This document appears to be the introduction chapter of a student's dissertation on working capital management of Praga Tools Ltd. It provides background on working capital management and its importance for business success. It also outlines the objectives of the study which are to examine Praga Tools' working capital management policies, study its liquidity position, evaluate its financial performance, and make suggestions to improve working capital management. The next chapter will provide an overview of the machine tools industry.

1. 1 | P a g e
“A STUDY ON WORKING CAPITAL
MANAGEMENT OF PRAGA TOOLS LTD”
Dissertation submitted in partial fulfillment of the
requirements for the award of the Degree of
MASTER OF BUSINESS ADMINISRATION
of
CMR University
By
SHARATH KUMAR M
18CMBAD048
Under the supervision of
Prof. Arun N
CMR university
2018-2020

2. 2 | P a g e
DECLARATION
I hereby declare that “A study of PRAGA TOOLS LIMITED” is the result of the
project work carried out by me in partial fulfillment for the award of Master’s Degree
in Business Management by CMR University I also declare that this project is the
outcome of my own efforts and that it has not been submitted to any other university or
Institute for the award of any other degree or Diploma or Certificate.
Place: BANGALORE Name: SHARATH KUMAR M
Date: Register Number:18CMBAD048

3. 3 | P a g e
CERTIFICATE OF ORIGINALITY
This is to certify that the dissertation titled “A STUDY ON WORKING CAPITAL
MANAGEMENT OF PRAGA TOOLS LTD “is an original work of Mr. SHARATH
KUMAR M; bearing University Register Number 18CMBAD048 and is being
submitted in partial fulfillment for the award of the Master’s Degree in Business
Administration of CMR University. This is further to certify the student has worked on
preparing dissertation for the period of time as per specified requirements.
SIGNATURE OF GUIDE SIGNATURE OF THE SCHOOL
HEAD
DATE: DATE:

4. 4 | P a g e
ACKNOWLEDGEMENT
I am thankful to the institutions to provide me with such a great opportunity. It has been
a great learning experience. I wish to thanks the staff for their whole hearted support
and co-operation extended to me during the course of the project.
I wish to thanks Prof. Arun N, for her valuable guidance throughout the study thank all
faculty members for their consent support and encouragement I express my sincere
thanks to my beloved parents and friends who have provided support and constant
encouragement throughout my project.
I am grateful to Mr. Uma Maheswara Reddy for giving me permission to do the
project in PRAGA TOOLS LIMITED. I would express my sincere thanks to Mrs.
Padmini for helping me a lot in gathering information for my project. I also express my
gratitude to my Father, Mother and my friends who had been a constant source of
encouragement and provided me the necessary help during the period of my project.
Place
Date:

5. 5 | P a g e
TABLE OF CONTENTS
CONTENTS PARTICULARS PAGE NO
COVER PAGE - 1
DECLARATION - 2
CERTIFICATE OF
ORIGINALITY
- 3
ACKNOWLEDGEMENT - 4
TABLE OF CONTENTS - 5
CHAPTER 1 INTRODUCTION 6-9
CHAPTER 2 INDUSTRY PROFILE 10-22
CHAPTER 3 METHODLOGICAL FRAME
WORK
23-40
CHAPTER 4 DATA ANALYSIS AND
INTERPRETATION
41-67
CHAPTER 5 FINDINGS AND
SUGGESTIONS
68-72
CONCLUSION - 73
BIBLOGRAPHY - 74

6. 6 | P a g e
CHAPTER 1
INTRODUCTION

7. 7 | P a g e
INTRODUCTION
1. WORKING CAPITAL MANAGEMENT
The success of business, among other things depends upon the manner in which
its capital is managed in the dynamic business setting, the composition of
working capital mismanaged, in the dynamic business setting, the difference
between the current assets and current liabilities. Constantly changes in relation
to the level of activity of the business concern and rates at which the current
assets of current liabilities keep changing in relation to each other and other
things are significant factors also continuous review and direction of the financial
manager. It is the task of the financial maintain an appropriate level of working
capital that is enough current assets to pay off current liabilities neither excess
nor less because excessive working capital leads to interruption in the smooth
functioning of the business concern.
There are numerous instances in the history of business world where inadequacy
of working capital has led to business failures when a firm finds it difficult to
meetings day to day. Operating expenses essential out lays may have to be
postponed for want of funds, operating plans will go out of gear & enterprise
objectives on investment slumps the suppliers & creditors of the firm may have
to wait longer to raise their dues & will hesitate to extend further credit to the
firm.
Thus, efficient management of working capital in an important prerequisite for
successful working of a business concern it reduces the chances of business
failure generates a feeling of security and confidence in the minds of personnel
in the organization it assurance solvency of steady of the organization.

8. 8 | P a g e
NEED AND IMPORTANCE OF THE STUDY:
1.Their projects is helpful in knowing the company’s position of funds
maintenance and setting the standards for working capital inventory levels,
current ratio level, quick ratio, current amount turnover level & web torn
turnover levels.
2. This project is helpful to the managements for expanding the dualism & the
project viability & present availability of funds.
3. This project is also useful as it companies the present year data with the
previous year data and thereby it show the trend analysis, i.e. increasing fund or
decreasing fund.
4. The project is done entirely as a whole entirely. It will give overall view of the
organization and it is useful in further expansion decision to be taken by
management.

9. 9 | P a g e
OBJECTIVE OF THE STUDY:
1. To examine the effectiveness of working capital management polices with
the help of accounting ratio.
2. To study liquidity position of the company by taking various
measurements.
3. To evaluation the financial performance of the company.
4. To make suggestions for policy makers for effective management of
working capital.

10. 10 | P a g e
CHAPTER – 2
INDUSTRY PROFILE
[MACHINE TOOLS INDUSTRY – AN OVERVIEW]
MACHINE TOOLS INDUSTRY – AN OVERVIEW

11. 11 | P a g e
India ranks nineteenth in production and sixteenth in consumption of machine
tools in the world. The Indian machine tool industry averaged more than 35
percent growth. Imports exceeded production in the year 2019 with us$356
million worth machine tools being imported while the production was only
us$225 million. Machine tools from I percent of Indies engineering industry and
contributes 0.3 Percent of total machinery exports.
The Indian machine tool industry currently consists about 450 manufacturing
units of which approximately 33 percent (150 units) Fall under the organized
category. Further ten Major Indian companies constitute also most 70 percent of
the total production. The government Owned Hindustan Machine tools Limited
(HMT) alone accounts for Nearly 32% of Machine tools Manufactured in India
Approximately 75% of the Indian Machine tool producers have received the
coveted. 150 certifications while the large organized players cater to Indian’s
Heavy and Medium industries, the small scale sectors meets the demand of
ancillary and other units
Worldwide the total modify locations are 3,336. First highest modify location
country is United States in 1333 lowest Modify location countries are Belarus,
Bosnia and Merzegovina, Bulgaria, Croatia, Malta, Russian Federation in only
one Modify Location. 51 modify location are located in India. Modern Machine
Tool in India’s leading Industrial Magazine on machine tools and Ancillary
industries. Published in affectation with the country’s apex Body for the
machine tools industry. Indian machine tool Manufacture’s association
(IMMA)With a healthy readership base of over 2 lakhs, this Premium quarterly
magazine is regularly referred to by the key decision makers in the machine tool,
cutting and other manufacturing Industries that include CEOs. Directors, senior
managers, as well as engineers and shop. Floor technical personal apart from
students. It serves as the bench mark and with word it this ever-growing sector
of Indian industry. In addition to manufactures, this publication also reaches out
to exporters, dealers, distributors, R&D personnel Educational institution,

12. 12 | P a g e
consultants, industry associations and trade commission’s almost every entry in
the industry. Modern machine tools provide an intelligent balanced and cohesive
insight into the machine tools and ancillary industries in India in terms of the
death editorial content. It includes the latest trends and technologies highly
useful technical articles and case studies. Business strategies views and vision of
industry leaders and one of the largest ranges of machines tools/cuttings tools.
This apart, there is exhaustive coverage of the current national and international
news, upcoming projects, tenders, events and much more that help the readers to
effectively manage their business in a facilitator and guide for this burgeoning
industry.
Modern machine tools strives to facilitate effective interaction among several
fatuities of the machine tool, cutting and user industries by enabling them in
reaching out to their prospects buyers and sellers through better trade contacts
and more business opportunities.
Machine tool industry has undergone a radical shift in its paradigm thinking, the
Indian machine tool industry is now recognized as a provider of low-cost high
quality learn manufacturing solutions. The industry resiliently supports all its
users to enhance productivity as well as improve competitiveness, for the
betterment of the final customer.
Being an integral sector, growth of the machine tool industry has an immense
bearing on the entire economy, especially India’s manufacturing industry. And
is even more crucial for development of the country’s strategic segments such as
Defense, railways, space and atomic energy. World over too, industrialized-
advanced countries have created market inches on the back of a well- developed
and supportive machine tool sector.
In India as well, indigenous machine tools have the highest impact on capital
output ratios. Machine tool consumption of Rs. 1,000 Crore truly supports the

13. 13 | P a g e
advancement of the country’s engineering sector, output of which is estimated
to be worth over Rs. 1,50,000 crore.
2.2 Manufacturing range:
The Indian machine tool industry manufactures almost the complete range of
metal cutting and metal forming machine tools complete range of metal-cutting
and metal-forming machine tools.
Customized in nature, the products from the Indian basket comprise and
conventional machine tools as well as computer numerically controlled (CNC)
machines. There are other variants offered by Indian manufactures too, including
special purpose machines, robotics, handling systems and TPM friendly
machines.
Efforts within the industry, are now on to better the features of CNC machines,
and provide further value additions at lower costs, to meet specific requirements
of users. Based on the perception of the current trends, and emerging demands,
CNC segment could be the driver of growth for the machine tool industry in
India.
2.3 Current trends :
A slowdown in the Indian economy since mid-1999 had its fallout on prospects
of Indian machine tool manufactures. The Indian machine tool industry is
besieged by lack of adequate business opportunities that has stemmed from
sluggish demand in the home market of all user industries.
Output by domestic metal working machine tool manufacturers in 2001 calendar
year declined by 14 pr cent to Rs.5, 137 million marking the fourth yeast of
decline, since 1997, for the Indian machine tool industry. Much of this fall was
due to subdued investment by all the major users segments of machine tools,
except the Defense industry, primarily because of a higher capital expenditure

14. 14 | P a g e
outlay. While decrease in domestic production was dormant in case of
conventional metalworking machine tools computer numerically conventional
metalworking machine tools, computer numerically controlled (CNC) machine
tool manufacturers too suffered, although marginally. Lathes, machining centers,
special purpose machines, and grinding machines were among the machine tools
that sustained much of the order inflow during 2001.even though these segments
registered decline, in comparison with the previous corresponding year.
2.4 Export Performance:
In view of an imminent slowdown in the Indian economy, most Indian machine
tool manufactures focused on potential overseas markets for business
opportunities. Sustenance on Indian market alone did not look feasible enough.
Further, there has off late been a perceptible change in the image of the made in
India brand in overseas markets particularly true for Indian-built machine tools.
Enhanced features, competitive pricing, and marketing focus has increased
demand for Indian –made machine tools in overseas markets, particularly in
Europe, United states, and East-Asian regions. And this is what Indian machine
tool manufactures are hoping to leverage so as to post an optimistic export
turnover in the next few years. Indian-made machine tools are currently exported
to over 50 countries: major ones being United states, Italy, Brazil. Germany and
the middle East. Lathes and automats, presses, electro-discharge machines, and
machining centers formed the bulk of export orders for Indian manufactures.
These machines from the Indian basket are generally favored in overseas markets
primarily due to their cost-competitiveness, as compared to that available
elsewhere compared to those available elsewhere.
This vision of the Indian machine tool industry is now to step out and establish
a relative presence in, other potential markets. World-over, market leaders have
been those who have looked to increase their market presence beyond their
national frontiers.

15. 15 | P a g e
2.5 Industry Structure
Machine tool industry in India comprises about 450 manufactures with 150 units
in the organized sector. Almost 70 percent of production in India is contributed
by ten major companies of this industry. And over three-quarters of total machine
tool production in the country comes out of ISO certified companies. Many
machine tool manufacturers have also obtained CE marking certification, in
keeping with requirements of the European markets. The industry has an
installed capacity of over Rs. 10,000 million and employs a workforce totaling
65,000 skilled and unskilled personnel.
Machine tool industry in India is scatted all over the country. The hub of
manufacturing activities, however, is concentrated in places like Mumbai and
Pune in Maharashtra; Batala, Jullunder and Ludhiana in Panjab; Ahmedabad,
Baoada, Jamnagar, Rajkot and Surendranagar in Gujarat, Combatore and
Chennai (Madras) in Tamilandu: some parts in East India; and Bangalore in
Karnataka. Bangalore is considered as the hub for the Indian machine tool
industry. The city, for instance, house HMT machines Tools limited, a company
that manufactures nearly 32 percent of the total machine tool industry’s output.
2.6 User Industries Services
The industry’s prospects mainly depend on growth of engineering industries. The
user sectors of machine tools are the automotive, automobile and ancillaries,
Railways, Defense, Agriculture, steel, Fertilizers, Electrical, Electronics,
Telecommunication, textile machinery, ball & roller bearings, industrial values,
power-driven pumps, multi-product engineering companies, earth moving
machinery, compressors and consumer durable like washing machines,
refrigerators, television sets, watches, dish-washers, vacuum cleaners, air
conditioners, etc.
ORGANISATION PROFILE

16. 16 | P a g e
INTRODUCTION
Praga is one of the leading machine tool manufacturing units in India established
in the year 1943, Praga’s production are well known in the field of machine tools
the company in organized in four divisions via the machine tools forge foundry
and CNC division which pulsated with the activities of 697 employees turning
out a wide range of production the four divisions equipped with the modern
facilities for design development of manufacture of machine tools, are manned
by qualified personnel with proven record of technical knowledge and exquisite
craft smashup acquitted over a period of year. Praga is proud of its diverse of
machine tools the cutler& tools venders milling machines copy lathes thread
rolling machines & Praga CNC machines which keep pace with the ever-
changing technology in addition the company also manufactures a wide of
industrial forgings for railway automotive & ordnance applications. Praga’s
wriest investment has been in its excellent collaboration with world famous
names like Jones & shipman of UK for surface grinding and cutter of tool
vendors gamin of France for milling machines scoffers of grace for thread rolling
machines George finisher of Switzerland for coping lather Mitsubishi Heavy
industries of Japan for machining centers of Kayo spiky of Japan for CNC lather
the collaboration have culminated in Praga producing machine tools of the
highest quality conforming to international standards by virtue of their
dependability prevision engineering & proven.
PROFILE OF PRAGA
The Praga Tools is one of the oldest, machine Tools industries in India and has
entire its golden jubilee year in 1993-94. The company has incorporated has the
joint stock company is 1943 has a private company with objective of
manufacturing, instruments with the Technical assistance of a few
Czechoslovakia Engineers. The company was incorporated in Many 1943 as a
public limited company in private sector. The name PRAGA symbolizes the

17. 17 | P a g e
technical co-operation extended in the initial phase by some Czechoslovakian
engineers who suggested the naming of the company as PRAGA after their
capital city PRAGUE (PRAGA).In March 1995, the Government of India
acquired the controlling interest in the company by acquiring majority shares and
placed the administrative control under the ministry of commerce and industry
from May 1995 to December 1963. The managing agents M/S united industrial
corporation limited initially managed the company. Administrative control of the
company has been transferred from the defense minister to the department of
public enterprise under ministry of industry on the 25th
of April 1986. Presently
the company enjoys the status of being a subsidiary of HMT LTD. Bangalore
when a paid up capital of the company was transferred in its name from the
government. The company has four manufacturing units located within the twin
cities of Hyderabad at Kavadiguda at Secunderabad it manufactures a wide range
of machine Tools, accessories and defiance items. A unit of forge and foundry
divisions is located at Kukatpally Hyderabad where manufactures castings and
forgings are.
➢ A CNC project was established with advance technology like numerical
control machines like automobiles CNC lathes, VNC mailing machines
etc are manufactures with the qualified personnel’s in the fields of
engineering of technology.
➢ The company has manpower of 2000 employees turning out wide range
of products.
➢ The company has organized into four divisions viz., the machine Tools
division (MT-I), machine Tools II (MT-II), forge and foundry division,
and the CNC division.

18. 18 | P a g e
➢ Performance Praga machine tools ate penetrating large segments of
foreign markets including UK CIC Canada, Bulgaria, Indonesia,
Germany, Japan.
➢ PRAGA is even more proud of the fact that it has contributed to the
development of thee machine tools industry in the development of the
machine tools industry in the country and the creation of a vast band of
skilled technicians thus Praga to day in name of techno, within the
machine tool industry.
3.2 CORPORATE VISION OF PRAGA TOOL
VISION STATEMENT:
Praga tools to be the provider of choice for total machine tools solution to
customers and a significant provider of service in Indian industry of oversees too
the strong market position in to be sustained by the provision of integrated
products and services and the aggressive marketing of machine tool knowledge
expensive and support services.
COMPANY STATRATEGY:
1. To maintain good customer relation
2. Providing after seller service
3. Increasing the book order position
4. To maintain good quality and loyalty of the customers on their products
5. Maintain better research and development activities
6. Relation to company and other customer services through conducting the
product exhibition within the company preview

19. 19 | P a g e
QUALITY VALUE:
• Commitment of the management of the quality at all stager.
• To create quality culture among all employees to maintain quality
leadership in all products.
• To maintain quality leadership in all products and services.
• Total customer satisfaction through quality goods and services.
• Total quality through performance leadership.
3.3 MANUFACTURING FACILITIES
The company has two manufacturing units the order manufacturing unit is
located at Kavadiguda in Secunderabad, the heart of the city these unit houses
the machine toils division and the corporate head office and accompanies and
area of slightly over 1 acres the company.
Has its second manufacturing has is at balanagar in Hyderabad, about 5 to 6
kilometers from Hyderabad, airport the CNC division forge shop of foundry
division are located in the balanagar unit the total and available with the currently
utilized by the CNC division forge shop and foundry division leaving a surplus
of nearly 100 acres.
3.4 PRODUCT RANGE:
The company has three manufacturing division viz., can pavilion forge shop and
foundry division.

20. 20 | P a g e
MACHINE TOOLS DIVISION:
The major products manufactured by the company in its machine toll division
are cutler of fool grinders, milling machines, thread rotting machine, lather
chuckn etc. There products were developed with the technical assistance of the
world-renowned machine tool manufacture by entering into collaboration
agreements with M/s. Escofier, SA, France, M/s. F. Pratt and Co. and U.K. There
machines enjoy good reputation in the market.
FORCE DIVISION:
Railway Duplication
Auto dialer pants
Tractors links
Other carting
BOUNDARY DIVISION:
Carting for companies machine tools:
The sophisticated machines like CNC machining center sideway, grinding
machines, universal grinding machines, jigs boring machine with coordinated
system been added at a cost of Rs. 1,107.05 lacks.
PRAGAS VALUES:
Underlying our minion in a set of core corporate valued which deliver praga
priorities. This set of values creates an overall framework for determining our
derived future and developing plans to achieve it.We take advantage of existing
synergies and foreseeing higher level of competitiveness. Safety in the priority
value for all aspects of our business.

21. 21 | P a g e
SWOT Analysis:
STRENGTHS:
• Proven products and brand image.
• High brand loyalty of customer.
• High market shares in few of the products categories.
• Skilled work force.
• ISO 9001 accredited company.
WEEKNESSES:
• Limited product gage.
• Low volume production.
• Out dead technology.
• Inadequacy of working capital.
• Aberrance of MIS.
• Board needs to be board bared and must include.
• Financial expensive.
• Obralete machinery.
• High man power cost.
• Poor marketing plants.
OPPORTUNITIES:
• Prospects of improved in auto and automotive sector.
• Export potential for exports of machines.
• Foreign and components (with up gradation)

22. 22 | P a g e
Opportunity to from joint venture update technology. And use technical
manicuring experience for globalization through venture partnership.
Diversification into related areas where ever synergy exists.
Threats:
• Dwindling market for some of the products server.
• Competition from imports of latest technology machines.
• A threat from second hand machine imparts.
• Shrinking resources of traditional customers, defense and railways.
The above analysis indicates ample scope and prospects for the company
subject to corrective steps being taken early.

23. 23 | P a g e
CHAPTER – 3
CONCEPTUAL & METHODOLOGICAL FRAME WORK

24. 24 | P a g e
4.1 NATURE OF WORKING CAPITAL
Working capital management in concerned with the problem that arises in
attempting to manage the current assets current liabilities and the inter
relationship the exist between them the term current assets refers to those assets
which in ordinary course of business can be or will be turned into cash within
one year without undergoing diminution in value and without undergoing in
value and without disrupting the operations of the firm.
The major current assets are cash marketable securities accounts receivable and
inventory, current liabilities those liabilities, which are intended at their
inception to be paid in the ordinary course of business with in a year current
liabilities are amount payable, bills payable bank overdraft and outstanding
expenses.
METHODOLOGY
Primary Data
DEF: The first handed information/Fresh data collected through various methods
is known as primary data. In respect of primary data which the researchers is
directly collects data that have not been previously collected. The primary data
was gathered through personal interaction with various functional heads and
other technical personnel. Some information was also collected by observation.
Secondary Data:
DEF: The data which have been already collected & comprised for another
purpose. Secondary data was collected various reports / annual reports,
documents charts, management information systems, etc in PRAGA. And also
collected various magazines, books, newspapers and internet. The analysis of the
information gathered has been made on the basis of the clarifications sought
during the personal discussions with the concerned people and perception during

25. 25 | P a g e
the personal visits to the important areas of services. In marking observations
identifying problems and suggesting certain remedies such emphasis was given
on the basis of opinions gathered during the personal discussions and with the
personal experience gained during the academic study of M.B.A course.
1.4 SCOPE OF THE STUDY
1. The scope is limited to operations of Praga tools Ltd, Hyderabad.
2. The period considers 2 months
The scope of the study is limited to collecting the financial data published in
the annual reports of the company with reference to the objectives stated
above and an analysis of the data with a view to suggest favorable solution
to various problems related to financial performance.
1.5 LIMITATION OF THE STUDY:
1. The following are the various aspects involved in the analysis of the study.
2. The data used in this study have been taken from published annual report only.
3. This study in conducted within a short period. During the limited period the
study may not be retailed, full-fledged and utilization in all aspects.
4. Financial accounting does not take into account the price level changes.

26. 26 | P a g e
4.2 DEFINITION OF WORKING CAPTIAL:
According to MY Khan and P.K Jain “Working capital refers to manage the firm
current assets and current liabilities in such a way that a satisfactory level of
working capital is maintained. According to the Shubin “working capital is an
amount of fun is necessary to cover the cost of operating the enterprise”.
Working capital management is concerned with the problems is that arise in
attempting to manage the current assets and the current liabilities and their inter
relationship they arise between them. Current assets refer to those assets which
to ordinary course of business can be or will be turned into cash within one year
without undergoing a diminution in value and without disrupting the operations
of the firm.
The major current assets are cash marketable securities accounts receivable and
their inception to be paid in the ordinary course of business within a year out of
Current Assets or earnings of the concern. The basic Current Liabilities are Bill
payables, Bank Overdrafts and Outstanding expenses. The goal of working
capital managements is to manage the firms Current Assets. And Current
Liabilities in such a way that a satisfactory level of working capital is maintained.
Thus, the current assets should be large enough to cover its current Liabilities in
order to ensure a reasonable margin of safety. Each of the current assts must be
efficiently in order to maintain the liquidity of the short term be managed
efficiently in order to maintain the liquidity of the short-term sources of
financing must be continuously managed to ensure that they are obtained and
used in a best possible way. Therefore, interaction between current assets and
current liabilities in the main theme of working capital Management.The current
assets should be large enough to cover is current liabilities in order to ensure a
reasonable margin of safety. The interaction between current assets and current
liabilities in therefore the main theme of the threat of working capital
management.
The two concepts of working capital are:

27. 27 | P a g e
4.3 Methodological Framework
The data for the period 20015-2019 used in this study have been taken from
primary and secondary sources. The necessary primary data have been collected
from corporate office of the organization; secondary data have been collected
from the financial statements published in the report of the PRAGA TOOLS
LTD. Data was analyzed through various established techniques of working
capital and personal observation. Editing the data, clarification and tabulation of
the financial data collection from the above-mentioned source have been done
as per the requirements of the study. Data has been analyzed using various
comparative statements and working capital ratios.
The data is analyzed in the chapter-4 ‘Analysis of Working Capital
PRAGA TOOLS LTD’ under the following head.
1. Trends in Net Working Capital
2. Working Capital Ratios
a) Current Ratios
b) Quick or Acid test Ratio
c) Current Assert Turnover Ratio
d) Current Asserts to Total Asserts Turnover Ratio
e) Working Capital Turnover Ratio
3. Cash Management
a) Percentage of Cash to Current Asserts
4. Receivables Management
a) Debtors Turnover Ratio

28. 28 | P a g e
b) Debtors Collection Period
5. Inventory Management
a) Inventory to Total Current Asserts
b) Inventory Turnover Ratio
c) Inventory Holding Period in Days
4.4 NEED FOR WORKING CAPITAL:
Working capital is the amount of funds necessary to cover the cost of
operating the enterprise. Working capital in a going concern is revolving
funds; it consists of cash receipts from sales which are used to cover the cost
of current operations.The need of working capital arises because of time gaps
in manufacturing and marketing cycle of business operations. This time gap
is due to time gaps between Cash and purchase of Raw-Materials.
a) Purchase and production
b) Production and sales
c) Sales and Realization of cash.
During these intervals, the company should have ready working or
operating funds to keep their business going. Thus every business concern
should have sufficient liquidity funds as its disposal to buy Raw-
Materials, stores etc to pay wages to personnel and to meet incidental
expenses with the installed plant equipment, tools and other fixed assets,
the concerned would be able to produce finished goods by spending cash
or Raw Materials, intermediate goods Labor remuneration etc. The goods
so produced will swell into inventories or stock soon, the stock will take
the form of debtors or Bill Receivable on maturity.There is therefore, a
need for working capital, because the production Sales and cash payment
and realization of cash are not instantaneous, the company needs cash to
purchase Raw material and to meet expenses as there may not be helps to
meet future agencies.

29. 29 | P a g e
The stocks or Raw materials are kept in order to assure smooth production and
protect against the risk of Non availability of raw material. Similarly, stocks of
finished goods have to be carried to meet the demands of the customers on
continuous basis and sudden demand. Thus, an adequate amount of funds has to
be invested in current assets for smooth and uninterrupted. Production and sales
process, which is refers to as operating cycle or cash cycle. The operating cycle
determines the need for working capital.
The operating cycle represents the period during which investment of one unit
of remain blocked till recovery out of revenue, in other words, the operating
cycle refers to the time necessary to complete.
a) Conversion of cash into Raw Material.
b) Conversion of Raw Material into finished goods.
c) Conversion of finished goods into cash sales or credit sales.
d) Conversion to credit sales or receivable into cash.
Thus, it is said Management must know the length of time required to convert
cash into resource used by the firm, the resource into the resource used the firm
the resource into final product. The final product into receivable bank into cash.
This is the operating cycle of an enterprise.
Thus, it is said Management must know the length of time required to
convert cash into resource used by the firm, the resource into the firm the
resource into final product. The final product into receivable bank into cash. This
is the operating cycle of an enterprise.The pattern of operating cycle depends
upon the nature of the enterprise. The financial institution may have a shorter
cycle while trading concern has and extended one. The usual operating cycle of
manufacturing concern is shown. In real business situation, the operating or cash
flow cycle in not as simple and smooth going as the depicted above. A going
concern by nature undergoes the process of liquidity the besides, a circular flow

30. 30 | P a g e
among working capital itself, all process of liquidity valued added to the product
of the firm. Therefore, we can say that, working capital in needed not only for
financing current assets but also to meet various other requirements like payment
of dividends, interest etc. Therefore, it is recovery for a product financial
manager to provide correct amount of working capital at the time to provide for
operating reach.
5.5 SCOPE OF WORKING CAPITAL MANAGEMENT
Since a firm has to maintain a sound working position and there should be
optimum investment in working capital, effective management involves
manages of current assets and current liability. Current asserts management
involves management of current assets like Cash.Marketable Securities, Account
Receivable, inventories etc. effective in order to maintain liquidity of the firm.
The process of current asserts management can be as follow management of cash
and Marketable Securities.
a) Management of cash and Marketable Securities.
b) Management of Cash.
Current liability management is concerned with the management of curr3ent
liabilities like, trade Credit or Account Payable, Accruals etc. which
represents short term financial source and must be cautiously management to
ensure that they are obtained and used in the best way possible.
4.6 OBJECTIVES OF WORKING CAPITAL
The main objective of working capital management is to attain tradeoff between
profitability and risk. Here risk refers to the profitability that a firm will become
technically involvement that is unable to pay obligation promptly. Risk is
commonly measured by using either the amount of net working capital of the

31. 31 | P a g e
current ratio. Thus, more the net working capital the more liquidity is associated
with increasing levels of risks.
To have higher profit the firm may have to sacrifice solvency that is take the risk
of technical insolvency and maintain relatively low level of current assets. When
the firm does so, its profitability would improve but greater risk of technical
insolvency.
Thus, if a firm wants to increase profitability it must also increases its risk and if
it want to decrease risk, it must decrease profitability. Thus, working capital
management involves tradeoff between risk and profitability.
4.7 COMPONENTS OF WORKING CAPITAL
The main components of working capital are currents assets & currents
liabilities.
A. CURRENT ASSETS:
Current assets comprised items that would get converted in to cash in short term,
within a year, through the business operations current asserts include.Inventories
including stock of raw material, work in progress, finished goods & factory
supplies. Packing, shipment material, office supplies etc Loan & advances, other
balances; include sundry debtors, bills receivables and others including loans and
advances, prepaid expenses etc. Marketable securities including government
securities and semi government securities, cash and bank balances.
B. CURRENT LIABILITIES:

32. 32 | P a g e
Current liabilities are those which are expected to fall due of mature for payment
in short period of one year and they represent short term source of funds. They
include:
C. SHORT TERM BORROWINGS:
Include bank borrowings other than those against own debentures and other
mortgages, trade creditors and other labializes sundry creditors, outstanding
expenses and advances received etc.
Provision for taxation, dividends and other current provisions.
4.8 GROSS WORKING CAPITAL:
Gross working capital in represented by the sum total of all current assets of the
enter price adequate funds have to be provided to sustain the movement of the
row material through the work in process to the finished goods stage and then to
receivables and up to realization of cash.
NET WORKING CAPITAL:
Net working capital in excess of current assets over current liabilities the concept
of net working capital highlights the character of serves from which the funds
have been obtained to support that position of current liabilities.
PRORIETORS
FUNDS

33. 33 | P a g e
NEED FOR WORKING CAPITALS
Business firms aim at maximizing the wealth of shareholders. In its endeavor to
maximize shareholder’s wealth a firm should earn sufficient return from its
operation earning a steady amount of profits required successfully sales activity.
The firm has to invest enough funds in current assets for the success of sales
activity current assets are needed because sales don’t convert into cash
instantaneously there is always an operating cycle involved in the conversion of
sales into cash.
PERMANENT AND TEMPORARY WORKING CAPITAL:
The above figure shows permanent level is fairly constant, while temporary
working capital is fluctuating sometimes increasing and sometime decreasing in
accordance with seasonal demands, in the case an expanding firm the permanent
working capital may not be horizontal. This is because the demand for
permanents current asserts might be increasing or decreasing support a rising
level of activity. In that the line should be a rising one.

34. 34 | P a g e
PERMANENT AND TEMPORARY WORKING CAPITAL.
Both kinds of working capital are necessary to facilitate the sale process through
the operation cycle. Temporary working capital is created is created to meet
liquidity requirements that are purely transient nature
4.9 THE DANGERS OF EXCESSIVE WORKING CAPITAL
1. It results in unnecessary accumulation of inventories thus chances of
inventory mishandling waste theft and losses increases.
2. It is an indication of defective credit policy and slack collection period.
Consequently, higher incidence of bad debts results, which adversely
effect degenerated into management co placement, which degenerated
into managerial inefficient.
3. Excessive working capital makes management complacent, which
degenerates into managerial efficiency.
Permanent
Temporary or
Fluctuating
TIME

35. 35 | P a g e
4. Tendencies of accumulating inventories to make speculation profits grow
this may tend to make dividend policy liberal and difficult to cope with in
future when the firm is unable to make speculative profits.
INADEQUATE WORKING CAPTIAL
1. It stages growth and become difficult for the firm to undertaken profitable
projects for non-availability of working capital funds.
2. It becomes difficult to implement operating plans and achieve the firms
profit target.
3. Operating inefficiencies creep in when it becomes difficult even to meet
day-to-day commitments.
4. Fixed assets are not efficiently utilized for the lack of working capital
funds thus the firms profitability would deteriorate.
5. Paucity of working capital funds renders the firm unable to avail attractive
credit opportunities etc.
6. The firm losses its reputation when it is not in position to honor its short
term obligation as result the firm faces tight credit terms. Thus,
enlightened management should therefore maintains a right amount of
working capital on a continuous basis which helps to develop the
organization effectively and efficiently.
4.10 ROLE OF FINANCIAL MANAGER IN WORKING CAPITAL
MANAGEMENT:
1. Working capital management requires must of the finance manager time
as it represent a large position of investment is assets.

36. 36 | P a g e
2. Working capital management requires much of the finance management
time as it represent larger position of investment in assets.
3. Action should be taken to curtail unnecessary investment in current assets.
4. All precautions should be taken for the effective and efficient
management of working capital.
5. Larger firms have to manage their current assets and current liabilities
very carefully and should see that the work should be done properly in
order to achieve predetermined organization goals.
6. The financial manger should pay special attention to the managements of
current assets on continuing basis.
FUNDS FLOW STATEMNET
Funds flow analysis design effective management toll to study how funds have
been procured for the business and how they have been employed. The statement
of variation in working capital is based fundamentally on the same approach used
for the preparation of funds flow statement. This technique helps to analyses
changes in working capital between dated or two balance sheets. The comparison
of current assets and current liabilities as shown in the balance sheet at the
beginning and the ending of a specific period.
The statement of changes in working capital reveals to manage to way in which
working capital was obtained and use with this insight management to can

37. 37 | P a g e
prepare the estimates of the working capital flows. A project statement of
changes in working capital is very much useful in the firm long planning.
CONCEPT OF FUND
The working capital flow or fund arises when the net effect of a transaction is to
increase or decrease the amount of working capital a firm will have same
transactions that will change net working capital and same that will cause no
change in net working capital transaction which change net working capital
include most of items of the profit & loss account and those business events
which simultaneously effect both current and not current balance sheet items. On
the other based transaction, which do not increase or decrease working capital
include those which effect only current accounts or only non-current accounts.
USES AND SIGNIFICANCE OF THE FUND FLOW STATEMENT
1. A Funds Flow statement show how the resource has been obtained and
the uses to which are put it helps in analyzing the financial operations.
2. It helps in determining the financial consequences of business operations.
3. It is useful in judging whether the fund has expanded at too faster rate and
whether financing is trained.
4. It points out the effectiveness with which the management has handled
working capital during the period under review.
5. The statement can assist the financial management in planning
intermediate and long-term finance to obtaining resources in the further
and determining how they are used.

38. 38 | P a g e
6. It gives an insight into the evaluation of the present situation it provides
certain useful information about the firm financial policies to out side
world.
The funds flow statement is becoming popular with the management because
it helps to explain why in spite of earn sizeable amount of profits the company
is experiencing difficulty in making payment to creditors the rate of dividend
on equi9ty shares cannot be increased and bank balance is getting thinner.
OBJECTION OF FUND FLOW ANLAYSIS:
1. To indicate the result of current financial position.
2. To lay emphasis on the most significant change that has taken place
during specified period.
3. To show how general expansion in business has been financed or to
describe the sources from which additional funds were derived.
4. To know the relationship between profits from operating distribution of
dividing and rating a new capital or contracting of loans.
5. To give reorganization to the fact that a business exists on flow of funds
and is not a static management.
MANAGEMENT OF CASH
CASH MANAGEMENT: -

39. 39 | P a g e
Cash is the important assets for the operations of the business cash is the basis
input to keep the business running on continuous basis. Cash shortage will
disrupt the firms manufacturing operations while excessive cash will simply
remain ideas without contribution anything towards the firm’s profitable
way. Cash management is concerned with the managing of cash flow into
and out of the firm cash flow with in the firm and cash balances held by the
firm at appoint of time by financing depict investing surplus cash. Cash
management is to obtain adequate control over cash position to keep the firm
sufficiently liquidate and to use excess cash in some profitable way.
CASH PLANNING: -
Cash planning is technique to plan and control of the use of funds. It protect
the financial condition of them firm by developing a projected cash statement
from a forecast of plans are very crucial and developing the overall operating
plans of the firm.
USES OF CASH MANAGEMENT: -
1. It indicates company’s future financial need especially for its working
capital requirement.
2. To help to evaluate proposed capital projects.
3. It pinpoints the cash required to finance these projects as well as the cash
to be generated by the company to support them.
4. It helps to improve corporate planning.

40. 40 | P a g e
5. Cash forecasting helps to future and to formulate projects carefully.

41. 41 | P a g e
CHAPTER –5
DATA ANALYSIS & INTERPRETATION

42. 42 | P a g e
Table-1
STATEMENT SHOWING CHANGES IN WORKING CAPITAL BETWEEN
31-03-2015 & 31-03-2016
Rs. in Lakhs
S.No. Particulars 31-03-2015 31-03-2016 Increase Decrease
(a)
Current
Assets
Inventories 1,44,120.00 1,19,395.00 24,725.00
Sundry debtors 71,970.00 61,278.00 10,692.00
Cash & Bank
balance
1,213.00 1,252.00 39.00
Loan &
Advance
31,317.00 22,180.00 9,137.00
Total (a) 2,48,620.00 2,04,105.00
(b)
Current
Liabilities
Current
Liabilities
3,41,037.00 3,70,306.00 29,269.00
Provisions 82,424.00 83,160.00 736.00
Total (b) 4,23,461.00 4,53,466.00
Working
Capital
(a-b) -1,74,8,741.00 -2,49,361.00
Net increase
in W.C
74,520.00 74,520.00
Total of
N.W.C
-7,74,841.00 -1,74,841.00 74,559.00 74,559.00
ANALYSIS:
Above table explaining that working capital shows the continuous increase in the net
working capital through in the year 31-03-2014 to the year of comparing the balance

43. 43 | P a g e
sheet is the year 31-03-2015 to 31-03-2016. So, this is due to the sale of inventory and
reducing the debtors and increasing the current liabilities and provisions.
Rs. in Lakhs
S.No. Particulars 31-03-2016 31-03-2017 Increase Decrease
(a)
Current Assets
Inventories 1,19,395.00 72,230.00 47,165.00
Sundry debtors 611,278.00 28,478.00 32,800.00
Cash & Bank
balance
1,252.00 7,041.00 5,789.00
Loan & Advance 22,180.00 13,205.00 8,975.00
Total (a) 2,04,105.00 1,20,954.00
(b)
Current
Liabilities
Current Liabilities 3,70,306.00 3,10,123.00 60,183.00
Provisions 83,120.00 71,062.00 12,099.00
Total (b) 4,53,466.000 3,81,185.00
Working
Capital
(a-b) -2,49,361.00 -2,60,231.00
Net decreased
in W.C
10,870.00
Total of
N.W.C
-2,49,361.00 -2,49,361.00 88,940.00 88,940.00
ANALYSIS:
Above table discloses that working capital shows the continuous increase in the net
working capital through in the year 31-03-2016 to the year of comparing the balance

44. 44 | P a g e
sheet is the year 31st
March. So, this is due to the sale of inventory and reducing the
debtors and decreasing the current liabilities and provisions.
Table-2
STATEMENT SHOWING CHANGES IN WORKING CAPITAL BETWEEN
31-03-2017 & 31-03-2018.
Rs. in Lakhs
S.No. Particulars 31-03-2017 31-03-2018 Increase Decrease
(a)
Current Assets
Inventories 72,230.00 50,765.00 21,465.00
Sundry debtors 28,478.00 34,042.00 5,564.00
Other current
Assets
--- 4,932.00 4,932.00
Cash & Bank
balance
7,041.00 1,56,398.00 1,49,357.00
Loan & Advance 13,205.00 11,368.00 1,837.00
Total (a) 1,02,954.00 2,57,505.00
(b)
Current
Liabilities
Current Liabilities 3,10,123.00 3,77,829.00 67,706.00
Provisions 71,062.00 71,793.00 671.00
Total (b) 3,81,185.00 4,49,562.00
Working
Capital
(a-b) -2,60,231.00 -1,92,057.00
Net decreased
in W.C
68,174.00 68,174.00
Total of
N.W.C
1,59,853.00
1,59,853.0
0

45. 45 | P a g e
ANALYSIS:
The above table discloses in this working capital as that was the Net decrease in
working capital in this year 31-03-2017 to 31-03-2018 is Rs.68,174.00 due to major
reasons of adjusting current assets as increase and the current liabilities decrease but
the provision decreased.
Table-3
STATEMENT SHOWING CHANGES IN WORKING CAPITAL BETWEEN
31-03-2018 & 31-03-2019.
Rs. in Lakhs
S.No. Particulars 31-03-2018 31-03-2019 Increase Decrease
(a)
Current Assets
Inventories 50,765.00 43,429.00 7,336.00
Other current
Assets
4,932.00 5,313.00 381.00
Sundry debtors 34,042.00 36,681.00 2,639.00
Cash & Bank
balance
1,56,398.00 51,469.00 1,04,929.00
Loan & Advance 11,368.00 10,466.00 902.00
Total (a) 2,57,505.00 1,47,358.00
(b)
Current
Liabilities
Current Liabilities 3,77,829.00 3,90,548.00 12,719.00
Provisions 71,733.00 57,232.00 14,501.00
Total (b) 4,49,562.00 4,47,780.00
Working
Capital
(a-b) -1,92,057.00 -3,00,422.00

46. 46 | P a g e
Net decreased
in W.C
1,08,365.00 1,08,365.00
Total of
N.W.C
-1,92,057.00 -1,92,057.00 1,25,886.00 1,25,886.00
ANALYSIS:
In this above table of working capital discloses that as the net increase in working
capital in this 31-03-2018 to 31-03-2019 is Rs.1,08,365.00 due to major reasons of
adjusting current assets as increase and the current liabilities decreases but the provision
decreased.
FUND,S FLOW STATEMENT AS ON 31ST
MARCH, 2015
SOURCES AMOUNT APPLICATIONS AMOUNT
Increased in secured
Loans
2,39,919.00 Purchased of Fixed Assets 108.00
Increased in Un-secured
Loans
14,062.00
Net increased in working
capital
85,948.00
Funds Lost in operation 1,67,925.00
Total 2,53,981.00 Total 2,53,981.00
ANALYSIS:
During this year 2000-2001 the funds flow statement the losses of the PRAGA
TOOLS LIMITED is still continuing. The company has mobilized his funds
increased figures of the secured and unsecured loans. The company has
adjusting their losses through these areas and in this year the purchasing power
of the company is also decreased.

47. 47 | P a g e
FUND’S FLOW STATEMENT AS ON 31ST
MARCH, 2016.
SOURCES AMOUNT APPLICATIONS AMOUNT
Increased in secured Loans 2,64,416.00 Purchased of Fixed Assets 33.00
Increased in Un-secured
Loans
8,237.00
Net increased in working
capital
85,948.00
Work in Progress 746.00 Funds Lost in operation 1,87,418.00
Total 2,73,399.00 Total 2,73,399.00
ANALYSIS:
In this last year of comparing there is the funds flow statement is still including
the losses from the operation. The company has procured huge amount from
borrowing loans in the from of secured and unsecured loans. The company has
Wright off their losses in operations which is the major thread of the company
that’s need to be ratified by the management of the PRAGA TOOLS Limited.

48. 48 | P a g e
FUND’S FLOW STATEMENT AS ON 31ST
MARCH, 2017
SOURCES AMOUNT APPLICATIONS AMOUNT
Increased in secured Loans 4,07,033.00
Purchased of Fixed
Assets
652.00
Increased in Un-secured
Loans
13,764.00
Net increased in
working capital
10,870.00
Funds Lost in operation 4,09,284.00
Total 4,20,779.00 Total 4,20,779.00
ANALYSIS:
During this year 2002-2003 the funds flow statement the losses of the PRAGA
TOOLS LIMITED is still continuing. The company has mobilized his funds
increased figures of the secured and un-secured loans. The company has
adjusting their losses through these areas and in this year the purchasing power
of the company is also decreased.

49. 49 | P a g e
FUND’S FLOW STATEMENT AS ON 31ST
MARCH, 2018.
SOURCES AMOUNT APPLICATIONS AMOUNT
Increased in un-secured
Loans
13,747.00
Decreased in
secured loans
1,05,789.00
Sales of fixed assets 9,211.00
Net decreased in working
capital
68,174.00
Funds lost in operations 14,657.00 10,870.00
Total 1,05,789.00 Total 1,05,789.00
ANALYSIS:
During this year 2003-2004 the funds flow statement the losses of the PRAGA
TOOLS LIMITED is still continuing. The company has mobilized his funds
from increased figures of the secured and un-secured loans. The company has
adjusting their losses through these areas and in this year the purchasing power
of the company is also decreased.

50. 50 | P a g e
FUND’S FLOW STATEMENT AS ON 31ST
MARCH, 2019.
SOURCES AMOUNT APPLICATIONS AMOUNT
Increased in Share Capital
funds.
1,700.00
Net increased in
working capital
1,08,365.00
Increased secured loans 2,12,657.00
Funds lost in
operations
1,35,004.00
Increased un-secured loans 13,746.00
Sales of fixed assets 15,266.00
Total 2,43,369.00 Total 2,43,369.00
ANALYSIS:
During this year of comparing there is the funds flow statement is still including
in losses from the operations. The company has procured huge amount from
borrowing loans in the form of secured and unsecured loans. The company has
Wright off their losses in operations in operations which is the major thread of
the company that’s need tobe ratified by the management of the PRAGA TOOLS
Limited.

51. 51 | P a g e
CHART – 1
TRENDS IN NET WORKING CAPITAL
INTERPRETATION: -
Net working capital had shown an increasing trend since, 2002, which in taken as a
base year from 100% to 98.40% in 2006. Which appears to be a normal trend. A careful
analysis into the components of the working capital would reveal the changes in NWC
the current assets decreased in the next years that is 2016-17 and at the next consecutive
assets increased in the next consecutive year to a good extent, but there is a decreasing
trend in the year 2018-19 as the current liabilities are covered their in a increase in the
next two year, 2016-17 & 2017-18 but there is gradual decrease in the year 2018-19
which is good sign to the company.This is calculated on the basis of the prevision year
i.e. the net working capital shown a decreasing trend compare to the year 2015-16 then
the net working capital increaser gradually from 2016-17 & 2018-19.
Several ratios calculated from the accounting data, can be grouped into various
classes according to financial activity or function to be evaluated the parties
interested in financial analysis are short and long term creditors owners and
managements short term creditors main interested is in the liquidity position or
short term solvency of the form long term creditors on the other hand. Are more
interested in the long-term solvency and profitability of the form. Similarly
0
20
40
60
80
100
120
2002-03 2003-04 2004-05 2005-06
Series1

52. 52 | P a g e
owners are more interested on the form profitability and conditions. Management
is interested in evaluating every aspect of the forms performance. They have
protect interested of all the parties.
The ratios are classified into three types.
(a). Liquidity Ratios
(b). Leverage Ratios
(c). Profitability Ratios
LIQUIDITY RATIOS: -
Liquidity Ratios measure the ability of the firm to meet its current
obligations. The analysis of liquidity needs the preparation of cash budget
and cash fund flow statement but liquidity ratios by establishing relationship
between cash and other current asset of current obligation, provide a quick
measure of liquidity. A firm should ensure that it does not suffer form.
LIQUIDITY OR SHORT TERM SOLVENCY RATIOS:-
Liquidity ratio measures the short-term solvency of the firm. The following
are the important liquidity ratios.
4.2 WORKING CAPITAL RATIOS:-
Current Assets
Current Ratio = ----------------------
Current Liabilities
The current Ratio is calculated by dividing current assets by current liability. The
current ratio is a measure of the firm’s short term solvency a current ratio of 2 or more
in considered satisfactory.

53. 53 | P a g e
TABLE – 2
CURRENT RATIO
(In Lakhs)
Year Current Assets Current Liabilities Current Ratios
2015-16 17846.14 4652.24 4.10
2016-17 15800.00 5117.81 3.09
2017-18 20272.00 11485.00 1.76
2018-19 1377.11 5130.73 2.69
CHART – 2
CURRENT RATIO
INTERPRETATION: -
Generally 2:1 in considered ideal for a concern from the ratios we can observe that the
ratios are above the standard in the year 2015-16 & 2016-17 but in the year 2017-18
the firm in not able to maintain a standard level of liquidity so the current assets ratio
has been directed below standard level that is by 1.76 but in the year 2018-19 the
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2015-16 2016-17 2017-18 2018-19
CURRENT RATIO
Current Ratios

54. 54 | P a g e
company is able to regain its standard level and can obtain its current assets ratio by
2.69 compared to its current liabilities.
Quick Assets
Quick or Acid Test Ratio = ------------------------
Current Liabilities
The quick Ratio is more penetrating test of Liquidity than Current Ratio, this Ratio
measures the firms liability to meet short term liabilities from its liquid assets that is
current assets inventories.

55. 55 | P a g e
TABLE – 3
QUICK RATIO
Year Quick Assets Current Liabilities Quick Ratios
2015-16 10141.00 4352.00 2.33
2016-17 8697.00 5118.00 1.64
2017-18 15335.00 11486.00 1.34
2018-19 9722.00 5130.00 1.89
CHART-3
QUICK RATIO
INTERPRETATION:
Quick ratio is ascertained by comparing the liquid assets this ratio shows the
immediately available assets which can be easily converted in to cash to meet the short
term solvency of the company the normal value which shows the non-availability of
0
0.5
1
1.5
2
2.5
2015-16 2016-17 2017-18 2018-19
QUICK RATIO
Quick Ratios

56. 56 | P a g e
assets for immediate conversion into liquid cash in the later year the figures were a
little.
ABSOLUTE LIQUIDITY RATIO:-
It is the ratio of absolute liquidity assets to quick liabilities. However, for calculation
purpose it is taken as ratio of absolute assets includes cash in hand at bank and short
term or temporary inventory investments.
Absolute Liquidity Assets
Absolute Liquidity Ratio = --------------------------------
Current Liabilities
Absolute Liquidity Assets = Cash in hand + Cash at bank + Short term investments
The ideal Absolute Liquidity Ratio is taken as 1:2 or 0.5
S.No Year
Absolute Liquid
Assets
Current
Liabilities
Current
Ratio
1 2001-2002 23,432,000.00 453,466,000.00 0.05:1
2 2002-2003 20,246,000.00 381,185,000.00 0.05:1
3 2003-2004 167,776,000.00 449,562,000.00 0.37:1
4 2004-2005 61,935,000.00 447,780,000.00 1.14:1
5 2005-2006 150,900,000.00 340,710,000.00 0.44:1
ANALYSIS:-
The above tables shows the Absolute Liquidity Ratio during the study period the ratio
was 0.08:1 in 2002 and gradually decreases to 0.05 in 2003, which in 2003, which to
too below from the standard 0.05:1 so the company, should try to improve and also
maintain this ratio

57. 57 | P a g e
LEVERAGE OR CAPITAL STRUCTURES RATIOS:-
Leverage ratios indicate, the relative interest of owner and creditors in a business. The
significant Leverage ratios are
1.DEBIT EQUITY RATIO:-
The ratio examines the relationship between funds and owner’s funds of a firm. In
other words it measures the relative claims of creditors and shareholders against the
assets of a business. Debit, usually refers to the long-term liabilities. Equity and
performance share capitals and reserves.
Long Term Liabilities
Debit Equity Ratio = ------------------------------------------
Share Holders Funds
S.No Year
Long Term
Liabilities
Share Holders
funds
Debit equity
ratio
1 2001-2002 1,978,031,000.00 361,731,000.00 5.47
2 2002-2003 2,398,602,000.00 361,731,000.00 6.63
3 2003-2004 2,306,560,000.00 361,731,000.00 6.38
4 2004-2005 2,532,963,000.00 363,431,000.00 6.97
5 2005-2006 662,910,000.00 1,237,367,000.00 0.54
ANALYSIS:-
A high debt equity ratio means a high claim of outsider on the assets of business and
very highly debt financed from will be under great pressure to pay the interest charges
and it is unfavorable to the firm. A firm with a debt equity ratio of two or less exposes
its creditors to relatively less risk a firm a high debt equity ratio exposes its creditors to
grater risk so this firm should minimize this ratio.

58. 58 | P a g e
Net Sales
WORKING CAPITAL TURNOVER RATIO = -----------------------
Working Capital
This ratio in computed by dividing net sales by working capital this ratio helps to
measure the efficiency of the utilization of net working capital is needed if any increase
in sales is contemplated working capital should be a adequate and thus this ratio helps
management to maintain the adequate level of working.
CHART-4
WORKING CAPITAL TURNOVER RATIO
Year Net Sales Working Capital Working Capital Turnover Ratio
2015-16 15192.02 13493.9 1.1
2016-17 16283.04 10682.82 1.49
2017-18 23993.07 8786.15 2.56
2018-19 24610.98 8646.38 2.85
CHART -5

59. 59 | P a g e
INTERPRETATION:
This ratio maker a comparison between net sales and net working capital in order to
find the working capital turnover ratio the working capital turnover ratio for the year
2015-16 in 1.10 hence there is increase in working capital turnover ratio for the next 3
year has increased in a gradual way in the last year the net sales has been increased and
the working capital in being similarly that of previous year hence the working that of
previous year hence the working that capital turnover ratio is at 2.82 in the year 2018-
19.
4.4 RECEIVABLES MANAGEMENT
1. DEBTORS TURNOVER RATIO:
Debtor constitute an important constitute of current assets & their fore the quality of
debtor to great extent determines a firm liquidity of a firm use two ratio. They are
debtors turnover ratio & debt collection period ratio. This ratio indication the speed
with which debtors receivable are being collected there it is indicative of the efficiency
of trade credit management. The higher the turnover ratio the better the trade credit
management & the better the liquidity of debtors.
0
0.5
1
1.5
2
2.5
3
1 2 3 4 5
WORKING CAPITAL TURNOVER RATIO
Year Working Capital Turnover Ratio

60. 60 | P a g e
TABLE-5
DEBTORS TURNOVER RATIO
(In Lakhs)
Year Total Sales Account Receivables Debtors Turnover Ratio
2015-16 15191.02 3803.54 3.99
2016-17 16283.04 4513.34 3.66
2017-18 24948.18 10325.48 2.42
2018-19 25884.26 5143.55 5.03
CHART-5
DEBTORS TURNOVER RATIO
INTERPRETATION:
From the date of interpretation it in observed that both the rates & account revisable are
going up, we see that in the year 2002-2003 the division was in a very good portion
regarding the collection but in the year 2004-2005 due to increase in the amount of
0
1
2
3
4
5
6
2015-16 2016-17 2017-18 2018-19
DEBTORS TURNOVER RATIO
Debtors Turnover Ratio

61. 61 | P a g e
average payables the ratio has come down drastically. In the year 2018-19 the decrease
in the previous year has been reduced by the increased in the ratio of current year 2018-
19.
2.DEBITORS COLLECTION PERIOD:
Their ratio indication the extent to which the debts have been collected in time it gives
the average debt collection period the ratio is very helpful to the lenders because it
explain them whether borrowers are collating money in a reasonable time an increase
in the period reflects grater blockage of funds in debtors a very long collection period
would imply either power credit selection or and inadequate collection effort.
TABLE-6
DEBTORS COLLECTION PERIOD
(In Lakhs)
Year No of Days Debtors Turnover Ratio
Debtors Collection Period
in Days
2015-16 364 3.99 91
2016-17 365 3.66 100
2017-18 365 2.42 151
2018-19 365 5.03 73

62. 62 | P a g e
CHART-6
DEBTORS COLLECTION PERIOD
INTERPRETATION
During the year 2018-2019 average collection period is very low which indicates the
better quality of debtors as the quick payments by them with in a short period During
the year 2004-2005 average collection period is very high as 151 days which indicate
ting the inefficient performance of the debtor as by late payments.
2. INVENTORY TURNOVER RATIO
This ratio indicates whether inventory has been efficiently used or not. This ratio checks
whether only the required minimum has been looked up in inventory.
Cost of good Sold
I.T.R = -----------------------
Average Inventory
Cost of goods of Sold = Opening Stock + Purchase + Direct expenses - Closing
Opening Stock + Closing Stock
0
20
40
60
80
100
120
140
160
2015-16 2016-17 2017-18 2018-19
DEBTORS COLLECTION PERIOD
Debtors Collection Period in Days

63. 63 | P a g e
Average stock = -----------------------------------------
2
TABLE-7
INVENTORY TURNOVER RATIO
(In Lakhs)
Year Cost of Goods sold Avg. Inventory Inventory Turnover Ratio
2015-16 10711.19 7704.71 1.39
2016-17 11850.37 7554.4 1.57
2017-18 18665.5 6170.48 3.02
2018-19 16358.92 4495.96 3.46

64. 64 | P a g e
CHART-7
INVENTORY TURNOVER RATIO
INTERPRETATION:-
From the above figure given in the table we can interpret that the inventory to the cost
of goods sold for the year 2015-16 in 1-39 their ratio has been increasing continuously
in an exponential manner in all the year which in a good sign to the company. This
shows the effective utilization of the inventory by the company.
In the year 2015-16 the percentage of inventory in current assets 42.17% which is not
beneficial sign to the company. In the next year has increased by nearly 3% more than
the previous year at that time the company retained not to block the current assets with
inventory, in the year 2017-18 it has decreased drastically to 24%. In the following year
this has increased by 5% but this is not sufficient on the increase in the recent past was
much more than that.
0
0.5
1
1.5
2
2.5
3
3.5
2015-16 2016-17 2017-18 2018-19
INVENTORY TURNOVER RATIO
Inventory Turnover Ratio

65. 65 | P a g e
3. INVENTORY HOLDING PERIOD (IN DAYS):
Days in Year
Inventory Holding Period (in days) = ----------------------------------
Inventory Turnover Ratio
The ratio represents the length of time required for conversion of investments
in inventoried for conversion of investments in invests airier to cash of a firm as a
result, the firm will be able to forecast its working capital requirements. Lower ratio
suggested better inventory management their ratio is calculated by dividing the number
of days of year by inventory turnover ratio.
TABLE-8
INVENTORY HOLDING PERIOD (IN DAYS)
(In Lakhs)
Year No. of Days Inventory Turnover Ratio Collection Period
2015-16 365 1.93 189 Days
2016-17 365 1.39 263 Days
2017-18 365 2.27 161 Days
2018-19 365 3.29 111 Days

66. 66 | P a g e
CHART-8
INVENTORY HOLDING PERIOD
INTERPRETATION:
In general, the inventory ratio of any company should be as low as foible. The reason
being the occurrence of the blockage of money due to holding of the inventory. The
figure shows in the year 2017-18 and 2018-19 also would have been for the company
if they were similar to the velour in the year 2015-16 & 2016-17.
7. AVERAGE COLLECTION PERIOD:-
The ratio is another device to measure the quality of debtors. It shows the nature of the
firm credit policy to the shorter period. The better the quality of debtors since the short
term collecting period implies prompt payment by debtors and excessively long period
implies a too long and liberal and inefficient credit and collection performance where
as too low period indicates a very strict credit and collection period.
Months in a Year
Average Collection Period = ----------------------
Debtors Turnover
365 365 365 365
1.93 1.39 2.27 3.29
0 0 0 0
2015-16 2016-17 2017-18 2018-19
INVENTORY HOLDING PERIOD
No. of Days Inventory Turnover Ratio Collection Period

67. 67 | P a g e
S.No. Year No. of Months in a
year
Debtors
Turnover Ratio
Average
Collection period
1. 2001-
2002
12.00 1.26 9.52
2. 2002-
2003
12.00 0.81 14.81
3. 2003-
2004
12.00 2.31 4.76
4. 2004-
2005
12.00 2.52 4.76
5. 2005-
2006
12.00 3.17 3.79
ANALYSIS:-
The table shows that the average collection period of the company the average
collection period was 9.52 month in 2002, which is decreased to 4.76 in the month of
2005 it shows the company is unable to collect the money in proper time or company
is extending more credit period to the customer. The company should try to reduce this
credit period.

68. 68 | P a g e
CHAPTER – 6
FINDINGS
&
SUGGESTIONS

69. 69 | P a g e
FINDINGS
1. The company is not having sufficient working capital
2. Inventories are decreased by year by year
3. Loans & advances are decreases by year by year
4. current liabilities are more than current assets.
5. The working capital is negative working capital
6. Current liabilities are decreased by ever year but in 2017-18 to 14.12%
and again in 2018-2019 decreased from 14-42% to 13.39%
7. long – term liabilities are increased by every year but in 2017-18 year
long term liabilities are decreased from 76.356 to 73.989 and again
increased from 74.98% to 7-8-76%
8. The Quick Ratio > 1 which shows the sound short-term solvency.
9. The suggested current ratio is 2:1. But it is not fixed as it various from; industry.
Here in this case the current ration is more than 1 and it is enough to meet the
current liability.
10. When comparing Working capital is compared with net sales it is in increasing
trend indicating the effective utilization of the net working capital.
11. The debtor’s turnover ration is high and it shows the better trade credit
management.
12. Debtor’s collection period is very less which shows the better trade credit
management.
13. Debtor’s collection is very less it shows the better collection of funds from
debtors.
14.Inventory holding period is less; it shows the better management of inventory.
15.Through the preparation of funds flows statement analysis it is cleared
that the Company is losing its funds through its operating. But the positive
Elements is the losses through its operations and its decreasing year by
year. That is when the losses where in the year 2000-01.
16.It is understanding that from the year 2000-01 to the year 2017-18 there
was decreased in working capital position in the major circumstances this

70. 70 | P a g e
cleared that company is trying to procure the funds all the times in order
to compensate on wipe on the losses.
17.It is to be observed that the company’s new worth is decreases
considerably. Through this increase in procurement of secured loans.
18.The decrease in figures of sources and applications from the year 2001-
01 to the year 20002-03 makes at clear that the company is no activity
increasing or standardizing of its operations.
SUGGESTIONS: -
1. The manpower needs to be assessed in relation to production and sales.
The excess of employees should be removed through various measures
like VRS, retirement’s and destructing the requirement of new employees.
2. There are various global challenges that are faced by every company n
the present competitive environment and PRAGA TOOLS is not any
exemption. To face the present global challenges the human resources
department should be develop to improve various skills among the
employees specially the motivational skills and having the regular
training for the employees about various developments in the market.
3. The marketing department should be restructured on profit center and
product line basis. The new marketing strategy should also make efforts
to regain the agents in Germany and UK. They should also make efforts
to regain the defiance and railways and find new markets for expansion.
4. There are various development taking in the industry to change it the
company should develop a full fledged research and development

71. 71 | P a g e
department for bringing technological change and improvement in design
and process.
5. The policy of development new market with the accreditation of ISO 9001
and C.E. making for certain products should be continuous as it will help
in development the confidence of foreign buyers.
6. The sundry debtors should be efficiently managed so that the outstanding
are to be cleared at short intervals. The company should appoint on
different areas on a success fees basis to collect the debtors.
7. The cost of holding inventory is too high so the inventory holding period
is to be reduced and to build up inventory in anticipation of export orders
from Russia and Germany.
8. The company has to make new joint venture with other companies in
order to reduce the losses.
9. The current assets should be managed more effectively so as to avoid
unnecessary blocking of capital that could be used for other purposes.
10.The Working Capital requirement is to be assessed based on the norms
circulated by RBI for the machine tools industry.
11.The inventory turnover ratio has decreased considerably from the year
2001-02 to 2017-18. This was due to the huge average stock holding even
when there was a decrease in sales figure this clears that inventory should
be managed appropriately moreover it was improved in the year 2016-17.

72. 72 | P a g e
12.The company has maintained proper records showing full particulars,
quantitative details and solutions of fixed assets are indicated for major
items in the register, the managements during the year has conducted a
random verification in respect of fixed assets, which in our opinion is
reasonable, having regard to the size of the company and the nature of tits
assets.
13.The management has physically verified the stock of finished goods and
work in progress at the end of the year.
14.In respect of service activities there is a reasonable system for recording
receipts issues and consumption of materials and stores and collection of
materials consumed to the relative jobs, commensurate with the size and
nature of its business.

73. 73 | P a g e
CONCLUSION
The company is performing exceptionally well due to the up wising in the global
market followed by the domestic market. It is an upcoming one with good and
innovative ideas and believed in improving all the areas of its operations. The
company has a good liquidity position and does not delay its commitment in case
of both its creditors and debtors. The company being mostly dependent on the
working capital facilities, it is maintaining very good relationship with their
banks and their working capital management is well balanced.

74. 74 | P a g e
BIBILOGRAPHY
BOOKS
Financial management Khan and Jain, Tata Mcgrw Hill
Financial management Prasanna Chandra, Tata Mcgrw Hill
Management accounting R.K. Sharma and K. Gupta
Financial Management and polices V.K. Bhalla, ANMOL Publication
Pvt., Ltd.,
Financial Management K. Rajeswari, Sultan chand & sons
Catalogues & Boucher PRAGA Tools Ltd.,
Web sites
www. Pragatools.org
www.machinetoolsindustry.com