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BABASAB PATIL- 1 -
INDEX TABLE
SL.NO CONTENTS PAGENO.
1 PART I
EXECUTIVE SUMMARY
2 TO 6
2 PART II
INTRODUCTION TO THE STUDY
INDUSTRY PROFILE
TO 1!
" PART # IIIINTRODUCTION OF COMPANY
1$ TO "$
! PART # IVRESEARCH METHDOLOGY
OB%ECTIVES OF THE STUDY
"6 TO "
6 PART # VWORKING CAPITAL MANAGEMENT
!' TO 66
PART # VIDATA ANALYSIS AND INTERPRETATION
6 TO ($
( PART VIIFINDINGS
SUGGESTIONS &
CONCLUSIONS.
(6 TO (
ANNEXURE
FINANCIAL STATEMENT.
BIBILOGROPHY.
' TO 2
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EXECUTIVE SUMMARY
BABASAB PATIL- 2 -
EXECUTIVE SUMMARY
INDUSTRY PROFILE.
COMPANY PROFILE.NEED FOR THE STUDY.
OB%ECTIVES OF THE STUDY.
SCOPE OF THE STUDY.
LIMITATIONS OF THE STUDY.
METHODOLOGY.
FINDINGS.
SUGGESTIONS.
CONCLUSION.
PART # I
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T)*+ - */ 0* 34
5T/ 0* 3 - -78)9: ;
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)he chemical industry is one of the oldest domestic industries in !ndia,
contributing significantly to both the industrial and economic gro"th of the country since
it achieved independence in 19:; )he chemical industry currently produces nearly
; , commercial products, )he industry covers a large spectrum of categories
including inorganic and organic chemicals, drugs and pharmaceuticals, plastics and
petrochemicals, dyes and pigments, fine and specialty chemicals, pesticides and
agrochemicals and fertili5ers
COMPANY PROFILE
Bahety chemicals and Minerals &7vt'
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)he scope of the study is identified after and during the study is conducted )he main
scope of the study "as to put into practical the theoretical aspect of the study into real life
"ork e*perience )he study of "orking capital is based on tools like atio Analysis,
6tatement of changes in "orking capital urther the study is based on last ? years Annual
eports of Bahety #hemicals $ minerals pvt ltd
LIMITATIONS OF THE STUDY
)he study duration &summer in plant' is short
)he analysis is limited to just five years of data study &from year 2 3 to year 2 1 '
for financial analysis
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FINDINGS4
+orking capital of the Bahety #hemicals $ Minerals 7vt
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BABASAB PATIL- ; -
INTRODUCTION TO THE STUDY
INDUSTRY PROFILE
PART # II
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INTRODUCTION TO THE STUDY
BACKGROUND OF STUDY
C#ash is the lifeblood of businessC 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 6hort-
term liabilities include creditors, trade advances, borro"ings and provisions )he major
emphasis is, ho"ever, on short-term assets, since short-term liabilities arise in the conte*t
of short-term assets !t is important that companies minimi5e risk by prudent "orking
capital management
STATEMENT OF THE PROBLEM )his project deals "ith the study about +orking #apital Management0 in
BAHETY CHEMICALS AND MINERALS PVT. LTD
IMPORTANCE OF THE STUDY)here are numerous aspects of "orking capital management that makes it an important
topic for the study
)he management of assets in any organi5ation 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 Do"ever, in the overall
day-to-day financial management, after the initial investment, the management gives
more importance to managing "orking capital !f "e look at any financial statement it
"ill be evident that the investment in fi*ed assets remains more or less static but the
"orking capital is constantly changing A healthy "orking capital position is the sine-
.ua-non of a successful business )his is reflected in ade.uate inventories, lo"est level of
debtors, minimum utili5ation of bank facilities for "orking capital, etc thus the study of
"orking capital management occupies an important place in financial management
BABASAB PATIL- -
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INDIAN CHEMICAL INDUSTRY SCENARIO
#hemical !ndustry is one of the oldest industries in !ndia, "hich contributes
significantly to"ards industrial and economic gro"th of the nation !t is highly science
based and provides valuable chemicals for various end products such as te*tiles, paper,
paints and varnishes, leather etc , "hich are re.uired in almost all "alks of life )he
!ndian #hemical !ndustry forms the backbone of the industrial and agricultural
development of !ndia and provides building blocks for do"nstream industries
#hemical !ndustry is an important constituent of the !ndian economy !ts si5e is estimated
at around G6E 8? billion appro* , "hich is e.uivalent to about 8H of !ndiaFs I%7 )he
total investment in !ndian #hemical 6ector is appro* G6E 3 billion and total
employment generated is about 1 million )he !ndian #hemical sector accounts for
18-1:H of total e*ports and -9H of total imports of the country !n terms of volume, it is
12th largest in the "orld and 8rd largest in Asia #urrently, per capita consumption of
products of chemical industry in !ndia is about 1/1 th of the "orld average =ver the last
decade, the !ndian #hemical industry has evolved from being a basic chemical producer
to becoming an innovative industry +ith investments in $%, the industry is registering
6ignificant gro"th in the kno"ledge sector comprising of specialty chemicals, fine
#hemicals and pharmaceuticals
)he !ndian #hemical Market 6egment "ise is as under -
CHEMICAL INDUSTRY STRUCTURE
Dighly fragmented and "idely dispersed
+estern !ndia accounts for :?-? H of total !ndian chemical !ndustry
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FOREIGN TRADE
!ndia "as a net importer of chemicals in early 199 s, but has no" become a net
e*porter due to reduction in !mports because of implementation of many large scale
petrochemical plants like eliance etc and also because of tremendous gro"th of e*ports
in sectors like bulk drugs and pharma, pesticides, dyes and intermediates
B);
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LISTS OF CHEMICAL INDUSTRIES
2 Microns
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"ater "hich is represented by chemical formula D2= is a chemical compound consisting
of t"o hydrogen
#hemical compounds are further divided into subcategories )hose chemical compounds
"hich are based on carbon and hydrogen atoms are called organic compounds and other
chemical compounds "hich are based on elements other than carbon and hydrogen are
called inorganic compounds Another form of chemical compound "hich contain bond
bet"een carbon and metal are called organ metallic compound .
#hemical compounds in "hich components share electrons are kno"n as covalent
compounds "hereas compounds consisting of oppositely charged ions are kno"n as
iconic chemical )alking about property of chemical compounds, a chemical compound
may have several possible phases At lo" enough temperatures all compounds can e*ist
as solids 6ome chemical compounds may also e*ist as li.uids, gases, and even plasmas
very kno"n chemical compound decompose "hen heat is applied !ndian chemicals
industry during 2 ?- 3 "as G6E8 ?9 billion, a gro"th of 1 28Hover the previous year
and a #AI of 3 H during the last 8 years #hemical industry occupies an important
place in the country(s economy %uring 2 ?- 3 contributed about 8H of I%7 and
1; 3H of the manufacturing sector Do"ever, !ndia continued to be a net importer in
2 ?- 3, "ith imports of G6E; 92 billion and e*ports of E9 ? billion the post +)= era,!ndian chemical industry is undergoing a massive e*pansion, brand building and
increased global reach )he industry is e*pected to gro" at a#AI of over 1 H for the
ne*t 8 years, in line "ith the gro"th of manufacturing industry
)he "ide and diverse spectrum of chemical products can be broken do"n into number of
categories - inorganic and organic &commodity' chemicals, drugs and pharmaceuticals,
plastics an petrochemicals, dyes and pigments, fine and specialty chemicals, pesticides
and agrochemicals and fertili5ers )his report covers all the segments e*cept
petrochemicals, drugs and pharmaceuticals )he report covers overall industry scenario in
the conte*t of global chemicals industry, various segments, gro"th drivers, critical
success factors, issues and challenges and future outlook for the industry )he report also
profiles the major 1;companies in the !ndian industry &11 !ndian companies and 3
M@#s' )he report is useful for industry analysts, banks and financial institutions,
investors, consultants, corporate engaged directly or indirectly in the chemicals industry
and international readers "ho "ant to keep abreast of the !ndian manufacturing sectors
BABASAB PATIL- 18 -
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ORGANIC CHEMICALS=rganic chemicals are compounds that are formed from the t"o basic building
blocks of carbon and hydrogen !t is one of the most important sectors of the chemical
industry, providing the basic feedstock for a variety of other industrial sectors such asdrugs and pharmaceuticals, dyes and dye intermediates, leather chemicals, paints and
pesticides
As in the case of most of the other chemical sectors, the domestic industry is a late starter,
"ith the pioneers in the field being the @ational =rganic #hemical !ndustries
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BABASAB PATIL- 1? -
INTRODUCTION OF COMPANYCOMPANY PROFILE.VISION AND MISSION.BOARD OF DIRECORS.OB%ECTIVES OF BCM.PVT.LTD.PRODUCT PROFILE OF BCM.PVT.LTD.EXPANSION AND DIVERSIFICATION.SWOT ANALYSIS OF BCM.PVT.LTDORGANI ATION STRUCTURE.DEPARTMENTAL STUDIES.
PART # III
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INTRODUCTION OF THE COMPANY
COMPANY PROFILE
HISTORY OF THE COMPANY
Bahety chemicals and Minerals &7vt'
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BABASAB PATIL- 1 -
N - */ ;->= 7 - >=+-3 012;
N > 7 - -78)9:
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CAPITAL STRUCTURE OF BCM.CO.LTD
SHARE CAPITAL4#
1 Authori5ed capital s 1 , ,
1 , e.uity shares of s 1 each
2 6ubscribed/ paid-up share capital s 1 , ,
1 , e.uity shares of s 1 each
BORROWED FUND-
)he #ompany has taken long term loans from #orporation Bank %andeli !t has also
taken unsecured loans from its joint associate 6hri aghavendra #hemicals )he
company has also received government subsidy of 2?H on capital investments
TABLE SHOWING THE LONG TERM LOANS TAKEN BY BCM .CO.LTD
Y
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6hri #handrashekhar > Bahety
6hri >a"aharlal Bahety
6hri 7ritvipal Bahety
6hri Badal Jumar Bahety
6mt a"aharlal > Bahety
MANAGING DIRECTOR
6hri #handrashekhar Bahety
STAFF
@AM 6 % 6!I@A)!=@Mr Mahesh @adkarni inance Manager
Mr N %eshpande Administrative Manager Mr ajendra Mahalkar 7roduction Manager Mr @eil 7urchase Manager Mr 7atil
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Alum is used in "ater treatment as mordant in dyeing Aluminium sulphate mainly usedin paper si5ing and in "ater treatment 7harmaceutically, it is employed in dilute solution
as a mild astringent and antiseptic for the skin 6oda alum or aluminium sulphate is used
in some baking po"ders Aluminium sulphate is kno"n more as alum !t is a colourless
solid, "hich is soluble in "ater but insoluble in alcohol
MA%OR PRODUCTS OF THE COMPANY
Ni5 ferric alum
Ni5 ferric li.uid alum
@on K ferric alum
USES4
!ndustrial "aste"ater treatment
Municipal "aste"ater treatment
#larification and phosphorus removal
7otable and process "ater treatment #olor and turbidity removal
7ulp and paper mills, 7aper si5ing, 6oap manufacturers, Manufacture of glycerin
from soap lyes 6"imming pools, oil "ell operators
BABASAB PATIL- 22 -
A+ >)9) >#S +=/
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USE4%yeing and purification, +ater treatment
USES4
Gsed for dyeing and purification
Gsed in the pulp $ paper industry
Gsed in +ater and +aste "ater )reatment 7lants
BABASAB PATIL- 28 -
A+ >)9) >#S +=/
A+ >)9) >#S +=/
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EXPANSION AND DIVERSIFICATION *pansion of the company is under progress )he company is planning to
produce alum ferric solid through conventional process, Boiler evaporation of "ater from
li.uid alum stimated investment in e*pansion process is s 2;
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SWOT ANALYSIS OF BAHETY CHEMICALS & MINERALSPVT.LTD.
STRENTHS1 Availability of manpo"er
2 Digh .uality product
8
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ORGANISATION STRUCTURE
BABASAB PATIL- 23 -
MA@AI!@I %! #)=
Manager
7G #DA6% 7)
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DEPARTMENTAL STUDIES OF BCM. CO.LTD
PURCHASE DEPARTMENT.
LABORATORY DEPARTMENT.
ADMINISTRATION DEPARTMENT.
PRODUCTION DEPARTMENT.
FINANCE DEPARTMENT.
MARKETING DEPARTMENT.
PURCHASE DEPARTMENT4
)he purchase officers and assistance head the purchase department )he clearly
take the re.uisition from various departments and for"ard to the purchase offices and
then the purchase officer arranges to the purchase re.uired materials from the best seller
available in the market
)he purchase department plays a very important role in the company "here the
dealing made bet"een the purchase officers and sellers is convenient then it can be help
in reduction of the price of the materials and their by "hich "ill also result in increase of
profit
FUNCTIONS
7urchase the good .uality materials
Dave a better dealing at present and future "ith the supplier
7urchase only and re.uired materials
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PRODUCTION DEPARTMENT4
)he 7roduction department is one of the important department in the company
!t is the department that produces the product on "hich the company is established
6pecial care is taken in this department on production
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materials are together, e*othermic reaction takes place &
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together, e*othermic reaction takes place &
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materials are together, e*othermic reaction takes place &
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is responsible for the man po"er in the "hole factory 7ersonal Manager is concerned
"ith the most efficient use of people to achieve organi5ation and individual goals !t is the
"ay of managing people at "ork so that they give the best to the organi5ation
Administration department also takes care of the planning, organi5ing, directing,
controlling, procuring and developing and integrating of the company and human
resources to the end !t also looks after the financial matters of the company
FUNCTIONS4
Maintenance of files, records etc ,
#ollecting and presenting the data in the form of useful information from the
recordsMaintenance of time management in the company
!nsuring smooth running of the office files by interacting "ith e*ternal agendas as
re.uired
Iood relation bet"een the employer and employee
Maintaining the financial matters of the company
Iood relations "ith supplier and customers
Maintenance of salary, "ages records
Jeeping all the records of all the departments
FINANCE DEPARTMENT4
inance is an essential component of the business to maintain its operations
effectively )his dept is concerned "ith day-to-day activities like purchases, sales salary
etc and proper management and maintenance of accounts of concerned year
6ince B#M is the small scale industry it maintains very good accounting system,
)he "hole financial matter is mainly dealt by the separate dept called finance dept
)he Major sources of finance are,
1 6hares & .uity 6hares'
2
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ecording day to day transactions in a systematic manner
Maintaining proper accounts of purchases and sales
Maintaining profit $ loss A/c and 7reparing the Balance sheet of B#M
systematically7aying the interest on loans at right time
Maintain $ paying the ta*(s $ insurance
Make use of available finance resources properly
Maintain li.uidity of assets properly to earn the ma*imum profit
MARKETING DEPARTMENT4
Marketing %epartment is also a one of the important department in the company
)his department is important because it gives a clear picture of ho" much to produceQ
+hich "ill also help in the investment to he made and to purchase department to
purchase ra" materials
)he marketing department has a procedure, by "hich it is done i e , fit receives the
order from the buyers and for"ards the order to the production department and as per the
order production department produces the re.uired production and it makes the packing
of materials and sends it to the buyers as per the order
Marketing department also take care of the time given to it by the buyer to produce the
product !f there is any default in the order such as product not as per order or not at time
or minimum product supplied the party "ill send back the sample to the organi5ation and
the organi5ation gives certain percentage of discount for the default but no replacement is
made
BABASAB PATIL- 8: -
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THE SOME OF THE IMPORTANT CUSTOMERS OF THE BAHETYCHEMICALS AND MINERALS PVT. LTD., ARE4#
TABLE SHOWING CUSROMERS
SL.NO CUSTOMERS LOCATION
1 + 6) #=A6) 7A7 M!
" RGA ! !@%G6) ! 6
MAD @% A #D M!#A
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SCOPE OF THE STUDY )he scope of the study is identified after and during the study is conducted )he main
scope of the study "as to put into practical the theoretical aspect of the study into real life
"ork e*perience )he study of "orking capital is based on tools like atio Analysis,
6tatement of changes in "orking capital urther the study is based on last ? years Annual
eports of Bahety #hemicals $ minerals pvt ltd
BABASAB PATIL- 83 -
RESEARCH METHDOLOGY.
SCOPE OF THE STUDY.
OB%ECTIVES OF THE STUDY.
METHDOLOGY.
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OB%ECTIVES OF THE STUDY
)o study the sources and uses of the "orking capital
)o study the li.uidity position through various "orking capital related ratios
)o study the "orking capital components such as receivables accounts,
#ash management, !nventory management
)o make suggestions based on the finding of the study
RESEARCH METHDOLOGY
INTRODUCTION4
esearch methodology is a "ay to systematically solve the research problem !t May be
understood as a science of studying no" research is done systematically !n that various
steps, those are generally adopted by a researcher in studying his problem along "ith the
logic behind them
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)he secondary data are those "hich have already collected and stored 6econdary data
easily get those secondary data from records, annual reports of the company etc !t "ill
save the time, money and efforts to collect the data
)he major source of data for this project "as collected through annual reports, profit and
loss account of ? year period from 2 3-2 1 $ some more information collected from
internet and te*t sources
SAMPLING DESIGN
6ampling unit inancial 6tatements
6ampling 6i5e
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BABASAB PATIL- : -
WORKING CAPITAL MANAGEMENT.INTRODUCTION.MEANIG OF CAPITAL.MEANING OF WORKING CAPITAL.NEED OF WORKING CAPITAL.CLASSIFICATION OF WORKING CAPITAL.ESTIMATION OF 5WC? RE IUREMENTSOPERATING CYCLE OF WORKING CAPITAL.FINANCING OF WORKING CAPITAL.DETERMINANTS OF 5WC? RE UIREMENTS.#=M7=@ @)6 = + # M?.
PART # V
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CAPITAL
I9*7- ;*)-94 #apital is the keynote of economic development !n this modern age, the level
of economic development is determined by the proportion of capital available
M
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INTRODUCTION OF WORKING CAPITAL4
+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, "orking capital is very essential
to maintain the smooth running of a business @o business can run successfully "ithout
an ade.uate amount of "orking capital
)here is operative aspects of "orking capital i e current assets "hich is kno"n as funds
also employed to the business process from the gross "orking capital #urrent asset
comprises cash receivables, inventories, marketable securities held as short term
investment and other items nearer to cash or e.uivalent to cash +orking capital comes
into business operation "hen actual operation takes place generally the re.uirement of
.uantum of "orking capital is determined by the level of production "hich depends
upon the management attitude to"ards risk and the factors "hich influence the amount of
cash, inventories, receivables and other current assets re.uired to support given volume of
production
+orking capital management as usually concerned "ith administration of the current
assets as "ell as current liabilities )he area includes the re.uirement of funds from
various resources and to utili5e them in all result oriented manner !t can be stated "ithout
e*aggeration that effective "orking capital management is the short re.uirement of long
term success
)he importance of "orking capital management is indisputableS Business liability relieson its ability to effective management of receivables, inventory, and payables By
minimi5ing the amount of funds tied up in current assets irms are able to reduce
financing costs or increase the funds available for e*pansion Many managerial efforts are
put into bringing non-optimal level of current assets and liabilities back to"ards their
optimal levels
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MEANING OF WORKING CAPITAL
+orking capital means the funds &i e S capital' available and used for day to day
operations &i e S "orking' of an enterprise !t consists broadly of that portion of assets of a
business "hich are used in or related to its current operations !t refers to funds "hich are
used during an accounting period to generate a current income of a type "hich is
consistent "ith major purpose of a firm e*istence
!n Accounting
DEFINITIONS4
Many scholars( gives many definitions regarding term "orking capital some of
these are given belo"
According to Weston & Brigham
+orking capital refers to a firm(s investment in short-term assets cash, short
term securities, accounts receivables and inventories
Mead Mallott & Field
+orking capital means current assets0
Bonnerille
Any ac.uisition of funds "hich increases the current assets increases
"orking capital for they are one and the same0
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7ositive "orking capital means that the company is able to pay off its short-term
liabilities companies that have a lot of "orking capital "ill be more successful since they
can e*pand and improve their operations
@egative "orking capital means that a company currently is unable to meet its short-term
liabilities "ith its current assets #ompanies "ith negative "orking capital may lack the
funds necessary for gro"th
OB%ECTIVES OF WORKING CAPITAL MANAGEMENT
ffective management of "orking capital is means of accomplishing the firm(s goal of
ade.uate li.uidity !t is concerned "ith the administration of current assets and current
liabilities !t has the main follo"ing objectives-
1 )o ma*imi5e profit of the firm
2 )o help in timely payment of bills
8 )o maintain sufficient current assets
: )o ensure ade.uate li.uidity of the firms
? !t protects the solvency of the firm
3 )o discharge current liabilities
; )o increase the value of the firm
)o minimi5e the risk of business
THE NEED FOR THE WORKING CAPITAL
BABASAB PATIL- :: -
http://www.investorwords.com/2899/lot.htmlhttp://www.investorwords.com/3467/operation.htmlhttp://www.investorwords.com/3467/operation.htmlhttp://www.investorwords.com/8111/negative_working_capital.htmlhttp://www.investorwords.com/2130/funds.htmlhttp://www.businessdictionary.com/definition/necessaries.htmlhttp://www.businessdictionary.com/definition/necessaries.htmlhttp://www.investorwords.com/2258/growth.htmlhttp://www.investorwords.com/2899/lot.htmlhttp://www.investorwords.com/3467/operation.htmlhttp://www.investorwords.com/8111/negative_working_capital.htmlhttp://www.investorwords.com/2130/funds.htmlhttp://www.businessdictionary.com/definition/necessaries.htmlhttp://www.investorwords.com/2258/growth.html8/13/2019 Working Capital Management PROJECT REPORT MBA 2013
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)he need for "orking capital arises due to the time gap bet"een production and
reali5ation of cash from sales +orking capital is must for every business for purchasing
ra"-materials, semi finished goods, stores $ spares etc and the follo"ing purposes
1. T- = 7;/
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+orking #apital Management refers to management of current assets and current
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Iross "orking capital is the amount of funds invested in various components of
current assets #urrent assets are those assets "hich are easily / immediately converted
into cash "ithin a short period of time say, an accounting year #urrent assets includes
#ash in hand and cash at bank, !nventories, Bills receivables, 6undry debtors, short term
loans and advances
)his concept has the follo"ing advantages -
i inancial managers are profoundly concerned "ith the current assets
ii Iross "orking capital provides the correct amount of "orking capital at the right
time
iii !t enables a firm to reali5e the greatest return on its investment
iv !t helps in the fi*ation of various areas of financial responsibility
v !t enables a firm to plan and control funds and to ma*imi5e the return on investment
or these advantages, gross "orking capital has become a more acceptable concept in
financial management
2 N * W-78)9: C
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1 S-+ 9;3 - */ 0)9 004Ade.uate "orking capital helps in maintaining the
solvency of the business by providing uninterrupted of production
2 G-- )++ 4 6ufficient amount of "orking capital enables a firm to make prompt
payments and makes and maintain the good"ill
8 E
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+orking capital should be ade.uate so as to protect a business from the adverse
effects of shrinkage in the values of current assets !t ensures to a greater e*tent the
maintenance of a company(s credit standing and provides for such emergencies as strikes,
floods, fire etc !t permits the carrying of inventories at a level that "ould enable a
business to serve satisfactorily the needs of its customers !t enables a company to operate
its business more efficiently because there is no delay in obtaining materials etcS because
of credit difficulties
INADE UATE OF WORKING CAPITAL4 +hen "orking capital is inade.uate, a company faces many problems !t stagnates the
gro"th and it becomes difficult for the firm to undertake profitable projects for non-
availability of "orking capital funds %ifficulty in implementing operating plans and
achieving the firm(s profit targets =perating inefficiencies creep in "hen it becomes difficult
even to meet day-to-day commitments i*ed assets are not utili5ed efficiently thus the firm(s
profitability "ould deteriorate 7aucity of "orking capital funds renders the firm unable to
avail attractive credit opportunities )he firm loses its reputation "hen it is not in a position to
honor it short-term obligations thereby leading to tight credit terms
DANGERS OF EXCESSIVE WORKING CAPITAL4
)oo much "orking capital is as dangerous as too little of it *cessive "orking capital raises
problems
1 !t results in unnecessary accumulation of inventories )hus chances of inventory
mishandling, "aste, theft and losses increase
2 !ndication of defective credit policy and slack collection period #onse.uently, it
results in higher incidence of bad debts, adversely affecting profits,
8 Makes the management complacent "hich degenerates in to managerial inefficiency
: )he tendencies of accumulating inventories to make a speculative profit, "hich tends
to liberali5e the dividend policy, make it difficult for the concern to cope in the future
"hen it is not able to make speculative profits
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ESTIMATION OF WORKING CAPITAL RE IUREMENTS
Managing the "orking capital is a matter of balance )he firms must have
sufficient funds on hand to meet its immediate needs )he Bahety chemicals $ minerals
&pvt'
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OPERATING CYCLE OF WORKING CAPITAL4)he "orking capital cycle reserves to the length of time bet"een the firm paying cash for
materials etc , this "orking capital also kno"n as operating cycle +orking capital cycle
or operating cycle indicates the length or time bet"een companies paying for materials
entering into stock and receiving the cash from sales of finished goods )he operating
cycle &+orking #apital' consists of the follo"ing events +hich continues throughout
the life of businessQ
#onversion of cash into ra" materials
#onversion of ra" materials into "ork in progress
#onversion of "ork in progress into finished stock
#onversion of finished stock into accounts receivables&%ebtors'through sale and
#onversion of account receivables into cash
BABASAB PATIL- ?2 -
RAWMATERIALS
WORK#IN#PROGRESSFINISHED STOCK
DEBTORS
CASH
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FINANCING OF WORKING CAPITAL
I9*7- ;*)-94
After determining the level of "orking capital, a firm has to decide ho" it is to befinanced
!n that B#M, it "as financing the "orking capital from the follo"ing four common
sources )hey are,
1. SHARES4
)he B#M has issued the e.uity shares for raising the funds )he .uity 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 )hese funds have been injected from the company(s
o"n personal resources and from the members
2. TRADE CREDIT4
)he trade credit refer to the credit e*tended by the suppliers of goods in the normal
course of business )he firm has a good relationship "ith the trade creditors 6o that
suppliers send the goods to the firm for the payment to be received in future as per the
agreement or sales invoice !n this "ay, the firm generates the short-term finances from
the trade creditors !t is an easy and convenient method to finance and it is informal and
spontaneous source of finance for the firm
". BANK CREDIT4
#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
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1. L-
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DETERMINANTS OF WORKING CAPITAL RE UIREMENTS!n order to determine the amount of "orking capital needed by the firm a number of
factors have to be considered by finance manager )hese factors are e*plained belo"
1. N
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=n the other hand, if liberal credit terms are available from the suppliers of goods L)rade
creditors , the need for "orking capital is less )he "orking capital re.uirements of
business are, thus, affected by the terms of purchase and sale, and the role given to credit
by a company in its dealings "ith #reditors and %ebtors
!n B#M company ra" materials are purchased "ith a credit or cash and finished goods
are sold on cash basis and also credit basis
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(. S ==+3 C-9 )*)-904
!f supply of ra" material and spares is timely and ade.uate, the firm can get by
"ith a comparatively lo" inventory level !f supply is scarce and unpredictable or
available during particular seasons, the firm "ill have to obtain ra" material "hen it isavailable !t is essential to keep larger stocks increasing "orking capital re.uirements
. M
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ESTIMATION OF CURRENT ASSETS
1. R< M
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!. D *-70 4 )he "orking capital tied up in debtor should be estimated in relation to total cost
price & e*cluding depreciation ' symbolically,
Budgeted #ost of 6ales per Average %ebt
7roduction * unit e*cluding * #ollection 7eriod
& !n units ' depreciation &months/days'
12 months / ?2 "eeks / 83?days
$. C
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2. D)7 ;* W
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FORMAT FOR DETERMINATION OF WORKING CAPITAL4
SL.NO PARTICULARS AMOUNT
1
2
6)!MA)!=@ = CURRENT ASSETS
1 Minimum desired cash and Bank balances ***
2 !nventories
a" material ***
+ork-in-progress *** inished stock ***
" %ebtors ***
)otal #urrent Assets
6)!MA)!=@ = CURRENT LIABILITIES
1 #reditors ***
2 +ages ***
" =verheads ***
)otal current liabilities
NET WORKING CAPITAL
&)otal #urrent assets K )otal #urrent liabilities'
Add Margin for contingency net
+orking capital re.uirement
XXX
XXX XXX
XX
XXXX
COMPONENTS OF WORKING CAPITAL
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)he components of "orking capital are
CASH MANAGEMENT
RECEIVABLES MANAGEMENT
INVENTORY MANAGEMENT
CASH MANAGEMENT 4
#ash is the important current asset for the operation of the business #ash is theBasic input needed to keep the business running in the continuous basis, it is also the
ultimate output e*pected to be reali5ed by selling or product manufactured by the firm
)he firm should keep sufficient cash neither more nor less #ash shortage "ill disrupt
the firm(s manufacturing operations "hile e*cessive cash "ill simply remain ideal
"ithout contributing anything to"ards the firm(s profitability )hus a major function of
the financial manager is to maintain a sound cash position #ash is the money, "hich a
firm can disburse immediately "ithout any restriction )he term cash includes coins,
currency and che.ues held by the firm and balances in its bank account
NEED FOR HOLDING CASH
)he need for holding #ash arises from a variety of reasons "hich are,
1. T7
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irms also maintain cash balances in order to take advantage of opportunities
that do not take place in the course of routine business activities or e*ample, there may
be a sudden decrease in the price of a" Materials "hich is not e*pected to last long or
the firm may "ant to invest in securities of other companies "hen the price is just right
)hese transactions are purely of speculative nature for "hich the firms need cash
OB%ECTIVES OF CASH MANAGEMENT
7rimary object of the cash management is to maintain a proper balance bet"een
li.uidity and profitability !n order to protect the solvency of the firm and also to
ma*imi5e the profitability ollo"ing are some of the objectives of cash management
1 )o meet day to day cash re.uirements
2 )o provide for une*pected payments
8 )o ma*imi5e profits on available investment opportunities
: )o protect the solvency of the firm and build up image
? )o minimi5e operational cost of cash management
3 )o ensure effective utili5ation of available cash resources
CASH BUDGETING
#ash budgeting is an important tool for controlling the cash !t is prepared for
future period to kno" the estimated amount of cash that may be re.uired #ash budget is
a statement of estimated cash inflo"s and outflo"s relating to a future period !t gives
information about the amount of cash e*pected to be received and the amount of cash
e*pected to be paid out by a firm for a given period
#ash budgeting indicates probably cash receipts and cash payments for an under
consideration !t is a statement of budgeted cash receipts and cash payment resulting in
either positive or negative cash or for a "eek or for a year and so on
RECEIVABLES MANAGEMENT 4
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eceivables or debtors are the one of the most important parts of the current
Assets "hich is created if the company sells the finished goods to the customer but not
receive the cash for the same immediately )rade credit arises "hen a company sales its
products or services on credit and does not receive cash immediately !t is an essential
marketing tool, acting as a bridge for the moment of goods through production and
distribution stages to customers
)he receivables include three characteristics
1' !t involve element of risk "hich should be carefully analysis
2' !t is based on economic value )o the buyer, the economic value in goods or services
passes immediately at the time of sale, "hile seller e*pects an e.uivalent value to be
received later on
8' !t implies futurity )he cash payment for goods or serves received by the buyer "ill
be made by him in a future period
A company gives trade credit to protect its sales from the competitors and to attract the
potential customers to buy its products at favorable terms )rade credit creates receivables
or book debts that the company is accepted to collect in the near future )he customers
from "ho receivables have to be collected are called as )rade %ebtors0 receivables
constitute a substantial position of current assets
Iranting credit and crediting debtors, amounts to the blocking of the company(s funds
)he interval bet"een the date of sale and the date of payment has to be financed out of
"orking capital as substantial amounts are tied up in trade debtors !t needs carefulanalysis and proper management
!n B#M ltd , they are selling the goods on cash basis and also on credit basis
INVENTORY MANAGEMENT 4
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BENEFITS OF HOLDING INVENORIES4Dolding of large and ade.uate inventories is very beneficial to every firm
)he benefits or advantages of holding inventories area as follo"s
1 educing orders cost
2 #ontinuous production
8 )o avoid loss
: Availing .uantity discount
? !t enables the firm to avoid scarcity of goods meant for either production o
sale
COST OF HOLDING INVENTORIES4
Dolding of inventory e*poses the firm to a number of risks and costs isks ofholding inventories can be put as follo"s
1 Material cost
2 =rder cost
8 6torage cost
: !nsurance
? =bsolescence
3 6poilage
!n the B#M, each of the above mentioned costs have to be controlled through efficient
inventory management techni.ue )hat is
E;-9->); O7 7
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BABASAB PATIL- 3; -
DATA ANANLYSIS AND INTERPRETATION.
PART # VI
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INTRODUCTION4atio Analysis is a po"erful tool of financial analysis Ale*ander Dall first
presented it in 1991 in ederal eserve Bulletin atio Analysis is a process of
comparison of one figure against other, "hich makes a ratio and the appraisal of the ratios
of the ratios to make proper analysis about the strengths and "eakness of the firm(s
operations )he term ratio refers to the numerical or .uantitative relationship bet"een t"o
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
N-* ! have used the ratio analysis in this project in order to substantiate the managing
of "orking capital or this, ! used some of the ratios to get the re.uired output
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INTERPRETATION4
!n the above table, it is seen that during the year 2 :- ? and 2 ?- 3 there "as a net
increase in "orking capital of s 83 ? !t indicates an ade.uate "orking capital in
Bahety chemicals $ minerals pvt ltd ,
)his is because of
1 !ncrease current assets such as 6undry debtors by s ;32?;1 , other current assets
by s 1::? And decrease in !nventories by s :3 ? , #ash $ Bank balance
by s 992? ,
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!n the above table, it is seen that during the year 2 ?- 3 and 2 3- ; there "as huge net
increase in "orking capital by s 819 82? As #ompare to 2 :- ? and 2 ?- 3
)his is because
1 )here is !ncrease in current assets such as !nventories by s 32 313 , 6undry
debtors by s 2;?;1:3 , #ash $ Bank balance by s ;1191 ,
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2 )here is %ecrease in current liabilities such as 6undry creditors by s :28:3 ,
7rovisions by s 2138:
T< + !4 S* 9* - C/
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T< + $4 S* 9* - C/
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FINDINGS.
BABASAB PATIL- ? -
FINDINGS.
SUGGESTIONS &
CONCLUSIONS.
PART # VII
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+orking capital of the Bahety #hemicals $ Minerals 7vt
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FINANCIAL STATEMENT.
BIBILOGROPHY.
FINANCIAL STATEMENT 2'' #2'1'
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PROVISIONAL BALANCE SHEET AS AT "10* MARCH, 2'1'
BIBLIOGRAPHY
TEXT BOOKS
M.Y.K/
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P7