CHAPTER-1 INTRODUCTION BACKGROUND OF STUDY: Whatever may be the organization, working capital plays an important role, as the company

needs capital for its day to day expenditure. Thousands of companies fail each year due to poor working capital management practices. Entrepreneurs often don't account for short term disruptions to cash flow and are forced to close their operations. In simple term, working capital is an excess of current assets over the current liabilities. ood working capital management reveals higher returns of current assets than the current liabilities to maintain a steady li!uidity position of a company. "therwise, working capital is a re!uirement of funds to meet the day to day working expenses. #o a proper way of management of working capital is highly essential to ensure a dynamic stability of the financial position of an organization. #eeing the good opportunity to study financial systems and practices of $%I &'(&# )*+, it is relatively important take up internship assignment on ,W"%-I. $/&I*/) (/./ E(E.* I. $%I &'(&# )*+0. +uring the pro1ect work, it is being analyzed the working capital position of this organization. +ecisions relating to working capital and short term financing are referred to as working capital management. *hese involve managing the relationship between a firm's short2term assets and its short2term liabilities. *he goal of Working capital management is to ensure that the firm is able to continue its operations and that it has sufficient money flow to satisfy both maturing short2term debt and upcoming operational expenses. Working capital management deals with maintaining the levels of working capital to optimum, because if a concern has inade!uate opportunities and if the working capital is more than re!uired then the concern will lose money in the form of interest on the blocked funds. *herefore working capital management plays a very important role in the profitability of a company. /nd also due to heavy competitions among different organization0s it is now compulsory to look after working capital

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RELEVANCE OF STUDY /t $%I &'(&# )*+ a substantial part of the total assets are covered by current assets. $urrent assets form around 3452 645 of the total assets. 7owever this could be less profitable on the assumption that current assets generate lesser returns as compared to fixed assets. 8ut in today0s competition it becomes mandatory to keep large current assets in form of inventories so as to ensure smooth production an excellent management of these inventories has to be maintained to strike a balance between all the inventories re!uired for the production. #o, in order to manage all these inventories and determine the investments in each inventories, the system call for an excellent management of current assets which is really a tough 1ob as the amount of inventories re!uired are large in number. 7ere comes the need of working capital management or managing the investments in current assets. *hus in big companies like $%I &'(&# )*+ it is not easy at all to implement a good working capital management as it demands individual attention on its different components. *he study of working capital management is very helpful for the organisation to know its li!uidity position. *he study is relevant to the organization to know the day to day expenditure. *his study is relevant to give an idea to utilise the current assets. *his study is also relevant to the student as they can use it as a reference. *his report will help in conducting further research. "ther researcher can use this pro1ect as secondary data PROBLEM STATEMENT: Working capital management or simply the management of capital invested in current assets is the focus of study. #o topic is to study working capital management of $%I &'(&# )*+. Working capital is the fund invested by a firm in current assets. .ow in a cut throat competitive era where each firm competes with each other to increase their production and sales, holding of sufficient current assets have become mandatory as current assets
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include inventories and raw materials which are re!uired for smooth production runs. 7olding of sufficient current assets will ensure smooth and un interrupted production but at the same time, it will consume a lot of working capital. 7ere creeps the importance and need of efficient working capital management. Working capital management aims at managing capital assets at optimum level, the level at which it will aid smooth running of production and also it will involve investment of nominal working capital in capital assets. 9*he problem generally explains that, less attention has been paid to the area of short2 term finance, in particular that of working capital management. #uch neglect might be acceptable were working capital considerations of relatively little importance to the firm, but effective working capital management has a crucial role to play in enhancing the profitability and growth of the firm. Indeed, experience shows that inade!uate planning and control of working capital is one of the more common causes of business failure.: HYPOTHESIS OF THE STUDY: *he following are the hypothesis of the study ;< *he firm is facing difficulty in paying short2term debt. =< *he firm is not properly managing the sundry debtor. 3< *he current liabilities are increasing than current assets year by year. OBJECTIVE OF THE STUDY> Everything in life holds some kinds of ob1ectives to be fulfilled. *his study is not an exception to it. *he following are a few straight forward goals which i have tried to fulfil in my pro1ect> ;< *o study the various components of working capital. =< *o analyze the li!uidity trend. 3< *o analyze the working capital trend. 6< *o appraise the utilization of current asset and current liabilities and find out short2 comings if any. ?< *o suggest measure for effective management of working capital.
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LIMITATIONS OF THE STUDY:@ollowing are the limitations of the study> ;< *he topic working capital management is itself a very vast topic yet very important also. +ue to time restraints it was not possible to study in depth in get knowledge what practices are followed at $%I &'(&# )*+. =< (any facts and data are such that they are not to be disclosed because of the confidential nature of the same. 3< #ince the financial matters are sensitive in nature the same could not ac!uired easily. 6< *he study is restricted to only the @our Aear data of $%I &'(&# )*+.

CHAPTERISATION: @ollowing are the chapterisation of the study> $hapter2; represents the background of the study, relevance of the study, problem statements, hypothesis, ob1ectives as well as limitations of the study. $hapter2= represents company profile of $%I &'(&# )*+. $hapter23 represents review of literature. $hapter26 represents research methodology of the study including sources of data collection, formulas and statistical tools used for data analysis. $hapter 2? represents results and findings. $hapter 2B represents conclusion and suggestion. $hapter 2C represents implication for future research.

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CHAPTER-2 COMPANY PROFILE

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CHAPTER-3: REVIEW OF LITERATURE *he purpose of this chapter is to present a review of literature relating to the working capital management. *he following are the literature review by different authors and different research scholars. Pass C L ! P"#$ R H1 D;EF6<, studied that over the past 64 years ma1or theoretical developments have occurred in the areas of longer2term investment and financial decision making. (any of these new concepts and the related techni!ues are now being employed successfully in industrial practice. 8y contrast, far less attention has been paid to the area of short2term finance, in particular that of working capital management. #uch neglect might be acceptable were working capital considerations of relatively little importance to the firm, but effective working capital management has a crucial role to play in enhancing the profitability and growth of the firm. Indeed, experience shows that inade!uate planning and control of working capital is one of the more common causes of business failure. H$%&'$() B2 D;EE4<, studied that 9$ash is king:22so say the money managers who investors the responsibility of running this country's businesses. /nd with banks demanding more from their prospective borrowers, greater emphasis has been placed on those accountable for so2called working capital management. Working capital management refers to the management of current or short2term assets and short2term liabilities. In essence, the purpose of that function is to make certain that the company has enough assets to operate its business. 7ere are things you should know about working capital management. Sa*"(+,(- F a.) D$*"%,-.$s K3 (2/110, studied that the effect of working capital management on firm profitability. In accordance with this aim, to consider statistically significant relationships between firm profitability and the components of cash conversion cycle at length, a sample consisting of Istanbul #tock Exchange DI#E< listed
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Pass C.L., Pike R.H: An overview of working capital management and corporate financing Her%feld &' How to (nderstand )orking Capital *anagement ( !!+$. ,amilogl- .. and /emirg-nes 0., 12e 3ffect of )orking Capital *anagement on .irm

( !"#$.
2 3

Profita4ilit5: 3vidence from 1-rke5 (6++"$

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A11-2a*"! Ra.3"42 B# (2/110! studied impact of firms' capital expenditure on their working capital management. *he author used the data collected from listed companies in the *hailand #tock Exchange. *he study used #chulman and $ox's D;EF?< .et )i!uidity 8alance and Working $apital %e!uirement as a proxy for working capital measurement and developed multiple regression models. *he empirical research found that firms' capital expenditure has a significant impact on working capital management. *he study also found that the firms' operating cash flow, which was recognized as a control variable, has a significant relationship with working capital management. Ha%)5as4($ J6 72/120 ! studied that Working capital, sometimes called gross working capital, simply refers to the firm's total current assets Dthe short2term ones<, cash, marketable securities, accounts receivable, and inventory. While long2term financial analysis primarily concerns strategic planning, working capital management deals with day2to2day operations. 8y making sure that production lines do not stop due to lack of raw materials, that inventories do not build up because production continues unchanged when sales dip, that customers pay on time and that enough cash is on hand to make payments when they are due. "bviously without good working capital management, no firm can be efficient and profitable. T2a52a11"((8 G9 72/12$., 9Working $apital (anagement (anages @low of @unds:, D=4;=< describes that Working capital is the cash needed to carry on operations during the cash conversion cycle, i.e. the days from paying for raw materials to collecting cash from customers. %aw materials and operating supplies must be bought and stored to ensure uninterrupted production. Wages, salaries, utility charges and other incidentals must be paid for converting the materials into finished products. $ustomers must be allowed a credit period that is standard in the business. "nly at the end of this cycle does cash flow in again

App-2ami, Ran7it2 & A' 12e 8mpact of .irms9 Capital 3:pendit-re on )orking Capital Hardcastle' )orking Capital *anagement,(6++!$. 12ac2appill5 ;. )orking Capital *anagement *anages .low of .-nds,(6++!$

*anagement: An 3mpirical ,t-d5 across 8nd-stries in 12ailand, (6++"$

5 6

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B$.$)a! Na.58: ;2a.,! Y"($"< (6+

$, studied impact of working capital management

on the operating performance and growth of new public companies. *he study also sheds light on the relationship of working capital with debt level, firm risk, and industry. 'sing a sample of initial public offerings DI&"'s<, the study finds a significant positive association between higher levels of accounts receivable and operating performance. *he study further finds that maintaining control Di.e. lower amounts< over levels of cash and securities, inventory, fixed assets, and accounts.

D-=$8 R> (6+

$., studied *he working capital in a firm generally arises out of four

basic factors like sales volume, technological changes, seasonal , cyclical changes and policies of the firm. *he strength of the firm is dependent on the working capital as discussed earlier but this working capital is itself dependent on the level of sales volume of the firm. *he firm re!uires current assets to support and maintain operational or functional activities. 8y current assets we mean the assets which can be converted readily into cash say within a year such as receivables, inventories and li!uid cash. If the level of sales is stable and towards growth the level of cash, receivables and stock will also be on the high. M5C(-%$ B? (6+ +$., 9Working $apital Works: describes that $ash is the lifeline of a company. If this lifeline deteriorates, so does the company's ability to fund operations, reinvest and meet capital re!uirements and payments. 'nderstanding a company's cash flow health is essential to making investment decisions. / good way to 1udge a company's cash flow prospects is to look at its working capital management DW$(<. $ash is king, especially at a time when fund raising is harder than ever. )etting it slip away is an oversight that investorss should not forgive. /nalyzing a company's working capital can provide excellent insight into how well a company handles its cash, and whether it is likely to have any on hand to fund growth and contribute to investors.
7

&eneda, <anc5' =2ang, >ilei, )orking Capital *anagement, ;rowt2 and Performance of <ew

P-4lic Companies, Credit ? .inancial *anagement Review, (6++"$

8 9

/-4e5 R, )orking Capital *anagement@an 3ffective 1ool for Arganisational ,-ccess (6++"$ *cCl-re &, )orking Capital )orks (6++B$

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Gass D1/ (6++!$., studied G$ash is the lifeblood of businessG is an often repeated maxim amongst financial managers. Working capital management refers to the management of current or short2term assets and short2term liabilities. $omponents of short2term assets include inventories, loans and advances, debtors, investments and cash and bank balances. #hort2term liabilities include creditors, trade advances, borrowings and provisions. *he ma1or emphasis is, however, on short2term assets, since short2term liabilities arise in the context of short2term assets. It is important that companies minimize risk by prudent working capital management.

Ma8.a%) E R$'-s$11 ( !!C$, /rgued that attempts to improve working capital by delaying payment to creditors is counter2productive to individuals and to the economy as a whole. $laims that altering debtor and creditor levels for individual tiers within a value system will rarely produce any net benefit. &roposes that stock reduction generates system2wide financial improvements and other important benefits. 'rges those organizations seeking concentrated working capital reduction strategies to focus on stock management strategies based on 9lean supply2chain: techni!ues.

T2+*as M K%-$,$%12 (6++D$, studied distinct levels of W$( measures for different industries, which tend to be stable over time. (any factors help to explain this discovery. *he improving economy during the period of the study may have resulted in improved turnover in some industries, while slowing turnover may have been a signal of troubles ahead. "ur results should be interpreted cautiously. "ur study takes places over a short time frame during a generally improving market. In addition, the survey suffers from survivorship bias H only the top firms within each industry are ranked each year and the composition of those firms within the industry can change annually.

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;ass /, How 1o 8mprove )orking Capital *anagement (6++C$ *a5nard 3. Raf-se, )orking capital management: an -rgent need to refoc-s *anagement 12omas *. 0r-eger, An Anal5sis of )orking Capital *anagement Res-lts Across 8nd-stries

/ecision, ( !!C$
12

American Eo-rnal of &-siness, (6++D$

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E(3$((813 D=44=< empirically examined the relationship between profitability and li!uidity, as measured by current ratio and cash gap Dcash conversion cycle< on a sample of E=E 1oint stock companies in #audi /rabia. 'sing correlation and regression analysis, El1elly IEJfound significant negative relationship between the firm's profitability and its li!uidity level, as measured by current ratio. *his relationship is more pronounced for firms with high current ratios and long cash conversion cycles. /t the industry level, however,he found that the cash conversion cycle or the cash gap is of more importance as a measure of li!uidity than current ratio thataffects profitability. *he firm size variable was also found to have significant effect on profitability at the industry level. La&a%")"s a.) T%8'+.")"s
1@

(6++#$, conducted a cross sectional study by using a

sample of ;3; firms listed on the /thens #tock Exchange for the period of =44; 2 =446 and found statistically significant relationship between profitability, measured through gross operating profit, and the cash conversion cycle and its components Daccounts receivables, accounts payables, and inventory<. 8ased on the results analysis of annual data by using correlation and regression tests, they suggest that managers can create profits for their companies by correctly handling the cash conversion cycle and by keeping each component of the conversion cycle Daccounts receivables, accounts payables, and inventory< at an optimal level. Ra2$*a. a.) Nas%16 (6++#$, studied the effect of different variables of working capital management including average collection period, inventory turnover in days, average payment period, cash conversion cycle, and current ratio on the net operating profitability of &akistani firms. *hey selected a sample of E6 &akistani firms listed on -arachi #tock Exchange for a period of six years from ;EEE 2 =446 and found a strong negative relationship between variables of working capital management and profitability of the firm. *hey found that as the cash conversion cycle increases, it leads to decreasing profitability of the firm and managers can create positive value for the investors by reducing the cash conversion cycle to a possible minimum level.

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3l7ell5' cas2 conversion c5cle 5ear (6++6.$ La%aridis and 1r5fonidis, cas2 conversion c5cle 5ear (6++#$ Ra2eman and <asr' varia4les of working capital management 5ear ( 6++#$.

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Ga%5"a-T$%-$( a.) Ma%4".$&-S+(a.+ C( !!C$ collected a panel of F,FC= small to medium2sized enterprises D#(Es< from #pain covering the period ;EEB 2 =44=. *hey tested the effects of working capital management on #(E profitability using the panel data methodology. *he results, which are robust to the presence of endogeneity, demonstrated that managers could create value by reducing their inventories and the number of days for which their accounts are outstanding. (oreover, shortening the cash conversion cycle also improves the firm's profitability. Fa(+1$ a.) A3"(+%$ B D=443<, used a sample of ?4 .igerian !uoted non2financial firms for the period ;EEB 2=44?. *heir study utilized panel data econometrics in a pooled regression, where time2series and cross2sectional observations were combined and estimated. *hey found a significant negative relationship between net operating profitability and the average collection period, inventory turnover in days, average payment period and cash conversion cycle for a sample of fifty .igerian firms listed on the .igerian #tock Exchange. @urthermore, they found no significant variations in the effects of working capital management between large and small firms. K+-*a G-81>, D=44;< in a study on, 9W+%#"., 5a1"4a( *a.a,$*$.4 ". 2$a(425a%$A! Working capital is the re!uired to finance the day to day operations of an organization. Working capital may be re!uire to bridge the gap between buying of stocked items to eventual payment for goods sold on account. Working capital also has to fund the gap when products are on hand but being held in stock. &roducts in stock are at full cost, effectively they are company cash resources which are out of circulation therefore additional working capital is re!uired to meet this gap which can only be reclaimed when the stocks are sold Dand only if these stocks are not replaced< and payment for them is received. Working capital re!uirements have to do with profitability and much more to do with cash flow.

;B

;arcia@1er-el and *artine%@,olano' working capital management of ,*3s 5ear !!C.

17

.alope and A7ilore: -tilisation of reso-rces 5ear 6++F

18

$ 0o-ma ;-5, (6++ $)orking capital management in 2ealt2care www.Gakdesni%.ed-.tr Hol-me D' page <o BC@"!

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M$2*$4 SEN! E)a ORUC 72//601? in the study BR$(a4"+.s2"1 =$4C$$. 42$ $''"5"$.58 +' C+%#"., 5a1"4a( *a.a,$*$.4 a.) 5+*1a.8 s"&$A! /s it is known, one of the reasons which cause change in working capital from one period to another is the change in management efficiency. *he change in management efficiency will affect the change in working capital in a way as increaser or reducer from on period to another. In this study, the effect of change in management efficiency in working capital management in to the change in working capital is compared by company size and sectors. *he data of this study covers sixty periods as the total of !uarterly financial statement of ?? manufacturing companies which were in operation in Istanbul #tock exchange DI#E< between the years ;EE3 and =4;4. In every period we studied, for inventories short term commercial receivables and short term commercial liabilities, and calculated the effect of change in management efficiency on to the effect of working capital change. In all sectors considered, in the change in working capital, and observed the effect of reducing of efficiency in inventory management. It is also observed that efficiency change in the management of the short term commercial receivables and the short term commercial liabilities by the company sizes and sectors make a positive effect in to the change in working capital B%$a($8! R ! ( !!B$6+ in a study on, 9W+%#"., Ca1"4a( *a.a,$*$.4 5+.5$14s C+%# s2$$4 -."D$%s"48 +' 12+$."EA $oncept application of concept in the #imulation reference to concept in reading cash conversion cycle cash conversions is the process of managing a company0s cash inflows and outflows. In the simulation, the finance manager was responsible for balancing sales with collections or accounts receivables Dcash inflows< and purchases with payments or accounts payables Dcash outflows<. *his delicate balance maintains the company0s balance sheet keeping the cash and loans in a situation of financial stability and keeping the money from being tied up. &rinciples of corporate finance. Working capital management. .ew Aork> (c raw27ill.

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*e2met ,3<, 3da AR(C (6++D$ Relations2ip 4etween t2e efficienc5 of working capital management and compan5 si%e, www.Gakdesni%.ed-.tr Hol-me 6' Pages <o F6@#6
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&reale5, R., ( !!B$ )orking capital management )orking Capital management concepts work s2eet -niversit5 of p2oeni:. Hol-me ' Pages <o 6F@ 6"

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CHAPTER-@ RESEARCH METHODOLOGY %esearch methodology is a systematic approach in management research to achieve pre2defined ob1ectives. It helps a researcher to guide during the course of research work. %ules and techni!ues stated in research methodology save time and labour of the researcher as researcher know how to proceed to conduct the study as per the ob1ective. SELECTION OF TOPIC> *he selection of topic is a crucial factor in any research study. *here should be newness and it should give maximum scope to explore the ideas from different angles. In present day due to increase in competition, working capital is becoming necessary for the organisation. It is that part of capital which is necessary to undertake day to day expenditure of the business organization. Whatever may be the organization, working capital plays an important role, as the company needs capital for its day to day expenditure. *housands of companies fail each year due to poor working capital management practices. Entrepreneurs often don't account for short term disruptions to cash flow and are forced to close their operations. Working capital is the fund invested by a firm in current assets. .ow in a cut throat competitive era where each firm competes with each other to increase their production and sales, holding of sufficient current assets have become mandatory as current assets include inventories and raw materials which are re!uired for smooth production runs. 7olding of sufficient current assets will ensure smooth and un interrupted production but at the same time, it will consume a lot of working capital. 7ere creeps the importance and need of efficient working capital management. /fter due to consultation with the external guide Kinternal guide, the topic was finalized and titled as2BA STUDY ON WORKING CAPITAL MANAGEMENT IN CRI PUMPS LTDA SELECTION OF LOCATION FOR THE STUDY: *he location for study was selected as the corporate office of $%I &'(&# )*+, 8hubaneswar. RESEARCH DESIGN: B/ %esearch design is the arrangement of conditions for collection and analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure: *he research design followed to study
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the working capital management in $%I &'(&# )*+<is +escriptive and /nalytical %esearch +esign. SOURCES OF DATA COLLECTION: ;. #econdary data collection

S$5+.)a%8 )a4a 5+(($54"+.:

*he secondary data are those which have already collected and stored. #econdary data easily get those secondary data from records, 1ournals, annual reports of the company etc. It will save the time, money and efforts to collect the data. #econdary data also made available through trade magazines, annual reports, books etc. *his pro1ect is based secondary data collected through annual reports of the organization. *he data collection was aimed at study of working capital management of the company. P%+3$54 "s =as$) +. ;. /nnual report of $%I &'(&# )*+. =44E2=4;4 =. /nnual report of $%I &'(&# )*+ =4;42=4;; 3. /nnual report of $%I &'(&# )*+. =4;;2=4;= 6. /nnual report of $%I &'(&# )*+. =4;=2=4;3

FORMULAS OF RATIO ANALYSIS F DEFINITION RATIO: %atio analysis is the pumpsful tool of financial statements analysis. / ratio is define as 9the indicated !uotient of two mathematical expressions: and as 9the relationship between two or more things:. *he absolute figures reported in the financial statement do not provide meaningful understanding of the performance and financial position of the firm. %atio helps to summaries large !uantities of financial data and to make !ualitative 1udgment of the firm0s financial performance.

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ROLE OF RATIO ANALYSIS %atio analysis helps to appraise the firms in the term of there profitability and efficiency of performance, either individually or in relation to other firms in same industry. %atio analysis is one of the best possible techni!ues available to management to impart the basic functions like planning and control. /s future is closely related to the immediately past, ratio calculated on the basis historical financial data may be of good assistance to predict the future. E.g. "n the basis of inventory turnover ratio or debtor0s turnover ratio in the past, the level of inventory and debtors can be easily ascertained for any given amount of sales. #imilarly, the ratio analysis may be able to locate the point out the various arias which need the management attention in order to improve the situation. E.g. $urrent ratio which shows a constant decline trend may be indicate the need for further introduction of long term finance in order to increase the li!uidity position. /s the ratio analysis is concerned with all the aspect of the firm0s financial analysis li!uidity, solvency, activity, profitability and overall performance, it enables the interested persons to know the financial and operational characteristics of an organization and take suitable decisions. LIGUDITY RATIO: )i!uidity refers to ability of a concern to meet its current obligations as and when these become due. *he short2term obligations are met by realising amounts from current, floating or circulating asset. *he current asset either be li!uid or near li!uidity. *hese should be convertible into cash for paying obligation of short2term nature. *o measure the li!uidity of a firm, following ratios can be calculated> A0 CURRENT RATIO: $urrent assets include cash and those assets which can be converted in to cash within a year, such marketable securities, debtors and inventories. /ll obligations within a year are include in current liabilities. $urrent liabilities include creditors, bills payable accrued expenses, short term bank loan income tax liabilities and long term debt maturing in the current year. $urrent ratio indicates the availability of current assets in rupees for every rupee of current liability.

$'%%E.* %/*I"

$'%%E.* /##E*K $'%%E.* )I/8I)I*IE#

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B0 GUICK RATIO OR ACID TEST: Muick ratios establish the relationship between !uick or li!uid assets and liabilities. /n asset is li!uid if it can be converting in to cash immediately or reasonably soon without a loss of value. $ash is the most li!uid asset .other assets which are consider to be relatively li!uid and include in !uick assets are debtors and bills receivable and marketable securities. Inventories are considered as less li!uid. Inventory normally re!uired some time for realizing into cash. *heir value also be tendency to fluctuate. *he !uick ratio is found out by dividing !uick assets by current liabilities. M'I$- %/*I"

total li!uid assetK total current liabilities

C0 ABSOLUTE LIGUID ASSET: Even though debtors and bills receivables are considered as more li!uid then inventories, it cannot be converted in to cash immediately or in time. *herefore while calculation of absolute li!uid ratio only the absolute li!uid assets as like cash in hand cash at bank, short term marketable securities are taken in to consideration to measure the ability of the company in meeting short term financial obligation. It calculates by absolute assets dividing by current liabilities. /8#")'*E )IM'I+ %/*I"Labsolute li!uid assetK total current liabilities EFFICIENCY RATIO: @unds are invested in various assets in business to make sales and earn profits. *he efficiency with which assets are managed directly affects the volume of sale. /ctivity ratios measure the efficiency and effectiveness with which a firm manages its resources or assets. *hese ratios are also called turnover ratios. A0 DEBTORS TURNOVER RATIO: %eceivable turnover ratio provides relationship between credit sales and receivables of a firm. It indicates how !uickly receivables are converted into sales. +E8*"%# *'%."NE% %/*I"L #/)E#K /NE%/ E /$$"'.* %E$EIN/8)E#. /NE%/ E /K$ %E$EIN/8)E#L opening trade debtorO $losing trade debtorK= /NE%/ E $"))E$*I". &E%I"+L D3B?K+*%< days "r %E$EIN/8)E# P 3B?K sale

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B0 WORKING CAPITAL TURNOVER RATIO: It signifies that for an amount of sales, a relative amount of working capital is needed. If any increase in sales contemplated working capital should be ade!uate and thus this ratio helps management to maintain the ade!uate level of working capital. *he ratio measures the efficiency with which the working capital is being used by a firm. It may thus compute net working capital turnover by dividing sales by net working capital. W"%-I. $/&I*/)*'%."NE% %/*I"Lcost of salesK net working capital

CURRENT ASSET TURNOVER RATIO: $'%%E.* /##E* *'%."NE% %/*I"L sales K current asset

STATISTICAL TOOLS USED FOR DATA ANAYLSIS:

*he various statistical tools used for data analysis is as follows> a< *ables> b< 8ar2chart c< raphs d< $orrelation

ANALYTICAL TOOLS USED: *he analytical tools used for data analysis is as follows> a< %atio analysis b< #chedule of change in working capital c< $ash flow statements

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CHAPTER-6 RESULTS AND FINDINGS *he result and discussion of the study is presented in five different sections. *he first sections explain about the various components of working capital, variable of working capital. *he second section explains about the li!uidity trend of the organization. *he third section explains about the working capital trend .*he fourth section explains the utilization of current assets and current liabilities. *he fifth section explains the measure to effective management of working capital. *he first section explains about the various components of working capital and variables of working capital. *he components of working capital are presented in *able ?.;. 7TABLE 6 1: COMPONENTS OF WORKING CAPITAL0 Ta=($ 1 1 $ash
Debtors Inventories

2//?2/1/7%s0 B6F,=CB,F;= CEF;EB=4; C?;4B6BE4 B;,43,==,6EB F3,4F,B?,F;E

2/1/-2/117Rs0 6E4,FF;,;F3 ;,4?,=6,CE,EF= CB,BF,B?,=B= BB,?;,BC,EF4 ;,34,6?,;C,C66

2/11-2/127Rs0 E4C,4;E,C?4 ;,4?,?4,EC,6C3 F4,F?,;E,=CF BF,E?,=B,?EC 6,F;,C4,4=,B43

2/12-2/137Rs0 C=C,;4B,;=E ;,4?,?B,3;,BEF EB,E4,?B,6B4 C=,64,?;,6?B ?,BE,?B,BC,6C?

sundry $reditors &rovisions

/n insight into the table reveals that> a< $ash and bank balances in =44E2=4;4 were %s B6F=CBF;=. It is decreased to %s 6E4,FF;;F3. With a2=6.=C5 growth. In =4;;2=4;= it increased to %s E4C,4;E,C?4. /nd then it suddenly decreased to %s C=C,;4B,;=E. b< +ebtors increases which was not a good sign. In =44E2=4;4 debtors were %s CE,F;,EB,=4; and it increased %s ;4?,=6,CE,EF= a total increase in %s =?6=F3CF;. In =4;;2=4;= it was %s ;,4?,?4,EC,6C3. /nd in =4;=2=4;3 it again increased to %s ;,4?,?B,3;,BEF. c< Inventories were increased at a good speed. *he inventories were %s CE,F;,EB,=4; in =44E2=4;4. In =4;42=4;; it increased to %s CB,BF,B?,=B=, ultimately increase in %s

[18]

;?F44?C=, with the percentage growth =.;45. EB,E4,?B,6B4 with a increase in =E5.

In =4;;2=4;= it increased to %s

F4,F?,;E,=CF with the increase in C.C5 . in =4;=2=4;3 it again increased to

d< #undry creditors also increased a lot. In =44E2=4;4 it was %s B;, 43, ==,6EB. *hen it increased by %s ?,6 F,6?,6F6 which ultimately amounted to %s BB,?;,BC,EF4 with a increase of F.EE5. in the year =4;42=4;;. In =4;;2=4;= it increased to %s BF,E?,=B,?EC with a percentage increase of ;=.EF5. in =4;=2=4;3 it again increase to %s C=,64,?;,6?B. e< &rovisions also increased throughout this 6years. In =44E2=4;4 it was %sF3,4F,B?,F;E. *hen it increased to %s ;,34,6?,;C,C66 with a percentage increase of ?C5. In =4;;2=4;= it again increased to %s6,F;,C4,4=,B43 with a percentage increase in 6CE5. In =4;=2=4;3 it again increased to %s ?,BE,?B,BC,6C?. 7Ta=($ 6 2: Va%"a=($s +' W+%#"., Ca1"4a( Ma.a,$*$.40 VARIABLES =44E2=4;4 %"*/ D%eturn on *otal /ssets< "&( Doperating profit margin< E/% D earing %atio i.e. financial debt K total assets< $% D$urrent %atio< M/% DMuick /ssets %atio< $/K*/ D$urrent /ssets to *otal /ssets< $)K*/ D$urrent )iabilities to *otal 4.;? YEARS =4;42=4;; 4.;B =4;;2=4;= 4.== =4;=2=4;3 4.;4

B;.??5

?B.645

=C.CF5

36.B?5

4.B6>;

4.??>;

4.63>;

4.33>;

;.=F>; 4.?F>;

4.E6>; 4.6B>;

4.FB>; 4.=C>;

4.B=>; 4.==

4.;3

4.;=

4.=;

4.;B

4.;;

4.;3

4.=6

4.=B

[19]

/ssets< #-K$/ D#tocks to $urrent /ssets< *+K$/ D*rade +ebtors to $urrent /ssets< $/Q*'%. D$urrent /ssets *urnover is #alesK$urrent /ssets< 4.=3 4.=? 4.;3 4.;E

4.=?

4.36

4.;C

4.=;

;.;4

;.=E

;.4F

4.B4

*he various variables of working capital is presented in table ?.=. /n analysis of data presented in the table reveals the following findingsR /< %eturn on total asset came 4.;? in =44E2=4;4, 4.;B in =4;42=4;;, 4.== in =4;;2 =4;= and 4.;4 in =4;=2=4;3. 8< "perating profit margin was B;.??5 in =44E2=4;4 then it reduced to ?B.645, =C.CF5, and 36.B?5 in =4;42=4;;, =4;;2=4;=, and =4;=2=4;3 respectively. /nything between B?5 to F?5 is known as a good operating margin. /nd for $%I &'(&# )*+ is a sign of alarm. $< earing ratio came 4.B6>; in =44E2=4;4 and in =4;42=4;; it is 4.??>; and 4.63>;

and 4.33>; in =4;;2=4;= and =4;=2=4;3. +< $urrent ratio generally reduced for the organisation, in =44E2=4;4 it was ;>=F and it reduced to 4.E6>; in =4;42=4;; and then it again reduced to to4.FB>; and 4.B= in =4;;2 =4;= and =4;=2=4;3 respectively. E< Muick asset ratio in =44E2=4;4 as it was 4.?F>;, in =4;42=4;; it became 4.6B>; and in =4;;2=4;= and in =4;=2=4;3 it became 4.=C>; and 4.==>;. @< $urrent asset to total asset ratio came 4.;3, 4.;=, 4.=; and 4.;B in the year =44E2 =4;4, =4;42=4;;, =4;;2=4;=, and =4;=2=4;3. < $urrent liability to total asset ratio came 4.;; in =44E2=4;4, in =4;42=4;; it came 4.;3, and in =4;;2=4;= and =4;=2=4;3 it came 4.=6>; and 4.=B>; respectively. 7< #tock to current asset is 4.=3, 4.=?, 4.;3, and 4.;E in respective years.
[20]

I< *rade debtors in =44E2=4;4 is 4.=?, in =4;42=4;; is 4.36, in =4;;2=4;= is 4.;C and in =4;=2=4;3 is 4.=;. S< $urrent asset turnover is ;.;4 in =44E2=4;4, ;.=E in =4;42=4;;, ;.4F in =4;;2=4;= and become 4.B4 in =4;=2=4;3 Ta=($ 6 3: C+*1+.$.4s +' C-%%$.4 %a4"+! H-"5# %a4"+ a.) A=s+(-4$ L"H-") Ra4"+s 2//?-2/1/ $urrent ratio ;.=F>; Muick ratio /bsolute li!uid ratio #-K$/ *+K$/ $/K*/ $)K*/ 4.?F>; 4.=?>; 4.E6>; 4.6B>; 4.;?>; 4.FB>; 4.=C>; 4.;=>; 4.B=>; 4.== 4.4F>; 2/1/-2/11 2/11-2/12 2/12-2/13

4.=3 4.=? 4.;3 4.;;

4.=? 4.36 4.;= 4.;3

4.;3 4.;C 4.=; 4.=6

4.;E 4.=; 4.;B 4.=B

CCC7 5as2 5+.D$%s"+. 585($0 Inventory days +ebtor turnover days $reditors turnover days CC days ;=?days C4 days F?days 63 days ?Cdays ;;?days ;=Bdays

B3 days

B;days

3C days

FBdays

Ta=($-6 3 %$D$(s 42$ 5+*1+.$.4s +' 5-%%$.4 %a4"+! H-"5# %a4"+ a.) a=s+(-4$ H-"5# %a4"+ F%+* 42$ 4a=($ '+((+C"., 42".,s 5a. =$ )$%"D$):

[21]

a< In =44E2=4;4 it is found that the current ratio is ;.=F>; which is 1ust below the standard of =>;. In =4;42=4;;, it is found that the current ratio of $%I &'(&# )*+ is ;4.E6>;. It is below the standard of =>; and it is due to a decrease in total current assets from previous year and an increase in current liability this year. *he cash and bank balance is found to be decreased this year in comparison to that of previous year where as the current liabilities and provisions both have increased this year. In =4;;2=4;=, it is found that the current ratio of $%I &'(&# )*+ is 4.FB>;. . It is a not good indication according to the rule of thumb. 8ecause the firm has more current liabilities than current assets. *he firm may not be able to meet its short term obligations in time. In =4;=2=4;3, it is found that the current ratio of $%I &'(&# )*+ was 4.B=>; it was not a good indication according to rule of thumb.
b< Muick ratio in =44E2=4;4 it was 4.?F>; and 4.6B>;, 4.=C>; and 4.==>; in =4;42=4;;, =4;;2 =4;=, and =4;=2=4;3 respectively.

c< In the year =44E2=4;4 the /bsolute )i!uid %atio is found to be 4.=?>;. In the year =4;42=4;; the /bsolute )i!uid %atio of $%I &'(&# )*+ is found to be 4.;?>;. *he /bsolute )i!uid %atio of the firm for the financial year =4;;2=4;= is found to be 4.;=>; which is below the normal standard of ;>= or 4.?>;. *his is due to less cash and bank balances of the organization in comparison to the $urrent )iabilities. In the year =4;=2=4;3, the absolute li!uid ratio found to be 4.4F>;. d< #tock to current asset is 4.=3, 4.=?, 4.;3, and 4.;E in respective years. e< *rade debtor to current asset ratio come 4.=?, 4.36, 4.;C and 4.=; respectively. f< $urrent asset to total asset ratio came 4.;3, 4.;=, 4.=; and 4.;B in the year =44E2 =4;4, =4;42=4;;, =4;;2=4;=, and =4;=2=4;3. $urrent liabilities to total asset came 4.;; in =44E2=4;4 and in =4;42=4;; it came 4.;3 , in =4;;2=4;= it came 4.=6>; and in =4;=2=4;3 it came 4.=B>;.

h< $ash conversion ratio for inventory came CCdays, C4 days, 63 days and ;;? days.

[22]

$ash conversion for debtor comes ;=? days in =44E2=4;4, and it reduced to F? and ?C days in =4;42=4;;, =4;;2=4;= respectively. 8ut in =4;=2=4;3 it increases to ;=B days. $ash conversion ratio came B3days, B;days, 3Cdays and FBdays respectively.

[23]

THE SECOND SECTION EIPLAINS ABOUT THE LIGUIDITY TREND OF THE ORGANI;ATION LIGUIDITY RATIO CURRENT RATIO Ta=($6 @ CURRENT RATIO- 7CURRENT ASSETSJCURRENT LIABILITY0 YEAR CURRENT ASSET 7IN RUPEES0 3!21!6/!29!@2? 3!1/!91!1?!3/3 9!3/!93!13!31? 6!/<!?3!<6!3<> CURRENT LIABILITY 7IN RUPEES0 2!6/!>/!12!619 3!36!?9!>9!6/> <!2?!3@!>>!9@? >!21!39!9@!2<@ RATIO

2//?-2/1/ 2/1/-2/11 2/11-2/12 2/12-2/13

1 2>:1 / ?@:1 / >9:1 / 92:1

@rom the table ?.6 and diagram of $urrent %atios of different financial years of $%I &'(&# )*+, various results can be made. /< =44E2=4;4 it was found that the current ratio was ;.=F>; which is below the standard of =>;. It is due to a decrease of total current assets from the previous year to current year. #till it is manageable and also the condition was under the control. 8< In =4;42=4;;, it was found that the current ratio of $%I &'(&# )*+ was 4.E6>;. It was below the standard of =>; and it is decrease in total current assets from previous year and an increase in current liability this year. *he cash and bank balance is found to be decreased this year in comparison to that of previous year where as the current liabilities and provisions both have increased this year. $< In =4;;2=4;=, it was found that the current ratio of $%I &'(&# )*+ was 4.FB>;. . It is a not good indication according to the rule of thumb. 8ecause the firm has more

[24]

current assets than current liabilities. *he firm may be able to meet its short term obligations in time. +< In =4;=2=4;3, it was found that the current ratio of $%I &'(&# )*+ was 4.B=>;. It was not a good indication according to rule of thumb. 8ecause the firm has more current assets than current liabilities. *he firm was not able to meet its short term obligation in time. E< 8ecause of increase in administrative overhead expenses, super annuity benefits and payment of past loan etc. are the ma1or factor for increasing of current liabilities. @< #ituation can be controlled. #o more emphasis can be given on these areas to reduce current liabilities and to increase current assets so that the actual standard of =>; can be achieved. In addition to, company should make clear cut strategic planning to sell electricity to ma1or industries at industrial rate to achieve higher revenue TABLE6 6G-"5# Ra4"+- 7L"H-") Ass$4J C-%%$.4 L"a="("480

YEAR 2//?-2/1/ 2/1/-2/11 2/11-2/12 2/12-2/13

LIGUID ASSET 1!@@!9@!<3!/13 1!6@!33!91!196 1!?9!21!1<!223 1!<>!2<!3<!>2<

CURRENT LIABILITY 2!6/!>/!12!619 3!36!?9!>9!6/> <!2?!3@!>>!9@? >!21!39!9@!2<@

RATIO / 6>:1 / @9:1 / 2<:1 / 22:1

FROM THE TABLE 2 2 FOLLOWING THINGS ARE DERIVED: /< *he Muick %atio or the /cid *est %atio of $%I &'(&# )*+ for the financial year =44E2=4;4 was found to be 4.?F>; and the normal standard for is ;>;. #o it is a manageable situation. 8< In the year =4;42=4;; it was found that the Muick %atio of $%I &'(&# )*+ was 4.6B>; which was below the normal standard. It was due to a little bit increase in current liabilities in comparison to that of previous year. #till it was also in a

[25]

manageable position and by giving a small effort the normal standard of ;>; can be achieved. $< In the year =4;;2=4;= it Is found that the M'I$- ratio of $%I &'(&# )*+ I# 4.=C>;, which is 1ust normal standard. It is due to a little bit increase in current liabilities. +< In the year =4;=2=4;3 it is found that the Muick ratio was 4.==>;. Which is below standard of ;>;T (anagement should have an eye on to that.

TABLE 6 9 ABSOLUTE LIGUID RATIO- 7ABSOLUTE LIGUID ASSETJCURRENT LIABILITY0:

YEAR 2//?-2/1/ 2/1/-2/11 2/11-2/12 2/12-2/13

A=s+(-4$ L"H-") Ass$4 9@!>2!<9!>12 @?!/>!>1!1>3 ?/!</!1?!<6/ <2!<1!/9!12?

C-%%$.4 L"a="("48 2!6/!>/!12!619 3!36!?9!>9!6/> <!2?!3@!>>!9@? >!21!39!9@!2<@

Ra4"+ / 26:1 / 16:1 / 12:1 / />:1

[26]

8y going through the table ?.B U diagram of /bsolute )i!uid %atio, balance sheet of $%I &'(&# )*+ the following results can be drawn. /< In the year =44E2=4;4 the /bsolute )i!uid %atio was found to be 4.=?>;. *hough it is below the normal standard still it is in a manageable condition. 8< In the year =4;42=4;; the /bsolute )i!uid %atio of $%I &'(&# )*+ was found to be 4.;?>; which is below from the previous year. It is due to a decrease in cash and bank balances and also a slightly increase in $urrent )iabilities. $< *he /bsolute )i!uid %atio of the firm for the financial year =4;;2=4;= is found to be 4.;=>; which is below the normal standard of ;>= or 4.?>;. *his is due to less cash and bank balances of the organization in comparison to the $urrent )iabilities. +< In the year =4;=2=4;3, the absolute li!uid ratio found to be 4.4F>;. *his is due to less cash and bank balances of the organization in comparison to the $urrent liabilities. 7Ta=($ 6 <0 CASH FLOW STATEMENTS

[27]

72/12-2/130 profitKloss before tax U extraordinary items ad1ustment for> appropriation to reserves and surpluses interest and finance charges +epreciation preliminary expenses WK" excess provision written back interest income provisions for wealth tax provisionKwrite off against theft materials provisions for obsolete stock2store etc bad and doubtful debt provisions for fringe benefit tax OPERATING PROFIT BEFORE WORKING CAPITAL CHANGE 7A0 WORKING CAPITAL CHANGE stores and spares sundry debtors other current assets loan and advances current liabilities &rovisions NET WORKING CAPITAL CHANGES 7B0 CASH GENERATED FROM THE OPERATION 7A0K7B0 CASH FLOW FROM INVESTING ACTIVITIES: capital expenditure D$/&EV< Interest received revenue CASH GENERATED FROM INVESTING ACTIVITIES 7 C 0 CASH FLOW FROM FINANCING ACTIVITIES: proceeds from secured loan proceeds from unsecured loan interest paid proceed from investors capital CASH FLOW FROM FINANCING ACTIVITIES 7D0 NET CASH GENERATED FROM ALL ACIVITIES 7AKBKCKD0 $ash and cash e!uivalent at the beginning of the year cash e!uivalent at the end of the period
a*+-.4 ". 7Rs0 -<1!3<!1<!9@@ ;,;F,3B,3E,466 ?6,;B,4;,;EF ;,4F,==,43,?E= 34,=B,6=3 2;,46,44,FC,?;4 26,??,;3,3;4 =C,F6B ;?,==,B43 6,6C,BF,B?= 22222222222222222222 1!/6!<@!</!>?3

72/11-2/120
a*+-.4 ". 7Rs0 -1>!3/!2?!>>3 B,33,FC,3F3 EC,=6,?6,B;C ;,4E,C6,3C,FCE 34,=B,6=3 26C,?C6 2B,E4,4E,44F 6B,3;F =E,?4,3;= ;;,B3,?=? 2=3,EB,E;? 1!>>!6?!>3!/<>

72/1/-2/110
a*+-.4 ". 7Rs0 -3!9@!??!3>3 ;;,;?,?B,F;F ;,;4,B?,?6,3;F ;,4E,E4,?F,EE4 34,=B,6=3 2=4E 2?,43,B4,3F3 6B,34? =F,B?,=E= ;,;;,EB,F4; E=,FE,=CF 2=;,;3,=?B 2!26!@9!2/!??@

2;B,=4,?E,CF? 26,?3,4=,FCC 2?E,63,?F; ;,=4,36,C;,4FC 6,E3,?E,43C ;,E;,FC,?=,3F= 2!?6!>2!<9!293 @!/1!6<!@<!169

26,6B,46,3=F 23C,F;,4;B 2;,63,EF,3=? 2=,C=,?3,F?,B;F 6=,FF,43,E=F 3,?=,3;,44,B?B 1!19!3<!36!2?9 3!/@!?<!1>!3<@

2=,EF,B=,BB6 2=B,3?,C3,4?E 2=,66,C;,3;C =6,B4,BC,;BC 6=,4;,=C,64; 6C,3B,?=,;36 >2!1?!3?!992 3!/<!96!9/!969

2E3,6;,?C,B6; 6,??,;3,3;4 ->>!>9!@@!331

2E;,BF,3C,63= B,E4,4E,44F ->@!<>!2>!@2@

2;,43,E;,4F,BE6 ?,43,B4,3F3 -?>!><!@>!311

2;,4B,6;,=6,6C6 3=,3E,;4,;B? 2=,B;,BF,4=,;3C ?,44,44,444 -3!3/!</!19!@@9

2;,4?,EB,33,BF3 2B,E?,F=,E6F 2FF,C4,FE,C?= =3,4?,??,444 -1!<>!6<!61!3>3

2;,4=,BB,E?,3=F 23B,FB,4;,3E3 2F3,;E,;;,=?= 22222222222222222 -2!2@!62!/<!?<3

-1<!??!13!921 [28] E4,C4,;E,C?4 <2!<1!/9!12?

@1!91!3>!69< 6E,4F,F;,;F3 ?/!</!1?!<6/

2;?,C3,E?,B=F B6,F=,CB,F;= @?!/>!>1!1>@

Ta=($ 6 < )$'".$s 42$ '+((+C".,: a< $ash generated from investing activities, %s2FF,FB,66,33; , %s2F6,CF,=F,6=6 and %s2EF, FC, 6F,3;; in the year =4;=2=4;3, =4;;2=4;= and =4;42=4;; respectively. b<7ence, there is a generation of %s.6,4;,?C,6C,;?B cash flow from its operating activities for the year =4;=2=4;3, where as in =4;;2=4;=, it was %s.3,46,EC,;F,3C6. /nd in =4;42=4;; it was 3,4C,B?,B4,B?B. c< *he net cash flow of %s23,34C,4;B,66B from financing activities in =4;=2;4. where it was 2;,CF,?C,?;,3F3 and 2=,=6,?=,4C,EC3 in =4;;2=4;= and =4;;2=4;4 respectively. d<*hat, the net cash flow from its operating, investing and financing activities for the year =4;=2=4;3 is a negative figure of %s.2;C,EE,;3,B=;. It became positive in the year =4;;2=4;=, which was %s 6;, B;, 3F,?BC. /nd in =4;42=4;; it became%s2;?C3, E?,B=F. T2$ 42"%) s$54"+. $E1(a".s a=+-4 42$ C+%#"., 5a1"4a( 4%$.) Ta=($-6 > S"&$ +' W+%#"., Ca1"4a(: D/mount. In %s.<

CURRENT ASSETS7CA0 #tores and spares #undry debtors $ash and bank balances "ther current assets )oan and advances *otal )ess> CURRENT LIABILITIES7CL0 #undry creditors +eposits and retention from suppliersKcontractors Interest accrued but not due on

2/1/7%-1$$s0
751064690 798196201 648276812 628081987 389406739 3,21,50,26,429

2/117%-1$$s0 2/127%-1$$s0
76,68,65,262 1,05,24,79,98 2 49,08,81,183 65,25,53,304 14,33,39,572 3,10,61,19,30 3 80,85,19,278 1,05,50,97,4 73 90,70,19,750 66,69,51,629 2,86,87,25,1 89 6,30,63,13,3 19

2/137%-1$$s0
96,90,56,460 1,05,56,31,698 72,71,06,129 74,48,94,758 1,58,26,86,333 5,07,93,75,378

2/1/7%-1$$s0
61,03,22,496 12,50,63,350 6,27,33,789 [29]

2/117%-1$$s0 2/127%-1$$s0
66,51,67,980 13,71,54,497 2,05,82,149 68,95,26,597 14,91,29,269 1,30,49,185

2/137%-1$$s0
72,40,51,456 12,89,91,075 51,73,055

loans )iabilities for wealth tax Electricity duty payable )iabilities for fringe benefit tax "ther liabilities *otal &rovisions *otal C+%#"., 5a1"4a(7 CA-CL0
37,299 2,12,903 23,41,534 87,64,35,326 1,67,71,46,697 83,08,65,819 2,50,80,12,516 70,70,13,913 47,240 49,092 44,54,790 1,22,77,13,01 6 2,05,51,68,76 4 1,30,45,17,74 4 3,35,96,86,50 8 -25,35,67,205 47,253 1,82,269 68,51,705 1,61,76,99,7 68 2,47,64,86,0 46 4,81,70,02,6 03 7,29,34,88,6 49 28,781 1,56,113 68,51,705 1,65,27,44,614 2,51,79,96,799 5,69,56,67,475 8,21,36,64,274

- -3,13,42,88,896 98,71,75,330

F%+* 42$ 4a=($ -6 > '+((+C"., 42".,s a%$ )$%"D$): In =44E2=4;4, working capital was %sC4,C4,;3,E;3 because current asset was more than current liabilities. In =4;42=4;; working was became negative due to the fact that current liabilities exceeds current assets. In =4;;2=4;= it became %s 2EF,C;,C?,334 due to excessive of provisions. In that year current liabilities exceeds current assets. In =4;=2=4;3, working capital again became negative. WORKING CAPITAL TREND ANALYSIS: In working capital analysis the direction at changes over a period of time is of crucial importance. Working capital is one of the important fields of management. It is therefore very essential for an analyst to make a study about the trend and direction of working capital over a period of time. #uch analysis enables as to study the upward and downward trend in current assets and current liabilities and its effect on the working capital position. 9*he term trend is very commonly used in day2today conversion trend, also called secular or long term need is the basic tendency of population, sales, income, current assets, and current liabilities to grow or decline over a period of time: 9*he trend is defined as smooth irreversible movement in the series. It can be increasing or decreasing.: Emphasizing the importance of working capital trends, 9analysis of working capital trends provide as base to 1udge whether the practice and privilege policy of the management with regard to working capital is good enough or an important is to be made in managing the working capital funds.
[30]

TABLE-6 ? W+%#"., Ca1"4a( S"&$ 4%$.) Y$a%s N$4 W C 7A-B0 W C I.)"5$s 2//?-2/1/
</!</!13!?1 3

D/mount. In %s.<

2/1/-2/11
26!36!9<!2/ 6

2/11-/?
-?>!<1!<6!33/

2/12-1/
-3!13!@2!>>!>?9

1//

36 >9

-13? 92

-@@3 31

F%+* 42$ 4a=($ 6 ? '+((+C".,s 42".,s a%$ )$%"D$): It is observed that in =44E2=4;4, working capital indices was very high due to current assets exceeded current liabilities. In =4;42=4;;indices was also high because current asset were more than current liabilities. In =4;42=4;; the company was able to manage their working capital efficiently. 8ut in =4;;2=4;= and =4;=2=4;3 it became negative. 7ere in the year =4;;2=4;= and =4;=2=4;3 current liabilities exceeded current assets.

TABLE-6 1/ WORKING CAPITAL TURN OVER RATIO- 7SALESJNET WORKING CAPITAL0 W+%#"., 5a1"4a( 4-%.+D$% %a4"+ YEAR 2/1/ 2/11 2/12 2/13 C+s4 +' Sa($s 3663@?@@/1 3??<66><?> 9<>?2?6@2< 3/6192<69> N$4 C+%#"., 5a1"4a( </</13?13 @26!36!9<!2/6 -?>!<1!<6!33/ -3!13!@2!>>!>?9 Ra4"+ 6 /34"*$s -16 <4"*$s -9 >>4"*$s -/ ?< 4"*$s

[31]

F%+* 42$ 4a=($ 6 1/ '+((+C"., 42".,s )$%"D$): /< In the year =44E2=4;4, there was an increased in working capital turnover ratio to ?.43. 8< 7owever, in the year =4;42=4;;, it was 2;?.C which indicates there was a decrease in net current assets due to increase in current liabilities. $< In the year =4;;2=4;=, it was 2B.FF which is better than the previous year. +< 8ut in =4;=2=4;3, working capital turnover was 24.EC, which indicates there was decrease in net current assets due to increase in current liabilities. TABLE 6 11 STATEMENT SHOWING CHANGES IN WORKING CAPITAL 72/1/ a.) 2/110 72//?-2/1/0 7Rs0 72/1/2/110 7Rs0 I.5%$as$ ". C+%#"., 5a1"4a( 7Rs0 ;?F44?C= =?6=F3CF; 2 =66C;3;C 2 D$5%$as$ ". C+%#"., 5a1"4a( 7Rs0

C-%%$.4 ass$4s S4+%$s a.) s1a%$s S-.)%8 )$=4+%s Cas2 F =a.# =a(a.5$s O42$% 5-%%$.4 ass$4s L+a.s F a)Da.5$s T+4a( C?;4B6BE4 CEF;EB=4; B6F=CBF;= B=F4F;EFC 3FE64BC3E 3216/29@2? CBBFB?=B= ;4?=6CEEF= 6E4FF;;F3 B?=??3346 ;6333E?C= 31/911?3/3
[32]

2 2 ;?C3E?B=E 2 =6B4BC;BC

C-%%$.4 ("a="("4"$s C-%%$.4 ("a="("4"$s P%+D"s"+.s T+4a( W+%#"., 5a1"4a( 75-%%$.4ass$4s5-%%$.4 ("a="("4"$s0 N$4 )$5%$as$ ". C+%#"., 5a1"4a( ;BCC;6BBEC F34FB?F;E 26/>/12619 </</13?13 =4??;BFCB6 ;346?;CC66 336?9>96/> -26369<2/6 2 2 3CF4==4BC 6C3B?;E=?

-?9/6>111>

EB4?F;;;F

-26369<2/6

-26369<2/6

1266139<>>

1266139<>>

F%+* 42$ 4a=($ 6 11 '+((+C"., 42".,s a%$ )$%"D$):

8y going through the statement showing changes in working capital the following results can be made. /< that, the total current asset of the year =4;42=4;; is decreased to %s. 3,;4,B;,;E,343 from a previous year0s figure of %s. 3=;?4=B6=E. 8< *he total value of stores and spare is increased from the previous year0s figure and the value of sundry debtors is also increased from the previous year0s figure. $< *he cash and bank balances of the organization have a decrease of %s. ;?C3E?B=E from the previous year0s figure. #imilarly the figure for loans and advances is also decreased to %s. ;6333E?C= from the previous year0s figure of %s. 3FE64BC3E. +< *he other current assets like prepaid expenses and sundry receivables have also increased from the previous year0s figure. E< *he total current liabilities of the year =4;42=4;; are increased to %s.33?EBFB?4F from a previous year0s figure of %s.=?4F4;=?;B. @<*hat, the increase for current liabilities is due to increase in the figure of sundry creditors, deposits and retention from suppliersKcontractors, liabilities for wealth tax, liabilities for fringe benefit tax and other liabilities from the previous year0s figure. < +ue to increase in the value of stores and spares, sundry debtors, and other current assets, there is a sign of increase in working capital. 7owever, due to a decrease in the
[33]

figure of cash, bank balances, loan and advances etc, there is a clear sign of decrease in the working capital. 7< +ue to increase in current liabilities and provisions for pension and gratuity and retrospective revision of pay, there is a sign of decrease in working capital. I</s per the analysis, it is observed that, the ratio of increase of working capital is drastically reduced than the previous year0s and the decrease sign of working capital is %s.EB4?F;;;FD=4;42=4;;<, which has impacted the steady increase of current working capital U negatively affected the profitability of the organization. S< It is found that the current asset0s figure is decreased from the previous year0s figure U the current liabilities figure is increased from the previous year. /s a result of which, there is a net decrease Dnegative figure< in working capital this financial year D=4;42 =4;;<. -< *hat, some more emphasis can be given on current assets to increase its figure and to decrease current liabilities0 figure as a result of which the figure for working capital can be increased. TABLE-6 12 STATEMENT SHOWING CHANGES IN WORKING CAPITAL (2/12 TO 2/130 72/11-2/120 7Rs0 72/12-2/130 7Rs0 I.5%$as$ ". C+%#"., 5a1"4a( 7Rs0 ;B4?3C;F= ?36==? D$5%$as$ ". C+%#"., 5a1"4a( 7Rs0 2 2 ;CEE;3B=; CCE63;=E 2 2 ;,=F,B4,3F,F?B

C-%%$.4 ass$4s S4+%$s a.) s1a%$s S-.)%8 )$=4+%s Cas2 F =a.# =a(a.5$s O42$% 5-%%$.4 ass$4s L+a.s F a)Da.5$s T+4a( C-%%$.4 ("a="("4"$s F4F,?;E,=CF ;,4??,4EC,6C3 E4C,4;E,C?4 BB,BE,?;,B=E =,FB,FC,=?,;FE 9!3/!93!13!31? EB,E4,?B,6B4 ;,4?,?B,3;,BEF C=,C;,4B,;=E C6,6F,E6,C?F ;,?F,=B,FB,333 6!/<!?3!<6!3<>

[34]

C-%%$.4 ("a="("4"$s P%+D"s"+.s T+4a( W+%#"., 5a1"4a( 75-%%$.4 ass$4s5-%%$.4 ("a="("4"$s0 N$4 )$5%$as$ ". C+%#"., 5a1"4a(

=,6C,B6,FB,46B 6,F;,C4,4=,B43 <!2?!3@!>>!9@? -?>!<1!<6!33/

=,?;,CE,EB,CEE ?,BE,?B,BC,6C? >!21!39!9@!2<@ -3!13!@2!>>!>?9

2 2

6,;?,;4,C?3 FC,FB,B6,FC=

-21@<113699

=;6C;;3?BB

-3!13!@2!>>!>?9 %$s-(4s 5a. =$ *a)$:

-3!13!@2!>>!>?9

23>912>1/2

23>912>1/2

B8 ,+"., 42%+-,2 42$ 4a=($6 12 s2+C"., 52a.,$s ". C+%#"., 5a1"4a( 42$ '+((+C".,

a< *hat, the total current asset of the year =4;=2=4;3 is decreased to %s. ?,4C,E3,C?,3CF @rom a previous year0s figure of %s. B,34,B3,;3,3;E . b< *he total value of stores and spare is increased from the previous year0s figure and the value of sundry debtors is also increased from the previous year0s figure. c< *he cash and bank balances of the organization have a decrease of %s.;C,EE,;3,B=;from the previous year0s figure. #imilarly the figure for loans and advances is also decreased to %s.;,?F,=B,FB,333 from the previous year0s figure of %s. =,FB,FC,=?,;FE. d< *he other current assets like prepaid expenses and sundry receivables have also increased from the previous year0s figure. e< *he total current liabilities of the year =4;=2=4;3 are increased to %sF, =;,3B,B6,=C6
From a previous years figure of Rs 7,29,34,88,649

f<*hat, the increase for current liabilities is due to increase in the figure of sundry creditors, deposits and retention from suppliersKcontractors, liabilities for wealth tax, liabilities for fringe benefit tax and other liabilities from the previous year0s figure. g<+ue to increase in the value of stores and spares, sundry debtors, and other current assets, there is a sign of increase in working capital. 7owever, due to a decrease in the figure of cash, bank balances, loan and advances etc, there is a clear sign of decrease in the working capital.
[35]

h<+ue to increase in current liabilities and provisions for pension and gratuity of pay, there is a sign of decrease in working capital. i</s per the analysis, it is observed that, the ratio of increase of working capital is drastically reduced than the previous year0s and the decrease sign of working capital is %s. 2=;6C;;3?BB D=4;=2=4;3<, which has impacted the steady increase of current working capital U negatively affected the profitability of the organization. 1<It is found that the current asset0s figure is decreased from the previous year0s figure U the current liabilities figure is increased from the previous year. /s a result of which, there is a net decrease Dnegative figure< in working capital this financial year D=4;=2 =4;3<. k<*hat, some more emphasis can be given on current assets to increase its figure and to decrease current liabilities0 figure as a result of which the figure for working capital can be increased.

SECTION-@ EIPLAINS ABOUT CURRENT ASSETS AND CURRENT LIABILITIES CURRENT ASSETS *otal assets are basically classified in two parts as fixed assets and current assets. @ixed assets are in the nature of long term or life time for the organization. $urrent assets convert in the cash in the period of one year. It means that current assets are li!uid assets or assets which can convert in to cash within a year. TABLE 6 13 CURRENT ASSETS SI;E D/mnt. In %s.<

C-%%$.4 ass$4s7CA0 S4+%$s a.) s1a%$s S-.)%8 )$=4+%s Cas2 a.) =a.# =a(a.5$s O42$% 5-%%$.4 ass$4s

2/1/7%-1$$s0 C?;4B6BE4 CEF;EB=4; B6F=CBF;= B=F4F;EFC

2/117%-1$$s0 CB,BF,B?,=B= ;,4?,=6,CE,EF = 6E,4F,F;,;F3 B?,=?,?3,346

[36]

2/127%-1$$s0 F4,F?,;E,=CF ;,4?,?4,EC,6C 3 E4,C4,;E,C?4 BB,BE,?;,B=E

2/137%-1$$s0 EB,E4,?B,6B4 ;,4?,?B,3;,BEF C=,C;,4B,;=E C6,6F,E6,C?F

L+a. a.) a)Da.5$s T+4a( +' CA CA ".)"5$s

3FE64BC3E 3!21!6/!29!@2 ? 1//

;6,33,3E,?C= 3!1/!91!1?!3/ 3 ?? 91

=,FB,FC,=?,;F E 9!3/!93!13!31 ? 1?9 16

;,?F,=B,FB,333 6!/<!?3!<6!3<> 16< ??

@rom the table2?.;3 followings things are derived> *he current asset indices show growth in the year =44E2=4;4. In =4;42=4;; it declines marginally and in =4;;2=4;= it again increase and in =4;=2=4;3 it declines. TABLE-6 1@ CURRENT ASSET TURNOVER RATIO- 7sa($sJ5-%%$.4 Ass$4s0

YEAR 2/1/ 2/11 2/12 2/13

SALES 3!66!3@!?@!@/1 3!??!<6!6>!<?> 9!<>!?2!?6!@2< 3!/6!19!2<!69>

CURRENT ASSETS 3!21!6/!29!@2? 3!1/!91!1?!3/3 9!3/!93!13!31? 6!/<!?3!<6!3<>

RATIO 1 1/ 1 2? 1 /> / 9/

[37]

F%+* 42$ 4a=($ 6 1@ '+((+C"., 42".,s a%$ )$%"D$): In the year =44E2=4;4, the current asset turnover was ;.;4 which became ;.=E, ;.4F, and 4.B4 in the year =4;42=4;;, =4;;2=4;= respectively. 8ut in the year =4;=2=4;3, the current asset turnover was 4.B4 due to sale was less than the current assets. COMPONENTS OF CURRENT ASSETS /nalysis of current assets components enable one to examine in which components the working capital fund has locked. / large tie up of funds in inventories affects the profitability of the business or the ma1or portion of current assets is made up cash alone, the profitability will be decreased because cash is non earning assets. TABLE 6 16 C-%%$.4 ass$4s7CA0 S4+%$s a.) s1a%$s S-.)%8 )$=4+%s Cas2 a.) =a.# =a(a.5$s O42$% 5-%%$.4 ass$4s L+a. a.) a)Da.5$s T+4a( +' CA 2/1/ =3.3C =6.F= =4.;B ;E.?6 ;=.;; 1// 2/11 =6.BE 33.FE ;?.F4 =;.4; 6.B; 1// 2/12 ;=.F= ;B.C3 ;6.3F ;4.?F 6?.6E 1// D.o. in 5< 2/13 ;E.4F =4.CF ;6.3; ;6.BC 3;.;B 1//

[38]

CURRENT LIABILITIES:TABLE 6 19
2/1/7%-1$$s0 S-.)%8 5%$)"4+%s D$1+s"4s a.) %$4$.4"+. s-11("$%sJ5+.4%a54+%s '%+* 91!/3!22!@?9 12!6/!93!36/ 9!2<!33!<>? 3<!2?? 2!12!?/3 23!@1!63@ ><!9@!36!329 1!9<!<1!@9!9?< >3!/>!96!>1? 2!6/!>/!12!619 1// 2/117%-1$$s0 99!61!9<!?>/ 13!<1!6@!@?< 2!/6!>2!1@? @<!2@/ @?!/?2 @@!6@!<?/ 1!22!<<!13!/19 2!/6!61!9>!<9@ 1!3/!@6!1<!<@@ 3!36!?9!>9!6/> 133 ?9 2/127%-1$$s0 9>!?6!29!6?< 1@!?1!2?!29? 1!3/!@?!1>6 @<!263 1!>2!29? 9>!61!</6 1!91!<9!??!<9> 2!@<!9@!>9!/@9 @!>1!</!/2!9/3 <!2?!3@!>>!9@? 2?/ >1 2/137%-1$$s0 <2!@/!61!@69 12!>?!?1!/<6 61!<3!/66 2>!<>1 1!69!113 9>!61!</6 1!96!2<!@@!91@ 2!61!<?!?9!<?? 6!9?!69!9<!@<6 >!21!39!9@!2<@ 32< 6/

I.4$%$s4 a55%-$) =-4 .+4 )-$ +. (+a.s L"a="("4"$s '+% C$a(42 4aE E($54%"5"48 )-48 1a8a=($ L"a="("4"$s '+% '%".,$ =$.$'"4 4aE O42$% ("a="("4"$s T+4a( P%+D"s"+.s T+4a( C-%%$.4 ("a="("4"$s ".)"5$s

TABLE 6 1<

[39]

CURRENT LIABILITIES SI;E

F%+* 42$ 4a=($ 6 1< '+((+C"., 42".,s a%$ )$%"D$): *he current liabilities graph shows a rapid growth. In =44E2=4;4 ,the current asset indices is ;44 and thereafter it increases to ;33.EB, =E4.F;, 3=C.? in =4;42=4;;, =4;;2=4;=, =4;=2=4;3 respectively. *he current liabilities increased at a speed. 7TABLE 6 1>0 DEBTOR TURN OVER RATIO- 7NET SALESJAVERAGE DEBTORS0 YEAR N$4 Sa($s AD$%a,$ D$=4+%s Ra4"+ AD$%a,$ C+(($54"+. P$%"+) 7396JDTR0)a8s 2/1/ 2/11 2/12 2/13 3!66!3@!?@!@/1 3!??!<6!6>!<?> 9!<>!?2!?6!@2< 3!/6!19!2<!69> 1219>@6@1/ ?2633>/?1 6 1!/6!3<!>>!<2> 1!/6!63!9@!6>9 2 ?2 @ 32 9 @@ 2 >? 126 >6 6< 129

[40]

D$=4+% T-%. OD$% Ra4"+- 8y going through our calculation table and diagrams of +ebtor *urn over %atio, profit and loss accounts and balance sheets of $%I &'(&# )*+ the following results can be drawn. /< In the year =44E2=4;4 the debtor turnover ratio is =.E= times and the average collection period is found to be ;=? days. *his year, there is a higher value of debtor turn over and a shorter average collection period in comparison to that of previous year. *his is a good indication. 8< In the year =4;42=4;; the debtor0s turnover ratio is 6.3= times and the average collection period is F? days. *his year, the value of debtor0s turnover is higher than the

[41]

previous year due to decrease in average debtors and an increase in net sales. /nd the average collection period is also shorter than the previous year0s figure. $< In the year =4;;2=4;= the debtor turnover ratio is B.66 times and the average collection period is ?C days. *his year, the value of debtor turnover is higher than the previous year due to decrease in average debtor. +< In the year =4;=2=4;3 the debtor turnover is =.FE times and the average collection period is found to be ;=B days. *his year, there is higher value of debtor turn over. E< $%I &'(&# )*+ used to collect pending dues directly from consumers for which, substantial delay in getting payment was . 7owever, the present average period of collection is decreased due to involvement of .E#$", #"'*7$", $E#$", WE#$" etc. for collection of revenue on behalf of $%I &'(&# )*+ and the same has been made through banks. *he shorter the average collection period, the better the !uality of debtors, since a short collection period implies the prompt payments by debtors. #o this is a good indication for the organization. S$54"+. '"D$ ,$.$%a((8 )$'".$s M$as-%$s 4+ I*1%+D$ W+%#"., Ca1"4a( Ma.a,$*$.4 a4 CRI PUMPS LTD> *he essence of effective working capital management is proper cash flow forecasting. *his should take into account the impact of unforeseen events, market cycles, loss of a prime customer and actions by competitors. #o the effect of unforeseen demands of working capital should be factored by company. *his was one of its reasons for the variation of its revised working capital pro1ection from the earlier pro1ection. a< It pays to have contingency plans to tide over unexpected events. While market2 leaders can manage uncertainty better, even other companies must have risk2 management procedures. *hese must be based on ob1ective and realistic view of the role of working capital. b< /ddressing the issue of working capital on a corporate2wide basis has certain advantages. $ash generated at one location can well be utilized at another. c< /n innovative approach, combining operational and financial skills and an all2 encompassing view of the company0s operations will help in identifying and implementing strategies that generate short2term cash. *his can be achieved by having the right set of executives who are responsible for setting targets and performance
[42]

levels. *hey could be then held accountable for delivering, encouraged to be enterprising and to act as change agents. d< Working capital management is an important yardstick to measure a company operational and financial efficiency. *his aspect must form part of the strategic and operational thinking. Efforts should constantly be made to improve the working capital position. *his will yield greater efficiencies and improve customer satisfaction. e< $ash should be managed properly. f< Effort should be made to reduce the current liabilities and to increase the current asset. g< &lacing the responsibility for collecting the debt upon the centre that made the sale HYPOTHESIS TESTING: generally hypothesis means a mere assumption or some supposition to be proved or disproved. 7ypothesis is usually considered as the principle instrument in research. Its main function is to suggest new experiments and observations. H81+42$s"s: 1- T2$ '"%* "s 'a5"., )"''"5-(48 ". 1a8"., s2+%4-4$%* )$=4 *he following table contains the details about the average collection period from debtors and average payment period to creditors from the period =44E2=4;4 to =4;=2=4;3.

Y$a%s

AD$%a,$ 5+(($54"+. 1$%"+) 7E0 126 >6 6< 129 LEM 3?3

AD$%a,$ 1a8*$.4 1$%"+)780 93 91 3< >9 L YM2@<

IY

I2

82

2//?-2/1/ 2/1/-2/11 2/11-2/12 2/12-2/13

<><6 61>6 21/? 1/>39 IYM29//6

16926 <226 32@? 16><9

L E2 M @1?<6

3?9? 3<21 139? <3?9 L 82 M 19@66

[43]

KARL PEARSONSNS COFFICIENT OF CORRELETION:

B8 1-44"., 42$ Da(-$s ". 42$ '+%*-(a 42$ B%A 5a*$ M/ >9 @rom the calculation value of 9r: come L4.FB which is a positive one. /s the correlation came a positive one which ensures that the firm is facing difficulty in paying short2term debt. It is the case where current liabilities are increased throughout the financial years from, =44E2=4;4, =4;42=4;;, =4;;2=4;= and =4;=2=4;3.

HYPOTHESIS:2 THE FIRM IS NOT PROPERLY MANAGING THE SUNDRY DEBTOR *he following table contains average collection period from debtors and sundry debtors Din crore< from the period =44E2=4;4 to =4;=2=4;3.

8$a%s

AD$%a,$ 5+(($54"+. 1$%"+) 7E0 126 >6 6< 129 LEM 3?3

s-.)%8 )$=4+%s 7". 5%+%$0 I8 >/ 1/6 1/9 1/9 LYM3?@ 1//// >?26 9/@2 13369 IYM3>323

I2

82

2//?-2/1/ 2/1/-2/11 2/11-2/12 2/12-2/13

16926 <226 32@? 16><9

L E2 M@1?<6

9@// 11/26 11239 11239 L 82 M3?>?<

[44]

KARL PERSONNS COFFICIENT OF CORRELETION:

T2$ 5+%%$(a4"+. 5a*$ .$,a4"D$ 4+ 42$ s$5+.) 281+42$s"s /fter putting the data 9r: is foundL 24.?=. #o the hypothesis is re1ected. /s the firm is able to manage the sundry debtor.

HYPOTHESIS: 3- THE CURRENT LIABILITIES ARE INCREASING THAN CURRENT ASSETS YEAR BY YEAR *he following table contains the amount of current liabilitiesDin crore< and current assets Din crore< from the period =44E2=4;4 to =4;=2=4;3.

8$a%s

CURRENT CURRENT LIABILITIES ASSETS 7". 5%+%$0 7". 5%+%$0 261 322 321 931 6/> LYM1<>2

I2 IY >/>22 1/<>69 @6???? @1</9> IYM 1/96<@6 93//1 112>?9 631@@1 9<@/@1
L E2 M 13>13<?

82

2//?-2/1/

1/39>@ 1/3/@1 3?>191 26>/9@ L 82 M >92?6/

2/1/-2/11 339 2/11-2/12 <2? 2/12-2/13 >21 LEM213<

KARL PERSONNS COFFICIENT OF CORRELETION:

[45]

M/ >> /s the hypothesis is positive which ensures that the current liabilities of firm is increased at a speed than current assets. #o the firm should have an eye to this one.

FINDINGS OF THE STUDY F+((+C"., a%$ 42$ '".)".,s +' 42$ s4-)8: a< Working capital of three years i.e., D=4;42=4;;, =4;;2=4;=, =4;=2=4;3< is in negative figure. *he reason is that the company0s current liabilities exceeds current assets from =44E2=4;4 to =4;=2=4;3. *he company created more provisions
[46]

throughout this 3 years. #undry creditors increased at a speed in these 3 years. It is an alarm sign for the company. 8esides these sundry creditors, other current liabilities also increased like deposits and retention from supplies, liability for wealth tax, electricity duty payable. b< *he standard current ratio is =>;. /nd for $%I &'(&# )*+ it is not satisfactory. *he reason behind such result is that the current liabilities exceed current assets. *he standard current ratio for =44E2=4;4 is satisfactory but in the year =4;42=4;;, =4;;2 =4;=, =4;=2=4;3 situations becomes worst. *he reason behind the increase in current liabilities and provisions. It is not a good sign for the company. c< *he standard !uick ratio is ;>;. /nd for $%I &'(&# )*+ it is not satisfactory. *he reason behind $%I &'(&# )*+ did not achieve the rule of thumb. *he current liabilities exceed the li!uid assets. *here is an increase in current liabilities like sundry creditor, interest accrued but not due on loans, liability for wealth tax and liabilities for fringe benefit tax than of li!uid assets. d< /bsolute li!uid test ratio is below ;>=, which are worries for $%I &'(&# )*+. *he reason is that li!uid assets fall very short than current liabilities. *he current liabilities again exceed the absolute li!uid assets. *here is not significant increase in absolute current assets like cash and bank balances from =44E2=4;4 to =4;=2=4;3. 8ut there is a rapid increase in case of current liabilities like sundry creditors, deposits and retention from suppliers, liabilities for fringe benefit tax and provisions. e< +ebtors of the company were highR they were increasing year by year, so more funds were blocked in debtor. /s the company is selling electricity to the sundry debtors and the cash is not immediately received so some amount of cash is blocked in that matter. f< *he current asset trend increased from =4;4 to =4;=, but in =4;3 it declines. *he current assets like stores and spare increased in =44E2=4;4 to =4;42=4;; but in =4;;2 =4;= it declined and then it is increased in =4;=2=4;3. #undry debtors increased from =44E2=4;4 to =4;42=4;; but it declined in =4;;2=4;= but again it is increased in =4;=2 =4;3. g< *he current liabilities trend increasing at a speed which is worried thing for company.

[47]

$urrent liabilities like sundry creditors, deposits and retention from suppliers, interest accured but not due on loans, liabilities for wealth tax, electricity duty payable, liabilities for fringe benefit tax increased from =44E2=4;4 to =4;=2=4;3. h< +ebtor0s turnover ratio improved from =4;4 to =4;= and so number of collection period decreases. 8ut in =4;3 debtor0s turnover ratio decreases and collection period increases. In =44E2=4;4 it was ;=B days. *hen it is reduced to F? and ?C days in =4;42 =4;; and =4;;2=4;= respectively. 8ut in =4;=2=4;3 it again increased to ;=? days. 1< $urrent asset ratio decrease throughout the year. It was ;.;4 in =44E2=4;4 then it increased to ;.=E then a fall down occurred as it was ;.4F in =4;;2=4;= and 4.B4 in =4;=2=4;3. k< Working capital turnover ratio was positive in =44E2=4;4R it became negative in =4;42=4;;, =4;;2=4;= and =4;=2 =4;3. It was ?.43 times in =44E2=4;4 then is sloped downward and it was 2;?.C, 2B.FF, 24.EC in =4;42=4;;, =4;;2=4;=, =4;=2=4;3 respectively.

CHAPTER -9 CONCLUSION AND RECOMMENDATION

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: CONCLUSION: "n the basis of data analysis on working capital management in $%I &'(&# )*+, the following conclusions arrived. a< *he company has gross profit for the past four years D=44E24C, =4;424F, =4;;24E, and =4;=2;4< in negatives and the current liabilities are increasing, in comparison to current assets position. 7ence, it is an alarming sign for the smooth working capital management. b< *he $%I &'(&# )*+ didn0t manage the li!uidity position of the company. *he li!uidity position was in a good condition and in =44E24C, it was also satisfactory. 8ut, in the year =4;424F, =4;;2=4;=, =4;=2;4 the situation of li!uidity position was alarming due to increase in total current liabilities and decrease in total current assets which led to the decrease in the net working capital of the company. c< +uring the year =44E24C, =4;424F, =4;;2=4;= and =4;=2=4;3 the company0s li!uid assets were not satisfactory. d< *he average collection period of the company during the year =44E22=4;4 is ;=? days, it is reduced to F? days in =4;42=4;; and again it reduced to ?Cdays in =4;;2 =4;=, but the average collection period again increases to ;=B days in =4;=2=4;3. e< *here is also satisfactory net cash flow from the operating, investing and financing activities of the organization. f<*hough the net working capital of the company is decreased, still the company is in a better manageable position and the company0s present status of maintaining current assets and current liabilities are satisfactory. g< *hey are unable to manage their cash, funds and debts. 8y adapting better management practices, the company may attain a sound financial position in future and able to manage its working capital efficiently

RECOMMENDATION

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$%I &'(&# )*+ is the soul of "rissa0s pumps transmission and is playing a pivotal role in making surplus pumps consumption state through efficiently administering the system of transmission. @or improvement of organization0s profitability, much emphasis is needed to improve the better working capital management by decreasing the current liabilities through reducing of unplanned over head expenses. In such process, current assets position will be improved through collection of revenue from pumps transmission as well as recovery of past dues from consumers, ovt. and other agencies etc. *he company should give more attention on increasing its collection of revenue from wheeling of pumps and should give more emphasis to curtail unplanned expenses to decreases the loss. @urther, the management should focus on shortening its average collection period by changing its credit terms and conditions. 8y taking the above remedial measures, the organization can be an EN/O company with due emphasis on proper way of managing the working capital. .

CHAPTER -<
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IMPLICATION FOR FUTURE RESEARCH:

*his study is the foundation stone for carrying out further research in the field of working capital management. @urther research can be also be carried out the study of working capital management. *his one of such preliminary research work and further review of this research work can open up many dimensions for researchers. /lthough the ob1ective taken in research study is diverse, yet a trend can be observed from the findings for future research work. "ne of the ma1or drawbacks of the study is the lack of time. Working capital management is a very vast topic and hence in a limited time it is impossible to know every aspects of working capital management. /nd also it was study that depended on 6years of data. *here is future scope for studying these things.

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DISCLAIMER *he present study of working capital management in $%I &'(&# )*+ is purely academic in nature. *he analysis of the data and interpretation of the matters in the pro1ect report are purely academic purpose and nobody should take it as a fact finding conclusion for lodging any claim or submission of above facts for their personal benefits for which the undersigned will not be held responsible. *he views suggestions, conclusions etc. are the bonfied work of mine and nobody should claim or copy it for their benefit without permission.

...

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BIBLIOGRAPHY TEIT BOOKS:

;. (aheswari +r #.n 9@inancial management:, .inth edition, =44E sultan chand U sons, .ew +elhi =. &andey I.(., 9@inancial (anagement:, Nikas &ublishing 7ouse &vt.)td. F th Edition ;EEE. 3. &rasanna $handra, 9@inancial management:, @ourth edition ;EEE, *ata (c.graw hill publishing company ltd, .ew +elhi. 6. upta, sashi., 9financial management:, 6th edition,=4;4, kalyani publisher, new delhi ?. -othari $.%. 9%esearch (ethodology:, Wishva prakashan, .ew +elhi, =44;.

/%*I$)E#> /n overview of working capital management and corporate financing. Working capital management. Working $apital (anagement (anages @low of @unds: DAear =4;=< 9Working $apital (anagement2an Effective *ool for "rganisational #uccess: Aear D=4;;< W$=s"4$: www.cripumps.com www. oogle.com www. Investopedia.com www.moneycontrol.com www.wikipedia.com

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: ANNEITURE: BALANCE SHEETS OF CRI PUMPS LTD

PROFIT F LOSS ACCOUNTS OF CRI PUMPS LTD

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BALANCE SHEETs OF CRI PUMPS LTD7IN RUPEES0 as +. 31s4 *a%522/13 as +. 31s4 *a%52 2/12 as a+. 31s4 *a%52 2/11 as +. 31s4 *a%52 2/1/

i<sources of funds 1 ".D$s4+%s '-.)s Investors capital investors reserves and surplus 2 (+a.s '-.)s #ecured loans 'nsecured loans 3 +42$%s '-.)s $onsumer security deposit ""0a11("5a4"+. +' '-.)s 1 '"E$) ass$4s ross block )ess> accumulated depreciation .et block $apital work2in2progress =.investments 3 5-%%$.4 ass$4s! (+a.s a.) a)Da.5$s #tores and spaces #undry debtors $ash and bank balance "ther current assets )oans and advances )ess> C-%%$.4 ("a="("4"$s a.) 1%+D"s"+.s $urrent liabilities &rovisions N$4 5-%%$.4 ass$4s @7a0 *"s5$((a.$+-s $E1$.)"4-%$ 4+ 42$ $E4$.4 .+4 C%"44$. +'' +% a)3-s4$) a%$ .+4 C%"44$. +'' +% a)3-s4$) 7=01%+'"4 a.) (+ss a55+-.4

FF;,=??,444 B,F=6,BBB,E?4 <!</6!?21!?6/ =,EC4,F63,4EE C,33F,=;6,EE;

F3;,=??,444 ?,?3;,BCB,F=B 9!392!?31!>29 6,436,EBC,?C3 E,4F;,B=E,B36

B44,C44,444 ?,3BF,3B=,B?C 6!?9?!/92!96< ?,4E6,B4;,=?B E,4?F,3;6,C?=

B44,C44444 ?,;63,;CF,EE4 6!<@3!><>!??/ B,;=;,=EB,?F6 E,;=F,;=;,63E

6??,336 =B,43C,6C3,6;? ;=,?;E,C?4,;3F ;3,?;C,C=3,=CC ?,CB4,C43,F;C =C4,??4,444

F3,336 =6,;?=,B;6,?C; ;;,63C,?6B,?66 ;=,C;?,4BF,4=C B,C;;,433,4;E =C4,??4,444

F3,336 ==,C=?,3BE,BFB ;4,364,;4F,BBF ;=,3F?,=B;,4;F C,==;,664,6C6 =C4,??4,444

F3,336 =4,BB6,3C3,CEF E,=6;,46E,BCF ;;,6=3,3=6,;=4 F,=63,3=C,BBC =C4,??4,444

EBE,4?B,6B4 ;,4??,B3;,BEF C=C,;4B,;=E C66,FE6,C?F ;,?F=,BFB,333

F4F,?;E,=CF ;,4??,4EC,6C3 E4C,4;E,C?4 C3F,E?;,;CC =,CFB,;?C,6;E

CBB,FB?,=B= ;,4?=,6CE,EF= 6E4,FF;,;F3 B?=,??3,346 ;63,33E,?C=

C?;,4B6,BE4 CEF,;EB,=4; B6F,=CB,F;= B=F,4F;,EFC 3FE,64B,C3E

=,?;C,EEB,CEE ?,BE?,BBC,6C?

=,6CB,6FB,46B 6,F;C,44=,B43

=,4??,;BF,CB6 ;,346,?;C,C66

;,BCC,;6B,BEC F34,FB?,F;E

-3!13@!2>>!>?9

-??<!<@3!663 3,4=B,6=3

-263!69<!2/6 B,4?=,F6B

</<!/13!?13 E4CE=BE

71!9//!<@<!1<60

7<<<!9<>!@610

7@?2!32@!>990

73@/!/>6!3<>0

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PROFIT AND LOSS ACCOUNTS

INCOME %evenue from wheeling of &umps "ther Income *otal EIPENDITURE /dministrative, eneral U "ther Expenses 3;.43.=4;3 3,4?,;B,=C,?BF ;,3B,B=,;F,E?E @!@1!<>!@9!62< 3,6E,F6,?B,=EF

FOR THE YEAR ENDED

3;.43.=4;= B,CF,E=,E?,6=C 3B,F6,6C,4F3 <!16!<<!@2!61/ ?,=C,CB,BB,B33 ;,4E,F=,6 3;.43.=4;; 3,EE,C?,?F,CEF =F,=;,43,;C; @!2<!?9!91!?9? =,3E,EE,FF,B=C 3;.43.=4;4 3??36E664; ;BFB;;??4 3<221/6?61 ;,6=,3;,E6,4BC

+epreciation *otal &rofitK D)oss< before interest U finance charges Interest U @inance $harges .et prior period incomeKDexpenditure< &rofitKD)oss< before *axation U $ontingency P%+D"s"+. '+% 4aEa4"+.:$urrent year @ringe 8enefit *ax &rofit /fter *ax %eserve /ppropriation /ppropriation to $ontingencies %eserve &rofitKD)oss< /fter *axation U $ontingency %eserve 8alance of &U) /ccount 8rought @orward from )ast Aear &alance Carried over to &alance ,2eet

;,4F,43,36,?=4 @!6<!><!?/!>1> 2;B,4E,66,=E; 2?6,;B,4;,;EF 2;,;;,C=,;?? 2C;,3C,;C,B66

;,3?= 9!36!<?!/<!?>6 CF,;F,36,?=?

;,4F,?6,F?,C44 3!@>!6@!<@!32< CE,6;,FC,B6=

EFB,3F;,6?; 2!@/!?6!<6!61> ;,3;,=?,34,633 2;,;B,=3,;=,?3; 2;?,?E,CE,;EE 2?C,B;,=EC

2EC,=6,?6,B;C 2;,;4,B?,?6,3;F C?,E4,=4E =C,?F,BC,=E3 2;F,34,=E,FF6 23,B6,EE,3F3

4 4 2C;,3C,;C,B66 222222222222 2;4,E3,?;,4F4 2F=,34,BF,C=6 2CC,CB,CF,6?; -1!9/!/<!@<!1<6

4 4 2=3,EB,E;? 2;F,?6,=B,CEE 2E,EE,=B,CFB 2=F,?3,?3,?F? 26E,=3,=6,FBB -<<!<9!<>!@61

4 2=;;3=?B 23FB;=B3E 222222222222 2;;,3B,=B,F6E 2;?,==,3E,6FF 236,44,F?,3CF -@?!23!2@!>99

4 2=36;?36 2F;4=F3; 2222222222222 2F,=6,F?,6F3 2E,4?,FF,3;6 2=6,E6,EC,4B6 -3@!//!>6!3<>

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