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INTRODUCTIONWorking capital can be regarded as the circulatory system of any business. The success andefficiency of busine...
Definition:   1.     “Working      capital refers to a firm’s investment in short term assets, such as cash          amoun...
INDUSTRY PROFILE      The chemical industry comprises the companies that produceindustrial chemicals. Central to the moder...
home construction, containers, appliances, pipe, transportation, toys, andgames.   The largest-volume polymer product, po...
Life sciences (about 30 percent of the dollar output of the chemistry business)include differentiated chemical and biologi...
The largest corporate producers worldwide, each with plants in numerouscountries,include BASF, Bayer, Braskem, Celanese/Ti...
As accepted by chemical engineers, the chemical industry involves the useof chemical processes such as chemical reactions ...
oleochemicals         lard, soybean oil, stearic acidexplosives            nitroglycerin, ammonium nitrate, nitrocellulose...
building "integrated learning bases" (or organizational capabilities) whichenabled them to develop, produce, distribute, a...
Bayer, AG, Leverkusen, Germany                     $24.2   8Mitsubishi Chemical, Tokyo, Japan                  $22.2   9Ak...
Just as companies emerge as the main producers of the chemical industry,we can also look on a more global scale to how ind...
111. 117. 121. 138.France        79.1 78.5 76.5 76.8 80.5 99.6                       158.9                                ...
Russia         23.8 24.6 27.4 29.1 30.3 33.4 37.5 40.9 53.1 63.0 77.6Other          22.3 20.3 21.9 23.4 25.3 31.4 39.6 46....
Other               24.8   29.1   30.9   30.8   33.3   38.8   45.5   52.9   62.9   72.2   90.8Asia/Pacific                ...
COMPANY PROFILE                R.P Agro tech Limited entered the Agrochemical& pharmaceuticalindustry in 1973 founded by M...
chlorpyriphos, quinalphos, captan, folpet, thiophosgene and Tolnaftate etc.are someof The major contribution of the R&D ef...
Thiophosgenation:-Production and use of ThiophosgeneFor down stream reactions for Parma Intermediates/APIS etc.Nitration:-...
Brine System:-150TR at-10OcNitrogen Plant:-10m3/hrStand by power Generator:-1000KVAHot oil system Dow herm:-2 Nos., 2, 00,...
Fungicides:-Captan Technical 92% min.         Insecticides:-Captan 50% WPCaptan 80% WP                  Chlorpyriphos Tech...
Rubber chemicalsTetra Methyl Thiram Disulphide (TMTD)Zinc Diethyl Dithio Carbamate(ZDEC)Zinc Dimethyl Dithio Carbamate(ZDM...
Ziram 90% WPZiram 92% WDGPharmaceuticals:-APIS/Bulk Drugs:- 1.Lindane(Gamma Benzene Hexa Chloride)IP/BP/USP 2.Tolnaftate:-...
NEED FOR THE STUDYThe concept of working capital has gained vital role in the business activity of anyfirm. It’s difficult...
SCOPE OF THE STUDYAn extensive study is done the investment made by R.P.AGRO TECH PVT.LTD.,Industrial Corporation, on its ...
OBJECTIVES OF THE STUDYThe main aim of the study is to analyse the short term financial performanceof     R.P.AGRO TECH PV...
RESEARCH METHODOLOGY      The data obtained for study as to be divided in to two groups.          1. Primary data         ...
LIMITATION OF THE STUDY1.   Entire study is based on the financial statement of R.P.AGRO     TECH PVT. LTD.,. The study is...
WORKING CAPITAL MANAGEMENTIntroduction:      Working capital is the life blood and nerve centre of a business. Just as cir...
an accounting period to generate a current income of a type which is consistent with majorpurpose of a firm existence.Impo...
4. To provide credit facilities to customers etc.Factors that determine working capital:The working capital requirement of...
A. Permanent working capital:       It refers to that minimum amount of investment in all current assets which is       re...
Rate of return on investments also fall with the shortage of working capital.       • Excess working capital may result in...
The firm’s profitability is measured by profits after expenses. The term risk is defined as thatprobability that a firms w...
Any amount over and above the permanent level of working capital needed is to meetfluctuating or variable working capital....
One of the major cause of change in the level of working capital is policy changes initiatedby the management. The firm ha...
A growing firm may need to invest funds in fixed assets in order to sustain its growingproduction and sales. This will in ...
AVAILABILITY OF CREDIT:The working capital requirements of the firm are also affected by credit terms granted by itscredit...
After establishing the level of current assets, the firms must determine how these should befinanced. What mix of long-ter...
B. Sources of short term or seasonal working capital. Sources of long term or regular working capital:The long term workin...
The source of short term working capital may be classified in two heads.  A. Internal sources  B. External sources        ...
Creditors provide short-term financial position to the company by selling the goods, inventories    and equipment on the b...
Central and state governments of the country provide short term finance to industries or  business by allowing tax concess...
The basic goal of working capital management is to manage each of the funds current    assets and current liabilities in s...
The balance sheet method of forecasting is made up of the various assets and liabilities      of the business. After wards...
salesWorking capital turnover ratio= Net working capitalWorking capital cycle (or)Operating cycle:                        ...
1. Conversion of cash into raw materials.     2. Conversion of raw materials into works-in-process.     3. Conversion of w...
The term inventory management refers to the stockpile of the products affirm is    offering for sale and the components th...
The most commonly used tools of inventory management in India are ABC analysis, FSN  analysis, and inventory turnover anal...
1.TRANSACTION MOTIVE:The refers to holding of cash to meet routine cash requirements to finance the transaction,which a fi...
approach. Firms aim to exploit profitable opportunities and keep cash in reserve to do so thespeculative motive helps to m...
On the other hand the firm’s decision about when to pay its bills involves accounts payableand accrual management. he vari...
lubricate the ever turning wheels of business without it the process grids to a stop a basicsobjectives of cash management...
The receivable management is represent an important component of current assets of a firm.The term receivable is defined a...
to show down the payments of accounts payable may result in saving of some interest costsbut it can prove very costly to t...
RATIO ANAYSIS:It is essential for a firm to be meet its obligations as they becomes due. Liquidity ratiosmeasure the abili...
Current liabilitiesCurrent assets include cash and those assets which can be converted in to cash within a year,such as ma...
Current liabilitiesACTIVITY RATIO:Funds of creditors and owners and are invested in various assets to generate sales and p...
RECEIVABLE TURNOVER RATIO:It is also known as debtor’s turnover ratio. It establishes relationships between credit salesan...
TABLE: 1
STATEMENT OF CHANGES IN WORKING CAPITAL FROM 2007-2008                        As on  Particulars         31-3-2007        ...
TABLE:2       STATEMENT OF CHANGES IN WORKING CAPITAL FROM 2008-2009                           As on             As on    ...
TABLE:3        STATEMENT OF CHANGES IN WORKING CAPITAL FROM 2009-2010                      As on             As on        ...
TABLE: IV.4STATEMENT OF CHANGES IN WORKING CAPITAL FROM: 2010-11                                                          ...
TABLE: 5STATEMENT OF CHANGES IN WORKING CAPITAL FROM 2011-2012.                        As on            As on            E...
CURRENT RATIO:Current assets include cash and those assets which can be converted in to cash within a year,such as marketa...
GRAPH-1THE BELOW GRAPH SHOWN THE CURRENT RATIO                                   CURRENT RATIO   3  2.5   2  1.5          ...
QUICK RATIO:  Quick ratio establishes a relationship between quick or liquid assets and current liabilities.An assets is l...
GRAPHICAL REPRESENTATION:                          QUICK RATIO   2.5    2   1.5                                           ...
WORKING CAPITAL TURNOVER RATIO:Working capital of a concern is directly related to sales, the current assets like debtors,...
TABE-3        YEAR        SALES      NET WORKING       RATIO                                 CAPITAL      2007-08      356...
INTERPRETATION:    In the year 2007-08 the working capital turnover ratio is increased to    0.065 this is the biggest rat...
CURRENT ASSESTS TURNOVER RATIO :CURRENT ASSESTS TURNOVER RATIO =      SALES                                   CURRENT ASSE...
GRAPH:4                   CURRENT ASSESTS TURNOVER RATIO    0.09    0.08    0.07    0.06    0.05                          ...
DEBTORS TURNOVER RATIO:       This ratio indicates debtors constitute an important constituent of current assets andtheref...
DEBTORS TURNOVER RATIO             9             8             7             6                                            ...
AVERAGE COLLECTION PERIOD:                                                DebtorsAverage collection period      =---------...
AVERAGE COLLECTION PERIOD  100%   90%   80%   70%   60%   50%                                                             ...
FIXED ASSESTS TURNOVER RATIO:FIXED ASSESTS TURNOVER RATIO =         SALES                                  ---------------...
THE FIXED ASSESTS TURNOVER RATIO                  FIXED ASSESTS TURNOVER RATIO           100%            90%            80...
NET WORKING CAPITAL TURNOVER RATIO:NET WORKING CAPITAL RATIO =    NET WORKING CAPITAL                                   NE...
GRAPH:7            NET WORKING CAPITAL RATIO 6 5 4 3 2 1 0      2007-08      2008-09       2009-10      2010-11       2011...
Prathap working capital
Prathap working capital
Prathap working capital
Prathap working capital
Prathap working capital
Prathap working capital
Prathap working capital
Prathap working capital
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Prathap working capital
Prathap working capital
Prathap working capital
Prathap working capital
Prathap working capital
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Prathap working capital

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Prathap working capital

  1. 1. INTRODUCTIONWorking capital can be regarded as the circulatory system of any business. The success andefficiency of business enterprise depends largely on its ability to manage its working capital.Even a well established business concern, needs careful attention for effective managementof working capital .working capital is the one of the important facts of a firm’s over allfinancial management and whatever may be the size of business, working capital is its lifeblood. Working capital management is concerned with the problems that arise in attemptingto manage the current assets, current liabilities and the inter relationship that exist betweenthem. The current assets refer to those assets, which in the ordinary course of business can beconverted in to cash within one year without undergoing a dimension in value, currentliabilities are those liabilities, which are intended at the inception, to be paid in the ordinarycourse of business, within a year, out of current assets. The basic objective of working capitalmanagement is to put current assets to optimum use for overall profitability of a businessenterprise. If the firms maintain a satisfactory level of working capital it’s likely to becomeinsolvent and may even be forced to bankruptcy. The effective management of a workingcapital requires both medium term planning and intermediate reaction to change in forecastand conditions. The current assets should be managed in such a way that it should cover itscurrent liabilities in order to ensure a reasonable margin safety. Therefore the interaction,between the current assets and current liabilities is the main theme of the theory of workingcapital management.
  2. 2. Definition: 1. “Working capital refers to a firm’s investment in short term assets, such as cash amounts receivable, investments etc.” ___Weston & Brigham. 2. “The sum of the current assets is the working capital of the business.” _____J.S.Mill.Importance of working capital: Some time, If creditors demands their money from company, at this time companyshigh working capital saves company from this situation . You know that selling of currentassets are easy in small period of time but Company can not sell their fixed assets with insmall period of time. So, If Company have sufficient working capital , Company can easilypay off the creditors and create his reputation in market . But If a company have zero workingcapital and then company can not pay creditors in emergency time and either companybecomes bankrupt or takes loan at higher rate of Interest . In both condition , it is verydangerous and always Companys Account Manager tries to keep some amount of workingcapital for creating goodwill in market .Positive working capital enables also to pay day to day expenses like wages, salaries,overheads and other operating expenses. Because sufficient working capital can not only paymaturity liabilities but also outstanding liabilities without any more delay.One of advantages of positive working capital that Company can do every risky work withoutany tension of self security
  3. 3. INDUSTRY PROFILE The chemical industry comprises the companies that produceindustrial chemicals. Central to the modern world economy, it converts rawmaterials (oil, natural gas, air, water, metals, and minerals) into more than70,000 different products.ProductsPolymers and plastics, especially polyethylene, polypropylene, polyvinylchloride, polyethylene terephthalate, polystyrene and polycarbonate compriseabout 80% of the industry’s output worldwide.[citation needed] Chemicals are usedto make a wide variety of consumer goods, as well as thousands inputs toagriculture, manufacturing, construction, and service industries. The chemicalindustry itself consumes 26 percent of its own output.[citation needed] Majorindustrial customers include rubber and plastic products, textiles, apparel,petroleum refining, pulp and paper, and primary metals. Chemicals is nearly a$3 trillion global enterprise, and the EU and U.S. chemical companies are theworlds largest producers.[citation needed]Product category breakdownSales of the chemical business can be divided into a few broad categories,including basic chemicals (about 35 to 37 percent of the dollar output), lifesciences (30 percent), specialty chemicals (20 to 25 percent) and consumerproducts (about 10 percent).]Basic chemicalsBasic chemicals, or "commodity chemicals" are a broad chemical categoryincluding polymers, bulk petrochemicals and intermediates, other derivativesand basic industrials, inorganic chemicals, and fertilizers. Typical growth ratesfor basic chemicals are about 0.5 to 0.7 times GDP.[citation needed] Product pricesare generally less than fifty cents per pound.[citation needed]Polymers, the largest revenue segment at about 33 percent of the basicchemicals dollar value, includes all categories of plastics and man-madefibers.[citation needed] The major markets for plastics are packaging, followed by
  4. 4. home construction, containers, appliances, pipe, transportation, toys, andgames. The largest-volume polymer product, polyethylene (PE), is used mainly in packaging films and other markets such as milk bottles, containers, and pipe. Polyvinyl chloride (PVC), another large-volume product, is principally used to make pipe for construction markets as well as siding and, to a much smaller extent, transportation and packaging materials. Polypropylene (PP), similar in volume to PVC, is used in markets ranging from packaging, appliances, and containers to clothing and carpeting. Polystyrene (PS), another large-volume plastic, is used principally for appliances and packaging as well as toys and recreation. The leading man-made fibers include polyester, nylon, polypropylene, and acrylics, with applications including apparel, home furnishings, and other industrial and consumer use.The principal raw materials for polymers are bulk petrochemicals.[citation needed]Chemicals in the bulk petrochemicals and intermediates are primarily madefrom liquefied petroleum gas (LPG), natural gas, and crude oil. Their salesvolume is close to 30 percent of overall basic chemicals.[citation needed] Typicallarge-volume productsinclude ethylene, propylene, benzene, toluene,xylenes, methanol, vinylchloride monomer (VCM), styrene, butadiene, and ethylene oxide. Thesechemicals are the starting points for most polymers and other organicchemicals as well as much of the specialty chemicals category.Other derivatives and basic industrials include syntheticrubber, surfactants, dyes and pigments, turpentine, resins, carbonblack, explosives, and rubber products and contribute about 20 percent of thebasic chemicals external sales.Inorganic chemicals (about 12 percent of the revenue output) make up theoldest of the chemical categories. Products include salt, chlorine, causticsoda, soda ash, acids (such as nitric acid,phosphoric acid, and sulfuricacid), titanium dioxide, and hydrogen peroxide.Fertilizers are the smallest category (about 6 percent) andinclude phosphates, ammonia, and potash chemicals.Life sciences
  5. 5. Life sciences (about 30 percent of the dollar output of the chemistry business)include differentiated chemical and biological substances, pharmaceuticals,diagnostics, animal health products, vitamins, and pesticides. While much smallerin volume than other chemical sectors, their products tend to have very highprices—over ten dollars per pound—growth rates of 1.5 to 6 times GDP, andresearch and development spending at 15 to 25 percent of sales. Life scienceproducts are usually produced with very high specifications and are closelyscrutinized by government agencies such as the Food and DrugAdministration. Pesticides, also called "crop protection chemicals", are about10 percent of this category and include herbicides, insecticides,and fungicides.[citation needed]Specialty chemicalsSpecialty chemicals are a category of relatively high valued, rapidly growingchemicals with diverse end product markets. Typical growth rates are one tothree times GDP with prices over a dollar per pound. They are generallycharacterized by their innovative aspects. Products are sold for what they cando rather than for what chemicals they contain. Products include electronicchemicals, industrial gases, adhesives and sealants as well as coatings,industrial and institutional cleaning chemicals, and catalysts. Coatings makeup about 15 percent of specialty chemicals sales, with other products rangingfrom 10 to 13 percent.[citation needed] Specialty Chemicals are sometimes referredto as "fine chemicals"Consumer productsConsumer products include direct product sale of chemicals suchas soaps, detergents, and cosmetics. Typical growth rates are 0.8 to 1.0 timesGDP.Every year, the American Chemistry Council tabulates the U.S. productionvolume of the top 100 basic chemicals. In 2000, the aggregate productionvolume of the top 100 chemicals totalled 502 million tons, up from 397 milliontons in 1990. Inorganic chemicals tend to be the largest volume, though muchsmaller in dollar revenue terms due to their low prices. The top 11 of the 100chemicals in 2000 were sulfuric acid (44 milliontons), nitrogen (34), ethylene (28), oxygen (27), lime (22), ammonia (17), propylene (16), polyethylene (15), chlorine (13), phosphoric acid (13)and diammonium phosphates(12).Companies
  6. 6. The largest corporate producers worldwide, each with plants in numerouscountries,include BASF, Bayer, Braskem, Celanese/Ticona, Degussa, Dow, DuPont, Eastman Chemical Company,ExxonMobil, INEOS, Mitsubishi, PPGIndustries, SABIC and Shell, along with thousands of smaller firms.In the U.S. there are 170 major chemical companies.[citation needed] They operateinternationally with more than 2,800 facilities outside the U.S. and 1,700foreign subsidiaries or affiliates operating. The U.S. chemical output is $750billion a year. The U.S. industry records large trade surpluses and employsmore than a million people in the United States alone. The chemical industryis also the second largest consumer of energy in manufacturing and spendsover $5 billion annually on pollution abatement.In Europe, especially Germany, the chemical, plastics and rubber sectors areamong the largest industrial sectors.[citation needed] Together they generate about3.2 million jobs in more than 60,000 companies. Since 2000 the chemicalsector alone has represented 2/3 of the entire manufacturing trade surplus ofthe EU. The chemical sector accounts for 12% of the EU manufacturingindustrys added value.The chemical industry has shown rapid growth for more than fifty years. [citationneeded] The fastest-growing areas have involved the manufacture ofsynthetic organic polymers used as plastics, fibres andelastomers. Historicallyand presently the chemical industry has been concentrated in three areas ofthe world, Western Europe, North America and Japan (the Triad). TheEuropean Community remains the largest producer area followed by the USAand Japan.The traditional dominance of chemical production by the Triad countries isbeing challenged by changes in feedstock availability and price, labour cost,energy cost, differential rates of economic growth and environmentalpressures. Instrumental in the changing structure of the global chemicalindustry has been the growth in China, India, Korea, the Middle East, SouthEast Asia, Nigeria, and Brazil.TechnologyThis is a process diagram of a turbine generator. Knowing how to design asustainable process in which the system can withstand or manipulate processhalting conditions such as; heat, fiction, pressure, emissions, contaminants, isessential for engineers working to produce a sustainable process for use inthe chemical industry.
  7. 7. As accepted by chemical engineers, the chemical industry involves the useof chemical processes such as chemical reactions and refining methods toproduce a wide variety of solid, liquid, and gaseous materials. Most of theseproducts are used in manufacture of other items, although a smaller numberare used directly by consumers. Solvents, pesticides, lye, washing soda,and portland cement are a few examples of product used by consumers.The industry includes manufacturers of inorganic- and organic-industrialchemicals, ceramic products, petrochemicals, agrochemicals, polymers andrubber (elastomers), oleochemicals (oils, fats, and waxes), explosives,fragrances and flavors. Examples of these products are shown in the Tablebelow.The novel chemical reactor reduces the amount of solvents used from 1000litres to just 4 litres.Product Type Examplesinorganic industrial ammonia, nitrogen, sodium hydroxide, sulfuric acid, nitric acidorganic industrial acrylonitrile, phenol, ethylene oxide, ureaceramic products silica brick, fritpetrochemicals ethylene, propylene, benzene, styreneagrochemicals fertilizers, insecticides, herbicidespolymers polyethylene, Bakelite, polyesterelastomers polyisoprene, neoprene, polyurethane
  8. 8. oleochemicals lard, soybean oil, stearic acidexplosives nitroglycerin, ammonium nitrate, nitrocellulosefragrances and flavors benzyl benzoate, coumarin, vanillinAlthough the pharmaceutical industry is often considered[who?] a chemicalindustry , it has many different characteristics that puts it in a separatecategory. Other closely related industriesinclude petroleum, glass, paint, ink, sealant, adhesive, and foodprocessing manufacturers.Chemical processes such as chemical reactions are used in chemicalplants to form new substances in various types of reaction vessels. In manycases the reactions are conducted in special corrosion resistant equipment atelevated temperatures and pressures with the use of catalysts. The productsof these reactions are separated using a variety of techniquesincluding distillation especially fractionaldistillation, precipitation, crystallization, adsorption, filtration,sublimation,and drying.The processes and product or products are usually tested during and aftermanufacture by dedicated instruments and on-site qualitycontrol laboratories to ensure safe operation and to assure that the productwill meet required specifications. The products are packaged and delivered bymany methods, including pipelines, tank-cars, and tank-trucks (for both solidsand liquids), cylinders, drums, bottles, and boxes. Chemical companies oftenhave a research and development laboratory for developing and testingproducts and processes. These facilities may include pilot plants, and suchresearch facilities may be located at a site separate from the productionplant(s).HistoryChandler (2005) argues the relative success or failure of American andEuropean chemical companies is explained with reference to three themes:"barriers to entry," "strategic boundaries," and "limits to growth." He sayssuccessful chemical firms followed definite "paths of learning" whereby firstmovers and close followers created entry barriers to would-be rivals by
  9. 9. building "integrated learning bases" (or organizational capabilities) whichenabled them to develop, produce, distribute, and sell in local and thenworldwide markets. Also they followed a "virtuous strategy" of reinvestment ofretained earnings and growth through diversification, particularly to utilize"dynamic" scale and scope economies relating to new learning in launching"next generation" products.Companies in the 21st centuryThe chemical industry includes large, medium, and small companies locatedworldwide. Companies with sales of chemical products greater than $10 billiondollars in fiscal year 2007 appear listed below. For some of these companiesthe chemical sales might represent only a portion of their total sales; (forexample ExxonMobils chemical sales covered only 8.7 percent of their totalsales in 2005). 2007 Chemical Sales,COMPANY, HEADQUARTERS Rank Country billions[1]BASF SE, Ludwigshafen, Germany $65.3 1Dow Chemical, Midland, Michigan, United $53.5 2StatesINEOS, Lyndhurst, UK $43.6 3LyondellBasell, Houston, Texas, United States $42.8 4Formosa Plastics, Taiwan $31.9 5DuPont, Wilmington, Delaware, United States $28.5 6Saudi Basic Industries Corporation, Riyadh, $26.4 7Saudi Arabia
  10. 10. Bayer, AG, Leverkusen, Germany $24.2 8Mitsubishi Chemical, Tokyo, Japan $22.2 9Akzo Nobel/Imperial Chemical Industries(ICI), $19.9 10Amsterdam/LondonAir Liquide, Paris, France $16.3 11Sumitomo Chemical, Tokyo, Japan $15.2 12Evonik Industries, AG, Essen, Germany $15.0 13Mitsui Chemicals, Tokyo, Japan $14.3 14Asahi Kasei, Tokyo, Japan $13.8 15Toray Industries, Tokyo, Japan $13.1 16Chevron Phillips, The Woodlands, Texas, $12.5 17United StatesDSM NV, Heerlen, Netherlands $12.1 18PPG Industries, Pittsburgh, Pennsylvania, $11.2 19United StatesShin-Etsu Chemical Co., Ltd., Tokyo, Japan $11.1 20
  11. 11. Just as companies emerge as the main producers of the chemical industry,we can also look on a more global scale to how industrialized countries rank,with regards to the billions of dollars worth of production a country or regioncould export. Though the business of chemistry is worldwide in scope, thebulk of the world’s $3.7 trillion chemical output is accounted for by only ahandful of industrialized nations. The United States alone produced $689billion, 18.6 percent of the total world chemical output in 2008.GlobalChemicalShipments by 1998 1999 2000 2001 2002 2003 2004 2005 2006 2008 2009Country/Region (billions ofdollars)[2]United States 416. 420. 449. 438. 462. 487. 540. 610. 657. 664. 689.3of America 7 3 2 4 5 7 9 9 7 1Canada 21.1 21.8 25.0 24.8 25.8 30.5 36.2 40.2 43.7 45.4 47.4Mexico 19.1 21.0 23.8 24.4 24.3 23.5 25.6 29.2 32.0 33.4 37.8North 456. 463. 498. 487. 512. 541. 602. 680. 733. 742. 774.6America 9 1 0 6 6 7 7 3 4 8Brazil 46.5 40.0 45.7 41.5 39.6 47.4 60.2 71.1 82.8 96.4 126.7Other 59.2 58.1 60.8 63.4 58.6 62.9 69.9 77.2 84.6 89.5 102.1Latin 105. 106. 104. 110. 130. 148. 167. 185. 98.1 98.2 228.8America 7 5 9 3 0 3 4 9
  12. 12. 111. 117. 121. 138.France 79.1 78.5 76.5 76.8 80.5 99.6 158.9 1 5 3 4 124. 123. 118. 116. 120. 148. 168. 178. 192. 229.Germany 263.2 9 2 9 1 1 1 6 6 5 5 105.Italy 63.9 64.6 59.5 58.6 64.5 75.8 86.6 89.8 95.3 122.9 9United 107. 118. 70.3 70.1 66.8 66.4 69.9 77.3 91.3 95.2 123.4Kingdom 8 2Belgium 27.1 27.0 27.5 27.1 28.7 36.1 41.8 43.5 46.9 51.6 62.6Ireland 16.9 20.1 22.6 22.9 29.1 32.3 33.9 34.9 37.5 46.0 54.8Netherlands 29.7 29.4 31.3 30.6 32.2 40.1 49.0 52.7 59.2 67.9 81.7Spain 31.0 30.8 30.8 31.9 33.4 42.0 48.9 52.7 56.7 63.7 74.8Sweden 11.1 11.4 11.2 11.0 12.5 15.9 18.2 19.3 21.2 21.2 22.6Switzerland 22.1 22.2 19.4 21.1 25.5 30.3 33.8 35.4 37.8 42.7 53.1Other 27.1 26.8 25.9 26.4 27.9 33.5 38.6 42.9 46.2 50.3 58.9Western 503. 504. 490. 488. 524. 630. 721. 762. 822. 935. 1,076.Europe 1 0 4 8 4 9 9 7 4 4 8
  13. 13. Russia 23.8 24.6 27.4 29.1 30.3 33.4 37.5 40.9 53.1 63.0 77.6Other 22.3 20.3 21.9 23.4 25.3 31.4 39.6 46.2 55.0 68.4 87.5Central/Easter 46.1 44.9 49.3 52.5 55.6 64.8 77.1 87.1 108.0 131.3 165.1n EuropeAfrica & 52.7 53.2 59.2 57.4 60.4 73.0 86.4 99.3 109.6 124.2 160.4Middle EastJapan 193.8 220.4 239.7 208.3 197.2 218.8 243.6 251.3 248.5 245.4 298.0Asia-Pacificexcluding 215.2 241.9 276.1 271.5 300.5 369.1 463.9 567.5 668.8 795.5 993.2JapanChina 80.9 87.8 103.6 111.0 126.5 159.9 205.0 269.0 331.4 406.4 549.4India 30.7 35.3 35.3 32.5 33.5 40.8 53.3 63.6 72.5 91.1 98.2Australia 11.3 12.1 11.2 10.8 11.3 14.9 17.0 18.7 19.1 22.8 27.1Korea 39.3 45.5 56.3 50.4 54.9 64.4 78.7 91.9 103.4 116.7 133.2Singapore 6.3 8.5 9.5 9.4 12.5 16.1 20.0 22.0 25.8 28.9 31.6Taiwan 21.9 23.7 29.2 26.8 28.4 34.3 44.5 49.5 53.8 57.4 62.9
  14. 14. Other 24.8 29.1 30.9 30.8 33.3 38.8 45.5 52.9 62.9 72.2 90.8Asia/Pacific 1041.Asia/Pacific 409.0 462.3 515.7 479.7 497.7 587.8 707.5 818.8 917.3 1291.2 0Total world 1573. 1625. 1719. 1670. 1748. 2008. 2325. 2596. 2858. 3160. 3696.8shipments 5 5 0 9 8 5 6 4 1 7
  15. 15. COMPANY PROFILE R.P Agro tech Limited entered the Agrochemical& pharmaceuticalindustry in 1973 founded by Mr. Anand swarup Augural an industrialist with a strongvision for future growth now a multiproduct multicoated company which includes aleading Hindi daily RASHTRIYA SWAROOP. The company’s manufacturing facilitiesand their corporate office at Luck now are manned by highly qualified, adequatelyexperienced professionals and scientists in addition to a committed team ofemployees which include skilled and semiskilled work force with competentupcountry operations are manned by competent marketing professionals andsupports staff located in company’s relational/branch offices based at all the regionsof India well known productsCAPTEN,FOLPET,LINDANE,THIRAM,CHLORPYRIPHOS,TOLNAFTATE,RUBBER,CHEMICALS, DYE, INTERMEDIATES ETC. R.P Argotic Ltd enjoys a very healthy management-workerrelationship reflecting high standards of industrial relations, through constantimplementation of excellent staff welfare programmes.The employees in turn are ahighly motivated term committed to the goals of organization with special emphasison superior quality and customer satisfaction. R.P.Agrotech Ltd has its own R&D department to the development ofinnovative chemical technologies for specialty and bulk Agrochemicals and BulkDrugs. With its focused R&D effort in the recent past, it has been able toimprove the process condition for existing products resulting in better product andhas developed process conductions for other Agrochemicals of largeusage.Development of technology for Mancoze2, 4, 5, Ttrichloroaniline, DDV,
  16. 16. chlorpyriphos, quinalphos, captan, folpet, thiophosgene and Tolnaftate etc.are someof The major contribution of the R&D efforts.R.P. Pesticides Ltd has a sprawling complex at the UPSIDC Industrial Area at chinhat,at the outskirts of Lucknow City which is ideally situated in terms of operationallogistics. The state-of-art manufacturing complex in equipped with modern plant andmachinery with other highly sophisticated facilities to produce high quality technicalgrade products,based on technologies from internationally known institutions as likethe R.p.Agro chemicals Technology. The product portfolio consists of MonocrotophosTechnical, Lindens Technical and their formulations, Dichlorobenzene and 1, 2, 4-Trichlorobenzene. The complex also has a sophisticated granular formulation plant tomanufacture savido14.4G (Carbyl+Lindane) a specialist combination products undera special agreements with Bayer Crop science Ltd. The complex also has a wellequipped quality assurance laboratory with Gas Chromatographs, Ultra violet visiblespectrophotometer, Karl-Fischer apparatus, Roto Vacuum driers etc. For monitoringquality right form raw material to the finished product at every stage. As far as R.P.Agro tech Ltd concerned, it has a good future because ofquality parameters that are ideal without incurring losses in the process andcompromising the capacity utilization.ReactionChlorination:-We have facilities for photo chlorination, normal chlorination etc the turn of about20 to30 tones of chlorine consumption for Agro & Parma intermediates
  17. 17. Thiophosgenation:-Production and use of ThiophosgeneFor down stream reactions for Parma Intermediates/APIS etc.Nitration:-Using Nitric& Sulphuric AcidReduction:-Using IronAminolysis:-Infrastructure FacilitiesBoiler:-1st 6Tones per Hr.Capacity2nd 2Tones per Hr.CapacityChilled Water System:-Cumulative Capacity Available500TR at 6-7oCBrine System:-70TR at-35Oc
  18. 18. Brine System:-150TR at-10OcNitrogen Plant:-10m3/hrStand by power Generator:-1000KVAHot oil system Dow herm:-2 Nos., 2, 00,000 Kcal/hrWorkshop:-For day to day MaintenanceAnalyticallab:-GLC’S: 3 Nos.HPLC: 1 No.UV Spectra Photometer: 1 No.Karl Fischer: Nos.Other Facility for volumetric and Gravimetric AnalysisIn-house R&D Gram Lab. Kg Lab. Semi Commercial pilot plant Equipped with all Separate utilities like chilled water, Boiler waters, Vaccum system & DG etc.
  19. 19. Fungicides:-Captan Technical 92% min. Insecticides:-Captan 50% WPCaptan 80% WP Chlorpyriphos Technical 97% minCaptan 80% WDG Chlorpyriphos 20% ECFolpet Technical 95% min. DDVP Technical 97% min.Folpet 50% WP DDVP 76%ECFolpet 80% WPFolpet 80% WDG Lindane Technical 99.5% min.Folpet 75% WP Lindane 20%EC, Lindane 6%5-Nitroisophthalic A(5-NIPA)Hexa Fluoro BenzeneThiophosgeneBNTCF (BetaNaphthylThioChloroFormate)Tetra Methyl Thiram MonosulfideN N Di Methyl Carbamoyl ChlorideDi Methyl Carbamoyl ChlorideBiotech Products 1.Alien 98:-The broad spectrum Biocide for fungus control 2. Cucurmin Powder
  20. 20. Rubber chemicalsTetra Methyl Thiram Disulphide (TMTD)Zinc Diethyl Dithio Carbamate(ZDEC)Zinc Dimethyl Dithio Carbamate(ZDMC)Zinc Dibutyl Dithio Carboamate(ZDBC)Sodium Dimethyl Ditjio Carbamate(SDMDC)Hexa Chloro Benzene(HCB)Dye IntermediatesTrichiorobenzene(TCB)-Commerical Grade1, 2, 4 trichlorobenzene 99.5% min.2, 4, 5 Trichloroaniline 99% min1, 2, 4 Trichloro-5-nitro benzeneHexachlorobenzene 99%Febam technical Lindane 4% + Carbaryl 4%Febam 76%WP Monocrotophos Technical 73% min.Thiram Technical 95%min. Monocrotophos 36%SLThiram 75% WPThiram 80% WP Quinalphos Technical 70% min.Thiram 70% WDG Quimalphos 25%ECZiram Techinal 95% min. Phosphamidon Technical 92% minZiram 27% CS Phosphamidon 40%SLZiram 80% WP
  21. 21. Ziram 90% WPZiram 92% WDGPharmaceuticals:-APIS/Bulk Drugs:- 1.Lindane(Gamma Benzene Hexa Chloride)IP/BP/USP 2.Tolnaftate:-BP/USP 3.Captan(Technical)Pharma Intermediates:-PhthalidePhthalimidePotassium Phthalimide4-Nitro Phthalimide4-Amino phthalimide5-Amino phthalide5-Bromo phthalide5-Cyano phthlide2-Mercapto Benzimidazole5-Methoxy 2-MBI
  22. 22. NEED FOR THE STUDYThe concept of working capital has gained vital role in the business activity of anyfirm. It’s difficult to find a firm without any amount of working capital. However, thecomposition of working capital may vary for different firms. It is the base for thecompany to earn sufficient sale activity. Working capital management is a significantfact of financial management. Two major reasons underline the important of scope ofthe working capital management which areA substantial portion of total investment is represented in the investment of currentassets.Quick changes in sales have to be geared up by investment in current assets andthe level of the current liabilities.
  23. 23. SCOPE OF THE STUDYAn extensive study is done the investment made by R.P.AGRO TECH PVT.LTD.,Industrial Corporation, on its working capital and the factors determining thatinvestment. Also the study concentrates on the liquidity positions of the firm, and abrief study is made on the techniques used by firms for the management of itscurrent assets and the sources through which the finance for working capital isavailed for the firm.
  24. 24. OBJECTIVES OF THE STUDYThe main aim of the study is to analyse the short term financial performanceof R.P.AGRO TECH PVT. LTD.,. In addition to following are the objectives ofthe present study. To review the growth and working of the company during the last 5 years 2007-2012 is required. To measure the financial strength of R.P.AGRO TECH PVT. LTD., during the period of study. To evaluate the working capital management of R.P.AGRO TECH PVT. LTD., Finally to suggest the measure for more effective working capital of the firm if any.
  25. 25. RESEARCH METHODOLOGY The data obtained for study as to be divided in to two groups. 1. Primary data 2. Secondary data  Primary data: primary data comprises information obtained by the candidate during the discussion with the head of department and from the meeting with the officials and the staff.  Secondary data: secondary data comprises of information obtained from annually reports, balance sheets and other financial statement files, and some other important document maintained by the organisation are also helpful. In the study one fourth of the total information obtained is from primarydata and the rest is from secondary data.
  26. 26. LIMITATION OF THE STUDY1. Entire study is based on the financial statement of R.P.AGRO TECH PVT. LTD.,. The study is limited to the other 2007-2012.2. Opinions of the management of the R.P.AGRO TECH PVT. LTD., were taken in to consideration. Hence there is a chance for the personal bias.3. The availability of time is very less
  27. 27. WORKING CAPITAL MANAGEMENTIntroduction: Working capital is the life blood and nerve centre of a business. Just as circulation ofblood is essential in the human body for maintaining life, working capital is very essential tomaintain the smooth running of a business. No business can run successfully without anadequate amount of working capital.Working capital refers to that part of firm’s capital which is required for financing short termor current assets such as cash, marketable securities, debtors, and inventories. In other wordsworking capital is the amount of funds necessary to cover the cost of operating the enterprise.Meaning:Working capital means the funds (i.e.; capital) available and used for day to day operations(i.e.; working) of an enterprise. It consists broadly of that portion of assets of a businesswhich are used in or related to its current operations. It refers to funds which are used during
  28. 28. an accounting period to generate a current income of a type which is consistent with majorpurpose of a firm existence.Importance of working capital: Some time, If creditors demands their money from company, at this time companyshigh working capital saves company from this situation . You know that selling of currentassets are easy in small period of time but Company can not sell their fixed assets with insmall period of time. So, If Company have sufficient working capital , Company can easilypay off the creditors and create his reputation in market . But If a company have zero workingcapital and then company can not pay creditors in emergency time and either companybecomes bankrupt or takes loan at higher rate of Interest . In both condition , it is verydangerous and always Companys Account Manager tries to keep some amount of workingcapital for creating goodwill in market .Positive working capital enables also to pay day to day expenses like wages, salaries,overheads and other operating expenses. Because sufficient working capital can not only paymaturity liabilities but also outstanding liabilities without any more delay.One of advantages of positive working capital that Company can do every risky work withoutany tension of self security.Objectives of working capital:Every business needs some amount of working capital. It is needed for following purposes- 1. For the purchase of raw materials, components and spares. 2. To pay wages and salaries. 3. To incur day to day expenses and overhead costs such as fuel, power, and office expenses etc.
  29. 29. 4. To provide credit facilities to customers etc.Factors that determine working capital:The working capital requirement of a concern depend upon a large number of factors such as-  Size of business  Nature of character of business.  Seasonal variations working capital cycle.  Operating efficiency.  Profit level. Sources of working capital:  The working capital requirements should be met both from short term as well as long term sources of funds.  Financing of working capital through short term sources of funds has the benefits of lower cost and establishing close relationship with banks.  Financing of working capital through long term sources provides the benefits of reduces risk and increases liquidity. Types of working capital: Working capital an be divided into two categories-
  30. 30. A. Permanent working capital: It refers to that minimum amount of investment in all current assets which is required at all times to carry out minimum level of business activities. 2.Temporary working capital: The amount of such working capital keeps on fluctuating from time to time on the basis of business activities.Advantages of working capital:• It helps the business concern in maintaining the goodwill.• It can arrange loans from banks and others on easy and favourable terms.• It enables a concern to face business crisis in emergencies such as depression.• It creates an environment of security, confidence, and over all efficiency in abusiness.• It helps in maintaining solvency of the business.Disadvantages of working capital:
  31. 31. Rate of return on investments also fall with the shortage of working capital. • Excess working capital may result into over all inefficiency in organization. • Excess working capital means idle funds which earn no profits. • Inadequate working capital cannot pay its short term liabilities in time. Working capital may be defined in to two ways; 1. Gross working capital 2. Net working capital 1. Gross working capital: The term working capital refers to total current assets .The net working capital is again defined in two ways  Net working capital is the difference between current and current liabilities.  Net working capital is that portion of current assets which is financed with a long-term funds.2. Net working capital:Cash and short-term assets expected to be converted to cash within a year less short-termliabilities. Businesses use net working capital to measure cash flow and the ability to servicedebts. A positive net working capital indicates that the firm has money in order to maintain orexpand its operations. Net working capital tends not to add much to the business assets, buthelps keep it running on a day-to-day basis.Trace off between profitability and risk:
  32. 32. The firm’s profitability is measured by profits after expenses. The term risk is defined as thatprobability that a firms will become technically insolvent so that it will not be able to meet itsobligation when they become due for payment.Net working capital is used for measuring therisk of becoming technically insolvent. The greater NWC the more liquid is the firms andtherefore, the less likely it is going to become technically insolvent. The inter relationshipbetween risk, Liquidity and NWC is such that if the NWC or liquidity increases the firms riskdecrease.Trade off:To get higher profits the firms has to face higher risk. otherwise the higher the profits, thehigher the risk the firm has to face. The trade-off between these variables is that regardless ofhow the firm increases its profitability through the manipulation of working capital, theconsequence is the corresponding increase in risk as measured by the level of NWC.EFFECT OF LEVEL OF CURRENT ASSESTS AND CURRENTLIABILITIES ON THE PROFITABILITY-RISK-RETURN TRADE OFF:The effect of current assets and current liabilities on profitability i.e, risk-return trade off canbe shown using the ratio of assets to total assets and current liabilities. To total assets changein the ratio will reflect a change in the amount of current assets and current liabilities. It mayeither increase or decrease.PERMANENT AND TEMPORARY WORKING CAPITAL:Its necessary for a business enterprise to maintain and contain minimum level of workingcapital to carry on its business on continuous and uninterrupted working capital.
  33. 33. Any amount over and above the permanent level of working capital needed is to meetfluctuating or variable working capital. The position of required working capital is needed tomeet fluctuations in demand consequent upon changes in business condition.CHANGES IN WORKING CAPITAL:1. Changes in level of sales and operating expenses.2. Changes in policy.3. Changes in technology.1.CHANGES IN LEVEL SALES AND OPERATING EXPENSES:The first factor causing a change in working capital requirement is a change the sales andoperating expenses. The changes in the factor may be a long run trend of changed. Forinstance the price of raw material may be consultancy rising necessitating the holding of largeinventory. Secondly the cyclical changes in the economy leading to ups and downs inbusiness activity influencing the level of working capital, both permanent and temporary.Thirdly the source of change is seasonality in sales activity. Seasonal peaks and can be said tobe the main score of variation in the level of temporary working capital. The change in salesand operating expenses may be either increasing or decreasing an increase in volume of salesis bound to be accompanied by need for working capital. Similarly a change in operatingexpenses in the form of rise or fall has a similar effect on the level of working capital.2.POLICY CHANGES:
  34. 34. One of the major cause of change in the level of working capital is policy changes initiatedby the management. The firm has avoided choice in the matters of current assets policy. Thecurrent assets-policy is based on the difference between the respect having a very high levelof current assets in relation to sales may deliberately opts for a less conservative policy andvice-versa. Therefore the managerial decisions on policy changes have an impact on theworking capital.3.TECHNOLOGICAL CHANGES;Third main cause that affects the level of working capital is technological change, which is aresult of technological developments, which shortens the operating cycle, thus reducing theneed for working capital.DETERMINANTS OF WORKING CAPITAL:NATURE OF BUSINESS:Working capital requirements of firms are basically influenced by the nature of itsbusiness. Trading and financial firms have a very small investment in fisted assets, butrequires a large sum of money to be invested in working capital.SALES AND DEMAND CONDITIONSA;`The working capital needs of the firm are related to its sales. Its difficult to preciselydetermine the relationship between volume of sales and working capital needs. In practicecurrent assets have to be employed before the growth takes place. It is therefore necessary tomakes advances planning of working capital for a growing firm on a continuous basis.
  35. 35. A growing firm may need to invest funds in fixed assets in order to sustain its growingproduction and sales. This will in turn increase investment in current assets to supportenlarged scale of operations. It should be realised that a growing firms needs fundscontinuously. it uses external sources as well as internal sources to meet increasing need forfunds and such firm face further financial problems when it retains substantial proportions ofits profits towards meeting the working capital needs. It would not retains substantialproportion of its profits towards meeting the working capital needs. It would not be able topay dividends to share holders. Its therefore operative that proper planning to be done by suchcompanies to finance their increasing needs for working capital.Sales depend on demand conditions .Most firms experience seasonal and cyclical fluctuationsin demand for their products and services. These business variation affect the working capitalrequirements, especially the temporary requirements of the firms.TECHNOLOGY AND MANUFACTURING POLICY:The manufacturing cycle comprises of purchase and the use of materials and the productionof finished goods. Longer the manufacturing cycle, larger will be the firm’s working capitarequirements. If there are alternative technology of manufacturing cycle, one best alternativesmay be chosen. Once a manufacturing technology has been selected, it should be ensured thatmanufacturing cycle is completed with in the specific period. This needs proper planning andco-ordination at all levels of activity.A strategy of constant production may be maintained in order to resolve the working capitalproblems arising due to seasonal changes in the demand for the firm’s product. A steadyproduction policy will cause inventories to accumulate during the off season periods and risksof maintaining a constant production schedule and the firm may adopt a variable productionpolicy, varying its production schedules in accordance with changing demand.
  36. 36. AVAILABILITY OF CREDIT:The working capital requirements of the firm are also affected by credit terms granted by itscreditors. A firm will needs less working capital if liberal terms are available to it. Similarly,the availability of credit from banks also influences the working capital needs of the firms. Afirm, which can get bank credit easily on favourable conditions, will operate with lessworking capital than a firm without such facility.OPERATING EFFICIENCY:The operating efficiency of the firm relates to the optimum utilisation of resources atminimum cost. The firm will be effectively contributing in keeping the working capitalinvestment at a lower level if it is efficient in controlling operations costs and utilising currentassets. The use of working capital is improved and pace of cash conversion cycle isaccelerated with operating efficiency. Better utilisation of resources improves profitabilityand, thus helps in releasing the pressure in working capital. Although it may not be possiblefor a firm to control prices of material, wages of labour, it can certainly ensure efficient andeffective use of its material, labour and other resources.LEVEL OF CURRENT ASSETS:An important working capita policy decision is concerned with the level of investment incurrent assets under a flexible policy. The investment in current assets are high. this meansthat the firm maintains a huge balance of cash and marketable securities, carries amount ofinventories, and grants generous term of credit to customers, which leads to high level ofdebtors.
  37. 37. After establishing the level of current assets, the firms must determine how these should befinanced. What mix of long-term capital and shorter debts should the firms employ to supportits current assets.Several strategies are available to a firm for financing its capital requirements. Following arethree strategies namely A,B and C.Strategy A: Long term financing is used to meet fixed assets requirements as well as peakworking capital ,requirements when the working capital requirements is less than its peaklevel the surplus is invested in liquid assets.Strategy B:Long term financing is used to meet fixed assets requirements ,permanent working capitalrequirements and a portion of fluctuating working capital requirements. During seasonaldownswings surplus is invested in liquid assets.Strategy C:Long term financing is used to meet fixed assets requirements and permanent working capitalrequirements. Short-term financing is used to meet fluctuating working capital requirements.SOURCES OF WORKING CAPITAL:After determining the level of working capital on the basis of various determinants, the nextstep is to consider how it will be financed. A large manufacturing concern may procure fundsfrom various sources to meet its working capital requirements from time to time. For theconvenience of study the sources of working capital may be classified under two heads. A. Sources of long term or regular working capital.
  38. 38. B. Sources of short term or seasonal working capital. Sources of long term or regular working capital:The long term working capital requirements can be met from the following sources. 1. Issue of shares: It is the safest way of procuring permanent and regular working capital without fixed charges. 2.Issue of debentures: Regular and long term working capital may be obtained at lower cost of trade on equity. 3.Retained profits: Accumulated large profits are also considered to be a good source of financing long term working capital requirements. It is the best and the cheapest source of finance. It creates no change in future profits. 4.Sales of fixed assets: If there are any idle fixed assets in the firms, they can be sold out and the proceed may be utilized for financing the working capital requirements. 5.Term loans: Mid term and long term loans for a period above 3 years provide important source of working capital and such term loans borrowed from the special financials institution such as IDBI,IFCI,LIC.........Etc.SOURCES OF SHORT TERM WORKING CAPITAL:
  39. 39. The source of short term working capital may be classified in two heads. A. Internal sources B. External sources A. Internal sources: Under this category the sources of working capital are tapped from within the internal sources such as depreciation funds. provision for taxation and accrued expenses.1.Depreciation fund: Depreciation funds are out of profits provided they are invested in or represented by assets 2.Provision for taxation:There remains a time lag between making the provision for and payment of Taxation. A Company may utilise such provision during the intermittent period temporarily.3. Accrued expenses: The company sometimes postpones the payment of certain expenditure due to finalisation of the accounts. These accrued (due to paid) expenses also constitute an important source of working capital. C. External sources: External sources mean the sources providing financial for company’s working capital other than those of internal sources. these may be enumerated as giving below.Normal trade credit:
  40. 40. Creditors provide short-term financial position to the company by selling the goods, inventories and equipment on the basis of differed payment. It is a very common sources of short term financial and normally every concern use this sources as a normal trade practice.1.Credit papers: Bills payable or promissory note, which may be discounted from bankers for meeting short term capital by the drawer. 2.Bank credit: The greater part of the working capital is supplied by commercial banks to their customers through direct advances in the shape of loans, cash credit or over draft and through discounting the credit, papers, e.g bills payable and promissory notes etc.3.Customer credit: Advance may also be obtained from customers against the contracts entered into by the enterprise such advances are generally asked for the completing the process of manufacturing large plants and machinery involving long time in completing the process of manufacturing e.g, ship building industries. The amount can be used for purchasing raw materials, paying wages and so on.4. Public deposits: Most of the companies in recent years depends on this sources to meet their working capital requirements. Under the companies’ act 1956 a company is authorizes to funds to 25% of equal and free by this source. 5. Government assistance:
  41. 41. Central and state governments of the country provide short term finance to industries or business by allowing tax concessions, sanctioning direct loans or grant to industries or a class of industries to asset their production program etc.WORKING CAPITAL POLICY: Working capital management policies have a great effect on firms profitability, liquidity and its structural health a finance manager should therefore, chalk out appropriate working capital policies in respect of each component of working capital so as to ensure high profitability proper liquidity and sound structural health of the organisation. In order to achieve this financial manager has to perform basically following two functions 1. Estimating the amount of working capital. 2. Searching for course from which these funds have to be raised. OBJECTIVE OF WORKING CAPITAL MANAGEMENT: 1. Maintenance of working capital. 2. Ability of ample funds at time of needs.
  42. 42. The basic goal of working capital management is to manage each of the funds current assets and current liabilities in such a way that an acceptable level of net working capital is always maintained in the business.WORKING CAPITAL FORECAST:There are number of methods to determine the working capital needs. 1.BY DETERMINING THE AMOUNT OF CURRENT ASSETS AND CURRENT LIABILITIES: The assessment of working capital requirement can be made on the basis of the current assets required for the business and the credit facilities available for the acquisition of such current assets in the form of current liabilities.2.CASH FORECASTING METHOD: In this method the position of cash at the end of the period is shown after consideration the receipts and payments to be made during the periods. Its from assumes more or less a summary of cash book. this shows the deficiency or surplus of cash as the definite point of time.3.THE BALANCE SHEET METHOD:
  43. 43. The balance sheet method of forecasting is made up of the various assets and liabilities of the business. After wards, the difference between the two is taken which will indicate either cash surplus on cash or deficiency. 4.PROFIT AND LOSS ADJUSTMENT METHOD: Under this method the forecasted profits are adjusted after adding the cash flows and deducting the cash out flows. The basic idea under this method is to adjust the estimated profit on cash basis. 5.WORKING CAPITAL AS A PERCENTAGE OF SALES: Under this method the working capital is to be related to sales and calculated percentageof sales. 6.WORKING CAPITAL AS A PERCENTAGE OF FIXED ASSESTS: In this method working capital is related to fixed capital investment. therefore it is projected as a percentage of fixed capital investment.WORKING CAPITAL TURNOVER RATIO: It measures the efficiency of the employee of the working capital. Generally higher the turnover, greater is the efficiency and larger the scale of profits. working capital turnover ratio can be calculated with the help of the following formula.
  44. 44. salesWorking capital turnover ratio= Net working capitalWorking capital cycle (or)Operating cycle: Raw Cash material s working bills receivable, -in- debtors. Progress cash/ Finished Credit goods salesOPERATING CYCLE: Thus, sum total of these times is called on “operating cycle“ and it consists on the following six steps.
  45. 45. 1. Conversion of cash into raw materials. 2. Conversion of raw materials into works-in-process. 3. Conversion of works-in-process into finished products. 4. Time for sale of finished goods—cash sales and credit sales. 5. Time for realisation from debtors and bills receivables into cash. 6. Credit period allowed creditors for credit purchase of raw materials, inventory and creditors for wages and overheads.The firm begins with the purchase of raw material, which are paid for after a delay, whichrepresents the accounts payable period. The firm converts the raw materials in to finishedgoods and then sells the same. The time lag between the purchase of raw material and sale offinished goods is the inventories period. Customers pay their bills some time after the sales.The period that elapses between the dates of sales and collection of receivables is theaccounts receivable period. The time that elapses between the purchases of raw material and the collection of cash for sales is referred to as the operating cycle. Where as the time length between the payment of raw materials purchases and the collection of cash for sales is referred to as the cash cycle. The operating cycle is the sum of the inventory period and the accounts receivable period, where as the cash is equal to operating cycle less the account payable period. From the financial statement of the firm ,we can estimate the inventory period ,the account receivable period, and the account payable period. INVENTORY MANAGEMENT:
  46. 46. The term inventory management refers to the stockpile of the products affirm is offering for sale and the components that make up the products. In other words inventory is composed of assets that will be sold in future in the normal course of business operations the assets. which forms store as inventory in anticipation of need are raw material ,B. work in process (semi finished goods) and (c)finished goods. The material inventory contains items that purchase by the firm form others and are converted in to finished goods through the manufacturing process. They form an important ingredient of the final product. The work in process .Inventory consists of items currently be used in the production process. They are normally semi-finished goods which are at various stages of product in multi stage production process. Finished goods represent final or completed product, which are available for sale. The inventory of such goods consists of items that have been produced yet to be sold. INVENTORY MANAGEMENT IN INDIA: Inventory level in India is appearing to be high. The reasons commonly cited for this are as follows: Purchase executives are severely penalized for stock outs, but they are not questioned for high inventories. Lengthy and cumbersome import procedures in the past forced companies to carry huge amount of inventories for imported items. Its pays to keep inventories high because of price rise due to inflation. Most of the vendors are not reliable in terms of delivery schedules and quality materials supplied. Hence companies carry large safety stocks. Due to lack of standardization’s there is a large variety of stores.
  47. 47. The most commonly used tools of inventory management in India are ABC analysis, FSN analysis, and inventory turnover analysis. ABC Analysis: Thought ABC analysis is widely used, one often finds that the ABC classification is not reviewed and revised periodically. FSN Analysis: For the purpose of control companies classify items into fast moving(F),slow moving(S),and non-moving(N) categories; unfortunately companies do not dispose off non-moving items swiftly. CASH MANAGEMENTIn working capital management, cash management is one of the key factors. Cash is the mostliquid current assets and it is the common denominator to which all current assets can bereduced. More over receivable and inventory get eventually converted in to cash.MOTIVES OF THE HOLIDING:With reference to cash management, the term cash is used in two senses, they are narrowsense and broad sense. In narrow sense used to broadly cover currency and the generallyaccepted equivalents of cash such as cheques, drafts, and the bundies in banks’ he broad viewof cash also included cash assets such as marketable securities and time deposits in banks.There are four primary motives for maintaining cash balances. They are1.Transaction motive2.Precautionary motive3.Speculative motive4.compensation motive
  48. 48. 1.TRANSACTION MOTIVE:The refers to holding of cash to meet routine cash requirements to finance the transaction,which a firm carries on in the ordinary course of business. To ensure that the firm can meetits obligations when payments are due in a situation in which disbursement are in excess ofcurrent cash receipts ,it must have adequate cash balances. The requirement of cash balancesto meet routine cash anticipated obligations whose timings is not perfectly synchronized withcash receipts.2.PRECAUTIONARY MOTIVE:In addition to the non-synchronized of anticipated cash inflows and out flows in the ordinarycourse of business, a firm may have to pay cash for purpose, which cannot be predicted oranticipated, The unexpected cash needs may be the result of following  Floods, strikes and failure of important customers;  Bills may be presented for settlement earlier than expected;  Unexpected slow down in collection of accounts receivable;  Cancellation of some order for goods as the customer is not satisfied;  Sharp increase in cost of raw material.3.SPECULATIVE MOTIVE:It refers to the desire to take advantage of opportunities ,which present themselves atunexpected moments and which are typically outside the normal course of business. while theprecautionary motive is defensive in nature in that firms must make provision to tide overunexpected contingency, the speculative motive represents appositive and aggressive
  49. 49. approach. Firms aim to exploit profitable opportunities and keep cash in reserve to do so thespeculative motive helps to make advantage of;  An opportunity to purchase raw material at a reduced price on payment of immediate cash.  A chance to speculate on interest rate movements by buying securities when interest rates are expected to decline.  Delayed purchase of raw material on the anticipation of decline in price and  Make purchase at favourable prices.4. COMPENSATION MOTIVE:Yet another motive to hold cash balance is to compensate banks for providing certain servicesand loans. Banks provide a variety of services to business firms such as clearance of chequesupply of credit information transfer of funds, and so on, while for some these services bankscharge a commission or fee ,for other they seek indirect compensation. Usually it is requiredto maintain a minimum balance of cash at the bank. Since the firm for transaction purposecannot utilize this balance, the bank can use the amount to earn a return. Such balances arecompensating balances.Cash management involves managing the money of the firm in order to maximize cashavailability and interest income on any idle funds. At one end, the function starts when acustomer writes a cheque to pay the firm on its accounts receivable, the function ends fromthe supplier. An employee, or the government realizes collects funds from the suppliers. Anemployee or the government realizes collected funds from the firm on an account payable oractual. All activities’ between these two points fall within accounts receivable management.
  50. 50. On the other hand the firm’s decision about when to pay its bills involves accounts payableand accrual management. he various collection and disbursement methods by which a firmcan improve its cash management efficiency constitute two sides of the same coin. Theexercise joint impact on the overall efficiency of cash management. The idea is to collectaccounts receivables as soon possible, but pay accounts payable as late as consistent withmaintaining the firm’s credit standing with the suppliers.COLLECTION PROCESS:A number or methods are designed to speed up this collection process by once or all of thefollowing; Speed time of payment from the customer to firm. Reduce the during which payment receive by the firm remain uncollected funds. Speed the movement of funds to disbursement banks.OBJECTIVES OF CASH MANAGEMENT:The basic objectives of cash management are to fold to meet the cash disbursement needs{payment schedule} and to minimize funds committed to cash balances. These are conflictingand mutually contradictory and the task of cash management are to reconcile them.MEETING PAYMENT SCHEDULE:In the normal course of business, the firms have to make payment of cash on a continuousand regular basis to suppliers, employees and so on .AT the same time there is a constantinflow of cash through collection from debtors. cash is therefore, aptly described as the oil to
  51. 51. lubricate the ever turning wheels of business without it the process grids to a stop a basicsobjectives of cash management is to meet the payment schedule that is to have sufficient cashto meet the payment schedule can hardly be over emphasized.The advantage of adequate cash are 1. It prevent insolvency or bankruptcy arising out of inability of affirm to meet its obligations. 2. The relationship with the bank is not strained. 3. It helps in forecasting good relation with trade creditors and suppliers of raw materials, as prompt payment is made within the due date. 4. A cash discount can be availed of if payment is made within the due date. 5. It leads to a strong credit rating which enables the firm to purchase the goods on favourable terms and to maintain its line of credit with bank and sources of credit.MINIMIZING FUNDS COMMITTED TO CASH BALANCE:The second objective of cash management is to minimize cash balance. In minimizing thecash balances two conflicting aspects have to be reconciled. A high level of cash balanceswill ensure prompt payment along with all the advantages. But it also implies that large fundswill remain idle, as cash is non earning asset and the firm will have to forgot profit. Allowlevel of cash balances on the other hand may mean failure to meet the payment schedule. Theaim of cash management therefore should be to have an optimal of cash balance.RECEIVABLES MANAGEMENT :
  52. 52. The receivable management is represent an important component of current assets of a firm.The term receivable is defined as “Debt owned to the firm by customer arising from sales ofgoods or services in the ordinary course of business”. When a firm makes an ordinary sales ofgoods of services and does not reserved payment, the firm grant trade credit and this createsaccount receivables which could be collected in future. Receivables management is alsocalled trade credit customers allowing them a reasonable period of time in which to pay forthe goods received. The main object of receivables management is to promote sales and profits until thatpoint is reached where the return on investment in further funding receivable is less than thecost of funds raised to finance that additional credit. The main aim of accounts receivables management is to maintain a trade of betweenprofits (benefits) and risk (cost) that is to say, the decision to commit funds to receivable willbe based on a comparison and a cost involved while determining the optimum level ofreceivables. The cost and benefits to be comparative are marginal cost and benefits the firmshould only consider the incremental(additional) marginal cost and benefits. The firm shouldonly considered the incremental or additional benefits and cost that result from a change inthe receivables or trade credit policy.PAYABLE MANAGEMENT:Management of accounts payable is as much important as management of account receivableof course, their is a basic difference between the approach to be adopted by the financemanager in two cases. where as the underlying objective in case of accounts receivable is tomaximize the acceleration of collection process, the objective in case of accounts payable is
  53. 53. to show down the payments of accounts payable may result in saving of some interest costsbut it can prove very costly to the firm in the form of loss credit in the market. The financemanager has ensure that payments to the credit are made at the stipulated time period afterobtaining the best credit terms possible.CONTROL OF ACCOUNTS PAYABLE:Computing average age of payable can do this. This may be calculated by any of thefollowing methods.Months or days in the period/Accounts payable turnover.Account payable turnover = credit purchase in the period / Average accountspayable.
  54. 54. RATIO ANAYSIS:It is essential for a firm to be meet its obligations as they becomes due. Liquidity ratiosmeasure the ability of the meet its current obligations. Infect, analysis of liquidity needs thepreparation of cash budgets and cash and funds flows statements, but liquidity ratios byestablished a relationship between cash and other current obligation, provide a quick measureof liquidity. A firm should ensure that it does not suffer from lack of liquidity, and also that itdoes not have excess liquidity, the failure of a company to meet this obligation due to lack ofsufficient liquidity, will result in a poor credit worthiness, loss of creditor’s confidence oreven in legal tangles resulting in the closure of the company. A very high degree of liquidityis also bad ,idle assets earn nothing. The firm’s funds will be unnecessarily tie up in currentassets. Therefore it is necessary to strike a proper balance between high liquidity and lack ofliquidity. The most common ratios which indicate the extent of liquidity or lack of it are1.current ratio and2. Quick other ratios interval measure and networking capital turnoverratio.CURRENT RATIO :The current ratio is calculated by dividing assets by current liabilities. Current ratio = current assets
  55. 55. Current liabilitiesCurrent assets include cash and those assets which can be converted in to cash within a year,such as marketable securities, debtors and inventories. Prepaid expenses are also include incurrent assets as they represent the payments that will not be made by the firm in the future.All obligations maturing within a year included in current liabilities. current liabilities includecreditors, bills payables short term bank loans, income-tax liability and long-term debtmaturing in the current year.QUICK RATIO: Quick ratio establishes a relationship between quick or liquid assets and current liabilities.An assets is liquid if it can converted in to cash immediately or reasonably soon without aloss of value. Cash is the most liquid asset. Other assets which are consider to be relativelyliquid and included in quick assets as debtors and bills receivables and marketable securitiestemporary quoted investment. Inventories are considered tube less liquid. Inventoriesnormally requires some time for realizing into cash. Their value also has a tendency tofluctuate. The ratio is found out by dividing quick assets by current liabilities.Quick ratio = current assets – inventories Current liabilitiesCASH RATIO:Since cash is the most liquid assets, a financial analyst may examine cash ratios and itsequivalent to current liabilities. Trade investment or marketable securities are equivalent ofcash. Therefore they may be include in the computation of cash ratio.Cash ratio = Cash in hand or bank
  56. 56. Current liabilitiesACTIVITY RATIO:Funds of creditors and owners and are invested in various assets to generate sales and profits.The better the management of assets are the amount of sales. Activity ratios are employed toevaluate the efficiency with which the firm manages and utilize its assets. These ratios arealso called turnover ratio because they indicate the speed with which assets are beingconverted or turned over into sales. Activity ratios, thus involves a relationship between salesand assets .A proper balance sales and assets generally reflect that assets are managed well.Several activity ratio can be calculated to judge the effectiveness of asset utilization.INVENTORY TURNOVER RATIO:Inventory turnover ratio indicates the efficiency of the firm in producing and selling itsproduct. It is calculated by dividing the total sales by the average inventory.Inventory turnover ratio = Total sales Average inventory
  57. 57. RECEIVABLE TURNOVER RATIO:It is also known as debtor’s turnover ratio. It establishes relationships between credit salesand average receivables. This ratio is calculated on the basis of the following formulaReceivable turnover ratio = Sales Average inventoryIn case of receivable turnover ratio debtors and bills receivables are added together todetermine the receivables.In case of newly start business debtors in the beginning will not be available. So debtor at thewill be supposed to average debtors.
  58. 58. TABLE: 1
  59. 59. STATEMENT OF CHANGES IN WORKING CAPITAL FROM 2007-2008 As on Particulars 31-3-2007 As on Effect on Changes in Amounts 31-3-2008 working capital Amounts RS/- Rs/- Increase DecreaseCurrent assets:Inventories 8,00,38,989 5,36,54,395 ……… 2,63,84,594Sundry debtors 139,14,87,559 141,52,79,192 2,37,91,633 ……….Cash &bank 2,04,79,270 97,91,407 ........... 1,06,87,863BalanceLoans, 531,44,66,731 620,20,95,437 88,76,28,706 ..........Advances& depositsTotal Current 680,64,72,549 768,08,20,431 ……… ……….assets(A)Currentliabilities:current 175,03,76,281 220,07,98,208 ……… 45,04,21,927liabilitiesTotal Currentliabilities (B) 175,03,76,281 220,07,98,208 ……… ….......Net working in 548,00,22,223 ……… ….......capital(A-B) 505,60,96,268Increasing inworking 42,39,25,955 ……… ……… 42,39,25,955capitalTotal: 548,00,22,223 548,00,22,223 91,14,20,339 91,14,20,339INTERPRETATION: When comparing 2007 to 2008 there was an increase in working capital by42,39,25,955 due to increase in Sundry debtors, loans, advance, and currentliabilities. The Networking capital positive.
  60. 60. TABLE:2 STATEMENT OF CHANGES IN WORKING CAPITAL FROM 2008-2009 As on As on Effect on Changes inParticulars 31-3-2008 31-3-2009 working capital Amounts Amounts RS/- Rs/- Increase DecreaseCurrent assets :Inventories 5,36,54,395 8,31,49,191 2,94,94,796 ………Sundry debtors 1,41,52,79,192 203,86,81,691 62,34,02,499 ………Cash &bank 97,91,407 1,46,35,496 48,44,089 ………BalanceLoans, Advances 620,20,95,437 555,87,32,120 ……… 64,33,63,317& depositsTotal Current 768,08,20,431 769,51,98,498assets(A)Current liabilities:current liabilities 220,07,98,208 186,55,17,674 33,52,80,534 ………Total current 220,07,98,208 186,55,17,674liabilities(B)Net working in 548,00,22,223 582,96,80,824 ……… ………capital(A-B)Increasing in 34,96,58,601 ……… ……… 34,96,58,601working capitalTOTAL: 582,96,80,824 548,00,22,223 99,30,21,918 99,30,21,918INTERPRETATONS: When comparing 2008 to 2009 there was an increase in working capital by34, 96, 58,601 due to increase in Sundry debtors, Inventories , and decrease inloans, advance, deposits , current liabilities. The Networking capital positive.
  61. 61. TABLE:3 STATEMENT OF CHANGES IN WORKING CAPITAL FROM 2009-2010 As on As on Effect on Changes in working capitalParticulars 31-3-2009 31-3-2010 Amounts Amounts RS/- Rs/- Increase DecreaseCurrent assetsInventories 8,31,49,191 12,66,45,600 4,34,96,409 ……………Sundry debtors 203,86,81,691 203,96,81,691 10,00,000 ……………Cash &bankBalance 1,46,35,496 2,46,35,496 1,00,00,000 ……………Loans,Advances 555,87,32,120 555,92,09,543 477423 ……………& depositsTotal Currentassets(A) 769,51,98,498 775,01,72,330 …………… ……………Currentliabilities:current ……………liabilities 186,55,17,674 43,77,84,616 142,77,33,058Total current …………… ……………liabilities(B) 186,55,17,674 43,77,84,616Net working in …………… ……………capital(A-B) 582,96,80,824 731,23,87,714Increasing in 148,27,06,890 …………… …………… 148,27,06,890working capitalTOTAL 731,23,87,714 731,23,87,714 148,27,06,890 148,27,06,890INTERPRETATONS: When comparing 2009 to 2010 there was an increase in working capitalby 148,27,06,890 due to increase in Sundry debtors, Inventories , and in loans,advance, deposits , current liabilities. The Networking capital positive. All currentcurrent assets.
  62. 62. TABLE: IV.4STATEMENT OF CHANGES IN WORKING CAPITAL FROM: 2010-11 Effect on changes in Particulars AS ON AS ON working capital 31/3/2010 31/3/2011 RS/- RS/- Increases DecreasesCurrent assets :Inventories 12,66,45,600 27,15,51,706 14,49,06,106 ………Sundry debtors 203,96,81,691 297,74,90,285 93,78,08,594Cash & bank ………balances 246,35,496 544,35,408 297,99,912Loans & advances, 555,92,09,543 522,63,39,617 ……… 33,28,69,926DepositOther current assets 169,55,602 169,55,602 ………TOTAL CURRENT 775,01,72,330 854,67,72,618ASSETS(A)CUURENTLIABILITIES:Current liabilities 43,77,84,616 1,05,78,723 42,72,05,893 ………Provisions ……… 96,88,459 ……… 96,88,459TOTAL CURRENT 43,77,84,616 2,02,67,182LIABILITIES(B)Net working capital 731,23,87,714 852,65,05,436 ……… ……… (A- B)Increasing in 121,41,17,722 ……… ……… 121,41,17,722working capitalTOTAL: 852,65,05,436 852,65,05,436 155,66,76,107 155,66,76,107INTERPRETATONS: When comparing 2010 to 2011 there was an increase in working capital by121,41,17,722 due to increase in Sundry debtors, Inventories, current liabilities , anddecrease in loans, advance, deposits . The Networking capital positive.
  63. 63. TABLE: 5STATEMENT OF CHANGES IN WORKING CAPITAL FROM 2011-2012. As on As on Effect on changes in Particulars 31/3/2011. 31/3/2012 Amounts Amounts working capital.Current assets: RS/- RS/- Increase DecreaseInventories 27,15,51,706 28,97,95,767 1,82,44,061 ………Sundry debtors 297,74,90,285 336,93,40,046 39,18,49,761 ………cash & bank 5,44,35,408 4,44,35,408 ……… 1,00,00,000BalancesLoans ,advances & 522,63,39,617 513,06,86,883 ……… 9,56,52,734Deposits Other 1,69,55,602 12,14,98,881 10,45,43,279 ……… current assets Total current 854,67,72,618assets(A) 895,57,56,985Current liabilities:current liabilities 1,05,78,723 2,05,78,723 ……… 1,00,00,000Provisions 96,88,459 84,12,811 12,75,648 ……… Total current 2,02,67,182 2,89,91,534 liabilities(B)Net working capital ……… ……… (A-B) 852,65,05,436 892,67,65,451 Increasing in 40,02,60,015 ……… ……… 40,02,60,015 working capital TOTAL: 892,67,65,451 892,67,65,451 51,59,12,749 51,59,12,749INTERPRETATONS: When comparing 2011 to 2012 there was an increase in working capital by40,02,60,015 due to increase in Sundry debtors, Inventories, current liabilities , anddecrease in loans, advance, deposits, cash and bank . The Networking capitalpositive.
  64. 64. CURRENT RATIO:Current assets include cash and those assets which can be converted in to cash within a year,such as marketable securities, debtors and inventories. Prepaid expenses are also include incurrent assets as they represent the payments that will not be made by the firm in the future.All obligations maturing within a year included in current liabilities. current liabilities includecreditors, bills payables short term bank loans, income-tax liability and long-term debtmaturing in the current year.CURRENT RATIO: CURRENT ASSETS CURRENT LIABILITIES TABLE:1 YEAR CURRENT CURRENT ASSESTS LAIBILITIES CURRENT RATIO (In lakhs) (In lakhs) 2007-08 76808.20 22007.98 2.49 2008-09 76951.98 18655.17 2.12 2009-10 77501.72 43778.46 2.77 2010-11 85467.72 20267.18 2.21 2011-12 89557.56 28991.53 2.59
  65. 65. GRAPH-1THE BELOW GRAPH SHOWN THE CURRENT RATIO CURRENT RATIO 3 2.5 2 1.5 CURRENT RATIO 1 0.5 0 2007-08 2008-09 2009-10 2010-11 2011-12INTERPRETATION: Current ratio of the company is above the standard ratio 2:1. In the year 2007-2008 the current ratio is 2.49 In the year 2008-2009 the current ratio has been decreased to 2.12 when compared to 2007-2008. 2009-2010 the current ratio is increased to 2.77 when compared to previous years. In the year 2010-2011 the current ratio is decreased 2.21 when compared to 2009- 2010. In the year 2011-2012 this is current ratio 2.59 when compared to all ratios.
  66. 66. QUICK RATIO: Quick ratio establishes a relationship between quick or liquid assets and current liabilities.An assets is liquid if it can converted in to cash immediately or reasonably soon without aloss of value. Cash is the most liquid asset. Other assets which are consider to be relativelyliquid and included in quick assets are debtors and bills receivables and marketable securitiestemporary quoted investment. Inventories are considered tube less liquid. Inventoriesnormally requires some time for realizing into cash. Their value also has a tendency tofluctuate. The ratio is found out by dividing quick assets by current liabilities Quick ratio = quick assets Current liabilities Quick assets = current assets – stock TABLE:2 YEAR QUICK CURRENT RATIO ASSESTS LIABILITIES 2007-08 76271.66 52007.98 1.47 2008-09 76120.49 68655.17 1.10 2009-10 27554.12 14377.84 1.91 2010-11 42522.09 22026.71 1.93 2011-12 5359.61 2899.15 1.84
  67. 67. GRAPHICAL REPRESENTATION: QUICK RATIO 2.5 2 1.5 RATIO 1 YEAR 0.5 0 2007-08 1 2008 2 -09 2009-10 3 2010-11 4 2011-12 5 6 yINTERPRETATION: Quick ratio is the standard ratio . 1:1. In ratio 2007-08 is 1.47 starting. In 2008-2009 the quick asset ratio is decreased 1.10. ratio than compared to previous year. In the year 2009-2010the quick asset ratio is increased 1.91 . In the year 2010-11 the quick assets ratio is decreased 1.93. 2011-2012 the quick assets ratio is decreased than the previous year 1.84.
  68. 68. WORKING CAPITAL TURNOVER RATIO:Working capital of a concern is directly related to sales, the current assets like debtors, billsreceivables, cash, and stock etc. change with the increase or decrease in sales.The working capital taken as Working capital = current assets – current liabilities Working capital turnover ratio indicates velocity of the utilization of net working capitalthis ratio indicates number of times the working capital is turned over in the course of year.This ratio measures the efficiency with which the working capital is being used by a firm.WORKING CAPITAL TURNOVER RATIO = SALES ------------------- NET WORKING CAPITAL
  69. 69. TABE-3 YEAR SALES NET WORKING RATIO CAPITAL 2007-08 356572676 5480022223 0.065 2008-09 401518095 5829680824 0.055 2009-10 443662199 7312387714 0.061 2010-11 729128449 1214117722 0.601 2011-12 536297256 8926765451 0.060 GRAPH-3 WORKING CAPITAL TURNOVER RATIO0.70.60.50.4 RATIO YEAR0.30.20.1 0
  70. 70. INTERPRETATION: In the year 2007-08 the working capital turnover ratio is increased to 0.065 this is the biggest ratio than compared to all the years. In the year 2008-2009 the ratios is decreasing and fall by 0.055. In the year 2009-2010, 2010-2011 the ratio is 0.061 & 0.601 is decreased because lack of sales. 2011-2012 this is the decreased to 0.060.
  71. 71. CURRENT ASSESTS TURNOVER RATIO :CURRENT ASSESTS TURNOVER RATIO = SALES CURRENT ASSESTS TABE:4 YEAR SALES CURRENT RATIOS ASSESTS 2007-08 356572676 7680820431 0.046 2008-09 401518095 7695198498 0.052 2009-10 443662199 7750172330 0.057 2010-11 729128449 8546772618 0.085 2011-12 536297256 8955756985 0.060
  72. 72. GRAPH:4 CURRENT ASSESTS TURNOVER RATIO 0.09 0.08 0.07 0.06 0.05 RATIOS YEAR 0.04 0.03 0.02 0.01 0INTERPRETATION: In the year 2007-2008 the current assets turnover ratio is very least 0.046. Because lack of sales. In the year 2008-2009 the current assets turnover ratio increased to 0.12 when compared to previous year because they increase sales. In 2009-2010 the current assets turnover ratio is 0.057. In the year 2010-2011 the ratio is increased to 0.85. In the year 2011-2012 is decreased to 0.060 because lack of sales.
  73. 73. DEBTORS TURNOVER RATIO: This ratio indicates debtors constitute an important constituent of current assets andtherefore the liquidity of debtors to a great extent determines a firm’s liquidity. Two ratios areused by financial analysis to judge the liquidity of the firm. They are 1. debtors turnover ratio 2. debtors collection period Debtor’s turnover indicates the number of times turnover each year. It indicates the efficiency of the staff entrusted with collection of book debts. The higher the ratio. The better it is, since it would indicate that debts are being collected more promptly. Credit sales Debtors turnover ratio = -------------------------------- Average debtors Opening balance + closing debtors Average debtors = -------------------------------------------------- 2 Table-5 Year Credit sales Avg. debtors Ratio 2007-08 9475.92 3031.27 3.12 2008-09 9085.59 2935.43 3.09 2009-10 9333.96 2315.83 4.03 2010-11 23858.36 3055.17 7.80 2011-12 31587.33 5648.28 5.59
  74. 74. DEBTORS TURNOVER RATIO 9 8 7 6 Ratio 5 YEAR 4 3 2 1 0Interpretation: The debtors turnover ratio in the year 2007-08 is 3.12 and it will be decrease 3.09 inthe year 2008-09 and increased to 4.03& 7.8 In the two years 2009-10 &2010-11 and againdecreased to 5.59 in the year2011-12.
  75. 75. AVERAGE COLLECTION PERIOD: DebtorsAverage collection period =------------------------- X 360 Sales TABLE-5 Year Avg. debtors Sales Days 2007-08 3031.27 9475.92 115 2008-09 2935.43 9085.59 116 2009-10 2315.83 9333.96 89 2010-11 3055.17 23858.36 46 2011-12 5648.28 3157.33 64
  76. 76. AVERAGE COLLECTION PERIOD 100% 90% 80% 70% 60% 50% Days 40% 30% 20% 10% 0% 2007-08 2008-09 2009-10 2010-11 2011-12INTERPRETATION: The debtor’s collection period is fluctuating trend during the period from 2007-08-2011-12 .i.e. 115 days,116 days, 89 days,46 days,64 days.
  77. 77. FIXED ASSESTS TURNOVER RATIO:FIXED ASSESTS TURNOVER RATIO = SALES ------------------------ NET FIXED ASSESTS FIXED ASSESTS TURNOVER RATIO YEAR SALES NET FIXED RATIOS ASSESTS 2007-08 356572676 114170482 3.12 2008-09 401518095 101156552 3.96 2009-10 443662199 87887763 5.04 2010-11 729128449 89027211 8.18 2011-12 536297256 80475301 6.66
  78. 78. THE FIXED ASSESTS TURNOVER RATIO FIXED ASSESTS TURNOVER RATIO 100% 90% 80% 70% 60% 50% RATIOS 40% 30% 20% 10% 0% 2007-08 2008-09 2009-10 2010-11 2011-12INTERPRETATION: During the period 2007-08 to 2011-12 the fixed turnover ratio is increasing trend i.e. from In the year 2007-2008 is 3.12, 2008-09 is 3.96, 2009-10 is 5.04 , 2010-11 is 8.18 and 2011-12 is 6.66.
  79. 79. NET WORKING CAPITAL TURNOVER RATIO:NET WORKING CAPITAL RATIO = NET WORKING CAPITAL NET ASSESTS TABE:7 YEAR NET NET RATIO WORKING ASSESTS CAPITAL 2007-08 5480022223 3864904460 1.41 2008-09 5829680824 3322793288 1.75 2009-10 7312387714 185867549 4.34 2010-11 1214117722 392090424 3.09 2011-12 8926765451 596591353 4.96
  80. 80. GRAPH:7 NET WORKING CAPITAL RATIO 6 5 4 3 2 1 0 2007-08 2008-09 2009-10 2010-11 2011-12INTERPRETATION: In the year 2007-2008 the working capital ratio is 1.41, 2008-2009 the net working capital is 1.75. these two are the lowest ratio than compare to all years. 2011-2012 is the highest ratio 4.96 than compared to all the years.

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