Chapter 1

COMPANY PROFILE
1.1

SCENARIO OF HEALTHCARE SECTOR IN INDIA

Today Hospital industry is an important component of the value chain in Indian Healthcare
industry rendering services and recognized as healthcare delivery segment of the healthcare
industry, which is growing at an annual rate of 14%.The leaders in the Indian healthcare sector
will be in a position to provide world-class services at affordable prices. Healthcare will be
accessible to areas that hardly have any medical facilities now as government plans to invest to
develop health centers in partnership with private healthcare companies Indias cost advantage
and explosive growth of private hospitals, equipped with latest technology and skilled healthcare
professionals has made it a preferred destination for medical tourism. The government has
formulated favorable policies to promote health tourism. Many corporate hospitals are adopting
world-class service standards to obtain international accreditations such as JCI accreditation.
Corporate hospitals have come a long way in India since their start. People now a days when
have to use the services of healthcare unit, look at various parameters before choosing which
hospitals they will get treated or in which hospital they would get their loved ones treated.
According to reports, the corporate hospital sector of the country is all set to take away a
significant share of the tertiary healthcare service business from private healthcare providers by
the year 2010. According to the report of the National Commission on Macroeconomics and
Health has estimated the size of the private of private healthcare sector in India will be worth Rs.
156,000 crore by 2012.
Various corporate hospital brands in India in the present times include few of the following
below mentioned names

Fortis Healthcare Limited

Apollo Hospital Group

Lockhart Hospitals

Escorts Hospital
1

1.2

INTRODUCTION TO THE MIND PLUS HOSPITAL

The Mind Plus (Dr Kala Nursing Home) was the first private psychiatry hospital in Ludhiana;
established in 1986 they provide evidence based treatments for mental health and
neuropsychiatric conditions. For over 25 years, they have been a reputable Centre for patients
with complex mental health conditions, and often treat patients who have not responded to first
line interventions by physicians or other mental health professionals. They routinely provide
inpatient treatment to patients from all over North India, and often from further afield and
overseas. They have a team of qualified and experienced multidisciplinary professionals who
ensure that patients receive individualized patient centered treatment.
They are also a center recognized for training of various mental health professionals. A number
of other psychiatrists, who are now working successfully in individual private practices in
Ludhiana and elsewhere, have at one point or another trained with us. They have trained a
number of psychologists in a variety of "talking therapies" and are a recognized center for
psychiatric nursing training. They continue to offer a range of training opportunities for
professionals interested in a career in mental health.
They offer easily accessible, fast and effective treatment for most mental health conditions and
addictions. They can offer us an appointment with a specialist consultant, usually within 24
hours. They can then devise a personalized programme to suit our needs and other commitments,
with a wide range of therapies and fee structures. The earlier us seek help, the greater the chance
of a complete recovery.
They can devise our personalized care package at times to suit us. It will depend on how long us
want or need treatment. They use a wide range of therapies which they can offer to us
individually or in group therapy sessions, which take place on different days and evenings.
They carry out comprehensive assessments and provide holistic care; all our patients receive
physical health assessments as part of their diagnosis. For most of the treatment interventions
that they provide, our costs are lathery than those of similar treatment providers; in fact early
diagnosis and the right treatment ensure that most people are able to recover in the shortest
duration of period.
2

1.2.1 Vision
To create a world-class integrated healthcare delivery system in India, entailing the finest
medical skills combined with compassionate patient care.

1.2.2 Mission
To make quality healthcare services widely available to the community at large.

1.2.3 Core values

Vision: Imbibe and share the vision.
Integrity: Lead through honesty and integrity.
Respect: Earn respect
Trust: Gain patient trust.
Understanding: Commit to compassion, care and understanding.
Own: Own quality excellence.
Uphold: Uphold innovation and continuous improvement.
Share: Develop and share success.

1.3

DIFFERENT TREATMENTS

They have successfully treated patients with a variety of conditions including treatment
refractory and comorbid disorders. In our extensive experience, they often find that patients have
been misdiagnosed diagnosis or receiving inappropriate treatment. There often exists a complex
relationship between mental illnesses and addictions, and a comprehensive multidisciplinary
assessment is required to fully understand the nature of someone's problems. Read more about
some of the common conditions that they provide treatment for:

1.3.1

Depression

The World Health Organization notes that there are 12.1 crore people

who suffer from

Depression. It is among the leading causes of disability worldwide. Suicide, a serious outcome of
depression is is among the top 20 leading causes of death globally for all age groups. Nearly 10
Lakh people commit suicide annually worldwide.
The clinical features of depression are:

Persistent Sadness or Low Mood

Loss of Interests or Pleasure

Fatigue or Low Energy

Disturbed Sleep

Poor Concentration

Low Self-Confidence

Poor or Increased Appetite

Suicidal Thoughts or Acts

Guilt

The causes of depression are:

Poor Physical health(Thyroid problems ,Epilepsy and Cancer are a few examples)

Psychosocial issues (marital problems, financial difficulties, anxiety about employment,

bereavement)

Harmful use of Alcohol or Illicit drugs

Sometimes, around Child Birth

Family History of Depression

Sometimes, no cause can be found

They offer a thorough assessment and will identify the causes and treat them effectively. They
Offer a range of treatments ranging psychological treatments and medication. Inpatient treatment
Will be offered to manage risk of suicide, or treatment refractoriness.
4

1.3.2

Anxiety

Anxiety is a normal phenomenon. Think of 5 minutes before us have gone into an examination
hall or attending an interview or making a presentation! Heart pounding, dry mouth and stheyaty
palms are experienced by everyone from time to time. But when anxiety makes us lose sleep,
affect our Attention and Concentration, affect our performance and in the process damage our
confidence, It is time to seek help. In certain extreme scenarios, it becomes the cause of job loss or
marital discord.
Different types of Anxiety:
1. Generalized Anxiety (worrying about routine everyday things)
2. Panic Attacks(Anxiety for specific situations, specific to each individual, catastrophic in its
effects)
3. Social Phobias (Anxiety when needed to make a speech, presentation or needs our
presence in social situations)
4. Phobias (Irrational fear of things/objects or feelings like spiders, heights).
The physical signs of anxiety are racing pulse, stheyaty palms, dry mouth and poor attention and
concentration. The psychological features of anxiety are negative automatic thoughts. Theyre
"Negative" in that they tend to hinder the person's motivation and ability to engage with activities,
and contribute to emotional problems. They're "Automatic" in that they seem to occur "just like
that", popping into the person's head as if from nowhere. The combination of physical and
psychological features of anxiety results in individuals avoiding Anxiety provoking situations
altogether or use alcohol to cope with Anxiety, to their detriment.
In majority of the cases, oral medication and talking therapies help patients substantially. If
alcohol has become a problem, they offer comprehensive range of treatments to help us deal with
it. At Mind Clinic, They offer comprehensive assessment and treatment solutions, individually
tailored to help us the most. They aim to work with us in collaboration and help us realize our
goals.

1.3.3

Alcohol Drugs Related Problems

Take a minute to answer these four questions:

1. Have you ever felt you needed to cut down on your drinking?
2. Have people annoyed you by criticizing your drinking?
3. Have you ever felt guilty about drinking?
4. Have you ever felt you needed a drink first thing in the morning to steady your nerves or to
get rid of a hangover?
If you have answered "Yes" to 2 or more questions on the questionnaire, specialist help is
indicated.
Alcohol dependence is a recognized mental disorder under the International Classification of
Diseases; it is a serious and life-threatening condition with a number of physical, psychological
and social adverse consequences. Drinking large amounts of alcohol or finding it difficult to stop
drinking or to reduce the amount of alcohol one consumes can indicate alcohol dependence.
People often start drinking alcohol or increase the amount of alcohol they consume because of
underlying symptoms of depression or anxiety, and after some time struggle to stop drinking
because they get used to the amount of alcohol. In addition to physical consequences, heavy
drinking can lead to marital problems, financial problems, inability to hold down job/s & in
certain individuals leads to criminal activity (thieving from near and dear to fund alcohol use is
common) drunken driving, public disorder, domestic violence and serious crime.
There is treatment available for alcohol dependence. In the Initial acute phase, hospitalization is
required to treat withdrawal symptoms. A comprehensive physical health assessment is carried out
as part of the admission process. Certain Vitamins and Nutrients are low and they will need to be
corrected immediately. Other mental health problems need to be corrected (like anxiety and
depression). Once the physical health is stabilized, addressing the reasons for alcohol use via
talking therapies takes importance. Motivational interviewing techniques along with therapies to
limit/prevent alcohol use are implemented in our treatment program.

Drug use, which often begins as experimentation with drugs for fun, results in significant
physical, psychological and social morbidity, and mortality. They provide evidence based medical
treatment for detoxification and rehabilitation for patients with drug use. There is a range of
therapies starting from CBT, Individual & Family Therapies. Some of the therapies are short term
and some are intended for long term. They also offer long term Life Coaching sessions, intended
as a part of relapse prevention program.

1.3.4

Dementia

As people get older, they tend to forget things, they could easily remember in their usage days.
Dementia affects memory first and later affects Activities of Daily living (self-care and hygiene,
cooking, cleaning etc...), causes problems in expressing themselves to others and affects their
personality (He is a different person now). According to a report in 2010, India has 37 lakh
citizens who have dementia and it costs around 14,700 crores to manage the illness. By 2030, the
number of citizens who suffer from Dementia will double and it would cost 3 times the current
costs managing the illness. It is estimated that the cost of taking care of a relative with dementia
per year is 43,000/-. According To the 2001 census, there are 7.5 crore people older than 60 years
in India. With more people living longer, more and more people will be diagnosed as suffering
from Dementia. Approximately 10% of Punjab is over the age of 60.
There are 4 predominant types of Dementias:
1. Alzheimers Dementia (50% - 75%)
2. Vascular Dementia (20% - 30%)
3. Dementia with Lewy Bodies (less than 5 %)
4. Fronto Temporal Dementia (5% - 10%)
Depression can cause a condition similar to Dementia Physical illnesses such as kidney, liver or
thyroid problems, shortage of some vitamins, chest or urine infections, and rarer conditions such
as Huntington's disease, which causes dementia in usage people. Consulting with us is beneficial
as they would complete a thorough assessment and treat the treatable causes of dementias. An
early assessment is vital in dementia as many treatments are most effectiveness when the person
receives and early assessment, diagnosis and treatment.
7

1.4

SERVICES

1.4.1 Psychiatry / Neuro-Psychiatry Clinic:

They offer two types of clinics:
1. Walk-in Clinics : 10:00 AM till 8:00 PM
2. They have provisions for Appointment Booking for specific clinicians. This can save
time & prevent waiting. For Booked Consultations, timings can be more flexible and
consultations can be more comprehensive.
They offer:

A comprehensive assessment to identify the factors that contribute to the illness, and
provide effective treatment options.

A range of treatments covering psychological treatments and medication.

Inpatient treatment can be offered to manage risk of suicide, or treatment refractoriness.

1.4.2 Psychology and Therapy Clinic

Psychological treatments/talking therapies are as effective as medication for a number of mild to
moderately severe mental health conditions and patients often prefer these over medication.
People prefer psychological treatments as they may have experienced side effects of medication
(such as drowsiness), or simply because of personal preference. They offer a range of therapy
interventions, from brief structured therapies on one hand to longer term, more explorative
therapies.
Psychological testing:

The

psychology

department

provides

comprehensive

Psychological

Behavioral

and

Neuropsychological evaluations on both inpatient and outpatient basis for children, adolescents
and adults. Some of these include:

Intelligence testing (I.Q)

Testing for depression and other mood disorders

Memory disorder screening

Testing for learning disabilities and dyslexia

Testing for attention deficit hyperactivity disorder ( ADHD )

Testing for parent-Child relationships.

Testing for family environment

Aptitude testing

Testing by motivation scales in patients of addictions

Marital adjustment & marital compatibility scales.

Counseling and therapy services for adults:

At our Centre, they have a team of clinical psychologists, counselors and psychotherapists who
deliver structured psychological interventions to help clients.

Achieve better relationships,

Solve life problems

Handle mood changes such as anxiety, depression and anger.

9

Adjustment difficulties in their work,

Family or marriage counseling

Giving them emotional support

Developing problem solving skills

Phone counseling services available for Indian & International patients

The psychologists at our Centre are trained in counseling skills with special focus on cognitive
behavior therapy (CBT) approaches in order to help the clients with mood disorders,
alcohol/drug use, adjustment difficulties & marital and family difficulties.
Cognitive behavior therapy is an evidence based intervention which was originally devised as a
combination of behavioral and cognitive therapies; it is effective for the treatment of a variety of
problems, including mood, anxiety, personality, eating, substance abuse, and psychotic disorders
adjustment difficulties & marital and family difficulties. CBT is technique-driven, brief, direct,
and time-limited treatment for specific psychological disorders and is usually completed within
12-16 sessions.
CBT caters to:

Individuals and families seeking counseling and support

Chronic patients,

Patients with mental illnesses such as bipolar disorder and schizophrenia and addictions receive
holistic care which includes therapy interventions for patients and their families aimed at
promoting recovery and preventing relapse.

Child and adolescent therapy

10

At our center a team of psychologists, psychiatrists and counselors works with children to
diagnose and treat various childhood and adolescent disorders like ADHD, mental retardation,
depression, anxiety, phobia, OCD, adjustment disorders and school phobia, aggression,
withdrawn behavior, academic difficulties etc. Our interventions involve:

Counseling of the child and parents, (emotional, behavioral and academic difficulties
and dealing with normal experiences such as exam stress.)

Behavior therapy,

Relaxation technique

Play therapy.

IQ testing,

Personality assessment,

Aptitude testing,

Tests for ADHD,

Tests for autism,

Diagnosis of dyslexia

Severe childhood mental disorders.

Parenting Skills
Good parenting skills such as good communication, a stable emotional bond and fair and
consistent parenting skills can promote and support the physical, emotional, social and
intellectual development of a child from infancy to adulthood.

11

Some of our programmes:

Workshops on parenting skills

Study skills and exam stress management workshops

Workshops for school teachers imparting skills to manage academic, behavioral and
emotional problems of students.

1.4.3 Repetitive Trans Cranial Magnetic Stimulation Clinic

RTMS is a relatively new non-invasive technology validated in clinical trials and approved for
use in Canada since 2002 that targets specific areas of the brain.
It is an effective treatment for the following problems:

Depression and mood disorders.

Parkinson's disease,

Obsessive compulsive disorder,

Eating disorder,

Auditory hallucinations (schizophrenia)

Migraine,

Chronic tinnitus

Pain management.

12

Treatment sessions consist of outpatient attendances, probe is held close to the persons head and
a magnetic field is generated which painlessly stimulates specific brain cells. By adjusting
stimulation parameters, such as the stimulus strength, duration and inter-stimulus interval,
treatment can be individualized. They customize our treatments by carefully monitoring
progress, using validated rating scales, to ensure that treatment is most effective for each person.
Please contact us to find out more about our rTMS clinic.
Inpatient Service
They have a facility of general wards as well as private rooms for patients needing
hospitalization.
For inpatients they provide:

Holistic package of treatment

Care for people,

Working with individuals and their families,

To create a personalized solution.

Conducting rehabilitation group activities to enhance social skills, motor activity and
build in confidence.

Providing conducive social environment for patients to help them change their emotional
behavior

Where required, our aim is to admit the patient promptly, minimize the length of treatment, and
ensure a timely return to independent living.

1.5

Courses
13

The Mind Plus conducted a 2 day workshop on 17th &18th June 2013 on
"Mental disorders, IQ Testing and Counseling"
Their Experts:

Dr Kunal Kala, MBBS, MRC Psych.(UK)

Dr Dwaraka Pershad, Clinical Psychologist (Chd.), Ph.D

Dr( Mrs) Ravinder Kala, Ph.D

Eligibility: BA (Hons.) / MA (Psychology)

Limited Seats: 20
List of tests that they are taught to students:

Malins Test of Intelligence

Ravens Progressive Matrices Test

Bhatia Battery of Intelligence Test

Seguin Form Board Test

Catellis Culture Fair Intelligence Test

Vineland Social Maturity Scale

Developmental Screening Test

Memory Tests: PGI Memory Test ( Pershad & Wig 1980)

Short courses are conducted for students of psychology for learning counseling skills,
psychological testing & Cognitive Behavior Therapy. The course duration can be 1 month, 3
14

months & 6 Months. During these courses the students get practical training about these skills.
Courses for personality development, study skills for students, parenting skills, anger
management & stress management are conducted for general public.
Workshops for teachers are conducted in schools to enhance their skills for managing the
academic and behavioral problems of the students. This Centre is approved by the Nursing
Council of India for training of B.Sc. Nursing students in the field of psychiatry. One year
internship in Psychiatric Nursing with stipend for candidates who have completed their nursing
diploma.

Chapter 2
REVIEW OF LITERATURE
Review of literature is the most useful and simple method of formulating the research problem.
The researches done by previous researchers are reviewed and their usefulness is evaluated to
serve as basis for further research. Thus researcher reviews builds upon the work of others. The
reviews that are collected by the researcher should give an insight into the field under study. The
reviews must explain the need and scope of the study under consideration. It is not necessary
that the reviews are to be in accordance with the objectives. Being a layman in the research field,
I as a researcher have covered reviews that are related to Credit Rating Agencies.

An evaluation of the working capital management practices in Kenyan National Referral

Hospitals
Date 2009

15

The purpose of this study is to evaluate the policies in the two national referral hospitals
in Kenya in view of the normal day to day practices carried out in the management of
working capital. These hospitals are Kenyatta National Hospital and Moa Teaching and
Referral Hospital. Numerous studies have been conducted in the field of working capital
management in both for-profit and not-for-profit organizations. A review of this literature
is presented in this study with the aim of highlighting areas that require further research.
All these studies illustrate the importance of efficiently managing working capital and
more so in the public health sector domains where public hospitals are facing
progressively less funding from the treasury as well as other donors. It emerges that many
public hospitals globally are facing liquidity problems and hence, these problems are not
peculiar to anyone state or continent. In studying the working capital management
practices at KNH and MTRH, personal interviews targeting key finance staff were
carried out. The results of this exercise were then analyzed using statistical and
spreadsheet software. The findings show that government and hospital policies often
impact negatively on the hospitals' revenue bases particularly considering the extent of
poverty levels amongst communities served by these institutions. Whereas treasury
regulations require that any surplus funds of these institutions be invested in treasury bills
and bonds (Treasury Circular No. 10 of 1992), any year end surpluses must be remitted
back to the government, meaning that the institutions may not be able to plough back the
surpluses generated to fund their operations. It is also evident that although the two
institutions have financial regulation policies to guide financial management practices,
these policies are often too general and superficial. In other words, they do not set
comprehensive benchmarks or minimum requirements that cover all possible areas of
working capital management. This has made the implementation of these policies to be
ad hoc and uncoordinated. Numerous other challenges facing the management of working
capital have been identified in the two institutions. These challenges have adversely
affected operational efficiency and thereby created liquidity problems. Addressing these
challenges

can

improve

the

efficiency

of

working

capital

management

and

in

consequence, improve the operating cash flows of these institutions.

16

Christopher and Kamalavalli (2009)

They investigated a sample of 14 corporate hospitals in India using panel data analysis for the
period 96/97 to 2005/06. The independent variables used were current ratio, quick ratio,
inventory turnover ratio, working capital turnover ratio, and debtors turnover ratio, ratio of
current asset to total asset, ratio of current asset to operating income, comprehensive liquidity
index, net liquid balance size, leverage and growth. The dependent variable profitability is
measured in terms of return on investment ROI. From multiple regression analysis, negative
association with ROI can be seen in current ratio, cash turnover ratio, current asset to operating
income and leverage. On the other hand, positive associations with ROI are in quick ratio, debtor
s turnover ratio, current asset to total asset and growth rate. Conclusion is that hospitals should
concentrate more on efficient use of working capital for increasing the profitability which would
increase the value of hospitals.

Chakraborty (2008)
The relationship of Working Capital Management and Profitability was also examined by
Chakraborty (2008) in Indian Pharmaceutical companies. He took a sample of 25 selected firms
in the industry for the period 1996-97 to 2007-08 in his article Working Capital and
Profitability: An Empirical Analysis of Their Relationship with Reference to Selected Companies
in the Indian Pharmaceutical Industry. He observed that there were two different viewpoints:
One was that there might exist a negative relationship between working capital and profitability
and that the former does not play any role in improving the later. The second view was that
Working Capital Management had a notable impact on Profitability and that without investment
in working capital, the desired level of Sales could not be achieved.
Reddy Y V. and Patkar S B. (2004)
Stated that sundry debtors and amount due to creditors are the major components of
current assets and current liabilities respectively in determining the size of the working capital.
Haworth C. and West head P. (2003)
17

In their study of working capital in small firms of the UK found that firms focus only on
those areas where they expect to improve marginal returns.
Narasimhan and Murthy
Stress on the need for many industries to improve their return on capital
employed(ROCE) by focusing on some critical areas such as cost containment, reducing
investment in working capital and improving working capital efficiency.
Sanger emphasized that working capital has increasingly been looked at as a restraint on
financial performance since these assets do not contribute to return on equity. The study
undertaken by Peel et al (2000) revealed that small firms trend to have a relatively high
proportion of current assets, less liquidity, exhibit volatile cash flows and a high reliance on short
term debt.

Antonio C. David (2007):In this paper we attempt to analyze whether price-based controls on capital inflows are successful
in insulating economies against external shocks. We present results from vector autoregressive
(VAR) models, which indicate that Chile and Colombia, countries that adopted controls on
capital inflows, seem to have been relatively well insulated against certain types of external
disturbances. Subsequently, we use the autoregressive distributive lag (ARDL) approach to cointegration in order to isolate the effects of the capital controls on the pass-through of external
disturbances to domestic interest rates in those economies. We conclude that there is evidence
that the capital controls have allowed for greater policy autonomy.

Apur Basarker (2007):

Financial Analysis of Hmt, Industrialization commenced in earnest only after the independence
in 1947. From a predominantly agrarian economy, India has moved towards rapid
industrialization with the state retaining the privilege of entrepreneurship an authority in a
18

system of mixed economy. For four decades, the focus had been on the public sector, which was
perceived

as

means

of

achieving

industrial

growth

with

social

justice.

It was Pandit Jawaharlal Nehru the 1st prime minister of independent India, who laid the
foundation of a strong industrial base for the country. It was he who should be given the chief
credit for fostering the creation of a rich scientific and technological pool by which the country is
benefiting today. During his time many dams were built such as the one at Bhakra Nangal. In the
mixed economy followed during that period as per his brand of socialist ideology, in which both
the public and private sectors were given the scope and the opportunities to grow. The private
sector was allowed to function along with public enterprises, but under the control of the
government with strict licensing and supervision. Initially, this led to a rapid industrialization
with large capital-intensive industries in the public sectors. A number of state owned industrial
enterprises were established in various sectors - In steel, power, heavy engineering etc. It cannot
be denied that much of the industrial and scientific advance achieved by India of which are
proudly boasted today owe a lot to his foresight and vision. He called all these projects, The
Temples of Modern India, that would bring about the country progress and prosperity. But
unfortunately many of the state owned and run enterprises in various sectors did not function
successfully and satisfactorily due to structural, operational, managerial, marketing, and other
such deficiencies so that the public sector came to be looked upon as inefficient, not yielding.

Vadu Krishna (2008):

Annual report analysis of Kodak Mahindra Bank Limited, Financial statements provide an
overview of a business' financial condition in both short and long term. They help in
understanding the past performance of the company and making future predictions about the
company. It thus helps us to look beyond the profit figures. There are 3 basic financial statements
are used. They are income statement, balance sheet and cash flow statement, the purpose of
financial statements "The objective of financial statements is to provide information about the
financial position, performance and changes in financial position of an enterprise that is useful to
a wide range of users in making economic decisions."[Financial statements should be
understandable, relevant, reliable and comparable. Reported assets, liabilities and equity are
19

directly related to an organization's financial position. Reported income and expenses are directly
related to an organization's financial performance. Financial statements are intended to be
understandable by readers who have "a reasonable knowledge of business and economic
activities and accounting and who are willing to study the information diligently. Owners and
managers require financial statements to make important business decisions that affect its
continued operations. Financial analysis is then performed on these statements to provide
management with a more detailed understanding of the figures. These statements are also used as
part of management's annual report to the stockholders. Employees also need these reports in
making collective bargaining agreements (CBA) with the management, in the case of labor
unions or for individuals in discussing their compensation, promotion and rankings, External
Users: are potential investors, banks, government agencies and other parties who are outside the
business but need financial information about the business for a diverse number of reasons.

Simon Mohun (2008)

In the decomposition of the US macroeconomic pre-tax rate of profit as the product of profit
share and capital productivity, this paper considers the role of capital productivity over the
period 19642001. The primary finding is that prior to 1982 capital productivity fell because
capital deepening proceeded faster than labour productivity growth, whereas from 1982 to 1997
the opposite occurred. If, prior to 1982, the US economy was characterized by Marx-biased
technical progress, what requires explanation is why labour productivity continued to grow after
1982 in the absence of sufficient capital deepening. The paper explores various hypotheses,
contrasts neoclassical and classical notions of technical change, and investigates the robustness of
its results to the productiveunproductive distinction and to accounting for changes in capacity
utilization.

Icarr (2006):Nike, Inc. Financial Ratio Analysis, In assessing the significance of various financial data,
experts engage in financial analysis, the process of determining and evaluating financial ratios. A
20

ratio is a relationship that indicates something about a company's activities, such as the ratio
between the company's current assets and current liabilities or between its accounts receivable
and its annual sales. The basic source for these ratios is the company's financial statements that
contain figures on assets, liabilities, profits, and losses. Ratios are only meaningful when
compared with other financial information. Since compared with industry data, ratios help an
individual understand a company's performance relative to that of competitors, and used to trace
performance over time (Venture Line, 2005).

Chapter 3
OBJECTIVES OF THE STUDY
3.1 Objective
To learn the effective management of working capital.
To study the different components of working capital and its impact on the performance of

the firm.
To study the working capital management of the hospital.
To study how the hospital finances working capital requirements of the firms.
To study the operating cycle of the hospital.
To compare the working capital of The Mind plus Hospital, Ludhiana for five years.
To forecast the working capital required for next year
To study the financial position of plant through various ratios.

3.2

Need of the Study

This project increases the knowledge in the field of finance. This project helps in analyzing

the financial position of the company and helps in understanding the companys strengths and
weaknesses.
21

Chapter 4:
RESEARCH METHODOLOGY
4.1

Definition of Research

The word research is derived from the Latin word meaning to know. It is a systematic and a
replicable process which identifies and defines problems, within specified boundaries. It employs
well designed method to collect the data and analyses the results. It disseminates the findings to
contribute to generalize able knowledge.
The data used in this research was acquired from internet & web site of the firm. The
sample is based o the financial statement of the firm. In this research we have provided two types
of data analysis descriptive and quantitative.

4.2

Research design:

Research design is a blueprint or framework for conducting the research project. It specifies the
details of the procedures necessary for obtaining the information needed to structure and solve
research problems. The research design used in this study is Descriptive research.
Primary Research: It is that type of research which is original in character.

4.3

Sampling Design:
22

Sampling design is defined as the section of some parts of an aggregate or totality on the basis of
which judgment or an inference about aggregate or totality is made .

4.4

Data Collections:
4.4.1 Primary Data:
Primary data are those, which are collected a fresh and first time, and thus happen to be
original in character .It is the backbone of any study.
4.4.2

Secondary data:

Secondary data are those which have already been collected by someone else and which
have already been passed through the statistical process.
4.4.3

Source of data:

The research involved gathering Secondary data as well as Primary data. Secondary data
regarding sales figures, promotional expenses and other related expenses was collected from the
companys own record to analyses the impact on sales due to the running schemes and make cost
benefit analysis. Primary data was collected through direct interaction with the companys
finance and accounts department..

4.5

Tools and Analysis:

The results of the analysis have been presented with the following:

4.6

Percentage
Table
Graphs

Scope of the Study

23

Both primary and Secondary data has been be used for the study. Apart from conducting this
research work on the basis of these information, various techniques of financial management
e.g., comparative statement, trend analysis and ratio analysis etc. were used in the present study.
To present a broad view so far the purpose of the analysis and to make it easy to understand the
problem/concept of a few graphs and tables shall also be presented. In each chapter, the analysis
has been compared with actual management practices of the company under study.

4.7

Limitation of the Study

The present study is limited to one company i.e. The Mind plus Hospital Ludhiana, and
covers a period from 2010 to 2012 due to limitation of accessibility to data base.

The authenticity of the suggestions and recommendations depend upon the rationality of
the data provided.

Executives are not ready to part with the information beyond a limit.

24

Chapter 5:
WORKING CAPITAL MANAGEMENT
5.1

MEANING OF WORKING CAPITAL

Capital required for a business can be classified under two main categories via,
1)

Fixed Capital

2)

Working Capital

Every business needs funds for two purposes for its establishment and to carry out its day- today operations. Long terms funds are required to create production facilities through purchase of
fixed assets such as p&m, land, building, furniture, etc. Investments in these assets represent that
part of firms capital which is blocked on permanent or fixed basis and is called fixed capital.
Funds are also needed for short-term purposes for the purchase of raw material, payment of
wages and other day to- day expenses etc.
These funds are known as working capital. In simple words, working capital refers to that part of
the firms capital which is required for financing short- term or current assets such as cash,
marketable securities, debtors & inventories. Funds, thus, invested in current assts keep
revolving fast and are being constantly converted in to cash and this cash flows out again in
exchange for other current assets. Hence, it is also known as revolving or circulating capital or
short term capital.

25

5.2 CONCEPT OF WORKING CAPITAL

There are two concepts of working capital:
1.

Gross working capital

2.

Net working capital

The gross working capital is the capital invested in the total current assets of the enterprises
current assets are those Assets which can convert in to cash within a short period normally one
accounting year. In a narrow sense, the term working capital refers to the net working. Net
working capital is the excess of current assets over current liability, or, say:
NET WORKING CAPITAL = CURRENT ASSETS CURRENT LIABILITIES.
Net working capital can be positive or negative. When the current assets exceeds the current
liabilities are more than the current assets. Current liabilities are those liabilities, which are
intended to be paid in the ordinary course of business within a short period of normally one
accounting year out of the current assts or the income business.
The gross working capital concept is financial or going concern concept whereas net working
capital is an accounting concept of working capital. Both the concepts have their own merits.
The gross concept is sometimes preferred to the concept of working capital for the following
reasons:
1.

It enables the enterprise to provide correct amount of working capital at correct time.

2.

Every management is more interested in total current assets with which it has to operate

then the source from where it is made available.

3.

It take into consideration of the fact every increase in the funds of the enterprise would

increase its working capital.

26

4.

This concept is also useful in determining the rate of return on investments in working

capital. The net working capital concept, however, is also important for following reasons:

5.3 CLASSIFICATION OF WORKING CAPITAL

Working capital may be classified in two ways:

On the basis of concept.

On the basis of time.

On the basis of concept working capital can be classified as gross working capital and net
working capital. On the basis of time, working capital may be classified as:
1. Permanent or fixed working capital.
2. Temporary or variable working capital

5.3.1 PERMANENT OR FIXED WORKING CAPITAL

Permanent or fixed working capital is minimum amount which is required to ensure effective
utilization of fixed facilities and for maintaining the circulation of current assets. Every firm has
to maintain a minimum level of raw material, work- in-process, finished goods and cash balance.
This minimum level of current assts is called permanent or fixed working capital as this part of
working is permanently blocked in current assets. As the business grow the requirements of
working capital also increases due to increase in current assets.

5.3.2 TEMPORARY OR VARIABLE WORKING CAPITAL

27

Temporary or variable working capital is the amount of working capital which is required to
meet the seasonal demands and some special exigencies. Variable working capital can further be
classified as seasonal working capital and special working capital. The capital required to meet
the seasonal need of the enterprise is called seasonal working capital. Special working capital is
that part of working capital which is required to meet special exigencies such as launching of
extensive marketing for conducting research, etc.

5.4

IMPORTANCE OR ADVANTAGE OF ADEQUATE

WORKING CAPITAL

SOLVENCY OF THE BUSINESS: Adequate working capital helps in maintaining the

solvency of the business by providing uninterrupted of production.

Goodwill: Sufficient amount of working capital enables a firm to make prompt payments

and makes and maintain the goodwill.

Easy loans: Adequate working capital leads to high solvency and credit standing can

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

Cash Discounts: Adequate working capital also enables a concern to avail cash discounts

on the purchases and hence reduces cost.

Regular Supply of Raw Material: Sufficient working capital ensures regular supply of raw

material and continuous production.

Regular Payment Of Salaries, Wages And Other Day TO Day Commitments: It leads to the

satisfaction of the employees and raises the morale of its employees, increases their efficiency,
reduces wastage and costs and enhances production and profits.

Exploitation Of Favorable Market Conditions: If a firm is having adequate working capital

then it can exploit the favorable market conditions such as purchasing its requirements in bulk
when the prices are lower and holdings its inventories for higher prices.

28

Ability To Face Crises: A concern can face the situation during the depression.

Quick And Regular Return On Investments: Sufficient working capital enables a concern to

pay quick and regular of dividends to its investors and gains confidence of the investors and can
raise more funds in future.

High Morale: Adequate working capital brings an environment of securities, confidence,

high morale which results in overall efficiency in a business.

5.4.1 DISADVANTAGES OF INADEQUATE WORKING CAPITAL

Every business needs some amounts of working capital. The need for working capital arises due
to the time gap between production and realization of cash from sales. There is an operating
cycle involved in sales and realization of cash. There are time gaps in purchase of raw material
and production; production and sales; and realization of cash.
Thus working capital is needed for the following purposes:

For the purpose of raw material, components and spares.

To pay wages and salaries

To incur day-to-day expenses and overload costs such as office expenses.

To meet the selling costs as packing, advertising, etc.

To provide credit facilities to the customer.

To maintain the inventories of the raw material, work-in-progress, stores and spares and

finished stock.

5.5 EXCESS OR INADEQUATE WORKING CAPITAL

29

Every business concern should have adequate amount of working capital to run its business
operations. It should have neither redundant or excess working capital nor inadequate nor
shortages of working capital. Both excess as well as short working capital positions are bad for
any business. However, it is the inadequate working capital which is more dangerous from the
point of view of the firm.

5.5.1 DISADVANTAGES OF REDUNDANT OR EXCESSIVE WORKING

CAPITAL
1.

Excessive working capital means ideal funds which earn no profit for the firm and business

cannot earn the required rate of return on its investments.

2.

Redundant working capital leads to unnecessary purchasing and accumulation of

inventories.
3.

Excessive working capital implies excessive debtors and defective credit policy which

causes higher incidence of bad debts.

4.

It may reduce the overall efficiency of the business.

5.

If a firm is having excessive working capital then the relations with banks and other

financial institution may not be maintained.

6.

Due to lower rate of return n investments, the values of shares may also fall.

7.

The redundant working capital gives rise to speculative transactions

For studying the need of working capital in a business, one has to study the business under
varying circumstances such as a new concern requires a lot of funds to meet its initial
requirements such as promotion and formation etc. These expenses are called preliminary
30

expenses and are capitalized. The amount needed for working capital depends upon the size of
the company and ambitions of its promoters. Greater the size of the business unit, generally
larger will be the requirements of the working capital.
The requirement of the working capital goes on increasing with the growth and expensing of the
business till it gains maturity. At maturity the amount of working capital required is called
normal working capital.
There are others factors also influence the need of working capital in a business.

5.6

FACTORS DETERMINING THE WORKING CAPITAL

REQUIREMENTS
1. NATURE OF BUSINESS: The requirements of working is very limited in public utility
undertakings such as electricity, water supply and railways because they offer cash sale only and
supply services not products, and no funds are tied up in inventories and receivables. On the
other hand the trading and financial firms requires less investment in fixed assets but have to
invest large amt. of working capital along with fixed investments.
2. SIZE OF THE BUSINESS: Greater the size of the business, greater is the requirement of
working capital.

3. PRODUCTION POLICY: If the policy is to keep production steady by accumulating

inventories it will require higher working capital.

4. LENTH OF PRODUCTION CYCLE: The longer the manufacturing time the raw material
and other supplies have to be carried for a longer in the process with progressive increment of
labor and service costs before the final product is obtained. So working capital is directly
proportional to the length of the manufacturing process.

5. SEASONALS VARIATIONS: Generally, during the busy season, a firm requires larger
working capital than in slack season.

31

6. WORKING CAPITAL CYCLE: The speed with which the working cycle completes one
cycle determines the requirements of working capital. Longer the cycle larger is the requirement
of working capital.

Operating cycle

7.

RATE OF STOCK TURNOVER: There is an inverse co-relationship between the

question of working capital and the velocity or speed with which the sales are affected. A firm
having a high rate of stock turnover will needs lower amt. of working capital as compared to a
firm having a low rate of turnover.

8.

CREDIT POLICY: A concern that purchases its requirements on credit and sales its

product / services on cash requires lesser amt. of working capital and vice-versa.

32

9.

BUSINESS CYCLE: In period of boom, when the business is prosperous, there is need

for larger amt. of working capital due to rise in sales, rise in prices, optimistic expansion of
business, etc. On the contrary in time of depression, the business contracts, sales decline,
difficulties are faced in collection from debtor and the firm may have a large amt. of working
capital.

10. RATE OF GROWTH OF BUSINESS: In faster growing concern, we shall require large
amt. of working capital.

11. EARNING CAPACITY AND DIVIDEND POLICY: Some firms have more earning
capacity than other due to quality of their products, monopoly conditions, etc. Such firms may
generate cash profits from operations and contribute to their working capital. The dividend
policy also affects the requirement of working capital. A firm maintaining a steady high rate of
cash dividend irrespective of its profits needs working capital than the firm that retains larger
part of its profits and does not pay so high rate of cash dividend.

12. PRICE LEVEL CHANGES: Changes in the price level also affect the working capital
requirements. Generally rise in prices leads to increase in working capital.

5.7 MANAGEMENT OF WORKING CAPITAL

Management of working capital is concerned with the problem that arises in attempting to
manage the current assets, current liabilities. The basic goal of working capital management is to
manage the current assets and current liabilities of a firm in such a way that a satisfactory level
of working capital is maintained, i.e. it is neither adequate nor excessive as both the situations
are bad for any firm. There should be no shortage of funds and also no working capital should be
ideal. WORKING CAPITAL MANAGEMENT POLICES of a firm has a great on its probability,
liquidity and structural health of the organization. So working capital management is three
dimensional in nature as

33

1.

It concerned with the formulation of policies with regard to profitability, liquidity and risk.

2.

It is concerned with the decision about the composition and level of current assets.

3.

It is concerned with the decision about the composition and level of current liabilities.

5.8 WORKING CAPITAL ANALYSIS

As we know working capital is the life blood and the centre of a business. Adequate amount of
working capital is very much essential for the smooth running of the business. And the most
important part is the efficient management of working capital in right time. The liquidity position
of the firm is totally effected by the management of working capital. So, a study of changes in
the uses and sources of working capital is necessary to evaluate the efficiency with which the
working capital is employed in a business. This involves the need of working capital analysis.
The analysis of working capital can be conducted through a number of devices, such as:
1.

Ratio analysis.

2.

Fund flow analysis.

3.

Budgeting.

5.8.1

RATIO ANALYSIS

A ratio is a simple arithmetical expression one number to another. The technique of ratio analysis
can be employed for measuring short-term liquidity or working capital position of a firm. The
following ratios can be calculated for these purposes:
1. Current ratio.
2. Quick ratio

34

3. Absolute liquid ratio

4. Inventory turnover.
5. Receivables turnover.
6. Payable turnover ratio.
7. Working capital turnover ratio.
8. Working capital leverage
9. Ratio of current liabilities to tangible net worth.

5.8.2

FUND FLOW ANALYSIS

Fund flow analysis is a technical device designated to the study the source from which additional
funds were derived and the use to which these sources were put. The fund flow analysis consists
of:
a.

Preparing schedule of changes of working capital

b.

Statement of sources and application of funds.

It is an effective management tool to study the changes in financial position (working capital)
business enterprise between beginning and ending of the financial dates.

5.8.3 WORKING CAPITAL BUDGET

A budget is a financial and / or quantitative expression of business plans and polices to be
pursued in the future period time. Working capital budget as a part of the total budge ting process
of a business is prepared estimating future long term and short term working capital needs and
sources to finance them, and then comparing the budgeted figures with actual performance for
calculating the variances, if any, so that corrective actions may be taken in future. He objective
working capital budget is to ensure availability of funds as and needed, and to ensure effective
35

utilization of these resources. The successful implementation of working capital budget involves
the preparing of separate budget for each element of working capital, such as, cash, inventories
and receivables etc.

5.9 ANALYSIS OF SHORT TERM FINANCIAL POSITION OR

TEST OF LIQUIDITY
The short term creditors of a company such as suppliers of goods of credit and commercial
banks short-term loans are primarily interested to know the ability of a firm to meet its
obligations in time. The short term obligations of a firm can be met in time only when it is
having sufficient liquid assets. So to with the confidence of investors, creditors, the smooth
functioning of the firm and the efficient use of fixed assets the liquid position of the firm must be
strong. But a very high degree of liquidity of the firm being tied up in current assets. Therefore,
it is important proper balance in regard to the liquidity of the firm. Two types of ratios can be
calculated for measuring short-term financial position or short-term solvency position of the
firm.
1.

Liquidity ratio.

2.

Current assets movements ratios.

5.9.1 LIQUIDITY RATIOS

Liquidity refers to the ability of a firm to meet its current obligations as and when these become
due. The short-term obligations are met by realizing amounts from current, floating or circulating
assts. The current assets should either be liquid or near about liquidity. These should be
convertible in cash for paying obligations of short-term nature. The sufficiency or insufficiency
of current assets should be assessed by comparing them with short-term liabilities. If current
36

assets can pay off the current liabilities then the liquidity position is satisfactory. On the other
hand, if the current liabilities cannot be met out of the current assets then the liquidity position is
bad. To measure the liquidity of a firm, the following ratios can be calculated:
1.

CURRENT RATIO

2.

QUICK RATIO

3.

ABSOLUTE LIQUID RATIO

1. CURRENT RATIO
Current Ratio, also known as working capital ratio is a measure of general liquidity and its most
widely used to make the analysis of short-term financial position or liquidity of a firm. It is
defined as the relation between current assets and current liabilities. Thus,
CURRENT RATIO = CURRENT ASSETS
CURRENT LIABILITES
The two components of this ratio are:
1)

CURRENT ASSETS

2)

CURRENT LIABILITES

Current assets include cash, marketable securities, bill receivables, sundry debtors, inventories
and work-in-progresses. Current liabilities include outstanding expenses, bill payable, dividend
payable etc. A relatively high current ratio is an indication that the firm is liquid and has the
ability to pay its current obligations in time. On the hand a low current ratio represents that the
liquidity position of the firm is not good and the firm shall not be able to pay its current liabilities
37

in time. A ratio equal or near to the rule of thumb of 2:1 i.e. current assets double the current
liabilities is considered to be satisfactory.

2. QUICK RATIO
Either with current ratio and acid test ratio so as to exclude even receivables from the current
assets and find out the absolute liquid assets. Absolute Liquid Assets includes :
ABSOLUTE LIQUID RATIO =

ABSOLUTE LIQUID ASSETS

CURRENT LIABILITES

5.9.2 CURRENT ASSETS MOVEMENT RATIOS

Funds are invested in various assets in business to make sales and earn profits. The efficiency
with which assets are managed directly affects the volume of sales. The better the management
of assets, large is the amount of sales and profits. Current assets movement ratios measure the
efficiency with which a firm manages its resources. These ratios are called turnover ratios
because they indicate the speed with which assets are converted or turned over into sales.
Depending upon the purpose, a number of turnover ratios can be calculated. These are :
1.

Inventory Turnover Ratio

2.

Debtors Turnover Ratio

3.

Creditors Turnover Ratio

4.

Working Capital Turnover Ratio

The current ratio and quick ratio give misleading results if current assets include high amount of
debtors due to slow credit collections and moreover if the assets include high amount of slow
moving inventories. As both the ratios ignore the movement of current assets, it is important to
calculate the turnover ratio.
38

1. INVENTORY TURNOVER OR STOCK TURNOVER RATIO :

Every firm has to maintain a certain amount of inventory of finished goods so as to meet the
requirements of the business. But the level of inventory should neither be too high nor too low.
Because it is harmful to hold more inventory as some amount of capital is blocked in it and some
cost is involved in it. It will therefore be advisable to dispose the inventory as soon as possible.
INVENTORY TURNOVER RATIO =

COST OF GOOD SOLD

AVERAGE INVENTORY

Inventory turnover ratio measures the speed with which the stock is converted into sales. Usually
a high inventory ratio indicates an efficient management of inventory because more frequently
the stocks are sold ; the lesser amount of money is required to finance the inventory. Where as
low inventory turnover ratio indicates the inefficient management of inventory. A low inventory
turnover implies over investment in inventories, dull business, poor quality of goods, stock
accumulations and slow moving goods and low profits as compared to total investment.
AVERAGE STOCK = OPENING STOCK + CLOSING STOCK
2

2. DEBTORS TURNOVER RATIO :

A concern may sell its goods on cash as well as on credit to increase its sales and a liberal credit
policy may result in tying up substantial funds of a firm in the form of trade debtors. Trade
debtors are expected to be converted into cash within a short period and are included in current
assets. So liquidity position of a concern also depends upon the quality of trade debtors. Two
types of ratio can be calculated to evaluate the quality of debtors.
a)

Debtors Turnover Ratio

39

b)

Average Collection Period

DEBTORS TURNOVER RATIO = TOTAL SALES (CREDIT)

AVERAGE DEBTORS
Debtors velocity indicates the number of times the debtors are turned over during a year.
Generally higher the value of debtors turnover ratio the more efficient is the management of
debtors/sales or more liquid are the debtors. Whereas a low debtors turnover ratio indicates poor
management of debtors/sales and less liquid debtors. This ratio should be compared with ratios
of other firms doing the same business and a trend may be found to make a better interpretation
of the ratio.
AVERAGE DEBTORS= OPENING DEBTOR+CLOSING DEBTOR
2
AVERAGE COLLECTION PERIOD :
Average Collection Period = No. of Working Days
Debtors Turnover Ratio
The average collection period ratio represents the average number of days for which a firm has to
wait before its receivables are converted into cash. It measures the quality of debtors. Generally,
shorter the average collection period the better is the quality of debtors as a short collection
period implies quick payment by debtors and vice-versa.
Average Collection Period = 365 (Net Working Days)
Debtors Turnover Ratio

40

3. WORKING CAPITAL TURNOVER RATIO :

Working capital turnover ratio indicates the velocity of utilization of net working capital. This
ratio indicates the number of times the working capital is turned over in the course of the year.
This ratio measures the efficiency with which the working capital is used by the firm. A higher
ratio indicates efficient utilization of working capital and a low ratio indicates otherwise. But a
very high working capital turnover is not a good situation for any firm.
Working Capital Turnover Ratio =

Cost of Sales
Net Working Capital

Chapter 6
DATA ANALYIS AND INTERPRETATION
6.1

EVALUATION OF CASH MANAGEMENT

To assess the cash management performance this phase is divided as follows:

a) Size of cash and sales
The quantum of cash and sales held by FEHJ during the study period is presented in the table.
The trend percentage is also calculated and shown in the table:
Table no 1
Year

Cash (in Rs crore)

Trend

2010-2011

15.22

100

2011-2012

23.60

55.05

41

Comparison of Actual cash size and Trend

120
100
80
Cash (in Rs crore)

60

Trend

40
20
0
2010-2011

2011-2012

Figure no 1

Conclusion: Size of cash has increased from financial year 2010-11 in year 2011-12 by around
55%. It is a good sign for future prospects of company.

Table no 2

Year

Sales (in Rs crore)

Trend

2010-2011

16.86

100

2011-2012

29.31

73.84

42

Comparison of Actual sales size and Trend

120
100
80
Sales (in Rs crore

60

Trend

40
20
0
2010-2011

2011-2012

Figure no 2

Conclusion: Sales size is increased by around 74% from 2010-11 to 2011-12, which is very
favorable in current market scenario.
b) Liquidity and Adequacy of Cash
One of the most important jobs of the Finance Manager is to maintain sufficient liquidity to
enable the firm to pay off its obligations when they fall due. To test a firms liquidity and
solvency we commonly use current and quick ratios. Traditionally 2:1 current ratio and 1:1 quick
ratio are taken as satisfactory standards for the purpose. The former indicates the extent of the
soundness of the current financial position of a firm and the degree of safety provided to the
creditors, the later signifies the ability of a firm to settle all its current obligations on a particular
date.

Table no 3

43

Year

Current Ratio

2010-2011

0.72

2011-2012

1.66

Comparison of Current Ratio

2
1.5

2010-2011
2011-2012

1
0.5
0

Current Ratio

Conclusion: Increase in current ratio a show that firm are now more capable to repay the
liabilities and so is more attractive to creditors.

Table no 4

Year

Quick Ratio

2010-2011

0.4

2011-2012

1.44

44

Comparison of Quick Ratios

1.6
1.4
1.2
1

2010-2011
2011-2012

0.8
0.6
0.4
0.2
0

Quick Ratio

Figure no 4

Conclusion: Very low Quick ratio in comparison to Current show states that firm doesnt have
very good inventory management, also increasing value of ratio is good for firm.

c) Control of Cash
One of the major objectives of cash management from the stand point of increasing return on
investment is to economize on the cash holding without impairing the overall liquidity
requirements of the firms. This is possible by effecting tighter controls over cash flows. The
Cash to Current Assets ratio and Cash to current liabilities ratio has been applied to assess the
efficiency of cash control.

Table no 5

Year

Cash to Current Assets Ratio

45

2010-2011

0.03

2011-2012

0.044

Comparison of Cash to Current Assets Ratio

0.05
0.04
2010-2011

0.03

2011-2012

0.02
0.01
0

Cash to Current Assets Ratio

Figure no 5
Conclusion: As cash present in current asset is like non-returning asset so its good for the firm to
have low cash to current asset ratio.

Table no 6

Year

Cash to Current Liabilities Ratio

2010-2011

0.02

2011-2012

0.032

46

Comparison of Cash to Current Liabilities Ratio

0.04
0.03
0.03
0.02
0.02
0.01
0.01
0
Cash to Current Liabilities Ratio

Figure no 6

Conclusion: Lower value of this ratio indicates that fewer portions of cash is available to
repay the liabilities of the firm and as this ratio is increasing it is good for the firm.

6.2

EVALUATION OF INVENTORY MANAGEMENT

47

In this section, an attempt has been made to judge the efficiency of inventory management in The
Mind Plus Hospital by examine composition movement and level of inventory held by the firm.
ABC inventory analysis is conducted of the whole inventory currently company is holding.

Table no 8

Year

Inventory Turnover Ratio

2010-2011

10.6

2011-2012

24.28

Inventory Turnover Ratio

25
20
15

2010-2011

Ratio

2011-2012

10
5
0

Inventory Turnover Ratio

Years

Figure 8
Conclusion: Increasing Inventory Turnover Ratio shows the increasing efficiency of firm to

convert its inventory into stock.

48

Table no 9

Year

Inventory holding period (in days)

2010-2011

35

2011-2012

16

Inventory Holding Period

35
30
25
Days

20

2010-2011

15

2011-2012

10
5
0

Inventory Holding Period

Years

Figure 9

Conclusion: The stock held during 2009 is for 77 days as comparison of average at 74 days
for the view of 3 years. As the holding period is decreasing so its good for firm as inventory is
being converted fast and giving returns.
The above two factors increases the cost of production and decreases the profitability, therefore,
these should be taken in to consideration for better productivity and efficiency of operation.
49

6.3 EVALUATION OF RECEIVABLE MANAGEMENT

Evaluation of the performance of the credit department is a difficult task. Yet a successful
receivable management must ensure a comparatively slow growth of receivable as against sales,
as factory collection period and receivable task over minimum bad debts losses and effective use
of capital invested in receivable. To what extent the concern has been successful in their efforts,
can be gauged by their actual performance. Accordingly the following criterion have been
employed to evaluate the performance of receivable management in the company.

Composition of Receivable: It helps in showing the point where receivable are

concentrated most.

Ageing of accounts receivable: To have a detail idea of a quality of accounts receivable

through agency schedule.

Average collection period: To measure the effectiveness of collection efforts.

Relationship between debtors and sales: To know growth rate and also co-efficient of
correlation and determination.

Receivable as percentage of sales ratio: To examine the level of investment is receivable

Average collection period

Average collection period explains how many days of credit, a company is allowing to the
customer, a higher collection period indicates towards a liberal and inefficient credit and
collection performances shorter the collection period the better the credit management and
liquidity of accounts receivable.
Debtors Turnover Ratio
This ratio is calculated the effective utilization of funds involved in receivable. An effective
credit management results in a higher turnover of accounts receivable.
50

Table no 10

Year

Debtors Turnover Ratio

2010-2011

17.51

2011-2012

37.52

Debtors Turnover Ratio

40
35
30
25

2010-2011

Ratio 20

2011-2012

15
10
5
0

Debtors Turnover Ratio

Years

Figure no 10

Conclusion: Increasing value of this ratio shows that firm is now more efficient in getting
back credit amount from debtors.
Table no 11

Year

Average Collection Period (in days)

51

2010-2011

20

2011-2012

10

Average Collection Period

20
Days

15
10
5
0
Average Collection Period
Years

52

Figure no 11

Conclusion: As ratio is increasing so collection period is decreasing which is good for the firm
as it will allow it to use the credit amount in investing activities.

6.4 EVALUATION OF PAYABLES MANAGEMENT

Table no 12

Year

Creditors Turnover Ratio

2010-2011

2.531

2011-2012

4.48

Comparison of Creditor's Turnover Ratio

2010-2011

2011-2012

4
3
2
1
0
Creditors Turnover Ratio

53

Figure no 12

Conclusion: Increasing value of the ratio shows that firm is now paying its debts in lesser
period which is good for the goodwill of firm.
Table no 13

Year

Average Payment Period (in days)

2010-2011

144.17

2011-2012

81.39

54

Comparison of Average Payment Period

160
140
120
100
80
60
40
20
0

2010-2011

2011-2012

Average Payment Period (in days)

Figure no 13

Conclusion: Average Payment period also reducing which means firm is now more able to
repay its debts.

Chapter 7:

55

FINDINGS AND SUGGESTIONS OF THE STUDY

7.1

FINDINGS:

Ratios/Year

2010-2011 2011-2012

Conclusion

Current Ratio

0.72

1.66

Increase in current ratio

shows that firm is now more
capable to repay the
liabilities and so is more
attractive to creditors

Quick Ratio

0.4

1.44

Very low Quick ratio in

comparison to Current show
states that firm doesnt have
very good inventory
management, also increasing
value of ratio is good for
firm

Cash to Current Assets

0.03

0.044

As cash present in current

asset is like non-returning
asset so its good for the firm
to have low cash to current
asset ratio.

Cash to Current
Liabilities

0.02

0.032

Lower value of this ratio

indicates that fewer portions
of cash is available to repay
the liabilities of the firm and
as this ratio is increasing it is
good for the firm.

Inventory Turnover Ratio

3.47

10.37

Increasing Inventory
Turnover Ratio shows the
increasing efficiency of firm
to convert its inventory into
stock

Inventory holding period

105

35

As the holding period is

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decreasing so its good for

firm as inventory is being
converted fast and giving
returns

(in days)

173.27

Increasing value of this ratio

shows that firm is now more
efficient in getting back
credit amount from debtors.

Average
Collection 9.72
Period (in days)

2.10

As ratio is increasing so
collection period is
decreasing which is good for
the firm as it will allow it to
use the credit amount in
investing activities.

Creditors Turnover Ratio 2.531

4.48

Increasing value of the ratio

shows that firm is now
paying its debts in lesser
period which is good for the
goodwill of firm.

Average Payment Period 144.17

(in days)

81.39

Average Payment period

also reducing which means
firm is now more able to
repay its debts.

Debtors Turnover Ratio

37.52

7.2 SUGGESTIONS:

By the analysis of financial statements of hospital quick ratio is not up to the mark. It
indicates that inventory management should be improved further. As it has improved

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from last year the company is moving in right direction but there is further need to
closely manage their inventory.

The liquidity position of the company is quite satisfactory. And this must be improved
further for the purpose of proper utilization of the liquid assets of the company.

The sales of the organization can further be increased by improving the quality through
optimum utilization of companys resources (assets, credit system, etc.) and that in turn
will increase the overall profits of the organization.

The Management must also study the market position and this will guide them to enhance
their sales volume.

7.3 LEARNINGS:

I came to know that Networking is an essential part of the job search process. I gained
valuable contacts and references.

I have been able to relate concepts and theories with practice.

I gained a broader perspective about working capital and its importance for any firm.

I came to know about the method followed by The Mind plus Hospital, Ludhiana for
computation of working capital requirement.

I came to know about the various ratios which help in determining the performance of the
company and help in taking better decision for the future.

Chapter 8:
CONCLUSION
58

While testing the short-term liquidity position, Current Ratio (Current Ratio, Absolute Liquid
ratio, Liquid ratio) and Efficiency Ratios (Inventory turnover ratio, Creditor turnover ratio,
Debtors turnover ratio and Working Capital turnover ratio) are near to the rule of thumb, it can be
said that Hospital has good short-term financial position.
While testing it profitability ratio is good. However, gross profit ratio is fair.
Overall conclusion of the study is that the Financial Position of Hospital is good. The shortterm financial position is good because current ratio, quick ratio and absolute ratio are satisfied.

Chapter 9
BIBLIOGRAPHY
59

1.

BOOKS
BOOK

AUTHOR

Management Accounting and Business Finance

Financial Management

Shashi K. Gupta
I.M.Pandey

2. BROCHURE/BOOKLET/MAGAZINE OF THE MIND PLUS HOSPITAL

3.

SEARCH ENGINES

www.themind.in
www.hfma.org
www.scribd.com/mobile/doc/24070840
www.gurupko.com/admin/bookpdf/150.pdf
www.businessstandard.com
www.24/7.com

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