CHAPTER 4: ANALYSIS OF WORKING CAPITAL ...shodhganga.inflibnet.ac.in/bitstream/10603/90858/13...Debtors turnover ratio or accounts receivable turnover ratio indicates the velocity

CHAPTER 4: ANALYSIS OF WORKING CAPITAL

MANAGEMENT PRACTICES

4. 0 INTORDUCTION

Period under study (commonly referred as Period): AY 2003 - AY 2008

Period 1 under study (commonly referred as Period-1): AY 2003 - AY 2005

Period 2 under study (commonly referred as Period- 2): AY 2006 - AY 2008

Capital is a scarce commodity today but scarcer it is to find an effective and

efficient mechanism for management of the same. When it comes to

management of capital we may find many a times corporate managers giving

more attention to long-term capital decisions as compared to short-term capital

decisions. But as pointed out by Brealey and Myers, both short-term and long

term decisions are equally important for the efficient functioning of the business.

Working capital management refers to all management decisions and actions

that ordinarily influence the size and effectiveness of the working capital. It is

concerned with the most effective choice of working capital sources and the

determination of the appropriate levels of the current assets and their use. It

focuses attention to the managing of the current assets, current liability and their

relationships that exist between them. In other words, working capital

management may be defined as the management of a firm·s liquid assets viz. -

cash, marketable securities, accounts receivable and inventories.

In the present day context of rising capital cost and scarce funds, the importance

of working capital needs special emphasis. It has been widely accepted that the

profitability of a business concern likely depends upon the manner in which its

working capital is managed. The inefficient management of working capital not

only reduces profitability but ultimately may also lead a concern to financial crisis.

On the other hand, proper management of working capital leads to a material

savings and ensures financial returns at the optimal level even on the minimum

level of capital employed. We also know that both excessive and inadequate

working capital is harmful for a firm. Excessive working capital leads to un

remunerative use of scarce funds.

107

On the other hand inadequate working capital usually interrupts the normal

operations of a business and impairs profitability. There are many instances of

business failure for inadequate working capital working capital. Further, working

capital has to playa vital role to keep pace with the scientific and technological

developments that are taking place in the concerned area of pharmaceutical

industry. If new ideas, methods and techniques are not injected or brought into

practice for want of working capital, the concern will certainly not be able to face

competition and survive. In this context, working capital management has a

special relevance and a through investigation regarding working capital practice

in the pharmaceutical industry is of utmost importance.

OPERATING CYCLE ANALYSIS

Operating cycle analysis has been of immense benefit in determining the

duration of the period that a single operating cycle takes to complete. This gives

us the idea about the length of time each component of the working capital

(involved in the operating cycle) will require investment (or blockage) of funds

therein. That is, if the operating cycle will be of a longer duration, more funds will

be required to finance the components, which, in turn, will involve higher costs in

the form of inventory carrying costs and interest outgo or opportunity costs. The

reverse will be the position if the operating cycle period will be shorter. Therefore,

"shorter the better" should be the motto in the management of the operating

cycle, and the management of working capital that goes therewith.

BILLS ~ RECEIVABLE "'----V CASH

D £7 FINISHED GOODS

WIP

RAW MATERIAL

As we may see from the above figure, the process starts with the investment) or

outflow) of cash for the purchase of raw materials and ends up in the collection of

receivables (or in flow) of cash. Thus, from the stage of cash out-flow to cash in

flow, involving four stages in all, one cycle is completed, and this is known as the

operating cycle.

We may, therefore, define the duration of the operating cycle (Doc) as the sum

total of the period (duration) involved in all the four stages, viz.,

i. The duration of the raw materials stage (Drm)

ii. The duration of the work-in-process stage (Dw;p)

iii. The duration of the finished goods stage (DIg)

iv. The duration of the bills receivable (Dbr)

Doc = Drm + Dw;p + DIg + Dbr

To, compute the duration of the cash cycle (Decl, we would just subtract the

accounts payable period from the above aggregate figure.

Dec = Doc - Dap

Now, let us try to understand what does the duration of each of those four

stages, of the four components, of the operating cycle, represent. We would also

like to see as to how we arrive at the duration of cash cycle.

i. Duration of the raw material stage: This reflects the number of days

for which raw materials, consumables stores and spares etc.

remain in the inventory before these are issued for the production

purposes, this may be calculated as follows:

Dnn = (Avg. stocks of RM) / (Avg. RM consumed per day)

109

ii. Duration of the Work-in-Process stage: This indicates the number

of days that elapses in the work-in-process stage, it may be

computed as under:

Dwip = (Avg. WIP Inventory) I (Avg. WIP value of RM cons. per day)

III. Duration of the finished goods stage: This represents the number of

days for which the finished goods remain in the inventory, before

these are sold out, his may be calculated as under:

Dig = (Avg. stocks of FG) I (Avg. costs of goods sold per day)

iv. Duration of the sundry debtors stage: This indicates the number of

days required to collect the sundry debtors, this may be computed

as under:

Dar = (Avg. Sundry Debtors) I (Avg. Credit sales per day)

v. Duration of the Sundry Creditors Stage: This denotes the number

of days for which the supplier's credit is available to the company,

this may be arrives at as under:

Dap = (Avg. Sundry Creditors) I (Avg. Credit Purchases per day)

110

i. Working Capital Turnover Ratio

Working capital turnover ratio indicates the velocity of the utilization of net

working capital. This ratio represents the number of times the working capital is

turned over in the course of year and is calculated as follows:

Formula of Working Capital Turnover Ratio:

Following formula is used to calculate working capital turnover ratio

[Working Capital Turnover Ratio = Cost of Sales / Net Working Capital]

The two components of the ratio are cost of sales and the net working capital. If

the information about cost of sales is not available the figure of sales may be

taken as the numerator. Net working capital is found by deduction from the total

of the current assets the total of the current liabilities.

Significance:

The working capital turnover ratio rneasures the efficiency with which the working

capital is being used by a firrn. A high ratio indicates efficient utilization of

working capital and a low ratio indicates otherwise. But a very high working

capital turnover ratio may also mean lack of sufficient working capital which is not

a good situation.

i. Inventory Turnover Ratio:

Every firm has to maintain a certain level of inventory of finished goods so as to

be able to meet the requirements of the business. But the level of inventory

should neither be too high nor too low. A too high inventory means higher

carrying costs and higher risk of stocks becoming obsolete whereas too low

inventory may mean the loss of business opportunities. It is very essential to

keep sufficient stock in business.

III

Stock turn over ratio and inventory turn over ratio are the same. This ratio is a

relationship between the cost of goods sold during a particular period of time and

the cost of average inventory during a particular period. It is expressed in number

of times. Stock turn over ratio / Inventory turn over ratio indicates the number of

time the stock has been turned over during the period and evaluates the

efficiency with which a firm is able to manage its inventory. This ratio indicates

whether investment in stock is within proper limit or not.

Components of the Ratio:

Average inventory and cost of goods sold are the two elements of this ratio.

Average inventory is calculated by adding the stock in the beginning and at the

and of the period and dividing it by two. In case of monthly balances of stock, all

the monthly balances are added and the total is divided by the number of months

for which the average is calculated.

Formula of Stock Turnoverllnventory Turnover Ratio:

The ratio is calculated by dividing the cost of goods sold by the amount of

average stock at cost.

a. [Inventory Turnover Ratio = Cost of goods sold / Average inventory at cost]

Generally, the cost of goods sold may not be known from the published financial

statements. In such circumstances, the inventory turnover ratio may be

calculated by dividing net sales by average inventory at cost. If average inventory

at cost is not known then inventory at selling price may be taken as the

denominator and where the opening inventory is also not known the closing

inventory figure may be taken as the average inventory.

b. [Inventory Turnover Ratio = Net Sales / Average Inventory at Cost]

c. [Inventory Turnover Ratio = Net Sales / Average inventory at Selling Price]

d. [Inventory Turnover Ratio = Net Sales / Inventory]

112

Significance of ITR:

Inventory turnover ratio measures the velocity of conversion of stock into sales.

Usually a high inventory turnoverlstock velocity indicates efficient management of

inventory because more frequently the stocks are sold, the lesser amount of

money is required to finance the inventory. A low inventory turnover ratio

indicates an inefficient management of inventory. A low inventory turnover

implies over-investment in inventories, dull business, poor quality of goods, stock

accumulation, accumulation of obsolete and slow moving goods and low profits

as compared to total investment. The inventory turnover ratio is also an index of

profitability, where a high ratio signifies more profit; a low ratio signifies low profit.

Sometimes, a high inventory turnover ratio may not be accompanied by relatively

high profits. Similarly a high turnover ratio may be due to under-investment in

inventories.

It may also be mentioned here that there are no rule of thumb or standard for

interpreting the inventory turnover ratio. The norms may be different for different

firms depending upon the nature of industry and business conditions. However

the study of the comparative or trend analysis of inventory turnover is still useful

for financial analysis.

ii. Debtors turnover ratio

A concern may sell goods on cash as well as on credit. Credit is one of the

important elements of sales promotion. The volume of sales can be increased by

following a liberal credit policy. The effect of a liberal credit policy may result in

tying up substantial funds of a firm in the form of trade debtors (or receivables).

Trade debtors are expected to be converted into cash within a short period of

time and are included in current assets. Hence, the liquidity position of concern to

pay its short term obligations in time depends upon the quality of its trade

debtors.

113

Debtors turnover ratio or accounts receivable turnover ratio indicates the velocity

of debt collection of a firm. In simple words it indicates the number of times

average debtors (receivable) are turned over during a year.

Formula of Debtors Turnover Ratio:

[Debtors Turnover Ratio = Net Credit Sales / Average Trade Debtors]

The two basic components of accounts receivable turnover ratio are net credit

annual sales and average trade debtors. The trade debtors for the purpose of

this ratio include the arnount of Trade Debtors & Bills Receivables. The average

receivables are found by adding the opening receivables and closing balance of

receivables and dividing the total by two. It should be noted that provision for bad

and doubtful debts should not be deducted since this may give an impression

that some amount of receivables has been collected. But when the information

about opening and closing balances of trade debtors and credit sales is not

available, then the debtors turnover ratio can be calculated by dividing the total

sales by the balance of debtors (inclusive of bills receivables) given. And formula

can be written as follows.

[Debtors Turnover Ratio = Total Sales / Debtors]

Significance of the Ratio:

Accounts receivable turnover ratio or debtors turnover ratio indicates the number

of times the debtors are turned over a year. The higher the value of debtors

turnover the more efficient is the management of debtors or more liquid the

debtors are. Similarly, low debtors turnover ratio implies inefficient management

of debtors or less liquid debtors. It is the reliable measure of the time of cash flow

from credit sales. There is no rule of thumb which may be used as a norm to

interpret the ratio as it rnay be different from firm to firm.

iii. Average Collection Period:

114

The Debtors / Receivable Turnover ratio when calculated in terms of days is

known as Average Collection Period or Debtors Collection Period Ratio. The

average collection period ratio represents the average number of days for which

a firm has to wait before its debtors are converted into cash.:

Formula of Average Collection Period:

Following formula is used to calculate average collection period:

[(Trade Debtors x No. of Working Days) / Net Credit Sales)


This ratio measures the quality of debtors. A short collection period implies

prompt payment by debtors. It reduces the chances of bad debts. Similarly, a

longer collection period implies too liberal and inefficient credit collection

performance. It is difficult to provide a standard collection period of debtors.

iv. Average Payment Period:

This ratio is similar to the debtors turnover ratio. It compares creditors with the

total credit purchases. It signifies the credit period enjoyed by the firm in paying

creditors. Accounts payable include both sundry creditors and bills payable.

Same as debtors turnover ratio, creditors turnover ratio can be calculated in two

forms, creditors turnover ratio and average payment period.

Formula:

Following formula is used to calculate creditors turnover ratio:

[Creditors Turnover Ratio = Credit Purchase / Average Trade Creditors)

Average Payment Period:

Average payment period ratio gives the average credit period enjoyed from the

creditors. It can be calculated using the following formula:

[Average Payment Period = Trade Creditors / Average Daily Credit Purchase)

[Average Daily Credit Purchase= Credit Purchase / No. of working days in a year)

Or

115

[Average Payment Period = (Trade Creditors x No. of Working Days) / Net Credit

Purchase]

(In case information about credit purchase is not available total purchases may

be assumed to be credit purchase.)


The average payment period ratio represents the number of days by the firm to

pay its creditors. A high creditors turnover ratio or a lower credit period ratio

signifies that the creditors are being paid promptly. This situation enhances the

credit worthiness of the company. However a very favorable ratio to this effect

also shows that the business is not taking the full advantage of credit facilities

allowed by the creditors.

v. Fixed assets turnover ratio:

Fixed assets turnover ratio is also known as sales to fixed assets ratio. This ratio

measures the efficiency and profit earning capacity of the concern. Higher the

ratio, greater is the intensive utilization of fixed assets. Lower ratio means under

utilization of fixed assets. The ratio is calculated by using following formula:

Formula of Fixed Assets Turnover Ratio:

Fixed Assets Turnover Ratio = Cost of Sales / Net Fixed Assets

116

4.1 Cadila Healthcare Limited

4.1.1: Working Capital Structure

A. Composition of Gross Working Capital

CBB : Cash & bank balance INT : Inventories

REC : Receivables EPA : Expenses paid in advance

LA : Loans & advances GWC : Gross Working Capital

ORE : Deferred revenue expenditure

Figure 4.1.1: Composition of Gross Working Capital of CHL

Gross Working Capital

1200

10001 ~ 800 . u c 600 ~

0 • 400

D _D_u '" 200

o . 2003 2004 2005 2006 2007 2008

Year

Source: CHL Annual Reports and CMIE Prowess

The investment in GWC by CHL was almost constant during period-1 with an

average of Rs. 449.43 Crs. Period-2 witnessed a sharp increase in the GWC,

maintaining an average of Rs. 794.60 Crs. Inventory and Receivables forms

major section of CHL's GWC, collectively on an average for the period under

study they were at a level of 83% (Rs.515.25 Crs.) of GWC and they peaked to

90% (Rs. 726.67 Crs.) of GWC for the year ending March 2007, which increased

to Rs. 770.15 Crs. (79.56% of GWC) for year ending March 2008.

117

Table 4.1.1: Composition 0 fG ross W k or Inq Capital 0 f L CH

Year CBB INT REC EPA LA

2003 9.00 175.60 184.70 2.20 32.50

2004 37.20 160.30 215.79 2.20 18.01

2005 26.40 193.90 174.98 4.70 66.32

2006 2.30 212.80 276.58 4.10 113.02

2007 12.40 328.70 397.97 0.80 67.13

2008 19.00 331.00 439.15 000 178.85 Source. CHL Annual Reports and CMIE Prowess

Figure 4.1.2: Composition of Gross Working Capital of CHL

1200

1000

~ 800 u ,;. 600

2003 2004

Composition of GWC

2005 2006 2007

Year

2008

Figure 4.1.3: Composition of Gross Working Capital of CHL (Trend)

500

_ 400

~ u 300 c

COMPOSITION OF GWC

ORE 22.20

14.80

7.50

0.00

000

0.00

• ORE

.LA o EPA

oREe

.'NT

.CBB

:. 200 .

~ /~--- ~ 10:~_~~~~~~~~~~==T= ____ ~~~~~~=-~

2003 2004 2005 2006 2007 2008

YEAR

I-CBB INT REC

118

GWC 426.2

448.3

473.8

608.8

807

968

T bl 412 C a e 'r fG omposllon 0 ross W k C I P or Ing aplta In ercentage T erms

Year 2003 2004 2005 2006 2007 2008 CBB 2.11 8.30 5.57 0.38 1.54 1.96

INT 41.20 35.76 40.92 34.95 40.73 34.19

REC 43.34 48.14 36.93 45.43 49.31 45.37

EPA 0.52 0.49 0.99 0.67 0.10 0.00

LA 7.63 4.02 14.00 18.56 8.32 18.48

ORE 5.21 3.30 1.58 0.00 000 0.00

Table 4.1.3: Descriptive Statistics of Components of GWC Particulars . CBB INT REC EPA LA ORE

Mean." • 17.72 233.72 281.53 2.33 79.31 7.42 Standard Error 5.16 31.24 46.00 0.74 24.02 3.82 Median 15.70 203.35 246.19 2.20 66.73 3.75 Standard Deviation 12.64 76.52 112.67 1.82 58.84 9.36 Sample Variance 159.71 5855.26 12695.51 3.31 3462.11 87.62 KurtOSIS: -0.41 -1.88 -175 -1.38 0.67 -0.80 Skewness 0.53 0.75 0.65 0.12 1.01 0.88 Ran!1e 3490 170.70 264.17 4.70 160.84 22.20 Minimum 2.30 160.30 174.98 0.00 18.01 0.00 Maximum 37.20 331.00 439.15 4.70 178.85 22.20 Sum '. 106.30 1402.30 1689.17 14.00 475.83 44.50 Count 6.00 6.00 6.00 6.00 600 6.00 Largest(1) 37.20 33100 439.15 4.70 178.85 22.20 Smallest(1 ) 2.30 160.30 174.98 0.00 18.01 0.00 Confidence Level (95.0%) 13.26 80.30 118.24 1.91 61.75 9.82

Receivable individually add to 45% (Rs. 281.53 Crs.) of GWC on an average for

the period, attaining a level of 49.31% (Rs. 397.97 Crs.) of GWC for the year

ending March 2007, which increased to Rs. 439.15 Crs (45.37% of GWC) in the

following year.

Comparing receivables with the sales volume it was noticed that with the

increase in the sales volume there was increase registered in the receivables,

both having a high degree of association (Co-efficient of correlation = 0.97) as

evident in figure 4.1.4. The ratio RIS (%) reflects that CHL's credit sales is

increasing as for the six year period the average ratio was 20.73, but the average

ratio for period-1 was about 17.63 and for period-2 it was almost 23.83 which

clearly indicates the increase of credit sales for CHL.

119

Figure 4.1.4: Sales and Receivables of CHL

2000 ~

1800 1 1600 .

-:- 1400 5 1200 : '~~~ I 600

400 200

o . 2003

Sales and Receivables

2004 2005 2006

YEAR

Table 4 1 4' Sales and Receivables of CHL

Particulars 2003 2004 2005 Sales 986 1136.9 1152

REC 184.7 215.79 174.98

RIS (%) 18.73 1898 15.19

Figure 4.1.5: Receivables I Sales (%) of CHL

30 -I

,

25 .

20 .

15 •

10 •

5 ~

o . 2003

RIS (%)

2004 2005

Year

2006

2007 2008

2006 2007 2008 1339 1538.4 1758.5

276.58 397.97 439.15

20.66 25.87 24.97

2007 2008

At the same time cash position of CHL is not encouraging with an average of just

3% (Rs. 17.72 Crs.) of GWC, lowering to the level of only 0.38% (Rs. 2.3 Crs.) of

GWC for the year ending March 2006, in-fact the cash position has tremble in the

last three years of the study, maintaining an average of 1.29% (Rs. 11.23 Crs.) of

GWC, keeping in view that GWC has increased almost two-fold in the period of

last three years (2006-2008), compared to the initial three years period of our

study (2002-2005).

120

The working capital employed by the company in its business declined from Rs.

2865 mn in 2001-02 to Rs. 2007 mn in 2002-03 due to reduction in loans and

advances and increase in sundry creditors. The size of the working capital used

by the company in its business was influenced by the long production cycle and

its receivables cycle. The working capital at the end of March 31, 2004 changed

marginally to Rs. 2005 mn and comprised current assets of Rs. 4335 mn net of

current liabilities and provisions of Rs. 2330 mn. Current assets as per cent of

sales reduced from 39% in 2002-03 to 37%. The current ratio at the end of March

2004 was 1.15 (after considering loan installments falling due for repayment in 1

year).

The working capital at the end of March 31, 2005 increased to Rs. 2244mn, from

Rs. 2005mn at the end of March 31, 2004 and comprised current assets of Rs.

4663mn net of current liabilities and provision of Rs. 2419mn. The working

capital (excl. Buyer's Credit) at the end of March 31, 2006 increased to Rs. 3682

mn, from Rs. 2475 mn at the end of March 31, 2005 and comprised current

assets of Rs. 6088 mn net of current liabilities and provision of Rs. 2406 mn.

Level of working capital (excl. Buyers' Credit) of Rs.4,824 mn at the end of 2006-

07 shows an increase of Rs.1, 152 mn from Rs. 3,672 mn at the end of 2005-06.

Average working capital represents 22.7% of turnover for 2006-07. Working

capital level (excl. Buyers' Credit) at the end of 2007-08 was Rs. 6,407 mn as

against Rs. 4,824 mn, which shows an increase of Rs. 1,583 mn. Net working

capital of acquired companies as on 31$1 march, 2008 was Rs. 418mn. Average

working capital represents 23.8% of turnover for 2007-08, as against 22.1 % last

year.

B. Composition of Inventory

RM

SSP

SFG

Raw materials

Stores & spares

Semi-finished goods

PM

FG

121

Packing materials

Finished goods

Table 4.1.5: Com osition of Inventorv of CHL

Year 2003 2004 2005 2006 RM 57.1 50A 49.6 56A

PM 0 0 6A 14.5

SSP 8.2 5.7 4A 3.2

FG 71.9 70.3 96.8 100A

SFG 38A 33.9 36.7 38.3

Total 175.6 160.3 193.9 2128 Source: CHL Annual Reports and CMIE Prowess

Figure 4 1 6' Composition of Inventory of CHL

COMPOSITION OF INVENTORY

160 l

140

120

~ 100 o :§. 80

~ 60

40 =---~ 20

O+--·~

2003 2004

----- --

2005

YEAR

2006 2007 2008

2007 2008 95.1 96.5

19.2 24.3

2.9 2.7

128A 136.9

83.1 70.6

328.7 331

r- Raw matenals

: - :~::i~~ ::~:::IS

I

F Inlshed goods

- Semi-finished goods

The inventory consists of raw materials, packing materials, stores and spares,

finished goods and semi-finished goods. The finished good inventory forms the

major portion of inventories with an average of 43.72% (Rs. 100.78 Crs.) of total

inventory, reaching to a level of 49.92% (Rs. 96.8 Crs.) in the year 2004-05.

Table 4.1.6: Composition of Inventorv of CHL in Percentage Terms

Particulars 2003 2004 2005 2006 2007 2008 RM 32.52 31A4 25.58 26.50 28.93 29.15

PM 0.00 0.00 3.30 6.81 5.84 7.34

SSP 4.67 3.56 2.27 1.50 0.88 0.82

FG 40.95 43.86 49.92 47.18 3906 41.36

SFG 21.87 21.15 18.93 18.00 25.28 21.33

The company's inventories increased from Rs. 1057 mn in 2001-02 to Rs. 1756

mn in 2002-03 in absolute terms. The inventories reduced from 66 days of

turnover in 2001-02 to 62 days of turnover in 2002-03. The company leveraged

the use of information technology to maintain reasonable raw material inventories

122

across its various plants as well as a low quantum of finished products within its

plants and distribution pipeline. Inventories reduced to Rs. 1603 mn from Rs.

1756 mn at the end of 2002-03. Inventory days were reduced to 50 days from 62

days' turnover in 2002-03.

Table 4.1.7: Descriptive Statistics of Components of Inventory of CHL Particulars RM PM SSP FG SFG

Mean 67.52 10.73 452 100.78 50.17

Standard Error 903 4.16 0.87 11.32 8.62

Median 56.75 10.45 3.80 98.60 3835 Standard Deviation 22.12 10.19 2.13 27.74 21.11 Sample Variance 489.39 103.82 4.53 769.32 445.47 Kurtosis -1.86 -1.96 0.82 -1.70 -0.98 Skewness 0.89 0.17 1.22 0.22 109 Range .. . 46.90 24.30 5.50 66.60 49.20 Minimum 49.60 0.00 2.70 70.30 33.90 Maximum 96.50 24.30 8.20 136.90 83.10 Sum 405.10 64.40 27.10 604.70 301.00 Count 6.00 6.00 6.00 6.00 6.00 Largest(1)

. 96.50 24.30 8.20 136.90 83.10

Smallest(1) 49.60 000 2.70 70.30 33.90 Confidence Level 95.0%) 23.22 10.69 2.23 29.11 22.15

Inventories increased to Rs. 1939mn as on March 31, 2005 from Rs. 1603mn at

the end of 2003-04, on account of the sales being affected in March 2005 due to

VAT related issues. Consequently, inventory days increased to 63 days, from 52

days' turnover in 2003-04. The management believes that this is a temporary

phenomenon and inventory levels will come down as normalcy is restored in the

market place. Inventory level went up to Rs.3,896 mn at the end of 2006-07 from

Rs.2,475 mn last year with average of 153 days of cost of goods sold against

112 days at the end of 2005-06. Major part of this increase is attributable to

higher level of stocking required for export business.

Inventory level went up to Rs. 4,729 mn at the end of 2007-08 from Rs. 3,986 mn

last year with average of 161 days of cost of goods sold against 147 days at the

end Of 2006-07. Major part of this increase is attributable to higher levels of

stocking required for export business.

123

C. Composition of Receivables

SO'

S02

AILO

OEP

Sundry debtors Outstanding less than six months

Sundry debtors Outstanding less than six months

Accrued income, lease rent & other receivables

Deposits

Table 4.1.8: Composition 0 fR eC81va b les 0 fC HL Year 2003 2004 2005 2006 SO 127.6 158 97.9 171.8 SO· 9.2 7.9 10.9 13.3

AILO 40.3 38.49 55.18 83.88 OEP 7.6 11.4 11 7.6 Total 184.7 215.79 174.98 276.58

Source. CHL Annual Reports and CMIE Prowess

Figure 4.1.7: Composition of Receivables of CHL

COMPOSITION OF RECEIVABLES

300 l

250 "

~ 200 u :§. 150

~ 100

50

2007 214.6

24 143.27

16.1 397.97

2008 246.6 35.9

113.25 43.4

439.15

o L_~=====~_==--c __ = ___ - ___ ~

2003 2004 2005 2006 2007 2008

YEAR

-SD1 S02 AILO D~

Receivables consist of sundry debtors, accrued income, lease rent & other

receivables and deposits. Sundry debtors (outstanding less than six months)

form the major portion of receivables maintaining an average of 61.74% (Rs.

169.42 ers.) of total receivables, reaching to a level of 73.22% of receivables in

the year ending March 2004.

T bl a e 4.1. 9 C ompoSitlon 0 fR ecelvables 0 fC HL in rercenta~e Terms Year 2003 2004 2005 2006 2007 2008 SO 6909 73.22 55.95 62.12 53.92 56.15 SO' 4.98 3.66 6.23 4.81 603 8.17 AILO 21.82 17.84 31.54 30.33 36.00 25.79 OEP 4.11 5.28 6.29 2.75 4.05 9.88

124

Table 4.1.10: Descriptive Statistics of Comoonents of Receivables of CHL Particulars SO SO' AILO DEP Mean .. 169.42 16.87 7906 16.18 Standard Error "'" 22.36 4.47 17.35 5.59 Median 164.90 12.10 69.53 11.20 Standard Deviation 54.77 10.96 42.51 13.70 Sample Variance 2999.62 120.13 1806.73 187.57 Kurtosis :: . -0.89 0.79 -118 4.91 Skewness -;" 0.20 1.33 0.65 2.18 Ranoe 148.70 28.00 104.78 35.80 Minimum 97.90 7.90 38.49 7.60 Maximum 246.60 35.90 143.27 43.40 Sum .. ' . 1016.50 101.20 474.37 97.10 Count ;Yli"" 6.00 6.00 6.00 6.00 Laroestl1l 246.60 35.90 143.27 43.40 Smallest!1 ) 97.90 7.90 38.49 7.60 Confidence Level 195.0%1 57.48 11.50 44.61 14.37

The company's debtor's increased from 669 mn in 2001-02 to Rs. 1368 mn in

2002-03. The increase was mainly on account of the effect of the merger.

However, the receivables cycle became longer: debtor (days of turnover)

increased from 41 days in 2001-02 to 49 days in 2002-03 mainly due to increase

in exports and API sales. The company continued to protect its receivables in the

domestic formulation business through the following initiatives: goods were

released by stockiest following the receipt of cheques from the buyers. As a

result, the collections cycle for formulations sold within the country was

maintained around 25 days. Receivables increased by Rs. 291 mn to Rs. 1659

mn at the end of 2003-04 and from 49 days (of turnover) in 2002-03 to 52 days in

2003-04. This was on account of higher proportion of export sales in 2003-04.

For the same reason, drop in sales in March 2005 - the receivables reduced by

Rs. 571mn to Rs. 1088mn at the end of 2004-05 and from 54 days (of turnover)

in 2003-04 to 35 days in 2004-05. The receivables increased by Rs. 763 mn to

Rs. 1851 mn at the end of 2005-06 and from 35 days (of turnover) in 2004-05 to

52 days in 2005-06. Last year, receivables were lower because of lower sales in

the month of February and March because of destocking by trade. Inventory

levels improved from 63 days last year to 59 days.

125

Accounts Receivable increased by RS.794 mn to Rs.2J84 mn at the end of

2006-07 representing 54 days (of turnover) in 2006-07 against 48 days in 2005-

06. Increase in the level of receivable is due to steep rise in exports as well as

API sales, for which higher credit of 180 days is extended. Accounts Receivable

increased by Rs. 771 mn to Rs. 3,555mn at the end of 2007-08 representing 55

days (of turnover) in 2007-08, marginally up from 54 days last year. This increase

was mainly on account of higher exports where higher credit period is allowed to

customers. Loans and advances reduced from Rs. 2,201 mn to Rs. 2,013 mn,

showing reduction of Rs. 188 mn.

D. Composition of Loans and Advances

A: Loans & advances to employees & directors

B: Loans provided to companies/ departmental undertakings/business

enterprises

T bl 41 11 C a e ampOSllon 0 fL oans an dAd vances 0 fCHL Year 2003 2004 2005 2006 2007

A 0 0.01 0.02 0.02 0.03 B 32.5 18 66.3 113 67.1

Total 32.5 18.01 66.32 11302 67.13 Source. CHL Annual Reports and CMIE Prowess

Figure 4.1.8: Composition of Loans and Advances of CHL

COMPOSITION OF LOANS AND ADVANCES

200 C 180 ~

160 ~ -0 140 ]' ~ 120 o : :§. 100 ~

. 80 1 iP.

~~~--------------------------------------~ 2003 2004 2005 2006 2007 2008

YEAR

Table 4.1.12: Composition of Loans and Advances in Percentaae Terms Year 2003 2004 2005 2006 2007

A 000 0.06 0.03 0.02 0.04 B 10000 99.94 99.97 99.98 99.96

126

2008 0.05 178.8

178.85

I

--AI

- 8 '

2008 0.03 99.97

Loans and advances reduced from Rs. 2185 mn in 2001-02 to Rs. 826 mn in

2002-03, due to the elimination of advances to subsidiary companies merged

with the company in 2002-03 and completion of projects. The major part of

remaining loans and advanced were made to the company's joint ventures, other

agencies and employees as a part of the ongoing nature of the company's

business. In the opinion of the management, the quanta of these loans are

reasonable in relation to the company's overall volumes and considered fully

recoverable.

T bl 4 1 13 0 . r St r r f C a e escrlpllve a IS les 0 tIL omponen S 0 oans an dAd vances 0 fCHL Particulars . A B Mean 0.03 99.97 Standard Error • 0.01 0.01 Median 'l!J. 0.03 99.97 Mode

., 0.03 99.97

Standard Deviation 0.02 0.02 Sample Variance 0.00 0.00 Kurtosis , 0.93 0.92 Skewness ·iIii~· 0.00 000 Range 0.06 0.06 Minimum 000 99.94 Maximum 0.06 100.00 Sum iil· 0.18 599.82 Count .> 6.00 6.00 Largest(1) 0.06 100.00 Smallest(1 ) 0.00 99.94 Confidence Level (95.0%) 0.02 0.02

Loans and advances as on March 31, 2005 increased by Rs. 671 mn to Rs.

1372mn, from Rs. 701 mn as on March 31, 2004 due to loans given to

subsidiaries and a JV company to support their operations. Loans and advances

as on March 31, 2006 increased by Rs. 714 mn to Rs. 2086 mn, from Rs. 1372

mn as on March 31 2005 due to increase in loans given to subsidiaries.

Loans and Advances increased from Rs.1,588 mn to RS.2,201 mn, which is

attributed to advance of RS.160 mn for acquisition of Liva Healthcare and

increase in advances for projects and capital goods.

127

E. Current Liability

SC

INTA

PROV

DACE

Sundry creditors

I nterest accrued

Provisions

ACC

OCl

Acceptances

Other current liabilities

Deposits & advances from customers & employees

T bl 41 14 C a e t omj:!9sf Jon 0 fC urrent l bT 18 Iities 0 f CHl

Particulars 2003 2004 2005 2006 2007 2008

SC 128.8 151.5 150.1 169.1 326.5 243

ACC 32.9 16.6 23.1 19 39.9 23.5

DACE 5.8 5.5 3.8 7 5.9 54

INTA 4.2 7.5 6.5 3.9 3.1 4.7

OCl 0.6 0.8 0.9 0.9 1 1

PROV 31 51.1 57.5 59.7 74.3 98.3

Total 203.3 233 241.9 259.6 450.7 375.9 Source: CHl Annual Reports and CMIE Prowess

Current liabilities consists of sundry creditors. acceptances. interest accrued,

other current liabilities, provisions, deposits & advances from customers &

employees. Sundry creditors form the major portion maintaining an average of

65.44% (Rs. 194.83 Crs.) of current liabilities, reaching to a level of 72.44% (Rs.

326.5 Crs.) of current liabilities in the year 2006-07.

Figure 4.1.9: Composition of Current Liabilities of CHl

500 ", 450 j 400 I

-:- 350 . ~ , o 300 -!:: 250 -

::::- 200 -

cP. 150 1 100 1

50 1 0--

2003 2004

CURRENT LIABILITIES

2005 2006 2007

Year

128

2008

-SC

-ACC

DACE'

INTA

-OCl

I

-PROV

-Total

Table 4.1.15: Composition of Current Liabilities of CHL in Percentage Terms

Particulars . f:2003 2004: 2005 2006::' 2007 2008

SC 63.35 6502 6205 65.14 72.44 64.64

ACC .. Co:

16.18 7.12 9.55 7.32 8.85 6.25

DACE 2.85 2.36 1.57 2.70 1.31 1.44

INTA 2.07 3.22 2.69 1.50 0.69 1.25

OCl 0.30 0.34 0.37 0.35 0.22 0.27

PROV 1525 21.93 23.77 23.00 16.49 26.15

Current liabilities of Rs. 1844mn include sundry creditors (inclusive of buyers

credit) of Rs. 1501 mn and provisions of Rs. 575mn.The current ratio at the end of

March 2005 was 1.11 (previous year 1.15) (net of loan installments falling due for

repayment within one year). Current liabilities of Rs. 2406 mn include sundry

creditors of Rs. 1691 mn. The current ratio at the end of March 2006 was 2.53

(previous year 2.13). Current Liabilities net of Buyers' Credit has gone up to

Rs.4,189 mn from Rs.2,214 mn. Major component of this is increase in Creditors

for supplies, which represents increase in volume as well as longer credit terms

negotiated by the Company.

Table 4.1.16: Descriptive Statistics of Components of Loans and Advances of CHL Particulars SC ACC DACE INTA OCl PROV Mean 194.83 25.83 5.57 4.98 0.87 61.98 Standard Error 30.85 362 0.42 0.68 0.06 9.26 Median .':. 160.30 23.30 565 4.45 0.90 58.60 Standard Deviation::L" 75.57 886 1.04 1.68 0.15 22.69 Sample Variance •• 5711.52 78.53 1.07 2.81 0.02 514.87 Kurtosis :': 0.89 -OA4 222 -0.95 1.53 0.88 Skewness 133 0.86 -0.68 0.70 -1.27 OA8 Range 197.70 23.30 3.20 4AO OAO 67.30 Minimum 128.80 16.60 3.80 3.10 0.60 31.00 Maximum 326.50 39.90 7.00 7.50 1.00 98.30 Sum 116900 155.00 33AO 29.90 5.20 371.90 Count ': 6.00 600 6.00 6.00 6.00 6.00 Larqest(1) ... : 326.50 39.90 7.00 7.50 1.00 98.30 Smallest(1) .:::: 128.80 16.60 3.80 3.10 0.60 3100 Confidence Level :: (95.0%) 79.31 930 109 1.76 0.16 23.81

129

F. Composition of Sundry Creditors

SCGS

SCCW

Sundry creditors for goods & services

Sundry creditors for capital works

T bl 4 1 17 C a e om l 051 Ion 0 f S d C d un lry re Itors 0 fCHL

Particulars 2003 2004 2005 2006 SCGS 122.9 148 145.1 163.2

SCCW 5.9 3.5 5 5.9

Total 128.8 151.5 150.1 169.1 Source: CHL Annual Reports and CMIE Prowess

Figure 4.1.10: Composition of Sundry Creditors of CHL

350 I 300

~ 250 • o 200 J c .

"=- 150 ~

~ 100 ;

SUNDRY CREDITORS

2007 2008 319.1 234.7

7.4 8.3

326.5 243

50 I oL1 __ ~~~ __ ~ __________ ~~~~~ ____ _ 2003 2004 2005 2006 2007 2008

YEAR

1----·-----' -SCGS --sccw;

T bl 4 1 18 C a e om oSllon 0 f S d C d un lry re Itors 0 fCHL· P In ercen age T erms

Particulars 2003 2004 2005 2006 2007 2008 SCGS 95.42 97.69 96.67 96.51 97.73 96.58

SCCW 4.58 2.31 3.33 3.49 2.27 3.42

Analyzing sundry creditors it was observed that CH L has two types of sundry

creditors; sundry creditors for goods & services and sundry creditors for capital

works. For the period under study sundry creditors for goods & services were not

below 95% of total sundry creditor for any of the years.

130

T bl 4 1 19 D a e escnpuve a IS ICS 0 f St f f f C omponents a unlr re I ors 0 f S d C dt fCHL Particulars SCGS SCCW Mean 188.83 6.00 Standard Error 30.36 0.70 Median 155.60 5.90 Standard Deviation 74.37 1.70 Sample Variance 5531 A8 2.90 Kurtosis 1.03 -0.28 Skewness 1.35 -0.10 Range 196.20 4.80 Minimum 122.90 3.50 Maximum 319.10 8.30 Sum 1133.00 36.00 Count 6.00 6.00 Largest(1 ) 319.10 8.30 Smallest(1 ) 122.90 3.50 Confidence Level (95.0%) 78.05 1.79

G_ Composition of Deposits and Advances

STDO

ACRA

Security deposits /trade deposits/dealer deposits

Advances from customers on revenue account

Table 4.1.20: Com osition of Deposits & Advances of CHL

Particulars 2003 2004 2005 2006

STDD 4.1 2.5 1.2 1.2

ACRA 1.7 3 2.6 5.8

Total 5.8 5.5 3.8 7 Source. CHL Annual Reports and CMIE Prowess

Figure 4.1.11: Composition of Deposits & Advances of CHL

7 ,

6 ! ~ 5, u 4-c =- 3 • ~ 2 _

1 -

DEPOSITS & ADVANCES

o--------~------~---

2003 2004 2005 2006

YEAR

I--STDO - ACRA I

13 1

2007

2007

1.9

4

5.9

2008

2008

1.5

3.9

5A

Table 4.1.21: Com osition of Deposits & Advances of CHL in Percentage T erms

Particulars 2003 2004 2005 2006 2007 2008

STDO 70.69 45.45 31.58 17.14 32.20 27.78

ACRA 29.31 54.55 68.42 82.86 67.80 72.22

T bl 41 22 D a e escnpnve a IS les 0 r st r r f C omponents 0 fD ·t &Ad eposl s vances 0 fCHL Particulars : .. , . '" STDO ACRA ·,c Mean 207 3.50 Standard Error 0.45 0.58 Median

., 1.70 3.45

Standard Deviation 1.11 1.41 Sample Variance . 1.23 2.00 Kurtosis 2.18 0.63 Skewness 1.53 0.60 Range 2.90 4.10 Minimum ... 1.20 1.70 Maximum 'I: . 4.10 5.80 Sum 12.40 21.00 Count ·i:' .... 6.00 6.00 Largest(1) 4.10 5.80 Smallest(1 \ h. .' 1.20 1.70 Confidence Level (95.0%) 1.17 1.48

H. Composition of Provisions

CTP : Corporate tax provision

DTP : Dividend tax provision

TDP : Total dividend provisions

PEM : Provision for employees

OP : Other provisions

Table 4.1.23: Composition of Provisions of CHL

Particulars 2003 2004, 2005 2006 '., 2007 2008

CTP 0 0 0 0 0 13.1

TOP : 22 37.7 37.7 37.7 50.2 56.5

OTP .' 2.8 4.8 5.3 5.3 8.5 9.6

PEM ,: 6.2 8.6 13.4 15.6 14.3 17.5

OP 0 0 1.1 1.1 1.3 1.6

Total 31 51.1 57.5 59.7 74.3 98.3 Source. CHL Annual Reports and CMIE Prowess

132

Figure 4 1 12' Composition of Provisions of CHL

60

50

e 40 o .g 30

~ 20

10

PROVISIONS

-------/.

-------

2003 2004 2005 2006 2007 2008

Table 4.1.24: Com

Particulars

crp

TOP

Drp

PEM

OP

'-CTP I

TOP

oSition 0 fP rovlSlons 0

2003 2004

000 000

70.97 73.78

903 9.39

20.00 16.83

0.00 000

YEAR

DTP

f CHL' P In ercentage T erms

2005 2006 2007

000 0.00 0.00

65.57 63.15 67.56

9.22 8.88 11.44

23.30 26.13 19.25

1.91 1.84 1.75

T bl a e 4.1.25: Descriptive s tatlstlcs 0 fC omponents 0 fP rovislons 0 f CHL

Particulars CTP TOP DTP PEM Mean 2.18 40.30 605 12.60

Standard Error 2.18 4.88 1.03 1.77 Median 0.00 37.70 5.30 13.85 Standard Deviation 5.35 11.96 2.52 4.32 Sample Variance 28.60 143.12 6.37 18.70

Kurtosis 6.00 0.27 -0.91 -1.05

Skewness 2.45 -0.17 0.42A -0.65 Range 13.10 34.50 6.80 11.30 Minimum 000 22.00 2.80 6.20 Maximum 13.10 56.50 9.60 17.50

Sum 13.10 241.80 36.30 75.60 Count 6.00 6.00 6.00 6.00 LarQest(1 ) 13.10 56.50 9.60 17.50 Smaliest(1 ) 0.00 2200 2.80 6.20

Confidence Level (95.0%) 5.61 12.55 2.65 4.54

133

2008

13.33

57.48

9.77

17.80

1.63

OP 0.85 0.28 1.10 0.68 0.47 -1.73 -0.64 1.60 0.00 1.60 5.10 6.00 1.60 0.00

0.72

4.1.2: Impact of WCS on Efficiency and Profitability

Section I: Liquidity, Efficiency and Profitability Analysis

In this section we are trying to identify relationship between the composition of

gross working capital as a measure for liquidity with profitability and efficiency.

Inventory, Receivable, Loans and Advances and Cash and Bank Balance as a

percentage of gross working capital are taken as parameters for liquidity.

Working capital turnover ratio, Inventory turnover ratio, Debtors turnover ratio,

fixed asset turnover ratio, Current asset turnover ratio, Total asset turnover ratio

are taken as parameters for efficiency. Gross profit margin ratio, net profit margin

ratio, Return on asset, return on capital employed and return on equity ratio are

taken as parameter for profitability. We have ranked performance of the firm for

the period under study on the basis of liquidity, efficiency and profitability. Rank

correlation has been calculated between ranks on the basis of:

I. Liquidity and Efficiency

II. Efficiency and Profitability

III. Profitability and Liquidity

In the following part ranks have been calculated followed by rank correlation

using the formula:

where,

r = Coefficient of rank correlation

n = number of paired observations

d = difference between the ranks for each pair of observations

T test has been performed on the coefficient of correlation using the formula:

t = r /"J1- ~ ...j (n-2)

Ranks have been assigned individually to all the components of liquidity,

efficiency and profitability thereafter summation of ranks is done to get ultimate

rank for liquidity, efficiency and profitability.

134

A. Ranking on the basis of Liquidity

This portion deals with assigning ranks to different parameters of liquidity VIZ

Inventory, Receivable, Loans and Advances and Cash and Bank Balance. The

Criteria for assigning ranks to all parameters of liquidity varies according to the

nature of the parameter. For inventory lower the percentage with respect to gross

working capital is favorable hence higher rank is given to the year with lower

percentage of inventory to gross working capital. The argument in support of this

logic is that more inventories in gross working capital reflects under utilization of

inventory hence capital is blocked in the form of inventory raising cost of capital

for the firm. The treatment for receivables is similar with that of inventory; year

with higher percentage of receivables to gross working capital reflects firms'

inability to recover its receivables in timely manner, thus increasing the cost of

capital as capital is blocked in form of receivables. For loans & advances and

Cash & bank balance higher ranks are given to year with higher percentage of

the parameter with respect to gross working capital.

INT : Inventories R1 : Rank on the basis of INT

REC : Receivables R2 : Rank on the basis of REC

LA : Loans & advances R3 : Rank on the basis of LA

CBB : Cash & bank balance R4 : Rank on the basis of CBB

TR : Total of Rank UL : Ultimate Rank

Table 4.1.26: GWC of CHL in Terms

48.14 4.02 8.3

36.93 14 5.57

45.43 18.56 0.38

49.31 8.32 1.54

45.37 18.48 1.96

135

2008 1 3 2 4 10

From the above table we can notice for the financial year ending on March 31,

2008 CHL was in best position towards maintaining its liquidity while for the year

ending on March 31,2007 its liquidity ranking was last for the period under study.

B. Ranking on the basis of Efficiency

This portion deals with assigning ranks to different parameters of efficiency viz

working capital turnover ratio, inventory turnover ratio, debtors turnover ratio,

fixed asset turnover ratio, current asset turnover ratio, total asset turnover ratio.

The Criteria for assigning ranks to all parameters of efficiency is uniform higher

the value of parameter higher the rank is assigned. The argument in support of

this logic is that higher turnover ratios reflects fast cash conversion cycle, thus

following this criteria ranks have been assigned to all the parameters and

summation of ranks is done to get the ultimate rank for efficiency.

WCTR: Working Capital Turnover Ratio

ITR : Inventory Turnover Ratio

DTR : Debtors Turnover Ratio

FATR : Fixed Asset Turnover Ratio

CATR : Current Asset Turnover Ratio

AT : Total Asset Turnover Ratio

R1: Rank on the basis of WCTR

R2: Rank on the basis of ITR

R3: Rank on the basis of DTR

R4: Rank on the basis of FATR

R5: Rank on the basis of CATR

R6: Rank on the basis of AT

From the tables we can notice for the financial years ending on March 31,2004 &

2005 CHL was in best position towards maintaining its efficiency while for the

136

year ending on March 31, 2007 its efficiency ranking was last for the period

under study.

Table 4.1.28: Ratios of C H L

Table 4 1 29 Ranking of GWC Components of CHL for Activity

1~~~i~Ulars~l:i: Ri '; R3j;$;I: R4iRS;;:

,; :~t~jT 2'005 1 3 1 5

'-1,,1:2006 4 2 4 3 3

"12'12007 5 6 6 2 6 ,,:;,,'d,' ;:;;;;;2008 6 5 5 1 5

C. Ranking on the basis of Profitability

2.74 0.88

2.88 0.86

2.7

2.08 0.80

2.23 0.76

., R6 /" UR

4 23 3

1 13

2 13 1

3 19 2

5 30 5

6 28 4

This portion deals with assigning ranks to different parameters of profitability viz

Gross profit margin ratio, net profit margin ratio, Return on asset, return on

capital employed and return on equity .The Criteria for assigning ranks to all

parameters of profitability is uniform higher the value of parameter higher the

rank is assigned. The argument in support of this logic is that higher profitability

ratios reflects higher profits for the firm, thus following this criteria ranks have

been assigned to all the parameters and summation of ranks is done to get the

ultimate rank for profitability.

GPMR : Gross Profit Margin Ratio

NPMR : Net Profit Margin Ratio

ROA : Return on Asset

R1

R2

R3

ROCE : Return on Capital Employed R4

137

: Rank on the basis of GPMR

: Rank on the basis of NPMR

: Rank on the basis of ROA

: Rank on the basis of ROCE

ROE : Return on Equity R5 : Rank on the basis of ROE

Table 4.1.30: Profitabilitv Ratios of CHL Particulars . ".'. GPMR NPMRilli" ROA "i: ROCE ROE"l!liIIi~:: 2003 :'.:l 0.1856 0.1059 0.0639 0.1205 2.5705 2004 :'f 0.2137 0.1452 0.1112 0.1476 4.5510

2005 0.1964 0.1306 0.0976 0.1261 4.1847

2006 :.: 0.1999 0.1403 0.1058 0.1323 5.2516 2007 :.; 0.2111 0.1507 0.1068 0.1347 3.2596 2008 .. ~ 0.2215 0.1575 0.1021 0.1367 3.7611

Table 4.1.31: Rankina of GWC Com~ onents of CHL for Profitabilitv Particulars R1~:lil''" R2 Rijl!fcl': R4 R5·:::::::: TR UR.Le: 2003 6 6 6 6 6 30 6 2004 2 3 1 1 2 9 1

'2005 5 5 5 5 3 23 5 2006 4 4 3 4 1 16 4 2007 3 2 2 3 5 15 3 2008 1 1 4 2 4 12 2


2004 CHL was in best position towards maintaining its profitability while for the

year ending on March 31, 2003 its profitability ranking was last for the period

under study.

Data Analysis and Hypothesis Testing

H1o: Enhanced liquidity position is associated with efficient utilization of

resources and vice-versa.

Coefficient of rank correlation between liquidity and efficiency is 0.2857 and the

corresponding t-value is 0.1491, this reflects weak positive association between

liquidity and efficiency. Thus our hypothesis enhanced liquidity position is

associated with efficient utilization of resources and vice-versa is not established.

H2o: Enhanced Liquidity position of firm is associated with better profitability and

vice-versa.

138



liquidity and profitability. Thus our hypothesis enhanced Liquidity position of firm

is associated with better profitability and vice-versa is not established.

H30: Enhanced efficiency position of firm is associated with beller profitability and

vice-versa.

Coefficient of rank correlation between efficiency and profitability is -0.0571 and

the corresponding t-value is -0.0286, this reflects weak negative association

between efficiency and profitability. Thus our hypothesis Enhanced efficiency

position of firm is associated with beller profitability and vice-versa is not

established.

Section II: Liquidity and Cash Flow Analysis

In this section we are trying to identify relationship between cash flow from

operating activity and liquidity as a whole and individually with four major

components of liquidity namely inventory, receivables, loans & advances and

cash & bank balance. The logic central to the study is that cash flow from

operating activity is generated because of changes in the composition of working

capital. In this study we our trying to identify individually how these four liquidity

parameters are able to explain the changes taking place in cash flow from

operating activity, for carrying out the study correlation and simple regression

technique has been used. Ratio of selected liquidity parameter to gross working

capital represents liquidity component as an independent variable. Ratio of cash

flow from operating activity to gross working capital is taken as dependent

variable. Second part of the study is an allempt to identify how these four

parameters of liquidity are collectively able to explain the changes taking place in

the cash flow from operating activity. To carry out the study multiple correlation

technique has been used taking all the four parameters of liquidity as

139

independent variables and ratio of cash flow from operating activity to gross

working capital is taken as dependent variable.

a. Inventory and Cash Flow

Hypothesis (Ho): ""INT /wc is inversely associated to the company's ""CF/Wc

Table 4.1.32: Inventory and Cash Flow of CHL

Year INTlWc LlINTIWC CFlWc LlCFlWc

2003 41.20 - 4003 -2004 35.76 -5.44 45.48 5.45

2005 40.92 5.16 2809 -17.39

2006 34.95 -5.97 10.45 -17.65

2007 40.73 5.78 27.32 16.88

2008 34.19 -6.54 603 -21.29

Figure 4.1.13: Inventory and Cash Flow of CHL

~NT and L';CF

20 -

10

o 0 ;:: ~ ·10

..... ~ .~ 207 2005 ~-' =--2-o-o7----'''''''·~~-0-8--

I

·20 J ·30

YEAR

i - ,,,-tNT - .",CF,

Coefficient of correlation between ""INT /wc and ""CF/Wc is 0.4104 and the


""INT /wc and ""CF/Wc. Thus our hypothesis ""INT INC is inversely associated to the

company's ""CFINc cannot be established. The results of simple regression show

that independent variable can explain only 17% of the variation in the dependent

variable.

140

Table 4.1.33 1 Re~ression Statistics 0 Inventory an d C h FI as owo fCHL

.. :)' Regression Statistics kfu

Multiple R 0.41

R Square 0.17

Adjusted R Square -0.11

Standard Error 17.86

Observations 5.00

Table 4.1.34: ANOVA Results 0 1 Inventory and Cash Flow 01 C HL Of' SS -: . MS .. .2 ...... F Significance F

Regression 1.00 193.69 193.69 0.61 0.49 Residual 3.00 956.83 318.94

Total 4.00 1150.52

T bl 4 1 35 C ffi t D tl f I a e oe lelen 5 e 81 S 0 nven ory an d C h FI as owo ICHL Intercept il.INT

Coefficients' -. -5.25 1 .11 Standard Errori. 8.23 1.42 t Stat •• ;f -0.64 0.78 P-value •• 0.57 0.49 Lower 95% .' -31.44 -3.41 Upper 95% 20.95 5.62 Lower 95.0% -31.44 -3.41 Upper 95.0% 20.95 5.62

From the above table following regression equation is derived:

Y = -5.25 + 1.11 X

The intercept coefficient and "'INT coefficient are statistically insignificant as the

t-value for both variables is less then 2. Thus, there is no strong association

between "'INT!Wc and "'CF!Wc

T bl 4 1 36 R 'd I 0 a e eSI ua utput 0 1 I nventory an d C h FI as owo ICHL '.- Predicted Standard

Observation e.CF Residuals : Residuals 1 -11.27 16.72 1.08 2 0.46 -17.85 -1.15 3 -11.85 -5.79 -0.37 4 1.15 15.73 1.02 5 -12.48 -8.81 -0.57

141

Table 4.1.37: Probability Output of Inventory and Cash Flow of CH ....... Percentile 6CF

10 ·21.29 30 -17.65 50 -17.39 70 545

90 16.88

Figure 4.1.14: Inventory Residual Plot of CHL

~INT Residual Plot

ResiraIS-:.~2::::1-1 ~~~~.:::..]iJ::..c"i_.' ----<l

-1 1(,00 -5.00 200~r-=-jOO"," .. ~ .. ----=:5.QO .' 1 ~.OO ~INT

Figure 4.1.15: Inventory Line Fit Plot of CHL

~INT Line Fit Plot

50.0or-·~

~CF! ) ooC+ ~:----1 -10.00 -5:g8:0~jOO 5.00 1Q.00

~INT

Figure 4.1.16: Normal Probability Plot of CHL

.6CF

• Predicted t.CF

Normal Probability Plot

50.00'r-----------

~CF 0.00 • •

-50.0? 00· 20.00·40.00· 60.00 80.00 1 (Pod Sample Percentile I

b. Receivables and Cash Flow

L

Hypothesis (Ho): ~INT NVC is inversely associated to the company's ~CF NVC

142

Table 4 1 38· Receivables and Cash Flow of CHL

Year REC~r LlREC~r CF~r LlCFMlc

2003 184.70 - 40.03 -

2004 215.79 4.80 45.48 5.45

2005 174.98 -11.20 2809 -17.39

2006 276.58 8.50 10.45 -17.65

2007 397.97 3.88 27.32 16.88

2008 439.15 -3.95 603 -21.29

Figure 4.1.17: Receivables and Cash Flow of CHL

LlREC and "'CF

2000 .

1000 -

ODD i ---~~----~--_. -'- -~-

2007 2008 I 2004 2005" 2006 -1000 1

-2000 j

-3000 I YEAR

Coefficient of correlation between ~REClWc and ~CFlWc is 0.4364 and the


~REClWc and ~CFlWc. Thus our hypothesis ~REC!Wc is inversely associated to

the company's ~CF!Wc cannot be established. The results of simple regression

show that independent variable can explain only 19% of the variation in the

dependent variable.

Table 4.1.39 Reqression Statistics of Receivables and Cash Flow of CHL

Rearession Statistics

Multiole R 0.44

R Souare 0.19

Adiusted R Souare -008

Standard Error 17.62 Observations 5

143

Table 4 1 40' ANOVA Results of Receivables and Cash Flow of CHL

df .• : SS MS F Significance F Regression 1.00 219.34 219.34 0.71 0.46

Residual 3.00 931.18 310.39

Total 4.00 1150.52

Table 4 1 41' Coefficients Details of Receivables and Cash Flow of CHL

Intercept IIREC Coefficients -7.18 0.94

Standard Error 7.89 1.11

t Stat " -0.91 0.84

P-value i1H< . 0.43 0.46

Lower 95% 'PI' -32.29 -2.61

Upper 95% ••• 17.94 4.48

Lower 95.0%' -32.29 -2.61

Upper 95.0% 17.94 4.48


Y = -7.18 + 0.94 X

The intercept coefficient and !".REC coefficient are statistically insignificant as the


between !".REC!Wc and !".CF!Wc

Table 4.1.42, Residual Output of Receivables and Cash Flow of CHL Predicted Standard

Observation lieF Residuals Residuals 1 -2.69 8.14 0.53

2 -17.66 0.27 0.02

3 0.77 -18.42 -1.21

4 -3.55 20.42 1.34

5 -10.87 -10.42 -0.68

T bl 1 43 P b bl 0 a e 4. ro a IIty t f R utpu a ecelva bl es an d C h FI as owo fCHL

". Percentile IICF 10 -21.29

30 -17.65

50 -17.39

70 5.45

90 16.88

144

Figure 41.18: Receivables Residual Plot of CHL -------

~REC Residual Plot

Resi ~al"s--~~~SO:OO,' --....",,·1:~: ~--,

~-.. ~I--~I~.~,~oo+I--·~~--~1 -1 .. 00 -10.00 -S.O?SOO?y00 5.00 ·10.00

~REC

Figure 4.1.19: Receivables Line Fit Plot of CHL -------

I

~REC Line Fit Plot

r=;~~~] ~CF •• I. t\CF - _.

I -29·00 -fa"!;: ';'-i .00 I· Predicted ",CF.

~REC ------



'c:~~f. ~o.:, ~o, ·,:~o :.:;0 · ,lo Sample Percentile

c. Loan & Advances And Cash Flow

Hypothesis (Ha): ~LAlWc is directly associated to the company's ~CFlWc

Coefficient of correlation between ~LAlWc and ~CFlWc is -0.9740 and the

corresponding t-value is -2.4822, this reflects strong negative association

between ~LAlWc and ~CFlWc. Thus our hypothesis ~LANVC is directly associated

to the company's !1CFNVC cannot be established. The results of simple regression

145

show that independent variable can explain almost 95% of the variation in the

dependent variable.

Table 4 1 44· Loans and Advances and Cash Flow of CHL

Year LAnN~ ~LAlWc CFlWc ~CFIW.c

2003 7.63 - 4003 -2004 4.02 -3.61 4548 545

2005 14.00 9.98 28.09 -17.39

2006 18.56 4.57 1045 -17.65

2007 8.32 -10.25 27.32 16.88

2008 1848 10.16 6.03 -21.29

Figure 4.1.21: Loan & Advances and Cash Flow of CHL

~LA and ilCF

20,00

10.00 ~ ~ /

o 000~----~~--------~----~~-------7~------~

;:: 206. ' 2005 2006 2007 A.

Oi ·10 00 2008

-20,00

-3000

YEAR

Table 4.145: ReQression Statistics of Loans and Advances and Cash Flow of CHL

Regression Statistics

Multiple R 0.97

R Square 0.95

Adiusted R Square 0.93

Standard Error 444

Observations 5

Table 4 1 46 ANOVA Results of Loans and Advances and Cash Flow of CHL Of SS MS F Significance F

ReQression 1 1091.51 1091.51 5549 0.0050 Residual 3 59.01 19.67

Total 4 1150.52

146

Table 4 1 47' Coefficients Details of Loans and Advances and Cash Flow of CHL Intercept ALA

Coefficients'·" -2.78 -1.85

Standard Error" 206 0.25 t Stat

, -1.35 -7.45

P-value 0.27 0.01 Lower 95% -9.32 -2.64 Upper 95% 3.76 -1.06

Lower 95.0% -9.32 -2.64

Upper 95.0% 3.76 -106


Y=-2.78-1.85X

The intercept coefficient and ",LA coefficient are statistically insignificant as the t

value for both variables is less then 2.

f Table 4.1.48: Residual Output of Loans and Advances and Cash Flow a CHL Predicted Standard

Observation llCF Residuals Residuals 1 3.90 1.55 0.40 2 -21.27 3.88 101 3 -11.24 -6.41 -1.67 4 16.20 0.68 0.18

5 -21.60 0.31 0.08

Table 4 .1.49 Probability Output of Loans and Advances and Cash Flow a fCHL Percentile llCF

10 -21.29

30 -17.65 50 -17.39 70 5.45

90 16.88

Figure 4.1.22: Loan & Advances Residual Plot of CHL

",LA Residual Plot

(h

::., ,. 0

00 -10.00 -5.09onno.po 5000 ;O:~ 15j' - 00 ,

",LA

Figure 4.1.23: Loan & Advances Line Fit Plot of CHL

147

I L'.LA Line Fit Plot

",---50. Ofl-r,...,.".,.~--,

, . • Predicted ,",CF I: q

• >

-2 .00-1~5Wo0010.00 2 .00

L'.LA



! 50.00,-------------'1

. "CF5~~ • 20 • 40·.!lO: 80 • 1~0 Sample Percentile

d. Cash & Bank Balance and Cash Flow

Hypothesis (Ho): L'.CBBlWc is directly associated to the company's L'.CFlWc

Table 4 1 50' Cash and Bank Balance and Cash Flow of CHL

Year " CBBIWC ACBBMlc CFmc Il.CFlWc

2003 2.11 - 40.03 -

2004 ...

8.30 6.19 45,48 5,45

2005 5.57 -2.73 28.09 -17.39

2006 0.38 -5.19 10,45 -17.65

2007 1.54 1.16 27.32 16.88

2008 1.96 0.43 603 -21.29

Coefficient of correlation between L'.CBBlWc and L'.CF IWC is 0.6237 and the

corresponding t-value is 0.4607, this reflects strong positive association between

L'.CBBlWc and L'.CFlWc. Thus our hypothesis L'.CBBNVC is directly associated to the

company's !1CFNVc is established. The results of simple regression show that

independent variable can explain about 39% of the variation in the dependent

variable.

148

Figure 4.1.25: Cash & Bank Balance and Cash Flow 01 CHL

"'CBB and "'CF

20 00

2008 000 -20~~05

/~~ 200~ 2007

10,00

-10,00

-2000

-3000

YEAR

T bl 4 1 51 R a e eQreSSlon a IS les 0 as an an St r ric h d B k B a ance an d C h FI as owo f CHL


Multiple R 0.62

R Square 0.39

Adjusted R Square 0.19


Observations 5

Table 4 1 52' ANOVA Results of Cash and Bank Balance and Cash Flow of CHL df 55 MS F Significance F

Regression 1 447.75 447.75 1.91 0.2608 Residual 3 702.77 234.26

Total 4 1150.52

Table 4 1 53' Coefficients Details of Cash and Bank Balance and Cash Flow of CHL Intercept "'CBB

Coefficients -6.73 2.46 Standard Error 6.84 1.78 t Stat -0.98 1.38 P-value 040 0.26 Lower 95% -28.51 -3.20 Upper 95% 1506 8.11 Lower 95:0% -28.51 -3.20 Upper 95.0% 1506 8.11


Y = -6.73 + 2.46 X

The intercept coefficient and ""CBB coefficient are statistically insignificant as the

t-value for both variables ;s less then 2.

149

Table 4.1.54: Residual Output of Cash and Bank Balance and Cash Flow of CHL ·iC:~~~:h I Standardl<lE];il'i predict~~~!

.•. Residual~1iB I.f~¥f Observation, bCF "F:1f;Rf Residuals· 't ... 4fj fU"

Table 4.

1 8.47 -3.02 -0.23 2 -13.42 -3.97 -0.30 3 -19.49 1.84 0.14 4 -3.88 20.76 1.57

5 -5.68 -15.61 -1.18

Figure 4.1.26: Cash & Bank Balance Residual Plot of CHL

LILA Residual Plot

ResiJ"":~::C::·~--Cls-~--c--c·-:-J(~~l

~:.¥: •. f.:.i..... :l~~.O· ~f.--c: ----~~~7:;.~;:~flftr-----~~

-1 Qr.:.:.O""O'-----'=-5:.:.:.0'-"0'-2~~~b~~O 1Q.OO

LILA

Figure 4.1.27: Cash & Bank Balance Line Fit Plot of CHL

LIeF -1

LILA Line Fit Plot

LILA

150

.1lCF

• Predicted bC~



20.0°r---:~~~~~~~'""+1

L\CF 0.00 I---~

-20.

_40.nnL~~~~~~~~L...J

Sample Percentile

Section III: Liquidity and Profitability Analysis

In this section we are trying to identify relationship between operating profit and

liquidity as a whole and individually with four major components of liquidity

namely inventory, receivables, loans & advances and cash & bank balance. We

our trying to identify individually how these four liquidity parameters are able to

explain the changes taking place in the operating profit, for carrying out the study

correlation and simple regression technique has been used. Ratio of selected

liquidity parameter to gross working capital represents liquidity component as an

independent variable. Ratio of operating profit to gross working capital is taken

as dependent variable. Second part of the study is an attempt to identify how

these four parameters of liquidity are collectively able to explain the changes

taking place in the operating profit. To carry out the study multiple correlation


independent variables and ratio of operating profit to gross working capital is

taken as dependent variable.

a. Inventory and Profitability

Hypothesis (Ho): L\INT /wc is inversely related to the company's L\PM/Wc

Coefficient of correlation between L\INT /wc and L\PM/Wc is -0.5519 and the


between L\/Wc and i\PM/Wc. Thus our hypothesis L\INT MlC is inversely associated

to the company's L\PMMlc can be established. The results of simple regression

151

show that independent variable can explain only 30% of the variation in the

dependent variable.

Table 4.1.56: Inventorv and Profitability of CHL

Year INT...,c t.INTlWc PM~r t.PM~r

2003 41.20 - 42.94 -2004 35.76 -5.44 54.18 11.24

2005 40.92 5.17 47.76 -6.42

2006 34.95 -5.97 43.96 -3.81

2007 40.73 5.78 40.24 -3.71

2008 34.19 -6.54 40.24 000

Figure 4.1.29: Inventory and Profitability of CHL

~INT and t>PM

1500 '

1000 j a,,-,_

500 1

000 +- ------ - ""'---------, 2004 2005 . 2~

.-- ---' ----

21l1l7 .. 2008 ·500 .

-1000 -

YEAR

i _..\INT -- _'\PM

Table 4.1.57: Regression Statistics of Inventorv and Profitability of CHL


Multiple R 0.55

R Square 0.30


Standard Error 6.71

Observations 5

T bl 41 58 ANOVA R a e esu ts 0 f I nventory an d fi Pro ,tability of CHL

Of SS MS F Significance F Regression 1 59.30 59.30 1.32 0.3345

Residual 3 135.18 4506

Total 4 194.48

152

Table 4.1.59:


Y=-1.40-0.61 X

The intercept coefficient and I'J. coefficient are statistically insignificant as the t


T bl 4 1 61 P b bT 0 a e ro a IIty utput 0 1 I nventory an ro Ita Iity 0 dP f bT ICHL :' ." Percentile . ir.H~llPM .'

10 -642 30 -3.81 50 -3.71 70 0.00

90 11.24

Figure 4.1.30: Inventory Residual Plot 01 CHL

I'J.INT Residual Plot

: i5,OlO' • : 10,00 . '5.0

• .' .0 .5.00_1~'~ 0

I'J.INT

153

Figure 4.1.31: Inventory Line Fit Plot of CHL

~INT Line Fit Plot

~INT


.APM

• Predicted ,,-PM I

I


15.nn,--~

10. ~PM5.

o.nnf-----r-5.

-1 nnlL....~L....""'

b. Receivables and Profitability

•

Sample Percentile

Hypothesis (Ho): ~RECiWc is inversely related to the company's ~PMiWC

Table 4.1.62: Receivables and Profitabilitv of CHL

Year : ..... II!!:.: REClWc . 1 •. ··:6RECmc PM~ I\PM5;;!~

IWC'8t""

2003 : , 43.34 - 42.94 -

.. :- 2004 j"'j;

48.14 4.80 54.18 11.24

Ie 2005 ..... :. 36.93 -11.20 47.76 -642

2006 .:'\ 45.43 8.50 43.96 -3.81 ~

2007 .:: 49.31 3.88 40.24 -3.71

2008 ·.ll 45.37 -3.95 40.24 0.00

Coefficient of correlation between ~RECiWC and ~PMiWC is 0.3633 and the


~RECiWC and ~PMiWC. Thus our hypothesis ~RECNVC is inversely associated to

the company's ~PMNVC cannot be established. The results of simple regression

154

show that independent variable can explain just 13% of the variation in the

dependent variable.

Figure 4.1.33: Receivables and Profitability 01 CHL

"'REC and ~PM

1500

10 00

500

000

-500 2004

-1000

-15.00

YEAR

Table 4.163: Reqression Statistics 01 Receivables and Prolitability 01 CHL

Reqression Statistics

Multiple R 0.36

R Square 0.13


Standard Error 7.50

Observations 5

T bl 4164 ANOVAR a e esu ts 0 IR ecelva bl es an d P fi ro Itability 01 CHL Of SS MS F Significance F

Regression 1 25.66 25.66 0.46 0.5479 Residual 3 168.82 56.27 Total 4 194.48

T bl 4165 C If tDt·1 I R a e oe IClen s e 81 S 0 eC81va bl es an d P f bl I CHL ro Ita Iity 0

Intercept "'REC Coefficients -0.67 0.32 Standard Error 3.36 0.47 t Stat -0.20 0.68 P-value 0.86 0.55 Lower 95% -11.36 -1.19 Upper 95% 10.03 1.83 Lower 95.0% -1136 -1.19 Upper 95.0% 1003 1.83

155


Y = -0.67 + 0.32 X

The intercept coefficient and t>REC coefficient are statistically insignificant as the

t-value for both variables is less then 2.

Figure 4.1.34: Receivables Residual Plot of CHL

t>REC Residual Plot

t>REC

156

Figure 4.1.35: Receivables Line Fit Plot of CHL

I L'lREC Line Fit Plot

L'lPM .~PM

• Predicted ~PM

-2~.00 ~ .00

L'lREC



Sample Percentile ------------_. -----

c. Loan & Advances and Profitability

Hypothesis (Ho): L'lLAlWc is directly associated to the company's L'lPMlWc

-3.61 11.24

9.98 -642

-3.71

40.24 0.00

Coefficient of correlation between L'lLAlWc and L'lPMlWc is -0.3143 and the

corresponding t-value is -0.1911, this reflects weak negative association between

L'lLAlWc and L'lPMlWc. Thus our hypothesis 6LArwc is directly associated to the

157

company's t1PMlWc cannot be established. The results of simple regression show


variable.

Figure 4.1.37: Loan & Advances and Profitability of CHL

15 00

1000

500

!>LA and !>PM

0.00 +-----r'--~" . ---_----".~----7_L---=--~ -5 00

.10.00 J -15 00 J

T bl 4169 R a e

Multiple R

R Square

egression

Adjusted R Square

Standard Error

Observations

S

2 _____ ---J-----'".-----4---- 5

YEAR

[- "'-A - 'PM I

tatistlcs 0 f L oans an dA f dvances and Pro itability of CHL


0.31

0.10

-0.20

7.64

5.00

Table 4.1.70: ANOVA Results of Loans and Advances and Profitability of CHL

Of SS MS F Sianificance F Regression 1 19.20 19.20 0.33 0.6066 Residual 3 175.28 58.43

Total 4 194.48

T bl 4 1 71 C If a e oe IClents o t·1 f L e 31 5 0 oans an dAd vances an d P f b fO Ita ility 0 fC HL Intercept !>LA

Coefficients -0.01 -025 Standard Error 3.54 0.43 t Stat 000 -057 P-value 1.00 061 Lower 95% -11.28 -161 Upper 95% 11.27 1.12

Lower 95.0% -11.28 -1.61

Upper 95.0% 11.27 112

158


Y = -0.01 - 0.25 X

The intercept coefficient and 6LA coefficient are statistically insignificant as the t


T bl 4 1 72 R 'd lOt tIL a e eSI ua U[pU 0 oans an dAd vances an d P fit bTt 1 CHL ro I a I Iry 0

Predicted Standard Observation "'PM Residuals Residuals

Table 4

1 0.88 10.36 1.57 2 -2.46 -3.96 -0.60

3 -1 13 -2.68 -0.40 4 2.51 -6.22 -0.94

5 -2.50 2.50 0.38

.1.73: Probability Output 01 Loans and Advances and Profitability 01 Percentile "'PM

10 -6.42

30 -3.81

50 -3.71

70 0.00

90 11.24

Figure 4.1.38: Loan & Advances Residual Plot 01 CHL

I Residuals

6LA Residual Plot ----

I --+-0:00 + + -15.00 -W.OO -5.05. v1vO 5.00 1(1.00 1 .00

I -10.0(y----- J

6LA

159

CHL

Figure 4.1.39: Loan & Advances line Fit Plot of CHL

L\LA Line Fit Plot

L\LA

I I·"'PM I! i • Predicted "'PMI



Sample Percentile

d. Cash & Bank Balance and Profitability

Hypothesis (Ho): L\CBB/Wc is directly associated to the company's L\PM/Wc

Table 4.1.74: Cash and Bank Balance a'!in~d£.rc~~1 '!ll '-,!o~fJC;tH!.!:L;--,-_-:-~

1.54 1.16 40.24 -3.71

1.96 0.43 0.00

.., .\ .)

Coefficient of correlation between L\CBB/Wc and L\PM/Wc is 0.8533 and the


L\CBB/Wc and L\PM/Wc. Thus our hypothesis L\CBB/Wc is inversely related to the

160

company's !!.PMINc cannot be established. The results of simple regression show

that independent variable can explain almost 73% of the variation in the

dependent variable.

Figure 4.1.41: Cash & Bank Balance and Profitability of CHL

"'CBB and "PM

1500

10 00

" 2008

~ _:::: +-1' --20-0-' -~"·""·~"" .. -2-{~-_-___ -_-_ ~--?-~~ :OO7--~/-

-1000

500

YEAR

Ta bl 7 R e 4.1. 5: egression Statistics 0 Cash an dB k B I an a ance an dP rofitability of CH L

Rellression Statistics

Multiple R 0.85

R Square 0.73


Standard Error 4.20

Observations 5

T bl 4 1 76 ANOVA R It f C h d B k B I a e esu so as an an a ance an d P ft blt f CHL ro f a I fry 0

df SS MS F Significance F Regression 1 141.48 141.48 8.01 0.0662 Residual 3 53.00 17.67

Total 4 194.48

T bl 41 77 C ff a e oe relents D '1 f C h d B k B I eta I s 0 as an an a ance an dP rofitability 0 f HL C Intercept "'CBB

Coefficients -0.50 138 Standard Error 1.88 0,49 t Stat -0.26 2.83 P-value 0.81 0.07 Lower 95% -6,48 -0.17 Upper 95% 5,48 2.93 Lower 95.0% -6,48 -0.17 Upper 95.0% 5,48 2.93

161


Y = -0.50 + 1.38 X

The intercept coefficient and ~CBB coefficient are statistically insignificant as the


Table 4 1 78 Residual Output of Cash and Bank Balance and Profitability of CHL

observati!~: . pr:~~~"., ResidUal~!TIf, ~:~::;~ i U1T~f 1 804 3.20 0.88 2 ~.59 -4.26 -2.16 3 -7.67 386 106 4 1.10 -4.81 -1.32

5 0.09 -009 -002

Table ~r'=7';;

Figure 4.1.42: Cash & Bank Balance Residual Plot of CHL

~CBB Residual Plot

~CBB

162

Figure 4.1.43: Cash & Bank Balance Line Fit Plot of CHL

i\CBB Line Fit Plot

i\PM • "'PM I

• Predicted "'PM

i\CBB


Normal Probability Plot -----1

-10 011'-------"

Sample Percentile

163

4.1.3: Liquidity Trends

A. Net Working Capital

Table 4.1.80: Oriainal and Trend Values of Net Workina Capital of CHL Orlclinal and Trend Values of Net Workina Capital (Rs. In Crs.)

Year Orlainal Value Indices Trend Value' (Yo)

2002-03 629.5 100 526.52 2003·04 681.3 108.23 682.34 2004-05 715.7 113.69 838.17 2005-06 868.4 137.95 994.00 2006-07 1257.7 199.79 1149.82 2007·08 1343.9 213.49 1305.65

Chi-square Test: Computed Value of X' = 65.15; Critical Value of X' = 11.07 Result: Ho is Rejected , Y, stands for computed values of net working capital based on the least square equation of Y, = a + b X where the equation comes to Y, = 370.69 + 155.83 X ( origin of X = 2002·03, X in units of vears and Y in crores of rupees)

Figure 4 1.45' Liquidity Trend (NWC) of CHL

LIQUIDITY TREND

1600 1400

-:- 1200 5 1000 c: 800 "- 600 ~ 400

200

.------

O+-I---~

2002-03

a------

2003-04 2004-05 2005-06

YEAR

---.----

2006-07

- -+- Origi~al Value -_ Trend Value' (Ye) I

2007-08

The net working capital registered an increasing trend throughout the period

under study. The net working capital indices were 108.23, 113.69, 137.95,

199.79, and 213.49 respectively from 2003-04 to 2007-08 in comparison to 2002-

03, the base year.

The linear least squares trend values of working capital in CHL are also shown in

Table 4.3.1. The deviation in the years 2003-04 and 2007-08 were not so

significant. The deviations during the years 2003-04, 2004-05 and 2005-06 were

negative, while these were positive in rest of the years under study.

164

B. Current Assets

Table 4.1.81: Oriainal and Trend Values of Current Assets of CHL OriOinal and Trend Values of Current Assets IRs. In Crs.)

Year Oriqinal Value Indices Trend Value' (Yo) 2002-03 426.2 100 342.01 2003-04 448.3 105.19 454.01 2004-05 473.8 111.17 566.02 2005-06 608.8 142.84 67802 2006-07 807 189.35 790.02 2007-08 968 227.12 90202

Chi-square Test: Computed Value of X' = 48.08; Critical Value of X' = 11.07 Result: Ho is Reiected 'Yo stands for computed values of current assets based on the least square equation of Yo = a + b X where the equation comes to Yo = 230.01 + 112 X ( origin of X = 2002-03, X in units of years and Y in crores of rupees)

Figure 4 1.46: Liquidity Trend (CA) of CHL

1200

1000

~ 800 u ,2. 600

LIQUIDITY TREND

------.----

~ :~~L~ --- -. -r-- ----~-- ---~----~--~

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

YEAR

The current assets .registered an increasing trend throughout the period under

study. The net working capital indices were 105.19, 111.17, 142.84, 189.35 and

227.12 from 2003-04 to 2007-08 in comparison to 2002-03, the base year.

The linear least squares trend values of current asset in CHL are also shown in

Table 4.3.2. The deviation in the years 2003-04 and 2007-08 were not so

significant. The deviations during the years 2003-04. 2004-05 and 2005-06 were

negative, while these were positive in rest of the years under study.

165

C. Current Liabilities

Table 4.1.82: Oriainal and Trend Values of Current Liabilities of CHl OriCiinal and Trend Values of Current Liabilities IRs. In Crs.)

Year Oriainal Value Indices Trend Value' IY,) 2002-03 203.3 100 184.51 2003-04 233 114.61 228.33 2004-05 241.9 118.99 272.16 2005-06 259.6 127.69 315.98 2006-07 450.7 221.69 359.80 2007-08 375.9 184.90 403.62

Chi-square Test: Computed Value of x' = 40.30; Critical Value of X' = 11.07 Result: Ho is Reiected 'Y, stands for computed values of current liabilities based on the least square equation of Y, = a + b X where the equation comes to Y, = + X ( origin of X = 2002-03. X in units of years and Y in crores of ruoees)

Figure 4.1 47 liquidity Trend (Cl) of CHl

LIQUIDITY TREN D

~

500 1 400 !

o 300 c

:::;. 200

£ 100

. -o +----_--~--- -- _

2002-03 2003·04

YEAR

--.---

2005-06

---- -.-----

2006-07

----+---- Original Value -- Trend Value* (Yc) I

•

The current liabilities registered an increasing trend throughout the period under

study, except in the year 2007-08. The current liability indices were 114.61.

118.99,127.69,221.69 and 184.90 from 2003-04 to 2007-08 in comparison to

2002-03, the base year.

The linear least squares trend values of current liability in CHL are also shown in

Table 4.3.3. The deviation in the year 2003-04 was not so significant. The

deviations during the years 2004-05, 2005-06 and 2007-08 were negative, while

these were positive in rest of the years under study.

166

4.1.4: Analysis ofWCM Efficiency Using DEA

The working capital meets the short-term financial requirements of a business

enterprise. It is the investment required for running day-to-day business. It is the

result of the time lag between the expenditure for the purchase of raw materials

and the collection for the sales of finished products. The components of working

capital are inventories. accounts to be paid to suppliers. and payments to be

received from customers after sales. Financing is needed for receivables and

inventories net of payables. The proportions of these components in the working

capital change from time to time during the trade cycle. The working capital

requirements decide the liquidity and profitability of a firm and hence affect the

financing and investing decisions. Lesser requirement of working capital leads to

less need for financing and less cost of capital and hence availability of more

cash for shareholders. However the lesser working capital may lead to lost sales

and thus may affect the profitability.

The management of working capital by managing the proportions of the WCM

components is important to the financial health of businesses from all industries.

To reduce accounts receivable, a firm may have strict collections policies and

limited sales credits to its customers. This would increase cash inflow. However

the strict collection policies and lesser sales credits would lead to lost sales thus

reducing the profits. Maximizing account payables by having longer credits from

the suppliers also has the chance of getting poor quality materials from supplier

that would ultimately affect the profitability. Minimizing inventory may lead to lost

sales by stock-outs. The working capital management should aim at having

balanced; optimal proportions of the WCM components to achieve maximum

profit and cash flow.

The form and amount of working capital components vary over the operating

cycle. It would be hard to get the amounts of the components used in operations

for an operating cycle. Hence the working capital management efficiency is

167

measured in terms of the "days of working capital" (DWC). DWC value is based

on the ruppe amount in each of equally weighted receivable, inventory and

payable accounts. The DWC represents the time period between purchases of

materials on account from suppliers until the sale of finished product to the

customer, the collection of the receivables, and payment receipts. Thus it reflects

the company's ability to finance its core operations with vendor credit.

The firm's profitability is measured using the operating income plus depreciation

related to total assets (IA). This measure is indicator of the raw earning power of

the firm's assets. Another profitability measure used for this analysis is the

operating income plus depreciation related to the sales (IS). This indicates the

profit margin on sales. To measure the liquidity of the firm the cash conversion

efficiency (CCE) and current ratio (CR) are used. The CCE is the cash flow

generated from operating activities related to the sales. The formulae for

calculating these values are given in the following Table 1.

Working Capital Management Component Definitions

Component

Days Sales Outstanding (DSO)

Days Inventory Outstanding (DIO)

Days Payable Outstanding (DPO)

Days Working Capital (DWC)

Current Ratio (CR)

Cash Conversion Efficiency (CCE)

Income to Total Assets (IA)

Income to Sales (IS)

Equation

Receivables/(Sales/365)

I nventories/( Sa les/365)

Payables/(Sales/365)

DSO + DIO - DPO

Current Assets/Current Liabilities

(Cash flow from operations)/Sales

(Operating Income + Depreciation)lTotal Assets

(Operating Income + Depreciation)/Sales

168

Input Oriented CRS Envelopment Model

A. Target

B. Slack

C. Efficiency

Table 4.1.83-85 indicates the results which we have obtained using Input

oriented CR8 Model, using D80, DIO, DPO, DWC, CR, and CCE as input

parameters and IA & 18 as output parameters. Years 2004, 2005 and 2007

CHL's' are most efficient with an efficiency score of 1.0000; year 2003 is least

efficient with an efficient score of 0.8790.

169

DMU No. 1 2 3 4 5

6

DMU No .. ' 1 2 3 4

5

6

II. Measure Specific Model

i. DSO - Days Sales Outstanding

Table 4.1.86 indicates the results which we have obtained using Measure

Specific Input oriented CRS Model, using DSO as input parameters and IA & IS

as output parameters.

a e : Measure jpeci IC o e: T bl 4 1 87 S'fi M d I DSO Input Slacks w,""'""", '.

)'·.I·~1h Inp~!~I~:CkS .• :"0 •• n!jfutput SlaCkS::.~ ""1~1::1 :.~. .PNlU '''f> ... j::::: : ::: :':B:':

Name oso :.n. 010 opo':' . OWC clfn • ': CCE ::;::;'Wl" • 15. 2

2003 000000 16.95687 5.28646 23.19177 0.29898 0.00000 0.01176 0.00000 2004 0.00000 0.00000 0.00000 0.00000 000000 0.00000 0.00000 0.00000 2005 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 000000 0.00000 2006 000000 7.95525 0.00000 19.10831 0.23019 15.40053 0.00540 0.00000 2007 0.00000 000000 0.00000 0.00000 0.00000 0.00000 000000 0.00000 2008 000000 7.04429 0.00000 35.52842 0.31739 21.93973 0.02745 0.00000

T bl 4188 M a e easure S T M d I DSO opecllc 0 e: Measure-Specific E ffi Iclency : Measu~~, .

Jl1 f:;' : ... :_:: '. .' :":;:": '.: £ DMU speCifi;v Sum of 0p!ima.1 Lambdas wifliEJl1l)chmarks

h if ',;:yj'Name Efficienc' lambdas' jRTS ,:;;?,~¢~::>;" ' '" ;t~m:l,:;,;~',:.

2003 0.83149 0.878 Increasing 0.591 2004 0.287 2005.000 2004 1.00000 1.000 Constant 1.000 2004 2005 1.00000 1.000 Constant 1000 2005 2006 0.85207 0.950 Increasin!l 0.835 2004 0.115 2005.000 2007 100000 1.000 Constant 1.000 2007 2008 0.68751 1.054 Decreasing 0.308 2004 0.746 2005.000

Table 4.1.88 shows result taken DSO as the input parameter. Year 2004, 2005

and 2007 are most efficient with a score of 1.0000 and year 2008 is least efficient

with a score of 0.68751.

170

DMU No.

1

2

3 4

5

6

DMU No.

1 2

3 4

5

6

ii. Days Inventory Outstanding - 010

T bl 41 89 M a e easure S T M d I 010 ffi' pecllc o e: E IClent nput T arget

hL. in ~! '.: ":~~"! Effi(:ient Output Target: Efficient!;; ut Tar!let ,. <;,,". ·~j00fPI?~d"

~ : »: 0.

DMUName 050· iT, 1,'; 010 OP()':~~ OWC ··CR: CCE 'lA" 2003 59.69537 44.34482 41.91042 62.12977 1.53654 4.80445 0.19842

2004 69.27905 51.46407 48.63884 72.10427 1.78322 5.57577 0.23028 2005 55.44071 61.43533 47.55773 69.31832 1.65349 8.65515 0.21023

2006 65.38043 48.56798 45.90174 68.04667 1.68287 526200 0.21732 2007 94.42216 7798719 77.46522 94.94413 1.64160 6.97687 0.20434

2008 70.05561 52.04094 49.18405 72.91251 1.80321 5.63827 0.23286


Specific Input oriented CRS Model, using 010 as input parameters and IA & IS


Table 4.1.91: Measure Specific Model: 010 Measure·Speclfic Efficiency l~!E:':; Measure·,'

.. , 15j(of

0.22434

0.26036 0.24557

0.24571

0.25447

0.26328

IJI~}i: <:::0!tJ:;, ;*,:~~:;~~2:,'" ... ' •... ·'!£(.DMU SP'1£!!!~y , 5umof O!,limal Lambdas witll Benchmarks

,<:<:~lWd~:j:, ' ,<'iI!b~:' ~Name Efficier'lc .. lambdas' 'j

2003 0.68219 0.862 Increasing 0.862 2004 1 2004 1.00000 1.000 Constant 1.000 2004 2 2005 1.00000 1.000 Constant 1.000 2005 3 2006 0.83727 0.944 Increasing 0.944 2004 4 2007 1.00000 1.000 Constant 1.000 2007 5 2008 0.75747 1.011 Oecreasinq 1.011 2004 6

Table 4.1.91 shows result taken 010 as the input parameter. Year 2004, 2005



171

:

2003

2004

2005

2006 2007

2008

DMU No ..

1 2 3 4 5

6

DMU No.

iii. Days Payable Outstanding - DPO

Table 4.1.92: Measure Specific Model: DPO Efficient Input Tarqet

";;-/' ';;':"{'" . ':':':'1~~L ·!.irt Effi~il1ntOutput Targef;

:~~::;:',::> Efficient Input Target .•...•.. > .2':"~· . : •••

DMUName osol{{ [:[.010 opo:'!!! HOWe; ·.··tit," CCE ',:rIA; 15-',' 2003 59.69537 44.34482 41.91042 62.12977 1.53654 4.80445 0.19842 0.22434 2004 69.27905 51.46407 48.63884 72.10427 1.78322 5.57577 0.23028 0.26036 2005 55.44071 61.43533 47.55773 69.31832 1.65349 8.65515 0.21023 0.24557 2006 65.38043 48.56798 45.90174 6804667 1.68287 5.26200 0.21732 0.24571 2007 94.42216 77.98719 77.46522 94.94413 1.64160 6.97687 0.20434 0.25447

2008 7005561 52.04094 49.18405 72.91251 1.80321 5.63827 0.23286 0.26328


Specific Input oriented CRS Model, using DPO as input parameters and IA & IS


Table 4.1.94 shows result taken DPO as the input parameter. Year 2004, 2005



172

iv. Days Working Capital - DWC


Specific Input oriented CRS Model, using OWC as input parameters and IA & IS


Table 4.1.97 shows result taken OWC as the input parameter. Year 2004, 2005



173

OMU No.

1

2

3 4

5

6

v. Current Ratio - CR

Table 4.1.98: Measure Specific Model: CR Efficient Input Tarqet

"I,;; .~B~ " ,"::11irt:- : ·.· .. £ri Eff!<:jent Output Target.: Efficielltllrpl.lt Target __ ~;_:~~<-" :::o:!~

OMUName 050 .'"' I:,olo OPO.': OWC CR:.:·: CCE : cIlIA':" . IS:LI:l 2003 62.49916 52.01398 47.67951 66.83362 1.51233 5.77960 0.19323 0.22434 2004 69.27905 51.46407 48.63884 72.10427 1.78322 5.57577 0.23028 0.26036 2005 55.44071 61.43533 47.55773 69.31832 1.65349 8.65515 0.21023 0.24557 2006 64.24030 50.05221 4609522 68.19729 1.67959 5.65293 0.21652 0.24571 2007 94.42216 77.98719 77.46522 94.94413 1.64160 6.97687 0.20434 0.25447

2008 62.66728 61.65915 50.43787 73.88856 1.78197 8.17157 0.22766 0.26328


Specific Input oriented CRS Model, using CR as input parameters and IA & IS as

output parameters.

Table 4.1.100 shows result taken CR as the input parameter. Year 2004,2005



174

DMU No.

1 2 3 4 5

6

vi. Cash Conversion Efficiency - CCE

Table 4.1.101: Measure Specific Model: CCE Efficient Input Tarqet :,;~~:~",,:, .. ,~~: ';ill-Ib~;(':: 'l:rH:!~:' Eff:e~t Output Tar~ei: ~lL': Efficient~rlput Target

DMUName 0501:: :~iliOIO OPQ~ I·:owc ;CR:.:& CCE : lilA 2003 59.69537 44.34482 41.91042 62.12977 1.53654 4.80445 0.19842 2004 69.27905 51.46407 48.63884 72.10427 1.78322 5.57577 0.23028 2005 55.44071 61.43533 47.55773 69.31832 1.65349 8.65515 0.21023 2006 65.38043 48.56798 45.90174 6804667 1.68287 5.26200 0.21732 2007 94.42216 77.98719 77.46522 94.94413 1.64160 6.97687 0.20434

2008 7005561 5204094 49.18405 72.91251 1.80321 5.63827 0.23286


Specific Input oriented GRS Model, using GGE as input parameters and IA & IS


15.~l 0.22434 0.26036 0.24557 0.24571 0.25447

0.26328

, ,', ., ~:~:f:~Ta' Lambdas wit:tiElenchlnalrks

Table 4.1.103 shows result taken GGE as the input parameter. Year 2004, 2005



175

4.2 Dishman Pharmaceutical and Chemicals Limited



INT : Inventories CBB : Cash & bank balance

REe .. : Receivables

LA : Loans & advances

EPA : Expenses paid in advance

GWC : Gross Working Capital


Figure 4.2.1: Composition of Gross Working Capital of DPL

350 -

300 j - 250 ~ u 200 ~

= 150

r2 100

5~1 D 2003 2004

Gross Working Capital

,----

,---

2005 2006 2007

Year

,---

2008

The investment in GWC by DPL was almost constant during period-1 with an


maintaining an average of Rs. 317.55 Crs. For the period under study average

level of GWC was Rs. 216.39 Crs.

Table 4.2.1: C omposition 0 fG ross Working Capital I! yfiar: :.' CBB,! 'qH'INT J:REC:~~ . EPA .' .• L:Ji!~!l.A DRE~illI .···.GWC

2003 2.22 35.45 44.62 3.32 0 0.32 85.93 Z()()4 .'. 1.85 48.47 47.68 4.24 2.19 3.01 107.44

... 2005 2.17 64.31 78.52 509 1.51 0.73 152.33

2006 12403 84.54 101.29 8.13 7.22 108 326.29

'.2007 . 4.95 98.65 149.53 13.23 32.77 077 299.9

2008 4.49 120.64 147.19 21.35 32.17 0.64 326.48 Source: DPL Annual Reports and CMIE Prowess

176

Figure 4.2.2: Composition of Gross Working Capital of DPL

Composition of GWC

350

300

--:- 250 ~ o 200 0 :. 150

~ 100

50 W 0 I'a 2003 2004 2005 2006 2007

Year

2008

.OREi

.LA

oEPA

OREG

.INT

.CBB

Inventory and Receivables forms major section of DPL's GWC, collectively on an

average for the period under study they were at a level of 83% (Rs.170.15 Crs.)

of GWC and they peaked to 93.77% (Rs. 142.83 Crs.) of GWC for the year

endjng March 2005. ,

Figure 4.2.3: Composition of Gross Working Capital of DPL (Trend)

COMPOSITION OF GWC

160

140 _ 120

~ 100 0 -- - - -- ---,-

0 80 -----,; 60 0:

40 ---------

20

0

2003 2004 2005 2006 2007 2008

YEAR

-CBB

INT

REC

EPA -LA

-ORE

Receivable individually add to 45% (Rs. 45.64 Crs.) of GWC on an average for

the period, attaining a level of 51.93% (Rs. 44.62 Crs.) of GWC for the year

ending March 2003, which increased to Rs. 147.19 Crs (45.08% of GWC) in the

year ending March 2008.

177

Table 4.2.2: Comoosition of Gross Workinq Capital in Percentage T erms

Year 2003 2004 2005 2006

eBB 2.58 1.72 1A2 3801

INT 41.25 45.11 42.22 25.91

REC 51.93 44.38 51.55 31.04

EPA 3.86 3.95 3.34 2A9

LA 000 204 0.99 2.21

ORE 0.37 2.80 OA8 0.33

Table 4.2.3: Descriotive Statistics of Comoonents of GWC Particulars CBB INT REC

Mean 23.29 75.34 94.81 Standard Error 20.16 1306 18.96 Median 3.36 74A3 89.91 Standard Deviation 49.37 31.98 46A4 Sam ale Variance 2437.60 1022.99 2157.11 Kurtosis 5.99 -118 -206 Skewness 2A5 0.20 0.22 Ranoe 122.18 85.19 104.91 Minimum 1.85 35A5 44.62 Maximum 124.03 120.64 149.53 Sum 139.71 452.06 568.83 Count 6.00 6.00 6.00 Laraest(11 12403 120.64 149.53 Smallestril 1.85 35A5 44.62 Confidence Level (95.0%1 51.81 33.57 48.74

Table 4 2 4· Sales and Receivables of DPL

Particulars 2003 2004 2005 2006 Sales 104.25 125.89 159.66 219.19

REC 44.62 47.68 78.52 101.29 RIS (%1 42.80 3787 49.18 46.21

Figure 4.2A: Sales and Receivables of DPL


400 350

-: 300

& 250 c 200 ~ 150 1

~ 100· 50 . 0·---_-

2003 2004 2005 2006

YEAR

-=--=--S-a;;~ _ .. -Re-c-e,"'-b-'e-s I

178

2007 2008

1.65 138

32.89 36.95

49.86 45.08

4A1 6.54

10.93 9.85

0.26 0.20

EPA LA 9.23 12.64 2.83 6.35 6.61 4.71 6.94 15.55

48.21 241.77 0.97 -1.90 1.29 0.87

1803 32.77 3.32 0.00

21.35 32.77 55.36 75.86 6.00 6.00 21.35 32.77 3.32 000

7.29 16.32

2007 2008

281.74 367A5

149.53 147.19

5307 4006

2007 2008

ORE 109 OAO 0.75 0.97 0.94 4.75 2.11 2.69 0.32 3.01 6.55 6.00 3.01 0.32

1.02

Figure 4.2.5: Receivables I Sales (%) of DPL

60.00 l 50.00 '

4000 J

3000 .

20 00 < ,

RIS (%)

10 .. 00 l' 000 .------~--------------~------__ ------~--------

2003 2004 2005 2006 2007 2008

YEAR


PM : Packing materials SSP: Stores & spares RM : Raw materials

FG : Finished goods SFG : Semi-finished goods

Table 4.2.5: Com. osition of Inventory of DPL

Year 2003 2004 2005 RM 11.84 15.76 23.86

PM 0 0 0.1

SSP 0.45 0.66 1.22

FG 6.06 7.06 5.44

SFG 17.1 24.99 33.69

Total 35.45 48.47 64.31 Source: DPL Annual Reports and CMIE Prowess

Figure 4.2.6: Composition of Inventory of DPL

80 .

70 .

60

~ 50 U ~ 40

iP. 30

20

10 -

0---_--

2003 2004

INVENTORY

2005 2006

YEAR

179

2006 2007

28.28 2307

0.2 0.24

1.7 1.9

5.95 9.18

48.41 6426

84.54 98.65

2007 2008

2008 29.43

0.32

1.87

15.93

7309

120.64

-RM I

--FM

SSP'

FG .

-SFGj

/j


finished goods and semi-finished goods. The semi - finished good inventory

forms the major portion of inventories with an average of 55.86% (Rs. 43.59 Crs.)

of total inventory, reaching to a level of 65.14% (Rs. 64.26 Crs.) in the year 2006-

07.

Table 42.6: Com osition of Inventory 0 . P DPL In ercentage Terms

". Particulars: ii· :lt2003 20()4WW! 1.:2005 200~'$ RM . :'i. 33.40 32.51 37.10 33.45

:. PM .:,nf 0.00 000 0.16 0.24 . SSP if 1.27 1.36 1.90 2.01

. FG :·1 1709 14.57 8.46 7.04 . SFG~ 4824 51.56 52.39 5726


SD 1 : Sundry debtors Outstanding less than six months

SD2: Sundry debtors Outstanding less than six months

AILO:Accrued income, lease rent & other receivables

22007 . 2()OSnif

23.39 24.39

0.24 0.27

1.93 1.55

9.31 13.20

65.14 60.59

DEP: Deposits




180

64.26 Crs.) of total receivables, reaching to a level of 81.19% of receivables in

the year ending March 2004.

Table 4.2.8: Composition 0 eC81va es 0 I R bl IDPL Year 2003 2004 2005 2006 2007 SO 32.45 38.71 50.95 55.88 103.59 SO' 2.64 1.93 12.93 21.56 17.13 AILO 8.98 6.21 12.52 21.29 24.45 OEP 0.55 0.83 2.12 2.56 4.36 Total 44.62 47.68 78.52 101.29 149.53 Source. DPL Annual Reports and CMIE Prowess

Figure 4.2 7' Composition 01 Receivables 01 DPL

RECEIVABLES

120 .

100

~ BO 0

~ 60 :

,; 40 a:

20 --------- - - ---

0

2003 2004 2005 2006 2007 200B

YEAR

T able 4.2.9: C omposltlon 0 IR I ecelvables 0 DPL in Percentage T erms Year 2003 2004 2005 2006 2007 SO 72.73 81.19 64.89 55.17 69.28 SO' 5.92 4.05 16.47 21.29 11.46 AILO 20.13 13.02 15.94 21.02 16.35 OEP 1.23 1.74 2.70 2.53 2.92

T bl 42 10 0 a e escnptlve St r a IStlCS 0 IC omponents 0 IR eC81va bl IDPL es 0

Particulars SO' SO' AILO Mean 64.26 10.62 16.97 Standard Error 12.96 3.25 3.67 Median 53.42 10.22 16.91 Standard Oeviation 31.74 7.95 8.99 Sample Variance 1007.32 63.25 80.75 Kurtosis -1.86 -1.70 -2.15 Skewness 0.67 0.24 0.06 Range 71.53 19.63 22.15 Minimum 32.45 1.93 6.21 Maximum 103.98 21.56 28.36 Sum 385.56 6370 101.81 Count 6.00 6.00 6.00 LarQest(1\ 103.98 21.56 28.36 Smaliest(1 ) 32.45 1.93 6.21 Confidence Level (95.0%) 33.31 8.35 9.43

181

2008 103.98 7.51 28.36 7.34

147.19

-SDl

- SD2

AILO

DEP

2008 70.64 5.10 19.27 4.99

OEP 2.96 104 2.34 2.54 6.47 0.88 1.14 6.79 0.55 7.34 17.76 6.00 7.34 0.55 2.67



Table 4.2.11: Comoosition of Loans and Advances of DPL Year 2003 2004 2005 2006

A 0 2.19 1.51 7.22 Total 0 2.19 1.51 7.22

Source: DPL Annual Reports and CMIE Prowess

Figure 4 2 8' Composition of Loans and Advances of DPL

35 .

30

...,. 25 ~ () 20 o :. 15

!P. 10

5

LOANS AND ADVANCES

2007 2008 32.77 32.17 32.77 32.17

o~--~~====~~----__ --~-----2003 2004 2005 2006 2007 2008

YEAR

For DPL loan and advances to employees and directors forms 100% of loan and

advances. For the AY 2002-03 it was zero which increased gradually and

reached to a level of Rs. 32.17 Crs in the A Y 2006-07.

2008 100

Table 4.2.13: Descriotive Statistics of Comoonents of Loans and Advances of D PL Particulars A Particulars A Mean 12.64 Minimum 0

Standard Error 6.35 Maximum 32.77

Median 4.71 Sum 75.86

Standard Deviation 15.55 Count 6 Samole Variance 241.77 LarQest(1 ) 32.77

Kurtosis -1.9 Smallestc1l 0

Skewness 0.87 Confidence Level Ranoe 32.77 (95.0%\ 16.32

182

E. CURRENT LIABILITY

Acceptances SC

INTA

PROV

DACE

Sundry creditors

Interest accrued

ACC

OCl Other current liabilities

Provisions


Table 4.2.14: Comoosition of Current Liabilities of DPL

Particulars 2003 2004 2005 2006 SC 29.84 27.43 28.75 34.55

ACC 0.32 0.15 0 0

DACE 0.92 0.28 0.03 0.67

INTA 1.19 106 0.51 0.28

OCL 6.84 7.35 7.36 14.17

PROV 4.91 8.6 10.97 14.63

Total 4402 44.87 47.62 64.3 Source: DPL Annual Reports and CMIE Prowess

Figure 4.2.9: Composition of Current Liabilities of DPL

60

50

e 40 U

~ 30

~ 20 ~

10 I o +-1 -_

2003 2004

CURRENT LIABILITY

2005 2006 2007

YEAR

2007 40.64

0

0.08

0

49.39

19.94

110.05

2008

2008 46.27

0

1.17

0

1207

30.78

90.29

-sc -ACC

DACE

INTA

-OCl

- ffiOV

Current liabilities consists of sundry creditors, acceptances, interest accrued,



55.2% (Rs. 34.58 Crs.) of current liabilities, reaching to a level of 67.79% (Rs.

29.84 Crs.) of current liabilities in the year 2002-03.

183

Table 4.2.15: Composition of Current Liabilities of DPL in Percentaqe Terms

I", ParticularS,'ffi!t~t20032004~I~i2005 20oe':~ ' .. ' 2007 .' 2008:~;: SC. ~ 67.79 61.13! 60.37 53.73 36.93 51.25

. ACC ,':, 0.73 0.33 I 0.00 000 000 000

DACE,:':l 209 0.62 0.06 1.04 0.07 1.30

INTA·: 2.70 2.36 1.07 044 0.00 0.00

OCL:: 15.54 16.38 1546 22.04 44.88 13.37

PROV, ,' .. 'J 11.15 19.17 23.04 22.75 18.12 34.09


SCGS

SCCW



Analyzing sundry creditors it was observed that DPL has only one type of sundry

creditor's i.e. sundry creditors for capital works. For the year ending March 2003

184

it was at the level of Rs. 29.84 Crs which reached to the level of Rs. 46.27 Crs. in

the year ending on March 2008.

Figure 4.2.10: Composition of Sundry Creditors of DPL

50

45 40

-:- 35

5 30 c 25

~ 20 0: 15

10

5

o 2003 2004

SUNDRY CREDITORS

[-SCGsl

2005 2006 2007 2008

YEAR

T bl a e 4.2.18: Composition 0 f S d C d un ley re Itors of DPL in Percenta~e Terms

Particulars 2003 2004 2005 2006 2007 2008

SCGS 100 100 100 100 100 100

SCCW 0 0 0 0 0 0

Table 4.2 19 D t St t t escnpllve a IS les 0 fC omponents 0 f S d C dt of DPL un ry re lors

Particulars SCGS Mean 34.58 Standard Error 306 Median 32.20 Standard Deviation 7.50 Sample Variance 56.19 Kurtosis -0.86 Skewness 0.82 Ranae 18.84 Minimum 27.43 Maximum 46.27 Sum 207.48 Count 6.00 Laraest!1 ) 46.27 Smallest(1 ) 27.43 Confidence Level (95.0%) 7.87

185

G. Composition of Deposits and Advances

ACCA

ACRA

Advances from customers on capital account


T bl 220 C a e 4. omposltlon 0 fD eposlts &Ad vances 0 DPL

Particulars 2003 2004 2005 2006 ACCA 0 0.28 0 0

ACRA 0.92 0 0.03 0.67

Total 0.92 0.28 0.03 0.67 Source: DPL Annual Reports and CMIE Prowess

Figure 4.2.11: Composition of Deposits & Advances of DPL

14

1.2

.., 1 ~ u 08 o ~ 0.6 • 0: 04

02

DEPOSITS AND ADVANCES

2007 0

0.08

0.08

O~--~~~-~·r-~~~---~--~--~

2003 2004 2005 2006 2007 2008

YEAR

2008 0

1.17

1.17

FAcCA1 ~-ACRA

Analyzing deposits and advances it was observed that DPL has advances from

customers on capital account and advances from customers on revenue account.

Only for the year ending March 2004 it was having advances from customers on

capital account for Rs. 0.28 Cr. Advances from customers on revenue account

forms the major portion of deposits and advances, reaching to a level of Rs. 1.17

Crs. for the year ending March 2008.

T bl 4221 C a e omposllon 0 fD eposl s vances 0 f DPL' P In ercen a,e T erms

Particulars 2003 2004 2005 2006 2007 2008 ACCA 0 100 0 0 0 0

ACRA 100 0 100 100 100 100

186

T I 222 D abe 4. escnptlve S tatlstlcs 0

Particulars Mean ··Vii Standard Error ... ' Median " Standard Deviation Sample Variance Kurtosis Skewness Range Minimum Maximum , Sum IT!;( .. ;if

Count Largest(1) Smallest(1) Confidence Level (95.0%)


CTP : Corporate tax provision

DTP : Dividend tax provision

.

. ' .. ;

Ie omponents 0 ID eposlts &Ad vances 0 f DPL ACCA ACRA 0.05 048 0.05 0.21 000 0.38 0.11 051 0.01 0.26 6.00 -2.24 245 0.37 0.28 1.17 0.00 000 0.28 1.17 0.28 2.87 6.00 6.00 0.28 1.17 000 0.00

0.12 0.53

TDP : Total dividend provisions

PEM : Provision for employees

T bl 4223 C a e om poSItion 0 IP rovlslons 0 f DPL

Particulars 2003 2004 2005 2006 2007 2008 CTP 3.71 4.18 5.71 7.39 9.34 18.9

TDP 052 2.75 343 4.82 7.63 8.07

DTP 007 0.35 045 0.67 1.3 1.37

PEM j 0.61 1.32 138 1.75 1.67 244

Total 4.91 8.6 10.97 14.63 19.94 30.78 Source. DPL Annual Reports and CMIE Prowess

Analyzing provisions it was observed that DPL has namely four provisions viz

corporate tax provision, dividend tax provision, total dividend provisions and

provision for employees. Corporate tax provision forms the major portion of total

provisions marinating an average of Rs. 8.20 Crs. (55.82% of provisions) for the

period under study, reaching to a level of 75.56% of total provisions (Rs. 3.71

Crs.) for the year ending on March 2003.

187

Figure 4.2.12: Composition of Provisions of DPL

~~ I 16

--:- 14 I

5 12 ~ .: 10 ; i 8!

6 • 4 J

I

PROVISIONS

~ j -----=-----~.---~-- c--------~--2003 2004 2005 2006 2007 2008

YEAR

Table 4.2.24: Composition of Provisions of DPL in Percentaqe Terms

Particulars 2003 2004 2005 2006 2007

CTP 75.56 48.60 52.05 50.51 46.84

TOP 10.59 31.98 31.27 32.95 38.26

DTP 1.43 4.07 4.10 458 6.52

PEM 12.42 15.35 12.58 11.96 8.38

T bl 422 0 a e 5: escrlptive Statistics of Components a Provisions of DPL Particulars CTP TOP DTP Mean 8.21 4.54 0.70

Standard Error 2.30 1.19 0.22

Median 6.55 4.13 0.56 Standard Deviation 5.64 2.92 0.53

Sample Variance 31.79 8.54 0.28 Kurtosis 3.30 -1.26 -1.68

Skewness 1.76 0.02 0.41 Range 15.19 7.55 1.30

Minimum 3.71 0.52 0.07 Maximum 18.90 807 1.37

Sum 49.23 27.22 421 Count 6.00 6.00 6.00

Largest(1) 18.90 8.07 1.37

Smaliest(1 ) 3.71 0.52 0.07

Confidence Level (95.0%) 5.92 3.07 0.55

188

-CTPI -11>',

DTP'

2008

61.40

26.22

4.45

7.93

PEM 1.53 0.25 1.53 0.60 0.36 1.27 -002 1.83 0.61 2.44 9.17 6.00 2.44 0.61

0.63







Working capital turnover ratio. Inventory turnover ratio, Debtors turnover ratio,







i. Liquidity and Efficiency

II. Efficiency and Profitability

iii. Profitability and Liquidity


using the formula:

where,





t = r I ';1- ~ ,; (n-2)




189


This portion deals with assigning ranks to different parameters of liquidity VIZ














INT : Inventories

REC : Receivables


CBB : Cash & bank balance

TR : Total of Rank

R1

R2

R3

R4

UL

T bl 22 GWC C a e4 6: omponents 0

Year INT

2003 41.25

2004 . 45.11

2005:l! 42.22 ....

2006 25.91

2007 32.89

2008 36.95

: Rank on the basis of INT

: Rank on the basis of REC

: Rank on the basis of LA

: Rank on the basis of CBB

: Ultimate Rank

f DPL· P In ercentage Terms

REC LA eBB

51.93 0 2.58

44.38 2.04 1.72

51.55 0.99 1.42

31.04 2.21 38.01

49.86 10.93 1.65

45.08 9.85 1.38

190

Table 42.27: Rankinq of GWC Components of DPL for Liauiditv

Year R1 R2 R3 R4 TR UR

2003 4 6 6 2 18 5

2004 6 2 4 3 15 4

2005 5 5 5 5 20 6

2006 1 1 3 1 6 1

2007 2 4 1 4 11 2

2008 3 3 2 6 14 3


2006 OPL was in best position towards maintaining its liquidity while for the year

ending on March 31,2005 its liquidity ranking was last for the period under study.

B. Ranking on the basis of Efficiency











OTR : Debtors Turnover Ratio




191



R3: Rank on the basis of OTR


R5: Rank on the basis of CATR


Table 4.2.28: Activity Ratios of DPL

Particulars ,:WCTR ITR DTR FATR', CATR AT ,

2003 ... 2.51 2.94 2.34 102 1.22 0.53

2004 2.19 2.60 2.64 1.17 1.23 0.57

2005 1.56 2.48 203 1.21 106 0.54

2006 0.86 259 2.16 1.16 0.69 0.41

2007 1.80 2.86 1.88 1 .11 1.06 0.41

2008 1.81 3.05 2.50 1.00 1.25 0.45

Table 4.2.29: Rankina iWC Components~;DPL for Activity "'t". Particulars R1 R2.: R3 t., R4 ' R5:+'" R6 TR UR

2003 1 2 3 5 3 3 17 2

2004 2 4 1 2 2 1 12 1

2005 5 6 5 1 4 2 23 3

2006 6 5 4 3 6 5 29 5

2007 4 3 6 4 5 5 27 4

2008 3 1 2 6 1 4 17 2

From the above table we can notice for the financial years ending on March 31,

2004 DPL was in best position towards maintaining its efficiency while for the


under study.












R1

R2

192



ROA : Return on Asset R3


ROE : Return on Equity R5



: Rank on the basis of ROE

Table 4.2.31: Rankin of GWC Components of DPL for Profitabili tv 't: Particulars 'R1't R2 "::Ra: R4 ll:]t;RS: .... TR . "':lJR

1,:",,:"., 2003 5 6 4 3 6 24 5 H:!iI¥¥.t~: 2004 1 5 3 1 5 15 3 ,:¥(:;ci 200S 4 4 1 2 4 15 3 :!1j1\ ,,·2006 2 2 2 4 3 13 2 :\ . 2007 1 1 2 3 1 8 1 :~:\2008 3 3 5 4 2 17 4


2007 DPL was in best position towards maintaining its profitability while for the


under study.


H 1 0: Enhanced liquidity position is associated with efficient utilization of


Coefficient of rank correlation between liquidity and efficiency is -0.3714 and the





vice-versa.

193




is associated with better profitability and vice-versa can be established.

H30: Enhanced efficiency position of firm is associated with better profitability and

vice-versa.

Coefficient of rank correlation between efficiency and profitability is 0 and the

corresponding t-value is 0, this reflects no association between efficiency and

profitability. Thus our hypothesis enhanced efficiency position of firm is

associated with better profitability and vice-versa can not be established.













variable. Second part of the study is an attempt to identify how these four




194




Hypothesis (Ho): f.INT /wc is inversely associated to the company's f.CF/Wc

Table 4.2.32: Inventorv and Cash Flow of DPL

Year INT""," 6INT"",c

2003 41.25 -

2004 45.11 3.86

2005 42.22 -2.89

2006 25.91 -16.31

2007 32.89 6.98

2008 36.95 406

Figure 4.2.13: Inventory and Cash Flow of DPL

1000 I 5_00 ~

o 00 ~I ---"':"Cc,'

·500 .

-10 DC ,

-1500 1 ·20.00 1

.2500 J

2004 2<lb5

61NT and <lCF

2006

•

YEAR

[_I-"CBB ---,\PMl

CF ... c 6CFIW"

32.40 -13.35 -1905

-1.49 -14.84

3.00 4.49

6.84 3.84

12.60 5.77

2007 2008

Coefficient of correlation between Ll.INT /wc and Ll.CF/Wc is -0.1576 and the


f.INT /wc and f.CF/Wc. Thus our hypothesis MNT!We is inversely associated to the

company's Ll.CF!Wc cannot be established. The results of simple regression show


variable.

195

Table 4.2.33: Rearession Statistics of Inventory and Cash Flow of DPL :8;:l. . Rearession Statistics .. :::: : : ..

Multiole R 0.16

R Square 0.02

Adiusted R Sauare -0.30


Observations 5

Table 4.2.34: ANOVA Results of Inventory and Cash Flow of DPL

Of .. : SS MS ••••

.F Significance F Reqression 1 14.26 1426 0.08 0.80 Residual 3 558.62 186.21 Total 4 57289

Table 4.2.35: Coefficients Details of Inventorv and Cash Flow of DPL Interceot 6.INT

Coefficients -4.13 -0.20 Standard Error 6.13 0.73 t Stat ~ -0.67 -0.28 P-value ,.;it. 0.55 0.80 Lower 95% ffTf -23.66 -2.52 UDDer 95% .. 15.39 2.12


Y = -4.13- 0.20 X

The intercept coefficient and L'lINT coefficient are statistically insignificant as the


between L'lINT!Wc and L'lCF!Wc.

Table 4.2.36: Residual Outout of Inventory and Cash Flow of DPL Predicted Standard

Observation 6.CF Residuals Residuals 1 -4.91 -14.14 -1.20 2 -3.55 -11.29 -0.96 3 -0.84 5.33 0.45 4 -5.54 9.38 0.79 5 -4.95 10.72 0.91

196

and Cash Flow of DPL

Figure 4.2.14: Inventory Residual Plot of DPL

",PM Residual Plot

Figure 4.2.15: Inventory Line Fit Plot of DPL

"'INT Line Fit Plot

E·.·.·.····· ··Z. 0 ..... 0 .... ' ........ : •.. '" C B .,. ~ I ·:".C::. 'I -.-!1-C B8-' - . !

,ii:' . O,OQ:.H'·" ;,; -z· .00 -1O.o.ru. 00. 1 .00 I" Predicted !1CBB:

1::. -40.01f1l'.LC"·::";" ~.:.J

"'INT , ... - .... _ .... -,_._------------

Figure 4.2.16: Normal Probability Plot of DPL


Sample Percentile ----._---


Hypothesis (Ho): "'INT!Wc is inversely associated to the company's "'CF!Wc

197

Table 4238' Receivables and Cash Flow of DPL

Year REClWc L1REClWc CFIW,,- L1CFlWc

2003 51.93 - 32.40 -

2004 44.38 -7.55 13.35 -19.05

2005 51.55 7.17 -1.49 -14.84

2006 3104 -20.51 3.00 4.49

2007 49.86 18.82 6.84 3.84

2008 45.08 -4.78 12.60 5.77

Figure 4.2.17: Receivables and Cash Flow of DPL

ilREC and IICF

3000

2000

10 00

000

-1000 2004/

• , ............. 1

---~r"---20-y-5 ~'" T~ 2006

•

2007 2,roB

-2000 ~

-3000

YEAR

Coefficient of correlation between t.RECNVC and L'.CFNVC is -0.0517 and the


t.RECNVC and t.CFNVC· Thus our hypothesis t.RECtWC is inversely associated to

the company's t.CFtWC cannot be established. The results of simple regression

show that independent variable cannot explain any variation in the dependent

variable.

Table 42.39: Reqresslon Statistics of Receivables and Cash Flow of DPL


Multiple R 0.05

R Square 0.00



Observations 5.00

198

Table 4 2 41· Coefficients Details of Receivables and Cash Flow of DPL , InterceDt ~REC·· .~

Coefficients "fi>:""~,:~

-4.02 -0.04 . Standard En'bt··, 6.20 0.46 t Stat lrt'" -0.65 -0.09 P-value ~ 0.56 0.93 Lower 95% ••.• ,,', •• -23.76 -1.51 UnDer 95% 'i"'?lf;, 15.73 1.43


Y = -4.02 - 0.04 X

The intercept coefficient and ,A,REC coefficient are statistically insignificant as the


between ,A,RECNVc and ,A,CFNVc.

199

Figure 4.2.18: Receivables Residual Plot of DPL

L\REC Residual Plot

r---------2QO~Or--------~--~

Resi uals. 1~00 • I 1 O:uu- , .. ----+--------1

I -3 .00 -20.00-1QM.d000 .10.00 20.00 3C .00 I t. -20 001 . '- .. J L_ L\REC

Figure 4.2.19: Receivables Line Fit Plot of DPL

I L\REC Line Fit Plot

L\csJ' f~;oO'", :--40.0()'2D1 .00 20.004 .00

!;m -20tl • .

• ",CBB --I'I . I

• Predicted "'CB61 ------~!i

.. .. -30: . !

L\REC --_, Figure 4.2.20: Normal Probability Plot of DPL


10. 00 r=>,.....,-.... "l': .• "!!' •• ,.Il!". ,.,..",,..,..,-....... .,..,,,,.ilI"ilI"ilI"ilI"":".. ,.....,.., ..•.. . .. :.~ ..

L\ C S ~ 00 f-------t------'-·--·f------t-------"i-------j -1O.0C 20 40 60 80 1PO

• -20.00 • -30.0Lor--~~-................ ----~--------.J

Sample Percentile

c. Loan & Advances and Cash Flow

Hypothesis (Ho): L\LA/Wc is directly associated to the company's L\CF /wc

200

Table 4 2 44' Loans and Advances and Cash Flow of DPL

Year LAIW~ t.LAlWc CFmc t.CFlWc

2003 0 - 32.40 -2004 2.04 204 13.35 -19.05

2005 0.99 -1.05 -1.49 -14.84

2006 2.2.1 1.22 3.00 4.49

2007 10.93 8.72 6.84 3.84

2008 9.85 -1.08 12.60 5.77

Figure 4.2.21: Loan & Advances and Cash Flow of DPL

t.LAand t.CF

15 00 1 1000 1

5 00 ---- .L..-------- -----.... a 00 ~-~-=--~o=~~"'T=.---------.~--="_, • .____-~

2004 2007 2008 ,

-1-~ ~~ ~ -15 00 i -20 00 J'

-25 00

/ 2006

----YEAR

[ ---+----- ~CBB __ ,\LA

Coefficient of correlation between ,',LA/Wc and ,',CF/Wc is 0.251 9 and the


,',LA/Wc and ,',CF /Wc- Thus our hypothesis L'lLA;wc is directly associated to the

company's L'lCF;wc cannot be established. The results of simple regression show


variable.

T bl 4245 R a e egression S t't' fL ta IS ICS 0 oans an dAd vances an d C h FI as owo f DPL


Multioie R 0.25

R Square 0.06



Observations 5

201

Table 4246· ANOVA Results of Loans and Advances and Cash Flow of DPL .'p, . "Of· 55 M5 .' ·F 5iQniu~ance F

Rt¥bl'ession 1 36.29 36.29 0.20 068 Residual 3 536.60 178.87

Total 4 572.89


Y = -5.44 + 0.75 X

The intercept coefficient and ~LA coefficient are statistically insignificant as the t


Table 4.2.48: Resl d 10 ua utput of Loans and Advances and Cash Flow of DPL . ..·,'0 Predicted~~ ';:;'-1\1

~ 5tandard.Ji. .', '2':;".% Observatl6h .. CF ·i'fdi!§L!1Y Residuals ,*1 Residuals Jj. . ,,::; r%0Y'0~

1 -3.91 -15.15 -1.31 2 -6.22 -8.61 -0.74 3 -4.52 9.01 0.78 4 1.10 2.73 0.24 5 -6.25 12.01 104

Table 4.2.49: Probability Output of Loans and Advances and Cas h Flow of DPL .. '::.El:lI·,r . ·:;;'i;CTiif",,, r:: Percentile """'"''''''''''/' ;:''Z~~'::i

10 -1905 30 -14.84 50 3.84 70 4.49

90 5.77

Figure 4.2.22: Loan & Advances Residual Plot of DPL

~LA Residual Plot

~LA

202

Figure 4.2.23: Loan & Advances Line Fit Plot of DPL

LILA Line Fit Plot

~~"='--1 I. I1CBB I

o I- Predicted I1CBBi

LILA



20. OO,,,,,,,,-~,,,, LlCB/il.nn+---+-

Sample Percentile


Hypothesis (Ho): LlCBBlWc is directly associated to the company's LlCFlWc

-19.05

-14.84

3.84

5.77

203

Figure 4.2.25: Cash & Bank Balance and Cash Flow of DPL

"CBB and "CF

60.00

4000

2000

000 2; -20,00

qp;L ___ -«,~ ~006 -4000

-60,00

YEAR

Coefficient of correlation between f,.CBB/Wc and f,.CF/Wc is 0.0317 and the


f,.CBB/Wc and f,.CF/Wc. Thus our hypothesis f,.CBB,wc is directly associated to the

company's f,.CF,wc is established. The results of simple regression show that

independent variable cannot explain any variation in the dependent variable.

Table 4.2.51: Reqression Statistics of Cash and Bank Balance and Cash Flow of D PL


Multiple R 0.03

R Square 0.00



Observations 5

Table 4 2 52' ANOVA Results of Cash and Bank Balance and Cash Flow of DPL Of SS MS F Significance F


Total 4 57289

Table 4 2 53' Coefficients Details of Cash and Bank Balance and Cash Flow of DPL Intercept l>CBB

Coefficients -3.96 0.01 Standard Error 6.18 0.27 t Stat -0.64 0.06 P-value 0.57 0.96 Lower 95% -23.61 -0.84 Upper 95% 15.70 0.87

204


Y = 6.18 + 0.27 X

The intercept coefficient and "'CBB coefficient are statistically insignificant as the


Table 4.2.54: Residual Output of Cash and Bank Balance and Cash Flow of DPL :::~ill~:;':,; Predicted.f'LL '--'_v.

W'L" Standard • J0!~ Observatisn~ '.' 8CF :~if'l " Residuals'!:' ':::-:.ii.::- Residuals 1 -3.97 -1508 -1.26 2 -3.96 -10.88 -0.91

3 -3.41 7.90 0.66 4 -4.49 8.33 0.70

5 -3.96 9.73 0.81

Cash Flow of DPL

Figure 4.2.26: Cash & Bank Balance Residual Plot of DPL

",CBB Residual Plot

"'CBB

Figure 4.2.27: Cash & Bank Balance Line Fit Plot of DPL

"'CBB Line Fit Plot

"'C ---------

• "'CBB I

• Predicted "'CBS

"'CBB ---- - -----------

205



-2 -4

Sample Percentile

Section II: Liquidity and Profitability Analysis
















Hypothesis (Ha): !'lINT MlC is inversely related to the company's !'IPMMlc

Coefficient of correlation between L'>INT MlC and L'>PMNVC is 0.8569 and the


!'lINT MlC and L'>PMMlc. Thus our hypothesis ""'NT!Wc is inversely associated to the

company's L'>PM!Wc cannot be established. The results of simple regression show

206

that independent variable can explain about 73% of the variation in the

dependent variable.

Table 4.2.56: Inventorv and Profitability of OPL

Year INTlWc AINT~r

2003 41.25 -2004 45.11 3.86

2005 42.22 -2.89

2006 25.91 -16.31

2007 32.89 6.98

2008 36.95 406

Figure 4.2.29: Inventory and Profitability of OPL

1500 -

1000 -

500 '

o 00 ~

-500 1

-1000 :

-1500 .

-2000 -'

<liNT and t.PM

•

YEAR

[ _______ l.1.PM -. ,\I NT I

PM ,,~ M'M-

29.37 -36.35 6.97

28.34 -801

19.51 -8.83

28.97 9A6

31.18 2.22

Table 4.2.57: Reqression Statistics of Inventorv and Profitability of OPL


Multiple R 0.86

R Square 0.73


Standard Error 502

Observations 5

Table 4.2.58: ANOVA Results of Inventorv and Profitability of OPL Of SS MS F Sianificance F


Total 4 284.36

207


y= 1.03+0.77X

The intercept coefficient is statistically insignificant as the t-value is less then 2.

Table 4.2.61: Probability Output of Inventory and Profitability of D PL >'¥l£~. Percentile>;:'1~~ . . ···;'.!tilc\PM

10 -8.83 30 -801 50 2.22 70 6.97

90 9.46

Figure 4.2.30: Inventory Residual Plot of DPL

~INT Residual Plot

• o

~INT

208

--_._- ----------------

Figure 4.2.31: Inventory Line Fit Plot 01 DPL

I'IINT Line Fit Plot

1 • "PM . - --I • Predicted "PMj

-10_1

I'IINT

Figure 4.2.32: Normal Probability Plot 01 DPL -------


l ________ s_a_m_p_l_e_p_e_rcentile


Hypothesis (Ha): I'IREClWc is inversely related to the company's I'IPMlWc

T bl 4262 R a e eC81va bl es an d P ft blt 1 DPL ro I a Iity 0

Ii Year," lir~( REClWc ~A.$4rs;:;

,"nREClWc llPMmii~,';k-2003 .'. 51.93 - 29.37 -

h 2004 .. 44.38 -7.55 3635 6.97

2005":', 51.55 7.17 28.34 -8.01 i. 2006 '.: 3104 -20.51 19.51 -8.83

.: 2007 .ir. 49.86 18.82 28.97 946

2008 ... ,,,, 45.08 -4.78 31.18 2.22

Coefficient of correlation between I'IREClWc and I'IPMlWc is 0.4771 and the


I'IREClWc and I'IPMlWc. Thus our hypothesis fl.RECM'c is inversely associated to

the company's fl.PMM'c cannot be established. The results of simple regression

209

show that independent variable can explain just 23% of the variation in the

dependent variable.

Figure 4.2.33: Receivables and Profitability of DPL

30,00

20 00

10,00

000

·10 00

-20 00

-30 00

"'REC and "'PM

YEAR

T able 4. 26 R 3: egression S f tatistics a Receivables and Profitability of DPL

Re!lression Statistics

Multiple R 048

R Square 0.23

Adjusted R Square -003

Standard Error 8.56

Observations 5

T bl 4264 ANOVA R a e esu ts 0 fR eC81va bl es an d P f bT f DPL ro Ita IIty 0

Of SS MS F Significance F Regression 1 64.71 64.71 0.88 04165 Residual 3 219.65 73.22 Total 4 284.36

Table 4.2.65: Coefficients Details of Receivables and Profitability of DPL Intercept "'REC

Coefficients 0.73 0.27 Standard Error 3.85 0.29 t Stat 0.19 0.94 P-value 0.86 042 Lower 95% -11.51 -0.64 Upper 95% 12.97 118


Y = 0.73 + 0.27 X

2tO

The intercept coefficient and !'.REC coefficient are statistically insignificant as the


Table 4.2.67: Probability Output of Receivables and Profitability of Perce ntil e:G:':.li;:-Hi~.jj0:: .1:;Q,APM

10 -8.83

30 -8.01

50 2.22 70 6.97

90 946

Figure 4.2.34: Receivables Residual Plot of DPL ------ - ---------~

!'.REG Residual Plot

!'.REG

Figure 4.2.35: Receivables Line Fit Plot of DPL

!'.REG Line Fit Plot

!'.REG

211

• "'PM l : • Predicted !,;PMI . ,

DPL



20.00r----------------,

~PMOOO • •

1-

0_ 00 j------;------+-----=.-+--------1-------l

-1 O. OuO"-..,·"--,Z"",O,-,,.,--_4""0,,,--......:::6.,.0_-=80---110 I

Sample Percentile _~

c_ Loan & Advances and Profitability

Hypothesis (Ho): ~LAlWc is directly associated to the company's ~PMlWc

T bl 4268 L a e oans an dAd vances an d P ft bl f DPL ro r a Iity 0

Year LAlWo "'LAlWo PM"",o

2003 0 - 29.37

2004 2.04 2.04 36.35

2005 0.99 -1.05 28.34

2006 2.21 1.22 19.51

2007 10.93 8.72 28.97

2008 9_85 -1.08 31.18

Figure 4.2.37: Loan & Advances and Profitability of DPL

~LAand ~PM

1500 -

1000 .

5 00 ~ . -- --000 ---

----. - --2004 2005 2006 2007

-500 1

-1000 '

YEAR

1 ___ ,'lPM -- ,.\INT I

"'PM"",o

-

6_97

-8.01

-8.83

946

2.22

• 2008

Coefficient of correlation between ~LAlWc and ~PMlWc is 0_6522 and the


~LAlWc and ~PMlWc- Thus our hypothesis MA,wc is directly associated to the

212

company's /l.PM/Wc can be established. The results of simple regression show


dependent variable.

Table 4.2.69:. Regression StatisticS.:~~co"ans and Advances and profitabili~

~. .~~Li: Regression Statistics :;:~: ...

Multiple R 0.65

R Square 0.43


Standard Error 7.38

Observations 5

Table 4.2.70: ANOVA Results of Loans and Advances and Profitability of DPL .,,"JDf <;; 55"::':: ::.:0~ M5 .. , 1:Jli¥:; F 5illnific:mce F

Rellression 1 120.93 120.93 2.22 0.2330 Residual 3 163.43 54.48

10till:,1 4 284.36

Table 4 2 71 Coefficients Details of Loans and Advances and Profitability of DPL :. lL:.1.1U:.lntercept .. ,c: I~WH: tlLA'ial . -2.33 1.37

Standard Error:,!":. 3.76 0.92 -0.62 1.49 0.58 0.23

Lower 95% :lii:,:: . -14.31 -1.55 9.65 4.29


Y = -2.33 + 1.37 X

The intercept coefficient and /l.LA coefficient are statistically insignificant as the t


Table 4.2.72: Residual Output of Loans and Advances and Profitability of DPL

'.: observa~;~~f:i pr:~:~ik!.: Residuals':i~e::;1 ~!:~:::~i~1 1 0.46 6.52 1.02 2 -3.77 -4.23 -0.66 3 -0.66 -8.17 -1.28 4 9.60 -0.14 -0.02

5 -3.81 603 0.94

213

Table 4 2 73 P b bl 0 ro a IIty utput 0 IL oans an dAd vances an d P 1 ro itability 0 IDPL " Percentile '!jiFir.~i'8~!;,~' .. ", f'APM .

10 -883 30 -8.01 50 2.22 70 6.97

90 9.46

Figure 4.2.38: Loan & Advances Residual Plot 01 DPL ~ ~-.-----,

!'.LA Residual Plot

!'.LA ----------------

Figure 4.2.39: Loan & Advances Line Fit Plot 01 DPL

r !'.LA Line Fit Plot

I· ~PM- ... -l l.. Predicted "PM,

!'.LA



Sample Percentile

214


Hypothesis (Ha): tJ.CBBlWc is directly associated to the company's tJ.PMlWc

Table 4.2.74: Cash and Bank Balance and Profitability of DP L

Year CBBIWc t.CBBIWc PM '0 t.PM_o

2003 2.58 - 29.37 -2004 1.72 -0.86 36.35 6.97

2005 142 -0.30 28.34 -8.01

2006 38.01 36.59 19.51 -8.83

2007 1.65 -36.36 28.97 946

2008 1.38 -0.27 31.18 2.22

Figure 4.241: Cash & Bank Balance and Profitability of DPL

60,00 I

4000

2000

0.00

-2000

-40 00 :

-60 00 ~

-.:---= 2004

""CBB and ~PM

•

-~~==~~~~~=.~~=~~. ~- • ::;::::=--2005 2006 2007 2008

•

YEAR

Table 4.2.75: Re~ression Stalistics of Cash an d Bank Balance and Profitability of 0


Multiple R 0.77

R Square 0.59

Adiusted R Square 046

Standard Error 6.20

Observations 5

PL

Coefficient of correlation between tJ.CBBlWc and tJ.PMlWc is -0.7709 and the


between tJ.CBBlWc and tJ.PMlWc. Thus our hypothesis !1CBBMlc is directly

associated to the company's !1PMMlc cannot be established. The results of

215

simple regression show that independent variable can explain almost 59% of the

variation in the dependent variable.

Table 4.2.76: AN o VA Results 0 fC ash and Bank B alance and P rofita bT f DPL Iity 0

':':,':" " . -:C- Dtee 55'" MS " 1."tS2.. F Sianificance F

Rearession 1 168.99 168.99 4.39 0.1270 Residual 3 115.37 3846

Total" 4 284.36

Table 4.2.77: Coefficients Details of Cash and Bank Balance and Profitability of DPL ~i::' Intercept't· i ¥,t3 • ",CBB ...... :"!F~

Coefficients·:!.,,:.·· 0.30 -0.25

Standard Error;i: tSta! ~-::: P-value~';· Lower 95% UDDer 95% ..

'.

".

2.77 0.11 0.92 -8.52 9.13

0.12 -2.10 0.13 -0.63 0.13


Y = 0.30 - 0.25 X

The intercept coefficient and !'lCBB coefficient are statistically insignificant as the


Table 4.2.78: Residual Output of Cash and Bank Balance and Profitability of DPL ,::2f;j't::< Predicted.Ji· I .... ·n)~ le':i StandardsHtjl~

Observatiol1 t.PM·~ Residualsf:~. Residuals ,;AWj~"'0

1 0.52 645 1.20 2 0.38 -8.38 -1.56 3 -8.92 0.09 0.02 4 9.46 -0.01 0.00 5 0.37 1.85 0.34

Table 4 .2.79: Probability Output of Cash and Bank Balance and Profitabili ty of DPL : l~.!tJ~li· Percentile-"':"l',,-,,""'·::·· . . :. '::I;;;l'APM·· ..

10 -8.83 3D -801 50 2.22 70 6.97 90 946

216

Figure 4.2.42: Cash & Bank Balance Residual Plot of DPL

L'.CBB Residual Plot

Res duals

~~~--~·=i'~oo~--+---~~~~~ -20~5.(r

"""'=~~~",":~"~:O~Onr· ~ ___ ...:;;;.=~=..J L'.CBB

Figure 4.2.43: Cash & Bank Balance Line Fit Plot of DPL

L'.CBB Line Fit Plot !

flCBB


I

I

."'PM Ii • Predicted ",PM


Sample Percentile

217


A. NWC

Table 4.2.80: Oriqinal and Trend Values of Net Workinq Capital of DPL Original and Trend Values of Net Workinq Capital IRs. In Crs.)

Year Original Value Indices Trend Value' (Y,) 2002-03 41.91 100 41.64 2003-04 62.57 149.30 84.80 2004-05 104.71 249.84 127.96 2005-06 261.99 625.13 171.12 2006-07 189.85 452.99 214.27 2007-08 236.19 563.56 257.43

Chi-square Test: Computed Value of X' = 62.84; Critical Value of X' = 11.07 Result: Ho is Rejected 'Y, stands for computed values of net working capital based on the least square equation of Y, = a + b X where the equation comes to Y, = - 1.51 + 43.15 X ( origin of X = 2002·03, X in units of years and Y in crares of rupees)

Figure 4.2.45: Liquidity Trend (NWC) of DPL

300

250

~ 200 o c 150 c r2. 100 I

50 1 ------- -- .---o,-I ___ ~_-

2002-03 2003-04

LIQUIDITY TREND

.---- --

-- --

2004-05 2005-06

YEAR

-----

2006-07

--+- O~gi~al Value -- Trend Value~ {V0]

2007-08


under study, except for the year ending March 2007. The net working capital

indices were 149.30, 249.84, 625.13, 452.99 and 563.56 respectively from

2003-04 to 2007-08 in comparison to 2002-03, the base year.

The linear least squares trend values of working capital in CHL are also shown in

Table 4.3.1. There is almost no deviation in the year 2002-03, while the

deviation in the years 2005-06 was positive, deviations were negative in rest of

the years under study.

218

B. Current Assets

Table 4.2.81: Oriqinal an d Trend v alues a IC urrent Assets a DPL Original and Trend Values 01 Current Assets (Rs. In Crs.)

Year OriQinal Value Indices Trend Value' JY,) 2002-03 85.93 100 76.82 2003-04 107.44 12503 132.65 2004-05 152.33 177.27 188.48 2005-06 326.29 379.72 244.31 2006-07 299.9 349.01 300.14 2007-08 326.48 379.94 355.97

Chi-square Test: Computed Value of X2 = 42.76 ; Critical Value of X2 = 11.07 Result: Ho is Rejected 'Y, stands for computed values of current assets based on the least square equation of Y, = a + b X where the equation comes to Y, = 20.98 + 55.83 X ( origin of X = 2002-03, X in units of years and Y in crares of rupees).

Figure 4.2.46: Liquidity Trend (CA) of DPL

LIQUIDITY TREN DS

400 -

350 -i

""7 300 ~ 5 250 1 g, 200 i

150 i 2 ..... 100 •

50 -

.------------

-_.-------- .~--

.. -------------- -------

o ~- --~ .. _;_-----~---~---~--_---~ 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

YEAR

~ Original Value -- Trend Value· (YC) I

The current assets registered an increasing trend throughout the period under



The linear least squares trend values of current asset in CHL are also shown in

Table 4.3.2. There is almost no deviation in the year 2006-07, while the deviation

in the years 2002-03 and 2005-06 were positive, deviations were negative in rest

of the years under study.

219


I 4282 0 . Tab e nglna an dT d V I ren a ues a fC urren t l' bTl 18 Illes 0 f DPl Original and Trend Values of Current Liabilities (Rs. In Crs.)

Year Original Value Indices Trend Value' (Y,) 2002-03 4402 100 35.17 2003-04 44.87 101.93 47.85 2004-05 47.62 108.18 60.52 2005-06 64.3 14607 73.20 2006-07 110.05 250.00 85.87 2007-08 90.29 205.11 98.54

Chi-square Test: Computed Value of x' = 13.74 ; Critical Value of X' = 11.07 Result: Ho is Reiected 'Y, stands for computed values of current liabilities based on the least square equation of Y,= a + b X where the equation comes to Y, = 22.50 + 12.67 X (origin of X = 2002-03, X in units of years and Y in crores of rupees)

Figure 4.2.47 Liquidity Trend (Cl) of DPl

UQUIDITYTREND

120

100

~ 80 0 -- ----- --.--c 60

'"" ~ 40 .---------

2~ l ~---- - - ~--------

2002-03 2003-04 2004-05 2005-06 2006-07 2007·08

YEAR

I--+- Original Value ----- Trend Value· (9


study, except in the year 2007-08. The current liability indices were 101.93,

108.18, 146.07,250.00 and 205.11 from 2003-04 to 2007-08 in comparison to



Table 4.3.3. The deviations during the years 2002-03 and 2006-07 were positive,

while these were negative in rest of the years under study.

220

4.2.4: Analysis of WCM Efficiency Using DEA





capital are inventories, accounts to be paid to suppliers, and payments to be










. components is important to the financial health of businesses from all industries.













221 ,

measured in terms of the "days of working capital" (OWC). OWC value is based

on the rupee amount in each of equally weighted receivable, inventory and

payable accounts. The OWC represents the time period between purchases of











calculating these values are given in the following Table.


Component

Oays Sales Outstanding (OSO)

Oays Inventory Outstanding (010)

Oays Payable Outstanding (OPO)

Oays Working Capital (OWC)

Current Ratio (CR)




Equation


Inventories/(Sales/365)

Payables/( Sales/365)

OSO + 010 - OPO



(Operating Income + Oepreciation)/Total Assets

(Operating Income + Oepreciation)/Sales

222


A. Target

T bl 283 I a e 4. nput o' t d CRS E nen e nve opment M d IT o e: arget

OMUji i OMU H{t,' .' EfficienfinputTarget ; : Efficient Output Target N ;~0W Name .050 010 ';;101'0 OWC ':. fCR IA'!;, lb' IS O.f\,;,l-

1 2003 105.65 107.40 60.78 152.27 1.74 0.16 0.28 2 2004 138.24 140.53 79.53 199.24 2.28 0.21 0.37 3 2005 145.89 130.85 60.80 215.94 2.92 0.17 0.35 4 2006 15108 126.10 51.53 225.64 3.21 0.16 0.34 5 2007 193.72 127.80 52.65 268.87 2.42 0.15 0.36

6 2008 146.21 119.84 45.96 22008 3.25 0.14 0.32

B. Slack

C. Efficiency


oriented CRS Model, using OSO, 010, OPO, OWC, CR, and CCE as input

parameters and IA & IS as output parameters. Years 2004, 2007 and 2008 are

CHL's most efficient with an efficiency score of 1.0000; year 2003 is least

efficient with an efficient score of 0.8954.

223



T M d I DSO Eff T Table 4.2.86: Measure Speci IC 0 e: IClent nput arget

DMLJ;I: t DMU :::'1F:t : Efficient inputTarget . : ·Ht,,., .' Efficient OufputTarget .: No.·r~ . Name D50:': DIO 'DPO DWC .:. :1kCR .. IA::tJK ::: 15

1 2 3 4 5 6

2003 105.6464 107.3968 60.7777 152.2655 1.7413 0.1596 0.2812 2004 138.2413 140.5318 79.5294 199.2438 2.2786 0.2089 0.3680 2005 123.9037 121.7636 65.7256 179.9417 2.1650 0.1760 0.3202 2006 143.7526 127.1395 57.5334 213.3587 2.9253 0.1663 0.3389 2007 193.7192 127.8031 52.6500 268.8724 2.4204 0.1469 0.3589 2008 146.2086 119.8356 45.9615 220.0827 3.2525 0.1437 0.3228




Table 4.2.88 shows result taken DSO as the input parameter. Year 2004, 2007



224





Table 4.2.91 shows result taken 010 as the input parameter. Year 2004, 2007



225





Table 4.2.94 shows result taken DPO as the input parameter. Year 2004, 2007



226

iv. Days Working Capital- DWC

Table 4.2.95: Measure Specific Model: DWe Efficient Input Tarqet OMU :L::' OMU .. :.:~:' Efficient Input Tar!let ''co;c,\if.':' EfficientOll!put Tar!let

IA<.7.t:< . . 15 No.::;, : Name 050:< OI01!ttOPO OWC "':"lI!CR 1 2003 105.6464 107.3968 60.7777 152.2655 1.7413 0.1596 0.2812 2 3 4

5

6

2004 138.2413 140.5318 79.5294 199.2438 2.2786 0.2089 0.3680 2005 123.9037 121.7636 65.7256 179.9417 2.1650 0.1760 0.3202 2006 143.7526 127.1395 57.5334 213.3587 2.9253 0.1663 0.3389 2007 193.7192 127.8031 52.6500 268.8724 2.4204 0.1469 0.3589

2008 146.2086 119.8356 45.9615 220.0827 3.2525 0.1437 0.3228


Specific Input oriented CRS Model, using DWC as input parameters and IA & IS


Table 4.2.97 shows result taken DWC as the input parameter. Year 2004, 2007



227


Table 4.2.98: Measure Soecific Model: CR Efficient Input Taraet

OMU I OMU < ,,:: , Efficient lri'ifut Taroet ; 1~1,i,1): >, Efficient Output Target No.' Name OSO'" 010 .': OPO··· OWC" ifCR IA . IS .... :

1 2 3 4 5

6

2003 105.6464 107.3968 60.7777 152.2655 1.7413 0.1596 0.2812 2004 138.2413 140.5318 79.5294 199.2438 2.2786 0.2089 0.3680 2005 128.4695 120.9784 65.7256 183.7223 2.0100 0.1738 0.3202 2006 164.4363 123.5826 57.5334 230.4855 2.2233 0.1565 0.3389 2007 193.7192 127.8031 52.6500 268.8724 2.4204 0.1469 0.3589 2008 146.2086 119.8356 45.9615 220.0827 3.2525 0.1437 0.3228



output parameters.

Table 4.2.100 shows result taken CR as the input parameter. Year 2004,2007



228

4.3 Lincoln Pharmaceuticals Limited



INT : Inventories CBB : Cash & bank balance

REC : Receivables


EPA : Expenses paid in advance

GWC : Gross Working Capital


Figure 4.3.1: Composition of Gross Working Capital of LPL

GROSS WORKING CAPITAL

2003 2004 2005 2006 2007 2008

YEAR

The investment in GWC by LPL was almost constant during period-1 with an


maintaining an average of Rs. 317.55 Crs. For the period under study average

level of GWC was Rs. 216.39 Crs.

a e T bl 431 C T fG omposl Ion 0 ross or Ing apia W k Ct I

Year CSS· L ',INT REC:~;; EPA . 1:,lJiJij'LA DRE:;~ e;l GWC

····:2003··· 0.78 5.47 15.39 1.07 0.25 0.44 23.4

·;2004 0.37 6.99 16.07 1.31 0.25 0.32 25.31

2005 0.79 7.14 20.72 1.67 0.25 0.17 30.74 .::2006: .' 1.27 8.04 21.5 0.53 0.25 0 31.59

::-:2007 .:' 1.57 10.67 24.2 1.49 5.6 0 43.53 . '.-' ·2008 2.06 12.5 22.94 2.92 5.6 0 46.02 Source. LPL Annual Reports and CMIE Prowess

229

Figure 4.3.2: Composition of Gross Working Capital of LPL

50 I 45 1 40 j

..,. 35

& 30

0: 15 10 5

COMPOSITION OF GWC

• ORE

• LA : I

o EPA I

oRB::'

.INT I • caB

:;~ U O~ ~ ___ ~ ___ L-~ ___ ~----"_Il-~ ___ _

2003 2004 2005 2006 2007 2008

YEAR

Inventory and Receivables forms major section of LPL's GWC, collectively on an

average for the period under study they were at a level of 87% (Rs. 28.6 Crs.) of

GWC and they peaked to 93,51 % (Rs. 29.54 Crs.) of GWC for the year ending

March 2006.

Figure 4.3.3: Composition of Gross Working Capital of LPL (Trend)

30·

25

'l 20 U g 15

COMPOSITION OF GWC

~ ': LJ ~-"""'-====T'=-.z::::-<s"=='--::;=-'-=--2003 2004 2005 2006 2007 2008

YEAR

~caB

--INT

RB::

EPA

~LA

~rnE

Receivable individually add to 61.69% (Rs. 20.14 Crs.) of GWC on an average

for the period, attaining a level of 68.06% (Rs. 21.5 Crs.) of GWC for the year

ending March 2006.

230

Table 4.3.2: Composition of Gross Working Capital in Percentage Terms

Year 2003 2004 2005 2006

CBB 3.33 1.46 2.57 402

INT 23.38 27.62 23.23 25.45

REC 65.77 63.49 67.40 68.06

EPA 4.57 5.18 5.43 1.68

LA 1.07 0.99 . 0.81 0.79

ORE 1.88 1.26 0.55 000

Table 4.3.3: Descriptive Statistics of Com onents of GWC Particulars CBB INT

Mean 1.14 8.47 Standard Error 0.25 1.07 Median 103 7.59 Standard Deviation 0.62 2.62 Sample Variance 0.38 6.85 Kurtosis -0.71 -0.63

Skewness OAO 0.73 Ran~e 1.69 7.03 Minimum 0.37 5.47 Maximum 206 12.50 Sum 6.84 50.81 Count 6.00 6.00 LarQesU1 ) 206 12.50 Smaliest(1 ) 0.37 5.47

Confidence Level 195.0%) 0.65 2.75

Table 434· Sales and Receivables of LPL

Particulars 2003 2004 2005

Sales 28.23 33.57 36.93

REC 15.39 16.07 20.72

RIS 10/0) 54.52 47.87 56.11

Figure 4.3.4: Sales and Receivables of LPL


70

60

~ 50

" 40

" ==- 30

r2. 20

10

o 2003 2004 2005 2006

YEAR

REC 20.14 1.48

21.11 3.62 13.13 -1.70 -0.52 8.81 15.39 24.20 120.82 6.00

24.20 15.39

3.80

2006

37.91

21.5

56.71

1- Sales -- Rec~~vables i

231

2007 2008

3.61 4.48

2.4.51 27.16

55.59 49.85

3.42 6.35

12.86 12.17

000 0.00

EPA 1.50 0.33 1AO 0.80 0.64 2.26 1.10 2.39 0.53 2.92 8.99 6.00

2.92 0.53

0.84

2007

56.48

24.2

42.85

2007 2008

LA ORE 203 0.16 1.13 0.08 0.25 0.09 2.76 0.19 7.63 0.04 -1.88 -1.39 0.97 072 5.35 0.44 0.25 0.00 5.60 0.44 12.20 0.93 6.00 6.00

5.60 0.44 0.25 0.00

2.90 0.20

2008

63.39

22.94

36.19

Figure 4.3.5: Receivables I Sales (%) of LPL

60.00·

50.00

40.00

30.00

20.00

10.00

RIS(%)

0.00 1-----~---~---~---~-- --~--~

2003 2004 2005 2006

YEAR


RM PM

Raw materials

Packing materials

SSP

FG

SFG Semi-finished goods

Table 4.3.5: Com osition 0 fl nventorv of LPL

Year 2003 2004 2005 RM 1.18 1.62 2.22

PM 0 0 0

SSP 0 0 0

FG 3.28 4.44 3.46

SFG 0.99 0.91 1.37

Total 5.45 6.97 705 Source: LPL Annual Reports and CMIE Prowess

Figure 4.3.6: Composition of Inventory of LPL

10 .

9 B

.., 7

& 6 c 5

~ 4 3

2 1

G~

2003 2004

INVENTORY

~----

2005 2006

YEAR

232

2006 1.17

1.15

0

4.3

1.42

8.04

2007

2007 2008

Stores & spares

Finished goods

2007 1.39

0.91

0

707

1.3

10.67

2008

2008 1.14

0.92

0

8.8

1.64

12.5

P' - FM

SSP FG

-SFG


finished goods and semi-finished goods. The finished good inventory forms the

major portion of inventories with an average of 60.52% (Rs. 5.23 Crs.) of total

inventory, reaching to a level of 70.4% (Rs. 8.8 Crs.) in the year 2007-08.

T bl 4 36 C 'r f I a e omposllon 0 nven ory .0 f LPL' P In ercen age T

Particulars . 2003 2004 ; . 2005 2006

RM 21.65 23.24 3149 14.55

PM 0.00 000 000 14.30

SSP ". 0.00 000 0.00 000

FG 60.18 63.70 49.08 5348

SFG 18.17 1306 1943 17.66

T I 4370 S fC ab e escnpttve tatlstlcs 0 omponen so f I nventory 0 f LPL Particulars RM PM SSP Mean .... 145 0.50 000 Standard Error 0.17 0.22 0.00 Median 1.29 046 0.00 Standard Deviation 042 0.55 0.00 Sample Variance 0.17 0.30 0.00 Kurtosis 2.20 -3.01 -Skewness 1.57 010 -Range 1.08 1.15 000 Minimum 1.14 000 000 Maximum 2.22 1.15 000 Sum

,,'~

8.72 2.98 0.00 Count 6.00 6.00 6.00 Largest(1) 2.22 115 0.00 Smallest(1 I' 1.14 000 000 Confidence Level (95.0%) 044 0.58 000


SO L Sundry debtors Outstanding less than six months

SD2: Sundry debtors Outstanding less than six months

AILO: Accrued income, lease rent & other receivables

erms

2007 2008:-1303 9.12

8.53 7.36

000 0.00

66.26 7040

12.18 13.12

FG "' ,SFG 5.23 1.27 0.90 0.11 4.37 1.34 2.22 0.28 4.91 0.08 ·044 -1.07

1.04 -0.22 5.52 073 3.28 0.91 8.80 1.64 31.35 7.63 600 6.00 8.80 1.64 3.28 0.91

2.33 0.29

DEP: Deposits




233



B: Loans provided to companies/ departmental undertakings/business

enterprises

T bl 43 11 C a e omposl [on 0 1 L oans an dAd vances 0 fLPL Year 2003 2004 2005 2006

A 0 0 0 0 B 0.25 0.25 0.25 0.25

Total 0.25 0.25 0.25 0.25 Source: LPL Annual Reports and CMIE Prowess

Figure 4.3.8: Composition 01 Loans and Advances 01 LPL

6 1 ,

5 '

LOANS AND ADVANCES

2007 0

5.6 5.6

2008 0

5.6 5.6

I-A, -- B I

, I

o 2003 2004 2005 2006 2007 2008

YEAR

For LPL loan and advances provided to companies/ departmental undertakings /

business enterprises forms 100% of loan and advances. For the AY's 2002-03 to

2005-06 it was Rs. 0.25 Crs. which increased gradually and reached to a level of

Rs. 5.6 Crs in the AY 2006-07.

Table 4.3.12: Composition 01 Loans and Advances in Percentage Terms Year 2003 2004 2005 2006 2007 2008

A 0 0 0 0 0 0 B 100 100 100 100 100 100

235

Table 4.3.13: Descriptive Statistics of Components of Loans and Advances 0 f LPL

Particulars A Mean :,j •. ." ::;,. 2.03

Standard Error 1.13

Median 0.25

Mode :' .

•••• 0.25

Standard Deviation '.' 2.76

Sample Variance 7.63

Kurtosis .; -1.88 Skewness

. 0.97

Range 5.35 Minimum. ..' 0.25

Maximum . ...... 560

Sum 12.20

Count .. . 6.00

largest(1) de- 5.60 Smallest(1) 0.25

Confidence level (95.0%).; 2.90

E. CURRENT LIABILITY

SC

ACC

PROV

DACE

Sundry creditors

Acceptances

Provisions

INTA

OCL

Interest accrued

Other current liabilities


T able 4.3.14: Composition 0 fC urrent L labilities of LPL

.. Particulars:: ': 2003 2004 ··2005 2006.: .·2007 2008:,:

SC 3.94 3.93 801 7.5 8 7.36

ACC 0 0 0 0 0 0

DACE :r 0 0 0 0.11 1.55 1.93

INTA 0 0 0 0 0 0

OCl 0.07 0.14 0.16 0.21 0.29 0.39

PROV . 161 2.01 2.49 1.47 2.47 3.87

Total 5.62 608 10.66 9.29 12.31 13.55 Source. LPL Annual Reports and CMIE Prowess

Current liabilities consists of sundry creditors, acceptances, interest accrued,



68.32% (Rs. 6.46 Crs.) of current liabilities, reaching to a level of 80.73% (Rs. 7.5

Crs.) of current liabilities in the year 2005-06.

236

Figure 4.3.9: Composition of Current Liabilities of LPL

9 .

8 •

~ ~ 1 u 5. c "'-4

12 3

2

CURRENT LIABILITIES

1

O~--~-----,----~--~~~~-----

2003 2004 2005 2006 2007 2008

YEAR

T bl 4315 C a e t omposllon 0 fC urren t L· bl· f LPL· P la I Itles 0 In ercen age T

Particulars 2003 2004 2005 2006 2007

SC 70.11 64.64 75.14 80.73 64.99

ACC 000 000 0.00 0.00 000

DACE 0.00 0.00 0.00 1.18 12.59

INTA 0.00 0.00 0.00 000 0.00

OCl 1.25 2.30 1.50 2.26 2.36

PROV 28.65 3306 23.36 15.82 2006

I-sc I' -ACC

DACE I

1

'-:

-PROV

erms

2008

54.32

000

14.24

0.00

2.88

28.56

Table 4.3.16: Descriptive s C tallslics of omponents of Loans and Advances of LPL Particulars SC ACC DACE INTA OCl Mean 6.46 0.00 0.60 0.00 0.21 Standard Error 0.80 0.00 0.36 0.00 0.05 Median 7.43 0.00 0.06 0.00 0.19 Standard Deviation 1.97 0.00 0.89 0.00 0.11 Sample Variance 3.88 0.00 0.80 0.00 0.01 Kurtosis -1.88 - -1.4 1 - -0.17 Skewness -0.89 - 104 - 0.62 Range 4.08 0.00 1.93 0.00 0.32 Minimum 3.93 0.00 0.00 0.00 0.07 Maximum 8.01 0.00 1.93 0.00 0.39 Sum 38.74 0.00 3.59 0.00 1.26 Count 6.00 6.00 6.00 6.00 6.00 lar~est(1 ) 8.01 000 1.93 0.00 0.39 Smallest(1) 3.93 0.00 0.00 0.00 0.07 Confidence level (95.0%) 2.07 000 0.94 0.00 0.12

237

PROV 2.32 0.35 2.24 0.87 0.76 1.80 1.25 2.40 1.47 3.87

13.92 6.00 3.87 1.47

0.91


SCGS

SCCW



Table 4.3.17: Composition of Sund", Creditors of LPL

Particulars 2003 2004 2005 2006 SCGS 3.94 3.93 8.01 7.5

SCCW a a a a Total 3.94 3.93 801 7.5

Source. LPL Annual Reports and CMIE Prowess

Figure 4.3.10: Composition of Sundry Creditors of LPL

9 .

8 -7 .

~ 6 I

U 5 c =. ~ 3

2

1 .

o .- --2003

SUNDRY CREDITORS

~--~~-

2004 2005 2006 2007

YEAR

2007 2008 8 7.36

a a 8 7.36

I '~CGS sccw --~--

2008

Analyzing sundry creditors it was observed that LPL has only one type of sundry

creditor's i.e. sundry creditors for goods & services. For the year ending March

2003 it was at the level of Rs. 3.94 Crs which reached to the level of Rs. 7.36

Crs. in the year ending on March 2008.

T bl 4318 C a e om position 0 f S d C dt un lry re I ors a f LPL' P In ercentage T erms

Particulars 2003 2004 2005 2006 2007 2008 SCGS 100 100 100 100 100 100

SCCW a a a a a a

238

Table 4.3 .19: Descriptive S tatistics 0 Components of Sundry Creditors Particulars SCGS Mean 6.46 Standard Error 0.80 Median 7.43 Standard Deviation 1.97 Sample Variance 3.88 Kurtosis -1.88 Skewness -0.89 Range 4.08 Minimum 3.93 Maximum 801 Sum 38.74 Count 6.00 LarQest(1 ) 8.01 Smallest(1 ) 3.93 Confidence Level 195.0'10) 2.07

G. Composition of Deposits and Advances

STDD ACRA

Security deposits /trade deposits/dealer deposits


T I ab e 4.3. 20 C omposl Ion 0 fD 't & A eposl s dvances of LPL

Particulars 2003 2004 2005 2006

STDD 0 0 0 0.11

ACRA 0 0 0 0

Total 0 0 0 0.11 Source: LPL Annual Reports and CMIE Prowess

Figure 4.3.11: Composition of Deposits & Advances of LPL

2.5 i

2 '

~ 15 u

05

DEPOSITS AND ADVANCES

2007

1.55

0

1.55

o -r--- --~--~-_

2003 2004 2005 2006 2007 2008

YEAR

239

of LPL

2008

1.93

0

1.93

I STDO, -ACPA

Analyzing deposits and advances it was observed that LPL has Security deposits

I trade deposits Idealer deposits. For the year's ending March 2003 to March

2005 the figure was, reaching to a level of Rs. 0.11 Crs. for the year ending

March 2006, gradually it went to Rs. 1.93 Crs for the year ending March 2008.

T bl 4321 C a e 1 omposllon 0 fD eposl s vances 0 fLPL· P In ercen age T erms

Particulars 2003 2004 2005 2006 2007 2008 STDD 0 0 0 100 100 100

.. ACRA 0 0 0 0 0 0

Table 4.3.2 2: Descriptive Statistics of Components of Deposits & Adva nces of LPL Particulars STOO Mean 0.60 Standard Error . 0.36 Median 0.06 Standard Deviation 0.89 Sample Variance 0.80 Kurtosis . -1.41 Skewness 1.04 Range 1.93 Minimum 0.00 Maximum 1.93 Sum 3.59 Count :,.' " 6.00 Largest(1) 1.93 Smallest(1) 0.00 Confidence Level (95.0%) 0.94


CTP Corporate tax provision

TDP Total dividend provisions

T bl 4323 C a e omposr JOn 0 fP rovlslons 0 fLPL

Particulars 2003 2004 2005 2006 2007 2008 CTP 1.02 1.32 1.8 0.56 1.56 2.96

I TOP , ,

0.59 0.69 0.69 0.91 0.91 0.91

Total 1.61 2.01 2.49 1.47 2.47 3.87 Source. LPL Annual Reports and CMIE Prowess

240

Figure 4.3.12: Composition of Provisions of LPL

35

3

- 25 ~ u 2 Z :::. 15 ,; 0: ,

PROVISIONS

0: LI __ ~ ___ ~ ______ ~ _______ ~ __ _

2003 2004 2005 2006 2007 2008

YEAR

Analyzing provisions it was observed that LPL has namely two provisions viz

corporate tax provision and total dividend. Corporate tax provision forms the

major portion of total provisions marinating an average of Rs. 1.54 Crs. (63.18%

of provisions) for the period under study, reaching to a level of 76.49% of total

provisions (Rs. 2.96 Crs.) for the year ending on March 2008.

Table 4.3.24: Composition of Provisions of LPL in Percentaqe Terms

Particulars 2003 2004 2005 2006 2007 2008

CTP 63.35 65.67 72.29 38.10 63.16 76.49

TOP 36.65 34.33 27.71 61.90 36.84 23.51

Tabl 4325 0 e escnpllve a IS les 0 t St ttl C omponents 0 IP rOVISIO ns 01 LPL Particulars CTP TOP Mean 1.54 0.78 Standard Error 0.33 0.06 Median 1.44 0.80 Standard Deviation 0.82 0.14 Sample Variance 0.67 0.02 Kurtosis 1.63 -2.42 Skewness 0.99 -0.28 RanQe 2.40 0.32 Minimum 0.56 0.59 Maximum 2.96 0.91 Sum 9.22 4.70 Count 6.00 6.00 Largest(1 ) 2.96 0.91 Smaliest(1 ) 0.56 0.59 Confidence Level (95.0%) 0.86 0.15

241







Working capital turnover ratio, Inventory turnover ratio, Debtors turnover ratio,







i. Liquidity and Efficiency

ii. Efficiency and Profitability

iii. Profitability and Liquidity


using the formula:

where,





t = r J,j1- ~ -J (n-2)




242


This portion deals with assigning ranks to different parameters of liquidity viz














INT : Inventories R1 : Rank on the basis of INT

REC : Receivables R2 : Rank on the basis of REC

LA : Loans & advances R3 : Rank on the basis of LA

CBB : Cash & bank balance R4 : Rank on the basis of CBB

TR : Total of Rank UL : Ultimate Rank

T bl 4 3 26 GWC C a e omponents 0 fLPL' P In ercentage T erms

Year INT REC LA CBB

2003 23.38 65.77 1.07 3.33

2004 ••••••

27.62 6349 0.99 146

2005 "j'

23.23 6740 081 2.57

2006 25.45 68.06 0.79 402

2007 24.51 55.59 12.87 3.61

2008 ;, 27.16 49.85 12.17 448

243

Table 4.3.27: Rankin~ of GWC Components of LPL for Liquidity

Year R1 R2 R3 R4 TR UR

2003 2 4 3 4 13 2

2004 6 3 4 6 19 5

2005 1 5 5 5 16 3

2006 4 6 6 2 18 4

2007 3 2 1 3 9 1

2008 5 1 2 1 9 1

From the above table we can notice for the financial year's ending on March 31,

2007 and 2008 LPL was in best position towards maintaining its liquidity while for

the year ending on March 31, 2004 its liquidity ranking was last for the period

under study. '. ';:. (_" ,i "I("AC':

~. ~ I' B. Ranking on the basis of Efficiency

L ... L.;, ' ••

I ',~.GAn.::~











DTR : Debtors Turnover Ratio




244



R3: Rank on the basis of DTR


R5: Rank on the basis of CA TR


Table 4.3.28: Activity Ratios of LPL

Particulars WCTR ITR DTR FATR:: CATR AT

2003 . 1.65 5.16 1.83 3.27 1.24 0.88

2004 1.80 4.80 2.09 3.80 1.36 0.98

2005 1.88 5.17 1.78 4.24 1.22 0.94

2006 1.72 4.72 1.76 4.40 1.21 0.94

2007 2.20 5.29 2.33 6.63 1.49 1.09

2008 2.36 5.07 2.76 6.94 1.57 115

Table 4.3.29: Rankinq of GWC Components of LPL for Activity

Particulars R1 :~1ii R2 R3'" IR4 R5.·:;: R6 TR:: UR

2003 6 3 4 6 4 6 29 5

2004 4 5 3 5 3 3 23 3

2005 3 2 5 4 5 4 23 4

2006 5 6 6 3 6 5 31 6

2007 2 1 2 2 2 2 11 2

2008 1 4 1 1 1 1 9 1

From the above table we can notice for the financial years ending on March 31,

2008 LPL was in best position towards maintaining its efficiency while for the


under study.












R1

R2

245



ROA : Return on Asset R3


ROE : Return on Equity R5

Table 4.3.30: Prolitability Ratios 01 LPL Particulars GPMR NPMR 2003 0.0818 0.0390 2004 0.0792 0.0515 2005 0.0915 0.0631 2006 , 0.0786 0.0485 2007 " 0.0850 0.0611 2008

..... 0.0954 0.0688



: Rank on the basis of ROE

ROA ROCE ROE 0.0240 0.0534 0.1283 0.0410 0.0615 0.2333 0.0466 0.0715 0.3067 0.0323 0.0575 0.2167 0.0498 0.0822 0.3403 0.0546 0.0995 0.3955

T bl 4331 R k' IGWCC a e an In 0 t 1 LPL 1 P It bit omponen so or ro I a "Y Particulars R1 ", R2 R3 R4 R5 TR UR 2003 4 6 6 6 6 28 6 2004 5 4 4 4 4 21 4 2005 2 2 3 3 3 13 3 2006 6 5 5 5 5 26 5 2007 3 3 2 2 2 12 2 2008 1 1 1 1 1 5 1


2008 LPL was in best position towards maintaining its profitability while for the


under study.


H10: Enhanced liquidity position is associated with efficient utilization of







vice-versa.

246




is associated with better profitability and vice-versa can be established.

H30: Enhanced efficiency position of firm is associated with better profitability and

vice-versa.

Coefficient of rank correlation between efficiency and profitability is 0.8857 and

the corresponding t-value is 1.1015, this reflects no association between

efficiency and profitability. Thus our hypothesis enhanced efficiency position of

firm is associated with better profitability and vice-versa can not be established.













variable. Second part of the study is an attempt to identify how these four




247




Hypothesis (Ho): t.INT /wc is inversely associated to the company's t.CF /WC

T bl 4332 I a e nven ary an d C h FI as owo fLPL

Year INTlWc LlINTlWc CFlWc LlCFlWc

2003 23.38 - -0.30 -

2004 27.62 4.24 -0.16 0.14

2005 23.23 -4.39 6.02 6.18

2006 25.45 2.22 -108 -709

2007 24.51 -0.94 -5.70 -4.62

2008 27.16 2.65 4.35 1004

Figure 4.3.13: Inventory and Cash Flow of LPL

LlINT and LlCF

15

1 10 1

5 : • 0-' --

• ----- --- • -- .---

-5 I 2004 2006 200 2008

-10 j YEAR

;---+-,\CF • j,INTI

T bl 4333 R a e egression S tatistlcs a f I nventory and Cash Flow of LPL


Multiple R 0.15

R Square 0.02


Standard Error 8.20

Observations 5

Coefficient of correlation between t.INT/Wc and t.CF/Wc is -0.15 and the


t.INT /wc and t.CF/Wc. Thus our hypothesis t-.lNT INC is inversely associated to the

248

company's t.CF,wc cannot be established. The results of simple regression show


variable.

T bl 4 3 34 ANOVA R It 1 I a e esu so nven cry an d C h FI as owo 1 LPL

Of. SS·. MS .. F Significance F Regression 1 4.67 4.67 007 0.81 Residual 3 201.64 67.21

Total 4 206.30

fl' Table 4.3.35: Cae IGlents o etails a 1 Inventory and Cash Flow a ILP L .. : ... Intercept '. .:lINT .'"

Coefficients 1.17 -0.31 Standard Error 3.78 1.19 t Stat .... 0.31 -0.26 P-value stilE. . 0.78 0.81 Lower 95%

.. -10.B5 -4.11

Upper 95% 13.18 34B


Y=1.17-0.31 X

The intercept coefficient and t.INT coefficient are statistically insignificant as the


between t.INT MIG and t.CF MIG.

Table 4.3.36: Residual Output 01 Invento'Y and Cash Flow 01 LPL .f Predicted Ii' Standard .~iF~i

Observation .:lCF .. Residuals . Residuals. 1 -0.16 0.30 0.04 2 2.55 3.63 0.51 3 047 -7.56 -106 4 146 -60B -0.B6

5 0.33 9.71 1.37

Table 4.3.37: Probability Output 01 Inventory and Cash Flow 01 LP L Percentile .:lCF

10 -709 30 -4.62 50 0.14 70 61B

90 1004

249

Figure 4.3.14: Inventory Residual Plot of LPL

!'lINT Residual Plot

ReJi'duals . q w~~:o • ~----~ f------I---~: ~O -----r------j. ----

-,6 -4 -2 -~o 4 4 I -10.00!L-----=--------'

!'lINT -----------------.~

Figure 4.3.15: Inventory Line Fit Plot of LPL . __ ._-------

!'lINT Line Fit Plot

r·t>CF I

I "_ Predicted t>C9

Figure 4.3.16: Normal Probability Plot of LPL


15.00 r=-----,-",,,.,,.-..,,.,.,,,... """,.~.........,,,,,,,,.,,,,,,,,..,.,...,--, 1 0.00 "";:m~: •

!'ICF 5.00 . • 0.00 f-----+----+-----I--+---J -5.00 • 20 • 40 60 80 1pO!

-1O.00L --------------.:

Sample Percentile


Hypothesis (Ho): !'lINT /wc is inversely associated to the company's !'ICF/Wc

Coefficient of correlation between !'IREC/Wc and !'ICF /We is 0.1877 and the


250

t.REC/Wc and t.CF/Wc. Thus our hypothesis t.RECIWc is inversely associated to

the company's t.CFIWc cannot be established. The results of simple regression

show that independent variable can explain only 4% variation in the dependent

variable.

Table 4338· Receivables and Cash Flow of LPL

Year RECJWo ~REC""o CF""o ~CFJWo

2003 65.77 - -0.30 -2004 63.49 -2.28 -0.16 0.14

2005 67.4 3.91 6.02 6.18

2006 6806 0.66 -1.08 -7.09

2007 55.59 -12.4 7 -5.70 -4.62

2008 49.85 -5.74 4.35 10.04

Figure 4.3.17: Receivables and Cash Flow of LPL

LlREC and LlCF

15

1

'~-: --2~"~---·-2""OL.06--- ,A-a--·10 ~

-15 -

YEAR

I----+-- ACF .-- "'REC I

•

Table 4.3.39: Reqression Statistics of Receivables and Cash Flow of LPL


Multiple R 0.19

R Square 0.04


Standard Error 8.15

Observations 5

Table 4 3 40· ANOVA Results of Receivables and Cash Flow of LPL Of SS MS F Sianificance F

Regression 1 7.26 7.26 0.11 0.7625 Residual 3 19904 66.35

Total 4 206.30

251

Table 4341· Coefficients Details of Receivables and Cash Flow of LPL InterceDt ~REC

Coefficientsi' 1.61 0.21 Standard Error 4.18 0.65 t Stat 0.39 0.33 P-value 0.73 0.76 Lower 95% -11.70 -1.84 Uooer95% ii'· 14.93 2.27


Y = 1.61 + 0.21 X

The intercept coefficient and ~REC coefficient are statistically insignificant as the


between ~RECNVC and ~CFNVC

Table 4342· Residual Output of Receivables and Cash Flow of LPL Predicted Standard

Observation t.CF Residuals Residuals 1 1.12 -0.98 -0.14 2 2.45 3.73 0.53 3 1.75 -8.84 -1.25 4 -106 -3.56 -0.51 5 0.38 9.66 1.37

Table 4.3.43: Probability Output of Receivables and Cash Flow of LPL Percentile t.CF

10 -709 30 -4.62 50 0.14 70 6.18 90 10.04

Figure 4.3.18: Receivables Residual Plot of LPL

~REC Residual Plot

!L rc~-------2e:OIIh------

ReS~dual~ __ +___ _.--+-_ :00-

-I~5~ __ -~1~0 _____ -~5 __ 1~1~~~-Y

~REC

252

Figure 4.3.19: Receivables Line Fit Plot of LPL

5· -10

I

I

6REC Line Fit Plot

,.C • v .

• 10 5 • .,

v

-5 -~ ~ D - itT

6REC

-Ii ."'CF II • Predicted IIC!'j1



15.00r----------~--,

1000 6CF5.00 • •

O. Ou-o+----+--··.·-+--··-+----'---+S i.:0--~ • .---.--j -5.00) • 20 ·40 60 1PO

-10.00 I Sample Percentile

c. Loan & Advances and Cash Flow

Hypothesis (Ho): 6LArwc is directly associated to the company's 6CF rwc

Table 4 3 44· Loans and Advances and Cash Flow of LPL

Year li2. LAmc "'LAlWc CF~c . IICFmc

2003 4.57 - -0.30 -

2004 5.18 061 -0.16 0.14

2005 5.43 0.25 6.02 6.18

2006 1.68 -3.75 -1.08 -7.09

2007 3.42 1.74 -5.70 -4.62

2008 6.35 2.93 4.35 10.04

Coefficient of correlation between 6LArwc and 6CFrwc is 0.6613 and the


6LArwc and 6CF/Wc. Thus our hypothesis 6LAIWc is directly associated to the

company's !1CFlWc can be established. The results of simple regression show

253


dependent variable.

Figure 4.3.21: Loan & Advances and Cash Flow of LPL

t.LA and ~CF

15

10

5 -- ....

0 .. ~

2004 2005 ·5

·2qp6 .•. 200 2008

-10 -

YEAR

Table 4.3.45: Reqression Statistics of Loans and Advances and Cash Flow of LPL

Retlression Statistics

Multiple R 0.66

R Square 0.44


Standard Error 6.22

Observations 5

Table 4346· ANOVA Results of Loans and Advances and Cash Flow of LPL Of SS MS F Significance F

Regression 1 90.22 90.22 2.33 0.2242 Residual 3 11609 38.70 Total 4 206.30

Table 4 3 47 Coefficients Details of Loans and Advances and Cash Flow of LPL Intercept t.LA

Coefficients 0.26 1.88 Standard Error 2.82 1.23 t Stat 0.09 1.53 P-value 0.93 0.22 Lower 95% -8.70 -204 Upper 95% 922 5.80


Y = 0.26 + 1.88 X

254

The intercept coefficient and "'LA coefficient are statistically insignificant as the t


T I ab e 4.3.48: R 'd 10 eSl ua utput a f L oans an dAd vances an d C h FI as owo fLPL Predicted Standard

Observation t.CF Residuals Residuals 1 1.41 -1.27 -0.24 2 073 5.45 1.01 3 -6.80 -0.29 -0.05 4 3.53 -8.15 -1.51

5 5.77 4.27 0.79

Table 43 9 P .4 roba bl 0 I ity utput a fL oans and Advances and Cash Flow of LPL Percentile t.CF

10 -7.09 30 -4.62 50 0.14 70 6.18

90 1004

Figure 4.3.22: Loan & Advances Residual Plot of LPL

I

I "'LA Residual Plot

I Residuals

f ;-10:{)

• •

-2 -5.0 2 f 1 <J. 001 • "'LA

-_.

Figure 4.3.23: Loan & Advances Line Fit Plot of LPL ! ----_. "'LA Line Fit Plot ·----1

~~--~s,------,

• I m .. ' I

-+--f- 0- " ..... -+ ---j 13 -1 -2 -5 ~ 4 '--..-~~~~1

10

5 • I• ,1CF- ---l • Predicted "'C~ '--- '

"'LA

255



15.oOr---------------, 10.00 • I

t.CF 5.00 • I -~.~~--.-~~-;-~I-IO .... ·-;0~70-1 0 1

-10.00L----------------'

Sample Percentile ---~ -----------------'


Hypothesis (Ha): t.CBB/Wc is directly associated to the company's t.CF/Wc

Table 4 3 50· Cash and Bank Balance and Cash Flow of LPL

Year CBIhvc. ~CBB/Wc CFlWc 2003 3.33 - -0.30

2004 146 -1.87 -0.16

2005 2.57 1 .11 6.02

2006 4.02 145 -1.08

2007 3.61 -041 -5.70

2008 448 0.87 4.35

Figure 4.3.25: Cash & Bank Balance and Cash Flow of LPL

15 -

10 -

5 -

-5 -,

-1 0 ~

~CBB and ~CF

YEAR

i\CF/Wc

-0.14

6.18

-7.09

-4.62

10.04

Coefficient of correlation between t.CBB/Wc and t.CF/Wc is 0.1495 and the


t.CBB/Wc and t.CF/Wc. Thus our hypothesis t.CBB;wc is directly associated to the

256

company's Jl.CFNVc can be established. The results of simple regression show

that independent variable can explain only 2% variation in the dependent

variable.

T bl 4351 R a e egression S tatlstlcs a fChdBkBI as an an a ance an d C h FI as owo fLPL

••. ;Ul; Regression Statistics .; ;.,~ .. ;; Multiple R 0.15

R Square 0.02

Adiusted R Square -0.30

Standard Error 8.20

Observations 5.00

Table 4352· ANOVA Results of Cash and Bank Balance and Cash Flow of LPL . . .. .,; .. .. ·Of SS ;;,; . MS H" F Significance F


Total 4 206.30

Table 4353· Coefficients Details of Cash and Bank Balance and Cash Flow of LPL Interceot t.CBB

Coefficients 0.75 0.78 Standard Error 3.73 3.00 t Stat ;;,;;.1 0.20 0.26 P-value ',1 0.85 0.81 Lower 95% -11.12 -8.75 Upper 95% 12.62 10.32


Y=O.75+0.78X

The intercept coefficient and Jl.CBB coefficient are statistically insignificant as the


T bl 4 3 54 Rd I 0 a e eSI ua utput a IC h dB kB I as an an a ance an d C h FI as owo fLPL Predicted .

i Standard 'ilil.' Observation t.CF ;:l!' Residuals:· •.. Residuals'

1 -0.72 0.86 0.12 2 1.62 4.56 0.64 3 1.89 -8.98 -1.26 4 0.43 -5.05 -0.71

5 1.43 8.61 1.21

257

Table 4 .3.55: Probability Output of Cash and Bank Balance and Cash Flo . Percentile heF 10 -709 30 -4.62 50 0.14 70 6.18

90 1004

Figure 43.26 Cash & Bank Balance Residual Plot of LPL

",CBB Residual Plot

Or-----.;:-. --=-;

Re iduals • -2 -1 -~.O

"'CBB

Figure 4.3.27: Cash & Bank Balance Line Fit Plot of LPL ,--"'CBB Line Fit Plot

r-"'t --~j 5 0 •

"'C 5- • n

-..... v

.. ~ D 1 • -3 -2 -1 f5

-~ 0

"'CBB


I

-!

.hCF ! I

• Predicted lIC~

I Normal Probability Plot

15.00,----,.------,.,....-----, 10.00 •

"'CF 5.00 0.00 -- I •

-5.0 • 20 • 40 60 80 100 -10.0(f----------~--..J

Sample Percentile

258

w of LPL

Section II: Liquidity and Profitability Analysis
















Hypothesis (Ho): !'.INT!Wc is inversely related to the company's !'.PM!Wc

T bl 4356 I a e nven ory an d P It bTl f LPL rOlalnyo

Year • •• INT /wc ":", t.INT /wc PMIWC t.PM;;~ 2003 23.38 - 9.87 -

2004 27.62 4.24 10.51 0.64

2005 23.23 -4.39 11.00 0.49

2006 .

25.45 2.22 9.43 -1.56

2007 24.51 -0.94 1103 1.59

2008 27.16 2.65 13.15 2.12

Coefficient of correlation between !'.INT!Wc and "'PM!Wc is -0.0649 and the

corresponding t-value is -00460 this reflects weak negative association between

!'.INT!Wc and !'.PM!Wc. Thus our hypothesis "'INT!Wc is inversely associated to the

company's "'PM!Wc cannot be established. The results of simple regression show

that independent variable cannot explain any variation in the dependent variable.

259

Figure 4.3.29: Inventory and Profitability of LPL

LlINT and LlPM

6 .

•

. -.........

2004 2005 2008

•

YEAR

~ .lPM _ ..\INT I

T b a Ie 4.3.57: Regression S tatistics of nventory an d Profrta bl f LPL IIty 0


Multiple R 0.06

R Square 0.00


Standard Error 1.62

Observations 5

T bl 4358 ANOVA R It f I a e esu so nven ory an d P ft bit f LPL ro I a Illy 0

Of SS MS F SiQnificance F ReQression 1 0.03 0.03 0.01 0.9175 Residual 3 7.92 2.64 Total 4 7.95

T bl 4 3 59 C ffi a e oe IClents D etalls 0 f l f PL Inventory and Profitabllty 0 L Intercept diNT

Coefficients 0.68 -003 Standard Error 0.75 0.24 t Stat 0.90 -0.11 P-value 043 0.92 Lower 95% -1.71 -0.78 Upper 95% 306 0.73


Y = 0.68 - 0.03 X

The intercept coefficient is statistically insignificant as the t-value is less then 2.

260

T bl 4 3 60 R 'd lOt til a e es! ua utpu a nventory an d P f bl 1 LPL ro Ita I It a Predicted Standard

Observation t<.PMlWc Residuals Residuals .;;. 1 0.56 008 0.05 2 079 -0.30 -0.22 3 062 -2.18 -1.55 4 0.70 0.89 0.63

5 061 1.51 1.08

Table 4.3.61; Probability Output 01 Inventory and Prolitability 01 LP Percentile t<.PM

10 -1.56 30 0.49 50 0.64 70 1.59

90 2.12

Figure 4.3.30; Inventory Residual Plot 01 LPL

",INT Residual Plot

lIlNT

Figure 4.3.31; Inventory Line Fit Plot 01 LPL

!---~-IN-T-L-in-e-Fit P-Io-t---

liP • ~--~2

lIlNT

+ "

+ __ ---'5

261

I +t<.PM I,

• Predicted t<.PM I

L


INormal Probability Plot

I 4.00 I

• • I I1PM·OO •

0.00 ~--+-.=---+----+---+-----l

-2.0u • 20 40 60 80 --1P0 i

Sample percentil~. __ ~


Hypothesis (Ho): I1REC/Wc is inversely related to the company's ~PM/Wc

Table 4.3.62: Receivables and Profitabilitv of LPL

Year REC,",~ "REC..,c PMMI" "PMIW~

2003 65.77 - 9.87 -2004 6349 -2.28 10.51 0.64

2005 674 3.91 11.00 049

2006 6806 0.66 943 -1.56

2007 55.59 -1247 1103 1.59

2008 49.85 -5.74 13.15 2.12

Figure 4.3.33: Receivables and Profitability of LPL

!>PM and !>REC

5 a __ _

2008

-5 - • -10 .

• -15 ~

YEAR

Coefficient of correlation between I1REC/Wc and I1PM/Wc is -0.6228 and the


between ~REC/Wc and ~PM/Wc. Thus our hypothesis ~REC,wc is inversely

associated to the company's I1PM,wc can be established. The results of simple

262

regression show that independent variable can explain about 39% of the

variation in the dependent variable.

Table 4.3.63: Rearession Statistics of Receivables and Profitabilitv of LPL

Rearessian Statistics

MultiDle R 062

R Sauare 0.39


Standard Error 1.27

Observations 5

Table 4.3.64: ANOVA Results of Receivables and Profitabilitv of LPL Of SS MS F Sianificance F

Rearession 1 3.09 3.09 1.90 0.26 Residual 3 4.87 1.62 Total 4 7.95

Table 4.3.65: Coefficients Details of Receivables and Profitabilitv of LPL ;:,?~ InterceDt I:·,· ~REC ....... :

Coefficients!::!!" 0.21 -0.14 Standard Error 0.65 0.10 t Stat 0.32 -1.38 P-value 077 026 Lower 95% -1.87 -0.46 UDDer 95% 2.29 0.18


Y=O.21-0.14X

The intercept coefficient and "'REC coefficient are statistically insignificant as the


Table 4.3.66: Residual Output of Receivables and Profitabilitv of LPL Predicted Standard

Observation ~PM Residuals Residuals 1 0.53 0.11 0.10 2 -0.33 0.82 0.75 3 0.12 -1.68 -1.52 4 1.95 -0.36 -0.33 5 1.01 1.11 1.00

263

Table 4.3.67: Probability Output of Receivables and Profitability of ... ,. Percentile .

10 30 50 70

90

Figure 4.3.34: Receivables Residual Plot of LPL

"'REC Residual Plot

Res duals • • -10 -5

Figure 4.3.35: Receivables Line Fit Plot of LPL

1--- "'REC Line Fit Plot

I 4

,xf,PM

-1.56 049 0.64 1.59

2.12

• 5 !

- • 2 "'Pi • 1·6PM . ., ~ I. • • Predicted 6PM I 0 ------

-15 -10 -5 2t. P



4.00r---~~~------""'---

"'PM·OO • • • • O.OO!---+-~--+-~+---+----

_ 2.00"---'".'---'2 ... ° _____ 4..::°=--_.::6°"-_-=8=-°_-------.01 00

Sample Percentile

264

LPL

c. Loan & Advances and Profitability

Hypothesis (Ho): t>LA/Wc is directly associated to the company's t>PM/Wc

Table 4.3.68: Loans and Advances and Profitabil itv of LPL

Year LAowe Ll.lA""e PMMlc

2003 4.57 - 9.87

2004 5.18 0.61 10.51

2005 5.43 0.25 11.00

2006 1.68 -3.75 9.43

2007 3.42 1.74 1103

2008 6.35 2.93 13.15

Figure 4.3.37: Loan & Advances and Profitability of LPL

"LA and l>PM

Ll.PMowe

-

0.64

0.49

-1.56

1.59

2.12

----• -"=--::-=;==2~::::O5-~~~ ~ <--~--2-0-08-

•

YEAR

[~~ L\PM -- !1LA1WC I

Coefficient of correlation between t>LA/Wc and t>PM/Wc is 0.9957 and the


t>LA/Wc and t>PM/Wc. Thus our hypothesis MA/Wc is directly associated to the

company's t>PM/Wc can be established. The results of simple regression show

that independent variable can explain almost 99% of the variation in the

dependent variable.

Table 4.3.69: Reqression Statistics of Loans and Advances and Profitability of LPL

ReQression Statistics

Multiple R 1.00

R Sauare 0.99

Adiusted R Sauare 0.99

Standard Error 0.15

Observations 5

265

Table 4.3.70: ANOVA Results of Loans and Advances and Profitability of LPL ., .. -,'·.Of·· SS·,:Lt ::>::" MS . Y I·:>::';' F Signifitance F

ReQression 1 7.89 7.89 343.85 0.000342 Residual 3 0.07 0.02

Total 4 7.95

Table 4.3.71: Coefficients Details of Loans and Advances and Profitability of LPL

Coefficients:;F· Standard Errot : .. '

P-value Lower 95% • <:', ... UDDer 95%,,$l:l:b

---'~T!'lnterceDt~1 ; .. 'St: ALA 0.46 0.07 6.68 0.01 0.24 0.68

0.56 0.03 18.54 000 0.46 0.65


Y = 0.46 + 0.56 X

The intercept coefficient and L'lLA coefficient are statistically significant as the t

value for both variables is more then 2.

Table

Table 4. 3.73: Probabilitv Outout of Loans and Advances and Profitabilitv of LPL .~ .. , Percentile. L~i¥:::ic~: ' ; i~~rnPM

10 -1.56 30 0.49 50 0.64 70 1.59

90 2.12

266

Figure 4.3.38: Loan & Advances Residual Plot of LPL

""LA Residual Plot

""LA

Figure 4.3.39: Loan & Advances Line Fit Plot of LPL

""LA Line Fit Plot

~ (;> .!'.PM I

IC:-~+-~-+--I",*~--l~~ • Predicted !'.PM

-2 2

""LA



4.00 .-------~=~-----~~-------.

""PM·OO

_2.nnl:.......~=

Sample Percentile


Hypothesis (Ha): ""CBBlWc is directly associated to the company's ""PMlWc

267

T bl 4374 C h d B k B I a e as an an a ance an d P fit bTl f LPL ro I a Iity 0

Year CBBlWC Ll.CBBlWc PMlWc Ll.PMMlc

2003 3.33 - 9.87 -

2004 1.46 -1.87 10.51 0.64

2005 2.57 1.11 11.00 0.49

2006 402 1.45 9.43 -1.56

2007 3.61 -0.41 11.03 1.59

2008 4.48 0.87 13.15 2.12

Figure 4.3.4 1: Cash & Bank Balance and Profitability of LPL

i\.CBB and i\.PM

3

2

0

:: j 2004 /

/ ~

·3

YEAR

Coefficient of correlation between Ll.CBBlWc and Ll.PMlWc is -0.3208 and the


Ll.CBBlWc and Ll.PMlWc. Thus our hypothesis Ll.CBBIWc is directly associated to the

company's Ll.PMIWc cannot be established. The results of simple regression show


variable.

Table 4.3.75: Regression Statistics of Cash and Bank Balance and Profitability of LPL


Multiple R 0.32

R Square 0.10


Standard Error 1.54

Observations 5

268

Table 4.3.76: ANOVA Results of Cash and Bank Balance and Profitability of LPL I··;m::: .. : •.. Df. 55 M5 :?: ::,,~;:; F 5ignitl~ance F

Regression 1 0.82 0.82 0.34 0.5986 Residual 3 7.14 2.38 T6lal. 4 7.95

L


Y = 0.73 - 0.33 X

The intercept coefficient and t.CBB coefficient are statistically insignificant as the


Table 4.3.78:

269

Figure 4.3.42: Cash & Bank Balance Residual Plot of LPL

I ! ~CBB Residual Plot

L ~CBB ------

Figure 4.3.43: Cash & Bank Balance Line Fit Plot of LPL

I I I

~P

. - -------------,

~CBB Line Fit Plot

~CBB

• "'PM I

.yredicted ,',PM,



4.001,.----~

-2 .OO'~~="-'

Sample Percentile ----------

270


A. NWC

T bl 4380 O' a e nglna an d T d V I ren a ues 0 IN t W k' C I I LPL e or 109 aplta 0 Original and Trend Values of Net Working Capital (Rs. In Crs.)

Year Original Value Indices Trend Value' (Y,) 2002-03 17.78 100 15.87 2003-04 19.23 108.16 1906 2004-05 20.08 112.94 22.25 2005-06 22.3 12542 2544 2006-07 3122 175.59 28.63 2007-08 3247 182.62 31.82

Chi-square Test: Computed Value 01 X' = 1.08; Critical Value of X' = 11.07 Result: Ho is accepted. 'Y, stands lor computed values 01 net working capital based on the least square equation of Y, = a + b X where the equation comes to Y, = 12.68 + 3.19 X ( origin 01 X = 2002-03, X in units of years and Y in crores 01 rupees)

Figure 4.345: Liquidity Trend (NWC) of LPL

35 1 30

-; 25

o 20 o '=- 15

~ 10

5

a 2002-03 2003-04

LIQUIDITY TREND

2004-05 2005-06

YEAR

2006-07

1---...- Original Value --- Trend-Value" (Yc) 1

•

2007-08


under study. The net working capital indices were 108.16,112.94,125.42,

175.59 and 182.62 from 2003-04 to 2007-08 in comparison to 2002-03, the

base year. The linear least squares trend values of working capital in LPL are

also shown in Table 4.3.1. There is almost no deviation in the year 2003-04,

while the deviation in the year 2007-08 was marginal. Years ending on March

2003 and 2007 observed positive deviations while years ending on March 2005

and 2006 were having negative deviations.

271

B. Current Assets

T bl 4381 0 a e flQma an dT d V I ren a ues 0 fC urren tA sse S 0 f LPL Original and Trend Values of Current Assets (Rs. In Crs.)

Year Original Value Indices Trend Value' (Y,) 2002-03 23.4 100 21.39 2003-04 25.31 108.16 26.21 2004-05 30.74 131.37 31.02 2005-06 31.59 135.00 35.84 2006-07 43.53 186.03 40.66 2007-08 46.02 196.67 45.48

Chi-square Test: Computed Value of X' = 0.94; Critical Value of X' = 11.07 Result: Ho is accepted 'Y, stands for computed values of current assets based on the least square equation of Y, = a + b X where the equation comes to Y, = 16.57 + 4.82 X ( origin of X = 2002-03, X in units of years and Y in crores of rupees)

Figure 4.3.46: liquidity Trend (CA) of LPL

50

40

~ o 30 c :. 20

LIQUIDITY TREN D

~-- ~-.. -- ~-------.==---..... ... .,~~-... ~--==--

•

~ ':~1 _________ __ ------,------------~

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

YEAR

I __ Original Value -_ Tr~~d Value· (Ye) I

The current assets registered an increasing trend throughout the period under



The linear least squares trend values of current asset in LPL are also shown in


in the year 2007-08 was marginal. Years ending on March 2003 and 2007

observed positive deviations while years ending on March 2004 and 2006 were

having negative deviations.

272


Table 4.3.82: Orlainal and Trend Values of Current Liabilities of lPl Oriainal and Trend Values of Current Liabilities (Rs. In Crs.)

Year Oriqinal Value Indices Trend Value' (Y,) 2002-03 5.62 100 5.52 2003-04 6.08 108.19 7.14 2004-05 10.66 189.68 8.77 2005-06 9.29 165.30 10AO 2006-07 12.31 21904 12.03 2007-08 1355 241.10 13.65

Chi-square Test: Computed Value of X' = 0.69; Critical Value of X' = 11.07 Result: Ho is acceoted 'Yo stands for computed values of current liabilities based on the least square equation of Yo = a + b X where the equation comes to Yo = 3.89 + 1.63 X ( origin of X = 2002-03, X in units of vears and Y in crores of ruoees)

Figure 4.3A7: Liquidity Trend (Cl) of lPl

16

1 14 -:- 12 ~ 10 1

~ j 2002-03

LIQUIDITY TREND

2003-04 2004-05 2005-06 2006-07

YEAR

I--+- Original Value - __ Trend Value* (Ye) [

2007-08


study, except in the year 2005-06. The current liability indices were 108.19,

189.68,165.30,219.04 and 241.10 from 2003-04 to 2007-08 in comparison to




in the year 2006-07 was marginal. Years ending on March 2003 and 2005

observed positive deviations while years ending on March 2004 and 2006 were

having negative deviations.

273

4.3.4: Analysis of WCM Efficiency Using DEA





capital are inventories, accounts to be paid to suppliers, and payments to be










components is important to the financial health of businesses from all industries.













274

measured in terms of the "days of working capital" (OWC). OWC value is based

on the ruppe amount in each of equally weighted receivable, inventory and

payable accounts. The OWC represents the time period between purchases of











calculating these values are given in the following Table.


Component

Oays Sales Outstanding (OSO)

Oays Inventory Outstanding (010)

Oays Payable Outstanding (OPO)

Days Working Capital (OWC)

Current Ratio (CR)




Equation


Inventories/(Sales/365)

Payables/(Sales/365)

OSO + 010 - OPO



(Operating Income + Oepreciation)lTotal Assets

(Operating Income + Oepreciation)/Sales

275


A. Target

Table 4383 nput Oriented CRS Enve opment Model: Target EfficienfdiJlput Target

IA,:it~ 'd IS OMlJ':!.l:LOMlJ "?:~f: Efficieritli'\Pl.lt Target:.':",:",.· .:.

I' Name "OSO~. 010. ::,.~,Of>O OWC\::~.CR 1 2003 139.3305 66.4001 47.8275 157.9031 2.7333 0.1056 0.0964 2 2004 116.2209 63.3287 37.2880 142.2617 2.6247 0.1055 0.0917 3 4 5

6

2005 204.7874 70.5686 79.1673 196.1887 2.8443 0.0963 0.1029 2006 159.2426 630989 58.8609 163.4806 2.5687 0.0928 0.0918 2007 139.8381 64.8902 48.5767 156.1516 2.6672 0.1022 0.0942

2008 1320887 71.9751 42.3789 161.6848 2.9830 0.1199 0.1043

B. Slack

C. Efficiency

Table 4.3.85: Input o riented CRS Enve opment M odel: Efficiency :::SiFJ:l·: ."J~;'>' iii'NI1~1 I :"i()ptimal Lambda~.r'il:~ .

biipMU. OMU ' ',;;i:iji{: Sumof' !;0:'" Benchmarks:"" .. :'ruNo. Name . I 'Efficiencv lambdas RTS :i~~?J{ : 'i ',':: :~¥f:-':

1 2003 0.93886 0.927 Increasing 0.232 2005.000 2 2004 0.87264 0.880 Increasinq 0.880 2008.000

3 2005 1.00000 1.000 Constant 1.000 2005.000 4 2006 0.81513 0.888 Increasinq 0.577 2005.000 5 2007 0.94106 0.907 Increasing 0.276 2005.000

6 2008 1.00000 1.000 Constant 1.000 2008.000


oriented CRS Model, using OSO, 010, OPO, OWC, CR, and CCE as input

parameters and IA & IS as output parameters. Years 2005 and 2008 LPL's' are

most efficient with an efficiency score of 1.0000; year 2006 is least efficient with

an efficient score of 0.81513.

276






Table 4.3.88: M easure Specific Model: DSO Measure-Specific Efficiency .; . :.' '!iW1~G:[;,"

""x :: Lambdas with .: :::0:::1; . DMU DMU <3\:1, ,; Sum of;§! • :lI~~'; Benchmarks-);::

"iNo.:··· Name -Efficiency lambdal!, RTS :..:--:: --Tp~C;'oJi

1 2003 0.61337 0.924 Increasing 0.924 2008.000 2 2004 0.66516 0.880 Increasing 0.880 2008.000

3 2005 1.00000 1000 Constant 1.000 2005.000 4 2006 0.56174 0.880 Increasing 0.880 2008.000

5 2007 0.76294 0.903 Increasinq 0.903 2008.000

6 2008 1.00000 1.000 Constant 1.000 2008.000

Table 4.3.88 shows result taken DSO as the input parameter. Year 2005 and

2008 are most efficient with a score of 1.0000 and year 2006 is least efficient


277


Table 4.3.89: Measure Specific Model: 010 Efficient Input Tarqet

OM~,~ OMU ::. ;: Efficientlnput TarQet •••• ,±v; EfficienfOutout TarQet No. Name 050.··· 010 I: .. [)PO OWC ,,- I::CR IA··.:.··iil; 15

1 2 3 4 5

6

2003 145.5390 66.3621 50.9423 1609588 2.7250 0.1038 0.0964

2004 127.0684 63.2624 42.7301 147.6006 2.6102 0.1023 0.0917

2005 204.7874 70.5686 79.1673 196.1887 2.8443 0.0963 0.1029

2006 180.4701 62.9690 69.5107 173.9284 2.5404 0.0866 0.0918

2007 139.8381 64.8902 48.5767 156.1516 2.6672 0.1022 0.0942

2008 1320887 71.9751 42.3789 161.6848 2.9830 0.1199 0.1043




Model: 010 Slacks

Table 4.3.91 shows result taken 010 as the input parameter. Year 2005 and



278


T bl 392 M a e4. Sfi M d I OPO Elf easure ,peGI IG o e: IGlent nput T arget

OMUU I;.OMU . Efficient Input Target . ~"b.·. Efficient Output Target .....

N"':-O'd.' Name OSO' 010 ,,;01"0 OWC '11 %lI;CR IA··J~· ••••••

IS 1 2 3 4 5 6

2003 122.0514 66.5058 391586 149.3986 2.7563 0.1107 0.0964 2004 116.2209 63.3287 37.2880 142.2617 2.6247 0.1055 0.0917 2005 204.7874 70.5686 79.1673 196.1887 2.8443 0.0963 0.1029 2006 116.2814 63.3617 37.3074 142.3357 2.6260 0.1055 0.0918 2007 119.3168 65.0157 38.2813 146.0513 2.6946 0.1083 0.0942

2008 1320887 71.9751 42.3789 161.6848 2.9830 0.1199 0.1043

Table 4.3.92 indicates the results which we have obtained uSing Measure



Table 4.3.94 shows result taken DPO as the input parameter. Year 2005 and



279

iv. Days Working Capital - DWC

Table 4.3.95: Measure Specific Model: OWC Efficient Input Target

OMU" OMU ··m>::· Efficient Input Target . Efficient Output Target No.,!,: I ',:"Name 050' .. 010 }'OPO OWC :1i ':i!¥CR· IA .:.)1\ IS

1 2 3 4 5

6

2003 122.0514 66.5058 39.1586 149.3986 2.7563 0.1107 0.0964 2004 116.2209 63.3287 37.2880 142.2617 2.6247 0.1055 0.0917 2005 204.7874 70.5686 79.1673 196.1887 2.8443 0.0963 0.1029 2006 116.2814 63.3617 37.3074 142.3357 2.6260 0.1055 0.0918 2007 119.3168 65.0157 38.2813 1460513 2.6946 0.1083 0.0942 2008 1320887 71.9751 42.3789 161.6848 2.9830 0.1199 0.1043


Specific Input oriented CRS Model, using OWC as input parameters and IA & IS


T bl 4397 M a e easure S T M d I OWC 'pecllc 0 e : Measure-Specific Efficiency

"ffr" Emal LambdaSciwith >'l?/ " '1",d,,'" H,,~:

~~' , DMO OMU: Aiiff[iF Sumo~ .. :. Benchmarks'~l~" ".No. Name . :'Efficiencv lambdas t ' RTS ':7:m":

1 2003 0.68291 0.924 Increasing 0.924 2008.000 2 2004 0.68396 0.880 Increasing 0.880 2008.000 3 2005 1.00000 1.000 Constant 1.000 2005.000 4 2006 0.67075 0.880 Increasing 0.880 2008.000 5 2007 0.84108 0.903 Increasinq 0.903 2008.000 6 2008 1.00000 1.000 Constant 1.000 2008.000

Table 4.3.97 shows result taken OWC as the input parameter. Year 2005 and



280

DMU No.

1

2

3

4

5

6


I Model: CR Efficient



output parameters.

Table 4 3 100 Measure Specific Model: CR Measure-Specific Efficiency -i), _ .'

imDMu :t;Niime

2003 0.67435 0.92B Increasinq 0.316 2005.000 0.613 200B.000

2004 0.64147 0.BB2 Increasing 0.146 2005.000 0.736 200B.000

2005 1.00000 1.000 Constant 1.000 2005.000

2006 0.75304 0.B92 Increasing 0.B62 2005.000 0.029 200B.000

2007 0.B6563 0.907 Increasing 0.276 2005.000 0.631 200B.000

200B 100000 1.000 Constant 1000 200B.000

Table 4.3.100 shows result taken CR as the input parameter. Year 2005 and



281

4.4 INTER FIRM WCM ANALYSIS USING DEA

i. Efficiency of firms

Table 4.4.1: E ff icient nput Tarqet

:' ['S':DMU ill:\;" ';; t?:0?,;;'~: 'm~t Effjcie!ltOutput Target·

It:F. EfflcieritElnput Target " ,':f1:;fiiH>:'; , ,:ih',' DMUNo. l;hName DSO DIO .. :~"DPO DWC'.!li1 I,' CR IA IS : ....

1 CHL 75.6766 63.7669 52.9791 86.4644 1.8191 0.2068 0.2490

2 DPL 163.7614 133.3476 67.6459 229.4630 2.9989 0.1605 0.3317

3 LPL 35.3764 29.8090 24.7661 40.4194 0.8504 0.0967 0.1164

2 DPL 0.0000 0.0000

3 LPL 43.0548 45.0594 0.0000

T bl 43 I a e: 4. nput- nented C S Eff R iciency ";" : " IlH:' IflPut- . ; ::;SJ!G4L';; 'Ii , :'p-itii: "::::3:';"

DMU .... Orie!lted C RS *~q!ll:of RTS~ "

Optimal Lal\l;!idas with

• No. DMU Name ;~;Efflciency .:.Iambdas Benchmarks '. 1 CHL 1.00000 1.000 Constant 1.000 CHL

2 DPL 1.00000 1.000 Constant 1.000 DPL

3 LPL 0.43817 0.467 Increasing 0.467 CHL

Table 4.4.4: Input-Oriented CRS Efficiency , :< sq;' <:;. J!:"': •. .. :,j'lriput-Oriented CRS Efficiency ...•.•• :i0".

. DMU ' 'itr!''','::,,'' ,f:iL: '. :}J}~¥4R;H; DMU No, , Name AVG .• ' 2003.i ~~;O04 2005 1'11' 2006 ·.2001"· . 20081:'

1

2

3

CHL 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000

DPL 1.0000 1.0000 1.0000 0.9434 1.0000 1.0000 1.0000

LPL 0.4381 0.4304 0.4458 0.3988 0.3073 0.7397 0.7125

From the above tables we can notice that CHL is most efficient for all the years

under study. DPL was also most efficient performing firm except for the year

2005. LPL was least efficient firm throughout the period under study.

282

:.

ii. DSO

Table 4.4.5: Input-Oriented C RS Measure- ped ic 0 e S f MdlT ar~et ;ji~,t'" ·,.i:q .L ,;;;g:lL

;;;j~W':'; EffiCie~~?utPut Target, '::z({<' " :. '. Efficient InputTarget OMU OMU

No. Name 050 , ,:, 010 . OPO" OWC .' :fCR IA ':<::11"> ' IS y.

1 CHL 75.6766 63.7669 52.9791 86A644 1.8191 0.2068 0.2490

2 DPL 163.7614 133.3476 67.6459 229A630 2.9989 0.1605 0.3317

3 LPL 35.3764 29.8090 24.7661 40A 194 0.8504 0.0967 0.1164

0.0000

2 0.0000 0.0000 0.0000 0.0000 0.0000

3 LPL 0.0000 42.7965 31.7554 154.6617 2.5483 0.0000 0.0195

Table 4 4 7' Input Oriented CRS Measure Specific Efficiency - -

,I :<:')"1"; "!nput-Oriented CRS,~ .'C- :Jill": ,,' , ;f,:,~m:l'fi> 'OMtn OMU ,:\ffiMeasure-Specific '!l:: (,Sum of Optimal Lambdas with .. No~ Name .,,~!J:q::.: Efficiency ;.::;:lj "Iambdas .. RTSh: Benchmarks

1 CHL 1.00000 1.000 Constant 1.000 CHL

2 DPL 1.00000 1.000 Constant 1.000 DPL

3 LPL 0.19764 OA67 Increasing 0.467 CHL

Table 4.4.8: InpUl-C' I "CRS <A, i i ';': ·:;:iiz I. .. CHS

, ii: :' ,;:;i- . j:';~a~e 2003: 1:Jl.iI~~n. :"':';'. •.. 2006 2()O7 OMU No. "V,"" ; 2005 ,,,, 2008 .,. <,"

1

2

3

CHL 1.0000 1.00000 1.00000 1.00000 1.00000 1.00000

DPL 1.0000 1.00000 1.00000 OA0269 1.00000 1.00000

LPL 0.1976 0.15802 0.15529 0.12401 0.14935 0.30200




283

1.00000

1.00000

OA1313

iii. 010

Table 4 4 9· Input-Oriented CRS Measure-Specific Model Target

63.7669 52.9791 86.4644 1.8191 0.2068 0.2490

2 DPL 163.7614 133.3476 67.6459 229.4630 2.9989 0.1605 0.3317

3 LPL 35.3764 29.8090 24.7661 40.4194 0.8504 0.0967 0.1164

2 DPL 0.0000 0.0000 0.0000 0.0000 0.0000. 0.0000 0.0000

3 LPL 143.6206 0.0000 31.7554 154.6617 0.0195

Table 4.4.11: I

DMU with Name CHL 1.00000 1.000 Constant 1.000 CHL

1.00000 1.000 Constant 1.000 DPL


Table 4.4.12: Input-Oriented CRS Measure-Specific Efficiency :: '.::. Input-Oriented CRS Measllfe-Specific Efficienc\)lfj .. .: ··1

DMU >;;1<,0"," .. DMU No:

1;:2 Name

he::. AVG. 2003 :.p '1'~2004 2005:~~1 12006 2007: . 2008 .•

1

2

3

CHL 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000

DPL 1.00000 1.00000 1.00000 0.54483 1.00000 1.00000 1.00000

LPL 0.41056 0.42269 0.26521 0.39879 0.30727 0.56572 0.57145




284

DMU No. 1

2

3

iv. DPO

CHL 75.6766 63.7669 52.9791 86.4644 1.8191 0.2068 0.2490

DPL 163.7614 133.3476 67.6459 229.4630 2.9989 0.1605 0.3317

LPL 35.3764 29.8090 24.7661 40.4194 0.8504 0.0967 0.1164

Table 4 4 14' Input-Oriented CRS Measure-Specific Model Slacks

jiM~ .• DMU .'iT "rn'p'\.it Slacks ·,,'i'F··· Outpt.t' Slacks

.• No.' ... Name. ','2~,DSO 010 "0' ·.;DPO DWC'~ CR '., IA.:t!. I',:IS 1 CHL 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

2 DPL 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

3 LPL 143.6206 42.7965 0.0000 154.6617 2.5483 0.0000 0.0195

Table 4 4.15' Input-Oriented CRS Measure-Specific Efficiency

, ~-:.- . Input-Oriented CRS ~' ~,DMU DMU ,Measure.Specific 1': Sum of .'. '.' :.- No. - Name I' f'· Efficiency"" .l' lambdas ' ••

" .. ;,-" .. Optimal Latn6Ctas with

Benchmarks 1 CHL 1.00000 1.000 Constant 1.000 CHL

2 DPL 1.00000 1.000 Constant 1.000 DPL


T bl O' dCRS M STEff a e 4.4.16: n ut-.. ~

easure- ::ipeci Ie fCfency

• Inpuf.Orit.1ted CRS Meastirij.Specific EfficierillY· . .. , 'T!f§l%};~"

..-

DMU No; 1 ... DMU r- Name AVG;':j). 2003:'. 20~~t~~~ ._ 2006i6~~ _ 200B";.t

1

2

3

CHL 1.00000 1.00000 1.00000 1.00000 1.00000 100000 1.00000

DPL 1.00000 1.00000 1.00000 0.94341 1.00000 100000 1.00000

LPL 0.43817 0.43043 0.44582 0.27518 0.26175 0.72496 0.71251




285

DMU No.

1

2

3

DMU

2

3

v. DWe

Target

DPL 163.7614 133.3476 67.6459 229.4630 2.9989 0.1605 0.3317

LPL 35.3764 29.8090 24.7661 40.4194 0.8504 0.0967

0.0000

2 DPL 0.0000 0.0000 0.0000 0.0000

3 LPL 143.6206 42.7965 31.7554 0.0000 2.5483

Optimal Larnb(las with

1 1.00000 Constant 1.000 CHL

1.000 DPL


2006 1.00000 1.00000 1.00000

DPL 1.00000 1.00000 1.00000 0.34654 1.00000 1.00000 1.00000

LPL 0.20719 0.18015 0.13577 0.16185 0.16870 0.27349 0.40514




286

VI. CR

Table 4.4.21: I CRS

OMUOMU No.

2

3

2

3

75.6766 63.7669

DPL 163.7614 133.3476

29.8090 24.7661 40.4194 0.8504 0.0967 0.1164

Table 4 4 22' Input-Oriented CRS Measure-Specific Model Slacks

'dMU. OMU '. ~:t;" ''''': Input Slacks O~"CR OutpUtYSlacks

'c .. No •. Name ." ,jiloso •

010 ••.•• ~ •• ,(,: OPO IAft! i IS 1 CHL 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

2 DPL 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

3 LPL 143.6206 42.7965 31.7554 154.6617 0.0000 0.0000 0.0195

i i

.~.~ ... of

2 DPL 1.00000 1.000 Constant 1.000 DPL

3 0.467 Increasing CHL

CRS

DPL 1.00000 1.00000 1.00000

LPL 0.25021 0.20796 0.26649




287

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CHAPTER 4: ANALYSIS OF WORKING CAPITAL ...shodhganga.inflibnet.ac.in/bitstream/10603/90858/13...Debtors turnover ratio or accounts receivable turnover ratio indicates the velocity