1.

1 INTRODUCTION

A project is well organized and undertaken with related activities to achieve a goal of the study.

This project was undertaken at GANDHIMATHI APPLIANCES LTD. The Company is a profit

making organization, which manufactures and sells products like Cookers, flasks, mixers etc., It

export products to other countries which serves as source of revenue for the company.

Efficiency of the organization depends upon how well they manage their short term funds.

Hence, a study on working capital management is done in “GANDHIMATHI APPLIANCES

LTD”. Working Capital Management is concerned with the problems arise in attempting to

manage the Current assets, Current liabilities and the inter relationship between them. The goal

of working capital management is to manage the firm’s current assets and current liabilities in

such a way that the satisfactory level of working capital is maintained. The current assets should

be large enough to cover its current liabilities in order to ensure a reasonable margin of safety.

Working Capital Management policies have a great effect on firm’s profitability, liquidity and its

structural health. A Finance Manager should, therefore, check out appropriate working capital

management policies to ensure higher profitability, proper liquidity and sound structural health

of the organization

Every business needs adequate liquid resources in order to maintain day-To-day cash flow. It

needs enough cash to pay wages and salaries as they fall due and to pay creditors if it is to keep

its workforce and ensure its supplies.

1
Maintaining adequate working capital is not just important in the short-term. Sufficient liquidity

must be maintained in order to ensure the survival of the business in the long-term as well.

Even a profitable business may fail if it does not have adequate cash flow to meet its liabilities as

they fall due. Therefore, when businesses make investment decisions they must not only

Consider the financial outlay involved with acquiring the new machine or the new building, etc,

but must also take account of the additional current assets that are usually involved with any

expansion of activity. Increased production tends to engender a need to hold additional stocks of

raw materials and work in progress. Increased sales usually mean that the level of debtors will

increase. A general increase in the firm’s scale of operations tends to imply a need for greater

levels of cash.

2
 1.2 INDUSTRY PROFILE

India has emerged as one of the world's top ten countries in industrial production as per
UNIDO's new report titled 'Yearbook of Industrial Statistics 2010'.India surpassed Canada,
Brazil and Mexico in 2009 to reach the 9th position from the 12th position it held in 2008.

The Index of Industrial Production (IIP) quick estimates data for October 2010 shows a
growth of 11.3 per cent in the manufacturing sector as compared to October 2009. The
cumulative growth during April-October 2009-10 over the corresponding period of 2008-09 is 11
per cent, according to data by the Ministry of Statistics and Program Implementation.

The selling industry in India is generally defined as a low investments and high returns
affair. The rapid growth of the selling market in India means that sales in the country could bring
in more than $1 billion by the fiscal year ending March 2013. The World Federation of direct
Selling Associations made the forecast.

The Association pointed out that the current Indian market for direct selling products is
worth around U$600m and provides employment to around 1.8 million people, of which 1.2
million are women. Hence, though India continues to witness a phenomenal growth of shopping
malls and specialty retail stores, direct selling industry, too, is on a fast route to success.

3
GROWTH TRENDS:

India is ranked second in terms of manufacturing competence, according to report '2010

Global Manufacturing Competitiveness Index', by Deloitte Touché Tohmatsu and the US
Council on Competitiveness. The report states that the country's talent pool of scientists,
researchers, and engineers, together with its English-speaking workforce and democratic regime
make it an attractive destination for manufacturers.

India, the direct selling industry has shown a robust growth, bringing numerous
individuals in its fold through its entrepreneurial nature of activity. Today, the industry
encompasses a size of INR 33,300 million, bringing into its fold nearly 1.8 million people and
having posted a healthy growth rate of 17% in 2008-2009.”

HOMEAPPLIANCES

Home Appliances are that without which a modern home is considered incomplete, especially in
urban areas. We have become so used to some of the home appliances that it seems difficult to live
without them. Indeed, they have made our life more comfortable and easier than ever. In metro cities
and big towns, such household appliances are regarded as a boon, as they are instrumental in cutting
down the time involved in most of the domestic chores. This is really a great help since people often
find it difficult to keep a balance between professional obligation and household needs.

HOMEAPPLIANCES PRODUCTS:

Products such as microwave ovens, juicer- mixer- grinder, fully automatic washing machines, and
frost- free refrigerators are the most popular category of home appliances. This is because they have
made the work of housewives less tiresome and more enjoying. Most of the domestic appliances are
useful in various kitchen related jobs and hence are termed as kitchen appliances. Gas stoves,
toasters, microwave ovens, mixer & grinders, juicers & blenders, rotti makers, refrigerators, water
purifiers are some of the most common kitchen appliances in India. Besides, there is a category of
electronic products that have become an integral part of modern houses. These are air conditioners,
fans, room coolers, room heaters, geysers, electrical irons etc.

4
HOMEAPPLIANCES COMPANIES IN INDIA:

There are many Home Appliance companies in India like Videocon, Voltas, Godrej, Blue star, Ken
star etc. Apart from them there are various international companies also that deal in domestic
appliances. Some of these home appliances manufacturers are Samsung, LG, IFB, Whirlpool, and
Kenmore etc. With the arrival of international brands in Indian market, the competition among rival
companies have become stiff, which results in further improvement in qualities and depreciation in
prices of most of the home appliances in India. Since, a majority of products is electrically operated;
the focus is on such household appliances that are efficient in power consumption.

HOME APPLIANCE STORES

Most of the leading home appliances manufacturers and companies have set up their exclusive
retail outlets in important towns and cities of the country. Besides, there are local home
appliances suppliers, manufacturers, wholesalers and retailers spread throughout India. Apart
from that, Home Appliances stores and shops are located in every locality, which let you
compare products of different companies before buying and also let you buy all kinds of home
appliance products at one place. Some manufacturers also offer after sale service, and if needed,
repair the damaged parts of your electronic products. So here you will find the sites of some of
the leading Home Appliances manufacturers and suppliers.

Samsung: Samsung India has its head office in Delhi and 19 branches all over the country. It
manufacturers a comprehensive range of home appliances such as microwave ovens, refrigerator,
air conditioners and washing machines. All these products come in various sizes and styles and
offer various functions according to your need and budget.

LG- Life's Good: LG Electronics is a South Korean company and was established in India in
1997. They started their business with manufacturing of Color Televisions, LG Washing
Machines, Air-Conditioners and Microwave Ovens and other electronics products. Till date it
has gained a reputed name in Indian home appliances industry and serving their customers
satisfactorily from the past one decade.

5
Videocon: There are number of Home Appliances companies in India among which Videocon is
one of them who tops the list. Their domestic products include refrigerators of various types,
microwave, mixer grinder, television etc.

Godrej: Godrej is one of the prominent manufacturers of home appliances in India. Its domestic
appliances products include refrigerators, washing machines, air conditioners and cooking
ranges. Its kitchen appliances are vast such as rotti maker, sandwich maker, and toaster. They
offer full warranty on their products.

6
 1.3 COMPANY PROFILE

The Butterfly Group, Pioneers in Stainless Steel Appliances started operations four
decades ago. The company was the first in India, to introduce Stainless Steel Pressure Cookers
and Vacuum Flasks, and acquire the ISO 9002 certification, in the LPG and Mixie divisions.
Over the years, under the enterprising leadership of Mr. V Murugesa Chettiar and his sons,
Butterfly has grown to be a household name among millions in India.

Today, Butterfly manufactures a comprehensive range of home appliances, kitchen

products and cookware. Four state-of-the-art-manufacturing units, backed by the latest D
facilities ensure total compliance to standards of excellence in design and quality.

Quality and Consistency are our prime motivating factors. Our in-house design facilities,
tool & die-making facilities with an impetus on quality control, has enabled us to consistently
produce products of the highest quality sticking to the finest functionality norms.

The Company has state of the art manufacturing facility. The Company’s R&D
facilities has the latest design and development tools, Spectrum Analyzer etc. to keep up its
passion for progress at all levels. This passion would constantly give birth to new product ranges

Over the years, the BUTTERFLY Group has grown from just manufacturing a handful of
basic kitchen utensils to an organization involved in a comprehensive range of domestic
appliances, kitchen products and cookware.

Their products are also exported to the United Kingdom, Canada, Australia, Japan,
Middle East and the East Asian Countries, among others. Across the globe, Butterfly products
have been recognized for their quality standards by various international organizations.

The Success of Butterfly is attributed to its customer orientation. Serving the customer
with the finest quality products and adapting to the changing needs and tastes of customers have
been the company’s primary motive. BUTTERFLY is all set to conquer wider horizons.

7
 1.4 PRODUCT PROFILE

LPG STOVES

8
MIXER GRINDERS

TABLE TOP GRINDERS

9
 PRESSURE COOKERS

STAINLESS VACUUM FLASKS

STAINLESS STEEL VACUUM LUNCH BOX

10
 ELECTRIC COOKERS

The manufacture and sale of stainless steel home appliances, kitchen products, and
cookware products in India. The company’s Butterfly product line includes LPG stoves,
mixer grinders, tabletop wet grinders, pressure cookers, vacuum flasks and lunch boxes,

11
 and cookware sets. Its products also comprise electric cookers, kitchen sinks, water
filters, and dinner sets; and ensemble products. The company exports its products
primarily to the United Kingdom, Canada, Australia, Japan, the Middle East, and the East
Asian countries. Gandhimathi Appliances Limited is based in Chennai, India.

The company's products command a premium valuation in the home appliances market. The
company has excellent reach in South India and I don't have the details on North India. But, the
company has established branches across the country.

Today, it manufactures a comprehensive range of home appliances, kitchen products and

cookware. Four state-of-the-art-manufacturing units, backed by the latest R&D facilities ensure
total compliance to standards of excellence in design and quality.

12
 1.5 NEED FOR THE STUDY

Study of the working capital management is important because unless the Working Capital is

managed effectively, monitored efficiently, planed properly and reviewed periodically at regular

intervals, bottlenecks cannot be removed so that the company cannot earn Profit and increases its

turnover.

13
 1.6 OBJECTIVE OF THE STUDY

PRIMARY

To analyze the working capital management of Gandhimathi appliances.

SECONDARY

 To find out the size of working capital and to measure its liquidity and operational
efficiency by using ratio analysis.

 To make an element wise analysis of working capital and to identify the elements of
responsible for variable for variation in working capital

 To evaluate the performance of the company through inventory, receivables and each
management

 To project the important ratio is pertaining to working capital management for near future
year.

14
 1.7 SCOPE OF THE STUDY

The scope of the study is identified after and during the study is conducted. The study of

working capital is based on tools like RATIO ANALYSIS, WORKING CAPITAL ANALYSIS

& TREND ANALYSIS. Further the study is based on last 5years Annual Reports of

GANDHIMATHI APPLIANCES Ltd. And even factors like competitors analysis, industry

analysis were not considered while preparing this project.

15
 1.8 LIMITATION OF THE STUDY

• The project has been done with Annual Reports. It constitutes only a part of data

collection i.e. secondary. There were limitations to primary data due to confidentiality.

• The project is based on the Annual Report of five years. Conclusions and

recommendations are based on such limited data. The trend of last three years may or

may not reflect the actual Working Capital position of the company. Moreover, the time

given for our research was limited.

16
 2.1 REVIEWOF LITERATURE

WORKING CAPITAL MANAGEMENT

MEANING:

Working capital is the life blood and nerve centre of a business. Just as circulation of

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.

Working capital refers to that part of firm’s capital which is required for financing short

term or current assets such as cash, marketable securities, debtors, and inventories. In other

words working capital is the amount of funds necessary to cover the cost of operating the

enterprise.

Working capital means the funds (i.e.; capital) available and used for day to day

operations (i.e.; working) of an enterprise. It consists broadly of that portion of assets of a

business which are used in or related to its current operations. It refers to funds which are used

during an accounting period to generate a current income of a type which is consistent with

major purpose of a firm existence.

Working Capital = Current Assets

Net Working Capital = Current Assets − Current Liabilities

Equity Working Capital = Current Assets − Current Liabilities − Long-term Deb

17
DEFINITION:

Working capital is how much in liquid assets that a company has on hand. Working capital

is needed to pay for planned and unexpected expenses, meet the short-term obligations of

the business, and to build the business

OBJECTIVES:
Every business needs some amount of working capital. It is needed for following purposes-

• For the purchase of raw materials, components and spares.

• To pay wages and salaries.

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

expenses.

• To provide credit facilities to the customers.

FACTORS:

The working capital requirement of a concern depends upon a large number of factors such as

• Size of business

• Nature of character of business.

• Seasonal variations working capital cycle

18
 • Operating efficiency

• Profit level.

SOURCES:

The working capital requirements should be met both from short term as well as long term

sources of funds.

• Financing of working capital through short term sources of funds has the benefits of

lower cost and establishing close relationship with banks.

• Financing of working capital through long term sources provides the benefits of reduces

risk and increases liquidity

TYPES:

• Permanent working capital:

It refers to that minimum amount of investment in all current assets which is required at all times

to carry out minimum level of business activities.

• Temporary working capital:

The amount of such working capital keeps on fluctuating from time to time on the basis of

business activities.

19
NEED:

The amount of funds tied up in working capital would not typically be a constant figure

throughout the year. Only in the most unusual of businesses would there be a constant need for

working capital funding. For most businesses there would be weekly fluctuations. Many

businesses operate in industries that have seasonal changes in demand. This means that sales,

stocks, debtors, etc. would be at higher levels at some predictable times of the year than at

others.

In principle, the working capital need can be separated into two parts:

• A fixed part, and

• A fluctuating part

The fixed part is probably defined in amount as the minimum working capital requirement for

the year. It is widely advocated that the firm should be funded in the way shown in the diagram

below:

20
ADVANTAGES:

• It helps the business concern in maintaining the goodwill.

• It can arrange loans from banks and others on easy and favorable terms.

• It enables a concern to face business crisis in emergencies such as depression.

• It creates an environment of security, confidence, and overall efficiency in a business.

• It helps in maintaining solvency of the business.

21
DISADVANTAGES:

• Rate of return on investments also fall with the shortage of working capital.

• Excess working capital may result into over all inefficiency in organization.

• Excess working capital means idle funds which earn no profits.

• Inadequate working capital cannot pay its short term liabilities in time

A firm must have adequate working capital, i.e.; as much as needed the firm. It should be neither

excessive nor inadequate. Both situations are dangerous. Excessive working capital means the

firm has idle funds which earn no profits for the firm. Inadequate working capital means the firm

does not have sufficient funds for running its operations. It will be interesting to understand the

relationship between working capital, risk and return. Working capital sometimes is referred to

as “circulating capital”. Operating cycle can be said to be the heart of the need for working

capital. The flow begins with conversion of cash into raw materials which are, in turn

transformed into work-in-progress and then to finished goods. With the sale finished goods turn

into accounts receivable, presuming goods are sold as credit. Collection of receivables brings

back the cycle to cash.

22
CHANGES:

The excess of current assets over current liabilities is referred to as the company’s working

capital. The difference between the working capital for two given reporting periods is called the

change in working capital.

Changes in working capital is included in cash flow from operations because companies

typically increase and decrease their current assets and current liabilities to fund their ongoing

operations. When a company increases its current assets, it’s a cash outflow: The Company had

to shell out money to buy the extra assets. Likewise, when a company increases its current

liabilities, it’s a cash inflow: The added liabilities, such as short-term debt, provide money.

Changes in working capital simply show the net effect on cash flows of this adding and

subtracting from current assets and current liabilities. When changes in working capital are

negative, the company is investing heavily in its current assets, or else drastically reducing its

current liabilities. When changes in working capital are positive, the company is either selling off

current assets or else raising its current liabilities.

For the Pros

For many growing companies, changes in working capital are a little like capital spending: its

money the company is investing—in things like inventory—in order to grow. To get a true

picture of the cash a company is generating before investment, one can add back changes in

working capital to cash flow from operations. Another point: A negative value for changes in

working capital could mean the company is investing heavily in growth, or that something’s

23
gone wrong. If a company is having trouble selling its goods, inventories will balloon, and

changes in working capital will turn sharply negative.

The following are the “PRINCIPLES” for the preparation of working capital statement

INCREASE IN ASSET- INCREASES WORKING CAPITAL

DECREASE IN ASSET-DECREASES WORKING CAPITAL

INCREASE IN CURRENT LIABILITY-DECREASES WORKING CAPITAL

DECREASE IN CURRENT LIABLITY-INCREASES WORKING CAPITAL

SCHEDULE OF CHANGES IN WORKING CAPITAL

PARTICULARS YEAR YEAR INCREASE DECREASE

Rs Rs Rs Rs
CURRENT ASSET
• Cash XXX XXX XX -
• Bank Balance XXX XXX XXX -
• Stock XXX XXX - XXX
• Sundry debtors XXX XXX XXX -
• Trading Investment XXX XXX - XXX
• Prepaid expenses XXX XXX XXX -
XXX XXX
TOTAL(A)
CURENT LIABILITY
• Creditors XXX XXX XXX
• Bills payable XXX XXX XXX
• Outstanding expenses XXX XXX XXX
• Short term loans
• Bank overdraft XXX XXX XXX
XXX XXX XXX
XXX XXX
TOTAL(B)
WORKING CAPITAL(A-B) XXX XXX

24
NETINCREASE/DECREASE XXX XXX XXX
IN WORKING CAPITAL

WORKING CAPITAL CYCLE

As we know working capital is the life blood and the centre of a business. Adequate amount of

working capital is very much essential for the smooth running of the business. And the most

important part is the efficient management of working capital in right time. The liquidity position

of the firm is totally effected by the management of working capital. So, a study of changes in

25
the uses and sources of working capital is necessary to evaluate the efficiency with which the

working capital is employed in a business. This involves the need of working capital analysis.

The analysis of working capital can be conducted through a number of devices, such as:

• Ratio analysis.

• Working capital analysis

• Trend analysis.

26
 1. Working capital management: an urgent need to refocus

Abstract

Argues that attempts to improve working capital by delaying payment to creditors are counter-
productive to individuals and to the economy as a whole. Claims that altering debtor and creditor
levels for individual tiers within a value system will rarely produce any net benefit. Proposes that
stock reduction generates system-wide financial improvements and other important benefits.
Urges those organizations seeking concentrated working capital reduction

2. AN OPERATIONAL AUDIT OF WORKING CAPITAL MANAGEMENT

Abstract

An operational audit (or value-for-money audit) is an organized search for ways of improving
efficiency and effectiveness. Although internal auditors have traditionally performed most
operational audits, such audits are also conducted by external auditors and by company managers
who wish to make self-audits. Whoever performs an operational audit, the objective is to assist
managers in performing their daily functions more effectively and economically. In effect, an
operational audit is an early warning system for the detection of potentially destructive problems.
Traditionally, operational audits have been conducted by means of a questionnaire interview of
departmental employees. Virtually all large companies conduct operational audits in their major
production and service departments. However, working capital management has often been
ignored in these audits. Perhaps this oversight is caused by the view that the controllership and
treasury functions are high-level departments that are not susceptible to scrutiny by internal

27
auditors. Alternatively, the oversight may be attributable to the feeling that there is little
standardization of duties among controllers and treasurers in the management of working capital.
Whatever the reason, this article is intended to end the oversight. An operational audit can lead to
better management of working capital in the same way that it can lead to better management of a
production area. The questionnaire in Exhibit 1 can be used by internal auditors, or by a treasurer
who merely wants to perform a self-audit of his or her own department's efficiency and
effectiveness.

3. Working Capital Management and The Management of Foreign Exchange Risk

Abstract

As is true for all areas of financial management, working capital management is more complex
for the multinational corporation (MNC) than for firms engaged in only domestic operations.
Such incremental complexity is due to a number of reasons related to the effects of operating in
diverse economic and political climates and tax jurisdictions. This article is concerned with
selected aspects of how foreign exchange risk—the potential impact on a MNC's profitability,
net cash flows, and market value of a change in exchange rates—may affect working capital
management.

4. Effects of working capital management on SME profitability

Abstract

Purpose – The object of the research presented in this paper is to provide empirical evidence on
the effects of working capital management on the profitability of a sample of small and medium-
sized Spanish firms.

Design/methodology/approach – The authors have collected a panel of 8,872 small to medium-

sized enterprises (SMEs) covering the period 1996-2002. The authors tested the effects of
working capital management on SME profitability using the panel data methodology.

Findings – The results, which are robust to the presence of endogeneity, demonstrate that
managers can create value by reducing their inventories and the number of days for which their

28
accounts are outstanding. Moreover, shortening the cash conversion cycle also improves the
firm's profitability.

Originality/value – This work contributes to the literature in two ways. First, no previous such
evidence exists for the case of SMEs. Second, unlike previous studies, in the current work robust
test have been conducted for the possible presence of endogeneity problems. The aim is to ensure
that the relationships found in the analysis carried out are due to the effects of the cash
conversion cycle on corporate profitability and not vice versa.

5. Management of Working Capital: A Neglected Subject

Abstract

Economic recessions have severely stretched the financial resources of many businesses. One
result has been to focus attention on the management of working capital in companies that
have often had to remain solvent by shrinking.

6. The Mechanics, Determinants and Management of Working Capital Investment

Abstract

A multiperiod analysis of working capital investment is outlined. An attempt is also made to

clarify the objects of working capital management by reference to wealth maximization
orthodoxy.

29
 RESEARCH METHODOLOGY

Research is a careful investigation or enquiry especially through search for new fact in any
branch of knowledge

RESEARCH DESIGN

Research design is an overall operational pattern or frame work of the project that stipulates
on what information is to be collected, from which source any by which procedures. The
research design constitutes the blue print for the collection measurement and analysis of data

SOURCES OF DATA

Primary data

This refers to the information that is generated to meet the specific requirement of the
investigation at hand. The data collected by this method consist of all answers obtained with first
hand

In this research primary data is collected an unstructured interview with official

Secondary data

This refers to the information that is collected for a purpose other than to solve the specific
problems under investigation. This is not originally collected for the first time

In this research, secondary data are collected from company records profile, audited annual
report, and collected from on line integrated information system.

30
TOOLS AND TECHNIQUES OF THE STUDY

1. Statement Showing Changes In Working Capital

2. Ratio Analysis

3. Trend Analysis

31
 DATA ANALYSIS AND INTERPRETATION

4.1.1a TABLE SHOWING RETURN ON INVESTMENT

YEAR OPERATING CAPITAL RATIO

PROFIT EMPLOYED
2005 (51.57) 2226.69 (2.32)
2006 143.72 945.73 15.20
2007 488.45 2456.26 19.88
2008 1409.27 3159.35 44.61
2010 2790.62 6316.19 44.18

4.1.1b CHART SHOWING RETURN ON INVESTMENT

INFERENCE:

32
 4.1.2a TABLE SHOWING OPERATING PROFIT RATIO

YEAR OPERATING SALES RATIO

PROFIT
2005 (51.57) 2117.75 (2.43)
2006 143.72 3474.1 4.14
2007 488.45 6858.39 7.12
2008 1409.27 16055.57 8.77
2010 2790.62 2762.38 10.27

4.1.2b CHART SHOWING OPERATING PROFIT RATIO

INFERENCE:

33
 4.1.3a TABLE SHOWING NET PROFIT RATIO

year NET PROFIT SALES ratio

2005 170.27 2117.75 8.04
2006 (110.26) 3474.10 (3.17)
2007 291.3 6858.39 4.24
2008 950.14 16055.57 5.92
2010 1558.23 27162.38 5.73

4.1.3b CHART SHOWING NET PROFIT RATIO

INFERENCE:

34
 4.1.4a TABLE SHOWING FIXED ASSET TURNOVER RATIO

YEAR SALES FIXED RATIO

ASSETS
2005 2117.75 1677.72 1.26
2006 3474.10 1559.42 2.23
2007 6858.39 1475.63 4.65
2008 16055.57 1421.65 11.29
2010 27162.38 1934.37 14.04

4.1.4b CHART SHOWING FIXED ASSET TURNOVER RATIO

INFERENCE:

35
4.1.5a TABLE SHOWING WORKING CAPITAL TURNOVER RATIO

year SALES NET WORKING ratio

CAPITAL
2005 2117.75 548.97 3.86
2006 3474.10 613.69 5.66
2007 6858.39 980.62 6.99
2008 16055.57 1737.70 9.24
2010 27162.38 4381.82 6.20

4.1.5b CHART SHOWING WORKING CAPITAL TURNOVER RATIO

36
INFERENCE:

4.1.6a TABLE SHOWING DEBTORS TURNOVER RATIO

year SALES AVERAGE ratio

ACCOUNTS
RECEIVABLE
2005 2117.75 325.18 6.51
2006 3474.10 661.78 5.25
2007 6858.39 979.05 7.00
2008 16055.57 2157.67 7.44
2010 27162.38 2896.74 9.37

4.1.6b CHART SHOWING DEBTORS TURNOVER RATIO

37
INFERENCE:

4.1.7a TABLE SHOWING DEBTORS COLLECTION PERIOD RATIO

year MONTHS DEBTORS ratio

TURNOVER
RATIO
2005 12 6.51 1.84
2006 12 5.25 2.28
2007 15 7.00 2.14
2008 18 7.44 2.42
2010 18 9.37 1.92

4.1.7b CHART SHOWING DEBTORS COLLECTION PERIOD RATIO

INFERENCE:

38
 4.1.8a TABLE SHOWING CREDITORS TURNOVER RATIO

year PURCHASE AVERAGE ratio

ACCOUNTS
PAYABLE
2005 1167.53 1219.10 0.95
2006 2025.05 988.81 2.05
2007 3971.21 1363.19 2.91
2008 943.45 1062.53 0.88
2010 17260.06 1241.71 13.90

4.1.8b CHART SHOWING CREDITORS TURNOVER RATIO

INFERENCE:

39
4.1.9a TABLE SHOWING CREDITORS PAYMENT PERIOD RATIO

year MONTHS CREDITOR ratio

TURNOVER
PERIOD
2005 12 0.95 12.63
2006 12 2.05 5.85
2007 15 2.91 5.15
2008 18 0.88 20.45
2010 18 13.90 1.29

4.1.9b CHART SHOWING CREDITORS PAYMENT PERIOD RATIO

40
INFERENCE:

4.1.10a TABLE SHOWING CAPITAL TURNOVER RATIO

year SALES CAPITAL ratio

EMPLOYED
2005 2117.75 2226.69 0.95
2006 3474.10 945.73 3.67
2007 6858.39 2456.26 2.79
2008 16055.57 3159.35 5.08
2010 27162.38 6316.19 4.30

4.1.10b CHART SHOWING CAPITAL TURNOVER RATIO

INFERENCE:

41
 4.1.11a TABLE SHOWING INVENTORY TURNOVER RATIO

year SALES AVERAGE ratio

STOCK
2005 2117.75 3304.58 6.41
2006 3474.10 409.53 8.48
2007 6858.39 526.80 13.02
2008 16055.57 949.54 16.90
2010 27162.38 20095.37 13.52

4.1.11b CHART SHOWING INVENTORY TURNOVER RATIO

INFERENCE:

42
 4.1.12a TABLE SHOWING INVENTORY TURNOVER RATIO

year MONTHS INVENTORY ratio

TURNOVER
RATIO
2005 12 6.41 1.87
2006 12 8.48 1.42
2007 15 13.02 1.15
2008 18 16.90 0.94
2010 18 13.52 0.75

4.1.12b CHART SHOWING INVENTORY TURNOVER RATIO

INFERENCE:

43
 4.1.13a TABLE SHOWING CURRENT RATIO

year CURRENT CURRENT ratio

RATIO LIABILTIES
2005 918.79 1302.13 0.71
2006 1339.21 1799.69 0.74
2007 1808.23 2042.20 0.88
2008 3983.72 1877.97 2.12
2010 8998.35 2617.93 3.43

4.1.13b CHART SHOWING CURRENT RATIO

INFERENCE:

44
TABLE4.1.14: SHOWING CHANGES IN WORKING CAPITAL FOR THE YEAR 2004-
2005

PARTICULARS 2004 (Rs) 2005 (Rs) Increase In Decrease In

Working Working
Capital Capital
CURRENT ASSETS:
 Inventories 28,240,952 37,850,611 9,609,659
 Sundry debtors 30,149,397 32,518,484 2,369,087
 Cash & bank balance 8,704,943 2,520,045 6,184,898
 Loans & advances 21,864,527 1,898,724 2,874,803
TOTAL (A) 88,959,819 91,878,864
CURRENT LIABILITIES 97,208,244 1,27,786,473 30,578,229
PROVISIONS 1,922,576 2,426,798 5,04,222
TOTAL (B) 1,00,994,228 130213271
NET WORKING CAPITAL (A-B) 12,034,409 38,334,407
INCREASE IN WORKING 28,163,406 28,163,406
CAPITAL
TOTAL (38,334,407) (38,334,407) 40,142,152 40,142,152

INFERENCE:

The above table discloses that there is increase in working capital for the year 2004-2005
was 28,163,406

45
TABLE4.1.14: SHOWING CHANGES IN WORKING CAPITAL FOR THE YEAR 2005-
2006

PARTICULARS 2005 (Rs) 2006 (Rs) increase in decrease in

working working
capital capital
CURRENT ASSETS:
 Inventories 37,850,611 44,056,199 6,205,588
 Sundry debtors 32,518,484 66,178,617 33,660,133
 Cash & bank balance 2,520,045 5,173,136 2,653,091
 Loans & advances 18,989,724 18,513,108 4,76,616
TOTAL (A) 91,878,864 1,33,921,060
CURRENT LIABILITIES 1,27,786,473 1,76,777,339 48,990,866
PROVISIONS 2,426,798 3,192,143 7,65,345
TOTAL (B) 1,30,213,271 1,79,969,482
NET WORKING CAPITAL (A-B) 38,334,407 46,048,422
INCREASE IN WORKING 7,714,015 7,714,015
CAPITAL
TOTAL 46,048,422 46,048,422 50,232,827 50,232,827

INFERENCE:

The above table discloses that there is increase in working capital for the year 2005-2006
was 7,714,015

46
TABLE4.1.15: SHOWING CHANGES IN WORKING CAPITAL FOR THE YEAR 2006-
2007

PARTICULARS 2006 (Rs) 2007 (Rs) Increase In Decrease In

Working Working
Capital Capital
CURRENT ASSETS:
 Inventories 44,056,199 61,303,403 17,247,204
 Sundry debtors 66,178,617 97,905,231 31,726,614
 Cash & bank balance 5,173,136 6,104,041 9,30,905
 Loans & advances 18,513,108 15,509,853 3,003,255
TOTAL (A)
CURRENT LIABILITIES 1,76,777,339 1,99,699,994 22,922,655
PROVISIONS 3,192,143 4,520,000 1,327,857
TOTAL (B) 1,79,969,482 2,04,219,994
NET WORKING CAPITAL (A-B) (46,048,422) (23,397,466)
DECREASE IN WORKING 22,650,956 22,650,956
CAPITAL
TOTAL (46,048,422) (46,048,422) 49,904,723 49,904,723

INFERENCE:

The above table discloses that there is decrease in working capital for the year 2006-2007
was 22,650,956

47
TABLE 4.1.16: SHOWING CHANGES IN WORKING CAPITAL FOR THE YEAR 2007-
2008

PARTICULARS 2007 (Rs) 2008 (Rs) Increase In Decrease In

Working Working
Capital Capital
CURRENT ASSETS:
 Inventories 61,303,403 1,28,605,183 67,301,780
 Sundry debtors 97,905,231 2,15,767,012 1,17,861,781
 Cash & bank balance 6,104,041 6,661,365 5,57,324
 Loans & advances 15,509,853 47,338,780 31,828,927
TOTAL (A) 1,80,822,528 3,98,372,340 2,17,549,812
CURRENT LIABILITIES 1,99,699,994 1,77,263,353 22,436,641
PROVISIONS 4,520,000 10,533,147 6,013,147
TOTAL (B) 2,04,219,994 1,87,796,500
NET WORKING CAPITAL (A-B) (23,397,466) 2,10,575,840
INCREASE IN WORKING 2,33,973,306 2,33,973,306
CAPITAL
TOTAL 2,10,575,840 2,10,575,840 2,39,986,453 2,39,986,453

INFERENCE:

The above table discloses that there is increase in working capital for the year 2007-2008
was 2, 33,973,306

48
TABLE4.1.17: SHOWING CHANGES IN WORKING CAPITAL FOR THE YEAR 2008-
2010

PARTICULARS 2008 (Rs) 2010 (Rs) Increase In Decrease In

Working Working
Capital Capital
CURRENT ASSETS:
 Inventories 1,28,605,183 2,73,302,268 1,44,697,085
 Sundry debtors 2,15,767,012 2,89,674,337 739077325
 Cash & bank balance 6,661,365 18,131,145 11,469,780
 Loans & advances 47,338,780 3,18,727,391 2,71,388,611
TOTAL (A) 1,80,822,528 3,98,372,340
CURRENT LIABILITIES 1,77,263,352 1,42,925,858 34,337,494
PROVISIONS 10,533,147 1,18,866,804 1,08,333,657
TOTAL (B) 2,04,219,994 1,87,796,500
NET WORKING CAPITAL (A-B) 2,10,575,841 6,38,042,479
INCREASE IN WORKING 4,27,466,638 4,27,466,638
CAPITAL
TOTAL 6,38,042,479 6,38,042,479 1,08,333,657 1,08,333,657

INFERENCE:

The above table discloses that there is increase in working capital for the year
2008-2010 was 4, 27,466,638.

49
YEAR 2005 2006 2007 2008 2010
PROFIT 170.27 (110.26) 291.30 950.14 1588.23
(Rs in crores)

Y1= a+bx

Year Profit Deviation X X2 XY

From 2007
2005 170.27 -2 0 0 0
2006 (110.26) -1 1 1 (110.26)
2007 291.30 0 2 4 582.60
2008 950.14 1 3 9 2850.42
2010 1588.23 2 5 25 7941.15
TOTAL 2889.68 0 11 39 11263.91

N=5

Σy= Na+bΣx= 2889.68 -1

Σxy= aΣx+bΣx2=11263.91 -2

Solving 1 and 2 we get

a= (151.43)

b= 331.53x

The equation of the straight-line trend is

Y1 = - 151.43+331.53x

50
Trend values

Year X Y1= -151.43+331.53x Y1 Trend

2005 0 -151.43+331.53(0) -151.43
2006 1 -151.43+331.53(1) 180.10
2007 2 -151.43+331.53(2) 511.63
2008 3 -151.43+331.53(3) 843.16
2010 5 -151.43+331.53(4) 1506.22

As per the trend value, estimated profit of the year 2010 is 1506.22. However, actual profit for
the year 2010 is 1588.23. Therefore, there is a difference between actual and estimated values.
This difference is likely to be there because estimates are based on certain assumptions and only
in rare circumstances both the figures will completely coincide.

Trend value for 2011

Value X for the year 2011 will be 6

Y2011= - 151.43+331.53(6)

= -151.43+1989.18

Y2011=1837.75

51
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