SUMMER TRAINING PROJECT REPORT ON “
STUDY OF WORKING CAPITAL MANAGEMENT AT SUPERTECH S UPERTECH LTD
”
For the partial fulfilment for the Degree of
MASTER OF BUSINESS ADMINISTRATION
EXECUTIVE SUMMARY
Supertech Group “Pioneer in Real Estate Development over 20 years”, Supertech Supertech Group is a prominent name for development of high quality residential, commercial and shopping centres, Malls, Multiplexes and Hotels in NCR and other prominent places UP and Uttrakhand. Ut trakhand.
Supertech was promoted promoted by Mr. R.K. Arora Arora aged 48 years who is Civil Civil engineer by
profession,
having more that 25 years experience in construction and allied activiti es. Supertech Group started long back in 1995 with their flagship company “Supertech Construction Private Limited” (Name of the same company was changed to Supertech Limited subsequently). Supertech Limited is a company incorporated under the Indian Companies Act 1956. The group grew from small ll known brand “Supertech”. Supertech limited has company to a large corporate house of we well developed and constructed several prestigious group housing, Malls, Hotels, Multiplexes and Commercial complexes in and around Delhi. The group is known for its high quality construction, innovative designs and well planned amenities at prime location. The brand “Supertech” is well known in real estate industry and the group has successfully completed a number of residential and commercial complexes in Delhi NCR and Western W estern U.P.
Management At Supertech Limited. My Project is Study of Working Capital Management
The study was conducted at the Corporate office of Supertech Limited in Noida (U.P.). 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?
Objectives
To identify the financial strengths & weakness of the company.
Through the profit ratio, understand the profitability of the company.
Evaluating company s performance relating to financial statement analysis.
To know the liquidity position of the company with the help of current ratio.
To determine policy regarding profitability, liquidity and risk by considering company s objectives.
To determine the quantum and structure of current assets.
Determining the relationship between the current assets and current li abilities and hence liquidity is determined.
COMPANY PROFILE
Supertech Group, founded in 1988 , has set new trends and benchmarks benchmar ks of architectural architectu ral excellence in the contemporary global scenario. An ISO 9001:2000 certified company; Supertech has successfully completed 20 years in real estate business and today it has revolutionized the real estate arena. Under the dynamic and pragmatic leadership of Mr. R.K.Arora, Chairman & CMD and experienced Board Members, Supertech Group is scaling new heights and touched the horizon of excellence. excellence. Their vision and entrepreneurial entrepreneurial acumen and have taken the group to the greater heights.
All this dedication and commitment has enabled us to receive the coveted “Udyog Ratan Award”, 2001 for unparalleled contribution to this area. The greatest contributory factor to this landmark achievement is the vision of Mr. R.K. Arora whose entrepreneurial skills and business acumen have steered the group diligently on a growth path. Mr. Arora has also been bestowed with “Excellence Award” for the year 2001 for his outstanding contributions to real estate industry.
Supertech Group has already converted more than 33 million sq. ft. area of residential and commercial
entity
into
architectural
landmarks
and
more
than
36
projects
that
accommodates nearly 30000 families. Its various projects viz. Residential & Commercial Townships, Shopping Malls, Hotels and IT Parks have either completed or about to complete. We are inspired by our clients to endeavour the dreams turning into reality. realit y. Our commitment to deliver quality with aesthetic design surges ahead with the t he enterprising
vision of creating value through excellence. world class architecture shows true modern lifestyle.
In a span of 20 years, Supertech Limited has achieved an impressive growth. The annual turnover for the year ending 31
st
March 2012 stands at ₹ 1410 crores and profit after
tax(PAT) at ₹ 110 crores. The tangible tangible net worth of Supertech Supertech Limited is more than ₹ 430 crores as on 31
st
March 2012. „Supertech‟ as a brand name is registered with the
registrar of Trade Marks . The group has completed three shopping malls called “Shopprix” at sector-61, Noida, No ida, sector-5 Vaishali Vai shali and Kaushambhi, Kaushambhi , Ghaziabad respectively. respecti vely. The Group has completed group housing projects like “Supertech Residency”, “Supertech Estate” at Vaishali, Housing project “Rameshwar Orchid” at Kaushambhi and Housing Project “Icon” at Indrapuram, Indrapuram, Ghaziabad, Emerald Court, at Expressway Noida. The presently ongoing projects of the group include Residential Townships, Large Group Housing Complexes, Commercial Complexes, Multi Cineplex‟s & 5 Star Hotel Projects etc.
COMPANY’S CHAIRMAN PROFILE
R K Arora ( Chairman & Managing Director)
Mr. R K Arora is a Chairman & Managing Director of the Supertech Ltd. He has reappointed on th
April 2012 by the board of directors in 16 Annual General Meeting. He has a good entrepreneur entrepre neur skills which leads to the organization to maintain a sustainable growth. He is B.E. in civil engineering & has more than 28 years experience of this sector. He has also get Excellence Award for the year 2001 for his outstanding contribution to real estate industry.
In Board Board Of Directors Directors company company also also have 5 other directors who who have a great great entrepreneur
&
business skills whish leads organization to achieve a sustainable growth. They all have a more than 18 year of experience of different market sectors or corporate world.
Board of Directors-
Mrs. Sangita Arora (JMD)
Mr. Mohit Arora (Director)
Mr. Anil Sharma (Director)
Mr. G.L.Khera (Director)
Mr. Vikas Kansal (Director)
Corporate Social Responsibility (CSR)-
Realty major Supertech Ltd., a socially aware company, is significantly contributing towards growth of the society. The company is aware about its social responsibility to give back a certain share to the socio-economic growth. As part of the CSR the various initiatives of the company include:
Supertech provide public amenities like running of community centres, adoption and maintenance of parks and walkways where families spend time together further enriching their lives. The need of the project area and CSR C SR programmes are developed keeping in mind the identified need. Also, provision
of
ample
greenery
and
open
space
at
our
residential
projects.
The company believes in Social responsibility is about giving something back, and we do this with every project we take on. It believes in giving their clients a place to live, work and flourish. It builds
developments
that
enhance
their
surroundings
that
enrich
people's
lives.
Kaksha'' a CSR activity at its ongoing projects to educate the poor The company has just started ''Kaksha children in the area and the labourers working at construction project. The programme is an initiative of "Supertech Foundation" a Trust established by Mr. R. K. Arora and his family members.
Quality Policy-
Supertech Group has been awarded an internationally inter nationally recognized ISO 9001:2001 certification and “Udyog Ratan” Award for its quality standard. Supertech Group is constantly working towards creating new benchmarks of architectural excellence in the contemporary global environment. In this new environment, the demand for multi-faceted real estate development has become crucial for keeping pace with the progress. Capitalizing on these demand dynamics, we at Supertech Group have always taken new initiatives and emerged as one of the prominent entities.
Supertech introducing quality into every aspect of the Company ranging from Process, Human Resource, Technology and Services to create an all-encompassing quality culture. Developing collective willingness towards the discipline of doing things right by using perfect planning & state of the art technology and delivering highest quality Standard to the clients. Our strong Quality Consciousness and quest for continuous up gradation for ultra modern life-style and luxurious living standard. Our clients‟ interests are paramount priority for us. We want all our clients' investment to be safe & profitable.
We always try to research, innovate and improve on service quality. We also provide the most accurate information and added value in order to fulfil our clients‟ demands.
Organization Chart
Board of Directors
R.K. Arora (Chairman & Managing Director)
Director-Projects
Director-IT
Sunita Arora (Joint Managing Director)
Company Secretary
Director
CFO
(Mktg & Sales)
Vice president (HR)
SGM/GM
GM-HR
AM-IT
EXEC.-IT
EXEC.-IT
AM-HR
EXEC.-HR
EXEC.-HR
VP/AVP
Project Head
Engineers
SUPERVISOR
SUPERVISOR
VP/AVP
GM(Accounts)
GM(Finance)
GM(Mktg)
Mgr.
Mgr.
M r.
AM-Acct.
EXEC.-ACC.
EXEC.-ACC
AM-Fin.
EXEC.-FIN.
AM TL-Sales
EXEC.-FIN
EXEC
EXEC.
Financial Results of the Company:
The Company‟s performance during the financial years is Summarized below: (Rs. in crores)
Particulars
2009-10 (Audited)
Total Income 337.66 Less: Operative Expenses 283.41 Profit before Interest, Depreciation and 54.25 Taxation Less: Depreciation Depreciati on 0.68 Less: Interest 5.53 Less: Prior Period Item Profit Before Taxation 48.04 Less: Provision For Taxation -Current 10.41 -Deferred 0.03 Profit After Tax 37.59 Add: Profit Brought Forward 176.44 Balance Available For Appropriation 214.03 Appropriation Proposed Dividend on Equity Shares 0.39 Tax on Proposed Dividend 0.06 213.58 Balance Carried to Balance Sheet
2010-11 (Audited)
2011-12 (Provisional)
1333.67 1,189.01 144.65
1883.47 1674.06 209.41
2.33 5.05 10.53 126.74
6.71 63.59 139.34
27.36 0.16 99.22 213.58 312.80
29.30 0.25 111.56 311.9 423.46
0.78 0.13 311.89
423.46
Total Income ₹ 2,000.00
1883.47
₹ 1,800.00 ₹ 1,600.00 ₹ 1,400.00
s e r ₹ 1,200.00 o r c ₹ 1,000.00 n i . ₹ 800.00 s R
1333.67
₹ 600.00 ₹ 400.00
337.66
₹ 200.00 ₹ 0.00
2 0 0 9 -1 0
2 0 1 0- 1 1
2 0 1 1- 1 2
Profit After Tax 200 180 160 140
s e r 120 o r c 100 n i . 80 s R
111.56 99.22
60 40
37.59
20 0 2 0 0 9- 1 0
2 0 1 0- 1 1
2 0 1 1- 1 2
Earning Per Share 160 140
138.56 122.69
120 . s R100 n i t 80 n u o m 60 A
a r Y e c i a l a n F i n
48.36
40 20 0 2 0 0 9- 1 0
20 10 -11
2 0 1 1- 1 2
Company has excellent track record in paying interest and repayment of loan. Company has not defaulted even for a single day in interest & loan repayment. No account so far has been restructured with any bank. They have term loan facilities from following bankers:
1. Corporation Bank 2. Punjab National Bank 3. Indian Overseas Bank 4. Bank Of India 5. Indian Bank 6. ICICI Bank Ltd. 7. Oriental Bank Of Commerce(OBC) 8. UCO Bank 9. Kotak Mahindra Bank 10. HUDCO
COMPANY’S NEW PROJECT
SUPERNOVA
SUPERNOVA
It is the most awaited project of Supertech Limited. Supertech Group, after the successful launch development, has launched Supertech Supernova, of North Eye-North, India‟s tallest residential development, situated in NOIDA. This splendid project, which is the biggest project in North India, has mixeduse development development spread over the area of 5 million sq. sq . ft. The new township is set on beautiful lush green area to offer its residents luxurious lifestyle. Each plot has 70% open area. The project involves a 300 meter tall building that is going to be the tallest in North India. Supertech Supernova is build by keeping in mind the necessities of prominent clients who desire to have luxurious lifestyle, and it is comprised with all modern facilities like well appointed apartments with modern conveniences such as a clubhouse, jogging track, swimming pool and more. Supernova is having five towers. “Spira” – is – is the iconic tower, which is India‟s tallest mixed use development having 80 floors which stands at 300 meters. Supertech Supernova is offering mixed use development and offering Residential, Serviced Apartment, Hotels, Shopping Malls, Office Spaces and Recreational centres. Mixed use development and its benefits redefine this project as an Epicentre. This project reveals luxurious amenities, world class modern conveniences conveniences all around inside this complex. This project is very well scheduled and and designed with prominent prominent architects and consultants, consultants, who are working to offer high class facilities with long-lasting designs. Supertech Supernova as a residential community is contained with two luxurious hotels, premium and luxurious retail brands offices, deluxe residences, fully furnished serviced apartments, free entry and exits for all verticals etc.
Revenue Model of this project is as under: Particulars Of Project
Revenue Model
Hotel-1(Super Luxury)
Revenue from operations of Hotel
Hotel-2(Five Star)
Revenue from operations of Hotel
Retail
Lease Model
Office Area
50% sale 50% Lease
Service Apartments
Revenue From Operations
High end residential Apartments/
Sale Model
Cost of Project & Means of Finance (Rs. in Crores) Cost of P roject Payment for Land(During Cons truction Period) Interes t Cos t paid to NOIDA Authority Cons truction Cos t Cons ultancy, Admin & Marketing Expens es Interes t During Cons truction Period TOTAL Means Of Finance Loan From Bank/FI Promoters ers Co Contribu ibution ion(By (By way of Cap Capital ital & Unsecu secured Loan Loan)) Advances From Buyers TOTAL
Orignal 397.66 378.73 1241.34 136.26 180.71 2334.7
735.58 527.49 1071.63 2334.7
Detail Of Towers
Name Of Tower
Spira
No. Of Floors
79
Hotel & Serviced Apartment 45
Nova East
Nova West
Astralis
39
38
28
The Table Containing Combination of various segments in Different towers is as follows:
s u o i r a V r n e i l w a o i t T n e d i s e R n s s i r l u o e i t r o a H V T
t n s d e o s e m u i r c r i t e r a v r a V e p n o S A i T s e c d n e e ) d d K n i s a r e B 4 B R (
Towe r
Locati on In towe r
Uni ts
Total No. Of Floors
Spi ra(4BHK+3BHK)
5th To 17th Fl oor
8
13
Nova East(4BHK+3BHK)
5th To 39th Fl oor
8
35
Nova West(3BHK+2BHK)
5th To 38th Fl oor
8
34
Spi ra
53rd To 75th Fl oor
51
23
Hote l Tower
30th To 45th Fl oor
40
16
Spi ra
41st To 51st Fl oor
28
11
Hotel Tower
5th To 28th Floor
4
24
Spi ra
9th To 40th Floor
26
22
t n e
o i t r d a u p t S A
Payment Plan for Towers (Astralis, Nova, Spira) Flexi Flexi Payment Plan Within 15 days of Booking ₹ 5,00,000
With ithin 60 days ays of Bo Booking ing Balan Balance of of 10% 10%* On completion of foundati ation 40%* Down Payment On s tart of Ground Floor 9%* Booking Amount ₹5,00,000 On s tart of 5th Floor 9%* Withi Within 15 days of Booking Balance Balance of 10%* On s tart of 8th floor 9%* Within 30 days of Boo ooki kin ng 85%* On s tart of 12th Floor 9%* O npossession 5%* On Pos s es s ion 5%* * including all allied charges * includes all allied cahrges
Construction Link Payment Plan
Booking Amount
₹5,00,000
Wi thinn 45 Days Of Booki ng
Balance of 10%*
Wi thinn 60 Days Of Booki ng
10% of BSP
On Bhumi Poojan
10% of BSP
On Start of foundati on Work
10%+25% of ( LR)
On Start of Ground Fl oor
7.5%+25% of ( LR)
On Start of 2nd Floor
7.5%+25% of ( LR)
On start of 5th Floor
7.5%+25% of ( LR)
On Start of 8th Floor
7.5%+50% Car Parking 7.5%+50% 7.5%+50% Car Parking+25%of Park ing+25%of
On Start of 12th 12th Floor Floo r
IFMS+25% IFMS+25% of CRF 7.5%+50% 7.5%+50% Car Parking+25%of Park ing+25%of
On Start of 15th 15th Floor Floo r
IFMS+25% IFMS+25% of CRF 7.5%+50% 7.5%+50% Car Parking+25%of Park ing+25%of
On Completion of super structure
IFMS+25% IFMS+25% of CRF 7.5%+50% 7.5%+50% Car Parking+25%of Park ing+25%of
On Start of electrification work On off er of Possessi on
IFMS+25% IFMS+25% of CRF 5%
WHAT IS WORKING CAPITAL? Working capital refers to the investment by the company in short terms assets such as cash, marketable securities. Net current assets or net working capital refers to the current assets less current liabilities.
Symbolically, it means, Net Current Assets = Current Assets- Current Liabilities
DEFINITIONS OF WORKING CAPITAL:
The following are the most important definitions of Working capital:
1) “Working capital is the difference between the inflow and outflow of funds. In other words it is the net cash inflow “.
2) “Working capital represents the total of all current assets. In other words it is the Gross working capital, it is also known as Circulating capital or Current capital for current assets are rotating in their nature” nature ”.
3) “Working capital is defined as the excess of current assets over current liabilities and provisions. In other words it is the Net Current Assets or Net Working Capital” Capital”.
IMPORTANCE OF WORKING CAPITAL
Working capital may be regarded as the lifeblood of the business. Without insufficient
working capital, any business organization cannot run smoothly or successfully. In the business the Working capital is comparable to the blood of the human body.
Therefore the study of working capital is of major importance to the internal and external analysis because of its close relationship with the current day to day operations of a business. The inadequacy or mismanagement of working capital is the leading cause of business failures.
To meet the current requirements of a business enterprise such as the purchases of
services, raw materials etc. working capital is essential. It is also pointed out that working capital is nothing but one segment of the capital structure of a business. In short, the cash and credit in the business, is comparable to the blood in the human
body like finance s life and strength i.e. profit of solvency to the business enterprise. Financial management is called upon to maintain always the right cash balance so that flow of fund is maintained at a desirable speed not allowing slow down. Thus enterprise can have a balance between liquidity and profitability. Therefore the management of working capital is essential in each and every activity.
WORKING CAPITAL MANAGEMENT
INTRODUCTION:
Working Capital is the key difference between the long term financial management and short term financial management management in terms of the timing of cash. Long term finance involves the cash flow over the extended period of time i.e. 5 to 15 years, while short term financial decisions involve cash flow within a year or within operating cycle.
Working capital management is concerned with the problems that arise in attempting to manage the current assets, the current liabilities & the inter relationship that exists between them. The current assets refer to those assets which can be easily converted into cash in ordinary course of business, without disrupting the operations of the firm.
There are basically four components have to be managed in the working capital management because whole working wor king capital management based on it‟s components management.
PAYABLE
CASH
MANAGEMENT
MANAGEMENT
WORKING CAPITAL MANAGEMENT
RECEIVABLE MANAGEMENT
Composition of working capital Major Current Assets
1) Cash 2) Accounts Receivables 3) Inventory 4) Marketable Securities Major Current Liabilities
1) Bank Overdraft 2) Outstanding Expenses 3) Accounts Payable 4) Bills Payable
INVENTORY MANAGEMENT
The Goal of Capital Management is to manage the firm s current assets &liabilities, so that the satisfactory level of working capital is maintained. If the firm can not maintain the satisfactory level of working capital, it is likely to become insolvent & may be forced into bankruptcy. To maintain the margin of safety current asset should be large enough to cover its current assets.
Main theme of the theory t heory of working capital management is interaction between the current assets & current liabilities.
CONCEPT OF WORKING CAPITAL:
There are 2 concepts:
Balance Sheet Concept Operating Cycle Concept
Balance Sheet Concept: There are two interpretation of working capital under Balance Sheet Concept.
Focuses on, Gross working capital: - It is referred as total current assets. Focuses
Optimum investment in current assets:
Excessive investments impairs firms profitability, as idle investment earns nothing. Inadequate working capital can threaten solvency of the firm because of its inability to meet its current obligations. Therefore there should be adequate investment in current assets.
Financing of current assets:
Whenever the need for working capital funds arises, agreement should be made quickly. If surplus funds are available they should be invested in short term securities.
Net working capital (NWC)- defined in 2 ways, Difference between current assets and current liabilities. Net working capital is that portion of current assets which is financed with long term
funds.
NET WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITIES
If the working capital is efficiently managed then liquidity and profitability both will improve. They are not components of working capital but outcome of working capital. Working capital is basically related with the question of profitability versus liquidity & related r elated aspects of risk.
Implications of Net Working Capital:
Net working capital is necessary because the cash outflows and inflows do not coincide. In general the cash outflows resulting from payments of current liability are relatively predictable. The cash inflows are however difficult to predict. More predictable the cash inflows are, the less NWC will
be required. But where the cash inflows are uncertain, it will be necessary to maintain current assets at level adequate to cover current liabilities that are there must be NWC.
For evaluating NWC position, an important consideration is trade off between probability and risk. The term profitability is measured by profits after expenses. The term risk is defined as the profitability that a firm will become technically insolvent so that it will not be able to meet its obligations when they become due for payment. The risk of becoming technically insolvent is measured by NWC. If the firm wants to increase profitability, the risk will definitely increase. If firm wants to reduce the risk, the profitability will decrease.
Operating Cycle Concept: A company‟s operating cycle typically consist of three p primary rimary activities. Purchasing resources, Producing the product and Distributing (Selling)the product. If the firm is to maintain liquidity and function properly, it has to invest funds in various short term assets (Working Capital) during this cycle. It has to maintain a cash balance to pay the bills as they come due. In addition the company must invest in account receivables to extend credit to its customers.
We can show the operating cycle of a company in this way-
Purchase Resources
Pay for resources Purchases
Inventory Conversion Period
Sell Product on Credit Receivables Conversion Period
Payables Deferred Period
Cash Conversion Cycle Operating Cycle
Receive Cash
Operating cycle= Inventory conversion period + Receivable conversion period
Operating Cycle In Supertech Ltd-
In the above said statement it concludes that, There is a different procedure of operating cycle in this company, compare to others core manufacturing sector because it‟s a real estate company which is not a core manufacturing sector. So it is difficult to ascertain operating cycle for a particular period. Basically company follow the operating c ycle in this way e.g. company purchase raw material, Construction and selling it to the customers and after a certain period company generate cash from it. Here it is quite difficult to make relationship between the construction and cash generated from the sale.
NOTENOTE- Therefore we can say It is quite difficult to calculate the exact operating cycle period because it is difficult to ascertain in how much period product would be sold which can not identified here.
PLANNING OF WORKING CAPITAL:
Working capital is required to run day to day business operations. Firms differ in their requirement of working capital (WC). Firm s aim is to maximize the wealth of share holders and to earn sufficient return from its operations. WCM is a significant facet of financial management. Its importance stems fr om two reasons:
Investment in current asset represents a substantial portion of total investment.
Investment in current assets and level of current liability has to be geared quickly to change in sales.
Business undertaking required funds for two purposes:
To create productive capacity through purchase of fixed assets.
To finance current assets required for running of the business.
The importance of WCM is reflected in the fact that financial managers spend a great deal of time in managing current assets and current liabilities. The extent to which profit can be earned is dependent upon the magnitude of sales. Sales are necessary for earning profits. However, sales do not convert into cash instantly; there is invariably a time lag between sale of goods and the receipt of cash. WC management affect the profitability and liquidity of the firm which are inversely proportional to each other, hence proper balance should be maintained between two. To convert the sale of goods into cash, there is need for WC in the form of current asset to deal with the problem arising out of immediate realization of cash against good sold. Sufficient WC is necessary to sustain sales activity. This is referred r eferred to as the operating or cash cycle.
WORKING CAPITAL CYCLE:
A firm requires many years to recover initial investment in fixed assets. On contrary the investment in current asset is turned over many times a year. Investment in such current assets is realized during the operating cycle of the firm.
Each component of working capital (namely inventory, receivables and payables) has two dimensions ... TIME ......... and MONEY. When it comes to managing working capital - TIME IS MONEY. MONEY. If you can get money to move faster around the cycle (e.g. collect dues from debtors
more quickly) or reduce the amount of money tied up (e.g. reduce inventory levels relative to sales), the business will generate more cash or it will need to borrow less money to fund working capital. As a consequence, you could reduce the cost of bank interest or you'll have additional free money available to support additional sales growth or investment. Similarly, if you can negotiate improved terms with suppliers e.g. get longer credit or an increased credit limit; you effectively create free finance to help fund future sales. It can be tempting to pay cash, if available, for fixed assets e.g. computers, plant, vehicles etc. If you do pay cash, remember that this is now longer available for working capital. Therefore, if cash is tight, consider other ways of financing capital investment - loans, equity, leasing etc. Similarly, if you pay dividends or increase drawings, these are cash outflows and, like water Flowing down a plughole, they remove liquidity from the business
AR Converted Into Cash CASH
COLLECT ACCOUNT RECEIVABLES
SALE ORDER
Cash Converted to DELIVER GOODS/SERVICES
PURCHASE GOODS/SERVICES
Goods/Services Converted into AR
WORKING CAPITAL CYCLE
Prepaid expenses and Inventory
Comparative Balance Sheet for Three Years
PARTICULERS
AS AT 31.3.2010
AS AT 31.3.2011
AS AT 31.3.2012
Capital
7,77,00,000
7,77,00,000
7,77,00,000
Reserves and Surplus
2,13,58,07,783 2,13,58,07,783
3,11,89,60,308 3,11,89,60,308
4,23,12,58,710 4,23,12,58,710
Share Application Money(pending Money(pending allotment) LOAN FUNDS Secured Loans(B) Loans(B)
-
56,66,700
56,66,700
2,33,91,46,897 2,33,91,46,897
2,86,85,62,309 2,86,85,62,309
5,77,54,65,414 5,77,54,65,414
Unsecured Loans(C) Loans (C)
4,71,94,214
9,53,34,014
9,56,80,457
TOTAL(A+B+C)
4,59,98,48,894 4,59,98,48,894
6,16,62,23,331 6,16,62,23,331
10,18,57,71,281 10,18,57,71,281
FIXED ASSETS(D) Gross Block Less: Accumulated Depreciation
8,74,28,613 2,71,41,393
34,22,14,848 5,04,67,682
49,69,86,596 49,69,86,596 6,70,21,537
NET BLOCK (1)
6,02,87,220
29,17,47,166
37,94,97,376
Investment(E) Investment(E)
68,41,26,430
1,25,18,17,837
1,20,76,07,837
Deferred tax Assets/Liability(2) Assets/Liability(2)
680,741
(963,662)
(45,83,076)
CURRENT ASSET,LOANS AND ADVANCES Inventories(F) Inventories(F) 5,53,00,00,985
13,30,02,08,898
5,73,70,23,205
Sundry Debtors(G) Debtors(G)
73,68,03,369
2,16,41,14,233
9,43,35,47,853
Cash and Bank Balance(H) Balance (H)
48,52,60,801
2,48,10,93,076
1,15,55,50,106
Loans and Advances(I) Advances (I)
1,35,90,52,209 1,35,90,52,209
3,80,71,12,586 3,80,71,12,586
11,18,17,76,444 11,18,17,76,444
8,11,11,17,364
21,75,25,28,793
27,50,78,97,608
4,15,07,22,371 10,86,79,342 10,86,79,34 2 3,85,17,15,651 3,85,17,15,651
16,84,74,63,161 28,26,31,918 28,26,31,91 8 4,62,24,33,714 4,62,24,33,714
18,62,58,64,528 27,87,83,936 8,60,32,49,144 8,60,32,49,144
30,38,852
11,88,276
18,50,576
4,59,98,48,894 4,59,98,48,894
6,16,62,23,331 6,16,62,23,331
10,18,57,71,281 10,18,57,71,281
SOURCES OF FUNDS SHAREHOLDER’S FUNDS (A)
APPLICATION OF FUND
LESS:CURRENT LAIBILITIES AND PROVISION Current Liabilities(J) Liabilities(J) Provision(K) Provision(K) NET CURRENT ASSETS (3) {(F+G+H+I)-(J+K)} Miscellaneous Expenditure to the Extent Not Written Off Or Adjusted (L) TOTAL(1+E+2+3)
Profit & Loss Account for the years (2009-10, 2010-11, 2011-12)
(Rs. in crores)
PARTICULARS
I. II. III. IV.
Revenue from Operations Other Income Total Revenue(I+II) Expenses Cost of material Consumed Changes in Inventories of FG,WIP & Stock In Trade Employee benefits Expenses Finance Cost Depreciation Depreci ation and Amortization Other Expenses Total Expenses V. Profit before Exceptional, Extraordinary items & tax VI. Exceptional Items VII. Profit Before Extraordinary items & tax[V-VI] VIII. Extraordinary Items IX. Profit Before Tax X. Tax expense: (1) Current Tax (2) Deferred Tax XI. Profit/loss for the period
AMOUNT (Audited) (2009-10) 330.37 7.3 337.66
AMOUNT (Audited) (2010-11) 1322.42 11.24 1333.66
AMOUNT (Provisional) (2011-12) 1859.62 24.19 1883.81
64.12 208.71
273.58 (780.81)
273.58 749.16
4.60 5.53 0.68 5.99 289.62 48.03
36.97 37.67 2.32 1626.66 1196.39 137.28
32.93 63.59 6.71 618.55 1744.36 139.45
48.03
137.28
139.45
48.03
10.53 126.74
.060 139.40
10.41 .03 37.59
27.36 1.6 99.21
27.87 3.6 111.15
CASH MANAGEMENT
CASH MANAGEMENT
Cash management is one of the key areas of WCM. Apart from the fact that it is the most liquid asset, cash is the common denominator to which all current assets, that is, receivables & inventory get eventually converted into cash. Cash is oil of lubricate the ever-turning wheels of business: without it the process grinds to a shop.
Motives for holding cash:
Cash with reference to cash management is used in i n two senses: It is used broadly to cover currency and generally accepted equivalents of cash, such as cheques, drafts and demand deposits in banks. It includes near-cash assets, such as marketable securities & time deposits in banks.
The main characteristic of these is that they can be readily sold & converted into cash. They serve as a reserve pool of liquidity that provides cash quickly when needed. They provide short term investment outlet to excess cash and are also useful for meeting planned outflow of funds.
CASH IS MAINTAINED FOR FOUR MOTIVES:
A. Transaction motive:
Transaction motive refer to the holding of cash to meet routine cash requirements to finance the transactions which a firm carries on in a variety of transactions to accomplish its objectives which have to be paid for in the form of cash. E.g. payment for purchases, wages, operating expenses, expenses,
financial charges like interest, taxes, dividends etc. Thus requirement of cash balances to meet routine need is known as the transaction motive and such motive refers to the holding of cash to meet anticipated obligations whose timing is not perfectly synchronized with cash receipts.
B. Precautionary motive:
A firm has to pay cash for the purposes which cannot be predicted or anticipated. The unexpected cash needs at the short notice may be due to:
Floods, strikes & failure of customer
Slowdown in collection of current receivables r eceivables
Increase in cost of raw material
Collection of some order of goods as customer is not satisfied
The cash balance held in reserves for such random and unforeseen fluctuations in cash flows are called as precautionary balance. Thus precautionary cash provides a cushion to meet unexpected contingencies. contingencies. The more unpredictable are the cash flows, the larger is the need for such balance.
C. Speculative motive:
It refers to the desire of the t he firm to take advantage of opportunities which present themselves at unexpected moment & which are typically outside the normal course of business. If the precautionary motive is defensive defensive in nature, in that firms must make provisions to tide over unexpected contingencies, contingencies, the speculative motive represents a positive and aggressive Approach. The speculative motive helps to take advantages of:
An opportunity to purchase raw material at reduced price on payment
Of immediate cash.
A chance to speculate on interest rate movements by buying securities When interest rates are expected to decline.
Make purchases at favourable price.
Delay purchase of raw material on the anticipation of decline in prices.
OBJECTIVES OF CASH MANAGEMENT
To meet the cash disbursement needs
In the normal course of business firms have to make payment of cash on a continuous and regular basis to the supplier of goods, employees and so son. Also
the collection is done from the debtors. Basic objective is to meet payment schedule that is to have sufficient cash to meet the cash disbursement needs of the firm.
To minimize the funds committed to cash balances First of all if we keep high cash balance, it will ensure prompt payment together with all the advantages. But it also implied that the large funds will remain idle, as cash is the non-earning asset and firm will have to forego profits. On the other hand, low cash balance mean failure to meet payment schedule. Therefore we should have optimum level of cash balance.
FACTORS DETERMININING CASH NEEDS
Synchronization Synchronization of cash - need for the cash balances arises from the non-synchronization of the inflows & outflows of cash. First need in determining cash needs is, the extent of non-synchronization of cash receipts & disbursements. For this purpose cash budget is to be prepared. Cash budget point out when the firm will have excess or shortage of cash.
Short cash- Cash period reveals the period of cash shortages. Every shortage of cash whether expected or unexpected involves a cost depending upon the security, duration & frequency of shortfall & how the shortage is covered. Expenses incurred as a shortfall are called short costs.
There are following costs included in the t he short cash:
Transaction cost: this is usually the brokerage incurred in relation to the some short-term
near-cash assets like marketable securities.
Borrowing costs: these include interest on loan, commitment charges & other expenses
relating to loan.
Loss of cash discount: that s a loss l oss because of temporary shortage of cash.
Cost associated with deterioration of credit rating.
Penalty rates: By a bank to meet a shortfall in compensating balances. balances.
Excess cash balance - cost associated with excessively large cash balances is known as
excess cash balance cost. If large funds are idle the implication is that the firm has missed the opportunity to invest those funds and has thereby lost interest. This loss of interest is primarily the excess cost.
Procurement & Management cost: establishing and and operating operating cash cost : cost associated with establishing
management staff and activities. They are generally fixed and accounted for by salary, handling of securities etc.
Uncertainty: the first requirement in cash management is Precautionary cushion to cope
with irregularities in cash flows, unexpected delays in collection &disbursements, defaults and unexpected cash needs.
DETERMINING THE CASH NEEDS IN A COMPANY There are two ways to determine the cash needs-
Planned way Unplanned way
PLANNED WAY
DETEMINING THE CASH NEEDS UNPLANNE D WAY
Planned way :
Cash needs can be determined through preparing cash budget, for the year, month, week etc. Cash reports, providing a comparison of actual development with forecast figures, are helpful in controlling and revising cash forecasts on a continual basis. The i mportant cash reports are-
The daily cash reports
Daily treasury reports
The monthly cash report
By preparing of these reports cash needs can be easily identified and fulfilled accordingly.
Unplanned way:
There is no requirement to make a cash budget or any other statement relating to fulfil the cash needs here. In this way as timely requirement has to be generated, it has to be fulfilled from cash available. As such in this regard there in no certain plan to meet out the cash needs.
INVENTORY MANAGEMENT
Inventory management-
Inventory Management is concerned with keeping enough products on hand to avoid running out while, at the same time maintaining a small enough inventory balance to allow for a reasonable return on investment. Proper Inventory management is important for the financial help of the corporation. Being out of stock forces customers to turn to competitors or results in a loss of sales. Excessive level of inventory, however, results in large inventory carrying cost, including the cost of the capital tied up in inventory warehouse fee, insurance etc. A major problem with managing inventory is that a demand for a corporation‟s product is to a degree uncertain. The supply of the raw material used in its production process is also somewhat uncertain. In addition the corporation‟s own production contains some degree of uncertainty due to possible equipment breakdowns and labour difficulties. Because of these possibilities, inventory acts as a shock absorber between product demand and product supply. If product losing sales unit production can be stepped up enough to select the unexpected demand. However, inventory is difficult to manage because it crosses so many line so of responsibility
Why Inventories Exist? Some function of the firm, such as the purchase of the raw materials, processing and having finished goods available for sale, have a sequential, physical dependence.
Maintenance of
inventories allows the firm to decuple these functions so that each can be planned, schedule and operated independen i ndependently. tly.
Types of inventories -
RAW MATERIALS
WORK-INPROGRESS
FINISHED GOODS
Raw Materials - An inventory of raw materials allows separation of production scheduling from arrival of basic inputs to the production process. Factors affecting the amount of the raw materials inventory include proximity to the supplier, relationship with the supplier, predictability of the production process, lead time required to place an order, transportability of materials.
Work in Progress - An inventory of partially completed units allows the separation of different phases of the production process. The amount of work in process inventory is in part a function of the type of product, the measurement measurement period and the nature of the production process.
Finished Goods - An inventory of finished goods allows separation of production from selling. With a stock of finished merchandise on hand, a firm can fill orders as they are received rather than depend upon the completion of production to satisfy customer demands.
Motives of holding of InventoryEconomists have established three motives of holding inventories are as followsTransactions motiveThe transaction motive for holding inventory is to satisfy the expected level of activities of the firm. Precautionary Motive – The precautionary motive is to provide cushion in case the actual level of activity is different than anticipated. Speculative MotiveThe speculative motive for holding inventory might entice a firm to purchase a larger quantity of materials than normal in anticipation of making abnormal profits. Advance purchase of raw materials in inflationary times is one form of speculative behaviour. A second reason for speculative inventory purchase purchase may involve an anticipated change in a product. Factors to be considered when determining optimum stock levels include:
What are the projected sales of each product? How widely available are raw materials, components etc.?
How long does it take for delivery by suppliers? Can you remove slow movers from your
product range without compromising best sellers?
RECEIVABLE MANAGEMENT
INTRODUCTION-
Receivable Management refers to the decisions a business makes regarding to overall credit and collection policies and the evaluation of individual credit applications. In formulating an optional credit policy, marginal benefits and costs associated with changes in credit standards, credit terms , collection efforts etc. etc. Receivable management management proves for a firm, both, an asset and a problem: problem: an asset because of the promise of a future cash flow and a problem because of the need to obtain financing while waiting for the future cash flow.
Company Credit Policy - Company is providing a credit period of 30days to its customers. Basically it‟s not a core manufacturing company. It‟s a real estate company. If any Customer is not able to pay the due amount to the company in given period that condition company provides a 15 days extension in existing period but for this there is an approval required signed by the CEO of the company.
Cost of maintaing Receivables Cost of financing - The credit sales delays the time of sales realization and therefore the time gap between incurring the cost and the sales realization is extended. This result is blocking of funds for a longer period. On the other hand company has to arrange funds to meet its obligation. These funds are to be procured at some explicit cost or implicit cost.
Administrative Cost - a firm will also be required to incur various costs in order to maintain the record of credit customers both before the credit sales as well as after the credit sales. Before credit sales, costs are incurred on obtaining information regarding credit worthiness of the customers.
Delinquency Costs - over and above the normal administrative cost of maintaing and collection of receivables, the firm may have to incur additional costs, if there is delay in payment by a customer.
Cost of Default by Customers Customers-- if there is a default by a customer and the receivables becomes, partly or wholly, unrealizable then this amount, known as bad debt, also becomes a cost to the company. In receivable Management there are four things which is to be managed by the company as follows-
Credit Sales - Changing credit standards can also be expected to change the volume of sales. As standards are relaxed, sales are expected to increase with relaxation in credit standards and decrease if credit standards become more restrictive off between Credit Policy - the credit policy of a company can be regarded as a kind of trade – off increased credit sales regarding to increase in profit and the cost of having larger amount of cash locked up in the form of receivables and the loss due to the i ncidence of bad debts. – this cost have to be beard by the company if it choose an external agency or Factoring cost – this institution for collecting the money from debtors.
Opportunity cost of investment - if the company provide a more relaxation in credit period in that situation more funds have to be blocked, the result is company will lose opportunity to invest somewhere else for this company have to be beard some cost.
PAYBLES MANAGEMENT
Creditors are a vital part of effective cash management and should be managed carefully to enhance the cash position. Purchasing initiates cash outflows and an over-zealous purchasing function can create liquidity problems. Consider the following:
Who authorizes purchasing in your company - is it tightly managed or spread among a
number of (junior) people?
Are purchase quantities geared to demand forecasts?
Do you use order quantities, which take t ake account of stock holding an purchasing costs?
Do you know the cost to t o the company of carrying stock?
Do you have alternative sources of supply? If not, get quotes from major suppliers and
shop around for the best discounts, credit terms, and reduce dependence on a single supplier.
How many of your suppliers have a returns policy?
Are you in a position to pass on cost increases quickly through price increases to your
customers?
If a supplier of goods or services lets you down can you charge back the cost of the delay?
Can you arrange (with confidence!) to have delivery of supplies staggered or on a just-in-
time basis?
There is an old adage in business that if you can buy well then you can sell well. Management of your creditors and suppliers is just as important as the management of your debtors. It is important to look after your creditors -slow payment by you may create ill feeling and can signal that your company is inefficient (or in trouble!).
Company Policy – Company purchase purchase cement always on cash basis from some major suppliers i.e. ACC
Cement, Ultratech Cement & J.K.Cement etc. purchase iron rods r ods and other Materials on the basis of 30days credit basis from Company purchase the suppliers. Company purchase purchase electronics items on the basis of 15 days.
DATA INTERPRETATION & RATIO ANALYSIS
CURRENT RATIO
Current Assets CURRENT RATIOCurrent Liabilities (Rs. in Crores )
Year
2009-10
2010-11
2011-12
Current Assets Current Liabilities Current Ratio
811.11 415.07 1.95:1
2175.25 1684.74 1.29:1
2750.79 1862.69 1.48:1
Current Ratio 3 2.5 2 1.5 1 0.5 0 2009-10 2010-11 2011-12
Interpretation In 2012 company company current ratio is 1.48 which is good in comparison to last year year for a company to pay their obligations but in 2009 company have a current ratio of 1.95 which showed that company have a more current assets in that year.
QUICK RATIO
Liquid Assets Quick RatioCurrent Liabilities ( Rs. in Crores )
Year
2009-10
2010-11
2011-12
Liquid Assets Current Liabilities Quick Ratio
258.11 415.07 0.67
845.25 1684.74 0.49
2177.09 1862.69 1.17
Quick Ratio 1.4 1.17
1.2 1 0.8
0.67
0.6
0.49
0.4 0.2 0 2 0 0 9 -1 0
2 0 1 0- 1 1
2 0 1 1- 1 2
Interpretation: In 2009 company had a quick ratio i.e. 0.67 which was goes down in 2010 i.e. 0.49 but in 2012 company have a better quick ratio i.e. 1.17 in comparison to last two years which shows that company has able to reduce the blockage blockage in inventory this year and and also able to generate the the more liquidity for the company. company.
Debtors Collection Period 12 months Debtors Collection PeriodDebtors Turnover Ratio
Particulars Period In Months DT Ratio DCP in months
2009-10 12 5.2 2.30
2010-11 12 9.11 1.31
2011-12 12 3.2 3.75
Debtors Collection Period 4 3.75 3.5 3 2.5
2.3
2
DCP in Months
1.5
1.31
1 0.5 0 2 0 0 9- 1 0
2 0 1 0- 1 1
20 1 1 -12
InterpretationIn 2012 company have a collection period of 3.75 months in compare to last two years in this time period company has able to collect due amount as per the company credit policy and it is also helpful to reduce the blockage of funds which gives a more opportunity to invest somewhere but in 2010 company had a 1.31 moths collection which showed more blockage of funds and in 2009 company
had
the
very
good
level
in
collection
period
in
compare
to
2009.
CREDITORS PAYMENT PERIOD 12 Months Creditors Payment PeriodCreditors Turnovers Ratio
Particulars Period in months C.T.R. C.P.P.
2009-10 12 2.02 5.94
2010-11 12 1.94 6.18
2011-12 12 1.95 6.15
Creditors Payment Period 6.2
6.18
6.15
6.15
6.1 6.05 6
CPP in Months
5.95
5.94
5.9 5.85 5.8 2 0 0 9- 1 0
2 0 1 0- 1 1
2 0 1 1 -1 2
Interpretation: 2010-11 shows the the highest CPP i.e. 6.18 because because in this year creditors variation in regards regards to purchase are satisfactory and have also increased increased compare to 2009-10 2009-10 or 2011-12 therefore CTR CTR is also higher higher which affect the CPP. In 2009-10 2009-10 CPP is lower because because in this year year purchase have more varied varied in compare compare to creditors therefore therefore CTR
more which which affect the CPP. But But in 2011-12 2011-12
there is a minor variation in to CTR & CPP because creditors increased in to a same way in which purchase have increased.
INTEREST COVERAGE RATIO EBIT Interest Coverage RatioInterest (Rs.in Crores) Particulars Interest EBT EBIT I.C.R.(in times)
2009-10 5.53 48.04 53.57 9.69
2010-11 5.05 126.74 131.79 26.09
2011-12 63.01 139.34 202.35 3.21
Interest Coverage Ratio 30 26.09
25 20 15 10
9.69
5 3.21 0 2 0 0 9- 1 0
2 0 1 0- 1 1
2 0 1 1 -1 2
Interpretation: In 2010 company have a good interest coverage coverage ratio 26.90 which shows shows that company have have very good image in paying the interest interest but in 2012 company have a ratio of 3.21 times which is not for a good because it shows that company is not able to pay its obligations and it also shows the blockage of funds.
DEBT TO EQUITY RATIO
Total Debts Debt Equity RatioEquity (Sh. Capital+ Reserve & Surplus) (Rs. in Crores) Particulars Equity Total Debt D.T.E.R.
2009-10 221.35 238.63 1.07
2010-11 320.24 296.39 0.90
2011-12 430.18 587.11 1.36
Debt Equity Ratio 1.6 1.4
1.34
1.2 1.07
1
0.9 0.8 0.6 0.4 0.2 0 2 0 0 9- 1 0
20 10 -11
2 0 1 1- 1 2
Interpretation: In 2011 company have 1.34 debt equity ratio which is more in compare to last two years its shows that company are using more debt in their capital structure. The reason of increasing debt is in this year company have taken more loan because of launching of some new projects. In 2010 company have a satisfactory situation situation but in 2009 it is 1.07 which is more in compare to 2010
,GROSS PROFIT RATIO
Gross Profit Gross Profit Ratio:-
×100 Sales (Rs. in Crores)
Particulars Gross Profit Sales G.P. Ratio (in %)
2009-10 48.03 330.37 14.53
2010-11 137.28 1333.67 10.29
2011-12 139.45 1883.81 7.40
G. P. Ratio 16
14.53
14 10.29
12 10
7.4
8
Ratio in %
6 4 2 0 2 0 0 9- 1 0
2 0 1 0- 1 1
2 0 1 1- 1 2
Interpretation: It shows that company have a highest gross profit ratio i.e. 14.53 in 2010 but its goes down in 2011 & 2012 doe to increase of expenses i.e. finance cot & other expenses in compare to last two year. In 2012 company have a G.P. ratio of 7.4 which is least to last two years due to high increment in expenses.
TOTAL ASSETS TURNOVER RATIO
Net Sales Total Assets Turnover RatioAverage Total Assets (Rs. in Crores) Particulars Total Fixed Assets(Opening + Closing) Average Fixed Assets(Opening + Closing)/2 Total Current Assets(Opening + Closing) Average Current Assets (Opening + Closing)/2 Average Total Assets(AFA+ACA) Net Sales Total assets Turnover Ratio
2009-10 6.03 3.02 811.11 405.55
2010-11 29.17 14.62 2175.25 1087.625
2011-12 37.95 18.95 2750.79 1375.395
408.57 337.66 0.826
1102.245 1333.66 1.21
1394.345 1883.81 1.35
Total Assets As sets Turnover Ratio 0.826 1.35
2009-10 1.21
2010-11 2011-12
Interpretation:In 2010 company having a total assets turnover ratio rati o of 0.826 which is increased in 2011 by 0.384 due to increase in sales i.e. 337.66 to 1333.66 but in 2012 there is a slight increment in total assets turnover ratio is 0.14 . it has happened also because of increment in sales of 550.15 crores .
WORKING CAPITAL TURNOVER RATIO
Net Sales WORKING CAPITAL TURNOVER RATIO: Net Working Capital
Particulars Net Sales Net Working Capital WCTR
2009-10 337.66 385.17 0.88
2010-11 1333.66 460.25 2.89
2011-12 1883.47 860.32 2.19
WCTR 3.5 3
2.89
2.5 2 1.64
1.5 1
0.88
0.5 0 2 0 0 9 -1 0
2 0 1 0- 1 1
2 0 1 1 -1 2
Interpretation: In 2011 company have 2.89 working capital turnover ratio which is more in compare to 2010 i.e. 0.88 it means company have more blockage of funds in 2011 but in 2012 it is 1.64 which is less from2010.
WORKING CAPITAL AND SALES st
As on 31 March
(Rs. in Crores)
Particulars
2009-10 385.17
2010-11 460.25
2011-12 860.32
337.66
1333.66
1883.17
114.29
34.66
45.68
Working Capital Sales % Of Sales
DEBTORS AND WORKING CAPITAL As on 31st March (Rs. in Crores)
Particulars Debtors Working Capital % of WC
2009-10 73.68 385.17 19.12
2010-11 217.41 460.25 47.23
2011-12 943.35 860.32 109.65
CREDITORS AND WORKING CAPITAL As on 31st March (Rs. in Crores) Particulars Creditors Working Capital
2009-10 415.07
2010-11 1684.75
2011-12 1862.58
385.17
460.25
860.32
As a % of WC
107.76
366.05
216.43
DEBTORS AND SALES st
As on 31 March (Rs. in Crores) Particulars Debtors Sales As a % sales
2009-10 73.68 337.66 21.82
2010-11 217.41 1333.66 16.30
2011-12 943.35 1883.17 50.09
RESEARCH METHODOLOGY
RESEARCH METHODOLOGY
Research TypeType- This Is an Analytical Research which is to be based on secondary data.
The whole secondary data have collected from various sources like Annual Reports of the company. Magazines, Reports in the company. Policy documents of finance departments. Tally & SAP softwares.
After collection of these data analysis has to be done for fulfilling the research objective
FINDINGS
Company revenue is increasing year by year which shows its growth.
Increment in Gross Profit in compare to last year.
Company have a Liquidity Ratio of 1.17 in i n current year which that company have a sufficient liquidity to pay their obligations.
Company have a 6.15 creditors payment period in compare to debtors collection period i.e. 3.75 in current year. It means company have a more opportunity for investment.
Company have have a 1.64 working capital turnover turnover ratio in current year which is less from last year i.e. 2.89 it also shows that blockage in funds is less in compare to last year.
SUGGESTIONS
It can be said that overall financial position of the company is normal but it is required to be improved from the profitability point of view.
Company should try to reduce the receivable r eceivable period so that blockage of funds can be reduced.
Company should try to pay interest timely on long term debts.
Company should not rely on Long-term debts.
Company should try to increase Volume based sales so as to stand in the competition.
LIMITATION
Operating cycle cannot be clearly determined here because it is Real Estate Company rather than core manufacturing m anufacturing company.
Company used unstructured way to meet out the daily expenses from available cash balance.
Optimum inventory level cannot be determined here.
ANNEXURS
Statement of Changes in Working Capital (2009-10) Particulars A) Current Assets Inventory Sundry Debtors Cash & Bank Loan & Advances Total Current Assets B) Current Liabilities Sundry Creditors Provision Total Current Liabilities Net Current Assets Net Increase in Working Capital
2009
2010
Increase
319.17 53.38 22.33 80.99 475.87
553.03 73.68 48.53 135.9 811.14
233.86 20.3 26.2 54.91
126.31 7.28 133.59 342.28
415..07 10.87 425.94 385.2
Decrease
288.76 3.59
42.92
Statement of Changes in Working Capital (2010-11)
Particulars A) Current Assets Inventory Sundry Debtors Cash & Bank Loan & Advances Total Current Assets B) Current Liabilities Sundry Creditors Provision Total Current Liabilities Net Current Assets Net Increase in Working Capital
2010
2011
Increase
553.03 73.68 48.53 135.9 811.14
1330.02 216.41 248.11 380.71 2175.25
776.99 142.73 199.58 244.81
415.07 10.87 425.94 385.2
1684.75 28.26 1713.01 462.24
Decrease
1269.68 17.39
77.04
Projection of Changes in Working Capital (2011-12)
Particulars A) Current Assets Inventory Sundry Debtors Cash & Bank Loan & Advances Total Current Assets B) Current Liabilities Sundry Creditors Provision Total Current Liabilities Net Current Assets Net Increase in Working Capital
2011
2012
1330.02 216.41 248.11 380.71 2175.25
573.7 943.35 115.55 1118.18 2750.78
1684.75 28.26 1713.01 462.24
1862.58 561.27 1890.46 860.32
Increase
Decrease 756.32
726.94 132.56 737.47
177.83 533.01
710.84
BIBLIOGRAPHY
Working Capital Management – Management – V.K. V.K. Bhalla
Company Website – Website – www.supertechlimited.com www.supertechlimited.com
Annual reports of Supertech Limited
