2011 -12

A STUDY ON WORKING CAPITAL MANAGEMENT OF UNIGLOBAL PAPERS PVT. LTD.

PRIYANKA GUPTA Shri Shikshayatan College BBA(Hons.) PART- III CALCUTTA UNIVERSITY REGISTRATION NO.- 034-BBA10F-0011.

ACKNOWLEDGEMENT
It gives me immense pleasure to extend my gratitude to both Mr. S.D.Mahapatra, Manager (finance) and KAILASH CHAND DUJARI of UNIGLOBAL PAPERS PVT. LTD. for guiding me in the project. Their invaluable suggestions and information have helped me to complete this project. I am extremely thankful to my mentors M/S. JAYITA DAS GUPTA and M/S. ARCHANA VIMAL GOVIL VERMA (Head Of The Department), faculty members of SHRI SHIKSHAYATAN COLLEGE for their kind support and guidance. Finally I would like to thank all the employees of Uniglobal Papers Pvt. Ltd for their support and cooperation during the project.

CONTENTS
CHAPTER Chapter 1 PARTICULARS Introduction 5 16 17 18 20 PAGE NO.

1.1 Introduction of Working Capital. 1.2 Objectives of the Study. 1.3 Research Methodology. 1.4 Limitations of the study. Chapter 2 Chapter 3 Review of Literature Profile

3.1 Industry Profile. 3.2 Company Profile. Chapter 4 Data Analysis & Interpretations

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4.1 Analysis of the liquid position of Uniglobal Papers Pvt. Ltd. 4.2 Analysis of Working Capital elements. 4.3 Analysis of some other necessary elements. 4.4 Formulation of operating capital cycle of Uniglobal Papers Pvt. Ltd. Chapter 5 Findings& Discussions

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5.1 Raw Material Storage Period. 5.2 Conversion Period. 5.3 Finished Goods Storage Period. 5.4 Receivable Collection Period. 5.5 Payable Deferral Period. 5.6 Net operating cycle period & Round of operating cycle. Chapter 6 Chapter 7 Chapter 8 Conclusion Recommendations Bibliography

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CHAPTER- I
INTRODUCTION & DESIGN OF THE STUDY Contents: 1.1 Introduction of Working Capital. 1.2 Objectives of the Study. 1.3 Research Methodology. 1.4 Limitations of the study.

1.1 INTRODUCTION OF WORKING CAPITAL Working Capital is defined as the capital which is needed for the daily working of an organization. In other words, the capital which is required for day to day operations of the business is known as working capital. Working Capital is the amount of funds necessary to cover the cost of operating the enterprise. Working capital is defined to include stock of materials, fuels, semifinished goods including work-in-progress and finished goods and by-products; cash in hand and at bank and the algebraic sum of sundry creditors as represented by: Outstanding factory payments e.g. rent, wages, interest and dividend; Purchase of goods and services; Short-term loans and advances and sundry debtors compromising amounts due to the factory on account of sale of goods and services and advances towards tax and payments. The working capital ratio is calculated as below: Working Capital = Current Assets Current Liabilities Components of Working Capital Working capital is defined as the excess of current assets over current liabilities. So, the two components of working capital are current assets and current liabilities. The term Current Assets refer to those assets which are converted into cash within one accounting year in the ordinary course of business without undergoing a diminution in value and without disrupting the operation of the firm. Current assets have a very short life span. Each component of current assets is swiftly transformed into other asset forms. Examples of current assets are: Inventories or stock of i) Raw materials ii) Work-in-progress iii) Stores and Spares iv) Finished goods

Sundry Debtors (less provision) Marketable Securities Cash in hand Bank Balances Short-term (inter-company) loans and advances Bills Receivable Prepaid expenses Accrued Incomes

Current Liabilities are those which are intended to be paid within a period of one accounting year, in the ordinary course of business, out of the current assets or earnings of the concern. Examples are: Sundry Creditors Acceptances/ Bills Payable Short-term loans, advances and deposits Accrued or outstanding expenses Proposed dividends Provision for taxation Bank overdraft etc.

Classification and Concepts of Working Capital Working Capital may be classified in two ways: (a) On the basis of concept (b) On the basis of time From the conceptual viewpoint, working capital is classified as: 1. Gross working capital and, 2. Net working capital Again, the net working capital is classified as: 1. Positive working capital and, 2. Negative working capital On the basis of time, working capital is classified as:

1. Permanent or fixed working capital and, 2. Temporary or variable working capital Again, permanent working capital may be classified as: 1. Regular working capital and, 2. Reserve working capital Temporary working capital may also be classified as: 1. Seasonal working capital and, 2. special working capital The above classification can be shown in the following chart: (I) Gross Working Capital: Gross working capital is the capital which is invested in the total current assets of the enterprise. This is a wider concept of working capital. Simply it may be said that the summation of all current assets of a firm is called the gross working capital, i.e.
Gross Working Capital = Total Current Assets

In other words, Gross Working Capital = Shareholders fund + Long-term debts + Current liabilities Fixed assets Where, Shareholders fund = Equity share capital + preference share capital + Reserve & Surplus Miscellaneous Expenditure

(II)

Net Working Capital: This is the narrow concept of working capital. As per this Concept net working capital or simply working capital is the difference between current assets and current liabilities. It is the excess of total current assets over total current liabilities. Therefore, we can write that:
Net Working Capital = Total Current Assets Total Current Liabilities OR, = Shareholders fund + Long-term debts Fixed Assets

Net Working Capital may again be of two types: Positive working capital and Negative working capital Positive working capital: If the total current assets are more than the total current liabilities, then the difference is known as positive net working capital. It is desirable that working capital should be positive as it guarantees the repayment of short-term liabilities. Thus, it is called as the safety margin of short-term liabilities. It also indicates how much of the long term fund is utilized to finance the current assets. Negative working capital: This situation occurs when the current liabilities exceed the current assets. If the value of total current liabilities of a firm on a particular date is more than the total value of current assets on that date the difference is known as negative working capital. It includes that the firm does not have the capacity to pay off its current debts and it is compelled to use its fixed assets for this purpose. Under such circumstances, the very existence of the firm jeopardized. Permanent of Fixed Working Capital: On the basis of time, working capital is divided as PERMANENT Working Capital and Temporary Working Capital. Permanent working capital represents that part of capital which is locked up in the minimum level of investment of working capital which is requires permanently operating at a minimum level of activity. It increases with the increase in the size of the business. The permanent or fixed working capital may be subdivided into: Regular Working Capital, and Reserve Working Capital. Temporary or Variable Working Capital: As the name suggests, temporary working capital is a capital which is not permanent. Ti represents that part of the total working capital which is required over and above the permanent working capital. It is the additional assets required at different points of time during the year; this type of working capital is not needed by the firm always throughout the year. Ti is required to meet seasonal fluctuations and any other special purpose. There are also two subdivision of Temporary Working Capital, Seasonal Variable Working Capital.

 Special Variable Working Capital. The need for maintaining adequate amount of working capital is as follow: Regular supply of raw materials. Availability of cash discount. Regular payment of wages and salaries. Increase in efficiency and productivity. High morale. Regular payment of overhead expenses. Smooth flow of production. Regular supply of merchandise. Confidence of third parties. Solvency. Goodwill. Easy loans. Exploitation of Favorable market condition. Ability to face crisis. Increase in efficiency of fixed assets. Quick and regular return on investment. Technical developments, innovation, etc. Increase in profitability.

Factors need consideration for determining the working capital requirements: Nature of business. Size of business. Volume of sales. Manufacturing or production cycle. Business cycle fluctuation. Production policy. Operating efficiency. Working capital cycle. Credit policy and accessibility to credit. Seasonal variations. Supply of raw materials. Rate of stock turnover. Growth and expansion of business. Extent of competition.

Technological developments. Profit level. Dividend policy. Depreciation policy. Price level change. Level of taxes. Cash reserve. Environmental factors.

Advantages: Gives a company the ability to meet its current liabilities. Expand its volume of business. Take advantage of financial opportunities as they arise. Disadvantages: Lack of sufficient working capital and inability to liquidate current assets are frequent causes of business failure.

1.1.1 WORKING CAPITAL MANAGEMENT Decisions relating to working capital and short-term financing are referred to as Working Capital Management. These involve managing the relationship between a firms short-term assets and its short-term liabilities. The goal of working capital management is to ensure that the firm is able to continue its operations and that it has sufficient cash flow to satisfy both maturing short-term debt and upcoming operational expenses. Decision criteria By definition, working capital management entails short-term decisions generally, relating to the next one year period which is reversible. These decisions are therefore not taken on the same basis as Capital Investment Decisions (NPV or related, as above) rather they will be based on cash flows and/or profitability.

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 One measure of cash flow is provided by the cash conversion cycle the net number of days from the outlay of cash for raw material to receiving payment from the customer. As a management tool, this metric makes explicit the interrelatedness of decisions relating to inventories, accounts receivable and payable, and cash. Because this number effectively corresponds to the time that the firms cash is tied up in operations and unavailable for other activities, management generally aims at a low net count. In this context, the most useful measure of profitability is Return on Capital (ROC). The result is shown as a percentage, determined by dividing relevant income for the 12 months by capital employed; Return on Equity (ROE) shows this result for the firms shareholders. Firm value is enhanced when, and if, the return on capital, which results from working capital management, exceeds the cost of capital, which results from capital investment decisions as above. ROC measures are therefore useful as a management tool, in that they link short-term policy with long-term decision making. 1.1.2 MANAGEMENT OF WORKING CAPITAL Guided by the above criteria, management will use a combination of policies and techniques for the management of working capital. These policies aim at managing the current assets (generally cash and cash equivalents, inventories and debtors) and the short-term financing, such that cash flows and returns are acceptable. Cash management. Identify the cash balance which allows for the business to meet day to day expenses, but reduces cash holding costs. Inventory management. Identify the level of inventory which allows for uninterrupted production but reduces the investment in raw materials and minimizes reordering costs and hence increases cash flow; see supply chain management; Just in Time (JIT); Economic Order Quantity (EOQ); Economic Production Quantity (EPQ). Debtors management. Identify the appropriate credit policy, i.e. credit terms which will attract customers, such that any impact on cash flows and the cash conversion cycle will be offset by increased revenue and hence return on capital (or vice-versa); see Discounts and Allowances.

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 Short-term financing. Identify the appropriate source of financing, given the cash conversion cycle: the inventory is ideally financed by credit granted by the supplier; however, it may be necessary to utilize a bank loan (or overdraft), or to convert debtors to cash through factoring. Working capital is among the many important things that contribute to the success of a business. Without it, a business may cease to function properly or at all. Not only does a lack of working capital render a company unable to build and grow, but it may also leave a company with too little cash to pay its short-term obligations. Simply put, a company with a very low amount working capital may be at risk of running out of money. When a company has too little working capital, it can face financial difficulties and may even be forced toward bankruptcy. This is true of both very small companies and billion-dollar organizations. A company with this problem may pay creditors late or even skip payments. It may borrow money in an attempt to remain afloat. If late payments have affected the companys credit rating, it may have difficulty obtaining a loan at an affordable interest rate. In some types of business, it isnt as much of a problem to have a lower amount of working capital. Companies that are operated on as cash basis, have fast inventory turnovers, and can generate cash quickly dont necessarily need as much working capital. For example, a grocery store might meet these requirements and do well with less working capital. 1.1.3 WORKING CAPITAL TURNOVER RATIO Working capital turnover ratio indicates the velocity of the utilization of net working capital. This ratio represents the number of times the working capital is turned over in the course of year and is calculated as follows: Formula: Working capital turnover ratio = cost of sales Net working capital

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The two components of the ratio are cost of sales and net working capital. If the information about cost of sales is not available the figure of sales may be taken as the numerator. Net working capital is found by deduction from the total of the current assets the total of the current liabilities.

Example:

calculate working capital turnover ratio Rupees 10,000 5,000 25,000 20,000 30,000 150,000 cost of sales Net working capital

Particulars Cash Bills receivables Sundry debtors Stock Sundry creditors Cost of sales Working capital turnover ratio =

Current assets = Rs. (10,000 + 5,000 + 25,000 + 20,000) = Rs. 60,000 Current liabilities = Rs. 30,000 Therefore, Net Working Capital = Current assets Current liabilities = Rs. (60,000 30,000) = Rs. 30,000 So the working capital turnover ratio = 150,000 30,000 = 5 times

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Significance: The working capital turnover ratio measures the efficiency with which the working capital is being used by a firm. A high ratio indicates efficient utilization of working capital and a low ratio indicates otherwise. But a very high working capital turnover ratio may also mean lack of sufficient working capital which is not a good situation. 1.1.4 OPERATING CYCLE: Working capital cycle is more popularly known as the operating cycle. This title is more expensive in the sense that the normal business operations of a manufacturing and trading company start with cash, go through the successive segments of the operating cycle, viz, raw material storage period, conversion period, finished goods storage period and average collection period before getting back cash along with profit. The total duration of all the segments mention above is known as gross operating cycle period. In case the company is placed in an advantageous position of being able to sell its products for cash then the segment of average collection period will disappear from the gross operating cycle period and that extent the total duration of the cycle gets reduced. In case advance payments are to be made for procuring materials, the operating cycle period increases. The purchase of raw materials, components etc., are usually made on a credit basis, thereby giving rise to the spontaneous current liability, viz, accounts payable. When the average payment period of the company to its suppliers is deducted from the gross operating cycle period of the company to its suppliers is deducted from the gross operating cycle period the resultant period is called net operating cycle period or simply operating cycle period. It becomes obvious that shorter the duration of operating cycle period, faster will be the transformation of current assets into cash. The operating cycle approach is quite useful both in controlling and forecasting the requirement of working capital.

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Operating Cycle technique or method: Under this method, working capital requirements depend on the operating cycle of the firm. Operating cycle starts with payment for acquisition of raw materials and ends with the collection of receivables from debtors. It consists in the following:Raw Materials Conversion Average inventory of raw materials and stores Period = Average daily consumption of raw materials

Work-In-Progress Conversion Average work-in-progress Period = Average daily factory cost of production

Finished Goods Conversion Average stock of finished goods Period = Average cost of goods sold per day

Receivables Collection Period =

Average debtors Average daily credit sales

Payment Deferral Period

Average creditors = Average daily credit purchase

Net Operating Cycle Period (NOCP) = RMCP+WIPCP+FGCP+RCP+PDP

After calculating the net operating cycle period, the total number of operating cycle during a year is computed by dividing 330 days with the number of operating days in the net operating cycle period.
Round of Operating Cycle in a year (ROC) = 330 / Net Operating Cycle Period

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1.2OBJECTIVES OF THE STUDY: The basic objective of studying the working capital of the company is to know the financial position of the company. To know the days holding of the inventory and debtors management of the company. To study the current assets and current liabilities so as to know whether there is enough current assets to be turned into cash and pay off the current liabilities. To study the funds available in the company to cover the cost of operating the enterprises. To know the financial position of the company in the last financial year and finding its working capital.

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1.3 RESEARCH METHODOLOGY : The research design used in the study is exploratory research to provide insights and understanding. Research process was flexile and unstructured. The methods adopted were: a) Survey of experts b) Analysis of secondary data SURVEY OF EXPERTS: Information from experts in the company was obtained by unstructured personal interview, without administering a formal questionnaire. SECONDARY DATA ANALYSIS: In the study secondary data involves the information made available by the company. Balance sheet, cash flow statements and other data provided by the company were analyzed in depth for the study.

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1.4 LIMITATIONS OF THE STUDY:

The data is limited only for a period of two months. The data on credit purchase and credit sales was not available. The company does not maintain Fund Flow and Cash Budget.

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CHAPTER II
REVIEW OF LITERATURE Contents: Review of Literature.

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REVIEW OF LITERATURE: The field of finance refers to the concepts of time, money and risk and how they are interrelated. Banks are the main facilitators of funding through the provision of credit, although private equity, mutual funds, hedge funds, and other organizations have become important. Financial assets, known as investments, are financially managed with careful attention to financial risk management to control financial risk. Financial instruments allow many forms of securitized assets to be traced on securities exchanges such as stock exchanges, including debt such as bonds as well as equity in publicly-traded corporations. THE MAIN TECHNIQUES AND SECTORS OF THE FINANCIAL INDUSTRY An entity whose income exceeds its expenditure can lend or invest the excess income. On the other hand, an entity whose income is less than its expenditure can raise capital by borrowing or selling equity claims, decreasing its expenses, or increasing its income. The lender can find a borrower, a financial intermediary such as a bank, or buy notes or bonds in the bond market. The lender receives interest, the borrower pays a higher interest than the lender receives, and the financial intermediary pockets the difference. A bank aggregates the activities of many borrowers and lenders. A bank accepts deposits from lenders, on which it pays the interest. The bank then lends these deposits to borrowers. Banks allow borrowers and lenders, of different sizes, to coordinate their activity. Banks are thus compensators of money flows in space. Finance is used by individuals (personal finance), by governments (public finance), by businesses (corporate finance), as well as by a wide variety of organizations including schools and non-profit organizations. In general, the goals of each of the above activities are achieved through the use of appropriate financial instruments and methodologies, with consideration to their institutional setting. Finance is one of the most important aspects of business management. Without proper financial planning a new enterprise is unlikely to be successful. Managing money (a liquid asset) is essential to ensure a secure future, both for the individual and an organization. What we are dealing with here is corporate finance.

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CORPORATE FINANCE Managerial or corporate finance is the task of providing the funds for a corporations activities. For small business, this is referred to as SME finance. It generally involves balancing risk and profitability, while attempting to maximize an entitys wealth and the value of its stock. Long term funds are provided by ownership equity and long-term credit, often in the form of bonds. The balance between these forms the companys capital structure. Short-term funding or working capital is mostly provided by banks extending a line of credit. Another business decision concerning finance is investment, or fund management. An investment is an acquisition of an asset in the hope that it will maintain or increase its value. In investment management in choosing a portfolio one has to decide what, how much and when to invest. To do this, a company must: Identify relevant objectives and constraints: institution or individual goals, time horizon, risk aversion and tax considerations; Identify the appropriate strategy: active v. passive hedging strategy Measure the portfolio performance. Financial management is duplicate with the financial function of the accounting profession. However, financial accounting is more concerned with the reporting of historical financial information, while the financial decision is directed towards the future of the firm.

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CHAPTER III
PROFILE Contents: 3.1 Industry Profile. 3.2 Company profile.

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3.1 INDUSTRY PROFILE Since antiquity, paper has been the preferred medium for dissemination of knowledge for advancing the frontiers of thinking .The word paper owes its origin to papyrus, a plant which grew in abundance in Egypt. The ancient Egyptians had made a crude version of paper from papyrus around 20th century B.C. it is generally believed that the Chinese did create the first sheet of paper in the 2 nd century B.C.Paper making is believed to have been brought to India in the 15 th century A.D. by the Moguls although there are stray accounts of its existence even earlier. The early years of the 19th century witnessed efforts to mechanize paper industry in India. The British colonizers were responsible for wiping out paper making in India in 1840 when it was ordered that all paper be brought from Great Britain. Still, on account of patronage of moneylenders and Christian missionaries who used domestically produced paper for their account ledgers and propaganda literature respectively, the nascent craft of papermaking was saved from extinction. AN OVERVIEW OF INDIAN PAPER INDUSTRY There are over 500 paper mills in India and the product profile is categorized into 3 broad heads. They are as follows: Cultural Paper Writing and printing: Cream wove Map litho, Manifold, and Duplicating. Copier, Type writing, Chrome Paper. Industrial Paper Packing and Wrapping:

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 Kraft, MG Poster, Interleaving paper, Pulp Board. Duplex board, Coated Board. Specialty Paper
Tissue, Currency, Security Paper.

The per capita consumption of paper is around 6 kg and the production of paper and board is around 5.5 million tones and that of newsprint is around 0.8 million tones with a turnover of Rs. 1137 cores employing directly 300000 and indirect around 1000000 and exporting 0.2 million tones. DEVELOPMENTS IN TECHNOLOGY Improved raw material handling and cleaning. Continuous/Modified batch digesters. State of art washing system. Elemental chlorine free (ECF) bleaching. Omission of direct contact evaporators. Lime sludge reburning system. Improved solid-liquid separation techniques. Energy efficient Effluent treatment practices. 3.2 COMPANY PROFILE UNIGLOBAL was incorporated on May 29, 1970 when the country was plagued by a pervasive paper famine which did affect supply of quality text books and other commonly used products for the educational sector. UNIGLOBAL, a wholly owned government of India enterprise was thus the outcome of a genuine national concern for having paper in plenty, employing the state-of-art production process know-how and utilizing the forest-based raw materials available in the North-East. UNIGLOBAL

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is today synonymous with the quest for quality paper, especially for mass consumption.

UNIGLOBAL today owns four paper mills; two of which are directly managed units, viz. Nagaon Paper Mill (NPM) and Cachar Paper Mill (CPM) and two managed through subsidiary companies, viz. Hindustan Newsprint Limited (HNL) and Nagaland Pulp and Paper Company Limited (NPPC). THE BUSINESS MISSION The business mission of the UNIGLOBAL aims at maintaining a leading position in the paper and newsprint industry in terms of production, quality, customer services and technology. However, in the new globalize environment, understanding customer expectations and ensuring customer satisfaction at all stages have been identified as the key strategy to achieve the highest standards of excellence in every area of its activity. The recognition of its pursuit of excellence the company and its subsidiary HNL have been awarded ISO 9002 quality system certificate. Regional offices There are five regional offices, which are located in the following places North Zone Delhi. West Zone Mumbai. South Zone Chennai. East Zone Kolkata North-East Guwahati. Sales offices

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Fifteen sales offices of UNIGLOBAL are spread across different zones of the country. These are: North Zone Delhi, Lucknow, Chandigarh and Jaipur. West Zone Mumbai, Ahmadabad and Indore. South Zone Chennai, Bangalore, Hyderabad, Madurai and Kochi East Zone Kolkata and Patna North-East Zone Guwahati. Product profile Cream wove. Color wove. White offset printing. Duplicating. Offset cartridge. Telephone directory paper. Typewriting paper. White cover. Mill wrapper. Deluxe maplitho. Surface sized maplitho. Computer stationery. Copier paper. Newsprint.

Trail blazing performance

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In pursuit of its mandate to produce paper of world-class quality at affordable prices, UNIGLOBAL has been continuously modernizing and upgrading its plant and equipment. Anticipating shortage of forest-based raw materials from the traditional sources of Government owned forest land, UNIGLOBAL has re-launched its Farm Forestry Scheme with the active involvement of Voluntary /Non-Governmental Organizations. UNIGLOBAL is committed to developing sustainable sources of raw material resources. Further, UNIGLOBAL is collaborating with State Government to effectively tackle, control and mitigate the predicted damage likely to occur in the NorthEastern Region on the imminent gregarious flowering of muli bamboo.

At UNIGLOBAL the pursuit for excellence is a continuous process. The operating Mills of UNIGLOBAL in Assam have received ISO 9001:2000 Certification from Det Norske (DNV) of Netherlands. Both the Mills have also received the ISO 14001 Certification for the Environment Management System (EMS) from Bureau Veritas Quality International (BVQI), United Kingdom (for NPM) and Det Norske Veritas of Netherlands (for CPM). NPM has received the occupational Health and Safety Assessment Series (OHSAS) 18001:1999 Certification from M/s. Det Norske Veritas (DNV), a first in the Indian Pulp and paper Industry.

UNIGLOBAL has been able to display a trail-blazing performance both in physical and financial terms in the recent past. UNIGLOBAL endeavors to be a socially responsive and responsible corporate citizen and has always extended its support to local community development and promotion of income-generating avenues in the informal sector through encouraging youth with an entrepreneurial bent of mind to become ancillary associates, besides helping in construction and maintenance of roads in the villages nearby and providing safe drinking water and affordable healthcare facilities to the community at large.

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UNIGLOBAL is conscious of the fact that as the ongoing process of economic reforms is irreversible, the challenge of change on all facets of business and environment is inevitable. UNIGLOBAL is conscious of the immense efforts needed for negotiating the road ahead for equipping its members with the necessary expertise and exposure to grapple with the concerns of here and now as well as with the dedicates of long term imperatives for profitable growth. The company believes that the profitability and growth are inseparable.

UNIGLOBAL is in the process of implementing Enterprise Resource Planning (ERP) solutions to render the organization fully integrated and interactive for enabling its members to be innovative and imaginative.

After achieving over 100% capacity utilization for eight consecutive years, efforts are afoot to augment the installed capacity of Nagaon Paper Mill by 30%.

On the strength of a sterling performance, UNIGLOBAL boldly looks forward with expectancy to scale new peaks of performance, making records and breaking them and setting standards and surpassing them. Market share UNIGLOBAL has a market share of about 30% in indigenous newsprint and about 12% in the writing and printing paper. The company supplied about 1.58 lakh tones of writing and printing paper and about 0.95 lakh tones of newsprint to the domestic market during 2007-2008. The newsprint turnover of Rs.221 crores resulted in savings of foreign exchange of equivalent amount.

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Export performance UNIGLOBAL has emerged as a major exporter of paper in recent times. It seeks to play an important supporting role in the promotion of literacy in the neighboring countries. During the past couple of years, it has supplied paper to Jordan, Nigeria, Bangladesh, Egypt, Nepal, Srilanka and Myanmar. Employment UNIGLOBAL has generated direct employment for about 3750 persons and indirect employment through forestry operations, transportation, material handling, etc. to more than 35,000 persons. UNIGLOBAL believes in investment in its own employees. Development of human resources, as a result, has been high on its agenda. Major emphasis is laid on a planned and sustained basis for developing a new corporate culture through in-house programmes on modern management tools and techniques relevant to new managerial challenges, arising out of economic liberalization. Farm forestry In the crusade of preserving forests and maintaining ecological balance, the availability of forest based cellulose raw materials would be increasingly scarce in the days to come for sustained operations of the mills. Innovative and untiring efforts, are, therefore being made for captive plantations. The local villagers and the tribal farmers are encouraged to participate in the implementation of the companys social forestry schemes. Research and development UNIGLOBAL has in-house consultancy and R and D Wings. Research activities give special emphasis on finding out alternative fibrous raw materials, product diversification, improving the quality of newsprint, process improvement, and

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desilication of black liquors and propagation of eucalyptus grandis. Continuous efforts are being made through Research & Development for process improvement, cost reduction and improving the product quality.

Social development UNIGLOBAL is committed to social uplift and development of areas near its mills. It has made significant contribution to the development of the local community by encouraging ancillary industries in Greenfield areas. It provides health-care facilities and encourages education, sports and cultural activities in the nearby villages. UNIGLOBAL has also contributed to the construction of roads in the villages near its mills and provided safe drinking water to the villages.

SWOT ANALYSIS:
STRENGTHS: Capability to manufacture large quantities of writing and printing paper in a short time (Bulk volume production). Fairly state-of-the-art technology and relatively modern plant and equipment. Physical properties of paper made from 100% bamboo comparatively, superior to those made from agricultural residues and recycled fiber. Widespread clientele with the backup of depots and a strong stockiest network. Complete self-sufficiency in power 30 MW generating capacity each at NPM & CPM. ISO-9001: 2000 and 14001:1996 certified mills. NPM is also ISO-18001 (OHSAS).

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WEAKNESSES: Infrastructural inadequacies especially transport bottlenecks. Limited scope for product quality improvement owing to complete dependence on single raw material i.e. locally sourced bamboo; use of imported pulp proves to be uneconomical. Transshipment damages at lumding (for CPM) due to non-existence of unigauge system. Dearth of trained skilled and qualified personnel owing to inability to attract and retain talent. Exorbitant transportation cost and comparatively longer delivery period. NER accounts for less than 10% for sale of production output. High inventory carrying costs for inputs and finished production. OPPORTUNITIES: Gap between demand and supply expected to widen. Remote possibility of installing very large capacity integrated paper mills due to inadequate availability of forest raw materials and increasingly stringent environmental regulations. Entry barrier-Green field investment prohibitively expensive due to escalating capital costs. Competitive market with greater demand can emerge on BIMSTEC (Bay of Bengal Initiative for Multi Sectoral Technical and Economic Co-operation) gathering momentum. Substantial expansion of installed capacity can lead to significant surpluses.

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THREATS: Diminishing availability and affordability of forest raw materials. Steadily diminishing import duties (now 12.5%) lending to larger quantum of imports at competitive prices. Vulnerability to natural disasters like floods, landslides in the North-Eastern Region hampering smooth operations. Worsening transport bottlenecks and insurgency. Gregarious flowering of Muli (Melicona Bacciferra) bamboo in the Barak Valley, Manipur, Mizoram and Tripura will worsen the availability of raw materials at CPM. Competition from mills going in for expansion and modernization especially with second hand plant and machinery and emergence of new mills using recycled fiber especially along the costal area. AREAS OF CONCERN: Raw material availability / accessibility / affordability diminishing. Fast dwindling availability of forest raw materials. No captive plantations. Imposition of entry tax on major inputs procured from within and outside Assam leading to increased variable cost. Non fulfillment of long term agreements by autonomous council. Karbi Analog autonomous council for NPM. North Cachar Hills Autonomous Council for CPM. Extreme difficulty in extraction, collection and transport of raw material (bamboo) owing to Infrastructural inadequacies and insurgency related problems. Development/ laying of feeder roads has roads but not materialized.

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 Total dues from major Governments / Institutional parties as on 31-04-2008 Rs. 68 crores pending for more than 6 months. Sharp rise in landed cost of bulk production inputs owing to adverse inbound logistics and dent in the realizations owing to fright disadvantage for outbound transport of finished product to major demand centers. (HPC sells 90% of its production output outside NER) Inadequate supplier base: No new entrepreneurial groups. Continuing vulnerability to frequent natural disasters like flood, landslides / landslips. Problems related to extraction of forest raw material from KarbiAnglong Autonomous Council areas for NPM and north Cachar hill autonomous council areas for CPM. PAPER INDUSTRY Production and Consumption Details
Percapita consumption Production (Paper & Board) Turnover Exchequer Employment 7.0 kg 5.5 mn tones Rs. 15000 crores Rs. 2500 crores Direct-4 lakhs Indirect-10 lakhs Export 0.2 mn tones

Indian paper industryfragmentation Over 500 paper mills in India. Only 14 machines have capacities of 50000 tpa or more. Average capacity of paper machines is about 14000 tpa.

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 Most of Indian paper machines have a trim width from 1.5 to 3.5 mn. Only 9 paper machines with trim width of 5 mn or more. Environmental issues
Solid Wastes Disposal of Lime Sludge /Fly Ash.

Liquid Effluents

Suspended Solids (SS) Colored Effluents Organ halides (AOX)

Air Pollutants

Mercaptans Suspended Particulate Matter (SPM)

PERFORMANCE SNAPSHOT (in lakhs)

Particulars 20032004 PROD.NPM PROD.CPM TOT.PRODN(t) CAPC.UTN(%) SALES. NPM SALES. CPM TOTAL. SALES Sales Turnover PBT(Rs.lakhs) PAT(Rs.lakhs) 112639 97376 210015 105 110945 93460 204405 62423 5969 4094 20042005 106300 91012 197312 99 106317 90512 196829 60410 5560 3416 20052006 106437 100631 207068 104 108441 102768 211209 73068 8798 5872 20062007 105160 103155 208315 104 103580 107157 210737 77377 12031 8101 20072008 115125 96621 211746 106 115847 97377 213224 83166 13674 9184

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CHAPTER IV
DATA ANALYSIS AN D INTERPRETATIONS Contents: 4.1 Analysis of the liquid position of HPC. 4.2 Analysis of working capital elements. 4.3 Analysis of some other necessary elements. 4.4 Calculation of Net Operating Cycle Period of UNIGLOBAL.

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4.1 ANALYSIS OF THE LIQUIDITY POSITION OF UNIGLOBAL Current ratio: It measures the ability of the firm to meet its current liabilities current assets get converted into cash in the operational cycle of the firm and provide the funds needed to pay current liabilities. Current Ratio = Current Assets / Current Liabilities.
Financial Years 20032004 20042005 20052006 20062007 20072008 61225 61232 72047 81478 75590 Current Assets Current Liabilities 13332 13819 17695 24873 23753 4.5 4.4 4.1 3.3 3.2 (Rs. lakhs) Current Ratio

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Analysis of Current Ratio: Coming to the analysis of the liquidity of the company i.e., its ability to meet shortterm obligation, in the financial year of 2003-2004, 2004-2005, 2005-2006, 20062007, 2007-2008 the current ratios were 4.5, 4.4, 4.1, 3.3 and 3.2 respectively.

The standard of the current ratio is normally taken 2:1, i.e., for every Rs. 1 of the current liabilities, there should be Rs. 2 of the current assets. Actually, this ratio reveals the firms ability to meet its current liabilities. Any ratio which is smaller than 2 is considered to be a dangerous sign for the management. That means it could raise question on the credit worthiness of the company. But current ratios of HPC were greater than normal ratio during the past 5 years. In the financial year of 2003-2004, 2004-2005, 2005-2006 it was 4.5, 4.4, and 4.1 which was far way from normal ratio but in the financial year of 2006-2007 and 2007-2008 it was 3.3 and 3.2 respectively, which was also above the normal ratio but the company was able to improve its current ratio comparing to the previous years. Generally creditors are like to see the standard of the current ratio, so the companies are try to reach that target to impress the creditors.

But the current ratio of UNIGLOBAL is high above the standard ratio because the company maintains high stock of raw materials as the raw materials like bamboo are not easily available and the company has some unutilized resources also. From the study it is found that the companys current ratio is not touched the standard ratio. But from the financial year of 2003-2004 to the financial year of 2007-2008, it is still improving year after year; comparing to the previous years.

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Quick ratio It is based on the current assets, which are highly liquid. Inventories are excluded as they are deemed to be the least liquid component of current assets.
Quick Ratio = Current Assets Inventories / Current Liabilities

(Rs. lakhs) Financial Years 20032004 20042005 20052006 20062007 20072008 Current Assets 61225 66232 72047 81478 75590 Inventories 14537 15936 16134 16076 13532 Current Liabilities 13332 13819 17695 24873 23753 Quick Ratio 3.5 3.6 3.2 2.6 2.6

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Analysis of Quick Ratio : Inventories are typically the least liquid of firms Current Assets. So it is important to measure the firms ability to pay off short-term obligations without relying on the sale of inventory. The quick ratio of UNIGLOBAL for the financial year of 20032004, 20042005, 20052006, 20062007 and 20072008 are 3.5, 3.6, 3.2, 2.6 and 2.6 respectively. The stander of the quick ratio is normally taken 1:1. This means that for every Rs. 1 of the Current liabilities, there should be Rs. 1 of the current assets. This ratio is also is also used for testing the solvency of the enterprise. From the financial year of 2003-2004 to 2007-2008 the quick ratio was too high comparing to the stander ratio 1:1. But UNIGLOBAL is able to bring down its quick ratio and it reaches 2.6 in the financial year of 2007-2008. And it is still improving. In recent years UNIGLOBAL able to cut down its raw material storage period, for this reason the quick ratio is decreasing in a systematic way. Its a very good sign for the company. Cash inflows and outflows The major cash inflows for the company are the sale of paper, caustic and chlorine. The other sources of income are from the dividend of subsidiary company, interest on employees loan, deposit and from subsidiaries on government loans. The major cash outflows are purchase of raw materials, chemicals, power & fuel, repairs & maintenance, employees remuneration, excise duty & cess on stock of paper and other expenses like rent, traveling expense, legal expense, packing, freight, handling & forwarding expense, hire charges for vehicles, equipment, etc. To sum it up,
(Rs. lakhs)

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Financial Years Cash from operating activities Cash from investing activities Cash from financing activities

20042005 8610 (-) 2844 (-) 24

20052006 13395 (-) 12661 (-) 40

20062007 7042 (-) 6691 (-) 8

20072008 (-) 2031 2436 5035

To analyze the cash flow some necessary ratios are calculated in the below. Ratio of Dividend to Operating cash flow (RDOCF)
= Dividend Payment * 100 / Operating cash flow.

(Rs. lakhs) Financial Years 2004-2005 2005-2006 2006-2007 2007-2008 Interpretation The ratio of dividend to OCF in the financial year of 2005-2006 and 2006-2007 reveals that as much as 11.4% and 21.6% of cash generated through operation has been disbursed outside the business in the form of dividend. It is also to be noted than cash from operation activities get decreased in the following year which is an alert for the company. Dividend Payment Not available 1520 1521 Not available Operating Cash Flow Not available 13395 7042 2031 Nil 11.4% 21.6% Nil RDOCF

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Debt Coverage Ratio (DCR) = Operating Cash Flow / Long term debt (Rs. lakhs Financial Years 2004-2005 2005-2006 2006-2007 2007-2008 Operating Cash Flow 8610 13395 7042 (-) 2031 Long term debt 3097 3097 3135 178 2.8 4.3 2.3 NIL DCR

In the financial year of 2004-2005, 2005-2006, 2006-2007 and 2007-2008 the debt coverage ratios are 2.8, 4.3, 2.2 and Nil respectively. The ratios indicate that the companys long term solvency position is not comfortable. It signifies that the company is not able to redeem the debt at once by internally generate fund. Rate of Dependence on External Fund for Capital Expenditure (RDEFCE)
= Financing Cash Flow before Dividend * 100 / Investing Cash Flow

(Rs. lakhs)

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Financial Years 2004-2005

Financing Cash Flow Not available

Dividend Payment Not available 1520 1521 Not available

Investing Cash Flow Not available 12661 6691 2436

RDEFCE

Nil

2005-2006 2006-2007 2007-2008

(-) 40 (-) 8 5035

11.7% 22.6% Nil

Interpretation In the financial year of 2005-2006 and 2006-2007 the rate of dependence on external fund for capital expenditures are 11.7% and 22.6%. From the ratio of external fund to investing cash flows, it appears that the maximum capital expenditure has been financed by fund from internal sources have been reduced and the rate of dependence on external sources should be increased. Cash Return on Net Worth (CRNW) = Operating cash Flow * 100 / Net Worth.
Financial Years 2004-2005 2005-2006 2006-2007 2007-2008 Operating Cash Flow 8610 13395 7042 (-) 2031 66684 70632 76929 87238 13% 19% 9.2% Nil (Rs. lakhs) Net Worth CRNW

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Interpretation From the study it is found that the cash return on net worth ratios are 13%, 19%, 9.2% and Nil in the financial year of 2004-2005, 2005-2006,2006-2007 and 2007-2008 respectively. The cash return to net worth ratio of the financial year of 2004-2005, 2005-2006, 2006-2007 it appears to be satisfactory. But cash return to net worth ratio in the financial year of 2007-2008 should be improved. Cash and bank balance It means the liquid cash position in companys hand to continue its daily production activity.

Financial Years Cash at Bank Financial Years Cash at Bank

20032004 5554

2004 2005 11297

2005 2006 19935

2006 2007 20370

2007 2008 24015

20032004 5554

2004 2005 11297

2005 2006 19935

2006 2007 20370

2007 2008 24015

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Interpretation From the study it is found that cash position of the company continuously increase from the financial year 2003-2004 to 2007-2008. In the financial year of 2003-2004 cash and bank balance was Rs. 5554 lakhs and it increase by 103%, 76% and 2% in the financial year of 2004-2005, 2005-2006 and 2006-2007. Because in these financial years the receivable conversion period is decreasing and the company quickly earn money from its credit sales. But in the financial year of 2007-2008 the company was decide to reduce its raw material conversion period and for this reason cash is increased in companys hand by 18% and it reach to Rs. 24015 lakhs and it is a very good sign, which indicate the company is successfully able to manage its cash management in the last five financial years.

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4.2 ANALYSIS OF WORKING CAPITAL ELEMENTS Stock of raw materials: Raw Materials are the materials, which are directly used in the production process .
Financial Years Stock of Raw Materials 2373 2754 4071 4884 2100 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008

Raw material stock has been increased 16%, 48%, 20%, in the financial year of 2004 2005, 20052006 and 20062007, comparing to the previous financial year of 2003 2004, 20042005 and 20052006. This is because sometimes the production level has been decrease. In the financial year of 20072008 a huge fall has been recorded in the stock of raw materials is 57%, due to increase in production level. Stock of work-in-process Stock of work-in-progress is the goods that are on the process of production. They are not ready for sale. Managing stock of work-in-progress is essential as these goods take up the space and it leads to additional costs.

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(Rs. lakhs)

Financial Years Stock of WIP

2003 2004 78

2004 2005 118

2005 2006 47

2006 2007 70

2007 2008 276

The stock of work-in-progress in the factory has increased 51% from the financial year of 20032004 to 20042005 as the production target set was high and it was not able to achieve it. The goods were still in process of production. Then it has decreased by 60% in the financial year of 20042005 to 20052006. Again in the financial year of 2006 2007, stock has increased by 49%.But in the financial year of 20072008 it was a huge increased by 294% as the production came down and goods were still in process of production.

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Stock of finished goods Finished goods are those goods which have been completed its production process and ready for sale (Paper).
(Rs. lakhs) Financial Years Stock of FG 20032004 4171 20042005 4140 20052006 3127 20062007 2405 20072008 1675

In the financial year of 20042005 a slight decrease of 0.7% was seen in the stock of finished goods, comparing with the previous financial year 2003-2004. The stock has further come down by 24% in the financial year of 20052006, as there were more sales. In the financial year of 20062007 the stock was again decreased by 23% as the rate of production was small compared to the stock sold off. There was another decrease in the stock of finished goods of 30% in the financial year of 20072008 due to the stoppage of production because of flood.

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Accounts receivable Accounts receivables are relatively liquid assets, usually converting into cash within a period of 3060 days. Debtors are people who owe money to the company. The company sells its goods either in cash basis or credit basis. Those buyers who purchase in credit term are known as debtors. Financial Years Accounts Receivables 2003 2004 12839 2004 2005 8302 2005 2006 4774
(Rs. lakhs)

2006 2007 9497

2007 2008 14031

In the financial year of 20042005 debtors has come down by 35% when compared to the previous financial year of 20032004. There has been another decrease in debtors by 42% in the financial year of 20052006 due to the decrease in credit sales. There has been a huge increase in debtors in the financial year of 20062007 by 99%. Because there was an increase in sales and more customers availed credit. In the financial year 20072008 the debtors have been further increased by 48% as the company remains unchanged in its credit sales policy.

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Accounts payables Creditors are the people or organization to whom debt is owed. The company may not
Financial Years Accounts Payables

20032004 7565

20042005 7419

20052006 8789

20062007 13093

20072008 15335

always make its purchases on cash terms. It depends on the availability of cash. Or else, the company may make its purchase in credit terms. Those suppliers from whom the company makes it purchase in credit terms are called creditors.
(Rs. lakhs)

There has been a decrease in creditors in the financial year of 20042005 by 2% comparing to the previous financial year of 20032004. But in the following years creditors has increased. In the financial year of 20052006, 18% increases is seen and in the financial year of 20062007, creditors further increased by 49%. Also the increase will continue in the financial year of 2007-2008 by 17%. The increase in creditors shows that the company is increasing its credit purchase which indicates credit worthiness of the company as well as a good relationship with the suppliers.

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4.3 ANALYSIS OF SOME OTHER NECESSARY ELEMENTS

(Rs. lakhs)

Financial Years

Raw Material Consumption

Cost of Production

Cost of Goods Sold

Credit Sales

20032004 20042005 2005-2006 20062007 2007-2008

20812 20317 23293 23731 26168

46775 47230 50640 50450 54386

55493 54512 64332 66340 72025

62424 58131 73068 77377 83167

(Note: The Company made all purchase and sales on credit. The portion of cash sales and cash purchase is negligible. For sake of simplicity I ignore all cash sale and cash purchase for my further analysis. So, assume Total Sales = Credit Sales and Cost of Goods Sold = Credit Purchase.) In the financial year of 2004-2005 raw material consumption was decrease by 2% due decrease in volume of purchase. Cost of production was slightly increased by 1% due to increase of direct expenses. But cost of goods sold was decreased by 2% due to decrease of finished stock. Credit sales were also decreased by 7%, because volume of total sales was decreased. In the financial year of 2005-2006 raw material consumption was increased by 15% due to increase in volume in purchase. Cost of production was also increased by 7% because labour expenses were increased. Cost of goods sold was also increased by 18% due to increase in finished stock. Credit sales were also increase by 26% because the volume of total sales was increased.

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In the financial year of 2006-2007 raw material consumption was increased by 2% due to increase in volume of purchase. Cost of production was slightly decreased due to decrease of office and administration overhead. Cost of goods sold was increased by 3% because finished stock was increased. Credit sale was increased due to increase of the volume of total sales. In the financial year of 2007-2008 raw material consumption was increased by 10% due to increase in volume of purchase. Cost of production was also increased by 8% due to increased in labour cost. Cost of goods sold was also increased by 9% because stock of finished goods was increased. Credit sales were increased because the volume of total sales was increased. 4.4 FORMULATION OF OPERATING CAPITAL CYCLE OF UNIGLOBAL PAPERS PVT. LTD. Calculation RAW MATERIAL STORAGE PERIOD : It means the length of time for which raw materials are to remain in stores before they are issued for production. RMSP (Days) = Stock of Raw Material * 330 / Raw Material Consumption.

Financial Years 20032004 20042005 20052006 20062007 20072008

Stock of Raw Material 2373 2754 4071 4884 2100

Raw Material Consumption 20812 20317 23293 23731 26168

RMSP (Days) 38 45 58 68 26

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Conversion period It means the length of conversion period or work-in-progress, i.e., time taken for conversion of raw materials into finished goods. CP (Days) = Stock of Work-in-process * 330 / Cost of production.
Financial Years 20032004 20042005 20052006 20062007 20072008 Stock of WIP 78 118 47 70 276 Cost of production 46775 47230 50640 50450 54386 CP(Days) 1 1 1 1 2

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Finished goods storage period It means the length of sales cycle during which finished goods are to be kept waiting for sales. FGSP (Days) = Stock of Finished Goods * 330 / Cost of Goods sold (COGS). Financial Years 20032004 20042005 20052006 20062007 20072008 4171 4140 3127 2405 1675 55493 54512 64332 66041 72025 25 25 16 12 8
(Rs. lakhs)

Stock of FG

COGS

FGSP (Days)

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Receivables collection period It means the average period of credit allowed to customers. RCP (Days) = Account Receivables * 330 / Credit sales.

Financial Years 20032004 20042005 20052006 20062007 20072008

A/C Receivables 12839 8302 4774 9497 14031

Credit sales

RCP (Days)
(Rs. lakhs)

62424 58131 73068 77377 83167

68 47 22 41 56

(Note:-We assume Total Credit sales =

Sales.)

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Payable deferral period The average credit period expected to be allowed by suppliers. PDP (Days) = Accounts Payables * 330 / Cost of Goods Sold (COGS). (Rs. lakhs) Financial Years 20032004 20042005 20052006 20062007 20072008 A/C Payables 7565 7419 8789 13093 15335 55493 54512 64332 66340 72025 COGS PDP (Days) 45 45 45 65 70

(Note: We assume; Cost of Goods sold = Credit purchase.)

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CALCULATION OF NET OPERATING CYCLE PERIOD NOCP = RMSP + CP + FGSP + RCP - PDP Financial Years 20032004 20042005 20052006 20062007 20072008 RMSP 38 45 58 68 26 CP 1 1 1 1 2 FGSP 25 25 16 12 8 RCP 68 47 22 41 56 PDP 45 45 45 65 70 (Days) NOCP 87 73 52 57 22

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CALCULATION OF THE ROUND OF OPERATING CYCLE After calculating the net operating cycle period, the total number of operating cycle during a year is computed by dividing 330 days with the number of operating days in the net operating cycle period. Round of Operating Cycle (ROC) in a year = 330 / Net Operating Cycle Period Financial Years 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 No of Working days in a year 330 330 330 330 330 87 73 52 57 22
(Days)

NOCP

ROC (Times)

4 5 6 6 15

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CHAPTER V
FINDINGS AND DISCUSSIONS Contents: 5.1 Raw material storage period. 5.2 Conversion period. 5.3 Finished goods storage period. 5.4 Receivable collection period. 5.5 Payable deferral period. 5.6 Net operating cycle period & Round of operating cycle.

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5.1 RAW MATERIAL CONVERSION PERIOD From the study it was found that the raw material storage period is continuously increasing from the financial year of 2003-2004 to 2006-2007. In the financial year of 2003-2004, 2004-2005, 2005-2006, 2006-2007 the raw material storage period was 38 days, 45 days, 58 days and 68 days respectively. When calculate the percentage; the increase is 18%, 29%, and 17% in the financial year 2004-2005, 2005-2006 and 20062007; comparing to the previous financial years. The reason behind the increase of raw materials storage period was various. HPCs manufacturing units are situated on Karbi-anglong and Cachar area in state of Assam. It fully depends on Karbi-Anglong and North Cachar area for muli bamboos which is its main raw materials. But extreme difficulty in extraction, collection and transport of raw material (bamboo) owing to infrastructructural inadequacies and insurgency related problems. In recent years the supply of raw material is inadequate and there was a huge extraction of bamboo forest. Moreover, there is continuing vulnerability to frequent natural disasters like flood, landslides/landslips etc. from the past few years.

That is why the company increases its raw material storage period. So, that the production doesnt hampered. But in the financial year of 2007-2008 the raw material storage period is decreased by 61% and it stands to 26 days comparing to the previous year. Because the overall situation is slightly improve and the company is able to increase production from its own bamboo forest. So, the company decides to reduce its raw material storage period and it will help the company to keep cash in hand.

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5.2 CONVERSION PERIOD From the study it is found that in the financial year of 2003-2004, 2004-2005, 20052006, 2006-2007 the conversion period was 1 days but in the financial year of 20072008 it was 2 days. It indicates that the company is able to manage the whole production process efficiently. The Company is successfully handling the workers problems and supply of raw material is good throughout the five financial years. But in the last financial year of 2007-2008 the conversion period was slightly increased due to modernization of two manufacturing units. 5.3 FINISHED GOODS STORAGE PERIOD The finished goods storage periods are 25 days, 25 days, 16 days, 12 days and 8 days, in the financial year of 2003-2004, 2004-2005, 2005-2006, 2006-2007 and 20072008. From the study it is found that the finished goods storage periods are decreasing comparing the past five previous years. It means the company is improving its selling efficiency. In percentage calculation; it would be seen that in the financial year of 2003-2004 to 2004-2005 the finished goods storage period is same. But in the financial year of 2005-2006, 2006-2007 and 2007-2008 the finished goods storage period is continuously decreased by 36%, 25% and 33% respectively comparing to the previous financial year. The demand of newsprint, printing & writing paper will increase in the recent years. So, the company is able to sell its product to the stockiest more quickly.

5.4 RECEIVABLES COLLECTION PERIOD From the study it is found that the receivable collection period is 68 days, 47 days, 22 days, 41 days, 56 days in the financial year of 2003-2004, 2004-2005, 2005-2006, 2006-2007 and 2007-2008. In the financial year of 2003-2004 the receivable

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collection period was 68 days which is quite alarming. But in the financial year of 2004-2005 and 2005-2006 the receivable period was decreasing and it come down from 68 days to 47 days and 22 days. In percentage calculation, the decrease shows 31% and 53% from the previous financial year. In the financial year of 2004-2005 and 2005-2006 the companys product demand was very high in the market; so, the debtors paid cash as quick as possible to increase more purchase from the company for next financial year. That is why in the financial year of 2005-2006, the receivable collection period was only 22 days. But in the financial year of 2006-2007 the receivable collection period was increasing and it reaching 41 days, which is normal. Also in the financial year of 2007-2008 it shows a further increase and it reaches 56 days. The reason behind that the company decided to increase credit sale to reduce finished goods stock. 5.5 PAYABLE DEFERRAL PERIOD From the study it is found that the payable deferral period was same in the financial year of 2003-2004, 2004-2005 and 2005-2006; and that was 45 days, which is normal. In the above three years the companys raw material storage period was continuously increasing which block the cash and finished goods storage period was also high. Actually the company follows a systematic plan and it increased raw material storage period in the coming years. So, UNIGLOBAL tried to create a good impression among the creditors.

But in the financial year of 2006-2007 payable deferral period was increased by 44% and it stands to 65 days because in this year the company decided to increase its sale volume which lead to increase in raw material consumption. So, the company increases its payable deferral period to maintain its operating activities. In the

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financial year of 2007-2008 the payable deferral period increase by 8% and it stands to 70 days. Actually in this year receivable collection period was high then the normal period. But if we analyze the five years payable deferral period; the overall situation was not so bad and the company is still improving. 5.6 NET OPERATING CYCLE PERIOD & ROUND OF

OPERATING CYCLE The number of days the cash is tied up in current assets for the financial year of 20032004 was 87 days. So for 87 days company stands in need of cash. The cash is only rolled for 4 times in a year, which shows it requires more cash to be pumped in that year. The company had to finance from external sources like loan from financial institutions. In the financial year 20042005, it was able to make a slight improvement. Cash was tied up for 73 days i.e., cash get rolled 5 times. Cash was getting rolled much faster than the previous year as it was able to reduce its receivables collection period.

In the financial year of 20052006, again it was able to reduce its cycle from 73 days to 52 days. The cash roll in this year is 6 times. But in the financial year of 2006 2007, the cash got tied up for 57 days as the receivable collection period was only 41 days, which is exceeded than the previous year receivable collection period limit of 22 days. This resulted in blocking of the cash for 57 days. The cash roll in this year is 6 times.In the financial year of 20072008, it was again able to maintain a control on collecting back of debtors. So the cash delay was just only for 22 days. In this year the payables deferral period is the biggest for 70 days. This resulted in blocking of the cash for 21 days. This shows it gets rolled 15 times in a year. It indicates there is a need of huge cash in this year for continues the cash conversion cycle.

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CHAPTER - VI CONCLUSION
For manufacturing companies, working capital management is a very crucial element. In UNIGLOBAL the mills run 24 hours (3 shifts) per day. It is very important to manage their working capital in order to have a smooth production. The study was conducted to find out whether UNIGLOBAL was able to manage its working capital efficiently. It was done through analyzing the operating cycle i.e., the time intervening between the acquisition of materials entering the process and the final cash realization.

For this purpose exploratory research is conducted by interviewing the experts and analyzing the secondary data. The elements of working capital like stock of raw materials, stock of work-in-process, stock of finished goods, accounts receivables and accounts payables are analyzed in depth to understand how the company handles these elements. After that working capital cycle is formulated and each of the elements of the cycle is analyzed. From the raw material storage period, it is found that the raw material storage period of UNIGLOBAL in the last five years are between 26 days to 68 days. The raw material storage period is continuously increasing due to shortage of raw material and it cause cash block but in recent financial year it is able to reduce to 26 days which is good for the company. The conversion period is impressively attractive. It is only 1 day from the past four financial years and 2 days in the last financial year. It indicates that the production process is continuing on unentrap way and UNIGLOBAL is able to manage workers problem successfully. But from the last financial year two manufacturing units are stopped due to modernization of these units.

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The finished goods storage period is between 8 days to 25 days in the last five years and it was continuously decreasing. It indicates the companys management is efficiently working. The demand of newsprint is increasing; for this reason the stockiest want to quickly purchase its product.

On analyzing receivables collection period it was found that on the financial year of 2003-2004 it was 68 days but the next two financial years receivable collection period was decreasing because the demand of its product was increasing after the next two financial year that it financial year 2006-2007 and 2007-2008 receivable collection period was slightly increase but it does not touch the alarming rate. The company is able to manage its receivable collection period successfully. In the past five financial years from 2003-2004 to 2007-2008 the payable deferral period was between 45 days to 70 days in the first three financial years the payable deferral period was 45 days which is normal. The company maintains a very good relation with the suppliers and as a result it enables to increase its payable deferral period. Actually the company tries to increase its sales volume by allowing its customer a little bit more credit period which ultimately increases its payable deferral period on the basis of the relation developed with the suppliers. Its a very good sign as it could manage to increase its sales volume on the basis of its previous amount of working capital. In these recent years the company also reduces in raw material storage period. But the overall the company is able to manage its payable deferral period efficiently.

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CHAPTER- VII RECOMMENDATIONS

At UNIGLOBAL the raw material storage period is continuously increasing and it leads to increasing the working capital cycle. More and more cash is blocked. The company should reduce its raw material storage period and keep it within a normal period. The company goes ahead towards reducing the period and it is a good sign. The company is able to handle conversion period successfully from the past four years but only in the last financial year it was increased due to modernization. So, the company should try shortening its conversion period within a stable normal period. The finished goods storage period is continuously decreasing and it helps to reduce the cycle period. The company should try to keep it within limit. The cash position of the company is increasing over the years and phenomenal cash is left idle with the company. The company should utilize the cash by investing in short term securities. The company should evaluate their credit practices and establish clear credit practices as a matter of company policy as well as make sure that these practices are clearly understood by staff, suppliers and customers. UNIGLOBAL does not maintain a cash budget as a result of which they are unable to predict requirement of cash time to time. Thus it is essential on the part of the company to maintain a cash budget.

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CHAPTER - VIII BIBLIOGRAPHY

Khan & Jain, 2007, Financial Management, Tata McGraw-Hill publishing company limited, New Delhi, Fifth edition. Richard. A. Brealey, Stewart. C. Myers, 1991, Principles of Corporate Finance, McGraw Hill Inc, USA, fourth edition. Eugene. F. Brigham, Michael. C. Ehrhardt, Financial Management Theory and Practice, Thomson Learning Inc, tenth edition. Shashi K. Gupta & R.K. Sharma, 2008, Financial Management, Kalyani Publishers, New Delhi, first edition. Sushil Mukherjee & Pradeep Kumar Chandra, 2005, Profile of Financial Management B. B. Kundu Grandsons, Kolkata, first edition.
Dr. Anjan Bhattacharyya & Madan Mohan Jana, 2005, Financial Statement

Analysis B. B. Kundu Grandsons, Kolkata, first edition.

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