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SUMMER TRAINING PROJECT REPORT
ON
WORKING CAPITAL MANAGEMENT OF
SHREYANS INDUSTRIES LIMITED
(UNIT:SHREYANS PAPERS)
In the partial fulfillment of the requirement for the award of Degree of
Master of Business Administration(Session 2010-2012)
SUBMITTED TO:-
GURU NANAK INSTITUTE OF MANAGEMENT &TECHNOLOGY ,MODEL TOWN,LUDHIANA
SUBMITTED BY:-
ANU TAYALMBA (3 SEM)
104602248658
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PREFACE
On the job training in business organisation infuses among students a sense of
critical analysis to apply the real managerial situation, to which they are exposed.It gives them an opportunity to apply their conceptual, theoretical and imaginative
skills to the real life situation and to evaluate the result thereafter.
I was lucky to have got the opportunity to work at SHREYANS INDUSTRY
LIMITED. I visited the concern for six weeks and prepared my project on the topic
Working Capital Management. I also got practical experience in the field of
management.
This report is written on the basis of what I have learnt, experience and explored
during my summer training.
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ACKNOWLEDGEMENT
The most pleasant task of the report writing is to expressing my thanks and
gratitude to all those, with whose guidance, cooperation and sincere advice. I havebeen able to draw and complete my report entitled Working Capital Management
with reference to Shreyans Industries Limited.
I am especially grateful to Mr. Anil Kumar Jain (Executive Director) and Mr. Arun
Goyal (Sr.GM Personnel Deptt.) for providing me an opportunity to complete my
summer training in this prestigious organization and for his timely guidance.
I would like to express my deep sense of gratitude towards Mr. R.P. Gupta (GM
Finance & Accounts) and Mr. Surinder Sharma (Manager of Finance &
Accounts) who helped me very much in completing my project with case. Wordsare insufficient to express my appreciation for the sincerely acknowledge,
suggestions, invaluable and continuous motivations provided by them.
I am highly thankful to Mr. R.P. Gupta (Pulp Deptt.), Mr. Rakesh Saxena (R & D
Deptt.), Mr. D.K. Gautam (GM Raw material), Mr. G.S. Yadav (GM Store
Purchase), and Mr. V.C.R. Pillai (DGM Marketing), without the help of these people
it would not have been possible to collect the data. Last but not the leas, I express
gratitude to my teachers and staff members of Shreyans Industries Ltd., whose
contributions are no less in the completion of my project.
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CONTENTS
1. Introduction of Paper Industry
2. Introduction of Company
Organization Profile
Founder Chairman Profile
Acquasition of SHREE RISABH
Brief Highlights of SIL
Future Expansion & Diversification
Technology Sharing
Paper Manufacturing Process
3. SWOT Analysis of SIL
4. Research Methdology
5. Working Capital Management
Concept of Working Capital
Kinds of Working Capital Sources of Working Capital
Assessment of Working Capital Reqirement
6. Components of Working Capital
Cash Management
Receivable Management
Inventory Management
7. Bibliography
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CHAPTER-1
PAPER INDUSTRY IN INDIA
The Paper Industry in India is witnessing significant growth and capacity
expansions to meet the growing demand for paper consumption as a result ofgrowth in education sector and increasing literacy rate. Increased economic activity
is providing the players an opportunity for growth and expansion.
Indian paper industry is poised to grow and touch 11.5 million tonnes
from 9.18 million tonnes to 2011-12 from 2009-10 at the rate of 8% per annum,
according to The Associated Chambers of Commerce and Industry of India
(ASSOCHAM).
The ASSOCHAM paper on Growth of Paper Industry in India, indicated that percapita paper consumption increased to 9.18 kg on 2009-10 as compared to 8.3 kg
during 2008-09. India has emerged as the fastest growing market when it comes to
consumption, posting 10.6% growth in per capita consumption of paper in 2009-
10.
The industry offers employment to more than 0.3 million people
directly and about 1 million people indirectly. India produces many varieties of
papers, namely, printing and writing paper, packaging paper, coated paper andsome speciality paper. Varieties under printing and writing paper are creame wove
paper, super printing paper, maplithopaper (non-surface and surface size), copier
paper, bond paper and coating base paper and others. The varieties under
packaging paper are kraft paper, boards, poster paper and others.
The other varieties under coated paper are art paper/board, chromo
paper/board and others. There are approximately 600 paper mills in India, of which
twelve are major players.
The paper industry in India could be classified into 3 categories according to theraw materials consumed:
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1. Wood based
2. Agro based &
3. Waste paper based
Paper in India is made from 40 per cent of hardwood and bamboo fibre, 30 per
cent from agro waste and 30 per cent from recycled fibre. Newsprint and
publication paper account for 2 million tonnes, of which 1.2 million tonnes of
newsprint paper is manufactured in India and the remaining 0.8 million tonne is
imported.
Indian paper industry can be more competitive by adding
improvements of key ports, roads and railways and communication facilities,
revision of forest policy is required for wood based paper industry so that
plantation can be raised by industry, cooperatives of farmers, and state
government.
Degraded forest land should be made available to the industry for
raising plantations.Import duty on waste paper should be reduced,Duty free
imports of new & second hand machinery/equipment should be allowed for
technology up gradation.
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CHAPTER-2
SHREYANS INDUSTRIES LIMITED
COMPANYS PROFILE
Shreyans is one of the leading industrial groups of North India promoted by the
well known OSWAL family of Ludhiana. Shreyans is a multi unit group with
interests in Paper and Textiles. Shreyans has an annual turnover of US $ 50
million. Shreyans Group has over 1100 employees.
Shreyans industries limited (SIL) an existing assisted
company promoted by Late Mr. D.K Oswal, has facilities of manufacturing of 100
tones per day of writing & printing paper (WPP) at Ahmedgarh, district Sangrur,
Punjab (Shreyans Paper) & 64 tpd at Bannah , District Ropar, Punjab(Shree
Rishabh paper).
The company also had a spinning unit with complements
of 25,344 spindles for manufacturing of cotton & cotton blended yarn at
Machhiwara, district Ludhiana, Punjab(Shreyans Spinning Mill) which was sold to
Sabina woolen mills ltd in 2000-01 for consideration of Rs 130 million.
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ABOUT SHREYANS PAPERS
The company was incorporated in 1979, as Shreyans Paper Mills Ltd, the name
was subsequently changed to Shreyans Industries Ltd. The Company, has been
promoted by well known Oswal family of Ludhiana.
Presently, the company has two paper manufacturing units
located at Ahmedgarh (Distt. Sangrur) & at Banah (Distt. Nawanshaher) in the
state of Punjab. Over the years number of modernization-cum-expansion schemes
were undertaken and the present installed capacity of manufacturing writing &printing paper, from agro-based raw materials, is 37000 Mts per annum.
Company had been the winner of Best Productivity Awards
for number of years.Company has also set up Chemical Recovery Plant at both
the paper units. This has enabled to economizing on consumption of chemicals
andsimultaneously achieving the prescribed standards of effluent discharge.
In addition, company has total captive cum power co-
generation capacity of about 5.6 MW, at Ahmedgarh unit. However to augment
the total power requirement at Banah power plant with a capacity of 5MW is
already installed.
With a view to improve the quality of pulp and also to save
on cooking chemicals, a Continuous Digesterhas been installed in both the units.
The units at Ahmedgarh & Banah have its own E.O. Bleaching plant, for the
manufacturing of High Bright, Superior Quality paper.
The company is operating with a wide product mix with
well accepted quality in the market based on non-conventional raw materials.
Major consumers of the companys products includes Major Publishers, Copy
Manufacturers, Job Printers, Various states Text Book Boards, Exporters ofNotebooks & Diaries, Printing & Stationary Dept., Railways, P&T Dept., Security
Press etc.
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FOUNDER CHAIRMAN PROFILE
Late Sh. D.K OSWAL Founder chairman & managing DirectorMr. D.K. Oswal, the
Founder Chairman & Managing Director of Shreyans Group, was born on 17thMarch, 1940 in the well known OSWAL FAMILY of Ludhiana. Business was in
his blood by birth. He became the Chairman ofVARDHMAN Group. He remained
the chairman of the VARDHMAN Group for more than 20 years.
During his tenure as Chairman Cum Managing Director
Company implemented various Expansion and Modernizations plans at its paper
units including the setting up of Chemical Recovery plant and Power Co-
Generation plant at both the units. During his tenure company had been awarded
National Productivity Award for five consecutive years.
In his capacity as Managing Director of the Company Mr. D.K.
Oswal continued taking effective steps for the Companys future growth plans and
sustained development and lead a strong team of professionals, managerial staff
and work force having expertise in their fields.
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CAUSTIC RECOVERY
During 1995, the company implemented a scheme for recovery of caustic soda at
an estimate cost of Rs 113 million. The scheme was to give two-fold benefit
Reduce the cost of caustic Lyle
Reduce the pollution level of water being discharged from the unit.
The scheme was completed in 1996. The cost was financed by way of a
conditional grant of Rs 21.8 million from ICICI (test division), concessional loan of
Rs 38.5million. The caustic recovery of the company has been operatingsatisfactorily.
The company has been utilizing the caustic recovery facilities for
production of soda ash as the company do not possess the required equipment for
the extraction of caustic soda from black liquid (by product of the paper pulp
making process) & also because, on account of current market conditions, the
extraction sale of soda ash is more beneficial than the extraction & captive
consumption of caustic soda.
The company has been recovering approximately 85% of soda ash &
selling the same in the open market.
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CO- GENERATION
The SIL has its co-generation plant consisting of four boilers, which are used for
generating power for captive use, primarily in the caustic recovery plant where
uninterrupted power supply is essential. The co-generation plant was to be set up
at an estimate cost of Rs 44.4million.
The scheme was implemented at the cost of Rs 48 million (over
run of Rs 3.6 million) & was financed by rupee term loan of Rs 30million from ICICI
& internal accruals of Rs 18 millions. The company is at present generating about
3.0MW of power with the above.
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Board of Directors
Sh. Rajneesh Oswal(Chairman & ManagingDirector)
Sh. Vishal Oswal
(Vice Chairman & Managing
Director)
Sh. Anil Kumar (Executive Director & CEO)
Sh. Ajay KumarChakarborty
(Independent Director)
Sh. Kunal Oswal (Whole Time Director)
Sh. Madan Lal Gupta (Independent Director)
Dr. (Mrs.) Harbhajan KaurBal
(Independent Director)
Dr. Nandagiri JagannathaRao
(Independent Director)
Sh. Raghubir Chand Singal (Independent Director)
Sh. Rajneesh Oswal (Executive Director)
Sh. Raman Marwaha (Independent Director)
Sh. Rajendra Prasad Gupta (Independent Director)
Sh. Surinder Kumar Sekhri (Independent Director)
Bankers State Bank of Patiala
Bank of India
State Bank of Mauritius
Auditors M/S. Dass Khanna & CompanyChartered AccountantsB-XX-2815, Gurdev Nagar,Pakhowal Road, Ldh
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ACQUASITION OF SHREE RISHABH
During 1994, the company acquired the paper unit of Zenith limited at village
Banah, District Ropar, Punjab. Zenith had been referred to BIFR & as per the
operating agency (OA) reports prepared by ICICI. ZENITH S paper & steel unit
were a drag on the companys operations & were to be hived off. Accordingly, bids
were invited for the same & SIL offered to take over the fixed assets of the paper
unit for consideration of Rs 147.5 million.
This scheme was approved by BIFR vide its order dated July 28,
1994. Sil named the unit Shree Rishabh paper (Rishabh) .The Company had
financed the total consideration of Rs 147.5 million for acquisition of the unit by
internal accruals of Rs 47.5 million & term loan of Rs 100 million from ICICI. After
undertaking balancing scheme SIL, has been able le to improve the operations &
the unit has been earning gross profits since 1995.
BRIEF HIGHLIGHTS OF SHREYANS
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PAPERS,AHMEDGARH
An agro based paper plant using rice straw, wheat straw and sugarcane
residue
Annual production capacity of 66000 M.t.
Installed Asia first soda recovery plant with US AID TEST SCHEME
One of the large Agro based paper mill in north India
Excellent technology inputs and parameters in the industry
Operating at a high capacity of over 100% utilization
Leading supplier to Indian Railways, Postal Department, Universities andEducation Boards throughout India.
National productivity awards won by the company for the years 1986 to
1991(5 consecutive years)
R & D lab equipped with Lab Digester, lab Valley Beater brightness,
Opacity and gloss Testing Machine, Burst Strength Tester, Double Folding
Endurance tester, Gurley Porosity, Smoothness Tester, and Cobb tester.
Future Plans to increase capacity by 100%
A continuous digester plant developed in house, has been set up to improve
the quality of pulp and also to reduce the consumption of various chemicals
Company products have also been exported to south Asian & Middle East
Countries.
State of the art automation system to keep strict control on ash
content,grammage variation,moisture percentage to produce quality paper.
PRODUCT PROFILE
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In the range of 40 GSM to 150 GSM
High Brightness Paper Inland Letter Paper
Cream Wove Postal Envelope Paper
Coloured Paper Offset Paper
Duplicating Paper Cover Paper
Surface Sized Printing Paper Super Calendared Paper
Azure Laid Paper Rail Ticket Paper
Maplitho Paper Super Printing Paper
Stamp Paper
Quality Policy
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Shreyans Group has plans in the near future for capacity Enhancement at
both its paper plants.
Horizontal expansion by setting up facility for office stationery
manufacturing.
Converting plant for maplitho & copier paper.
To diversify into information technology sector by going into call centers,
medical transcriptions, software export etc.
TECHNOLOGY SHARING
Shreyans Group is looking for technology up gradation and technology
sharing in the following area on global basis.
Improvement in quality of pulp (Agro Based)
Improvement in quality of paper (Agro Based)
Water Management system (In Agro Based paper unit)
BUSINESS ALLIANCE
Looking for business alliance both in domestic and international market for export
of paper from 50 GSM to 170 GSM in Africa, Middle East and South America.
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ORGANIZATIONAL CHART OF SIL
PAPER MANUFACTURING PROCESS
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Paper mill
Section
Wheat Straw
(Raw material)
(Raw
Material)
Washing
Cooking
Washing
Bleaching Chlorination
Alkali Extraction
O2
H2O2 Hypo I
Hypo II
Pulp(Bleached)
Stock Preparation
section
Section
Paper
machine
Finishing House
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1.Wheat Straw Shreyans is an Agro based paper mill. So, here raw materialused for making is agricultural waste. Various types of raw materials can be usedin these kinds of industries like Wheat straw, Baggase, Sarkanda, Kahi grass,Sabai grass etc. In Shreyans, 95% of raw material is obtained from wheat strawand the rest 5% from imported wood pulp or imported waste paper to increase the
strength of the paper. Raw material is stored for 15 days.
2.Washing The raw material i.e. wheat straw is washed with water to remove thedust and impurities which are present in the raw material. 10cm of water is
consumed for washing per tonne of raw material. The wheat straw wash liquor isused for producing Biogas.
BIOGAS PLANT
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The gas produced here goes to Boiler House to generate power.
3.Cooking The raw material is cooked in Continuous Digestor. This process isfully automatic. In Continuous Digestor raw material and water are cooked inCaustic Soda and Steam under required pressure. The pulp here made is calledcooked pulp or unbleached pulp.
4.Washing This cooked pulp is allowed for washing. Caustic Soda is removed inthe form of Black Liquor by the process of washing.
This black liquor is subjected for recovery in Recovery Plant where
caustic soda is recovered in the formof soda ash passing through evaporators,venture & scrubber and fluidized Bed Reactor System.
Wheat Straw Wash Liquor
Decker- to remove
waste particles
Clarifier
Buffer Tank tomaintain the pH
Digestor gas generation
Gas Holder
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5.Bleaching The unbleached washed pulp remaining behind after separation of
black liquor is processed in bleaching plant having sequence of chlorination stage,caustic extraction stage and two Hypo stages. The pulp made is called bleachedpulp.
6.Stock Preparation The various pulps mainly Straw pulp, long fibre pulp andwood pulp/waste paper pulps are pumped into mixing chests in the requiredproportion. Here various chemicals like Alkyne ketodimer, Poly TC, Ranipal areadded to reach at the required strength and brightness of the paper. This pulp isthen fed into the paper machine for making the paper.
7.Paper Machine The pulp while passing over a paper machine wire forms a
layer of paper as a long running of the wire and at Sunction roll, water content to alarge extent are drained out. The paper layer so formed is then forwarded topresspart and the dryers where the paper is dried up with the help of steam whichheats up the dryers. The paper so formed is then reeled at the pop reel in the formof rolls.
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8.Finishing House The percent rolls of paper are either cut into reels atrewinder or into sheets at sheet cutter as per the requirements. The paper is thenstored, counted and packed into bundles and transferred to sales department.
9.Sales and Excise - This department is headed by MR. V. C. RAVINDRAN. Thepaper department produces various types of writing and printing paper. All these
varieties of paper are sold through dealers in major cities.
Besides this the company has its own branch offices at Mumbai, Delhi,
Chandigarh, and Ahmedgarh which fulfill the needs of dealers in their respective
areas. The major centers where the company dealers are located are Delhi, Agra,
Ahmadabad, "Mumbai, Kanpur, Jalandhar, Chandigarh, Patna, Pune, and Jaipur.
The company has been selling its products mainly to Government/ Semi
government departments like Indira Gandhi National Open University, Text Book
Corporation like N.C.E.R.T., banks and universities.
Besides the company has also been selling to local markets of states
like Punjab, U.P., Rajasthan, Gujarat, Madhya Pradesh, Maharashtra and J&K
through wide network. The marketing department keeps record of excise duty and
fixes price of various varieties of paper. The marketing department also makes
proper arrangement for transporting paper to various destinations
Effluent Treatment Plant
From the point of view of pollution a paper industry is labeled as the most water
pollution causing industry and due to this, to reduce water pollution Effluent
Treatment Plant have to set up for treatment of water before discharging it outside
the factory.
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The waste water releasing from the different sections of process is treated in waste
water treatment plant where biological treatment system is being performed and
the treated water is partially utilizing in plantation and the rest being discharged.
ETP Plant Process
The water released from settling tank is discharged.
Waste Water
Equalization Tank
Settling Tank or Clarifier
Aeration Tank
Settling Tank
Aeration Tank
Settling Tank
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CHAPTER-3
SWOT ANALYSIS
Strengths -
Excellent operating parameters.
Highly qualified, motivated and professionally competent workforce.
Easy accessibility and proximity to raw material sources.
Both units fully compliant to environmental laws.
Adequate marketing network and large presence in institutional andinternational market.
Good acceptability in market place.
Weaknesses
Paper industry highly cyclic in nature.
Limited product range in lower end of paper market.
Prices and availability of basic raw materials, highly dependent on vagaries
of nature.
Lower level of technology vis--vis competition in nearby regions.
Opportunities
Increase in demand of paper on account of increase in per capita
consumption due to increase in GDP and literacy levels.
Price competitiveness, which can cater to growing educational sector
requirements.
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Opportunities in export market in nearby countries on account of price
advantage vis--vis distant suppliers.
Production of better quality paper will bring in newer segments of market
under the fold of the Company.
Threats
Adverse changes in Government Policies.
Continuous fall in import tariff creating tough competition from international
suppliers.
Build-up of State of Art technology in nearby regions, which will lower the
pricing of imports into the country.
Continuing strengthening of Indian currency to make imports cheaper and
limited scope of export of paper.
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CHAPTER-4
Research MethodologyResearch in common parlance refers to a search for knowledge. One can also
define research as a scientific and systematic search for pertinent information on a
specific topic. In fact, research is an art of scientific investigation. This
inquisitiveness is the mother of all knowledge and the method, which man employs
for obtaining the knowledge of whatever the unknown, can be termed as research.
Objectives of Research
The purpose of research is to discover answers to questions through the
application of scientific procedures. The main aim of research is to find out the
truth which is hidden and which has not been discovered as yet.
To gain familiarity with a phenomenon or to achieve new insights
into it.
The portray accurately the characteristics of an particular individual,
situation or a group
To determine the frequency with which something occurs or with which it is
associated with something else.
To test a hypothesis of a casual relationship between variables.
Types of research -
The basic types of research are as follows:-
Descriptive: - Descriptive research includes surveys and fact finding enquires ofdifferent kinds. The major purpose of descriptive research is description at the
state of affairs as it exists at present.
Analytical:- In this research has to use facts or information already available
analyze these to make a critical evaluation of the material.
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Applied: - Research can either be applied or fundamental research. Applied
research aimed at finding a solution for immediate problems facing a society orindustries or business organization.
Fundamental Research:- This research is mainly concerned withgeneralizations
and with the formation of a theory. Research concerning some naturalphenomenon or relating to pure mathematics are examples of fundamental
research.
Empirical Research: - Empirical research relies on experience or observation
alone, often without due regard for system and theory. Empirical research is
appropriate when proof is sought that certain variables affect other variables in
some way.
Qualitative Research: - Qualitative research is especially important in the
behavioral science where the aim is to discover the underlying motives of human
behavior which make people like or dislike a particular thing.
SIGNIFICANCE OF RESEARCH
The increasingly complex nature of business and government has focused
attention on the use of research in solving operation problem. Significance of
research is as follows:
Research has its special significance in solving various operational and
planning problems of business and industry.
Research provides the basis for nearly all government policies in our
economic system.
Research is equally important for social scientists in studying social
relations answer to various social problems.
Research may mean the generalizations of new theories.
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RESEARCH DESIGN
Decisions regarding what, where, how, much, by what mean concerning an
enquiry or a research study constitute a research design. A research design is the
arrangement of conditions for collection and analysis of data in a manner that aims
to combine relevance to the research purpose with economys procedure.
LIMITATIONS
Limitations of the study are all those limitations which a student has to face while
completing such project. However following are the main limitations:
Limitations of time and resources may have shadow the study.
Time for training period was too small to study the organization in detail.
It is the policy of all the companies that they cannot tell the trainees the
accurate figures of the company. So the project made by the student does
not show the accurate position of the company as they have to rely upon the
information provided to them by the company.
Inspite of my best efforts this report may be suffering from some personal
errors.
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CHAPTER-5
MEANING OF WORKING CAPITAL
Capital required for a business can be classified under two main categories via,
1) Fixed Capital
2) Working Capital
Every business needs funds for two purposes for its establishment and to carry out
its day- to-day operations. Long terms funds are required to create production
facilities through purchase of fixed assets such as p & m, land, building, furniture,
etc. Investments in these assets represent that part of firms capital which is
blocked on permanent or fixed basis and is called fixed capital.
Funds are also needed for short-term purposes for the purchase
of raw material, payment of wages and other day to- day expenses etc.These
funds are known as working capital.
In simple words, working capital refers to that part of the firms
capital which is required for financing short- term or current assets such as cash,
marketable securities, debtors & inventories. Funds, thus, invested in current assts
keep revolving fast and are being constantly converted in to cash and this cash
flows out again in exchange for other current assets. Hence, it is also known as
revolving or circulating capital or short term capital.
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CONCEPT OF WORKING CAPITAL
There are two concepts of working capital:
1.) Balance sheet concept
2. )Operating cycle
1.) There are 2 interpretatiom of working capital under balance sheet concept:-
a) Gross working capital
b) Net working capital
The gross working capital is the capital invested in the total current assets of the
enterprises .Current assets are those Assets which can convert in to cash within a
short period normally one accounting year.
CONSTITUENTS OF CURRENT ASSETS
1) Cash in hand and cash at bank
2) Bills receivables
3) Sundry debtors
4) Short term loans and advances.
5) Inventories of stock as:
a. Raw material
b. Work in process
c. Stores and spares
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d. Finished goods
6. Temporary investment of surplus funds.
7. Prepaid expenses
8. Accrued incomes.
9. Marketable securities.
In a narrow sense, the term working capital refers to the net working. Net working
capital is the excess of current assets over current liability, or, say:
NET WORKING CAPITAL = CURRENT ASSETS CURRENT
LIABILITIES.
Net working capital can be positive or negative. When the current assets exceeds
the current liabilities are more than the current assets. Current liabilities are those
liabilities, which are intended to be paid in the ordinary course of business within a
short period of normally one accounting year out of the current assts or the income
business.
CONSTITUENTS OF CURRENT LIABILITIES
1. Accrued or outstanding expenses.
2. Short term loans, advances and deposits.
3. Dividends payable.
4. Bank overdraft.
5. Provision for taxation, if it does not amt. to app. of profit.
6. Bills payable.
7. Sundry creditors.
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The gross concept is sometimes preferred to the concept of working capital for the
following reasons:
1. It enables the enterprise to provide correct amount of working capital at
correct time.
2. Every management is more interested in total current assets with which it has
to operate then the source from where it is made available.
3. It take into consideration of the fact every increase in the funds of the
enterprise would increase its working capital.
4. This concept is also useful in determining the rate of return on investments in
working capital.
The net working capital concept, however, is also important for following reasons:
It is qualitative concept, which indicates the firms ability to
meet to its operating expenses and short-term liabilities.
It indicates the margin of protection available to the short term
creditors.
It is an indicator of the financial soundness of enterprises.
It suggests the need of financing a part of working capital
requirement out of the permanent sources of funds.
2.)Operating Cycle
As discussed earlier,working capital refers to that part of firms capital which is
required for financing short-term or current assets such as
cash,debtors,inventories.Funds,thus,invested in current assets keep revolving fast
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Raw
Materia
ls
Cash
Work-
in-
Progres
s
Finishe
d
Goods
Sales
Debtor
s
and are being constantly converted into cash and this cash flows out again
exchange for other current assets
Hence it is also known as revolving or circulating capital.The circular flow concept
of working capital is based upon working capital cycle of a firm.
The cycle starts with the purchase of raw material and other
resources & end with the realization of cash from the sale of finished goods.The
time required to complete one cycle determines the requirement of working
capital,longer the period of cycle ,larger is the requirement of working capital.
The gross operating cycle of a firm is equal to the length of the
inventories and receivables conversion period.
GROSS OPERATING CYCLE=RMCP+WIPCP+FGCP+RCP
Where, RMCP = Raw material conversion period
WIPCR=Work-in-process conversion period
FGCP=Finished goods conversion period
RCP=Receivable conversion period
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PDP=Payable deferral period
NET OPERATING CYCLE PERIOD=GROSS OPERATING CYCLE
PERIOD PAYABLE DEFERAL PERIOD
Following formulas can be used to determine the conversion periods
1. RMCP = Avg stock of raw material
Raw material consumption per day
2.WIPCP = Avg stock of work in process
Total cost of production per day
3.FGCP = Avg stock of finished goods
Total cost of sales per day
4.RCP = Avg accounts receivable
Net credit purchases per day
5.PDP = Avg payables
Net credit purchases per day
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KINDS OF WORKING CAPITAL
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1. PERMANENT OR FIXED WORKING CAPITAL
KINDS OF
WORKING
CAPITAL
On The
Basis Of
CONCEPT
On The
Basis Of
TIME
GROSS
Working
Capital
NET
Working
Capital
FIXED
Working
Capital
VARIABLE
Working
Capital
REGULAR
Working
Capital
RESERVE
Working
Capital
SEASONAL
Working
Capital
SPECIAL
Working
Capital
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Permanent or fixed working capital is minimum amount which is required to ensure
effective utilization of fixed facilities and for maintaining the circulation of current
assets. Every firm has to maintain a minimum level of raw material, work- in-
process, finished goods and cash balance. This minimum level of current assets is
called permanent or fixed working capital. As the business grow the requirements
of working capital also increases due to increase in current assets.
Fig. 1
In fig.1 permanent working capital is stable or fixed over time while the temporary
or variable working capital fluctuates.
2. TEMPORARY OR VARIABLE WORKING CAPITAL
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Temporary or variable working capital is the amount of working capital which is
required to meet the seasonal demands and some special exigencies. Variable
working capital can further be classified as seasonal working capital and special
working capital.Temporary working capital differs from permanent working capital
in the sense that is required for short periods and cannot be permanently
employed gainfully in the business.
Fig.2
In fig.2 permanent working capital is also increasing with the passage of time due
to expansion of business .
ADVANTAGE OF ADEQUATE WORKING CAPITAL
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SOLVENCY OF THE BUSINESS: Adequate working capital helps inmaintaining the solvency of the business by providing uninterrupted ofproduction.
Goodwill: Sufficient amount of working capital enables a firm to make promptpayments and makes and maintain the goodwill.
Easy loans: Adequate working capital leads to high solvency and creditstanding can arrange loans from banks and other on easy and favorable terms.
Cash Discounts: Adequate working capital also enables a concern to avail cashdiscounts on the purchases and hence reduces cost.
Regular Supply of Raw Material: Sufficient working capital ensures regularsupply of raw material and continuous production.
Regular Payment Of Salaries, Wages And Other Day TO Day
Commitments: It leads to the satisfaction of the employees and raises themorale of its employees, increases their efficiency, reduces wastage and costsand enhances production and profits.
Exploitation Of Favorable Market Conditions: If a firm is having adequate
working capital then it can exploit the favorable market conditions such aspurchasing its requirements in bulk when the prices are lower and holdings itsinventories for higher prices.
Ability to Face Crises: A concern can face the situation during the depression.
DISADVANTAGES OF REDUNDANT OR EXCESSIVE WORKING
CAPITAL
Excessive working capital means ideal funds which earn no profit for the firmand business cannot earn the required rate of return on its investments.
Redundant working capital leads to unnecessary purchasing and accumulation
of inventories.
Excessive working capital implies excessive debtors and defective credit policy
which causes higher incidence of bad debts.
It may reduce the overall efficiency of the business
. If a firm is having excessive working capital then the relations with banks and
other financial institution may not be maintained.
Due to lower rate of return n investments, the values of shares may also fall.
The redundant working capital gives rise to speculative transactions
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DISADVANTAGES OF INADEQUATE WORKING CAPITAL
Every business needs some amounts of working capital. The need for working
capital arises due to the time gap between production and realization of cash from
sales. There is an operating cycle involved in sales and realization of cash. There
are time gaps in purchase of raw material and production; production and sales;
and realization of cash.
Thus working capital is needed for the following purposes:
For the purpose of raw material, components and spares.
To pay wages and salaries
To incur day-to-day expenses and overload costs such as office expenses.
To meet the selling costs as packing, advertising, etc.
To provide credit facilities to the customer.
To maintain the inventories of the raw material, work-in-progress, stores andspares and finished stock.
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FACTORS DETERMINING THE WORKING CAPITAL
REQUIREMENTS
1. NATURE OF BUSINESS: The requirements of working is very limited in public
utility undertakings such as electricity, water supply and railways because they
offer cash sale only and supply services not products, and no funds are tied up in
inventories and receivables. On the other hand the trading and financial firms
requires less investment in fixed assets but have to invest large amt. of working
capital along with fixed investments.
2. SIZE OF THE BUSINESS: Greater the size of the business, greater is the
requirement of working capital.
3. PRODUCTION POLICY: If the policy is to keep production steady by
accumulating inventories it will require higher working capital.
4. LENTH OF PRDUCTION CYCLE: The longer the manufacturing time the raw
material and other supplies have to be carried for a longer in the process with
progressive increment of labor and service costs before the final product is
obtained. So working capital is directly proportional to the length of the
manufacturing process.
5. SEASONALS VARIATIONS: Generally, during the busy season, a firm
requires larger working capital than in slack season.
6. WORKING CAPITAL CYCLE: The speed with which the working cycle
completes one cycle determines therequirements of working capital. Longer the
cycle larger is the requirement of working capital.
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etc. Such firms may generate cash profits from operations and contribute to their
working capital.
The dividend policy also affects the requirement of working
capital. A firm maintaining a steady high rate of cash dividend irrespective of itsprofits needs working capital than the firm that retains larger part of its profits and
does not pay so high rate of cash dividend.
12. PRICE LEVEL CHANGES: Changes in the price level also affect the working
capital requirements. Generally rise in prices leads to increase in working capital.
Others FACTORS: These are:
Operating efficiency.
Management ability.
Irregularities of supply.
Import policy.
Asset structure.
Importance of labor.
Banking facilities, etc.
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FORECAST OF WORKING CAPITAL REQUIREMENT
Factors to be considered
Total costs incurred on materials, wages and overheads
The length of time for which raw materials remain in stores before they are
issued to production.
The length of the production cycle or WIP, i.e., the time taken for conversion
of RM into FG.
The length of the Sales Cycle during which FG are to be kept waiting for
sales.
The average period of credit allowed to customers.
The amount of cash required to pay day-to-day expenses of the business.
The amount of cash required for advance payments if any.
The average period of credit to be allowed by suppliers.
Time lag in the payment of wages and other overheads
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PROFORMA FOR ESTIMATION OF WORKING CAPTIALREQUIREMENT
1. TRADING CONCERN
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SOURCES OF WORKING CAPITALWorking capital is an essential requirement for any business activity. Working
capital management does not include mere planning and control of total assets
and its composition. The broader view encompasses the financing aspects also. In
other words, the finance executives have to see answers to the questions What
should be the composition of working capital? and What is the best financing mix
to employ? An answer to the question leads to the decision making with regard to
financing mix of working capital.
Shares Indigenous
Bankers
Debentures Trade Creditors
Public Deposits Installment Credit
Retained Earnings Advances
Loan from financial Institution Accrued Expenses
Deferred Incomes
Commercial Paper
CommercialBankers
Sources of WorkingCapital
Permanent or Fixed Temporary or Variable
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BALANCE SHEET AS AT 31ST MARCH 2011
PARTICULARS
I SORCES OF FUNDS
1)SHAREHOLDERS FUND
a)Capital
b)reserve & surplus
2)loan funds
a)secured loans
b)unsecured loans
3)Deferred tax liability
II APPLICATIONOF FUNDS
1)Fixed assets
31.3.2011
Rs.in lacs
1382.47
5227.82
6610.29
3070.26
466.34
3536.60
1989.38
12136.27
31.3.2010
Rs.in lacs
1382.47
4755.78
6138.25
4129.16
454.59
4583.75
2167.82
12889.82
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a)Gross block
b)Less depreciation
c)Net block
d)Capital work in progress
2)INVESTMENTS
3)CURRENT ASSETS,LOANS, &
ADVANCESa)Inventories
b)sundry debtors
c)cash & bank balance
d)loans & advances (A)
LESS:
CURRENT LIABILITIES AND
PROVISIONS
a)Liabilities
b)Provisions (B)
Net current assets(A-B)
18211.52
8346.66
9864.86
267.56
10132.42
21.86
2409.86
2125.65
243.49
2288.25
7067.25
4266.23
819.03
5085.26
1981.99
12136.27
17527.97
7485.13
10042.84
437.74
10480.58
12.02
2001.63
1731.93
414.84
2193.81
6342.21
3272.49
672.50
3944.99
2397.22
12889.82
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STATEMENT OF CHANGE IN WORKING CAPITAL
PARTICULARS 2010-11 2009-10 2008-09
CURRENT ASSETS
INVENTORIES 2409.86 2001.63 1827.09
SUNDRY DEBTORS 2125.65 1731.93 2813.55
CASH AND BANK
BALANCE 243.49 414.84 520.89
LOANS AND ADVANCES 2288.25 2193.81 1047.1
GROSS WORKING
CAPITAL 7067.25 6342.21 6208.63
LESS:
CURRENT LIABILITIES 5085.26 3944.99 4558.02
NET WORKING CAPITAL 1981.99 2397.22 1650.61
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NET WORKING CAPITAL
0
500
1000
1500
2000
2500
3000
2010-11 2009-10 2008-09
NET WORKING
CAPITAL
Interpretation
Working capital management policies of a firm have a great effect on its profitability
and liquidity.A sound working capital management policy is one that ensures
higher profitability,proper liquidity and sound health structure of organitation.
As shown in the above figure the Net Working Capital of SIL is
fluctuating in last years.In 2008-09 it as on 1650.51 and in 2009-10 it increased to
2397.22 and again in 2010-11 in decrease to 1981.99. Little decrease in wc will not
effect the working of organization.As there are some advantages and
disadvantages of inadequate and excessive working capital.
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CHAPTER-6
COMPONENTS OF WORKING CAPITAL
There are three main components of Working Capital Management. The study of
these components is very necessary because without these components the studyof Working Capital Management remains half. So following are the components of
the Working Capital Management:-
1) Cash Management2) Receivables Management3) Inventories Management
CASH MANAGEMENT
Cash is one of the current assets of a business. It is needed at all times to keep
the business going. A business concern should always keep sufficient cash for
meeting the obligations.
Any shortage of cash
will hamper the operations of the concern and any excess of it will be unprotected.
It is in this context the Cash Management has assumed much importance.
Cash Management is one of the key areas of Working Capital
Management. Apart from the fact it is the most liquid current asset, it is the ultimate
output expected to be realized by selling the services as product manufactured bya company.
Cash shortage will disrupt the firms manufacturing operations while excess cash
will simply remain idle. Thus the major function of Financial So Cash Management
is concerned with the managing of:
1. Cash flows into and out of the firm Inflows and Outflows
2. Cash flows within firm3. Cash balances held by the firm at a point of time by financing deficit or
investing surplus cash.
Manager is to maintain a sound cash position.
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The reason for holding cash here traditionally being divided into four categories as
postulated by Keynes:
- The Transaction Motive- The Precautionary Motive-
The Speculative Motive- The Compensatory Motive
The Transaction Motive is to meet the routine cash requirements to finance the
transactions which are found carry on in the ordinary course of business.
The Precautionary Motive for holding cash relates to the need for creating readily
available to meet the unexpected circumstances.
The Speculative Motive refers to the desires of a firm to take advantages of
opportunities which presents themselves at unexpected movements and which aretypically outside the normal course of the business.
The Compensatory Motive refers to hold cash balances is to compensate banks
for providing certain services and loans to be compensated for their services
indirectly in this form, they required the clients to always keep a bank balance
sufficient to earn a return equal to the cost of services. Such balances are called
Compensative balances.
OBJECTIVES OF CASH MANAGEMENT
1. To meet the cash disbursement needs2. To minimize funds committed to cash balances
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EVALUATION OF CASH MANAGEMENT
The following ratios have been calculated to check the liquidity position of the
company.
1)CURRENT RATIO
Current Ratio = Current Assets
Current Liabilities
PARTICULARS 2010-11 2009-10 2008-09
CURRENT ASSETS 7067.25 6342.21 6208.63
CURRENT
LIABILITIES 5085.26 3944.99 4558.02
CURRENT RATIO 1.389752 1.607662 1.362133
CURRENT RATIO
1.2
1.25
1.3
1.35
1.4
1.45
1.5
1.55
1.6
1.65
2010-11 2009-10 2008-09
CURRENT RATIO
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Interpretation:
The current ratio of the company showing an fluctuation as per the chart given
above. In 2008-09 it goes down to 1.36% and in year 2009-10 it is 1.60 % and
now in 2010-11 it goes down to 1.38%. As per rule of thumb the current ratio
should be 1.33:1 and companys current ratio is more as compared to the rule ofthumb hence, the company is having a good current position in all the three
years.
2)QUICK RATIO
Quick Ratio = Quick Assets
Current Liabilities
Quick Assets = Current Assets Inventories Prepaid Expenses
PARTICULARS 2010-11 2009-10 2008-09
QUICK ASSETS 4657.39 4340.58 4381.54
CURRENT
LIABILITIES 5085.26 3944.99 4558.02
QUICK RATIO 0.915861 1.100277 0.961281
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QUICK RATIO
0
0.2
0.4
0.6
0.8
1
1.2
2010-11 2009-10 2008-09
QUICK RATIO
Interpretation:
In the year 2008-09 the liquid position of the SIL is 0.96% & it increased up to
1.10% in 2009-10 and it further decreased to 0.91 in 2010-11.The liquid position
of the company is showing an downward trend. The rule of thumb for the liquidity
ratio is 1:1 and the company is showing a ratio nearer to rule of thumb in 2010-11
that means the companys liquidity position is good in last 2 years.
3)ABSOLUTE LIQUID RATIO OR CASH RATIO
Absolute Liquid Ratio = Absolute Liquid Assets
Current Liabilities
Absolute Liquid Assets = Cash + Marketable Securities
PARTICULARS 2010-11 2009-10 2008-09
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ABSOLUTE LIQUID
ASSET 243.49 414.84 520.89
CURRENT LIABILITIES 5085.26 3944.99 4558.02
ABSOLUTE LIQUID
RATIO 0.047882 0.105156 0.11428
ABSOLUTE LIQUID RATIO
0
0.02
0.04
0.06
0.08
0.1
0.12
2010-11 2009-10 2008-09
ABSOLUTE LIQUID
RATIO
Interpretation:
The absolute liquidity ratio is showing an upward trend in last two years. In 2008-
09 it was 0.11% and decreased to 0.04%The ratio of the firm for all the years is
not satisfactory. It means that the company is not in a position to meet its short
term obligation. But according to the nature and type of business the ratio is
sufficient this is because the company has unutilised working capital limit which
can be used to pay current liabilities as and when demand arises
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RECEIVABLES MANAGEMENT
Receivables constitute a substantial portion of current assets of several firms. For
example in India, Trade Debtors and Inventories are the major component of
current assets. They form about one-third of current assets in India. Granting
credit and creating debtors amount to the blocking of the firms funds. The intervalbetween the date of sale and the date of payment has to be financed out of
working capital.
This necessitates the firms to get funds from banks or other
sources. Thus, Trade Debtors represent investment. As substantial amounts are tied-
up in trade debtors, it needs careful analysis and proper arrangement.
Trade credit creates receivables or book debt that the firm is
expected to collect in the near future. The term receivable is defined as debt owed to
firm by customers arising from sales of goods or services in ordinary course ofbusiness. Receivables Management is also called Trade Credit Management.
DIMENSIONS OF RECEIVABLES MANGEMENT
Receivables Management involves the careful consideration of the following
aspects:
1) Forming of Credit Policy2) Executing the Credit Policy3) Formulating and Executing Collection Policy
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EALUATION OF RECEIVABLES MANAGEMENT
1) DEBTOR TURNOVER RATIO
Debtor Turnover Ratio = Credit Sales
Average Debtors
Average debtors = opening debtors + closing debtors
2
( no provision of doubtful debts)
PARTICULARS 2010-11 2009-10 2008-09
CREDIT SALES 25580.86 23879.46 21857.72
AVERAGE DEBTORS 2991.61 4521.34 3126.63
DEBTORS TURNOVERRATIO 8.550867 5.281501 6.990824
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DEBTORS TURNOVER RATIO
0
1
2
3
4
56
7
8
9
2010-11 2009-10 2008-09
DEBTORS TURNOVER
RATIO
Interpretation
The companys debtors decreased from 6.9 to 5.2 in 2009-10 and further it
showed an increasing trend and was highest in 2010-11. Debtor velocity
indicate the number of times the debtors are turned over during a year.
Generally, the higher the value of debtors turnover the more efficient is the
management of debtors/sales or more liquid are the debtors.
2) AVERAGE COLLECTION PERIOD
Average collection period = 365(days)
Debtor turnover ratio
PARTICULARS 2010-11 2009-10 2008-09
AVERAGE COLLECTIONPERIOD 42.68573 69.10915 52.2113
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AVERAGE COLLECTION PERIOD
0
10
20
30
40
50
60
70
80
2010-11 2009-10 2008-09
AVERAGE
COLLECTION PERIOD
Interpretation
The average collection period increased in 2009-10 from 52.2 to 69.10 and
decreased in 2010-11 from 69.10 to 42.68.
3)Debtors or receivables turnover ratio:
Receivable turnover = Net credit annual sales
Average trade debtors
Trade debtors = sundry debtors + bills receivable and account
receivables
Average debtors = opening trade debtors + closing trade debtors
2
PARTICULARS 2010-11 2009-10 2008-09
NET CREDIT SALES 48429.5 47397.8 41423.7AVERAGE DEBTORS 7083.3 8050.8 7247DEBTOR TURNOVER RATIO 6.83 5.88 5.71
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DEBTOR TURNOVER RATIO
5
5.2
5.4
5.6
5.8
6
6.2
6.4
6.6
6.8
7
2010-11 2009-10 2008-09
DEBTOR TURNOVER
RATIO
Interpretation
The companys debtors increase from 5.71 to 5.88 in 2009-10 and further it
showed an increasing trend and was highest in 2010-11. Debtor velocity
indicate the number of times the debtors are turned over during a year.
Generally, the higher the value of debtors turnover the more efficient is the
management of debtors/sales or more liquid are the debtors.
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INVENTORY MANAGEMENT
Inventory is the most important segment of working capital. Inventory Management
is a part of Production Management. Inventory Management helps to the financial
manager in planning and budgeting inventory. It is a technique of controlling the
purchase, use and transformation of material in optimal manner.
The phrase optimal signifies minimal waste and cost of holding
inventory. The management of inventory requires stocking of raw materials,
components, consumables, packing material, work-in-progress and finished goods,
so that production and marketing line are fed regularly. While on the other hand,
he has to reduce the idle capital tied up in an inventory.
NATURE OF INVENTORIES
Inventories are the stock of the product a company is manufacturing for sale and
components that make up the product. The various forms in which inventories exist
in a manufacturing company are: raw material, work-in-progress and finished
goods.
Raw materials are those basic inputs that are converted into finished productthrough the manufacturing process. Raw materials inventories are those unitswhich have been purchased and stored for future productions.
Work-in-progress inventories are semi-manufactured products. Theyrepresent products that need more work before they become finished productsfor sale.
Finished goods inventories are those completely manufactured which areready for sale. Stocks of raw material and work-in-progress facilitateproduction, while a stock of finished goods is required for marketing operations.Thus, inventories serve as a link between the production and consumption ofgoods.
The level of three kinds of inventories for a firm depends on the nature of its
business. A manufacturing firm will have substantially high levels of all three kinds
of inventories, while a resale or wholesale firm will have a very high level offinished goods inventories as compared to raw materials and work-in-progress
inventories.
Within manufacturing firms, there will be differences. Large heavy
engineering companies produce long production cycle products; therefore, they
carry large inventories. On the other hand, inventories of a consumer product
company will not be large because of short production cycle and fast turnover.
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NEED TO HOLD INVENTORIES
There are three general motives for holding inventories:
Transactions motive: Transactions motive emphasizes the need tomaintain inventories to facilitate smooth production and sales operations.
Precautionary motive: Precautionary motive necessitates holding ofinventories to guard against the risk of unpredictable changes in demandand supply forces and other factors.
Speculative motive: Speculative motive influences the decision to increaseor reduce inventory levels to take advantage of price fluctuations.
A company should remain adequate stock of materials for a continuous supply to
the factory for an uninterrupted production. It is not possible for a company toprocure raw materials whenever it is needed. A time lag exists between demand
for materials and its supply. Therefore, the firm should maintain sufficient stock of
raw materials at a given time to streamline production. Other factors which may
necessitate purchasing and holding of raw material inventories are quantity
discounts and anticipated price increase. The firm may purchase large quantities of
raw materials that are needed for the desired production and sales levels, to obtain
quantity discounts of bulk purchasing. At times, the firm would like to accumulate
raw materials in anticipation of price rise.
Work-in-progress inventory builds up because of the production cycle. Productioncycle is the time span between introduction of raw material into production andemergence of finished product at the completion of production cycle.
Stock of finished goods has to be held because production and sales are not
instantaneous. A firm cannot produce immediately when goods are demanded by
customers. Therefore, to supply finished goods on a regular basis, their stock has
to be maintained. Stock of finished goods has also to be maintained for sudden
demands from customers.
OBJECTIVE OF INVENTORY MANAGEMENT
In the context of inventory management, the firm is faced with the problem of
meeting two conflicting needs:
To maintain a large size of inventory for efficient and smooth production andsales operations.
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To maintain a minimum investment in inventories to maximize profitability.Both excessive and inadequate inventories are not desirable. These are two
danger points within which the firm should operate. The optimum level of inventory
will lie between the two danger points of excessive and inadequate inventories.
The firm should always avoid a situation of over-investment or under-investment ininventories. The major dangers of over investment are:
a) Unnecessary tie-up of the firms funds and loss of profits.b) Excessive carrying costc) Risk of liquidity.The excessive level of inventories consumed funds of the firm, which cannot be
used for any other purpose, and thus, it involves an opportunity cost.
An effective inventory management should
a) Ensure a continuous supply of raw materials to facilitate uninterruptedproduction.
b) Maintain sufficient finished goods inventory for smooth sales operation, andefficient customer service.
c) Maintain sufficient stocks of raw materials in periods of short supply andanticipate price changes.
d) Minimize the carrying cost and time.
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EVALUATION OF INVENTORY MANAGEMENT
1) INVENTORY TURNOVER RATIO
Inventory Turnover Ratio = Cost of Goods Sold
Average Inventory
PARTICULARS 2010-11 2009-10 2008-09INVENTORY TURNOVER RATIO 11.14 9.39 10.93
INVENTORY TURNOVER RATIO
8.5
9
9.5
10
10.5
11
11.5
2010-11 2009-10 2008-09
INVENTORY
TURNOVER RATIO
Interpretation:
The inventory turnover ratio of the company is fluctuating. In 2008-09 it was 10.93
times and it decreased up to 9.39 times in 2009-10 and increased to 11.14 times in
2010-11. Standard for this ratio is 8 times, the company,s ratio is more than the
standard hence position is satisfactory.
A high inventory turnover/stock velocity indicates efficient management
of inventory because more frequently the stock are sold, the lesser amount of
money is required to finance the inventory. A low inventory turnover ratio indicates
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an inefficient management of inventory. A low inventory turnover implies over-investment in inventories, dull business, poor quality of goods, stock accumulation,
accumulation of obsolete and slow moving goods and low profit as compared to
total investment.
2)INVENTORY CONVERSION PERIOD
Inventory Conversion period = Days in a year
Inventory Turnover Ratio
PARTICULARS 2010-11 2009-10 2008-09INVENTORY CONVERSIONPERIOD 32.764 38.871 33.394
INVENTORY CONVERSION PERIOD
28
30
32
34
36
38
40
2010-11 2009-10 2008-09
INVENTORY
CONVERSION PERIOD
Interpretation
The Inventory conversion period is showing a fluctuating trend.It was increasing
in 2009-10 the ratio came down then again in 2010-11 it has gone up and came
down in 2010-11 with little change.
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BIBLIOGRAPHY
BOOKS
Shashi K. Gupta & R.K. Sharma, Financial Management, KalyaniPublications
I.M. Pandey, Financial Management, Vishal Publicating HousePvt. Ltd.
M.Y. Khan, Financial Management, Tata Mc Graw Hillpublications Co. Ltd.
Annual reports of SIL
Internal files related to Working Capital Management
Websites: www.google.com
www.wikipedia.com
www.shreyansgroup.com
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