact, in would be wise to
cover also a part of this seasonal requirement form long term sources, as insurance
against unexpected shifts in case flows.
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Cash flows in a cycle into, around and out of a business. It is the business's
lifeblood and every manager's primary task is to help keep it, flowing and to use
the cash flow to generate profits. If a business is operating profitably, then it
should, in theory, generate cash surpluses. If it doesn't generate surpluses, the
business will eventually run out or cash and expire.
The faster a business expands the more cash it will need for working capital
and investment. The cheapest and best sources of cash exist as working capital
right within business.
Good management of working capital will generate cash will help improve
profits and reduce risks. Bear in mind that the cost of providing credit to customers
and holding stocks can represent a substantial proportion of a firm's total profits.
There are two elements in the business cycle that absorb cash inventory
(stocks and work-in -progress) and Receivables (debtors owing you money).The
main sources of cash payables (your creditors) and Equity and Loans.
Each component of working capital (namely inventory, receivables and
payables) has to dimensions ....TIME.....And MONEY. When it comes to
managing working capital -TIME IS MONEY. If you can get money to move
faster around the cycle (e.g. collect monics due from debtors more quickly) or
reduce the amount of money tied up (e.g. reduce inventory levels relative to sales).
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If you... Then.....
Collect receivables (debtors)faster
Collect receivables (debtors)
shower
Get better credit (in term of
duration or amount) from suppliers
Shift inventory(stocks) faster
Move inventory (stocks)
slower
You release cash from thecycle
Your receivables soak up cash
You increase your cash
resources
You free up cash
You consume more cash
It can be tempting to pay cash, if available, for fixed assets e.g. computers ,
plants, vehicles etc. if you do pay cash, remember that this is now longer available
for working capital.Therfore,if cash is tight consider other ways of financing
capital investment-loans,equity,leasing etc. similarly, if you pay dividends or
increase drawings, these are cash outflows and, like water flowing down a
plughole, they remove liquidity from the business.
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More business fail for lack of cash than for want of profit. The third area in the
account receivable management is collection policies.
These policies cover two aspects.
. Degree of effect to collect overdue
. Type of collection effects
THE OPERATING CYCLE:
The operating cycle of the company can be said to cover distinct stage, each
stage requiring a level of supporting investment. The sum total of these stage-wise
investments will be the total amount of working capital required.
The operating cycle has four stages:
a. The raw materials and stores inventory stage.
b. The work-in-progress stage
c. The finished goods inventory stage
d. The book debts or accounts receivable stage.
The level of investments in raw materials and stores inventory can be
expressed in term of the number of days materials and stores consumption, on an
average, held in inventory. The work-in-progress can be stated as representing a
certain number of days have cost of production. The finished goods inventory can
be expressed an equivalent to a given number of days cost of sales, on an average.
The number of days purchases on an average, included in the trade creditors can
also be calculated form the companys data. The fact that the trade creditors
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The average inventory or accounts receivable level can be arrived at by
finding the mean between the opening and closing balances for the year. The
average consumption or output or cost of sakes or sales per day can be obtained by
dividing the respective annual figures by 365.
The total operating cycle time, expressed in number of days, can at best give
a very general idea of the time interval for initial cash outlay on purchases to get
converted into cash again after passing through production, sales and collection
processes. But, the information pertaining to each distinct stage of the operating
cycle, stated in number of days relevant activity, has considerable significance, in
that it can be used, directly or with modifications, in arriving at the money values
will represent the estimated working capital requirements. Such an estimate can
only indicate the magnitude of working capital needs, on an average. The short
run fluctuations attributable to seasonal and other factors and their impact on funds
requirements cannot be spelt out by the above blanket approach to assessment of
working capital needs. To get at these specifics, Short run forecasts and budgets
have to be resorted to involving more elaborate and searching exercises, on
accounting basis.
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One of the main tasks of financial management is to hold and maintain
adequate, but not excessive, cash position. Cash is an essential input companys
operations and as such it has to be available in sufficient does according to needs,
on accounting basis. Cash is also the major out put or result of the companys
operations and there is the need for effective plan to deploy this liquid resource to
utmost productive use.
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Table showing the working capital for the year 31-03-2005 to 31-03-2006
(Rs.in Lakhs)
Particulars YEAR Changes in working capital
Increase Decrease
2005 2006
Current Assets
Inventories
453.08
367.11
0.0085.97
Sundry Debtors 330.89 137.23 0.00 193.66
Cash and bank balances 1399.46 3191.94 1792.48 0.00
Loans and advances 325.45 305.52 0.00 19.93
Total current assets (A) 2508.88 4001.8
Liabilities and
provisions
Liabilities 297.53 692.77 0.00 395.27
Provisions 495.46 284.3 211.16 0.00
Total current liabilities (B) 792.99 977.07
Net working capital
Current assets(A) -current liabilities(B) 1715.89 3024.73
Increase in working capital 1308.84 1308.84
3024.73 3024.73 2003.64 2003.64
Inference:In 2005-06 the percentage of cash and bank balance had been the highest followed by
inventory, debtors, loans and advances, to the total current asset. In this annual the period of the
company raised more cash and bank balance than actually required. From this, we can know the
other current assets declaimed too least from the total study period.
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Table showing the working capital for the year 31-03-2006 to 31-03-2007
(Rs.in Lakhs)
Particulars
YEAR Changes in working capital
Increase Decrease
2006 2007
Current Assets
Inventories367.11 532.84
165.730.00
Sundry Debtors 137.23 387.17 249.46 0.00Cash and bank balances 3191.94 4615.58 1423.64 0.00
Loans and advances 305.52 371.36 65.84 0.00
Total current assets (A) 4001.8 5906.95 0.00
Liabilities and
provisions
Liabilities 692.77 279.29 413.48 0.00
Provisions 284.3 557.06 0.00 272.76
Total current liabilities (B) 977.07 836.35
Net working capital
Current assets(A) -current liabilities(B) 3024.73 5070.6
Increase in working capital 2045.87
5070.6 5070.6 2318.63 2318.63
Inference:In 2006-07 the percentage of cash and bank balance had been the highest followed by
inventory, debtors, loans and advances, to the total current asset. In this annual the period of the
company raised more cash and bank balance than actually required. In this annual the company
decrease the credit sales and increase cash and bank balances.
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Table showing the working capital for the year 31-03-2007 to 31-03-2008
(Rs.in Lakhs)
Particulars
YEAR Changes in working capital
Increase Decrease
2007 2008
Current Assets
Inventories
532.84
534.65
1.810.00
Sundry Debtors 387.17 386.24 0.00 0.93
Cash and bank balances 4615.58 4685.06 69.48 0.00
Loans and advances 371.36 486.61 115.25 0.00
Total current assets (A) 5906.95 6092.56 0.00Liabilities and
provisions
Liabilities 279.49 313.04 0.00 33.75
Provisions 557.06 394.54 162.52 0.00
Total current liabilities (B) 836.35 707.58
Net working capital
Current assets- current liabilities 5070.6 5384.98
Increase in working capital 314.38 314.38
5384.98 5384.98 349.06 349.06
Inference: In 2007-08 the percentage of cash and bank balance had been the highest followed by
inventory, debtors, loans and advances, to the total current asset. In this annual the period of thecompany raised more cash and bank balance than actually required. In this annual the company
decreases the credit sales and increase cash and bank balances.
Table showing the working capital for the year 31-03-2008 to 31-03-2009
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Table showing the working capital for the year 31-03-2009 to 31-03-2010
(Rs.in Lakhs)
Particulars
YEAR Changes in working capitalIncrease Decrease
2009 2010
Current Assets
Inventories
656.51
427.71
427.71
0.00
Sundry Debtors 495.42 291.28 291.28 0.00
Cash and bank balances 4830.46 5501.81 5501.81 0.00
Loans and advances 623.24 675.24 675.24 0.00
Total current assets (A) 6605.63 6896.04 6896.04 0.00Liabilities and
provisions
Liabilities 620.99 429.39 429.39 307.95
Provisions 219.49 305.80 305.80
Total current liabilities (B) 840.48 735.19 735.19
Net working capital
Current assets(A) -current liabilities(B) 5765.15 6160.85 6160.85
Increase in working capital 1533.01 380.17
6160.85 6160.85 6160.85 688.12
Inference:In 2009-10 the percentage of cash and bank balance had been the highest followed by
inventory, debtors, loans and advances, to the total current asset. In this annual the period of the
company raised more cash and bank balance than actually required. In this annual the companydecreases the credit sales and increase cash and bank balances.
FINDINGS
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SUGGESTIONS
It can be suggested that the large amount of current assets should be managed properly
As the cash and bank balance is heavy it can be suggested that they are to be utilized in
an effective manner.
Working capital in 2005-2006 was decreased but after that from 2009-10 it has been
increased tremendously. Keeping the funds ideally the company has not gone for
expansion and bought any fixed assets.
It is better to utilize funds by investing in fixed assets or going for expansion.
The company should effective measures for proper utilization of working capital, which
is more adequate to for diversification or expansion.
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BIBILOGRAPHY
K.ASWATHAPPA & K.SRIDHARA BHAT (1999). Production and operationsmanagement. Himalaya Public House, Mumbai.
I.M.PANDEY (1999), Financial Management Vikas Publishing House Pvt.Ltd. NewDelhi.
M Y KHAN & P K JAIN, Management Accounting. Tata MC Graw Hill PublishingCompany Limited, New Delhi.
R.K.SHARMA & SHASHIK GUPTA, Management Accounting Kalyani Publishing
www.spongeironindianlimited.com