The document discusses working capital management of DCM Textiles. It provides details about the company, its current assets and current liabilities over the past few years, and various ratios to analyze working capital management and liquidity position. The working capital has increased over time except in 2012-13. Current assets have also increased while current liabilities have decreased in some years. Various liquidity, solvency, activity, and profitability ratios are also presented to evaluate working capital management and financial performance of DCM Textiles.

1. 1

2.  ABOUT COMPANY
 NETWORK OF DCM TEXTILES
 SWOT ANALYSIS OF DCM TEXTILES
 OBJECTIVES OF THE STUDY
 WORKING CAPITAL MANAGEMENT
 FACTORS INFLUENCING WORKING CAPITAL
REQUIREMENTS
 EVALUATION OF WORKING CAPITAL MANAGEMENT
 RATION ANALYSIS
 CONCLUSIONS
2

3.  Delhi Cloth Mill
 The DCM group was founded by Lt. Lala Shri Ram in the year 1889 with
the establishment of Delhi Cloth Mill (DCM) which specialized in
Textiles.
 DCM Textiles, a unit of DCM Ltd. started its production in 1991
 The name of the company was changed in 1994 to Delhi Commerce and
Manufacturing Company (DCM) to reflect the group’s diverse business
activities covering the areas of:
 Cotton Textiles
 Silk Textiles
 Woollen Textiles
 Readymade Garments
 Hand-crafted Textiles
3

4.  Type: Public
 Founded: 1889
 Registered office : New Delhi and listed at BSE and NSE
 Industry : Manufacturer & Exporter
 Products : 100% cotton carded and combed yarns
 spindle capacity: 1,15,000
 Employs: more than 1500
 Annual turnover : INR 5s00 cr. (2014-15)
 Website: yarn@dcmtextiles.com
www.dcmtextile.co.in
4

5.  The company is exporting to major World-markets including China,
Colombia, Peru, Dominican Republic, Spain, Portugal, Hong Kong,
South Korea, Bangladesh, Venezuela, Egypt, Bulgaria, Italy, Sir
Lanka, Mauritius, Vietnam, Singapore and Ukraine.
 In India, DCM Textiles has presence in all the major Hosiery & Weaving
markets like Delhi, Panipat, Ludhiana, Ahmadabad, Ichalkaranjli &
Bhilwara.
 The raw material can be purchased from various stats like; Haryana,
Punjab , Rajasthan, Gujarat, M.P, Maharashtra and A.P
5

6. Internal
Analysis
External
Analysis
6

7.  STRENGTHS:-
• Availability of manpower.
• High quality product.
• Low price high quality.
WEAKNESS
• Heavy transport charges.
• Poor customer care/service
• Transaction cost
• Bad working conditions
7

8.  OPPORTUNITIES:-
• Technological up gradation.
• Foreign market expansion.
• Online ordering process.
• Product expansion.
• Market expansion.
 THREATS:-
• Entry of competitors
• Product substitution
• Dissatisfied customers
8

9.  To study the sources and uses of the working
capital.
 To study the liquidity position through various
working capital related ratios.
 To study the working capital components such as
receivables accounts, Cash management, Inventory
management.
 To make suggestions based on the finding of the
study.
9

10. 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 business
which are used in or related to its current operations. It refers
to funds which are used during an accounting period to
generate a current income of a type which is consistent with
major purpose of a firm existence.
In Accounting:
10
working capital =Current assets - Current
liabilities

11.  To Maximize Profit Of The Firm.
 To Help In Timely Payment Of Bills.
 To Maintain Sufficient Current Assets.
 To Ensure Adequate Liquidity Of The Firms.
 It Protects The Solvency Of The Firm.
 To Discharge Current Liabilities.
 To Increase The Value Of The Firm.
 To Minimize The Risk Of Business.
11

12.  To Purchase Raw Materials, Spare Parts And
Other Component.
 To Meet Over Head Expenses.
 To Hold Finished And Spare Parts etc.
 To Pay Selling & Distribution Expenses.
12

13. 13
Finished goods
Work-in-progress
Accounts receivable
Raw materials
SuppliersCash
Wages, salaries, factory
overheads

14.  Net Working Capital:-
 Term Net working capital can be define in two way;
◦ It is the difference between current assets and current liabilities.
◦ Amount left for operational requirement.
 Gross Working Capital:-
 Gross working capital means the total current assets.
 And On the basis of time working capital may be classified as:-
 Permanent working capital
 Temporary working capital
14

15.  Nature of business
 Seasonality of operations
 Production policy
 Market conditions
 Conditions of supply
15

16.  The working capital management needs attention
of all the finance head/ working capital
management is important for avoiding
unnecessary blockage of fund. Like that liquidity
is important at it refer to the short-term financial
strength of company.
 It is very important to have proper balance in
regard to the liquidity of the firm.
16

17. TABLE 1: CONSTITUENTS OF CURRENT ASSETS AND
CURRENT LIABILITIES
PART- A: CURRENT ASSETS
Inventories
Raw materials and components
Work-in-progress
Finished goods
Others
Trade debtors
Loan and advances
Investment
Cash and bank balance
PART-B: CURRENT LIABILITIES
Sundry creditors
Trade advances
Borrowings From
Commercial banks
Others
Provision
17

18. Description of current assets and current liabilities 2014-15 (Rs.)
Stocks 795,807,291
Trade receivables 692,152,101
Cash & bank balances 53,105,704
Loans and advances 291,626,791
Other current assets 16,683,355
Current liabilities 1,307,725,193
Other Current liabilities 169,783,693
Provisions 7,675,657
18

19. YEAR ENDED WORKING CAPITAL
(RS. IN LAKHS)
31STMARCH 2005 1551.41
31STMARCH 2006 2251.10
31STMARCH 2007 4416.50
31STMARCH 2008 8095.09
31ST MARCH 2009 6179.17
31st MARCH 2010 11009.24
31st MARCH 2011 21071.99
31st MARCH 2012 93915.43
31st MARCH 2013 16601.39
31st MARCH 2014 42719.05
31st MARCH 2015 36419.06
19
WORKING CAPITAL YEAR ENDED

20. Particulars
A) Current Assets: -
i) Inventories
ii) Sundry Debtors
iii) Cash & Bank
Balance
iv) Loans & Advances
V) Other current
assets
B) Current Liabilities:
i) Current Liabilities
ii) Provisions
Working Capital (A-B)
Add: Provision for
Contingencies
Net Working Capital
Requirement
2010-11 2011-12 2012-13 2013-14 2014-15
1,539,676,299
524,540,343
8,16,190
170,483,304
_
686,451,272
314,758,759
10,35,080
95,205,454
27,584,289
823,377,964
410,634,543
18,12,464
131,040,166
25,524,513
915,433,075
589,343,347
31,960,904
215,329,442
93,62,578
795,807,291
692,152,101
53,105,704
291,626,791
16,683,355
2,235,516,136 1,125,034,054 1,392,389,650 1,761,429,346 1849,375,242
11,11,85,084
17,131,893
1,185,267,850
612,642
1,225,303,015
1,072,656 1,327,748,129
6490678
1477,508,886
7,675,657
128,316,977 1,185,880,492 1,226,375,670 1,334,238,807 1,485,184,543
2107,199,159
_
939,154,362
_
166,013,980
_
427,190,539
_
364,190,699
_
2,107,199,159 939,154,362 166,013,980 427,190,539 364,190,699
Table-1
20

21.  It is observed that current asset increase in 2012-13 as
compare to 2011-12 but in the year 2014-15 it had been
increase and the current liabilities has been in a
decreasing trend in the year 2011-12 and 2012-13.
Current asset increase in 2012-13 and again it increases
2013-14. It shows fluctuation in these years. Working
capital of DCM Textile ltd indicates a good position as it
shows the increasing trend except 2012-13 that represents
the sound position of the company.
21

22. Particulars Previous year
31.03.2014
Current year
31.03.2015
Effect on working capital
increase Decrease
A) Current Assets: -
i) Inventories
ii) Sundry Debtors
iii) Cash & Bank
Balance
iv) Loans & Advances
v) Other current assets
Total Current Assets:
B) Current Liabilities:
i) Current Liabilities
ii) Provisions
Total Current Liabilities:
Working Capital (A-B)
Net Increase Or Decrease
In Working Capital
915,433,075
589,343,347
31,960,904
215,329,442
9,362,578
795,807,291
692,152,101
53,105,704
291,626,791
16,683,355
-
102,808,754
21,144,800
76,297,349
7,320,777
119,625,784
-
-
-
-
1,761,429,346 1,849,375,242
1,327,748,129
6,490,678
1,477,508,886
7,675,657
149,760,757
1,184,979
-
-
62,999,840
1,334,238,807 1,485,184,543
427,190,539
427,190,539
364,190,699
364,190,699
Table-2
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23.  Statement of changes in the working capital is prepared to
show the changes in the working capital between the two
balance sheet dates. This statement is prepared with the
help of the current asset and current liabilities derived from
the 2 balance sheets
 So,
 An increase in current asset increases working capital
 A decrease in current assets decreases in working capital
 An increase in current liabilities decreases working capital.
 A decrease in current liabilities increase working capital
23

24. DCM Textiles , Hisar
Balance Sheet as at March 31, 2015
Amount in Rs.
Note
As at
Mar. 31, 2015
As at
Mar 31, 2014
EQUITY AND LIABILITIES
Shareholders’ funds
Share capital 2 - -
Reserves and surplus 3 39,731,099 452,546,275
39,731,099 452,546,275
865,107,887 557,133,529
Non-current liabilities
Long-term borrowings 4 989,861,145 847,491,770
Deferred tax liabilities (net) 5 - -
Other long-term liabilities 6 891,000 891,000
Long-term provisions 7 16,537,309 15,361,160
1,007,289,454 863,743,930
Current liabilities
Short-term borrowings 8 1,191,909,611 1,125,029,935
Trade payables 9 115,815,582 76,532,445
Other current liabilities 10 169,783,693 126,185,749
Short-term provisions 11 7,675,657 6,490,678
1,485,184,543 1,334,238,807
3,397,312,983 3,207,662,542
ASSETS
Non-current assets
Fixed assets
Tangible assets 12 1,482,104,164 639,262,313
Intangible assets 12 - -
Capital work-in-progress 432,490 625,499,035
1,482,536,654 1,264,761,348
Non-current investments 13 - -
Long-term loans and advances 14 65,401,086 181,471,847
Other non-current assets 15 - -
1,547,937,740 1,446,233,195
Current assets
Inventories 16 795,807,291 915,433,075
Trade receivables 17 692,152,101 589,343,347
Cash and bank balances 18 53,105,704 31,960,904
Short-term loans and advances 19 291,626,791 215,329,442
Other current assets 20 16,683,355 9,362,578
1,849,375,242 1,761,429,346
3,397,312,983 3,207,662,541 24

25.  Liquidity Ratios
 Solvency/Leveraging Ratios
 Coverage Ratios
 Activity/Turnover Ratios
 Profitability Ratios
 Investors Ratio
25

26. Liquidity ratios measure the short-term solvency i.e.
the firm’s ability to pay its current dues and also
indicate the efficiency with which working capital is
being used. Commercial banks and short-term
creditors may be basically in the ratios under this
group.
i. Current Ratio
ii. Liquid ratio or Quick Ratio
26

27.  Current ratio is a relationship of current assets to current liabilities
Computation:-
Current Ratio = Current Assets
Current Liabilities
27
Current ratio DCM textiles
2014-15 1.21

28.  Liquid ratio is a relationship of liquid assets with current
liabilities. It is fairly stringent measure of liquidity.
 A quick ratio of 1:1 is considered standard and ideal, since for
every rupee of current liabilities, there is a rupee of quick assets.
A decline in the liquid ratio indicates over-trading, which if
serious may land the company in difficulties.
 COMPUTATION;-
Liquid Ratio = Liquid Assets
Current Liability
28
LIQUID Ratio DCM Textiles
2014-15 0.39

29. The term solvency implies ability of an enterprise to meet its
long term indebtness and thus, solvency ratios convey the
long term financial prospects of the company.
The shareholders, debenture holders and other lenders of the
long-term finance/term loans may be basically interested in
the ratios falling under this group.
29

30.  The debt-equity ratio is worked out to ascertain
soundness of the long term financial policies of the
firm. The ratio expresses a relationship between
debt (external equities) and the equity (internal
equities).
 Debt equity ratio =1.08
COMPUTATION
Debt-Equity Ratio = Debt(long-term loans)
Equity (shareholder’s funds)
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31.  Profit as compared to the capital employed indicated
profitability of the concern. A measure of profitability is
the overall measure of efficiency.
 The net profit ratio establishes the relationship between net
profit and net sales expressed in percentage form.
 Net Profit Ratio = 18.10
computation:-
Net Profit Ratio= Net Profit After Taxes x 100
Net Sales
31

32. Interest coverage ratio:
The interest coverage ratio establishes the relationship between PBIT
( profit before interest and tax) and debt interest.
 Interest Coverage Ratio = 11.5
Computation:-
Interest Coverage Ratio = Net profit before interest and taxes
Debt interest
32

33.  These ratios are calculated on the basis of ‘cost
of sale’ or ‘sale’.
 Turnover indicates the speed with which capital
employed is rotated in the process of doing
business.
 Activity ratio measures the effectiveness with
which a concern uses resources as its disposal.
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34.  The working Capital turnover indicates the number of times
a unit invested in working capital produces sale. In other
words, the ratio shows the efficiency in the use of short-term
funds for achieving sales.
Working capital Turnover Ratio =1.28
 Computation:-
Working Capital Turnover Ratio = Net Sales
Working Capital
34

35.  This ration indicates whether inventory has been
efficiently used or not.
 This ration indicates the relationship between the cost of
goods sold during the year and average stock kept during
that year.
 Inventory Turnover Ratio =1.74
Computation:-
Inventory Turnover Ratio = Cost Of Goods Sold
Average Inventories
35

36.  The study duration (summer in plant) is short.
 The analysis is limited to just five years of data study (from
year 2011 to year 2015) for financial analysis.
 Limited interaction with the concerned heads due to their
busy schedule
 The findings of the study are based on the information
retrieved by the selected unit.
36

37.  After studying the components of working capital management. It s found that the
company has a very sound and effective policy and its performance is very good
and has managed to make good profit. Company is competing well at the domestic
as well as the international level because of its proper management of finance,
specially the short term finance known as the working capital.
 The company is a matured one and it has contributed well in the countries growth
and development and will also continue to perform and contribute to the whole
nation.
 In conclusion, we can say that the company’s management is an effective one and
knows well the management of finance; its working capital management system is
very good.
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