analysis of working capital with balance sheet and profit and loss

8/13/2019 ANALYSIS of Working Capital With Balance Sheet and Profit and Loss

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ANALYSIS & FINDINGS

(1) Raw Material Conversion Period (RMCP)

= Average Raw Material Stock

Average Raw Materials consumed during the year

PARTICULARS 2011-12 2010-11 2009-10 2008-09 2007-08

Average raw

material stock

33065118 33352213.5 20819151 13076062.5 9471720.12

Raw material

consumed

during the year

314166.03 213093.45 107464.04 218371.65 121729.46

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 2011-12 2010-11 2009-10 2008-09 2007-08Average stock in

progress

7834151.50 8313099.5 5586013 4818821.5 3634639.5

Avg. Cost of

production

190952.86 211273.02 194248.64 180015.22 136824.55

WICP 41.03 37.93 28.75 26.77 26.56

105.25

156.52

193.73

59.88

77.8

0

50

100

150

200

250

2011-12 2010-11 2009-10 2008-09 2007-08

RMCP


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2

(3) Finished Goods Conversion Period (FGCP)= Average finished goods inventory

Average Cost of goods sold

PARTICULARS 2011-12 2010-11 2009-10 2008-09 2007-08

Average

finished goods

inventory

14911159 13149905.5 5004497 6396225 5858384.5

Cost of goods

sold

1955523.98 1648540.72 1398222.17 1260173 989215.18

FGCP 7.63 7.98 3.58 5.08 5.92

41.03

37.93

28.7526.77 26.56

0

5

10

15

20

25

30

35

40

45

2011-12 2010-11 2009-10 2008-09 2007-08

WICP

7.637.98

3.58

5.08

5.92

0

1

2

3

4

5

6

7

8

9

2011-12 2010-11 2009-10 2008-09 2007-08

FGCP

X 360X 360


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3

(4) Debtors Conversion Period (DCP)

= Days in year company operating

Debtors turnover

PARTICULARS 2011-12 2010-11 2009-10 2008-09 2007-08

Days in year

company operating

360 360 360 360 360

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 2011-12 2010-11 2009-10 2008-09 2007-08

Days in year

company operating

360 360 360 360 360

Creditors turnover 27.15 26.02 39.50 22.77 23.30

Avg. consumption

period OR CCP

13.26 13.84 9.11 15.81 16.14

16.6215.72

19.55

22.76

19.59

0

5

10

15

20

25

2011-12 2010-11 2009-10 2008-09 2007-08

DCP


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4

GROSS OPERATING CYCLE FOR VARDHMAN GENERAL AND SPINNING MILLS :

YEAR RMCP WICP FGCP DCP GOC

2011-12 105.25 41.03 7.63 16.62 170.53

2010-11 156.52 37.93 7.98 15.72 217.84

2009-10 193.73 28.75 3.58 19.55 245.61

2008-09 59.88 26.77 5.08 22.76 114.49

2007-08 77.80 26.56 5.92 19.59 129.87

NET OPERATING CYCLE: -

YEAR GOC CCP OR APP NOC

2011-12 170.53 13.26 157.27

2010-11 217.84 13.84 204.31

2009-10 245.61 9.11 236.5

2008-09 114.49 15.81 98.68

2007-08 129.87 16.14 113.73

170.53

217.84

245.61

114.49129.87

0

50

100

150

200

250

300

2011-12 2010-11 2009-10 2008-09 2007-08

GOC

13.2613.84

9.11

15.81 16.14

0

2

4

6

8

10

12

14

16

18

2011-12 2010-11 2009-10 2008-09 2007-08

CCP


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5

INTERPRETATION

It claimed that gross operating cycle of Vardhman General and Spinning Mills isincreasing in year 2007-08 and in the year 2008-09 it decreasing up to certain extent. In

year 2007-08, it is 129.87 days then it decreased to 114.49 days in year 2008-09 due to

contraction in raw material. In 2009-10, it is on the highest point of 245.61 days. The

main reason of increasing gross operating cycle in 2009-10 is due to more availability of

raw material in the stores. In year 2009-10 the company purchased a bulk of raw material

due to market variations the GOC is increased. However, when we came to year 2010-11

the GOC for has shown a significant decrement of 204.31 days from the year 2009-10 to

245.61. When in next year 2011-12, it came out to be 170.53 days. The GOC for

satisfactory as it Varies as the market requirements and changes in form of meet the

customers requirements largely.

But when we came to the NOC of Vardhman General and Spinning Mills it we can see

that Creditors payment period OR Average payment period of Vardhman 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 companys NOC 113.73, 98.68, 236.5, 204.31, and 157.27 in the years

2008, 2009, 2010, 2011 and 2012. Therefore, we can say that there is a significant change

in the NOC of the Vardhman General and Spinning Mills.

157.27

204.31

236.5

98.68113.73

0

50

100

150

200

250

2011-12 2010-11 2009-10 2008-09 2007-08

NOC


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6

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 ASSETS CURRENT LIABILITIES CURRENT RATIO

2011-12 115612673.56 18528617.22 6.24

2010-11 141934492.00 35172584.20 4.04

2009-10 97761075.20 12343214.74 7.92

2008-09 72335450.22 13758132.09 5.26

2007-08 72171734.06 21676428.69 3.33


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7

INTERPRETATION

The current ratio of the Vardhman General and Spinning Mills 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 Vardhman General

and Spinning Mills is satisfactory.

The current ratio of Vardhman General and Spinning Mills has shown a remarkable

increment from 3.33 in 2007-08 to 5.26 in 2008-09 and then to 7.92 in 2009-10. Initially

in 2007-08, the ratio was not satisfactory but it is quite satisfactory for the years after

2010-11 and especially for the year 2009-10.

LIQUID RATIOThis 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 AssetsInventoryPrepaid Expenses

6.24

4.04

7.92

5.26

3.33

0

1

2

3

4

5

6

7

8

9

2011-12 2010-11 2009-10 2008-09 2007-08

CR


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8

YEAR LIQUID ASSETS CURRENT

LIABILITIES

LIQUID RATIO

2011-12 71845029.56 18528617.22 3.88

2010-11 74081279.00 35172584.20 2.11

2009-10 56583851.20 12343124.74 4.58

2008-09 50693352.22 13758132.09 3.68

2007-08 45231614.06 21676428.69 2.09

INTERPRETATION

According to rule of thumb, it should be 1:1. For Vardhman General and Spinning Mills,

the liquid ratio present a uneven change over the past four years. It was 2.09 in 2007-08

and increased to 4.58 in 2009-10 and then to 2.11 in 2010-11. The decrement in the ratio

is not satisfactory, however the ratio 2.11 in 2010-11 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

3.88

2.11

4.58

3.68

2.09

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

2011-12 2010-11 2009-10 2008-09 2007-08

LR


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9

YEAR SALES NET WORKING

CAPITAL

WCTR

2011-12 703988634.61 97084056.34 7.25

2010-11 593474659.66 106761907.80 5.56

2009-10 503359979.46 85417950.46 5.89

2008-09 453662278.70 453662278.70 7.74

2007-08 356117465.20 50495305.37 7.05

INTERPRETATION

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 Vardhman General

and Spinning Mills, the ratio is quite same for the past five years. It is 7.05 in 2007-08,

7.74 in years 2008-09 and in 2009-10 there was a slight change came over here and the

ratio decreased to 5.89. And in the next year in 2010-11 the ratio stand at 5.56 For

Vardhman General and Spinning Mills, the ratio is increasing once more in the very next

year in 2011-12, It shows increment to 7.24. The ratio of the company is satisfactory.

7.25

5.56 5.89

7.74

7.05

0

1

2

3

4

5

6

7

8

9

2011-12 2010-11 2009-10 2008-09 2007-08

WCTR


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10

STOCK TURNOVER RATIO

his 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

STOCK

STR or ITR

2011-12 703988634.61 55810428.5 12.61

2010-11 593474659.66 23981268.5 24.75

2009-10 503359979.46 31409661 16.03

2008-09 453662278.70 24291109 18.68

2007-08 356117465.20 18964744.11 18.78

INTERPRETATION

By analyzing the five-year data it seen, that it follows an uneven trend. We see that from

the year 2008 to 2009 & 2009 to 2010, 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 2011.In 2011 there is a huge increase in inventory due to this ratio the company maintains is

very high in 2011 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

2012, 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.

12.61

24.75

16.03

18.68 18.78

0

5

10

15

20

25

30

2011-12 2010-11 2009-10 2008-09 2007-08

STR


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11

DEBTORS TURNOVER RATIO: -

DEBTORS TURNOVER RATIO = CREDIT SALES

AVERAGE DEBTORS

YEAR CREDIT SALES AVERAGE

DEBTORS

DTR

2011-12 703988634.61 32503373 21.66

2010-11 593474659.66 25923481.52 22.89

2009-10 503359979.46 27348823.87 18.41

2008-09 453662278.70 28677098.13 15.82

2007-08 356117465.20 19374123.96 18.38

INTERPRETATION

Generally a low debtors 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.

21.6622.89

18.41

15.82

18.38

0

5

10

15

20

25

2011-12 2010-11 2009-10 2008-09 2007-08

DTR


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12

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 creditors turnover ratio implies favorable

since the firm enjoys lengthy credit period.

CREDITORS TURNOVER RATIO = NET CREDIT PURCHASE

AVERAGE CREDITORS

YEAR CREDIT PURCHASE AVERAGE CREDITORS CTR

2011-12 567750535.58 20914713.21 27.15

2010-11 505412322.46 19426820.02 26.02

2009-10 421557817.32 10672311.95 39.50

2008-09 358037616.35 15724391.01 22.77

2007-08 300672597.42 12906200.48 23.30

INTERPRETATION

Actually, this ratio reveals the ability of the firm to avail the credit facility from the

suppliers throughout the year. Generally, a low creditors 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 2010 the ratio was very

high which means that its position of creditors that year was not good only in the year

2010, when we turn ahead the other years creditors 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.

27.15 26.02

39.5

22.77 23.3

0

5

10

15

20

25

30

35

40

45

2011-12 2010-11 2009-10 2008-09 2007-08

CTR


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13

ANALYSIS ON THE BASIS OF SCHEDULE OF CHANGES IN WORKING CAPITAL

PARTICULARS 2008-09 2009-10 INCREASE DECREASE

CURRENT

ASSETS:

Inventories 21642098.00 41177224.00 19535126

S. debtors 30359548.69 22158429.16 8201119.53

Cash & Bank

Balances

3407307.32 2297697.88 1109609.44

Loans &

Advances

16926496.21 32127724.16 15201227.95

Total current

assets (A)

72335450.22 97761075.20

CURRENT

LIABILITIES:

S. creditors 11585162.05 9759461.84 1825700.21

Provisions 2072970.04 2483662.90 410692.86

Security deposits

& Retention

money

100000 100000 ----- ------

Total current

liabilities (B)

13758132.09 12343124.74

Working capital

(A-B)

58577318.13 85417950.46 36562054.16 9721421.83

Net increase in

working capital

26840632.33 26840632.33

85417950.46 85417950.46 36562054.16 36562054.16


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14

ANALYSIS ON THE BASIS OF SCHEDULE OF CHANGES IN WORKING CAPITAL

PARTICULARS 2010-11 2011-12 INCREASE DECREASE

CURRENT

ASSETS:

Inventories 67853213 43767644 24085569

S. debtors 27508864 37497882 9989018

Cash & Bank

Balances

3665403.60 6891449.29 3226045.69

Loans &

Advances

42907011.40 27455698.27 15451313.13

Total current

assets (A)

141934492.00 115612673.56

CURRENT

LIABILITIES:

S. creditors 29094178.20 12735248.22 16358929.98

Advance from

customers

2439050 722054 1716996

Provisions 3539356.00 4971315.00 1431959

Security deposits

& Retention

money

100000.00 100000 ----- -----

Total current

liabilities (B)

35172584.20 18528617.22

Working capital

(A-B)

106761907.8 97084056.34 31290989.67 40968841.13

Net Decrease in

working capital

9677851.46 9677851.46

106761907.8 106761907.8 40968841.13 40968841.13


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15

FOR YEARS 2009 AND 2010:

As we have a look on the schedule of changes in working capital for the Vardhman

General and Spinning Mills over the years 2008-09 and 2009-10, we find that, among

current assets, inventories, loans and advances have shown increment from year 2009-10

to year 2009-10. 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 2010-11 AND 2011-12:

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.


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16

ANALYSIS OF VARIOUS COMPONENTS OF WORKING CAPITAL

INVENTORY ANALYSIS

Inventory is total amount of goods and materials. Inventory means stock of three:-

1. Raw materials2. Semi finished goods.

3. Finished goods.

Position of inventory in Vardhman General and Spinning Mills: -

PARTICULARS 2011-12 2010-11 2009-10 2008-09 2007-08

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 2009-10 and 2010-11 respectively from previous year in figures it increases up

to19535126 in 2010 and in year 2011 it increases to 26675989 in comparison of 2010. Bythis growth we can say that the company is growing. A company uses inventory when

they have demand in market and Vardhman General and Spinning Mills 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.

0

1000000020000000

30000000

40000000

50000000

60000000

70000000

80000000

2011-12 2010-11 2009-10 2008-09 2007-08

STOCK


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17

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 Vardhman General and Spinning Mills

PARTICULARS 2011-12 2010-11 2009-10 2008-09 2007-08

DEBTS O/S

FOR A PERIOD

OF SIX

MONTHS

0.00 203547.00 118028.00 85124.00 262290.00

OTHER DEBTS 37497882.00 27305317.00 22040401.16 30274424.69 26732357.57

TOTAL 37497882.00 27508864.00 22158429.16 30359548.69 26994647.57

INTERPRETATION

In the table and figure, we see that there are continuous variations in the debtors of

Vardhman General and Spinning Mills 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 2007-08 the Debtors are at minimum level. Moreover, in next

two years in 2009 & 2011 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.

0

5000000

10000000

15000000

20000000

25000000

30000000

35000000

40000000

2011-12 2010-11 2009-10 2008-09 2007-08

DEBTORS


18/33


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19

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.

PARTICULARS 2011-12 2010-11 2009-10 2008-09 2007-08

LOANS &

ADVANCES

27455698.27 42907011.40 32127724.16 16926496.21 11619189.30

TOTAL 27455698.27 42907011.40 32127724.16 16926496.21 11619189.30

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 2012. In the year 2011 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 companys cash isblocked but this is good that company is doing modernization of plan competitors in

market.

0

5000000

10000000

15000000

20000000

25000000

30000000

3500000040000000

45000000

50000000

2011-12 2010-11 2009-10 2008-09 2007-08

LOANS &


20/33


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21

PROVISIONS ANALYSIS

Position of Other Provisions in Vardhman General and Spinning Mills

PARTICULARS 2011-12 2010-11 2009-10 2008-09 2007-08

PROVISIONS 4971315.00 3539356.00 2483662.90 2072970.04 1812808.72

TOTAL 4971315.00 3539356.00 2483662.90 2072970.04 1812808.72

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.

0

1000000

2000000

3000000

4000000

5000000

6000000

2011-12 2010-11 2009-10 2008-09 2007-08

PROVISIONS


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22

Chapter6

Limitations


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23

LIMITATIONS

i. The training session held was of short period, so proper data of concern into depth couldnot be gathered.

ii.

The accuracy of data cant be achieved due to the various restrictive policies of the firm.iii. The research is only a means not end.iv. Due to more reliance on the primary source of data collection subjectively is bound to

period.

v. Firms respondents or officers might not have responded truly in order to hide the actualinformation of the firm.

vi. There is difficulty of adequate timely assistance. Since the officers are busy in their ownwork and delays in the completion and research studies.


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24

Chapter7

Suggestions


25/33

25

SUGGESTIONS

Management should make the proper use of inventory control techniques like fixation ofminimum, 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. Thisinventory system can make the inventory management more result oriented. The EOQ

should also follow in stores.

The company should train its work force properly, which would enable the company toutilize 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 companyshould 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 notgenerally 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.

The company is losing its overseas customers due to decrease in exports so; the sufficientamount of exports should the maintained.

Companys Average debtor collection period of company is 19 days. Therefore, it wouldbe the one of the positive point for company and company should maintain it for future.

MEASURES TO IMPROVE WORKING CAPITAL MANAGEMENT

AT VARDHMAN GENERAL AND SPINNING MILLS

The essence of effective working capital management is proper cash flow forecasting.This should take into account the impact of unforeseen events, market cycles, loss of a

prime customer and actions by competitors. So, the effect of unforeseen demands of

working capital should be factored by company. This was one of its reasons for the

variation of its revised working capital projection from the earlier projection.

It pays to have contingency plans to tide over unexpected events. While market-leaderscan manage uncertainty better, even other companies must have risk-management


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26

procedures. These must be based on objective and realistic view of the role of working

capital.

Addressing the issue of working capital on a corporate-wide basis has certain advantages.Cash generated at one location can well be utilized at another. For this to happen,

information access, efficient banking channels, good linkages between production and

billing, internal systems to move cash and good treasury practices should be in place.

An innovative approach, combining operational and financial skills and an all-encompassing view of the companys operations will help in identifying and

implementing strategies that generate short-term cash. This can be achieved by having

the right set of executives who are responsible for setting targets and performance levels.

They could be then held accountable for delivering, encouraged to be enterprising and to

act as change agents.

Effective dispute management procedures in relation to customers will go along way infreeing up cash otherwise locked in due to disputes. It will also improve customer service

and free up time for legitimate activities like sales, order entry and cash collection.

Overall, efficiency will increase due to reduced operating costs.

Working capital management is an important yardstick to measure a company operationaland financial efficiency. This aspect must form part of the strategic and operational

thinking. Efforts should constantly be made to improve the working capital position. This

will yield greater efficiencies and improve customer satisfaction.


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27

Chapter7

Conclusion


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28

CONCLUSION

By conducting the study about working capital management, I found out that workingcapital management of Vardhman General and Spinning Mills is good. Vardhman

General and Spinning Mills has sufficient funds to meet its current obligation every time,which is due to sufficient profits and efficient management of Vardhman General and

Spinning Mills .

Raw material for all the units of Vardhman General and Spinning Mills purchased bycorporate office in bulk, which is a major problem for the company as it increases the

inventory cost.

Company is cash rich but as there are expansion and diversification plans under thepipeline, company is not utilizing these funds. For meeting the working capital needs and

capacity expansion needs, it has borrowed from banks.

Lack of advertisement can be considered to be a weak point for the Vardhman Generaland Spinning Mills.

The amount of stock is increasing per year, which is a good sign, as it would help them inthe tough competition coming ahead.

Firm profitability can be increase by shortening accounts receivables and inventoryperiods.


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References

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REFERENCES

BOOKS AND JOURNALS

Anand, M. 2001. Working Capital performance of corporate India: An empiricalsurvey,Management & Accounting Research, Vol. 4(4), pp. 35-65

Berryman, J. 1983. Small Business Failure and Bankruptcy: A survey of the Literature,European Small Business Journal, 1(4), pp47-59

Bhattacharya, H. 2001. Working Capital Management: Strategies and Techniques,Prentice Hall, New Delhi.

Grablowsky, B. J. 1976. Mismanagement of Accounts Receivable by Small Business,Journal of Small Business, 14, pp.23-28

Grablowsky, B. J. 1984. Financial Management of Inventory, Journal of SmallBusiness Management, July, pp. 59-65

Shields, Patricia and Hassan Tajalli. 2006. Intermediate Theory: The Successful StudentScholarship. Journal of Public Affairs Education. Vol. 12, No. 3. Pp. 313-334.

WEBSITES

Lazaridis, Ioannis and Tryfonidis, Dimitrios, Relationship between Working CapitalManagement and Profitability of Listed Companies in the Athens Stock Exchange.

Journal of Financial Management and Analysis, Vol. 19, No. 1, January-June 2006.

Available at SSRN:

http://ssrn.com/abstract=931591

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=931591&rec=1&srcabs=966188

http://www.emeraldinsight.com/Insight/ViewContentServlet?contentType=Article&Vardhman ename=/published/emeraldfulltextarticle/pdf/2910030202.pdf

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http://ssrn.com/abstract=931591http://papers.ssrn.com/sol3/papers.cfm?abstract_id=931591&rec=1&srcabs=966188http://papers.ssrn.com/sol3/papers.cfm?abstract_id=931591&rec=1&srcabs=966188http://www.emeraldinsight.com/Insight/ViewContentServlet?contentType=Article&S.Sename=/published/emeraldfulltextarticle/pdf/2910030202.pdfhttp://www.emeraldinsight.com/Insight/ViewContentServlet?contentType=Article&S.Sename=/published/emeraldfulltextarticle/pdf/2910030202.pdfhttp://www.emeraldinsight.com/Insight/ViewContentServlet?contentType=Article&S.Sename=/published/emeraldfulltextarticle/pdf/2910030202.pdfhttp://www.emeraldinsight.com/Insight/ViewContentServlet?contentType=Article&S.Sename=/published/emeraldfulltextarticle/pdf/2910030202.pdfhttp://papers.ssrn.com/sol3/papers.cfm?abstract_id=931591&rec=1&srcabs=966188http://papers.ssrn.com/sol3/papers.cfm?abstract_id=931591&rec=1&srcabs=966188http://ssrn.com/abstract=931591


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Annexure

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BALANCE SHEET AS AT

PARTICULARS 2011-12 2010-11 2009-10 2008-09 2007-

SOURCES OF FUNDSSh. Sanchit Jain 52.25 52.25 52.25 52.25 52.25

51.00 51.00 51.00 51.00 51.00

SHARE CAPITAL 19901000.00 19901000.00 19901000.00 19901000.00 19901000

RESERVE AND SURPLUS 345519604.82 29625127.98 15253853.53 21829192.29 2078594

LOAN FUNDS

SECURED LOANS 72686105.58 88539002.13 94535519.74 55323395.23 5439958

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

UNSECURED LOANS 43486673.00 46947616.00 28872233.00 15703501.00 14408414

TOTAL 173976583.65 188462261.36 171643192.52 113419523.77 1094950

APPLICATION OF FUNDS

FIXED ASSETS

A: GROSS BLOCK 178453951.93 172240571.18 164888412.68 126570061.76 1233705

B: less DEPRICIATION 101561424.62 90540217.62 78663170.62 71729938.62 6438071

C: NET BLOCK 76892527.31 81700353.56 86225242.06 54840123.14 5898986

D:CURRENT ASSETS

INVENTORY 43767644.00 67853213.00 41177224.00 21642098.00 2694012

SUNDRY DEBTORS 37497882.00 27508864.00 24338099.04 30359548.69 2699464

CASH IN HAND & BANK 6891449.29 3665403.60 2297697.88 3407307.32 6617777

LOANS AND ADVANCES 27455698.27 42907011.40 32127724.16 16926496.21 1161918

E:CURRENT LIABILITIES

SUNDRY CREDITORS 12735248.22 29094178.20 9759461.84 11585162.05 1986361

ADVANCE FROM

CUSTOMERS/DLRS

822054.00 2539050.00 100000.00 100000.00 -----------

PROVISIONS 4971315.00 3539356.00 2483662.90 2072970.04 1812808

(D-E)NET CURRENT ASSETS 97084056.34 106761907.80 85417950.46 58577318.13 5049530

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

TOTAL 173976583.65 188462261.36 171643192.52 113419523.77 1094504

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analysis of working capital with balance sheet and profit and loss

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