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DEFINITIONS
OBJECTIVE OF FINANCE
Traditionally, the basic Objectives of financial management are the
maintenance of liquid assets and maximization of the Profitability of the
firm.
Maintenance of liquid assets means that the firm has adequate cash in
hand to meet its obligations at all times. The firm’s investment and financing
decisions are unavoidable and continuous. In order to make them rationally,
the firm must have a goal. It is generally agreed in theory that the financial
goal of the firm should be the maximization of owners’ economic welfare.
Profit Maximization
• Cost of capital
• Ratio Analysis.
1. Controller or Comptroller
2. Treasurer.
Board of
Directors
President
Controller Treasurer
While the treasurer is mainly concerned with managing the firm’s funds,
his duties include the following;
Functions of Controller
Function of Treasurer
Finance Function:-
➢ Investment Decision:-
➢ Dividend Decision:-
✔ Distribute all profit. Or retain them of distribute a portion & retain the
balance.
✔ Dividend stability bonus shares and cash dividends.
✔ Optimum dividend policy.
➢ Financing Decision:-
➢ Liquidity Decision:-
Cost of Capital
Cash flow ability of the company
Flexibility
In Power Build Ltd. Finance department keeps the monthly records of:
Finance Controller
INTRODUCTION:-
Working Capital:-
Working Capital is the Capital which necessary for the smooth working
of the organization. This capital is required for the short term uses and for
day to day expenses.
○ Fixed Capital
○ Working Capital
Every business needs funds for two purposes for its establishment
And to carry out its day-to-day operations. Long term funds are required to
create production facilities through purchase of fixed assets such as plant and
machinery, land, building, furniture, etc. Investments in these assets
represent that part of firm’s capital, which is blocked on permanent of 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.
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.
Net working capital also covers the questions of judicious mix of long-
term and short-term funds for financing. The Gross working capital concept
is financial or going concern concept where as net working capital is an
accounting concept of working capital, both the concepts have their own
merits.
After computing the period of one operating cycle, the total number of
operating cycles that can be computed during a year can be computed by
dividing 365 days with number of operating days in a cycle. The total
expenditure in the year when year when divided by the number of operating
cycles in a year will give the average amount of the working capital
requirement.
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.
It has already been indicated earlier that the term “Working Capital
(net)” generally stands for excess of current assets and current liabilities.
Working capital management therefore refers to the administration of both
current assets and current liabilities. In other words, Working Capital
Management is concerned with the problems that arise in attempting to
manage the current assets, the current liabilities and the interrelationship that
exist between them.
2. Sundry Creditors:-
The lag in payment to suppliers of raw-materials, goods etc.
And the likely credit purchases to be made during the period will
Help in estimating the amount of creditors.
3. Outstanding Expenses:-
The time lag in payment of wages and other expenses will
Help in estimating the amount of creditors.
There are three basic approaches for determining the working capital
financing mix.
*MANAGEMENT OF CASH
Meaning of cash
1. Transaction motive
2. Precautionary motive
A firm keeps cash balance to meet unexpected cash needs arising out of
unexpected contingencies such as floods, strikes, presentment of bills for
payment earlier than the expected date, unexpected slowing down of
collection of accounts receivable, sharp increase in prices of raw materials,
etc. The more is the possibility of such contingencies more is the cash kept
by the firm for meeting them.
3. Speculative motive
4. Compensation motive
*MANAGEMENT OF INVENTORIES
Inventories are good held for eventual sale by a firm. Inventories are
thus one of the major elements, which help the firm in obtaining the desired
level of sales.
Kinds of inventories
These are goods, which have not yet been committed to production in a
manufacturing firm. They may consist of basic raw materials or finished
components.
(ii) Work-in-progress:
These are completed products awaiting sale. They are the final output
of the production process in a manufacturing firm. In case of wholesalers and
retailers, they are generally referred to as merchandise inventory.
The levels of the above three kinds of inventories differ depending upon the
nature of the business.
materials, finished goods, etc. thus inventories provide cushion so that the
purchasing, production and sales functions can proceed at optimum speed.
This may due to holding a product for too long a period or improper
storage conditions.
(iii) Obsolescence
This includes the variable cost associated with placing an order for the
goods. The fewer the orders, the lower will be the ordering costs for the firm.
This includes the expenses for storing the goods. It comprises storage
costs, insurance costs, spoilage costs, cost of funds tied up in inventories, etc.
Management of inventory
The former cost may be referred as the “cost of acquiring” while the
latter as the “cost of holding” inventory. The cost of acquiring decreases
while the cost of holding increases with every increase in the quantity of
purchase lot. A balance is, therefore, struck between the two opposing factors
and the economic ordering quantity is determined at a level for which
aggregate of two costs is the minimum.
Formula:
Q= 2U x P
Where,
Q = Economic Ordering Quantity
U = Quantity (units) purchased in a year (month)
P = Cost of placing an order
S = Annual (monthly) cost of storage of one unit.
The set up cost is of the nature of fixed cost and is to be incurred at the time
of commencement of each production run. Larger the size of the production
run, lower will be the set-up cost per unit.
However, the carrying cost will increase with increase in the size of the
production run.
Thus, there is an inverse relationship between the set-up cost and
inventory carrying cost. The optimum production size is at that level where
the total of the set-up cost and the inventory carrying cost is the minimum.
E = 2U x P
S
Where, E = Optimum production quantity, U = Annual (monthly) output
P = Set-up cost for each production run
S = Cost of carrying inventory per annum (per month)
LITERATURE REVIEW
1. Raw-Materials
2. Work-in-Process.
3. Finished Goods.
Meaning of Research:-
Research in Common parlance refers to a search for knowledge. One
can also define research as a scientific and systematic search for pertinent
information on a specific investigation. The advanced learner dictionary of
current English lays down the meaning of research as “a careful investigation
or inquiry especially through search for new facts in any branch of
knowledge.”
Types of Research
Significance of Research
Research provides the basis for nearly all government policies in our
economic system. Research has its special significance in solving various
operational and planning problems of business and industry. Operation
research and market research, along with motivational research, are
considered crucial and their results assist, in more than one way, in taking
business decisions.
➢ To philosophers and thinkers, research may mean the outlets for new
ideas and insights.
Research Methodology
Research Methodology is a way to systematically solve the research
problems. It may be understood as a science of studying how research is
done scientifically. In it we study the various steps that are generally adopted
by a researcher in studying his research problems along with the logic behind
them. It is necessary for the researcher to know not only how the research
methods/ techniques but also the methodology.
Whether may be the types of research works and studies, one thing that
is important is that they all meet on the common ground of scientific method
employed by them? One expects scientific research to satisfy the following
criteria;
Objectives of Research
➢ Primary Objectives:
➢ Secondary Objectives:
Sources of Data
1. Primary Data
The Primary Data during the project was obtained form the
company officials. The information has been collected by way of
interactions with employees in the organization
2. Secondary Data
The secondary data has been collected form the annual reports
of the company form 2005-06 to 2009-10. Secondary data has also
been collected from Power Build Limited’s website and other records
maintained in the company.
In India, the Gear manufacturers are very well aware of the world
Developments and technology competence in Indian industry is quite
comparable to other advanced countries within the restraints of capital
investment. Some of the companies are having foreign collaboration for the
manufacture of gears.
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Gears are very old machinery type, first time over 3000 years ago
primitive gears manufacturers used to transmit rotary motion. Slowly
gradually this is part of every machine for managing motor speed and
transmission generation. Now days consumer electronics have driven plastic
gearing, plastic gears are lubricant free, reliable and quiet operation.
It is the automotive sector that forms the single largest group when it
comes to gear applications. In fact the automotive sector is almost three times
the size of other three sectors added together. By ranking, industrial gears is
second following automotive sector.
Already the industrial sectors are changing at a rate than one can
imagine at the fore front of such a change is the new state-of-the art
technology. The coming two decades would be very vital for the Gear
Industry. It will impose serious challenges along with tremendous
opportunities. The need of the hour is innovative solutions. Expectations of
the customer would be driven by improved performance, cheaper cost, light
weight, better efficiency, minimal noise, and rapid development. Unless the
gear manufacturers do not respond swiftly to such challenges, they would be
in no time be sidelined.
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REPORT ON WORKING CAPITAL MANAGEMENT
The following points highlight the major trends and drivers of the Gear
Industry;
Market Trends
Transportation markets
Need for skilled human resources
Product Trends
Time compression and Supply chain integration
Environmental Impacts
Global Pressure
Collaborations
The Gear Industry is a huge, competitive market that has shown steady
growth rate of around 4% p.a worldwide sales of Gears are pegged at U.S
$93 Billion annually.
Gears are Power transmission elements. It is the Gears that decide the
torque, speed and direction of rotation of all the driven machine elements.
Broadly speaking, Gear types may be grouped into five major categories.
They are Spur, Helical, Bevel, Hypoid, and Worm. A lot of intricacies are
there in the different types of gears. Actually The choice of gear type is not a
very easy process. It is dependent on a number of considerations. Factors that
go into it are physical space and shaft arrangement, gear ratio, load, accuracy
and quality level.
TECHNOLOGY GAP
Capital Equipments
• Good quality bearings and oil seals for industrial gear box
applications are not available in the country.
R & D FACILITIES
➢ Dynamic analysis of the gear box design for the matching shafts,
bearings and housings.
INTERNATIONAL SCENE
The gear industry is over 30 years old. The manufacturers are well
equipped, with modern gear cutting facilities as well as testing equipments
imported from world renowned manufacturers e.g. Gleason, Fellow, Magg,
Oerlikon, Reishauer, Hurth, Klingelnberg, Pfauter, Liebherr etc, The industry
has also latest inbuilt facilities to manufacture gear cutting tools for captive
requirement as well as for outside sale. CAD is employed for the design of
gear cutting tools.
➢ Quality improvement
INTRODUCTION
Power Build Limited was a part of Elecon group of Industries and use
established in 1972. It manufactures the wide range of General Motors and
Truck Loaders. It is one of the pioneers and first manufacture of Automobile
It also manufactures the product like Gear Motors, Truck loaders and
automatic bag feeder machine. It is the first Indian Company to introduce
“Electric Weighting and Metal Detecting System”.
HISTORY OF ORGANISATION
Power Build Ltd. was registered under Indian Companies Act, 1956
and was incorporated on 15/4/1972, 3 decades ago. PBL manufactures
mechanical power transmission equipments and mechanized material
handling equipment like Gear motors, Truck loaders, Metal detector belt
weighed, etc. using the latest technology under the supervision of
experienced engineers with the use of most modern Industry.
The company is well accepted in the market during the year company
entered in to a foreign collaboration with Dr. Hans Bolkes gmbhunel co-op.
of the West Germany for manufacturing of the Electronic Belt, Weigh
Feeder, Metal Detector etc. in 1986, the company collaboration with the
Ramsty Engle Controls Pvt. Australia.
PBL has workshop area exceeding 10000 sq. meters. Equipped with the
latest mazak and excel CNC and NC Machines, tools, quality control and
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REPORT ON WORKING CAPITAL MANAGEMENT
It has also join hands with M/S. Boublen of France for manufacturing
magnetic equipment. The company entered in to a technical Agreement with
Roaol Lenuir, France.
Power Build has covered majority of the core sectors through its
supplier of highly sophisticated equipment becoming ample testimony of the
symbolic mark of Power Build’s unbeatable technology. Nation wide sales
and services at short notice. PBL is registered with registrar of the Gujarat,
Ahmadabad. This is a representing affine blend of specialized skills & high
technology serving almost all industries.
GENERAL INFORMATION
Company Profile:-
Power Build Ltd., Company has large clientele including NXL, Bhel
etc… and many other bear a testimony of PBL quality under why more and
more user insist on Power Build Products.
Power Build Ltd., Company received the order from their customer per
as their order company received the big order. This order depends for the
customer.
The Raw material is needed and collected some of the raw material or
components used in the company itself and those which are not product are
been purchase from outside. The production process starts and in the
workshop. After the process is over testing of that the buyer is carrying out
manufacturing goods of customers can respect the goods are painted to make
it good looking. Then it is packed and the customers’ executives the goods as
per the requirement.
Bring high growth in our business and an over increasing market share.
Bring high growth in our business and an ever increasing market share.
Continuously upgrade our knowledge with multidimensional skills.
Always remain environment - friendly.
PBL has a role towards the success of Vision and Mission of PBL and
draws inspiration and energy from the opportunity received through active
participation.
The high – spirited PBL family has the dynamism and expertise to
innovate and improve products suiting to the ever-changing global needs.
Manufacturing Range:
Geared Motors & reducers are available in 635, 805 & 1005 models with
rations ranging from 5:1 to 70:1
Helical gear wheels and pinions with internal as well as external splines
(both straight & involutes) can be offered. Hardened and ground spur/helical
gears manufactured by PBL are used in printing machines, plastic extrusion
machines, textile machines, air compressors, packing machines and gear
pumps.
HELICAL & SPUR GEAR PINIONS
Various hardened & ground spur & helical gears manufactured by PBL
used in printing machines, plastic extrusion machines, textile machines
and helical gear reducers.
Hardened & ground spur & Helical gears manufactured by PBL, used
in Gear compressor, packing machine & gear pumps.
110729139 + 76764336
= 2
190493475
= 2
= 95426737.50
Consumption of Raw-Materials
= 365
30329276
= 365
= 83094
452191069
= 365
PATEL DHRUVAL D Page 104
REPORT ON WORKING CAPITAL MANAGEMENT
= 1238839.6
14027500 + 12802867
= 2
26830367
= 2
= 13415183.50
490504189
Closing Balance of F.G = 12802867
469701322
463701322
= 365
= 1270414.58
9. AVERAGE DEBTORS ::
Credit Sales
= 365
842469422
= 365
= 2308135
11.AVERAGE CREDITORS ::
214627812 + 167241721
= 2
381869533
= 2
= 190934766.50
Total Purchase
= 365
379889893
= 365 = 1040794
95246738.50
= 83099
= 1146.25
16176833
= 1238879.60
= 13.05
(C)FINISHED GOOD
13415183.50
= 1276414.58
= 10.55
(D)DEBTORS COLLECTION PERIOD ::
Average Debtors
= Average Credit Sales per Day
259867996.50
= 230815
= 112.58
Average Creditor
= Average Credit Purchase per Day
190934766.50
= 1040794
= 183.45
= 1098.98
Balance
INTERPRETATION:-
The trend percentage of current assets shows that there was an increase
in the year 2007-08 over 2009-10. This increase occurs due to increase in the
debtors, inventory, loan and Advances. The increase in the indices is mainly
attributable to substantial increases in Loan and Advances in the gross
working capital of the concern.
against
order
Other 16,752,125 18,936,778 21,816,066 19,559,396 17,334,921
Creditors
Provisions 29,835,347 31,633,975 60,737,481 98,257,346 119,900,631
INTERPRETATION::
Years
INTERPRETATION::
In the figure 2009-10’s working capital is more than the previous year
(2008-09). The differences of working capital turnover ratio’s is 5.17. Thus
we are show that the working capital turnover ratio is increase in 2009-10.
Current Assets
Current Ratio = Current Liabilities
Years
INTERPRETATION::
(3)LIQUID RATIO ::
Liquid Assets
Liquid Ratio = Current Liabilities
Years
INTERPRETATION::
Current Assets turn over ratio shows the firm’s ability in generation
sales from all financial sources committed to current assets. This ratio
expresses the relationships between Current Assets and net Sales or Cost of
good sold.
Sales
Current Assets T/O Ratio = Current Assets
Years
INTERPRETATION::
The Current Assets Turn over ratio measures the efficiency of a firm in
managing and utilizing its assets. The higher the turn over the more efficient
is the organization. The current assets turnover of PBL ranged from 1 times
to 2 times. The current assets turnover ratio reflects the efficiency and
capacity of working capital.
Years
INTERPRETATION:
Years
INTERPRETATION:
Years
INTERPRETATION:
turned over during a year. In the year of 2008-09 ratio is 3.59 is highest and
then 2009-10 ratio is 3.24 is lower then 2008-09.
Debtors
Receivable Turn over Ratio = Sales X 360
Years
INTERPRETATION:
bank
(Short
term
Deposited)
Total 13,140,020 14,923,294 6,843,149 12,987,384 151,249,224
CASH RATIO:
Years
INTERPRETATION:
Company had only issued equity for the long- term. So it is not
having any types of fixed, burden of the payment of interest charges.
Company has taken a loan for their Working Capital need which
shows the Financial Leverages.
CONCLUSION
The projects analysis indicates that PBL is managing the all resources
in better way. The trend of working capital, current assets and current
liabilities are in favorable slops. The turnover of the Inventory and Debtors
has improved over years, all these shows the goods or effective Working
PATEL DHRUVAL D Page 136
REPORT ON WORKING CAPITAL MANAGEMENT
Bibliography
Websites:-
www.pbl.co.in
www.netguru.com
www.scribd.com
www.nse.com
www.bse.com
www.investopedia.com
www.tutor24.net
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