A

SUMMER INTERNSHIP PROJECT REPORT

ON

“THE WORKING CAPITAL MANAGEMENT”

AT

“THE AJMERA CEMENT PVT.LTD.”

SUBMITTED TO:-

NARANDAS JETHALAL SONECHA MANAGEMENT AND TECHNICAL

INSTITUTE

IN PARTIAL FULFILLMENT OF THE

REQUIREDMENT OF THE AWARD FOR THE DEGREE OF

MASTER BUSINESS ADMINISTRATION

UNDER

GUJARAT TECHNOLOGICAL UNIVERSITY

UNDER THE GUIDENCE OF

MISS. Dhara Abhani (Assistant professor)

Submitted by:-

CHAUHAN HIREN V.(178170592005)

MBA SEMESTER III

August, 2018
PREFACE

This project report is containing in according with the master of business

administration (M.B.A) prescribed by Gujarat Technological university.thus, it is our
morale and obligatory duty to take this part of our studies with great enthusiasms and
seriousness and give it the more importance.

The main objective of the project work training is to develop amon the student a
feel that about industrial environment & business practice in order to develop a
practical basis in them as a supplement to theoretical study of the management.

The report is based on my elective subject "WORKING CAPITAL

MANAGEMENT. " As a part of my project work, I had been departed to "AJMERA
CEMENTS PVT. LTD. BHANDURI"

I have mentioned all information which is true and useful in some time in
business.
 ACKNOWLEDGEMENT

Words are indeed inadequate to convey my deep sense of gratitude to all those
who have helped me in completing this summer project to the best of my ability.
Being a part of project has certainly been a unique and a very productive experience
on part.

I am really thankful to Mr. for making all kind of arrangements to

Carry the project successfully and for guiding and helping me to solve all kind of
quarries regarding the project work. His systematic way of worming and
incomparable guidance has inspired the pace of the project to a great extent.

I would also like to thank my mentor and project- coordinator, Mr. Hiren
kotadiyab for assigning me a project of such a great learning experience and
acquainting me with real life project financing and appraisal.

Last but not least I would like to thank all the employees of

"AJMERA CEMENT PVT. LTD.' Who have directly or indirectly helped me

with their moral support for the completion of my project.

DATE :-

PLACE :-

DECLARATION
I undersigned Mr. CHAUHAN HIREN V. STUDENT OF DEPARTMENT OF
MANAGEMENT (M.B.A) 2 semester hereby declare that the report for summer
internship project on " working capital manajment" from 3th June 2018 to 17th July
2018 in my own work and has been carried out under the guidance of Abhani dhara of
Department of management (M.B.A), Narandas jethalal sonecha management &
Technical Institute, Chanduvav.

This has not been submitted to any other university for securing in any
examination.

DATE:-

PLACE:-

Signature
TABLE OF CONTENTS

SR. NO. PARTICULARS PAGE

NO.

PART-1 GENERAL INFORMATION (IF IT IS INDUSTRY

SPECIFIC)/ THEORETICALTHEORETICAL

1 1.1 About the Industry / History & Evolution

1.2 Growth Of The Industry

2 2.1 About Major companies in the industry/

Assumptions & scope

3 3.1 Product profile / model or Tools

PART-2 PRIMARY STUDY

4 4.1 Introduction of the study

4.2 literature Review

4.3 Background of the study

4.4 Problem statement and Importance of the study

4.5 objectives of the study

4.6 Hypothesis(If Applicable)

5 Research Methodology

5.1 Research Design

5.2 source of Data

5.3 Data Collection Method

5.4 population (If Applicable)

5.5 Sampling method (If Applicable)

5.6 sampling Frame ( If Applicable)

5.7 Date collection Instrument

5.8 model Specification / Data processing

6 Data Analysis and Interpretation

7 Results and Findings

8 Limitations of the study

9 Conclusion/ Suggestions

Company Introduction

SR.NProfile Particulars Page no.

O.

1 Company Profile

2 Size and forms of the organization

3 Organization Chart

4 Time keeping system

5 Employers services

6 Production process

7 Contribution of the unit

INTRODUCTION OF CEMENT INDUSTRIES

India's Cement industry is a vital part of its economy, providing

employment to more than a million people, directly or i directly. Ever since it was
deregulated in 1982, the indian cement industry has attracted huge investments,from
both Indian and foreign investors, making, it the second largest in the word. The
industry is currently in a turnaround phase, trying to achieve global standards in
production, safety, and-efficiency.

India has a lot of potential for development in the infrastructure and

construction sector and the cement sector is expected to largely benefit from it.some
of the recent major government initiatives such as development of 100 smart cities are
expected to provide a major boot to the sector.

Expecting such development in the country and aided by suitable government

foreign policies, several foreign players such as lafarga, Holmic and vicar have
invested in the County in the recent past. A significant factor which aids the growth of
this sector is the ready availability of the raw materials for making cement, such as
limestone and coal.

Market size

Cement market in India is expected to grow at a compound annual growth

rate (CAGR) of 8.96 percent daring the period 2014-2019.

in india, the housing sector is the biggest demand driver of cement,

according for about 67 per cent of the total consumption. The other major consumers
of cement include infrastructure at 13 per cemt, commercial construction at 11 per
cent and industrial construction at nine per cent.

Company Profile

The major Objective of the study is to proper understanding of the

"Working Capital Management of " Ajmera Cements Pvt.Ltd." and to suggest how
attracting the customer.
 In the marketing world manager quite says "retaining customer is more
important than acquiring one, we will examine the importance of this sentence the
organization use communication tools to make their product and brand aware among
the consumer.

I have done summer training in " Ajmera cements Pvt.Ltd."

It has a four department like production, finance , marketing and human resource.

They see better future in cement industry in India so to produce more

quantity of cements & to cope up with demand of the product & to expand unit.

The customers are also benefited by relationship marketing in term of

improved service quality, personalized care reduction of customers stress, customer
stress , customer improvement, etc.

The study of the working capital is mainly focuses on the current assets of
the company and how the company manages their various component of the working
capital like inventory such as raw material, stock of the work in progress, stock of the
work in progress, stock of the finished good,debtors,cash etc..

NAME "AJMERA CEMENTS PVT.LTD."

PHONE 02870285137

FAX 02870285137

ADDRESS KESHOD VERAVAL STATE,

HIGH WAY BHANDURI

WEBSITE www.ajmeracement.com

E-MAIL ajcl@ajmera.com

YEAR OF EST. 1950

GLORIOUS HISTORY & DEVLOPMENT OF UNIT

"Ajmera cement Private Limited" was established in 1985 at bhanduri by leading
entrepreneurs shichhotubhai Ajmera group of ompanies.

"Ajmera cement private limited " started its production on 26th Dec.1985 i.e.8
years ago Bhanduri which 24 km Away from keshod on the way to veraval, on state
high way road no.31 in Junagadh Dist. Of gujarat. The land owned by the company is
of 10 hectors over which the plant is spread as well as they are own lime stone mines.

"Ajmera cement Private" established in 1985 with a semi dry process and
vertical shaft kitten, developed by national council for cement and building material is
know as cement research industry, New Delhi.

" Ajmera cement Private " Industry first year produce 13052 M.T. cement and
last year cement during this time company adopt new technology for the Best quality
of its product are Installed electrical weigh feeder and cost of technology is about
Rs.12 lack.In rain season for easy grading of raw material company established hotter
air generator, cost of it is Rs.6 lack.

SIZE AND FORMS OF THE ORGANIZATION

1. SIZE OF ORGANIZATION

There are mainly Three Types of unit.They are as under,

 1. Small Scale Industry

2. Medium Scale Industry

3. Large Scale Industry

1. Small scale Industry:-

If the money Invented in the organization is near about 1 Crore then the
Organization is Classified under the small scale industry.

2. Medium Scale industry:-

If the money invested in the organization is up to 10 Corers then then the

organization is classified under medium scale industry.

3. Large scale industry:-

If the money invested in the organization is more than 10 Crore then the
organization is Classified under large scale industry.

"AJMERA CEMENTS PVT.LTD." Is Large Scale Industry.As the

investment of it is 2082.03 lacks it is categorized as large scale industry. It is both
labour and machine orented unit.

Form of organization

There are kind of organization viz. Sole proprietors ship, Join stocks company,
privet company, public company and cooperative society.

"Ajmera cements" is privet limited company.

TIME KEEPING SYSTEM

The time keeping system is one of the important and most useful for every
large company or function of an organisation besides regulating the incoming &
outgoing of employees. The company run in three shift.
Shift Time

1 6:00 a.m. to 2:00 p.m.

2 2:00 p.m to 10:00 p.m

3 10:00 p.m to 6:00 p.m.

The company also have general shift,it begins from 8 A.M. to 6 P.M. with
recess from 12:30 P.M to 2 P.M. to the worker.

In the office when the workers are come at the time their cards are being
punched & Put in to their respective files separately provided for each shift punching
& after entry in the company. The timekeepers mark all the details in present leave &
also absence of employees of the files.

EMPLOYEES WALFARE ERVICES

The profitability and Productivity of any Organization depend upon the

industrial relation between administrative and employees of the unit.
 1.Leave facility:-

In ACPL according to company act, 30 days leave is taken during the year
& 1 leave for each during 1 week. In managing & worker level employees some
razing in to week because they have common being not machine.

2. Medical facilities:-

When any accidents take place at that Time company gives first aid
treatment to the workers and the company for company for employee's benefits also
takes insurance policy.

3. Housing facilities:-

Ajmera cement Pvt. Ltd. Provides quarter for operating staff in company's
colony and also provide housing facility. There is 20 quarter for managerial staff and
30 quarter for labours give at a free of charge but electrical bills is to be paid by him
to employees at accommodation is given on basis of the distance from the factory.

4. Loan facility:-

This unit also given loan for purchasing cycle and scooter rs.1000 to rs. 10000
respectively. This loan facility is available for only operative staff.

5. Safety equipments facility:-

Some safety equipment provides to the workers by this unit like hand glows,
helmets and also safety shoes.

Thus, "Ajmera cements pvt Ltd" is providing many services to their employees
and outsiders also.

MANUFACTURING PROCESS:-

Ajmera Cement Private limited is entirely manufacture unit. It is produce only

cement.

Manufacturing process is heart of any organisation. It is conveting raw

material into finish good. Which are ready to ? The whole manufacturing process is
divided into various stages.

1) Introduction Stage:-

Here, all raw materials are collected from different place,this raw
material are kept in the company ground and srored there and as per requirement they
are brought in the plant for the production.
 2) First stage :-

In this stage all raw material like limestone, clay, and coals are crushed
in the crushing machine and then after they are stored in the raw material silos thrown
the conveyer belt.

3) second stage :-

in this stage all raw material are taken into a raw mill through the
conveyer belt where all the raw material are mixed in a standard quality then after all
these raw material are grinded and formulated into power. After laboratory checking
this power is dispatched to the store silos the nodules are formulated by mixing the
power with water through. The miller the nodules are checked in the laboratory.

4) Third stage :-

in this stage all the nodules are brought into killen with the help of pipe
and high degree of temperature is given. Then after the nodules are converted into
black clinkers are stored in the hopper. These clinkers are crushed the laboratory
machine and converted into powder.

5) forth stage :-

in this stage clinkers and nodules are grinded and converted into the
powder in the cement mill. This powder is taken into the cement silos. Through the
screw conveyer. This powder is know as cement.

6) Fifth stage :-

This cement is taken into the packaging room, where it is packed by an

alternative packing machine.

Now, cement produces by unit is sold as an ordinary Portland cement

with the brand name "SHREEJI" with the ISI 269 conformation. It is available in 50
K.G.

Contributions of the unit

Contribution of the unit to the industry is significant because this company is

production the main raw materials is construction, plays pivotal role in the
development of country.

Ajmera cement Pvt. Ltd. has contributed a lot to the total strength of the industry
as well as of the country. Ajmera cement Pvt. Ltd. Is existing profit making of
"Ajmera group" going for expansion,diversification & modernisation. Promoters are
having long experience in the same line of business. The unit is aimed at up ginding
and expanding its manufacturing capabilities with the exploration of opportunities.
 MARKETING

DEPARTMENT

INTRODUCTION

"Marketing is social & Managerial process by which individual & group obtain
their need & wants through creating & exchanging product & value with others."

- Philip kotler

marketing mangement is a branch of total management and is concerned with

the direction of those activities towards the attainment of marketing goals
i.e.satisfaction of customers needs, increased in organization profit.

Marketing translate business philosophy into reality. It is theory of success in

any field of human activities. Marketing is "springboard" of all industrial production.
 OBJECTIVE OF MARKETING

Marketing objective are the aims that a marketing strategy wants to achieve in
order to achieve the overall corporate objectives.

The best way to write the goals and objective is to think about everything you
want to achieve and the time - frame you to want to achieve it in. Underneath them
list thing needed to accomplish the goals. Those will be yours objectives. Look at this
list everday and do something to put you closer to accomplishing the goals.
 ADVERTISEMENT

"Advertising is defined as any paid form of non - presentation & promotion

of ideas, goods, & services by an identified sponsored."

MEANING:-

" Advertising is a paid form of mass communication that consists of the

special message sent by the specific person ( Advertiser or company ) for the specific
group of people ( Listeners, Readers, Viewers ), for the specific period of time in the
specific manner to achieve the specific goals."

Entire marketing process is aimed at satisfying consumer more effectively than

competitors. Consumer satisfaction can achieved by receiving information for marker
and sending information to the market.

In order to inform, attract and convince the consumers a marketer undertakes

advertisement. Advertising is a powerful mean to inform about company's total offers.
There are many types of advertising Media like press media, television, Newspaper,
Magazines, print media etc.

Advertising message must fulfil certain conditions :

1) message must be attractive

2) It must be suggestive.

3) It must be appealing or motivating.

4) It must fulfil legal and social conditions.

5) It must be convincing.

6) It must be memorable.

7) It must indicate major benefits of product,etc.

 MARKET SEGMENTATION

" Market Segmentation is a process of dividing a total market into different sub-
Market, segments or parts by using definite criteria or bases."

Moden marketers operate in a few target markets, not total market. It is based on
the them "divide & conquer". Success depends on matching the product with
consumer needs. It is customer oriented process.

There is main two market segmentation:

A) consumer oriented characteristics

B) product oriented characteristic

Consumer characteristics also know as people oriented approach. It includes

following category:

A) Geographical bases

B) Demographical bases

C) psychographic bases

Product characteristic also know as product oriented approach. It includes following

categories:

A) Occasions

B) Benefits

C) user status

D) usage rates

E) loyalty pattern
HR

DEPARTMENT

introduction

Human resource management is also known as personnel management.

Personnel management is the study of human behavior, study of human being. In this
personnel management they select the employee and give training to them. Personnel
management is totally related with human being or in other word with people working
in organization.
 No business enterprise can exist and function without employees because
employees & workers are the main and very important assets of any types of company
or firm. The manager should always try to encourage each and every employee. The
plan of business may be logically sound and structure of organization may be perfect,
but if the recruitment and training of personnel are unscientific business and ability of
employees.

MEANING OF HRM

HRM refers to the application of management principles to management of

people in a organization. This is too simple a statement and fails to capture the
essence of HRM.

HRM consists of people-related function as hiring, training and development,

performance review, compensation, safety and health, welfare, industrial relations and
the like.These are typically functions. Of personnel management and are
administrative and supportive in nature. Appropriately called " doable", These
activities are highly routinisedand have been often outsourced. More important
functions of Hrm are the building of human capital.
 OBJECTIVE OF HRM

There are four objective. These objective are given below:

A) societal objective.

B) organizational objective.

C) Functional objective.

D) personal objective.

A) societal objectives:-

To be ethically and socially responsible to the need and challenges of the

society while minimizing the negative impact of such demands upon the organization.
B) organizational objective:-

HRM is not an end in itself. It is only a means to assist the organization with its
primary objectives.

C) Functional objectives:-

To maintain the departments contribution at a level appropriate to the

organizations needs. Resources are wasted when HRM is either more or less
sophisticated to suit the organization demands.

D) personal objectives:-

Per sonal objectives of employees must be met if workers are to be maintained,

retained and motivated. Otherwise, employee performance and satisfaction may
decline and employees may leave the organization.

FINANCE DEPARTMENT
INTRODUCTION OF F.M

finance management came into existence only after the barter system comes to
an end and money came into existence. It is one of the most important parts of any
industry. It can also be called as "Lifeblood for an industry".

Finance manajment is that managerial activity which concern with the planning,
controlling and organizing the firm's financial resources.

Finance is closely related with each & every activity of our life. We cannot think
of a single activity without consideration of finance. Finance is primary element in
each & every organization activity either directly or indirectly related with finance.

It is clear that human body cannot live without blood, like wise now a day the
finance is consider as the life blood of any organization, considering the important of
finance each & every company has to manage it effectively. Looking to all these
impotent's AJMERA CEMENTS PBT. LTD. Has also established separate financial
department, which concentrates on the financial matters of the industry.
 OBJECTIVE OF F.M

The main objectives of every finance department is to have maximum return

by paying minimum cost. There can be other subsidiary objectives like to run
business smoothly, to catch an opportunity, to maintain liquidity etc. The main
objectives are as follows:

1) profit maximization

2) wealth maximization

The financial objective of the "AJMERA CEMENTS PVT. LTD." Is

profit maximization. Mainly this firm wants to earn maximum profit. Because it
believes that profit maximization means maximum utilization of resources also. As
this is partnership firms all partner have established this unit with view to earn
maximum profit.

ORGANISATION OF FINANCE DEPARTMENT

 The exact nature of the organization for financial management will differ from
firm to firm. It will differ depend upon some factor like size of the firm, mature of
business kind of financing operation and financial philosophy of the firm.

Because of the vital important of finances decision of a firm. It is essential to set

up a sound & effective organization for the finance function. In ACPL financial
decision are combining taken by board of director and vice President of a firm the
financial organization of this unit is as under as graphicform. Detail about the
financial department is as under

A) chief Accountant

B) Accountant Assistant

C) Accountant

D) Clerks

"Ajmera cement private limited "is having line & staff type of organization in
financial department.

The duties and responsibility of account section is as under.

 Price fixation
 Keeping the accounts up to date
 Managing fix assets
 Sales tax

FINANCIAL PLANNING

Financial management is conducted with two things: one, obtaining fund and second,
proper use of fund. The first step is raise money when required and in the proportion
required. So the planning is important in this.

There are two types of financial planning.

 Long - term financial plan

 Short - term financial plan

Long - term financial plan:

Long term financial plans I.e. in other words it is called capital budgeting are to be
done for expansion of the existing unit. Starting of the new unit development of new
product etc.
Short term financial plan:

Short term financial plan I.e. called working capital marketing it is to be carried out
for the smooth running or daily production to pay 70 - day obligations for meeting the
future requirement of raw material etc.

In "Ajmera cement private limited" short term financial plans are carried out
effectively for their day-to-day work and for the success of sales activity.

WARNING CAPITAL MANAGEMENT

 CONCEPTUAL FRAMEWORK

Sr.no. Particular Page no.

1 Introduction

2 Significance of working capital management

3 Liquidity vs. Profitability: risk- return trade off

4 Classification of working capital

5 Types of working capital needs

6 Factors determining working capital requirements

7 Working capital cycle

8 Sources of working capital

9 Working capital position

10 Inventory management

11 Cash management

12 Receivables management
13 Managing playable (creditors)

14 Financing current assets

15 Working capital & short- term financing

16 Financing current Assets

 INTRODUCTION

The project undertaken is on "WRKING CAPITAL MANAGEMENT " in

"AJMERA CEMENT PVT. LTD."

It describes about how the company manages its working capital and the various
steps that are required in the management of working capital.

Cash is the lifeline of a company. If this lifeline deteriorates, so does the

company's ability to operations, reinvest and meet capital requirements and payments.
Understanding a company's cash flow prospects is to look at its working capital
management (wcm).

Working capital refers to the cash a business requires for day-to-day operations or
more specifically,for financing the conversion of raw materials into finished goods,
which the company sells for payment. Among the most important items of working
capital are levels of inventory, accounts receivable, and accounts payable. Analysts
look at these item for signs of a company's efficiency and financial strength.

The working capital is an important yardstick to measure the company's

operational and financial efficiency. Any company should have a right amount of cash
and line of credit for its business needs at all times.

This project describes how the management of working capital takes place at
"AJMER CEMENTS PVT. LTD."

WORKING CAPITAL= CURRENT ASSETS - CURRENT LIABILITIES

THE PROBLEM

In the management of working capital, the firm is faced with two key proble:

1. first, given the level of sales of sales and the relevant cost considerations, what
are the optimal of cash , accounts receivable and inventories that a firm should choose
to maintain ?

2. second, given these optimal amounts, what is the most economical way to
finance thes working capital investment ? to produce the best possibal results, firms
should keep no unproductive assets and should finance with the cheapest available
sources of funds. Why ? In general, it is quite advantageous for the firm to invest in
short term assets and to finance short-term liabilities.
PURPOSE OF STUDY

The objectives of this project were mainly to study the inventory, cash and
receivable at "AJMERA CEMENTS PVT. LTD." but there are some more and they
are -

 The main purpose of our study is to render a better understanding of

the concept " working capital manajment".
 To understand the planning and management of working capital at "
AJMERA CEMENTS PVT. LTD."
 To measure the financial soundness of the company by analyzing
various ratios.
 To suggest ways for better management and control of working capital
at the concern.
RESEARCH METHODOLOGY

Thise project requires a detailed understanding of the concept - "working

capital management". Therefore, firstly we need to have a clear idea about, what is
worming capital, how it is managed in "AJMERA CEMENTS PVT. LTD." what are
the different ways in which the financing of working capital is done in the company.

The management of working capital involves managing inventories, accounts

receivable and payable and cash. Therefore one also need to have a sound knowledge
about cash management, inventory manage and receivables management.

The come the financing of working capital requirement,i.e. how the working
capital is financed, wbat are the various sources through which it is done.

And, in the end, suggestions and recommendations on way for better

management and control of working capital are provided.
 SCOPE OF STUDY

1) This project will be a learning device for the finance student.

2) Through this project I would study the various methods of the Working

Capital management.

3) The project will be a learning of planning and financing Working capital.

4) The project would also be an effective tool for credit policies of the

Companies.

5) This will show different methods of holding inventory and dealing with cash

and receivables.

6) This will show the liquidity position of the company and also how do they

Maintain a particular liquidity position.

 DATA SOURCES:

The following sources have been sought for the preparation report:

 Primary sources such as business magazines,current annual report, book on

financial management by various authors and internet websites the
impamongst them being :www.studyfinance.com , www.indiainfoline.com .
 Secondary sources like previous year's annual reports, CMA Data, reports on
working capital for research, analysis and comparison of the data gathered.
 While doing this project, the data relating to working capital, cash
management, receivables management, inventory management and short term
financing was required.
 This data was gathered through the company's websites, its corporate intranet,
AJMERA'S annual reports and CMA data of the last three years.
 A detailed study on the actual working processes of the company is also done
through direct intreraction with the employees and by timely studying the
happenings at the company.
 Also, various text book on financial management like khan and jain, parana
chandra and I.M.PANDEY were consuited to equip ourselves with the topic.
LIMITATIONS OF THE STUDY

 We cannot do comparisons with other companies unless and until we have the
data of other companies on the same subject.
 Only the printed data about the company will be availabal and not the - end
details.
 Future plans of the compamy will not be disclosed to the trainees.
 Lastly,due to shortage of time it is not possible to cover all the factors and
details regarding the subject of study.
 The latest financial data could not be reported as the company's websites have
not been updated.
Significance of capital management

The management of working capital is important for several reasons:

 For one thing, the current assets of a typical manufacturing firm account for
half of its total assets. For a distribution company, they account for even more.
 Working capital requires continuous day to day supervision. Working capital
has the effect on company's risk, return.
 There is an inevitable relationship between sales growth and the level of
current assets. The target sales level can be achieved only if supported by
adequate working capital inefficient working capital management may lead to
insolvency of the firm if it is not in a position to meet its liabilities and
commitments.

Liquidity vs. Profitability: risk - return trade off

Another important aspect of a working capital policy is to maintain and provide

sufficient liquidity to the firm. Like the most corporate financial decisions, the
decision on how much working capital be maintained involves a tradeoff - having a
large net working capital may reduce the liquidity risk faced by a firm, but it can have
a negative effect on the cash flows. Therefore, the net effect on the value of the firm
should be used to determine the optimal amount of working capital.

Sound working capital involves two fundamental decisions for the firm.they are
the determination of :

 The optimal level of iinvestment in current assets.

 The appropriate mix of short- term and long - term financing used to support
this investment in current assets, a firm should decide whether or not it
should use short- term financing. If short-term financing has to be used, the
firm must determine its portion in total financig. short - term financing may
be preferred over long - term financing for two reasons.
I. The cost advantage
II. Flexibility

CLASSIFICACATION OF WORKING CAPITAL

Working capital can be classified as follows:

 On the basis of time

 On the basis of concept
 TYPES OF WORKING CAPITAL NEEDS

Another important aspects of working capital management is to analyze the total

working capital needs of the firm in order to find out the permanent and temporary
workin capital. Working capital is required because of existence of operating cycle.
The operating cycle is a continuous process and Therefore, the working capital is
needed constantly and regularly. However, the magnitude and quantum of working
capital required will not be same all the times, rather it will fluctuate.

The need for current assets tends to shift over time. Some of tbese changes
reflect permanent change in firm as is the case when the inventory and receivables
increases as the firm grow and the sales become higher and higher. other change are
seasonal, as is the case with increased inventory required for a particular Festival
season. Still others are random reflecting the uncertainty associated with growth in
sales due to firm's specific or general economic factors.

The working capital need can be bifurcated :

i. Permamanent working capital

ii. Temporary working capital
Permanenent working capital:

there is always a minimum level of working capital, which is continuously

required by a firm in order to maintain its activities. every firm must have a minimum
of cash, stock and other current assets, this minimum level of current assets, which
must be maintained by any firm all the times, is known as permanent working capital
for that firm. This amount of working capital is constantly and regularly required in
the same way as fixed assets are required. So, it may also be called fixed Working
capital.

Temporary working capital:

Any amount over and above the permanent level of working capital is
temporary, fluctuating or variable working capital. The position of the required
working capital is needed to meet fluctuations in demand consequent upon changes in
production and sales as a result of seasonal changes.

The permanent level is constant while the temporary workig capital is fluctuating
increasing and decreasing in accordance with seasonal demands as shown in the
figure. In the case of an expanding firm, the permanent working capital line may not
be horizontal. This is because the demand for permanent current assets might be
increasing ( or decreasing) to support a rising level of activity. In that case line would
be rising.

FACTORS DETERMINING WORKING CAPITAL REQUIREMENTS

There are many factors that determine that determine working capital needs of
an ebterprise. Some of these factors are explained below:

 Nature or character of Business:

The working capital requirement of a firm is closely related to the
nature of its business. A service firm, like an electricity undertaking or a
transport corporation, which has a short operating cycle and which sells
predominantly on cash basis, has a modest working capital requirement. The
other hand ,a manufacturing concern like a machine toola unit, which has a
long operating cycle and which sell largely on credit, has a veryA9.m
substantial Working capital requirement.
"AJMERA CEMENT PVT. LTD." Is a manufacturing concern so this
requires them to keep a very sizeable amount in working capital.

 Size of business / scale of operations :

"AJMERA CEMENT PVT. LTD." had a good position in its
segment and they are also spending their operations in the domestic Market
as well as in foreign market.the scale of operations and the size it holds in the
market makes it a must for them to hold their inventory and current asset at a
huge level.
 Rate of growth of business:
The rate of growth of sales indicates a need for increase in the
working capital requirements of the firm. As the firm is projected to increase
their sales by 69% from what it was in 2017, it is required to guard them
against the increasing requirements of the net current asset by way of
efficient working capital management. The sales and projected sales level
determine the investment in inventories and receivables.
 Price level changes:
change in the price level also affect the working capital requirements.
It was the reduced margins in the price of the raw materials that had
 prompted them to go for bulk purchases thus making on sdditions to their net
current assets. They might have gone for this large - scale procurement for
availing discounts and anticipating a rise in prices, which wiuld have meant
that more funds are required to maintain the same current assets.

SOURCES OF WORKING CAPITSL

"AJMERA CEMENT PVT.LTD." has the following banks available for

the fulfilment of its working capital requirements in order to carry on its operations
smoothly:

 Banks:

These include the following -

a) Indian Bank
b) Syndicate Bank

ANALYSIS OF WORKING CAPITAL

Working capital position Analysis

In
"Ajmera cement pvt. Ltd."

PARTICULARS 2013-14 2014-15 2015-16 2016-17 2017-18

SOURCES OF
FUNDS

SHARE CAPITAL 19901000.00 19901000.00 19901000.00 19901000.00 19901000.00

RESERVE AND 345519604.82 29625127.98 15253853.53 21829192.29 20785949.94

SURPLUS

LOAN FUNDS

SECURED LOANS 72686105.58 88539002.13 94535519.74 55323395.23 54399581.72

DEFERED TAX 3383097.00 3449412.00 3080483.00 662332.00 ---------

LIABILITY

UNSECURED 43486673.00 46947616.00 28872233.00 15703501.00 14408414.70

LOANS

TOTAL 173976583.65 188462261.36 171643192.52 113419523.77 109495049.61

APPLICATION OF
FUNDS

FIXED ASSETS

A: GROSS BLOCK 178453951.93 172240571.18 164888412.68 126570061.76 123370584.96

B: less 101561424.62 90540217.62 78663170.62 71729938.62 64380715.62

DEPRICIATION

C: NET BLOCK 76892527.31 81700353.56 86225242.06 54840123.14 58989869.34

D:CURRENT
ASSETS

INVENTORY 43767644.00 67853213.00 41177224.00 21642098.00 26940120.00

SUNDRY DEBTORS 37497882.00 27508864.00 24338099.04 30359548.69 26994647.57

CASH IN HAND & 6891449.29 3665403.60 2297697.88 3407307.32 6617777.19

BANK

LOANS AND 27455698.27 42907011.40 32127724.16 16926496.21 11619189.30

ADVANCES

E:CURRENT
LIABILITIES

SUNDRY 12735248.22 29094178.20 9759461.84 11585162.05 19863619.97

CREDITORS
ADVANCE FROM 822054.00 2539050.00 100000.00 100000.00 --------------
CUSTOMERS/DLR’S

PROVISIONS 4971315.00 3539356.00 2483662.90 2072970.04 1812808.72

(D-E)NET CURRENT 97084056.34 106761907.80 85417950.46 58577318.13 50495305.37

ASSETS

MISCELLANEOUS --------- --------- -------- 2082.50 9874.90

EXPENSES

TOTAL 173976583.65 188462261.36 171643192.52 113419523.77 10945049.61

Net working capital= current assets - current liabilities

BALANCE SHEET AS AT
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED
PARTICULARS 2013-14 2014-15 2015-16 2016-17 2017-18

(A) INCOME

1: NET SALES 703988634.61 593474659.66 503359979.46 453662278.70 356117465.

2: OTHER INCOME 436106.42 3913796.87 172310.00 13234.00 33965.73

TOTAL 704424741.03 597388456.53 503532289.46 453675512.70 356151430.

(B) EXPENSES

1:RAW 591836104.58 478736333.46 402022691.32 36335638.35 284721845.

MATERIAL,FINISHED
GOODS & WORK IN
PROGRESS

2:MANUFACTURING 68743029.05 76058287.24 69929616.64 64805480.37 49256838.9

EXPENSES

3:SALARY & OTHER 4115744.00 3845617.00 3348712.00 3336648.00 2678327.00

EMP.BENEFITS

4: ADMINISTRATIVE 3232698.41 3229712.90 3352674.68 2742302.31 2066811.17

EXPENSES

5: SELLING 4646428.28 4114634.84 3276473.48 3183784.89 1610635.56

EXPENSES

6: FINANCIAL 13455947.36 13038713.28 7292587.41 6731948.84 4803871.78

EXPENSES

7: OTHER EXPENSES 446187.51 324537.36 731402.50 38487.59 42963.40

8:DEPRICIATION 11021207.00 11877047.00 6933232.00 7349223.00 10608658.7

TOTAL 697497346.19 591224883.08 496887390.03 451523513.35 355789952.

PROFIT BEFORE TAX 6927394.84 6163573.45 6644899.43 2151999.35 361478.70

DEFERRED TAX -66315.00 368929.00 2418151.00 662332.00

PROVISION FOR FBT 99521.00 90342.00 56529.41 0.00

PROVISION FOR 1999712.00 1333028.00 745557.78 446425.00 58160.00

TAXATION

PROFIT AFTER TAX 4894476.84 4371274.45 3424661.24 1043242.35 303318.70

PROFIT AS PER LAST 18406627.98 14035353.53 10610692.29 9567449.94

YEAR BALANCE
SHEET

CARRIED TO 23301104.82 18406627.98 14035353.53 10610692.29 303318.70

CURRENT YEAR
BALANCE SHEET

THEORETICAL BACKGROUND

OF WORKING CAPITAL MANAGEMENT

MEANING AND NATURE OF WORKING CAPITAL MANAGEMENT

The management of working capital is concerned with two problems that arise
in attempting to manage the current assets, current liabilities and the inter relationship
that asserts between them.

The basic goal is working capital management is to manage current assets and
current liabilities of a firm in such a way that a satisfactory of optimum level of
working capital is maintained i.e. it is neither inadequate nor excessive. This is so
because both inadequate as well as excessive working capital position is bad for
business.

MAJOR DECISIONS IN WORKING CAPITAL MANAGEMENT

There are two major decisions management relating to working capital management:-

What should be ratio of current assets to sales?

What should be the appropriate mix of short term financing and long term financing
for financing these current assets?
1. Current assets in relation to sales:-
 If the firm can forecast accurately the factors, which effect the working
capital, the investment in current assets, can be designed uniquely. When uncertainty
characteristics the above factors, as it usually does the investment in current assets
cannot be specified uniquely. In case of uncertainty, the outlay on current assets
should consist of base component meant to meet normal requirement and a safety
component meant to cope with unusual requirement. The safety component depends
upon low conservative or aggressive in the current assets policy of a firm. If the firm
purchases a very conservative current asset policy it would carry a high level of
current assets in relation to sales. If a firm adopts a moderate current assets policy it
would carry moderate level of current assets in relation to sales, finally is a firm
follows a highly aggressive current assets policy, it would carry a low level of current
assets in relation to sales.

SATHE SYNTHETICS is following current assets policy showing moderate

level of current assets in relation to sales as is evident from ratio analysis.

2. Determining a Short Term and Long Term Financing Mix for Financing of current
assets:-

There are three approaches in this regard, which are discussed below:

HEDGING APPROACH: -

This approach is also called matching approach. In this approach

there is a proper matching of expected life of asset with the duration of fund. Usually,
according to this approach, long-term sources are used for financing permanent
current assets and fixed assets & short-term sources are used for financing temporary
current assets:

term financing
ASSETS Time

CONSERVATIVE APPROACH: -

In this approach there is more reliance on long-term financing in comparison

to short-term financing. Even some part of the temporary current comparison to
finance from long-term sources because long-term sources are less risky in
comparison to short-term sources.

Temporary Current Assets

Short-term
financing

Permanent Current Assets Long-term

financing Fixed Assets Time

AGGRESSIVE APPROACH

In this approach there is more reliance on short term financing and even a part
of permanent current assets is financed from short-term finance.

Temporary current assets Short term financing

 Permanent current assets Long term financing

Fixed Assets

Time

In SATHE SYNTHETICS, the current assets are financed from short term sources as
well as long term sources, so they follow conservative approach.

WORKING CAPITAL ANALYSIS

1. OPERATING CYCLE ANALYSIS

Operating cycle refers to the time period which starts from the raw material
purchases and ends with realization of receivable. So it is total time gap between raw
material purchases to total debtors’ collection. This is also known as working capital
cycle. Operating cycle is therefore expressed in terms of months or weeks or days.
The higher the operating cycle period, higher the working capital requirement. It
comprises of raw material conversion period, WIP conversion period, FG conversion
period and debtors’ conversion period and creditors period. The basic reason for
calculating operating cycle is to find out the means for reducing the duration of
operating cycle because if duration of operating cycle will be less than working
capital requirement will be less.

OC = R + W + F + D – C

Where,

R = raw material conversion period W = work in process period

F = finished goods conversion period D = debtor collection period

C = creditors payment period

(1) Raw Material Conversion Period (RMCP)

= Average Raw Material Stock

Average Raw Materials consumed during the year

PARTICULARS 2008-09 2007-08 2006-07 2005-06 2004-05

Average raw 33065118 33352213.5 20819151 13076062.5 9471720.12

material stock

Raw material 314166.03 213093.45 107464.04 218371.65 121729.46

consumed
during the year

RMCP 105.25 156.52 193.73 59.88 77.80

(2) Work in Progress Conversion Period (WIPCP)

= Average stock in progress

Average Cost of Production

PARTICULARS 2009 2008 2007 2006 2005

Average stock in 7834151.50 8313099.5 5586013 4818821.5 3634639.5

progress

Avg. Cost of 190952.86 211273.02 194248.64 180015.22 136824.55

production

WICP 41.03 37.93 28.75 26.77 26.56

(3) Finished Goods Conversion Period (FGCP)

= Average finished goods inventory

Average Cost of goods sold

PARTICULARS 2009 2008 2007 2006 2005

Average finished 14911159 13149905.5 5004497 6396225 5858384.5

goods inventory

Cost of goods 1955523.98 1648540.72 1398222.17 1260173 989215.18

sold

FGCP 7.63 7.98 3.58 5.08 5.92

(4) Debtors’ Conversion Period (DCP)

= Days in year company operating

 Debtors’ turnover

PARTICULARS 20009 2008 2007 2006 2005

Days in year 360 360 360 360 360

company
operating

Debtors’ turnover 21.66 22.89 18.41 15.82 18.38

DCP 16.62 15.72 19.55 22.76 19.59

(5) Credit Conversion Period (CCP)

= Days in year company operating

Creditors’ turnover

PARTICULARS 2009 2008 2007 2006 2005

Days in year 360 360 360 360 360

company
operating

Creditors’ 27.15 26.02 39.50 22.77 23.30

turnover

Avg. 13.26 13.84 9.11 15.81 16.14

consumption
period OR CCP

GROSS OPERATING CYCLE FOR AJMERA CEMENT:

YEAR RMCP WICP FGCP DCP GOC

2009 105.25 41.03 7.63 16.62 170.53

2008 156.52 37.93 7.98 15.72 217.84

2007 193.73 28.75 3.58 19.55 245.61

2006 59.88 26.77 5.08 22.76 114.49

2005 77.80 26.56 5.92 19.59 129.87

NET OPERATING CYCLE: -

YEAR GOC CCP OR APP NOC

2009 170.53 13.26 157.27

2008 217.84 13.84 204.31

2007 245.61 9.11 236.5

2006 114.49 15.81 98.68

2005 129.87 16.14 113.73

ANALYSIS

It claimed that gross operating cycle of AJMERA CEMENT is increasing in year

2004-05 and in the year 2005-06 it decreasing up to certain extent. In year 2004-05, it
is 129.87 days then it decreased to 114.49 days in year 2005-06 due to contraction in
raw material. In 2006-07, it is on the highest point of 245.61 days. The main reason of
increasing gross operating cycle in 2006-07 is due to more availability of raw material
in the stores. In year 2006-07 the company purchased a bulk of raw material due to
market variations the GOC is increased. However, when we came to year 2007-08 the
GOC for S.S has shown a significant decrement of 204.31 days from the year 2006-07
to 245.61. When in next year 2008-09, it came out to be 170.53 days. The GOP for
satisfactory as it Varies as the market requirements and changes in form of meet the
customer’s requirements largely.

But when we came to the NOC of Sathe Synthetics it we can see that Creditor’s
payment period OR Average payment period of S.S is on a average of 15 days in each
(5) five years so does not make more effect on GOC. Therefore, it is somehow near of
the GOC.
That is why the company’s NOC 113.73, 98.68, 236.5, 204.31, and 157.27 in the
years 2005, 2006, 2007, 2008 and 2009. Therefore, we can say that there is a
significant change in the NOC of the Sathe Synthetics.

1. RATIO ANALYSIS

Ratio analysis is a technique of analysis and interpretation of financial statements. It is

the process of establishing and interpreting various ratios for helping in making
decisions. It only means of better understanding of financial strengths and weaknesses
of a firm. The main emphasis has been on calculating the ratios related to a working
capital management.

LIQUIDITY RATIOS: -These are the ratios which measures the short term solvency
or financial position of a firm. In other words, it refers to the ability of a concern to
meet its current obligations as and when these become due. To measure the liquidity
of a firm, the following ratios can be calculated.

CURRENT RATIO: – It may be defined as the relationship between current assets

and current liabilities. This ratio is also known as working capital ratio and measures
the ability of the firm to meet current liabilities. High current ratio indicates firm is
liquid and has the ability to pay its current obligations in time as and when they
become due.

A ratio equal or near to the rule of thumb of 2:1 i.e. current assets double the current
liabilities is considered to be satisfactory.

Current Ratio = Current Assets

Current Liabilities
YEAR CURRENT CURRENT CURRENT RATIO
ASSETS LIABILITIES

2009 115612673.56 18528617.22 6.24

2008 141934492.00 35172584.20 4.04

2007 97761075.20 12343214.74 7.92

2006 72335450.22 13758132.09 5.26

2005 72171734.06 21676428.69 3.33

ANALYSIS

The current ratio of the Sathe synthetics is above the standard and it guarantees the
payment of dues in time. The current ratio of the company has been considerably high
because they had made over investment in inventories, which is the main reason for
the high ratio of current assets. Inventories are high because of seasonal availability of
raw material. The overall position of current ratio for Sathe synthetics is satisfactory.

The current ratio of dye house has shown a remarkable increment from 3.33 in 2004-
05 to 5.26 in 2005-06 and then to 7.92 in 2006-07. Initially in 2004-05, the ratio was
not satisfactory but it is quite satisfactory for the years after 2008-09 and especially
for the year 2006-07.

LIQUID RATIO –This ratio is also known as quick ratio or acid test ratio. It is a more
rigorous test of liquidity than the current ratio. It is based on those current assets
which are highly liquid. Inventory and prepaid expenses are excluded because they
are deemed to be least liquid component of current assets. A high quick ratio is the
indication that the firm is liquid and has the ability to meet its current liabilities in
time and on the other hand low ratio represents liquidity position is not good.

Quick Ratio = Quick or Liquid Assets

Current Liabilities

Quick Assets = Current Assets – Inventory – Prepaid Expenses

YEAR LIQUID ASSETS CURRENT LIQUID RATIO

LIABILITIES

2009 71845029.56 18528617.22 3.88

2008 74081279.00 35172584.20 2.11

2007 56583851.20 12343124.74 4.58

2006 50693352.22 13758132.09 3.68

2005 45231614.06 21676428.69 2.09

Analysis

According to rule of thumb, it should be 1:1. For Sathe synthetics, the liquid ratio
present a uneven change over the past four years. It was 2.09 in 2004-05 and
increased to 4.58 in 2006-07 and then to 2.11 in 2007-08. The decrement in the ratio
is not satisfactory, however the ratio 2.11 in 2007-08 is more than the rule of thumb
but it should be quite more than the rule of thumb.

WORKING CAPITAL TURNOVER RATIO – Working capital turnover ratio

indicates the velocity of the utilization of net working capital. This ratio measures the
efficiency with which the working capital is being used by a firm.

Working Capital Turnover Ratio = COGS OR Sales

Net Working Capital

YEAR SALES NET WORKING WCTR

CAPITAL
2009 703988634.61 97084056.34 7.25

2008 593474659.66 106761907.80 5.56

2007 503359979.46 85417950.46 5.89

2006 453662278.70 453662278.70 7.74

2005 356117465.20 50495305.37 7.05

ANALYSIS

This ratio indicates the number of times the working capital is turned over in the
course of a year. A high working capital ratio indicates the effective utilization of
working capital and less working capital ratio indicates less utilization. For Sathe
synthetics, the ratio is quite same for the past five years. It is 7.05 in 2004-05, 7.74 in
years 2005-06 and in2006-07 there was a slight change came over here and the ratio
decreased to 5.89. And in the next year in 2007-08 the ratio stand at 5.56 For Sathe
synthetics, the ratio is increasing once more in the very next year in 2008-09, It shows
increment to 7.24. the ratio of the company is satisfactory.

STOCK TURNOVER RATIO

This ratio tells the story by which stock is converted into sales. A high stock turnover
ratio
reveals the liquidity of the inventory i.e., how many times on an average, inventory is
turned over or sold during the year.

STOCK OR INVENTORY TURNOVER RATIO = COGS OR SALES

AVERAGE STOCK

YEAR SALES AVERAGE STR or ITR

STOCK

2009 703988634.61 55810428.5 12.61

2008 593474659.66 23981268.5 24.75

2007 503359979.46 31409661 16.03

2006 453662278.70 24291109 18.68

2005 356117465.20 18964744.11 18.78

ANALYSIS: -

By analyzing the five-year data it seen, that it follows an uneven trend. We see that
from the year
2005 to 2006 & 2006 to 2007, it moves on a slow pace means, the ratio is increased in
very nominal figures i.e. (.10) times and (2) times, which has been rectified in the
year 2008.
In 2008 there is a huge increase in inventory due to this ratio the company maintains
is very high in 2008 and the company is required to take measures to lower down this
ratio as it affects the working capital cycle of company and the flow of cash in the
company. In 2009, we saw company take measure to lower down its ratio which is
good for company because a low stock turnover ratio reveals undesirable
accumulation of obsolete stock.

DEBTORS’ TURNOVER RATIO: -

DEBTORS’ TURNOVER RATIO = CREDIT SALES

AVERAGE DEBTORS’

YEAR CREDIT SALES AVERAGE DTR

DEBTORS’

2009 703988634.61 32503373 21.66

2008 593474659.66 25923481.52 22.89

2007 503359979.46 27348823.87 18.41

2006 453662278.70 28677098.13 15.82

2005 356117465.20 19374123.96 18.38

ANALYSIS

Generally a low debtor’s turnover ratio implies that it considered congenial for the
business as it
implies better cash flow. The ratio indicates the time at which the debts are collected
on an
average during the year. Needless to say that a high Debtors Turnover Ratio implies a
shorter
collection period which indicates prompt payment made by the customer.
Now if we analyze the five year data we can say that it holds a good position while
receiving
its money from its debtors. The ratios are in variation trend, which implies that
recovery
position is good and company should maintain these positions.

CREDITORS’ TURNOVER RATIO: -

Actually this ratio reveals the ability of the firm to avail the credit facility from the
suppliers throughout the year. Generally a low creditor’s turnover ratio implies
favorable since the firm enjoys lengthy credit period.

CREDITORS’ TURNOVER RATIO = NET CREDIT PURCHASE

AVERAGE CREDITORS’

YEAR CREDIT AVERAGE CTR

PURCHASE CREDITORS’

2009 567750535.58 20914713.21 27.15

2008 505412322.46 19426820.02 26.02

2007 421557817.32 10672311.95 39.50

2006 358037616.35 15724391.01 22.77

2005 300672597.42 12906200.48 23.30

ANALYSIS

Actually, this ratio reveals the ability of the firm to avail the credit facility from the
suppliers throughout the year. Generally, a low creditor’s turnover ratio implies
favorable since the firm
enjoys lengthy credit period.
Now if we analyze the three years data we find that in the year 2007 the ratio was
very high
which means that its position of creditors that year was not good only in the year
2007, when we turn ahead the other years creditor’s turnover ratio is in pretty good
position.
In the all four years it has followed, a decreasing trend, which is very good, sign for
the company. Therefore, we can say it enjoys a very good credit facility from the
suppliers.

ANALYSIS ON THE BASIS OF SCHEDULE OF CHANGES IN WORKING

CAPITAL

PARTICULARS 2005-06 2006-07 INCREASE DECREASE

CURRENT
ASSETS:
Inventories 21642098.00 41177224.00 19535126

S. debtors 30359548.69 22158429.16 8201119.53

Cash & Bank 3407307.32 2297697.88 1109609.44

Balances

Loans & 16926496.21 32127724.16 15201227.95

Advances

Total current 72335450.22 97761075.20

assets (A)

CURRENT
LIABILITIES:

S. creditors 11585162.05 9759461.84 1825700.21

Provisions 2072970.04 2483662.90 410692.86

Security deposits 100000 100000 ----- ------

& Retention
money

Total current 13758132.09 12343124.74

liabilities (B)

Working capital 58577318.13 85417950.46 36562054.16 9721421.83

(A-B)

Net increase in 26840632.33 26840632.33

working capital

85417950.46 85417950.46 36562054.16 36562054.16

ANALYSIS ON THE BASIS OF SCHEDULE OF CHANGES IN WORKING
CAPITAL

PARTICULARS 2007-08 2008-09 INCREASE DECREASE

CURRENT
ASSETS:

Inventories 67853213 43767644 24085569

S. debtors 27508864 37497882 9989018

Cash & Bank 3665403.60 6891449.29 3226045.69
Balances

Loans & 42907011.40 27455698.27 15451313.13

Advances

Total current 141934492.00 115612673.56

assets (A)

CURRENT
LIABILITIES:

S. creditors 29094178.20 12735248.22 16358929.98

Advance from 2439050 722054 1716996

customers

Provisions 3539356.00 4971315.00 1431959

Security 100000.00 100000 ----- -----

deposits &
Retention
money

Total current 35172584.20 18528617.22

liabilities (B)

Working capital 106761907.8 97084056.34 31290989.67 40968841.13

(A-B)

Net Decrease in 9677851.46 9677851.46

working capital

106761907.8 106761907.8 40968841.13 40968841.13

FOR YEARS 2006 AND 2007:

As we have a look on the schedule of changes in working capital for the Sathe
synthetics over the years 2005-06 and 2006-07, we find that, among current assets,
inventories, loans and advances have shown increment from year 2005-06 to year
2006-07. The sundry debtors and cash & bank balances have decreased in the same
years. Among the current liabilities, the sundry creditors and other liabilities have
decreased and provisions were increased. Therefore, the overall net working capital
has increased.

FOR YEARS 2007-08 AND 2008-09:

Among the current assets, debtors and cash & bank balances have increased and
inventories and loans & advances have shown decrement. The total current assets
have increased. Among the current liabilities, sundry creditors and other liabilities
have decreased which made a positive effect on networking capital and it increases,
on the other hand, the provision increased which not directly but overall made a good
effect on company. Therefore, the net working capital has also increased.

ANALYSIS OF VARIOUS COMPONENTS OF WORKING CAPITAL

INVENTORY ANALYSIS

Inventory is total amount of goods and materials. Inventory means stock of three:-
1. Raw materials
2. Semi finished goods.
3. Finished goods.
Position of inventory in : -

PARTICULARS 2009 2008 2007 2006 2005

Raw material 28833211 37297025 29407402 12230900 13921225

W.I.P 5912280 9756023 6270176 4901850 4735793

Finished goods 9022153 20800165 5499646 4509348 8283102

TOTAL 43767644 67853213 41177224 21642098 26940120

INTERPRETATION:

By analyzing the 5 years data we see that the inventories are increased/decreased year
by year. We can look increasing pattern in inventories. We can see that inventories are
grown in 06-07 and 07-08 respectively from previous year in figures it increases up
to19535126 in2007 and inyear2008 it increases to 26675989 in comparison of 2007.
By this growth we can say that the company is growing. A company uses inventory
when they have demand in market and Sathe Synthetics is having a demand in
industry market. That is biggest reason for increase in
Inventories. From other point of view we can say that the liquidity of firm is blocked
in
inventories but to stock is very good due to uncertainty of availability of raw material
in time.

SUNDRY DEBTORS ANALYSIS

Debtors or an account receivable is an important component of working capital and
fall under
Current assets. Debtors will arise only when credit sales made.
Position of Sundry Debtors in Ambuja cement

PARTICULAR 2009 2008 2007 2006 2005

S

DEBTS O/S 0.00 203547.00 118028.00 85124.00 262290.00

FOR A
PERIOD OF
SIX MONTHS

OTHER 37497882.0 27305317.0 22040401.1 30274424.6 26732357.5

DEBTS 0 0 6 9 7

TOTAL 37497882.0 27508864.0 22158429.1 30359548.6 26994647.5

0 0 6 9 7

INTERPRETATION
In the table and figure, we see that there are continuous variations in the debtors of
Ambuja cement in five (5) successive years. A simple logic is that debtors increase
only when sales increase and if sales increases it is good sign for growth. We can see
that in the year 2006-07 the Debtors are at minimum level. Moreover, in next two
years in 2008 & 2009 the debtors are continuously increasing.
We can say that it is a good sign as well as negative also. Company policy of debtors
is very
good but a risk of bad debts is always present in high debtors. When sales are
increasing with a
great speed the profit also increases. If company decreases the Debtors, they can use
the money in many investment plans. So, this variation is good from the firm prospect
CASH AND BANK BALANCE ANALYSIS

Cash called the liquid asset and vital current assets; it is an important component of
Working capital. In a narrow sense, cash includes notes, bank draft, cheque etc.

Position of Cash and Bank Balance in AJMERA CEMENT: -

PARTICULARS 2009 2008 2007 2006 2005

Cash & Bank 6891449.2 3665403.6 2297697.8 3407307.3 6617777.1

9 0 8 2 9

TOTAL 6891449.2 3665403.6 2297697.8 3407307.3 6617777.1

9 0 8 2 9

INTERPRETATION

If we analyze the above table and chart we find that it follows an increasing trend. In
the year 2005, it had maintained a huge amount of cash and bank balance which has
decreases in the year 2006, 2007 and 2008. Although company’s cash position in the
year2006, 2007 & 2008 was not sound so, this is not a very good sign for company.
The analysis shows that the fix deposits of company are rapidly fallen in the year as
42.3% in 06- 07 respectively from year 2005 that is why company is have minimum
balance in 2007 in comparison of all. Through analysis, we got that company is
utilizing the fixed cash for exploding the Projects that is good for growth.

LOANS AND ADVANCES ANALYSIS

Loans and Advances here refers to any to amount given to different parties, company,
employees
For a specific period of time and in return they will be liable to make timely
repayment of that
Amount in addition to interest on that loan.

PARTICULAR 2009 2008 2007 2006 2005

S
LOANS & 27455698.2 42907011.4 32127724.1 16926496.2 11619189.3
ADVANCES 7 0 6 1 0

TOTAL 27455698.2 42907011.4 32127724.1 16926496.2 11619189.3

7 0 6 1 0

INTERPRETATION
If we analyze the table and the chart we can see that it follows an increasing trend
which is a
Good sign for the company. We can see that the increase of loans and advances are
increases year by year except the year 2009. In the year 2008 there is more than Rs 4
crore given as loan, due to this a lot of amount was blocked. But it used for expansion
of business.
The increasing pattern shows that company is giving advances for the expansion of
plants and
Machinery which is good sign for better production. Although company’s cash is
blocked but
This is good that company is doing modernization of plan competitors in market.

CURRENT LIABILITIES ANALYSIS

Current liabilities are any liabilities that are incurred by the firm on a short term basis
or current
Liabilities that has to be paid by the firm within one year.

CREDITORS: -

PARTICULAR 2009 2008 2007 2006 2005

S

SUNDRY 12735248.2 29094178.2 9759461.8 11585162.0 19863619.9

CREDITORS 2 0 4 5 7

TOTAL 12735248.2 29094178.2 9759461.8 11585162.0 19863619.9

2 0 4 5 7
INTERPRETATION
If we analyze the above table then we can see that it follow an uneven trend in the
sundry creditors and other liabilities. In 2006 it decreased by 75% and in 2007 it
further decreased by more then100%. In 07-08 it was increased because of growth in
other liabilities. This is done because in the year2008 company purchased a bulk of
raw material due to market variations. When company has minimum liabilities it
creates a better goodwill in market. High current liabilities indicate that company is
using credit facilities by creditors.

PROVISIONS ANALYSIS

Position of Other Provisions in Ajmera cement

PARTICULARS 2009 2008 2007 2006 2005

PROVISIONS 4971315.0 3539356.0 2483662.9 2072970.0 1812808.7

0 0 0 4 2

TOTAL 4971315.0 3539356.0 2483662.9 2072970.0 1812808.7

0 0 0 4 2

INTERPRETATION
From the above table we can see that provision shows a growing trend and the huge
amount is
Being kept in these provisions. Though the profits of the company are increased,
income tax is
Also increased. Therefore, there is a great need of maintaining proper provisions,
which is good that company is creating in time. The provisions are increasing as the
tax increases. Although company is paying more income tax that is why because
company also earning more. This is good sign for Company
 HYPOTHESIS TESTING

Generally hypothesis means a mere assumption or some supposition to be proved or

disproved. Hypothesis is usually considered as the principle instrument in research. Its
main function is to suggest new experiment and observations.

HYPOTHESIS : - The firm is facing difficulty in paying short - term dept.

The following tabal contains the detail about the averag collection period from
debtors and

Average Payment period to creditors from the period 2013-2014 to 2017-2018.

Years Average Average

collection payment
period (x ) period (y ) xy X×X Y×Y

2013-2014 17 13 221 289 169

2014-2015 16 14 224 256 196

2015-2016 20 9 180 400 81

2016-2017 23 16 368 529 256

2017-2018 20 16 320 400 256

96 68 1313 1874 958

By putting the value in the formula the "r " came 0.23

,
SUGGESTIONS

Management should make the proper use of inventory control

techniques like fixation of minimum, maximum and ordering levels for all the
items for less blockage of money.
The company should also adopt proper inventory control like ABC
analysis etc. This inventory system can make the inventory management more
result oriented.
The company should train its work force properly, which would enable
the company to utilize its resources properly and in the interim help in
minimizing wastage, and hence result in the expansion of its market share.
Due to competition, prices are market driven and for earning more
margin company should give the more concentration on cost reduction by
improving its efficiency.
The investments of surplus funds made by the corporate office and the
units are not generally involved while taking decisions with regard to structure
of investment of surplus funds. The corporate office should involve the units
to better ascertain the future requirements of funds and accordingly the
investments made in different securities.
Company’s Average debtor collection period of company is 19 days.
Therefore, it would be the one of the positive point for company and company
should maintain it for future.