Chapter 1
Introduction:
Working capital management involves the relationship between a firm's short-term
assets and its short-term liabilities. The goal of working capital management is to ensure that
a firm is able to continue its operations and that it has sufficient ability to satisfy both
maturing short-term debt and upcoming operational expenses. The management of working
capital involves managing inventories, accounts receivable and payable, and cash.
The process of managing activities and processes related to working capital. This
level
of management serves as
check
ensure
that
the amount of cash flowing into the business is enough to sustain the company's operations.
This
is
an
ongoing
process
that
must
be
of assets and liabilities. Working capital management may involve implementing shortterm decisions that may or may not carry over from one earnings period to the next.
The
need
for
working
capital
fluctuates
from
time
to
firm
should
maintain
sound
working
capital
position. It should have adequate working capital to run its business operations. Both
excessive as well as inadequate working capital positions are dangerous from firm's point of
view. Excessive working capital means holding costs and idle funds which earn no profit for
the firm. Paucity of working capital not only impairs the firm's profitability but also results in
production interruptions and inefficiencies and sales disruption
SVTM, MADANAPALLI.
INDUSTRY PROFILE
In the most general sense of the word, a cement is a binder, a substance which
sets and hardens independently, and can bind other materials together. The word "cement"
traces to the Romans, who used the term "opus caementicium" to describe masonry which
resembled concrete and was made from crushed rock with burnt lime as binder. The volcanic
ash and pulverized brick additives which were added to the burnt lime to obtain a hydraulic
binder were later referred to as cementum, cementum, cement and cement. Cements used in
construction are characterized as hydraulic or non-hydraulic.
The most important use of cement is the production of mortar and concretethe
bonding of natural or artificial aggregates to form a strong building material which is durable
in the face of normal environmental effects.
Concrete should not be confused with cement because the term cement refers only to
the dry powder substance used to bind the aggregate materials of concrete. Upon the addition
of water and/or additives the cement mixture is referred to as concrete, especially if
aggregates have been added.
It is uncertain where it was first discovered that a combination of hydrated nonhydraulic lime and a pozzolan produces a hydraulic mixture (see also: Pozzolanic reaction),
but concrete made from such mixtures was first used on a large scale by Roman
engineers.They used both natural pozzolans (trass or pumice) and artificial pozzolans (ground
brick or pottery) in these concretes. Many excellent examples of structures made from these
concretes are still standing, notably the huge monolithic dome of the Pantheon in Rome and
the massive Baths of Caracalla. The vast system of Roman aqueducts also made extensive use
of hydraulic cement. The use of structural concrete disappeared in medieval Europe,
Modern cement
Modern hydraulic cements began to be developed from the start of the Industrial
Revolution (around 1800), driven by three main needs:
Hydraulic renders for finishing brick buildings in wet climates
Hydraulic mortars for masonry construction of harbor works etc, in contact with sea
water.
SVTM, MADANAPALLI.
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10
the current financial year by expanding its plant in Andhra Pradesh, with an
investment of US$ 149.97 million.
increase the manufacturing capacity of its Ariyalur plant in Tamil Nadu to 4.5 MT
from 2 MT by April 2011.
between the Hyderabad-based My Home Group and Ireland's building material major
CRH Plc, plans to scale up its cement production capacity from the existing 5 million
tonne per annum (mtpa) to 15 mtpa by 2016. The company would undertake this
capacity expansion at a cost of US$ 1 billion.
Shree Cement, plans to invest US$ 97.13 million this year to set up a
1.5 million MT clinker and grinding unit in Rajasthan. Moreover, in June 2010, Shree
Cement signed a memorandum of understanding (MoU) with the Karnataka
government to invest US$ 423.6 million for setting up a cement unit and a power
plant. US$ 317.7 million will be used to set up a cement manufacturing unit with an
annual capacity of 3 mtpa while the balance will be for the 100 mega watt power
plant.
cement capacity.
SVTM, MADANAPALLI.
11
up 2-3 greenfield manufacturing plants in the country in the next five years to serve
the rising domestic demand. Holcim is present in the country through ACC and
Ambuja Cements and holds around 46 per cent stake in each company. While ACC
operates 16 cement plants, Ambuja Cements controls five plants in India. The Aditya
Birla group is the largest cement-making group by capacity in the country and
controls Grasim Industries and Zuari Cement.
Government Initiatives
The cement industry is pushing for increased use of cement in highway and road
construction. The Ministry of Road Transport and Highways has planned to invest US$ 354
billion in road infrastructure by 2012. Housing, infrastructure projects and the nascent trend
of concrete roads would continue to accelerate the consumption of cement.
Increased infrastructure spending has been a key focus area. In the Union Budget
2010-11, US$ 37.4 billion has been provided for infrastructure development.
The government has also increased budgetary allocation for roads by 13 per cent to
US$ 4.3 billion.
Gujarat plans to treble its cement production capacity in 3-5 years. Proposals have
been invited from cement companies such as ACC, ABG, Ambuja Cement, Emami,
Indiabulls, Adani group, Ultratech and L&T and the state hopes to raise its capacity from 20
million tonnes per annum to 70 million tonne. The state will host the biennial Vibrant Gujarat
Global Summit in January 2011 and expects to witness investment proposals worth US$ 13.2
billion in the cement sector.
Exchange rate used: 1 USD = 47.82 INR (as of January 2013)
The cement industry is one of the vital industries for economic development in a
country. The total utilization of cement in a year is used as an indicator of economic growth.
Cement is a necessary constituent of infrastructure development and a key raw material for
the construction industry, especially in the governments infrastructure development plans in
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12
context
of
the
nations
socioeconomic
development.
Prior To Independence
The first endeavor to manufacture cement dates back to 1889 when a Calcutta based
company, But the first endeavor to manufacture cement in an organized way commenced in
Madras. South India Industries Limited began manufacture of Portland cement in 1904.But
the
effort
did
not
succeed
and
the
company
had
to
halt
production.
Finally it was in 1914 that the first licensed cement manufacturing unit was set up by
India Cement Company Ltd at Porbandar, Gujarat with an available capacity of 10,000 tons
and production of 1000 installed. The First World War gave the impetus to the cement
industry still in its initial stages. The following decade saw tremendous progress in terms of
manufacturing
units,
installed
capacity
and
production.
is
During the earlier years, production of cement exceeded the demand. Society had a biased
opinion against the cement manufactured in India, which further led to reduction in demand.
The
government
intervened
by
giving
protection
to
the
Industry.
In 1927, the Concrete Association of India was formed with the twin goals of creating
a positive awareness among the public of the utility of cement and to propagate cement
consumption.
After Independence
the growth rate of cement was slow around the period after independence due to
various factors like low prices, slow growth in additional capacity and rising cost. The
government intervened several times to boost the industry, by increasing prices and providing
financial
incentives.
But
it
had
little
impact
on
the
industry.
of
cement
SVTM, MADANAPALLI.
and
it
intervened
indirectly
through
price
control.
13
In 1977 the government authorized higher prices for cement manufactured by new units or
through capacity increase in existing units. But still the growth rate was below par.
In 1979 the government introduced a three tier price system. Prices were different for cement
produced in low, medium and high cost plants.
However the price control did not have the desired effect. Rise in input cost, reduced profit
margins meant the manufacturers could not allocate funds for increase in capacity.
Partial Control (1982-1989)
To give impetus to the cement industry, the Government of India introduced a quota
system in 1982.A quota of 66.60% was imposed for sales to Government and small real estate
developers. For new units and sick units a lower quota at 50% was effected. The remaining
33.40%
was
allowed
to
be
sold
in
the
open
market.thes
changes
These changes had a desired effect on the industry. Profitability of the manufacturers
increased
substantially,
but
the
rising
input
cost
was
cause
for
concern.
After Liberalization
In 1989 the cement industry was given complete freedom, to gear it up to meet the
challenges of free market competition due to the impending policy of liberalization. In 1991
the industry was de licensed.
This resulted in an accelerated growth for the industry and availability of state of the art
technology for modernization. Most of the major players invested heavily for capacity
expansion.
To maximize the opportunity available in the form of global markets, the industry laid
greater focus on exports. The role of the government has been extremely crucial in the growth
of the industry.
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14
Company Profile
Ambuja Cements Ltd, a part of the global conglomerate LafargeHolcim, is one of the
leading cement companies in the Indian cement industry.
Operating for over 25 years, Ambuja has proved to be the best cement for construction
and the best cement manufacturing company in India with its uniquely sustainable
development projects. Its environment friendly initiatives have played a key role in
Indias efforts to become a green state. The sustainable constructions and renewable
energy projects undertaken by it have a lions share in creating a blueprint for
sustainable development in Indias bright future.
By virtue of its hassle-free customer support & home building solutions and its unique
cement sustainability initiatives such as True Value and Water Positive, Ambujas
business has seen a rapid growth in the past decade. The company has a significant
presence across western, eastern and northern markets of India as a brand for Ordinary
Portland Cement (OPC) and Pozzolana Portland Cement (PPC).
Currently, Ambuja has a cement capacity of 28.75 million tonnes with five integrated
cement manufacturing plants and eight cement grinding units across the country. It is
the first Indian cement manufacturer to build a captive port with four terminals along the
countrys western coastline to facilitate timely, cost effective and environmentally cleaner
shipments of bulk cement to its customers.
About LafargeHolcim
With a well-balanced presence in 90 countries and a focus on Cement, Aggregates and
Concrete, LafargeHolcim (SIX Swiss Exchange, Euronext Paris: LHN) is the world
leader in the building materials industry. The Group has 115,000 employees around the
world and combined net sales of CHF 33 billion (EUR 27 billion) in 2014. LafargeHolcim
is the industry benchmark in R&D and serves from the individual homebuilder to the
largest and most complex project with the widest range of value-adding products,
innovative services and comprehensive building solutions. With a commitment to drive
SVTM, MADANAPALLI.
15
sustainable solutions for better building and infrastructure and to contribute to a higher
quality of life, the Group is best positioned to meet the challenges of increasing
urbanization.
Ambuja Cement is committed to make high strength cement that would enable our
customers build strong and durable structures.
16
Customer segments
This function has been working with our stakeholders for over two decades now in
Educating & empowering users & Influencers, Onsite guidance on right construction
practices, Value added services for building strong houses, Training & certification of
unskilled / semiskilled manpower, Knowledge transfer on advancement of materials &
technology, Developing simple tools & methods for improving construction practices and
Developing Customers & Influencer engagement programs.
The Company has created many such platforms under which the engagement programs,
customized as per customer segments, are carried out by the Customer Support Group.
It is a continuous endeavor to upgrade the programs and make it more sustainable.
The
Company
has
been
creating
sustainable
impact
beyond
business
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17
Sustainability
Sustainable construction can contribute to environment protection
The food we eat and the air we breathe has all come to a point where it is no more
consumable. Urbanization has led to environmental challenges which have a negative
effect on our planet. These effects need to be treated at the earliest. The one factor that
is triggering such a hazardous effect is the construction industry.Sustainable
Construction in India is perhaps one of the most frequently used but the least
understood usages in the cement industry. It is an approach which doesnt have a
negative impact on the environment throughout its life time and even after it. The
Cement Sustainability Initiative (CSI) is trying to do just the same.
The world is progressing at a lightning speed and due to such a rapid progress the
needs and priorities of the people have also changed. Such a progress is good, but we
should make sure that it doesnt reach a point where we affect the needs of our future
generations by being highly dependent on natural resources and depleting its overall
supply. That is why the need for Sustainable Development Projects in India is the
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18
need of the hour. New and innovative methods to implement it have to be realized which
can be used in the long run. The society should be educated about such a sustainable
approach so that it becomes a part of peoples lives.
Sustainable Development in India is not only good for the environment but is also
important for the economic development of the nation. The environmental effects that it
has are pretty amazing. The indoor quality of air drastically increases and hence
provides healthier air to breathe. It reduces the energy consumption by nearly 36
percent as well as it also helps in reducing the overall consumption of natural resources
and emits lesser carbon dioxide in our atmosphere.
Sustainable Development Projects even reduce the overall cost of the construction and
hence in fact help in the economic development of a nation. Sustainable construction
has some social impacts as well. Citizens can be more aware about the importance of
green development and hence will push developers to go green. It will also improve
productivity as Sustainable Development Environment will improve the health of the
citizens.
01Sustainability Policy
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19
o
o
o
Sustainable Development
Sustainability
CSR
Environmental Sustainability
AFR
Sustainability Reports
SVTM, MADANAPALLI.
01Sustainability Policy
02Climate Change Mitigation Policy
03Corporate Social Responsibility Policy
20
o
o
Sustainable Development
Sustainability
CSR
Environmental Sustainability
AFR
Sustainability Reports
SVTM, MADANAPALLI.
21
Chapter 2
Review of Literature
NCEAR (1966)i The first and foremost formals study conducted and compiled on
working capital management in India was by the National council of applied Economic
Research (NCEAR) in 1966. The council published a report on Structure of Working
Capital which confined to the analysis of the composition of working capital with special
reference to fertilizers, Cement and Sugar industries. The prime objective of the study was to
examine as to The study revealed that working capital management practices were highly
unplanned and hence the establishment of suitable accounting policies, costupuring system
and inventory controlling techniques in the above-mentioned industries. This study highlights
the significance of suitable and appropriate working capital management policies in the
success of the business.
Misra (1975)ii has studied the problem of working capital in a selected six public
enterprises for a period of 1960-61 to 1967 68. The importance and findings of the study
are : 1) Selected enterprises are not able to utilize working capital efficiently. 2) In all
enterprises excess inventory is noticed which is due to lack of inventory control, defective
inventory management and also due to a congenial organization. Inordinate delays in the
releases of foreign exchange and issue of import licenses are also some reasons for overstock
of inventory. It is found that receivable turnover ratio is very low due to the generous credit
granting and inadequate collection policy. In all the selected enterprises, the size of cash is
found to be very much high on account of improper planning and control of cash.
Vijaya (1977)iii study conducted on working capital management in six cooperative
and seven private sector companies in the sugar industry of Tamil nadu found that the growth
in current assets had registered more than that of sale indicating poor working capital
management. The application of correlation analysis revealed that there was a negative
correlation between return on investment and working capital.
Gangadhar (1981)iv study examined the statistical trends in working capital position
among medium, large and small public, private limited companies in the Indian corporate
sector during 1961 76. The application of second parabola revealed that the current assets
formed relatively higher proportion of total net assets in private limited companies than that
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22
23
24
25
26
2. Wealth Maximization:
According to prof. Sol man, maximization of Wealth provides useful and meaningful
objectives as basic guideline by which financial decision should be evaluated.
Wealth maximization means the net present value of a course of action to share
holders. The net present value of a course of action is differences between the net present
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27
Working capital has ordinarily been defined as the excess of current assets over
current liabilities.
-
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C. W. GERSTEN BERG
28
29
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30
31
32
33
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34
and
35
NEED:
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 are
time gaps in purchases of raw material and production, production and sales, and sales and
realization of cash.
36
Acquisition of resources such as Raw Materials, Labour, power and Fuel etc.
Manufacturing process includes conversion Raw Materials into Work-InProgress and finished goods.
SVTM, MADANAPALLI.
37
Sales of the product either for cash or credit. Credit sales create Book Debts for
collection. This phase completes the Operating Cycle.
OPERATING CYCLE
38
Sales generate cash that has to be disbursed. The surplus cash has to be invested while deficit
has to be borrowed. Cash management seeks to accomplish this cycle at a minimum cost at a
minimum cost. At the same time, it also seeks to achieve liquidity and control.
Therefore, the aim of cash management is to maintain adequate control over cash
position to keep the firm sufficiently liquid and to use excess cash in some profitable way. In
order to resolve the uncertainty about cash flow prediction and lack of synchronization
between cash receipts and payments, the firm should develop appropriate strategies of cash
management.
Cash Planning:
Cash inflows and outflows should be planned to project cash surplus or deficit for
each period of the planning period. Cash budget should be prepared for this purpose.
1.
39
RATIO ANALYSIS
Ratio analysis is a form of financial statement analysis that is used to obtain a quick
indication of firms financial performance in several key areas. The ratios are categorized as
shortterm solvency ratios. Debt management ratios, asset management ratios, profitability
ratios and market value ratios.
Ratios analysis as a tool possesses several important features. The data, which are
provided by financial statements, are readily available. The computation of ratios facilitates
the comparison of firms which differ in size. Ratios can be used to compare a firms financial
performance with industry average. In addition, ratios can be used in a form of trend analysis
to identify areas where performance has improved or deteriorated over time.
Because ratio analysis is based upon accounting information, its effectiveness is
limited by the distortions which arise in financial statements due to such things as historical
cost accounting and inflation. Therefore, ratio analysis should only be used as a first step in
financial analysis, to obtain a quick indication of a firms performance and to identify areas
which need to be investigated further.
CLASSIFICATION OF RATIOS:
Classification from the point of financial management is as follows:
1. Liquidity ratios
2. Leverage ratios
3. Activity ratios
4. Profitability ratios
LIQUIDITY RATIOS:
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40
Current ratios:
The current ratio is calculated by dividing current assets by current liabilities. Current
assets that the firm expects to convert in to cash in the coming year and current liabilities
which have to be paid in cash in the coming year. The appropriate value for this ratio depends
on the characteristics of the firms industry and the composition of its current assets. How
ever at a minimum the current ratio should be greater than once.
Current assets
Current ratio = -----------------Current liabilities
QUICK RATIO:
The quick ratio recognizes that, for many firms, inventories can be rather liquid. If
these inventories had to sold off in a hurry to meet an obligation the firm might have
difficulty in finding a buyer and the inventory items would likely have to be sold at a
substantial discount from their fair market value. This ratio attempts to measure the ability of
the firm to meet its obligations relying solely on its more current asset accounts such as cash
and accounts receivable. This ratio is calculated by dividing current assets less inventories by
current liabilities.
Current assets inventory
Quick ratio = --------------------------------Current liabilities
ACTIVITY RATIOS:
INVENTORY TURN OVER RATIO:
SVTM, MADANAPALLI.
41
-------------------Total assets
42
PROFITABILITY RATIOS:
Profitability ratios attempt to measure the firms success in generating income. These
ratios reflect the combined effects of the firms asset and debt management. The profit margin
indicates the dollars in income that the firm earns on each dollar of sales. This ratio is
calculated by dividing net income by sales.
Net profit after taxes
Net profit margin =
------------------------------Total Revenues
(ordinary)
shares outstanding.
EPS = profit after tax / no of equity shares
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43
Chapter -3
RESEARCH METHODOLOGY
Methodology of research can be divided into two types. One of the sources of data is
called primary data and a second source of data is called secondary data. The primary data
which means collection of data with a questioner form the employees, the customers and the
sources. The secondary data which means collection of information from the books records
journals magazines of the organizations.
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44
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45
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46
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47
measuring the liquidity and profitability performance and also to arrive at various
objectives of the study,
3. Thirdly, the study is based on the annual reports of the company for a period of 5
years from 2011-2015. Due to time constraint the study period is restricted.
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48
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49
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50
Chapter - 4
DATA ANALYSIS AND INTERPRETATION
TABLE 1.1 Statement of changes in Working Capital as on 31-3-2015
Working Capital Management as 2015 -2014
Particulars
31-Mar-15
31-Mar-14
Increase
2848.39
888.39
1960
336.26
227.98
62.91
2458.12
108.28
2395.21
2848.39
308.32
2540.07
62.91
45.4
17.51
6548.6
5995.21
553.39
679.82
618.49
61.33
1461.93
1342.83
119.1
1084.34
1176.22
3226.09
3137.54
Decrease
Current Assets
current investment
Inventories
Sundry Debtors
Cash and Bank Balance
total
-2395.21
Current Liabilities
Short term Borrowings
trade payables
-91.88
88.55
0
Working Capital
3322.51
2857.67
464.84
TABLE 1.2,
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51
Particulars
31-Mar-14
31-Mar-13
Increas
e
Decrees
Current Assets
current investment
Inventories
888.39
933.94
-45.55
Sundry Debtors
227.98
231.51
-3.53
2458.12
2341.09
117.03
308.32
289.41
18.91
45.4
57.15
5995.21
5537.04
Total
Current Liabilities
Short term Borrowings
-11.75
458.17
0
618.49
974.52
1342.83
792.39
550.44
1176.22
1076.29
99.93
3137.54
2843.2
294.34
Working Capital
2857.67
2693.84
trade payables
0
-356.03
2406.1
7
FORMULA:
Working Capital= Current Assets-Current Liabilities.
INFERENCE:
The above tables in the year 2014 the total Current assets are increase by Rs
458.17 and the Total Current liabilities are increased by Rs 294.34. Hence the working capital
increased by Rs 2406.17.
52
31-Mar-13
31-Mar-12
Increas
e
Decrees
Current Assets
current investment
Inventors
933.94
983.93
Sundry Debtors
231.51
213.37
18.14
2341.09
2253.72
87.37
289.41
248.98
40.43
57.15
32.57
24.58
5537.04
5276.4
260.64
Total
Current Liabilities
Short term Borrowings
0
-49.99
0
0
trade payables
974.52
934.54
39.98
792.39
655.87
136.52
1076.29
1308.93
-232.64
2843.2
2899.34
-56.14
2693.84
2377.06
working Capital
316.78
FORMULA:
Working Capital= Current Assets-Current Liabilities.
INFERENCE:
The above tables in the year 2013 the total Current assets are increase by Rs 260.64
and the Total Current liabilities are decreased by Rs 56.14. Hence the working capital
increased by Rs 316.78.
53
31-Mar-12
31-Mar-11
Increase
Decrees
Current Assets
current investment
Inventories
983.93
924.97
58.96
Sundry Debtors
213.37
240.85
2253.72
2071.23
248.98
567.61
32.57
23.66
8.91
5276.4
3828.32
1448.08
Total
Current Liabilities
Short term Borrowings
-27.48
182.49
-318.63
0
0
trade payables
934.54
934.54
655.87
1588.13
1308.93
1106.11
202.82
2899.34
2694.24
205.1
-932.26
0
working Capital
2377.06
1134.08
1242.98
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54
Net working
Capital
Net Sales
Working
Capital Ratio
31-Mar-15
3322.51
9368.30
2.82
31-Mar-14
2857.67
9910.70
3.47
31-Mar-13
2693.84
9086.84
3.37
31-Mar-12
2377.06
9674.94
4.07
31-Mar-11
1134.08
7390.21
6.52
QUICK RATIO
Formula:
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55
Quick Ratio =
Quick Assets
Current liabilities
Table 2.2 Quick ratio of Amara Raja Batteries Ltd., company for the year 2008-2012.
year
Quick Asset
Current
Liabilities
Quick Ratio
31-Mar-15
5653.15
3226.09
1.75
31-Mar-14
5106.82
3137.54
1.63
31-Mar-13
4603.10
2843.20
1.62
31-Mar-12
4292.47
2899.34
1.48
31-Mar-11
3596.81
2694.24
1.33
56
Cash Ratio =
Current liabilities
Table 2.2 Quick ratio of Amara Raja Batteries Ltd., company for the year 2008-2012.
Years
Ratio (%)
RS
31-Mar-15
31-Mar-14
31-Mar-13
31-Mar-12
31-Mar-11
5653.15
5106.82
4603.10
4292.47
3596.81
3226.09
3137.54
2843.20
2899.34
2694.24
1.75
1.63
1.62
1.48
1.33
Current ratios:
Current assets
Current ratio = -----------------SVTM, MADANAPALLI.
57
Current Asset
Current
liabilities
Current Ratio
31-Mar-15
6548.60
3226.09
2.03
31-Mar-14
5995.21
3137.54
1.91
31-Mar-13
5537.04
2843.20
1.95
31-Mar-12
5276.40
2899.34
1.82
31-Mar-11
3828.32
2694.24
1.42
58
Ratio is 1.42, in the year 2012 ratio is 1.82, in the year 2013 ratio is 1.95, in
the year 2014 ratio is 1.91 and in the year 2015 ratio is 2.03.
SUGGETIONS
The company should maintain huge inventories, which results in high inventory
carrying cost.
SVTM, MADANAPALLI.
59
The firm go to the short term deposits are investment for surplus of quick Assets
CONCLUSION
The net working capital is sufficient, but the total assets, inventories are decreased.
The bank balance is less. In the Ambuja Cement there was increase the assets, inventory&
bank balance. If there is high properties they can face many problems. The net working
capital is high. The total properties are Very high in.
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BIBLIOGRAPHY
1. S.P.JAIN ANDK.L.NARANG
2. I M PANDEY
SVTM, MADANAPALLI.
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4. PRASANNA CHANDRA
FUNDAMENTALS OF FINANCIAL
MANAGEMENT
WEBSITE:
WWW.Ambujacement.com
WWW.google.COM
SVTM, MADANAPALLI.
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