A STUDY ON WORKING CAPITAL MANAGEMENT AT LANCO INDUSTRIES

INTRODUCTION TO THE STUDY:

One of the most important areas in the day to day management of the firm is the management of working capital. Working capital management is the functional area of finance that covers all the current accounts of the firm. Working capital management includes the management of all the types of current assets and current liabilities. It also includes the decisions as to the appropriate amount of long term financing used in financing the current assets of the enterprise. All the current asset decisions are related. Not only are those, current assets and current liability decisions are interrelated in nature. These comple interactions are managed using tools of financial analysis. It is concerned with management of the level of individual !urrent Assets as well as the management of total working capital. The management of !urrent Assets is similar to that of "i ed Assets in the sense that in both cases a firm analyses their effects on its return and risk. The management of "i ed and !urrent Assets however differs in three important ways. "irst, in managing "i ed Assets time is a very important factor# conse$uently,discounting and compounding techni$ues play a significant role in capital budgeting and a minor one in the management of !urrent Assets. %econd, the large holding of the !urrent Assets, especially cash, strengthens the firms li$uidity position &and reduces risk' but also reduces the overall profitability. Thus, a risk(return trade off, is involved in holding !urrent Assets. Third, levels of "i ed as well as !urrent Assets depend upon e pected sales, but it is only current assets, which can be ad)usted with sales fluctuations in the short run. Thus, the firm has a greater degree of fle ibility in managing !urrent Assests.

NEED FOR THE STUDY:

This pro)ect work is an attempt to get ac$uainted with various facts of short(term finance management. This pro)ect work aims at encompassing working capital management practices that prevail in the organi+ation upon which the study was undertaken. working capital is the difference between current assets and current liabilities. Though this concept of working capital is commonly used, it is an accounting concept with little economic meaning. It makes little sense to say that a company manages its net working capital. What a company really does is to take decisions with respect to various current assets and current liabilities. Working capital management is a significant facet of financial management. In fact, this simply reflects the repetitive nature of investment commitments with relatively short life e pectancy and rapid transformation from one investment form to another. "inancial analysis recogni+es that all working capital investments do not en)oy the same life e pectancy, nor are they transformed into useable li$uidity flows at the same speed. There is need to study the factors influencing the working capital, the components of working capital, level of operations and length of the operating cycle. ,onitoring the duration of the operating cycle is an important ingredient of working capital.

OBJECTIVES OF THE STUDY:

The main ob)ectives of the study of Working !apital ,anagement in -anco Industries -td. Are as follows. Primary Ob !"#i$!. To study the working capital management in -anco Industries.

S!"%&'ary Ob !"#i$!(: To determine the changes in the Working !apital of the "irm over 0 years. To determine the short term solvency position. To give suggestions to the !ompany to improve its performance, if any.

SCOPE OF THE STUDY:

The contents of the total evaluation of current assets and current liabilities and their percentage contribution in the total turnover. The yearly increase or decrease of current assets or current liabilities in the budget of -anco Industries -imited is being reviewed. "rom this one would be in a position to glance the performance of current assets and current liabilities of the !ompany. This pro)ect greatly deals with the working capital re$uirements of -anco Industries -td 1. And emphasi+es on the yearly composition of Working !apital in the total turnover of the !ompany. This also deals with key ratios to obtain a clearer picture of different resources available and at the disposal of the organi+ation, which will enable one to give appropriation suggestion to the !ompany to improve its performance, if any.

Im)%r#a&"! %* W%r+i&, Ca)i#a-:

Investment in fi ed assets only is not sufficient to run the business. Therefore working capital or investment in current assets is a must for the purchase of raw materials and for meeting the day(to(day e penditure on salaries, wages, rents etc. The main advantages of ade$uate working capital are as follows. If proper cash balance is maintained a !ompany can avail the advantage of cash discounts by paying cash for the purchase of raw materials in the discount period, which results in reducing the cost of production.

Ade$uate working capital creates a sense of security, confidence and loyalty not only through out the business itself but also its customers, creditors and business associates.

A firm can raise funds from the market, purchase of goods on credit and borrow short(term funds from banks etc. If investors and borrowers are confident that they will get their due interest and payment of principle in time.

!ertain contingencies like financial crises due to heavy losses# business oscillation etc. can be easily overcome, if the company maintains ade$uate working capital.

A continuous supply of raw material, research programs, innovation and technical developments and e pansion programs can successfully be carried out if working capital is maintained in the business. It will increase the production efficiency, which in turn increase the efficiency and morale of the employees, lower the cost and create image in the community.

REVIEW OF LITERATURE:
MEANING OF WORKING CAPITAL: Working capital in simple terms is the amount of funds which business concerns have to finance its day(to(day operations. It can also be regarded as that proportion of company3s total capital which is employed in short(term operations. Working capital refers to the funds invested in !urrent Assets i.e. Investment in %tock, %undry 4ebtors, !ash and Other !urrent Assets. !urrent Assets are essential to use "i ed Assets profitably. CONCEPTS OF WORKING CAPITAL. Working capital can be defined through its two concepts, namely. &a' 5ross working capital &b' Net working capital.

Gr%(( W%r+i&, Ca)i#a-: 5ross working capital refers to the firm3s investment in current assets. !urrent assets are the assets which can be converted into cash within an accounting year and include cash, short term securities, debtors, &accounts receivable or book debts' bills receivable and stock &inventory'. N!# W%r+i&, Ca)i#a-: Net working capital refers to the difference between current assets and current liabilities are those claims of outsiders which are e pected to mature for payment within an accounting year and include creditors &accounts payable', bills payable, and outstanding e penses. Net working capital can be positive or negative. A positive net working capital will arise when current assets e ceed current liabilities. A negative net working capital occurs when current liabilities are in e cess of current assets.

IMPORTANCE OF ADE.UATE WORKING CAPITAL: The importance of ade$uate working capital in commercial undertakings can never be over emphasi+ed. A concern needs funds for its day to day running. Ade$uacy or inade$uacy of these funds would determine the efficiency with which the daily business may be carried on. ,anagement of working capital is an essential task of the finance manager. 7e has to ensure that the amount of working capital available with his concern is neither too large nor too small for its re$uirements. A large amount of working capital would mean that the company has idle funds. %ince funds have a cost, the company has to pay huge amount as interest on such funds.

TYPES OF WORKING CAPITAL:

Working capital can be classified as , &a' permanent working capital &b' Temporary working capital P!rma&!&# W%r+i&, Ca)i#a-: It also refers to the hardcore working capital. It is that minimum level of investment in the !urrent Assets that is carried by the business at all times, to carry out minimum level of its activities.

Amount of Working !apital Temporary "i ed

Time

T!m)%rary W%r+i&, Ca)i#a-: It refers to that part of total working capital that is re$uired by a business over and above 8ermanent working capital. It is also called variable working capital. %ince the volume of Temporary working capital keeps on fluctuating 9

from time to time according to the business activities, it may be financed from %hort term sources.

Amount of Working !apital "i ed Temporary

Time

DETERMINANTS OF WORKING CAPITAL:

A large number of factors, each having a different importance, influence working capital needs of firms. Also, the importance of factors changes for a firm over time. Therefore, an analysis of relevant factors should be made in order to determine total investment in working capital. The following are the factors which generally influence the working capital re$uirements of the firm. Nature of the business !redit policy Abnormal factors

,arket conditions !onditions of supply ;usiness cycle 5rowth and e pansion -evels of ta es 4ividend policy 8rice level changes Operating efficiency

Na#/r! %* #0! b/(i&!((: The shorter the manufacturing process, the lower is the re$uirement for the working capital. This is because in such a case inventories have to be maintained at a low level. -onger the manufacturing process,s the higher would be the re$uirements of working capital. This is the reason why highly capital(intensive industries re$uire a large amount of working capital to run their sophisticated and long production process. %imilarly, a trading concern re$uires lower working capital than a manufacturing concern. Cr!'i# )%-i"y: The credit policy of the company also determines the re$uirements of working capital. A company, which allows liberal credit to its customers, may have higher sales but conse$uently will have large amount of funds tied up in sundry debtors. %imilarly, a company which has very efficient debt collection machinery and offers strict credit terms may re$uire less amount of working capital than the one where debt collection system is not so efficient or where the credit terms are liberal. The credibility of a company in the market also has an effect on the working capital re$uirements. <eputed and established concerns can purchase raw

material on credit and en)oy many other services also like door delivery, after sales service etc. This would mean that they can easily have large current liabilities, and therefore, the re$uired working capital may not be very high. Ab&%rma- *a"#%r(: Abnormal factors like strikes and lockouts also re$uire additional working capital. <ecessionary conditions necessitate a higher amount of stock of finished goods. %imilarly, inflationary conditions necessitate more funds for working capital to maintain the same amount of current assets. Mar+!# "%&'i#i%&(: Working capital re$uirements are also affected by market conditions like degree of competition. -arge inventory is essential as delivery has to be off the shelf or credit has to be e tended on liberal terms when market competition is fierce or market is not very strong or is a buyer3s market. C%&'i#i%&( %* (/))-y: If prompt and ade$uate supply of raw materials, spares, stores, etc.., is available it is possible to manage with small investment in inventory or work on )ust in time &>IT' inventory principles. 7owever if supply is erratic, scant, seasonal, channeli+ed through government agencies etc.., it is essential to keep larger stocks, increasing working capital re$uirements. B/(i&!(( "y"-!: ;usiness fluctuations lead to cyclical and seasonal changes in production and sales and affect the working capital re$uirements. Gr%1#0 a&' !2)a&(i%&: The growth in volume and growth in working capital go hand in hand. 7owever, the change may not be proportionate and the increased need for working capital is felt from the initial stage of growth.

L!$!-( %* #a2!(: The amount of ta es paid depends on ta ation laws. These amounts usually have to be paid in advance. Thus need for working capital varies with ta rates and advances ta provisions.

Di$i'!&' )%-i"y: 8ayment of dividend utili+es each while retaining profits acts as a source of working capital. Thus dividend policies affect working capital. Pri"! -!$!- "0a&,!(: Inflationary trends in the economy necessitate more working capital to maintain the same level of activity. O)!ra#i&, !**i"i!&"y: @fficient and co(ordinate utili+ation of capital reduces the amount of working capital re$uired to be invested. METHODS OF ESTIMATING WORKING CAPITAL: There are two methods, which are usually followed in determining working capital re$uirements. These are. C%&$!&#i%&a- m!#0%': According to the conventional method, cash inflows and outflows are matched with each other. 5reater emphasis is laid on li$uidity and greater importance is attached to current ratio, li$uidity ratio, etc., which pertain to the li$uidity of a business. O)!ra#i&, "y"-! m!#0%': In order to understand what gives rise to difference in the amount of timing of cash flows, we should know the length of time which is re$uired to convert cash into final product, the final product into receivables and receivables into cash. The length of the operating cycle is a function of the nature of a business. There are four ma)or components of the operating cycle of a manufacturing company. These are The cycle starts with free capital in the form of cash and credit, followed by investment in materials, manpower and the services.

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8roduction phase %torage of the finished products terminating at the time finished product is sold. !ash or accounts receivable collection period, which results in, and ends at the point of dis(investment of the free capital originally committed. New li$uid capital then becomes available for productive reinvestment. When new li$uid capital becomes available for recommitment to productive activity, a new operating cycle begins

ISSUES IN WORKING CAPITAL MANAGEMENT: Working capital management refers to the administration of all aspects of current assets namely cash, marketable securities, debtors and stock and current liability. The financial manager must determine levels and compositions of current assets. 7e must see that right sources are tapped to finance current assets and that current liability paid in time. There are many aspects of working capital management, which make it an important function of the financial manager. Tim!: Working capital management re$uires much of the finance managers time. I&$!(#m!&#: Working capital management has great significance for all firms but it3s very critical for small firms. Gr%1#0: The need for working capital is directly related to the firm3s growth.

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PRINCIPLES OF WORKING CAPITAL MANAGEMENT: Pri&"i)-!( %* ri(+ $aria#i%&: <isk here refers to the inability of a firm to maintain sufficient current assets to pay for its obligations. If working capital is varied relative to sales, the amount of risk that a firm assumes is also varied, and the opportunity for gain or loss is increased. Pri&"i)-! %* "%(# %* "a)i#a-: This principle emphasi+es the different sources of finance, for each source has a different cost of capital. It should be remembered that the cost of capital moves inversely with risk. Thus, additional risk capital results in the decline in the cost of capital.

Pri&"i)-! %* !3/i#y )%(i#i%&: According to this principle, the amount of working capital invested in each component should be ade$uately )ustified by a firm3s e$uity position. @very rupee invested in the working capital should contribute to the net worth of the firm. Pri&"i)-! %* ma#/ri#y %* )aym!&#: A company should make every effort to relate maturities of payment to its flow of internally generated funds. There should be the least disparity between the maturities of a firm3s short(term debt instruments and its flow of internally generated funds because a greater risk is generated with greater disparity. A margin of safety should, however be provided for short term debt payments.

SOURCES OF WORKING CAPITAL:

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The various sources for the financing of working capital are as follows.

S%/r"!( %* 1%r+i&, "a)i#aP!rma&!&# %r *i2!' *. %hare /. 4ebentures 2. -ong term public deposits 6. <etained earnings 0. -oans from financial institutions T!m)%rary %r $ariab-! *.Trade credit /. ;ank loans &a' Overdraft &b' !ash credit &c' 4iscounting of bills &d' -etter of credit &e' Working capital 2. !ommercial paper 6. "actoring

Fi&a&"ia- %* )!rma&!&#4 *i2!' 1%r+i&, "a)i#a-:

*. S0ar!(: Issue of shares is the most important source for raising the permanent or long term capital. A company can issue e$uity or preferences shares to raise the funds. /. D!b!&#/r!(. It3s also an important source of raising permanent working capital. A debenture is an instrument issued by the company acknowledging its debt to its holder. *2

2. L%&,5#!rm )/b-i" '!)%(i#(: -ong term public deposits also have become important sources of long term finance. 6. R!#ai&!' !ar&i&,(: <etained earnings refer to re(investment of a part of the profits in the business. It is an internal sources of finance and suitable for an established firm for its e pansion. 0. L%a&( a&' *i&a&"ia- i&(#i#/#i%&(: "inancial institutions such as industrial finance corporations, commercial banks, I4;I, state finance corporations, I"!I, I!I!I, etc. provides long term and short term and medium term loans for the business.

Fi&a&"i&, %* #!m)%rary %r (0%r# #!rm 1%r+i&, "a)i#a- :

67Tra'! "r!'i#: It refers to the credit that a company gets from suppliers of goods. The buying firms do not have to pay cash immediately for the purchases made. The supplier will allow the credit period to the firm for the repayment of cash. It is easy and fle ible source of finance for the short(term working capital. 87Ba&+ -%a&(: ;ank credit is the primary and main institutional source of working capital finance.

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F%rm( %* ba&+ *i&a&"! a7 O$!r 'ra*# Bnder overdraft facility, the borrower is allowed to withdraw funds in e cess of the balance in his current account up to a certain specified limit during a stipulated period. Through overdrawn amount is repayable on demand.

b7 Ca(0 "r!'i#: The cash credit facility is similar to the O4 facility. Bnder this credit facility a borrower is allowed to withdraw funds from the bank up to the sanctioned credit limit. "7 P/r"0a(! %r 'i("%/&#i&, %* bi--(: Bnder the purchase or discounting of bills a borrower can obtain credit from a bank against its bills. The bank discounts the borrower bills and provides credit facility to the firm. '7 L!##!r %* "r!'i#: The purchaser of goods on credit obtains a letter of credit from a bank. A bank opens a -C! in favour of a customer to facilitate his purchases of goods. If the customer does not pay to the supplier within the credit period, the bank makes the payment under the -C! arrangements. !7 W%r+i&, "a)i#a- -%a&: A borrower may sometimes re$uire ad hoc or temporary accommodation in e cess of sanctioned credit limit to meet unforeseen contingencies. ;anks provide such accommodation through a Ddemand loan3 account or a separate Dnon(operable3 cash credit account. *0

97C%mm!r"ia- )a)!r: !ommercial paper is a short term unsecured negotiable instrument, consisting of promissory notes with a fi ed maturity. It is also a source of working capital finances, popular in India as well as many foreign nations. :7Fa"#%ri&, %* bi--( %* r!"!i$ab-!(: "actoring is a systematic and sophisticated way to get advances against receivables. 7ere a firm sells its receivables to a third party called Dfactor3 which is usually a financial institution or a commercial bank. The factor purchases these receivables immediately and assumes all credit risks and collection efforts in e change of a factoring commission.

OPERATING CYCLE: Operating !ycle is the time duration re$uired to convert sales, after the conversion of resources into inventories, into cash. The operating cycle of a manufacturing company involves three phases. They are, Ac$uisition of resources such as raw material, labour, power and fuel etc. ,anufacture of the product which includes conversion of raw material into work( in(progress into finished goods %ale of the product either for cash or on credit. !redit sales create account receivable for collection. The firm is re$uired to invest in current assets for smooth, uninterrupted functioning. It needs to maintain li$uidity to purchase raw materials and

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pay e penses such as wages, salaries and other manufacturing, administrating and selling e penses as there is hardly a matching between cash inflows and outflows. %tocks of raw material and work(in(process are kept to ensure smooth production and to guard against non(availability of raw material and other components. The firm holds stock of finished goods to meet the demands of customers on continuous basis and sudden demand from some customers. 4ebtors are crated because goods are sold on credit for marketing and competitive reasons.

T0! %)!ra#i&, "y"-! "a& b! m!a(/r!' a( *%--%1(: <,!8 E <aw material !onversion 8eriod WI8!8 E Work(in(progress !onversion 8eriod "58 E "inished 5oods !onversion 8eriod %4!8F %undry 4ebtors !onversion 8eriod %!!8F %undry !reditors !onversion 8eriod

W%r+i&, "a)i#a- "y"-!4%)!ra#i&, "y"-! !ash

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4ebtors <eceivables <aw( ,aterials

"inished 5oods Work(in( process

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DEBTORS MANAGEMENT : <eceivables occupy the second place among the various components of working capital in any manufacturing concern. @ffective management of the receivable investments is a re$uired characteristic of successful and growing enterprise. The main purpose of maintaining receivables is to push up the sales and also profit by giving credit to the customers who find it difficult to purchase on cash. This process involves so much risk, which is called credit risk. While giving credit to any customer, credit manager has to consider the five !s of credit. !haracter, !apacity, !apital, !ollateral and !onditions, otherwise loss of bad debts will increase. The receivable improve the li$uidity position of an enterprise as it is a near cash item, and the receivables should be at the satisfactory level. The receivable in the strict accounting sense, arise out delivery of goods or rendering of services on credit. According to this, receivables mean only a trade debtor. ;ut in the present conte t, the term receivable has been in its broader sense, i.e., to include trade debts, loans and advances in this preview. The sale of the products against cash would be an ideal situation to eliminate a stage in the working capital cycle thus achieving the ob)ective of drastic reduction in its length and the re$uirement of Working !apital. The e istence of numerous competitors in the era of globali+ation and liberali+ed economy, such sales on cash could only be ne t to impossibility if growth of the organi+ation is any aspiration. In the present comple market scenario one leads the other, in offering more value for money to their customers and e tending credit has been one such ma)or step. This encounters the organi+ation with substantial blockage of Working capital. Indiscriminant e tension of credits in the name of growth could erase the entire profitability and as stated above non(e tending of credit would keep the organi+ation out of business. A great deal of planning and efficiency is warranted to keep the receivables at optimum level. A little elaboration is needed in this level. There are two measures in this regard.

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LAYING DOWN CREDIT POLICY: The organi+ation specifying applicability of general credit policy i.e., the period of credit e tendable as a thumb rule would fall short of its effort in controlling the receivables. The credit policy re$uired to be more selective and should bare the growth, the recoverability, the product strength, the distribution network etc., in its upper most mind. The variation in credit policy could also be on customer based. As we would observe there would be two sets of organi+ations, one looking for a lower margin with reasonable growth through a conservative credit policy. The credit policy should not only lay down the period of credit but also a well thought out procedures for e tending credit in order to prevent or minimi+e the debts going bad. A systematic evaluation of customers3 credibility, financial. %trength and their usefulness to the organi+ation in terms of $uantum of sales etc., would fetch desired results. The credit policy should specify fairly senior personnel could take the level of management authori+ed to e tend general credit and instead of decentrali+ing the power of e tending any further dispensation such decisions, few in number. 4epending upon the market conditions the policy could also specify incentives for early payments like cash discounts, so also interest on delayed payments. MONITORING RECEIVABLES: ,onitoring the receivables areas important, if not more, as laying down the credit policy. It has to be constant and continuous in order to bring down the level of receivables to an optimum level in conformity with the laid down credit policy of the organi+ation. When we talk about the monitoring of receivables, two ready indicators are remembered(a. the collection period and b. the age of the book debts.

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a7 COLLECTION PERIOD:
The collection period would be in terms of number of days average credit sale. %uch a calculation area wise, marketing personnel wise at fre$uent intervals would provide information3s for selective credit control. An application of incentive for faster collection in certain selective areas also would render possible, the collection faster.

b7 AGING OF BOOK DEBTS:

The collection efforts could be intensified on greater analysis of receivables from the point of view of the number of days it is outstanding. 7igher the number of days the debt is outstanding, the probability of it becoming doubtful of recovery is higher. @arlier detection of such outstanding from customers would facilitate taking hard decisions of stoppage of further sales, in order to minimi+e bad debts. !ollection of book debts )ust as per credit policy would enable the organi+ation to achieve planned profitability. It would be an art and efficiency of marketing personnel in an organi+ation, which enables overall monitoring of receivables effective and to keep at an optimum level.

INVENTORY MANAGEMENT: Inventories constitute the most significant part of current assets of a company. Inventory refers to the stock of good yet to be sold by a firm. Inventory includes raw material, work in progress and finished goods. Na#/r! %* i&$!&#%ri!( The various forms in which inventories e ist in a manufacturing company are

Ra1 ma#!ria-(: ;asic inputs that are converted into finished product through the manufacturing process. These inventories are purchased and stored for the future productions. /*

W%r+ i& )r%,r!((: WI8 inventories are semi finished products. They represent products that need more work before they become finished products for sale. Fi&i(0!' ,%%'(: These inventories completely manufacture products which are ready for sale. Inventories serve as a link between the production and consumption of goods.

REVIEW OF LITERATURE THROUGH JOURNALS:

Im)a"# %* W%r+i&, Ca)i#a- Ma&a,!m!&# %& C%r)%ra#! P!r*%rma&"!5 A& Em)iri"a(#/'y %ushma Gishnani, ;hupesh Hr.%hah &/AA:' It is felt that there is the need to study the role of working capital management policies on profitability of a company. !onventionally, it has been seen that if company desires to take a greater risk for bigger profits and losses, it reduces the si+e of its working capital in relation to its sales. If it is interested in improving its li$uidity, it increases the level of its working capital. 7owever, this policy is likely to result in a reduction of the sales volume, therefore of profitability. In this paper an effort has been made to make an empirical study of Indian !onsumer Industry for accessing the impact of Working !apital 8olicies 1 practices on profitability during the period *??=(?0 to /AA6(A0. The impact of working capital policies on profitability has been e amined by computing coefficient of correlation and regression analysis between profitability ration and some key working capital policy indicator ratios.

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RESEARCH METHODOLOGY:
R!(!ar"0 '!(i,&: In this pro)ect Analytical research is used,because it is already e isting in nature7

Primary Da#a: The primary data for this pro)ect is collected from personal interviews and discussions with e ecutives and the officials of the !ompany.

S!"%&'ary Da#a: The secondary data is collected from the following sources Annual "inancial <eports of the !ompany Internal <eports of the !ompany <elevant research articles from financial )ournals. "inancial newspapers

TOOLS UESD FOR ANALYSIS OF THE DATA:

FUNDFLOW STATEMENTS: "unds flow analysis design effective management tool to study how funds have been procured for the business and how they have been employed. The statement of variation in working capital is based fundamentally on the same approach used for the preparation of funds flow statement.

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STATEMENT OF CHANGES IN WORKING CAPITAL: This techni$ue helps to analyses changes in working capital between dates of two balance sheets. The comparison of current assets and current liabilities as shown in the balance sheet at the beginning and the ending of a specific period. RATIO ANALYSIS: 67 C/rr!&# Ra#i% : The current ratio establishes the relationship between current assets and current liabilities. The ob)ective of computing this ratio is to measure the ability of the firm to meet its short term financial strengthCsolvency of a firm. If a firm having high degree of li$uidity funds is unnecessarily toed up in current assets. The satisfactory current ratio /.*. In other words, the ob)ective is to measure the safely margin available for short term indicators. This ratio is e pressed as under.

!urrent assets !B<<@NT <ATIOF /7 ./i"+ Ra#i%: Iuick ratio also known as Acid test ratio or li$uid ratio is more rigorous test of li$uidity than the current ratio. The term li$uidity refers to the ability of a firm to pay its short term obligations as and when they become due. 5enerally a $uick ratio is of *.* is considered to represent a satisfactory ratio. A company with a high value of $uick ratio can suffer from the shortage of funds it is has slow(playing, doubtful and long(duration out(standing book debts. On the other hand a company with a low value of $uick ratio may really be prospering and paying its current obligation in time if it has been turning over its inventories efficiently. This ratio may e press as under. (((((((((((((((((((((((((((((((((( !urrent liabilities

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Iuick assets IBI!H <ATIOF 97 Ca(0 Ra#i%: It is suggested that it would be useful, for the management if the li$uidity measure also takes into account reserve borrowing power as the firm3s real debt paying ability depends not only on cash resources available with it but also on its capacity on its capacity on borrow from the market at short notice. Absolute li$uid assets include cash in hand and at bank and marketable securities or temporary investment. This ratio may be e pressed as under. Absolute li$uid assets A;%O-BT@ -IIBI4 <ATIOF (((((((((((((((((((((((((((((((((( !urrent liabilities :7 N!# W%r+i&, Ca)i#a- Ra#i%: The difference between !urrent Assets and !urrent -iabilities e cluding short term bank borrowings is called net working capital. It is sometimes used as a measure of a firm3s li$uidity. It is considered that, between two firms, the one having the larger Net working capital has the greater ability to meet its current obligations. This is no necessary so# the measure of li$uidity is a relationship, rather than the difference between !urrent Assets and !urrent -iabilities. Net working capital N@TWO<HIN5 !A8ITA- <ATIOF (((((((((((((((((((((((((((((((((( Net Assets Net working capitalF !urrent Asset E !urrent -iabilities 0. T%#a- A((!#( T/r&%$!r Ra#i%: (((((((((((((((((((((((((((((((((( Iuick liabilities

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Net assets turnover can be computed simply dividing sales by total assets. sales TOTA- A%%@T% TB<NOG@< <ATIOF (((((((((((((((((((((((((((((((((( Total assets ;7 Fi2!' A((!#( T/r&%$!r Ra#i% This ratio can be calculated for purposes of finding relationships between the fi ed assets and with sales. This ratio is calculated by using the following formulae, sales "IJ@4 A%%@T% TB<NGO@< <ATIOF (((((((((((((((((((((((( "i ed assets :. N!# Pr%*i# Ra#i% Net profit ratio establishes a relation ship between net profit and sales, and indicates the efficiency of the management in controlling e penditure in selling, administrative and other activities of the firm. This ratio is the overall measure of the firm3s profitability and is calculated as. Net profit N@T 8<O"IT <ATIOF ((((((((((((((((( K *AA Net sales OPERATING CYCLE CALCULATIONS. Ra1 Ma#!ria- C%&$!r(i%& P!ri%' W%r+ i& Pr%"!(( "%&$!r(i%& )!ri%' Fi&i(0!' ,%%'( C%&$!r(i%& P!ri%' D!b#%r( "%--!"#i%& P!ri%'

/9

Cr!'i#%r( "%--!"#i%& )!ri%'

INDUSTRY PROFILE

ABOUT THE INDUSTRY

India, in *??6 has become the 6th largest producer of cement in the world. This impressive record owes its origin to the progressive of the government since late :A3s and enabled on assured */L post ta return on Net worth. The economic reforms of >uly D?* gave a further fillip by abolishing the licensing system for setting up cement plants. %ince then, innumerable technological development took place in cement production enabling cost reduction and mass production. The wet kilns of the late :A3s were replaced by dry kilns which reduced the fuel cost by 2AL. Thermal efficiency was improved by installing pre(heaters, followed by the addition of pre( calcinatory. Optimal usage of fuel and power we achieved through computeri+ation and $uality control of raw materials.

In a developing country like India, the re$uirement of housing and infrastructure is high and so the demand elasticity of cement with respect to 5.4.8 O" *.9L is also high. P-a&# /&'!r #0! Gr%/) The pig iron plant and -AN!O cement plant are two plants which are presently under the name of ,Cs -AN!O industrial -imited and -AN!O construction -imited. /:

LANCO PIG5IRON DIVISION

It is located at <A!7A5BNN@<I. The pig iron is commissioned in a record time of eleven months, drawing on the group3s e pertise in civil @ngineering and industrial construction.

HIGHLIGHTS

%tate of art mini blast furnace %trategic location with easy access One of the few plants with its own railway siding 7igh $uality is from the neighboring 4onimalai 4eposits Access to best grade coke from china ?A,AAA T8A !apacity 8ro imity to end users ,anufacturing all grades of pig iron with the highest rating $uality

CEMENT DIVISION

/=

-AN!O Industries limited as setup a 8ortland %lag !ement &8%!' plant of :A,AAA T8A !apacity at <A!7A5BNN@<I. The cement plant utili+ing as raw materials(slag, coke bree+e 1 iron are time being generated by the pig iron plants as by product 1 waster. ;y this cement plant -AN!O Industries limited adding values to by productsCwaste generated from pig iron, in addition to solving the problem of storing slag in the plant premises.

The main plant and machinery installed are lime stone crusher, a raw mill system for blending and grinding iron ore, clay, limestone 1 coke bree+e, a vertical shift kiln, a cement mill for grinding slag. !linker 1 gypsum 1 slag drying system. M@conomy builds the nation and industry builds the @conomyN.

-AN!O Industries limited is one of the best mini(blast furnace pig iron manufacturing units in our country, and it was the 0th plant under TATA(HO<@ Technology. The company was in corporated on November * st *??* under companies Act(*?09, I the name if -AN!O "@<<O -T4.

To company started construction work in august *??2. The entire construction work was completed in a record time of */ months. This was achieved by team work of -AN!O collective ad the best efforts of the contractors. With this achievement the company started commercial productions %eptember *??6. The name -AN!O "@<<O -I,IT@4 was changed to -AN!O IN4B%T<I@% -I,IT@4 on >uly 9th *??6. -AN!O IN4B%T<I@% -I,IT@4 is located in between TI<B8AT7I and %<IHA-A7A%TI with an access of about 2A H,% from

/?

TI<B8AT7I and about *A H,% for %<IHA-A7A%TI. The reasons for location of -AN!O IN4B%T<I@% at <A!7A5BNN@<I village, %<IHA-A7A%TI ,andal of chittoor district, Andhra 8radesh are as follows.

!heap availability of re$uired -and.

There is more water resource

The distance between the harbor and present work spot is less.

8ro imity <aw materials.

8ro imity to marketing.

To have financial subsidy.

Nearer to the <ailway sidings.

Well connected to the road, rail, and port.

Availability of labour.

2A

COMPANY PROFILE

INTRODUCTION "or a corporation totally itself with a great purpose, it must have courage, conviction, discipline and endurance $ualities which engender organi+ational growth and all round success. -AN!O, a name represents a rare synergy of strength in the core industries sector. "or -AN!O, the great purpose is to build infrastructure strong India. -eaping tongues of fire, the logo of -AN!O has come to symboli+e the display of a fiery spirit along a creatively engineered span of operations. ESTABLSHMENT The -AN!O 5roup of companies was seeded in *??=. When it is started, founded by two young technocrats it was with a vision and solution to aspire for youth and synergies that would make -AN!O a leader in the core sector. The study foundation of the company is constituted of a dynamic term of managers# young technocrat3s who are in turn fortified with the e pertise of a term of highly e perienced professionals. Three youthful technocrat3s %ri -.<a)agopal, %ri -.,adhusudhan <ao and %ri 5.;haskar <ao over the last decade have partnered and promoted all the ventures of -AN!O 5roup.

2*

LOCATION -AN!O Industries limited is a rural based factory sprawling over many areas of land with deep resources and congenial soil. It is located in <A!7A5BNN@<I Gillage near TI<B8AT7I. Nearly 0AL of the consumption of electrical power is supplied by A8%@;, 5overnment of Andhra 8radesh and other 0ALof power is maintained by the company owned 45 sets and power plants. %ince it is a rural area labor potential is available an also company is en)oying the subsidies from state 5overnment. The -AN!O group is a diversified multifaceted conglomerate, with business interests in pig iron, cement, power graded castings, spun pipes, real estate development, information technology a past from infrastructure use development prompted by entrepreneurial skills and the agenda to put the group on the global corporate map during the ne t *A years. -AN!O Industries limited established in the year of *??2. As I%O ?AA/ company, it had set up a state of the art, integrated manufacturing facility for pig iron through mini blast. "urnace route conforming to the latest international technology with initial capacity of *,AA,AAA T8A. Its $uality products of %5(5rade pig iron are being supplied to foundries in the south. As a forward integration, it has utili+ed the slag produced in the pig iron manufacturing of ?A,AAA T8A. The uninterrupted power re$uirement for the energy intensive plant is being met through /.0 mw co(generation power plant. LANCO CONSTRUCTIONS LIMITED This group company was established in the year *??2 and has e ecuted most demanding and difficult pro)ects in the field of civil construction engineering on schedule essaying repute as a world class construction company in a very short time span. The company is mainly e ecuting prestigious work in the fields of irrigation, pipeline pro)ects compared several housing comple es roads, irrigation canals, bridges and industrial

2/

comple es at -AN!O diverse dimensions of growth is achieved through converging rays of vision rays of vision creating dimensions. KALAHASTI CASTING LIMITED @stablish in *??: and strategically located in alone pro imity to the mini blast furnace of the pig iron plants it has a clear economics mileage over other castings sites. The molten metal from the blast cone is directly loosed as basic raw material to produce graded castings. !ast iron span pipes and iron spun gradually e panded further to meet the scaring demand of the products. The B8% to the pipe plant will be met through *A ,W capture power plant.

PIG IRON DIVISION @stablished in the year of *??2.An I%O(?AA/ !ompany, with a state of the art, integrated manufacturing facility for pig iron through mini blast furnace route conforming to the latest international technology with initial capacity of *,AA,AAA T8A and subse$uently e panded and moderni+ed to *.:0 -T8A. Its $uality products of %5( 5rade pig iron are being supplied to foundries in the southern India. The uninterrupted power re$uirement for the energy intensive plant is being met through a /.0 ,W co( generation power plant. CEMENT DIVISION: @stablished in the year of *??9 the basic raw materials is slag produced in the pig iron manufacturing process to install the cement plant with a capacity of ?A,AAA T8A. SPUN PIPE DIVISION

22

@stablished in *??: and strategically located in lose pro imity to the mini blast furnace of the pig iron plant, it has a clear economic mileage over other castings sites. The molten metal from the blast furnace is directly used as basic raw material to produce graded castings , cast iron pipes and ductile iron pipes with a capacity of ?A,AAA T8A. COKE OVEN DIVISION: @stablished in /AA0 the basic raw materials for the mini blast furnace , the coke oven plant capacity of ?,AAA plant. POWER PLANT DIVISION: It has proposed to setup a power plant of */ ,W. 8ower plant will be setup in the e isting land coke oven plant. Waste heat of flue gas from coke oven will be utili+ed in waste heat recovery boiler to produce steam. %team produced in the above process will be utili+ed to run on T.5. %et for generating power. 8ower generated from the power plant will be used for in E house consumption and balance power will be fed into the A8%@4; grid.

26

ANALYSIS < INTERPRETATION S#a#!m!&# %* "0a&,!( i& 1%r+i&, "a)i#a- = 8>>?58>>@AR(7i&7La"(B

Par#i"/-ar( A. C/rr!&# A((!#(: Inventories %undry 4ebtors !ash and ;ank ;alances -oan and Advances T%#a- %* C/rr!&# A((!#( AAB B7 C/rr!&# Liabi-i#i!( !urrent -iabilities 8rovisions T%#a- %* C/rr!&# Liabi-i#i!(ABB Working !apital &A(;' Increasing in working capital Total 8>>? 8>>@ I&"r!a(! C *66/.:= ?9*.22 //??.: 2*:*./9 D!"r!a(! 5 ( ( ( (

?*?6.A= 9:A9.0? 20A.9: /A:A.6/ 6@9867?; ?/A/.** 206.6/ ?009.02 =:90./2 9:A0.A* 6E:?>78:

*A929.=9 :99:.?/ /90A.2: 0/6*.9= 8;6D;7@9 *A*==.26 02=./0 *A:/9.0? *06:A./6 6E:?>78:

( (

?=9./2 *=2.=2

?@?E7>?

9:A0.A* ?@?E7>?

INTERPRETATION: "rom the above table it could be seen that the working capital of the firm for the year /AA= is *06:A./6 whereas for the previous year /AA: the working capital was =:90./2. while comparing the working capital for the two years ie /AA: 1 /AA=, we find that there is an increase in the working capital of about 9:A0.A*. This was due to increase in the inventories, sundry debtors, cash 1 bank balances, loan and advances, decrease in current liabilities and provisions of the firm. 20

S#a#!m!&# %* "0a&,!( i& 1%r+i&, "a)i#a- = 8>>@58>>DAR(7i&7La"(B

Par#i"/-ar( A. C/rr!&# A((!#(: Inventories %undry 4ebtors !ash and ;ank -oan and Advances T%#a- %* C/rr!&# A((!#( AAB B7 C/rr!&# Liabi-i#i!( !urrent -iabilities 8rovisions T%#a- %* C/rr!&# Liabi-i#i!(ABB Working !apital &A(;' Increasing in working capital Total INTERPRETATION: "rom the above table it could be seen that the working capital of the firm has shown an increase in working capital of about ***9.A9 for the year /AA? when compared to that of the previous year /AA=. This is due to the increase in the inventories, sundry debtors, cash 1 bank balances, loan and advances, decrease in current liabilities and provisions of the firm. 8>>@ 8>>D I&"r!a(! C *609.A0 **69.2? ( 6:.?= D!"r!a(! 5 ( ( //2A./: (

*A929.=9 :99:.?/ /90A.2: 0/6*.9= 8;6D;7@9 *A*==.26 02=./0 *A:/9.0? *06:A./6 ***9.A9 6;E@;79

*/A?/.?* ==*6.2* 6/A.*A 0/=?.99 8;;6;7D@

?2*?.2= :**.2A 6>>9>7;@

=9=.?9 5

( *:2.A0

6;E@;79

***9.A9 6;E@;79 9E6D79@ 9E6D79@

29

S#a#!m!&# %* C0a&,!( i& W%r+i&, Ca)i#a- E 8>>D58>6>AR(7i&7La"(B

Par#i"/-ar( A. C/rr!&# A((!#(: Inventories %undry 4ebtors !ash and ;ank -oan and Advances T%#a- %* C/rr!&# A((!#( AAB B7 C/rr!&# Liabi-i#i!( !urrent liabilities provisions T%#a- %* "/rr!&# -iabi-i#i!( Net working capital &A(;' Increasing in working capital T%#a-

8>>D

8>6>

I&"r!a(! C

D!"r!a(! 5 ( ( ( 5 :=? 92.90 5 ( =0A6.?* D9E?7E;

*/A?/.?* ==*6.2* 6/A.*A 0/=?.99

8;;6;7D@

*6629.6= **?99.*9 2692.99 9*A:.06

9ED?97@:

/266./: 2*0*.=0 2A62.09 =*:.== 5 ( ( 5 ( D9E?7E;

?2*?.2= :**.2A
6>>9>7;@ 6;E@;79

*A*A=.2= ::6.?0
6>@@9799 8E>D>7E6

=0A6.?* 8E>D>7E6

8E>D>7E6

INTERPRETATION: "rom the above table it could be seen that the working capital of the firm for the year /A*A is /0A?A.0* whereas for the previous year /AA? the working capital was *90=9.2. While comparing the working capital for the two years ie., /AA? 1 /A*A, we find that there is an increase in the working capital of about =0A6.?* due to increase inventories, sundry debtors, cash and bank balances and loan and advances and decrease in current liabilities and provisions.

S#a#!m!&# %* C0a&,!( i& W%r+i&, Ca)i#a- E 8>6>58>66AR(7i&7La"(B

2:

Par#i"/-ar( A. C/rr!&# A((!#(: Inventories %undry 4ebtors !ash and ;ank -oan and Advances T%#a- %* C/rr!&# A((!#( AAB B7 C/rr!&# Liabi-i#i!( !urrent liabilities provisions T%#a- %* "/rr!&# -iabi-i#i!( Net working capital &A(;' Increasing in working capital T%#a-

8>6>

8>66

I&"r!a(! C

D!"r!a(! 5 /?*:./? */A.29 *?6:./6 0/9.A: 5 ( /?*.:? 5 ( ( E@>87?E

*6629.6= **?99.*9 2692.99 9*A:.06

9ED?97@:

**0*?.*? **=60.=A *0*9.6/ 00=*.6:

9>:;87@@

( ( ( ( 5 2/06.66 ( 5 ( 8E:@796 E@>87?E

*A*A=.2= ::6.?0
6>@@9799 8E>D>7E6

9=02.?6 *A99.:6
?D8>7;@ 88E:878

8E>D>7E6

8E:@796 8E>D>7E6

INTERPRETATION: "rom the above table it could be seen that the working capital of the firm has shown an decrease in working capital of about /06=.2* for the year /A** when compared to that of the previous year /A*A. This is due to the decrease in inventories, sundry debtors, cash and bank balances, loan and advances and provisions and increase in current liabilities.

a7 C/rr!&# Ra#i%
Y!ar /AA: /AA= /AA? C/rr!&# A((!#( *=2/*.:9 /9*?9.=2 /99*9.?= *AA2A.9= 2= C/rr!&# Liabi-i#i!( ?009.02 *A:/9.0? Ra#i% 67D6 87::
87;E

/A*A /A**

20?:2.=6 2A69/.==

*A==2.22 :?/A.9=

979> 97@:

I&#!r)r!#a#i%&: The above table shows that the current ratio of the firm is in increasing trend every year ie. *.?*, /.66, /.90, 2.2A and 2.=6 for /AA9(A:, /AA:(A=, /AA=(A?, /AA?(*A and /A*A(** respectively. This shows that the firm has an increasing ability to meet its short term financial strength.

b7 ./i"+ Ra#i%:

2?

Y!ar /AA: /AA= /AA? /A*A /A**

C/rr!&# A((!#( *=2/*.:9 /9*?9.=2 /99*9.?= 20?:2.=6 2A69/.==

I&$!&#%ry ?*?6.A= *A929.=9 */A?/.?* *6629.6= **0*?.*?

./i"+ A((!#( ?*/:.9= *000?.?: *60/6.A: /*02:.29 *=?62.9?

C/rr!&# Liabi-i#i!( ?009.02 *A:/9.0? *AA2A.9= *A==2.22 :?/A.9=

Ra#i% >7DE 67:E 67:: 67D? 879D

I&#!r)r!#a#i%&: The above table shows that the $uick ratio of the firm is in increasing trend ie. A.?0, *.60, *.66, *.?: and /.2? for the year /AA9(A:, /AA:(A=, /AA=(A?, /AA?(*A and /A*A(** respectively. This increase in the value of $uick ratio shows that the firm can suffer from shortage of funds where it has slow(playing, doubtful and long(duration out(standing book debt.

6A

"7 CASH RATIO:

Y!ar /AA: /AA= /AA? /A*A /A** Ca(0 < Ba&+
20A.9: /90A.2: 6/A.*A 2692.99 *0*9.6/

C/rr!&# Liabi-i#i!( ?009.02 *A:/9.0? *AA2A.9= *A==2.22 :?/A.9=

Ra#i% >7>9 >78: >7>: >796 >76D

I&#!r)r!#a#i%&: The above table shows that cash ratio of the firm is in fluctuating rate year by year ie., A.A2 , A./6, A.A6, A.2* and A.*? for the year /AA9(A:, /AA:(A=, /AA=(A?, /AA?(*A and /A*A(** respectively. This shows the firms li$uidity capacity position on paying the firms debt.

6*

'7 N!# W%r+i&, Ca)i#a- Ra#i%:

. Y!ar /AA: /AA= /AA? /A*A /A** N!# W%r+i&, Ca)i#a=:90./2 *06:A./6 *90=9.2 /0A?A.0* //06/.0A N!# a((!#( *=0/0.:A /6*0=.A= /92==.20 /=/2?.?= /::0?.A? Ra#i% >7:?9 >7;:> >7;8 >7@@ >7@6

I&#!r)r!#a#i%&: The above table shows that the movement of the net working capital ratio of the firm is in fluctuating trend year by year ie., A.6:2 , A.96A, A.9/, A.== and A.=* for the year /AA9(A:, /AA:(A=, /AA=(A?, /AA?(*A and /A*A(** respectively. This fluctuating trend in Net working capital shows that firms ability on paying its financial obligation is not stable and this is due to the changes in the net working capital of the firm.

!7 T%#a- A((!#( T/r&%$!r Ra#i%:

6/

Y!ar /AA: /AA= /AA? /A*A /A**

Sa-!( 2A/?0.9A 29?29.90 69290.92 966:*.9* 9?A0:.?9

T%#a- A((!#( *=2/*.:9 /9*?9.=2 /99*9.?= 20?:2.=6 2A69/.*=

Ra#i% 67;E 67:> 67?: 67?D 878;

I&#!r)r!#a#i%&: The above table shows that the total asset turnover of the firm has been increasing from the year /AA:(A= to /A*A(/A** from *.6A to /./9. This shows that the firm is successful in increasing its profits and thereby increasing its assets of its business.

*7 Fi2!' A((!#( T/r&%$!r Ra#i%:

62

Y!ar /AA: /AA= /AA? /A*A /A**

Sa-!( 2A/?0.9A 29?29.90 69290.92 966:*.9* 9?A0:.?9

Fi2!' A((!#( /6*/?.:/ /6?*/.02 /:/0A.29 /=990.20 2*/AA.2A

Ra#i% 678E 67:@ 67?> 878: 8786

I&#!r)r!#a#i%&: The above table shows that the fi ed asset turnover of the firm has been increasing year by year ie., *./0 , *.6=, *.:A and /./6 for the year /AA9(A:, /AA:(A=, /AA=(A? and /AA?( *A respectively, wheras for the year /A*A(** the fi ed assets turnover decreased with the turnover of /./*. This shows that the firm had established a good relationship between its net profit and sales and has increased its profitability of the business till /AA?(*A compared to the decrease in turnover during /A*A(**.

,7 N!# Pr%*i# Ra#i%:

66

Y!ar /AA: /AA= /AA? /A*A /A**

N!# Pr%*i# **92.:? /6*:.=? 22?0./A 2A::.:: ::00.:9

Sa-!( 2A/?0.9A 29?29.90 69290.92 966:*.9* 9?A0:.?9

Ra#i% 97@: ;7E: ?798 :7?? 6678

I&#!r)r!#a#i%&: The above table shows that the net profit of the firm has been increasing year by year ie., 2.=6 , 9.06 and :.2/ for the year /AA9(A:, /AA:(A= and /AA=(A? respectively, whereas for the year /AA?(*A the net assets of the firm decreased to 6.:: and gradually increased to **./ in the year /A*A(**. This shows the firms establishment in maintaining good relationship between its net profit and sales in increasing its profits.

60

OPERATING CYCLE CALCULATIONS RAWMATERIAL CONVERSION PERIOD: Ra1 Ma#!ria- C%&$!r(i%& P!ri%' a.<aw ,aterial !onsumption b.<aw ,aterial !onsumption per day c. <aw ,aterial Inventory d. <aw ,aterial Inventory 7olding days 8>>? *=/96.?6 0A.:2 0*0?.66 6>6' 8>>@ *?/2/.60 02.6/ 9A0A.A= 669' 8>>D /6::?.?2 9=.=2 :60/.6A 6>@' 8>6> 2?::0.0* **A.6= ?99/.*? @?' 8>66 2:0:=.*6 *A6.2= 0::=.=A EE'

87W%r+ i& )r%"!(( C%&$!r(i%& P!ri%'FW%r+ i& )r%"!(( i&$!&#%ry 5555555555555555555555555555555555555555 G"%(# %* )r%'/"#i%&H49;>

69

W%r+ i& Pr%"!(( "%&$!r(i%& )!ri%' a.cost of production b.cost of production per day c. .Work in 8rocess inventory d. Work in 8rocess inventory holding days

8>>? 2209./0 ?.2/ =:2.A/ D9'

8>>@ 2?=0.96 **.A =:A.== ?D'

8>>D 60=:./? */.: ?/:.*: ?9'

8>6> 6?:0.*/ *2.= ??=.6= ?8'

8>66 00:2.69 *0.6 *2?9.6? D>'

97 Fi&i(0!' ,%%'( C%&$!r(i%& P!ri%'FFi&i(0!' ,%%'( i&$!&#%ry 5555555555555555555555555555555555555 G"%(# %* ,%%'( (%-'H49;> Fi&i(0!' ,%%'( C%&$!r(i%& P!ri%' a.cost of goods sold b.cost of goods sold per day c."inished goods inventory d.finished goods inventory holding days 8>>? /:9.A ? ?./A :=A./ 2 @:' 8>>@ 966.60 /*.6 */02.9* E@' 8>>D 90?.*9 /*.? */**.6= EE' 8>6> 9A:.22 /A./ =?2.20 ::' ???.22 :;' 8>66 96A.0= /*.2

6:

D!b#%r( : 7 D!b#%r( "%--!"#i%& )!ri%'F 5555555555555555555555555555555555555 G"r!'i# (a-!(H49;>

D!b#%r( "%--!"#i%& P!ri%' a.credit sales b.sales per day c.debtors d.debtors outstanding days

8>>? 2A/?0.9A =6.* 9:A9.0? ?D'

8>>@ 29?29.90 *A/.9 :99:.?/ ?:'

8>>D 69290.92 */=.: ==*6.2* ;@'

8>6> 966:*.9* *:?.A **?99.*9 ;;'

8>66 9?A0:.?9 *?*.= **=60.=A ;6'

6=

"r!'i#%r( E 7 Cr!'i#%r( "%--!"#i%& )!ri%'F 5555555555555555555555555555555555555 G"r!'i# )/r"0a(!(H49;> "r!'i#%r( "%--!"#i%& P!ri%' a.!redit 8urchases b.purchase per day c.creditors d.creditors outstanding days 8>>? /69A6.6A 9=.2 969*./A D:' 8>>@ /??96.A* =2./ 9?:/.?0 @:' 8>>D 2?0A=.=? *A?.: :6/*.9 ;?' 8>6> 62?::.*? *//.* =2=0./: ;D' 8>66 6?22A.*? *2:.A ?A0/.=2 ;;'

6?

0A

ITEMS 67Ra1 Ma#!ria- C%&$!r(i%& P!ri%' a.<aw ,aterial !onsumption b.<aw ,aterial !onsumption per day c. <aw ,aterial Inventory d. <aw ,aterial Inventory 7olding days 87W%r+ i& Pr%"!(( "%&$!r(i%& )!ri%' a.cost of production b.cost of production per day c. .Work in 8rocess inventory d. Work in 8rocess inventory holding days 97Fi&i(0!' ,%%'( C%&$!r(i%& P!ri%' a.cost of goods sold b.cost of goods sold per day c."inished goods inventory d.finished goods inventory holding days :7"%--!"#i%& P!ri%' a.credit sales b.sales per day c.debtors d.debtors outstanding days E7Cr!'i#%r( D!*!rra- )!ri%' a.!redit 8urchases b.purchase per day c.creditors d.creditors outstanding days

8>>?

8>>@

8>>D

8>6>

8>66

*=/96.?6 0A.:2 0*0?.66 6>6'

*?/2/.60 02.6/ 9A0A.A= 669'

/6::?.?2 9=.=2 :60/.6A 6>@'

2?::0.0* **A.6= ?99/.*? @?'

2:0:=.*6 *A6.2= 0::=.=A EE'

2209./0 ?.2/ =:2.A/ D9'

2?=0.96 **.A =:A.== ?D'

60=:./? */.: ?/:.*: ?9'

6?:0.*/ *2.= ??=.6= ?8'

00:2.69 *0.6 *2?9.6? D>'

/:9.A? ?./A :=A./2 @:' 2A/?0.9A =6.* 9:A9.0? ?D' /69A6.6A 9=.2 969*./A D:'

966.60 /*.6 */02.9* E@' 29?29.90 *A/.9 :99:.?/ ?:' /??96.A* =2./ 9?:/.?0 @:'

90?.*9 /*.? */**.6= EE' 69290.92 */=.: ==*6.2* ;@' 2?0A=.=? *A?.: :6/*.9 ;?'

9A:.22 /A./ =?2.20 ::' 966:*.9* *:?.A **?99.*9 ;;' 62?::.*? *//.* =2=0./: ;D'

96A.0= /*.2 ???.22 :;' 9?A0:.?9 *?*.= **=60.=A ;6' 6?22A.*? *2:.A ?A0/.=2 ;;'

OPERATING CYCLE CALCULATIONS ANUMBER OF DAYSB

0*

8>>? Gr%(( O)!ra#i&, "y"-! *.Inventory conversion period a.<awmaterial b.work in process c.finished goods Total /.4ebtors conversion period 2.5ross operating cycle&*Q/' 6.payment deferral period E7N!# %)!ra#i&, "y"-!A95:B

8>>@

8>>D

8>6>

8>66

*A* ?2 =6 /:= :? 20: ?6 8;9

**2 :? 0= /0A :6 2/6 =6 8:>

*A= :2 00 /29 9= 2A6 9: 89?

=: :/ 66 /A2 99 /9? 9? 8>>

00 ?A 69 *?* 9* /0/ 99 6@;

F/&'*-%1 a&a-y(i( *%r #0! y!ar 8>>?58>>@

S%/r"! %* F/&'( 67 S0ar! H%-'!r F/&'( a. %hare !apital b. <eserve 1 %urplus 87 L%a& F/&'( a. %ecured -oans b. unsecured -oans 4eferred Ta -iability ONetP (((( T%#aA))-i"a#i%& *%r F/&'( Fi2!' A((!#( a. 5ross ;lack b. -ess 4epreciation c. Net ;lock 0 98D>67:> :>9@;79; 2 6 * / 8>>? 8>>@

2?:9.29 2??2.A9

2?:9.29 0*A=.96

?/66.=* *0A9?.** 9*=.A9

*92=/.?/ *2:22.90 **=6.:?

/0A20.?? 90*A./? *=0/0.:A

2*=/6.2/ :999./6 /6*0=.A=

0/

d. !apital Work in 8rogress Total fi ed assets Investments C/rr!&# A((!#( L%a&( a&' A'$a&"!( a. Inventories b. %undry 4ebtors c. !ash 1 ;ank ;alances d. -oans and Advances T%#a- C/rr!&# A((!#( C/rr!&# Liabi-i#i!( *a. !urrent -iabilities b. 8rovisions T%#a- C/rr!&# Liabi-i#i!( N!# W%r+i&, Ca)i#a** : = ? *A 9

09A6.A/ /6*/?.:/ ((((

:06.60 /6?*/.02
((((

?*?6.A= 9:A9.0? 20A.9: /A:A.6/ 6@9867?;

*A929.=9 :99:.?/ /90A.2: 0/6*.9= 8;6D;7@9

?/A/.** 206.6/ DEE;7E9 @?;E789

*A*==.26 02=./0 6>?8;7ED 6E:?>78:

T%#a-

98D>67:>

:>9@;79;

F/&'*-%1 a&a-y(i( *%r #0! y!ar 8>>@58>>D

S%/r"! %* F/&'( 67 S0ar! H%-'!r F/&'( a. %hare !apital b. <eserve 1 %urplus 87 L%a& F/&'( a. %ecured -oans b. unsecured -oans 2 6 * / 8>>@ 8>>D

2?:9.29 0*A=.96

2?:9.29 :*:?.:A

*92=/.?/ *2:22.90

*:=2/.?/ *//:*.2/

02

4eferred

Ta

-iability

ONetP ((((

**=6.:? /0:9.?0
:>9@;79; :9@9;7;;

T%#aI7 A))-i"a#i%& *%r F/&'( Fi2!' A((!#( a. 5ross ;lack b. -ess 4epreciation c. Net ;lock d. !apital Work in 8rogress Total fi ed assets Investments C/rr!&# A((!#( L%a&( a&' A'$a&"!( a. Inventories b. %undry 4ebtors c. !ash 1 ;ank ;alances d. -oans and Advances T%#a- C/rr!&# A((!#( C/rr!&# Liabi-i#i!( *a. !urrent -iabilities b. 8rovisions T%#a- C/rr!&# Liabi-i#i!( N!# W%r+i&, Ca)i#a** : = ? *A 9 0

2*=/6.2/ :999./6 /6*0=.A= :06.60 /6?*/.02

((((

200*9./2 ?*/:.== /92==.20 =9/.A* /:/0A.29

((((

*A929.=9 :99:.?/ /90A.2: 0/6*.9= 8;6D;7@9

*/A?/.?* ==*6.2* 6/A.*A 0/=?.99 8;;6;7D@

*A*==.26 02=./0 6>?8;7ED 6E:?>78:

?2*?.2= :**.2A 6>>9>7;@ 6;E@;79

T%#a-

:>9@;79;

:9@9;7;;

06

F/&'*-%1 a&a-y(i( *%r #0! y!ar 8>>D58>6>

S%/r"! %* F/&'( 67 S0ar! H%-'!r F/&'( a. %hare !apital b. <eserve 1 %urplus 87 L%a& F/&'( a. %ecured -oans b. unsecured -oans 4eferred Ta -iability ONetP (((( T%#aI7 A))-i"a#i%& *%r F/&'( Fi2!' A((!#( a. 5ross ;lack b. -ess 4epreciation c. Net ;lock d. !apital Work in 8rogress Total fi ed assets Investments C/rr!&# A((!#( L%a&( a&' A'$a&"!( a. Inventories b. %undry 4ebtors c. !ash 1 ;ank ;alances d. -oans and Advances : = ? *A */A?/.?* ==*6.2* 6/A.*A 0/=?.99 *6629.6= **?99.*9 2692.99 9*A:.06 9 0 2 6 * / 8>>D 8>6>

2?:9.29 :*:?.:A

2?:9.29 =06?.::

*:=2/.?/ *//:*.2/

//960.06 *069A.69

/0:9.?0
:9@9;7;;

2*/2.:2
E9I?EE7@;

200*9./2 ?*/:.== /92==.20 =9/.A* /:/0A.29

((((

2=?:6.=9 *A:26.== /=/2?.?= 6/0.2: /=990.20

((((

00

T%#a- C/rr!&# A((!#( C/rr!&# Liabi-i#i!( *a. !urrent -iabilities b. 8rovisions T%#a- C/rr!&# Liabi-i#i!( N!# W%r+i&, Ca)i#a**

8;;6;7D@

9ED?97@:

?2*?.2= :**.2A 6>>9>7;@ 6;E@;79

*A*A=.2= ::6.?0 6>@@9799 8E>D>7E6

T%#a-

:9@9;7;;

E9I?EE7@;

F/&'*-%1 a&a-y(i( *%r #0! y!ar 8>6>58>66

S%/r"! %* F/&'( 67 S0ar! H%-'!r F/&'( a. %hare !apital b. <eserve 1 %urplus 87 L%a& F/&'( a. %ecured -oans b. unsecured -oans 4eferred Ta -iability ONetP (((( T%#aI7 A))-i"a#i%& *%r F/&'( Fi2!' A((!#( a. 5ross ;lack 0 2 6 * / 8>6> 8>66

2?:9.29 =06?.::

2?:9.29 *2:*.?*

//960.06 *069A.69

*92A=.2?0 *92A=.2?0

2*/2.:2
E9I?EE7@;

2620.:06
E9?:87@6:

2=?:6.=9

6*??6.=9

09

b. -ess 4epreciation c. Net ;lock d. !apital Work in 8rogress Total fi ed assets Investments C/rr!&# A((!#( L%a&( a&' A'$a&"!( a. Inventories b. %undry 4ebtors c. !ash 1 ;ank ;alances d. -oans and Advances T%#a- C/rr!&# A((!#( C/rr!&# Liabi-i#i!( *a. !urrent -iabilities b. 8rovisions T%#a- C/rr!&# Liabi-i#i!( N!# W%r+i&, Ca)i#a** : = ? *A 9

*A:26.== /=/2?.?= 6/0.2: /=990.20

((((

**:26.== 2A/0?.?= ?6A.2/ 2*/AA.2A

((((

*6629.6= **?99.*9 2692.99 9*A:.06 9ED?97@:

**0*?.*? **=60.=A *0*9.6/ 00=*.6: 9>:;87@@

*A*A=.2= ::6.?0 6>@@9799 8E>D>7E6

9A02.?6 *==A.=? ?D9:7@9 88E8@7>E

T%#a-

E9I?EE7@;

E9?:87@6:

0: