project report working capital
TRANSCRIPT
DATA ANALYSIS & INTERPRETATION
6.1 WORKING CAPITAL LEVEL
The consideration of the level investment in current assets should
avoid two danger points excessive and inadequate investment in
current assets. Investment in current assets should be just
adequate, not more or less, to the need of the business firms.
Excessive investment in current assets should be avoided because
it impairs the firm’s profitability, as idle investment earns nothing.
On
the other hand inadequate amount of working capital can be
threatened solvency of the firms because of it’s inability to meet it’s
current obligation. It should be realized that the working capital
need of the firms may be fluctuating with changing business
activity. This may cause excess or shortage of working capital
frequently. The management should be prompt to initiate an action
and correct imbalance,
Table 6.1 A- Size of working capital
(Rs. In Crores)
A) Current assets 2008-09 2009-10 2010-11
Projected
Inventories 47.18 53.67 02.50
Cash & Bank Balance 04.20 70.15 52.50
Other Assets 00.30 00.34 00.35
Loan & Advances 03.14 09.56 16.16
TOTAL OF A 54.82 133.72 71.51
Graph 6.1A shows all the components of Current Assets.
Table 6.2 B- Size of working capital
(Rs. In Crores)
A) Current Liabilities 2008-09 2009-10 2010-11
Projected
Current liabilities 05.46 21.39 02.50
Provisions 0.016 0.030 00.25
TOTAL of B 05.48 21.42 02.75
TOTAL OF A & B 60.30 155.14 74.26
Total of A(Gross W.C.)
54.82 133.72 71.51
Total of B
05.48 21.42 02.75
Net W.C
60.30 155.14 74.26
The net working capital of the company in 2008-09 was Rs.60.30
Crores and it is projected at Rs.74.26 in 2010-11.
6.2 Working capital trend analysis
In working capital analysis the direction at changes over a period of
time is of crucial importance. Working capital is one of the
important fields of management. It is therefore very essential for an
annalist to make a study about the trend and direction of working
capital over a period of time. Such analysis enables as to study the
upward and downward trend in current assets and current liabilities
and it’s effect on the working capital position.
In the words of S.P. Gupta “The term trend is very commonly
used in day-today conversion trend, also called secular or long term
need is the basic tendency of population, sales, income, current
assets, and current liabilities to grow or decline over a period of
time”.
According to R.C.Galeziem “The trend is defined as smooth
irreversible movement in the series. It can be increasing or
decreasing.” Emphasizing the importance of working capital trends,
Man Mohan and Goyal have pointed out that “analysis of working
capital trends provide as base to judge whether the practice and
privilege policy of the management with regard to working capital is
good enough or an important is to be made in managing the
working capital funds.
Further, any one trend by it self is not very informative and
therefore comparison with Illustrated their ideas in these words, “An
upwards trends coupled with downward trend or sells, accompanied
by marked increase in plant investment especially if the increase in
planning investment by fixed interest obligation”
6.3 Operating Cycle
The need of working capital arrived because of time gap between
production of goods and their actual realization after sale. This time
gap is called “Operating Cycle” or “Working Capital Cycle”. The
operating cycle of a company consist of time period between
procurement of inventory and the collection of cash from
receivables. The operating cycle is the length of time between the
company’s outlay on raw materials, wages and other expanses and
inflow of cash from sales of goods.
Operating cycle is an important concept in management of
cash and management of cash working capital. The operating cycle
reveals the time thatelapses between outlays of cash and inflow of
cash. Quicker the operating cycle less amount of investment in
working capital is needed and it improves profitability. The duration
of the operating cycle depends on nature of industries and
efficiency in working capital management.
Calculation of operating cycle
To calculate the operating cycle of JISL used last five year data.
Operating cycle of the LGCL vary year to year as changes in policy
of management about credit policy and operating control
6.3 WORKING CAPITAL RATIO ANALYSIS
As it is well known that working capital is the life blood and
the centre of a business. Adequate amount of working capital is
very much essential for the smooth running of the business. And the
most important part is the efficient management of working capital
in right time. The liquidity position of the firm is totally effected by
the management of working capital. So, a study of changes in the
uses and sources of working capital is necessary to evaluate the
efficiency with which the working capital is employed in a business.
This involves the need of working capital analysis.
The analysis of working capital can be conducted through a number
of devices, such as:
1. Ratio analysis.
2. Fund flow analysis.
3. Budgeting.
1. RATIO ANALYSIS
A ratio is a simple arithmetical expression one number to another.
The technique of ratio analysis can be employed for measuring
short-term liquidity or working capital position of a firm. The
following ratios can be calculated for these purposes:
Fig. 14: Ratio Analysis
1. Current ratio.
2. Quick ratio
3. Absolute liquid ratio
4. Inventory turnover.
5. Receivables turnover.
6. Payable turnover ratio.
7. Working capital turnover ratio.
8. Working capital leverage
9. Ratio of current liabilities to tangible net worth.
2. FUND FLOW ANALYSIS
Fund flow analysis is a technical device designated to the study the
source from which additional funds were derived and the use to
which these sources were put. The fund flow analysis consists of:
a. Preparing schedule of changes of working capital
b. Statement of sources and application of funds.
It is an effective management tool to study the changes in financial
position (working capital) business enterprise between beginning
and ending of the financial dates.
3. WORKING CAPITAL BUDGET
A budget is a financial and / or quantitative expression of business
plans and polices to be pursued in the future period time. Working
capital budget as a part of the total budge ting process of a
business is prepared estimating future long term and short term
working capital needs and sources to finance them, and then
comparing the budgeted figures with actual performance for
calculating the variances, if any, so that corrective actions may be
taken in future. He objective working capital budget is to ensure
availability of funds as and needed, and to ensure effective
utilization of these resources. The successful implementation of
working capital budget involves the preparing of separate budget
for each element of working capital, such as, cash, inventories and
receivables etc.
1.15 ANALYSIS OF SHORT – TERM FINANCIAL POSITION
OR TEST OF LIQUIDITY
The short –term creditors of a company such as suppliers of goods
of credit and commercial banks short-term loans are primarily
interested to know the ability of a firm to meet its obligations in
time. The short term obligations of a firm can be met in time only
when it is having sufficient liquid assets. So to with the confidence
of investors, creditors, the smooth functioning of the firm and the
efficient use of fixed assets the liquid position of the firm must be
strong. But a very high degree of liquidity of the firm being tied – up
in current assets. Therefore, it is important proper balance in regard
to the liquidity of the firm. Two types of ratios can be calculated for
measuring short-term financial position or short-term solvency
position of the firm.
1. Liquidity ratios.
2. Current assets movements ‘ratios.
1) LIQUIDITY RATIOS
Liquidity refers to the ability of a firm to meet its current obligations
as and when these become due. The short-term obligations are met
by realizing amounts from current, floating or circulating assts. The
current assets should either be liquid or near about liquidity. These
should be convertible in cash for paying obligations of short-term
nature. The sufficiency or insufficiency of current assets should be
assessed by comparing them with short-term liabilities. If current
assets can pay off the current liabilities then the liquidity position is
satisfactory. On the other hand, if the current liabilities cannot be
met out of the current assets then the liquidity position is bad. To
measure the liquidity of a firm, the following ratios can be
calculated:
1. CURRENT RATIO
2. QUICK RATIO
3. ABSOLUTE LIQUID RATIO
1. CURRENT RATIO
Current Ratio, also known as working capital ratio is a measure of
general liquidity and its most widely used to make the analysis of
short-term financial position or liquidity of a firm. It is defined as the
relation between current assets and current liabilities. Thus,
CURRENT RATIO = CURRENT ASSETS
CURRENT LIABILITES
The two components of this ratio are:
1) CURRENT ASSETS
2) CURRENT LIABILITES
Current assets include cash, marketable securities, bill
receivables, sundry debtors, inventories and work-in-progresses.
Current liabilities include outstanding expenses, bill payable,
dividend payable etc.
A relatively high current ratio is an indication that the firm is
liquid and has the ability to pay its current obligations in time. On
the hand a low current ratio represents that the liquidity position of
the firm is not good and the firm shall not be able to pay its current
liabilities in time. 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.
CALCULATION OF CURRENT RATIO
(Rupees in Crores)
Year 2008 2009 2010 (Proj.)
Current Assets 54.82 133.72 71.51
Current
Liabilities
05.48 21.42 02.75
Current Ratio 10.00:1 6.24:1 26.00:1
Graph Showing Current Ratio of LGCL for 3 years (1 yr.proj.)
Interpretation:-
As we know that ideal current ratio for any firm is 2:1. If we see the
current ratio of the company for last three years it has increased
from 2008 to 2010. The current ratio of company is more than the
ideal ratio. This depicts that company’s liquidity position is sound.
Its current assets are more than its current liabilities.
2. QUICK RATIO
Quick ratio is a more rigorous test of liquidity than current ratio.
Quick ratio may be defined as the relationship between quick/liquid
assets and current or liquid liabilities. An asset is said to be liquid if
it can be converted into cash with a short period without loss of
value. It measures the firms’ capacity to pay off current obligations
immediately.
QUICK RATIO = QUICK ASSETS_____
CURRENT LIABILITES
Where Quick Assets are:
1) Marketable Securities
2) Cash in hand and Cash at bank.
3) Debtors.
A high ratio is an indication that the firm is liquid and has the ability
to meet its current liabilities in time and on the other hand a low
quick ratio represents that the firms’ liquidity position is not good.
As a rule of thumb ratio of 1:1 is considered satisfactory. It is
generally thought that if quick assets are equal to the current
liabilities then the concern may be able to meet its short-term
obligations. However, a firm having high quick ratio may not have a
satisfactory liquidity position if it has slow paying debtors. On the
other hand, a firm having a low liquidity position if it has fast
moving inventories.
CALCULATION OF QUICK RATIO
(Rupees in Crores)
Year 2008 2009 2010 (Proj.)
Quick Assets
Securities
Cash & Bank
Debtors
00.1
04.20
03.14
00.1
70.15
09.56
00.1
52.50
16.16
Current Liabilities 05.48 21.42 02.75
Quick Ratio 1.36:1 3.72:1 25:1
Interpretation :
A quick ratio is an indication that the firm is liquid and has the
ability to meet its current liabilities in time. The ideal quick ratio is
1:1. Company’s quick ratio is more than ideal ratio. This shows
company has no liquidity problem.
3. ABSOLUTE LIQUID RATIO
Although receivables, debtors and bills receivable are generally
more liquid than inventories, yet there may be doubts regarding
their realization into cash immediately or in time. So absolute liquid
ratio should be calculated together with current ratio and acid test
ratio so as to exclude even receivables from the current assets and
find out the absolute liquid assets. Absolute Liquid Assets includes :
ABSOLUTE LIQUID RATIO = ABSOLUTE LIQUID ASSETS
CURRENT LIABILITES
ABSOLUTE LIQUID ASSETS = CASH & BANK BALANCES.
e.g. (Rupees in Crores)
Year 2008 2009 2010 (Proj.)
Absolute Liquid Assets 04.20 70.15 52.50
Current Liabilities 05.48 21.42 02.75
Absolute Liquid Ratio 0.77:1 3.27:1 19.09:1
Graph Showing Absolute Liquid Ratio for 3 years
Interpretation :
These ratio shows that company carries a small amount of cash
during first year of its operation and it is projected to be 19:1 for the
year 2010-11. But there is nothing to be worried about the lack of
cash because company has reserve, borrowing power & long term
investment. In India, firms have credit limits sanctioned from banks
and can easily draw cash.
B) CURRENT ASSETS MOVEMENT RATIOS
Funds are invested in various assets in business to make sales and
earn profits. The efficiency with which assets are managed directly
affects the volume of sales. The better the management of assets,
large is the amount of sales and profits. Current assets movement
ratios measure the efficiency with which a firm manages its
resources. These ratios are called turnover ratios because they
indicate the speed with which assets are converted or turned over
into sales. Depending upon the purpose, a number of turnover
ratios can be calculated. These are :
1. Inventory Turnover Ratio
2. Debtors Turnover Ratio
3. Creditors Turnover Ratio
4. WORKING CAPITAL TURNOVER RATIO
The current ratio and quick ratio give misleading results if current
assets include high amount of debtors due to slow credit collections
and moreover if the assets include high amount of slow moving
inventories. As both the ratios ignore the movement of current
assets, it is important to calculate the turnover ratio.
1. INVENTORY TURNOVER OR STOCK TURNOVER RATIO :
Every firm has to maintain a certain amount of inventory of finished
goods so as to meet the requirements of the business. But the level
of inventory should neither be too high nor too low. Because it is
harmful to hold more inventory as some amount of capital is
blocked in it and some cost is involved in it. It will therefore be
advisable to dispose the inventory as soon as possible.
INVENTORY TURNOVER RATIO = COST OF GOOD SOLD
AVERAGE INVENTORY
Inventory turnover ratio measures the speed with which the
stock is converted into sales. Usually a high inventory ratio indicates
an efficient management of inventory because more frequently the
stocks are sold ; the lesser amount of money is required to finance
the inventory. Where as low inventory turnover ratio indicates the
inefficient management of inventory. A low inventory turnover
implies over investment in inventories, dull business, poor quality of
goods, stock accumulations and slow moving goods and low profits
as compared to total investment.
AVERAGE STOCK = OPENING STOCK + CLOSING STOCK
2
(Rupees in Crores)
Year 2008 2009 2010 (Proj.)
Cost of Goods sold 47.18 74.00 98.00
Average Stock 70.77 207.20 171.5
Inventory Turnover
Ratio
0.67:1 0.36:1 0.57:1
Graph Showing Inventor Turnover Ratio for 3 years
Interpretation :
These ratio shows how rapidly the inventory is turning into
receivable through sales. In 2009-10 the company has high
inventory turnover ratio but in 2008-09 it was only 0.67:1. This
shows that the company’s inventory management technique is
less efficient in 2010 and it is projected to be 0.57:1 in 2010-11.
2. INVENTORY CONVERSION PERIOD:
INVENTORY CONVERSION PERIOD= 365 (net working days)
INVENTORY TURNOVER RATIO
e.g.
Year 2008 2009 2010 (Proj.)
Days 365 365 365
Inventory Turnover Ratio 1.5 2.8 1.8
Inventory Conversion
Period
243 days 130 days 202 days
Interpretation :
Inventory conversion period shows that how many days inventories
takes to convert from raw material to finished goods. In the
company inventory conversion period is decreasing. This shows the
efficiency of management to convert the inventory into cash.
3. DEBTORS TURNOVER RATIO :
A concern may sell its goods on cash as well as on credit to
increase its sales and a liberal credit policy may result in tying up
substantial funds of a firm in the form of trade debtors. Trade
debtors are expected to be converted into cash within a short
period and are included in current assets. So liquidity position of a
concern also depends upon the quality of trade debtors. Two types
of ratio can be calculated to evaluate the quality of debtors.
a) Debtors Turnover Ratio
b) Average Collection Period
DEBTORS TURNOVER RATIO = TOTAL SALES (CREDIT)
AVERAGE DEBTORS
Debtor’s velocity indicates the number of times the debtors are
turned over during a year. Generally higher the value of debtor’s
turnover ratio the more efficient is the management of
debtors/sales or more liquid are the debtors. Whereas a low debtors
turnover ratio indicates poor management of debtors/sales and less
liquid debtors. This ratio should be compared with ratios of other
firms doing the same business and a trend may be found to make a
better interpretation of the ratio.
AVERAGE DEBTORS= OPENING DEBTOR+CLOSING DEBTOR
2
(Rs. In crores)
Year 2008 2009 2010
(Proj.)
Sales 47.18 74.00 98.00
Average Debtors 3.14 9.56 16.16
Debtor Turnover Ratio 15.03:1 7.74:1 6.06:1
Graph showing the Debtor Turnover Ratio for 3 years
Interpretation :
This ratio indicates the speed with which debtors are being
converted or turnover into sales. The higher the values or turnover
into sales. The higher the values of debtors turnover, the more
efficient is the management of credit. But in the company the
debtor turnover ratio is decreasing year to year. This shows that
company is not utilizing its debtors efficiency. Now their credit
policy become liberal as compare to previous year. As the
company’s reputation rose high, the inflow of customers has also
increased and as a result, the debtor turnover ratio is in decreasing
trend.
4. AVERAGE COLLECTION PERIOD :
Average Collection Period = No. of Working Days
Debtors Turnover
The average collection period ratio represents the average number
of days for which a firm has to wait before its receivables are
converted into cash. It measures the quality of debtors. Generally,
shorter the average collection period the better is the quality of
debtors as a short collection period implies quick payment by
debtors and vice-versa.
Average Collection Period = 365 (Net Working Days)
Debtors Turnover Ratio
Year 2008 2009 2010 (Proj.)
Days 365 365 365
Debtor Turnover Ratio 15.03:1 7.74:1 6.06:1
Average Collection Period 24 days 47 days 60 days
Interpretation :
The average collection period measures the quality of debtors and it
helps in analyzing the efficiency of collection efforts. It also helps to
analysis the credit policy adopted by company. In the firm average
collection period increasing year to year. It shows that the firm has
reasonably good Liberal Credit policy in the sense that payment to
the extent of 10 to 15% is paid in advance and the balance is paid
through loans on progress of the project. These changes in policy
are due to competitor’s credit policy. In real estate business, actuall
the collection period is less, once the products
(villas/houses/apartments) are booked by the customers and when
it is tied with bank finance.
5. WORKING CAPITAL TURNOVER RATIO :
Working capital turnover ratio indicates the velocity of utilization of
net working capital. This ratio indicates the number of times the
working capital is turned over in the course of the year. This ratio
measures the efficiency with which the working capital is used by
the firm. A higher ratio indicates efficient utilization of working
capital and a low ratio indicates otherwise. But a very high working
capital turnover is not a good situation for any firm.
Working Capital Turnover Ratio = Cost of Sales
Net Working Capital
Working Capital Turnover = Sales __
Networking Capital
e.g. (Rs. Crores)
Year 2008 2009 2010
(Proj.)
Sales 47.18 74.00 98.00
Networking Capital 49.34 112.3 68.76
Working Capital Turnover 0.96 0.66 1.42
Graph showing the Working Capital Turnover of LGCL for 3
years (including one year projected)
Interpretation
This ratio indicates low much net working capital requires for sales.
In 2008-9, the reciprocal of this ratio (1/0.96) shows that for sales of
Rs. 1 the company requires 96 paisa as working capital. Thus this
ratio is helpful to forecast the working capital requirement on the
basis of sale.
INVENTORIES (Rs. in Crorees)
Year 2008-
2009
2009-
2010
2010-11
(PR)
Inventories 47.18 53.67 02.50
]Interpretation :
Inventories is a major part of current assets. If any company wants
to manage its working capital efficiency, it has to manage its
inventories efficiently. The company should try to reduce the
inventory upto 10% or 20% of current assets.
CASH BNAK BALANCE : (Rs. in Crores)
Year 2008-
2009
2009-2010 2010-2011
(PR)
Cash Bank Balance 04.20 70.15 52.50
Interpretation :
Cash is basic input or component of working capital. Cash is needed
to keep the business running on a continuous basis. So the
organization should have sufficient cash to meet various
requirements. The result of that it disturb the firms products
(buildings) were under construction in 2008 and marketing has
taken part in 2009-10. In 2009-10, it is increased upto approx.
15times cash balance. So in 2010-11, the company has no problem
for meeting its requirement as compare to 2008.
DEBTORS : (Rs. in crores)
Year 2008-
2009
2009-2010 2010-2011
(PR)
Debtors 3.14 9.56 16.16
Interpretation :
Debtors constitute a substantial portion of total current assets. In
India it constitute one third of current assets. The above graph is
depict that there is increase in debtors. It represents an extension
of credit to customers. The reason for increasing credit is
competition and company liberal credit policy.
CURRENT ASSETS : (Rs. in Crores)
Year 2008-
2009
2009-2010 2010-
2011 (PR)
Current Assets 54.82 133.72 71.51
Interpretation :
It can be seen from the above table that there is an increase in
current assets in 2009-10. This increase is arise because there is
approx. 50% increase in inventories. Increase in current assets
shows the liquidity soundness of company.
CURRENT LIABILITY : (Rs. in Crores)
Year 2008-
2009
2009-2010 2010-
2011 (PR)
Current Liability 05.48 21.42 02.75
Interpretation :
Current liabilities shows company short term debts pay to outsiders.
In 2009-10 the current liabilities of the company increased. But still
increase in current assets are more than its current liabilities.
NET WOKRING CAPITAL :
(Rs. in Lakhs)
Year 2008-
2009
2009-2010 2010-2011
(PR)
Net Working Capital 49.34 112.3 68.76
Interpretation :
Working capital is required to finance day to day operations of a
firm. There should be an optimum level of working capital. It should
not be too less or not too excess. In the company there is increase
in working capital. The increase in working capital arises because
the company has expanded its business.
7.0 FINDINGS AND SUMMARY
The following are the findings of the study of Working Capital
Management carried out at LGCL Developers Private Limited,
Bangalore.
The Current Assets are always higher than the Current
Liabilities during the period 2008-09 to 2010 and the same
trend is projected for 2010-11.
The working capital trend indicates that the company has
wisely planned its finances so as to maximize its profits, by
keeping a tab on utilization of working capital, especially
when it comes to market borrowing.
The operating cycle which comes into force because of time
gap between production of goods (construction of villas/row
houses/apartments) and actual realization after sale. In real
estate, especially the quality construction and good
reputation always sells. That being the case, though the
company is new, its designs are impeccable and quality is of
high standard and as a result, the time gap in operating cycle
is narrowed down, due to effective sales.
Calculation of current ratio indicates that current assets are
always more than double the current liabilities and hence WC
management is more than satisfactory.
Even in the quick ratio analysis, it is more than 1:1 in 2008-09
and it was 3.72 : 1 in 2009 which is an excellent management
of working capital.
While analyzing the absolute liquid ratio, in the beginning
when the company was formed, it was less cash flow and in
2009 it picked up very well, since the company had then
reached optimum functioning.
In analyzing the inventory turnover ratio, the company was at
its best efficiency in convering inventory into receivable sales
and it is highly satisfactory, though it was less efficient in
2009-10, due to liberal credit policy resultant of recession
prevailed in real estate market.
Analysis of Debtor Turnover ratio indicates the speed with
which debtors were converted or turnover into sales. The
ratio which was 15.03:1 in 2008 came down to 7.74:1 in 2009
in it is projected to be little more less in 2010-11.
Though the average collection period ranged from 45 to 60
days, the collection is much more organized and efficient in
real estate and cash in-flow was quite excellent.
The most important THE WORKING CAPITAL TURNOVER which
was 0.96 in 2008 rose to 0.66 in 2009 and it is projected to
1.42 in 2010-11, indication of committed working capital
management.
Inventory which stood at 47.18 crores in 2008-09 rose to
53.67 and it is projected to bring it down to 2.50 crores in
2010-11.
Cash and Bank Balance indicated 4.20 crores in 2008-09 and
it rose to 70.15 in 2009-10 and it is projected to be 52.50 in
2910-11 which indicates that the company has no problem in
meeting its financial requirement.
The debtors who constitute a substantial portion of total
current assets is on the increasing trend over last 2 years and
it is expected to reach Rs.16.16 cores in 2010-11.
The overall current assets of the company indicates upward
trend thoughtout which needless to say it shows the
soundness of the company. The currents assets which was
54.82 in 2008-09 stood at 132.72 in 2009-10.
The calculation of current liabilities which stood at 21.42 in
2009-10 from 5.48 in 2008 is not alarming, as there is
correspondingly higher current assets off-set any problems.
While analyzing all the ratios stated above, it is arrived that
the company utilized 49.35 crores as working capital in 2008
and it rose to 112.3 in 2009-10 and it the WCR will be 68.76 in
2010-11. The working capital requirement is a healthy
requirement, considering that the company has shown profits
in 2008-09 and it is projected to get higher profits in 2009-10.
8.0 SUMMARY AND CONCLUSION
Conclusion can be drawn on the working capital management by
the firm for the betterment after analysis of project report on study
and analysis of working capital ratios. The following are the
suggestions and conclusions:
1. Working capital of the company was increasing and showing
positive working capital per year. It shows good liquidity
position.
1. Positive working capital indicates that company has the
ability of payments of short terms liabilities.
3. Working capital increased because of increment in the current
assets is more than increase in the current liabilities.
4. Company’s current assets were always more than requirement
it affect on profitability of the company.
5. Current assets are more than current liabilities indicate that
company used long term funds for short term requirement,
where long term funds are most costly then short term funds.
6. Current assets components shows sundry debtors were the
major part in current assets it shows that the inefficient
receivables collection management.
7. In the year 2008-09 working capital was more because of
increased the expenses as the company started the acquisition of
lands and expenses thereof and also increase in the prices of land
as well as raw materials such steel, cement and sand.
8. Inventory was supporting to sales, thus inventory turnover ratio
was increasing, but company increased the raw material holding
period particular when there was slump in the sales.
10. Company should raise funds through short term sources for
short term requirement of funds, which comparatively economical
as compare to long term funds.
11. Company should take control on debtor’s collection period
though it has not reached an alarming state.
12. Company has to take control on cash balance because cash is
non earning assets and increasing cost of funds.
13. Company should reduce the inventory holding period with
use of zero inventory concepts.
Over all company has good liquidity position and sufficient
funds to repayment of liabilities. Company has accepted
conservative financial policy and thus maintaining more
current assets balance. Due to ever increasing demand for
houses in the real estate sector, the Company is increasing
sales volume per year which supported the company for
sustain a good position in the real estate industry.
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Hill New York Satish Inamdar- Principles of Financial
Management-Everest Publishing House
Websites
ezinearticles.com/?Working-Capital-Management
www.investopedia.com › Dictionary - Cached
www.studyfinance.com/lessons/workcap/
www.planware.org/workingcapital.htm -