INTRODUCTION

1.1 INTRODUCTION TO TOPIC:

As the part of curriculum, every student studying M.Com has to

undertake a project on a particular subject assigned to him\her.
Accordingly I have been assigned the project work on the topic of
"Study of Working Capital Management" in Morde Foods Pvt. Ltd',
Manchar.
The various information regarding "Working Capital Management"
such as classification, determinants, sources have been discussed relating
to Morde Foods Pvt. Ltd.
Ratio analysis has been carried out using Financial Information for
last three accounting years i.e. from 2014 to 2016 Ratios like Working
capital turnover Ratio, Quick Ratio, Current Ratio, Inventory turnover
Ratio, Debtor turnover ratio, Creditors turnover ratio have also been
analyzed. A Statement of changes in Working Capital Management has
also been analyzed.
The object of any business is to earn profit. The main factors
affecting the profits of the business is the magnitude of the sales. But the
sales cannot be converted into cash immediately. There is a time lag
between the sales of goods and realization of cash. Hence there is a need
of working capital in the form of current assets to fill up this time lag.
Technically, this is called as Operating cycle or Working capital cycle,
which is the heart of the need for working capital.

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 This working capital cycle may be defined as the intervening
period from the time the goods and services enter the business till their
realization in cash. This intervening period depends upon the combination
of various steps.
1) Acquisition and shortage of raw material.
2) Actual production process that takes place.
3) Shortage of finished goods awaiting sale.
4) Sale of finished goods and realization of cash.
Working capital needs of the company arise to cover the
requirement of funds during this time gap, and the4 quantum of working
capital needs, varies as per the length of this time gap.

1.2 NEED FOR THE STUDY:

The study has been conducted for gaining practical knowledge about
Working Capital Management & activities of Morde Foods Pvt. Ltd.
The study of working capital can find out the drawbacks of working
capital management of the company by analyzing the preview years
working Capital.

1.3 OBJECTIVE OF PROJECT:

The object of any business is to earn profit. The main factors

affecting the profits of the business is the magnitude of the sales. But the
sales cannot be converted into cash immediately. There is a time lag
between the sales of goods and realization of cash. Hence there is a need
of working capital in the form of current assets to fill up this time lag.
Technically, this is called as Operating cycle or Working capital cycle,
which is the heart of the need for working capital.

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To find out the financial position of the company.

To know the working capital need of the company.

To know the profitability of the company.

To study the effect of movement of current assets and current liability

of working capital.

To evaluate performances of company.

1.4 SCOPE OF PROJECT:

This Project relates to working capital of Morde Foods Pvt. Ltd.

The domestic market leader as well as profitable concern internationally.
This Project involves study of data for the past three years that is 2011,
2012, 2013.
The purpose of taking up this is to study the effect of current assets,
current liabilities and net working capital on profitability and risk and
overall analysis of working capital management with the help of financial
ratios.
During the period of this study. I learnt about the percentage of
composition of various current assets in the total working capital. I also
observed that Inventory is the largest component followed by Debtors and
then loans and advances. It was also found that the rate of turnover of
Inventories and Debtors showed a decreasing trend while on the other
hand cash balances showed a constant increase.

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 BASIC CONCEPT WITH RESPECT TO PROJECT

2.1 Introduction of Working capital Management:

A business cannot run on fixed assets alone. A lot of money has to

be invested in short term resource of financing as well. The management
of such asset, which is referred to as working capital management or
current asset management, is one of the most important aspect of overall
financial management. For facility of understanding, it's necessary to deal
with certain term before proceeding with the discussion any further.
Decision relating to working capital (Current assets-Current
liabilities) and short term financing are known as "Working capital
Management". It involves the relationship between a firm's short-term
assets and its short liabilities.
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.

Definition of Working capital Management:

"Working Capital is descriptive of that capital which is not fixed,

but the more common use of working capital is to consider it as the
difference between the book value of current asset and current liabilities."
- Prof. Hoagland.

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2.2 MANAGEMENT OF WORKING CAPITAL:

Management of working capital is concerned with the problem that

arises in attempting to manage the current assets, current liabilities. The
basic goal of working capital management is to manage the current assets
and current liabilities of a firm in such a way that a satisfactory level of
working capital is maintained, i.e. it is neither adequate nor excessive as
both the situations are bad for any firm. There should be no shortage of
funds and also no working capital should be ideal. WORKING CAPITAL
MANAGEMENT POLICES of a firm has a great on its probability,
liquidity and structural health of the organization. So working capital
management is three dimensional in nature as
1. It concerned with the formulation of policies with regard to
profitability, liquidity and risk.
2. It is concerned with the decision about the composition and level of
current assets.
3. It is concerned with the decision about the composition and level of
current liabilities.

2.3 COMPONENTS OF WORKING CAPITAL:

WORKING CAPIAL = CURRENT ASSETS - CURRNT LIABILITIES

Current assets:
Current assets have been defined as assets that are usually
converted into cash within the current accounting cycle, i.e., one year.
Major current assets are cash, bills receivable, accounts receivable and
inventory. For example, cash is used to purchase raw materials and pay

5
the labor and other manufacturing cost to produce products, which are
then carried as inventories.

Current liabilities:

Current liabilities are those liabilities which are intended at

their inception to be paid in the ordinary course of business, within a year,
out of the current assets or earnings of the concern. The basic current
liabilities are Accounts payable, Bills payable, Bank overdraft and
outstanding expenses.

Gross working capital:

The term gross working capital, also referred to as working

capital means the total current assets.

Net working capital:

It represents the difference between current assets and current

liabilities. This can be alternatively defined as that portion of current
assets which is finance with long term funds. The term working capital
indicates the liquid position of the organization.

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2.4 OPERATING CYCLE OF WORKING CAPITAL:

CASH

DEBTORS

RAW MATERIALS

Operating Cycle
of Manufacturing
Enterprise
SALES

WIP

FINISH GOODS

Fig: 2.1 operating cycle of Working capital.

The working capital requirement of a firm depends to a great extent

upon the operating cycle of the firm. The duration of the time required to
complete the sequence of events right from purchase of Raw
material/goods for cash to the realization of sales is called the Operating
cycle or Working capital cycle. It can be determined by adding the
number of days required for each day required for each stage in the cycle.
In the case of manufacturing concern, working capital is required to cater
the following needs of business in order.

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Raw materials are to be purchased for cash.

Production process converts Raw Material into work in progress.

Work in progress is converted into finish goods, during the course
of time through production process.

Finished goods are converted into accounts receivable through sale.

Account receivables are realized into cash in due course of time.

The above operating cycle is repeated again and again over the
period depending upon the nature of the business and types of the product
etc. The duration of the operating cycle for the purpose of the estimating
working capital is equal to the sum of duration allowed by supplier.

2.5 ANALYSIS OF DATA:

For analyzing the data the technique of ratio analysis, simple

mathematical tools like percentages and averages etc. and simple
statistical technique like Simple Correlation Technique have been used.

2.6 DETERMINANTS OF WORKING CAPITAL:

1. Business size and its nature:

Nature of business greatly influences the working capital

requirements of an enterprise. Thus financial and trading enterprises
require less of fixed assets but require huge working capital investments.
For example a retailer has to carry large stockers of a variety of goods to

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satisfy the varied and continuous needs and requirements of his
customers.

2. Manufacturing cycle:

Working affected by its manufacturing cycle as well. The

cycle starts with the purchase and use of raw material and ends when
finished goods are produced. Thus the longer the cycle the greater the
companies' working capital needs. To avoid this an alternative
manufacturing cycle should be adopted if it calls for shortest time span.

3. Fluctuations of business:

Fluctuations in business are of several types namely short

period, seasonal and cyclical etc. These fluctuations result in change in
the demand of products of the enterprise. This in turn results in change in
working capital requirements of the business. In the event upswing in the
economy there will be increase in demand and correspondingly increase
in sales. With the result there will be more investments in inventories and
debtors will also increase.

4. Policy of production:

An enterprise as stated above nay adopt a constant policy of

production to suit its ends. But such a policy will expose the company to
greater risks and inventory costs. Therefore the company may prefer to
follow the policy of varying its production schedules in accordance with
the changes in its demand. Some concerns may utilize their production
capacities.

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5. Credit policy of the company:

The working capital of an enterprise is also determined by its

credit policy as it affects the companies level of book debts. An enterprise
formulates the terms of credit followed by it towards its customers which
of course is influenced by the norms set in the similar policy on the merit
of each individual case and thus it should have a discretionary practice.

6. Credit Availability:

Credit terms granted to an enterprise by its customers also

affect the requirements of working capital. If liberal credit terms are
available to the company it will require less investments in its working
capital. The availability of bank creditors also affects the level of working
capital needs of an enterprise. It will operate on less working capital if
bank credits are available to it easily and on favorable conditions.

7. Activities of growth and expansion:

With the growth of a firm by way of increase in its sales and

fixed assets the working capital needs of it also increase. In fact the
increased working capital needs proceed the growth in business activities
.Thus the increased working capital need not follow the growth of the
firm rather the growth follows it. As such for a growing firm there is
every need to make advance planning on continuous basis for working
capital needs.

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8. Margin of profit and profit appropriation:

Profit earning capacity of business enterprise varies from one

another. This of course depends much upon the quality of the product
pricing, marketing strategies and monopoly power or otherwise enjoyed
by the enterprise. Different organizations some earning high and others
low profit margin. The volume of net profit earned is a source of working
capital.

9. Changes in price level:

There is direct impact of changes in price level on the working

capital requirements of an enterprise. This makes the job of the financial
manager very important as he is required to anticipate correctly this
impact. Generally a company will have to maintain higher volume of
working capital as a result of rise in price line. This is because
investments in current assets will increase because of price rise.

10. Operating Efficiency:

With optimum utilization of its resources a company can improve

its operational efficiency. Thus will result in minimization of cost and
maximization of returns. When the company is able to control its
operational costs it can effectively contribute towards its working capital.
The operational efficiency of an enterprise improves the use of its
working capital add the pace of the cash cycle will be accelerated.

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2.7 NEED FOR WORKING CAPITAL:

The need for working capital (gross) or current asset cannot be

overemphasize. Giving the objective of financial decision making to
maximize shareholder's wealth. It is necessary to generate sufficient
profits. The extent to which profit can be earned will naturally depend,
among other things, upon the magnitude of the sales. A successful
programmed is necessary for earning profits by any business enterprise.
However sales do not convert in to cash instantly, there is invariably a
time lag between the sale of goods and the receipt of cash. Therefore
there is need for working capital in the form of current asset to deal with
the problem arising out of the lack of immediate realization of cash
against goods sold. Therefore sufficient working capital is necessary to
sustain sales activity. Technically, this is referred to as the operating or
cash cycle. The operating can be said to be at the heart of the need of
working capital. The continuing flow from cash to supplier, to inventory,
to accounts receivable and back in to cash is what is called the operating
cycle.

Permanent and Temporary Working capital:

Operating cycle creates the need for current asset (working

capital). However the need does not come to an end after the cycle is
completed. It continues to exist. To explain this continuing need of
current asset a distinction should be drawn between permanent and
temporary working capital.
Business activity does not come to an end after the
realization of cash from customer. For company, the process is continuous
and hence the need for a regular supply of working capital.
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 However the magnitude of working capital. However the magnitude of
working capital required not constant, but fluctuating. To carry on
business, a certain minimum levels of working capital is necessary on
continuous and uninterrupted basis. For all practical purposes this
requirement has to be met permanently as with other fixed assets. This
requirement is referred to as permanent or fixed asset working.

2.8 FORMAT OF WORKING CAPITAL BUDGET:

PARTICULARS AMOUNT AMOUNT

(Rs) (Rs)

Current Assests
Xxx
Inventory
Raw Material XXX
Work In Progress XXX
Finished Goods Xxx
Xxx
Debtors
Xxx
Cash And Bank Balance
Xxx
Prepaid Expenses
Total Current Assets (A) Xxx
Current Liabilities Xxx
Xxx
Creditors
Xxx
Delay In Payment Of Expenses
Total Current Liabilities (B) Xxx
Net Working Capital (A-B) Xxx
ADD: Contingency Margin If Any XXX
Total Working Capital Required Xxx
Table : 2.1. Format of Working Capital Budget

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2.9 ASPECT OF WORKING CAPITAL MANAGEMENT:

1) MANAGEMENT OF CASH
Cash is the most liquid type of current assets and as such it is the
responsibility of the finance function to see that various functional areas
of the business have sufficient cash whenever they require the same. At
the same time, it has also to be ensured that the funds are not blocked in
the form of idle cash.
The primary objective of cash management in a firm is to strike
tradeoff between liquidity and profitability. This is possible only when the
firm aims at optimizing the use of funds in the working capital pool.
Keeping these two views in the mind, the two main objectives of cash
management are:
To make cash payment
To maintain minimum cash reserves

Cash management assumes importance because it is the most

significant asset that the firm holds as it is used to pay the firms
obligations. However, it is unproductive and as such; the aim of cash
management id to maintain adequate cash position to keep the firm
sufficiently liquid and to use excess cash in a profitable way.

2) MANAGEMENT OF RECIEVABLES

Accounts receivable is a permanent investment and an ever-rolling

account. The finance manager has to determine the level of this account
suitably so that there will be an easy flow of working capital. The
management should see that debtors turn fast; if debtor's turn over
velocity is high then the firm can minimize borrowings for working

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capital. All these that is maintenance of debtors at optimum level, the
degree of credit sales to be made, making the debtors turn fast, involves
the "Accounts Receivables Management."
The objective of receivables management is to increase the sales to
such an extent that the risk of bad debts is reasonable and within control.
The benefits rising out of receivable management are in the form of
profits from the sales made on credit basis. An effective receivable
management policy tries to increase credit sales to such an extent that the
profits arising there from are more than the cost attached to it.

3) MANAGEMENT OF INVENTORY

Inventories constitute a major element of working capital. It is,

therefore, important that investment in inventory is properly controlled.
Usually the company is faced with the following conflicting
objectives in the areas of inventory management
To carry maximum inventory in order to facilitate efficient and
smooth production and sales operations.
To minimize the investments in inventory and to maximize
profitability.

Thus, the objective of inventory management is to avoid the
situation of over investment as well as under investment and the level of
inventories should be maintained at the optimum level.
To conclude, it can be said that the objective of inventory
management is to minimize the investment in inventory without affecting
the production or sales operation.

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2.10 WORKING CAPITAL FINANCE:

Working capital financing is essential to any growing business. It

helps keep your business current and competitive in your market.
Working capital finance generally refers to debt raised for a period of
less than a year from Term Lending Institutions, Commercial Banks and
Non Banking Finance Companies (NBFC) catering to the short-term
credit needs of the business entities

1) Overdraft:
In this case, the company is allowed to withdraw in excess of the
balance standing in its Bank account. However, a fixed limit is stipulated
by the Bank beyond which the company will not be to overdraw the
account. Granting of the assistance in the form of overdraft presuppose
the opening of a formal current account. Legally, overdraft is a demand
assistance given by the bank that is bank can ask for the repayment at any
point of time. However in practice, it is in the form of a continuous types
of assistance due to annual renewal of the limit. Interest is payable on the
actual amount drawn and is calculated on daily product basis.

2) Cash Credit:
The cash credit facility is similar to the overdraft arrangement. It is
the most popular method of bank finance for working capital in India.
Under the cash credit facility, a borrower is allowed to withdraw funds
from the bank up to a sanctioned credit limit. He is not requires to borrow
the entire sanctioned credit once, rather he can draw periodically to the
extent of his requirements and repay by depositing surplus funds in his
credit account. There is no commitment charge, therefore, interest is
payable on the amount actually utilized by the borrower. Cash credit

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limits are sanctioned against the security of current assets. Though funds
borrowed are repayable on demand, banks usually do not recall such
advances unless they are compelled by adverse circumstances. Cash
credit is the most flexible arrangement from borrower's point of view.

3) PURCHASE OR DISCOUNTING OF BILLS:-

Under the purchase or discounting of bills, a borrower can obtain

credit from a bank against its bills. The bank purchases or discounts the
borrower's bills. The amount provided under this agreement is covered
within the overall cash credit or overdraft limit. Before purchasing or
discounting the bills, the bank satisfies itself as to the creditworthiness of
the drawer. Though the term "bills purchased" implies that the bank
becomes owner of the bills, in practice, bank holds bills as security for
the Credit. When a bill is discounted, the borrower is paid the discounted
amount of the bill (viz., full amount of bill minus the discount charged by
the bank). The bank collects the full amount on maturity.
To encourage bills as instruments of credit, the reserve bank of
India introduced the new bill market scheme in 1970. The scheme was
intended to reduce the borrower's reliance on the cash credit system
which is susceptible to misuse. It was also envisaged that the scheme will
facilitate banks to deploy their surpluses or deficits by rediscounting or
selling the bills purchased or discounted by them. Banks with surplus
funds could repurchase or rediscount bills in the possession of banks with
deficits. There can be situation where every bank wants to sell its bills.
Therefore, The Reserve bank of India plays the role of the lender of last
resort under the new bill market scheme. Unfortunately, the scheme has
not worked successfully so far.

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4) LETTER OF CREDIT:-

Suppliers, particularly the foreign suppliers, insist that the buyer

should ensure that his bank will make the payment if he fails to honor its
obligation. This is ensured through the letter of credit arrangement. A
Bank opens an L/C in favor of a customer to facilitate his purchase of
goods. If the customer does not pay to the supplier within the credit
period, the bank makes the payment under the L/C arrangement. This
arrangement passes the risk of the supplier to the bank. Bank charges the
customer for opening the L/C. It will extend such facility to financially
sound customers. Unlike cash credit or overdraft facility, the L/C
arrangement is an indirect financing,
The bank will make the payment to the supplier on behalf of the
customer only when he fails to meet the obligation.

5) WORKING CAPITAL LOAN:-

A borrower may sometimes require ad hoc or temporary

accommodation in excess of sanctioned credit limit to meet unforeseen
contingencies. Banks provide such accommodation through a demand
loan account or a separate non-operable cash credit account. The
borrower is required to pay higher rate of interest above the normal rate
of interest on such additional credit.

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2.11. COMMERCIAL PAPERS
Commercial paper is an important money market instrument to
raise short term funds. In India, on the recommendation of the Vague
Working Group, the Reserve Bank of India (RBI) introduced the
commercial paper scheme in the Indian market in 1989. Commercial
paper is a form of unsecured promissory note issued by firms to raise
short term funds. The buyers of C.P. include banks, insurance companies,
unit trusts and firms. Interest rate on commercial paper is generally less
than the bank borrowing rate.

Merits

It is a cheaper source of finance in comparison to the bank credit.

Interest yield on C.P. is less than the prime rate of interest.
It provides an opportunity to make a safe, short term investment of
surplus funds.
It is alternate source of raising short term finance, and proves to be
handy during periods of tight bank credit.

Demerits

It is available only to the financially sound and highest rated

companies.
A firm facing temporary liquidity problems may not be able to raise
funds by issuing new papers.
It cannot be redeemed until maturity.

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 COMPONY PROFILE

3.1 INTRODUCTION TO COMPANY:

'Morde Foods Pvt. Ltd. Established in 1983, Morde launched

itself with three chocolate products and today they competently produce
more than 40 product developed indigenously and formulations too for
different applications

The products are manufacture at fully automated chocolate at

manufacturing plant, with a conscious approach towards food safety
program and quality management system.
Morde foods Pvt .ltd. Manufacturers of cocoa &chocolate
products in India .They market their products to institutional customers in
segments like bakery, ice cream, confectionery &such others. They have

20
been established in this business for past 22 years & have credible clients
throughout Location:-
It is located on NH 50, K.M, Pune - Nasik highway, 65 K.M from
industrial city Pune , amongst the western that at Manchar.
It is an ISO-9001 HACCP certified company.

3.2. MORDE VISION:

"To remain successful, respected & well recognized enterprise in

food industry, growing continuously by striving to create & sustain
leading market position, being ethical & responsible for delivery of
products to the society, while building excellent business legacy".

3.3. DIRECTOR INTRODUCTION

Mr. Chandrakant Morde : Managing Director
Mr. Kishor Morde : Director ( Factory )
Mr. Sudhir Morde : Director ( Engineering and Projects )
Mr. Mahesh Morde : Director Purchases
Mr. Harshal Morde : Director Sales and Marketing
Mr. Sanjay Morde : Director Sales

3.4 PRODUCT RANGE:

Chocolates
1. Chocolate (Dark/Milk/White)
2. Compound (Dark/Milk/White)
Cocoa Products
1. Cocoa Powder (Natural/Alkalized Low Fat/Alkalized Premium)
2. Cocoa Butter

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3. Cocoa Mass
Pastel Products
1. Chocopaste (Dark/Milk/White)
2. Chocodip (Dark & Milk)
3. Bakery Spreading
4. Choco Hazelnut Paste
Chocolate Coated Products
1. Almond
2. Cashews
3. Raisins
4. Crispies
5. Butterscotch
Decorations & Inclusions
1. Chocolate Chips
2. Choco Strands
3. Fancy Strands
4. Butterscotch
5. Drinking Chocolate

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3.5. PRODUCTS PROFILE:

1. Chocolate

Since time immortal, chocolate has been a relishing food item around the
globe. Recently, it has emerged as the perfect gift materials on various
festive occasions and personal celebrations. We present a wide range of
branded chocolates, which include branded as well
as handmade chocolate products - available in different packaging.

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2. Chocolate chip

The broken-up chocolate pieces are mixed in the batter of chocolate chip
cookie, and are normally irregular in shape.
These are manufactured using high grade material of production, and
adhere to the food safety & hygiene norms of the industry. This product
finds its application in bakeries, hotels and various catering
establishments.

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3. Choc paste

Chocopaste is used as chocolate cream for biscuits, and also used as

center filling for pastries. It is also used by bakers, confectioners and ice
cream manufacturers. Choco bar ice creams and Chocolate flavored ice
creams are made out of Chocopaste. We are manufacturing two varieties
of Chocopaste. One is Dark Chocolate and other is Milk Chocopaste.
Packing is 25 Kg carton with 25 numbers of one Kilogram packets inside
each master carton. Apart from this we are manufacturing another product
known as Belgium Chocopaste, which is very thin and can be poured
from one vessel to another. It is very rich in flavor. Packing is 25 Kg jars.

25
4. Coca Powder

We offer fine quality coco powders that are prepared from partially
fermented fatty seed of the cacao from which chocolate is made. The dry
coco powder is made by grinding cocoa seeds removing the cocoa butter
from the dark, bitter cocoa solids. Our coco powders are mostly used in
bakery, ice cream, biscuits etc.

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5. Coca Butter

We make both organic and natural Cocoa Butter. Cocoa Butter is made
out of Cocoa mass with the help of hydraulic butter press. Cocoa butter is
the ivory-colored natural fat of the cocoa bean extracted during the
manufacturing process of producing chocolate and cocoa powder. It has a
very subtle mellow flavor that gives chocolate its creamy smooth, melt-
in-your-mouth texture. The quality of the
Cocoa Butter depends on the quality of the bean it came from and the
process of separating it from the chocolate liquor. Cocoa Butter is solid at
room temperature but it has a low melting point and it does change from a
solid to a liquid quickly.

27
3.6. MAJOR CLIENTS:
Monginis
Vadilal
Sunfeast
Taj Group of Hotels
Britannia
Baskin 31 Robbins
Parle
ITC
Gsk (Glaxo smith Kline)
HUL (Hindustan Unilever Ltd)

3.7. DEPARTMENTS OF MORDE:

Quality
1. Quality Assurance
2. Quality Control
3. R & D
4. House Keeping
Human Resource
Stores
1. Engineering
2. Production
3. Raw Material
Dispatch & Logistics
Engineering Maintenance, Project
Account & Finance
Production
Purchases
Sales and Marketing

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3.8. ORGANIZATIONAL STRUCTURE:

ORGANIZATIONAL STRUCTURE

Human Resource Production Finance/ Accounting Quality

Store Sales Purchase Maintanance

Organizational Structure

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 RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the

research problem. it may be understood as a science of studying how
research is done scientifically. In it various steps are generally adopted by
a research in studying his research problem along with the logic behind it.

Research process is as follows:-

1. Define research problem
2. Research design
3. Collection of data
4. Analysis of data
5. Data interpretation and report writing

4.1 DATA COLLETION:

1. Primary Data
2. Secondary Data

1) Primary Data:

The primary data is collected through questionnaire. The

theoretical information about process of credit proposal collected from
branch manager and bank credit staff. The information collected through
the primary sources like:
Talking with the employees of the Department.
Getting information by observation like in Manufacture Process.

30
 Discussion with Head of the Department.

2) Secondary Data:

Secondary data is collected through internal sources and external

sources. Secondary data is also called as 'Historical Data'. The required
data collected from annual report, books and website which are related to
the project.
The data is collected through the secondary sources:
Annual report of the Company.
Office manuals of the Department.
Magazines, Report in the Company.
Policy documents of Various Departments.

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 DATA ANALYSIS & INTERPRETATION

5.1. STATEMENT OF CURRENT ASSETS AND

CURRENT LIABILITIES

(Rs. In crore)
CURRENT ASSETS(A) 31/03/2014 31/03/2015 31/03/2016
Inventories 28.12 34.13 29.22
Sundry Debtor 51.24 60.61 92.52
Cash and Bank Balance 0.22 0.26 0.19
Other Current Assets 4.16 3.06 5.33
Loans and Advance 2.17 3.28 3.48

TOTAL (A) 85.91 101.34 130.74

CURRENT LIABILITIES (B)
Sundry Creditors 26.14 31.29 78.44
(Micro & Small Enterprises)

Creditors for Capital Goods 12.89 10.56 7.13

Advance from Customer 7.87 9.12 12.20
Other liabilities 4.18 6.14 3.74

TOTAL (B) 51.08 57.11 101.51

NET WORKING CAPITAL 34.83 44.23 29.23

(A-B)

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Other Related Information:-

(Rs. In Crores)

Particulars 2014 2015 2016

Net Profit 4.66 8.33 12.01
Net Sales 97.68 141.48 218.29
Credit Sales 97.68 141.48 218.29
Average Debtors 31.35 39.57 71.49
Average Stock 28.11 34.12 29.22

Calculation of Net Working Capital

Working Capital = Current Assets - Current Liabilities

(Rs. In Crores)
Years Current Assets- Current Liability working Capital
2013-14 85.91-51.08 34.83
2014-15 101.34-57.11 44.23
2015-16 130.74-101.51 29.23

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 45

40

35

30

25 working
Capital

20

15

10

0
2013-14 2014-15 2015-16

Interpretation

The working capital of Company has been showing fluctuating

trend. It has been increasing from 2015 to 2016 and decreasing from 2013
to 2014
During 2014working capital was highest because debtor's turnover
ratio was also highest and company increased inventory. The company
succeeded to recover money much faster than other years. The
proportionate increase in current assets was more than proportionate
increase in current liabilities.
During 2016 company's working capital has going down. The main
reason behind this the company has reduced its inventory. The debtor's
turnover ratio was low during this period. Company's current liability has
increased in more proportion to current asset. During this period company
was more depend on sundry creditors than short term bank borrowing.
34
 5.2. Ratio analysis:

Ratio analysis is a process of comparison of one figure against

another, which makes a ratio. It is a powerful analytical tool useful for
measuring performance of an organization. It's extremely helpful in
providing valuable insight into a company's financial picture. Ratios
normally pinpoint a business' strengths and weakness.

The ratio analysis is made under six broad categories as follows:-

1)Liquidity ratios
2)Turnover ratios
3)Profitability ratios

1) LIQUIDITY RATIOS:-

Liquidity refers to the ability of the firm to meet its obligations in

the short run, usually one year. Liquidity ratios are generally based on the
relationship between current assets and current liabilities.

a) Current Ratio: - This ratio measures the solvency of the company in the
short term. Current ratio of 2:1 indicates a highly solvent position. A very
high current ratio will have an adverse impact on the profitability of the
organization.

Calculation of Current Ratio:-

Current Ratio =

35
 (Rs. In Crores)

Current Ratio
Years Current Ratio

2013-14 1.68

2014-15 1.77

2015-16 1.28

1.8

1.6

1.4

1.2

1
Current Ratio
0.8
0.6

0.4

0.2

0
2013-14 2014-15 2015-16

36
Interpretation:-

The Current Ratio has been fluctuating. It was high during 2014
because Current Liability has not much increased as it increased in 2013.
During 2015 the ratio was minimum because Current Liability has
increased more as companied to proportionate increase in Current Assets.
The Company Current Ratio is below Standard level i.e. 2:1.
Due to increase in sales of the company has increase its
investments in Fixed assets in years 2013 and its causes to the current
ratio of the company to be worst.

Liquid Ratio or Quick Ratio

This ratio is also known as Liquid ration or test ratio. It

expressed the relationship between quick current assets & current
liabilities. While calculation of quick ratio. Inventories are excluded
from current Assets. Since inventories cannot be converted into cash
in short time without loss of value. This ratio is more refined tool to
measure the liquidity of an organization.

Calculation of Liquid Ratio

Liquid Assets
Liquid Ratio =
Liquid Liabilities

37
 Current Assets Inventory
=
Current Liabilities- Bank Overdraft
(Rs. In Cores)

Years Liquid Ratio

2013-14 1.13

2014-15 1.18

2015-16 1.00

1.2

1.15

1.1

1.05 Liquid
Ratio

0.95

0.9
2013-14 2014--15 2015-
16

38
Interpretation:-

The companies Quick Ratio has been increasing from 2013 to 2014
and then decreasing from 2015 to 2016. In 2015 it is low even though
inventories were Minimum. This is become liquid asset has not much
increased in proportion to liquid liabilities. In 2016 Liabilities increase
but Assets not increasing in proportion to liabilities to increase Liquidity
Company should maintain sufficient cash balance. In year 2016 it is
successfully decrease to the optimum level.

5.2. TURNOVER RATIOS:

They measure how efficiently the assets are employed by the firm.
These ratios are based on the relationship between the level of activity,
represented by the sales or cost of goods sold and levels of various assets.

a) Inventory turnover ratios:-

It measures how fast the inventory is moving through the firm and
generating sales. It reflects the efficiency of inventory management, the
higher the ratio the more efficient the management of inventories and
vice versa.
Net sales
Inventory turnover ratio =
Average inventory

39
Calculation of Inventory Turnover Ratio:-

(Rs. In Cores)
Inventory turnover ratio
Years Inventory turnover
ratio

2013-14 3.47

2014-15 4.15

2015-16 7.47

4 Inventory turnover
ratio
3

2013-14 2014-15 2015-16

40
Interpretation:-
Inventory Turnover Ratio of company has been increasing. The
main reason is company has succeeded to control on inventory level. It is
highest during 2016 because Inventory has decreased as compared to last
years. It shows that company has not blocked amount in inventory but
company increase its sales in credit sales more than cash sales.

b) Debtors turnover ratio

This ratio shows how many times sundry debtor's turnover during the
year, higher the ratio, the greater the efficiency of credit management.

Net credit sales

Debtors turnover ratio=
Average sundry debtors

Calculation of Debtors Turnover Ratio:-

(Rs. In Crores)
Years Calculation of Debtors
turnover ratio

2013-14 3.12

2014-15 3.57

2015-16 3.05

41
 3.6

3.5

3.4

3.3

3.2 Debtors
turnover
3.1
ratio
3

2.9

2.8

2.7

2013-14 2014-15 2015-16

Interpretation:-
Debtors Turnover Ratio shows fluctuating trend. It was highest during
2014-15 because debt collection was good.

a) Average collection period

It represents the number of days worth of credit sale that is locked
in sundry debtors. An average collection period which is shorter than the
credit period allot by the firm needs to be interpreted carefully. It may
mean efficiency of credit management.

360
Average collection period =
Debtor's turnover

42
Calculation of Average Collection Period:- (Rs. In Crores)

Years Average collection

period

2013-14 115

2014-15 101

2015-16 118

120

115

110

105 Average collection

period

100

95

90

2013-14 2014-15 2015-16

Interpretation:-
It shows fluctuating trend. This is because fluctuation in debtors
Turnover Ratio. During 2014 debtor's collection were good. In the year
2014 company collected money much faster than other years.

43
d) Working capital Turnover ratio

This ratio indicates the extent of working capital turned over in achieving
sales of the firm. A high ratio indicates efficient utilization of working
Capital

Sales
Working capital turnover ratio =
Working capital

Calculation of working capital Turnover ratio:-

(Rs. In Crores)
Years Working capital
turnover ratio

2013-14 2.8

2014-15 3.2

2015-16 7.5

44
 8

3
working
Capital
2
turnover
ratio
1

0
2013-14 2014-15 2015-16

Interpretation:-

Working Capital Turnover Ratio shows increasing trend. It is

maximum during 2014 because working capital has decreased as
compared to last some years irrespective increase in sales.

e) Current assets turnover:-

This ratio indicates the extent of Current assets turned over in achieving
sales of the firm.

Net sales
Current asset turnover=
Current assets

45
Calculation of current assets turnover:-
(Rs. In Crores)

Years Current asset

turnover

2013-14 1.14

2014-15 1.39

2015-16 1.67

1.8

1.6

1.4

1.2

0.8
Current
0.6 asset
turnover
0.4

0.2

0
2013-14 2014-15 2015-16

46
Interpretation:-

This ratio shows increasing trend. The company has succeeded to

achieve maximum sales with minimum level of investment in Current
assets.

5.4. PROFITABILITY RATIO:

As the main itself suggests, the intention for calculating these ratios is to
know the profitability of the organization.

Net profit ratio

Net profit
Net profit ratio = x 100
Net Sales

Years Net profit ratio

2013-14 4.77

2014-15 5.89

2015-16 5.50

47
 6

3
Net profit
ratio
2

0
2013-14 2014-15 2015-16

Interpretation:-
The net profit ratio of company shows fluctuating trend. It has
decreased in the year 2012as compared to 2013 due to tremendous
increase in expenditure. The profitability of company has decrease
because in this year company has charged depreciation on machinery &
company cannot recover sufficient cash balance from debtors.

48
5.5. CALCULATION OF MAXIMUM PERMISSIBLE
BANK FINANCE:
1) Statement showing computation of working capital requirement

First method of lending i.e.25%of working capital gap:-

Working capital gap:

Current Assets
Current ratio =
Current Liability + M.P.B.F.

Years 2013-14 2014-15 2015-16

Current assets 85.91 101.34 130.74
Less- Current liability 51.08 57.11 101.51
Working capital Gap 34.83 44.23 29.23
Less- 25% of 8.71 11.06 7.31
WIC Gap

M. P. B. F. 26.12 33.17 21.92

Ideal Current Ratio As Per P L Tandon Committee Ratio 1:1 But in

2013-14it is 1.05 this means company has to raised fund from debt due to
this cost of capital is increasing by interest on debt. Company can reduce
cost of capital by increasing current asset, &company successfully
maintain it to the standard current ratio.

49
2) Second Method of Leading:

i.e.25%of total current assets:-

Years 2013-14 2014-15 2015-16

current assets 85.91 101.34 130.74
less(-) 25%of total 21.48 25.41 32.69
current assets

Total 64.43 76.23 98.05

less(-)current liability 51.08 57.11 101.51
M.P.B.F. 13.35 19.12 -3.46

Current ratio:-

current ratio
Years 2013-14 2014-15 2015-16
current assets 85.91 101.34 130.74
current liability 64.43 76.23 98.05
current ratio 1.33 1.33 1.33

Ideal current ratio for MPBF is 1.33 as per P L Tandon Committee

report but 2013-14MPBF figure shows negative balance means company
following aggressive working capital policy. Company earns more profit
but higher the risk in 2013-14to minimize the risk company can increase
the total current assets as proportion to current liabilities.

50
5.6. ANALYSIS OF FINANCIAL STETEMENT

Analysis of Balance Sheet

The share capital of company is constant. Company has not issued

any share capital to the public. Company transferred some portion of
profits to reserve and surplus in 2014. During this period company has
taken new loans for its requirements. It means company's debt has
increased.
The company has purchased new fixed assets with improved
technology for the purpose of increasing production. The current assets of
company has going up. The sundry debtors due to increase in sales.
Inventory of company has gone down. The current liabilities have also
increased. The net current assets have been fluctuating. It was high during
2009 because of increase in debtors' turnover ratio as compared to other
years.

Analysis of Profit and Loss account

Company's sales have been increasing. During 2014 it has

increased in more percent as compare to increase in 20013. The company
has also earned income from other sources like sale of Fixed Assets.
Manufacturing expenses of company has been increasing as result
increase in sales. It has increased more in 2013 as compared to increase in
2012. Company has purchased new fixed assets to improve the
production and depreciation has also increasing. Company has repaid
more loan in 2001 as its result interest has decreased. In 2012interest
have increased. As a result increased in profit tax has increased.

51
FINDINGS
1. During 2014sales of company has shown tremendous growth as
compared to last year.
2. Working capital of company has showing fluctuating trend.
3. Inventory turnover ratio of company has been increasing
4. Debtor's turnover ratio shows fluctuating trend. It was highest
during 2013.
5. Company finances its working capital through cash credit.
6. The current ratio has been fluctuating.

LIMITATIONS
Every project has its own limitations, so as ours. But we have to
work irrespective of these limitations and find our way, so that we can
achieve the required aim.
Some of the limitations of our project are:
1) As our project is based on the data recorded by the company, we
face the limitation of extracting that particular data because our
access is limited for the sake of confidential information of the
company.
2) The grouping of different items in the balance sheet also created
hindrances for us, as it is very difficult to identify which item is
clubbed with which head. But thanks to accounts personal who
made it easy to understand these clubbing.
3) A questionnaires part should be filling up at shift change over or in
the recession period, so the time factor is one of the limitations to
the study.

52
SUGGESTIONS

Working capital of the company has increasing every year. Profit
also increasing every year this is good sign for the company. It has
to maintain it further, to run the business long term.

The Current and quick ratios are almost up to the standard
requirement. So the Working capital management. Morde Foods
Pvt. Ltd. is satisfactory and it has to maintain it further.

The company has sufficient working capital and has better liquidity
position. By efficient utilizing this short-term capital, then it should
increase the turnover.

The company should take precautionary measures for investing and
collecting funds from receivables and to reduce the bad debts.

The company has sufficient working capital and has better liquidity
position. By efficient utilizing this short-term capital, then it should
increase the turnover.

Creditor's turnover ratio has increasing from 2013-14to 2014-15
and in the last year 2015-2016 it is same as compared to 214-15
Company is making prompt payment to its creditors. This is good
sign for the company. On-time payment to suppliers will increase
the credibility of the firm. It has maintain it further to survive in the
market.

The company is utilizing working capital effectively this is good
for the company. It has to maintain it further.

53
CONCLUSIONS
1) Due to increase in expenditure, the net profit margin of company
has gone down. It indicates company's profitability has decreased.
2) The working capital need of company has gone down due to
fluctuation in debtors and inventory turnover ratio.
3) As company has taken new loans from outside sources, company
liability in terms of repayment of loan has increased.
4) Company has followed good inventory management policy.
5) The current ratio of company has gone down. It indicates that
current liabilities have increased in more proportion to current
assets.

RECOMONDATIONS
1) Company should cut down its expenditure. During 2014
expenditure has increased largely as compared to increase in 2013
2) Working capital turnover ratio of company in high during 2013. It
is beneficial to the company. Company should carry on this
approach.
3) Company needs to work on inventory management to reduce extent
of inventory in current assets.
4) The management needs to take proper action in order to maintain
their debtors in the coming years and try to make their debtors
more liquid.
5) Current ratio of company is below standard level that is 2:1.
Current ratio has decreased in 2013. Company must increase
current ratio by maintaining proper level of current assets and
minimizing current liabilities.
6) Company should increase its profitability.
7) Company should adopt strict credit policy.
54
 BIBLIOGRAPHY

REFERNCES BOOKS:
I M Pandey - Financial Management.
M. Y. Khan & P. K. Jain - Financial management.

M.Y.Khan / P.K Jain, Financial Management Text, Problem's Cases,

5THEdition,Tata McGraw -Hill Publishing Company Limited,
New Delhi, 2007.

Prasanna Chandra, Financial Management Theory and Practice,

5THEdition,
Tata McGraw -Hill Publishing Company Limited, New Delhi,
2001.
Annual Report of Morde Foods Private Limited.

Web Site:
www.google.com
www.mordechocolate.com

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