str on working capital management

8/3/2019 Str on Working Capital Management

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SUMMER TRAINING REPORT

ON

WORKINING CAPITAL MANAGEMENT

IN

JINDAL INDUSTRIES LTD. HISAR

In the fulfillment of the requirements for the award of theDegree of:

MASTER OF BUSINESS ADMINISTRATION

(SESSION 2010-12)

Under the Guidance of: Submitted by

Mr. T.R. GAUR Mr. Harish Mehta

Submitted to:

CHOUDHARY DEVI LAL UNIVERSITY SIRSA


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ACKNOWLEDGEMENT

A project report is never the sole product of the personwhose name appears on the cover. There are always other

people whose guidance and help make it happens. So, it

becomes my duty to express my gratitude towards all of

them.

I am thankful to department of business administration,

Chaudhary Devi Lal University Sirsa for granting me

permission to take up this project. First of all I would like

to convey my sincere gratitude to Mr.T.R. GAUR for

giving me permission to work on a project in this

organization. I am very thankful to him for his

supervision and guidance during my project work. Iwould like to thank management of Jindal Industry Ltd.

Hisar.

HARISHMEHTA


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DECLARATION

I am the student of M.B.A. 2.nd Semester ofJINDAL

INDUSTRIES. HISAR hereby declare that the Project

Report onWORKING CAPITAL MANAGEMENT

is my original work and has not been submitted by any

other person.

I also declare that I have done my work

sincerely and accurately even then if any mistake or error

had kept in, I request to the readers to point out these

errors and guide me to remove theses errors infuture.

HARISH MEHTA


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COMPANY PROFILE


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SWOT Analysis

Four quadrants of SWOT analysis are strengths, weaknesses, opportunities and

threats.

SWOT analysis is an examination of the strength, weakness, opportunities and

threats faced by a company during its phase of operation. A SWOT analysis is

important for Jindal Industries to evaluate its current position and formulatestrategies to tackle its competitors.

Strengths of Jindal Industries

Jindal Industries is the pioneer of steel business in India and thus enjoys brand

equity. Jindal Industries has a multiple companies under the same banner, whichgives it an advantage of value-chain efficiency, whereby the company can utilize

products made in its sister companies to process raw materials and increase

efficiency.

Weaknesses of Jindal Industries

The biggest weakness of Jindal Industries is its increasing debt-to-equity ratio.

Most of its assets are financed by debt, which can be dangerous in the long-run.

Jindal Industries largely depends on domestic and a few international markets for

generating business. This over-dependence can prove to be fatal in times ofeconomic crisis.

Opportunities for Jindal Industries

Jindal Industries is branching out to overseas market. Tata Steel will now be in a

position to utilize the R&D facility and the patents owned by the themselves

Exposure to new technologies and markets is a big advantage for the company.

Threats to Jindal Industries

In the current scenario, the biggest threat for Jindal Industries is to maintain the

Co2 emission standards when it starts its operations in India. The sudden overseas

exposure along with a possible economic slowdown is the biggest challenge faced

by Jindal Industries in the present circumstances.


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PRODUCTS & EQUIPMENTS

PRODUCTS

Galvanised pipes : 1\2to12 various national & international

Jindal Hissar-ACL pipes : 1\2to 2 for concealed piping

Black pipes : 1\2to 12various national & international

Rectangle pipes : from 25mm*25mm to 150mm*150mm

Line pipes : from 80mm*80mm to 300mm*300mm

EQUIPMENTS

Slitting units

Erw pipe mills

Galvanizing lines

Threading machines

Hydro testing machines

Eddy current testing

Annealing

Power plant


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MANUFACTURING PROCESS

The process utilizes the latest technology and modern equipments for producing

high quality ERW pipes.

Slit preparation. HR Coils are slitted to predetermined widths for each size of

pipe and thickness. Slitted coil is uncoiled at the entry of ERW mill and the

ends are sheared and welded one after another to make it single endless strip.

1. Forming. Slitted coils are initially formed into U shape and then into acylindrical shape with open edges using a series of forming rolls.

2. Welding. The open edges are heated to the required temperature throughhigh frequency low voltage high current and press welded by forge rolls

making perfect and strong butt weld without filler materials.

3. Debeading. Weld flash on top and inside is trimmed out through carbidetools

4. Seam Annealing. Whenever required, welding portion and heat affectedzone is put to normalizing with medium frequency normalizes and then

cooled down in air cooling bed.

5. Sizing & Cutting. After water quenching slight reduction is applied to pipeswith sizing rolls to give them desired accurate outside diameter. Pipes are

cut to required lengths by flying cut off disc\saw cutter.

6. Facing and Beveling. The pipe ends are faced and beveled by the end facer.All the processes are continuous with auto arrangements. These plain ended

tubes go for further processing as per the customer nee like galvanizing,

threading, black varnishing etc.

7. Packing. Finishing pipes are bundled in desired number of pieces as percustomers requirements and packed properly to ensure freshness till

delivery.


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QUALITY IS THE STRENGTH

JINDAL INDUSTRIES LTD. HISAR manufactures high quality MS. Black &

Galvanized Pipes\ Tubes in the range of 15mm to 300mm as per BIS well

equipment with modern manufacturing machineries, mills, welding plants &

galvanizing plants. It has full on maintenance work shop and testing equipment to

produce the best quality steel pipes besides other infrastructure facilities.

JINDAL Industries ltd. has trebled its production & sales during last five years. It

has achieved this fat by winning a higher share in very competitive market, which

is also flooded with inferior & duplicate quality pipes. Their strength lies in their

all time endeavor to provide higher standard of quality and service to worthycustomers. They never compromise on quality front even under the most adverse

market conditions.

QUALITY ASSURANCE DEPARTMENT:

This department is guided by quality control manager and it performs bellow

mentioned functions:

To device and follow system as per ISI standards requirements. To support product to achieve zero defect product. Achieve total customer satisfaction. Continuous production in process rejection store work.

MAINTAINCE DEPARTMENT:

Manager of maintaince heads it. It undertakes the following functions:

To maintain the equipment with less down time. Planning & scheduling of spares required for replacement. Planning & function of preventive maintaince. Maintaining of main inventory of spares and consumable.


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MANUFACTURING DEPARTMENT:

To produce the largest quality consistently. To produce with zero defect. To maintain quality. To avoid waste & maintain shop floor cleanness.

PRODUCTION ENGINEERING DEPARTMENT:

Deputy Manager heads this department and it undertakes industry. Watching the progress of delivery according with schedule. Studying markets to determine time & quality to buy. Locating cheaper & better sources to supply. Maintaining records.

PURCHASE DEPARTMENT:

Scrutinizing store indents for which purchase is to be affected. Placing purchase order.

STORE DEPARTMENT:

After material received by purchase department, store department checks it. Here

store receipt note is prepared. The store receipt specifies description of material,quantity after inspection. Store code no. rate per unit & total amount. The name of

department using is also written. Besides the name of the supplier, date of delivery

& date of bill, challan no, bill no. etc is noted.


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FURURE OUTLOOK

Steel industries has witness a robust growth in the global arena in past few years.

As a result, capacity creation has outpaced demand growth resulting in over

capacities. This has led to a major correction in steel prices. At the same time thereis an increased volatility, creating a challenging environment for steel processes.

Fortunately, Indian economy is on a growth path, expected to touch more than 8%

growth in 2010-11. This should result in some demand growth for steel pipe

industries. However increased steel pipes capacity and substitution by PVC, will

put pressure on volumes and margins from the same.

Growth opportunities in existing market segments are likely to be limited. To

maintain growth tempo, it would be imperative to diversify. Our company has

taken steps to enter cross country pipes core and section segments. These are

related and growing sectors and we expect good volumes and margins from the

same.

In view of continuous thrust of the government of India on housing, water and

infrastructure sectors, there is tremendous scope for growth in steel tubes and pipes

every year. With the easy availability of finance and tax incentives, it is expected

that housing sector will get a major boost. In view of the same, the long term

outlook of the company remains positive. All these measures will help inincreasing the sales and profitability in the current financial year.

Further at the same time, there is competition due to low technology resulting in;

number of players catering to regional markets. The segment also faces

competition from PVC pipes in the household usage segment.


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Table No. 1.1

Turnover of Jindal Industries Ltd.

Year Turnover

2008-09 829

2009-10 950

(In Crore )

Graph 1.1 Showing the Graphical Turnover In 2008-09 and

2009-10

829

950

760

780

800

820

840

860

880

900

920

940

960

2008-09 2009-10

Turnover

Turnover


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37.93

52.55

0

10

20

30

40

50

60

2008-09 2009-10

Profit after Tax

Profit after Tax

Year Profit after Tax

2008-09 37.93

2009-10 52.55


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Sales of the company

Year Sales

2005-06 360.5

2006-07 550.6

2007-08 708.1

2008-09 829.1

2009-10 949.7

(rs in crore)

Graphical representation of the sales

(Rs in crore)

0

100

200

300

400

500

600

700

800

900

1000

2005-06 2006-07 2007-08 2008-09 2009-10

sales

sales


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Research Methodology

OBJECTIVE OF THE STUDY

The main objectives of study are:

1. To find the liquidity position of the company.2. To find the effectiveness of working capital management.3. To analyze the credit policy of the company.4. To know the cause of changes in the firms working capital.

DATA COLLECTION

Data is collected by secondary method.


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LIMITATION OF THE STUDY

Time is considered as major constraint because it is based upon six weeksstudy only.

Working Capital analysis is based upon only monetary information and non-monetary factors are ignored.

The accuracy of the result is also limited to the reliability of methods ofinvestigation, measurement and analysis of data.

It does not considered changes in prices levels. Analysis is only a means and not ends in itself. The analyst has to make

interpretation and draw his own conclusion.


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Techniques Used For Analysis

1. Balance sheet

2. Profit & loss

3. Current ratio

4. Quick ratio

5. Cash management

6. Inventory management

7. Management of receivable

8. Management of payble

9. Cash management


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INTRODUCTION OF WORKING

CAPITAL

Working capital is a financial metric which represents operating liquidity available

to a business, organization or other entity.

Working capital is calculated as:

Working capital=Current assets-Current liability

One of the main advantage of looking at the working capital position is being able

to for see any financial difficulty that may arise. If current assets are less than

current liabilities and entity has a working capital deficiency, also called a workingcapital deficit.

There are two types of working capital:

1. Positive working capital= it means that the company is able to pay its shortterm liabilities.

2. Negative working capital= it means that the company is unable to meet istshort term liabilities with its current assets.

CURRENT ASSETS:

Those assets which can be converted into cash within a short period of time not

exceeding one year.

It includes:

Stock of raw material Work in progress Finished goods Cash balance Sundry debtors Bills receivable


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CURRENT LIABILITIES:

Those liabilities which have to pay within a short period of not exceeding one year.

It includes:

Trade creditors Accrual expenses Outstanding expenses Bills payable Short term loan


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CONCEPT OF WORKING CAPITAL

1. Gross working capital concept :

According to this concept, working capital is the total of all current assets of

a business.

Gross working capital =total current assets.

2. Net working capital concept:

According to this concept, working capital means net working capital which

is the excess of current assets over current liabilities.

Net working capital= current assets-current liabilities.


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Net working capital of Jindal Industries

(Rs. In crore)

Year Ending

31st March

Current

Assets

Current

liabilities

Net Working

Capital2005 7529.82 2249.62 5280.2

2006 7598.1 2587.67 50510.43

2007 7034.77 2269.57 4768.19

2008 12398 3565 8833

2009 17730 5797 11933

2010 13709.67 6892.24 6817

2011 18395.18 5150.18 13245Explanation:

Net working capital is the excess of current assets over current liabilities. An

enterprise should have the sufficient Net Working Capital in order to meet the

claim of its creditors and day to day business. Net working capital of JINDAL

INDUSTRIES LIMITED increases gradually. In 2005 Net working capital has

increased from 3256.6 to 5280.2. however in 2006& 2007 net working capital has

decreased due to short term investment purposed, still the company will be

considered to be in a good position. Then again, in 2009, it has increased to 11933

lakhs and in the year 2010 & 2011 it has increased to 13245.00 lakhs.


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WORKING CAPITAL MANAGEMENT

Working capital is that part of company capital which is used for purchasing raw

material and involve in sundry debtors. We all know that current assets are very

important for proper working of fixed assets. Suppose, if we have invested our

money to purchased machines of company and if we do not have any more money

to buy raw material, then our machinery will no use for any production without

raw material, then our machinery will no use for any production without raw

material, From this example, we can understand that working capital is very useful

for operation any business organization. we can also take one more liquid item of

current assets that is cash. If you have not cash in hand, then you cannot pay for

different expenses of company, and at that time, your many business works many

delay for not paying certain expenses. If we define working capital is the excess of

current assets over current liabilities.


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DETERMINANTS OF WORKING CAPITAL

A firm should have neither too much nor too nor little working capital. The

working capital requirement is determined by a large number of factors but, in

general, the following factors influence the working capital needs of an enterprise.

1. Nature of business:Working capital requirements of enterprises are largely influenced by the nature

of its businesses. For instance, public utilities such as railways, transport, water,

electricity etc. have every limited need for working capital because they have to

invest fairly large amount of fixed assets. Their working capital need is minimal

because they get immediate payment for their services and do not have to

maintain big inventories. On the other extreme are the trading and financialenterprises which have to invest fewer amounts in fixed assets and a large

amount in working capital. This is so because the nature of cash, inventories

and debtors. Working capital of most of the enterprise falls between these two

extreme, that is, between public and utilizes and trading concerns. JINDAL

INDUSTRIES LTD, is a manufacturing enterprise.

2. Growth and expansion:

As business enterprise grows, it is logical to expect that a large number ofworking capital will be required. Growing Industries require more working

capital than those that are static. JINDAL INDUSTRIES LTD. is a growing

continuously, hence it requires increasing working capital is a continuing

necessary for the company.

3. Production policy:The demand for certain products ( such as woolen clothes) is seasonal. Two

types of production policies may be adopted for such products. Firstly, the

goods may be produced in the months of demand and secondly, the goods man

be produced throughout the year. If the second alternative id adopted, the stock

of finished goods will accumulate up to the season of demand which requires an

increasing amount of working capital that remains tied up in stock of finished

goods for some months.


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4. Production cycle:

The production cycle means the time span between the purchase of raw material

and its conversion into finished goods. The longer the production cycle, the

larger will be the need for working capital because the funds will be tied up fora longer period in work in process. If the production cycle is small, the need for

working capital will also be small. The production cycle for JINDAL

INDUSTRIES LTD. is of 50 days which is neither too long nor too short.

Hence it requires average working capital.

5. Credit policy relating to sales:

Is a firm liberal credit policy in respect of sales, the amount tied up in debtors

will also be higher? Obviously higher book debts man more working capital.

On the other hand, if the firm follows tight credit policy, the magnitude of

working capital will decrease.

6. Credit policy relating to purchase:

If a firm purchases more goods on credit, the requirement for working capital

will be less. In other words, the liberal credit terms are available from the

supplier of goods, the requirement for working capital will be reduced and vice

versa.

7. Price level changes:Changes in price level affect the working capital requirements. If the price level

is rising, more funds will be required to maintain the existing level of

production.

8. Availability of credits form banks:

If a firm can get easy bank credit facility in case of need, it will operate with

less working capital. On the other hand, if such facility is not available, it will

have to keep large amount of working capital.

9. Efficiency of management:Efficiency of management is also a significant factor to determine the level of

working capital. Management can reduce the need for working capital by the


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efficient utilization of resources. It can accelerate the pace of cash cycle and

thereby use the same amount of working capital again and again very quickly.


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ADVANTAGES OF WORKING CAPITAL

1. Availability of raw material regularly:

Adequacy working capital makes it possible for a firm to pay the supplier of

raw material on time. As a result it will continue to receive regular suppliers of

raw materials and thus will be no disruption in production process.

2. Full utilization of fixed assets:

Adequacy of working capital makes it possible for a firm to utilize its fixed

assets fully and continuously. For example, if there is inadequate stock of raw

material, the machines will not be utilized in full and their productivity will bereduced.

3. Cash discount:

A firm having the adequacy working capital can avail the cash discount by

purchasing the goods for cash or by making the payment before the due date.

4. Increase in credit rating

Paying its short term obligations in time leads to a strong credit rating whichenables the firm to purchase goods on credit on favorable terms and to maintain

its line of credit with banks etc. It facilities the taking of loan in case of need.

5. Advantage of favorable business opportunities:

Whenever there are chances of increase in prices of raw material. The firm can

purchase suffient quantity if it has adequate working capital. Similarly, if a firm

receives a bulk order for the supply of goods, it can take advantage of such

opportunity if it has sufficient working capital.

6. distribution of dividend:

Occasionally, in spite of sufficient profits, management faces difficulty in

paying a proper rate of dividend to the shareholder because of paucity of cash.

7. Facility of obtaining bank loans:


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Banks do not hesitate to advance even the unsecured loan to a firm which has

the sufficient working capital. This is because the excess of current assets over

current liabilities itself is a good security.

8.

Increase in efficiency of management

Adequacy of working capital has a favorable psychological effect on the

managers. This is because no obstacles arise in the day-to-day business

operations. Creditors, wages and all other expenses are paid on time and hence

it keeps the morale of managers high.

9. Meeting unseen contingencies:Adequacy of working capital enables a company to meet the unseen

contingencies successfully.


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DISADVANTAGE OF INADEQUATE

1.A concern, which has inadequate working capital, cannot pay its short termliabilities in time. Thus, it will loose its reputation & shall not be able to get

good credit facilities.

2.It cannot buy its requirements in bulk & cannot avail of discounts, etc.3.It becomes difficult for the firm to exploit favorable market conditions &

undertake profitable projects due to lack of working capital.

4.The firms cannot pay day-to-day expenses of its operations & it createsinefficiencies, increases costs & reduces the profits of the business.

5.It becomes impossible to utilize the fixed assets due to non-availability ofliquid funds.

6.The rate of return on investments also falls with the shortage of workingcapital.


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Balance sheet

AUDITED BALANCE SHEET AS AT 31ST MARCH, 2010

PARTICULARS 31.03.2010 31.3.2009

SOURCES OF FUNDS

SHARE HOULDER FUNDS

Share capital 4.5 1.5

Reserve & Surplus 70.14 46.71

74.64 48.21

LOAN FUNDS

Secured Loans 77.23 28.17

Unsecured Loans 20.7 12.45

97.93 40.62

DEFERRED TAX LIABLITY 3.48 3.25

176.05 92.08

APPLICATION OF FUNDS

FIXED ASSETS

Gross Block 49.07 34.4

less: Depreciation 13.28 11.19

35.78 23.21

add: silver coin 0.0002 0.0002add: CWIP including Capital Advance 7.82 0.69

Net Block 43.6 23.9

CURRENT ASSETS, LOANS & ADVANCES

Inventories 101.58 66.7

Sundry Debtors 46.95 49.52

Cash and Bank Balance 28.65 13.79

Other current assets 0.004 0.004

Loans and Advances 6.77 7.08

183.95 137.1

less: Current Liabilities & Provisions

Liabilities 14.03 9.83

Provisions 37.47 59.09

NET CURRENT ASSETS 132.45 68.18

TOTAL 176.05 92.08


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Profit & loss of Jindal Industries for the year Ended 31st

March ,2010

AUDITED PROFIT & LOSS FOR THE YEAR ENDED

31ST MARCH, 2010PARTICULARS 31.3.2010 31.3.2009

REVENUE

Rs.In

Crore

Rs. In

Crore

Sales and servicing charges 949.66 829.1

less: excise Duty 71.74 88.21

877.92 740.89

Other Income 3.05 2.41

Total Revenue 880.97 743.3

EXPENDITURE

Material, Manufacturing & Operating Expenses 740.22 626.99Employees Remuneration & Benefits 10.46 9

Interest & Financial Charges 5.97 7.24

Selling, Administration & Other Charges 41.6 39.84

Depreciation 2.09 1.58

PROFIT BEFORE TAXATION 80.63 58.65

Less: provision for Current Taxation 27.85 20.5

Deferred Tax Liability 0.23 0.06

Fringe benefit tax 0.15

Wealth Tax 0.001PROFIT AFTER TAXATION 52.55 37.94

Balance brought forward from last year 3.81 22.99

Income relating to earlier year 0.12 -0.51

add Income tax relating to earlier year 0.04

56.48 60.46

TRANSFER TO:

Proposed Dividend on Equity Shares 22.5 45

Corporate Tax on Proposed Dividend 3.74 7.65

General reserve 6 4

Balance Carried to Balance Sheet 24.24 3.81

56.48 60.46

Basic\Diluted Earnings per share in Rs. 1170.57 832.56

Face value per share in Rs. 100 100


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ratio shows that the firm is liquid & due. On the other hand, a relatively low

current ratio indicated that the liquidity position of the company is not so good &

may not be able pay its current liabilities in time without facing difficulty. Convent

ally a ratio of 2:1 is from this only we cannot say that the liquidity position is no

sound.


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Quick ratio

Quick ratio= Quick assets/Current liabilities

And Quick Assets= Current assets-Inventories

Interpretation

Quick ratio shows the relationship between quick assets of the firm & its current

liabilities. Quick assets are those which are easily converted into cash. It includes

cash & bank balance, debtors & receivables, marketable securities & excludesprepaid expenses & inventories. Since inventories are both readily converted into

cash hence they are not including in quick assets? In the year 2006-07 the ratio

1.85:1 shows the company can easily fulfill its obligation as & where they become

due. In the year 2009-10 the ratio is 1.59:1 which is greater than 2008-09 quick

ratios.

Year Ending

Quick

assets

Current

Liabilities

Quick

ratio

2004 3647.96 2249.62 1.62:1

2005 3829.11 2587.67 1.48:1

2006 2465.05 259.57 1.09:1

2007 6630 3565 1.85:1

2008 8584 5797 1.55:12009 7039.56 6892.24 1.02:1

2010 8237 5150.18 1.59:1


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CASH MANAGEMENT

Cash management is the important current asset for the aerations of the business.

Cash is the basic input needed to keep the business running on a continuous basis it

is also the ultimate output expected to be realized by selling the service or product

manufactured by the firm. The firm should keep sufficient cash, neither more nor

less. Cash shortage will disrupt the firms operations while excessive cash will

simply remain idle, without contributing anything contributing anything towards

the firms profitability. Thus a major function of the financial manager is to

manager is to maintain a sound cash position.

Cash management is concerned with management of:

1. Cash flow in and out of the firm.2. Cash flows within the firm.3. Cash management held by the firm at a point of time by financing deficit or

inverting surplus cash.

4. Sales generate cash, which has to be disbursed out.

MOTIVE FOR HOLDING CASH:

1. Transaction motive: the transaction motive refers to the holding of ash tomeet anticipated obligations whose timing is not perfectly synchronized with

cash receipts. If the receipts of cash and its disbursements could exactly

coincide in the normal course of operations, a firm would course ofoperations; a firm would not need cash receipts. If the receipts of cash and

its disbursements could exactly coincide I the normal course of operations, a

firm would course of operations; a firm would not need cash for transaction

motive.


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2. Precautionary motive: precautionary motive of holding cash implies theneed to hold cash to meet unpredictable obligations and the cash balance

held in reserve for such random and unforeseen cash flows are called as

precautionary balances.

3. Speculative motive: it refers to the desire of a firm to take advantage ofopportunities which themselves at unexpected movements and which are

typically outside the normal course of business.

4. Compensation motive: yet another motive to hold cash balances is tocompensate banks for providing certain services and loans. Banks provide a

variety of services to business firms, such as clearances of cheques, supply

of credit informations transfer of funds etc.


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MANAGEMENT OF INVENTORY

Inventories are the product for sale by the company or semi finished of semi

finished goods or raw material. Inventory of finished goods which are ready for

sale is required to maintain smooth marketing operation. The inventory of raw

material and work in progress is required in order maintain an unobstructed flow of

material in the production line. These inventories serve as a link between the

production and consumption line. These inventories serve as a link between the

production and consumption of goods.

Basically there are three reasons for which inventories are stocked and they are:

1. Transaction motive: this motive lays emphasis on maintain of inventoriesin order to maintain a smooth and unobstructed supply of materials for the

sales and productions operations.

2. Precautionary motive: this motive emphasizes on the stocking goods inorder to guard against the uncertainties of future unpredictable changes in

the forces for demand, supply and other forces.

3. Speculative motive: this motive influences the decisions regarding theincrease and decrease in the level of inventory in order to take advantage of

price fluctuations.


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MANAGEMENT OF PAYABLES

A substantial part of purchase of goods and services and services in business are

on credit terms rather than against cash payment. While the supplier of goods and

services tends to perceive credit as a layer for enhancing sales or as a form of non-

price instrument of completion the buyer tends to look upon it as a loaning og

goods of inventory. The supplier credit is referred to as accounts payables, trade

credit, trade bill, trade acceptance, and commercial drafts of bills payable

depending on the nature of the credit.

Types of trade credit:

Open accounts Promissory notes Bills payable


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MANAGEMENT OF RECEIVABLES

Trade credit, the tool as a bridge for movement of goods through production stage

to customers is a force in the present day business and an essential device. Trade

credit creates receivables which refer to the amount, which a firm is expected to

collective in near future. It represents futurity. The cash payments for the good or

services received by the buyer will be made in future.

The goals of management of receivable are:

To obtain optimum value of sales. To control the cost of credit and keep it to the minimum level. To maintain investments in debtors at optimum level.


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CONCULSION

Jindal Industries ltd. is growing enterprise. Its sales are increasing gradually

depending upon its capital requirements in also increased.

The management of working capital is JIL is quite satisfactory which is shown by

different ratios and other calculations. Ratio like Net working Capital, Current

Ratio, and Quick Ratio shows that the liquidity positions of the company is good,

which mean companys quick assets are almost to its current liabilities. Thus the

risk of getting insolvent is almost nil.

Working capital as the percentage of total net assets is showing a downward trend

also. There is no direct and proportional relationship between expansion of activity

level and working capital.

The companys trade credit policy is good which is shown by ratios like debtors

conversion and creditors conversion period.

From these it is concluded that company is getting trade credit for a longer period.

It reflects the efficiency of credit collection department they has made good credit

collection efforts. These efforts are improving gradually.


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str on working capital management

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