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WORKING CAPITAL MANAGEMENT

A SUMMER TRAINING REPORT Submitted by

AKASH GOYAL

In partial fulfillment for the award of the degree Of

MASTER IN BUSINESS ADMINISTRATION

RIMT-INSTITUTE OF MANGEMENT AND COMPUTER TECHNOLOGY

PUNJAB TECHNICAL UNIVERSITY, JALANDHAR, PUNJAB


2011-12

CERTIFICATE OF THE COMPANY

To Whom It May Concern

This is to certify that the project report title WORKING CAPITAL MANGEMENT carried out by AKASH GOYAL has been accomplished under the guidance and supervision of faculty guide Ms. PRABHDEEP. This project is being submitted by him in the partial fulfillment of requirement for the award of the Master in business administration from RIMT-IMCT affiliated to Punjab Technical University Jalandhar.

This is an original work and has not been submitted by him anywhere else for the award of any degree. All source of the information and help have been duty mentioned and acknowledged.

Signature of Guide

ACKNOWLEDGEMENT

We have prepared this study paper for the Working Capital Management A Study of Bunge India Pvt.Ltd.. We have derived the contents and approach of this study paper through discussions with company executives and internet as well as with the help of various Books, Magazines and Newspapers etc.

We would like to give our sincere thanks to a host of friends and the teachers who, through their guidance, enthusiasm and couselling helped us enormously As we think there will be always need for improvement. Apart from this, we hope this study would stimulate the need of thinking and discussion on the topics like this one.

PREFACE

Its a thing of massive gratification for me to present this project report on the subject of WORKING CAPITAL MANGEMENT at Bunge Company completed in an unrivaled organization Bunge India Pvt.Ltd.. Mr. Parveen Tarika,General Manager of Finance Department , Bunge India Pvt.Ltd. , for motivating and guiding me to complete the project? This project is done in the field of Finance The report gives a true picture of the practical activities done by whole group with in the jurisdiction. The report incorporates the Financial study about the Financial Statements i.e. how the company blends this set of controllable tactical financial tools to produce the response it want in the customized manner and to make accounting and financial processes more user friendly so that better analysis can be made to control cost and increase Marginal revenue of the company.

INDEX No.
1. 2. 3.

Particulars
Executive Summary Objective of Project Company Profile Introduction History Core Values Strategy Health Zone Bunge Products Business Overview Locations Overview Performance Graph News

Page no.
3 5 6-34 7 8 10 13 14 17 21 26 33 34 35-41 36 37 38 40 41 42-46 43 44 45 46 47-56 57

4.

Theoretical Background Introduction of Working Capital management Need of Working Capital management Gross & Net Working Capital Types Determinants

5.

Research Methodology Introduction Types Objectives Scope & Limitation Data Analysis & Evaluation of Working Capital Bibliography

6. 7.

EXECUTIVE SUMMARY

Company being established as BUNGE FOUNDS BUNGE & CO. IN AMSTERDAM in 1818, The Netherlands, as an import/export trading firm, Bunge will maintain a prominent role in world grain markets. My Project is the study of Working Capital Management. The study was conducted at the office of Bunge India Pvt. Ltd., Patiala - Chandigarh Road, Rajpura Punjab - 140 401. The project was of 2 months duration. During the project I interviewed the executives & staff to collect the data, & also made use of company records & annual reports. The data collected were then compiled, tabulated and analyzed.

Working Capital Management is a very important facet of financial management due to: Investments in current assets represent a substantial portion of total investment. Investment in current assets & the level of current liabilities have to be geared quickly to change sales. Some the points to be studied under this topic are:

How much cash should a firm hold? What should be the firms credit policy? How to & when to pay the creditors of the firm? How much to invest in inventories?

CHAPTER 1 INTRODUCTION

INTODUCTION

The introduction of company can be described in two parts: Company Details Company Overview

Company Details: Company Name: Bunge India Pvt.Ltd. (Agribusiness and Food Company) Address: Patiala - Chandigarh Road, Rajpura Punjab - 140 401. 01762-232890, 01762-232897 www.bungeindia.com and www.bunge.com

Telephone: Fax: Web:

Company Overview:
Bunge is a leading agribusiness and food company with integrated operations that circle the globe, stretching from the farm field to the retail shelf.

1-originating oilseeds and grains from the world's primary growing regions and transporting them to customers worldwide; 2-crushing oilseeds to make meal for the livestock industry and oil for the food 3-processing, food service and biofuel industries; 4-producing bottled oils, mayonnaise, margarines and other food products for consumers; 5-crushing sugarcane to make sugar, ethanol and electricity; 6-milling wheat and corn for food processors, bakeries, brewers and other commercial customers; and 7-selling fertilizer to farmers.

HISTORY

BUNGE LIMITED HISTORY Company being established as BUNGE FOUNDS BUNGE & CO. IN AMSTERDAM in 1818, The Netherlands, as an import/export trading firm, Bunge will maintain a prominent role in world grain markets. In 1935 , Bunge builds it first major grain handling facility in Midway, MN, and becomes an originator of grain in NORTH AMERICA. In 1967 , Bunge expands at Destrehan by building its first US Soybean processing plant. In 2007, Bunge purchases its first sugarcane mill in brazil and forms a fertilizer joint venture in Morocco.

BUNGE INDIA LIMITED HISTORY

IN 23 June 2003, US-based agribusiness and food company Bunge has announced that it has signed a memorandum of understanding with Hindustan Lever to acquire the Indian consumer goods firms edible oils and fats businesses based in Bangalore, India. In 22 Sep. 2003, US agribusiness giant Bunge has announced that its Indian subsidiary, Gee Pee Ceval Proteins and Investment, has acquired the India-based assets of Prestige Foods. In 15 Oct. 2004, US agribusiness Bunge is to invest between US$100m and $200m in India over the next five years, its Indian subsidiary has said. In 21 Dec. 2011, US agribusiness giant Bunge is set to buy the edible oils and fats business of India's Amrit Banaspati.

CORE VALUES

Bunge's five core values reflect who workers are and what they do. They ensure the effectiveness of integrated and decentralized approach and help us achieve purpose of improving the global agribusiness and food chain.

Integrity Honesty and fairness guide every action.

Teamwork value individual excellence and work as a team for the benefit of Bunge and stakeholders.

Citizenship contribute to the development of individuals and the social and economic fabric of communities, and act as stewards of the environment.

Entrepreneurship prize individual initiative to meet opportunities and deliver results.

Openness and Trust


open to other ideas and opinions, and trust its colleagues.

STRATEGY

Company strategy capitalizes on the fundamentals that drive its industry. It is strengthening its core businesses in key origin and destination markets, expanding into adjacent growth businesses where it can leverage its strengths, and focusingon operational excellence

HEALTH & NUTRITION


BALANCED DIET BODY MASS INDEX (BMI) TYPES OF FATS

HEALTHY EATING TIPS

BALANCED DIET A balanced diet contains carbohydrates, proteins, fat, vitamins, mineral salts and fibre in the right proportions. A diet that lacks in one or the other of these ingredients creates imbalances in the body. Sometimes these imbalances can create serious ailments. Carbohydrates Proteins Fats Vitamins Minerals Fibre The bottom line on oil Clearly theres good and bad. Therefore, its best to eat cautiously and strike a balance. According to the National Institute of Nutrition, Hyderabad, the upper limit of fat in the diet should not exceed 25-30% of your calories.

BODY MASS INDEX (BMI) Body Mass Index (BMI) is a formula used to express body weight in relation to height. BMI equals weight in kilograms divided by height in meters squared.

Calculate your BMI


Your Height Your Weight (In Centimetres) = BMI (In Kilograms)

A body mass index of less than 25 is considered normal and one of over 30 implies obesity. Underweight = <18.5 Normal weight = 18.5-24.9 Overweight = 25-29.9 Obesity = BMI of 30 or greater

TYPES OF FATS
What do we understand by fat and what are the various types commonly known? Fats & Oils Fats and oils belong to a group of substances called lipids, and have common molecular structure with the same benefits or disadvantages. The only difference is that fats are solid at room temperature and oils are liquid.

Depending on the changing bonds they are categorised as Saturated Fats Mono Unsaturated Fats Unsaturated Fats Trans Fats Polyunsaturated Fats

HEALTHY EATING TIPS


AVOID EXCESSIVE REUSE OF OILS When oils are reused again and again several times they become carcinogenic. This simply means bidding farewell to those potato and banana chips which we generally pick up from the corner.

BUNGE PRODUCTS

LIFESTYLE PRODUCTS

CONSUMER PRODUCTS

PREMIUM PRODUCTS

GINNI NUTRI DELIGHT NUGGETS

MERRILITE

MERRIGOLD TABLE MARGARINE

REFINED PALM OIL

GAGAN VANASPATI

GAGAN GOLD VANASPATI

REFINED SOYABEAN OIL

BANSARI PURE MUSTARD OIL

GINNI PLUS REFINED OIL

REFINED GROUNDNUT OIL

KACHI GHANI MUSTARD OIL

REFINED RICEBRAN OIL

GINNI GOLD REFINED SUNFLOWER OIL

REFINED COTTONSEED OIL

Business Overview

Bunge is a leading global agribusiness and food company with operations on six continents and a diverse portfolio of products ranging from bottled vegetable oils to electricity. Bunge sells products and services at numerous points along the agribusiness and food production chain, from farm to retail shelf. Each activity complements the next, creating a logical progression in which we transform bulk commodities into a host of value-added products, while creating multifaceted, mutually beneficial relationships with customers. Integration enables us to supply global needs efficiently and create value in a variety of market conditions. Our decentralized structure enables us to stay close to local markets, where we can react quickly to customer needs. Bunge operates in four business segments: > agribusiness, > sugar & bioenergy, > food & ingredients, and > fertilizer

AgribusinessConnect farmers to the global marketplace and supply end customers, from nations to small livestock producers, with high-quality commodity products derived from a variety of crops. In agribusiness, the world is Bunge's market - seven billion people and counting. Bunge operate a global network of facilities, including grain elevators, oilseed processing plants and port terminals that are located in the world's largest agricultural production regions, in areas of fast-growing food consumption and close to major transportation systems. These industrial facilities are complemented by marketing and trading offices, as well as joint venture operations, on six continents.

Bunge's agribusiness operations:


purchase grains and oilseeds from farmers store, transport and sell raw commodities to end customers in domestic and export markets process oilseeds into protein meals and crude vegetable oil for sale to livestock producers, feedmillers, food processors, the biofuels industry and other customers provide financial services, risk management and logistics services to end customers execute risk management strategies for Bunge

Sugar & BioenergyBunge is a leading, integrated producer of sugar and ethanol in Brazil, and a leading trader and merchandiser of sugar worldwide. Bunge entered the global sugar market as a trader in 2006, and has since built a strong position as a producer and marketer of sugar and ethanol. The mills are located close to main domestic markets in Brazil and have access to export logistics systems, positioning Bunge to capture increasing demand for sugar and sugarcane ethanol in Brazil and beyond. Demand for ethanol in Brazil is rising, with an expected 18% per year increase in the country's flex fuel auto fleet until 2015. Flex fuel vehicles are those that run on gasoline, or a combination of gasoline and ethanol, and have proliferated in Brazil since they were introduced in 2003. Today, nine out of 10 vehicles sold in the country are flex fuel.

Bunge also produces oilseed-based biodiesel at joint venture facilities in the Americas and Europe, and has investments in a small number of corn ethanol plants in the United States.

Food & IngredientsThroughout the world, Bunge's products are ingredients in some of the most recognized brands, restaurant meals and private label products. And its retail products are helping consumers cook and eat better. Food & Ingredients is comprised of two businesses - edible oils and milling - with operations in North and South America, Europe and Asia. The edible oils business produces specialty oils and fats, margarines, mayonnaise, shortenings and whipped toppings for sale in foodservice, food processor and retail markets. The milling business creates milled wheat, corn and rice products for food processors, bakeries, brewers, snack food producers and other customers. Integration is very important to its food products business. By sourcing oilseeds and grains from its agribusiness unit, and by utilizing the same logistics systems, we improve efficiency. So is innovation. At R&D centers in the Americas, Europe and India, its research and development teams work to harness further nutritional value from oilseeds and grains. In recent years they have developed a portfolio of innovative products, include low trans fat and fortified oils that improve nutrition and create foods that satisfy changing consumer tastes.

FertilizerFertilizer is a strategic part of its business, with strong commercial and logistics linkages to its agribusiness operations. Bunge is a leading blender and distributor of crop fertilizers to farmers in South America and a distributor in North America. Bunge sells blended NPK (nitrogen, phosphate and potassium) fertilizer formulas, mixed nutrients and liquid fertilizer products to farmers and distributors in North and South America. In Brazil, bunge operate blending and distribution facilities, as well as a port terminal. In Argentina, bunge have phosphate and nitrogen production, as well as blending and distribution operations. In the U.S., bunge is developing a

wholesale business that leverages its established agribusiness network and logistics expertise. In Morocco, one of the world's largest suppliers of phosphates, bunge participate in a joint venture that produces intermediate phosphate products for export to South America.

Locations: Regions Overview

Through its hundred of facilities and thousand of dedicated employees, Bunge is an integral part of agribusiness and food markets on six continents. Bunge serves local markets in a host of different countries and facilitates international trade by linking areas of agricultural production and consumption.

Locations: North AmericaNorth America is a major agricultural exporter and a significant market for agricultural commodities, food, fertilizer and biofuels products. In North America, Bunge has agribusiness, food & ingredients and fertilizer operations, as well as investments in bioenergy. Bunge is a major originator and exporter of oilseeds, grains and related byproducts like soybean meal and oil. It also supply some of the region's

best-known food processors and food service companies with oils, shortenings, milled corn and rice products, and operate a wholesale fertilizer distribution business. If you have eaten at a restaurant or bought a box of cereal in North America, you have probably enjoyed one of our products.

Locations: South AmericaDue to its abundant land, rain and skilled agricultural sector, south America is fast becoming the worlds leading agricultural exporters.

In South America, Bunge operates the full spectrum of its businesses: agribusiness, sugar & bioenergy, food & ingredients and fertilizer Bunge supply fertilizer to farmers, protein meal to livestock producers, edible oils, sugar, wheat and rice products to food processors and food service companies, ethanol and biodiesel to millions of drivers, branded retail food products to consumers and electricity, generated at its sugarcane mills, to thousands of households..

Locations: EuropeEurope is a major importer or consumer oilseeds and related products. It is also a large or growing market for commercial and consumer food products, as well as biofuels. Eastern Europe is one of the worlds most significant and fastest-growing exporters of wheat and other grains. Bunge has built a substantial business in Europe in the past decade. Today our agribusiness and food & ingredients operations stretch from Portugal to Russia, and Bulgaria to Finland. Bunge produces a variety of protein meal and edible oil products at soybean, rapeseed and sunseed processing plants throughout Europe. Our bottled oil and margarine brands can be found on retail shelves in Germany, Poland, Hungary, Romania, Finland, Russia, Ukraine and other countries. We also export grains from the Black Sea region.

Locations: Asia PacificWith growing economies and expanding per capita income, Asia is a driver of global growth in demand for agricultural commodities and food products. Bunge is a major importer of commodities to Asia and trusted partner to customers and communities on the ground. It is committed to being a productive part of the dialogue on food security in the region and to providing solutions for customers.

Bunge supplies grains, oilseeds and related products to Asia via dedicated supply chains that start at its country elevators in North and South America. It also operate processing facilities in China, Vietnam and India that supply local markets with high-quality products, and export sugar and grains from the region. The opening of its state-of-the-art export grain terminal facility in the Pacific Northwest in the U.S. in 2011 further enhance its ability to connect North American farmers with its Asian customers.

Locations: Africa & Middle EastThe middle east and north Africa are two of the fatest growing regions for grain imports in the world and Sub-Sahara Africa presents unique opportunities for growth in agricultural production, exports and domestic consumption. Bunge has long been a leading supplier of grains, edible oils and other products to the Middle East and North Africa. In 2011 we signed an agreement to form a joint venture in South Africa, which will be our first entry into Sub-Saharan Africa's grain and oilseed trade.

Locations: CaribbeanThe Caribbean is a small but growing market for agricultural commodities. Bunge Latin America serves the Caribbean from shipping points in North and South America, offering customers access to commodities like vegetable oils, corn, wheat, soybeans and soybean meal year-round.

CAREERS

CAREERS: APPROACHBunge approach set us apart. In the rapidly changing marketplace, its dual prospective- decentralized and integrated is a tremendous advantage. Bunges operating model is based on integrated but decentralized operations and a strong culture built on shared values and a common purpose. Its approach enables us to interpret a global market with global vision; to meet opportunity where and when it arises with agility and responsiveness; and provide superior products and service to farmers, customers and consumers around the world. Maintaining integrated but decentralized operations means striking a balance between the efficiency of a global corporation and the speed of a local business, between the value of a world perspective and the insights and customer relationships born of local knowledge and experience. That is why bunge emphasize our purpose enhancing lives by improving the global agribusiness and food production chain and its values. Its purpose ensures it is aligned and moving in a common direction. Its values ensure the communication and trust necessary for a network of businesses to operate with latitude and individual initiative and leadership, while each contributing to the same goal.

Careers: Career PossibilitiesThere are many career paths at Bunge and many ways to succeed. If you share Bunge's core values, then there is likely a career path for you within our global operations.

Bunge integrated operations require the expertise and skill of thousands of people to run hundreds of industrial facilities; coordinate a global logistics network; manage risk across a host of products and markets; provide financial services to customers; develop innovative food ingredients; build consumer brands; market fertilizer and commodities; and ensure the world-class IT, HR, finance and strategy functions to keep it all running smoothly.

Specific career opportunities vary by region and we encourage you to visit the websites of our regional operations, which can be found in the Locations section of this site, to learn about general opportunities, review current job postings or submit your resume. Additional information about our global commodity risk management program can be found at the link to the right.

Careers: Professional DevelopmentBunge provides employees with opportunities for learning and growth to help them gain the professional skills and leadership qualities necessary to achieve their full potential. Bunge approach presents enormous opportunities for it as individuals and a competitive advantage for it as a team. Bunge strongly supports professional development opportunities that strengthen existing skills, build new ones, and explore ways in which individual talents contribute to the whole. Bunge offer a variety of development programs, ranging from highlevel workshops for traders and risk managers to targeted programs for plant managers. More information about three of our global development programs can be found by clicking the link to the right. Tuition assistance is available at most Bunge units to employees who pursue academic study or degrees related to their present or potential work assignments. Executive education is available to high-potential employees.

PERFORMANCE GRAPH

Comparison of 5 Year Cumulative Total Return Assumes Initial Investment of $100 December 2011

News
Bunge India has announced the acquisition of the edible oils and fats business of Amrit Banaspati. The acquisition includes a manufacturing facility in the state of Punjab, rights to consumer brands and trademarks including Amrit, Gagan and Ginni and a strong distribution network. Amrit Banaspati employees engaged in the edible oils and fats business will move to Bunge once the transaction is complete. Bunge plans to build on the strong heritage of the brands it is acquiring, and expand its distribution reach and manufacturing base in India.

Working Capital Management

1 ) I n tr o d u c tio n 2 )N e e d s o r O bojeWts r k in g C a p ita l fc o 3 ) G r o s s W .C . a n d N e t W .C . 4 )C la s s ific a tio nK a nddo fW o r k in g C a p ita l in s 5 ) I m p o r ta n c e o r A d v a n ta g e s o f W o r k in g C a p ita l 6) D e te r m in a n W oorfk in g C a p ita l ts 7 ) C o n s e q u e n c e s o f u n d e r A s s e s m e n t o f W o r k in g C a p ita l 8 ) C o n s e q u e n c e s o f o w n A s s e s m e n t o f W o r k in g C a p ita l 9 ) I n v e n to r y M a n a g e m e n t 1 0 ) R e c e iv a b le M a n a g e m e n t 11 ) C a sh B udg e t

1.1)Introduction:

Working Capital ManagementWorking capital management is concerned with the problems arise in attempting to manage the current assets, the current liabilities and the inter relationship that exist between them. The term current assets refers to those assets which in ordinary course of business can be, or, will be, turned in to cash within one year without undergoing a diminution in value and without disrupting the operation of the firm. The major current assets are cash, marketable securities, account receivable and inventory. Current liabilities ware those liabilities which intended at their inception to be paid in ordinary course of business, within a year, out of the current assets or earnings of the concern. The basic current liabilities are account payable, bill payable, bank over-draft, and outstanding expenses. The goal of working capital management is to manage the firms current assets and current liabilities in such way that the satisfactory level of working capital is mentioned. The current should be large enough to cover its current liabilities in order to ensure a reasonable margin of the safety.

Definition:1. According to Guttmann & Dougall-Excess of current assets over current liabilities.

1.2)Needs or Objects of working capital management:


The need for working capital gross or current assets cannot be over emphasized. As already observed, the objective of financial decision making is to maximize the to shareholders wealth. Achieve this, it is necessary to generate sufficient profits can be earned will naturally depend upon the magnitude of the sales among other things but sales cannot convert into cash. There is a need for working capital in the form of current assets to deal with the problem arising out of lack of immediate realization of cash against goods sold. Therefore sufficient working capital is necessary to sustain sales activity. Technically this is refers to operating or cash cycle. If the company has certain amount of cash, it will be required for purchasing the raw material may be available on credit basis. Then the company has to spend some amount for labor and factory overhead to convert the raw material in work in progress, and ultimately finished goods. These finished goods convert in to sales on credit basis in the form of sundry debtors. Sundry debtors are converting into cash after expiry of credit period. Thus some amount of cash is blocked in raw materials, WIP, finished goods, and sundry debtors and day to day cash requirements. However some part of current assets may be financed by the current liabilities also. The amount required to be invested in this current assets is always higher than the funds available from current liabilities. This is the precise reason why the needs for working capital arise. For the purchase of raw materials , components and spaces

To pay wages and salaries

To incur day to day expenses and overhead costs such as fuel, power and office expenses etc.

1.3)Gross working capital and Net working capital:

1. Gross working capitalGross working capital refers to the firms investment I current assets. Current assets are the assets which can be convert in to cash within year includes cash, short term securities, debtors, bills receivable and inventory.

2. Net working capitalExcess of current assets over current liabilities are called the net working capital or net current assets. Net working capital can be positive or negative efficient working capital management requires that firms should operate with some amount of

(Net working capital = Current Assets Current Liabilities)

Further, following formula can be used to determine the conversion periods.

1.4)CLASSIFICATION OR KIND OF WORKING CAPITAL:

Working capital may be classified in two ways: On the basis of concept On the basis of time Om the basis of concept, working capital is classified as gross working capital and net working capital. The classification is important from the point of view of the financial manager.

On the basis of time, working capital may be classified as: Permanent or Fixed working capital Temporary or Variable working capital.

WORKING CAPITAL BASIS OF CONCEPT Gross Working Capital Net Working Capital BASIS OF TIME Permanent / Fixed WC Temporary / Variable WC

1. PERMANENT OR FIXED WORKING CAPITAL:


Permanent or fixed working capital is the minimum amount which is required to ensure effective utilization of fixed facilities and for maintaining the circulation of current assets. There is always a minimum level of current assets which is continuously required by the enterprises to carry out its normal business operations.

2. TEMPRORAY OR VARIABLE WORKING CAPITAL:


Temporary or variable working capital is the amount of working capital which is required to meet the seasonal demands and some special exigencies.Varibles working capital can be further classified as second working capital and special working capital. The capital required to meet the seasonal needs of the enterprises is called the seasonal working capital. Temporary working capital differs from permanent working capital in the sense that is required for short periods and cannot be permanently employed gainfully in the business

The data is mostly secondary in nature Data has been recalculated & regrouped wherever necessary In the absence of sufficient data personnel judgment have been taken on reasonable assumption. In the absence of sufficient data in-depth study of cash, Receivables and inventory management was not possible.

1.5) IMPORATNCE OR ADVANTAGE OF ADEQUATE WORKING CAPITAL:

Working capital is the life blood and nerve centre of a business . just a circulation of a blood is essential in the human body for maintaining life, working capital is very essential to maintain the smooth running of a business. No business can run successfully without an adequate amount of working capital. The main advantages of maintaining adequate amount of working capital are as follows:

Solvency of the Business Goodwill Easy Loans Cash discounts Regular supply of Raw Materials Regular payments of salaries, wages & other day to day commitments. Exploitation of favorable market conditions Ability of crisis Quick and regular return on investments High morals

1.6)FACTORS DETERMING THE WORKING CAPITAL REQUIRMENT:

The working capital requirements of a concern depend upon a large number of factors such as nature and size of the business, the characteristics of their operations, the length of production cycle , the rate of stock turnover and the state of economic situation. However the following are the important factors generally influencing the working capital requirements.

NATURE OR CHARACTERSTICS OF A BUSINESS:


The nature and the working capital requirement of enterprises are interlinked. While a manufacturing industry has a long cycle of operation of the working capital, the same would be short in an enterprises involve in providing services. The amount required also varies as per the nature, an enterprises involved in production would required more working capital then a service sector enterprise.

MANAFACTURE PRODUCTION POLICY:

Each enterprises in the manufacturing sector has its own production policy, some follow the policy of uniform production even if the demand varies from time to time and other may follow the principles of demand based production in which production is based on the demand during the particular phase of time. Accordingly the working capital requirements vary for both of them.

OPERATIONS:
The requirement of working capital fluctuates for seasonal business. The working capital needs of such business may increase considerably during the busy season.

MARKET CONDITION:
If there is a high competition in the chosen project category then one shall need to offer sops like credit, immediate delivery of goods etc for which the working capital requirement will be high. Otherwise if there is no competition or less competition in the market then the working capital requirements will be low.

AVABILITY OF RAW MATERIAL:


If raw material is readily available then one need not maintain a large stock of the same thereby reducing the working capital investment in the raw material stock . On other hand if raw material is not readily available then

a large inventory stocks need to be maintained, there by calling for substantial investment in the same.

GROWTH AND EXAPNSION:


Growth and Expansions in the volume of business result in enhancement of the working capital requirements. As business growth and expands it needs a larger amount of the working capital. Normally the needs for increased working capital funds processed growth in business activities.

PRICE LEVEL CHANGES :


Generally raising price level require a higher investment in the working capital. With increasing prices, the same levels of current assets needs enhanced investments.

MANAFACTURING CYCLE:
The manufacturing cycle starts with the purchase of raw material and is completed with the production of finished goods. If the manufacturing cycle involves a longer period the need for working capital would be more. At time business needs to estimate the requirement of working capital in advance for proper control and management. The factors discussed above influence the quantum of working capital in the business. The assessment of the working capital requirement is made keeping this factor in view. Each constituents of the working capital retains it form for a certain period and that holding period is determined by the factors discussed above. So for correct assessment of the

working capital requirement the duration at various stages of the working capital cycle is estimated.

1.7)CONSEQUENCES OF UNDER ASSESMENT OF WORKING CAPITAL:

Growth may be stunted. It may become difficult for the enterprises to undertake profitable projects due to non availability of working capital. Implementations of operating plans may brome difficult and consequently the profit goals may not be achieved. Cash crisis may emerge due to paucity of working funds. Optimum capacity utilization of fixed assets may not be achieved due to non availability of the working capital.

The business may fail to honour its commitment in time thereby adversely affecting its creditability. This situation may lead to business closure. The business may be compelled to by raw materials on credit and sell finished goods on cash. In the process it may end up with increasing cost of purchase and reducing selling price by offering discounts . both the situation would affect profitable adversely.

Now avaibility of stocks due to non availability of funds may result in production stoppage. While underassessment of working capital has disastrous implications on business overassesments of working capital also has its own dangerous.

1.8)CONSEQUENCES OF OUR OWN ASSESMNET OF WORKING CAPITAL:

Excess of working capital may result in un necessary accumulation of inventories. It may lead to offer too liberal credit terms to buyers and very poor recovery system & cash management. It may make management complacent leading to its inefficiency. Over investment in working capital makes capital less productive and may reduce return on investment. Working Capital is very essential for success of business & therefore needs efficient management and control. Each of the components of working capital needs proper management to optimize profit.

1.9)INVENTORY MANAGEMNT:

Inventory includes all type of

stocks. For effective working capital management, inventory needs to be managed

effectively. The level of inventory should be such that the total cost of ordering and holding inventory is the least. Simultaneously stock out costs should be minimized. Business therefore should fix the minimum safety stock level reorder level of ordering quantity so that the inventory costs is reduced and outs management become efficient.

1.10)RECEIVABLE MANAGEMENT:
Given a choice, every business would prefer selling its produce on cash basis. However, due to factors like trade policies , prevailing market conditions etc. Business are compelled to sells their goods on credit. In certain

circumstances a business may deliberately extend credit as a strategy of increasing sales. Extending credit means creating current assets in the form of debtors or account receivables. Investment in the type of current assets needs proper and effective management as, it gives rise to costs such as :

Cost of carrying receivables Cost of bad debts losses

Thus the objective of any management policy pertaining to accounts receivables would be to ensure the benefits arising due to the receivables are more then the costs incurred for the receivables and the gap between benefit and costs increased resulting in increase profits. An effective control of receivables management help a great deal in properly managing it. Each business should therefore try to find out coverage credit extends to its clients using the below given formula:

Average Credit = (Extend in days)

Total amount of receivable Average credit sale per day

Each business should project expected sales and expected investments in receivable based on various factor, which influence the working capital requirement. From this it would be possible to find out the average credit days using the above given formula. A business should continuously try to monitor the credit days and see that the average. Credit offer to clients is not crossing the budgeted period otherwise the requirement of investment in the working capital

would increase and as a result, activities may get squeezed. This may lead to cash crisis.

1.11)CASH BUDGET:
Cash budget basically incorporates estimates of future inflow and outflows of cash cover a projected short period of time which may usually be a year, a half or a quarter year . effective cash management is facilated if the cash budget is further broken down into months, weeks or even a daily basis. There are two components of cash budget are:

1. Cash inflows
2. Cash outflows

The main source for theses flows are given here under: 1. Cash Sales 2. Cash received from debtors 3. Cash received from Loans, deposits etc. 4. Cash receipts other revenue income 5. Cash received from sale of investment or assets. CASH OUTFLOWS: 1. Cash Purchase 2. Cash payments to Creditors 3. Cash payment for other revenue expenditure

4. Cash payment for assets creation 5. Cash payments for withdrawals, taxes. 6. Repayments of Loan etc.

CHAPTER 2
RESEARCH METHODOLOGY

Research Methodology

1) 2) 3) 4)

I n tr o d u c tio n T y p e s o f r e s e a r c h m e th o d o lo g y O b je c tiv e o f s tu d y S c o p e a n d lim ita tio n s o f s tu d y

2.1) Introduction
Research methodology is a way to systematically solve the research problem. It may be understood as a science of studying now research is done systematically. In that various steps, those are generally adopted by a researcher in studying his problem along with the logic behind them. It is important for research to know not only the research method but also know methodology. The procedures by

which researcher go about their work of Describing, explaining and predicting phenomenon are called methodology. Methods comprise the procedures used for generating, collecting and evaluating data. All this means that it is necessary for the researcher to design his methodology for his problem as the same may differ from problem to problem. Data collection is important step in any project and success of any project will be largely depend upon now much accurate you will be able to collect and how much time, money and effort will be required to collect that necessary data, this is also important step. Data collection plays an important role in research work. Without proper data available for analysis you cannot do the research work accurately.

2.2) Types of data collection


There are two types of data collection methods available. 1. Primary data collection 2. Secondary data collection

1) Primary dataThe primary data is that data which is collected fresh or first hand, and for first time which is original in nature. Primary data can collect through personal interview, questionnaire etc. to support the secondary data.

2) Secondary data collection method-

The secondary data are those which have already collected and stored. Secondary data easily get those secondary data from records, journals, annual reports of the company etc. It will save the time, money and efforts to collect the data. Secondary data also made available through trade magazines, balance sheets, books etc.

2.3) OBJECTIVES OF THE STUDY

1 To identify the financial strengths & weakness of the company relating by the last 3 and current years working capital statement. 2. To study the liquidity position through various working capital related datas. 3. To study the working capital components such as receivables accounts, cash management, Inventory position 4. To analyzing the level of current assets with relation to current

liabilities

2.4) SCOPE & LIMITATIONS OF THE STUDY


Scope of the studyThe study of working capital is based on tools like trend Analysis, Ratio Analysis, working capital leverage, operating cycle etc. Further the study is based on last 3 and current years Annual Reports of Bunge Pvt.Ltd. And even

factors like competitors analysis, industry analysis were not considered while preparing this project.

Limitations of the studyFollowing are the limitations of the study being conducting: 1) Limited data:This project has to be done on the basis of the annual reports; it just constitutes one part of data collection i.e. secondary. There are limitations for primary data collection because of confidentiality. 2) Limited period:This project is based on four year annual reports. Conclusions and recommendations are based on such limited data. The trend of last four year may or may not reflect the real working capital position of the company

CHAPTER 3

DATA ANALYSIS & INTERPRETATION

DATA ANALYSIS & Evaluation of working capital

Table I - Statement of Working Capital Requirement


2009-10 2010-11 2011-12

Particulars A) Current Assets: i) Inventories ii) Sundry Debtors iii) Cash & Bank Balance iv) Other Current Assets v) Loans & Advances

1,698,235 4,172,586 4,309,852 1,802,032 22,982,705

3,283,909 7,319,804 4,855,139 1,798 1,809,396 17,270,127 12,759,018 2,468,701 15,227,719

4,842,246 11,097,716 9,394,447 3,597 4,164,082 29,502,088 24,275,052 3,415,310 27,690,362

B) Current Liabilities: i) Current Liabilities ii) Provisions

8,552,122 632,131 9,184,253

Working Capital (A-B) Add: Provision for Contingencies Net Working Capital Requirement

2,168,452 -2,168,452

2,042,408 -2,042,408

1,811,726 -1,811,726

INVENTORIES
5000000 4000000 3000000 2000000 1000000 0 FY 09-10 FY 10-11 FY 11-12
inventories

INVENTORIES
In the context of food agribusiness the major increase in the present four financial years has been of the inventory. Reasons: The increased inventory to produce more goods so as to utilize the new plant set up

SUNDRY DEBTORS
12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0

Sundry Debtors

FY 09- FY 10- FY 1110 11 12

DEBTORS AND AVERAGE RECEIVABLES


The debtors are increasing heavily in the financial year 10-11 because of a sales boom that has accounted for huge accounts receivables increase.

CASH & BANK BALANCE

FY 11-12 FY 10-11 FY 09-10 0 2,000, 4,000, 6,000, 8,000, 10,000 000 000 000 000 ,000

Cash & Bank Balance

CASH AND BANK BALANCES


Cash and bank balance as per the balance sheet it is seen to be increasing but from the above chart it is seen to be decreasing. This discrepancy can be attributed to the fact that balance sheet figures carry additional cash balance of unutilized FCCB issue proceeds which amount to long term liability as well.

OTHER CURRENT ASSETS

1,798 3,597 FY 09-10 FY 10-11 FY 11-12

OTHER CURRENT ASSETSIN COMPANY, The other current assets are nil in financial year(FY) 2008-2010, then after year 2010 the other current assets of the company was increased in 2010-2012. And other current assets is increased in 2011-2012 comparison to 2010-2011.

LOANS AND ADVANCES


5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 FY FY FY 09-10 10-11 11-12 loans and advances

LOANS AND ADVANCES


Loans & advances are increasing on the part of increased advances that are given to pile up inventory when the company went for the expansion mode

CURRENT ASSETS includes cash & those assets which can be easily converted into cash within a short period generally one year such as marketable securities , bills receivables, sundry debtors, inventories, work in progress, prepaid expenses etc .The total current assets are the sum of below contingency i.e. Current Assets = Stock/ Inventory + Sundry Debtors + Advances +Cash and bank balances + other current assets

CURRENT ASSETS

12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0 FY 0910 FY 1011 FY 1112


inventories sundry debtors cash & bank balances other current assets loans and advances

NET CURRENT ASSETS

FY 11-12 FY 10-11 FY 09-10 0 10,000,000 20,000,000 30,000,000 net current assets

Conclusions:
The trend of the current assets in Bunge India Pvt.Ltd. throughout the period from 2008-12 are shown in the pie-chart .it is evident from the table that the current assets in Bunge India Services has increased except in year 2010-11.

TOTAL CURRENT LIABILITIES

30,000,000 20,000,000 10,000,000 0 FY FY FY 09-10 10-11 11-12

current iabilities current iabilities provisions

CURRENT LAIBILITIES
These are those obligations which are payable within a short period of generally one year and includes outstanding expenses, bills payable, sundry creditors, accrued expenses, bank overdraft, short term advances, income tax payable.

NET CURRENT LIABILITIES


30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 0 FY 09-10 FY 10-11 FY 11-12

net current liabilities

Conclusion:
The trend of Current Liabilities of Bunge India Pvt.Ltd. throughout the period from 2007-2011 are shown in the table. It is evident from the table that it shows increasing trends in the year 2007 to 2011. It shows that the Bunge India services has stability in trends of Current Liabilities.

Graphical Representation of Working Capital Requirement

Working Capital Requirement 2,200,000 2,100,000 Working Capital (in Rs.) 1,900,000 1,800,000 1,700,000 1,600,000 2009-10 2010-11 2011-12 Year Working Capital Requirement 2,000,000

Table II - Statement of Changes in Working Capital

Particulars

Previous Year

Current Year

Effect on Working Capital Increase Decrease 1,558,256 3,777,912 4,539,308 1,799 2,354,686

A) Current Assets: i) Inventories ii) Sundry Debtors iii) Cash & Bank Balance iv) Other Current Assets v) Loans & Advances Total Current Assets:

3,283,990 4,842,246 7,319,804 11,097,716 4,855,139 1,798 1,809,396 9,394,447 3,597 4,164,082 29,502,08 8

B) Current Liabilities: i) Current Liabilities ii) Provisions Total Current Liabilities:

17,270,12 7

12,759,018 24,275,052 2,468,701 3,415,310 Working Capital (A-B) Net Increase Or Decease In Working Capital 2,042,408 1,811,726 230,682 2,042,408 2,042,408 12,462,64 3 230,682 15,227,71 9 27,690,36 2

11,516,034 946,609

12,462,64 3

RATIO ANALYSIS
Rs.(In Lac.) PARTICULAR Current assets current liabilities quick assets quick liabilities Net turnover (sales) working capital average inventory (average of opening & closing stock of year) cost of goods sold = cost of sales total assets total annual expenses (depreciation +debt expenses) average gross income PROFIT before interest and taxes Total interest Net Profit after tax (NPAT) capital employed (FA+CA-CL ) investment (FA+CA) Fixed assets 2009-10 29843.52 7611.44 12759.32 7611.44 45503 22232.08 8594.615 37398 87666 37313.16 97754.89 5998 747.8 4115 89529.68 97141.12 67297.6 2010-11 47163.72 6597.95 14530.46 6597.95 52527.1 40565.77 2011-12 61410.49 7459.4 20880.64 7459.4 81786.93 53951.09

14476.465 22666.83 47018.31 67855.4 124436.12 138465.6 27364.06 63633.37 8120.16 2653.75 3893.37 106917.71 113515.66 66351.94 23898.65 51858 14612.92 5214.77 7383.56 111772.7 119232.1 57821.59

LIQUIDITY RATIOS

CURRENT RATIOCurrent ratio is defined as the relationship between current assets and current liabilities. It is a measure of general liquidity & is most widely used to make the analysis of short term financial position of a firm. Current ratio is the ratio of current assets to current liabilities. A relatively higher ratio is an indication that the firm is liquid and has the ability to pay its current obligations on time. On the other hand a low current ratio indicates that the

Liquidity position of the firm is not good and shall not be able to pay its current liabilities in time. Current Ratio: The Current ratio is calculated by dividing current assets by current liabilities:

Current ratio:

Current Assets Current Liabilities


CURRENT RATIO

20% 43% FY 2009-10 FY 2010-11 FY2011-12 37%

QUICK RATIO: Quick ratio or liquid ratio is a more rigorous test of liquidity than the current ratio. The term liquidity refers to the ability of the firm to pay short term obligations as and when they become due. Quick ratio may be defined as ration of quick assets to quick liabilities. Liquid assets include all the current assets excluding inventories & prepaid expenses. Liquid liabilities mean all liabilities excluding bank overdraft. Inventories & prepaid expenses are not termed as liquid assets because they cannot be converted into cash immediately without a loss of value.

Quick Ratio: Quick Assests Current Liabiities

QUICK RATIO

25% 42% FY 2009-10 FY 2010-11 FY2011-12 33%

CURRENT SCENERIO INTERPRETATION While interpreting the figures of both the above ratios we should keep in mind the following one point Bunge India Pvt.Ltd. is a manufacturing concern Since it is manufacturing concern the an excess of inventory as compared to other industry models such as the services sector is an integral fact. As a result it is bound to have higher current ratio and quick ratio as compared to other industries. The sharp rise of current ratio from 20% (FY 05-06) to 37% (FY 06-07) to 43 %( FY 07-08) Can be attributed to

Higher pile up of inventory which was to be used up for trial run in producing new products from the new plant set up. Higher prepaid expenses related to advances given so as to pile up the inventory so that when the inventory is needed for trial run, its available. An increase in average receivables which was in sync with increased capacity of production and also increased sales.

An important point to note here is that an excess of cash balance arising out of idle money coming out of FCCB issue expense has been deducted as correspondingly it accounts for long term liability (debentures) which have no effect on working capital management. The quick ratio is a more important indicator of liquid position of Bunge India Pvt.Ltd. as it hardly varies from 25% (FY 06-07) to 33% (FY 07-08). Obviously the effect of inventories has been negated.

EFFICIENCY RATIO
From the perspective of working capital management we would be discussing three important ratios they are.

Sales to working capital ratio Inventory turnover ratio

Current assets turnover ratio.

SALES TO WORKING CAPITAL RATIOThis ratio is computed by dividing working capital by sales. This ratio helps to measure efficiency of the utilization of net working capital. It signifies that for an amount of sales. A relative amount of working capital is needed. If any increase in sales in contemplated, working capital should be adequate & thus this ratio helps management to maintain the adequate level of working capital.

Sales to working capital ratio= Sales Working Capital

SALES TO WORKING CAPITAL RATIO


2.046727 2.5 2 1.5 1 0.5 0 FY 05-06 FY 06-07 FY07-08 1.29486264 1.515946

Sales to working capital ratio

CURRENT SCENERIO INTERPRETATION

As seen from the above table the ratio has decreased from 2 (FY 05-06) to 1.29 in (FY 06-07) and then increased to 1.5 (FY 07-08). This ratio is again indicative of the fact that the year in which the expansion took place the sales did not match up with the scale of expansion. Otherwise it would have remained intact and not decreased. The slight increase from 1.29 to 1.51 is indicative of the fact that the full impact of expansion is being slowly realized & sales are slowly increasing.

INVENTORY TURNOVER RATIOThis ration indicates the effectiveness and efficiency of inventory management. This ratio is calculated as cost of goods sold: average inventory shows how speedily the inventory is turned into accounts receivables through sales. The higher the inventory turnover ratio (also called stock velocity) the more the efficient inventory management. Inventory Turnover Ratio= Cost of Goods Sold/ Average Inventory INVENTORY TURNOVER RATIO

FY09-10

FY 10-11

inventory turnover ratio/ stock velocity

FY 11-12

CURRENT SCENERIO INTERPRETATION

The stock velocity is decreasing subsequently from 4.35 (FY 06-07) to 2.99 (FY 0708) which shows inefficiency on the part of inventory management. Partly the reason for the fall can be attributed to stocking up of inventory for the trail run & using them in testing the expansion mode machinery.

CURRENT ASSETS TURNOVER RATIOThis ratio is indicated by sales upon current assets. This ratio indicates the efficiency with which the current assets turn into sales & higher current assets turnover ratio implies by & large a more efficient use of funds in current assets. Thus, a high turnover rate indicates reduced lock up of funds in current assets. An analysis of this ratio over a period reflects working capital management of the firm

Current Assets Turnover Ratio=

Net sales Current Assests

CURRENT ASSETS TURNOVER RATIO


1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 FY 05-06 FY 06-07 FY07-08 current assets turnover ratio 1.11371834 1.52472 1.331807

CURRENT SCENERIO INTERPRETATION The ratio is slightly decreasing from 1.52 (FY 05-06) to 1.11 (FY 06-07) & then increasing to 1.33 (FY 07-08) which shows that sales increase is not matched by the increase in current assets in the expansion phase of Bunge India Pvt.Ltd. . The reason can be well attributed to the piling up of trial stock and not full use of the expanded production capacity.

OPERATING RATIOS
-Working ratio

WORKING RATIOA ratio used to measure a company's ability to recover operating costs from annual revenue. This ratio is calculated by taking the company's total annual expenses (excluding depreciation and debt-related expenses) and dividing it by the annual gross income. A working ratio below 1 implies that the company is able to recover operating costs, whereas a ratio above 1 reflects the company's inability to do so.

Working Ratio= Total Annual Expenses Annual Gross Income

WORKING RATIO

FY09-10

0.460848

FY 10-11

0.43002689 working ratio

FY 11-12

0.381701

0.1

0.2

0.3

0.4

0.5

CURRENT SCENERIO INTERPRETATION The ratio consistently has been below 1 which means company can very well take out its operating costs, though the margin of comfort is slightly decreasing because of the increase in expenses of the Bunge India Pvt.Ltd.

CHAPTER 4 CONCLUSION

COCLUSION
Working capital management is an important aspect of any business. Every business concern should have adequate working capital to run its business operation. Every concern should have neither redundant of excess working capital nor inadequate or shortage of working capital. Both excess as well as short working capital positions are bad for any business. The three elements of working capital management are cash management receivable management and inventory management. If a finance

manager maintains these three elements of working capital management properly means the concern will get dramatic improvement in their sales volume and also in business. Working capital policies of a firm have a great effect on its profitability, liquidity and structured health of the organization. Every concern should adopt some new tread management strategies that will help in greater productivity, inventory optimization and also better working capital management. So, it is noted that working capital is a means to run business smoothly and profitability. important in a going concern. Good management of working capital is part of good finance management effective use of working capital will contribute to the operational efficiency of a department; optimum use will help to generate maximum return. Bunge India Company is also using SAP 6.0 versions which is very advanced to do every transaction of any organization. SAP 6.0 also applicable for e-transaction. Thus, the concept of working capital has its own

CHAPTER 6 BIBLIOGRAPHY

BIBLIOGRAPHY

Referred Books1)Financial Management theory and practice by Prassanna Chandra 2)Financial Management theory and practice by Shashi .K. Gupta & R.K. Sharma. 3) Annual reports of Bunge Pvt. Ltd.

Referred Web Sites1) www.bunge.com 2)www.bungeindia.com 3) Google.

Other Reference1)Financial Department of company