A project report on working capital management with special reference to  bagalkot cement industry ltd By Babasab Patil
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A project report on working capital management with special reference to bagalkot cement industry ltd By Babasab Patil

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A project report on working capital management with special reference to bagalkot cement industry ltd By Babasab Patil

A project report on working capital management with special reference to bagalkot cement industry ltd By Babasab Patil

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  • 1. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 1
  • 2. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 2 INDEX S.NO. PARTICULARS Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Executive summary Introduction --Industry Profile --Company Profile --Product Profile --Organization structure Project Details:  WC Management  Cash management  Receivables Management DATA ANALYSIS Statement of problem Objectives of the study Scope of the study Methodology of data collection Sampling design Limitations of the study DATA PRESENTATION Financial ratio analysis
  • 3. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 3 Chapter 6 Chapter 7 Chapter8 FINDINGS, SUGGESTIONS, and CONCLUSIONS BIBLIOGRAPHY Annexure EXECUTIVE SUMMARY
  • 4. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 4 The Bagalkot cements and industries ltd was incorporated on 6th September 1955 it was started by late shri. A.G.Tendulkar.The Company started its production with installation of wet process kiln with a capacity of 300TPD in 1960. Initially it was started with one Kiln, one raw mill and one cement mill as its machinery assets, 1200 strong workforce and 990 acres of landed property. The project report on “WORKING CAPITAL MANAGEMENT” is studied in the “THE BAGALKOT CEMENT INDUSTRY LTD” at Bagalkot for a period of two months as summer in plant training. During the study I found that the company is carrying its activity in producing cement. The company managers have co-operated with me a lot in completing my summer-in-plant training. They have given me all the information that I need for my study. The study is conducted in order to know how the organization is maintaining the working capital. So as to identify the problems of such a title and give suggestions and conclusions. In addition to this concept studying the over all organization role of different department functions of their respective departments, procedures and policies. The basic objective of the study is to see the liquidity position of the company by the help of ratio analysis. The scope of the study is limited to working capital ratios and regarding the liquidity of the company with whatever basic financial statements. It will help to understand the company’s liquidity position. PROJECT TITEL A study on working capital management with special reference to Bagalkot Cement Industry ltd.
  • 5. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 5 OBJECTIVES OF THE STUDY  To study efficiency of working capital components in the organization  To know the liquidity position of the company by the help of ratio analysis.  To asses the working capital requirement of the company. SCOPE OF THE STUDY  Analysis of working capital components in the B.G.K Cement.  Analysis of last five years financial Statements  Evaluation of Financial ratios is adapted to working capital management. METHODOLOGY OF DATA COLLECTION The methodology of data collection pertains to information to how the data is collected i.e. either from primary sources or secondary sources. It explains the methods utilized and the instruments used in data collection. SOURCES OF DATA The sources of data can be classified in two categories:  Primary sources  Secondary sources PRIMARY SOURCES The primary data are collected by the thorough and detailed discussion was conducted with the Assistant General Manager-Finance and Accounts. And the discussion. SECONDARY SOURCES I used secondary sources also for collecting the data. They are:
  • 6. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 6  Information from the text sources  Information form the internet sources  Information from the materials provided by the concern LIMITATIOMS OF THE STUDY  The study is confined only to a period of 5 years  Time Constraint  The study is used on secondary data such as annual reports of the company. Findings
  • 7. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 7 1 liquidity ratios Current ratios: The current assets ratio as per the stander is 2:1. Through calculation it is observed that, it has been decreased by 0.52 to 0.49 to 0.40 from 2003 to 2005. And again it decreased to 0.20 in the year 2006 but 2008 it increased to 1.83 but it doesn‟t reach the standard ratio, so it is unfavorable to the company. 2 Quick ratio: the quick ratio of the company has been decreased by continuously i .e 0.31 to 0.29 to 0.20 to 0.13 from 2003 to 2006 & in 2008 it is slightly increased by 0.69.But it doesn‟t reaches the standard ratio which it is 1:1 it shows that companies liquidity position of the company is not good, so it is unfavorable to the company. 3 Working capital turns over ratio: The working capital turn over ratio indicates that working capital is less in company. The working capital ratio of the company was 1.61% in 2003 & 2004 also same 1.61 but it was decreases 0.93 to 0.52 to 0.98 times from 2005- 2008 respectively. In the firm there is continuous decrease for 5 year. It has decreased in working capital turnover ratio so the firm is weak in working capital turnover ratio. 4 According to the statement of changes of working capital, amount is decreased from year to year up to 2003 to 2006 but there is slight increased in the year 2008. 5 According to the current asset to total asset ratio the company is having less current asset so better they have increases the current assets. Conclusion By analyzing the topic of working capital management in Bagalkot cement industry ltd. I conclude that the company is having less working capital but in the year 2008 the working capital is increasing. So if the company maintains the constant working
  • 8. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 8 capital which helps perform the day to day business by increasing the current assets. And the liquidity position of the company is also not satisfactory. This project report helped me to get the knowledge on the working capital utilization for better maintenance of the company. Suggestions 1. Company need to increase the current assets turn over ratio by increasing in their current assets. 2. The company needs to increase its current ratio by increasing its current assets so it helps to maintain standard form 2:1.
  • 9. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 9 3. Liquidity position of the company is weak hence it should increase investment in current assets. 4. Company properly has not invested in working capital during last four years, so company should constantly strive to maintain the working capital. HISTORY OF CEMENT INDUSTRY: The history of Cement can be traced to the days of Babylonia and Assyria. The Egyptians used clay motor in the Pyramids and Romans produced a type of Cement of by mixing Volcanic Ash with Quicklime which, to this day, is often entirely free from fissures whenever mankind has undertaken to build with any degree of permanence and using rock, stone or brick, it has been found that some form of Cement is an indispensable construction material.
  • 10. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 10 Before the development of Portland cement the Principal Cements were Natural Cement and Puzzolan. Natural Cement is made from Cement rock, naturally occurring limestone that needs only to be burned and pulverized. Puzzolan Cement is a mixture of slaked lime and granulated blast furnace slag. The history of Portland cement traces back to 18th Century when a patent for making of Portland cement was obtained by Joseph, a brick layer of Leeds, England in 1824. This Cement was called as Portland cement because when it hardened it produced a yellowish Gray mass resembling in appearance the stone from the famous quarry of Portland, England. The new Cement did not receive ready acceptance because of the established reputation of the natural Cements. It was not the until the 1850 that Portland and by 1860 the industry had developed in the European continent, particularly in Belguam, Germany and France. The industry was well established in Europe before the first patent to produce Portland cement was granted in 1872 in the US in the year 1904 Portland Cement entered into India since then it has been one of the major industry Indian economy constituting a major share. I remain ever grateful to all respondents for their co-operation INDUSTRY PROFILE India is 3rd largest producer with total production capacity exceeding 102.2 MT, including mini sector. China & Japan stands first & second in the world in the production of cement. It is great centralization & control in cement industry then any other industry in India. The industry is well diversified over all the states of India.
  • 11. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 11 Cement plays an important role in the development of the country. Cement is being used from more than 150 years of construction. The cement consumption determines the infrastructure strength and development of the nation. Since the manufacture of cement require huge raw materials like limestone, clay & gypsum. The industry has been attracted at the point of minimum transportation costs in relation to raw materials .Lime stone of excellent quality exists in abundance in many parts of the country. The history of cement industry in India started when the first plant was set up in 1904 at Chennai (Madras) in their earlier stage. Now-a-days cement has become the essential unit used for the construction works. The cement industries have been growing with global competence for quality and satisfaction of the products. COMPANY OVERVIEW Name of the company: Bagalkot cements and industries ltd (Kanoria groups) Chairman : Ajay Kanoria
  • 12. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 12 Board of directors : K.A.Kandelwala Vinayak Kanoria D.B.Mundra Shettar Location : Bagalkot Dist, Karnataka. Registered office : Air – India Building 14th floor, Nariman Point. Mumbai-400021 Year of establishment: 6th September 1955. Products : Bagalkot Shakti Bagalkot supreme Website : bulcement@reddiff.com www.bagalkotudyoglimited.com MISSION STATEMENTS a. We will provide products of superior Quality at competitive price and ensures sustained profitability and growth. b. We will protect the interest of all concerned Promoters, Shareholders, Customers, Distributors, Employees, Community.
  • 13. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 13 c. We believe in fair trade practices, principles of integrity standard and strive for total customer satisfaction, keeping the environment friendly. d. We believe that our people are the most valuable assets, personal and organizational growth synonymous. e. We will treat our people with dignity, look after the safety, welfare of individuals and their Families. f. We will be a World Class organization through leadership, in production, efficiency, cost of leadership by achieving the lowest consumption levels of fuel energy and raw materials. g. We will continue to be a moving force in our national progress. SWOT ANALYSIS STRENGTH:  It’s more workable in Coastal area.  Abundance of Lime stone (raw material) available in the region.  Its local brand & can be capitalized around Bagalkot surrounding area.  It has a formal technical collaboration with M/S Blue Circle Industries Ltd., PLC,UK
  • 14. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 14  A large number of dealers network helps in facilitating better width and depth of penetration in the market. WEAKNESS:  Lack of marketing oriented activities or strategies due to more sales orientation and profit consciousness lags to capture the market.  There are no interactions in the means of meetings and seminars with Dealers.  Old plant & machinery.  People prefer Brand names like ACC, Vasavadatta, L&T, Rajashree, OPPORTUNITIES:  The company can look forward for a bigger market by changing the name of the product.  By utilizing existing dealer’s network and skill force, they can look forward for more ventures in coastal areas. THREATS:  Due to more consciousness towards pollution control social groups in the region will provoke public to stop the production.  Due to environmental problem and global warming there is shortage of rain in the state, which will effect the generation of power. The company has to solely depend on its DC.  Compared to other company the technology of the plant is quite old. PRODUCT PROFILE PRODUCT OF THE COMPANY
  • 15. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 15 BCIL’S cement division produces two types of cement namely, 1. BAGALKOT CEMENT (PSC Portland slag cement) it is not having any grade. Even after final reading on 28th days, the strength will increase. 2. BAGALKOT SUPREME (OPC Ordinary Portland cement) it is 43-Grade cement, on 28th day the final reading is done. Thereafter the strength of the cement remains the same. Features of Bagalkot Cement :  Improved soundness  Higher long term strength  Resistance to attack by sea water  No risk on early age of Thermal cracking  Resistance to corrosion proof Reinforcement in concrete Application of cement:  Bridges & Fly-over  Roads & pathway  Deep Foundation & Marine works  Water storage tanks & Reservoirs  Marine constructions like Ports, Harbors & Jetties  Effluent treatment plants & swages treatment plants  Chemical factories where acids & alkali aggregates are present.  Canal Linings DEPARTMENTAL OVERVIEW HUMAN RESOURCES DEPARTMENT HR FUNCTIONS
  • 16. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 16 1. Human resource planning: HR functions analyses jobs, skills, task-present and future project needs and uses statistical data to plan human resource activity. 2. Recruitment & Placement: First of all notification is made by Company according to the required vacancy in the respective units. The further procedure is carried out by HRD (Asit. chakrovorthi) *Application is accepted according to required norms. *Srcutinisation is done and call letters are sent to the eligible Candidate. *Candidates are called for interview. *Suitable candidates are selected in personal Interview *After completing the training session successfully and satisfactorily, the trainees are placed accordingly to their Job specialization. Special recruitment is conducted for local people whose lands have acquired by company. Also recruitment for sc/st candidates is conducted time to time. All the trained workers are placed in the workshop or offices by the GM of respective shops according to the organization’s needs with qualified individuals. 3. Induction: Newly selected candidates are oriented about the organization and its various aspects, with help of Supervisors under whom they starts working as assistant or trainees. 4. Training& Development: Selected candidates are taken as management trainees and given Training according to their requirement .Besides these new employees. T&D dept also provides opportunities for learning skills, information and attitude related to job for existing employees. 5. Performance appraisal: The performance of employees is monitored by HR department periodically. 7. Compensation & Benefits Company focuses time productivity & talents through Compensation & Reward. FINANCE DEPARTMENT
  • 17. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 17 Finance is the backbone of any Organization and therefore efficient management of finance leads the organization to the success. The different sections and there functions are given: 1. MAIN ACCOUNTS: Deals with accounting of official assets, interplant reconciliation, co-coordinating section for all accounts, MIS etc. 2. PURCHASE ACCOUNTS: Deals with the payments and accounting of supplies, Bills against purchase order of raw materials. 3. CASH ACCOUNTS: Deals with disbursement and receipt of cash as per bills passed by the officers of various sections. 4. PLANT EQUIPMENTS A/c: Deals with the accounting of IPO investments in planning units and is related to project. 5. STORES A/c: Deals with accounting and maintenance of stores ledger, receipts, balance of receipts. 6. PROVIDENT FUND A/c: Deals with the accounting of provident fund, gratuity etc. 7. SALES TAX A/c: Deals with the accounting of sales tax matters. ORGANISATION STRUCTURE Mktg Mgr System Regional Manager Area Sales Manager A/C Mgr A/C Officer Asst Peons L&P Person al Officer s Security Officer Clerk HR D Office rHR D R/M Officer Mgrs(store s) Asst Mgr Purchase Officer Clerk VP (Power) Mgr Elect Asst Mgr Elect Jr. Engg Mgr Elect Mgr DG Asst Engg Mgr Mgr Kiln Burner Engg Worker Sr. Mgr Mines Asst Mines Mgr Asst Engg Foreman
  • 18. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 18 DEPARTMENTAL OVER PRODUCTION DEPARTMENT It is the one of the essential unit of the organization, which converts available raw material into saleable goods. It looks after the production of the cement and without this department there is no question of running the industry. All the functions like crushing, kiln, heating, packing all will be taken care by this department. LABORATORY AND QUALITY CONTROL He laboratory of BCIL, is well equipped with all modern instruments of testing cement, here the cement sample is taken for test & is tested on the base of specialization as recommended by the ISI & cement association of India. The features like setting time,
  • 19. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 19 compressive strength, color limestone, quality, clinker quality, gypsum, iron & grade of cement is tested to its satisfaction & the similar process is carried on for all production of cement tones. STORE DEPARTMENT In store department the things, which are required by the various department of factory, are stored in proper way & in systematic racks. Every item from pin to bag is stored & made available to the department as & when required so that there won’t to be any stores manager & is assisted by this staff ever requirement of the employees like dress etc stored. ELECTRICAL DEPARTMENT: It is the department which stores the power so generated in & center of power supply & thus it regulates the power supply to the department in an economical way. PRODUCTION PROCESS OF CEMENT PLANT Cement is manufactured from various methods for eg wet process and dry process. Bagalkot Cement Industries Ltd., manufacturers cement adopting Dry process method. Various processes in the production are as follows. 1. Limestone: The process starts with quarry where the limestone is found. Lime stone is chief raw materials used. The contents of limestone are calcium carbonate (caco3 98%).
  • 20. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 20 Lime is formed after heating the limestone & carbon dioxide is released as by product. Further the limestone has to be processed by reducing them in there size. This is done by feeding the limestone into the crusher. The limestone is reduced to the size round about 20-25mm. 2. Stockpile/blending: The crushed raw materials are stored ready for use in many plants; a buildings stockpile is used in order to assist in checking any chemical variations in the raw materials coming from quarries. A stocker builds up a layer upon layer to from the stockpile. Depending on area of the quarry it comes from each layer may have slightly different composition. 3. Raw milling/Ball mill After milling in the correct proportions the limestone & the shale are fed to a mill where they are ground to a fine powder called raw meal. In most modern plant, a closed circuit hall milling system is used. The ball mill basically a steel tube containing steel balls ranging is size typically from 90mm downwards. The balls gradually grind the raw materials to a fine powder. The mill is usually of single chamber design & may be fitted with a classifying liming. The lining has the effect of grinding the ball sizes of that the larger balls at the inlet end when the larger pieces of raw material have to be broken & smaller balls at the outlet end where the finger grinding takes place 4. Raw meal blending The raw meal is then conveyed to silos for the future blending. It is essential for raw meal to be of consistent chemical quality, if problems at the kiln stage are to be avoided. The base of the blending silo is divided into segments covered with porous tiles or canvas blending is achieved by arranging for up to three times as much air to be blown through one action of the base compared to the others tumbling mixing
  • 21. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 21 action is imported the raw meal after predetermined mixing time, or when the technical department is satisfied, that the raw meal is of consistent chemical composition. 5. Raw meal storage The raw meal is from blending silo’s blow. It is now ready to be Introduced to the next stage of the process, the kiln system. 6. Pre-heater (4 stage suspension): The raw meal passes through a pre-heater. This 4 stages suspension pre-heater is just one of the many types in use. It consists the 4 stage of cyclones. Hot exhaust gases from the kiln enter the bottom of the pre-heater column at the stage 4 cycle one & travel upwards through each of the other stage. The raw meal is fed the gas dust from the stages 2 cyclone. The meal is immediately picked up by the hot gas & carried into the stage 1. This process continues until the meal falls from the stage 4 cyclone & into the kiln in let chute or hearth. At reaching pre-heat stage, heat from the hot gases is transferred to the meal. Then gases from the kiln enter the pre-heater at about 1000 degree centigrade & leaves stage 1 at about 350*c the raw meal leaves stage at about 800*c. 7. Calcinations At this temperature of 800 c, the calcinations of the calcium carbonate in the raw meal, that is conversion of cac3 to line has started. About 30% of calcinations will have take place by the time the raw meal reaches the kiln 8. Dust control electrostatic precipitators: To prevent dust from the kiln or raw milling system entering the atmosphere, the gas is passes through electrostatic precipitators. To condition the dust laden gas using a water spray, either in the preheater or in as external conditioning lower.
  • 22. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 22 As the dust laden gas enters the chamber in which electrodes & earthed collector plates by vibrating the collector plates periodically the dust drops into the happer & is returned with the raw meal to the kiln system. The cleaned exhaust gas, mainly carbon dioxide nitrogen & water vapor, can then be safely released into the atmosphere. 9. The kiln: The partially pre-heated clacinized raw meal is fed to kiln through a steel tube typically with a length to diameter ratio of 16:01 & in cloned at an angle of about 3*. It rotates at a speech of 3rpm on a system of rollers & is driven through a mounted belt around the circumference. The seals at either end of the kiln are designed to prevent the ingress of cold air & to accommodate expression & rotation. The kiln is lined refractory bricks & fired either by oil or gas at the lower end. If coal is used, it must be pulverized often using a ring roller mill such as this. If heavy fuel oil is used, it must first be heated to reduce its viscosity & aid atomization. Raw meal from the pre-heater enters at the end & gradually moves down that the kiln Rotates. At firstly of the calcinations takes place so that the feed consists mostly of lime, silica, alumina & iron all in a hot reactive state. The hottest part of the kiln is near the tip of the frame. This is the burning zone where the feed as at temperature of around 1450*c & is in a partially molten state it is here that the four main constitutes of the feed by chemical reaction from cement clinker. 10. Clinker: A mix of complex compounds referred to in cement chemist’s nations as c2s, c3a and c4af. 11. Grate cooler:
  • 23. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 23 Another type of cooler is commonly used in the grate cooler. There is an empty cooler; the reciprocating grate through which air is blown is visible. As the clinker moves along the grate air cools it & the air itself cools the pre- heater prior to relating the kiln as secondary combustion air. However, more air is required for combustion is blown through the gate some of this excess hot air is used to dry & cool the fired plants after cooling the clinker is stored ready for grinding into cement. 12. Cement milling: The mixture of clinker & gypsum now passes to the cement mill. Ordinarily, the cement ball mill is similar to the raw mill. The cement mill is divided into 2 or 3 chambers by perforated steel diaphragms, each chamber containing a range of ball sizes, but because cement required finer grinding the smallest balls is smaller than those in a raw mill. Classifying lining are often used in the 2nd chamber mill to separate the ball size. 13. Open circuit milling: Open circuit milling is often used for ordinary Portland cement (opc). Here the cement is ground to required fineness in one pass through the mill. Open circuit mills are generally longer than closed circuit mills for this reason. The ground cement is conveyed directly away & the mill is vented in a dust filtration system. 14. Closed circuit milling: In a certain circumstances closed milling can have advantage consuming less power overall. The closed circuit system is similar classifier to that used raw milling a separating out the coarse fiction of the mill production & returning it to the mill for further grinding. This particularly suitable for hardening cement RHC that has to be ground very finally. 15. Storage: From milling the system, the cement is often pumped through pipes by what is basically a screw fed blower. The speed screw delivers the cement into a high
  • 24. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 24 volume airflow provided by compressors. The air conveys the cement along a pipeline to storage silos. 16. Dispatch: Cement is bagged, prior to bulk dispatch by either rail or road. The latest packing plants are fully automatic. For packing, various types of the bags are used like HDPE, polythene bags, paper bags.
  • 25. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 25 PROCESS CHART
  • 26. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 26
  • 27. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 27 GROWTH OF THE COMPANY The present Management of Kanoria Group Keeping in view of the good prospect for the Cement Industry has made many changes. In order to economize the Cost of production, Management modernized the machinery’s and changed the production process from Wet to Dry method. As a result, its capacity of production changed from 90 thousands tones/ annum to 3.3 lakh tones/annum. To bring more Technological changes in production the management reached an agreement with M/s Blue Circle Industries PLC in 1985. Under the services of BCI, it has been envisaged that the existing capacity 1000TPD will reach to 1200 to 1500 TPD under existing resources only. To meet the growing needs of the nation, another Wet process Kiln of 300TPD was installed. The entire machinery for the two kilns was imported from M/s Krupps of West Germany. In order to upgrade the capacity of the Kiln and bring operational improvement, the company entered into a technical agreement with PLC UK, who is one of the largest operating cement companies in the world. The chief advantages of this technical agreement with Blue Circle are:- 1. Sustained increased production of cement. 2. Improved thermal efficiency of the Kiln. 3. Energy conservation. 4. Training. 5. Improved method of plant maintenance In September 1982, to achieve fuel saving, the two wet process Kilns were replaced by a new 1000TPD dry process Kiln, supplied by ACC Ltd. The precision and care observed at Bagalkot cements and Industries Ltd., throughout the manufacturing process, reflects in quality and product which surpasses the specifications laid down by the Indian Standards Institution (ISI).The cement produced undergoes a number of physical tests such as Compressive strength, Fineness, Setting time, Soundness etc.
  • 28. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 28 In order to overcome the chronic power shortage of the state electricity grid, Bagalkot has installed a Diesel Generator set of 4000Kw capacity from Japan. With the assistance of M/s Blue Circle BCI Ltd as set up a separate training department in the company, which caters to complete training needs of the managerial, supervisory & operating staff? BCI Ltd enjoys a unique distinction of offering cement in a variety of packing bags viz. jute, & paper bags etc. according to customer needs & preferences.
  • 29. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 29  INTRODUCTION  MEANING OF WORKING CAPIPAL  FACTORS INFLUENCING WC REQUIMENTS  ESTMATION OF WC REQUIREMENTS  COMPONENTS OF WORKING CAPITAL MANAGEMENT CASH MANGEMENT RECIEVABLES MANAGEMENT INVENTORY MANAGEMENT INTRODUCTION
  • 30. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 30 As every enterprise knows that, working capital is the lifeblood and control of nerve center of the business. Just as circulation of blood is the essential for maintaining life, working capital is also essential for maintaining the smooth running of the business. The importance of working capital management is indisputable; Business liability relies on its ability to effective management of receivables, inventory, and payables. By minimizing the amount of funds tied up in current assets. Firms are able to reduce financing costs or increase the funds available for expansion. Many managerial efforts are put into bringing non-optimal level of current assets and liabilities back towards their optimal levels. Working Capital refers to the amount of capital which is readily available to an organization that is, working capital is the difference between resources in cash and readily convertible into cash (current assets) and organizational commitments for which cash will soon be required (current liabilities). Thus, working capital involves activities such as arranging the short-term finance, negotiating favorable credit terms, controlling the movement of cash, administrating accounts receivables and monitoring the investments also a great deal of time. Definition of working capital Gerstenberg “Working capital means current assets of company that are changed in the ordinary course of business from one form to another, ex: from cash to inventories, inventories to receivables, receivables into cash” Shubin “Working capital is the amount of funds necessary to the cost of operating the enterprise. Operating expenses involve investment in current assets, payment towards overhead and expenses. Investment made in these heads is classified as working capital”.
  • 31. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 31 J. smith “The sum of the current assets is the working capital of the business” ’’WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITY” Factors influencing working capital requirements Nature of business – Important factor that determines requirement of working capital is nature of business a firm is undertaking. Firm those are engaged in production and marketing need more working capital compared to the firm that are in trading or service oriented business. This is because manufacturing units need more current assets compared to service oriented units. Seasonality of operations – Some firms’ products sell only during particular seasons. For instance, air conditioners sell more during the summer than in the winter. Such firms have greater working capital requirements during peak seasons and lower requirements during other seasons. Firms whose sales are not affected by seasons have stable working capital requirements. Market conditions – The level of competition existing in the market also influences working capital requirement. When competition is high, the company should have enough inventories of finished goods to meet a certain level of demand. Otherwise, customers are highly likely to switch over to competitor’s products. It thus has greater working capital needs. When competition is low, but demand for the product is high, the firm can afford to have a smaller inventory and would consequently require lesser working capital. Supply conditions – If supply of raw material and spares is timely and adequate, the firm can get by with a comparatively low inventory level. If supply is scarce and
  • 32. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 32 unpredictable or available during particular seasons, the firm will have to obtain raw material when it is available Current Assets Current Assets are resources, which are in cash or will soon be converted into cash in “the ordinary course of business”. Current Assets of a firm include –  Cash balances  Accounts receivables  Inventories of: - - Raw material - Work-in-progress - Finished goods The two major characteristics of current assets are –  They have a short life span. Cash balances are held only for a week or so; accounts receivables typically are held for duration of 30-60 days and inventories may be held for 30-100 days.  They are rapidly transformed into other asset forms. Cash is utilized to purchase raw material. Raw material is converted to work-in-progress, which in turn is converted to finished goods. Finished goods are sold for cash or credit, which creates accounts receivables. Accounts receivables are finally realized in cash. Current Liabilities Current Liabilities are commitments, which will soon require cash settlement in “the ordinary course of business”. The Current Liabilities of a firm include- 1. Bills Payables 2. Sundry creditors/Accounts receivables 3. Accrued/outstanding expenses 4. Dividend payable.
  • 33. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 33 CLASSIFICATION OF WORKING CAPITAL Working capital can be classified on the basis of concept and on the basis of time. Various types of working capital are as follows 1) On the basis of concept: Working capital on this basis of concept is classified into A) Gross working capital: It refers to total investment made in current asset. Current assets are the asset which can be converted into cash within a short period of KINDS OF WORKING CAPITAL 1. ON THE BASIS OF CONCEPT 2. ON THE BASIS OF TIME GROSS WORKING CAPITAL NET WORKING CAPITAL PERMANEN T OR FIXED TEMPORAR Y OR VARIABLE REGULAR RESERVE SEASONAL SPECIAL
  • 34. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 34 an accounting year. Current assets include cash, debtors, bills receivables and short term securities etc. B) Net working capital: It is the difference between current assets and current liabilities. Current liabilities are those claims of outsiders which are expected to mature for payment within an accounting year and include creditors, bills payable and outstanding expenses. Net working capital can be positive or negative. Positive net working capital will arise when current asset exceeds current liabilities. A negative net working capital occurs when current liabilities are in excess of current assets. 2) On the basis of time : Classification of working capital in this case is made on the basis of time for which investment is required. Kinds of working capital in this category are: 1) Permanent: Some portion of working capital always remains permanent or fixed. This refers to minimum investment a firm has to make and keep in certain current assets. Firm has to always maintain minimum cash balance, inventory, debtors etc. as there current assets are required permanently. They are normally financed through long term capital. Such permanent working capital is further classified into a) regular and b) reserve a) Regular: regular permanent working capital is used in Routine business operations. b) Reserve: reserve working capital refers to some portion of working capital that is kept as reserve to meet any contingency. 2) Temporary working capital: required of such capital varies or fluctuates depending on season. Its requirement is not continuous it is normally finance through short term sources, like overdraft, cash credit and other short term liabilities. Temporary working capital is further classified into:
  • 35. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 35 a) Seasonal working capital: requirement of working capital is based on particular seasons ex; winter, summer or festival seasons etc during these seasons there will be additional demand for the products. To meet out such demand firm has to make additional arrangement of working capital. b) Special working capital: requirement of such working capital is necessitated to meet demands of special occasion’s ex. Occasion of world cup cricket, Olympics, kumba mela, elections. During these special occasions demand for goods and service will increase. To meet such special demand firm has to make temporary arrangement of working capital ESTIMATION OF WORKING CAPITAL REQIUREMENTS Managing the working capital is a matter of balance. The firms must have sufficient funds on hand to meet its immediate needs. The manufacturing oriented organizations are the following aspects have to be taken into consideration while estimating the working capital requirements. They are:  Total costs incurred on material, wages and overheads.  The length of time for which raw material are to remain in stores before They are issued for production.  The length of the production cycle or work-in-process, i.e., the time taken for conversion of raw material into finished goods.  The length of sales cycle during which finished goods to be kept waiting for sales.  The average period of credit allowed to customers.  The amount of cash required paying day-today expenses of the business.  The average amount of cash required to make advance payments  The average credit period expected to be allowed by suppliers.  Time lag in the payment of wages and other expenses.
  • 36. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 36 COMPONENTS OF WORKING CAPITAL The components of working capital are:  Cash management  Receivables management  Inventory management CASH MANAGEMENT Cash is the liquid form of an asset. It is the ready money available in the firm or with the business, essential for its operations. A firm needs the cash for the following three purposes: Transaction Motive: The firm must and should keep the funds for transactions like purchase, sales etc. These activities, which are not known in advance, are not considered while preparing a cash budget Precautionary motive: The firm also keeps funds for the safeguard against uncertainties, which are an integral part of business operations. Speculative Motive: To tap profits from opportunities arising from fluctuations in commodity prices, security prices, interest rates etc. The company with surplus cash is in a better position to exploit such situations. RECEIVABLES MANAGEMENT Receivable represents amounts owed to the firm as a result of sale of goods or services on the ordinary course of business. These are claims of the firm against its customers and form part of its current assets. These receivables are carried for the customers. The period of credit and extent of receivables depends upon the credit policy followed by the firm. The main purpose of maintaining or investing in receivables is to meet competitors, to increase sales, and to maintain a cordial relationship with the clients.
  • 37. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 37 Receivables management is the process of making decisions relating to investment in trade debtors. However, at the same time, investment in this current asset involves cost considerations also. Therefore, there is always a risk of bad debts too. Credit Evaluation There are three approaches used for credit evaluation. These are:  Traditional Credit analysis  Numerical Credit Scoring Traditional credit analysis In the, assessment of the prospective customer is done based on the "five C's of credit". They are:  Character- Identifies the moral attribute of the customer  Capacity - The customer's ability to meet credit obligations from the operating cash flow.  Capital - Financial soundness of the customer  Collaterals- The goods pledged by the customers in the form of security  Conditions - The conditions prevailing in the economy. Numerical credit scoring The credit rating obtained under the traditional approach is judgmental in nature and based on the assigned weights, which are subjective in nature. So, a more systematic approach known as the numerical credit policy is used. Under this method, the factors for credit evaluation are identified, and weightage is given to each according to their importance. INVENTORY MANAGEMENT Every enterprise needs inventory for smooth running of its activities. It serves as a link between production and distribution process. There is, generally a time lag between the recognition of a need and its fulfillment. The greater the time lag, the higher the
  • 38. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 38 requirements for inventory. The unforeseen fluctuations in demand and supply of goods necessitate the need for inventory. Moreover, it provides a cushion for future price fluctuations. Inventory is the list of raw materials, work-in-process, or finished goods have been waiting to be consumed in production or to be sold. Inventory management involves the control of the current assets, namely raw materials; work in process and finished goods. The main objective of inventory management is to minimize the total cost- both direct and indirect, which are associated with holding the inventories. A reduction in the excessive inventories has a favorable impact on the company’s profitability.
  • 39. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 39 STATEMENT OF PROBLEM
  • 40. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 40 This project deals with the study about “Evaluation of Working Capital requirements” in Bagalkot Cement Industry Limited. OBJECTIVES OF THE STUDY  To study efficiency of working capital components in the organization  To know the liquidity position of the company by the help of ratio analysis.  To asses the working capital requirement of the company. SCOPE OF THE STUDY  Analysis of working capital components in the B.G.K Cement.  Analysis of last five years financial Statements  Evaluation of Financial ratios is adapted to working capital management. METHODOLOGY OF DATA COLLECTION The methodology of data collection pertains to information to how the data is collected i.e. either from primary sources or secondary sources. It explains the methods utilized and the instruments used in data collection. SOURCES OF DATA The sources of data can be classified in two categories:  Primary sources  Secondary sources PRIMARY SOURCES The primary data are collected by the thorough and detailed discussion was conducted with the Assistant General Manager-Finance and Accounts. And the discussion.
  • 41. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 41 SECONDARY SOURCES I used secondary sources also for collecting the data. They are:  Information from the text sources  Information form the internet sources  Information from the materials provided by the concern LIMITATIOMS OF THE STUDY  The study is confined only to a period of 5 years  Time Constraint  The study is used on secondary data such as annual reports of the company. SAMPLING DESIGN Sampling unit : Financial Statements Sampling Size :Last five years financial statements
  • 42. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 42
  • 43. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 43 RATIO ANALYSIS INTRODUCTION The financial statement of a company contains a lot of information about the financial performance of the company. Financial statements mainly consist of the Balance Sheet and Profit and Loss Accounts. These statements give the overall picture of the company, but to analyses each aspect of business extensively, financial ratios are used. The Balance Sheet and the Statement of Income are essential, but they are only the starting point for successful financial management. Financial Ratio Analysis derived from Financial Statements analyses the success, failure, and progress of business. Ratio Analysis is a very powerful analytical tool useful for measuring the performance of an organization. The ratio analysis concentrates on the interrelationship among the figures appearing in the mentioned financial statements. The ratio analysis helps the management to analyze the past performance of the firm and to make further projections. Note: we have used the ratio analysis in this project in order to substantiate the managing of working capital. For this, we used some of the ratios to get the required output. Various working capital ratios used by me are as follows:  Liquidity ratios  Turnover/activity ratios LIQUIDITY RATIOS The liquidity ratios measure the firm’s ability to meet its short-term (less than one year) obligations as and when they become due. Liquidity ratios establish a relationship
  • 44. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 44 between cash and other current assets to provide a measure of then liquidity of the organization. The corporate liquidity has two dimensions namely, quantitative and qualitative concepts. The quantitative concept includes the quantum, structure and utilizations of liquid assets and in qualitative concepts, it is the ability to meet all present and potential demands on cash from any source in manner that minimizes cost and maximize the value of the form. Thus corporate liquidity is vital facto in business excess liquidity, through a generator of solvency would reflect lower profitability, deteriorations in managerial efficiency increased speculation and unjustified expansion, extension of too liberal credit and dividend policies. Too little liquidity then may lead to frustrations of business objections, reduced rate of return, business opportunity missed and weakening of morale. The important ratios to measure the liquidity of a firm are: A) Current Ratio B) Quick/Acid Test Ratio
  • 45. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 45 1) CURRENT ASSETS TO TOTAL ASSETS RATIO = Current Assets / Total Assets Interpretation An increase in the ratio of current assets to total assets will leads to a increase in profitability and decrease leads to technical solvency. The ratio’s fluctuating like during the year 2003 it 0.216% and it is increased to 0.249% and it increased to 0.532% and 0.403% in the year 2007 and 2008 and in the last a slight decreased to 0.1867% in 2008 2) CURRENT LIABILITIES TO TOTAL ASSETS RATIO Year Current assets Total asset Ratio 2002-2003 199735 922175 0.216 2003-2004 221599 887919 0.249 2004-2005 200370 376591 0.532 2005-2006 106758 264602 0.403 2006-2008 135060 723385 0.186 0.216 0.249 0.532 0.403 0.186 0 0.1 0.2 0.3 0.4 0.5 0.6 times 2003 2004 2005 2006 2008 year current asset to total asset ratio times
  • 46. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 46 =CURRENT LIABILITIES TOTAL ASSETS Year Current Liabilities Total Assets Ratio 2002-2003 377914 922175 0.409 2003-2004 451021 887919 0.507 2004-2005 499078 376591 1.325 2005-2006 524239 264602 1.981 2006-2008 73665 723385 0.101 Interpretation Effect of an increase in this ratio of current liabilities to total assets would be that profitability is decreased and increased the risk. In the above ratio it is increased from 0.409% to 0.507% from 2003 to 2004 but increase in the year 2005 up to 1.325% and in the next year again is increased from 1.981% and decreased the year 2008 from 0.101% as compared to last two years. 3) Sales to fixed assets ratio 0 0.5 1 1.5 2 times 2003 2004 2005 2006 2008 year current liabilities to total asset ratio Series1
  • 47. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 47 This ratio is differ from industry to industry. Increase in this ratio means trading is slack or mechanization has been used. A decline in this ratio means that debtors and stocks are increased too much or fixed assets are more intensively used. If current assets increase with the corresponding increase in profit, it will show that the business is expanding Fixed assets to current assets ratio: fixed assets/current asset Year Fixed asset Current asset Ratio 2002-2003 709638 199735 3.55 2003-2004 653518 221599 2.94 2004-2005 163419 200370 0.81 2005-2006 145042 106758 1.35 2006-2008 588310 135060 4.35 Interpret 3.55 2.94 0.81 1.35 4.35 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 times 2003 2004 2005 2006 2008 year fixed asset to current asset ratio Series1
  • 48. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 48 The sales to fixed assets ratio is 3.55% in 2003 and it is decreased to 2.94% in 2004 and it is increased to 0.81% 2005 and 2006 it increased to1.35% and it is increased to 4.35% in 2008. High ratio indicates favorable to company and low ratio indicates unfavorable to company.
  • 49. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 49 4) Current assets turn over ratio: This ratio is also known as the investment turnover ratio. This is based on the relation between the sales and assets of the company. Current assets turn over ratio= Sales Current assets Year Sales Current assets Ratio 2002-2003 288341 199735 1.44 2003-2004 371190 221599 1.67 2004-2005 278734 200370 1.39 2005-2006 218403 106758 2.04 2006-2008 60435 135060 0.44 Interpretation The current assets turn over ratio is 1.44% in 2003 and in further year increased to 1.67% & decreased in the year 2005 1.39% to 2.04% to 0.4474% in the year 2008.high ratio indicates favorable to company and low ratio indicates unfavorable to company. 1.44 1.67 1.39 2.04 0.44 0 0.5 1 1.5 2 2.5 times 2003 2004 2005 2006 2008 year current asset turnover ratio Series1
  • 50. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 50 Liquidity Ratio 5) Current ratio: Current ratio is the most common ratio for measuring liquidating being related to working capital analysis it is also called the working capital ratio. Current ratio expenses relationship between current assets and current liabilities. Current ratio= Current assets Current liabilities Year current assets Current liabilities Ratio 2002-2003 199735 377914 0.52 2003-2004 221599 451021 0.49 2004-2005 200370 499078 0.40 2005-2006 106758 524239 0.20 2006-2008 135060 73665 1.83 INTREPRETATION This ratio indicates higher the current ratio the larger amount of rupees available per rupee of liability its standard rate is 2 ; 1 the above mentioned. The companies current ratio is not satisfactory because there is an less amount in current asset than the standard the firm. Because up to 2003 to 2008 it does not reaches the standard ratio. 0.52 0.49 0.4 0.2 1.83 0 0.5 1 1.5 2 times 2003 2004 2005 2006 2008 year current ratio Series1
  • 51. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 51 6) Quick ratio: Quick ratio is also known as liquid ratio or acid test ratio or near money ratio. It is the ratio between quick or liquid assets and quick liabilities. As pointed out, the current ratio in the study of solvency may be sometimes misleading due to high ratio of stock to current assets. Quick ratio= Quick assets Quick liabilities Quick assets = current assets- inventories Quick liability= current liability- bank over draft Year Quick assets Quick liabilities Ratio 2002-2003 118488 377914 0.31 2003-2004 131886 451021 0.29 2004-2005 104048 499078 0.20 2005-2006 72918 524239 0.13 2006-2008 50839 73665 0.69 INTREPRETATION Here the quick ratio standard is 1:1 were as the considered to a satisfactory for the financial condition here the companies quick ratio is below one so the quick ratio is not satisfactory. Because up to 2003 to 2008 it does not reaches the standard ratio. 0 0.2 0.4 0.6 0.8 2003 2004 2005 2006 2008 0.31 0.29 0.2 0.13 0.69 times year quick ratio Ser…
  • 52. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 52 7) Working capital turnover ratio: It is taken as one of the primary indicators of the short-term solvency of the business. It establishes the relationship with the net sales. This ratio represents the number of times the working capital is turned over in course of a year i.e. it measures the efficiency with which the working capital is being used by the firm. WORKING CAPITAL TURNOVER RATIO = Net Sales Net Working Capital Year Net Sales Net working capital Ratio 2002-2003 288341 178179 1.618 2003-2004 371190 229422 1.61 2004-2005 278734 298708 0.93 2005-2006 218403 417481 0.52 2006-2008 60435 61395 0.98 Interpretation The ratio establishes relation between sales and net working capital The working capital ratio of the company was 1.61% in 2003 & 2004 also same 1.61 but it was decreases 0.93 to 0.52 to 0.98 times from 2005- 2008 respectively. In the firm there is continuous decrease for 5 year. It has decreased in working capital turnover ratio so the firm is unsatisfactory with its working capital turnover ratio. . 1.618 1.61 0.93 0.52 0.98 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 times 2003 2004 2005 2006 2008 year working capital turnover ratio Series1
  • 53. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 53 CALCULATION OF WORKING CAPITAL
  • 54. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 54 1] Statement of changes in working capital Particulars As @ 31/3/03 Amts in Rs‟000 As @ 31/3/04 Amts in Rs‟000 Effect of wc Increase decrease A. Current assets Cash and bank balance Other current assets Loans and advances Inventories Sundry debtors Total current assets B. Current liabilities Current liabilities Provisions Total current liability Net current assets(A-B) Increase or decrease in working capital Total working capital 14716 6300 36169 81247 61303 199735 367970 9944 377914 -178179 -178179 16680 6300 32726 89713 76180 221599 441154 9867 451021 -229422 51243 - 178179 1964 - - 8466 14877 - 77 25384 51243 - 76627 - - 3443 - - 73184 - 76627 76627
  • 55. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 55 Interpretation The statement shows that the changes in working capital in the year 2002- 2003&2003-2004 it shows how the current assets & current liabilities are changes in the two years. The different between current assets & current liabilities is net working capital of the two years. 2003-2004 calculation shows that the working capital was decreased. 2] Statement of changes in working capital
  • 56. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 56 Particulars As @ 31/3/04 Amts in Rs. „000 As @ 31/3/05 Amts in Rs‟000 Effect of wc Increase decrease A. Current assets Cash and bank balance Other current assets Loans and advances Inventories Sundry debtors Total current assets B. Current liabilities Current liabilities Provisions Total current liability Net current assets(A-B) Increase or decrease in working capital Total working capital 16680 6300 32726 89713 76180 221599 441154 9867 451021 -229422 - -229422 9679 63,00 42916 96322 45153 200370 487569 11509 499078 -298708 69286 - 229422 - - 10190 6609 - - - 16799 69286 86085 7001 - - - 31027 46415 1642 86085 - 86085
  • 57. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 57 Interpretation The statement shows that the changes in working capital in the year 2003- 2004 to 2004-2005 it show that the working capital was decreased .the cash & bank balance has decreased to 7001. And sundry debtor was decreased to 31027. And current liabilities is increased of rs 46415 & provisions 1642 3] Statement of changes in working capital
  • 58. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 58 Interpretation Particulars As @ 31/3/05 Amts in Rs‟000 As @ 31/3/06 Amts in Rs‟000 Effect of wc Increase decrease A. Current assets Cash and bank balance Other current assets Loans and advances Inventories Sundry debtors Total current assets B. Current liabilities Current liabilities Provisions Total current liability Net current assets(A-B) Increase or decrease in working capital Total working capital 9679 63,00 42916 96322 45153 200370 487569 11509 499078 -298708 - -298708 9217 6300 56818 33840 583 10,67,58 51,72,04 70,35 52,42,39 -417481 118773 -298708 - - 13902 - - - 4474 - 18376 118773 - 141623 462 - - 62482 44570 29635 - - 137149 - 141623
  • 59. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 59 The statement shows that the changes in working capital in the year 2004- 2005 to 2005-2006 it show that the working capital was decreased .the cash & bank balance has decreased to 44570. And sundry debtor was decreased to 31027 & inventory also. And current liabilities are increased of rs 29635. 4] Statement of changes in working capital
  • 60. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 60 Interpretation Particulars As @ 31/3/06 Amts in Rs‟000 As @ 31/3/08 Amts in Rs‟000 Effect of wc Increase decrease A. Current assets Cash and bank balance Other current assets Loans and advances Inventories Sundry debtors Total current assets B. Current liabilities Current liabilities Provisions Total current liability Net current assets(A-B) Increase or decrease in working capital Total working capital 96,79 63,00 4,29,16 9,63,22 4,51,53 20,03,70 48,75,69 1,15,09 49,90,78 -29,87,08 360103 61395 13618 - 34813 84221 2408 135060 66597 7068 73665 61395 61395 3939 - - - - 420972 4441 - 429352 - 429352 - 6300 8103 12101 42745 - - 69249 360103 429352
  • 61. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 61 The statement shows that the changes in working capital in the year 2005- 2006 to 2006-2008 it show that the working capital is increased compare to last 4 years. So the company is satisfactory with last year. Findings 1 liquidity ratios Current ratios: The current assets ratio as per the stander is 2:1. Through calculation it is observed that, it has been decreased by 0.52 to 0.49 to 0.40 from 2003 to
  • 62. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 62 2005. And again it decreased to 0.20 in the year 2006 but 2008 it increased to 1.83 but it doesn’t reach the standard ratio, so it is unfavorable to the company. 2 Quick ratio: the quick ratio of the company has been decreased by continuously i .e 0.31 to 0.29 to 0.20 to 0.13 from 2003 to 2006 & in 2008 it is slightly increased by 0.69.But it doesn’t reaches the standard ratio which it is 1:1 it shows that companies liquidity position of the company is not good, so it is unfavorable to the company. 3 Working capital turns over ratio: The working capital turn over ratio indicates that working capital is less in company. The working capital ratio of the company was 1.61% in 2003 & 2004 also same 1.61 but it was decreases 0.93 to 0.52 to 0.98 times from 2005- 2008 respectively. In the firm there is continuous decrease for 5 year. It has decreased in working capital turnover ratio so the firm is weak in working capital turnover ratio. 4 According to the statement of changes of working capital, amount is decreased from year to year up to 2003 to 2006 but there is slight increased in the year 2008. 5 According to the current asset to total asset ratio the company is having less current asset so better they have increases the current assets. Suggestions 1. Company need to increase the current assets turn over ratio by increasing in their current assets. 2. The company needs to increase its current ratio by increasing its current assets so it helps to maintain standard form 2:1. 3. Liquidity position of the company is weak hence it should increase investment in current assets.
  • 63. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 63 4. Company properly has not invested in working capital during last four years, so company should constantly strive to maintain the working capital. Conclusion By analyzing the topic of working capital management in Bagalkot cement industry ltd. I conclude that the company is having less working capital but in the year 2008 the working capital is increasing. So if the company maintains the constant working capital which helps perform the day to day business by increasing the current asset. This project report helped me to get the knowledge on the working capital utilization for better maintenance of the company..
  • 64. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 64 BIBLIOGRAPHY 1. Financial Management By M.Y.Khan & P.K.Jain Edition 2. Financial Management BY I.M.PandeEdition
  • 65. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 65 ANNEXURE Balance sheet Sources of funds 2003 2004 2005 Share shareholders funds Loan funds 610762 457758 570,077 472636 98,480 495773 Total 1068520 1042,713 594,253
  • 66. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 66 Application of funds Fixed assets Investments Current assets loans and advances Less: current liabilities & provisions Net current assets Miscellaneous expenditure Profit & loss account 709638 12802 199735 377914 (178179) 3971 520288 653,518 12,802 221,599 451,021 (229,422) 2,978 602,837 163,419 12,802 200,370 499,078 (298,708) 2,163 714,577 Total 1068520 1,042,713 594,253 Balance sheet Sources of funds 2006 2008 Share shareholders funds Loan funds 98,480 109311 106,476 543,244 --
  • 67. WORKING CAPITAL MANAGEMENT With Special reference to BAGALKOT CEMENT INDUSTRY LTD” Babasabpatilfreepptmba.com 67 Total 207,791 649,720 Application of funds Fixed assets Investments Current assets loans and advances Less: current liabilities & provisions Net current assets Miscellaneous expenditure Profit & loss account 145,042 12,802 106,758 524,239 (417,481) 1,481 465,947 588,310 15 135,060 73,665 61,395 -- -- Total 207,791 649,720