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CHAPTER - I
INTRODUCTION
The need for Cash to run the day-to-day business activities cannot be
overemphasized. One can hardly find a business firm, which does not require any
amount of Cash. Indeed, firms differ in their requirements of the Cash.
A firm should aim at maximizing their wealth. In its endeavor to do so, a firm
should earn sufficient return from its operation. The firm has to invest enough funds
in current asset for generating sales. Current asset are needed because sales do not
convert into cash instantaneously.
There is always an operating cycle involved in the conversion of sales into
cash. The objectives are to analyze the Cash management and to determine efficiency
in cash, inventories, debtors and creditors. Further, to understand the liquidity and
profitability position of the firm. These objectives are achieved by using ratio analysis
and then arriving at conclusions, which are important to understand the efficiency /
inefficiency of Cash.
The company goes in insufficient manner in the past five years. So the
company takes steps to improve the performance and concentrate in local areas. The
company financial capacities are low and borrow funds from the government and
outsiders. It creates liabilities for the company. The working capital is reducing from
year to year. So they should take some necessary steps for adding more amounts to
working capital.
Cash is the important current asset for the operations of the business. Cash is
the basic input needed to keep the business running on a continuous basis; it is also
the ultimate output expected to be realized by selling the service or product
manufactured by the firm. The firm should keep sufficient cash, neither more nor
less. Cash shortage will disrupt the firm’s manufacturing operations while excessive
cash will simply remain idle, without contributing anything towards the firm’s
profitability. Thus, a major function of the financial manager is to maintain a sound
cash position.
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FACTS OF CASH MANAGEMENT
Cash management is concerned with the managing of:
(i) Cash flows into and out of the firm,
(ii) Cash flows within the firm, and
(iii) Cash balances held by the firm at a point of time by financing deficit or
investing surplus cash.
It can be represented by a cash management cycle. Sales generate cash which has to
be disbursed out. The surplus cash has to be invested while deficit this cycle at a
minimum cost. At the same time, it also seeks to achieve liquidity and control.
Cash management assumes more importance than other current assets because
cash is the most significant and the least productive asset that a firm’s holds. It is
significant because it is used to pay the firm’s obligations. However, cash is
unproductive. Unlike fixed assets or inventories, it does not produce goods for sale.
Therefore, the aim of cash management is to maintain adequate control over cash
position to keep the firm sufficiently liquid and to use excess cash in some profitable
way.
Cash management is also important because it is difficult to predict cash flows
accurately, particularly the inflows, and there is no prefect coincidence between the
inflows and outflows of cash. During some periods, cash outflows will exceed cash
inflows, because payments for taxes, dividends, or seasonal inventory buildup. At
other times, cash inflow will be more than cash payments because there may be large
cash sales and debtors may be realized in large sums promptly. Further, cash
management is significant because cash constitutes the smallest portion of the total
current assets, yet management’s considerable time is devoted in managing it. In
recent past, a number of innovations have been done in cash management techniques.
An obvious aim of the firm these days is to manage its cash affairs in such a way as to
keep cash balance at a minimum level and to invest the surplus cash in profitable
investment opportunities.
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In order to resolve the uncertainty about cash flow prediction and lack of
synchronization between cash receipts and payments, the firm should develop
appropriate strategies for cash management. The firm should evolve strategies for
cash management. The firm should evolve strategies regarding the following four
facets of cash management.
Cash planning: Cash inflows and outflows should be planned to project cash
surplus or deficit for each period of the planning period. Cash budget should
be prepared for this purpose.
Managing the cash flows: The firm should decide about the properly
managed. The cash inflows should be accelerated while, as far as possible, the
cash outflows should be decelerated.
Optimum cash level: the firm should decide about the appropriate level of
cash balances. The cost of excess cash and danger of cash deficiency should
be matched to determine the optimum level of cash balances.
Investing surplus cash: The surplus cash balances should be properly
invested to earn profits. The firms should decide about the division of such
cash balances between alternative short-term investment opportunities such as
bank deposits, marketable securities, or inter-corporate lending.
MOTIVES FOR HOLDING CASH
The firm’s need to hold cash may be attributed to the following three motives:
The transactions motive
The precautionary motive
The speculative motive
TRANSACTION MOTIVE
The transactions motive requires a firm to hold cash to conduct its business in
the ordinary course. The firm needs cash primarily to make payments for purchases,
wages and salaries, other operating expenses, taxes, dividends etc. The need to hold
cash would not arise if there were perfect synchronization between cash receipts and
cash payments, i.e., enough cash is received when the payment has to be made. But
cash receipts and payments are not perfectly synchronized. For those periods, when
cash payments exceed cash receipts, the firm should maintain some cash balance to be
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able to make required payments. For transactions purpose, a firm may invest its cash
in marketable securities. Usually, the firm will purchase securities whose maturity
corresponds with some anticipated payments, such as dividends or taxes in the future.
Notice that the transactions motive mainly refers to holding cash to meet anticipated
payments whose timing is not perfectly matched with cash receipts.
PRECAUTIONARY MOTIVE
The precautionary motive is the need to hold cash to meet contingencies in the
future. It provides a cushion or buffer to withstand some unexpected emergency. The
precautionary amount of cash depends upon the predictability of cash flows. If cash
flows can be predicted with accuracy, less cash will be maintained for an emergency.
The amount of precautionary cash is also influenced by the firm’s ability to borrow at
short notice when the need arises. Stronger the ability of the firm to borrow at short
notice, less the need for precautionary balance. The precautionary balance may be
kept in cash and marketable securities. Marketable securities play an important role
here. The amount of cash set aside for precautionary reasons is not expected to earn
anything; the firm should attempt to earn some profit on it. Such funds should be
invested in high-liquid and low-risk marketable securities. Precautionary balances
should, thus, be held more in marketable securities and relatively less in cash.
SPECULATIVE MOTIVE
The speculative motive relates to the holding of cash for investing in profit-
making opportunity to make profit may arise when the security prices change. The
firm will hold cash, when it is expected that interest rates will rise and security prices
will fall. Securities can be purchased when the interest rate is expected to fall; the
firm will benefit by the subsequent fall in interest rates and increase in security prices.
The firm may also speculate on materials prices. If it is expected that materials prices
will fall, the firm can postpone materials purchasing and make purchases in future
when pric4e actually falls. Some firms may hold cash for speculative purposes. By
and large, business firms do not engage in speculations. Thus, the primary motives to
hold cash and marketable securities are: the transactions and the precautionary
motives.
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CASH PLANNING
Cash flows are inseparable parts of the business operations of firms. A firm
needs cash to invest in inventory, receivable and fixed assets and to make payment for
operating expenses in order to maintain growth in sales and earnings.
It is possible that firm may be making adequate profits, but may suffer from
the shortage of cash as its growing needs may be consuming cash very fast. The
‘poor cash’ position of the firm cash is corrected if its cash needs are planned in
advance. At times, a firm can have excess cash may remain idle.
Again, such excess cash outflows. Such excess cash flows can be anticipated
and properly invested if cash planning is resorted to.
Cash planning is a technique to plan and control the use of cash. It helps to
anticipate the future cash flows and needs of the firm and reduces the possibility of
idle cash balances ( which lowers firm’s profitability ) and cash deficits (which can
cause the firm’s failure).
Cash planning protects the financial condition of the firm by developing a
projected cash statement from a forecast of expected cash inflows and outflows for a
given period. The forecasts may be based on the present operations or the anticipated
future operations. Cash plans are very crucial in developing the overall operating
plans of the firm.
Cash planning may be done on daily, weekly or monthly basis. The period
and frequency of cash planning generally depends upon the size of the firm and
philosophy of management. Large firms prepare daily and weekly forecasts.
Medium-size firms usually prepare weekly and monthly forecasts. Small firms may
not prepare formal cash forecasts because of the non-availability of information and
small-scale operations. But, if the small firms prepare cash projections, it is done on
monthly basis. As a firm grows and business operations become complex, cash
planning becomes inevitable for its continuing success.
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OTHER FACTORS THAT AFFECT THE SIZE OF CASH BALANCE
Availability of short-term credit
To avoid holding unnecessary large balances of cash, most firms attempt to
make arrangements at borrow money is case of unexpected needs. With such an
agreement, the firm normally pays interest only during the period that the money is
actually used.
Money market rates
If money will bring a low return a firm may choose not to invest it. Since the
loss or profit is small, it may not be worth the trouble to make the loan. On the other
hand, if interest rates are very high, every extra rupee will be invested.
Compensating balance
If a firm has borrowed money from a bank, the loan agreement may require the
firm to maintain a minimum balance of cash in its accounts. This is called
compensating balance. In effect this requires the firm to use the services of bank a
guaranteed deposit on which it pays no interest. The interest free deposit is the bank’s
compensation for its advice and assistance.
CASH MANAGEMENT – BASIS STRATEGIES
The management should, after knowing the cash position by means of the cash
budget, work out the basic strategies to be employed to manage its cash.
CASH CYCLE:
The cash cycle refers to the process by which cash is used to purchase
materials from which are produced goods, which are them sold to customers.
Cash cycle=Average age of firm’s inventory
+Days to collect its accounts receivables
-Days to pay its accounts payable.
The cash turnover means the numbers of times firm’s cash is used during each year.
360
Cash turnover = ----------------
Cash cycle
The higher the cash turnover, the less cash the firm requires. The firm should,
therefore, try to maximize the cash turn.
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MANAGING COLLECTIONS:
Prompt Billing
By preparing and sending the bills promptly, without a time log between the
dispatches of goods and sending the bills, a firm can ensure earlier remittance.
Expeditious collection of cheques
An important aspect of efficient cash management is to process the cheques
receives very promptly.
Concentration Banking
Instead of a single collection center located at the company headquarters,
multiple collection centers are established. The purpose is to shorten the period
between the time customers mail in their payments and the time when the company
has use of the funds are then to a concentration bank – usually a disbursement
account.
Lock-Box System
With concentration banking, a collection center receives remittances, processes
them and deposits them in a bank. The purpose is to lock-box system is to eliminate
the time between the receipt of remittances by the company and their deposit in the
bank. The company rents a local post office box and authorizes its bank in each of
these cities to pick up remittances in the box. The bank picks up the mail several
times a day and deposits the cheque in the company’s accounts. The cheques are
recorded and cleared for collection. The company receives a deposits the cheque in
the company’s accounts. The cheques are recorded and cleared for collation. The
company receives a deposit slip and a lift of payments. This procedure frees the
company from handling a depositing the cheques.
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CONTROL OF DISBURSMENT
Stretching Accounts Payable
A firm should pay its accounts payables as late as possible without damaging
its credit standing. It should, however, take advantages of the cash discount available
on prompt payment.
Centralized Disbursement
One procedure for rightly controlling disbursements is to centralize payables
in to a single account, presumably at the company’s headquarters. Such an
arrangement would enable a firm to delay payments and can serve cash for several
reasons. Firstly, it increases transit time. Secondly, if a firm has a centralized bank
account, a relatively smaller total cash balances will be needed.
Bank Draft
Unlike an ordinary cheque, the draft is not payable on demand. When it is
presented to the issuer’s bank for collection, the bank must present it to the issuer for
acceptance. The funds then are deposited by the issuing firm to cover payments of the
draft. But suppliers prefer cheques. Also, bank imposes a higher service charge to
process them since they require special attention, usually manual.
Playing the float
The amount of cheques issued by the firm but not paid for by the bank is
referred to as the “payment float”. The differences between “payment float” and
“collection float” are the net float. So, if a firm enjoys a positive “net float”, it may
issue cheques even if it means having an ever drown account in its books. Such an
action is referred to as “playing the float”, within limits a firm can play this game
reasonably safely.
Thus management of cash becomes essential and it should be seen to, that
neither excessive nor inadequate cash balances are maintained.
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CASH FLOW ANALYSIS
The cash flow analysis is done with the help of cash flow statement. A cash
flow statement is a statement depicting changes in cash position from one period to
another. It is an important planning tool. Cash flow statement gives a clear picture of
the source of cash, the uses of cash and the net changes in cash. The primary purpose
of cash flow statement is to show that as to where from the cash to be acquired and
where to use them.
UTILITY OF CASH FLOW ANALYSIS
A Cash flow analysis is an important financial tool for the management. Its
chief advantages are as follows.
Helps in efficient cash management
Cash flow analysis helps in evaluating financial policies and cash position.
Cash is the basis for all operation and hence a projected cash flow statement will
enable the management to plan and co-ordinate the financial operations properly. The
management can know how much cash is needed from which source it will be
derived, how much can be generated, how much can be utilized.
Helps in internal financial management
Cash flow analysis information about funds, which will be available from
operations. This will helps the management in repayment of long-term debt, dividend
policies etc.,
Discloses the movements of Cash
Cash flow statement discloses the complete picture of cash movement. The
increase in and decrease of cash and the reasons therefore can be known. It discloses
the reasons for low cash balance in spite of heavy operation profits on for heavy cash
balance in spite of low profits.
Discloses success or failure of cash planning
The extent of success or failure of cash planning is known by comparing the
projected cash flow statement with the actual cash flow statement and necessary
remedial measures can be taken.
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DETERMINE THE OPTIMUM CASH BALANCE
One of the primary responsibilities of the financial manager is to maintain a
sound liquidity position of the firm so that the dues are settled in time. The firm
needs cash to purchase raw materials and pay wages and other expenses as well as for
paying dividend, interest and taxes. The test of liquidity is the availability of cash to
meet the firm’s obligations when they become due.
A firm maintains the operating cash balance for transaction purposes. It may
also carry additional cash as a buffer or safety stock. The amount of cash balance will
depend on the risk-return trade-off. If the firm maintains small cash balance, its
liquidity position weakens, but its profitability improves as the released funds can be
invested in profitable opportunities (marketable securities). When the firm needs
cash, it can sell its keeps high cash balance, it will have a strong liquidity position but
its profitability will be low. The potential profit foregone on holding large cash
balance is an opportunity cost to the firm. The firm should maintain optimum – just
to enough, neither too much nor too little – cash balance. How to determine the
optimum cash balance if cash flows are predictable and if they are not predictable.
CASH FLOW STATEMENT
A cash flow statement is used in conjunction with the other financial
statements, provides information that enables users to evaluate the change in net
assets of an enterprise, its financial structure (including its liquidity and solvency),
and its ability to affect the amounts and timing of cash flow in order to adapt to
changing circumstance and opportunities. Cash flow information is useful in
assessing the ability of the enterprises to generate cash and cash-equivalents and
enables users to develop models to assess and compare the present value of the future
cash flows of different enterprises. It also enhances the comparability of the reporting
of operating performance by different because it eliminates the effects of using
different accounting treatments for the same transactions and events.
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NEED FOR THE STUDY
The importance of Cash management in any industrial concern cannot be
overstressed. Under the present inflationary condition, management of Cash is
perhaps more important than even management of profit and this requires greatest
attention and efforts.
The anti-inflationary measure taken up creating a tight money condition has
placed working capital in the most challenging zone of management and it requires a
unique skill for its management. Today, the problem of managing Cash has got the
recognition of separate entity, so its study and management is of major importance to
both internal and external analyst to judge the current position of the business
concerns. Hence, the present study entitled “A study on Cash Management” has been
taken up.
OBJECTIVE OF STUDY
Objectives of a project tell us why project has been taken under study. It
helps us to know more about the topic that is being undertaken and
helps us to explore future prospects of that organization. Basically it tells what
all have been studied while making the project.
To learn about various aspects of BLUE SAPHIRE PACKAGING
SOLUTION PROVIDER CHENNAI cash management.
To analyze the history of BLUE SAPHIRE PACKAGING SOLUTION
PROVIDER CHENNAI
To gain insights about functioning of BLUE SAPHIRE PACKAGING
SOLUTION PROVIDER CHENNAI cash management.
To explore the future prospects of standard cash management.
To understand how cash is being managed by BLUE SAPHIRE
PACKAGING SOLUTION PROVIDER CHENNAI
To gain knowledge about the system prevailing in BLUE SAPHIRE
PACKAGING SOLUTION PROVIDER CHENNAI
To suggest methods for improving cash management in BLUE SAPHIRE
PACKAGING SOLUTION PROVIDER CHENNAI
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SCOPE OF THE STUDY
Cash management attempts, among other things, to decrease the length and
impact of these current periods.
A collection receipt point closer to the customer-;perhaps with an outside
third-party vendor to receive, process, and deposit the payment (check)-;is one way to
speed up the collection.
The effectiveness of this method depends on the location of the customer; the
size and schedule of its payments; the firm's method of collecting payments; the costs
of processing payments; the time delays involved for mail, processing, and banking;
and the prevailing interest rate that can be earned on excess funds.
The most important element in ensuring good cash flow from customers,
however, is establishing strong billing and collection practices.
RESEARCH METHODOLOGY
RESEARCH DESIGN
The research approach used for the study is descriptive. The form of the study is on
the financial statement analysis in general and specific to the cash position.
DATA COLLECTION
PRIMARY DATA
The primary data is collected from the personnel interview.
SECONDARY DATA
The study has been made using secondary data, which are obtained from annual
reports and statements of accounts. The study is period for the annual reports and statements
of accounts extended form the year 2012-2017
AREA OF STUDY
The study is concern to known about cash management of the BLUE SAPHIRE
PACKAGING SOLUTION PROVIDER.
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PERIOD OF STUDY
The study includes 5 years (2016-17 to 2020-21) financial rates of the firms. The
study was conducted for 1 month period.
ANALYTICAL TOOLS FOR THE STUDY
The researcher for the purpose of analysis and interpretation of the following tools have been
need
RATIO ANALYSIS
CASH FLOW STATEMENT
CASH BUDGETING
LIMITATIONS OF THE STUDY
However, there can be a number of issues with utilizing the statement of cash
flows as an investor speculating about different organizations. The simplest drawback
to a cash flow statement is the fact that cash flows can (but not always) omit certain
types of non-cash transactions. As the name implies, the statement of cash flows is
focused exclusively on tangible changes in cash and cash equivalents.
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CHAPTER SCHEME
CHAPTER – 1 Deals with Introduction of the study
CHAPTER – 2 Deals with Review of the Literature
CHAPTER – 3 Deals with Profile of the company
CHAPTER – 4 Deals with Analysis and Interpretation of data
CHAPTER – 5 Deals with Findings, Suggestions & Conclusion
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CHAPTER - II
INDUSTRY PROFILE
PACKAGING INDUSTRY
Packaging means the wrapping or bottling of products to make them safe from
damages during transportation and storage. It keeps a product safe and marketable
and helps in identifying, describing, and promoting the product.
“Packing is the preparation of product or commodity for proper storage and/or
transportation. It may entail blocking, bracing, cushioning, marking, sealing,
strapping, weather proofing, wrapping, etc.”
The history of packaging dates back to the year 1035, when a Persian
traveller, visiting markets in Cairo, noted that vegetables, spices and hardware were
wrapped in paper for the customers after they were sold. With the passage of time,
attempts were made to use the natural materials available, such as, Baskets of reeds,
wooden boxes, pottery vases, woven bags etc. However, the use of card board’s
paperboard cartons was first done in the 19th century.
The Michigan State University was the first to offer a degree course in
“Packaging Engineering” Since then, there has been no looking back. The packaging
industry boomed as more than the content, it is the ”packaging” which attracts the
attention of the buyer.
There was a revolution in Packaging in the early 20th century due to several
modes of packaging designed such as Bakelite closures on bottles, transparent
cellophane overwraps and panels on cartons, which increased processing efficiency
and improved food safety. As additional materials such as aluminium and several
types of plastic were developed, they were incorporated into packages to improve
performance and functionality.
Packaging is the science, art, and technology of enclosing or protecting
products for distribution, storage, sale, and use. Packaging also refers to the process
of design, evaluation, and production of packages.
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In short, Packaging can be described as a coordinated system of preparing
goods for transport, warehousing, logistics, sale, and end use. Packaging contains,
protects, preserves, transports, informs, and sells, in many countries it is fully
integrated into government, business, and institutional, industrial, and personal use.
Packing means packing or wrapping goods to look attractive as well as secure
safety i.e., (a) holding together the contents (b) protecting product while passing
through distribution channels. Again packaging refers to “all the activities involved in
designing and producing the container or wrapper for a product” (Stanton).
Recently, term packaging is being used interchangeably to mean both
‘packing’ proper as well as ‘packaging’. Traditionally, ‘packaging’ referred to retail
or consumer container and ‘packing’ to transport container. Consumer packaging has
significant marketing implications while transport containers are more important from
logistics standpoint.
The following materials are generally used for packaging:
(i) Wood
(ii) Metals
(iii) Plastics
(iv) Paper
(v) Glass
(vi) Polyester.
Definitions of Packaging
Packaging means the wrapping or bottling of products to make them safe from
damages during transportation and storage. It keeps a product safe and marketable
and helps in identifying, describing, and promoting the product.
Different kinds of products need different kinds of packaging, for example,
liquid products are packed in barrels and bottles; whereas, solid products are
wrapped. The organizations use special containers for fragile products, such as
glassware.
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The terms packing and packaging are used synonymously but there is a certain
amount of difference between the two. Packaging means covering the product itself
so that it is protected from damage, leakage, dust, pollution, contamination etc.
Examples – Chocolates packaged in thin sheet, milk packaged in sachets etc.
Packing means putting all the packages in a big box, container, chest, crate
etc. for the purposes of storage, transportation, handling etc. Moreover the functions
of packing and packaging, in the present context have gone beyond the basic
expectations of protection of the product.
“Packing is the preparation of product or commodity for proper storage and/or
transportation. It may entail blocking, bracing, cushioning, marking, sealing,
strapping, weather proofing, wrapping, etc.”
“Packing is the activity of putting your possessions into bags, cases, or boxes
so that you can take or send them somewhere.”
“Packaging refers to the processes (such as cleaning, drying, and preserving)
and materials (such as glass, metal, paper or paperboard, plastic) employed to contain,
handle, protect, and/or transport an article. Role of packaging is broadening and may
include functions such as to attract attention, assist in promotion, provide machine
identification (barcodes, etc.), impart essential or additional information, and help in
utilization.”
“Packaging is the wrapping material around a consumer item that serves to
contain, identify, describe, protect, display, promote and otherwise make the product
marketable and keep it clean.”
Packaging is the science, art, and technology of enclosing or protecting
products for distribution, storage, sale, and use. Packaging also refers to the process
of design, evaluation, and production of packages. Packaging can be described as a
coordinated system of preparing goods for transport, warehousing, logistics, sale, and
end use.
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Packaging
Until recently packing was being considered as a minor element in the
marketing mix of a product. But now it has become an integral part of the product
itself. Packages act as the major means-of creating product preference. It is a vehicle
by which the brand of a product is carried through the consumer. It is a powerful
selling tool. Hence, it has become a highly important area of managerial decisions.
Packing and Packaging
Packing is the process of covering, wrapping or crating goods into a package.
This is done for the purpose of delivering the product.
Packaging involves designing and producing the container or wrapper for a
product. The potentialities of packaging, essentially in the field of demand creation,
have been widely accepted now. If is often remarked as a silent salesman. Packaging
decision may affect production, distribution, research and development, sales,
accounting, and finance.
Packaging is an effective selling tool. For example, Gillette Company
introduced a package for keeping blades. This packaging has come to be known as –
“razor blade dispenser”. This dispensing packaging not only includes space for new
blades, which could easily be ejected, but contained space at the bottom of the
dispenser in which old and useless blades could be kept.
Packaging is the general group of activities which concentrate in formulating
the design of a package, and producing an appropriate and attractive container or
wrapper for the product. Packing refers to the wrapping and crating of goods before
they are transported or stored.
It is a physical action which provides a handling convenience, e.g., rice,
cotton, wheat or any other agricultural produce. It is necessary to prevent flowing out
of liquids and is essential to maintain freshness and quality. It can prevent the danger
of adulteration.Packaging is the subdivision of the packing function of marketing. It
involves more than simply placing products in containers or covering them with
wrappers. Philip Kotler defines packaging as an activity which is concerned with
protection, economy, convenience, and promotional considerations.
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Packaging obviously is closely related to labelling and branding because the
label often appears on the package and the brand is typically on the label. A package
defines the space in which a product is contained.The package contents may be pre-
measured, pre-weighted, pre-stored, pre-assembled, and then placed in a specially
designed wrapper, box, carton, can, crate, bottle, jar, tube, barrel, or drum for
convenient distribution.
Packing and packaging are basically done to protect the product. During the
present days however these two functions have assumed several additional objectives
in addition to protection.
To Provide Physical Protection
Packaging of objects insures that they are protected against vibration,
temperature, shock, compression, deterioration in quality etc. Packing and packaging
also protect the products against theft, leakage, pilferage, breakage, dust, moisture,
bright light etc.
To Enable Marketing
Packing and packaging play an important role in marketing. Good packing and
packaging along with attractive labelling are used by sellers to promote the products
to potential buyers. The shape, size, colour, appearance etc. are designed to attract the
attention of potential buyers.
To Convey Message
There is so much of information about the product that a manufacturer would
like to convey to the users of the product. Information relating to the raw materials
used, the type of manufacturing process, usage instructions, use by date etc. are all
very important and should be conveyed to the users. Manufacturers print such
information on the packages.
To Provide Convenience
Packing and packaging also add to the convenience in handling, display,
opening, distribution, transportation, storage, sale, use, reuse and disposal. Packages
with easy to carry handles, soft squeezed tubes, metallic containers, conveniently
placed nozzles etc. are all examples of this.
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To Provide Containment or Agglomeration
Small objects are typically put together in one package for reasons of
efficiency and economy. For example, a single bag of 1000 marbles requires less
physical handling than 1000 single marbles. Liquids, powders, granular materials etc.
need containment.
To Provide Portion Control
In the medicinal and pharmaceutical field, the precise amount of contents is
needed to control usage. Medicine tablets are divided into packages that are of a more
suitable size for individual use. It also helps in the control of inventory.
To Enable Product Identification
Packing and packaging enable a product to have its own identity. This is done
by designing a unique and distinct package through the effective use of colours,
shapes, graphics etc. Such identification and distinction are very essential in the
present situation of intense competition and product clutter.
To Enhance Profit
Since consumers are willing to pay a higher price for packaged goods, there
will be higher profit realization. Moreover packaged goods reduce the cost of
handling, transportation, distribution etc. and also cut down wastage and thereby
increase profits.
Promotional Aspect of Packaging
Packaging of a product plays an important role in promoting the product in the
international markets. With the advent of self-service starts and super markets, the
package of a product serves as a ‘silent sales man’. It is capable of performing many
of the salesman’s tasks.
When there is no salesman to promote the product in the stores, the package as
kept on the shelf must attract the attention of the consumer, describe the product’s and
producer’s features, project the confidence and make a favourable overall impression.
Good packaging thus leads to improved consumer acceptance because it carries and
projects various qualities of the product as well as the manufacturer.
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Good packaging must reinforce the integrated marketing concept. Brand
names occupy a dominant role in marketing which is popularised through
advertisement. But the reminding of brand names and making brands acceptable to
customers are achieved through proper packaging.
Packaging must, therefore, support and reinforce the brand identity the
company is trying to build. In this way, good packaging creates demand for the
product and brings large-scale production and distribution gains.
Protectional Aspect of Packaging
The second important aspect of packaging is its protectional aspect which it
provides to the product, consumer packaging intends to offer better convenience to
consumers in use and in storage.
It protects the product from
(a) Pilferage and adulteration – It cannot be adulterated with any other product unless
repacked.
(b) Product loss – Oil, petroleum products etc. are lost if remain exposed.
(c) Contamination by dirt or dust, e.g., clothing, food products.
(d) Moisture gain or loss, e.g., cement or sugar,
(e) Chemical change.
(f) Insect attack, e.g., moth in woolen garments.
It has been estimated that good packaging increases the unit value realisation
approximately three times if we are able to develop and bring about retail packs for a
large number of exportable items. It also increases the popularity of the product.
Transport Packaging Protection during Transit
The basic function of transport packaging in international marketing is to
ensure that the goods will reach safely in the hands of consumers. To ensure the goods
is no excuse for not bothering for damages or pilferage in transit. Good packaging is
essential irrespective of the fact whether the goods are insured or not.
22. 22
Improvements in packaging are needed to avoid transit losses due to
environmental hazards, i.e., climate, moisture, etc. and to achieve greater speed in
handling and deliveries. The materials used in packaging should be such that protect
the goods from the ill-effects of moisture, gas, light, air, etc. so that goods may
preserve its attributes, shape, weight, stability, fragility, rigidity, surface finish and
durability etc. Thus packaging plays an important role in the storage, preservation,
protection and distribution.
The type of packaging which ensures that the goods will be delivered in a
good condition to the foreign buyer will vary depending upon the various factors such
as-
(a) The product,
(b) The poor of destination,
(c) The length of the journey,
(d) The climate of the place of delivery and place of destination,
(e) Eat and measure to which the goods are subjected during the voyage,
(f) The loss of the importing and exporting countries regarding packaging of
goods,
(g) Mode of handling the goods etc.
In many cases, the packaging conditions are specified in the contract itself and
therefore the exporter should not be bothered about. He must adhere to the conditions
laid down in the contract. Even when the importer has not laid down any condition as
to packaging, it is the prime duty of the export to provide transport packaging of the
type which may ensure the safe arrival of the shipment in merchandise condition and
must adhere to the above factors.
Legal Provisions
The mandatory provisions as to packaging of the goods imported also have
important bearing on the packaging of goods. Most developed countries have enacted
comprehensive legislation on the type of containers, both bulk and consumer
especially for food items. For example, exports of food products to the USA must
conform in all respects to the provisions of the U.S. Foods and Drugs Act.
23. 23
Similarly, Australia bans the imports of any packing material containing vegetable
matter in order to check insect contamination of the country’s wood resources large
consignments of Indian goods were repacked at the Australian Port of entry at the
exporters’ cost. In 1978, the USA directed that all Indian export consignments in
wooden packing’s be first fumigated before they are unloaded at U.S. ports.
The laws of the importing countries may also specify the labelling
requirements to be shown on the packages imported. However, these rules may vary
from country to country.
These rules require the following information to be shown in the label
(i) Name and address of the manufacturer/importer;
(ii) Clear description of the product’s composition;
(iii) Net weight or volumetric measurement;
(iv) Duration of the product’s life;
(v) Storage conditions required after the package has been opened;
(vi) Manufacturer’s instructions for use or preparation, if any. Factors to be
considered for Package Designing.
Use of Packaging Machines
i. Integral Part – Packaging machines have now-a-days become an integral part of
industries.
ii. Health consciousness, urbanization and even changing habits are some of the
factors that have led to growing use of such machines.
iii. Food and Pharma sectors have contributed significantly in growing use of these
machines.
On the basis of nature, packaging is classified into the following
i. Family packaging – A package of a particular manufacturer, packed in an identical
manner is known as family packaging. The shape and colour, the materials used for
packaging will be similar for all the products in such cases.
ii. Reuse packaging – Packages that could be used for some other purposes after the
goods have been consumed is known as reuse packaging.
iii. Multiple packaging – It is the practice of placing several units in one container.
This helps to introduce new products and increase sales.
24. 24
iv. Transport packaging – The product entering into the trade needs to be packed well
enough to protect against loss or damage during handling, transport and storage, for
example, fiberboard, wooden crate, etc.
v. Consumer packaging – This packaging holds the required volume of the product for
ultimate consumption and is more relevant in marketing, for example, beverages,
tobacco, etc.
The following are the problems encountered in packaging
(a) Cost of packaging
(b) Appearance
(c) Kinds of designs
(d) Convenience
(e) Re-use purpose
Inspite of its various advantages, packaging has been subjected to criticism.
One among them is that it adds cost. To some extent this complaint holds goods. It is
true that packaging expenses definitely increase the price. But the benefits derived are
sufficient to compensate the increase in cost. For example some medicines which we
buy are to be consumed at once. Their preservation is very important. Only a good
package can render this service. So long as the product is capable of absorbing the
packaging cost proportionately this criticism cannot be accepted. In considering some
of the more sophisticated uses of packaging the protective aspects of packaging
should not be disregarded.
A decision taken in respect of packaging of a product is known as packaging
decision. When a producer wants to take a decision in respect of packaging of a
product, he has four main points for considerations to take the decision.
These considerations are as follows
Package Design
The very first decision taken by a producer in regard to packaging of a product
is to decide the design of packaging.
Decision of design of packaging includes following five decisions – (i) Which
type of material will be used for packaging? (ii) What will be the design of
packaging? (iii) What colours will be used on packaging? (iv) What will be the matter
printed on packaging? (v) What will be the brand name and trade mark on packaging?
25. 25
In addition to the decision on above questions, the design of packaging is
determined keeping in view the convenience of consumers and middlemen. The
design of packaging must be such that it may facilitate the activities of storage,
transportation, and distribution. Other factors affecting the decision of design of
packaging are — nature of product, cost of packaging, size of packaging, legal
restrictions, advertisement, etc.
Package Cost
While taking any decision on packaging of a product, the cost of package
plays an important role. The package must be selected only after considering the cost
of package and its effect on the price of product.
Package Size
Very important decision in respect of packaging is to decide the size of
packaging. The size of packaging differs from product to product, producer to
producer and time to time. In addition to it, a single product is offered by a single
producer to the consumers at a single time in different sizes of packaging. The size of
package depends upon the nature of product and the quantity generally purchased by
consumers. As different consumers buy a product in different sizes, it is advisable that
the product must be packed in the packages of different sizes.
Package Test
When a package is decided for a product, the efforts are made to test it so that
it may be assured that the package will meet the requirements of consumers.
26. 26
COMPANY PROFILE
Blue Saphire Packaging Solution Provider was founded in 2008.It has been a
benchmark company for over 14 years in the thermoforming and plastic packaging
sector, producing thermoformed, blister and flowpack packaging. Over the years,
Blue Saphire Packaging has gained excellent positioning on the market for the high
quality of the products on offer and partnership service it guarantees its customers..
The industry Founder : H. Narendrasamy, Managing director :N.Prabhakaran
Our Mission
Put our know-how at the service of our customers, which boasts decades of
experience in the design and manufacturing of thermoformed and standard packaging.
Our target is not to be a simple supplier for our customers, but a reliable partner to
face growth and investment projects, also in the long term..
Quality
Compliance with the quality system principles and the manufacturing
standards and regulations.
Technology
The continuous integration of technologically and organisationally innovative
solutions to the company’s value system.
Environmental ethics
Respect for the environment, attention to recycling and eco-sustainability
topics and compliance with EC regulations.
Human Resources
Recognition of the fundamental role of employees for the success of the
company.
Work environment
The creation and maintaining of an innovative work environment.
27. 27
Blue Saphire Packaging’s facilities have design, prototype and
maufacturing capabilities to provide in-house solution for all your complex
packaging needs.
Pre-Approved Dangerous Goods Packs
Pre-Production Prototypes for Transit Trials
Multi-Material Packaging
JIT / JIS Deliveries
VMI / Consignment Stock
Standard Pallet Packs
Bespoke Designed Die-Cut Packaging
Dangerous Goods Packaging Testing
Total Supply Chain Auditing
Key Industries That We Serve
Automotive
Engine & Transmission
Industrial Machinery
Energy
ATM
Electrical
28. 28
OUR USP
Over 14 years industry Experience
Diversified Market Experience
Systematic Timely Deliveries
Multi-Step Quality Check
Scientific Approach
Skilled Professional Operators
Value Addition through Research
Reasonable Product Pricing
Excellent Track Record
CONSUMER PRODUCT PACKAGING
After the products are shipped to their desired destination, the next step is to
transport them to markets and retailers. But first, they need to be packed here as well
to make them easy to move and provide protection. There are many packaging
techniques used to send products to consumers in bulk and individual form.
PRINTED CORRUGATED BOXES
These Recyclable boxes are commonly used to pack and carry heavy items
such as electronics, appliances, wine, fruit & vegetables. They are strong and durable
because of their layered paper material. Its main strength comes from the wavy ripple
in the middle. They are called corrugated because of these ripples - Flutes.
31. 31
CHAPTER-III
REVIEW OF LITERATURE
INTRODUCTION
Cash management is the process of systematic recording of the business
transactions in the various books of accounts maintained by the organization with the
ultimate intention of preparing the cash management there from. These cash
management are basically in two forms. One, profitability statement which indicates
the result of operations carried out by the organization during a given period of time
and second balance sheet which indicates the state of affairs of the organization at any
given point of time in terms of its assets and liabilities.
Agrawal (2013) in his study relating to 34 large manufacturing and trading public
limited companies, observed the use of modern control techniques in the areas of
inventory, receivables and cash management. His study revealed that there exist
sufficient scopes for reduction in investment in almost all the segments of working
capital. However the study tried to draw only general conclusions for all categories of
industries and businesses covered in the sample.
Khandelwal (2015) in his study analyzed the performance of working capital
management in 40 small scale industries located in Jodhpur Industrial Estate. This
study made a detailed analysis of performance of management of inventory,
receivables, cash and financing aspects in the selected units from 2012-2013 to 2015-
2016.
Rajeswara Rao (2015) thoroughly examined the managerial aspects of inventories,
receivables and advances and cash of certain Central Public Enterprises in India
during 2010-2012 to 2016-2017. The study concluded that the policies and practices
of working capital management in Public Enterprises are not useful for achieving the
working capital management objectives.
Panda (2016) studied the problems of working capital in 26 selected small
manufacturing companies in the State of Orissa. The study covered the problems of
adequacy, the choice, sources and problems of raising working capital.
Kamta Prasad Singh teal’s (2016) study analyzed the effectiveness with which the
working capital has been utilized in Indian Industries in general and the Fertilizer
Industry in particular.
32. 32
Panda and Satapathy’s (2014) study relates to the analysis of the structure of
working capital in 10 selected private sector Cement Companies which are listed in
different stock exchanges in India. This study was mainly based on the data obtained
from the Stock Exchange Official Directory during 2011 to 2015. This study covered
only broader aspects of working capital but failed to study intensively each
component of working capital.
Jain (2013) studied the current practices in the management of working capital in ten
selected State Enterprises of Rajasthan and examined the management performance in
this sphere. It also studied the possible remedial measures that could be used
efficiently and effectively during 2010-2014. It offered various suggestions for the
improvement of working capital management enabling State Enterprises reduce their
dependence on outside funds.
Mukharjee (2012) studied the performance of management of working capital and its
components in twenty Central Industrial and Manufacturing Undertakings which are
engaged in the production of non-homogeneous items. This study covered a period of
five years from 2004-2015 to 2011-2013.
Verna’s (2015) study on working capital management covered selected units both in
public sector and the integrated steel plants in private sector in the country. He made a
detailed comparative study of the management of various components of working
capital between the selected public and private sector units during the period from
2011-2013 to 2015-2016.
Rao (2010) in his study analyzed the performance of working capital management in
five public enterprises engaged in manufacturing activity and which are owned and
managed by the Andhra Pradesh Government during the decade 2011-2016 to 2012-
2015.
Mohan Reddy’s (2011) study relates to the management of working capital in six
selected large scale manufacturing undertaking in the private sector in Andhra
Pradesh during 2017 to 2016. This study covered one unit each in Cement, Cotton
Textiles, and Fertilizers, Food products, Paper and Plastic industries.
33. 33
Jain (2013) studied the performance of working capital management in selected units
of Paper Industry during 2011-2012 to 2016-2017. He made a comparison between
two public sector and five private sector paper mills. This study also analyzed the
performance of payables management, apart from the usual areas, such as inventory,
receivables, cash management and financing pattern of working capital during the
study period.
Bairathi (2013) studied the performance of working capital management in selected
units of Non-ferrous Metal Industries in Public Sector during 2011-2012 to 2015-
2016. This study analyzed the liquidity and financing aspects of working capital apart
from a thorough analysis of inventory, receivables and cash management. Apart from
the above published works, many other contributions have appeared in different issues
of leading journals and periodicals, from time to time, throwing light on chosen
aspects in the management of working capital. These include the following;
Hossain (2016) on “Receivables Management in Public Sector Textile Industry of
Bangladesh: a case study”, Hyderabad (2016) on “Management of Trade credit as a
source of finance”, Aramvalarthan (2016) on “Estimating working capital
requirements”, Dr. Ghosh (2017) on “Working Capital Management Practices in some
selected Industries in India”, Dr. Hitesh (2017) on “A Study of Receivables
Management of Indian Pharmaceutical Industry”, Ghosh (2014) on Liquidity
Management :
Singh (2016) on “Effects of Size on Working Capital Levels of the Firms’ in Steel
Industry in India”, Rakesh Kumar and Kulkarni (2017) on “Working Capital Structure
and Liquidity Analysis: An Empirical Research on Gujarat Textiles Manufacturing
Industry”.
34. 34
CHAPTER - IV
DATA ANALYSIS AND INTERPRETATIONS
RATIO ANALYSIS
An analysis of financial statements based on ratios is known as ratio analysis.
Ratio analysis involves the process of computing determining and resenting the
relationship of items or group of items of financial statements. Ratio analysis is a
widely – used tool of financial analysis. It can be used to compare the risk and return
relationship of firms of different sizes. It is defined as the systematic use of ratio to
interpret the financial statements so that the strengths and weaknesses of a firm as
well as its historical performance and current financial condition can be determined.
The term ratio refers to the numerical or quantitative relationship between two items.
NET WORKING CAPITAL:
Net working capital represents the excess of current assets over current
liabilities. The term current assets refers to assets which in the normal course of
business get converted into cash without diminutions in value over a short period
,usually not exceeding one year or length of operation cycle whichever is more. The
greater is the amount of net working capital, the greater is the liquidity of the firm,
accordingly net working capital is a measure of liquidity, and inadequate working
capital is the first sign of financial problem for a firm.
35. 35
RATIO ANALYSIS
CURRENT RATIO
The current ratio is a liquidity ratio that measures a company's ability to pay
short-term and long-term obligations. To gauge this ability, the current ratio considers
the current total assets of a company (both liquid and illiquid) relative to that
company's current total liabilities.
FORMULA:-
CURRENT ASSETS
CURRENT RATIO =
CURRENT LIABILITIES
TABLE 4.1
CURRENT RATIO
Year Current asset
Current
Liabilities
Ratio
2016-2017 1,910.48 704.59 2.71
2017-2018 2,157.99 851.18 2.54
2018-2019 2,659.86 1,183.63 2.25
2019-2020 2,489.10 1,346.81 1.84
2020-2021 2,767.82 1,209.43 2.29
Source : Secondary Data
INTERPRETATION
From the above table 4.1 current ratio analysis it was found that in the year
2016-2017 current ratio is 2.71, in the year 2017-2018 current ratio is 2.54, decreased
compare 2017-2018, in the year 2018-2019 current ratio is 2.25, in the year 2019-
2020 current ratio is 1.84 and in the year 2020-2021 current ratio is 2.29 increased
compare to above 4 years.
37. 37
CURRENT ASSET TO FIXED RATIO
The current ratio is calculated by dividing current assets by current liabilities.
This ratio is stated in numeric format rather than in decimal format. Here is the
calculation: GAAP requires that companies separate current and long-term assets and
liabilities on the balance sheet.
CURRENT ASSET
CURRENT ASSET TO FIXED RATIO = x 100
FIXED RATIO
TABLE 4.2
CURRENT ASSET TO FIXED RATIO
Year Current asset Fixed asset Ratio
2016-2017 1,910.48 2,195.16 0.87
2017-2018 2,157.99 2,335.52 0.92
2018-2019 2,659.86 2,774.68 0.96
2019-2020 2,489.10 2,496.27 0.99
2020-2021 2,767.82 2,488.35 1.11
Source : Secondary Data.
INTERPRETATION
From the above table 4.2 current asset to fixed asset ratio analysis it was found
in the year of 2016-2017 current asset to fixed asset ratio is 0.87, in the year of 2017-
2018 current asset to fixed asset ratio is 0.92 and the next year of 2018-2019 current
asset to fixed asset ratio is 0.96, in the year of 2019-2020 current asset to fixed asset
ratio is 0.99 and the year of 2020-2021 current asset to fixed asset ratio is 1.11.
38. 38
CHART 4.2
CURRENT ASSET TO FIXED ASSET
0
0.2
0.4
0.6
0.8
1
1.2
2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
0.87 0.92 0.96 0.99
1.11
Current Asset to Fixed Asset
39. 39
INVENTORY TO CURRENT ASSET RATIO
The acid-test ratio (or quick ratio) compares a company's easily liquidated
assets (including cash, accounts receivable and short-term investments, excluding
inventory and prepaids) to its current liabilities.
INVENTORY
INVENTORY TO CURRENT ASSET RATIO = x 100
CURRENT ASSET RATIO
TABLE 4.3
INVENTORY TO CURRENT ASSET RATIO
Year Inventory Current asset Ratio
2016-2017 1,315.23 1,910.48 0.69
2017-2018 1,499.44 2,157.99 0.69
2018-2019 1,871.54 2,659.86 0.70
2019-2020 1,636.73 2,489.10 0.66
2020-2021 1,809.12 2,767.82 0.65
Source : Secondary data
INTERPRETATION:
From the above table 4.3 is Inventory to Current Asset ratio analysis it was
found that in the year 2016-2017 Inventory to Current Asset ratio is 0.69, in the year
of 2017-2018 is Inventory to Current Asset ratio is 0.69, and the next year of 2018-
2019 Inventory to Current Asset ratio is 0.70,in the year of 2019-2020 Inventory to
Current Asset ratio is 0.66,and in the year of 2020-2021 in the year of Inventory to
Current Asset ratio is 0.65.
40. 40
CHART 4.3
INVENTORY TO CURRENT ASSET RATIO
0.62
0.63
0.64
0.65
0.66
0.67
0.68
0.69
0.7
2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
0.69 0.69
0.7
0.66
0.65
Inventory to Current Asset Ratio
41. 41
LOAN TO CURRENT ASSET RATIO
The Quick Ratio: Formula, What It Is, and How to Calculate It. ... It calculates
the proportion of a company's current assets to its current liabilities. The quick ratio is
used to determine a company's ability to meet short-term obligations with liquid
assets that can be easily converted into cash
LOAN
LOAN TO CURRENT ASSET RATIO = x 100
CURRET ASSET
TABLE 4.4
LOAN TO CURRENT ASSET RATIO
Year Loan Current asset Ratio
2016-2017 377.75 1,910.48 0.19
2017-2018 657.62 2,157.99 0.30
2018-2019 648.72 2,659.86 0.24
2019-2020 568.50 2,489.10 0.23
2020-2021 480.87 2,767.82 0.17
Source : Secondary data
INTERPREATATIONS
From the above table 4.4 is Loan to Current Asset ratio analysis it was found
that in the year 2016-2017 Loan to Current Asset ratio is 0.19, in the year of 2017-
2018 is Loan to Current Asset ratio is 0.30, and the next year of 2018-2019 Loan to
Current Asset ratio is 0.24, in the year of 2019-2020 Loan to Current Asset ratio is
0.23 and in the year of 2020-2021 in the year of Loan to Current Asset ratio is 0.17.
42. 42
CHAR 4.4
LOAN TO CURRENT ASSET RATIO
0
0.05
0.1
0.15
0.2
0.25
0.3
2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
0.19
0.3
0.24 0.23
0.17
Loan to Current Asset Ratio
43. 43
CASH TO CURRENT ASSET RATIO
The cash asset ratio is the current value of marketable securities and cash,
divided by the company's current liabilities. Also known as the cash ratio, the cash
asset ratio compares the amount of highly liquid assets (such as cash and marketable
securities) to the amount of short-term liabilities.
CASH
CASH TO CURRENT ASSET RATIO x 100
CURRENT ASSET
TABLE 4.5
CASH TO CURRENT ASSET RATIO
Year Cash Current asset Ratio
2016-2017 58.42 1,910.48 0.03
2017-2018 26.63 2,157.99 0.01
2018-2019 52.75 2,659.86 0.02
2019-2020 175.55 2,489.10 0.07
2020-2021 276.77 2,767.82 0.09
Source : Secondary data
INTERPRETATION
From the above table 4.5 is Cash to Current Asset ratio analysis it was found
that in the year 2016-2017 Cash to Current Asset ratio is 0.03, in the year of 2017-
2018 is Cash to Current Asset ratio is 0.01, and the next year of 2018-2019 Cash to
Current Asset ratio is 0.02, in the year of 2019-2020 Cash to Current Asset ratio is
0.07, and in the year of 2020-2021 in the year of Cash to Current Asset ratio is 0.09.
44. 44
CHART 4.5
CASH TO CURRENT ASSET RATIO
0.03
0.01
0.02
0.07
0.09
0
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
0.1
2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
Cash to Current Asset Ratio
45. 45
CASH TO SALES RATIO
TABLE 4.6
CASH TO SALES RATIO
Year Cash Sales Ratio
2016-2017 58.42 3,826.63 0.02
2017-2018 26.63 4,081.86 0.01
2018-2019 52.75 5,063.69 0.01
2019-2020 175.55 5,606.70 0.03
2020-2021 276.77 5,468.15 0.05
Source : Secondary data
INTERPRETATIONS
From the above table 4.6 is Cash to Sales ratio analysis it was found that in the
year 2016-2017 Cash to Sales ratio is 0.02, in the year of 2017-2018 is Cash to Sales
ratio is 0.01, and the next year of 2018-2019 Cash to Sales ratio is 0.01, in the year of
2019-2020 Cash to Sales ratio is 0.03, and in the year of 2020-2021 in the year of
Cash to Sales ratio is 0.05.
46. 46
CHART 4.6
CASH TO SALES RATIO
0
0.005
0.01
0.015
0.02
0.025
0.03
0.035
0.04
0.045
0.05
2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
0.02
0.01 0.01
0.03
0.05
Cash to Sales Ratio
47. 47
GROSS PROFIT RATIO
Gross profit ratio (GP ratio) is a profitability ratio that shows the relationship
between gross profit and total net sales revenue. It is a popular tool to evaluate the
operational performance of the business . The ratio is computed by dividing the gross
profit figure by net sales
GROSS PROFIT RATIO = GROSS PROFIT x 100
NET SALES
TABLE 4.7
GROSS PROFIT RATIO
Year Gross profit Net Sales Ratio
2016-2017 3,956.35 3,826.63 1.03
2017-2018 4,317.17 4,081.86 1.06
2018-2019 5,018.49 5,063.69 0.99
2019-2020 5,274.92 5,606.70 0.94
2020-2021 5,586.48 5,468.15 1.02
Source : Secondary Data
INTERPRETATIONS
From the above table 4.7 is Gross profit ratio analysis it was found that in the
year 2016-2017 Gross profit ratio is 1.03, in the year of 2017-2018 is Gross profit
ratio is 1.06, and the next year of 2018-2019 Gross profit ratio is 0.99, in the year of
2019-2020 Gross profit ratio is 0.94,and in the year of 2020-2021 in the year of Gross
profit ratio is 1.02.
49. 49
WORKING CAPITAL ANALYSIS
Working capital in a formula looks like this: Working Capital = Current
Assets - Current Liabilities. Working capital is the difference between the amount of
current assets the company has access to and the current liabilities. Current assets
include cash, accounts receivable, and inventory
CURRENT ASSET
WORKING CAPITAL ANALYSIS = x 100
CURRENT LIABILITIES
TABLE 4.8
WORKING CAPITAL ANALYSIS
Year Current asset
Current
Liabilities
Ratio
2016-2017 1,542.80 704.59 2.19
2017-2018 1,911.47 851.18 2.25
2018-2019 2,037.27 1,183.63 1.72
2019-2020 1,621.97 1,346.81 1.20
2020-2021 2,028.12 1,209.43 1.68
Source : Secondary data
INTERPRETATION
From the above table 4.8 current ratio analysis it was found that in the year
2016-2017 current ratio is 2.19, in the year 2017-2018 current ratio is 2.25, increased
compare 2017-2018, in the year 2018-2019 current ratio is 1.72, in the year
2019-2020 current ratio is 1.20, and in the year 2020-2021 current ratio is 1.68
increased compare to above 4 years.
50. 50
CHART 4.8
WORKING CAPITAL ANALYSIS
0
0.5
1
1.5
2
2.5
2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
2.19 2.25
1.72
1.2
1.68
Ratio
51. 51
FIXED ASSET TURNOVER RATIO
Fixed-asset turnover is the ratio of sales (on the profit and loss account) to the
value of fixed assets (on the balance sheet). It indicates how well the business is using
its fixed assets to generate sales. ... A declining ratio may indicate that the business is
over-invested in plant, equipment, or other fixed assets.
SALES
FIXED ASSET TURNOVER RATIO =
FIXED ASSET
TABLE 4.9
FIXED ASSET TURNOVER RATIO
Year Sales Fixed asset Ratio
2016-2017 3,826.63 2,195.16 1.74
2017-2018 4,081.86 2,335.52 1.75
2018-2019 5,063.69 2,774.68 1.82
2019-2020 5,606.70 2,496.27 2.25
2020-2021 5,468.15 2,488.35 2.19
Source : Secondary data
INTERPRETATION
From the above table 4.9 Fixed asset turnover ratio analysis it was found that
in the year 2016-2017 Fixed asset turnover ratio is 1.74, in the year 2017-2018 Fixed
asset turnover ratio is 1.75, increased compare 2017-2018, in the year 2018-2019
Fixed asset turnover ratio is 1.82,in the year 2019-2020 Fixed asset turnover ratio is
2.25, and in the year 2020-2021 Fixed asset turnover ratio is 2.19 increased compare
to above 4 years.
53. 53
CURRENT RATIO TREND
TABLE 4.10
CURRENT RATIO TREND
Year Ratio Trend
2016-2017 2.71 100
2017-2018 2.54 93.73
2018-2019 2.25 83.03
2019-2020 1.84 67.89
2020-2021 2.29 84.50
Source : Secondary Data
INTERPRETATION
From the above table 4.10 found that the current ratio trend analysis in the
year 2016-2017 to 2017-2018 is decreasing the trend and again decreasing the trend in
the year 2020-2021.
54. 54
CHART 4.10
CURRENT RATIO TREND
100
93.73
83.03
67.89
84.5
0
20
40
60
80
100
120
2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
Current Ratio Trend
55. 55
TABLE 4.11
INVENTORY TO CURRENT ASSET RATIO TREND
Year Ratio Trend
2016-2017 0.69 100
2017-2018 0.69 100
2018-2019 0.70 101.45
2019-2020 0.66 95.65
2020-2021 0.65 94.20
Source : Secondary data
INTERPRETATION
From the above table 4.11 found that the Inventory to current asset ratio trend
analysis in the year 2016-2017 to 2018-2019 is increasing the trend. And 2019-2020
to 2020-2021 decreasing the trend.
56. 56
CHART 4.11
INVENTORY TO CURRENT ASSET TURNOVER RATIO TREND
100 100
101.45
95.65
94.2
90
92
94
96
98
100
102
2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
Inventory To Current Asset Turnover Ratio Trend
57. 57
TABLE 4.12
CURRENT RATIO TO FIXED RATIO TREND
Year Ratio Trend
2016-2017 0.87 100
2017-2018 0.92 105.75
2018-2019 0.96 110.34
2019-2020 0.99 113.79
2020-2021 1.11 127.59
Source : Secondary data
INTERPRETATION
From the above table 4.12 found that the current ratio to fixed ratio trend
analysis in the year 2016-2017 to 2017-2018 is increasing the trend.
58. 58
CHART 4.12
CURRENT RATIO TO FIXED RATIO TREND
100
105.75
110.34 113.79
127.59
0
20
40
60
80
100
120
140
2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
Current Ratio To Fixed Ratio Trend
59. 59
TABLE NO : 4.13
CASH FLOW STATEMENT (2016-2017)
PARTICULARS 31-03-2016 31-03-2017
OPENING BALANCES
Cash in Hand 61738
SOURCE OF CASH
Central Excise 2151 779 1372
Secured Loan 3363880 3406134 42254
CASHFROMOPERATION
Net Profit 247341 206964 40377
ADD: Increase in Sundry Creditors 3363458 3747384 383926
Increase in Other Liabilities 300217 300466 249
Less Increase in Inventories 7310787 7466168 155381
Increase in Sundry Debtors 2154425 2473039 318614 -49443
TOTALCASHAVAILABLE 16742259 17600934 55921
APPLICATION OF CASH
Purchases of Fixed Assets 744630 749327 4697
Loans & Advance 162581 194320 31739
Income Tax 77494 84556 7062
CLOSING BALANCE
Cash in Hand 12423
TOTALAPPLICATIONAVAILABLE 984705 1028203 55921
60. 60
TABLE NO-4.14
CASH FLOW STATEMENT (2017-18)
PARTICULARS 31-03-2017 31-03-2018
OPENING BALANCES
Cash in Hand 12423
SOURCE OF CASH
Income Tax 194320 206000 2650
Sale of Fixed Assets 726292 749327 23035
CASH FROM OPERATION
Net Profit 247341 261547 14206
ADD Increase in Other Liabilities 300466 379275 78809
Decrease in Inventories 7466168 5698609 1767559
LESS Decrease in Sundry Creditors 3747384 2470569 1276815
Increase in Sundry Debtors 2473039 2651776 178737 405022
TOTAL CASH AVAILABLE 15155010 12417103 443130
APPLICATION OF CASH
Loans & Advance 194320 206000 11680
Secured Loan 3406134 3135484 270650
Unsecured Loan 1255000 1105000 150000
Central Excise 779 5313 4534
CLOSING BALANCE
Cash in Hand 6266
TOTAL APPLICATION
AVAILABLE
4856233 4451797 443130
61. 61
TABLE NO: 4.15
CASH FLOW STATEMENT (2018-2019)
PARTICULARS 31-03-2018 31-03-2019
OPENING BALANCES
Cash in Hand 6266
SOURCE OF CASH
Central Excise 5313 2596 2717
CASH FROM OPERATION
Net Profit 261547 267548 5999
ADD Increase in Sundry Creditors 2470569 3553092 1082523
Increase in Other Liabilities 379275 530420 151145
Decrease in Inventories 5698609 4378883 1319726
LESS Increase in Sundry Debtors 2651776 4542399 1890623 668770
TOTAL CASH AVAILABLE 11467089 13274938 677753
APPLICATION OF CASH
Purchases of Fixed Assets 726292 991175 264883
Loans & Advance 206000 332424 126424
Secured Loan 3135484 3088824 46660
Unsecured Loan 1105000 900000 205000
Income Tax 81906 107401 25495
CLOSING BALANCE
Cash in Hand 9291
TOTAL APPLICATION
AVAILABLE
5254682 5419824 677753
62. 62
TABLE NO: 4.16
CASH FLOW STATEMENT (2019-20)
PARTICULARS 31-03-2019 31-03-2020
OPENING BALANCES
Cash in Hand 9291
SOURCE OF CASH
Sale of Fixed Assets 991175 792972 198203
Unsecured Loan 900000 1200000 300000
CASH FROM OPERATION
Net Profit 267546 309347 41801
ADD Increase in Other Liabilities 530420 531981 1561
Decrease in Sundry Debtors 4542399 3652395 890004
Decrease in Inventories 4378883 3950640 428243
LESS Decrease in Sundry Creditors 3553092 3258702 294390 1067219
TOTAL CASH AVAILABLE 15163515 13696037 1574713
APPLICATION OF CASH
Loan & Advance 332424 377608 45184
Unsecured Loan 3088824 15892601 1499564
Central Excise 2596 24695 22099
Income Tax 107401 108612 1211
CLOSING BALANCE
Cash in Hand 6655
TOTAL APPLICATION
AVAILABLE
3531245 16403516 1574713
63. 63
TABLE NO : 4.17
CASH FLOW STATEMENT (2020-21)
PARTICULARS 31-03-2020 31-03-2021
OPENING BALANCES
Cash in Hand 6655
SOURCE OF CASH
Central Excise 24695 9867 14828
Secured Loan 1589260 1163089 350000
CASH FROM OPERATION
Net Profit 309347 413155 103808
ADD Increase in Other Liabilities 531981 735107 203126
Decrease in Sundry Debtors 3652395 3596559 55836
LESS Decrease in Sundry Creditors 3258702 3250590 8112
Increase in Inventories 3950640 4018625 67985 286673
TOTAL CASH AVAILABLE 13317020 13186992 658156
APPLICATION OF CASH
Purchases of Fixed Assets 792972 944278 151306
Loans & Advance 377608 432320 54712
Secured Loan 1163089 1589260 426171
Income Tax 108612 114142 5530
CLOSING BALANCE
Cash in Hand 20437
TOTAL APPLICATION
AVAILABLE
2442281 3080000 658156
64. 64
TABLE NO:4.18
CASH FLOW STATEMENT
PARTICULARS 2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
OPENING BALANCES
Cash in Hand 0.61 0.124 0.06 0.09 0.06
SOURCE OF CASH
Central Excise 0.013 0.02 0.14
Secured Loan 0.422
Income Tax 0.02
Sale of Fixed Assets 0.23 1.98
Unsecured Loan 3 3.5
CASH FROM OPERATION
NET PROFIT 0.4 0.14 0.05 0.42 1.04
ADD Increase in Sundry Creditors 3.84 - 10.82
Increase in Other Liabilities 0.002 0.78 1.51 0.015 2.03
Decrease in Inventories 17.67 14 4.28
Decrease in Sundry Debtors 3.18 8.9 0.56
LESS Increase in Inventories 0.68
Increase in Sundry Debtors 1.78 18.9
Decrease in Sundry Creditors 12.76 2.94 0.08
TOTAL CASH AVAILABLE 0.55 4.42 6.76 15.7 6.57
APPLICATION OF CASH
Purchases of Fixed Assets 0.046 2.65 1.51
Loans & Advance 0.31 0.11 1.26 0.45 0.54
Secured Loan 2.7 0.46 4.26
Unsecured Loan 1.5 2.05 15
Central Excise 0.04 0.22
Income Tax 0.07 0.25 0.012 0.055
CLOSING BALANCE
Cash in Hand 0.12 0.06 0.09 0.22 0.2
TOTAL APPLICATION
AVAILABLE
0.55 4.42 6.76 15.7 6.57
65. 65
INTERPRETATION
The above table explains that the beginning of the (2016-2017) opening
balance is in0.61 but in the other year it reduced gradually. So the concern should take
necessary step to overcome the default.
The concern is purchase the fixed assets in the year 2016-2017,2017-
2018,2018-2019,2019-2020,2020-2021 at 0.046,2.65 and 1.51. The concern purchase
high asset in the year 2018-2019 at 2.65 it clearly determine the outflow of cash in the
concern.
The borrowing of concerns high in the year 2018-2019 at 1.26 it indicates that
the concern uses more loan. The concern should reduce to borrow the money from the
various resources. It leads to take more advantage to the borrowers.
The closing balance is not high than the opening balance .it indicates that the
cash is not properly managed in the concern
66. 66
CASH BUDGETING
A firm is well advised to hold adequate cash balance but should avoid
excessive balances. The firm has, therefore, to assess its need for cash properly. The
cash budget is probably the most important tool in cash management. It is device to
help a firm to plan and control the use of cash. It is a statement showing the estimated
cash inflows and cash outflows over the planning horizon. In the other words, the net
cash position of a firm as it moves from one budgeting sub period to another is
highlighted by the cash budget
67. 67
TABLE NO – 4.19
CASH BUDGET
PARTICULARS 2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
a) OPENING CASH
BALANCE
61738 12423 6266 9291 6655
b) Receipts 16315437 18064710 19929244 20520232 23938082
c )Payments 16093407 17892478 19664631 20253149 23608102
d) NET CASH FLOW (b-c) 222030 172232 264613 267083 329980
e) Cumulative Net Cash
Flow
222030 394262 658875 925958 1255938
f) (a+e) 283768 406685 665141 935249 1262593
g) Minimum Cash Balance
Requirement
100000 100000 100000 100000 100000
SURPLUS RELATION TO
THE MINIMUM
CASHBALANCE
REQUIREMENT(F-G)
183768 306685 565141 835249 1162593
INTERPRETATION
In the above table it clearly determines the availability of the cash balance in
the subsequent year. It will clearly determine the minimum cash balance requirement
of the concern. In the 2020-21 leads to higher need of cash balance 11.62 lakhs. The
cash balance is highly required for the day- today transaction.
69. 69
CHAPTER-V
FINDINGS, SUGGESTIONS, AND CONCLUSION
FINDINGS
1. The net working capital of the organization is not satisfactory.
2. The current ratio for the four year it is as per the standard norms (2:1) concept
for the year 2020-21 which is 1.9:1. On an average current ratio is formed to
be satisfactory.
3. Quick ratio of the company is not satisfactory as it is not up to the standard
norms (1:1).
4. Cash turnover ratio is found to be not satisfactory as it is maintain low cash.
5. Debtor turnover ratio is decline indicates it is not satisfactory.
6. Creditor’s turnover ratio showing increasing ratio indicates that the company
is enjoying. Its credit facilities to the possible amount.
7. In the year 2020-21 is leads to higher requirement of cash balance 11.62 lakhs.
8. Cash reflects the liquidity position of the concern is reduced in the year 2020-
2021 is 0.06 lakhs decreasing cash position indicated that the company is not
managing its cash position satisfactorily.
70. 70
SUGGESTION & RECOMMENDATION
The various suggestions are followed after analyzing the main finding of this study.
The cash management of the company is failed to strengthen the cash position
so the company so required to table steps to improve the cash position by
concentrating on receivables, inventories avoiding to much on borrowings.
The company failed to manage the receivable in the normal level because of
poor performance of the collection procedure and inefficient performance
related with managing the receivables.
The inventories play a major role in production. So, the concern should take
measure to maintain the inventories that are required to in order reduce the e
cost, and keep the production flow continuously.
In 2020-21 the net profit is increased compare to the other four year. So the
concern should maintain the same position to improve the net profit.
The cash and bank balance indicate high liquidity position of a company, the
maintain cash including bank balance is at an optimum level and it is enough
to meet day to day requirement.
71. 71
CONCLUSION
The Cash Management Analysis done on the financial position of the
company has provided a clear view on the activities of the company. The use of the
ratio analysis, trend analysis, Cash Flow Statement and other accounting and financial
management helped in this study to find out the financial soundness of the company.
This project was very useful for the judgment of the financial status of the
company from the management point of view. This evaluation proved a great deal to
the management to make a decision on the regulation of the funds to increase the sales
and bring profit to the company.
Before I conclude I wish to convey my thankfulness in regard to the training
given to me in A STUDY ON CASH MANAGEMENT WITH SPECIAL
REFERENCE TO BLUE SAPHIRE PACKAGING SOLUTION PROVIDER
CHENNAI. It gave me extreme satisfaction and practical knowledge of the financial
activities carried out in the company. The kindness, attention, and immense co-
operation extended to me buy all the officials in the company made my project easy
and comfortable. Really it was a very pleasant experience in BLUE SAPHIRE
PACKAGING SOLUTION PROVIDER CHENNAI.
72. 72
BIBLIOGRAPHY
Khan M.Y and P.K. Jani Financial Management, New Delhi, Tata Mc Graw
Hill, 1992.
Dr.S.N. Maheshwari, Principles of Management Accounting.
Prasanna Chandra, Financial Management Theory and Practice
Websites:
Www.wikipedia.com
www.scribed.com
73. 73
BALANCE SHEET
2021 2020 2019 2018 2017
Sources Of Funds
Total Share Capital 63.65 63.65 63.65 63.65 63.65
Equity Share Capital 63.65 63.65 63.65 63.65 63.65
Reserves 3,589.53 3,019.73 2,784.67 2,212.92 1,932.37
Net worth 3,653.18 3,083.38 2,848.32 2,276.57 1,996.02
Secured Loans 1,888.33 1,772.23 2,722.57 2,741.13 2,402.89
Unsecured Loans 65.38 13.58 37.99 1.48 35.68
Total Debt 1,953.71 1,785.81 2,760.56 2,742.61 2,438.57
Total Liabilities 5,606.89 4,869.19 5,608.88 5,019.18 4,434.59
2021 2020 2019 2018 2017
Application Of Funds
Gross Block 5,586.48 5,274.92 5,018.49 4,317.17 3,956.35
Less: Accum. Depreciation 3,098.13 2,778.65 2,243.81 1,981.65 1,761.19
Net Block 2,488.35 2,496.27 2,774.68 2,335.52 2,195.16
Capital Work in Progress 84.83 76.78 84.58 212.9 181.91
Investments 1,005.61 674.17 712.34 559.3 514.72
Inventories 1,809.12 1,636.73 1,871.54 1,499.44 1,315.23
Sundry Debtors 681.93 676.82 735.57 631.92 536.83
Cash and Bank Balance 276.77 175.55 52.75 26.63 58.42
Total Current Assets 2,767.82 2,489.10 2,659.86 2,157.99 1,910.48
Loans and Advances 480.87 568.5 648.72 657.62 377.75
Total CA, Loans &
Advances
3,248.69 3,057.60 3,308.58 2,815.61 2,288.23
Current Liabilities 1,209.43 1,346.81 1,183.63 851.18 704.59
Provisions 11.14 88.82 87.68 52.96 40.84
Total CL & Provisions 1,220.57 1,435.63 1,271.31 904.14 745.43
Net Current Assets 2,028.12 1,621.97 2,037.27 1,911.47 1,542.80
Total Assets 5,606.91 4,869.19 5,608.87 5,019.19 4,434.59
Contingent Liabilities 844.89 962.91 308.97 595.33 735.87
Book Value (Rs) 573.93 484.41 447.48 357.66 313.58
74. 74
PROFIT AND LOSS BALANCE SHEET:
2021 2020 2019 2018 2017
INCOME
Revenue From Operations
[Gross]
5,468.69 5,607.30 5,064.25 4,082.92 3,828.09
Less: Excise/Sevice Tax/Other
Levies
0.54 0.6 0.56 1.06 1.46
Revenue From Operations
[Net]
5,468.15 5,606.70 5,063.69 4,081.86 3,826.63
Other Operating Revenues 118.99 135.34 107.62 77.88 91.37
Total Operating Revenues 5,587.14 5,742.03 5,171.31 4,159.74 3,918.00
Other Income 227.32 158.07 64.58 54.9 60.57
Total Revenue 5,814.46 5,900.10 5,235.89 4,214.64 3,978.57
EXPENSES
Cost Of Materials Consumed 2,667.15 2,900.52 2,512.39 2,096.37 2,200.34
Purchase Of Stock-In Trade 67.15 74.42 57.13 26.9 31.02
Changes In Inventories Of
FG,WIP And Stock-In Trade
12.2 131.03 -229.47 -89.81 126.9
Employee Benefit Expenses 410.38 350.83 320.17 268.34 221.13
Finance Costs 86.85 121.54 151.83 174.35 173.22
Depreciation And Amortisation
Expenses
361.92 488.85 294.13 253.86 234.67
Other Expenses 1,344.16 1,343.65 1,250.34 1,029.80 845.83
Total Expenses 4,949.82 5,410.83 4,356.51 3,759.80 3,833.11
2015 2014 2013 2012 2011
Profit/Loss Before
Exceptional, ExtraOrdinary
Items And Tax
864.64 489.27 879.38 454.84 145.46
Profit/Loss Before Tax 864.64 489.27 879.38 454.84 145.46
Tax Expenses-Continued Operations
Current Tax 221.82 186 188.5 106.82 29.75
Deferred Tax -10.23 -55.84 39 24.29 6.05
Total Tax Expenses 211.59 130.16 227.5 131.11 35.79
Profit/Loss After Tax And
Before ExtraOrdinary Items
653.05 359.11 651.88 323.73 109.67
Profit/Loss From Continuing
Operations
653.05 359.11 651.88 323.73 109.67
Profit/Loss For The Period 653.05 359.11 651.88 323.73 109.67
Continued …..
75. 75
2021 2020 2019 2018 2017
OTHER ADDITIONAL
INFORMATION
EARNINGS PER SHARE
Basic EPS (Rs.) 102.6 56.42 102.41 50.86 17.23
Diluted EPS (Rs.) 102.6 56.42 102.41 50.86 17.23
VALUE OF IMPORTED AND
INDIGENIOUS RAW MATERIALS
Imported Raw Materials 246.4 210.74 209.9 157.46 116.18
Indigenous Raw Materials 2,415.13 2,680.76 2,322.24 1,949.04 2,070.31
STORES, SPARES AND LOOSE
TOOLS
Imported Stores And Spares 57.6 83.05 54.86 50.16 46.78
Indigenous Stores And Spares 370.6 341.56 327.92 259.11 154.7
DIVIDEND AND DIVIDEND
PERCENTAGE
Equity Share Dividend 95.48 63.65 70.02 38.19 28.64
Tax On Dividend 1.08 13.32 10.11 6.49 4.65
Equity Dividend Rate (%) 150 100 110 60 45
