ravi chinnu working capital
TRANSCRIPT
-
7/31/2019 Ravi chinnu Working Capital
1/46
-
7/31/2019 Ravi chinnu Working Capital
2/46
FINANCE FUNCTIONS:
It may be difficult to separate the finance functions from production, marketing and
other functions. The functions of raising funds investing them in assets and distributing returns
earned from assets to shareholders are respectively known as,
1) Investment Decision: -
A firms investment decisions involve capital expenditures. A capital budgeting
decision involves the decisions of allocation of capital or commitment of funds to long term
assets that would yield benefits (cash flows) in the future. Two important aspects of
investment decisions are;
A) The evaluation of the prospective profitability of new investments, and
B) The measurement of a cut off rate against that the prospective return of new
investments could be compared.
2) Financing Decision: -
Financing decision is the second important function to be performed by the financial
manager. The mix of debt and equity is known as the firms capital structure.
3) Dividend Decision: -
The Financial Manager must decide whether the firm should distribute all profits, or
retain them, or distribute a portion and retain the balance. The dividend policy should be
determined in terms of its impact on the shareholders value.
4) Liquidity Decision: -
Investment in current assets affects the firms profitability and Liquidity. Current assets
should be managed efficiently for safeguarding the firm against the risk of illiquidity.
2
-
7/31/2019 Ravi chinnu Working Capital
3/46
GOALS OF FINANCIAL MANAGEMENT
1. Maximize the value of the firm to its equity shareholders.
2. Maximization of profit.
3. Maintenance of liquid assets in the firm.
4. Ensuring maximum operational efficiency through planning directing and controlling of
the utilization of the funds.
5. Enforcing financial discipline in the use of financial resources through the coordination of
the operation of the various divisions in the organization.
6. Building up of adequate reserves for financing growth and expansion.
7. Ensuring a fair return to the shareholders on their investment.
3
-
7/31/2019 Ravi chinnu Working Capital
4/46
The key challenges for the finance manager in India appear to be in the following areas:
1. Investment Planning
2. Financial Structure
3. Treasure Operations
4. Foreign Exchange
5. Investor communication
6. Management control
Companies that manage their working capital well have reported strong profits and their
share holders have been rewarded with capital appreciation deposits and overall trend of
declining share profits. Especially commodity producers and companies whose products face
cyclic demand have demand have floundered.
Many a time the main cause of the failure of a business enterprise has been found to be
shortage of current asset and their mishandling inadequate working capital is serious handicap
in business, where a fixed capital investment generates production capacity component and
administration of current assets solves the problem of under utilization of capacities.
The firm needs certain inputs to make a finished product, which is sold to make a profit.
These sale proceeds are reinvested to make more such products and generate further profits.
The problem is there is a lag between the time a finished product is ready and the time its sale
proceeds are realized. To conjure smooth operations in the company every business entity
marks funds, this is known as working capital.
DEFINITIONS:-
4
-
7/31/2019 Ravi chinnu Working Capital
5/46
The common definition of working capital is the amount of funds invested in current
assets.
Working capita is excess of current assets over current liabilities.
-Guthmann & Dougall.
Working capital refers to a firms investment in short term assets, cash, short term
securities, accounts receivables and inventories.
-Weston & Beighan
Circulating Capital means current assets of the company that are changed in the
ordinary course business from one to another, as for example, from cash to inventories,
inventories to receivables, receivables to cash.
Genestenberg
Working capital is the amount of funds necessary to cover the cost of operating the
enterprise.
Shubin
MEANING OF WORKING CAPITAL:
5
-
7/31/2019 Ravi chinnu Working Capital
6/46
Capital required 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 the assets represent that part f firms 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 purchase 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 firms capital which is required for financing short term (or) current
assets such as cash, marketable securities, bebtors and inventories. Funds thus invested in
current assets keep revolving fast and are being constantly converted into cash and these
cash flows out again in exchange for other current assets. Hence it is also knows as
Revolving or Circulating capital or Short-term capital.
CONCEPT OF WORKING CAPITAL:
There are two concepts of working capital.
6
-
7/31/2019 Ravi chinnu Working Capital
7/46
1) Gross Working Capital:- Gross Working Capital is the capital invested in total current
assets of the enterprise. 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.
2) Net Working Capital: Net Working capital is the excess of current assets over current
liabilities (or) Net working capital = Current assets Current Liabilities. Net working capital
may be positive or negative. When the current assets exceed 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 arte more than the current assets. 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 on accounting year out
of the current assets or the income of the business. Both gross and net concepts of working
capital are important aspects of the working capital management. The net Concept of working
capital may be suitable only for a proprietary from the organizations such as sole-trader (or)
partnership firms. But the gross Concept is very suitable to the company form of organizations
where there is a divorce between ownership, management and control.
In general practice, net working capital is referred to simply as working capital. In the
works of Hoagland, Working capital is descriptive of that capital which is not fixed. But the
more common use f the working capital is to consider it as the difference between the book
value of the current assets and current liabilities.
CLASSIFICATION OF WORKING CAPITAL
Working capital maybe classified in two ways:-
1) On the basis of concept
7
-
7/31/2019 Ravi chinnu Working Capital
8/46
(a) Gross working capital
(b) Net working capital
2) On the basis of time
(a) Permanent or Fixed working capital
(b) Temporary or variable working capital
a) Permanent or fixed working capital:- It is the minimum amount which is required to
ensure effective utilization of fixed facilities and foe maintaining the circulation of curren
assets. For example every firm has to maintain a minimum level of raw material, work in
process, finished goods and cash balance. This requirement is referred to as permanent or fixed
working capital.
b) Temporary or variable working capital:- It is the amount of working capital which is
required to meet the seasonal demands & some special exigencies. The permanent level of
working capital is fairly constant, while temporary working capital is fluctuating. It is
sometimes increasing and sometimes decreasing in accordance with seasonal and special needs.
GOALS OF WORKING CAPITAL MANAGEMENT
The two important of working capital management are profitability and solvency. To
ensure, solvency the firm should be very liquid, which means large current assets holdings.
8
-
7/31/2019 Ravi chinnu Working Capital
9/46
However, there is cost associated with the maintaining a sound liquid position. Since the funds
invested in current assets are higher due to higher investments, the firm profitability will suffer.
To have high profitability, the firms may sacrifice solvency and maintain a relatively
low level of current assets, which may expose the firm into the greater risk cash shortage and
stock outs. The finance managers would have to look into the both these objectives, so that one
may not suffer at the expenses of the other Hence while managing the working capital, the
objective of the firm is to achieve an optimal combination of risk returns trade off.
If the working capital pool is to function efficiently, the following matters must receive the
attention of the management.
The level of investment in stock.
The level of investment in debtors.
The ability of the concern to deal with its creditors.
The maturing obligations such as taxes and dividends.
FACTORS AFFECTING THE WORKING CAPITAL PROBLEMS
The requirements of working capital difference form industry, with in the same industry
from company and with in the company from time to time. A wide verity of factors influence
9
-
7/31/2019 Ravi chinnu Working Capital
10/46
the volume of investment in, working capital which may be external and intenal and
management must be familiar with these.
Nature of Business
The amount of working capital is related to the nature and volume of the business. In
concerns, where the cost of the raw materials is to be used in the manufacture of product in
very large in production to it total cost of its manufacturing the requirements of the working
will be very large.
Size of the business
Size of the business unit is also determining factor in estimating the total amount of
working capital.
Depreciation Policy
In every manufacture business, depreciation is the most significant item of the cost and
these forms largest item in the cost structure, which is the nature of the fixed cost.
Profit Level
The net profit level earned by the business firms the most important elements of the
working capital structure. The management should try its best of the maintain the structure in a
healthy start of earning satisfactory profits.
Taxes
Taxation has an important impact of the earned by an enterprise. Nearly on half of the
profit earned is drained off. Tax liability when assessed will be a drain on working capital fund.
10
-
7/31/2019 Ravi chinnu Working Capital
11/46
The management should be to calculate this liability and make provision for the payment when
due.
Credit Policy
Credit Policy of a firm has a direct bearing in the level working capital liberal
credit policy demands a higher level of working capital. If there is lack in collection effectors,
the problem would be further intensified decussating higher levels of working capital.
Dividend Policy
Divided policy is a dominant influence of working capital position of an
organization dividend policy connects liquidity the ability of the concern to find necessary cash
to meet the dividend declared and the same has to be paid in cash.
Attitude risk
The level of working capital is also influenced by the attitude of the
management towards the risk. If the management is mote concern with the liquidity then there
is need higher level of working capital.
COMPONENTS OF WORKING CAPITAL
The components working capital are
CURRENT ASSETS CURRENT LIABILITIESCash and bank balances Short-term borrowings including bill
11
-
7/31/2019 Ravi chinnu Working Capital
12/46
Sundry debtors
Bills receivables
Prepaid expenses
Investments (marketable securities maturing
within one year)
Fixed deposits with banks (maturing within
one year)
Installments of deferred receivables due
within one year.
Raw materials and components used in the
process of
Stocks in process including semi finished
goods.
Finished goods including semi finished goods.
Inventory
Outstanding income
Advance payment of tax.
purchases and discounted from banks and
others.
Unsecured loans maturing within one year.
Public deposit maturing within one year.
Sundry creditors.
Bills payables.
Interest & other charges due for payments for
payment.
Advance/progress payment from customers.
Deposit from dealers selling agents.
Outstanding expenses.
Statutory liabilities:
Provident fund dues
Provision for taxation
Sales tax, excise, etc.,
RESEARCH METHODOLOGY
DATA SOURCES
1. Primary Data 2. Secondary Data
12
-
7/31/2019 Ravi chinnu Working Capital
13/46
Primary data as it is known as synonymous to first hand information that is exclusively
collected for the sake of the study. Secondary data that has been already collected for some
other purpose and now which is being for the study.
Initially preliminary discussion with the general managers and chief accountant was carried on.
Information of the theoretical part was taken from reference book.
Profit/Loss and Balance Sheets are taken from companys annual reports.
The various concepts covered in the report are calculated by studying Balance Sheet and
Profit/Loss Accounts.
Research can be defined as
Methodical, unbiased and compete investigation of subject matter to establish principles
Investigation of a problems to discuss pertinent information to help solve it .
The term methodical, refers to carefully planned procedures ( should consistently
follow the same procedure). The will facilitate the comparison of results of similar
investigation over a period of similar investigations, over a period of time as that are
arrived at by other researches investigating similar problems in various parts of the same
country of in any corner of the world .
Both primary data and secondary data was collected from carious sources for
conducting the study. Primary data was collected from the company, whereas the secondary
data was collected from various newspapers, journals textbooks and websites.
SOURCES OF DATA
Primary data
Secondary data
13
-
7/31/2019 Ravi chinnu Working Capital
14/46
WORKING CAPITAL
Tools for data collection:
Secondary Data:
Observations
Reference books
Magazines
Journals
Newspapers
Websites
NEED OF THE STUDY
As we well known that working capital is flesh and blood of organization, in order to
maintain day to day activities.
The present study working capital management reveals each every aspect of the
organization.
Maintenance of the optimal level of working capital is must
14
-
7/31/2019 Ravi chinnu Working Capital
15/46
Utilizing the available working capital in an effective way.
OBJECTIVES OF THE STUDY
To determine optimal level of Current Assets
To study the changes in working Capital
To know the company liquidity position
To know the company turn over ratios
LIMITATIONS
Due to the limited time available, the authenticity of conclusions drawn based on the
observations made cannot be ensured.
The analysis of financial performance is based on information available and any
mistake inherent would be reflected in the study.
15
-
7/31/2019 Ravi chinnu Working Capital
16/46
The figures and facts claimed in the annual reports and other forms are assumed to be
true.
It is based in the data supplied by the factory personnel
Since only four years data is used for the analysis, the outcome may not be generalized.
It concentrates only on working capital aspects and does not look in to the long- term
financing.
LIMITATIONS OF THE STUDY
The ratios are generally calculated from past financial statements and thus are no
indications of the future.
Lack of adequate standards
These are no accepted standards or rules for all ratios which can be accepted as
norms. It renders interpretation of ratios difficult
Price level changes
While making ratio analysis no consideration is made to the changes in price levels and
this makes the interpretation of ratios invalid.
COMPANY PROFILE
The vision
To empower ourselves with excellence and to thes, grow and reach the pinnacle of
market leadership.
16
-
7/31/2019 Ravi chinnu Working Capital
17/46
The Mission
To provide products and services of international standards through pioneering innovations,
while keeping in sight, our responsibility towards the society we dwell in.
Chairman's foreword:
The new age enterprise has thrown open the doors to a world of seamless opportunities.
Time and space barriers no longer hold any significance. Thanks to the pervasiveness of IT and
the advent of the Internet, there's never been more to learn. Or to utilize. Or to provide.
Knowledge, and its acquisition, is at hand.
It is indeed heartening that India has kept pace with the sweeping changes in the global
economy. Throwing open its doors to globalization has meant the advent of multinational
corporate giants. The Indian economy is already gearing itself, both qualitatively and
quantitatively, to put up a fierce competition. Given our manpower and natural resources base,
there is little that can stop us from emerging winners. At TGV, we aim to harness this power to
bring our clients, customers and associates closer to the line of satisfaction. Without limits,
without restrictions.
Having proved our credentials as quality service/product providers in fields as varied as
chemicals and hospitality, finance and healthcare, real estate and IT, we are all set to make our
mark in the power sector too. The success of our initial forays in this direction has invested us
with the confidence to undertake projects of greater dimension and magnitude in the near future
The Human Touch
17
-
7/31/2019 Ravi chinnu Working Capital
18/46
The TGV conglomerate is headed by the dynamic and versatile personality, Tumbalam
Gooty Venkatesh(TGV). An entrepreneur par excellence, his track record spans a very
illustrious three-decade period during which he has notched up achievements and accolades
galore. "There is no substitute for hard work" is what this simple man believes in, and has
staunchly displayed in deed during his vibrant career.
The diversity of activities within the conglomerate portrays his vast experience and
understanding of various streams of knowledge and his ability to harness the same for the
generation of economic and social wealth. A shining example of his futuristic bent of mind is
the pioneering of the Bipolar Membrane Cell Technology in the manufacture of Caustic Soda
and allied products in India.
The philanthropic facet of TG Venkatesh has come to the fore on innumerable occasions. A
host of educational institutions have been established under his aegis. He is closely associated
with national programs for human well-being such as immunizations, eye camps, family
planning measures etc. To safeguard the health of his employees, he has mooted a unique 'Non-
smoking and Non-Alcoholic Allowance' that'll be forwarded to the wife/parent of each of those
who desist from indulging in the hazardous activity. He is also credited with mooting the
Gowri Gopal Educational Society that has set up a number of educational institutions under its
umbrella including Lakshmi Venkatesh TG College of Physiotherapy, affiliated to the Govt. of
Andhra Pradesh. A Nursing College, coming up as part of Lakshmi Venkatesh TG Educational
Academy, re-establishes TG Venkatesh's humane nature.
His dynamism, his obvious compassion for his people and his sense of service for his
state have earned for TG Venkatesh, the coveted position of a member of the Andhra Pradesh
Legislative Assembly. Recognition has poured in from various corners of the country. He was
18
-
7/31/2019 Ravi chinnu Working Capital
19/46
honored as the Jaycees Man of the Year for his invaluable contribution to social welfare. The
Best Entrepreneur Award, FICCI Award, Industrial Promotion Award, Kinnera Award,
Vijayshree Award, Udyogshree Award, Rajiv Ratna Award and scores of others speak for
his deep involvement in whatever he undertakes to do. The Best Sales Tax payer Award
proves his uprightness as a responsible Indian citizen.
The TGV scion TG Bharath, is a new age visionary. Overseas education - a post graduation in
Business Administration with International Management as elective - and work experience,
plus a disciplined Indian upbringing have inculcated in him, a deep sense of values and an
abiding respect for the state-of-the-art. A combination that has worked wonders for the
conglomerate. As the Chairman and Managing Director of Sree Rayalaseema Hi-strength Hypo
Ltd. and as Chairman for TGV Infosystems Ltd., TGV Projects and Investments Pvt. Ltd., Sree
Rayalaseema Dutch Kassenbouw Ltd. and Brilliant Securities Ltd., he has commandeered the
companies to the highest echelons of achievement within two years. Turnover has doubled,
resulting in phenomenal profit soaring as in the case of Sree Rayalaseema Hi-strength Hypo
Ltd., thanks to the imaginative cost-cutting measures introduced by him. Brilliant Securities has
established many branches under his able steering. TG Bharath aims at making the
conglomerate a force to reckon with in the very near future, and spares no effort in this
direction.
The Conglomerate
The USD 150 million/Rupees 750 crores TGV onglomerate, backed by a rich and
varied experience spanning more than two glorious decades, is a rapidly growing, well-
diversified one, with interests in Chemicals, Financial services, Merchant Banking, Securities,
Real Estate, Power, Pharmaceuticals, Healthcare, Hospitality, Entertainment, Information
19
-
7/31/2019 Ravi chinnu Working Capital
20/46
Technology, Personal Products, Salt and Aquaculture. A constant effort to keep pace with
change underlines all its endeavours. A 3000+ strong manpower base strengthens the
conglomerate's resolve to excel.
The conglomerate's quality consciousness and achievements have not gone
unrecognised. National Awards for Unity, Safety, Scientific & Industrial Research,
Environmental Protection, Research and Development and Energy Conservation, adorn the
office walls as testimonials of its dedicated efforts in these directions. The conglomerate has
also made significant philanthropic contributions to the society.
Sree Rayalaseema Hi-Strengh Hypo Ltd (SRHHL) was incorporated on 24 October,
1986 as a public limited company and obtained its certificate commencement of business on 30
October, 1986.
Initially the company has set up facilities for manufacture of chemicals and later on the
company has diversified into generation of power through wind turbines and biomass.
Promotions:
Mr. T G Venkatesh, who hails from an industrial family promoted SRHHL. He is
bestowed with experience in the art of industrial management. Since its inception, he bestowed
all the devotion and hard work and ensured that the company worked at optimum capacity and
post a stellar performance, both in financial and technical areas.
Technology:
The company has very strong Research and Development team. They have won nation
level awards in Research and Development. They are only manufactures of Calcium
Hypochlorite in India using the Sodium process. There are very few companies in the world
with this level of technology. Our other division benefit from the cutting edge research.
20
-
7/31/2019 Ravi chinnu Working Capital
21/46
Main products:
The main products include Sulphuric Acid, Oleum, Chioro Sulphonic Aid, Calcium
Hypochiorite, Stable Bleaching powder, Monochloro Acetic Acid, Bleach Liquor, MCA,
Sodium Hypo, Hydrochioric Acid and Non-Ferric alum.
Geared up for Exports:
Sree Rayalaseema Hi-Strength Hypo Ltd, the torch bearer of the conglomerate, is only
indina manufacturer of C alcium Hypochlorite, and one of the very few in the world. A state of
the art sodium process technology developed through in house Research Development efforts
helps the company in manufacturing the product with a chlorine content of 65% to 70% Sree
Rayalaseema Hi-Strength Hypo Ltd, exports Calcium Hypochlorite to countries all across the
globe Viz. Australla, Bangladesh, Belgium, Brunei, China, Colombia, Cyprus,
Durban, England, France, Germany, Hungary, Iran, Kenya, Korea, Malaysia, Mauritius,
Netherlands, Oman, Peru, Philippines, Sri Lanka, Saudi Arabia, Singapore, Tanzania, Thailand,
USA, Vietnam, etc. the certificate of Merit awarded by CHEMEXCIL for outstanding export
performance reinforces its status as a recognized export house.
Calcium Hypoclorite touches vital facets of human existence and its of proven
importance in many areas of day-to-day activity. Sree Rayalaseema Hi-Strength Hypo Ltd, has
distinctive edge in the maucfacture of this product, thanks to the twin advantages of indigenous
raw materials availability and supply of some specialized chemicals by Sree Rayalaseema
Alkalis and Allied Chemicals Ltd.
The company is also a front-ranking producer of Monochioro Actic Acid. Manufactured
by the scientific Crystallizer technology, the product meets international quality standards. All
21
-
7/31/2019 Ravi chinnu Working Capital
22/46
leading manufacturer of Non-Seroid Anti-Inflammatory Drugs, other pharmaceuticals,
pesticides, organ chemicals, etc use Monochloro Acetic Acids.
Product Range and Applications:
Calcium Hypochlorite (Gramules and Tablets)
Stable Bleaching Powder
Monochloro Acetic Acid
Chloro Sulphonic Acid
Oleum 23% and 65%
Bromine
Battery and commercial grades Sulphuric Acid
Calcium Hypoclorite is used extensively in aquaculture, textile, leather, Paper and
Sugar Industries. Stable Bleaching powder has taker in sanitization, water treatment,
and aquaculture and pesticide markers. Chloro Sulphonic Acid Caters to the
Pharmaceutical, and dyes & Intermediaries Industry. Producers of dyes &
intermediaries, soaps and dtergetns, explosives and others use application in various
industries including petrochemicals, dye intermediates photography, pesticides,
pharmaceuticals, bleaching of paper, pulp and others. Sulphuric Acid finds widespread
usage in sulphonation, fertilizer industry, as an intermediary in pharmaceutical industry
amongst others.
Production Capacity:
22
-
7/31/2019 Ravi chinnu Working Capital
23/46
Product installed Capacity
(Tons Per annum)
Calcium Hypochlorite 6600
Stable Bleaching Powder 9900
Monochloro Acetic Acid 2400
Sulphuric Acid 49500
Chloro Sulphonic Acid 33000
Bromine 65
Sree Rayalaseema Hi-Strength Hypo Ltd has provided capacitors and also uses steam
for refrigeration to conserve energy. Brick lined CSA operating efficiencies. A 9 MW biomass
powder project at Kurnool cater to the companys growing power requirements.
Sree Rayalaseema Hi-Strength Hypo Ltd adheres to all international standards of
quality. The ISO 14001 certification for Environmental Management and the ISO 9002
certification for Quality systems bear out the companys commitment to ensuring quality of
implacable standards
STATEMENTS OF CHANGES IN WORKING CAPITAL
FOR THE YEAR ENDING OF 31-03-04
Particulars 2003 2004 Increase in
working
capital
Decrease
working
Capital
CURRENT ASSETS
Inventories 49786564 49584070 202494
Sundry debtors 95733900 97236305 1502405
Cash and bank Balance 8692695 9197321 504630
Loans and advances 148863395 158816881 9953486
TOTAL (I) 303076550 314834577
CURRENT LIABILITIES
23
-
7/31/2019 Ravi chinnu Working Capital
24/46
Sundry creditors 8620197 11623374 3003177
Other dues 37299449 36648382 651067
Lease and rentals 1716533 261416 1455117
Other liabilities 24558480 37604601 13046121
Advances from customer 15407673 3147954 12259719
Due to directors 453552 0 453552Provisions for taxation 2244144 3254865
Provisions for others 14314222 15825527 1511305
TOTAL(II) 104014250 108366119
Working Capital (I-II) 198462300 206468458
Increase in W.C 8006158 8006158
206468458 206468458 26779976 26779976
INTERPRETATION
1. The comparative balance sheet of the company during the year 2003-2004 reveals that
the current assets have increased by 11758027 .
2. The current liabilities have increased by 4351869
3. The working capital for the year 2004 is 206468458 and for the year 2003 is 198462300
4. There is a increase in working capital of 8006158 compared to previous year
5. Hence financial position of the company during the year 2003-2004 is good.
24
-
7/31/2019 Ravi chinnu Working Capital
25/46
STATEMENTS OF CHANGES IN WORKING CAPITAL
FOR THE YEAR ENDING OF 31-03-05
Particulars 2004 2005 Increase in
working
capital
Decrease
working
Capital
CURRENT ASSETS
Inventories 49584070 45815006 3769064
Sundry debtors 97236305 97482177 245872
Cash and bank Balance 9197321 7115060 2082261
Loans and advances 158883881 148763797 10120084
TOTAL (I) 314934577 299176040CURRENT LIABILITIES
Sundry creditors 11623374 5444822 6178552
Other dues 36648382 37981755 1333373
Lease and rentals 261416 0 261416
Other liabilities 37604601 66241534 28636933
Advances from customer 3147954 9374199 6226245
Provisions for taxation 3254865 2988332 266533
Provisions for others 15825527 13193117 2632410
TOTAL(II) 108366119 135223759
Working Capital (I-II) 206535458 163952281
Increase in W.C 42583177 42583177
206535458 206535458 52167960 52167960
INTERPRETATION
25
-
7/31/2019 Ravi chinnu Working Capital
26/46
1. The comparative balance sheet of the company during the year 2004-2005 reveals that
the current assets have decreased by 15725537.
2. The current liabilities have increased by 26857631
3. The working capital for the year 2004 is 206535458 and for the year 2005 is
163952281.
4. There is a decrease in working capital of 42583177 compared to previous year
5. Hence financial position of the company during the year 2005 2006 is not good.
STATEMENTS OF CHARGES IN WORKING CAPITAL
FOR THE YEAR ENDING OF 31-03-07
26
-
7/31/2019 Ravi chinnu Working Capital
27/46
Particulars 2005 2006 Increase in
working
capital
Decrease
working
Capital
CURRENT ASSETS
Inventories 45815006 64651200 18836194
Sundry debtors 97482177 145943185 48461008Cash and bank Balance 7115060 11317138 4202078
Loans and advances 148763797 135979526 12784271
TOTAL (I) 299176040 357891049
CURRENT LIABILITIES
Sundry creditors 5444822 2436925 3007897
Other dues 37981755 57460774 19479019
Other liabilities 66241534 86688147 20446613
Advances from customer 9374199 19043802 9669603
Provisions for taxation 2988332 2413396 574936
Provisions for others 13193117 24854721 11661604TOTAL(II) 135223759 192897765
Working Capital (I-II) 163952281 164993284
Increase in W.C 1041003 1041003
164993284 164993284 75082113 75082113
INTERPRETATION
1. The comparative balance sheet of the company during the year 2005-2006 reveals that
the current assets have increased by 58715009.
2. The current liabilities have increased by 57674006.
3. The working capital for the year 2005 is 163952281 and for the year 2006 is 164993284
4. There is a increase in working capital of 1041003 compared to previous year.
5. Hence financial position of the company during the year 2005-2006 is good.
27
-
7/31/2019 Ravi chinnu Working Capital
28/46
STATEMENTS OF CHARGES IN WORKING CAPITAL
FOR THE YEAR ENDING OF 31-03-07
Particulars 2006 2007 Increase in
working
capital
Decrease
working
Capital
CURRENT ASSETS
Inventories 64651201 63310125 1341076
Sundry debtors 111519702 130247677 18727975
Cash and bank Balance 11317138 19529102 8211964
Other current assets 12736054 16578282 3842228Loans and advances 157666956 190203993 32537037
TOTAL (I) 357891051 419869179
CURRENT LIABILITIES
Sundry creditors 2436925 8019027 5582102
Other dues 57460774 67351274 9890500
Other liabilities 86688147 13364598 73323549
Advances from customer 19043802 14428265 4615537
Provisions for taxation 2413396 24984244 22570848
Provisions for others 24854721 26907868 2053147
TOTAL(II) 192897765 155055276
Working Capital (I-II) 164993286 264813903
28
-
7/31/2019 Ravi chinnu Working Capital
29/46
Increase in W.C 99820617 99820617
264813903 264813903 141258290 141258290
INTERPRETATION
1. The comparative balance sheet of the company during the year 2006-2007 reveals that
the current assets have increased by 61778128
2. The current liabilities have decreased by 37842489
3. The working capital for the year 2006 is 164993286 and for the year 2007 is
264613903.
4. There is a increase in working capital of 99820617 compared to previous year .
5. Hence financial position of the company during year 2006-.2007 is very goods.
29
-
7/31/2019 Ravi chinnu Working Capital
30/46
STATEMENTS OF CHARGES IN WORKING CAPITAL
FOR THE YEAR ENDING OF 31-03-08
Particulars 2007 2008 Increase in
working
capital
Decrease
working
Capital
CURRENT ASSETS
Inventories 63310125 112749029 49438904
Sundry debtors 1302476787 99203720 31043957
Cash and bank Balance 19529102 27674526 8145424
Other current assets 17079962 13596293 3483669
Loans and advances 189673318 152130809 37542509
TOTAL (I) 419840184 405354377
CURRENT LIABILITIES
Acceptances 32011049 26107900 5903149
Sundry creditors 8019027 1933382 6085645
Other dues 123718821 101571458 22147363
Other liabilities 13364598 13935096 570498Advances from customer 14428265 23157152 8728887
Provisions for taxation 24984244 21985566 29986678
Provisions for others 26862125 22183518 4678607
TOTAL(II) 243388129 210874072
Working Capital (I-II) 176452055 194480305
Increase in W.C 18028250 18028250
194480305 194480305 99397770 99397770
INTERPRETATION
1. The comparative balance sheet of the company during the year 2007-2008 reveals that
the current assets have decreased by 14485807
2. The current liabilities have decreased by 32514057.
30
-
7/31/2019 Ravi chinnu Working Capital
31/46
3. The working capital for the year 2007 is 176452055 and for the year 2008 is
194480305.
4. There is a increase in working capital of 18028250 compared to previous year.
5. Hence financial position of the company during year 2007.2008 is average.
CALCULATIONS
1. Current ratio :
=sLiabilitieCurrent
AssetsCurrent
31
-
7/31/2019 Ravi chinnu Working Capital
32/46
(In Rs)
Year Current Assets Current liabilities Ratio
2002-03 303076550 104014250 2.91
2003-04 314901577 108366119 2.90
2004-05 299176040 135223759 2.212005-06 357891049 192897765 1.85
2006-07 419869179 155055276 2.71
2007-08 405354377 210874072 1.92
32
-
7/31/2019 Ravi chinnu Working Capital
33/46
cuurent ratio
0
0.5
1
1.5
2
2.5
3
3.5
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
year
ratio
Series1
INTERPRETATION
1. Current ratio shown up the short term financial position on of the firm
2. The ideal current ratio is 2:1
3. In the year 2003-04 the current ratio was 2.91
4. This indicates that the firm is liquid and has the ability to pay its current obligation in
time as and when they become due.
5. But during the year 2002-03 , 2003-04, 2004-05 2005-06, 2006-07, 2007-08 the current
ratios are lesser than ideal ratio .
33
-
7/31/2019 Ravi chinnu Working Capital
34/46
2. QUICK RATIO :
sLiabilitieCurrent
AssetsQuickRatioQuick
=
(In Rs)
Year Quick Assets Current liabilities Ratio
2002-03 253289986 104014250 2.42
2003-04 265250507 108366119 2.44
2004-05 253361034 135223759 1.87
2005-06 293239850 192897765 1.52
2006-07 356559054 155055276 2.36
2007-08 292605348 210874072 1.38
34
Quick ratio
0
0.5
1
1.5
2
2.5
3
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
year
ratio
Series1
-
7/31/2019 Ravi chinnu Working Capital
35/46
INTERPRETATION
1. Quick ratio is an indication that the firm is liquid and has the ability to meet its current
or liquid in time and on the other hand a low quick ratio represent that the firm liquidly
position is not good .
2. As a rule of thumb or as a convention quick ratio of 1:1 is considered satisfactory
3. The quick ratio was 2.42 in the year 2002-03
4. It increases in the year 2003-04 up to 2.44
5. After that there was a decrease in the remaining years.
6. The company is in a favorable position which indicates that the firm has the ability to
meet its current or liquid liabilities in time
3. WORKING CAPITAL TURN OVER RATIO:
=assetNetCurrent
NetSales
35
-
7/31/2019 Ravi chinnu Working Capital
36/46
(in Rs)
Year Net sales Net working capital Ratio
2002-03 565270887 198462300 2.842003-04 588430865 206468458 2.85
2004-05 566190292 163952281 3.45
2005-06 830982499 164993284 5.03
2006-07 1128416539 176452055 6.39
2007-08 1175530328 2194480305 6.04
36
-
7/31/2019 Ravi chinnu Working Capital
37/46
working capital turn over ratio
0
1
2
3
4
5
6
7
2002-032003-042004-052005-06 2006-07 2007-08
year
ratio
Series1
INTER PRETATION:
1. From the table it is observed that sales to working capital ratio have been decreasing.
2. The firm recorded ratio in 2002-03 2.84 it is decreased in the year 2003-04 to 2.85
3. Again there is an increase in remaining years.
4. How ever the firm recorded the highest ratio in the year 2007-08 i.e. 6.04
4. FIXED ASSET TURN OVER RATIO:
37
-
7/31/2019 Ravi chinnu Working Capital
38/46
=setNetfixedas
NetSales
(In Rs)
Year Net sales Net Fixed asset Ratio
2002-03 565270887 561264570 1.01
2003-04 588430865 589102224 0.99
2004-05 566190292 577751344 0.97
2005-06 830982499 414440767 2.01
2006-07 1128416539 467712460 2.41
2007-08 1175530328 536578490 2.19
38
-
7/31/2019 Ravi chinnu Working Capital
39/46
Fixed asset turnover ratio
0
0.5
1
1.5
2
2.5
3
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
year
ratio
Series1
INTERPRETATION
1. It is the ratio, which shows the relationship of fixed asset turnover ratio and net fixed
asset which indicates how efficiently the working capital is used for the net sales and on
what ratio they are used .
2. In the year 2002-03 the ratio is 1.01
3. In the next year i.e. 2003-04 the 5ratio is decreased at 0.99
4. Afterwards it in decrease till 2004-05 to 0.97 and remaining the year 2005-06 and 2006-
07, 2007-08 the ratios are again increase to 2.01, 2.41 and 2.19.
39
-
7/31/2019 Ravi chinnu Working Capital
40/46
5. SHARE HOLDER FUND RATIO & PROPRITORY RATIO:
= Totalasset
rfundShareholde
(In Rs)
Year Share holder fund Total asset Ratio
2002-03 646601662 1040270744 0.62
2003-04 664798164 995144384 0.66
2004-05 667216595 1060966835 0.63
2005-06 256764913 580036591 0.44
2006-07 312868446 733716949 0.42
2007-08 360382161 762013232 0.47
40
-
7/31/2019 Ravi chinnu Working Capital
41/46
share holder funds
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
year
rati
Series1
INTERPRETATION
1. It is the ratio which shows the relationship of share holders funds and total assets
2. Which indicates how efficiently share holders is used for the total asset and on what
ratio they are used .
3. In the year 2002-03 the ratio is 0.62
4. In the next year i.e. 2003-04 the ratio is 0.66 It is increased.
5. From the year 2004-05 to 2007-08 the is an up and down in the ratio.
6. CURRENT ASSETS TURNOVER RATIO :
41
-
7/31/2019 Ravi chinnu Working Capital
42/46
=AssetsCurrent
Sales
(In Rs)
Year sales Current assets Ratio
2002-03 565270887 303076550 1.86
2003-04 588430865 314901577 1.89
2004-05 566190292 299176040 1.89
2005-06 830982499 357891049 2.32
2006-07 1128416539 419869179 2.69
2007-08 1175530328 405354377 2.90
current asset turnover ratio
0
0.5
1
1.5
2
2.5
3
3.5
2002-
04
2003-
05
2004-
06
2005-
07
2006-
08
2007-
09
year
ratio
Series1
INTERPRETATION
42
-
7/31/2019 Ravi chinnu Working Capital
43/46
1. This ratio indicates the extent to which the sales in current Assets contributed to sales it
indicates whether the investment in current assets has been judicious or not.
2. A high current assets turnover ratio indicates better utilization of the firms assets .
3. In the year 2002-03 the ratio was 1.86 that means the assets of the business enterprises
were contributed well to the sales. There after the ratio decreased gradually which is
not a good sign?
FINDINGS
The inventory has been continuously increased from 2006-2008 . The increase is
also due to finished goods awaiting customer clearance
The loans and advances are decreased in 2006-2007 and increased in 2007 2008
which mainly contributes to payments made to suppliers and materials to be
received and accounted in the plant.
There is an increase in sundry debtors in 2006-2008
The current liabilities of the company increase in 2006-2008
The Net Current assets of the company increase in 2006-2008
The current Ratio on has been fluctuating through out the year and in the year 2005-
2008
The Quick Ratio has been facing downs through out the years and below the ideal
ratio of 1:1
The cash Ratio has been facing ups & down
43
-
7/31/2019 Ravi chinnu Working Capital
44/46
SUGGESTIONS
The company should adopt efficient cash management system so as to invest
surplus cash in profitable ventures, depending on the amount of surplus cash and
duration of surplus cash in hand.
The company should take necessary steps to maintain working capital as far as
possible at standard ratio.
It is advisable for the company to keep as much amount of cash as necessary and
invest the surplus money in short term deposits.
It is advisable to the management to retract investment in fixed assets as there are
adequate fixed assets already installed further investment in fixed assets will affect
the WC of the company .
44
-
7/31/2019 Ravi chinnu Working Capital
45/46
The Companies liabilities in the form of loans and advance taken from different
institutions are increasing year by year . So the company should utilize the
available resources in proper manner .
The company has maintained rules and regulations and reduces the wastage
material
BIBLIOGRAPHY
TEXT BOOK
FINANCIAL MANAGEMENT - I.M. PANDEY
FINANCIAL MANAGEMENT - KHAN & JAIN
FINANCIAL MANAGEMENT - PRASSANACHANDRA
COMPANY ANNUAL REPORTS
ANNUAL REPORT 2003-2004
ANNUAL REPORT 2004-2005
ANNUAL REPORT 2005-2006
ANNUAL REPORT 2006-2007
ANNUAL REPORT 2007-2008
45
-
7/31/2019 Ravi chinnu Working Capital
46/46
WEB SITES
www.google.com
www.tgvgroup .com
http://www.google.com/http://www.google.com/