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SCHOOL OF MANAGEMENTRESEARCH PROJECT
(MBA IVth Semester)
WORKING CAPITAL MANAGEMENT OF
ICICI PRUDENTIAL LIFE INSURANCE
This Research Project is submitted for the partial fulfillment of MBA at
School of Management.
Project Guide: Submitted By:
Ruchi Sagar Aruna Bhatti
(2011PGMB015)
SCHOOL OF MANAGEMENT
BAHRA UNIVERSITY
1
CERTIFICATE OF COMPLETION
This is to certify that Ms. Aruna Bhatti, a
student of Master of Business Administration, Bahra
University, has worked under my Supervision to complete
his Project Report Working Capital Management Of ICICI
Prudential Life Insurance.
The work done is original and outcome of his
sincere efforts and University is satisfied with the work done
by him and recommend the same to be forward for
evaluation.
2
Declaration
I hereby declare that the final Project Report “Working Capital Management Of
ICICI Prudential Life Insurance” submitted in partial fulfillment of the award for the
degree of Master of Business Administration (MBA) to Bahra University, is one of my original work and
not submitted to any other Degree/Diploma, fellowship or other similar title.
Name:- Aruna Bhatti
Univ. Roll:- 2011PGMB015
Date:-
3
Acknowledgement
With immense gratitude I acknowledge all those, whose guidance & encouragement served
as a platform to stand firmly and complete the project successfully. On such an occasion, I would like to
thank all the people who helped me reach this milestone with relative ease.
I express my sincere thanks to my project guide Miss Ruchi Sagar for her wholehearted
support, inspiring guidance and encouragement throughout the project work.
I express my sincere thanks to my faculty guide, Mr. Karan Gupta for his guidance, moral
support and continuous encouragement throughout the project.
I also thank Faculty of School Of Management (Bahra University) for their guidance,
support and understanding. Finally I thank all my friends for their indirect support in completing this
project.
Aruna Bhatti
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CONTENTS
PART- A
1. INTRODUCTION. 2. OBJECTIVES AND SCOPE. 3. METHODOLOGY.
PART- B
4. PROFILE OF THE COMPANY. 5. THEORETICAL PROSPECTIVE.
PART- C6. ANALYSIS OF COMPANY.
PART- D
7. FINDINGS AND CONCLUSIONS.8. RECOMMENDATIONS.
PART- E
9. LIMITATION
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10. REFRENCES
I NTRODUCTION
1.1RELVANCE OF THE STUDY: -
Change is a global law of nature. The global economy is changing very fast and we in India
are part of it. Indian economy has witnessed a vast change during the last decade and
present decade. Since independence a wall was built around economy to protest the Indian
companies. This wall was continued to exist till 1991. The new economic policy which came
into force in the year of 1991 change of the whole scenario. The days of license and permit
are gone. The blanket of protectisum is no more. The Indian companies have already their
tails on fire. The foreign tigers are already trooping in to Indian market and the battle of
royal are already began in the field of business. Competition already increases its hand by
manifold due to liberalization and globalization of economy. The slogan ‘liberalize perish’ is
the buzzword of the presents days.
The importance of the working capital management for any kind of business can be very well
known from the following in view of the changing of business.
In the resent business working capital management covers following areas.
1. Management of Cash .
2. Inventory Management
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3. Management of Receivables.
4. Cash Flow management.
OBJECTIVES OF THE STUDY: -
1.) Identify the trends for last five years.
2.) To know the ability of the ICICI PRUDENTIAL to meet its current liabilities.
3.) To determine the working capital position of the Company.
4.) To know the efficiency with which the organization is utilizing its various assets in generating
sale revenue.
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SCOPE OF THE STUDY: -
1.) AREA COVERED: -
It covers the financial function of ICICI PRUDENTIAL
2.) PERIOD COVERED: -
The study covered 5 years from 2008 to 2012 to have a comprehensive picture.
3.) It helps to understand present position.
METHODOLOGY
A.) RESEARCH DESIGN: -
The study was descriptive in nature, in that an attempt was made to
evaluate the performance of the Company.
B.) SOURCE OF DATA: -
Only secondary data has been collected for the purpose of the study.
The secondary data analyst to extract of financial statement from the company records to a
possible extent for the period of 5 years starting from 2008 to 2011-12.
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C.) Ratio analysis is used for data analysis and interpretation
COMPANY PROFILE
ICICI Prudential Life Insurance
ICICI Prudential Life Insurance is a joint venture between the ICICI Group and Prudential plc, of
the UK. ICICI started off its operations in 1955 with providing finance for industrial development,
and since then it has diversified into housing finance, consumer finance, mutual funds to being a
Virtual Universal Bank and its latest venture Life Insurance. ICICI Prudential Life Insurance
Company Limited was incorporated on July 20, 2000. The authorized capital of the company is
Rs.2300 Million and the paid up capital is Rs. 1500 Million. The Company is a joint venture of ICICI
(74%) and prudential plc UK (26%).
The Company was granted Certificate of Registration for carrying out Life Insurance business, by
the Insurance Regulatory and Development Authority on November 24, 2000. It commenced
commercial operations on December 19, 2000, becoming one of the first few private sector
players to enter the liberalized arena.
The Company is now operational in Mumbai, New Delhi, Pune, Chennai, Kolkata, Bangalore,
Chandigarh, Ahmedabad, Hyderabad, Lucknow, Nasik, Jaipur, Cochin, Meerut, Mangalore and
Ludhiana.
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Till March 31,2002 the Company has issued 100,000 polices translating into a Premium Income of
around Rs. 1,200 Million and a sum assured of over Rs.15,000 Million.
The Company recognizes that the driving force for gaining sustainable competitive advantage in
this business is superior customer experience and investment behind the brand. The Company
aims to achieve this by striving to provide world class service levels through constant innovation
in products, distribution channels and technology based delivery. The Company has already taken
significant steps to achieve this goal..
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Sponsors
ICICI Ltd was established in 1955 by the World Bank, the Government of India and the Indian
Industry, to promote industrial development of India by providing project and corporate finance
to Indian industry.
Since inception, ICICI has grown from a development bank to a financial conglomerate and has
become one of the largest public financial institutions in India. ICICI has financed all major sectors
of the economy, covering 6,848 companies and 16,851 projects. In the fiscal year 2000-2001, ICICI
had disbursed a total of Rs 319.65 billion.
ICICI has now developed a whole range of activities to become a Universal Bank. Some of ICICI's
spectrum of activities include:
* Commercial Banking - ICICI Bank, India's first internet bank.
* Information Technology - ICICI Infotech, transaction processing, software development
* Investment Banking - ICICI Securities, one of the key players in the Indian Capital Markets
* Mutual Fund - Prudential ICICI AMC, leading private sector mutual fund player in India
* Venture Capital - ICICI Venture, leading private equity investor with focus on IT and HealthCare
* Retail Services - ICICI PFS, Marketing and Distribution of Retail Asset Products
* Distribution - ICICI Capital, Distribution and Servicing of Retail Liability Products
ICICI is listed on the Indian Stock Exchanges and on the New York Stock Exchange (NYSE). On
September 22, 1999, it became the first Indian company to be listed on the NYSE (symbol: IC and
IC.D). This has been followed by the listing of ICICI Bank on NYSE (symbol: IBN) on March 28,
2000.
Prudential plc:
Prudential plc was founded in 1848. Since then it has grown to become one of the largest
providers of a wide range of savings products for the individual including life insurance, pensions,
annuities, unit trusts and personal banking. It has a presence in over 15 countries, and caters to
the financial needs of over 10 million customers. It manages assets of over US$ 259 billion
(Rupees 11,39,600 crores approx.) as of December 31, 1999. Prudential plc. has had its presence
in Asia for the past 75 years catering to over 1 million customers across 11 Asian countries.
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Prudential is the largest life insurance company in the United Kingdom (Source : S&P's UK Life
Financial Digest, 1998). Asia has always been an important region for Prudential and it has had a
presence in Asia for over 75 years. In fact Prudential's first overseas operation was in India, way
back in 1923 to establish Life and General Branch agencies.
ICICI and Prudential came together in 1993 to provide mutual fund products in India and today
are the largest private sector mutual fund company in India. The two companies bring together
two of the strongest financial service brands in Asia known for their professionalism, excellent
quality of service and long term commitment to YOU.
Management
The ICICI Prudential Life Insurance Company Limited Management team comprises reputed
people from the finance industry both from India and abroad.
Ms Shikha Sharma, Managing Director & CEO
Mr N. S. Kannan, Executive Director
Mr Bhargav Dasgupta, Executive Director
Ms Anita Pai, EVP – Customer Service & Technology
Mr Azim Mithani, Chief Actuary
Mr Puneet Nanda, Chief Investments Officer
Mr Binayak Dutta, Chief – Sales and distribution
Mr. Puneet Nanda Chief Investment OfficerICICI PrudentialLife Insurance Company Limited
Products Offered by ICICI Prudential Life Insurance 12
Endowment Plans
ICICI Pru Save n Protect
ICICI Pru Assure Invest
Money Back Policy Plan
ICICI Pru Cashbak (Anticipated Endowment Assurance)
Retirement Plans
ICICI Pru Forever Life
ICICI Pru Reassure
ICICI Pru ForeverLife (Deferred Pension)
ICICI Pru LifeLink pension plan
ICICI Pru Lifetime
Children's Plan
ICICI Smart Kid PLan
Term Plan
Protection Plan
ICICI Pru LifeGuard Single Premium
LifeGuard Level Term Assurance with Return of Premium
ICICI Pru LifeGuard Level Term Assurance
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THEORETICAL PROSPECTIVE
Capital required for a business can be classified under two main categories
1. Fixed Capital.
2. Working Capital.
Every business needs funds for two purposes-for its establishment and to carry out its day-
to-day operations. Long term funds are required to create production facilities through purchase
of fixed assets such as plant and machinery, land ,building ,furniture, etc. Investments in these
assets represents that part of firm’s capital which is blocked on a permanent or fixed basis and is
called fixed capital. Funds are also needed for short term purposes for the purchases of raw
materials, payment of wages and other day-to-day expenses, etc. These funds are known as
working capital. In simple words working capital refers to that part of the firm’s capital which is
required for financing short term or current assets such as cash, marketable securities ,debtors
and inventories. Funds , thus ,invested in current assets keep revolving fast and are being
constantly converted into cash and this cash flow out again in exchange for other current assets.
Hence, it is also known as revolving or circulating capital or short – term capital.
In the words of Shubin, “Working capital is the amount of funds necessary to cover the cost of
operating enterprise.”
According to Genestenberg, “Circulating capital means current assets of a company that are
changed in the ordinary course of business from one to another, as for example , from cash to
inventories, inventories to receivables, receivables to cash.”
Concepts of working Capital :-
There are two concepts of working capital:
1. Balance Sheet Concept.
2. Operating Cycle or Circular Flow Concept.
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(1)Balance Sheet Concept:
There are two interpretations of working capital under the balance sheet concept:
(i) Gross Working Capital.
(ii) Net Working Capital.
In the broad sense, the term working capital refers to the gross working capital and represents the
amount of funds invested in current assets. Thus the gross working capital is the capital invested in
the total current assets of the enterprises. Current assets are those assets which in the ordinary
course of business can be converted into cash within a short period of normally one accounting
year. Examples of current assets are:
Constituents of current Assets
1 Cash in hand and bank balances.
2 Bills receivables.
3 Sundry debtors (less provision for bad debts).
4 Short-term loans and advances.
5 Inventories of stocks, as :
(a) Raw materials.
(b) Work – in – progress.
(c) Stores and spares.
(d) finished goods.
6 Temporary Investments of surplus funds.
7 Prepaid expense.
8 Accrued incomes.
In a narrow sense, the term working capital refers to the net working capital.
Net working capital is the excess of current assets over current liabilities, or say:
Net Working Capital = Current Assets - Current Liabilities
Net working capital may be positive or may be positive or negative. When the current assets
exceeds current liabilities the working capital is positive and the negative working capital results
when the current liabilities are more than the current assets .Current liabilities are those liabilities
which are intended to be paid in the ordinary course of business within a short period of normally
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one accounting year out of the current assets or the income of the business. Examples of current
liabilities are :
Constituents of current Assets
1 Outstanding Expenses.
2 Bills Payable.
3 Sundry Creditors or Accounts Payable
4 Short-term loans and advances.
5 Dividends Payables
6 Bank Overdraft
7 Provision for Taxation, if it does not amount to appropriation of
profit
The gross working capital concept is financial or going concern concept whereas net working
capital is an accounting concept. These two concepts of working capital are not exclusive, rather
both have their own merits. The gross concept is sometimes preferred to the net concept of
Working Capital for the following reasons:
(1) It enables the enterprise to provide correct amount of Working Capital at the right
time.
(2) Every management is more interested in the total current assets with which it has to
operate than the source from where it is made available.
(3) The gross concept takes into consideration the fact that every increase in the funds of the
enterprise would increase its Working Capital.
(4) The gross concept of Working Capital is more useful in determining the rate of return on
investments in Working Capital.
The net working capital concept, however, is also important for the following reasons:
(1) It is qualitative concept which indicates the firm’s ability to meet its operating expenses
and short term liabilities.
(2) It indicates the margin of protection available to the short term creditors, i.e., the excess
of current assets over current liabilities.
(3) It is an indicator of the financial soundness of an enterprise.16
(4) It suggests the need for financing a part of the working capital requirements out of
sources of funds.
To conclude, it may be said that ,both , gross and net ,concepts of working capital are
important aspects of working capital management. The net concept of working capital may
be suitable for proprietory form orgainsations such as sole-trader or partnership firms. But
the gross concept of working capital is very suitable to the company form of organization
where there is a divorce between ownership, management and control.
However , it may be clear that as per the general practice, net working capital is referred to
simply as working capital.
Classification Or Kinds of Working Capital
(1) Permanent or Fixed working capital:
Kinds of working capital
On the basis of concept
On the basis of Time
Gross working capital
Net working capital
Permanent working capital
Temporary or Variable
working capital
Regular working capital
Reserve working capital
Seasonal working capital
Special working capital
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Permanent or fixed working capital is the minimum amount which is required to
ensure effective utilization of fixed facilities and for maintaining the circulation of current
assets. There is always a minimum level of current assets which is continuously required
by the enterprise to carry out its normal business operations. For example, every firm has
to maintain a minimum level of raw material, work in progress, finished goods and cash
balance. This minimum level of current assets is called permanent or fixed working capital
as this part of capital as this part of capital is permanently blocked in current assets .As the
business grows, the requirements of permanent working capital also increases due to the
increase in the current assets .The permanent working capital can further be classified as
regular working capital and reserve working capital required to ensure circulation of
current assets from cash to inventories, from inventories to receivable and from
receivables to cash and so on. Reserve working capital is the excess amount over the
requirement for regular working capital which may be provided for contingencies that may
arise at unstated periods such as strikes, rise in price, depression, etc.
2). Temporary or Variable Working Capital:
Temporary or variable working capital is the amount of working capital which is
required to meet the seasonal demands and some special exigencies. Variable working
capital can be further classified as seasonal working capital and special working capital.
Most of the enterprises have to provide additional working capital to meet the seasonal
and special needs. The capital required to meet the seasonal needs of the enterprise is
called seasonal working capital. Special working capital is that part of working capital
which is required to meet special exigencies such as launching of extensive marketing
campaigns for conducting research ,etc.
Temporary working capital differs from permanent working capital in the sense
that it is required for short periods and cannot be permanently employed gainfully in the
business. Figures given below show the difference between permanent and temporary
working capital.
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Importance or advantages of adequate working capital :-
Working capital is the life blood and nerve centre of a business. Just as
circulation of blood is essential in the human body for maintaining life, working capital is very
essential to maintaiSn the smooth running of a business. No business can run successfully
without an adequate amount of working capital. The main advantages of maintaining adequate
amount of working capital are as follows:
(1) Solvency of the business : Adequate working capital helps in maintaining solvency of
the business by providing uninterrupted flow production.
(1) Goodwill: Sufficient working capital enables a business concern to make prompt
payments and hence helps in creating and maintaining goodwill.
(2) Easy loans : A concern having adequate working capital, high solvency and good credit
standing can arrange loans from banks and others on easy and favourable terms.
(3)Cash discounts : Adequate working capital also enables a concern to avail cash discount
on the purchases and hences it reduces costs.
(4)Regular payment of salaries , wages and other day-to-day commitments: A company
which has ample working capital can make regular payment of salaries, wages and other
day-to-day commitments which raises the morale of its employees, increase their
efficiency , reduces wastages and costs and enhances production and profits.
(5)Regular Supply of raw materials: - Sufficient working capital ensure regular supply of
raw material and continuous production.
(6)Exploitation of Favorable market conditions: Only concern with adequate working
capital can exploit favorable market conditions such as purchasing is requirements in
bulk when the price are lower and by holding its inventories for higher prices.
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(7) Ability to face crisis: Adequate working capital enables a concern to face business crisis
in emergencies such as depression because during such periods, generally, there is much
pressure on working capital.
(8) Quick and regular return on investment: Every investor wants a quick and
regular return on his investment .Sufficiency of working capital enables a concern to pay
quick and regular dividends to its investors as there may not be much pressure to plough
back profits.
(9) High morale: Adequacy of working capital creates an environment of security,
confidence, high morale and creates overall efficiency in business.
Excess or inadequate working capital :-
Every business concern should have adequate working capital to run its
business operations. It should have neither redundant or excess working capital nor
inadequate or shortage of working capital. Both excess as well as short working capital
positions are bad for any business. However, out of the two, it is the inadequacy of working
capital which is more dangerous from the point of view of firm.
Disadvantages of redundant or excessive working capital :-
(1) Excessive working capital means idle funds which earn no profits for the business and
hence business cannot earn a proper rate or return on its investments.
(2) When there is a redundant working capital, it may lead to unnecessary purchasing and
accumulation of inventories causing more chances of theft, waste and losses.
(3) Excessive working capital implies excessive debtors and defective credit policy which
may cause higher incidence of bad debts.
(4) It may result into overall inefficiency in the organization.
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(5) When there is excessive working capital, relations with banks and other financial
institutions may not be maintained.
(6) Due to low rate of return on investment, the value of shares may also fall.
(7) The redundant working capital gives rise to speculative transactions.
Disadvantages or Dangers of inadequate working capital:-
(1)A concern which has inadequate working capital cannot pay its short-term liabilities in
time. Thus, it will lose its reputation and shall not be able to get good credit facilities.
(2)It cannot buy its requirements in bulk and cannot avail of discounts, etc.
(3)It becomes difficult for the firm to exploit favorable market conditions and undertake
profitable projects due to lack of working capital.
(4)The firm cannot pay day to day expenses of its operations and it creates inefficiencies,
increases costs and reduces the profits of the business.
(5)It becomes impossible to utilize efficiently the fixed assets due to non availability of liquid
funds.
(6)The rate of return on investments also falls with the shortage of working capital.
Factors Determining the Working Capital Requirements:-
The working capital requirement of a concern depend upon a large number of
factors such as nature and size of business, the character of their operations, the length of
operating cycle, the rate of stock turnover and the state of economic situation. It is not
possible to rank them because all such factors are of different importance and the influence
of individual factors changes for a firm over time. However the following are important
factors generally influencing the working capital requirements.
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(1) Nature Or Character Of Business :-
The working capital requirements of a firm basically depend upon the nature of its
business. Public utility undertakings like Electricity, Water Supply and Railways need very
limited working capital because they offer cash sales only and supply services, not products
and as such no funds are tied up in inventories and receivables. On the other hand trading
and financial firms require less investment in fixed assets but have to invest large amount in
current assets like inventories, receivables and cash; as such they need large amount of
working capital. The manufacturing undertakings also require sizable working capital
alongwith fixed investments. Generally speaking it may be said that public utility
undertakings require small amount of working capital, trading and financial firms require
relatively very large amount, whereas manufacturing undertakings require sizable working
capital between these two extremes.
(2) Size Of Business / Scale of Operations :-
The working capital requirement of a concern are directly influenced by the size of
its business which may be measured in terms of scale of operations. Greater the size of a
business unit, generally larger will be the requirements of working capital. However, in some
cases even a smaller concern may need more working capital due to high overheads charges,
inefficient use of available resources and other economic disadvantages of small size.
(3) Production policy: -
In certain industries the demand is subject to wide fluctuations due to seasonal
variations. The requirement of working capital, in such cases, depend upon the production
policy. The production could be kept either steady by accumulating inventories during slack
periods with a view to meet high demand during the peak season or the production could be
curtailed during the slack season and increased during the peak season. If the policy is to
keep production steady by accumulating inventories it will require higher working capital.
(4)Manufacturing Process / Length of Production Cycle : -
In manufacturing business, the requirements of working capital increase in direct
proportion to length of manufacturing process. Longer the process period of
manufacture, larger the amount of working capital required. The longer the
manufacturing time the raw materials and other supplies have to be carried for a longer
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period in the process with progressive increment of labour and services cost before the
finished product finally obtained.
(5) Seasonal variations :-
In the certain industries the raw material is not available through the whole year
they have to buy raw material in bulk during the season to ensure an uninterrupted flow and
process them during the entire yea .A huge amount is thus blocked in the form of material
inventories during such seasons , which gives rise to more working capital requirements.
(6) Working Capital Cycle :-
In a manufacturing concern, the working capital cycle start with the purchase of raw
material and end with the realization of cash from the sale of finished products. This cycle
involve purchase of raw material and stores , its conversion into stock of finished goods
through work in progress with progressive increment of labour and service cost , conversion
of finished stock into sales , debtors and receivables and ultimately realization of cash and
this cycle continue again from the cash to purchase of raw material and so on.
Debtors (Receivable
s)
Raw Materials
Cash
FinishedGoods
Work –In- Progress
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( Working Capital /Operating Cycle of a Manufacturing Concern)
The speed with which the working capital completes one cycle determines the requirements
of working capital- longer the cycle larger is the requirements of working capital.
The gross operating cycle of a firm is equal to the length of the inventories and receivables
conversion periods. Thus
Gross Operating Cycle = RMCP + WIPCP +FGCP + RCP
Where
RMCP = Raw Material Conversion Period
WIPCP = Work In Process Conversion Period
FGCP = Finished Goods Conversion Period
RCP = Receivables Conversion Period
However a firm may acquire some resources on credit and thus deffer payments for certain
period. In that case, net operating cycle period can be calculated as follows:
Further following formulas can be used to determine the conversion periods :
Average Stock Of Raw Materials
(1) Raw Material Conversion Period = _____________________________
Raw Material Consumption Per day.
Average Stock Of Work In Progress
(1) Work In Progress Conversion Period= ____________________________
Total Cost Of Production Per Day
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Net Operating Cycle Period=Gross Operating Cycle Period-Payable Deferal Period
Average Stock Of Finished Goods
(4) Finished Goods Conversion Period = _____________________________
Total Cost Of Sales Per Day
Average Accounts Receivables
(2) Receivables Conversion Period = ________________________________
Net Credit Sales Per Day
Average Payables
(5) Payables Deferral Period = __________________________
Net Credit Purchases Per Day
Factor Determining working capital Requirements
1 Nature or Character of Business.
2 Size of Business / Scale Of Operations.
3 Production Policy.
4 Manufacturing Process /Length Of Production Cycle.
5 Seasonal Variations.
6 Working Capital Cycle.
7 Rate Of Stock Turnover.
8 Credit Policy.
9 Business Cycle.
10 Rate of Growth of Business.
11 Earning Capacity and Dividend Policy.
12 Price Level Changes
13 Other Factors
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(7) Rate Of Stock Turnover: -
There is a high degree of inverse co-relationship between the quantum of working
capital and the velocity or speed with which the sales are affected. A firm having a high rate
of stock turnover will need lower amount of working capital as compared to a firm having a
low rate of turnover. For example, in case of precious stone dealers, the turnover is very
slow. They have to maintain a large variety of stocks and the movement of stocks is very
slow. Thus, the working capital requirements of such a dealer shall be higher than that of a
provision store.
(8) Credit Policy : -
The credit policy of a concern in its dealings with debtors and creditors influence
considerably the requirements of working capital. A concern that purchases its requirements
on credit and sells its products / services on cash require lesser amount of working capital.
On the other hand a concern buying its requirements for cash and allowing credit to its
customers, shall need larger amount of working capital as huge amount of funds are bound
to be tied up in debtors or bills receivables.
(9)Business cycle: -
Business cycle refers to alternate expansion and contraction in general business
activity. In a period of boom i.e. when the business is prosperous, there is a need of larger
amount of working capital due to increase in sales, rise in sales , rise in prices , optimistic
expansion of business , etc. On the contrary in the times of depression i.e. when there is a
down swing of the cycle , the business contracts, sales decline, difficulties are faced in
collections from debtors and firms may have a large amount of working capital lying idle.
(10) Rate of Growth of Business :-
The working capital requirements of a concern increase with the growth and
expansion of its activities. Although, it is difficult to determine the relationship between the
growth in the volume of business and the growth in the working capital of a business, yet it
may be concluded that for normal rate of expansion in the volume of business, we may have
retained profits to provide for more working capital but in fast growing concerns, we shall
require larger amount of working capital.
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(11) Earning Capacity and Dividend Policy: -
Some firms have more earning capacity than others due to quality of their products,
monopoly conditions, etc. Such firms with high earning capacity may generate cash profits
from operations and contribute to their working capital. The dividend policy of a concern
also influences the requirements of its working capital. A firm that maintains a steady high
rate of cash dividend irrespective of its generation of profits needs more working capital
than the firm that retains larger part of its profits and does not pay so high rate of cash
dividend.
(12) Price Level changes :-
Changes in the price level also affect the working capital requirements. Generally,
the rising prices will require the firm to maintain larger amount of working capital as more
funds will be required to maintain the same current assets. The affect of rising prices may be
different for different firms. Some firms may be affected much while others may not be
affected at all by the rise in prices.
(13) Other Factors :-
Certain other factors such as operating efficiency , management ability ,
irregularities of supply, import policy, asset structure, importance of labour, banking
facilities, etc. also influences the requirements of working capital.
Financing of Working Capital
The working capital requirements of a concern can be classified as follow:-
Permanent or Fixed working capital requirements.
Temporary or Variable working capital requirements.
In any concern, a part of working capital investment are as permanent investments
in fixed assets. This is so because there is always a minimum level of current assets which is
continuously required by the enterprises to carry out its day to day business operations and
this minimum cannot be expected to reduce at any time . This minimum level of current asset
give rise to permanent or fixed working capital as this part of working capital is permanently
blocked in current assets.
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Similarly, some amount of working capital may be required to meet the seasonal demands
and some special exigencies such as rise in prices, strikes etc. This proportion of working
capital give rise to temporary or variable working capital which cannot be permanently
employed gainfully in business.
The fixed proportion of working capital should be generally financed from the fixed
capital resources while the temporary working capital requirements of a concern may
be met from the short term sources of capital.
The various sources for the financing of working capital are as follows:
Sources of working Capital
Sources of Working Capital
Permanent or Fixed Temporary or Variable
Shares Debentures Public DepositsPloughing back of profits.Loan from financial institution.
Commercial Banks.Indigenous Bankers.Trade CreditorsInstallment CreditAdvances Accounts Receivables.Accrued ExpensesCommercial
Papers.
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Forecast / Estimate of Working Capital Requirements:-
“Working Capital is the life blood and controlling nerve centre of a business.” No
business can be successfully run without an adequate amount of working capital. To avoid
the shortage of working capital at once, an estimate of working capital requirements should
be made in advance so that arrangements can made to procure adequate working capital.
But estimate of working capital. But estimation of requirements is not an easy task and
organization, the following factors have to be taken into consideration while making an
estimate of working capital requirements.
Factors Requiring Consideration While Estimating Working Capital:
1 Total Costs incurred on materials ,wages and overheads.
2 The length of time for which raw materials are to remain in stores
before they are issed for production.
3 The length of production cycle or work –in-process, i.e., the time
taken for conversion of raw materials into finished goods.
4 The length of sales cycle during which finished goods are to be kept
waiting to sales.
5 The average period of credit allowed to customers.
6 The amount of cash required to pay day to day expenses of the
business.
7 The average amount of cash required to make advance payments.
8 The average credit period expected to be allowed by suppliers.
9 Time lag in the payment of wages and other expenses.
29
Working Capital Management
(Cash , Receivables & Inventory Management)
MANAGEMENT OF CASH
Cash is one of the current assets of a business. It is needed at all times to keep the business
going. A business concern should always keep sufficient cash for meeting its obligations. Any
shortage of cash will hamper the operations of a concern and any excess of it will be
unproductive . Cash is most unproductive of all the assets. While fixed assets like machinery,
plant ,etc. and current assets such as inventory will help the business in increasing its
earning capacity, cash in hand will not add anything to the concern. It is in this context that
cash management has assumed much importance.
Cash Management :
The cash management has assumed importance because it is the most Significant of all
the current assets. Cash management deals with the following:-
(1) Cash inflows and outflows.
(2) Cash flows within the firm
(3) Cash balance help by the firm at a point of time.
Cash management needs strategies to deal with various facets of cash . Following are some of
its facets:-
(1)Cash Planning :-
Cash planning is a technique to plan and control the use of cash. A projected cash
flow statement may be prepared , based on present business operations and anticipated
future activities. The cash inflows from various sources may be anticipated and cash
outflows will determine the possible uses of cash.
(2) Cash Forecast and Budgeting :-
A cash budget is most important device for the control of receipt and payments of
cash . A cash budget is an estimate of cash receipts and disbursements during a future
period of time. It is analysis of flow of cash in a business over a future , short or long period
of time. It is a forecast of expected cash intake and outlay.
Both short and long term forecasts may be made with the help of following methods:
30
(2)Receipt and Disbursements Method :
In this method the receipts and payments of cash are estimated. The cash receipts
may be from cash sales, collections from debtors ,sale of fixed assets, receipts of dividend
or other incomes of all the items; it is difficult to forecast sales.
Receivables Management
Meaning of Receivables ;-
Receivables represents amounts owed to the firm as a result of sales of goods or
services in the ordinary course of business. Theses are claims of the firm against its
customers and form part of its current assets. Receivables are also known as accounts
receivables , trade receivables , customer receivables or book debts. The receivables are
carried for the customers. The period of credit and extent of receivables depends upon the
credit policy followed by the firm. The purpose of maintaining or investing in receivables is
to meet competition , and to increase the sales and profits.
Costs of Maintaining Receivables
The allowing of credit to customers means giving of funds for the customer’s use.
The concern incurs the following costs on maintaining receivables.
(1)Cost of financing receivables :-
When goods and services are provided on credit concern’s capital is allowed to be
used by the customers. The receivables are financed from the funds supplied by
shareholders for long term financing and through retained earnings . The concern incurs
some cost for collecting funds which finance receivables.
(2)Cost of Collection :-
A proper collection of receivables is essential for receivables management. The
customers who do not pay the money during a stipulated credit period are sent reminders
for early payments . Some persons may have to be sent for collecting these amounts. In
some cases legal recourse may have to be taken for collecting receivables. All these costs
are known as collection costs which a concern is generally required to incur.
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(3)Bad Debts :-
Some customers may fail to pay the amounts due towards them. The amounts
which the customers fail to pay are known as bad debts. Though a concern may be able to
reduce bad debts through efficient collection machinery but one cannot altogether rule out
this cost.
FACTORS INFLUENCING THE SIZE OF RECEIVABLES
Besides sales, a number of other factors also influence the size of receivables. The
following factors directly and indirectly affect the size of receivables.
Factors influencing the size of receivables
1
Size of Credit Sales.
2
Credit Policies.
3
Terms of Trade.
4
Expansion Plans.
5
Relation with Profits.
6
Credit Collection.
7
Habits of Customers.
(1)Size of Credit Sales : -
The volume of credit sales is the first factor which increases or decreases the size of
receivables. If a concern sells only on cash basis, as then there will be no receivables. The
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higher the part of credit sales out of total sales , figures of receivables will also be more or
vice versa.
(2)Credit Policies: -
A firm with conservative credit policy will have a low size of receivables while a
firm with liberal credit policy will be increasing this figure. The vigour with which the
concern collects the receivables also affects its receivables. If collections are prompt then
even if credit is liberally extended the size of receivables will remain under control. In case
receivables remain outstanding for a longer period, there is always a possibility of bad
debts.
(3)Terms of Trade: -
The size of receivables also depends upon the term of trade. The period of credit
allowed and rates of discount given are linked with receivables. If credit period allowed is
more then receivables will also be more. Sometimes trade policies of competitors have to
be followed otherwise it becomes difficult to expand the sales. The terms once followed
cannot be changed without adversely affecting sales opportunities.
(4)Expansion Plans: -
When a concern wants to expand its activities, it will have to enter new markets. To
attract customers, it will give incentives in the form of credit facilities. The periods of credit
can be reduced when the firm is able to get permanent customers. In the early stages of
expansion more credit becomes essential and size of receivables will be more.
(5)Relation with profits: -
The credit policies is followed with a view to increase sales. When sales increase
beyond a certain level the additional costs incurred are less than the increase in revenues.
It will be beneficial to increase sales beyond a point because it will bring more profits. The
increase in profits will be followed by an increase in the size of receivables or vice – versa.
(6)Credit Collection Efforts: -
The collection of credit should be streamlined. The customers should be sent
periodical reminders if they fail to pay in time. On the other hand , if adequate attention is
not paid towards credit collection then the concern can land itself in a serious financial
33
problem. An efficient credit collection machinery will reduce the size of receivables. If
these efforts are slower then outstanding amounts will be more.
(7)Habits of customers: -
The paying habits of customers also have a bearing on the size of receivables. The
customers may be in the delaying payments even though they are financially sound. The
concern should remain in touch with such customers and should make them realize the
urgency needs.
MEANING AND OBJECTIVES OF RECEIVABLES MANAGEMENT
Receivables management is the process of making decisions relating to investment
in trade debtors. Certain investment in receivables is necessary to increase the sales and
the profits of a firm. But at the same time investment in this asset involves cost
consideration also. Further is always a risk of bad debts too. Thus , the objective of
receivables management is to take a sound decision as regards investment in debtors.
DIMENSIONS OF RECEIVABLES MANAGEMENT
Receivables management involves the careful consideration of the following
aspects:
(1) Forming of Credit Policy.
(2) Executing the Credit Policy
(3) Formulating and executing collection policy.
INVENTORY MANAGEMENT
INTRODUCTION :-
Every enterprise needs inventory for smooth running of its activities. It serve as a
link between production and distribution processes. There is ,generally, a time lag between
the recognition of a need and its fulfillment . The greater the time – lag , the higher the
requirements for inventory . The unforeseen fluctuations in demand and supply of goods
34
also necessitate the need for inventory. It also provides a cushion for future price
fluctuations.
The investment in inventories constitutes the most significant part of current assets /
working capital in most of the undertakings. Thus , it is very essential to have proper
control and management of inventories. The purpose of inventory management is to
ensure availability of materials in sufficient quantity as and when required and also to
minimize investment in inventories.
MEANING AND NATURE OF INVENTORIES:-
In a manufacturing concern, inventory may include raw materials, work in process
and stores, stock of finished goods.
Spares
Finished Goods
Consum-ables
Work –in-
Progress
Raw Material
Inven-tory
35
Tools and Techniques of Inventory Management :-
Effective Inventory Management requires an effective control system for
inventories. A proper inventory control not only helps in solving the acute problem of
liquidity but also increase profits and causes substantial reduction in the working capital of
the concern. The following are the important tools and techniques of inventory
management and control:-
Techniques of Inventory Management
1. Determination of Stock levels.
2. Determination of Safety Stocks.
3. Selecting a proper system of ordering for inventory.
4. Determination of Economic ordering Quantity.
5. ABC Analysis.
6. VED Analysis.
7. Inventory Turnover Ratios.
8. Aging Schedule of Inventories.
9. Classification and codification of inventories.
10. Preparation of Inventory Reports.
11. Lead Time.
12. Perpetual Inventory System.
13. JIT Control System.
The analysis of working capital can be conducted through a no. of devices, such
as:-
(A) Ratio Analysis.
36
(A)The following Ratios may be calculated for this purpose :-
(1) Current Ratio.
(2) Acid Test Ratio.
(3) Absolute Liquid Ratio.
(4) Inventory Turnover Ratio.
(5) Receivables Turnover Ratio.
(6) Payable Turnover Ratio.
(7) Working Capital Turnover Ratio.
(8) Ratio of current liabilities to tangible net worth .
1.) CURRENT RATIO: -
It indicates the firm’s commitment to meet its short-term liabilities. An ideal current
ratio is 2:1. If the ratio is more the capital is unnecessary locked in current assets. It give
the solvency position of the firm. If the ratio is less than 2 it show the danger signal to the
management.
2.) QUICK RATIO : -
Quick ratio may be defined as the relationship between quick assets and current
liabilities. An asset is said to be liquid/quick if it can be converted in cash within a short
period of time without loss of value. In that sense, cash-in-hand and cash-at-bank are the
most quick assets. The ideal ratio is 1:1.
3.) SUPER QUICK RATIO : -
It includes cash-in-hand and cash-at-bank and marketable securities. The acceptable
norm of this ratio is 50% or1: 2.The ratio is the most vigorous measure of the firm
liquidity positions. However it is not widely used in practice.
37
4.) WORKING CAPITAL TURNOVER RATIO:-
This ratio indicates the velocity of the utilization of net working capital. This ratio
indicates the number of times the working capital is turned over in the course of a year.
In the other words we can say this ratio indicate whether the working capital has been
effectively utilized in making sales with small amount of working capital the company
higher volume of sales indicates the operational efficiency of the company.
5.) DEBTOER TURNOVER RATIO: -
Debtor constitute an important portion of current assets. Therefore the quality of
debtors determines the liquidity of the firm. Higher turnover indicates the liquidity
position of the firm. It also indicates the generation of bad debts.
6.) DEBTORS COLLECTION PERIOD: -
The ratio indicates the debt have been collected in time it give the average collection
period. It is helpful to find out the borrowers in collecting the money in the reasonable
time. If the collection period increase it will result in greater blockage of funds in
debtors. In general the amount of receivable should not exceed 3 to 4 month credit sales
7.) CREDITORS TURNOVER RATIO: -
It is similar to Debtors turnover ratio, it indicates speed in which in which payment
credit purchase. It also gives information about how the credit limit is properly utilized.
8.) STOCK TURNOVER RATIO: -
It indicates whether the investment in inventory is efficiently or not. It is also
helpful to control the inventory with in the limit. Inventory indicates raw material, work
in progress and finished goods. It signifies the liquidity of the inventory. High turnover
indicates brick sales. It also measures to discover the possible trouble in the firm of over
stocking or over valuation.
As per general guideline: -
38
Raw material 2 to 4 month consumption should not exceed.
Work-in-progress 15 to 30 days cost of should not exceed.
Finished goods 2 to 3 month sales.
LIMITATIONS OF RATIO ANALYSIS: -
Though ratios are simple to calculate and easy to
understand, they must be use very carefully if due care is not taken they might confuse
rather than clarify the situations. Ratios never provide a definite answer to financial
problems. There is always a question of judgment as to what significance should be given to
the figures. So that one must rely upon one’s own good sense in making ratio analysis and an
analysis must use this technique keeping in mind the following shortcomings of this
technique.
1.) LIMITED USE OF A SINGLE RATIO : -
Ratio can be useful only when they are computed in
sufficient larger number. A single ratio would not be able to convey anything. At the same
time if too many ratios are calculated, they likely confuse instead of revealing any meaningful
conclusion.
2.) LACK OF ADEQUATE STANDARADS: -
There are no well accepted standards or rules of
thumb for all ratios which can be accepted as norms. It renders interpretation of the ratios
difficult.
3.) LAW OF QUALITATIVE ANALYSIS OF THE PROBLEM : -
Ratio Analysis gives only a good
basis for quantitative analysis of financial problems. But it suffers from qualitative aspects.
4.) EFFECT OF INHERENT LIMITATION OF ACCOUNTING : -
39
Because ratios are computed from
historical accounting records they press their elimination’s and weakness as accounting
records process. Ratios of the past are not necessarily true indicators of the future.
5.) ARITHMETICAL WINDOW DRESSING : -
The term window dressing means manipulation of
accounts in a way as to conceal vital fact and present financial statements in a way to show a
better position than what is actually,
On account of such situation presence of particular ratio may not be a definite indicator of
good or bad management.
6.) PAST IS NOT INDICATOR OF FUTURE : -
It is not always possible to make future estimates
on the basis of the past, as it always does not come true.
7.) EFFECT TO PERSONAL ABILITY AID BASIS TO THE ANALYST: -
Ratios are only mean of financial analysis and not an end in itself. Ratios have
to be interpreted and different people may interpret the same ratio in different ways.
8.) BACKGROUND IS OVERLOOKED : -
When inter-firm comparisons are made on the basis of
ratio analysis and differ substantial in size, age and nature of the product. Ratio analysis can
not give satisfactory results, as these factors are not considered here.
9.) NO ALLOWANCE FOR CHANGE IN PRICE LEVEL: -
While making comparisons of
ratios, no allowance for change in price is made. A change in the price level can seriously
affect the validity of comparison of ratio computed for different time periods.
10.) DIFFERENCE IN DEFINATIONS: -
Comparisons are also made difficult, due to
difference in definitions of various financial firms. The terms like gross profit, net profit,
40
operating profit etc. have no precise definition and well-accepted procedure for their
computation.
10.) LIMITED USES : -
Ratio Analysis is not a substitute for several
Judgments rather are a hopeful tool to aid in applying judgment to otherwise complex
situations. So conclusions drawn with the help of ratios shared verified with other
techniques too.
11.) NO FIXED STANDARDS : -
No fixed standards can be laid down for ideal ratios, for
example current ratio is generally considered to be ideal if current assets are twice the
current liabilities. However, in case of those conclusions, which have adequate
arrangements, it may be perfectly ideal if the current assets are equal to current liabilities.
12.) RATIO’S NO SUBSTITUTES : -
While making ratio analysis, it is merely a tool of
financial statements. Hence, ratios become useless if separated from the statement from
which they are computed.
STANDARDS OF COMPARISION: -
The ratio analysis involves comparison for a useful
interpretation of the financial statement. A single ratio does not indicate favorable or
unfavorable condition. It should be compared its standard. Standard of comparison may
consist of: -
1.) Ratios calculated from the past financial statement of same firm.
2.) Ratio developed using the Companyed performa financial statement of same firm.
3.) Ratios of some selected firm especially a most progressive and successful one at the point
of time.
4.) Ratios of the industries to which the firm belongs.
41
DATA ANALYSIS AND INTERPRATION
1. TOTAL REVENUE:- 2. NET SALESYEARS Rs. in millions2008 3,893.322009 4,365.462010 4,819.142011 5,730.202012 6,006.10
3. CURRENT ASSETS : - 4. LIQUID ASSETS: -
5. CURRENT LIABILITIES: - 6. AVERAGE INVENTORY: -
YEARS Rs in millions2008 634.962009 778.152010 836.412011 1055.022012 1146.88
7. DEBTORS: 8. NET WORKING CAPITAL: -
YEARS Rs in millions2008 3,871.962009 4,245.612010 4,777.062011 5,624.132012 5,939.12
YEARS Rs in millions2008 684.072009 730.42010 1392.712011 1328.142012 1305.48
YEARS Rs in millions2008 1,397.062009 1,461.112010 2,203.972011 2,322.822012 2290.30
YEARS Rs in millions2008 426.062009 506.6852010 569.132011 649.7252011 708.26
YEARS Rs in millions
2008 762.12009 682.962010 1367.562011 1267.82012 1143.88
YEARS Rs in millions2008 657.292009 711.452010 956.562011 1,253.052012 1,235.80
42
Data interpretation and ratio analysis: -
III. TURNOVER RATIOS: -
(1) WORKING CAPITAL TURNOVER RATIO:-
The above table indicates that the working capital turnover is showing working capital to sales. In the year 2012 there is a increase in working capital turnover, more over there is a steep decline in working capital turnover.
(3) DEBTORS TURNOVER RATIO :-
Net Sales/Average Working Capital
YearsNet sales
Working Capital
Working Capital Turnover
2008 3,871.96 671.05 5.72009 4,245.61 722.5 5.872010 4777.06 1045.03 4.52011 5,624.13 1156.415 4.82012 5,939.12 1143.42 5.16
YearsTotal sales
Average debtors
debtors turnover
2008 3,871.96 657.29 5.892009 4,245.61 684.37 6.22010 4,777.06 834.00 5.732011 5,624.13 1104.80 5.092012 5939.12 1244.42 4.78
Total Sales / Average Account Receivable
43
The above table shows that debt turnover ratio is hovering around 6.2-4 times of net sales which
is considered good but it must not be very high as this shows firms inability to sell on credit basis.
(3)AVERAGE COLLECTION PERIOD :
Average collection period of debtors is increasing year by year from 2009-10 due to increase in amount of debtors during the period.
CURRENT ASSETS TURNOVER RATIO
Number of working days/ Debtors Turnover Ratio
YearsDebtor
Turnover
No. of Working
days
Average collection
period(in days)
2008 5.89 360 612009 6.2 360 582010 5.73 360 62.82011 5.09 360 702012 4.78 360 75
Net Sales / Current Assets
YearsTotal sales
Current Assets CATR
2008 3,871.96 1397.06 2.872009 4,245.61 1461.11 2.772010 4,777.06 2203.97 2.902011 5,624.13 2322.82 2.162012 5,939.12 2290.30 2.42
44
The above table shows that current assets turnover ratio is satisfactory. Although it is fluctuating a bit but as sales are twice to current assets the situation is o.k.
(5) INVENTORY TURNOVER RIATIO:-
The above table indicates that the inventory turnover ratio is stable around 8-9 which is considered as good indicating that stocks are being turned into finished goods frequently. It is also a sign of efficient management. However inventory level should not be very low as it
can lead to idealness of assets resulting in inefficiency.
(6) INVENTORY CONVERTION PERIOD:-
Net Sales / Average Inventory
Years Total sales
Avg inventory
Inventory turnover
ratio2008 3871.96 426.06 9.092009 4245.61 506.68 8.382010 4777.06 569.13 8.392011 5624.13 649.73 8.662012 5939.12 708.26 8.39
Days in a Year / Inventory Turnover Ratio
45
The above table indicates that with decreasing in the inventory ratio the conversion of inventory is increasing it is due to high stock of inventory
(7) NET PROFIT RATIO:-
Net Profit/Net Sales * 100
Years
Days in year
Inventory Turnover ratio
Inventory conversion period
(In days) 2008 365 9.09 40.15401542009 365 8.38 43.556085922010 365 8.39 43.504171632011 365 8.66 42.1478062012 365 8.39 43.50417163
YearsNet
Profit SalesN.P.
Ratio2008 524.77 3,871.96 13.552009 626.63 4,245.61 14.752010 815.47 4,777.06 172011 1,057.45 5,624.13 18.82012 944.83 5,939.12 15.9
46
The above table indicates that the net profit has increased in almost all the years
and a sharp surge in net profit took place during 2010-11 due to decrease in operating
expenses and company also experienced increase in its sales, non operating income also
contributed towards net profit.
Altogether it was due to organizations ability to decrease its operating expenses
that led to increase in its net profits.
IV. SHORT TERM FINANCIAL POSITION OR TEST OF LIQUIDITY: -
(1) CURRENT RATIO:-
Current Assets / Current Liabilities
The above table indicates that the current ratio of the Company is good as per the standard 2:1. it is evident from current ratio that the organization can pay its current liabilities
efficiently. It is not very high which shows that debtors are under control.
(2) QUICK / ACID TEST / LIQUID RATIO:-
YearsCurrent Assets
Current Liabilities
Current Ratio
2008 1,397.06 634.96 2.2:12009 1461.11 778.15 1.88:12010 2203.97 836.41 2.63:12011 2,322.82 1,055.02 2.2:12012 2290.30 1,146.88 1.99:1
47
Liquid Assets / Current Liabilities
The above table indicates that the quick ratio is hovering around 1-1.66 which is considered to b satisfactory also the organizations debt turnover ratio is good hence its good but it must be seen that money docent remain locked in debtors as it gives a false impression of healthy
liquid assets.
Schedule Of Changes In Working Capital
YearsLiquid Assets
Current Liabilities
Liquid Ratio
2008 684.07 634.96 1.07:12009 730.4 778.15 0.94:12010 1392.71 836.41 1.66:12011 1328.14 1,055.02 1.26:12012 1305.48 1,146.88 1.14:1
48
Particulars 2011 2012
Effect on Working Capital
Increase Decrease
Current Assets
Inventories 702.03 714.5 12.47
Debtors 1253.05 1235.8 17.25
Cash & Bank Balance 75.09 69.68 5.41
Loans & Advances 292.65 270.32 22.33
Total Current Assets 2322.82 2290.3
Current Liabilities
Creditors 821.62 725.45 96.17
Other Current Liabilities 100.56 85.07 15.49
Provisions 132.84 336.34 203.5
Total current Liabilities 1055.02 1146.88
Net working capital 1267.8 1143.42
Net Decrease in working capital 124.38 124.38
Total 1267.8 1267.8
FINDINGS AND CONCULSIONS:-
49
1. Gross sales increased by 5.7% from Rs5,624.13 million in 2010-11 to Rs. 5,939.12 million
in 2011-12.
2. Total Revenue increased(net) grew by 5.7% from Rs.5562.0 million in 2010-11 to Rs.
5877.9 million in 2011-12
3. Current ratio is satisfactory so that company is able its short term liability comfortably.
4. The overall working capital condition of the concern is satisfactory.
SUGGESTION1. Need of reducing avg collection period.2. Net profit to sales margin is of bit concern so need of paying attention is here.
50
LIMITATIONS OF STUDY: -
1.) Due to time constrain the limited data only considered for the analysis and
interpretation.
2.) We can apply only limited tools for analysis and interpretation.
3.) For the analysis and interpretation only five years data are available. On the basis of
these data we are unable to come to conclusion.
The analysis and interpretation is only on the basis of information furnished by
management. If the information was window dressing the entire result may go wrong
51
REFRENCES
Management Accounting by R.K Sharma, Shashi K. Gupta.
Financial Management by I.M. Panday
Advance Accounting by R.L. Gupta
www.iciciprulife.com Company reports and annual accounts.
www.wikipedia.com
www.investopedia.com
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