A

PROJECT REPORT
ON
WORKING CAPITAL MANAGEMENT
AT

Submitted to
J.H.PATEL COLLEGE OF MANAGEMENT AND TECHNOLOGY, DAHEMI
Affiliated to
GUJARAT TECHNOLOGICAL UNIVERSITY
In partial fulfillment of the requirement of the award for the degree of
MASTER OF BUSINESS ADMINISTRATION
Submitted by
BHAUMIK A.PATEL
Enrollment No:-107950592040
M.B.A (2010-2012)
INTERNAL GUIDE
MR.ROHIT LALWANI
(Asst. Prof.)

EXTERNALGUIDE
MR VIPUL PATEL
(Executive, T&D)

J.H.PATEL COLLEGE OF MANAGEMENT AND TECHNOLOGY

AT & POST DAHEMI, ANAND
JULY 2011
DECLARATION

I, the under signed Bhaumik A. Patel, hereby declare and confirm that work
done by me is original and true to the best of my knowledge and belief. It is the result
of my efforts and dedication. Moreover it has been approved by the management of
J. H. Patel College of Management & Technology and does not contain any
material objectionable to them. This project is just a part of my college curriculum and
will not be used elsewhere.

Date:
Signature:

PREFACE

The MBA programmed is well structured and integrated course of business studies.
The main objective of practical training at MBA level is to develop skill in student by
supplement to the theoretical study of business management in general. Industrial
training helps to gain real life knowledge about the industrial environment and business
practices. The MBA programmed provides student with a fundamental knowledge of
business and organizational functions and activities as well as an exposure to strategic
thinking of management.
In every professional course, training is an important factor. Professors give us
theoretical knowledge of various subjects in the college but we are practically exposed
of such subjects when we get the training in the organization. It is only the training
through which I come to know that what an industry is and how it works
Training is an integral part of MBA and each and every student has to undergo the
training for 6 weeks in a company and then prepare a project report on the same after
the completion of training.
During this whole training I got lot of experience and came to know about the
management practices in real that how it differs from those of theoretical knowledge and
the practically in the real life

ACKNOWLEDEGMENT
Many hands make a great work
In the 2ndsemester of my M.B.A. programs. I have undergone training at
ANUPAM INDUSTRY LIMITED. This Training has become successful and worth
because of the united hands and support of many people.
I take an opportunity to thank my college J. H. Patel College of management
and Technology, my director Dr.M.K.Patel and faculty guide MR.ROHIT LALWANI
With due respect, I present my sense of gratitude to Board of Directors of
Anupam Industry ltd.I am also greatfull to Mr. Vipul Patel and other Executives Mrs.
Bhavika for their constant support.
I am extremely very thankful to Human Resource Department who had
encouraging and helping me in preparing the project report.

PATEL BHAUMIK A.

EXECUTIVE S UMMARY

This project is carried out as a part of MBA programmed at ANUPAM

ENGINEERING LTD. For 6 weeks on working capital management. ANUPAM is very
successful in engineering works.its market is all over the Asia.
The major objective of the study is to proper understanding the working capital of
Anupam & to suggest measures to overcome the shortfalls if any funds needed for short
term needs for the purpose like raw materials, payment of wages and other day to day
expenses are known as working capital. Decisions relating to working capital (Current
assets-Current liabilities) and short term financing are known as working capital
management. It involves the relationship between a firms short-term assets and its
short term liabilities. By definition, working capital management entails short-term
definitions, generally relating to the next one year period.
The goal of working capital management is to ensure that the firm is able to
continue its operation and that it has sufficient cash flow to satisfy both maturing short
term debt and upcoming operational expenses. Working capital is primarily concerned
with inventories management, Receivable management, cash management & Payable
management.

INDEX

CHAPTER NO.

PARTICULAR

PAGE No.

PREFACE

ACKNOWLEDEGEMENT

ii

EXECUTIVE SUMMERY

iii

INTRODUCTION

WORKING CAPITAL MANAGEMENT

10

RESEARCH METHODOLOGY

28

DATA ANALYSIS & INTERPRETATION

31

FINDING

49

SUGGESTION

50

CONCLUSION

51

BIBLIOGRAPHY

52

ANNEXURE

53

CHAPTER -1
INTRODUCTION
1.
2.
3.
4.
5.

History of Company
Mission, Vision
Company profile
Organization Structure
Departments

HISTORY OF THE COMPANY

The foundation of Anupam was laid in 1973 by entrepreneur technocrat
shri,J.C.Patel., who had gained rich experience of a decade in crude designing at heavy
engineering corporation, Ranchi.
The main trust of company all along has been its proficiency in its design
capacity, research, development and satisfaction of its customer.
Anupam Industries Ltd. Having enriched experience of 37 years is one of the
market leaders in crude manufacturing in India. In a span of 37 years the company has

a satisfied customer base of more than 3500 installation across the globe.
Through its 37 decades long history, Anupam has grown strength to strength and
is now a front runner in the crane manufacturing industries.
The company headed by J.C.Patel founder chairman, who is a sound technocrat
with a total experience of 4 decades under his leadership a team of young technocrat
Mr. Mehul Patel who is managing director and Mrs. Shreya Patel who is executive
director both with rich experience are holding different operations of the company. They
are backed by a team of professors having experience of more than 3 decades of
various functions like designing, engineering, marketing, contracts, finance and
operations.
Since the Anupam Industry Ltd. has gradually developed its capabilities and
have flourished in all horizon. Today Anupam has one of the foremost.

Vision: To view growth as a way of life and make Anupam Industries the
foremost venture to invest in and prosper.

Mission: To establish ourselves as a dominant player in crane manufacturing

industries across the globe.

COMPANY PROFILE

Name :
Registered Office :

ANUPAM INDUSTRIES LTD

138, G.I.D.C. Vitthal Udyognagar,
Anand. 388121

Telephone no:

(02692) 236118, 235210, 236324

Fax no:

(02692) 236324

 E-mail:

anupamgrop@gmail.com
anupam@anupamgroup.com

Web-site:

http//www.anupamgroup.com

Year of establishment:

1973

Promoters:

Mr.JagdishchandraG. Patel.

Board of Directors :
Chairman:Mr. Jagdishchandra Patel.
Managing Director: Mr. Mehul Patel.
Executive Director: Mrs. Shreya Patel
Auditors :

M/S Deloitte Haskins & Sells,

Chartered Accountants, Ahmedabad

Bankers :

Size of the unit :

Main Product :
o
o
o
o
o
o
o
o
o

HDFC Bank Ltd.

ICICI Bank Ltd.
AXIS Bank Ltd.
Standard chartered Bank Ltd

Anupam Industry is a medium scale unit.

Overhead travelling eon crane up to 500t capacity.

Gantry/ Goliath cranes up to 500t capacity.
Four girder/ double girder ladel crane up to 500t capacity.
Magnet cranes with rotating trolley or rotating spreader beam.
Steel plant equipment viz., Coil/ slag pot transfer car, ladle car,ladel.
Tower crane.
Level buffing crane.
Container handling port cranes viz., RMQC, RTGC & RMGC.
Heavy duty transfer trolleys.

 Competitors :
I.
II.
III.
IV.

WMI
MUKUND
UNIC
FAFECO

I.
II.
III.
IV.
V.
VI.
VII.
VIII.
IX.

Tata steel
Hindal co.
Kawasaki
Reliance
A.B.B.
JSW
Siemens
Elicon
Alston

Clients:

ORGANIZATION STRUCTURE
Board Of Directors

Chairman

Managing Director

Executive Director


General Manager

Chief Manager

Senior

Manager

Officer

Staff

DEPARTMENTS OF COMPANY
Anupam industry have different department for the work carried out effectively and
efficiently. The entire departments maintain good interaction with one another.
Following are the departments;

Marketing & Sales Department;

Anupam has well organized marketing department. It has enough

number of marketing agents & salesmen.

Its most important function is to bring orders as without having an

order no one will think of producing items. Marketing Department
fetches orders from various industries through advertisement,

discounts, etc. It brings details depicting clients requirements. The

details include technical specifications, terms & conditions, price,
delivery date. It also receives payment

Design Department:

It is the one of the most important function of any organization. The

main Function of this department is to design as per the technical
detail provided by the marketing department.
Copy of the work order is released by marketing department. This
copy is given to the design department. Design department
released set of part drawing and assembly drawings to the planning
department as per design.
Design department maintains drawings of part assemblies, Part
and update their drawings if any change occurs in the design.

Production Planning & Control:

Once design department prepared the design according to

specification requirements, the marketing people show design to
customer & make changes if require then the final design comes to
ppc department. Now the function of planning starts.
They first list out bill of materials in which they decide about make
or buy policy. They check whether the material is available or not. If
not then they put order to a purchase department.
They draw out activity chart for all activity, time for each activity &
man hours availability. According to activity chart, they fix the
completion date & show it to marketing department. During
manufacturing of the product they continuously remain in contact
with people & note if the production is carried out as per planning or
not.

Purchase department:
Purchase department is involved in purchasing items from the
suppliers and selecting & registering the supplier on the basis of
their ability to meet specified requirements. It is also responsible for
establishing & maintaining the record of acceptable suppliers &
evaluation of suppliers.

 Quality Control Department:

Purchased raw materials and finished items are first inspected by
quality control department and after certified by quality control
department as flawless, they are taken to the store.
Quality Control Department is also involved in stage inspection and
final inspection of product.

Maintenance Department:

Maintenance department is responsible for repairing the breakdown

machines as soon as possible to reduce machine down time cost. It
is also responsible for maintaining data of available machines and
equipments.

Store :

The function of store is to document a procedure for receipt & issue

of material from store & to maintain sufficient inventory level of
items to ensure availability of material for production process.

Dispatch Department :
Function of dispatch department is to dispatch the product to the
respective client.
Human resource management :

Human resource department take care of the employees and as

well as the worker. HRD take care of the payment salary as well as
the wages to the concern employees or worker on time. And the
wages and salary fixed on the basis of the merit of the work and
which position employee work.
HRD make transfer or promotion of the employees base on the
performance system.

HRD arranged the training to the employees time to time for the
better improvements of the employee.
HRD also take of the allowances to the employees like travelling,
etc. which is fixed by the management of the company.

1) Time keeping system:

in Anupam industry limited there are 370 workers and
the time of working into plants is divided into shifts
there are mainly 2 shift in the company:
8:00am 4:30pm

4:30pm 12:30am
The company has 1 more shift for the office staff from
9:00am to 6:00pm.
The company has computerized attendance system.
Every employee is provided with a magnetic card
computable by the machine.

2) Employee service:
According to management employees services is essential
because it will encourage its workers to increase their
efficiency. The company provides all services to employees
according to Employees Welfare Act 1948. At the facilities
provided are as under;

Interest free advance to employees for medical

treatment.
Medical facilities
Employee welfare fund
Other facilities like insurance, mediclaim etc..
Uniform

The worker of the anupam industries limited get a financial

service from the company they are as followed:
Loan & advance at the time of two or three days in the
replace land and building property repairs.
Vehicle loans
Workers compensation fund
3) Work-force
Total 600 office staff and approximately 900 manpower

on shop floor including contract letter.

CHAPTER -2
WORKING CAPITAL MANAGEMENT
1. Intoduction of Finance
2. Working capital Management

INTRODUCTION OF FINANCE

MONEY IS THE LIFE BLOOD OF MODERN BUSINESS

Finance means the management of money. Money is the important current asset for the
operations of business. Cash is a basic requirement of the business running on a
continuous basis. Finance as considered as the heart of every organization. Finance
meets very important from like financial planning, capital structure and financial
statement.
It is also useful to know whether there is enough finance for the project or not
also whether the project will be advantage our profitability for the company or not, this
all things are decided by this department.
Financial management basically considered with managing of
(1) Cash flow & out flow
(2) Cash flow within the firm
(3) Cash balance deficit or investing surplus finance.
Financial management is considered with the effective utilization of raised funds
towards achieving the organizational goal. Finance is considered as a life blood o f an
organization without blood cant survival live, like that without finance organization
cannot work so it is rightly said that
THE FINANCE IS THE LIFE BLOOD OF AN ORGANISATION

o Financial planning

Planning means determining or forecasting future events of necessities. It

determine firms goal and polices where to invest, why to invest and also process for
purpose this is call financial planning.
Basically the various industries have a various types of financial planning.There
are three types of financial planning.
(1) Short term planning
(2) Medium term planning
(3) Long term planning
The Anupam industry follows various steps on financial planning.
(1) Financing
(2) Analysis of past performance
(3) Establishing objectives
(4) Quantity investment need
(5) Forecasting flows
(6) Consequences of plans

WORKING CAPITAL MANAGEMENT

DEFINITION
The management of short term asset and short run resource is said to be
Working capital management or current asset management. There are two concepts of
working capital : Gross working capital and Net working capital.
Note :Current Assets are the assets which can be converted into cash within an
accounting year and include cash, shorts-term securities, debtors, (accounts receivable
or book debts) bills receivable and stock (inventory)

CONCEPT OF WORKING CAPITAL

(1). Gross Working Capital :

The gross working capital is the capital invested in the total current assets of the
enterprises, it is short period normally one accounting year.
Gross working capital refers to the firm`s investment in current assets.
(2). Net Working capital :
Net Working Capital refers to the difference between current claims of outsiders
which are expected to mature for payment within an accounting year and include
creditors (accounts payable,) bills payable, and outstanding expenses.
CONSTITUENTS OF CURRENT ASSETS
1)

Cash in hand and cash at bank

2)

Bills receivables

3)

Sundry debtors

4)

Short term loans and advances.

5)

Inventories of stock as:

a.

Raw material

b.

Work in process

c.

Stores and spares

d.

Finished goods

6. Temporary investment of surplus funds.

7. Prepaid expenses
8. Accrued incomes.
9. Marketable securities.

NET WORKING CAPITAL = CURRENT ASSETS CURRENT LIABILITIES.

Net working capital can be positive or negative. When the current assets
exceeds the 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 one accounting year out of the current assts or the income
business.

CONSTITUENTS OF CURRENT LIABILITIES

1.

Accrued or outstanding expenses.

2.

Short term loans, advances and deposits.

3.

Dividends payable.

4.

Bank overdraft.

5.

Provision for taxation , if it does not amt. to app. Of profit.

6.

Bills payable.

7.

Sundry creditors.

The gross concept is sometimes preferred to the concept of working capital for the
following reasons:
1. It enables the enterprise to provide correct amount of working capital at correct time.
2. Every management is more interested in total current assets with which it has to operate
then the source from where it is made available.
3. It take into consideration of the fact every increase in the funds of the enterprise would
increase its working capital.
4. This concept is also useful in determining the rate of return on investments in working
capital. The net working capital concept, however, is also important for following
reasons:
i.

It is qualitative concept, which indicates the firms ability to meet to its

operating expenses and short-term liabilities.

ii.

IT indicates the margin of protection available to the short term

creditors.

iii.

It is an indicator of the financial soundness of enterprises.

iv.

It suggests the need of financing a part of working capital requirement

out of the permanent sources offunds.

CLASSIFICATION OF WORKING CAPITAL

Working capital may be classified in to ways:
o

On the basis of concept.

On the basis of time.

On the basis of concept working capital can be classified as gross working capital and
net working capital. On the basis of time, working capital may be classified as:

Permanent or fixed working capital.

Temporary or variable working capital

PERMANENT OR FIXED WORKING CAPITAL

Permanent or fixed working capital is minimum amount which is required to
ensure effective utilization of fixed facilities and for maintaining the circulation of current
assets. Every firm has to maintain a minimum level of raw material, work- in-process,
finished goods and cash balance. This minimum level of current assts is called
permanent or fixed working capital as this part of working is permanently blocked in
current assets.
TEMPORARY OR VARIABLE WORKING CAPITAL
Temporary or variable working capital is the amount of working capital which is
required to meet the seasonal demands and some special exigencies. Variable working
capital can further be classified as seasonal working capital and special working capital.

The capital required to meet the seasonal need of the enterprise is called seasonal
working capital.
IMPORTANCE OR ADVANTAGE OF WORKING CAPITAL
SOLVENCY OF THE BUSINESS: Adequate working capital helps in maintaining the
solvency of the business by providing uninterrupted of production.

Goodwill: Sufficient amount of working capital enables a firm to make prompt

payments and makes and maintain the goodwill.

Easy loans: Adequate working capital leads to high solvency and credit standing

can arrange loans from banks and other on easy and favorable terms.

Cash Discounts: Adequate working capital also enables a concern to avail cash

discounts on the purchases and hence reduces cost.

Regular Supply of Raw Material: Sufficient working capital ensures regular supply

of raw material and continuous production.

Regular Payment of Salaries, Wages And Other Day TO Day Commitments: It

leads to the satisfaction of the employees and raises the morale of its employees,
increases their efficiency, reduces wastage and costs and enhances production and
profits.

Quick And Regular Return On Investments: Sufficient working capital enables a

concern to pay quick and regular of dividends to its investors and gains confidence of
the investors and can raise more funds in future.

High Morale: Adequate working capital brings an environment of securities,

confidence, high morale which results in overall efficiency in a business.

DETERMINING THE WORKING CAPITAL REQUIREMENTS

1. NATURE OF BUSINESS: The requirements of working is very limited in public utility
undertakings such as electricity, water supply and railways because they offer cash sale
only and supply services not products, and no funds are tied up in inventories and
receivables.
2. SIZE OF THE BUSINESS: Greater the size of the business, greater is the
requirement of working capital.
3. PRODUCTION POLICY: If the policy is to keep production steady by accumulating
inventories it will require higher working capital.
4. LENTH OF PRDUCTION CYCLE: The longer the manufacturing time the raw
material and other supplies have to be carried for a longer in the process with
progressive increment of labor and service costs before the final product is obtained. So
working capital is directly proportional to the length of the manufacturing process.
5. SEASONALS VARIATIONS: Generally, during the busy season, a firm requires
larger working capital than in slack season.
6. WORKING CAPITAL CYCLE: The speed with which the working cycle completes
one cycle determines the requirements of working capital. Longer the cycle larger is the
requirement working capital.
DEBTORS,
CASH,
FINISHED GOODS,
RAW MATERIAL,
WORK IN PROGRESS.

7.

RATE OF STOCK TURNOVER: There is an inverse co-relationship between the

question of working capital and the velocity or speed with which the sales are affected.
8.

CREDIT POLICY: A concern that purchases its requirements on credit and sales

its product / services on cash requires lesser amt. of working capital and vice-versa.
9.

BUSINESS CYCLE: In period of boom, when the business is prosperous, there is

need for larger amt. of working capital due to rise in sales, rise in prices, optimistic
expansion of business, etc
10. RATE OF GROWTH OF BUSINESS: In faster growing concern, we shall require
large amt. of working capital.
11. EARNING CAPACITY AND DIVIDEND POLICY: Some firms have more earning
capacity than other due to quality of their products, monopoly conditions, etc.
12. PRICE LEVEL CHANGES: Changes in the price level also affect the working capital
requirements. Generally rise in prices leads to increase in working capital.
Others FACTORS: These are:

Operating efficiency,

Management ability,

Irregularities of supply,

Import policy,

Asset structure,

Importance of labor,

Banking facilities.

CURRENT ASSETS:
[In Rs]
PARTICULARS
Inventories

2009-2010

2008-2009

600169056

274038795

1668520305

1112394029

Cash & Bank

197011292

111869851

Loans and Advances

301733690

115392662

2767434343

1613695337

Sundry debtors

TOTAL

CURRENT LIABILITIES:
[In Rs]
PARTICULARS
Sundry Creditors
Other creditors
Total B

2009-2010

2008-2009

1019753303

521808384

239965622

105000000

1259718925

626808384

NET WORKING CAPITAL

PARTICULARS
CURRENT ASSETS
Inventories
Sundry debtors
Cash & Bank
Loans and Advances
TOTAL(A)
(-)CURRENT LIABILITIES
Sundry Creditors
Other creditors
TOTAL (B)
NET WORKING CAPITAL (A-B)

2009-2010

[In Rs]
2008-2009

600169056
1668520305
197011292
301733690
2767434343

274038795
1112394029
111869851
115392662
1613695337

1019753303
239965622
1259718925
1507715418

521808384
105000000
626808384
986886953

INTERPRETATION OF WORKING CAPITAL:

 NET WORKING CAPITAL:

o In the year 2008-09 & 2009-10, the net working capital of the firm is
increased by 6.55%.
o If the firm has to improve their cash position & has to bring more funds for
the payement of sundry creditors for long term sources
INVENTORIES:
o In the year 2008-09 & 2009-10, the inventory of the firm is increased by
45.66%.The high turnover of inventory indicates good
o management of inventory.
SUNDRY DEBTORS:

o In the year 2008-09 & 2009-10, the sundry debtor of the firm is increased
by 6.70%.
o There is no significant fluctuation seemed therefore nothing is bother
about debtors.
CASH & BANK:
o Cash and bank balance of Anupam Industries is progressively increasing.
o There is an increase in the cash and bank balance by 56.78%.
o Anupam industries has to reduce cash and bank balance level in the next
financial year, because high level of cash and bank balance will affect the
cost and financial burden of the company.
CREDITORS:

o Creditors of Anupam industries have increased by 51.18%. The company

has to concentrate and reduce the creditors next year, because the
increase in the creditors is the bad sign for company.

MANAGEMENT OF INVENTORY
Inventory is a list of goods and materials available in stock by a business.

Inventories are approximately 60% of current assets in public limited companies in

India. A large size of investment is needed in inventories. It is therefore absolutely
imperative to manage inventories efficiently and effectively in order to avoid
unnecessary investment. A firm neglecting the management of inventories will be
jeopardizing its long run profitability and may fail ultimately.

RAW MATERIALS:
Raw materials are those basic inputs that are converted into finished product
through the manufacturing process.
Raw materials inventories are those basic units which have been purchased and
stored for future productions.

WORK-IN-PROGRESS:
Work- in progress inventories are semi- manufactured products. They represent
products that need more work before they become finished product for sale.

FINISHED GOODS:
Finished goods inventories are those completely manufactured product which are
ready for sale.
COMPONENTS AND SPARE PARTS:
Components and spare parts inventory constitute a small part of total inventory
and does not involve significant investment.
Needs to hold inventories:There are three general motives for holding inventories: Transaction motive emphasizes the need to maintain inventories to facilitate smooth
production and sales operation.
Precautionary motive necessities holding of inventories to guard against the risk of
unpredictable changes in demand and supply forces and other factors.
Speculative motive influences the decision to increases or reduce inventory levels to
take advantage of price fluctuations and also for saving in reordering costs and quantity
discounts etc.

Objective of Inventory Management:The main objectives of inventory management are operational and financial.
The following are the objectives of inventory management:-

 To ensure continuous supply of materials, spares and finished goods.

To avoid both over-stocking of inventory.
To maintain investments in inventories at the optimum level as required by the
operational and sale activities.
To keep material cost under control so that they contribute in reducing cost of
production and overall purchases.
To eliminate duplication in ordering or replenishing stocks. This is possible
with the help of centralizing purchases.
To minimize losses through deterioration, pilferage, wastages and damages.
To design proper organization for inventory control so that management.
Clear cut account ability should be fixed at various levels of the organization.
To ensure perpetual inventory control so that materials shown in stock ledgers
should be actually lying in the stores.
To ensure right quality of goods at reasonable prices.
To facilitate furnishing of data for short-term and long term planning and
control of inventory.

Economic Order Quantity (EOQ)

An Economic Order Quantity (EOQ) is an inventory-related evaluation to

determine the optimum order quantity which a company should use to ensure
that Inventory is not overstocked whilst at the same time maintaining sufficient
stock to prevent a stock-out. The objective therefore is to minimize the combined
costs of acquiring and carrying inventory.
The Formula used is based on the fact that the greater the number of orders
placed per year would contain fewer items per order which results in lower
Inventory holding costs but would incur a larger overall ordering cost. Combining
these two costs you get a graph as shown below:

The EOQ formula uses the following parameters:

D = Average weekly usage taken from all issue movements over the previous
year.

C = Carry factor expressed as a percentage

S= Ordering cost, as entered

h = Holding Cost of the Item.

EOQ

2DS
Ch

The EOQ model let us distinguish between three types of costs in the context of
inventory management: ordering costs, carrying costs, and shortage costs.
Ordering costs
Carrying costs
Shortage costs

CREDIT MANAGEMENT
While business firms would like to sell on cash pressure of competion and the
force of custom persuades them to sell on credit. Firms grant credit to facilitate sales. It
is valuable to customers as it augments their resources- it is particularly appealitate to
those customers who cannot borrow form other sources or find it very expensive or
inconvenient.
A firm`s investment in accounts receivables depends on how much it sells on
credit and how long it takes to collect receivables.
Cash Terms
Open Account
I. Credit Period
II. Cash Discount
IV. Billing
Consignment
Bill of exchange
Letter of Credit

CHAPTER . 3
RESEARCH METHODOLOGY

Title of the Project

Objectives of the Research
Sources of Data
Data Analysis Tools
Scope of The Study

RESEARCH METHODOLOGY
It is a logical and systematic plan prepared for direction a research study. It
specifies the objectives of the study, the methodology and techniques to be adopted for

achieving the objectives.

It is the plan, Structure and strategy of investigation conceived so as to obtain
answers to research questions.

TITLE OF THE PROJECT:

The title of the project is Working Capital Management undertaken at ANUPAM
INDUSTRIES LTD

OBJECTIVES OF THE RESEARCH

The purpose of research is to discover answers to questions through the
application of scientific procedures. The main aim of research is to find out the truth
which is hidden and which has not been discovered as yet. Though each research
study has its own specific purpose, we may think of research objectives as falling
into a number of following broad groupings:
1. To gain familiarity with a phenomenon or to achieve new insights into it
2. To portray accurately the characteristics of a particular individual situation or a
group.
3. To determine the frequency which something occurs or with which it is
associated with something else.

To understand the importance and use of different types of ratios in business.

To assess the liquidity of the company.
To know the financial growth of the company.
To know various sources of finance for ANUPAM.
To evaluate the financial condition and profitability of the company.
To know the working capital requirement of the company.
To compare the past performance of the company systematically.
To identify the financial strengths and weakness of the company.

SOURCES OF DATA
Secondary data:-

Secondary data has been used for data analysis. All data are already available in
the companys financial statement.

DATA ANALYSIS TOOL:

Data will be represented in cross tabular formats. Use of percentage, charts, graph line
etc. will be made for the study

Tables
Charts and Diagrams
Ratios

SCOPES OF THE STUDY:

The study will mainly concentrate on the working capital Management of

ANUPAM.

The key focus area of the study will be to assess the reason behind proper
management of cash, receivable, and inventory.
The basic aim behind my study is to find out the key liquidity and cash in hand & bank.

CHAPTER -4
DATA ANALYSIS & INTERPRETATION
1. Ratio Analysis
2. Net Working Capital

RATIO ANALYSIS
The most important task of a financial manager is to interpret the financial
information in such a manner, that it can be well understood by the people, who are not
well versed in financial information figures. The technique, by which it is to be
calculated, is known as Ratio Analysis.
1) Percentage

2) Rate

3) Proportion

Ratio Analysis is an important technique of financial analysis. It depicts the

efficiency or shortfall of the organization in the form of trend Analysis.
Different ratio appeal to different people managements, having the task of running
business efficiency, will interest in all ratios.
STEPS IN RATIO ANALYSIS
Collection of information, which are relevant from the financial statements and
then to calculate different ratios accordingly.
Comparison of computed ratios of the same organization or with the industry
ratios.
Interpretation, drawing of the inference and report-writing
RATIO ANALYSIS
Ratio analyses are a powerful tool of financial analysis. A ratio is defined as the
indicated quotient of two mathematical expressions and as the relationship between
two or more things.

CURRENT RATIO
Current ratio is the ratio of total current assets to total current liabilities.
Current assets = Stock, Advance & debtors, Cash & Bank Balance.
Current liabilities = Deposits, Due to societies, O/s against Expenses and Purchases,
Sundry Creditors, Provisions.
Current assets
Current Ratio = ________________
Current liabilities
Table Showing Calculation of Current Ratio

Particulars
Current Assets
Current
Liabilities
Ratio

2007-08

[In Rs]

2008-09

2009-10

893511105

1613695337

2767434343

378507477

1571808384

1259718925

2.36

1.02

2.19

Source: Balance Sheet of ANUPAN INDSTRIES LTD.

Current Ratio
2.5
2
Current Ratio

1.5
1
0.5
0
2007-08

2008-09

Year

2009-10

Interpretation
Generally current ratio should 2:1 but as per our calculation in Mar'08 it was 2.36, it
means company has 2.36 rupees current assets against current liability on rupees 1.
Company has good current assets than current claims against them. In Mar'10
Companys current ratio is2.19 which is satisfactory.

STOCK TURNOVER RATIO

This ratio indicates the efficiency of the firm in selling its product. It is calculated by
dividing the cost of goods sold by average inventory.
Cost of goods sold
Inventory turnover = _________________
Average stock
Cost of goods sold = Opening stock + Purchase + Purchase
Of Raw Material + Purchase expenses Closing stock
Opening Stock + Closing Stock
Average Inventory = ____________________________
2
Table Showing Calculation of inventory turnover ratio
Particulars
Cost Of Goods
Sold
Average Inventory
Ratio
(in times)

[In Rs]

2007-08
1123744772

2008-09
1596398405

2009-10
2186812579

159998118
7.02

245131203
6.51

437103925
5.01

Source: Balance Sheet of ANUPAN INDSTRIES LTD.

Inventory turnover ratio

8
7
6
Inventory turnover ratio

5
4
3
2
1
0
2007-08

2008-09

2009-10

Year

Interpretation
It indicates the efficiency of the firm in selling its product. In Mar'08 inventory turnover is
7 times and in Mar'10 it is 5 times in a year. This is not good from view point of liquidity.
We can say company sells its product slow.

DEBTORS TURNOVER RATIO

The debtors turnover ratio indicates the velocity of debt collection of a firm. In other
words, it indicates number of times the debtors are turned over during a year.
Debtors turnover Ratio can be found out dividing Average Debtors by Sales
Sales = Net Sales
Debtors = Trade Debtors, Sundry debtors, due from societies
Debtors Turnover Ratio = Debtors 365
Sales
Table Showing Calculation of Debtors Turnover Ratio
Particulars

2007-08

[In Rs]

2008-09

2009-10

Net credit sales

1256645988

1939609532

2882500463

Average Debtors

580126705

846260367

1390457167

2.17

2.29

2.07

Ratio

Source: Balance Sheet of ANUPAN INDSTRIES LTD.

Debtors Turnover Ratio

2.3
2.25
2.2
2.15

Debtors Turnover Ratio

2.1
2.05
2
1.95
2007-08

2008-09

2009-10

Year

Interpretation
The companys debtors turnover ratio of Mar'08 2.17times, in Mar'10 2.07 times in a
yearwhich indicates company is not collecting its receivable rapidly.

CREDITOR TURNOVER RATIO

Creditor turnover ratio is computed by net credit purchases to average creditors.
Creditors = Outstanding against Purchases + Societies + Outstanding against Expenses
+ Sundry Creditors
Average Creditors
Creditor Turnover Ratio = __________________ 365
Net Purchase

Table Showing Calculation of Creditors Turnover Ratio[In Rs]

Particulars
Net Credit
Purchase

2007-08
901900455

2008-09
1364059118

2009-10
2128056819

Average Creditors

264983398

292868687

538429135

3.40

4.66

3.95

Ratio

Source: Balance Sheet of ANUPAN INDSTRIES LTD.

Creditors Turnover Ratio

5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0

Creditors Turnover Ratio

2007-08

2008-09

2009-10

Year

Interpretation
Above stated graph indicates that in Mar'08 Company has settled its creditors accounts
3.40 times in a year. In Mar'09 it had increased by 4.66 which show that company had
settled its account rapidly. From Mar'08 to Mar'10 it has paid its creditors account
average of 4 times.If creditors turnover ratio is high companys requirements of working
capital will increaseand vice-a-versa.

Debtors Collection Period

The ratio indicates the extent to which the debts have been collected in time. It gives
theaverage debt collection period. Debtors Collection Period is calculated from
followingformula:

Debtors Collection Period = 360 days / Debtors Turnover Ratio

Table Showing Calculation of Debtors Collection Period[In Rs]

Particulars

2007-08

2008-09

2009-10

Days in Years

360

360

360

Debtors Turnover
Ratio

2.17

2.29

2.07

Debtors Collection
Period (in days)

166

157

174

Source: Balance Sheet of ANUPAN INDSTRIES LTD.

Debtors Collection Period

175
170

Days

165
Debtors Collection Period

160
155
150
145
2007-08

2008-09

2009-10

Year

Interpretation
According to debtor collection period from above table, Company was following
liberalcredit policy as its collection period of Mar'10 was 174 days. Thus, to decrease
the debtcollection period the company has to adopt certain policy s to attract the
customers to paydebts. Policies like trade credit, cash credit.

TOTAL ASSETS TURNOVER RATIO

Total Assets Turnover Ratio shows the firms ability in generating sales from all
financial sources committed to total assets thus
Sales
Total Assets Turnover = _____________
Total Assets
Table Showing Calculation of Total Assets Turnover Ratio
[In Rs]
Particulars

2007-08

Sale
Total Assets
Ratio

1256645988
765481174
1.64

2008-09
1939609532
1393137273
1.39

2009-10
2882500463
2117155026
1.36

Source: Balance Sheet of ANUPAN INDSTRIES LTD

.

Total Assets Turnover Ratio

1.8
1.6
1.4
1.2
1

Total Assets Turnover Ratio

0.8
0.6
0.4
0.2
0
2007-08

2008-09

2009-10

Interpretation
Here, we can interpret that companys asset turnover ratio in Mar07 is 1.64is declining
continually in Mar10 it is 1.36 which indicates under utilization of available resources.

GROSS PROFIT RATIO

It is a ratio measuring the gross earning of the company to its sales which means
for the sale of every Rs.100, how much amount of money is earned as gross profit after
deducting all manufacturing expenses.
Gross Profit Ratio=Gross Profit/Sales100
Gross Profit=sales-cost of goods sold
[In Rs]

Particulars
GROSS PROFIT
SALES
RATIO (in %)

2007-08

2008-09

281290506
1256645988
22.40

2009-10

663851613
1939609532

1157006645
2882500463

34.23

40

Source: Balance Sheet of ANUPAN INDSTRIES LTD.

GROSS PROFIT TO SALES RATIO

40
35
30
25

GROSS PROFIT TO SALES

RATIO

20
15
10
5
0

Year
2007-08

Interpretation

2008-09

2009-10

The gross profit margin reflects the efficiency with which management produces each
unit ofthe product. This ratio indicates the average spread between the cost of goods
sold and the sales revenue. In the financial year Mar'08 the gross profit was 34.23%
and in financial year Mar'10 it is 40.00%. It indicates higher sales price without a
corresponding increasing in the cost ofgoods sold or decreasing in cost of sales.

NET PROFIT RATIO

Net Profit is obtained when operating expenses; interest and taxes are subtracted from

gross-profit. The net profit margin ratio is measured by dividing profit after tax by sales.
Net profit
Net profit margin = _________ 100
Sales
Table Showing Calculation of Net Profit to Sales Ratio

[ In Rs]

Particulars

2009-10

2007-08

NET PROFIT
SALES
RATIO(in %)

2008-09

185656190
1256645988
14.77

226395326
1939609532
11.67

440558680
2882500463
15.28

Source: Balance Sheet of ANUPAN INDSTRIES LTD.

NET PROFIT TO SALES RATIO

16
14
12
10

NET PROFIT TO SALES

RATIO

8
6
4
2
0
2007-08

2008-09

2009-10

Interpretation:
This ratio indicates the firm s capacity to face adverse economic conditions such as
pricecompetition, low demand etc. obviously, higher the ratio, the better is the
profitability. In thefinancial year Mar'08 the net profit was 14.77% and in Mar'10 it was

Year

increasing by 15.28%which ensure adequate return to the owner as well as enable a

firm to cope with the adverseeconomy conditions when selling price is declining or
demand of product is falling.

FIXED ASSETS TURNOVER RATIO

This ratio established the relationship between net sales & net fixed assets.helpsto
ascertain the efficiency & profitability of the business.
FIXED ASSETS TURNOVER RATIO = COGS / NET FIXED ASSETS
Table Showing Calculation of Fixed Assets Turnover[In Rs]

Particulars

2007-08

COGS
Net Total Fixed
Assets
Ratio

2008-09

2009-10

1123744772
129875460

1596398405
372118422

2186812579
567611107

8.65

4.29

3.85

Source: Balance Sheet of ANUPAN INDSTRIES LTD.

Fixed Asset Turnover Ratio

9
8
7
6
5

Fixed Asset Turnover Ratio

4
3
2
1
0
2007-08

2008-09

2009-10

Interpretation
Generally, high fixed assets turnovers are preferred since they indicate a better
efficiency in fixed assetsutilization. From the above calculations companys fixed assets
turnover ratio is continuously decreasing. In year Mar08 it is 4.29 and in Mar10 it is
3.85. It means companys efficiency of managing and utilizing its assets goes down.
Company is not utilizing its fixed assets at fullest capacity.

FINDINGS
Anupam industries is an engineering company situated at G.I.D.C ,
udhyog nagar
The major findings of Anupam industries are summarized below:

Vitthal

 It is clear that the working capital level has been increased significantly over last
year, the reason behind this is increase in current assets that is inventories,
debtors, cash and bank balance.
The company is having good debtors turnover ratio.
There is no significant fluctuation seemed therefore nothing is bother about
debtors.
Company has a good image in market as they are getting more credit from
supplier and good credit terms.
The stock turnover ratio of company is reducing its not a good sign for future

SUGGESTIONS
In order to overcome the influence or obstacle Company have to decide Business
Strategy suitably and ensure the performance of the operations management and
proper utilization of working capital so that the company can be competitive.
With the development of financial markets the concepts of liquidity has,
undergone further transformation. It is no longer liquidity per se but access to liquidity

that has taken the centre stage of liquidity management.

The performance of Production and Operation is decided by
Regular evaluation of its financial position and efficiency of
performance.
Making financial estimate for the future prospects.
Finding out potential credit suppliers and investors for future
advancement.
Manage their basic function of planning, coordinating, controlling etc.
Make business policy and certain important decisions.
Company is getting more and more order to manufacture the product
and for maintaining the order they have to purchase more raw
materials.
The company dont have good assets turnover ratio that meansthey are
not utilizing their resources effectively & efficiencly

Conclusion
Financial term and Operation of that company that is manufacturing is very
important for the company. We know that financial statement of a business organization
are very useful to different parties such as management, shareholders, creditors,
investors, banks, financial institution, government authorities etc. Information provided
in the financial statements serves no purpose unless it is analyzed and interpreted in
some comparable terms. To obtain the data analysis and interpretation of the data, it

can be done with the help of working capital and ratio analysis. It is important tool for
financial analysis and it is used as yardstick for examine the financial position of any
business organization.
An Anupam industry limited is a well established organization in the field of CRANE
manufacturing since last 3 decades. It has a enormous popularity in this field.
On the basis of the data analysis and interpretation we can say that the
companys management is very efficient and active.
Thus overall position of the company is satisfactory and up to the standard.
1. Net Working Capital found out that base , we could say last year the
Net Working Capital goes up approx. from 62.68 to 125.97crore which are
showing that the company is required more working capital for completing the
work in comparison of previous year.
2. Loan and Advances of company from the financial year 2009 to 2010. It has
increased significantly. In the financial year 2008, Loan and Advances is
decreasing significantly up to Rs.142.5 crore in comparisons of the previous
financial year 2007. Out of 2 years, there were lowest Loans and Advances in that
financial year of Rs. 82054.
3. Company is financial sound and ready to take risk and opportunities to meet
uncertainty

4. Current assets are increasing in 2009 in comparisons of financial

year 2008. In
the year 2009, it was increasing of Rs.1153739006 in comparisons of last
(previous) year 2008.

BIBLIOGRAPHY

BOOKS:
Pandey I M Financial Management,9th revised edition,Vikas Publishing House
Pvt. Ltd, 2005.New Delhi.

 Chandra Prasanna, Financial Management,Theory and practice, 7th edition Tata

McGraw Hill Publishing Co. Ltd,New Delhi.
WEBSITE:

www.anupamgroup.com

ANNEXURE

PROFIT & LOSS A/C

BALANCE SHEET

ANUPAM INDUSTRIES LIMITED

PROFIT & LOSS ACCOUNT
Year ended
Year ended
march
march
31,2010(in
31,2009(in
rupees)
rupees)
INCOME:
Sales
Less : Excise duty recovered on sales

Year ended
march
31,2008(in
rupees)

3124060857
241560394

2135838282
196228750

1405035278
148389290

2882500463
142998477

1939609532
94050651

1256645988

6934603

2119900

5326621

3032433543

2035780083

106142868

(167,754,199)
1,969,680,757
66,565,737
109,858,432
94,370,936
84,367,276
139,012,450
40,644,270

(1,376,656)
1,307,620,591
63,564,635
78,957,623
62,317,975
67,077,635
105,345,308
9,061,845

895592336
35502501
31120562
19909055
47617071
52990281
4093165

2,336,745,659
695,687,884

1,692,568,956
343,211,127

1086824971
281290506

238,036,492

105,000,000

92500000

4,088,906
13,004,106

318,329
10,676,712
820,760

2405541
728775

Profit After Tax:

Add: Balance brought forward from p.y

440,558,380
1,866,080

226,395,326
470,754

185656190
119759

Amount available for Appropriations:

APPROPRIATIONS:
Dividend on Preference Shares
Tax on Dividend
Transfer to General Reserve

442,424,460

226,866,080

184470754

4,930
819
425,000,000

225,000,000

184000000

425005749

225,000,000

17418711

1,866,080

115.80

59.51
59.51

Erection and Other charges

[T.D.S. Rs. 20,77,850/-(P.Y. Rs. 2602744/-)]
Other income
TOTAL :
EXPENDITURE:
Increased in stock
Materials Consumed
Manufacturing Expenses
Employee Costs
Administration & General Expenses
Selling & Distribution Expenses
Interest & Finance Charges
Depreciation/Amortization
TOTAL:
Profit Before Tax:
Provision for:
Current Tax
{Including RS. 36,492/-for Wealth Tax
(P.Y.Rs. NIL)}
Tax for earlier years
Deferred tax
Fringe Benefit Tax

Balance Carried to Balance Sheet:

Earnings Per Share
Basic
Diluted
(refer Note-21 of Schedule 21)

470754
48.80

In Rs.

ANUPAM INDUSTRIES LIMITED

Balance Sheet
Sources
SOURCES OF FUNDS
Share capital
Reserves &surplus
LOANS
Secured Loans
Unsecured Loans
Differed tax liabilities
Total
APPLICATION OF
FUNDS
Fixed Assets
Gross Block
(-) depreciation
Net Block
Capital work in
progress
Investment
Current assets Loans &
advances
Inventories
Sundry Debtors
Cash & Bank Balance
Loans & Advances
Less:- Current
Liabilities & Provisions
Current Liabilities
Provisions
Net current assets
Miscellaneous
expenditure
(to the extent not
written off or adjusted)
Share issue expenses
incurred during the year

As at 31st March
2010

As at 31st March
2009

As at 31st
March 2008

437943260
969573146
1407516406

38042260
528949393
566991653

3804226
302554067
340596327

647716697
32536000
680252697
29385923
2117155026

802087357
7713069
809800426
16345194
1393137273

318878885
100337480
419216365
5668482
765481174

633108667
65497560
567611107
339615

397098514
24980092
372118422
32912948

145992342
16116881
129875461
119383135

19900000

1218950

1218950

600169056
1668520305
197011292
301733690
2767434343

274038795
1112394029
111869851
115392662
1613695337

216223612
580126705
57094083
40066705

1019753303
239965622
1259718925
1259718418

521808384
105000000
626808384
986886953

365561055
12946422
12946422
515003628

21687886

(less) adjusted against

share premium account
Total

99000
21588886
2117155026

1393137273

765481174