project report on working capital of jisl

7/25/2019 Project Report on Working Capital of JISL

1/41

PROJECT REPORT

(Submitted for the Degree of B.COM Honours in Accounting !in"nce under the

#ni$ersit% of C"&cutt"'

Tit&e of the Proect

)OR*+,- CAP+TA MA,A-EME,T O! JA+, +RR+-AT+O, S/STEM TD

Submitted b%

,"me of the C"ndid"te0

Registr"tion ,o.0

Ro&& ,o.0

,"me of the Co&&ege0

Su1er$ised b%

,"me of the Su1er$isor0

,"me of the Co&&ege0

Month /e"r of Submission

!ebru"r%2 3456

Ac7no8&edgement


2/41

I have chosen the topic of Working Capital Management of Jain Irrigation System Ltd,

as my Entreprenership pro!ect" I have collected all the materials from varios #e$sites

related to my topic"

I am deeply gratefl to my spervisor, for all her gidance and help" I am also thankfl to

my parents and friends #ho helped me in framing the $ase of the pro!ect and gided me

in developing the infrastrctre of the pro!ect"

I am also very thankfl to the %niversity of Calctta fraternity for introdcing a system of

Entreprenership &ro!ect" 'his pro!ect has allo#ed me a practical e(posre in the society

and a $rief introdction in the day)to)day #orking of an *rgani+ation"

C O , T E , T S


3/41

P"rticu&"rs P"ge ,o.

5 +ntroduction

Working capital management -

.eed for #orking capital management -

/eterminants of #orking capital -)0

Introdction to the Company 1)2

3inancial 4ighlights 2)5

3 Conce1tu"& !r"me8or7

6esearch Methodology 78)7

9 An"&%sis "nd !indings

Working capital level 79)7:

Working capital trend analysis 7:)7-

Changes of #orking capital 7-)70

*perating cycle 70)71

Working capital leverage 71)72

)or7ing C"1it"& R"tio An"&%sis

Introdction 19

Efficiency 6atio 19-24

Li;idity 6atio 25-27

Working Capital Management Components 28-35

: Conc&usions "nd Recommend"tions 90)91

6 Bib&iogr"1h% 92

9


4/41

; Anne


5/41

7"Nature of business

Some $siness are sch, de to their very natre, that their re;irement of fi(ed capital is

more rather than #orking capital" 'hese $sinesses sell services and not the commodities

and that too on cash $asis" t if the $siness start gro#ing after certain limit, the #orking

capital re;irements may adversely affect $y the increasing si+e"

:"Business/ Trade Cycle

If the company is operating in the time of $oom, the #orking capital re;irement may $e

more as the company may like to increase the prodction and sales, to take the $enefit of

-


6/41

favora$le market" Similarly in the case of depression, #orking capital may $e high as the

sales in terms of vale and ;antity redces, there may $e nnecessary piling p of stock"

-" Operating Efficiency

If the $siness is carried on more efficiently, it can operate in profits #hich may redce

the strain on #orking capital? it may ensre proper tili+ation of e(isting resorces $y

eliminating the #aste and improved coordination etc"

+,TROD#CT+O, TO THE COMPA,/

5.:' CORPORATE H+STOR/ O! JA+, -RO#P

'he $eginning of the road to sccess@@@@@@@@@@

THE ROOTS

'he !orney of Jain Irrigation Systems Ltd" >egan in 7521 #hen their forefather left the

desert of 6a!asthan, their home state, in search of #ater and food, reached W

0


7/41

&lastic &ark, Jalgaon

In 7509, yong gradate, Shri" >havarlal Jain se to sell kerosene in pshcart" Bradally

on that he fonded $siness" It #as a family partnership firm #ith a Meager 1888)

rpees as capital #hich #as the accmlated savings of three Benerations" Soon

>havarlal Jain took the agencies for t#o #heelers, ato vehicles and atomo$ile

accessories #ere esta$lished in ;ick sccession"

THE STOR/ O! S#CCESS

Shri" >havarlal Jain #as inspired $y the ;ote


8/41

'his #as achieved throgh consistent high standard performance and personal $ehavior

on one hand and a strong sense of commitment for meeting targeted lmes and for

payment of de$ts in time on the other" 'he main contri$ting factors to#ards $ilding

these attitdes #ere their principles and this helped the company to come to $e

recogni+ed as repta$le, trst#orthy and prestigios hose"

'his $ackgrond helped #ell for an entry into the indstrial ventres"

5.6' !+,A,C+A H+-H+-HTS

7" Pioneers of Micro Irrigation Systems in India"

" 'he only manfactrer of complete drip irrigation systems in the 8or&d.

9" 'he &"rgest 1roducer of &lastic &ipes in India"

:" 'he on&% m"nuf"cturerprodcing #idest range of &lastic Sheets &C F &DCG nder

one roof"

-" .


9/41

78" JISL food di$ision has achieved certifications of HACCP2 S-! *OSHER"

77"


10/41

9"


11/41

6s" In millions, e(cept per share dataG

PART+C#ARS /e"r344@?54 /e"r 3454?55

Sales F *perating Income ::90"72 9:20:"99

Less=E(cise /ty 581"28G 00:":7G

*ther Income 1:"87 750"57

Less=*perating E(penses 99-57"7- 195:"0-

*perating profit &>/I'G 277": 188"72

Interest F finance charges 170"-: 759"57

/epreciation , amorti+ation, #ritten

off

7:88":5 770"0

&rofit $efore ta(ation &>'G :85:"7 9027"01

&rovision for ta(

) Crrent 770:":7 512"10

)/eferredassetsGlia$ility 90":7 :":

)Wealth >enefit 8" 8"

&rofit for the year &


12/41

)OR*+,- CAP+TA A,A/S+S A,D !+,D+,-S

9.5' )or7ing C"1it"& e$e&

ank>alance

2 7912 771 075 9-00 190 2157 :9127 92989

*ther


13/41

Loan F


14/41

T"b&e 9.3?)or7ing c"1it"& sie

6s" In LakhsG

/e"rs 3443?

49

3449?

4:

344:?

46

3446?

4;

344;?

4

344?

4>

344>?

4@

344@?

54

3454?55

,et ).C. 75: 757- 0828 :9092 :7879 2829: 251:2 7:8-20 72-299

).C. +ndices 788 52"5: 79:"2 :"02 77"70 :70"8 :0"85 19:"2- 5-0"2

0

20000

40000

60000

80000

100000

120000

140000

160000

180000

200000

Chart Title

Net Working Capital

Working Capital Indices

Amount

Observations & Inference

It #as o$served that in the year 88:)8- crrent assets increased $y arond 5 $t

crrent lia$ilities increased only $y 75, as a reslt, #orking capital increased $y 9-"

3rom 88- to 880, net #orking capital increased to 6s :90: million from 6s" 082

million, the increase in #orking capital is close to 01, #hile crrent assets increased $y

00 and crrent lia$ilities $y 0-"

7:


15/41

9.9' Ch"nges in )or7ing C"1it"&

3ollo#ing led to the changes in #orking capital)

7" Changes in sales and operating e(penses=)

'he changes in sales and operating e(penses may $e de to long rn trend of change,

cyclical changes in economy leading to ps and do#ns in $siness activity and changes

in seasonal sales"

" &olicy changes=)

'he second ma!or case of change in the level of #orking capital is $ecase of policy

changes initiated $y management"

9" 'echnological changes=)

'he third ma!or point is changes in technology $ecase change in technology leads to

more re;irement of #orking capital"

9.:' O1er"ting C%c&e

'he need of #orking capital arised de to the length of time $et#een a companyKs paying

for materials entering into stock and receiving the cash from sales of finished goods" 'his

time gap is called *perating Cycle or Working Capital Cycle" 'he operating cycle

analy+es the acconts receiva$le, inventory and acconts paya$le cycles in terms of days"

< sefl tool for managing #orking capital is the operating cycle"

7-


16/41


*perating cycle of JISL sho#s the nm$ers of days are decreasing in recent year" 'his

reflects the efficiency of management" /ays of operating cycle sho#s period of lack of

fnds in crrent assets"

9.6' )or7ing C"1it"& e$er"ge

'he term #orking capital leverage refers to the impact of level of #orking capital on

companyKs profita$ility" 'he #orking capital management shold improve the

prodctivity of investment in crrent assets and ltimately it #ill increase the retrn on

capital employed" Working capital leverage measres the responsiveness of 6etrn on

Capital Employed for changes in crrent assets"

Changes in 6*CE

Working Capital Leverage )))))))))))))))))))))))))))))))))))))))

Changes in Crrent


17/41

/e"r 3449?

4:

344:?

46

3446?

4;

344;?

4

344?

4>

344>?

4@

344@?

54

3454?

55

Ch"nges

in ROCE

90"22 8"20 8"1:- 9" 8"-5 7"8 7":- "87

Ch"nges

in C.A

-"59 2"29 0-"55 7"85 5"9- 9":- 9-"87 99"77

).C.

e$er"ge

s

;.33 4.3 4.455 5.@3 5.6; 3.:9 5.>6 3.6

0

10

20

30

40

50

60

70

% Canges in !"C#

% Canges in C$

W$C$ &e'erages


Working capital leverage of the company has decreased in the year 881 as compared to

the year 889)8:" In the year 88:)8- and 88-)80 the crrent assets has increased $y

high rate of 2 and 0- respectively" It adversely affects on 6*CE, #hich increased $y

only rate of 8"20 and 8"1: respectively, that reslted in psh do#n the #orking

capital leverage to 8"1 and 8"877 respectively"

71


18/41

)OR*+,- CAP+TA RAT+O A,A/S+S

:.5' +ntroduction

6atio analysis is the po#erfl tool of financial statements analysis" < ratio is defined as

the indicated ;otient of t#o mathematical e(pressions and as the relationship

$et#een t#o or more things" 'he a$solte figres reported in the financial statement do

not provide meaningfl nderstanding of the performance and financial position of the

firm" 6atio helps to smmarise large ;antities of financial data and to make ;alitative

!dgement of the firmKs financial performance" Working Capital ratios can $e classified

into=

7" Efficiency 6atio

" Li;idity 6atio

:.3' Efficienc% R"tio

7G Working Capital 'rnover 6atio

72


19/41

It signifies that for an amont of sales, a relative amont of #orking capital is needed" If

any increase in sales is contemplated #orking capital shold $e ade;ate and ths this

ratio helps management to maintain the ade;ate level of #orking capital"

Sales

Working Capital 'rover ratio )))))))))))))))))))))))))))))))))) .et Working Capital

T"b&e :.5 ? ).C Turno$er

P"rticu&"rs 3443?

49

3449?

4:

344:?

46

3446?

4;

344;?4 344?4> 344>?4@ 344@?54 3454?

S"&es 97:8 9507 08:27 2-587 782:2 7-7 0:72 ::907 9:20:

,et ).C 75: 7579 0827 :90:0 :7879 2829: 251:2 7:8-20 72-29

).C TOR 7"80 "80 "9 7"51 "5- 7"21 "5: 9"87 7"22

Chart .o" :"7

75


20/41

0

50000

100000

150000

200000

Chart Title

Net W$C

W$C ("!Axis Title


4igh #orking capital ratio indicates the capa$ility of the organisation to achieve

ma(imm sales #ith the minimm investment in #orking capital"

G Inventory 'rnover 6atio

Inventory trnover ratio indicates the efficiency of the firm in prodcing and selling itsprodcts"

Cost of goods sold

Inventory '*6 ))))))))))))))))))))))))))))))))

344>?4@ 344@?54 3454?

Cost of goods so&d 9118 98898 :0:58 0:-58 5258 78:-8 752088 195:0 99-5

A$er"ge +n$entor% 5712 78878 79799 70582 590 0-97 9-8: 950:- :-21

+n$entor% TOR "-5 9"88 9"-: 9"2 :"8- :"-: 0"77 0"57 1"99

8


21/41

Chart .o" :"

0

1

2

3

4

5

6

78

Chart Title

In'entor) ("!


It #as o$served that Inventory trnover ratio indicates ma(imm sales achieved #ith the

minimm investment in the inventory" 'he general rle, high inventory trnover is

desira$le $t high inventory trnover ratio may not necessary indicates the profita$le

sitation"

9G 6eceiva$le 'rnover 6atio

'he derivation of this ratio is made in follo#ing #ay=

Bross sales 6eceiva$le trnover ratio ))))))))))))))))))))))))))))))))))))))))


22/41

/e$tor trnover indicates the nm$er of times de$tors trnover each year"

Benerally the higher the vale of de$torKs trnover, the more is the management of credit"

90- days

/e$torKs trnover ratio ))))))))))))))))))))))))))))))))))))))))))

6eceiva$le trnover ratio

T"b&e :.9? C"&cu&"tion of Debtors turno$er r"tio

6s" In lakhsG

P"rticu&"rs 3443?

49

3449?

4:

344:?

46

3446?

4;

344;?4 344?4> 344>?4@ 344@?54 3454?55

-ross s"&es 97:78 :7108 090:8 5788 71:8 797-08 887-8 9:-028 9152-0

A$g.

Debtors

799-8 7:128 75-8 -918 90728 92-8 :-58 :20-: :5-28

Recei$"b&e

TOR

"9- "29 9"97 9"-5 9"- 9":: :"18 1"78 1"00

Chart .o" :"9


23/41


It #as o$served from receiva$le trnover ratio that receiva$les trned arond the sales

#ere less than : times" 'he actal collection period #as more than normal collection

period allo#ed to cstomer"

:G Crrent


24/41

T"b&e :.:?C"&cu&"tion of current "ssets turno$er r"tio

6s" In

lakhsG

P"rticu&"rs 3443?49 3449?4: 344:?46 3446?4; 344;?4 344?4> 344>?4@ 344@?54 3454

S"&es 97:88 95078 08:28 2-228 782:8 7988:8 88858 9:88:8 9-88

Assets 9:81- 9085- :0:02 11::- 20282 7:-078 71:050 ::77: 999:

Recei$"b&e

TOR

8"5 7"7 7"9 7"7 7"95 8"25 7"7- 7"95 7

Chart .o" :":


It #as o$served that crrent assets trnover ratio does not indicate any trend over the

period of ime" 'rnover ratio #as 8"5 in the year 88)89 and increase to 7"78 and 7"98

in the year 88: nd 88- respectively, $t it decreased in the year 88-)80, $ecase of

high cash $alance" In the year 880)81 company increased its sales #ith increased

:


25/41

investment in crrent assets, ths crrent assets trnover ratio increased to 7"95 from 7"7

in the year 88-)80"

:.9' iFuidit% r"tio

7G Crrent 6atio

'he crrent ratio is calclated $y dividing crrent assets $y crrent lia$ilities=

Crrent assets

Crrent ratio )))))))))))))))))))))))))))))))) Crrent lia$ilities

Crrent assets '*6

Crrent assets inclde cash and those assets #hich can $e converted into cash #ithin a

year, sch marketa$le secrities, de$tors and inventories"


26/41

Chart .o" :"-

0

0$5

1

1$5

2

2$5

Chart Title

C*rrent !atio

Axis Title


'he crrent ratio indicates the availa$ility of fnds to payment of crrent lia$ilities in the

form of crrent assets"


27/41

ick ratio esta$lishes the relationship $et#een ;ick or li;id assets and lia$ilities"

Cash is the most li;id asset, other assets #hich are considered to $e relatively li;id and

inclded in ;ick assets are de$tors, $ills receiva$le and marketa$le secrities"

Inventories are considered as less li;id"

Crrent asset N Inventory

ick ratio )))))))))))))))))))))))))))))))))))))))))) Crrent lia$ilities

'a$le :"0) ick 6atio 6s" In lakhsG

P"rticu&"rs 3443?

49

3449?

4:

344:?

46

3446?

4;

344;?

4

344?4> 344>?4@ 344@?54 34

iFuidCurrent

Assets

:587 -19 9789 -5817 -5928 775778 7:50 8::0: 2

Current

i"bi&ities

7:0-9 70228 8922 99281 :-288 0:110 2:5:2 789-2 7:

Guic7 R"tio

7"18 7"-8 7"- 7"1- 7"98 7"2: 7"02 7"51 7"5

Chart .o" :"0

0

0$5

1

1$5

2

2$5

Chart Title

+*ick !atio

1


28/41


ick ratio indicates that the company has sfficient li;id $alance for the payment of

crrent lia$ilities" 'he li;id ratio of 7=7 is sppose to $e standard or ideal $t here ratio

is more than 7=7 over the period of time, it indicates that the firm maintains the over

li;id assets than actal re;irement of sch assets"

)OR*+,- CAP+TA MA,A-EME,T COMPO,E,TS

6.5' Recei$"b&es M"n"gement

6eceiva$les is an essential marketing tool, acting as a $ridge for the movement of goods

throgh prodction and distri$tion stages to the cstomers" 'rade credit creates

receiva$les #hich the firm is e(pected to collect in the near ftre" 'he receiva$les

inclde three characteristics=

7G It involve element of risk #hich shold $e careflly analy+ed"

G It is $ased on economic vale" 'o the $yer, the economic vale in goods or services

passes immediately at the time of sale, #hile seller e(pects an e;ivalent vale to $e

received later on"

9G It implies ftrity" 'he cash payment for goods or serves received $y the $yer #ill $e

made $y him in a ftre period"

'a$le -"7)Si+e of receiva$les of JISL

6s" In lakhsG

2


29/41

P"rticu&"rs 3443?49 3449?4: 344:?46 3446?4; 344;?4 344?4> 344>?4@ 344@?54 345

Sundr%

Debtors

799:0 7088 98: 298- ::8-7 -5-09 12708 22108 7:2

0

20000

40000

60000

80000

100000

120000

140000

160000

Sundry Debtors

,*ndr) e.tors

Years

Debtors


30/41

7" In determining the collecta$ility of de$tors and ths, the efficiency of collection

efforts"

" In ascertaining the firmKs comparative strength and advantages related to its credit

policy and performance"

90- days


31/41

Chart .o"-"

020406080

100120140160

Average Collection PeriodDays!

Years

Days


'he si+e of receiva$les are steadily increasing" It indicates that the company #as

allo#ing more credit year to year"


32/41

of 58 days, it #as clear that the company re;ired to increase efficiency of collection of

receiva$les" 3or effective management of credit acconts shold involve follo#ing steps=

7G Credit information

G Credit investigation

9G Credit limits

:G Collection procedre"

6.3' +n$entor% M"n"gement

'he term OinventoryK is sed to designate the aggregate of those items of tangi$le assets

#hich are=

7" 3inished goods Osalea$leKG

" Work)in)progress Oconverti$leKG

9" Material and spplies Oconsma$leKG

'he natre of inventory is largely depending pon the type of operation carried on" 3or

instance, in the case of a manfactring concern, the inventory #ill generally comprise

all three grops mentioned a$ove #hile in the case of a trading concern, it #ill simply $e

stock) in) trade or finished goods" 'he o$!ectives of inventory management consist of t#o

conter$alancing parts=

7" 'o minimi+e the firmKs investment in inventory"

9


33/41

" 'o meet a demand for the prodct $y efficiently organi+ing the firms prodction and

sales operation"

90- daysInventory 'rnover in days )))))))))))))))))))))))))))))))))))))))))

Inventory 'rnover 6atio

P"rticu&"rs 3443?49 3449?4: 344:?46 3446?4; 344;?4 344?4> 344>?4@ 344@?54 34

+n$entor

% TOR in

d"%s

7:7

7 789 50 58 28 08 -9 -8

Chart .o" -")

0

50

100

150

"nventory T#$ in days

In'entor) ("! in da)s

Years

6.9' M"n"gement of C"sh

99


34/41

Cash refers to crrency F demand deposits? it is one of the key assets of the firm" It is

critically important as the firm mst meet its immediate o$ligations" 4olding of some

cash is essential to operate the firm $t holding e(cessive cash is costly $ecase it doesnKt

earn any income" 344>?4@ 344@?54 345

C"sh

B"n7

B"&"nce

2 7912 771 075 9-00 190 2157 :9127 929

9:


35/41

Chart .o -"9) Indices of cash in JISL

05000

1000015000200002500030000350004000045000

Cash % &ank &alance

Years

Cash % &ank


'he si+e of the cash in the crrent assets of the company indicates the mismanagement of

cash the company" 'he cash $alance in the year 88-)80 #as e(tremely increased?

$ecase of encashment of deposits from schedles $ank of PCC> fnds" Company failed

to properly invest availa$le cash" 'he firm shold hold an optimm $alance of cash and

invest any temporary e(cess amont in short term marketa$le secrities sch as treasry

$ills, commercial papers, certificates of deposit, $ank deposits and inter corporate

deposit"

9-


36/41

CO,C#S+O,S A,D RECOMME,DAT+O,S

.5' Conc&usion

Working capital management is an important aspect of financial management" 'he stdy

of #orking capital management of Jain Irrigation system ltd" has $een condcted on

#orking capital ratio analysis, #orking capital leverage, #orking capital components

#hich helped the company to manage its #orking capital efficienctly and affectively"

7" Working capital of the company #as increasing and reveals good li;idity position"

90


37/41

" &ositive #orking capital indicates that company has the a$ility of payments of short

terms lia$ilities"

9" Working capital increased $ecase of increment in the crrent assets"

:" CompanyKs crrent assets #ere al#ays more than re;irement, affecting on

profita$ility of the company"

-" Crrent assets are more than crrent lia$ilities, indicates that company sed long term

fnds for short term re;irement, #here long term fnds are most costly then short term

fnds"

0" Crrent assets components sho#s sndry de$tors as the ma!or part depicting inefficient

receiva$les management"

1" In the year 880)81 #orking capital decreased $ecase of increase in e(penses and

increase in the price of ra# material de to inflation"

2" Inventory #as spporting to sales, ths inventory trnover ratio #as increasing, $t

company increased the ra# material holding period"

5" Stdy of the cash management of the company sho#s that company lost control on

cash management in the year 88-)80, #here cash came from fi(ed deposits and PCC>

fnds, company failed to make proper investment of availa$le cash"

.3' Recommend"tions

3ollo#ing recommendations can $e sed $y the firm for its $etterment)

91


38/41

7" Company shold raise fnds throgh short term sorces for short term re;irements,

#hich comparatively is economical"

" Company shold take control on de$torKs collection period #hich is ma!or part of

crrent assets"

9" Company has to take control on cash $alance $ecase cash is non)earning assets and

increasing cost of fnds"

:" Company shold redce the inventory holding period #ith se of +ero inventory

concepts"

*ver all company has good li;idity position and sfficient fnds for repayment of

lia$ilities" Company has accepted conservative financial policy and ths maintaining

more crrent assets $alance" Company is increasing sales volme per year #hich

spported the company to sstain nd position in the #orld and 7st position in


39/41

9" A"D" Smith) management of Working Capital) Mc)Bro#)4ill .e# Qork

:" Satish Inamdar) &rinciples of 3inancial Management)Everest &$lishing 4ose

)ebsites References

7" ###"!ains"com

" ###"google"co"in

9" ###"#orkingcapitalmanagement"com

"Com 4onors in Working

Capital management of Jain Irrigation Systems Ltd of @@@@@"" College nder the

95
http://www.jains.com/http://www.google.co.in/http://www.google.co.in/http://www.jains.com/


40/41

%niversity of Calctta has #orked nder my spervision and gidance for her &ro!ect

Work and prepared a &ro!ect 6eport #ith the title Working Capital Management of Jain

Irrigation Systems Ltd"

'he pro!ect report, #hich he is s$mitting, is his genine and original #ork to the $est of

my kno#ledge"

Signatre=

&lace= .ame=

/ate= /esignation=

.ame of the College=


41/41

I here$y declare that the &ro!ect Work #ith the title W*6AI.B C

project report on working capital of jisl

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