A

PROJECT REPORT

ON

STUDY OF WORKING CAPITAL MANAGEMENT

AT

KAJ ENGINEERING WORK Pvt. Ltd

SUBMITTED TO

“UNIVERSITY OF PUNE”

IN THE PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD

OF THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION

(MBA)

SUBMITTED BY

MISS.AMRUTA DILEEP KHARADE

MBA(FINANCE)

UNDER THE GUIDANCE OF

PROF. SHAILESH RAJHANS

THROUGH

(RAJARSHI SHAHU SCHOOL OF BUSINESS STUDIES)

JSPM’S

NARHE TECHNICAL CAMPUS,NARHE-PUNE.

BATCH-2016-18

1
 DECLARATION

I, the undersigned, Mis.Amruta Dileep Kharade, hereby declare that the project report
“STUDY OF WORKING CAPITAL MANAGEMENT” at KAJ ENGINEERING
WORK Pvt. Ltd.” Written and submitted by me to University of Pune, in partial
fulfillment of the requirements for the award of degree of “Master of Business
Administration” under the guidance of Prof. SHAILESH RAJHANS is my original
work and the conclusions drawn therein are based on the material collected and
studied by myself

Place:

Amruta Dileep Kharade

Date:

2
 ACKNOWLEDGEMENT

I take this opportunity to thank KAJ ENGINEERING WORK Pvt. Ltd for allowing
me to do my on job industrial training project in their esteemed organization. It has
been a great learning experience throughout the duration of this project of two months
at KAJ ENGINEERING WORK Pvt. Ltd. I would like to mention the support and
contribution of several officials from finance Department at KAJ ENGINEERING
WORK Pvt. Ltd (finance manager) who gave me this wonderful opportunity to do the
summer internship at. I would like to mention the support, suggestion, co-operation
and contribution of several officials from KAJ ENGINEERING WORK Pvt. Ltd. I
also offer my heart full thanks to honorable (Director) of RAJARSHI SHAHU
SCHOOL OF BUSINESS STUDIES,NARHE TECHNICAL CAMPUS,
NARHE ,PUNE Prof.Shailesh Rajhans my project guide Prof. Shailesh Rajhans
(Head of department) for all their help, support, suggestion, co-operation and
encouragement which helped in providing right track and direction for
completing my project report.

AMRUTA DILEEP KHARADE

MBA (Finance)

2016-2017

3
 TABLE OF CONTENTS

SR.NO. PARTICULARS PAGE NO.

EXECUTIVE SUMMARY 6

1 INTRODUCTION :- 9
1.1 THEORETICAL CONCEPT 11
1.2 OBJECTIVES OF THE STUDY 19
1.3 SCOPE OF THE STUDY 19
2 COMPANY PROFILE 20

3 RESEARCH METHODOLOGY 30

4 DATA ANALYSIS & INTERPRETATION 33

5 FINDINGS , SUGGESTIONS & CONCLUSION 48

BIBLOGRAPHY 51

ANNEXURE 53

4
 List of Table

Figure No. Title of the Table Page No.

1.

Net working 42

2.

Current ratios 43

3.

Stock turnover ratio 45

4.

Working capital turnover 47

ratio

5
6
EXECUTIVE SUMMARY:

The main objective of the project was to study the working capital management of
KAJ ENGINEERING WORK Pvt. Ltd and comment of the financial position I have done
detailed study. The study covers the years 2010 and 2013. This study highlights the
concept of working capital, concept of working capital cycle, working capital
strategies, components of working capital, factor affecting working capital and
analysis of financial position with the help of ratio analysis. The working capital
management refers to management of the working capital, or, to be more precise the
management of current assets. A firm’s working capital consist of its investments in
current assets which includes short term assets such as cash and bank balance,
inventories, receivables and marketable securities. So the working capital
management refers to the management of the level of all these individual current
assets.

The need for working capital management arises from two considerations.:-

1) Existence of working capital is imperative in firm. The fixed assets that usually
require a large chunk of total funds can be used at an optimum level of only if
supported by sufficient working capital
2) The working capital involves investments of funds of the firm. If the working
capital level is not property maintained and managed, then it may results in
unnecessary blocking of scares resources of the firm.
The sufficient working capital, on other hand, put different hindrances
in smooth working of the firm. Therefore the working capital management needs
attention of financial manager.

Working capital is capital required to manage day-to-day operation of a

business. Management of adequate working capital is essential as it has directly
impact on profitability and liquidity. An attempt has been made in this comparative
study to study the size and its components and liquidity management in wiring

7
harness-manufacturing companies. This study also attempts to study the liquidity
position of the KAJ ENGINEERING WORK Pvt. Ltd including the study of the working
capital concept.

In this project study involves the working capital cycle including how the
company manage the operating cycle with controlling the inventories and maintaining
the receivable and creditors days. The study is done mainly on the basis of the ratio
analysis and for that different ratios are used namely-current ratio, acid test ratio and
absolute liquid ratio, current assets to total assets, debtor’s turnover ratio and working
capital turnover ratio. Which shows the different factors, which are going to help the
financial position of the company.

8
9
INTRODUCTION:-

Finance is considered to be the life blood of each & every organization whether it is
large or small & the firm should make a point to procure its funds in the most
favorable & convenient terms .Further Then funds should be properly allocated and
utilized in an effective manner .

The finance performance, in short, can be described as the firm’s decision to acquire
Assets & also to require the commitment or recommitment of the funds to new or
outgoing uses. It helps in monitoring the deployment of the funds in fixed assets &
current assets.

It also helps in estimating the short term & long term requirement of funds to assets
the financial position of the company .Different parties are interested in financial
statements for different reasons ; the Management is keen on finding of the
performance of the business & for the Purpose of evaluating policies & plans for
future course of action .

The problem of managing working capital has a separate entity, as against

different decision making issues concerning current assets individually. Working
capital has to be regarded as one of the conditioning factors in the long-run operations
of a firm which is often treated as an issue of short run analysis & decision making.

Working capital management is concerned with the problems that arise in

Attempting to manage current assets & current liabilities & the inter-relationship that
Exist between the two of them .The goal of working capital management is to
manage the firm’s current liabilities in such a way that a satisfactory level of
working capital is maintained .

1
0
THEORETICAL CONCEPT:-

INTRODUCTION:

Management is an art of anticipating and preparing for risks, uncertainties and

overcoming obstacles. An essential precondition for sound and consistent assets
management is establishing the sound and consistent assets management policies
covering fixed as well as current assets. In modern financial management, efficient
allocation of funds has a great scope, in finance and profit planning, for the most
effective utilization of enterprise resources, the fixed and current assets have to be
combined in optimum proportions.

Working capital in simple terms means the amount of funds that a company requires
for financing its day-to-day operations. Finance manager should develop sound
techniques of managing current assets.

WHAT IS WORKING CAPITAL?

Working capital refers to the investment by the company in short terms assets such as
cash, marketable securities. Net current assets or networking capital refers to the
current assets less current liabilities .Symbolically, it means,

Net Current Assets = Current Assets - Current Liabilities.

DEFINITIONS OF WORKING CAPITAL:

The following are the most important definitions of Working capital:

1) Working capital is the difference between the inflow and outflow of funds. In other
. word it is the net cash inflow.

2)Working capital represents the total of all current assets. In other words it is the
Gross working capital , it is also known as Circulating capital or Current capital for
current assets are rotating in their nature.

1
1
 3)Working capital is defined as The excess of current assets over current liabilities
and provisions . In other words it is the Net Current Assets or Net Working Capital

Working Capital Cycle:-

The time between purchase of inventory items (raw material or

merchandise) and their conversion into cash is known as operating cycle or working
capital cycle. The longer the period of this conversion the longer is the operating
cycle. A standard operating cycle may be for any time period but does not generally
exceed a financial year. Obviously, the shorter the operating cycle the larger will be
the turnover of the fund invested purposes. The channels of the investment are called
RAW
current assets. CASH
MATERIALS

WORK

DEBTORS IN

PROGRESS

FINISHED
SALES
GOODS

1
2
 The working capital cycle begins with the purchase of raw material and
ends with receipt of sale proceeds of the finished goods in brief it covers the
following five steps-

1) Purchase of raw material and stores.

2) Conversion into stock of finished goods through work in progress.
3) Conversion of finished stock into sales.
4) Conversion of sales into debtors.
5) Realization of cash.

Importance of Working Capital:-

Working capital is the lifeblood and nerve centre of a business. Just as

circulation of blood is essential for maintaining human life working capital is
essential to maintain the smooth running for a.The advantages are as follows:-
business

1. Solvency of Business :
Adequate working capital helps in maintaining solvency of business by
enabling uninterrupted flow of production.

2. Goodwill :
Sufficient working capital enables a business concern to make prompt
payments, thereby creating a maintaining goodwill.

3. Easy Loans :
A concern having adequate working capital, high solvency and good credit
standing can arrange loans from banks and other on easy and favorable terms.

4. Cash Discounts :

1
3
 Adequate working capital also enables a concern to avail cash discounts on
purchase, thus reducing production costs.

5. Regular Supply of Raw Material :

Sufficient working capital ensures this and hence continuous production.

6. Regular Payments of Salary and Wages :

A company, which has ample working capital, can make regular payments
of salaries, wages and other day-to-day commitments. This raises the morale of its
employees, increases their efficiency, reduces wastages and minimizes cost while
simultaneously enhancing production and profits.

7. Exploitation of Favorable Market Conditions :

Only concerns with adequate working capital can exploit favorable
market conditions such as purchasing requirements in bulk when the prices are
lower and thereby hedging inventories against higher procurement cost.

8. Ability to Face Crisis :

Adequate working capital enables a concern to face business crisis in
emergencies, such as depression, because during such periods there is generally an
increased pressure on working capital.

WORKING CAPITAL MANAGEMENT

INTRODUCTION:

Working Capital is the key difference between the long term financial management
and short term financial management in terms of the timing of cash. Long term
finance involves the cash flow over the extended period of time i.e 5 to 15 years,
while short term financial decisions involve cash flow within a year or within
operating cycle. Working capital management is a short term financial management.
Working capital management is concerned with the problems that arise in
attempting to manage the current assets, the current liabilities & the inter relationship
that exists between them. The current assets refer to those assets which can be easily
converted into cash in ordinary course of business, without disrupting the operations
of the firm.

1
4
Composition of working capital

 Major Current Assets

1) Cash
2) Accounts Receivables
3) Inventory
4) Marketable Securities

 Major Current Liabilities

1) Bank Overdraft
2) Outstanding Expenses
3) Accounts Payable
4) Bills Payable

The Goal of Capital Management is to manage the firm s current assets & liabilities,
so that the satisfactory level of working capital is maintained. If the firm can not
maintain the satisfactory level of working capital, it is likely to become insolvent &
may be forced into bankruptcy. To maintain the margin of safety current asset should
be large enough to cover its current liabilities. Main theme of the theory of working
capital management is interaction between the current assets & current liabilities.

Concepts of working capital

The concepts of working capital can be broadly divided into two categories:

1. Gross working capital and

2. Net working capital

 Gross working capital: this concept implies the total of all current assets of a
business firm. A current asset is that asset which can be converted into cash
within an accounting year or an operating cycle. The current assets include
cash and bank balances, debtors, bills receivables, inventories, prepaid
expenses and short term expenses.

 Net working capital: this concept of working capital is the difference between
the current assets and current liabilities. While current assets have been
defined above, current liabilities can be explained as those liabilities which
are expected to mature for payment within an accounting year and include
creditors, bills payable, outstanding expenses, bank overdraft and other short
term loans.

1
5
 The Net working capital can be positive or negative. If current assets exceed
current liabilities, the difference is positive net working capital and when current
liabilities exceed current assets, the difference is negative working capital.

Components of Working Capital

Current Asset:

Comprise several items like:-

 Cash to meet expenses as and when they occur.

 Accounts Receivable or Sundry Debtors.
 Inventory of:-
 Raw Material, stores, supplies and spares.
 Work in Process
 Finish Goods
 Advance payment towards expenses or purchases and other short-term advances,
which are recoverable.
 Temporary investment of surplus fund that could be converted into cash whenever
needed.

Current Liabilities:

Comprise several items like:-

 Goods purchases on credit

 Expenses incurred on the course of the business of the organization (e.g.
wages, salaries, rent, electricity bill, interest etc.), which are not yet paid for.
 Temporary or short-term borrowings from banks, financial institutions or other
parties.
 Advances received from parties against goods to be sold or delivered, or as
short-term deposits. Other current liabilities such as tax and dividend payable.

1
6
FACTORS AFFECTNG WORKING CAPITAL

The working capital needs of a firm are affected by numerous factors. The
important factors are as follows:

1) Nature of business: in some business organizations, the sales are mostly on

cash basis and the operating cycle is very short in these concerns, the working
capital requirement is comparatively less. Mostly service giving companies
come in this category. In manufacturing concerns, usually the operating cycle
is very long and a firm has to give credit to customers for improving sales.

2) Production policy: working capital requirement also fluctuates according to

the production policy. Some products have a seasonal demand, but in order to
eliminate the fluctuations in working capital, the manufacturer plans the
production in a steady flow throughout the Year

3) Market conditions : due to the competition in the market , the demands for
working capital fluctuate. In a competitive environment, a business firm has to
give liberal credit to customers. On the other hand, when a firm is on he sellers
market, it can manage with a smaller amount of working capital because sales
can be made on the cash basis and there will be no need to maintain large
inventory of finished goods because customers can be serviced with delay.

4) Seasonal fluctuations: a firm which is producing products with seasonal

demands requires more working capital during peak seasons while the demand
for working capital will go down during slack seasons.

5) Growth and expansion activities: the working capital needs of the firm
increases as it grows in terms of sales or fixed assets. A growing firm may
needs to invest finds in fixed assets in order to sustain its growth production
and sales.

6) Operating efficiency: the operating efficiency of the firm relates to the

optimum utilization of resources at minimum cost. The firm will be effectively
contributing to its working capital if it is efficient in operating costs. The
working capital is better utilized and cash cycle is reduced which decreases
working capital needs.

1
7
7) Credit policy: The working capital requirement of a firm depends to a great
extent on the credit policy followed by a firm for its debtors. A liberal policy
followed by a firm will result in huge funds blocked in debtors which will
enhance the need of working capital.

1
8
OBJECTIVES OF THE STUDY:-

The study of working capital management has been taken up with the following
objectives:

 To know the concept of working capital management.

 To understand the factors determining the working capital

 To understand the important and significance of working capital

 To calculate various ratio relating to working capital.

 To study the components of the working capital.

SCOPE OF THE STUDY:-

The present study covers the study of working capital of company for the period of
5years i.e. from 2007-2010.

1
9
Company profile:

2
0
 Kaj Engineering Work

Kaj Engineering Work is a leading manufacturer of a wide range of

durable and high performance equipments that find their applications in different
industries like sugar, chemical & pharmaceutical industries.

Kaj Engineering Work, were incorporated in the year 2000. Since then, they are
offering diverse steel products fabrication services to various industries.

They have specialization for the fabrication of storage tanks, heat exchangers,
pressure vessels and other process equipments which are used in sugar, chemical and
pharmaceutical industries.
They have shaped our success through our strong industry skills and professional
services to clients. They have established ourselves as a leading manufacturer and
supplier to a vast client base in private and public sector.

Our fabrication services includes various production stages such as designing,

engineering, installation. In each stage of there service, they strive to exceed the
client’s expectations.

Following ethical business practices, we furnish superior quality products and

efficient services to the clients

2
1
.

The main customer of Kaj Engineering Work:-

 THERMAX
Manufacturing & Assembly of Silent DG set for various ratings.

2
2
Company Product:-

KANOPY 500 KVA

2
3
1 NAME OF FIRM Kaj Engineering Work

GATENO:78,JYOTIVANAGER,TALAWADE,
2 ADDRESS
PUNE-14

3 EMAIL kajengg@yahoo.co.in

SILENT DG SET AND SHEET METAL

4 PRODUCT
PRODUCTS.
18000 SQ. FEET BUILT-UP
5 AREA 35094 SQ. FEET OPEN
6000 SQ. FEET OFFICE
100 HP 3 PHASE
6 ELECTRICAL CAPACITY
& 30 kVA DG

7 CAPITAL APPROX. 5 CRORE

8 VAT NO. 27730722245V

9 CST NO. 27730722245C

EXCISE REGRISTRATION
10 AANCS2037BXM001
NO.

TALAWADE
11 RANGE

12 DIVISION PUNE V

Our Vision:

2
4
To be a world class corporate and to work constantly for furthering the interest
of its stakeholders.

Our Motto:
* Reduction in customer complaints.
* Improvement in total quality management system.
* Continuous improvements

Our Mission:

1. Customers:
To consistently work for customer satisfaction and to create lasting
relationships by providing superior value for their money.

2. Employees:
To create an organization that incubates and promotes innovation and
excellence and to work towards improving the quality of life of its employees.

3. Suppliers:
To establish the lasting relationship so as to produce the quality and
competitive products for the ultimate benefit of customers and its end users.

4. Community and Nation:

To proactively participate in reshaping the country’s economic growth, to
become internationally competitive, and have a positive approach towards
environmental protection.

QUALITY POLICY

2
5
Kaj Engineering Work. Pledges itself to maximize Customer Satisfaction by continual
improvement through ongoing process design &Development, Manufacture of cost
effective & quality products of international Standards.
Kaj Engineering Work strives for continued Improvement in Quality, new
product development, efficiency and productivity within plant. It has a Strong
commitment to improve quality of life of its people through improved work Practices
and social welfare schemes.
This policy shall be reviewed periodically and Revised if needed.

Kaj Engineering Work

2
6
ORGANISATION STRUCTURE

GENERAL MANAGER
AMOL JAMBUKAR

PRODUCTION MANAGER
MANBLICK

FINANCE (HEAD) EXECUTIVE (D&D) EXECUTIVE

AMOL JAMBUKER JAGDALE PROMOD DUS

QUALITY INCHARGE SUPERVISOR STORE INCHARGE

PANDE SAROJ KUMAR JAYSHREE

SHEARING & BENDING FABRICATION ASSEMBLY

SUNIL PAWAR & SOMNATH YOGESH

SEMI SKILL SEMI SKILL SEMI SKILL

WORKER WORKER WORKER

LIST OF MANPOWER DEPARTMENT WISE:

2
7
 Name of Functional Skilled Un-skilled
Supervisor Total
Department Head workers workers
D&D 0 2 0 2

Procurement 6 1 0 0 1

1 1 1 3
Store
3 12 25 40
Production
5
1 3 0 3
QA

HR &
Admin
3
Accounts

TOTAL 14 49

LIST OF MACHINERY & EQUIPMENTS:

2
8
 NAME OF
SR.NO. SIZES QTY MAKE
MACHINE
1 Hydraulic Shearing 3125 x 8 mm 1 No. SYNDICATE
125 TON
2 Press Brake 1 No. SYNDICATE
2500 x 6 mm
2500 x1250 x
3 TURRET PUNCH-255 1 No. AMADA
6mm
4 Gas Cutting 1 No.
5 Air Compressor 10 kgs 2 No.
6 Co2 Welding Machine 350 Amp 8 Nos.
7 Arc Welding 450 Amp 6 No.
Radial Drilling 1 No
8 Magnet Drilling Max. 35 mm 1 No
Jig Saw Max. Saw 1 No
9 Hand Grinder 4” 5 Nos.
5” 2 Nos.
10 Hand Sander
7” 2 Nos.
11 Hand Drilling 13 mm 3 Nos.
Powder Coating Details
A) OVEN
3.8 x 1.7 x 1.7 Mtr 1
12 B) BOOTH 5.5 x 2.5 x 2.5 Mtr 1
C) SPRAY 1
MACHINE 2
(W/P)
D) SEVEN TANK
13 Profile Cutting UP TO 20 MM 1 No
14 Hand Shearing 1 No
15 Overhead crane 2 (5ton)
16 Xerox Machine 1No
17 Scanner 1No
18 PC 7 Nos

2
9
3
0
DEFINITION OF RESEARCH

The word research is composed of two syllables, re and search.re is a prefix meaning
again, anew or over again search is a verb meaning to examine closely and carefully,
to test and try, or to search.

Together they form a noun describing a careful, systematic, patient study and
investigation in some field of knowledge, undertaken to establish facts or principles.

Research is a structured enquiry that utilizes acceptable scientific methodology to

solve problems and create new knowledge that is generally applicable. Scientific
methods consist of systematic observation, classification and interpretation of data.

The present study is to observed nature and therefore relies heavily on primary
and secondary data. The analysis of the study has done through graph and interpreted.
The data has been represented in form of tables and graphs.

Research is the detection of the problem, in order to obtain the solution through
human intelligence and in a systematic manner. It may not fully obtain the solution,
but try to minimize the total uncertainty in the business.
It uses the most reliable data available in the organization.

3
1
 DATA COLLECTION

Primary Data: -

Primary data related to the project was collected from the discussion and interaction
with the senior employees and executives in the organization from Accounts and
Finance department.

Secondary Data: -

Secondary data was collected from the documents, which were in printed forms like
annual reports, pamphlets, reference books based on Financial Management and
through websites.

Steps involved in Research:-

 Collection of data regarding the working of the company as well as its

performance.
 The collected data has to be compared with past data and forecasted data.
 With the help of the compared data has to be revised.

LIMITION OF THE STUDY:-

 The study is limited to Kaj Engineering Work pvt.ltd.

 The summer project period (i.e. 60 days) was not sufficient to study all the
aspects.

 The study is limited to working capital management.

3
2
3
3
 ANALYSIS AND INTERPRETATION OF DATA

Calculation of working capital from 2010 to 2013

Particular 2010-11 2011-12 2012-13

Current assets

Other Current Asset 4,18,40,314.0 5,75,23,832.45 6,92,14,859.58

Cash and Bank 1,67,78,069.4 2,77,98,560.00 2,59,04,072.18

Debtors 1,30,78,804.4 1,02,05,285.00 1,18,05,783.93

Short term Investment 1,44,64,620.3 57,03,582.44 1,06,51,022.42

Total Current Assets (A) 8,61,61,808.1 10,12,31,259.89 11,75,75738.11

Current Liabilities

Creditors 3,60,54,079.2 5,34,61,856.31 5,15,84,520.00

Short Term Loan

Total Current Liabilities 3,60,54,079.2 5,34,61,856.31 5,15,84,520.00

(B)

Working Capital (A-B) 5,01,07,728.9 4,77,69,403.58 6,59,91,218.11

Source: Secondary data

3
4
NET WORKING CAPITAL:

Working capital is a financial metric which represents operating

liquidity available to a business, organization or other entity, including
governmental entity. Along with fixed assets such as plant and equipment,
working capital is considered a part of operating capital.

YEAR WORKING CAPITAL

2010-11 5,01,07,728.98

2011-12 4,77,69,403.58
2012-13 6,59,91,218.11

INTEPRETATION:-

In the year 2011-12 there was decrease in working capital as compared to year 2010-
11 and in the year 2012-12 it increases again which is good sign. In 2012-13 working
capital is increasing shows good sign of growth.

3
5
 STATEMENT SHOWING CHANGES IN WORKING CAPITAL

FOR THE YEAR 2009-10 & 2010-11:

(Amount in Rs.)

Particular 2009-10 2010-11 Increase Decrease

Current assets

Other Current 2,62,28,180.7 4,18,40,314.0 1,56,12,133.30

Asset

Cash and Bank 2,08,69,967.6 1,67,78,069.4 40,91,898.18

Debtors 23803987.0 13078804.4 1,07,25,082.60

Short term 2,27,98,110.1 1,44,64,620.3 83,33,489.80

Investment

Total Current 9,37,00,245.4 8,61,61,808.1

Assets (A)

Current
Liabilities

Creditors 3,78,27,308.6 3,60,54,079.2 17,73,229.40

Short Term Loan

Total Current 3,78,27,308.6 3,60,54,079.2 17,73,229.40

Liabilities (B)

Working 5,58,72,936.8 5,01,07,728.9

Capital (A-B)

Increase S/ 57,65,207.88 57,65,207.88

Decrease in
Working Capital

Total 5,58,72,936.8 5,58,72,936.80 2,31,50,570.58 2,31,50,570.58

Source: Secondary data

3
6
INTEPRETATION:-

The net working capital in the financial year 2009-10 is Rs. 5,58,72,936.80 and
financial year of 2010-11 is Rs. 5,01,07,728.9. The working capital is decreasing by
Rs. 57,65,207.88

The Table shows the decrease in working capital in the financial year 2009-10 &
2010-11 because current year turnover is decreasing. Cash at bank also decreased.
Closing stock increased. As compared to other the liabilities are not decreasing that
much that is why working capital is decreasing. This is not good for the liquidity/
solvency position of the organization.

3
7
 STATEMENT SHOWING CHANGES IN WORKING CAPITAL FOR THE
YEAR 2010-11 & 2011-12:

(Amount in Rs.)

Particular 2010-11 2011-12 Increase Decrease

Current assets

Other Current 4,18,40,314.0 5,75,23,832.45 1,56,12,133.30

Asset

Cash and Bank 1,67,78,069.4 2,77,98,560.00 1,10,20,490.58

Debtors 1,30,78,804.4 1,02,05,285.00 28,73,519.40

Short term 144,64,620.3 57,03,582.44 87,61,037.92

Investment

Total Current 8,61,61,808.1 10,12,31,259.89

Assets (A)

Current
Liabilities

Creditors 3,60,54,079.2 5,34,61,856.31 1,74,07,777.11

Short Term Loan

Total Current 3,60,54,079.2 5,34,61,856.31

Liabilities

Working 5,01,07,728.9 4,77,69,403.58

Capital(A-B)

Increase / 23,38,325.40 23,38,325.40

Decrease in
Working Capital

Total 29,04,233.43 5,01,07,728.98 29,04,233.43 29,04,233.43

3
8
 Source: Secondary data

INTEPRETATION:-

The net working capital in the financial year 2010-11 is Rs. 5,01,07,728.98 And
financial year of 2011-12 is Rs. 4,77,69,403.58 so working capital is decrease by Rs.
23,38,325.40.

In the year 2011-12 the current asset has increased as the closing stock is increasing,
due to the decrease in sale.

Increase in closing stock which is showing sales at lower side which turn in to
decreasing in the working capital which may have slighter negative impact on firms
working.

3
9
 STATEMENT SHOWING CHANGES IN WORKING CAPITAL FOR THE
YEAR 2011-12& 2012-13:

(Amount in Rs.)

Particular 2011-12 2012-13 Increase Decrease

Current assets

Other Current 5,75,23,832.45 6,92,14,859.58 1,16,91,027.13

Asset

Cash and Bank 2,77,98,560.00 2,59,04,072.18 18,94,487.82

Debtors 1,02,05,285.00 1,18,05,783.93 16,00,498.93

Short term 57,03,582.44 1,06,51,022.42 49,47,439.98

Investment

Total Current 10,12,31,259.89 11,75,75,738.11

Assets (A)

Current
Liabilities

Creditors 5,34,61,856.31 5,15,84,520.00 18,77,336.31

Short Term
Loan

Total Current 5,34,61,856.31 5,15,84,520.00

Liabilities

Working 4,77,69,403.58 6,59,91,218.11

Capital(A-B)

Increase / 1,82,21,814.53 1,82,21,814.53

Decrease in
Working
Capital

Total 29,04,233.43 5,01,07,728.98 20,11,63,02.35 2,01,16,302.35

Source: Secondary data

4
0
INTEPRETATION:-

The net working capital in the financial year 2011-12 is Rs. 4,77,69,403.58 and
financial year of 2012-13 is Rs. 6,59,91,218. 11The working capital is increasing by
Rs. 1,82,21,814.53.

This is due to the increase in deposits and debtors for the company. The fund is
utilized for expansion of the company. This is representing a better sign of efficiency
of working capital.

The working capital increase shows the proper utilization and more efficient
management of the organization.

4
1
CALCULATION OF RATIOS:-

CURRENT RATIO:

Current ratio indicates the backing available to current liabilities in the form of
current assets. In other words, higher current ratio indicates that there are sufficient
assets available with the organization, which can be converted in the form of cash. A
current ratio of 2:1 is supposed to be standard and ideal.

[Current Ratio=Current Assets/ Current Liabilities.]

YEAR Current Assets Current Current Ratios

Liabilities

2010-11 8,61,61,808.18 3,60,54,079.20 2.38 : 1

2011-12 10,12,31,259.89 5,34,61,856.31 1.89 : 1

2012-13 11,75,75,738.11 5,15,84,520.00 2.27 : 1

INTEPRETATION:-

The ideal level of current ratio is 2:1.we shown too much higher ratio it’s good for
the company
As we can see in the chart, in the year of 2010-11 & 2012-13 the company had a
ratio of more than 2 : 1, which states that the company has more than 2 Rs. of current
assets to pay off 1 Rs. of Current liabilities, showing good liquidity position.
While in the year of 2011 & 2012, the company had a ratio of 1.89 which is
considered to be as good as normal, and overall liquidity position is good.

Higher the current ratio, it is always better for the organization.

4
2
QUICK RATIO :

Quick assets are those assets which can be converted into cash within a short
period of time, say to six months. So, here the sundry debtors which are with the
long period does not include in the quick assets. The Ideal quick ration is 1:1.

[Quick Ratio = Current Assets – Non quick current assets / Current Liabilities –
non quick liabilities]

Year Current Assets – CurrentLiabilities – Ratio

Non Quick Assets NonQuickLiabilities

2010-11 44321494.12 36054079.2 1.23

2011-12 43707427.44 53461856.31 0.83

2012-13 48360878.53 51584520 0.95

A quick ratio is an Indication that the firm is liquid and the ability to meet its current
liabilities in time.,In the year 2010-11 Companies Quick ratio is more than the ideal
ratio which showing that organization is liquidity to bear quick liabilities.
In the year 2011-12 the decrease slightly due to increased in creditors but in the
2012-13 quick ratio is again moving towards ideal ratio and creditors has been
decreased which is showing management has taken appropriate actions.

4
3
STOCK TURNOVER RATIO:

Stock turnover ratio between costs of goods sold and average stock. This is also
known as stock velocity ratio or inventory ratio. Proper inventory turnover makes the
business to earn a reasonable margin of profit.This ratio indicates the number of times
the inventory of a firm rotates within an accounting cycle.

[Stock turnover ratio = Cost of goods sold/ Average stock]

Year Cost of sale Average Stock STR

2010-11 198715170.3 12935892.59 15.36

2011-12 170641211 12935892.59 13.19

2012-13 223604657.4 13502813.64 16.56

Source : Secondary Data

INTEPRETATION:-

In the year 2010-11 the Stock turnover ratio was 15.36 and in the year 2011-12 it
decreased to 13.19 and in the year again increased to 16.56. In the year 2011-12 ratio
increased means working capital cycle faced some problems like decreased in sales
increased in debtors etc.

But again in next year STR gets increased which is showing indication that
management has taken appropriate decision

4
4
WORKING CAPITAL TURNOVER RATIO:

Working capital turnover ratio is the net sale to average working capital. It is
indicator of efficiency of working capital management. Higher the ratio greater is the
efficiency. The higher the ratio, the lower is the investment in working capital, and
the higher is the profitability.

[WORKING CAPITAL TURNOVER RATIO= Net sales/Average working

Capital]

Year Sale Net working Working Capital

capital Turnover ratio

2010-11 44,59,26,148.90 5,01,60,421.69 8.89

2011-12 53,04,72,535.30 477,90,318.49 11.10

2012-13 62,63,83,875.30 6,59,91,218.11 9.49

Source: Secondary data

INTEPRETATION:-

In the year 2010-11 the working capital ratio is 8.89 and in the year 2011-12 ratio
increased to 11.10 due to decreased in debtors which is good indicator. In the year
2012-13 the working capital ratio is decreasing by 1.61 as compared to 2011-12.But
the positive point is that it was still higher than in 2010-11.

4
5
DEBT EQUITY RATIO:

The ratio suggests the claims of creditors and owners over the assets of the company.
Suppose the ratio comes to be 1:2 or 0.5:1, it says that for every Rs 1 financed by
debts, there is Rs 2 being brought in by the equity shareholders. The debt-to-equity
ratio shows the best pictures (growth) of a company's leverage. The higher the figure,
the higher is the leverage the company enjoys.

[DEBT EQUITY RATIO = DEBT / EQUITY]

Year Total Debt EQUITY DEBT EQUITY

RATIO

2010-11 18428638 73519405 0.26

2011-12 29842803 75450433 0.40

2012-13 46829285 88376793 0.53

Sorce : Secondary Data

INTERPRETATION :

Debt Equity Ratio Shows a relationship between Debt & Equity, In the year 2010-11
ratio was 0.26 which is showing that organization is playing on its own capital and
having minimum risk to outsiders ratio is consecutively increasing which means
organization optimizing more outsiders fund and trying expand operations.

Ratio reach to 0.53 in the year 2012-13 from 0.26 in 2010-11 and 0.40 in
2011-12.

4
6
Account Receivable Turnover ratio:

An accounting measure used to quantify a firm's effectiveness in

extending credit as well as collecting debts. The receivables turnover
ratio is an activity ratio, measuring how efficiently a firm uses its
assets.

Account Receivable Turnover Ratio = Net Credit Sales / Avg. Account Receivable

Year Net Credit Sales Avg Account Ratio

Receivable

2010-11 298770520 6539402 5.51

2011-12 374378028 5102643 5.87

2012-13 435845874 5902892 5.79

INTERPRETATION :

In the year 2010-11 ratio was 5.51 and it reaches to 5.79 that means
organization is maintaining accounts receivable; firms are indirectly
extending interest-free loans to their clients. A high ratio implies either
that a company operates on a cash basis or that its extension of credit
and collection of accounts receivable is efficient.

4
7
4
8
FINDINGS:

 In the year 2010-11 there was decrease in working capital but the decrease was
less as compared to 2009-10.On other hand in 2012-12 working capital is
increasing shows good sign of growth.

 The decrease in working capital in the financial year 2010-2011 & 2011-2012 be.
Debtos Short term investments also decreased. Closing stock increased.

 In the year 2011-12 and 2012-13 the current asset has increased as the closing
stock is increasing.

 The net working capital in the financial year 2010-2011 is Rs. 5,01,07,728.9 and financial
year of 2011-2012 is Rs. 47769403.58. The working capital is decreasing due to decrease
in debtors and short term investment. and in year it increased by Rs. 65991218.11.This
is due to the increase in deposits and debtors for the company.

 The stock turnover ratio suggests that a firm maintains minimum stock level in
order to maximize sales by quick rotation of inventory, no doubt the profit will be
maximized since the holding cost of inventory is lower, as normally 5 to 6 times is
considered to be standard for such ratio.

 In the year 2011-12 the working capital ratio is highest which indicate that the
company has achieved good sales with minimum investment in working capital.
In the year 2010 the working capital ratio is decreasing by 1.61 as compared to
2010-11.But the positive point is that it was still higher than in 2010-11.

 The company’s current ratio is quite satisfactory due to effective management of

current asset.

4
9
SUGGESTION:

 The company has huge idle cash balance which should be invested in some
productive use.

 Company should consider quality policy to avoid wastage and rejection of final
product by the customer as it’s directly affects the cost of production

 Company should prepare projected Working capital as it will act as a business guide and
budget can also be prepared with its help.

CONCLUSION

Working Capital Management being the crucial element in the smooth working of the
organization needs to be given great attention. Working capital is the fund left out with the
firm to after covering all its current liabilities.
I Conclude that,
The current ratio is quite good & the company is able to maintain its liquidity position. The
company need to improve its stock turnover ratio. As compared to last year current year
working capital is increasing shows good sign of growth.In the previous year the
current asset has increased as the closing stock is increasing, due to the decrease in
sale of coolers. The research proved to be satisfactory one to analyze the overall
financial position of the firm and to give the suggestions thereon.
I can conclude that company’s financial position is stable and company needs to
maintain the stability throughout the financial year.

5
0
5
1
 BIBLIOGRAPHY

A) BOOKS:

 I.M. Pandey,( 1996), Financial Management, Vikas Publishing House Pvt.

Ltd, New Delhi.

 M Y. Khan & P. K. Jain,( 1998), Financial Management, Tata McGraw

Hill Publishing Company Ltd, New Delhi.

B) WEBSITES :

 www.google.com
 www.wikipedia.com
 www.yahoofinance.com

5
2
5
3
QUESTIONNAIRE:

1. When is the review of working capital done?

2. What portion of long -term fund is used for financing current assets?
3. How are the inventory financed?
4. What amount of cash is kept aside as precautionary measure?
5. Maximum credit given to any customer?
6. Working capital is generally used for what purpose?

5
4
BALANCE SHEET

5
5
5
6