Anand Dave(Mba)1

WELCOME TO INTERNAL AND EXTERNAL EXAMINERS’ OF SIKKIM-MANIPAL UNIVERSITY OF HEALTH, MEDICAL AND TECNOLOGICAL SCIENCES

SIKKIM-MANIPAL UNIVERSITY OF HEALTH, MEDICAL AND TECNOLOGICAL SCIENCES MBA GRAND PROJECT ON ANALYSIS OF FINANCIAL HEALTH INCLUDING RATIO ANALYSIS AND WORKING CAPITAL MANAGEMENT OF CADMACH MACHINERY CO. PVT. LIMITED PREPARED BY ANAND TRILOKBHAI DAVE ( Reg. No. 520561861 )

CADMACH MACHINERY COMPANY PRIVATE LIMITED PLOT NO. 3604/3605, GIDC INDUSTRIAL ESTATE, PHASE IV, VATVA, AHMEDABAD 382 445.

Some Products of Cadmach Machineries  CU Rotary Tablet Press  CMB – 3 (Double Sided Rotary Tableting Machine)  CSGS 500 & 750 (Single Stroke Tableting Machine)  Drying oven  Horizontal mixture  Tablet hardness tester  Granulator  Coating Machine  Colloid Mill  Cad mil (CMS / CM)  CMB – 4 (Square model double sided rotary tablet press)  CTM (high speed of rotary tablet press)  Tube filling machine  Automatic ampoule filling and sealing machine (CAF – 04)  Rotary pelleting press  Cadpress IV machine (CPD IV)  De duster

Some companies to which Cadmach Sells its’ products  Cipla Ltd.  Anil International  Nestor Pharmaceuticals Pvt.Ltd.  Ins-Swift Ltd. (J & K)  Blue Cross Laboratories Ltd.  Khandelwal Laboratories  Cadila Health Care Ltd. Indian Clients

Some International Clients  Guten Exports Pty. Ltd., Singapore  Pharmathen SA, Greece  Guten Export Trade, Indonesia  Huynh Phuong Ltd. Co. Vietnam  W.H.Rosen Meyer & Co. Pty.Ltd., South Africa  Keio Meditech Trading, Malaysia  Inter Pharma, USA

FUNDAMENTALS OF ACCOUNTING What is Accounting ? Accounting is the art of recording, classifying, and summarizing in a significant manner and in terms of money, transaction and events which are, in part at least of a financial character, and interpreting the result thereof.

USERS OF ACCOUNTS AND THEIR INFORMATION NEEDS ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

FUNCTIONS OF ACCOUNTING DATA ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

FINANCIAL INFORMATION ANALYSIS ,[object Object]

OBJECTIVES OF FINANCIAL STATEMENTS ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

QUALITATIVE CHARACTERISTICS OF FINANCIAL STATEMENTS ,[object Object],[object Object],[object Object],[object Object],[object Object]

DIFFERENT TYPES OF FINANCIAL STATEMENTS ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

LIMITATIONS OF FINANCIAL STATEMENT ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

METHODS OF ANALYSING FINANCIAL STATEMENTS ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

What is ratio analysis ? Ratio analysis is an important tool for analyzing financial statements . Financial ratio analysis is the calculation and comparison of ratios which are derived from the information in a company's financial statements.

Major limitations of ratio analysis ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Significance of Using Ratios ,[object Object],[object Object],[object Object],[object Object]

RATIOS AT A GLANCE ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

What is working capital ? ,[object Object],[object Object],Objectives of working capital management  To improve the capital employed of the business.  To meet the current financial obligations.

Types of working capital ,[object Object],[object Object],[object Object]

Operating Cycle Small (Service Sector) (Industry) : Cash > Cash Medium (Trade) : Cash > Receivables > Cash Large: Cash > Raw Material > Stock in process > Finished Goods > Receivables > Cash

Financing strategies Supply Chain Management. Product Development. Sales Growth. Borrowing. R & D.

[object Object],Purchase resources Payment for resource purchase Sell product on credit Receive Cash Inventory convention period Receivable convention period Payable period Cash conversion period Operating cycle

Important Factors Determining Amount Of Working Capital 4. Inventory Turnover 2. Volume of Sales 3.Time 9. Operational and financial efficiency 7. Activities of the firm 8. Terms of purchase and Sales 6. Firm’s size 5. Business turnover 1. Nature of Industry

Principles Of Working Capital Management ,[object Object],[object Object],[object Object],[object Object]

Pipeline Concept Of Working Capital Processes Warehouse Collection Inputs Output Delivery Cash Cash 1 2 3 Cash Cycle

Consumption of Funds ,[object Object],[object Object],F I P W C Period based disbursements during cash cycle. Cash

ASSESSMENT OF WORKING CAPITAL ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

ANALYSIS AND FINDINGS ,[object Object],[object Object],[object Object],[object Object],[object Object]

ROE = PAT Net Worth ,[object Object],[object Object],[object Object],Higher is better :

Assessing Operating Management ,[object Object],[object Object],(a) Net Margin = PBIT Net Sales : Lower is better

Gross Profit Ratio = Net Sales – Cost of Goods Sold Net Sales Higher is better ,[object Object],[object Object]

Operating Ratio = Operating Expense Net Sales Higher is better ,[object Object],[object Object],[object Object]

Assessing The Efficiency in the Use of Resources ,[object Object],[object Object],[object Object],Asset Turnover = Net Sales Invested Capital : Higher is better

Fixed Asset Turnover = Net Sales Net Fixed Assets Higher is better ,[object Object],[object Object],[object Object]

Working Capital Turnover = Net Sales Working Capital Higher is better, “ but not in all situations ”. ,[object Object],[object Object],[object Object]

Sundry Debtors Turnover = Net Sales Sundry Debtors Higher is better ,[object Object],[object Object]

Average Collection Period = Sundry Debtors Average Net Sales per Day Lower is better ,[object Object],[object Object]

Average Payment Period = Trade Creditors Average Purchase per Day Higher is better, “ but not in all situations ”. ,[object Object],[object Object]

Inventory Turnover = Net Sales Inventory Higher is better, “ but not in all situations ”. ,[object Object],[object Object]

Assessing The Solvency ,[object Object],[object Object],Interest Coverage = PBIT : Higher is better Interest

Assessing the Liquidity ,[object Object],[object Object],[object Object],Current Ratio = Current Assets Current Liabilities From creditors’ perspective , higher is better . From managers’ perspective , lower is better .

Quick Ratio = Current Assets–Inventory–Prepaid Expenses Current Liabilities-bank overdraft ,[object Object],[object Object],From creditors’ perspective, higher is better.

E arning P er S hare ( EPS ) = Profit After Tax No. Of Equity Shares ,[object Object],[object Object]

Observations And Suggestions ,[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object]

Gross working capital ( GWC ) : GWC = TCA Net working capital ( NWC ) : NWC = CA – CL

[object Object],[object Object],[object Object]

Anand Dave(Mba)1

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