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A PROJECT REPORT
ON
STUDY OF WORKING CAPITAL MANAGEMENT DONE IN
ITC-PARK SHERATON HOTELS & TOWERS
Submitted to the SRM SCHOOL OF MANAGEMENT In partial fulfillment of the requirements
For the award of the degree
Of
Master Of Business Administration
by SIDDARTH.P
3511010680
Under the guidance of MR.T.VELMURUGAN (MBA,M.Phil)
SRM SCHOOL OF MANAGEMENT
SRM UNIVERSITY
KATTANKULATHUR – 603203
MAY 2012
BONAFIDE CERTIFICATE
It is certified that this project report titled “STUDY OF WORKING CAPITAL MANAGEMENT IN ITC PARK SHERATON HOTELS” is an original work done by SIDDARTH.P (3511010680) of 4th semester SRM School Of Management , SRM UNIVERSITY, Kattankulathur, during the academic year 2012, who carried out the research under my supervision . Certified further , that to the best of my knowledge the work reported here in does not form part of any other project report or dissertation on the basis of which a degree or award was conferred on an earlier occasion on this or any other certificate.
Submitted or viva voice to be held on ______________________
Mr.T.VELMURUGAN Dr.(Mrs.)JAYSHREE SURESH Project Guide Head of the Department
Internal Examiner External Examiner
DECLARATION
I, SIDDARTH.P, the bonafide student of SRM SCHOOL OF MANAGEMENT, hereby declare that the project entitled “STUDY OF WORKING CAPITAL MANAGEMENT IN ITC PARK SHERATON HOTELS” , submitted in partial fulfillment for the requirements of the MBA program, is my original work.
Place: SIDDARTH.P
Date:
ACKNOWLEDGEMENT
It is difficult to acknowledge a precious debt as that of learning ass it is the only debt that is difficult to repay except through gratitude.
First and foremost I wish to express my profound gratitude to the almighty, the merciful & compassionate with whose grace and gracing I have been able to complete this work.
It is my profound privilege to express my sincere thanks to the dean Dr JAYASHREE SURESH(School of management) ,for giving me an opportunity to work on the project and giving me full support in completing this project.
I am thankful to my guide Mr.T.Velmurugan (Professor in SRM UNIVERSITY, Kattankulathur) for his full support and guidance in completing this project work.
I am obliged to thanks the entire management of ADYAR GATE HOTELS .Ltd, for granting me permission and assisting me throughout the project.
Last but not the least, I would like to thanks my loving parents and my friend for their full cooperation and continuous support during the course of this assignment.
P.SIDDARTH
TABLE OF CONTENTS
S.NO TOPIC Page no
1. EXECUTIVE SUMMARY 5
2. INTRODUCTION 7
CONCEPTS OF WORKING CAPITAL 3. 9
4. INDUSTRIAL PROFILE 18
5. COMPANY PROFILE 23
6. REVIEW OF LITERATURE 34
OBJECTIVE OF THE STUDY 7. 43
8. RESEARCH METHODLOGY 45
9. DATA ANALYSIS& INTERPRETATION 50
10. COMPARATIVE BALANCE SHEET ANALYSIS 71
11. FINDINGS & SUGGESTION 80
12. BIBLOGRAPHY 84
LIST OF TABLES
S.NO TOPICS PAGE
NO
1. 54 CURRENT RATIO
2. 56 LIQUID RATIO
3. 58 PROPRIETARY RATIO
4. 60 FIXED ASSET TO NET WORTH
5. 63 CURRENT ASSETS TO FIXED ASSETS RATIO
6. 64 CASH TO CURRENT ASSETS RATIO
7. 65 CASH TO CURRENT LIABILITY RATIO
8. 66 FIXED ASSET TURNOVER
9. 67 NET PROFIT RATIO
10. 69 EARNING PER SHARE
11. 70 RETURN ON SHARE HOLDERS FUND
12. 73 COMPARATIVE BALANCE SHEET OF CPCL 2006-2007
13. 74 COMPARATIVE BALANCE SHEET OF CPCL 2007-2008
14. 75 COMPARATIVE BALANCE SHEET OF CPCL 2008-2009
LIST OF FIGURES
S.NO TOPICS PAGE
NO
1. FINANCIAL STRUCTURE 29
2. CURRENT RATIO 54
3. QUICK RATIO 56
4. PROPRIETARY RATIO 58
5. FIXED ASSET TO NET WORTH 60
6. CURRENT ASSETS TO FIXED ASSETS RATIO 62
7. CASH TO CURRENT ASSETS RATIO 64
EXECUTIVE SUMMARY
A well designed and implemented working capital management is expected to
contribute positively to the creation of a firm’s value. The purpose of this paper is to
examine working capital management and its impact on firms’ profitability. The working
capital needs and profitability of firm is examined. The key variables used in the analysis
are inventories days, accounts receivables days, accounts payable days and cash
conversion cycle, current ratio, Liquid ratio.
The dependent variable, return on total assets is used as a measure of profitability
and the relation between working capital management and corporate profitability is
investigated for ADYAR GATE HOTEL LTD using data for the period 2004-2005 to
2008-2009.The results show that there is a strong negative relationship between variables
of the working capital management and profitability of the firm.
It means that as the cash conversion cycle increases it will lead to decreasing
profitability of the firm, and managers can create a positive value for the shareholders by
reducing the cash conversion cycle to a possible minimum level.
CHAPTER 1
INTRODUCTION
“I don't want to do business with those who don't make a profit, because they can't
give the best service.”
- Lee Bristol
FINANCE:
Finance is the backbone of any enterprise. It may be manufacturing, trading or servicing.
Efficient management of every enterprise is the outcome of efficient management of its
finance. Finance is one of the basic foundations of all kinds of economic activities.
WORKING CAPITAL
INTRODUCTION:
The total capital employed in a business organization can be categorized as fixed
capital and working capital. The fixed capital that part of the funds, which is invested in
fixed assets, where as working capital is that portion of the funds which is invested in
current assets.
The investment in fixed assets is represented by land and buildings (for factory,
office, go-down and stores), equipment such as machinery, furniture and fixtures,
intangible assets in the form of patent and good will etc. To employ these fixed assets
fully, again current assets are required. Current assets consist of raw materials, work-in-
progress, finished goods, stores and spares accounts, receivables, cash in hand, cash at
bank and marketable securities.
MEANING:
Working Capital is the fund available for managing day-to-day requirement of an
enterprise. The initial investment of cash for the production or for any other function in
an enterprise is also known as working capital.
According to the Chartered Accountants of India, “Working Capital means the
fund available for day–to-day operations of an enterprise”. Hence, it is necessary for
any organization to run successfully its affairs to provide for adequate working capital
and in excreting proper working capital.
FORMULA OF WORKING CAPITAL:
WORKING CAPITAL =CURRENT ASSETS - CURRENT LIABILTIES
PRINCIPLES OF WORKING CAPITAL MANAGEMENT:
Working Capital Management is concerned with the problems that arise in
attempting to manage the current assets, the current liabilities and the inter-relationship
that exists between them. The term current assets refers to those assets which in the
ordinary course of business can be, or will be, turned into cash usually within one year
without undergoing a diminishing in the value and without disrupting the operations of
the firms. The major current assets are marketable securities, accounts receivables and
inventory. Current liabilities are those liabilities which are intended at their inception to
be paid in the ordinary course of business, within a year, out of the current assets or
earnings of the concern. The basic current liabilities are accounts payable, bills payable,
bank over-draft and outstanding expenses. The goal of working capital management is to
manage the firm’s current asset and current liabilities in such a way that a satisfactory
level of working is maintained. The interaction between current assets and current
liabilities is, therefore the main theme of the principles of Working Capital Management.
CONCEPTS OF WORKING CAPITAL:
To understand working capital better we should have basic
knowledge about the various aspects of working capital. To start with, there are two
concepts of working capital:
Gross Working Capital
Net working Capital
1. GROSS WORKING CAPITAL:
Gross working capital, which is also simply known as working capital,
refers to the firm’s investment in current assets: Another aspect of gross working capital
points out the need of arranging funds to finance the current assets. The gross working
capital concept focuses attention on two aspects of current assets management, firstly
optimum investment in current assets and secondly in financing the current assets. These
two aspects will help in remaining away from the two danger points of excessive or
inadequate investment in current assets. Whenever a need of working capital funds arises
due to increase in level of business activity or for any other reason the arrangement
should be made quickly, and similarly if some surpluses are available, they should not be
allowed to lie ideal but should be put to some effective use.
2. NET WORKING CAPITAL:
The term net working capital refers to the difference between the
current assets and current liabilities. Net working capital can be positive as well as
negative. Positive working capital refers to the situation where current assets exceed
current liabilities and negative working capital refers to the situation where current
liabilities exceed current assets. The net working capital helps in comparing the liquidity
of the same firm over time.
For purposes of the working capital management, therefore Working Capital
can be said to measure the liquidity of the firm. In other words, the goal of working
capital management is to manage the current assets and liabilities in such a way that a
acceptable level of net working capital is maintained.
NEED FOR WORKING CAPITAL:
The need for working capital is to run day-to-day business activities. Firms
aim at maximizing the wealth and to earn sufficient return from its operations. Earning a
steady amount of profit requires successful sales activity. The firm has to invest enough
funds in current assets for the success of sales activity. Current assets are needed because
sales do not convert into cash instantly. There is always an Operating Cycle involved in
conversion of sales into cash.
CLASSIFICATION OF WORKING CAPITAL
Working capital may be classified in to ways:
On the basis of concept.
On the basis of time.
On the basis of concept working capital can be classified as gross working capital and net
working capital.
PERMANENT OR FIXED WORKING CAPITAL
Permanent or fixed working capital is minimum amount which is required
to ensure effective utilization of fixed facilities and for maintaining the circulation of
current assets. Every firm has to maintain a minimum level of raw material, work- in-
process, finished goods and cash balance. This minimum level of current assts is called
permanent or fixed working capital.
TEMPORARY OR VARIABLE WORKING CAPITAL
Temporary or variable working capital is the amount of working capital which is
required to meet the seasonal demands and some special exigencies. Variable working
capital can further be classified as seasonal working capital and special working capital.
The capital required to meet the seasonal need of the enterprise is called seasonal
working capital. Special working capital is that part of working capital which is required
to meet special exigencies such as launching of extensive marketing for conducting
research, etc.
IMPORTANCE OF WORKING CAPITAL MANAGEMENT:
Management of working capital is very much important
for the success of the business. It has been emphasized that a business should maintain
sound working capital position and also that there should not be an excessive level of
investment in the working capital components. As pointed out by Ralph Kennedy and
Stewart MC Muller, “
TYPES OF WORKING CAPITAL:
Working Capital is broadly classified into types. They are;
1. Permanent Working Capital
2. Temporary Working Capital
1. PERMANENT WORKING CAPITAL:
It refers to the minimum life of the current assets, which is continuously required
by the firm to carry on its business operations. It grows with the size of the business.
Permanent working capital is permanently needed for business and therefore, it should be
financed out of long-term funds.
2. TEMPORARY WORKING CAPITAL:
It refers to the extra Working Capital needed to support the changing
production and sales activities of a business. Temporary Working Capital is generally
financed from short-term sources of finance such as bank credit.
COMPONENTS OF WORKING CAPITAL:
As per the statutory requirement, it is necessary to show separately the current
assets and the current liabilities as per the Companies Act. The division is also following
the same practice in presentation in the balance sheet. The current assets and current
liabilities comprise the following components of Working Capital.
HOW TO IMPROVE WORKING CAPITAL?
Working capital measures how much in liquid assets a company has available to build its
business. The number can be positive or negative, depending on how much debt the
company is carrying. In general, companies that have a lot of working capital will be
more successful since they can expand and improve their operations without incurring
debt. Companies with negative working capital may lack the funds necessary for growth.
So, how do you increase your working capital?
The following are 4 ways to accomplish an increase of working capital:
1.Increase net Profit
2. Owners add capital to the business
3. Sell unwanted assets
4. Increase long term debt (decrease or shift short term debt).
1
2
3
4 TEN COMMANDMENTS OF WORKING CAPITAL:
Here are the ten commandments of working capital management:
1. Find ways and means to shorten the operating cycle and cash cycle.
2. Match the maturity of the Sources of financing to those of assets.
3. Centralize cash management and invest surplus funds judiciously.
4. Establish Credit Policy sensibly.
5. Monitor closely the collection of receivables employ indigenous ways to
collection.
6. Maintain a tight vigil over the inventories.
7. Employ MRP (materials requirement planning), JIT (just-in-time), and EDI (
electronic data interchange ) systems.
8. Take cash discounts if you have controllable liquidity.
9. Stretch Payables within reasonable bounds.
10. Build a long – term relationship of trust with banker.
INDUSTRY PROFILE
INDUSTRY PROFILE:
5 HISTORY OF HOTEL INDUSTRY:
The hotel industry in India is going through an interesting phase. One of the
major reasons for the increase in demand for hotel rooms in the country is the boom in
the overall economy and high growth in sectors like information technology, telecom,
retail and real estate. Rising stock market and new business opportunities are also
attracting hordes of foreign investors and international corporate travelers to look for
business opportunities in the country.
Hotel industry is also inextricably linked to the tourism industry and its growth
has added fillip to the hotel industry. And with Conde Nast Traveler ranking India as the
fourth most preferred travel destination and Lonely Planet selecting the country among
the top five destinations from 167 countries, India has finally made its mark on the world
travel map.
The arrival of low cost airlines and the associated price wars have given domestic
tourists a host of options. The opening up of the aviation industry in India has led the way
for exciting opportunities for the hotel industry as it relies on airlines to transport 80% of
international arrivals. Moreover, the government’s decision to substantially upgrade 28
regional airports in smaller towns and privatization and expansion of Delhi and Mumbai
airport will improve the business prospects of hotel industry in India. Substantial
investment in tourism infrastructure is essential for Indian hotel industry to achieve its
potential. The upgrading of national highway connecting various parts of India has
opened new avenues for the development of budget hotels here. The Government
of India’s Incredible India destination campaign and the Atithi Devo Bhavah
campaign have also helped the growth of domestic and international tourism and
consequently the hotel industry.
In recent years the government has taken several steps to boost travel and
tourism, which have benefited the hotel industry in the country. These include the
abolishment of the inland air travel tax by 15%, reduction in excise duty on
aviation turbine fuel to 8% and removal of a number of restrictions in excise on
outbound chartered flights including those relating to frequency and size of aircraft. The
government’s decision to treat convention centers as part of core infrastructure has also
fuelled the demand for hotel rooms.
There are some 1,980 hotels approved and classified by the Ministry of Tourism,
Government of India, with a total capacity of about 110,000 hotel rooms. Revenues of the
hotel and restaurant industry in India during the financial year 2006-07 was Rs 604.32
billion, a growth of 21.27% over the previous year, primarily driven by foreign tourist
arrivals, which increased by 14.17%. The hospitality industry is poised to grow at a faster
rate and is expected to reach Rs. 826.76 billion by 2010.
The gap between demand and supply of hotel rooms is also growing. There is a
shortage of 1, 50,000 rooms fuelling hotel room rates across India. According to industry
estimates, demand is going to exceed supply by at least 100% over the next two years.
Five-star hotels in metro cities allot same room, more than once a day to different guests,
receiving almost 24-hour rates from both guests against 6-8 hours usage. With demand-
supply disparity, hotel rates in India are likely to rise by 25% annually and occupancy by
80%, over the next two years.
While the potential of hotel industry is great, there are several constraints for
the industry to grow. High cost of land in the country often discourages an investor to put
in money in construction of new hotels. Construction of hotels is highly capital intensive
and it is estimated that to construct a single five-star room it costs around Rs 1.25 crore.
As a result there is no incentive to construct new hotel properties and there is a mismatch
between demand and supply leading to higher occupancy rates and increasing prices. In
fact, average rate of hotel rooms in five-stars has gone up from Rs 4,000 five years ago to
Rs 16,000 now. Though this rate can be affordable for business travelers, it is very
difficult for leisure travelers to pay such exorbitant rates.
The diversity of experience in hotel management is greater than in any other
profession. Hotel industry involves combination of various skills like management, food
and beverage service, housekeeping, front office operation, sales and marketing,
accounting. Today, the rise in corporate activity (leading to greater number of business
trips) as well as the wish to travel on holiday has made the hotel industry a very
competitive one. All these factors make this industry as one of the opted career option by
most of the graduates.
The Hotel has a very central location and is close to some of the prominent
consultants, the Boat club‐A posch residential area as well as the commercial and
shopping area of the city.
Distance from Airport -14kms
Distance from Central Station-8kms.
Distance from Main Shopping Area – 4kms
Distance from nearest Fire station -2kms
Distance from nearest 24hrs Hospital –1kms
PROPERTY DETAILS:
Property Area built up area‐5.5 Acres.
Park Wing ‐1, 53.840 sq.ft.
Towers Wing – 1, 35,000 sq. ft.
Car Parking Area ‐ 30,000
ADAYAR GATE HOTEL
COMPANY PROFILE
Sheraton Park Hotel& Towers is a property of the
Welcomgroup, the hotel division of ITC Ltd which was formed in 1974. Sheraton Chola
in Chennai was the first hotel formed by this group. In April 1994 – Hotel division was
renamed as ITC Hotels Limited, a subsidiary of ITC Ltd. July 2000 – Hotels division was
than rebranded and four distinct categories were formed.
In August 2004 - ITC Hotels Ltd merged with ITC Ltd. May 2007 – 7 ITC Hotels
upgraded to Luxury Collection. In the year 2008 September- ITC Hotel Park Sheraton
was renamed as Sheraton Park hotel & Towers, Chennai.
Sheraton Park Hotel& Towers is a level of comfort and service
consistent with the number one hotel in Chennai city. Offering a fusion of rich South
Indian design cues and classic world class elegance, the Sheraton Park Hotel& Towers
gives guests the best of both worlds - business and leisure. The preferred venue of Heads
of State, Royalty, and the Who's Who of the Corporate World, this hotel is the only
which offers class and services at its best.
Today's guests at the hotel are as varied as the surroundings
they find themselves in. The keynotes are friendliness, informality and flexibility - so
families, couples or singles feel equally at home. A sense of unhurried calm pervades the
hotel providing the perfect antidote to the pressures of a busy world.
South India’s largest hotel, the Sheraton Park Hotel& Towers,
nests in an exclusive residential enclave, in the heart of the city and close to the
commercial centre. It has 283 guest rooms and suites.
Safety and Security is of utmost importance at ITC Hotel Park
Sheraton & Towers. In terms of safety, all the rooms and public areas have Water
Sprinklers, Smoke Detectors and alarm systems. The internal security of the hotel is
available round the clock with an appropriate number of staff on duty at all times to
ensure complete safety and security of all guests in the hotel. The frequent guest stay
programmes - the Starwood Preferred Guest and WelcomAward seek to recognize &
reward guests through value added services & benefits which are by far the best in the
Industry.
ADAYAR GATE HOTELS – The Advent
In 1981 the hotel started functioning as “Holiday Inn Adayar
Gate” with an initial room base of approximately 30 and a coffee shop (Brindavan). In
the same year another 60 rooms were added with a bar & a swimming pool. By March of
1982, another 30 rooms were commissioned making it a total of 120 rooms leaving only
the health club and restaurants to be completed. The holiday inn - Memphis collaboration
was once again renewed in 1983 and the hotel was named “Holiday Inn Adayar In
February of 1985 the hotel was taken over by Mr. O.P. Goyal who bought the majority
shareholding (92%) from the non resident Indians. Mr. O.P. Goyal signed an agreement
with ITC in the year 1985 to manage the hotel. The hotel was renamed “Welcomgroup
Park Sheraton”. In 1992 the towers block was made functional with an additional 142
rooms. The hotel came to be called the “Welcomgroup Park Sheraton Hotel & Towers”.
From the 1st June 2000, the hotel was renamed to ITC Hotel Park Sheraton & Towers.
From 1st September 2008, the hotel was renamed as Sheraton Park. Gate”, later being
renamed “Holiday Inn Madras”.
Sheraton Park Hotel& Towers focuses mainly on its philosophy which says:
• Guest experience
• Guest experience with profits
• Guest experience with profits, growth & development.
These are the three main guidelines that make the hotel deliver quality service and attain
profitability through maximum customer satisfaction.
The company aims at delivering and up keeping their slogan which says that “Nobody
Gives You India Like We Do”. This proves that every guest looked upon with at most
care in order to provide them with comfort and service, which indeed promotes are very
on motherland.
Sheraton Park Hotel& Towers is the recipient of various prestigious
awards. Some of them are as follows:
• Won the prestigious IHRA - green hotel award in the year 1997 for outstanding
contributions to conserving the environment
• British safety council awards from the year 1994 for three years consecutively in
recognition of services rendered in the cause safety.
Recognized by the governor of tamilnadu and the St.Johns ambulance association for
having trained the largest number of first aiders in the state
• Travel world nominated the hotel to be amongst the top 10 in Asia
• Dakshin restaurant is rated amongst the top 10 in India by jet wings for two
consecutive years
• Hazard analysis critical control point(haccp) certified kitchen august 2006
• The hotel has been acknowledged as the most "preferred hotel in Chennai"
(source a&m marg).
Initiatives on Environment Health & Safety
The hotel Environment Committee, which is headed by the General Manager, takes
various environment related issues like environment education, classes for staff and
Managers. Managers and staff are encouraged to participate in various other environment
related activities outside the hotel premises. Environment related messages are
communicated to our members of staff through Green Notice Board and through
information pamphlets. Greening supplier chain scheme is in place to educate vendors.
Special Training Programme is conducted by Environmental Experts.
SERVICE PROFILE:
Food & Beverage Outlets
The hotel offers a choice of five exclusive restaurants, each a brand on its own and
having carved a niche for itself in the market. A brief profile of the restaurants is
given below.
Dakshin: The hotels’ signature restaurant serves the celebrated cuisines from all the
four southern states - Karnataka, Kerala, Andhra Pradesh and Tamil Nadu in a regal
ambience. It’s a celebration of the rich diversity of South Indian cuisine offering the
rare pleasures of authentic costal and regional specialties.
The Residency: Multi cuisine restaurant serving the “Rolls Royce” buffet for lunch
and dinner. An elegant multi-cuisine restaurant, offers a lavish spread of buffet for
lunch and dinner.
Cappuccino: The Trendiest 24 Hour restaurant in town serving international cuisine.
A distinct Italian slant and also promises a truly international experience.
Dublin: Chennai’s No.1 Pub and entertainment hot spot, bringing to the city the
finest in International entertainment. The Irish pub cum night club which sets the pace
for Chennai’s night life.
The Westminster: A gentleman's reserve having the widest range of spirits, liqueur
and cigarsin The Gentleman’s reserve serving the world’s finest spirits and wines
masterfully blended in a tasteful ambience.
On the Rock: The restaurant offers undiluted culinary experience grill restaurant
which offers the guest opinion of conventional grills and hot rocks.
The Khyber Grill: The popular pool side barbecue restaurant serving kebabs
reviving tales of roasting meat around a roaring fire.
Banquets: Banqueting facilities offer a wide range of venues for conferencing &
banqueting, catering for up to 1000 persons indoors in ornate halls with chandeliers &
3000 outdoors provides entire catering solutions for all occasions, be they board
meetings, product launches or hosting Heads of State, or just pure entertainment.
FINANCIAL STRUCTURE OF ADAYAR GATE HOTEL
FINANCE CONSISTS OF:
PAYABLES: Accounts bills of contractors & Suppliers.
INCOME: Accounts for all income arising in hotel.
F& B CONTROLS: Food & Beverages accounting of purchases & Coordinate with F& B
Manager, Executive Chef, Purchase very closely.
SYSTEMS: Maintains all computer Hardware & Software.
GENERAL CASHIERS: Act as a banker for the Hotel. Reimburses your dues between 2 pm to
4 pm.
COMPANY SECRETARY FUNCTIONS: Guides the company towards meeting the
requirements of the companies Act, 1956 and various other statutes.
WHAT DOES FINANCE DO?
BOOK KEEPING
MANAGEMENT INFORMATION SYSTEMS (MIS)
TAX MATTERS AND RETURNS
Preparation and filing of various Tax Returns and interaction with Tax authorities for assessment
& orders.
VALUE ADDED TAX ( VAT)
LUXURY TAX
SERVICE TAX
TDS
WORKS CONTRACT TAX
BAKERY EXCISE
PROVIDENT FUND (PF)
EMPLOYEES STATE INSURANCE (ESI)
OTHERS
LEGAL MATTERS & SECRETARIAL MATTER
MAIN SOFTWARES USED IN OUR UNIT:
CLS – CENTRAL LODGING SYSTEM
POS – POINT OF SALE
PROLOGIC – ACCOUNTS PACKAGE
EXPLANATION:
CLS – This software facilitates Reservation, Reception and cashiering in Front office. Night
audit and accounts Receivables in finance and in addition to this it generates reports required for
House Keeping, Sales & Marketing. CLS is password controlled.
POS - This software is meant for F& B outlets and is linked to CLS. This will give all reports
and does all activities relating to F& B Outlets. POS is password controlled.
PRO-LOGIC: This software is used for recording transactions of accounts payable and
generating all reports including profits & loss account and Balance sheet.
TAXES
LUXURY TAX:
This tax is leviable by the state government.
At Present the Luxury Tax is chargeable at 12.5% on the published tariff.
This tax has been charged to the guest on daily basis to the tax authorities every month.
Revision of tariffs will have to be informed to at least one week before such change.
Every month a Return has to be filed in Form II along with the details like name of the Guest,
Room No, Date of stay, No. of .days, Room Tariff, applicable LT , applicable LT collected etc.
The amount should tally with the amount collected. This tax is applicable even to the Hotel
owner who gives the room on complimentary basis.
VAT:
This tax is chargeable on food & soft Beverage & Tobacco sale at 12.55 % in
Hotels. VAT is applicable on Indian liquor procured in Tamil Nadu. This tax varies from product
to product, like 73% for imported liquor, 58% for Indian wines procured from other states,
chargeable to Guests and remitted to the government. No input tax credit is applicable on liquor.
CREDIT POLICY:
Encourage Cash and credit card settlements. Discourage credit extension. Credit is
extended only to a few approved companies (approx 150nos).If the credit extension is not
stated/approved, it automatically means D.P. (i.e.) Direct Payment.
However, for bill payment by companies on credit, the time factor for banquet bills
is 7days and 15 days for stay bills, from date of receipt of the bills.
SEGMENTS IN ACCOUNTS RECIEVABLES:
1. Airlines
2. Corporates
3. Travel Agents
4. ETVP
5. EVTP Companies
6. Govt.Organisation /Clubs
CHAPTER 2
REVIEW
OF
LITERATURE REVIEW OF LITERATURE
INTRODUCTION:
Review of literature is an integral part of any research studies which includes other
researches points and findings .The main aim of including review of literature to any research
process is which give suitable support and guidance to accomplish the new research process.
Any review of literature includes objectives, research methodology & findings. Review of
literature chapter of any studies is the collection of various studies done by various researcher in
same topic or related topic in every studies each and every researchers are followed different
method for accomplish his objectives. Each studies are giving more & suitable ideas for
accomplish the new researchers objectives. In the study, the researcher using ten different studies
in different researchers and it support to make a good inclusion to this study.
Melody Y. Kiang and others (2005), the purpose of this study is to provide and
empirically support rationales for reverse splits by classifying reverse splitting firms into two
groups, those declaring bankruptcy within 2 years and those remaining solvent. The apparent
rationales for engaging in reverse splits differ between the two groups, i.e., weak firms
attempting to increase their stock price while solid firms seeking to reposition their stock in the
market. It should be generate an understanding of corporate rationale for engaging in reverse
splits and the relative success of Z-scores and artificial neural networks in forecasting the two
groups.
Working Capital Management, Growth and Performance of New Public Companies---- by Beneda, Nancy, Zhang, Yilei.
The current study contributes to the literature by examining impact of working capital
management on the operating performance and growth of new public companies. The study also
sheds light on the relationship of working capital with debt level, firm risk, and industry. Using a
sample of initial public offerings (IPO's), the study finds a significant positive association
between higher levels of accounts receivable and operating performance. The study further finds
that maintaining control (i.e. lower amounts) over levels of cash and securities, inventory, fixed
assets, and accounts payables appears to be associated with higher operating performance, as
well. We find that IPO firms which are experiencing unusually high growth tend not to perform
as well as those with low to moderate growth. Further firms which are experiencing high growth
tend to hold higher levels of cash and securities, inventory, fixed assets, and accounts payables.
These findings tend to suggest that firms are willing to sacrifice performance (accept low or
negative operating returns) to increase their growth levels. The higher level of growth is also
associated with higher operating and financial risk. The findings of this study suggest that
perhaps IPO firms should stay more focused on their operating performance than on maintaining
high growth levels.
Working Capital Management and Profitability –Case of Pakistani Firms –by Abdul Raheman and Mohamed Nasr
Working Capital Management has its effect on liquidity as well on profitability of the firm. In
this research, we have selected a sample of 94 Pakistani firms listed on Karachi Stock Exchange
for a period of 6 years from 1999 – 2004, we have studied the effect of different variables
ofworking capital management including the Average collection period,Inventory turnover in
days, Average payment period, Cash conversioncycle and Current ratio on the Net operating
profitability of Pakistani firms.Debt ratio, size of the firm (measured in terms of natural
logarithm ofsales) and financial assets to total assets ratio have been used ascontrol variables.
Pearson’s correlation, and regression analysis (Pooled least square and general least square with
cross section weight models)are used for analysis. The results show that there is a strong
negative relationship between variables of the working capital management and profitability of
the firm. It means that as the cash conversion cycle increases it will lead to decreasing
profitability of the firm, and managers can create a positive value for the shareholders by
reducing the cash conversion cycle to a possible minimum level. We find that there is significant
negative relationship between liquidity and profitability. We also find that there is a positive
relationship between size of the firm and its profitability. There is also a significant negative
relationship between debt used by the firm and its profitability.
Trends in Working Capital Management and its Impact on Firms’ Performance: An Analysis of Mauritian Small Manufacturing Firms - Kesseven Padachi
A well designed and implemented working capital management is expected to contribute
positively to the creation of a firm’s value The purpose of this paper is to examine the trends in
working capital management and its impaction firms’ performance. The trend in working capital
needs and profitability affirms are examined to identify the causes for any significant differences
between the industries. The dependent variable, return on total assets is used as a measure of
profitability and the relation between working capital management and corporate profitability is
investigated for a sample of 58small manufacturing firms, using panel data analysis for the
period 1998 –2003. The regression results show that high investment in inventories and
receivables is associated with lower profitability. The key variables used in the analysis are
inventories days, accounts receivables days, accounts payable days and cash conversion cycle. A
strong significant relationship between working capital management and profitability has been
found in previous empirical work. An analysis of the liquidity, profitability and operational
efficiency of the five industries shows significant changes and how best practices in the paper
industry have contributed to performance. The findings also reveal an increasing trend in the
short-term component of working capital financing.
5.1.1
5.1.2 Working Capital Management Impact of Working Capital Management in the Profitability of Hindalco Industries
Limited -J P Singh* and Shishir Pandey**
For the successful working of any business organization, fixed and current assets play a vital
role. Management of working capital is essential as it has a direct impact on profitability and
liquidity. An attempt has been made in this paper to study the working capital components and
the impact of working capital management on profitability of Hindalco Industries Limited. The
paper also makes an attempt to study the correlation between liquidity, profitability and Profit
Before Tax (PBT) of Hindalco. The study is based on secondary data collected from annual
reports of Hindalco for the study period 1990 to 2007. The ratio analysis, percentage method and
coefficient of correlation have been used to analyze the data. Multiple regressions were used to
check the significant impact on the profitability of Hindalco.
5.1.3 Working with Working Capital Management
MultiLine Industry ,Conglomerates Family Firms
In GCC Countries
An efficient Working Capital Management (WCM) has a significant effect toward the creation of
a firm’s value. It is a fact that financial managers in the firms used to give concentration on
managing long-term financial decisions, specially capital structure, investment decisions,
company valuation & dividends decisions. Only little attention was given to managing the short-
term assets and liabilities, managers began to realize the importance of investigating those short-
term assets and liabilities since the working capital management has an important role for the
firm’s profitability & risk and the overall value of the firm.
..
Finance analysis:
An Analysis of Working Capital Management Results Across Industries
Greg Filbeck, Schweser Study Program Thomas M. Krueger, University of Wisconsin-La Crosse
Firms are able to reduce financing costs and/or increase the funds available for expansion by
minimizing the amount of funds tied up in current assets. We provide insights into the
performance of surveyed firms across key components of working capital management by using
the CFO magazine’s annual Working Capital Management Survey. We discover that significant
differences exist between industries in working capital measures across time. In addition, we
discover that these measures for working capital change significantly within industries across
time.
Sales are outstanding, resulting in an increased cash flow of approximately $2 million at
Thibodaux Regional Medical Center. Furthermore, bad debts declined from $3.4 million to
$600,000. However, Waxer’s (2003) study of multiple firms employing Six Sigma® finds that it
is really a “get rich slow” technique with a rate of return hovering in the 1.2 – 4.5 percent range.
Even in a business using Six Sigma® methodology, an “optimal” level of
working capital management needs to be identified.
6 The Impact of Firms' Capital Expenditure on Working Capital
Management: An Empirical Study across Industries in Thailand.
International Management Review, June 2008 by B. A Ranjith Appuhami
The purpose of this research is to investigate the impact of firms' capital expenditure on their
working capital management. The author used the data colleted from listed companies in the
Thailand Stock Exchange. The study used Shulman and Cox's (1985) Net Liquidity Balance and
Working Capital Requirement as a proxy for working capital measurement and developed
multiple regression models. The empirical research found that firms' capital expenditure has a
significant impact on working capital management. The study also found that the firms'
operating cash flow, which was recognized as a control variable, has a significant relationship
with working capital management, which is consistent with findings of previous similar
researches. The findings enhance the knowledge base of working capital management and will
help companies manage working capital efficiently in growing situations associated with capital
expenditure. ABSTRACT FROM AUTHOR Copyright of International Management Review is
the property of American Scholars Press and its content may not be copied or emailed to multiple
sites or posted to a listserv without the copyright holder's express written permission. However,
users may print, download, or email articles for individual use.
7
The Effect of Working Capital Management on Firm Profitability: Evidence from Turkey
F. Samiloglu and K. Demirgunes
The aim of this study is to analyze the effect of working capital management on firm
profitability. In accordance with this aim, to consider statistically significant relationships
between firm profitability and the components of cash conversion cycle at length, a sample
consisting of Istanbul Stock Exchange (ISE) listed manufacturing firms for the period of 1998-
2007 has been analysed under a multiple regression model. Empirical findings of the study show
that accounts receivables period, inventory period and leverage affect firm profitability
negatively; while growth (in sales) affects firm profitability positively.
OBJECTIVE OF THE STUDY:
The main objective of the study is to analyze the working capital of ADYAR GATE
HOTEL LIMITED for the last six years from 2004-2005 to 2008-2009.
To study the changes in the working capital position.
To study the efficiency of the company’s working capital management.
To analyze the changes made by the company to improve its working capital.
To analyze the various components of working capital management.
To offer suitable suggestions for improvement in the field of working capital
management.
IMPORTANCE OF THE STUDY:
Working Capital is the lifeblood and new center of business. No Business can be
run successfully with adequate amount of working capital.
LIMITATIONS:
The data related to study is only for six years. The conclusion may be relevant for this
period.
The Research has been taken only for working capital. Therefore, the conclusions and
findings may not reflect the overall financial viability or profitability of the company.
Detailed analysis could not be carried for the project work because of the limited time
span.
The findings and recommendation are applicable only to ADYAR GATE HOTEL
LTD and is not related to other companies.
CONCEPTUAL REVIEW OF WORKING CAPITAL:
Working capital Management which is concerned with decisions relating to current
assets and current liabilities. The key difference between long term financial
Management and short term Financial Management is in terms of the timing of cash.
While Long term financial decisions like buying capital equipment or issuing
debentures involve cash flows within a year or within the operating cycle of the firm.
Working Capital generally stands for excess of current assets over current liabilities.
Therefore refers to all aspects of the administration of both current assets and current
liabilities. In Other words, working capital management in concerned with problem
that arise in attempting to manage the current assets. The current liabilities and the
inter relationships that exist between them.
The basic objective of working capital management is to the management of the
firm’s current assets and current liabilities in such a way that a satisfactory level of
working capital is maintained a reasonable safety margin moreover, different
compounds of working capital are to be properly balanced in the absence of such a
situation, the financial position in respect of the firms liquidity may not be
Satisfaction current ratio and liability ratio.
CHAPTER 3
RESEARCH OBJECTIVES
AND
METHODOLOGY
RESEARCH METHODOLOGY
METHODOLOGY:
In the view of the objectives of the analysis listed above, an Exploratory Research (which
narrates the all – available facts) design has been adopted. Exploratory research design largely
interprets the already available information; it makes use of secondary data & lays emphasis on
analysis & interpretation of the existing and available information. The major sources of data
were Secondary data, published annual reports, financial reports and discussion with the officials
of the company.
RESEARCH:
Research in simple terms refers to search for knowledge. It is a scientific and
systematic search for information on a particular topic or issue. It is also known as the art of
scientific investigation.
According to Clifford Woody (Kothari,1988), research comprises “defining and
redefining problems, formulating hypotheses or suggested solutions, collecting, organizing and
evaluating data; making deductions and reaching conclusions; and finally, carefully testing the
conclusions to determine whether fit the hypotheses”
RESEARCH METHODOLOGY
A research cannot be conducted abruptly. Researcher has to proceed systematically in the already
planned direction with the help of a number of steps in sequence. To make the research
systemized the researcher has to adopt certain methods. The method adopted by the researcher
for completing the project is called Research Methodology. Data becomes information only
when a proper methodology is adopted. Thus we can say Methodology is a tool which processes
the data to reliable information.
The research methods used in educational psychology tend to be drawn from psychology and
other social sciences. There is also a history of significant methodological innovation by
educational psychologists, and psychologists investigating educational problems. Research
methods address problems in both research design and data analysis. Research design informs
the planning of experiments and observational studies to ensure that their results have internal,
external and ecological validity.
Data analysis encompasses methods for processing both quantitive (numerical) and qualitative
(non-numerical) research data. Although, historically, the use of quantitative methods was often
considered an essential mark of scholarship, modern educational psychology research uses both
quantitative and qualitative methods.
RESEARCH DESIGN
A research design is an arrangement of conditions for collection and analysis of data in a manner
that aims to combine relevance to the research purpose. A research design is purely and simply
the framework and plan for the study that guides the collection and analysis of data.
In the view of the objectives of the analysis listed above, an Descriptive form of
Research (which narrates the all – available facts) design has been adopted. Descriptive research
design largely interprets the already available information; it makes use of secondary data & lays
emphasis on analysis & interpretation of the existing and available information. The major
sources of data were Secondary data, published annual reports, financial reports and discussion
with the officials of the company.
IMPORTANCE OF REASEARCH DESIGN:
The need for a research design arises out of the fact that it facilitates the smooth conduct
of the various stages of research. It contributes to making research as efficient as possible, thus
yielding the maximum information with minimum effort, time and expenditure. The Research
Design should be prepared with utmost care, so as to avoid any error that may disturb the entire
project. Thus; research design plays a crucial role in attaining the reliability of the results
obtained, which forms the strong foundation of the entire process of the research work.
CHARACTERSTICS OF A GOOD RESEARCH DESIGN:
A good research design often possesses the qualities of being flexible, suitable, efficient
and economical and so on. A research design Design which minimizes bias and maximizes the
reliability of the data collected and analyzed is considered a good design. A research Design
which does not allow even the smallest experimental error is said to be the best design for
investigation.
NATURE OF DATA:
The study is based on Primary as well as secondary data.
• Importance source of information for this study includes secondary data from annual
reports and contents gathered from websites.
• Primary data has been gathered through discussions with personnel of the company.
DATA COLLECTION METHOD:
• The financial information from annual Reports.
• Data relating to company profile where collected from the websites.
RESEARCH TOOLS:
Research tools are statistical techniques used for data analysis and to arrive certain conclusions.
TOOLS APPLIED IN THE STUDY:
Comparative balance sheet
Ratio analysis
Common size balance sheet analysis
ABOUT THE STUDY:
PROBLEM OF THE STATEMENT:
The study has been undertaken with a view to evaluate the working capital Position of the
organization and to identify the areas, where there is scope, possibilities and feasibilities for
improvement.
SCOPE OF WORKING CAPITAL MANAGEMENT:
Maintain an adequate level of working capital, always, to meet the rising
turnover.
Sufficient liquidity to meet short term obligations as and when they arise.
To avail market opportunities like purchase of raw materials etc...at low prices.
CHAPTER 4
DATA ANALYSIS AND
INTERPRETATION ANALYSIS & INTERPRETATION: INTRODUCTION: Analysis and interpretation of financial statements with the help of ‘ratios’ is termed as ‘ratio analysis’. Ratio Analysis involves the process of computing determining and presenting the relationship of items or groups of items of financial statements. Ratio Analysis was pioneered by Alexander wall who presented a system of ratio analysis in the year 1909. Alexander’s contention was that interpretation of financial statements can be made easier by establishing quantitative relationships between various items of financial statements.
MEANING OF RATIO: A ratio is a mathematical relationship between two items expressed in a quantitative form. Ratio can be defined as “Relationship expressed in quantitative terms, between figures which have cause and effect relationships or which are connected with each other. Arithmetically ratio is a comparison of the numerator with denominator. Ratio Analysis is an age old technique financial analysis. The information provided by the financial statements in absolute form is historical and static, conveying very little meaning to the users. Accounting ratio s are designed to show how one number is related to another and the meaning of such relationships.
The ratio analysis is one of the most powerful tools of financial analysis. It is the process of establishing and interpreting various ratios. A financial ratio is the relationship between two accounting figures expressed mathematically. Ratios provide clues to the financial position of a concern. These are the pointers and indicators of financial strength, soundness, position or weakness of an enterprise. One can draw conclusions about the exact financial positions of a concern with the help of ratios.
Ratio analysis is a process of comparison of one figure against another, which make a ratio, and the appraisal of the ratios to make proper analysis about the strengths and weaknesses of the company’s operations. Ratio analysis is extremely helpful in providing valuable insight into a company’s financial picture.
ADVANTAGES OF RATIO ANALYSIS: When rightly used offers the following Advantages:
1. It facilitates the comprehension of financial statements and evaluation of several aspects such as financial health, profitability and operational efficiency of the under taking.
2. It provides inter- firm comparison to measure efficiency and helps the management to take remedial measures.
3. It is also helpful in forewarning corporate sickness and helps the management to take corrective action.
4. Tend Analysis with the uses of ratios help in planning and forecasting. 5. It helps in investment decisions in the case of investors and lending decisions in
the case of bankers and financial institutions.
Classifications of ratios
1. Short term solvency ratio 2. Long-term solvency ratio 3. Turnover Ratio 4. Profitability ratio 5. Working capital groups ratio
7.1.1 1.FINANCIAL RATIOS (OR) SOLVENCY RATIOS:
Solvency or financial ratios include all ratios which express
financial position of the concern. Financial ratios are calculated on the basis of items
of the balance sheet – therefore they are also called balance sheet ratios.
Financial Position may mean differently to different person interested in the business
concern. Creditors , banks , management, investors and auditors have different views
about financial position. The term financial position generally refers to short – term
and long – term. Solvency of the business concern, indicating safety of different
interested parties. Financial ratios are
FORMULA:
CURRENT RATIO = Current ratio / Current Liabilities
The term current assets includes debtors, stock, bills receivable, bank
and cash balances, prepaid expenses ,income due and short – term invest. The term
current liabilities includes creditors , bank overdraft, bills payable , outstanding
expenses , income received in advance etc.
SIGNIFICANCE:
This ratio is used to assess the short term financial position of the
business concern. In other words, it is an indicator of the firms short term solvency.
Since,it shows their extent of the working capital which is the amount by which the
current assrts exceeds the current liabilities. The higher the ratio, the better it is.
IDEAL RATIO = 2:1
CURRENT RATIO CALCULATION
CURRENT RATIO = Current Assets / Current Liabilities
TABLE 1
YEAR CURRENT ASSET CURRENT LIABILITIES CA/CL
2004-2005 89,157,782 128,382,020 0.694472489
2005-2006 104,101,923 169,866,660 0.61284494
2006-2007 99,511,775 158,254,165 0.628809833
2007-2008 95,553,136 114,847,768 0.831998198
2008-2009 99,075,639 132,474,028 0.747887268
CHART 1
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
2004‐05 2005‐06 2006‐07 2007‐08 2008‐09
INTERPRETATION:-
Current ratio is an indicator of the firm’s commitment to meet its short term
liabilities. From the above table we can observe that the current asset level of the
company was sound enough to meet the firm’s current liabilities. In the year 2004-05
the current ratio was 0.69 from then it has shown a positive trend and now in 2008-09
the ratio is 0.74 which is nearing the ideal ratio. Thus the liquidity position of the
firm is considered to be good.
2. LIQUIDITY RATIO:
This ratio is called “quick” or “Acid test “Ratio. It is calculated by comparing the quick assets
with current liabilities.
FORMULA:
LIQUID RATIO = Quick assets or liquid assets / Current liabilities
Quick or liquid assets refer to asserts which are quickly convertible into cash . Current
assets other than stock and prepaid expenses are considered as quick assets. Comparison
of quick ratio with current ratio indicates the inventory hold’s ups.
SIGNIFICANCE:
The ratio indicated the short term solvency of the company, quick ratio also indicates the
inventory holds ups. Through this ratio the liquidity position of the company can be
identified.
QUICK RATIO CALCULATION
QUICK RATIO = Current ratio / Current Liabilities
TABLE 2
YEAR QUICK ASSET CURRENT LIABILITIES CA/CL
2004-2005 43,345,201 128,382,020 0.337626725
2005-2006 63,597,205 169,866,660 0.374394863
2006-2007 71,126,339 158,254,165 0.449443709
2007-2008 80,426,566 114,847,768 0.700288454
2008-2009 83,044,642 132,474,028 0.626874892
CHART 2
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
2004‐05
2005‐06
2006‐07
2007‐08
2008‐09
INTERPRETATION:
This ratio is the indicator of short-term solvency of the company. From the
above table it indicates that the solvency position of the company has been keep on
increasing. The ideal ratio in this case is 1. Since the company’s quick ratio is
nearing its ideal ratio the company is on upward trend. It is suggestible if the
company reaches ideal ratio 1.
3) PROPRIETORY RATIO:
A high proprietary ratio is indicative of strong financial position of the business. It is a variant of
debt equity ratio. It establishes relationship between the proprietor’s or shareholders funds and
the total tangible assets. It may be expressed as:
PROPRIETORY RATIO = Shareholder’s Funds/ Total Tangible Assets
PROPRIETORY RATIO CALCULATION
PROPRIETORY RATIO = Shareholder’s Funds/ Total Tangible Assets
TABLE 3
SHARE HOLDERS FUND
TOTAL PROPRIETORY RATIO YEAR ASSETS
2004-2005 114,008,580 1,198,847,314 0.095
2005-2006 114,008,580 1,802,509,770 0.063
2006-2007 114,008,580 1,894,224,995 0.060
2007-2008 114,008,580 1,893,232,184 0.060
2008-2009 114,008,580 1,888,567,707 0.060CHART 3
00.010.020.030.040.050.060.070.080.090.1
2004-2005 2005-2006 2006-2007 2007-2008 2008-2009
PROPRIETORY RATIO
INTERPRETATION:
The ratio focuses on the attention of the general financial strength of the business enterprise, a
high proprietary ratio indicate relatively little dangerous to the creditors. A ratio below 50% may
be alarming to the creditors .Low proprietary ratio indicates greater risk to creditors. The
proprietary ratio was at its highest in the year 2004-2005 (9.5) and in the following years there is
a gradual decrease in the prop ratio, finally in the year 2008-2009 they have maintained the ratio
of 0.06, this indicates that the company has efficiently tried to maintain a major portion of the
share holder’s of the total assets employed in the business.
4) Fixed assets to net worth ratio :
Fixed assets to net worth ratio = Fixed Assets/ total Shareholders Fund
FIXED ASSETS TO NET WORTH RATIO CALCULATION
Fixed assets to net worth ratio = Fixed Assets/ total Shareholders Fund
TABLE 4
YEAR FIXED ASSETS SHARE
HOLDERS FUND
RATIO
2004-2005 1,192,898,779 114,008,580 10.46
2005-2006 1,887,350,757 114,008,580 16.55
2006-2007 1,875,135,600 114,008,580 16.44
2007-2008 1,888,567,707 114,008,580 15.56
2008-2009 1,875,135,600 114,008,580 16.91
CHART 4:
0
2
4
6
8
10
12
14
16
18
2004-2005 2005-2006 2006-2007 2007-2008 2008-2009
Fixed Assets to Net Worth Ratio
Interpretation:
From the above table it indicates that there has been a increase in the
shareholders financial ability. In the year , 2004-2005 the fixed assets to net worth ratio
was only 10.46 whereas in the due course , in the year 2008-2009 it has risen to 16.91.
Thus it indicates the financial stability of the company which is in negative trend and it
implies that owners fund are not sufficient to finance the fixed assets and the firm has to
depend upon outsiders to finance the fixed assets.
5) CURRENT ASSETS RATIO TO FIXED ASSETS:
Current assets Ratio to Fixed assets = Current Assets /Fixed assets * 100
CURRENT ASSETS TO FIXED ASSETS RATIO CALCULATION
TABLE 5
Current assets Ratio to Fixed assets = Current Assets /Fixed assets
*100
TABLE: 5 YEAR CURRENT ASSET FIXED ASSET % OF CA
2004-2005 89,157,781 1,192,898,779 7.474044116
2005-2006 104,101,923 1,887,350,757 5.515769796
2006-2007 99,511,775 1,875,135,600 5.306910871
2007-2008 95,553,136 1,814,090,582 5.267274796
2008-2009 99075639 1,888,567,707 5.246072962
CHART : 5
0
1
2
3
4
5
6
7
8
2004-2005 2005-2006 2006-2007 2007-2008 2008-2009
Current Assets to Fixed Assets
% OF CA
Interpretation:
A higher CA to FA ratio indicates a conservative current asset policy of the
firm. A low ratio indicates aggressive current policy. From the above we can
conclude that all are following the conservative current policy till 2005, but
from the 2007-2008 there is a decreasing in the ratio which shows the
aggressive policy of the firm, but in the year 2009 the company’s CA ratio is
decreasing due to financial crises.
6) CASH TO CURRENT ASSETS RATIO:
CASH TO CURRENTASSETS RATIO CALCULATION
TABLE: 6
YEAR CURRENT ASSET CASH & BANK
BALANCES
% OF CASH
TO CA
2004-2005 89,157,781 4.782310727 18,643,243
2005-2006 104,101,923 3.296375336 31,580,725
Cash to current
Assets Ratio
2006-2007 99,511,775 2.959715718 33,622,072
2007-2008 95,553,136 2.090775222 45,702,252 2008-2009 99,075,639 2.307820022 42,930,401
Current Assets /Cash & Bank Balances*100
CHART:6
00.51
1.52
2.53
3.54
4.55
2004‐05 2005‐06 2006‐07 2007‐08 2008‐09
INTERPRETATION:
From the above we can see that cash played a very small role in all the years.
But in the year 2004-2005 it occupies a major place in current assets. The high
level of cash and bank balance in the year may be due to substantial collection
from debtors/bills discounting during the 2005 financial year. Then onwards the
company’s cash position has been showing a downward trend. Thus, the firm
should take steps to improve its cash position
7) FIXED ASSETS TURNOVER RATIO:
Fixed and turnover ratio = Sales / Net fixed assets
FIXED ASSETS TURNOVER RATIO CALCULATION:
Fixed and turnover ratio = Sales / Net fixed assets
TABLE:7
YEAR SALES NET FIXED ASSETS RATIO
2004-2005 0.63 753,969,820 1,192,898,779
2005-2006 0.51 970,508,524 1,887,350,757
2006-2007 0.64 1,202,494,168 1,875,135,600
2007-2008 0.73 1,327,494,696 1,814,090,582
2008-2009 0.67 1,262,716,001 1,888,567,707
CHART:7
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
2004‐05 2005‐06 2006‐07 2007‐08 2008‐09
INTERPRETATION:
Fixed assets turnover Ratio. This is basically because the investments towards fixed
assets were not efficient enough to contribute towards sales. Thus, the firm has to
improve its investment towards fixed assets. This ratio indicates the extend to which
the investment in fixed assets contribute towards sales. If compared with the previous
period it indicates whether the investment in fixed assets has been judicious or
not.From the above table it indicates that there has been fluctuations in the firms
8) NET PROFIT RATIO:
Formula:
Net profit ratio = Net Profit /Sales *100
NET PROFIT RATIO CALCULATION:
Net profit ratio= Net Profit after tax /Net Sales *100
Table: 8
YEAR NET PROFIT NET SALES RATIO
2004-2005 98,037,305 753,969,820 13.00
2005-2006 164,117,644 970,508,524 16.91
2006-2007 230,788,600 1,202,494,168 19.19
2007-2008 294,648,979 1,327,494,696 22.19
2008-2009 2,81,956,065 1,262,716,001 22.32
CHART:8
0
5
10
15
20
25
2004‐05 2005‐06 2006‐07 2007‐08 2008‐09
INTERPRETATION:
The above table and chart shows the Net profit ratio of the company for the period of
2004-2009. There is a good profitability by over all measure. This ratio indicates net
margin earned on sale of Rs.100.This ratio helps in determining the efficiency with which
affairs of the business are been managed. An increase in the ratio over the previous
period indicates improvement in the operational efficiency of the business provided the
gross profit ratio is constant. So based on this, the company has also been showing
improvement in its operational efficiency over the previous periods. During the year
2004-2005 it was 13 % and now 2008-2009 it has turned out to be 22.32%.
9) EARNING S PER SHARE:
Earnings per share = Net profit /Number of equity shares
EARNINGS PER SHARE CALCULATION:
Earnings per share = Net profit /Number of equity shares
7.1.2
7.1.3
7.1.4 TABLE: 9
YEAR NET PROFIT NO OF EQUITY
SHARES RATIO
2004-2005 98,037,305 11,400,858 8.59
2005-2006 164,117,644 11,400,858 14.39
2006-2007 230,788,600 11,400,858 20.24
2007-2008 294,648,979 11,400,858 25.84
2008-2009 2,81,956,065 11,400,858 24.73
CHART: 9
0
5
10
15
20
25
30
2004‐05 2005‐06 2006‐07 2007‐08 2008‐09
7.1.5 INTERPRETATION:
7.1.6 The Earnings per share helps in determine the market price of the equity shares of the
company. A comparison of earning per share of the company with another will also help
in deciding whether the equity share capital is being effectively used or not. In this case
the company‘s market price of its equity shares were sound enough to pay dividend to its
shareholders. Thus the earnings per share of the company are satisfactory in nature.
7.1.7 10) RETURN ON SHARE HOLDERS FUND:
7.1.8
7.1.9 Return on share holders fund = Net profit after tax / Share holders funds *100
7.1.10
TABLE: 10
YEAR NET PROFIT SHARE HOLDERS
FUND RATIO
2004-2005 98,037,305 114,008,580 85.99
2005-2006 164,117,644 114,008,580 143.95
2006-2007 230,788,600 114,008,580 202.43
2007-2008 294,648,979 114,008,580 258.44
2008-2009 2,81,956,065 114,008,580 247.311
CHART:10
0
50
100
150
200
250
300
2004‐05 2005‐06 2006‐07 2007‐08 2008‐09
INTERPRETATION:
This ratio indicates the percentage of return on the capital employed in the business. In
this case it is desirable to work out the profitability of the company from the shareholders
point of view. The amount of profitability will be judged after taking into account the
amount of dividend payable to the preference shareholders. In this case the firm ‘s
profitability level has kept on improving (i.e) 2004-2005 was 85.99 and now in 2008-
2009 it is 247.311.
COMPARATIVE BALANCE SHEET ANALYSIS
The comparative balance sheet analysis is the study of the trend of the same items,
group of items and computed items in two or more balance sheets of the same business
enterprise on different dates. The changes in periodic balance sheet items reflect the
conduct of a business. The changes can be observed by comparison of the balance sheet
at the beginning and at the end of a period and these changes can help in forming an
opinion about the progress of an enterprise.
Balance sheets as on two or more different dates are used for comparing the assets,
liabilities and the net worth of the company. Comparative balance sheet analysis is useful
for studying the trends of an undertaking.
Advantages
• Comparative statements help the analyst to evaluate the performance of the
company.
• Comparative statements can also be used to compare the performance of the firm
with
• The average performance of the industry between different years.
• It helps in identification of the weaknesses of the firm and remedial measures can
be taken accordingly.
Purposes of preparing Comparative statements are as follows
The Comparative statements are prepared to know the strengths and weakness
as in various areas of business.
The Comparative statements help us to know the changes: these changes
become the basics of forecasting future actions.
A continuous comparison of any one element of the financial statements leads
to develop the trend
COMPARATIVE BALANCE‐ SHEET FOR THE YEAR 2006 & 2007
Particulars Absolute
changes Percentage changes 2006 2007
SOURCES OF FUNDS: share holder funds Share capital 114,008,580 114,008,580 0 0.00%Reserves &Surplus 513,934,134 600,052,808 86,118,674 16.76% Total (X) 627,942,714 714,061,388 86,118,674 13.71%Loan Funds: Secured 312,729,095 797,411,230 484,682,135 154.98% Unsecured 78,191,114 76,738,588 -1,452,526 -1.86% Deferred tax and liabilities 179,984,391 214,298,564 34,314,173 19.07% Total (Y) 570,904,600 1,088,448,382 517,543,782 90.65%Application of funds Net fixed assets 1,116,682,865 1,816,091,172 699,408,307 62.63% Investments 71,223,585 71,259,585 36,000 0.05% Capital work in progress 4,992,329 0 -4,992,329 -100.00% Total (A) 1,192,898,779 1,887,350,757 694,451,978 58.22% Current Assets Inventories 45,812,580 40,476,056 -5,336,524 -11.65% Debtors 24,351,649 31,594,914 7,243,265 29.74% Cash and Bank 18,643,243 31,580,725 12,937,482 69.40%Interest accrued on deposits 350,309 421,566 71,257 20.34%Loans and Advances 67,097,139 112,694,707 45,597,568 67.96% Total Current assets (B) 156,254,920 216,767,968 60,513,048 38.73%Miscellaneous Expenditure © 1,350,447 517,439 -833,008 -61.68% TOTAL ASSETS(A+B+C) 1,350,504,146 2,104,636,164 754,132,018 55.84%CURRENT LIABILITIES AND PROVISIONS Current liabilities: Sundry creditors 126,828,596 224,852,057 98,023,461 77.29%Interest accrued but not due 1,553,424 4,575,598 3,022,174 194.55% Provisions 23,274,812 72,698,739 49,423,927 212.35% Total(Z) 151,656,832 302,126,394 150,469,562 99.22% TOTAL LIABILITY 1,350,504,146 2,104,636,164 754,132,018 55.84%
COMPARATIVE BALANCE SHEET FOR THE YEAR 2007 & 2008
Q Particulars
2007 2008 Absolute changes
Percentage changes
SOURCES OF FUNDS: share holder funds Share capital 114,008,580 114,008,580 0 0.00%Reserves &Surplus 600,052,808 772,342,180 172,289,372 28.71% Total (X) 714,061,388 886,350,760 172,289,372 24.13%Loan Funds: Secured 797,439,892 696,282,798 -101,157,094 -12.69% Unsecured 136,299,583 97,738,971 -38,560,612 -28.29% Deferred tax and liabilities 214,298,564 213,852,466 -446,098 -0.21% Total (Y) 1,148,038,039 1,007,874,235 -140,163,804 -12.21%Application of funds Net fixed assets 1,816,091,172 1,796,257,298 -19,833,874 -1.09% Investments 71,259,585 78,878,302 7,618,717 10.69% Total (A) 1,887,350,757 1,875,135,600 -12,215,157 -0.65% Current Assets Inventories 40,476,056 28,385,436 -12,090,620 -29.87% Debtors 31,594,914 36,756,234 5,161,320 16.34% Cash and Bank 31,609,387 33,622,072 2,012,685 6.37%Interest accrued on deposits 421,566 748,033 326,467 77.44%Loans and Advances 112,694,707 200,262,891 87,568,184 77.70% Total Current assets (B) 216,796,630 299,774,666 82,978,036 38.27% Miscellaneous Expenditure © 517,439 0 -517,439 -100.00% TOTAL ASSETS(A+B+C) 2,104,664,826 2,174,910,266 70,245,440 3.34%CURRENT LIABILITIES AND PROVISIONS Current liabilities:
Sundry creditors 165,291,062 154,407,591 -10,883,471 -6.58%Interest accrued but not due 4,575,598 3,846,574 -729,024 -15.93% Provisions 72,698,738 122,431,106 49,732,368 68.41% Total(Z) 242,565,398 280,685,271 38,119,873 15.72% TOTAL LIABILITY(X+Y+Z) 2,104,664,825 2,174,910,266 70,245,441 3.34%
COMPARATIVE BALANCE SHEET FOR THE YEAR 2008 & 2009
Particulars Absolute changes
Percentage changes 2008 2009
SOURCES OF FUNDS: share holder funds Share capital
114,008,580 114,008,580 0 0.00% Reserves &Surplus 772,342,180 945,691,574 173,349,394 22.44% Total (X) 886,350,760 1,059,700,154 173,349,394 19.56%Loan Funds: Secured 696,282,798 518,462,421 ‐177,820,377 ‐25.54% Unsecured 97,738,971 99,535,084 1,796,113 1.84% Deferred tax and liabilities 213,852,466 215,534,525 1,682,059 0.79% Total (Y) 1,007,874,235 833,532,030 ‐174,342,205 ‐17.30%Application of funds Net fixed assets 1,796,257,298 1,734,953,009 ‐61,304,289 ‐3.41% Investments 78,878,302 79,137,573 259,271 0.33% Total (A) 1,875,135,600 1,814,090,582 ‐61,045,018 ‐3.26% Current Assets Inventories 28,385,436 15,126,570 ‐13,258,866 ‐46.71% Debtors 36,756,234 33,950,125 ‐2,806,109 ‐7.63% Cash and Bank 33,622,072 45,702,252 12,080,180 35.93%Interest accrued on deposits 748,033 774,189 26,156 3.50%Loans and Advances 200,262,891 273,327,506 73,064,615 36.48% Total Current assets (B) 299,774,666 368,880,642 69,105,976 23.05% Miscellaneous Expenditure © 0 0 0 0.00% TOTAL ASSETS(A+B+C) 2,174,910,266 2,182,971,224 8,060,958 0.37%CURRENT LIABILITIES AND PROVISIONS Current liabilities:
Sundry creditors 154,407,591 111,951,649 ‐42,455,942 ‐27.50%Interest accrued but not due 3,846,574 2,896,119 ‐950,455 ‐24.71% Provisions 122,431,106 174,891,272 52,460,166 42.85% Total (Z) 280,685,271 289,739,040 9,053,769 3.23% TOTAL LIABILITY(X+Y+Z) 2,174,910,266 2,182,971,224 8,060,958 0.37%
INFERENCES FOR COMPARATIVE BALANCE SHEETS OF ITC
SHERATON PARK HOTEL AND TOWERS
FROM THE YEAR 2006-2007 TO 2008-2009
INFERENCE (1) (2006-2007)
Under this financial year (2006-2007) the
Net current assets increased to 38.73%
Fixed assets increased to58.2 %
Current liability and provisions increased to 99%
Share capital and reserves and surplus increased to 13.71%
Loans and advances increased to 67.90%
INFERENCE (2) (2007-2008)
Under this financial year (2007-2008) the
Net current assets increased to 38.27%
Fixed assets decreased to 0.65%
Current liability and provisions increased to 15.72%
Share capital and reserves and surplus increased to 24.13%
Loans and advances increased to 77.70%
INFERENCE (3) (2008-2009)
Under this financial year (2008-2009) the
Net current assets increased to 23.05%
Fixed assets decreased to 3.26%
Current liability and provisions increased to 15.72%
Share capital and reserves and surplus increased to 3.23%
Loans and advances increased to 36.48%
TREND ANALYSIS
THIS IS ALL ABOUT THE TREND ANALYSIS OF THE FINANCIAL STATEMENT
AND BALANCE SHEET
With the above FINANCIAL STATEMENT trend analysis the following is revealed,
The Sales of the analysis from the year 2004-2005 to 2007-2008 reveals that the sales has been in increasing trend.
EBIT of the analysis from the year 2004-2005 to 2007-2008 reveals it has
been in increasing trend.
PAT of the analysis from the year 2004-2005 to 2007-2008 reveals it has been in increasing trend.
The Current assets of the analysis from the year 2004-2005 to 2007-2008
reveals it has been in increasing trend.
The Current liabilities of the analysis from the year 2004-2005 to 2007-2008 reveals that third year it has been decreased slightly and again it has been increased trend
The Gross fixed assets of this analysis from the year 2004-2005 to 2007-
2008 reveals that the total sources of funds has been in increasing trend.
The Total assets of this analysis from the year 2004-2005 to 2008-2009 reveals that the total assets has been in increasing trend.
Inventories of the analysis from the year 2004-2005 to 2007-2008 reveals that second and third and forth year it has been decreased .
SWOT
Strengths
• Diversity
• Demand-Supply gap
• Government Support
• Market Share
Opportunities
• Open Sky
• Rising Income
Threats
• Fluctuation
• Increasing Competition
FUTURE POTENTIAL AND GROWTH
World Tourism Organization (WTO) - International tourist inflow in India by 2020 would be 10 m
Tourist influx to grow at a CAGR of 6.5% for the next 14 yrs
Expected share of world tourism: 1.5% by 2010
Untapped domestic tourist potential
Commonwealth Games in New Delhi in 2010
Medical Tourism
Rural Tourism
Wildlife Tourism
CHAPTER 5
FINDINGS & SUGGESTIONS
• The Current assets of the analysis from the year 2004-2005 to 2007-2008
reveals it has been in increasing trend.
• Inventories of the analysis from the year 2004-2005 to 2007-2008 reveals
that second , third and fourth year it has been decreased .
• The Current liabilities of the analysis from the year 2004-2005 to 2007-
2008 reveals that third year it has been decreased slightly and again it has
been increased trend.
• The Total assets of this analysis from the year 2004-2005 to 2008-2009
reveals that the total assets has been in increasing trend.
• The Sales of the analysis from the year 2004-2005 to 2007-2008 reveals that
the sales has been in increasing trend.
• EBIT of the analysis from the year 2004-2005 to 2007-2008 reveals it has
been in increasing trend.
• PAT of the analysis from the year 2004-2005 to 2007-2008 reveals it has
been in increasing trend.
• The Gross fixed assets of this analysis from the year 2004-2005 to 2007-
2008 reveals that the total sources of funds has been in increasing trend
• The study highlights the FINANCIAL STRENGTH AND WEAKNESS of
the ITC SHERATON PARK HOTEL AND TOWER by analyzing
FINANCIAL POSITION AND CAPITAL STRUCTURE.
• ITC SHERATON PARK HOTEL AND TOWER is one of the best
“STAR HOTEL” in Chennai its provide excellent service to the guests.
• After analyzing FINANCIAL POSITION (FP) of ITC SHERATON PARK
HOTEL AND TOWER from the year 2004-2005 to 2007-2008 it is clear
that the net worth of ITC SHERATON PARK HOTEL AND TOWER
during the study period has been in upward trend.
• The study of financial performance reveals the comparative balance sheets,
common size balance sheets, trend analysis, and ratio analysis by using
financial statements of. ITC SHERATON PARK HOTEL AND TOWER.
BIBLOGRAPHY:
Financial Management --- I M Pandey 9th edition Vikas
publications year of 2008
Financial Accounting --- Eugene F. Brigham 12th edition Brigham
Houston Publications year of 2007
EDP Centre --- Adyar Gate Hotel
http:/Wikipedia.com/working-capital-management.html
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