Silver Forge Pvt. Ltd.

Submitted To: Prof. Sadhna Gaur

Submitted by: Akshita jain (1407)

Shreya sharma
INTRODUCTION:
SILVER FORGE PRIVATE LIMITED was incorporated in the year 2004 to supply
quality-forged products to the manufacturers of Auto components, Diesel Engines,
Compressors and other OEMs.
It is managed by well qualified and experienced professionals having deep
understanding of forging industry. It has complete In-house facilities for production,
testing and supply of all types of forgings from prototype development to machined
finished components.

the production capacity target is 1800 Metric Tons for the very first year 2005. It
sources raw materials from approved steel plants such as RINL, ISSAL, MUSCO, and
TISCO etc. All incoming Raw materials are checked thoroughly in our Chemical Lab,
by qualified metallurgists.
it manufactures various types of forging components like Connecting Rods,
Crankshafts, Camshafts, Gears, Gear Blanks, Pinion, Crown Wheel, Gear Shifter Forks,
Torque Converter Cover, Universal joint components, Bucket tooth and many more
intricate components with fully CNC Machined and finished parts. It is ISO-9001:2000
certification

Working capital management

Working capital management is concerned with the problems arise in attempting to
manage the current assets, the current liabilities and the inter relationship that exist
between them.

Working capital refers to the cash a business requires for day-to-day operations or more
specifically, for financing the conversion of raw material into finish goods.

Current assets are including cash short term securities, bills receivables, debtors, and
stock. Current liabilities are including creditors, bills payable, and outstanding
expenses.

Working capital= current asset – current liability

Net operating cycle

1) Payable Deferral Period

2) Gross Operating cycle

A) Debtor Consumption Period

B) Inventory Consumption

a) Raw material Consumption

b) Work in Progress Consumption

c) Finish Good Consumption

CALCULATION

 Inventory consumption period = Raw material consumption period + Work

in Progress Consumption Period + Finish goods consumption period

 Gross operating cycle = Inventory consumption period + Debtors

consumption period

 Net Operating cycle= Gross Operating Cycle - Payable Deferral Period

Calculation of Net Operating Cycle

Years Inventory Debtors Payable Days

consumption consumption deferral period
period period

2013-14 196 99 182 113

2014-15 239 85 154 170

2015-16 226 71 155 142

2016-17 264 80 223 121

WORKING CAPITAL RATIO ANALYSIS

Ratio analysis is the powerful tool of financial statements analysis. A ratio is defined as “the
indicated quotient of two mathematical expressions” and as “the relationship between two or
more things”.
A) Working capital turnover ratio

W.C.R.A. = Net working capital / Sales

Particular 2016-17 2015-16 2014-15 2013-14

Sales 669249673 816685475 729950074 648628921

N.W.C 348405728 327647003 335792950 275044278

 W.C, TOR 0.52 0.40 0.46 0.42

Interpretation
High working capital ratio indicates the capability of the organization to achieve
maximum sales with the minimum investment in working capital. Company’s working
capital ratio shows mostly more than two, except for the year 2016-17 because of excess
of cash balance in current assets which occurred due to encashment of deposits. In the
year 2015-16 the ratio was around 3, it indicates that the capability of the company to
achieve maximum sales with the minimum investment in working capital.

Receivable turnover ratio Receivable turnover ratio

Particular 2016-17 2015-16 2014-15 2013-14

Gross Sales 6688623368 843295105 772355659 691409903
Sundry debtors 151569700 164825535 179198533 187721269

Receivable 0.22 0.20 0.23 0.27

TOR

Interpretation
Receivable turnover ratios that receivables turned around the sales were greater than
4 times. The actual collection period is more than normal collection period allowed to
customer. It shows that as compare to previous year the debtors are decrease but it led
to decrease in gross sales also. The company allows less credit sales but it may be
affected adversely on the total sales of the company.

Liquidity ratio
The ratios compounded under this group indicate the short-term position of the
organization and also indicate the efficiency with which the working capital is being
used.
Current ratio = Current assets / Current liabilities

Particular 2016-17 2015-16 2014-15 2013-14

Current assets 524544889 543102425 544804318 451413098
Current 176139161 215455422 209011368 176368820
liabilities
 Current ratio 2.98 2.52 2.61 2.55

Interpretation
The current ratio indicates the availability of funds to payment of current liabilities in
the form of current assets. A higher ratio indicates that there were sufficient assets
available with the organization which can be converted in cash, without any reduction
in the value. As ideal current ratio is 2:1, where current ratio of the firm is more than
2:1, it indicates the unnecessarily investment in the current assets in the form of debtor
and cash balance. Ratio is higher in the year 2016-17 where cash balance is more than
requirement which came through encashment of deposits of funds.

Quick Ratio = current assets- inventories / current liabilities

Particular 2016-17 2015-16 2014-15 2013-14

Current assets 270222975 257586120 260139350 248489696
Inventories
Current 176139161 215455422 209011368 176368820
liabilities
Quick ratio 1.53 1.20 1.24 1.40

Interpretation
Quick ratios establish the relationship between quick or liquid assets and liabilities. An asset is
liquid if it can be converting in to cash immediately or reasonably soon without a loss of value.
Cash is the most liquid asset. other assets which are consider to be relatively liquid and include in
quick assets are debtors and bills receivable and marketable securities. The liquid ratio of 1:1 is
supposed to be standard or ideal but here ratio is more than 1:1 over the period of time, it indicates
that the firm maintains the over liquid assets than actual requirement of such assets.

FINDINGS

 Working capital of the company was increasing and showing positive working
capital every year. It shows good liquidity position.
 Positive working capital indicates that company has the ability of payments of
short terms liabilities.
 Working capital increased because of increment in the current assets is more
than increase in the current liabilities.
 The company has more cash and bank balance in current year it shows that
inefficient management.
 The inventory conversion period of the company has increasing every year so
it shows that there are more days to convert the raw material into finished
products.
 Debtors of the company are decreasing every year it shows that company
allows less credit sales.