Project Cetrificate

8/18/2019 Project Cetrificate

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CHAPTER 1

EXECUTIVE SUMMARY

“The study of working capital management”

As a part of curriculum, every student studying MBA has to undertake a project on a

particular subject assigned to him/her. Accordingly I have been assigned the project work on

the study of working capital management in Bahety hemicals ! Minerals pvt ltd "andeli.

"ecisions relating to working capital #urrent assets$urrent liabilities% and short term

financing are known as working capital management. It involves the relationship between a

firm&s short$term assets and its short term liabilities.

'he goal of working capital management is to ensure that the firm is able to continue its

operation and that it has sufficient cash flow to satisfy both maturing short term debt and

upcoming operational e(penses.

)orking capital is used in BM private ltd., for the following purpose*$

+aw material, work in progress, finished goods, inventories, sundry debtors, and day to day

cash reuirements. 'he BM private ltd., keep certain funds which is automatically available

to finance the current assets reuirements.

+atio Analysis has been arried out using -inancial Information for last five accounting

years i.e. from 0 to 12 +atios like )orking capital 'urnover +atio, 3uick +atio,

urrent +atio, Inventory 'urnover +atio, "ebtor 'urnover +atio, reditors turnover radio

have also been analy4ed. A 5tatement of hanges in )orking apital has also been

analy4ed.

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OBJECTIVES OF THE STUDY

• 'o study the sources and uses of the working capital.• 'o study the liuidity position through various working capital related ratios.

• 'o study the working capital components such as receivables accounts,

ash management, Inventory management.

• 'o make suggestions based on the finding of the study.

SCOPE OF THE STUDY

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'he scope of the study is identified after and during the study is conducted. 'he

main scope of the study was to put into practical the theoretical aspect of the study into real

life work e(perience. 'he study of working capital is based on tools like +atio Analysis,

5tatement of changes in working capital. -urther the study is based on last 6 years Annual

+eports of Baht hemicals ! minerals put ltd.

LIMITATIONS OF THE STUDY

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• 'he study duration is short.

• 'he analysis is limited to just five years of data study #from year 7 to year 1% for

financial analysis.

•Limited interaction with the concerned heads due to their busy schedule.

• The fndings o the study are based on the inormation retrieved by the

selected unit.

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INTRODUCTION TO THE STUDY

8ash is the lifeblood of business8 is an often repeated ma(im amongst financial

managers. )orking capital management refers to the management of current or short$term

assets and short$term liabilities. omponents of short$term assets include inventories, loans

and advances, debtors, investments and cash and bank balances. 5hort$term liabilities include

creditors, trade advances, borrowings and provisions. 'he major emphasis is, however, on

short$term assets, since short$term liabilities arise in the conte(t of short$term assets. It is

important that companies minimi4e risk by prudent working capital management.

STATEMENT OF THE PROBLEM

'his project deals with the study about 9)orking apital Management: in

BAHETY CHEMICALS AND MINERALS PVT. LTD

'here are numerous aspects of working capital management that makes it an important

topic for the study.

'he management of assets in any organi4ation is an essential part of overall

management. 'he enterprise, at the time of formation attaches great importance to fi(ed

assets management, as a part of investment decision$making. ;owever, in the overall day$to$

day financial management, after the initial investment, the management gives more

importance to managing working capital. If we look at any financial statement it will be

evident that the investment in fi(ed assets remains more or less static but the working capital

is constantly changing

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CHAPTER 2

COMPANY PROFILE

BHATEY CHEMICALS AND MINERALS PVT.LTD COMPANY

HISTORY OF TH !O"#$%Y

Bahety chemicals and Minerals #pvt.%


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Name of te !om"a#$ BAHETY CHEMICALS AND MINERALS PVT.LTD%

DANDELI & '(1)2'.

Yea* of e+ta,-+me#t 1==>.

Ca*ma# 5heri handrasekhar. @. Baht

T$"e of !om"a#$ rivate 6. "ist* Dara #o.k.%,

Darnataka 5tate. 'el*$002 $ >>2.

Nat/*e of B/+#e++ roduction and 5ale of Alumina 5ulphate #Alum%.

E0"o*t "-a!e+ "andily, ;arsher, Eoa, ;yderabad, ;ubble, "harma,

Bangalore, Fagpur, Belgaum.

No. of e"a*tme#t+ 7 G5i(H "epartments.

N/m,e* of em"-o$ee+ 1

N/m,e* of o*3#4 a$+ 7 days in a week.

P*o/!to# !a"a!t$ 0 M' of Aluminum sulphates #Alum% per month as per the

=$1 report.

Sto*a4e Ca"a!t$ 1 Metric '?F.


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CAPITAL STRUCTURE OF BCM.CO.LTD

SHARE CAPITAL56

1. Authori4ed capital +s. 1,,

1, euity shares of +s. 1 each.

. 5ubscribed/ paid$up share capital +s. 1,,

1, euity shares of +s .1 each.

BORRO7ED FUND*$

'he ompany has taken long term loans from orporation Bank "andily. It has also taken

unsecured loans from its joint associate 5heri. +aghavendra hemicals. 'he company has

also received government subs

T$&' SHO(I%) TH 'O%) TR" 'O$%S T$*% &Y &!" +!O+'T,

Yea*Loa#

Se!/*e Loa# U#+e!/*e Loa#

0 $= 1=17. 67=>2.

= 1 >7616==. 116.

11 11 >2>7. 772.

1 1> >0026. 76121.

1> 12 627. >2=1=.

IdJe of 6K on capital investments.

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INVESTMENT IN FIXED ASSETS IS SO7N BELO7

SL.NO F0e A++et+ Tota- I#8e+tme#t 9R+.:

1 ,,.

Machinery 1,,.

> Adjacent Building 16,,.

VISION AND MISSION OF BCM .CO.LTD

;VISION<

9'o fulfil the growing demand of Alum and increasing the production:

;MISSION<

1. 'o provide employment.

. 3uality product,

>. Ma(imum satisfaction to customers.

2. 'o ensure enterprise growth.

6. 'o create clean and healthy environment.

7. 'o develop the establishing the organi4ation in the city.

COMPANY O7NERSHIP

SHARE HOLDERS

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• 5heri handrasekhar. @. Baht

• 5heri @awaharlal Baht.

• 5heri ritvipal Baht.

• 5heri Baal Dumar Baht.

•

5mt.


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MAJOR PRODUCTS OF THE COMPANY

• Li4 ferric alum.

• Li4 ferric liuid alum.

• Fon ferric alum.

USES5

• Industrial wastewater treatment.

•

Municipal wastewater treatment.

• larification and phosphorus removal.

11

$luminium%&ul'hate

(erric %alum


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USE5 "yeing and purification, )ater treatment.

INFRASTRUCTURE FACILITIES PROVIDED BY BCM.CO.LTD5

7ELFARE FACILITIES5

'he workers in Bahety hemicals and Minerals are given some facilities for their.

Betterment and comfort.

1. 7ASHIN= RESTIN= FACILITIES5

-acility for washing, storing, drying materials, resting first aid facilities have been

provided inside the factory for the benefits of workers on duty.

2. DRIN>IN= 7ATER5

'he company has made provision of clean, drinking water providing to the workers

during the working hours. 'here are drinking taps and coolers placed in every department.

). SHELTER AND LUNCHROOM5

After the working hours to take rest rooms have been made by the company and

to have food in lunchtime.

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?. CANTEEN5

anteen is also provided to the workers. It runs on 9no profit and no loss basis:.

'. PAR>IN= FACILITIES5

As the raw materials are brought in >7.

+eserves and surplus =01. 7711.

CURRENT LIABILITIES 5undry debtors 2>66>76.

5undry creditors >602=. ash ! bank balance 1=0=>0.

rovisions 1101. ?ther current assets 106606.

7717.

TOTAL 21?1()1.@@ 21?1()1.@@


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PURCHASE DEPARTMENT.

LABORATORY DEPARTMENT.

ADMINISTRATION DEPARTMENT.

PRODUCTION DEPARTMENT.

FINANCE DEPARTMENT.

MAR>ETIN= DEPARTMENT.

PURCHASE DEPARTMENT5

'he purchase officers and assistance head the purchase department. 'he clearly take the

reuisition from various departments and forward to the purchase offices and then the purchase officer

arranges to the purchase reuired materials from the best seller available in the market.

FUNCTIONS

• urchase the good uality materials.

• ;ave a better dealing at present and future with the supplier.

• urchase only and reuired materials.

LABORATORY DEPARTMENT5


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ADMINISTRATION DEPARTMENT5

Administration "epartment takes care of the whole activities happening in and around

the company. 'he personal manager heads the department and personal managers is

responsible for the man power in the whole factory. ersonal Manager is concerned with the

most efficient use of people to achieve organi4ation and individual goals. It is the way of

managing people at work so that they give the best to the organi4ation.

FUNCTIONS5

• Maintenance of files, records etc.,

• Eood relation between the employer and employee.

• Maintaining the financial matters of the company.

• Eood relations with supplier and customers.

• Maintenance of salary, wages records.

• Deeping all the records of all the departments.

FINANCE DEPARTMENT5

-inance is an essential component of the business to maintain its operations

effectively. 'his dept. is concerned with day$to$day activities like purchases, sales salary etc.

and proper management and maintenance of accounts of concerned year

5ince BM is the small scale industry it maintains very good accounting system,

'he whole financial matter is mainly dealt by the separate dept called finance dept.

'he Major sources of finance are,

1. 5hares # Cuity 5hares%

FUNCTIONS5

• +ecording day to day transactions in a systematic manner.

• Maintaining proper accounts of purchases and sales.

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• Maintaining profit ! loss A/c and reparing the Balance sheet of BM

systematically.

• aying the interest on loans at right time.

MAR>ETIN= DEPARTMENT5

Marketing "epartment is also a one of the important department in the company. 'his

department is important because it gives a clear picture of how much to produceN )hich will

also help in the investment to he made and to purchase department to purchase raw materials.

S7OT ANALYSIS OF BAHETY CHEMICALS MINERALS PVT.LTD.

STRENTHS

1. Availability of manpower.

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2. ;igh uality product.

). NESS

1. ;eavy transport charges.

2. Major consumption in paper industries but limited paper industries in Darnataka.

OPPORTUNITIES

1. 'echnological up gradation.

2. -oreign market e(pansion.

). ?nline ordering process.

?. roduct e(pansion.

'. Market e(pansion.

THREATS

1. Cntry of competitors.

2. roduct substitution.

INTRODUCTION OF 7OR>IN= CAPITAL5

)orking capital is the life blood and nerve centre of a business. @ust as circulation of

blood is essential in the human body for maintaining life, working capital is very essential to

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maintain the smooth running of a business. Fo business can run successfully without an

adeuate amount of working capital.

'here is operative aspects of working capital i.e. current assets which is known as

funds also employed to the business process from the gross working capital urrent asset

comprises cash receivables, inventories, marketable securities held as short term investment

and other items nearer to cash or euivalent to cash.

MEANIN= OF 7OR>IN= CAPITAL

)orking capital means the funds #i.e.O capital% available and used for day to day

operations #i.e.O working% of an enterprise. It consists broadly of that portion of assets of a

business which are used in or related to its current operations

In Accounting*

DEFINITIONS5

According to )eston ! Brigham

9)orking capital refers to a firm&s investment in short$term assets cash, short

term securities, accounts receivables and inventories.

OBJECTIVES OF 7OR>IN= CAPITAL MANA=EMENT

1. To ma0me "*oft of te f*m.

. To e-" # tme-$ "a$me#t of ,--+.

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(OR*I%) !$#IT$'

*n The +asis o ,once'ts

*n The +asis o Time

-ross or)ing ,a'ital/et or)ing ,a'ital

0ermanent (ied or)ing ,a'ital

Tem'orary (luctuating or)ing ,a'ital

nitial or)ing ,a'ital

egular or)ing,a'ital

&easonal or)ing ,a'ital

&'ecial or)ing ,a'ital

>. To ma#ta# +/ff!e#t !/**e#t a++et+.

2. To e#+/*e ae/ate -/t$ of te f*m+.

THE NEED FOR THE 7OR>IN= CAPITAL

1. 'o purchase raw materials, spare parts and other component.

2. 'o meet over head e(penses.

). 'o pay selling ! distribution e(penses.

CLASSIFICATION OF 7OR>IN= CAPITAL

IMPORTANCE OF 7OR>IN= CAPITAL

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1. So-8e#!$ of te ,/+#e++5 Adeuate working capital helps in maintaining the

solvency of the business by providing uninterrupted of production.

. =oo-- 5 5ufficient amount of working capital enables a firm to make prompt

payments and makes and maintain the goodwill.

>. Ea+$ -oa#+5 Adeuate working capital leads to high solvency and credit standing can

arrange loans from banks and other on easy and favourable terms.

4. Ca+ +!o/#t+5 Adeuate working capital also enables a concern to avail cash

discounts on the purchases and hence reduces cost.

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FI%$%!I%) OF (OR*I%) !$#IT$'

I#t*o/!to#5

After determining the level of working capital, a firm has to decide how it is to be

financed. In that BM, it was financing the working capital from the following four common

sources. 'hey are,

1. SHARES5

'he BM has issued the euity shares for raising the funds. 'he Cuity shares do not have

any fi(ed commitment charges and the dividend on these shares is to be paid subject to the

availability of sufficient funds.

TRADE CREDIT5

'he trade credit refers to the credit e(tended by the suppliers of goods in the normal

course of business. 'he firm has a good relationship with the trade creditors. 5o that suppliers

send the goods to the firm for the payment to be received in future as per the agreement or

sales invoice

2. BAN> CREDIT5

ommercial banks play an important role in financing the trade ! industry Bank

provides short$term, medium term ! long term finance to an industrialist or a business man.

1. Loa#+5 'he BM #L'%


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credit, any number of drawls&/drawings are possible to the e(tent of his reuirement

periodically..

). CUSTOMER ADVANCES5

'he BM #pvt% IN= CAPITAL5

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23

SL.N

O

PARTICULARSAMOUNT

0

1

C5'IMA'I?F ?- CURRENT ASSETS

02 Minimum desired cash and Bank balances. (((

12 Inventories

+aw material (((

)ork$in$progress (((

-inished stock (((

32 "ebtors (((

'otal urrent Assets

C5'IMA'I?F ?- CURRENT LIABILITIES

02 reditors (((

12 )ages (((

32 ?verheads (((

'otal current liabilities

NET 7OR>IN= CAPITAL

#'otal urrent assets 'otal urrent liabilities%

Add * Margin for contingency net

)orking capital reuirement

XXX

XXX

XXX

XX


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COMPONENTS OF 7OR>IN= CAPITAL

'he components of working capital are*

1: CASH MANA=EMENT

2: CEIVABLES MANA=EMENT

): INVENTORY MANA=EMENT

CHAPTER )

RESEARCH METHDOLO=Y

INTRODUCTION5

+esearch methodology is a way to systematically solve the research problem. It May be

understood as a science of studying now research is done systematically. In that various steps,

those are generally adopted by a researcher in studying his problem along with the logic

behind them.9'he procedures by which researchers go about their work of describing,

e(plaining and predicting phenomenon are called methodology.

TYPE OF RESEARCH5

'his project 9A 5tudy on )orking apital Management of Bahety chemicals ! minerals

rivate


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'he primary data is that data which is collected fresh or first hand, and for first time which is original

in nature. In this study the rimary data has been collected from ersonal Interaction with -inance

manager i.e., Mr. Mahesh Fadkarni and other staff members.

SECONDARY DATA5

'he secondary data are those which have already collected and stored. 5econdary data easily

get those secondary data from records, annual reports of the company etc. It will save the

time, money and efforts to collect the data.

'he major source of data for this project was collected through annual reports, profit and loss

account of 6 year period from 1$1 ! some more information collected from internet

and te(t sources.

SAMPLIN= DESI=N

5ampling unit * -inancial 5tatements.

5ampling 5i4e *


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CHAPTER5 ?

,$T$ $%$%'YSIS $%, I%TR#RT$TIO%

A NET 7OR>IN= CAPITAL

An analysis of the net working capital will be very help full for knowing the

operational efficiency of the company. 'he following table provides the data relating to the

net working capital of BM.

NET 7OR>IN= CAPITAL G CURRENT ASSETS6CURRENT LIABILITIS

Pears urrent Asset urrent ==. 2162>. 61667.

=$1 =6==727. >0076. 611001.

1$11 =71. 0==. 7206>0.

1$1> 11>20. >00=0==. 11>6=.

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1>$12 11=27777. 217676=. 01.

#

5######

1#######

15######

2#######

25######

3#######

/,

,urrent Liabilities

,urrent $sset

I%TR#RT$TIO%./

'he above chart shows that during the year 0$= the company has 61667.

F.).. In the year =$1 huge increase in the F.). is 611001. and in the year 1$

1the company has 7206>0. F.). in the year 1$1> the company has 11>6=.

F.). the F.). of the company is increasing compared to the previous years, in the year

1>$12 the company has 01. F.). this means the company in a positive position

! F.). has improved vary fast as compared to the previous years

& RATIO ANALYSIS

INTRODUCTION5

+atio Analysis is a powerful tool of financial analysis. Ale(ander ;all first presented

it in 1==1 in -ederal +eserve Bulletin.. 'he term ratio refers to the numerical or uantitative

relationship between two accounting figures. +atio analysis of financial statements stands for

the process of determining and presenting the relationship of items and group of items in the

statements.

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Va*o/+ o*3#4 !a"ta- *ato+ /+e ,$ me a*e a+ fo--o+5

1. LIUIDITY RATIOS5


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1$1> 11=27777. 217676=. .0

2#13%2#14 11"46666.## 416565".## 2.!

#

2######

4######

6######

!######

1#######

12######

14######

,urrent $ssets

,urrent Liabilities

,urrent atio

INTERPRETATION56

It is seen from the above chart that during the year 6$7 the current ratio was

.>, during the year 7$ it was .2 and in the year $0 it was >.1. 'his

shows the current ratio increases every year but in the year 0$= the current ratio

was dropped to .0> due to increase in current liabilities. In the year =$1 the current

ratio has increases .0.

ACID TEST RATIO UIC> RATIO LIUIDITY RATIO56

'his ratio establishes an relationship between uick liuid assets and current

liabilities. Because inventories normally reuire some time for reali4ing into cash. 'his ratio

is also known as acid$test ratio. 'he standard uick ratio is 1*1. Is considered satisfactory.

/!3 Rato G /!3 A++et+ 9!/**e#t a++et+ 6 I#8e#to*$:

C/**e#t La,-te

2"


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Pear urrent Assets Inventories 3uick Assets urrent ==. 16>266. >>722. 2162>. 1.20

1$11 =6==727. 1711. 2>066. >0076. 1.=1

11$1 =71. >>>72>. 62110. 0==. .>

1$1> 11>20. 7=1. 0>06. >00=0==. .16

1>$12 11=27777. >7711. =60766. 217676=. .>

#

2######

4######

6######

!######

1#######

12######

14######

2##!%#"

2#1#%#11

2#11%#122#12%#13

2#13%14

INTERPRETATION56

"uring the year 0$= the uick ratio was 1.20, in the year =$1 it increases to

1.=1 'his shows the company maintains satisfactory uick ratio, in the year 1$11 the

uick ratio increases to .>, in the year 11$1it increases .16, in the year 1$11>it

increases .>, due to increase in uick assets. 'he uick ratio is above the standard ratio i.e.,

1*1. ;ence it shows that the liuidity position of the company is adeuate.

2. ABSOLUTE LIUID RATIO56

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Absolute liuid ratio may be defined as the relationship between Absolute liuid

assets and current liabilities. Absolute liuid assets include cash in hand and cash at bank.

'he standard ratio is .6* 1.

A,+o-/te L/t$ Rato G Ca+ Ba#3 Ba-a#!e

C/**e#t La,-te+

#

1######

2######

3######

4######

5######

6######

######

$bsolute Liuidity

atio

,urrent Liabilities

,ash 7 +an) +alance

INTERPRETATION5

31

8ears ,ash 7 +an)

+alance

,urrent

Liabilities

$bsolute Liuidity

atio

2##!%#" 4"342.## 2#41543.## #.24

2#1#%#11 12#566#.## 3!!65.## #.31

2#11%#12 1#33152.## 2!2"#".## #.36

2#12%#13 12#!15.## 3!!"!"".## #.44

2#13%#14 1"!"3!.## 416565".## #.4


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"uring the year 6$7 the Absolute liuidity ratio was .2, during the year 7$

it was .>1 and in the year $0 it was .>7, in the year 0$= it was .. In the year

=$1 the Absolute liuidity ratio has increases .2;ence it shows that the liuidity

position of the company is satisfactory.

1. INVENTORY TURNOVER RATIO56

Inventory turnover ratio is the ratio, which indicates the number of times the stock is

turned over i.e., sold during the year.

I#8e#to*$ T/*#o8e* Rato G Net Sa-e+

C-o+#4 I#8e#to*$

INTERPRETATION5

It is seen from the above chart that "uring the year 0$=the Inventory t/o ratio is

1.6 times, in the year =$1 it increased to 12.2= times, But in the year 1$1> it

decreased to 0.>7 times

2. DEBTORS ACCOUNTS RECEIVABLES TURNOVER RATIO56

32

Pear Fet 5ales losing inventory Inventory 'urnover ratio

0$= 1=6201. 16>266. 1.6 'imes

1$11 >1>1=. 1711. 12.2= 'imes

11$1 0=206. >>>72>. 0.>7 'imes

1$1> >02=727. 7=1. 12.70 'imes

1>$12 2>26761. >7711. 1.=2 'imes


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"ebtor&s turnover ratio indicates the speed of debt collection of the firm. 'his ratio

computes the number of times debtors #receivables% has been turned over during the

particular period.

De,to*+ T/*#o8e* Rato G Net Sa-e+

A8e*a4e De,to*+

Pear Fet 5ales Average "ebtors "ebtors 'urnover +atio

0$= 1=6201. 1>01. 0.00

=$1 >1>1=. 2=606. 7.>

1$11 0=206. 106=20. 16.22

1$1> >02=727. >02. 1.17

1>$12 2>26761. 2>66>76. =.

#

1######

2######

3######

4######

5######

6######

$verage 9ebtors

9ebtors Turnover atio

INTERPRETATION5

It is clear that debtor turnover ratio fluctuating over the years. It was 0.00 times in the

year 0$=. It decreased to 7.> times in the year =$1 It again increased to 16.22

times in the year 1$11 but it decreased to 1.17 times and =. 'imes in the year 1$

1> and 1>$12 respectively.

). DEBTORS COLLECTION PERIOD 56

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"ebtors collection period measures the uality of debtors since it measures the

rapidity or the slowness with which money is collected from them a shorter collection period

implies prompt payment by debtors

A8e*a4e Co--e!to# Pe*o G Da$+ # a Yea*

De,to*+ T/*#o8e* Rato

32#

34#

36#

3!#

4##

42#

44#

9ebtors ,ollection

0eriod

9ebtors Turnover atio

9ays in a 8ear

34

8ear 9ays in a

8ear

9ebtors Turnover

atio

9ebtors ,ollection

0eriod

2##!%#" 365 !.!! 41.1#

2##"%#1# 365 6.32 5.5

2#1#%#11 365 15.44 23.64

2#11%#12 365 1#.16 35."2

2#12%13 365 ".2 3.55


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INTERPRETATION5

"ebt collection period changing over the years. It was 21.1 days in the year 0$

=.It increased to 6.6 days in the year 1$11, but in the year 11$1 it decreased to

>.72 days. 'his shows the inefficient credit collection performance of the company.

'. CREDITORSACCOUNTS PAYABLES TURNOVER RATIO56

reditor&s turnover ratio is the ratio, which indicates the number of times the debts are

paid in the year. 'his ratio is calculated as follows.

C*eto*+ T/*#o8e* Rato G Net P/*!a+e+

A8e*a4e C*eto*+

Pear Fet urchases Average reditors reditors 'urnover +atio

0$= 117=1=. 17>616. 7.=0

=$1 1076. >2=1. 6.=

1$11 100=700. 72=01. .1>

1$1> >76>. 760===. 0.00

1>$12 1277>=. >602=. 0.00

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#

5######

1#######

15######

2#######

25######

3#######

/et 0urchases

$verage ,reditors

,reditors Turnover

atio

INTERPRETATION5

It is clear that creditor turnover ratio changing over the years. It was 7.=0 times in the

year 0$=. It decreased to 6.= times in the year 0$=, there was a subseuent increase

in the year 1$11 and 11$1 to .1> times and 0.00 times respectively. In the year

1$1>it is same as compared to 1>$12. It shows that company has making prompt

payment to the creditors.

. CREDITORS PAYMENT PERIOD56

'he reditors ayment eriod represents the average number of days taken by the

firm to pay the creditors and other bills payables.

A8e*a4e Pa$me#t Pe*o G Da$+ # a Yea*

C*eto*+ T/*#o8e* Rato

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#

5#

1##15#

2##

25#

3##

35#

4##

9ays in a 8ear

,reditors Turnover

atio$verage 0ayment

0eriod

INTERPRETATION5

Average payment period changing over the years. It was 6.= days in the year 0$

=. It increased to 1.1 days in the year =$1, But in the year 1$11 and 11$1 it

decreased to 61.1= days and 21.1 days respectively. In the year 1>$12 it is same as

compared to 0$=. It indicates that the company has taken the steps to prompt payment to

the creditors.

. 7OR>IN= CAPITAL TURNOVER RATIO56

3

Pear "ays in a Pear reditors 'urnover +atio Average ayment eriod

0$= >76 7.=0 6.=

=$1 >76 6.= 1.1

1$11 >76 .1> 61.1=

1$1> >76 0.00 21.1

1>$12 >76 0.00 21.1


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'his ratio indicates the number of times the working capital is turned over in the course

of the year. 'his ratio measures the efficiency with which the working capital is used by the

firm. A higher ratio indicates efficient utili4ation of working capital and a low ratio indicates

otherwise. But a very high working capital turnover is not a good situation for any firm.

7o*3#4 Ca"ta- T/*#o8e* Rato G Net Sa-e+

Net 7o*3#4 Ca"ta-

Pear Fet 5ales Fet )orking apital )'+

0$= 1=6201. 61667. .6

=$1 >1>1=. 611001. 6.20

1$11 0=206. 7206>0. 2.27

1$1> >02=727. 11>6=. 6.21

1>$12 2>26761. 01. 6.22

#

5######

1#######

15######

2#######

25######

3#######

35######

4#######

45######

/et &ales

/et or)ing ,a'ital

,T

INTERPRETATION5

'he working capital t/o ratio is fluctuating year to year that was high in the year 0$

=, .6 timesO there was a subseuent decrease in the year =$1 and 1$11 to 6.20

3!


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times and 2.27 times. But it increases in the year 11$1 and 1$1 to 6.21 and 6.22

times respectively. 'his shows the company is utili4ing working capital effectively.

C FUND FLO7 STATEMENTS

rinciples of working capital for calculation purpose

CURRENT ASSET

1 If the current assets increase as a result of this, working capital also increases.

If the current assets decreases as a result of this working capital decreases.

CURRENT LIABILITIES

If the current liabilities increases as a result of this working capital decreases. If the

current liabilities decreases as a result of this working capital Increase.

Stateme#t of Ca#4e+ # 7o*3#4 Ca"ta-5

'he purpose of preparing this statement is for finding out the increase or decrease in working

capital and to make a comparison between two financial year

Stateme#t of Ca#4e+ # 7o*3#4 Ca"ta- fo* te Yea* 2@1?62@1'

Pa*t!/-a*+ A+ o# )16)6

2@1?

A+ o# )16)6

2@1'

I#!*ea+e De!*ea+e

CURRENT ASSETS

Inventories >>>72>. 7=1. QQ 1>6=.

5undry debtors 106=20. >02. 1=01>7. QQ

ash ! Bank balance 1>>16. 1016. 7077>. QQ

?ther current assets 10=70>. 77. 176>. QQ

. QQ 271.

3"

4ect on working


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9A:Tota- C/**e#t A++et+ @1.@@ 11@@)?2(.@@

CURRENT LIABILITIES

5undry creditors 72=01. 760===. QQ =10.

rovisions 1==0. 1>=. QQ 1617.

9B:Tota- C/**e#t La,-te+ 2(2@.@@ )(((.@@

9A:69B: Net 7o*3#4 Ca"ta- 2?(')(.@@ 11)'2.@@

I#!*ea+e # 7o*3#4 Ca"ta- (?1.@@K

QQ QQ

(?1.@@K

TOTAL 11)'2.@@ 11)'2.@@ 2'12.@@ 2'12.@@

INTERPRETATION5

In the above table, it is seen that during the year 0$= and =$1 there was also net

increase in working capital by +s 072==1. As compare to 11$1 and 1>12.

'his is because.

1. 'here is Increase in current liabilities such as 5undry creditors by +s =10., rovisions

by +s 1617..

Stateme#t of Ca#4e+ # 7o*3#4 Ca"ta- fo* te Yea* 2@1)62@1?

4#


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Pa*t!/-a*+ A+ o# )16)6

2@1)

A+ o# )16)6

2@1?I#!*ea+e De!*ea+e

CURRENT ASSETS

Inventories 7=1. >7711. QQ 7=.

5undry debtors >02. 2>66>76. 670=1. QQ

ash ! Bank balance 1016. 1=0=>0. 601> . QQ

?ther current assets 77. 106606. QQ 71.

. >7717. >===>6. QQ

9A:Tota- C/**e#t A++et+ 11@@)?2(.@@ 11?.@@

CURRENT LIABILITIES

5undry creditors 760===. >602=. QQ >=006.

rovisions 1>=. 1101. 1>=. QQ

9B:Tota- C/**e#t La,-te+ )(((.@@ ?1''.@@

A:69B: Net 7o*3#4 Ca"ta- 11)'2.@@ (1@@.@@

I#!*ea+e # 7o*3#4 Ca"ta- ?(.@@K QQ QQ ?(.@@K

TOTAL (2@(1.@@ (2@(1.@@ 1)?2).@@ 1)?2).@@

INTERPRETATION5

In the above table, it is seen that during the year 0$= and =$1 there was also net

increase in working capital by +s 11626. As compare to $0 and 0$=.

'his is because

A NET 7OR>IN= CAPITAL

An analysis of the net working capital will be very help full for knowing the

operational efficiency of the company. 'he following table provides the data relating to the

net working capital of BM.

NET 7OR>IN= CAPITAL G CURRENT ASSETS6CURRENT LIABILITIS

41

4ect on working


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Pears urrent Asset urrent ==. 2162>. 61667.

=$1 =6==727. >0076. 611001.

1$11 =71. 0==. 7206>0.

1$1> 11>20. >00=0==. 11>6=.

1>$12 11=27777. 217676=. 01.

#

5######

1#######

15######

2#######

25######

3#######

/,

,urrent Liabilities

,urrent $sset

INTERPRETATION56

'he above chart shows that during the year 0$= the company has 61667.

F.).. In the year =$1 huge increase in the F.). is 611001. and in the year 11$

1 the company has 7206>0. F.). in the year 1$1> the company has 11>6=.

F.). the F.). of the company is increasing compared to the previous years, in the year

1>$12 the company has 01. F.).

42


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CHAPTER5 '

FINDIN=S

)orking capital of the Bahety hemicals ! Minerals vt


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• reditor&s turnover ratio has increased in the years of 1$11 and 11$1. It is same in

the last year )orking capital turnover ratio is very low in the year =$1. In the year

0$= it has increased by .=6 times as compared to 1>$12 and in the last year 0$

= it has again increased by .> times. =$1 as compared to 1>$12.

SU==ESTIONS

• )orking capital of the company has increasing every year. rofit also increasing

every year this is good sign for the company.

• 'he urrent and uick ratios are almost up to the standard reuirement• 'he company has sufficient working capital and has better liuidity position.

• reditor&s turnover ratio has increasing from 0$= to 1$11 and in the last year

1$1> it is same as compared to 12$16

• 'he company is utili4ing working capital effectively this is good for the company. It

has to maintain it further.

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CONCLUSIONS

• Assets, as it would block the funds, which could otherwise be effectively utili4ed for

some productive purpose.• ?n the whole, the company is moving forward with e(cellent management.

• 'he study on working capital management conducted in Bahety hemicals !

Minerals vt


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Documents

Project Cetrificate