ravi chinnu working capital

7/31/2019 Ravi chinnu Working Capital

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FINANCE FUNCTIONS:

It may be difficult to separate the finance functions from production, marketing and

other functions. The functions of raising funds investing them in assets and distributing returns

earned from assets to shareholders are respectively known as,

1) Investment Decision: -

A firms investment decisions involve capital expenditures. A capital budgeting

decision involves the decisions of allocation of capital or commitment of funds to long term

assets that would yield benefits (cash flows) in the future. Two important aspects of

investment decisions are;

A) The evaluation of the prospective profitability of new investments, and

B) The measurement of a cut off rate against that the prospective return of new

investments could be compared.

2) Financing Decision: -

Financing decision is the second important function to be performed by the financial

manager. The mix of debt and equity is known as the firms capital structure.

3) Dividend Decision: -

The Financial Manager must decide whether the firm should distribute all profits, or

retain them, or distribute a portion and retain the balance. The dividend policy should be

determined in terms of its impact on the shareholders value.

4) Liquidity Decision: -

Investment in current assets affects the firms profitability and Liquidity. Current assets

should be managed efficiently for safeguarding the firm against the risk of illiquidity.

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GOALS OF FINANCIAL MANAGEMENT

1. Maximize the value of the firm to its equity shareholders.

2. Maximization of profit.

3. Maintenance of liquid assets in the firm.

4. Ensuring maximum operational efficiency through planning directing and controlling of

the utilization of the funds.

5. Enforcing financial discipline in the use of financial resources through the coordination of

the operation of the various divisions in the organization.

6. Building up of adequate reserves for financing growth and expansion.

7. Ensuring a fair return to the shareholders on their investment.

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The key challenges for the finance manager in India appear to be in the following areas:

1. Investment Planning

2. Financial Structure

3. Treasure Operations

4. Foreign Exchange

5. Investor communication

6. Management control

Companies that manage their working capital well have reported strong profits and their

share holders have been rewarded with capital appreciation deposits and overall trend of

declining share profits. Especially commodity producers and companies whose products face

cyclic demand have demand have floundered.

Many a time the main cause of the failure of a business enterprise has been found to be

shortage of current asset and their mishandling inadequate working capital is serious handicap

in business, where a fixed capital investment generates production capacity component and

administration of current assets solves the problem of under utilization of capacities.

The firm needs certain inputs to make a finished product, which is sold to make a profit.

These sale proceeds are reinvested to make more such products and generate further profits.

The problem is there is a lag between the time a finished product is ready and the time its sale

proceeds are realized. To conjure smooth operations in the company every business entity

marks funds, this is known as working capital.

DEFINITIONS:-

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The common definition of working capital is the amount of funds invested in current

assets.

Working capita is excess of current assets over current liabilities.

-Guthmann & Dougall.

Working capital refers to a firms investment in short term assets, cash, short term

securities, accounts receivables and inventories.

-Weston & Beighan

Circulating Capital means current assets of the company that are changed in the

ordinary course business from one to another, as for example, from cash to inventories,

inventories to receivables, receivables to cash.

Genestenberg

Working capital is the amount of funds necessary to cover the cost of operating the

enterprise.

Shubin

MEANING OF WORKING CAPITAL:

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Capital required a business can be classified under two main categories

(1) Fixed Capital.

(2) Working Capital.

Every business needs funds for two purposes for its establishment and to carry out its

day-to-day operations. Long-term funds are required to create production facilities through

purchase of fixed assets such as plant and machinery, land, building, furniture etc.

Investments in the assets represent that part f firms capital which is blocked on a

permanent or fixed basis and is called fixed capital. Funds are also needed for short-term

purposes for the purchase of raw materials, payment of wages and other day-to-day

expenses etc. These funds are known as working capital. In simple words, working capital

refers to that part of the firms capital which is required for financing short term (or) current

assets such as cash, marketable securities, bebtors and inventories. Funds thus invested in

current assets keep revolving fast and are being constantly converted into cash and these

cash flows out again in exchange for other current assets. Hence it is also knows as

Revolving or Circulating capital or Short-term capital.

CONCEPT OF WORKING CAPITAL:

There are two concepts of working capital.

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1) Gross Working Capital:- Gross Working Capital is the capital invested in total current

assets of the enterprise. Current assets are those assets, which in the ordinary course of business

can be converted into cash within a short period of normally one accounting year.

2) Net Working Capital: Net Working capital is the excess of current assets over current

liabilities (or) Net working capital = Current assets Current Liabilities. Net working capital

may be positive or negative. When the current assets exceed current liabilities the working

capital is positive and the negative working capital results when the current liabilities are more

than the current assets. Current Liabilities arte more than the current assets. Current Liabilities

are more than the current assets. Current liabilities are those liabilities, which are intended to be

paid in the ordinary course of business within a short period of normally on accounting year out

of the current assets or the income of the business. Both gross and net concepts of working

capital are important aspects of the working capital management. The net Concept of working

capital may be suitable only for a proprietary from the organizations such as sole-trader (or)

partnership firms. But the gross Concept is very suitable to the company form of organizations

where there is a divorce between ownership, management and control.

In general practice, net working capital is referred to simply as working capital. In the

works of Hoagland, Working capital is descriptive of that capital which is not fixed. But the

more common use f the working capital is to consider it as the difference between the book

value of the current assets and current liabilities.

CLASSIFICATION OF WORKING CAPITAL

Working capital maybe classified in two ways:-

1) On the basis of concept

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(a) Gross working capital

(b) Net working capital

2) On the basis of time

(a) Permanent or Fixed working capital

(b) Temporary or variable working capital

a) Permanent or fixed working capital:- It is the minimum amount which is required to

ensure effective utilization of fixed facilities and foe maintaining the circulation of curren

assets. For example every firm has to maintain a minimum level of raw material, work in

process, finished goods and cash balance. This requirement is referred to as permanent or fixed

working capital.

b) Temporary or variable working capital:- It is the amount of working capital which is

required to meet the seasonal demands & some special exigencies. The permanent level of

working capital is fairly constant, while temporary working capital is fluctuating. It is

sometimes increasing and sometimes decreasing in accordance with seasonal and special needs.

GOALS OF WORKING CAPITAL MANAGEMENT

The two important of working capital management are profitability and solvency. To

ensure, solvency the firm should be very liquid, which means large current assets holdings.

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However, there is cost associated with the maintaining a sound liquid position. Since the funds

invested in current assets are higher due to higher investments, the firm profitability will suffer.

To have high profitability, the firms may sacrifice solvency and maintain a relatively

low level of current assets, which may expose the firm into the greater risk cash shortage and

stock outs. The finance managers would have to look into the both these objectives, so that one

may not suffer at the expenses of the other Hence while managing the working capital, the

objective of the firm is to achieve an optimal combination of risk returns trade off.

If the working capital pool is to function efficiently, the following matters must receive the

attention of the management.

The level of investment in stock.

The level of investment in debtors.

The ability of the concern to deal with its creditors.

The maturing obligations such as taxes and dividends.

FACTORS AFFECTING THE WORKING CAPITAL PROBLEMS

The requirements of working capital difference form industry, with in the same industry

from company and with in the company from time to time. A wide verity of factors influence

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the volume of investment in, working capital which may be external and intenal and

management must be familiar with these.

Nature of Business

The amount of working capital is related to the nature and volume of the business. In

concerns, where the cost of the raw materials is to be used in the manufacture of product in

very large in production to it total cost of its manufacturing the requirements of the working

will be very large.

Size of the business

Size of the business unit is also determining factor in estimating the total amount of

working capital.

Depreciation Policy

In every manufacture business, depreciation is the most significant item of the cost and

these forms largest item in the cost structure, which is the nature of the fixed cost.

Profit Level

The net profit level earned by the business firms the most important elements of the

working capital structure. The management should try its best of the maintain the structure in a

healthy start of earning satisfactory profits.

Taxes

Taxation has an important impact of the earned by an enterprise. Nearly on half of the

profit earned is drained off. Tax liability when assessed will be a drain on working capital fund.

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The management should be to calculate this liability and make provision for the payment when

due.

Credit Policy

Credit Policy of a firm has a direct bearing in the level working capital liberal

credit policy demands a higher level of working capital. If there is lack in collection effectors,

the problem would be further intensified decussating higher levels of working capital.

Dividend Policy

Divided policy is a dominant influence of working capital position of an

organization dividend policy connects liquidity the ability of the concern to find necessary cash

to meet the dividend declared and the same has to be paid in cash.

Attitude risk

The level of working capital is also influenced by the attitude of the

management towards the risk. If the management is mote concern with the liquidity then there

is need higher level of working capital.

COMPONENTS OF WORKING CAPITAL

The components working capital are

CURRENT ASSETS CURRENT LIABILITIESCash and bank balances Short-term borrowings including bill

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Sundry debtors

Bills receivables

Prepaid expenses

Investments (marketable securities maturing

within one year)

Fixed deposits with banks (maturing within

one year)

Installments of deferred receivables due

within one year.

Raw materials and components used in the

process of

Stocks in process including semi finished

goods.

Finished goods including semi finished goods.

Inventory

Outstanding income

Advance payment of tax.

purchases and discounted from banks and

others.

Unsecured loans maturing within one year.

Public deposit maturing within one year.

Sundry creditors.

Bills payables.

Interest & other charges due for payments for

payment.

Advance/progress payment from customers.

Deposit from dealers selling agents.

Outstanding expenses.

Statutory liabilities:

Provident fund dues

Provision for taxation

Sales tax, excise, etc.,

RESEARCH METHODOLOGY

DATA SOURCES

1. Primary Data 2. Secondary Data

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Primary data as it is known as synonymous to first hand information that is exclusively

collected for the sake of the study. Secondary data that has been already collected for some

other purpose and now which is being for the study.

Initially preliminary discussion with the general managers and chief accountant was carried on.

Information of the theoretical part was taken from reference book.

Profit/Loss and Balance Sheets are taken from companys annual reports.

The various concepts covered in the report are calculated by studying Balance Sheet and

Profit/Loss Accounts.

Research can be defined as

Methodical, unbiased and compete investigation of subject matter to establish principles

Investigation of a problems to discuss pertinent information to help solve it .

The term methodical, refers to carefully planned procedures ( should consistently

follow the same procedure). The will facilitate the comparison of results of similar

investigation over a period of similar investigations, over a period of time as that are

arrived at by other researches investigating similar problems in various parts of the same

country of in any corner of the world .

Both primary data and secondary data was collected from carious sources for

conducting the study. Primary data was collected from the company, whereas the secondary

data was collected from various newspapers, journals textbooks and websites.

SOURCES OF DATA

Primary data

Secondary data

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WORKING CAPITAL

Tools for data collection:

Secondary Data:

Observations

Reference books

Magazines

Journals

Newspapers

Websites

NEED OF THE STUDY

As we well known that working capital is flesh and blood of organization, in order to

maintain day to day activities.

The present study working capital management reveals each every aspect of the

organization.

Maintenance of the optimal level of working capital is must

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Utilizing the available working capital in an effective way.

OBJECTIVES OF THE STUDY

To determine optimal level of Current Assets

To study the changes in working Capital

To know the company liquidity position

To know the company turn over ratios

LIMITATIONS

Due to the limited time available, the authenticity of conclusions drawn based on the

observations made cannot be ensured.

The analysis of financial performance is based on information available and any

mistake inherent would be reflected in the study.

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The figures and facts claimed in the annual reports and other forms are assumed to be

true.

It is based in the data supplied by the factory personnel

Since only four years data is used for the analysis, the outcome may not be generalized.

It concentrates only on working capital aspects and does not look in to the long- term

financing.

LIMITATIONS OF THE STUDY

The ratios are generally calculated from past financial statements and thus are no

indications of the future.

Lack of adequate standards

These are no accepted standards or rules for all ratios which can be accepted as

norms. It renders interpretation of ratios difficult

Price level changes

While making ratio analysis no consideration is made to the changes in price levels and

this makes the interpretation of ratios invalid.

COMPANY PROFILE

The vision

To empower ourselves with excellence and to thes, grow and reach the pinnacle of

market leadership.

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The Mission

To provide products and services of international standards through pioneering innovations,

while keeping in sight, our responsibility towards the society we dwell in.

Chairman's foreword:

The new age enterprise has thrown open the doors to a world of seamless opportunities.

Time and space barriers no longer hold any significance. Thanks to the pervasiveness of IT and

the advent of the Internet, there's never been more to learn. Or to utilize. Or to provide.

Knowledge, and its acquisition, is at hand.

It is indeed heartening that India has kept pace with the sweeping changes in the global

economy. Throwing open its doors to globalization has meant the advent of multinational

corporate giants. The Indian economy is already gearing itself, both qualitatively and

quantitatively, to put up a fierce competition. Given our manpower and natural resources base,

there is little that can stop us from emerging winners. At TGV, we aim to harness this power to

bring our clients, customers and associates closer to the line of satisfaction. Without limits,

without restrictions.

Having proved our credentials as quality service/product providers in fields as varied as

chemicals and hospitality, finance and healthcare, real estate and IT, we are all set to make our

mark in the power sector too. The success of our initial forays in this direction has invested us

with the confidence to undertake projects of greater dimension and magnitude in the near future

The Human Touch

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The TGV conglomerate is headed by the dynamic and versatile personality, Tumbalam

Gooty Venkatesh(TGV). An entrepreneur par excellence, his track record spans a very

illustrious three-decade period during which he has notched up achievements and accolades

galore. "There is no substitute for hard work" is what this simple man believes in, and has

staunchly displayed in deed during his vibrant career.

The diversity of activities within the conglomerate portrays his vast experience and

understanding of various streams of knowledge and his ability to harness the same for the

generation of economic and social wealth. A shining example of his futuristic bent of mind is

the pioneering of the Bipolar Membrane Cell Technology in the manufacture of Caustic Soda

and allied products in India.

The philanthropic facet of TG Venkatesh has come to the fore on innumerable occasions. A

host of educational institutions have been established under his aegis. He is closely associated

with national programs for human well-being such as immunizations, eye camps, family

planning measures etc. To safeguard the health of his employees, he has mooted a unique 'Non-

smoking and Non-Alcoholic Allowance' that'll be forwarded to the wife/parent of each of those

who desist from indulging in the hazardous activity. He is also credited with mooting the

Gowri Gopal Educational Society that has set up a number of educational institutions under its

umbrella including Lakshmi Venkatesh TG College of Physiotherapy, affiliated to the Govt. of

Andhra Pradesh. A Nursing College, coming up as part of Lakshmi Venkatesh TG Educational

Academy, re-establishes TG Venkatesh's humane nature.

His dynamism, his obvious compassion for his people and his sense of service for his

state have earned for TG Venkatesh, the coveted position of a member of the Andhra Pradesh

Legislative Assembly. Recognition has poured in from various corners of the country. He was

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honored as the Jaycees Man of the Year for his invaluable contribution to social welfare. The

Best Entrepreneur Award, FICCI Award, Industrial Promotion Award, Kinnera Award,

Vijayshree Award, Udyogshree Award, Rajiv Ratna Award and scores of others speak for

his deep involvement in whatever he undertakes to do. The Best Sales Tax payer Award

proves his uprightness as a responsible Indian citizen.

The TGV scion TG Bharath, is a new age visionary. Overseas education - a post graduation in

Business Administration with International Management as elective - and work experience,

plus a disciplined Indian upbringing have inculcated in him, a deep sense of values and an

abiding respect for the state-of-the-art. A combination that has worked wonders for the

conglomerate. As the Chairman and Managing Director of Sree Rayalaseema Hi-strength Hypo

Ltd. and as Chairman for TGV Infosystems Ltd., TGV Projects and Investments Pvt. Ltd., Sree

Rayalaseema Dutch Kassenbouw Ltd. and Brilliant Securities Ltd., he has commandeered the

companies to the highest echelons of achievement within two years. Turnover has doubled,

resulting in phenomenal profit soaring as in the case of Sree Rayalaseema Hi-strength Hypo

Ltd., thanks to the imaginative cost-cutting measures introduced by him. Brilliant Securities has

established many branches under his able steering. TG Bharath aims at making the

conglomerate a force to reckon with in the very near future, and spares no effort in this

direction.

The Conglomerate

The USD 150 million/Rupees 750 crores TGV onglomerate, backed by a rich and

varied experience spanning more than two glorious decades, is a rapidly growing, well-

diversified one, with interests in Chemicals, Financial services, Merchant Banking, Securities,

Real Estate, Power, Pharmaceuticals, Healthcare, Hospitality, Entertainment, Information

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Technology, Personal Products, Salt and Aquaculture. A constant effort to keep pace with

change underlines all its endeavours. A 3000+ strong manpower base strengthens the

conglomerate's resolve to excel.

The conglomerate's quality consciousness and achievements have not gone

unrecognised. National Awards for Unity, Safety, Scientific & Industrial Research,

Environmental Protection, Research and Development and Energy Conservation, adorn the

office walls as testimonials of its dedicated efforts in these directions. The conglomerate has

also made significant philanthropic contributions to the society.

Sree Rayalaseema Hi-Strengh Hypo Ltd (SRHHL) was incorporated on 24 October,

1986 as a public limited company and obtained its certificate commencement of business on 30

October, 1986.

Initially the company has set up facilities for manufacture of chemicals and later on the

company has diversified into generation of power through wind turbines and biomass.

Promotions:

Mr. T G Venkatesh, who hails from an industrial family promoted SRHHL. He is

bestowed with experience in the art of industrial management. Since its inception, he bestowed

all the devotion and hard work and ensured that the company worked at optimum capacity and

post a stellar performance, both in financial and technical areas.

Technology:

The company has very strong Research and Development team. They have won nation

level awards in Research and Development. They are only manufactures of Calcium

Hypochlorite in India using the Sodium process. There are very few companies in the world

with this level of technology. Our other division benefit from the cutting edge research.

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Main products:

The main products include Sulphuric Acid, Oleum, Chioro Sulphonic Aid, Calcium

Hypochiorite, Stable Bleaching powder, Monochloro Acetic Acid, Bleach Liquor, MCA,

Sodium Hypo, Hydrochioric Acid and Non-Ferric alum.

Geared up for Exports:

Sree Rayalaseema Hi-Strength Hypo Ltd, the torch bearer of the conglomerate, is only

indina manufacturer of C alcium Hypochlorite, and one of the very few in the world. A state of

the art sodium process technology developed through in house Research Development efforts

helps the company in manufacturing the product with a chlorine content of 65% to 70% Sree

Rayalaseema Hi-Strength Hypo Ltd, exports Calcium Hypochlorite to countries all across the

globe Viz. Australla, Bangladesh, Belgium, Brunei, China, Colombia, Cyprus,

Durban, England, France, Germany, Hungary, Iran, Kenya, Korea, Malaysia, Mauritius,

Netherlands, Oman, Peru, Philippines, Sri Lanka, Saudi Arabia, Singapore, Tanzania, Thailand,

USA, Vietnam, etc. the certificate of Merit awarded by CHEMEXCIL for outstanding export

performance reinforces its status as a recognized export house.

Calcium Hypoclorite touches vital facets of human existence and its of proven

importance in many areas of day-to-day activity. Sree Rayalaseema Hi-Strength Hypo Ltd, has

distinctive edge in the maucfacture of this product, thanks to the twin advantages of indigenous

raw materials availability and supply of some specialized chemicals by Sree Rayalaseema

Alkalis and Allied Chemicals Ltd.

The company is also a front-ranking producer of Monochioro Actic Acid. Manufactured

by the scientific Crystallizer technology, the product meets international quality standards. All

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leading manufacturer of Non-Seroid Anti-Inflammatory Drugs, other pharmaceuticals,

pesticides, organ chemicals, etc use Monochloro Acetic Acids.

Product Range and Applications:

Calcium Hypochlorite (Gramules and Tablets)

Stable Bleaching Powder

Monochloro Acetic Acid

Chloro Sulphonic Acid

Oleum 23% and 65%

Bromine

Battery and commercial grades Sulphuric Acid

Calcium Hypoclorite is used extensively in aquaculture, textile, leather, Paper and

Sugar Industries. Stable Bleaching powder has taker in sanitization, water treatment,

and aquaculture and pesticide markers. Chloro Sulphonic Acid Caters to the

Pharmaceutical, and dyes & Intermediaries Industry. Producers of dyes &

intermediaries, soaps and dtergetns, explosives and others use application in various

industries including petrochemicals, dye intermediates photography, pesticides,

pharmaceuticals, bleaching of paper, pulp and others. Sulphuric Acid finds widespread

usage in sulphonation, fertilizer industry, as an intermediary in pharmaceutical industry

amongst others.

Production Capacity:

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Product installed Capacity

(Tons Per annum)

Calcium Hypochlorite 6600

Stable Bleaching Powder 9900

Monochloro Acetic Acid 2400

Sulphuric Acid 49500

Chloro Sulphonic Acid 33000

Bromine 65

Sree Rayalaseema Hi-Strength Hypo Ltd has provided capacitors and also uses steam

for refrigeration to conserve energy. Brick lined CSA operating efficiencies. A 9 MW biomass

powder project at Kurnool cater to the companys growing power requirements.

Sree Rayalaseema Hi-Strength Hypo Ltd adheres to all international standards of

quality. The ISO 14001 certification for Environmental Management and the ISO 9002

certification for Quality systems bear out the companys commitment to ensuring quality of

implacable standards

STATEMENTS OF CHANGES IN WORKING CAPITAL

FOR THE YEAR ENDING OF 31-03-04

Particulars 2003 2004 Increase in

working

capital

Decrease

working

Capital

CURRENT ASSETS

Inventories 49786564 49584070 202494

Sundry debtors 95733900 97236305 1502405

Cash and bank Balance 8692695 9197321 504630

Loans and advances 148863395 158816881 9953486

TOTAL (I) 303076550 314834577

CURRENT LIABILITIES

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Sundry creditors 8620197 11623374 3003177

Other dues 37299449 36648382 651067

Lease and rentals 1716533 261416 1455117

Other liabilities 24558480 37604601 13046121

Advances from customer 15407673 3147954 12259719

Due to directors 453552 0 453552Provisions for taxation 2244144 3254865

Provisions for others 14314222 15825527 1511305

TOTAL(II) 104014250 108366119

Working Capital (I-II) 198462300 206468458

Increase in W.C 8006158 8006158

206468458 206468458 26779976 26779976

INTERPRETATION

1. The comparative balance sheet of the company during the year 2003-2004 reveals that

the current assets have increased by 11758027 .

2. The current liabilities have increased by 4351869

3. The working capital for the year 2004 is 206468458 and for the year 2003 is 198462300

4. There is a increase in working capital of 8006158 compared to previous year

5. Hence financial position of the company during the year 2003-2004 is good.

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STATEMENTS OF CHANGES IN WORKING CAPITAL



working

capital

Decrease

working

Capital

CURRENT ASSETS

Inventories 49584070 45815006 3769064

Sundry debtors 97236305 97482177 245872



TOTAL (I) 314934577 299176040CURRENT LIABILITIES


Other dues 36648382 37981755 1333373

Lease and rentals 261416 0 261416



Provisions for taxation 3254865 2988332 266533


TOTAL(II) 108366119 135223759


Increase in W.C 42583177 42583177

206535458 206535458 52167960 52167960

INTERPRETATION

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the current assets have decreased by 15725537.

2. The current liabilities have increased by 26857631

3. The working capital for the year 2004 is 206535458 and for the year 2005 is

163952281.

4. There is a decrease in working capital of 42583177 compared to previous year

5. Hence financial position of the company during the year 2005 2006 is not good.

STATEMENTS OF CHARGES IN WORKING CAPITAL


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working

capital

Decrease

working

Capital

CURRENT ASSETS

Inventories 45815006 64651200 18836194

Sundry debtors 97482177 145943185 48461008Cash and bank Balance 7115060 11317138 4202078


TOTAL (I) 299176040 357891049

CURRENT LIABILITIES


Other dues 37981755 57460774 19479019




Provisions for others 13193117 24854721 11661604TOTAL(II) 135223759 192897765


Increase in W.C 1041003 1041003

164993284 164993284 75082113 75082113

INTERPRETATION


the current assets have increased by 58715009.

2. The current liabilities have increased by 57674006.

3. The working capital for the year 2005 is 163952281 and for the year 2006 is 164993284

4. There is a increase in working capital of 1041003 compared to previous year.

5. Hence financial position of the company during the year 2005-2006 is good.

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working

capital

Decrease

working

Capital

CURRENT ASSETS

Inventories 64651201 63310125 1341076

Sundry debtors 111519702 130247677 18727975


Other current assets 12736054 16578282 3842228Loans and advances 157666956 190203993 32537037

TOTAL (I) 357891051 419869179

CURRENT LIABILITIES


Other dues 57460774 67351274 9890500





TOTAL(II) 192897765 155055276


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Increase in W.C 99820617 99820617

264813903 264813903 141258290 141258290

INTERPRETATION


the current assets have increased by 61778128

2. The current liabilities have decreased by 37842489


264613903.

4. There is a increase in working capital of 99820617 compared to previous year .

5. Hence financial position of the company during year 2006-.2007 is very goods.

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working

capital

Decrease

working

Capital

CURRENT ASSETS

Inventories 63310125 112749029 49438904

Sundry debtors 1302476787 99203720 31043957


Other current assets 17079962 13596293 3483669


TOTAL (I) 419840184 405354377

CURRENT LIABILITIES

Acceptances 32011049 26107900 5903149


Other dues 123718821 101571458 22147363

Other liabilities 13364598 13935096 570498Advances from customer 14428265 23157152 8728887



TOTAL(II) 243388129 210874072


Increase in W.C 18028250 18028250

194480305 194480305 99397770 99397770

INTERPRETATION


the current assets have decreased by 14485807

2. The current liabilities have decreased by 32514057.

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194480305.

4. There is a increase in working capital of 18028250 compared to previous year.

5. Hence financial position of the company during year 2007.2008 is average.

CALCULATIONS

1. Current ratio :

=sLiabilitieCurrent

AssetsCurrent

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(In Rs)

Year Current Assets Current liabilities Ratio

2002-03 303076550 104014250 2.91

2003-04 314901577 108366119 2.90

2004-05 299176040 135223759 2.212005-06 357891049 192897765 1.85

2006-07 419869179 155055276 2.71

2007-08 405354377 210874072 1.92

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cuurent ratio

0

0.5

1

1.5

2

2.5

3

3.5

2002-

03

2003-

04

2004-

05

2005-

06

2006-

07

2007-

08

year

ratio

Series1

INTERPRETATION

1. Current ratio shown up the short term financial position on of the firm

2. The ideal current ratio is 2:1

3. In the year 2003-04 the current ratio was 2.91

4. This indicates that the firm is liquid and has the ability to pay its current obligation in

time as and when they become due.

5. But during the year 2002-03 , 2003-04, 2004-05 2005-06, 2006-07, 2007-08 the current

ratios are lesser than ideal ratio .

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2. QUICK RATIO :

sLiabilitieCurrent

AssetsQuickRatioQuick

=

(In Rs)

Year Quick Assets Current liabilities Ratio

2002-03 253289986 104014250 2.42

2003-04 265250507 108366119 2.44

2004-05 253361034 135223759 1.87

2005-06 293239850 192897765 1.52

2006-07 356559054 155055276 2.36

2007-08 292605348 210874072 1.38

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Quick ratio

0

0.5

1

1.5

2

2.5

3

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

year

ratio

Series1


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INTERPRETATION

1. Quick ratio is an indication that the firm is liquid and has the ability to meet its current

or liquid in time and on the other hand a low quick ratio represent that the firm liquidly

position is not good .

2. As a rule of thumb or as a convention quick ratio of 1:1 is considered satisfactory

3. The quick ratio was 2.42 in the year 2002-03

4. It increases in the year 2003-04 up to 2.44

5. After that there was a decrease in the remaining years.

6. The company is in a favorable position which indicates that the firm has the ability to

meet its current or liquid liabilities in time

3. WORKING CAPITAL TURN OVER RATIO:

=assetNetCurrent

NetSales

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(in Rs)

Year Net sales Net working capital Ratio

2002-03 565270887 198462300 2.842003-04 588430865 206468458 2.85

2004-05 566190292 163952281 3.45

2005-06 830982499 164993284 5.03

2006-07 1128416539 176452055 6.39

2007-08 1175530328 2194480305 6.04

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working capital turn over ratio

0

1

2

3

4

5

6

7

2002-032003-042004-052005-06 2006-07 2007-08

year

ratio

Series1

INTER PRETATION:

1. From the table it is observed that sales to working capital ratio have been decreasing.

2. The firm recorded ratio in 2002-03 2.84 it is decreased in the year 2003-04 to 2.85

3. Again there is an increase in remaining years.

4. How ever the firm recorded the highest ratio in the year 2007-08 i.e. 6.04

4. FIXED ASSET TURN OVER RATIO:

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=setNetfixedas

NetSales

(In Rs)

Year Net sales Net Fixed asset Ratio

2002-03 565270887 561264570 1.01

2003-04 588430865 589102224 0.99

2004-05 566190292 577751344 0.97

2005-06 830982499 414440767 2.01

2006-07 1128416539 467712460 2.41

2007-08 1175530328 536578490 2.19

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Fixed asset turnover ratio

0

0.5

1

1.5

2

2.5

3

2002-

03

2003-

04

2004-

05

2005-

06

2006-

07

2007-

08

year

ratio

Series1

INTERPRETATION

1. It is the ratio, which shows the relationship of fixed asset turnover ratio and net fixed

asset which indicates how efficiently the working capital is used for the net sales and on

what ratio they are used .

2. In the year 2002-03 the ratio is 1.01

3. In the next year i.e. 2003-04 the 5ratio is decreased at 0.99

4. Afterwards it in decrease till 2004-05 to 0.97 and remaining the year 2005-06 and 2006-

07, 2007-08 the ratios are again increase to 2.01, 2.41 and 2.19.

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5. SHARE HOLDER FUND RATIO & PROPRITORY RATIO:

= Totalasset

rfundShareholde

(In Rs)

Year Share holder fund Total asset Ratio

2002-03 646601662 1040270744 0.62

2003-04 664798164 995144384 0.66

2004-05 667216595 1060966835 0.63

2005-06 256764913 580036591 0.44

2006-07 312868446 733716949 0.42

2007-08 360382161 762013232 0.47

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share holder funds

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

2002-

03

2003-

04

2004-

05

2005-

06

2006-

07

2007-

08

year

rati

Series1

INTERPRETATION

1. It is the ratio which shows the relationship of share holders funds and total assets

2. Which indicates how efficiently share holders is used for the total asset and on what

ratio they are used .

3. In the year 2002-03 the ratio is 0.62

4. In the next year i.e. 2003-04 the ratio is 0.66 It is increased.

5. From the year 2004-05 to 2007-08 the is an up and down in the ratio.

6. CURRENT ASSETS TURNOVER RATIO :

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=AssetsCurrent

Sales

(In Rs)

Year sales Current assets Ratio

2002-03 565270887 303076550 1.86

2003-04 588430865 314901577 1.89

2004-05 566190292 299176040 1.89

2005-06 830982499 357891049 2.32

2006-07 1128416539 419869179 2.69

2007-08 1175530328 405354377 2.90

current asset turnover ratio

0

0.5

1

1.5

2

2.5

3

3.5

2002-

04

2003-

05

2004-

06

2005-

07

2006-

08

2007-

09

year

ratio

Series1

INTERPRETATION

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1. This ratio indicates the extent to which the sales in current Assets contributed to sales it

indicates whether the investment in current assets has been judicious or not.

2. A high current assets turnover ratio indicates better utilization of the firms assets .

3. In the year 2002-03 the ratio was 1.86 that means the assets of the business enterprises

were contributed well to the sales. There after the ratio decreased gradually which is

not a good sign?

FINDINGS

The inventory has been continuously increased from 2006-2008 . The increase is

also due to finished goods awaiting customer clearance

The loans and advances are decreased in 2006-2007 and increased in 2007 2008

which mainly contributes to payments made to suppliers and materials to be

received and accounted in the plant.

There is an increase in sundry debtors in 2006-2008

The current liabilities of the company increase in 2006-2008

The Net Current assets of the company increase in 2006-2008

The current Ratio on has been fluctuating through out the year and in the year 2005-

2008

The Quick Ratio has been facing downs through out the years and below the ideal

ratio of 1:1

The cash Ratio has been facing ups & down

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SUGGESTIONS

The company should adopt efficient cash management system so as to invest

surplus cash in profitable ventures, depending on the amount of surplus cash and

duration of surplus cash in hand.

The company should take necessary steps to maintain working capital as far as

possible at standard ratio.

It is advisable for the company to keep as much amount of cash as necessary and

invest the surplus money in short term deposits.

It is advisable to the management to retract investment in fixed assets as there are

adequate fixed assets already installed further investment in fixed assets will affect

the WC of the company .

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The Companies liabilities in the form of loans and advance taken from different

institutions are increasing year by year . So the company should utilize the

available resources in proper manner .

The company has maintained rules and regulations and reduces the wastage

material

BIBLIOGRAPHY

TEXT BOOK

FINANCIAL MANAGEMENT - I.M. PANDEY

FINANCIAL MANAGEMENT - KHAN & JAIN

FINANCIAL MANAGEMENT - PRASSANACHANDRA

COMPANY ANNUAL REPORTS

ANNUAL REPORT 2003-2004





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WEB SITES

www.google.com

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ravi chinnu working capital

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