COMPANY PROFILE

JCBL - A name synonymous high quality, utmost safety, groundbreaking technology and futuristic styling. Since its inception, the company has been technology driven and has worked relentlessly to offer its patrons the best in technology and comfort. The company's product portfolio encompasses an array of high quality and lu urious coaches including, lu urious !ntercity and !ntra "ity #uses, Special Application $ehicles, %lection "ampaign $ans, &isplay $ans, '# $ans, (adar "alibration $ans, (iot "ontrol $ehicles, )obile *omes and 'ffices, +ife-Saving Ambulances, "argo #o es and ,ower-,acked Trailers. -ith an unending .eal to innovate and e cel, /"#+, has become a name to reckon with in the automobile industry. #y living up to its promise of providing 01lobal )obility Solutions2, /"#+ has today traversed a long 3ourney. 4rom being incorporated in 5676 as a company that would manufacture high quality /apanese technology buses, ambulances and load carriers for Swara3 )a.da, /"#+ has today evolved into a highly successful coach building company. +ocated on the "handigarh - Ambala *ighway, its manufacturing facilities have been steadily growing from strength to strength. Spread over an area of 89::: sq meters, the plant has As a technology lead company, each of /"#+2s state-of-art manufacturing systems are carefully engineered to ensure optimum hassle-free performance. #y diversifying into the manufacture of several high quality lu ury coaches, motor homes, trailers,

special utility vehicles and cargo bo es, /"#+ has today become a name to be reckoned with in the automobile industry. /"#+ wide range of products, from lu ury buses and mobile homes to ambulances, mobile display vans and much more, has established them firmly within the industry. %ach of them lives up to the /"#+ name and delivers an unparalleled performance.

Jcbl Group Vision

;To be a market leader, Sustaining domestic leadership and global presence through innovation quality, and value added growth with diversified interests<

Quality Policy
/"#+ +td. is committed to supply world class mobility solutions to its customer to satisfy their stated and implied needs through continued improvement in the quality management system and collective efforts of our employees.

Quality Ob !cti"!
)inimi.ing customer complaints. )inimi.ing internal re3ection. Adherence to =uality System. Adherence to =uality "ontrol ,lans. !nvolvement of Trained, Skilled, )otivated > Sincere )anpower in friendly, Safe and team environment. "ontinuous improvement

#!a$% /"#+ consider its workforce as its biggest Asset, with a total capital outlay
of over (s.?9: "rore, /"#+ employs over 9:: people. The workforce is empowered by skilled and dedicated engineers, )#A's, "A's, Supervisory staff and 'perators each of who are e posed to global manufacturing and quality practices. Through regular training programs, /"#+ constantly upgrade their skills and enhance their knowledge base, which enables them to perform delegated tasks with efficiency and accuracy

JCBL GRO&P COMPANIE'

CLIEN#'

A''OCIA#E'
/"#+ have found worthy associates in, @ing +ong from "hina and )arrel from 1ermany. They have helped /"#+ not 3ust strengthen /"#+2s product portfolio but also has helped /"#+ in e panding knowledge base and fortify technological prowess by establishing highly symbiotic relationships.

(in) Lon) &nit!* Auto$oti"! In*ustry Co+ Lt*.

/"#+ has proved to be an able partner in the manufacture of integral coaches. (anked Ao. 5 among over 5B: bus manufacturers nationwide in turnover and in per capita output as well, @ing +ong has willingly shared their know-how and technical e pertise with /"#+. Through various training programs and a healthy e change of information, /"#+ have been able to e pand its knowledge base and grown from strength to strength.

Marr!l Co$pany
is a leader in the hook lift market, and in the truck equipment market. -ith worldwide sales in e cess of C7: million, it is aggressively e panding in the DS market, building on its technical leadership and e traordinary reliability.

ORGANI'A#IONAL '#R&C#&RE
6

Boar* o, -ir!ctors
)r. (a3inder Aggarwal E"hairman cum )anaging &irectorF )r. (ishi Aggarwal E/oint managing directorF )r. (.@.#handari )r. /.,.&hami3a )r. ,.S. Sodhi EAdditional &irectorF

Ban.!rs
'riental #ank of "ommerce *&4" #ank

'tatutory Au*itors
@ansal Singla > Associates, "hartered Accountants "handigarh.

MAR(E#ING MI/ OF JCBL

Pro*uct
Manu,acturin) Bus!sG !ntegral "oaches and +u ury "oaches. Special ,urpose $ehicle -)obile *omes, )obile &isplay $an riot "ontrol $ehicle, ServiceH"overed $ans, ,olice $ans. Car)o Bo0- )"$ AA& +"$ Air susp!nsion- Air Suspensions for +"$ and *"$.

Pro*uct lin!%

 Plac!% Ambala I "handigarh (oad, +alru E58:9:5F, &istrict-,atiala, ,un3ab. Pro$otion% Advertisement in maga.ines and Aewspapers, internet.

#a) Lin!% 'n the (oad with JCBL

#ra*! Mar.

Ac1i!"!$!nt
/"#+ wins #%ST #DS A,,+!"AT!'A #D!+&%( '4 T*% J%A( A-A(& ?:5:

PRO-&C# PROFILE OF JCBL

Since its inception, /"#+ have been technology driven and have worked relentlessly to offer its patrons the best in technology and comfort. /"#+2s product portfolio encompasses an array of high quality and lu urious coaches including, lu urious intercity and intra city buses, special application vehicles, election campaign vans, display vans, ob vans, radar calibration vans, riot control vehicles, mobile homes and offices, life-saving ambulances, cargo bo es and power-packed trailers. /"#+ are mainly the manufactures of integral coachHlu ury coachHspecial utility vehicle trailersHcargo bo . 4ollowing are the activities of /"#+G

5. !ntegral coaches ?. "ruise the roads - lu ury coaches K. Ambulances 8. Special utility vehicles 9. #uses B. "argo vehicles L. Trailers

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NE2 RELEA'E'
To meet the demands of a dynamic new business scenario and answer the changing needs of the customer, /"#+ constantly innovate and present new mobility solutions. /"#+'s (>& department keeps pace with the latest design and styling trends and our production capabilities grow in keeping with their demands.

3+ 'p!!* 0l
The Speed M+ is one of the latest offerings of bus division. "ombining the best of both design and technology, the Speed M+ offers power, performance, comfort and endurance unlike any other. )odular in nature with various optional features, the Speed M+ carries the unmistakable stamp of superior quality and is rapidly gaining popularity.

4+ Int!)ral coac1 5336

The !ntegral "oach B55K is the outstanding result of a technology transfer agreement between /"#+, !ndia and @ing +ong, "hina. 'ffering low maintenance costs and better fuel efficiency, it is the first bus in !ndia to gain full approval from the A(A! for the entire vehicle. Armed with a "ummins "?89 *, D@ made diesel engine, a *olland Aeway ED.S.AF air suspension system and a host of other e citing features, the !ntegral "oach B55K is incomparable when it comes to lu ury, performance and reliability.

6+ Mobil! *isplay "an

/"#+ has tried to make it easier for companies to reach out to their consumers even in remote parts of the country by introducing the )obile &isplay $an. %ach of these superbly designed vans effectively showcases various products and speaks volumes for a company2s commitment to quality and service. %ngineered to suit a wide variety of purposes, these mobile &isplay $ans can be customi.ed to suit individual preferences and answer various needs.

11

7+ -!si)n "an
(eali.ing that the need for &SA1 vans was growing at an alarming rate, we entered into the category and soon found ready acceptance among the broadcasting fraternity. &esigned and engineered to suit !ndian conditions, van2s interiors boast of mini studio facilities and infrastructure. State-of-the-art 4acilities coupled with durability and strength make these vans the natural choice for leading broad casters acr.

12

PROCE''
't!p83 Four 'i*! 'tructur! Ass!$bly
This is the preliminary stage in the Tata )otor line. A fi ture is used for assembling the four side structure of the bus. The side structure of the bus is manufactured in Structure department and then this structure is carried in Tata )otor +ine. This structure is placed over the fi ture, and welding is use as a medium of 3oining the side structure. The welding which is done for the purpose of permanent 3oint is )!1 welding

't!p84 Roo, Joinin) an* 'i*! Pan!lin)

!n this stage, the roof is placed over the four side structure assembly which is manufactured in the previous stage. Again )!1 welding is used for 3oining the (oof with the side structure. Side paneling is done against the side structure. 4i ture is used for the side paneling. !n roof paneling, a thick sheet of 1! E1alvani.ed !ronF is placed over the roof. The roof is not 3oined with single sheet. A sheet is divided into two parts and then half portion of the sheet is placed over the roof from +*S and other is placed from (*S

't!p86 C1assis -is$!ntal

As clear from the name "hassis dismantle, disintegration of the chassis takes place. All the sub components are removed from the chassis. The accessories which removed from the chassis areG-!ndicators, Tail lights, -ipers, (eflectors, &ash board etc.

't!p87 Int!rnal Pan!lin)

!n !nternal paneling, work is done against the interior of the bus. The doors are assembled to the main body. These doors are manufactured in structure department and then e ported to T)+. All the internal strips are made hidden in this stage by
13

using galvani.ed iron sheets, 1! sheets are welded to the strips using welding set. The front driver door is also 3oined to the main body of the bus. Also fuel tank opening is also made and 3oined in this step. After the completion of this stage, an outlook of bus is visible.

't!p89 Frp Fit$!nt

4(, is 4iber (einforced ,lasticN this material is used for the front structure of bus and for rear as well. 4(, segment is 3oined at the front of bus and at the rear of the bus using screws. The 4(, is manufactured in )obility Solution +imited E)S+F and then e ported to Tata motor line. -indows fitting is also welded to the window frame so as to 3oin striker to window frame for locking purposes.

't!p85 Paintin)
!n this painting is done over the bus surfaces. ,rimer and ,utty is used before applying the paint over the bus. The purpose of applying primer and putty is to remove any dent and irregularity in the outer surface of the bus. After applying putty and primer, paint is applied. This painted bus is then carried to oven to dry the wet paint. The temperature inside the oven is near about L:-79 ". After this stage the bus is ready for the interior decoration like seats, mats. thermocol fitting, dashboard fitting etc

't!p8: 2irin) an* #1!r$ocol Fittin)

"ertain wires are connected to main power supply and placed along the roof. These wires are used to give power to 'ver *ead Speakers, (oof 4ans, and (oof +ights etc. After wiring Thermocol is being fitted to roof. The purpose of this Thermocol is to hide the wiring and give smoothness to roof so that mating can be done over the roof.

14

't!p8; Mattin)
)ats are used at the floor for providing nice look to the interior and to give proper friction to human body. $inyl is sprayed over the floor before placing the mat. This vinyl is an Adhesive and help in 3oining of the mat with floor. This vinyl is sprayed on the surface through pneumatic spray gun under certain pressure. Then this mat is keep open in air for drying the vinyl and then 3oins this mat with the floor.

't!p8< '!at Fittin)

Seats are manufactured in )S+ and e ported to T)+. 4irstly polyol and isocyanide is mi ed to get foam through (obotic arm. Then this mi ture is send in a bo having the same shape as of the foam required. So after 7-6 minutes, the solution gets dry and foam is ready for use. Then seat cover is applied over the foam. 4i ture of the seat on which seat is to be fi ed is also manufactured in )S+. This seat fi ture is also e ported to T)+. The fi ture is placed over the floor using welding set and screws, nut and bolts and pneumatic gun. After that seats are connected with the seat fi ture.

't!p83= Acc!ssori!s Fittin)

!n this particular stage some small but important accessories are fi ed to the bus body. The accessories which are being fi ed to the bus body are Side )irror (ear $iew )irror 4ront -indshield -iper (ear -indshield -iper 4ront indicators (ear indicators 4ront lights
15

 (ear +ights -indow glasses 4ront -indshield (ear windshield 4ront (eflectors (ear (eflectors Side )irrors And some other fittings which give good look to the bus body. Some aluminum channels like 58:9L, 58:9B, wearing strip, aluminum step edge, aluminum bonnet section etc are fitted to the bus interior.

't!p833 >at Rac. Ass!$bly

The component of bus which is being used by us for keeping our goods and load in the bus is known as *at (ack assembly. 4or making this assembly we need ,$" *at (ack 1rill, which is taken from the vendor. This ,$" *at (ack 1rill is connected with Aluminum channel and the channel is further linked with ,$" *at (ack Aew. 'ur *at (ack Assembly is ready and fi ed with the side wall of the bus.

16

COMPE#I#OR' OF JCBL L#-.

A?A- GRO&P
#us #ody kits

BIN2A COAC> B&IL-ER

#us #ody #uilding

-+'+BO-Y B&IL-ER'
#us Accessories

>N' COAC>E' P"t+ Lt*+

#uses and "oaches

JAI CO+A&#O MOBILE CO+PV#+L#-+

#us #ody #uilding Spare ,arts

VAN#EC> ENGINEERING IN-&'#RIE'

All types of Automobile #ody #uilding

A&#O COAC> B&IL-ER'

#us #odies, Auto "oaches, Auto )obile #ody #uilders

B>ARA# COAC> B&IL-ER@' PV#+ L#-+

#us ,roducts

17

 R&BY COAC> B&IL-ER

#uses, Ambulance, Trucks, #ody #uilders &esigning > bus coaches

NI'A IN-&'#RIE'
#us body spares, Accessories, *ardware items

#>E C>ANNER' ENGG+ 2OR('

#us #ody ,arts > Accessories

#RIM&R#I EN#ERPRI'E'
#us #ody #uilding, Truck #ody #uilding > Traller #uilding

VOL# AMP ENGINEER'

%lectrical "ontrol ,anels, &enral %ngineering 4abrication, Acoustic %nclosures #us #ody #uilding

VOLVO IN-IA PV#+ L#-+

$olvo #L( #us "hassis, $olvo Tractor-Trailer Truck $olvo %quipment, $olvo ,enta )arine and !ndustrial ,ower System "onstruction

?AIN IN-&'#RIE'
4(, "omponents

18

 MEENA ENGINEERING IMP/

Automobile #ody for #uses, Ambulance > Special Security #uildings

'I#A 'ING> A 'ON' PV#+ L#-+

4abrication > #us #ody #uilder

R&BY RI'>I A&#O PV#+ L#-+

#us #ody parts > Supplies, #us #ody #uilder, "oach #uilder, "oach 4abricators, #us #ody, 4abricators, "ity #uses, School #uses, +u ury #uses, Tarmac "oaches, Special, Application #uses, Ambulance $an, &elivery $an "ash $an, Troops "arrie

FRIEN-' A&#O
All Types of #ody fittings and "omponents of +u ury, Semi +u ury "oach, )ini #us and Trucks, (ubber "anvas "onveyor and Transmission #elts.

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F&#&RE PLAN' AN- O&#LOO(

The automotive industry has witnessed a double digit growth over the past two years and the growth is going to be sustained in future, so long as the present level of investment in infrastructure continues. The efforts put by the company in the past for the development of new models for Tata )otors and %icher has resulted into substantial orders from them. This would increase the production of the ongoing year by more than K:O.The company has received big order from State Transport Dndertaking for supply of delu e A" "oaches and more orders are e pected in the current year . The !ndian bus market is showing e ponential growth and will continue to do so in the coming years. The State Transport Dndertakings are also replacing their fleets with more lu urious air conditioned coaches. Apart from this, the government decision to use low floor buses in metro cities would also create the replacement demand. /"#+ is confident of taking full advantage of this growth and would remain its market position. The company has been allotted land by S!,"'T +td. And the company has initiated steps to put up another bus body making plant at "hennai. This would help to cater the growing market in the sout.

20

CAPI#AL '#R&C#&RE OF JCBL L#-+

The "apital Structure of /"#+ +td. as on )arch K5, ?:55 was as underI

'1ar! Capital Authori.ed Share "apital 5,::,::,::: %quity Share of (s. 5:H-each !ssued, Subscribed > ,aid up "apital 9,?::,?:: %quity Share of (s. 5:H- each fully paid

Rs+ 5::::::::

9?::?:::

21

MEANING OF 2OR(ING CAPI#AL

2or.in) Capital is co$$only *!,in!* as t1! *i,,!r!nc! b!tB!!n curr!nt ass!ts an* curr!nt liabiliti!s+ E,,ici!nt Bor.in) capital $ana)!$!nt r!Cuir!s t1at ,ir$s s1oul* op!rat! Bit1 so$! a$ount o, Bor.in) capitalD t1! !0act a$ount "aryin) ,ro$ ,ir$ to ,ir$ an* *!p!n*in)D a$on) ot1!r t1in)s on t1! natur! o, in*ustry+ "apital required for a business can be classified in two main categories vi.. 5F 4i ed capital, and ?F -orking capital. %very business needs funds for two purposes-for establishments and to carry out its day-to-day operations. +ong-term funds are required to create production facilities. Through purchase of fi ed assets such as plants and machinery, land, building, furniture, etc. !nvestments in these assets represent that part of firm2s capital which is blocked on permanent or fi ed basis and is called fi ed capital. 4unds are also needed for short-term purpose for the purchase of raw material, payment of wages and other day-to-day e penses, etc. These funds are known working "apital. !n simple words, Bor.in) capital r!,!rs to t1at part o, t1! ,ir$@s capitalD B1ic1 is r!Cuir!* ,or ,inancin) s1ort8t!r$ or curr!nt ass!ts suc1 as cas1D $ar.!tabl! s!curiti!sD *!btors an* in"!ntori!s+ 4unds thus invested in current assets keep revolving fast and are being constantly converted into cash and this cash flow out again in e change

22

for other current assets. *ence, it is also known as revolving or circulating capital or short-term capital.

CLA''IFICA#ION OF 2OR(ING CAPI#AL

-orking "apital may be classified on two basesG aE On t1! basis o, Conc!pt: -

'n the basis of concept, working capital can be classified as, 1ross -orking "apital Aet -orking "apital

bE On t1! basis o, #i$!% 8

'n the basis of time, working capital can be classified as, ,ermanent or 4i ed -orking "apital Temporary or $ariable -orking "apital

Gross 2or.in) CapitalG

The 1ross -orking "apital is the "apital invested in the total current assets of the enterprises. "urrent assets are those assets, which can be converted into cash within a short period, normally an accounting year. Gross 2or.in) Capital F #otal Curr!nt Ass!ts

23

N!t 2or.in) Capital%

The term Aet -orking "apital refers to the e cess of current assets over current liabilities, or say, Net Working Capital = Current Assets Current Liabilities Aet -orking "apital can be positive or negative + -hen the current assets e ceed the current liabilities the working capital is positive and the negative working capital results when the current liabilities are more than the current assets. "urrent liabilities are those liabilities, which are intended to be paid in the ordinary course of business within a short period of normally one accounting year out of the current assets of the income of the business. The gross working capital concept is financial or going concern concept whereas net working capital is an accounting concept of working capital+ #oth the concepts have their own merits.

#1! )ross conc!pt is so$!ti$! pr!,!rr!* to t1! conc!pt o, Bor.in) capital ,or t1! ,olloBin) r!asons% 8
!t enables the enterprise to provide correct amount of working capital at correct time %very management is more interested in total current assets with which it has to operate then the sources from where it is made available !t takes into consideration of the fact every increase in the funds of the enterprise would increase its working capital. The concept is also useful in determining the rate of return on investments in working "apital.

24

 The net working capital concept, however, is also important for the following reasonsG !t is a qualitative concept, which indicates the firm2s ability to meet its operating e penses the short-term liabilities. !t indicates the margin of protection available to short term creditors. !t is an indicator of financial soundness of enterprise+ !t suggests the need of financing a part of working capital requirement out of the permanent sources of funds.

P!r$an!nt or Fi0!* 2or.in) Capital%

,ermanent or fi ed capital is the minimum amount, which is required to ensure effective utili.ation of fi ed facilities and for maintaining the circulation of current assets. %very firm has to maintain a minimum level of current assets is called permanent or fi ed working capital as this part of working capital is permanently blocked in current assets. As the business, grow the requirement of working capital also increases due to increase in current assets.

#!$porary or Variabl! 2or.in) Capital%

Temporary or variable working capital is the amount of working capital, which is required to meet the seasonal demands and some special e igencies. $ariable working capital can further be classified as seasonal working capital and special working capital. The capital required to meet the seasonal need of the enterprise is called the seasonal working capital. Special working capital is that part of working capital which is required to meet special e igencies such as launching of e tensive marketing campaign for conducting research etc.

25

Temporary working capital differs from permanent working capital in the sense that it is required for short periods and cannot be permanently employed gainfully in business.

Calculat! curr!nt ass!ts to ,i0!* ass!t ratio%

A firm needs current and fi ed assets to support a particular level of output. *owever, to support the same level of output the firm can have different levels of current assets. As the firm2s output and sales increases, the need for current asset increases. 1enerally the current assets do not increase in direct proportion to outputN current assets may increase at a decreasing rate with input. This relationship is based upon the notion that it takes a greater proportional investment in current assets when only a few units of output are produced than it does later on when the firm can use its current assets more efficiently. The level of the current assets can be measured by relating current assets to fi ed assets. #1!r! ar! t1r!! polici!sG3E Cons!r"ati"! curr!nt ass!ts policy% "AH4A is higher. !t implies greater liquidity and lower risk. 4E A))r!ssi"! curr!nt ass!ts policyG "AH4A is lower. !t implies higher risk and poor liquidity.

26

6E Mo*!rat! curr!nt ass!ts policyG "AH4A ratio falls in the middle of conservative and aggressive policies.

Fi)ur! 3 Alt!rnati"! curr!nt ass!t polici!s

C&RREN# A''E#' G FI/E- A''E#' RA#IO

Particulars "urrent Assets 4i ed Assets C+AGF+A 4==58=: ?899 K6LK =+53 4==:8=; ?67K 8:?7 =+: 4==;8=< 8K99 885? =+< 4==<83= KB6B 98:: =+5; 4=3=833 9?:B 9?L9 :.67

#abl! 3 % s1oBin) ratio o, curr!nt ass!ts to ,i0!* ass!ts

27

I''&E' IN 2OR(ING CAPI#AL MANAGEMEN#

3+ LiCui*ity "s+ Pro,itability% Ris. R!turn #ra*! O,,.
The firm would make 3ust enough investment in current assets if it were possible to estimate working capital needs e actly. Dnder perfect certainty, current assets holdings would be at the minimum level. A larger investment in current assets under certainty would mean a low rate of return of investment for the firm, as e cess investment in current assets will not earn enough return. A small invest in current assets, on the other hand, would mean interrupted production and sales, because of frequent stock-cuts and inability to pay to creditors in time due to restrictive policy. As it is not possible to estimate working capital needs accurately, the firm must decide about levels of current assets to be carried.

?. #1! Cost #ra*! O,,G

A different way of looking into the risk return trade off is in terms of the cost of maintaining a particular level of current assets. There are two types of cost involvedG!. "ost of liquidity !!. "ost of illiquidity --!f the firm2s level of current assets is very high, it has e cessive liquidity. !ts return on assets will be low, as funds tied up in idle cash and stocks earn nothing and high level of debtors reduces profitability. Thus, the cost of liquidity increases with the level of current assets --the cost of illiquidity is the cost of holding insufficient current assets. The firm -ill not be in a position to honor its obligations if it carries to little cash. This

28

may force the firm to borrow at high rates of interests. This will also adversely affect the credit-worthiness of the firm and it will face difficulties in obtaining funds in the future. All this may force the firm into insolvency. Similarly, the +ow levels of stock will result in loss of sales and customers may shift to competitors. Also, low level of debtors may be due to right credit policy, which would impair sales further. Thus the low level of current assets involves cost that increase as this level falls.

Fi)ur! 4% Cost tra*! 8o,,

29

POLICIE' FOR FINANCING C&RREN# A''E#'

The following policies for financing current assets in /"#+G-

Lon) #!r$ Financin)

The sources of long term financing include ordinary shares capital, preference share capital debentures, long term borrowings from financial institutions and reserves and surplus. The /"#+ manages its long term financing from capital reserve, share premium AH", foreign pro3ect reserve, bonds redemption reserve and general reserve.

'1ort #!r$ Financin)

The short term financing is obtained for a period less than one year. !t is arranged in advance from banks and other suppliers of short-term finance include working capital funds from banks, public deposits, commercial paper, factoring of receivables etc. !t manages '!cur!* Loans asG5F +oans and advances from banks ?F 'ther loans and advancesG AF &ebenturesHbonds #F +oans from State 1ovt. "F +oans from financial institutions Esecured by pledge of ,SD #onds and bills accepted guaranteed by banksF KF !nterest accrued and due on loans aF 4rom State 1ovt. bF 4rom financial institutions bonds and other

30

!t manages &ns!cur!* Loans asG 5F ,ublic deposits ?F Short term loans and advancesG aF 4rom banks bF "ommercial papers cF 4rom companies dF 4rom financial institutions KF 'ther loans and advances aF 4rom banks bF 4rom others -from govt. of !ndia -from state govt. -from financial institutions -from foreign financial institution -post shipment credit % im #ank -credit for assets taken on lease 8F !nterest accrued and due on -,ost shipment credit -1ovt. credit -State 1ovt. loans

31

-"redits for assets taken on lease -4inancial institutions and others -4oreign financial institutions -,ublic deposits

'pontan!ous Financin)
Spontaneous financing refers to the automatic sources of short term funds arising in the normal course of a business. Trade "redit and outstanding e penses are e amples of spontaneous financing. A firm is e pected to utili.e these sources of finances to the fullest e tent. The real choice of financing current assets, once the spontaneous sources of financing have been fully utili.ed, is between the long term and short term sources of finances.

32

NEE-' AN- OBJEC#IVE' FOR 2OR(ING CAPI#AL

%very business needs some amount of working capital. The needs for working capital, arises due to time gap between production and reali.ation of cash from sales. There is an operating cycle involved in sales and reali.ation of cash. There are time gaps in purchase of raw material and production, production and sales, and reali.ation of cash. Thus, working capital is needed for the following purposesG 4or the purchase of raw material, component and spares. To pay wages and salaries. To incur day- to- day e penses and overhead costs such as fuel, power and office e penses etc. To meet the selling costs such as packing, advertising etc. To provide credit facilities to the customers. To maintain the inventories of raw material, work in progress, store, spares, and finished stock .4or studying the need of working capital in a business, one has to study the business under varying circumstances such as new concern, as a growing and one, which has attained maturity. A new concern requires a lot of funds to meets its initial requirement such as promotion and formation etc. These e penses are called preliminary e penses and are capitali.ed. The amount needed for working capital depends upon the si.e of the company and the ambition of its promoters. 1reater the si.e of the business unit generally will be the requirement of the working capital. The requirement of the working capital goes on increasing with the growth and e pansion of the business until its gains maturity. At maturity, the amount of working capital required is called normal working capital.

33

FAC#OR' -E#ERMINING #>E 2OR(ING CAPI#AL REQ&IREMEN#

3+ Natur! o, Busin!ss
The requirement of working capital is very limited in public utility undertaking such as %lectricity, -ater Supply and (ailways because they offer cash sales only and supply services not products and no funds are tied up in inventories and receivables. 'n the other hand, the trading and financial firm requires less investment in fi ed assets but have to invest large amounts in current assets. The manufacturing undertaking requires si.able amount of working capital along with fi ed investments.

4+ Pro*uction Policy
The determination of working capital needs depends upon the production policy of the business. The demand for certain products is seasonal i.e.N such products are purchased in certain months of a year. 4or such industries, two types of production policy can be followed. 4irstly they can produce the goods in the months of demand or secondly, they produce for the whole year. !f the second alternative were followed, it would mean that until the time of demand finishes, product would have to be kept in stock. !t would require additional working capital.

6+ L!n)t1 o, Pro*uction Cycl!

The longer the manufacturing time, the raw material and other supplies have to be carried for a longer time in the process with progressive increment of labor and service costs before the final product is obtained. Therefore, working capital is directly proportional to the length of the manufacturing process.

7+ Rat! o, 'toc. #urn O"!r

There is an inverse co-relationship between the quantum of working capital and the velocity or speed with which the sales are effected. A firm having a higher rate of

34

stock turnover will need lower amount of working capital as compared to a firm having a low rate of turnover.

9+ Cr!*it Policy
"redit policy affects the working capital requirements in two waysG EaF EbF Terms of credit allowed by customer to the firm, Terms of credit available to the firm.

A concern that purchases its requirements on credit and sells its productHservices on cash requires lesser amount of working capital and vice-versa.

5+ 2or.in) Capital Cycl!

The speed with which the working cycle completes one cycle determines the requirements of working capital. Longer the cycle larger is the requirement of working capital.

-EB#OR'

CA'>

FINI'>EGOO-'

RA2 MA#ERIAL

2OR( IN PROGRE''

35

%ach component of working capital Enamely inventory, receivables and payablesF has two dimensions T!)% and )'A%J. -hen it comes to managing working capital

#IME I' MONEY. !f you can get money to move faster around the cycle Ee.g.
collect monies due from debtors more quicklyF or reduce the amount of money tied up Ee.g. reduce inventory levels relative to salesF, 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 limitN you effectively create free finance to help fund future sales

I, you+++++++
36

Then......

Coll!ct r!c!i"abl!s H*!btorsE ,ast!r Coll!ct r!c!i"abl!s H*!btorsE sloB!r G!t b!tt!r cr!*it Hin t!r$s o, *uration or a$ountE ,ro$ suppli!rs

Jou release cash from the cycle Jour receivables soak up cash Jou increase your cash resources

:+ Rat! o, GroBt1 an* E0pansion o, Busin!ss

The larger si.e businesses require more permanent and variable working capital in comparison to small business. !f a company is growing, its working capital requirements will also go on increasing. Thus, the growing concerns require more working capital as compared to the stable industries.

;+ '!asonal Variation
1enerally, during the busy season, a firm requires larger working capital than in the slack season.

<+ Busin!ss Fluctuation

!n period of boom, when the business is prosperous, there is a need for larger amount of working capital due to rise in sales, rise in prices, optimistic e pansion of business etc. 'n the contrary in time of depression, the business contracts, sales decline, difficulties are faced in collection from debtors and the firm may have a large amount of working capital idle.

3=+ Earnin) Capacity an* -i"i*!n* Policy

Some firms have more earning capacity than other due to quality of their products, monopoly conditions, etc. Such firms may generate cash profits from operations and contribute to their working capital. The dividend policy also effects the requirement

37

of working capital. A firm maintaining a steady high rate of cash dividend irrespective of its profit needs more working capital than the firm that retains larger part of its profits and does not pay so high rate of cash dividend.

33+ Pric! L!"!l C1an)!s

,rice level changes also affect working capital needs. !f the prices of different goods increase, to maintain same level of production, more working capital is needed.

34+ A"ailability o, RaB Mat!rial

Availability of raw material on the continuo2s basis affects the requirement of working capital. There are certain types of raw materials, which are not available regularly. !n such a situation firm requires greater working capital to meet the requirements of production. Some raw materials are available in particular season only for e ample wool, cotton, oil seeds, etc. They have to keep greater working capital.

36+ Ma)nitu*! o, Pro,it

)agnitude of profit is different for different businesses. Aature of product, control on the market and ability of managers etc. determine the quantum of profit. !f the profit margin is high, it will help to arrange funds internally, which will also increase the working capital.

37+ Ot1!r Factor 'perating efficiency aF )anagement ability bF !rregularities of supply

38

cF !mport policy dF Asset structure eF !mportance of labor

IMPOR#ANCE OF 2OR(ING CAPI#AL

39

3+ #i$! *!"ot!* to Bor.in) capital $ana)!$!nt

The largest portion of financial manager2s time is devoted to day to day internal operation the firm. This may be appropriately sum up under the heading I-'(@!A1 "A,!TA+ )AAA1%)%ATI+

4+ In"!st$!nt in curr!nt ass!ts

"urrent assets represent more than half of the total assets of a business firm. #ecause they represent largest investment and because this investment tends to relatively volatile, current assets are worthy for the financial manager's careful attention +
3+ I$portanc! ,or s$all ,ir$

"urrent assets are similarly important for the financial manager's of small firm. 4urther small firm are relatively limited access to the long term markets, it must necessarily rely on the trade credit and short term bank loan, both of net effect on net working capital by increased current liabilities+ +iquidity and (isk

"omposition of level of "urrent assets

"omposition of level of current liabilities

Fi)ur! 4% -i$!nsions o, 2or.in) Capital

IN#RO-&C#ION OF -EB#OR MG#

40

!t is very difficult for the organi.ation to sell always on cash basis in today2s competitive market. !n almost every business, we have to sell on credit basis. The basic ob3ective of management of sundry debtor is to optimi.e the return on investment on this asset. !t is obvious that if there are large amounts tied up in sundry debtors, working capital requirement would be high and consequently interest charges will be high. !n such cases, the bad debts and cost of collection of debts would be high. 'n the other hand if the credit policy is very tight, investment in sundry debtors is low but the sale may be restricted, since the competitors may offer more liberal credit term. -e have limited resources and therefore every resource has its own opportunity cost. Therefore, the management of sundry debtors is an important issue and requires proper policies and efficient e ecution of such policies. &ebtors and cost of debtors have direct relationN cost will increase due to increase in debtors and vice versa. !t depends on the credit sale of concern and credit period Ecollection periodF allowed to customer. !t is in interest of customer to pay as late as possible, and company whom made sales, would like to collect their debtor as early as possible. There is a conflict between the two aspects. &ebtor management is the process of finding the equilibrium at which company agrees to receive its payment without hampering or having any adverse effect on its sales and customer agree to pay at their economical buying concept.

'un*ry *!btor l!"!l *!p!n*s on tBo $!asur! issu!s

41

'ne is "olu$! o, cr!*it sal!s and another is cr!*it p!rio* alloB!* to custo$!r. !t is the essence of every business that to sale on credit and allow credit period to the customer in such a competitive market. FolloBin) ,actors $ay b! consi*!r!* b!,or! alloBin) cr!*it p!rio* to t1! custo$!r Aature of the product "redit worthiness of the customer, which varies from customer to customer. =uantum of advance received from customers "redit policy of company, say number of days allowed to customer for payment to the customers. "ost of debtors )anufacturing cycle time of the product etc

-EB#OR' MANAGEMENT
42

There are mainly three aspects of )anagement of &ebtors

3+ Cr!*it Policy
The credit policy is to determine. !t involves a tradeoff between the profits on additional sale that arises due to credit being e tended on one hand and the cost of carrying those debtors and bad debts losses on the other.

4+ Cr!*it Analysis
This requires determining as how risky is to advance credit to a particular customer.

6+ Control o, R!c!i"abl!s
This requires to the firm to follow up debtors and decide about a suitable credit collection policy. !t involves both lying down of credit policy and e ecution of such policies. There is a cost of maintaining receivables, which comprises "ost ofG The company require additional funds as resources are blocked in receivables which involves a cost in the form of interest Eloan fundF or opportunity cost Eown fundF. Administrative cost which includes record keeping, investigation of credit worthiness etc. "ollection cost &efaulting cost or #ad debts

-EB#OR' MANAGEMEN# IN JCBL

43

JCBL is !n)a)!* in t1! $anu,acturin) busin!ss o, 1!a"y !Cuip$!ntsD B1!r! cycl! ti$! o, t1! pro*uct is 3;8 47 $ont1s an* $ost o, t1! contracts ta.! appro0i$at!ly 689 y!ars to co$pl!t!+ Custo$!rs o, ar! broa*ly *i"i*!* into ,olloBin) cat!)ori!s% 8 State electricity board ,ower ,ro3ect ,ublic Sector Dnder takings (ailways 1overnment &epartments ,rivate Sectors % ports !n most of the contracts, payments of /"#+ are made in following stagesG Pay$!nt #!r$s Advance from customersGAt the time of dispatch of goods. At the time of )(" Ematerial receipt at siteF &eferred payment after commissioning of

Coll!ctibl! *!btors are those, which are due for payment as on now and there is no credit time allowed to the customer say payment at the time of dispatch. -!,!rr!* *!btors are those, which will become due on the occurrence of a particular event such as issuing of )(" Ematerial (eceipt "ertificateF from customer or completion of contract with certain tests etc.

44

INVEN#ORY MANAGEMEN#
!nventories constitute most significant part of current assets, in most of the companies in !ndia. To maintain a large si.e of inventory, a considerable amount of fund is required. !t is, therefore, absolutely imperative to manage inventories efficiently and effectively in order to avoid unnecessary investment. A firm neglecting the management of inventories will be 3eopardi.ing its long-run profitability and may fail ultimately. !t is possible for a company to reduce its levels of inventories to a considerable degree, e.g.5:O to ?:O, without any adverse effect on production and sales, by using inventory planning and control techniques. The reduction in 0e cessive2 inventories carries a favorable impact on a company2s profitability.

#1!r! ar! at l!ast t1r!! $oti"!s ,or 1ol*in) in"!ntori!s%

3+ #o ,acilitat! s$oot1 pro*uction an* sal!s op!ration Htransaction motiveE+ 4+ to )uar*s a)ainst t1! ris. o, unpr!*ictabl! c1an)!s in usa)! rat! an* *!li"!ry ti$! Hprecautionary motiveE+ 6+ #o $a.! a*"anta)! o, pric! ,luctuations Hspeculative motiveF+

#Bo typ!s o, costs ar! in"ol"!* in t1! in"!ntory $aint!nanc!%

5-'rdering costsG - (equisition, placing of order, transportation, and staff services. 'rdering costs are fi ed per order si.e increases.

?-"arrying costsG - -arehousing, handling, clerical and staff services, insurance and ta es. "arrying cost increases.

45

The firm should minimi.e the total cost Eordering cost P carrying costF. The economic order quantity E%'=F of inventory will occur at a point where the total cost is minimum. The following formula can be used to determine %'=G

%'=Q E?A'H"F R5H?

-here, A Q Annual requirement. ' Q per order cost. " Q per unit carrying cost.

2>EN '>O&L- #>E FIRM PLACE AN OR-ER #O REPLENI'> INVEN#ORYJ

The inventory level at which the firm places order to replenish inventory is called reorder point. !t depends on EaF the lead time and EbF the usage rate. Dnder perfect certainty about the usage rate, the instantaneous delivery Ei.e. .ero lead time:, the reorder point will be equal toG

L!a*8ti$! K&sa)! rat! L'a,!ty stoc.+

The firm should strike a trade-off between the marginal rate of return and marginal cost of funds to determine the level of safety stock.

46

INVEN#ORY ANALY'I'
Altogether the company deals with stock of thousands of items raising a serious problem of how one can keep control of track of all items also, where it is necessary to have some e tent of control on each and every item. &ifferent types of analysis each having its own advantages and purpose help in bringing a particular solution to the control of inventory. The most important of all such analysis is A#" analysis. The other one A#" analysis $%& analysis S&T analysis *)+ analysis 4SA analysis

ABC ANALY'I'
A formal way of classifying inventory items so that important ones will be given the most attention. Through this analysis the professional inventory manager will concentrate his efforts on where they will yield the greatest rewards. The A#" of A#" analysis refers to the classes, A, # and c into which the inventory is divided. is high value items whose rupee volume typically account for L9-7:O of the value of total inventory while representing only 5:-59O of the inventory items. "lass is lesser value items whose rupee volume accounts for 59-?:O of the value of inventory, while representing 59-?:O of the inventory items.

47

"lass items are low value items whose volume accounts for 5:-59O of the inventory values but L9-7:O of the inventory items. The same degree of control is not 3ustified for all the three classes of items. "lass SAT requires the greatest attention and class S"T items require least attention. "lass S"T items need no special calculations since they represent a low inventory investment. The order might be placed once a year and periodically reviewed once a year, class S#T items are paid more attention then, proper "'&s are developed and semi-annual review of variables must be done. "lass SAT items needs direct attention to the inventory items, %'='s are to be developed each time an order is placed. The ma3or concern of an A#" classification is to give direct attention to the inventory items that represent the largest amount of e penditure. !f inventory levels can be reduced for claim of items it result in a significant reduction in inventory investment.

ABC INVEN#ORY CLA''IFICA#ION%8

Percentage items 10 15 75 of inventory Category classes A B ! of Value of the total inventory (rupee volume in %) 75 5 "

#abl! 6% ABC classi,ication

VE- ANALY'I'
This analysis specially pertains to the classification of maintenance of spares denoting the essentiality of blocking spares. V - Stands for vital - items when out of stock or when not readily available, completely brings the production a halt.
48

E - !s for essential - items without which we can temporarily loose our production or disclosure of production occurs within a week. - - &enotes desirable items - all other items, which are necessary but do not cause any immediate effect on production.

'+-+E+ ANALY'I'
4or developing countries and especially where certain items are in scarce supply. This analysis is very useful. ' - (efers to scarce items, especially imported items and those which are very much in short supply. - 8 Are difficult items which are available in market but not easily availableU E - !tems are those which are easily available, most local items.

>ML ANALY'I'
The cost per item is considered for this analysis E>E *igh cost items EME )edium cost items HLE +ow cost items *elp in bringing controls over consumption at department2s level and for storage.

F'N ANALY'I'
)aterials are classified as E4F 4ast moving ESF Slow moving and

49

EAF Aon moving items The non-moving items are of great importance. !t is found that many companies maintain huge stock of non-moving items and the number of such items running is thousands. (esulting of non-moving items is to be made to determine where they could be used or to be disclosed off. The fast and slow moving classification helps in arrangement of stocks in stores and their distribution handling methods.

50

F&NC#ION OF INVEN#ORY CON#ROL%

4unctions to be performed in the field of !nventory "ontrol areG 5 Setting up norms for carrying !nventory. ? &etermining what items to be stocked. K Setting rules for !nventory replenishments. 8 (eceiving, storing and issuing inventory items as needed. 9 )aintaining records of inventory quantities and values. B !dentifying and deposing of slow moving, non-moving, obsolete or damage inventories. L 4urnishing summary information on inventory position for control purposes.

51

INVEN#ORY RECOR- (EEPING AN- RELA#EPROCE-&RE'

*ow well !nventory records are maintained has a ma3or bearing on the effectiveness of !nventory control program. )ostly information recorded in /"#+ system isG Aame of the part or material Short description !dentifying Ao called )aterial code Dnit of measurement +ocation in store EcustodyF #in no. 'pening, received, issue, closing quantity and value these records are maintained in an online system on main frame computer user departments have shared access for posting and retrieval of information. There is a system for reserving specific items as customer specific, which is done by tagging on the item. ,osting of withdrawals or issue from inventory is done on specific authori.ation by a document called Store !ssue voucher.
Following is the process through which the company can achie e the optimum in entory le el

STANDARD INVENTORY LEVEL

TAKING ACTUAL INVENTORY LEVEL

COMPARI'ION OF 2I#> '#AN-ARAC#&AL

#A(E CORREC#IVE AC#ION'

ANALY'ING OF
52

REA'ON

VARIATION/ DEVIATION

VARIA#IONG-EVIA#IO

N!!* o, In"!ntory Mana)!$!nt%

5. ?. K. 8. 9. B. L. 7. Stiff competition, globali.ation of trade and liberali.ation. Achieving, increasing and positive %$A. "ost reduction. %nergy conservation. "onservation of natural resources. #etter, work environment. !mproved health and safety. %nhanced public image.

'trat!)i!sG$!asur!s%
4ormation of specific group in each area to identify the wastage elements and seek participation of all. !dentification of wastage. 4ormulation of action plan to eliminateHminimi.e wastage. (eview of status. !dentification of corrective actions and their implementation. *ighlighting the gains.

53

MANAGEMEN# OF CA'>
!t is the duty of the finance manager to provide adequate cash to all segments of the organi.ation. At the same time, he Hshe has also to ensure that no funds are blocked in idle cash as this will involve cost in terms of interest to the concern. A sound cash management scheme has to maintain the twin ob3ective of liquidity and cost.

M!anin) o, cas1 $ana)!$!nt%

The term cash management refers to the management of cash and 0near cash assets2 while cash includes coins, currency notes, ceruse, bank drafts, and the demand deposits, the near cash assets include marketable securities and time deposits with banks. Such securities and deposits are easily convertible into cash.

Moti"!s ,or >ol*in) Cas1

!n spite of the fact that cash does not earn any substantial return for the business, it is held by the concern with the following motives.
!+ #ransaction $oti"!G A "ompany enters a variety of business transactions resulting

both inflow and outflow of cashN at times the cash outflow e ceed the cash inflow. !n order to meet the business obligations in such situation, it is necessary to maintain adequate cash balance. Thus, a firm with the motive of making routine business payments maintains cash balance. 4+ Pr!cautionary $oti"!G A firm holds cash balance to meet sudden cash needs arising out of une pected contingencies such as floods, strikes, obsolesces, sharp

54

increase in prices of raw materials, presentation of bills for payment earlier than e pected date. )ore amounts of cash will be kept by the firm if there is more possibility of such contingencies. 6+ 'p!culati"! $oti"!% /"#+ also keeps cash balance to take advantage of une pected business opportunities. Such motive is there of speculative nature. 7+ Co$p!nsation $oti"!% #anks provide certain services to their customers free of charge. So they usually require the customers to keep minimum cash balance with them which enables them to earn interest and compensate for the free services rendered.

55

REA'ON' OF CA'> MANAGEMEN#

"ash management involves the following basic problems. 3+ Controllin) l!"!l o, cas1G - 'ne of the basic ob3ectives of cash management is to minimi.e the level of cash balances with the firm. This ob3ective is sought to be achieved by means of the followingG 8 Pr!parin) cas1 bu*)!tG "ash budget is the most important device for planning and controlling the use of cash. !t involves the future receipts and payments of the firm. 'n the basis of this information the finance manager needs of the firm. 8 Pro"i*in) ,or unpr!*ictabl! *iscr!panci!sG "ash budget shows discrepancies between cash receipts and payments on the basis of normal business activities. 8 A"ailability o, alt!rnati"! sourc! o, ,un*s G A firm need not keep large cash balance if it has arrangements with banks for borrowing money in times of emergencies. 4+ Controllin) o, cas1 in,loBG !n order to prevent fraudulent diversion of cash receipt and speeding up collections of cash, an adequate control on cash inflow is necessary. A properly installed internal check system can, to a great e tent, minimi.e the possibility of fraudulent diversion of cash. Speedier collection of cash can be made possible by adoption of the following two techniquesG 8 Conc!ntration ban.in) syst!$G it is a system of decentrali.ing collection of account receivables. According to this system, /"#+ branch can determine the future cash

56

'ffices are authori.ed to collect the payment from the customers, and deposit in the local bank accountsN this system facilities fast movement of funds. This system is good in case of the firms having their spread over a large area. - Loc. bo0 syst!$G This system is more popular in the D.S.A. and is further step in speeding up collection of cash. This system has been devised to element delay arising in cash of the concentration banking system on account of a time gap between actual receipt of cheque by the regional collection centers and its deposits in the local bank account. Dnder this system /"#+ hires a post office bo and instruct its customers for their remits to the bo . !t also reduces the chances of frauds in the cash collection process and controls the cash inflows better. !n order to avoid the unnecessary pockets of idle funds, the company should maintain minimum number of bank accounts. 6+ Controllin) out,loBs o, cas1G An efficient control over cash outflows is equally important for conserving cash and reducing financial requirements. "ontrol over cash outflows signifies slow disbursement. !n order to control the outflows of cash efficiently, a firm should keep in view the following considerationsG 8 C!ntraliM!* syst!$ ,or cas1 pay$!nts should be followed as compared to decentrali.ed system in cash of collections. All payments should be made from a single control account, i.e., from the central office of the company. *owever, the local office of the company may pay local e penses. 8 Pay$!nt s1oul* b! $a*! on t1! *u! *at!s neither before nor after. The company should neither lose cash discount nor its prestige on account of delayed payments. The company should, therefore, made payments within the terms offered by the suppliers. - Playin) ,loat, technique should be used by the company for ma imi.ing the availability of funds. The term 0float2 means the account tied up in checks which have been issued by /"#+ but not have been yet been presented for payment by the creditors. As a result of a time lag between issue of a cherub and its actual

57

presentation, the actual bank balance of a firm may be more than the balance shown in the books. The difference is called 0payment of float2. The longer the 0float period2 the greater would be the benefit of the firm.

#OOL' OF CA'> CON#ROL

Cas1 Bu*)!tG !t is the most significant tool of controlling the use of cash. !t provides
a comparison between actual and budgeted cash receipts and disbursements locating the points of deviations, if any. The financial manager, after ascertaining the reasons for deviations between the actual and budgeted figures, can take the necessary action to remove.

In,loBs an* out,loBs o, cas1G in order to check the change in cash position of the
firm from one period to another, a cash flow statement is prepared. !t helps management in controlling inflows and outflows of cash.

Ratio analysisG (atio analysis is also an important tool of cash control. &ifferent
financial ratios are used for this purpose. These ratios include current ratio, liquidity ratio, receivables turnover ratio, and inventory turnover ratio and cash position ratios.

58

OBJEC#IVE' OF #>E '#&-Y

Pri$ary Ob !cti"!
To analy.e the overall financial position of /"#+ +T&. interpret the same using various financial tools.

'!con*ary Ob !cti"!s

To study the profitability of the operations of the "ompany. To analy.e the growth rate of the "ompany. To analy.e the risk profile of the "ompany. To study the changes in the turnover of the "ompany over two years. To know about the financial position, risk bearing capacity of the company.

59

RE'EARC> -E'IGN
-!scripti"! r!s!arc1 #yp! o, -ata &s!*
Secondary source of data collection !.e. ,ublications of the company in the form of annual reports including profit > loss account and balance sheet.

60

LIMI#A#ION'
Ao work can get its due recognition or importance until and unless some difficulties are faced in its accomplishment. )y pro3ect work is also not an e ception. ! faced the following problems while completing this pro3ect 5. The operating cycle of the company has been calculated for all the products together as it was not possible to calculate the same for each product individually. Therefore, operating cycle might not give a true picture of the company as delay in the payment of one product might be compensated by the prompt payment of another product. ?. Since the study was based e tensively on the internal financial matters of the company, many a time people felt hesitated in providing the data K. ! was not allowed to walk freely on the plant for safety reasons, which kept me, abstained from doing time study of the products.

61

E/I'#ING 'Y'#EM OF 2OR(ING CAPI#AL IN JCBL

To maintain the optimum level of working capital in such a big organi.ation is really a challenging task. The three basic components that determine the level of working capital in any organi.ation areG "ash &ebtors #H( !nventory. On t1! basis o, our r!s!arc1 in t1! JCBLD t1!s! basic co$pon!nts ar! $ana)!* in t1! or)anisationD in t1! un*!r $!ntion!* $ann!r+

62

#abl! 38'1oBin) Curr!nt Ass!ts A Curr!nt Liabiliti!s

"Amt in lacs#

Particulars Curr!nt Ass!ts "ash and #ank #alance Sundry &ebtors !nventory +oans and Advances #O#AL

4==58=:

4==:8=;

4==;8=<

4==<83=

4=3=833

588.K5 ?9?8.L5 K:?7.7: 798.8K 5994+49

599.8B ?56B.:8 KK85.?? 787.B8 5973+65

86?.96 KBL9.:6 K58L.?6 5:L5.B7 ;6;5+55

K85.:K ?6KB.66 K997.B7 587?.6? ;63<+54

KLB.:9 8L?:.8: KL::.56 5KB8.K8 3=35=+<;

Curr!nt Liabiliti!s Sundry "reditors Advances from customer 'ther +iabilities ,rovisions #O#AL KK?K.89 57:.B? 556.6B K9B.L9 6<;=+:; ?79K.?8 595.B8 BB.56 KB6.65 677=+<: KK9?.9? 5B8.56 556.55 ?K7.5K 6;:6+<7 KL9K.?L 55?.BB K:?.66 ?LB.:B 7777+<; K668.:? ?:?.9 K8B.KB ?5K.5 7:99+<;

63

N!t Bor.in) capital #urno"!r

49:3+7: 9+:;

63==+6< 9+=7

7934+:4 7+44

6;:7+57 5+:;

97=9+= 6+<:

Grap1ical pr!s!ntation o, curr!nt ass!ts

Fi)ur! 3% Grap1ical pr!s!ntation o, curr!nt ass!t

Grap1ical pr!s!ntation o, Curr!nt Liabiliti!s

64

Fi)ur! 4% Grap1ical pr!s!ntation o, Curr!nt Liabiliti!s

Int!rpr!tation
!n The above "hart, it is clearly visible that the current assets and current liabilities has increasing drastically in past five year as ?::B-:L !n ?::B-:L B99?.?9 lacs , ?::L-:7 B985.KB lacs, ?::7-:6 7K7B.BB lacs, but ?::6-5: 7K56.B? lacs is decreas in comparisean to before three year, !n ?:5:-55 5:5B:.67 againb it has increase . !t has regularly increase which is good for the company . The main reason current assets continously incease then automaticaly current liabilities to be paid in correct time. The company current will be incease there are postive point of company but current liabilities continously company. increse there are negative point of

65

Grap1ical R!pr!s!ntaion O, 2or.in) Capital In JCBL

Fi)ur! 6% Grap1ical R!pr!s!ntaion O, 2or.in) Capital In JCBL

Int!rpr!tation
!n the above chart, it is clearly visible that the net working capital has !ncreasing drastically in the past five years as it was in ,ositive in ,ast Three Jears. !n ?::B-:L is ?9L5.86 +acs, in ?::L-:7 is K5::.K6, in ?::7-:6 is 895?.L? but ?::6-5: K7L8.B8 is decrease, in ?:5:-55 ,ositively -orking "apital again increases is 98:9.: . it has regularly increased which is good for the company because its turnover has also increased. The main reason for working capital to be in ,ositives is the untimely payment from debtors. And more over, there is a direct relation between working capital requirements with &ebtors and !nventory.

66

#1!r! 1as )i"!n r!asons to t1! or)aniMation to ta.! c!rtain strat!)ic $!asur!s to $ana)! its -!btors an* In"!ntory+

4ollowing are the measuresG Special task forces were built up from debtors and !nventory )anagement at senior level. (egular follow up at senior level. A close contact with the customers. ,roper age- wise analysis of the debtors. ,roper classification between collectible &ebtors and bad debts. #ad debts written off as early as possible after making all efforts for its collection. ,roduct cycle minimi.ed so that cost of the product does not become high to the agreed amount because of time factor. 4ormation of specific group in each area to identify the wastage elements and seek participation of all. 4ormulation of action plan to eliminateHminimi.e wastages. !dentification of corrective actions and their implementation. .

Focusin) on liCui*ity $ana)!$!nt

Aet working capital is a qualitative concept. !t indicates the liquidity position of the firm and suggests the e tent to which working capital needs may be financed by permanent sources of funds. "urrent assets should be sufficiently in e cess of current liabilities to constitute a margin or buffer for maturing obligations within the ordinary operating cycle of a business. !n order to protect their interests, short-term creditors always like a company to maintain current assets at a higher level than current

67

liabilities. !t is a conventional rule to maintain the level of current assets twice the level of current liabilities. *owever, the quality of current assets should be considered in determining the level of current assets $is-a I$is current liabilities. A weak liquidity position poses a threat to the solvency of the company and makes it unsafe and unsound. A n!)ati"! Bor.in) capital $!ans a n!)ati"! liCui*ity an* $ay pro"! to b! 1ar$,ul ,or t1! co$pany@s r!putation. % cessive liquidity is also bad. !t may be due to mismanagement of current assets. Therefore prompt and timely action should be taken by management to improve and correct imbalances in the liquidity position of the firm. Aet working capital concept also covers the question of 3udicious mi of long-term and short-term funds for financing current assets. 4or every firm there is a minimum amount of net working capital, which is permanent. Therefore a portion of the working capital should be financed with the permanent sources of funds such as equity, share capital, debentures, long-term debt, preference share capital or retained earnings. )anagement must decide the e tent to which current assets should be financed with equity capital or borrowed capital.

Balanc!* Bor.in) capital position

The firm should maintain a sound working capital position. it should have adequate working capital to run its business operations. #oth e cessive and inadequate working capital positions are dangerous from the firm2s point of view. % cessive working capital means holding costs and idle funds which earn no profits for the firm. ,aucity of working capital not only impairs the firm2s profitability but also results in production interruptions and inefficiencies and sales disruptions. #1! *an)!rs o, !0c!ssi"! Bor.in) capital ar! as ,olloBs 5. !t results in unnecessary accumulation of inventories. Thus chances of inventory mishandling, waste, theft and losses increase.

68

?. !t is an indication of defective credit policy and slack collection period. "onsequently, higher incidence of bad debts results, which adversely affects profits. K. % cessive working capital makes management complacent which degenerates into managerial inefficiency. 8. Tendencies of accumulating inventories tend to make speculative profits grow. This may tend to make dividend policy liberal and difficult to cope with in future when the firm is unable to make speculative profits. Ina*!Cuat! Bor.in) capital is also ba* an* 1as t1! ,olloBin) *an)!rs which /"#+ might face if inadequate working capital continuous for longer period of timeG 5. !t stagnates growth. !t becomes difficult for the firm to undertake profitable pro3ects for non-availability of working capital funds. ?. !t becomes difficult to implement operating plans and achieve the firm2s profit target. K. 'perating inefficiencies creep in when it becomes difficult even to meet day to day commitments. 8. 4i ed are not efficiently utili.ed for the lack of working capital funds. Thus the firm2s profitability would deteriorate. 9. paucity of working capital funds render the firm unable to avail attractive credit opportunities etc, B. The firm loses its reputation when it is not in a position to honor its short term obligations. As a result the firm faces tight credit terms.

)anagement of /"#+D should, therefore, maintain the right amount of working capital on the continuous basis. 'nly then a proper functioning of business operations will be ensured. Sound financial and statistical techniques, supported by 3udgement, should be used to predict the quantum of working capital needed at different time periods.
69

A firm2s net working capital position is not only important as an inde of liquidity but it is also used as a measure of the firm2s risk. (isk in this regard means chances of the firm being unable to meet its obligations on due date. The lender considers a positive networking as a measure of safety. All other things being equal, the more the networking capital a firm has, the less likely that it will default in meeting its current financial obligations. +enders such as commercial banks insist that the firm should maintain a minimum net working capital position.

2or.in) Capital #urno"!r Ratio

This ratio helps to measure the efficiency of the utili.ation of the working capital. !t signifies that for an amount of sales, a relative amount of working capital is needed. This ratio shows the direct relationship between the sales and working capital.

2+C+ #urno"!r Ratio F 'al!sG 2or.in) Capital

4==58=: Y!ars 'al!sHin lacsE 2or.in) CapitalHin lacsE 2C #urno"!r RatioHin lacsE 587L5 ?9L5 B

4==:8=; 59B85 K5:: 9

4==;8=< 56:?K 895K 8

4==<83= ?8?:B K7L9 B

4=3=833 ?589: 98:9.: 8

#abl! 4% Calculation o, 2or.in) Capital #urno"!r Ratio in JCBL+

70

Grap1ical R!pr!s!ntaion O, 2or.in) Capital #uro"!r Ratio

Fi)ur! 7% 2or.in) Capital #uro"!r Ratio o, JCBL

Int!rpr!tation
!n the above chart, it is clearly visible that the working capital Turnover has fluctuates drastically in years. !n ?::B-:L from B lacks in ?::L-:7 9 lacks in ?::7-:6 8 lacks but ?::6-5: B lacks increase, in ?:5:-55 it has again decreased. !t has regularly increased which is good for the company because its turnover has also increased. The main reason for working capital to be in ,ositives is the untimely payment from debtors. And more over, there is a direct relation between working capital requirements with &ebtors and !nventory.

71

Curr!nt Ass!ts #urno"!r Ratio

This ratio indicates the efficiency with which current assets turn into sales. A higher current assets turnover rate or a lower current assets turnover period is better. !t indicates the efficient use of the funds and the reverse case indicates reduced lock-up of funds in current assets.

C&RREN# A''E#' #&ROVER RA#IOF 'ALE'GC&RREN# A''E'#'

Particulars 'al!sHin lacsE "urrent AssetsEin lacsF "urrent Assets Turnover (atioEin lacsF

4==58=: 587L5 ?899

4==:8=; 59B85 ?67K

4==;8=< 56:?K 8K99

4==<83= ?8?:B KB6B

4=3=833 ?589: 9?:B

B.:9

9.?8

8.KB

B.98

8.5?

#abl! 6% Calculation o, Curr!nt Ass!ts #urno"!r Ratio

72

Fi)ur! +9 Grap1ical Pr!s!ntation o, Curr!nt Ass!ts #urno"!r Ratio

Int!rpr!tation
#y observing the above ratio we find that current assets turnover rate increased in ?::B-:L .Then after there was a &ecrease in ?::7-:6 and in very ne t year there was slight increase in ?::6-5: but it has again fluctuate drastically ?:5:-55 and decreased.

ANALY'I' OF -EB#OR'
73

)anagement with the help of certain ratio2s

-!btors #urno"!r Ratio

&ebtor2s turnover ratio establishes a relationship between net credit sales and average trade debtors. The ma3or ob3ective to calculate ratio is to determine the efficiency with which the trade debtors are managed. -e can easily calculate this ratio with the help of the following formulaG -!btor #urno"!r Ratio F N!t Cr!*it sal!s G A"!ra)! -!btors

#abl! 7% -!btor #urno"!r Ratio in JCBL EIn RsG lacsF

Particulars 'al!sHin lacsE Average &ebtorEin lacsF &ebtor Turnover (atio

4==58=: 587L5 ?9?8.L:66 L 9.76:5759 ?

4==:8=; 59B85 ?56B.:KBLL L.5??KLB57 6

4==;8=< 56:?K KBL9.:7BLL 9.5LB?:8K5 B

4==<83= ?8?:B ?6KB.6777 7 7.?85LL88 7

4=3=833 ?589: 8L?:.8:K 8.9885:8

74

Grap1ical pr!s!ntation o, *!btor turno"!r ratio

Fi)ur! 5% Grap1ical Pr!s!ntation o, -!btor #urno"!r Ratio

Int!rpr!tation%
!t indicates the speed with which the debtors turnover an average each year. !n general a high ratio indicates the shorter collection period which implies prompt payments by debtors and a low ratio indicates a long collection period which implies delayed payment by debtors. So we can see from the graph and the table above that in the last five years the company debtor2s turnover ratio has !ncrease in ?::B-:L ?::L-:7 but it &ecrease in ?::7-:6 i.e. is 9.5 and in ?:5:-55. 4rom ?::B to ?::7 the debtor turnover ratio has continuously !ncrease. !t depicts that how inefficiently debtors are collected.

75

AVERAGE COLLEC#ION PERIO-

A"!ra)! Coll!ction P!rio* F 659 G -!btors #urno"!r Ratio %&&'-&( %&&(-&) %&&)-&* %&&*-!&
$articulars 5.890181 5 7.12237618 9 51.2469420 8 5.17620431 6 70.5149908 5

%&!&-!!

Debtor Turnover Ratio Average Collection Perio

8.2177448 44.4160787 3

4.54410 4 80.3238 7

61.96753

#abl! 9% A"!ra)! Coll!ction P!rio*

Grap1ical r!pr!s!ntation o, a"!ra)! coll!ction p!rio*

Fi)ur! :% Grap1ical r!pr!s!ntation o, A"!ra)! Coll!ction P!rio*

Int!rpr!tation%
-e can check the managerial efficiency with the help of this ratio by the comparison of average collection period and credit policy of the company form the table we can

76

clearly see that in the year ?::B-:L > in ?::L-:7 there was a &ecrease and from the year ?::7-:6 it slight increase and again it increases in ?:5:-55 after the decreases of ?::6-5:. This indicates that the company is following a very liberal policy in recent years. !f the days are decreasing it indicates that the bad debts are also decreasing. !t is not difficult to lay down a standard collection periodN it depends upon the nature of the business. As a general rule the receivables should e ceed 8 to 9 months of credit sales.

'#EP' INVOLVE- IN MANAGEMEN# OF -EB#'

77

The following steps are involved in debtor2s management There should a close contact with the customers. There should be proper age- wise analysis of the debtors. There should be proper classification between collectible &ebtors and bad debts. #ad debts should be written off as early as possible after making all efforts for its collection. ,roduct cycle should be minimi.ed so that cost of the product should not become high to the agreed amount because of time factor. There must be a provision of discount for early payment of debts by the customers. (egular checking of the records of the debtors is essential so as to analysis the current position of that organi.ation. -hile making a policy, regarding the debtors the point should be considered that customer having e cellent past record, follow the lenient policy is adopted for doubtful customers )anage the working capital according to need as recovering the debt from customer as early as possible while, get e tension of payment of dues on the company of others as suppliers of raw material as late as possible.

INVEN#ORY ANALY'I' IN JCBL

78

 /"#+ produces long production cycle items against the firm orders from customers. #ecause of this as well as si.eable imported raw materials and compulsory bulk purchase of items like steel and copper in line with availability from company has to carry high level of inventory.

#abl!85 o, In"!ntory Mana)!$!nt in JCBL

INVEN#ORY MANAGEMEN# IN JCBLHA$t+ in lacsE

Particulars (aw )aterial > "omponents -ork-in-progress 4inished 1oods Stock at #ranches )aterial in Transit #otal Turnover Average !nventory !nventory Turnover (atio

4==58=: K.65 ??.?6 K.8L :.85 :.?5 6=+4< 587.L5 ?8.9 B.:L

4==:8=; 9.56 ?8.5? ?.8K :.6K :.69 66+54 59B.85 K5.79 8.65

4==;8=< 8.69 ?:.BB ?.L 5.?7 5.7L 63+75 56:.?K K5.BB B.:5

4==<83= 7.B? ?5.K5 K.KB ?.:L :.?K 69+9< ?8?.B KK.9K L.??

4=3=833 6.B5 ?K.LB 5.L7 5.75 :.8:9 6:+65 ?5K.5K KB.8L 9.78

Grap1ical r!pr!s!ntation o, #otal In"!ntory

79

Fi)ur!8; Grap1ical r!pr!s!ntation o, #otal In"!ntory

Int!rpr!tation
#y the graphical representation, we can easily understand that the level of inventory has increase in ?::B-:L and ?::L-:7. #ut in ?::7-:6, it decreases due to large amount of raw material. !t comes down because company takes not some effective measures to control the level of inventory. Those steps are following steps to control its inventoryG

-AY' OF INVEN#ORY >OL-ING

80

,articulars

4==5 8=: 4==:8=;

4==; 8=<

4==< 83=

4=3= 833

!nventory Turnover (atio &ays in a Jear &ays 'f !nventory *olding

B.:L KB9 B:

8.65 KB9 L8

B.:5 KB9 B5

L.?? KB9 95

9.78 KB9 B?

#abl!8: o, -ays o, In"!ntory >ol*in)

Grap1ical pr!s!ntation -ays o, In"!ntory >ol*in)

Fi)ur!8< Grap1ical pr!s!ntation -ays O, In"!ntory >ol*in)

Int!rpr!tation

81

!f we see from the above table that the days of inventory holding in the year ?::L-:7 has come down to L8 days from B: days in the previous year. !n spite of increase in turnover i.e. !n ?::L-:7 from ?::L in the year ?::B-:L the days of inventory holding decreases. This indicates that the company is using effective strategy to bring down its inventory level. This makes very less investment in inventory. !t is in the interest of every organi.ation to minimi.e its inventory level.

In"!ntory #urno"!r Ratio

82

In"!ntory #urno"!r Ratio #abl!

4==5 8=: ,articulars 4==:8=; 4==; 8=< 4==< 83= 4=3= 833

SalesEin lacsF Average !nventoryEin lacsF !nventory Turnover (atio

587.L5 ?8.9 B.:L

59B.85 K? 8.6:

56:.?K K5.BB B.:5

?8?.:B KK.9K L.??

?5K.5K KB.8L 9.78

#abl!8; In"!ntory #urno"!r Ratio #abl!

Grap1ical pr!s!ntation In"!ntory #urno"!r ratio

Figure-!& Grap1ical pr!s!ntation In"!ntory #urno"!r ratio

Int!rpr!tation

83

This ratio indicates the effectiveness and efficiency of the inventory management. The ratio shows how speedily the inventory turned into account receivables through sales. The higher the inventory to sales ratio, the more efficiently the inventory is said to be managed and vice-versa. #y observing the above ratio we find that the company is able to manage the inventory efficiently as the year progresses. This ratio was lowest as 8.65in ?::L-:7 in last 5years. And since then it is increasing as the year progresses. !n ?::B-:L it is B.:L .The organi.ation should try to maintain the highest on the above ratio.

ANALY'I' OF CA'> MANAGEMEN# 2I#> #>E >ELP OF

84

CER#AIN RA#IO'
Curr!nt Ratio%
This ratio represents a margin of safety for creditors. The higher the current ratio, greater is the margin of safetyN the higher the amount of current assets in relation to current liabilities, the more the firm2s ability to meet its current obligation. !t is the best ratio to find relationship between the current assets and current liabilities of /"#+. -e can easily calculate the current ratio with the help of the following formulaG

Curr!nt Ratio F Curr!nt Ass!ts G Curr!nt Liabiliti!s

4==58=: Particulars 5994+49 Curr!nt Ass!ts Curr!nt Liabiliti!s #urno"!r 6<;=+:; 3+57 5973+7 6773 3+<=3 4==:8=; 4==;8=< 4==<8 4=3=8 3= 33 ;6;5+: ;63<+ 3=353 5 6;:6+< 7779 7:99+< ; 4+357 3+;: 4+36

#abl!8< '1oBin) Curr!nt Ratio in last ,i"! y!ar

85

Fi)ur! 33% Grap1ical pr!s!ntation o, Curr!nt Ratio

Int!rpr!tation%
As a conventional rule, a current ratio of ? to 5 or more is considered satisfactory. The /"#+ organi.ation in the year ?::9-:B has the ratio of 5G5which is quite low the reason being is that its current assets and current liabilities are more than in equal comparison to its current assets and current liabilities this means that there is in sufficient fund with organi.ation to meet its current obligations. )oreover, as we can see from the above table and graph the current ratio of /"#+ is in ?::B-:L ?::L-:7 ?::7-:6 ?::6-5: ?:5:-?:55 is more than 5G5 which is quite equal but still it is able meet its obligation equal in the current liabilities and current assets as compared to previous year.

86

LIQ&I- RA#IO
This ratio establishes a relationship between quick assets and current liabilities. The ma3or ob3ective to compute this ratio is to measure the ability of the firm to meet its short-term obligations as and when due without relying upon the reali.ation stock. -e can easily calculate this ratio with the help of the following formulaG

LiCui* RatioF LiCui* Ass!ts G curr!nt liabiliti!s

+able: !& Calculation o, Li-ui. /atio in 0C1L

$articulars !i"ui A##et#$lac#% !urrent Lia#ilities$in lacs% !i"ui ratio

%&&'-&( 3523.45 &'(".7( 1.13

%&&(-&) 3200.14 &))".'7 1.1

%&&)-&* 5239.37 &(7&.') 0.74

%&&*-!& 47.61 )))).'( 0.9

%&!&-!! 6460.79 )755.'* 0.74

87

Grap1ical pr!s!ntation o, liCui* ratio

Fi)ur!833 Grap1ical pr!s!ntation o, liCui* ratio

Int!rpr!tation%
+iquid ratio indicates that what amounts of liquid assets are available for each rupee of current liability. -e know that the liquid ratio of any organi.ation may be 5G5, is considered to be satisfactory. Aow comparing the company's position according to
the li-ui. ratio in %&&' &( %&&( &) %&&)-&* %&&* -!& %&!&-!! the ratio was appro2imately !3 Which the 4ame li-ui.ity position all year was ,or the Company3 5t means that the li-ui.ity position o, the company is almost same it is .ue to large amount o, current liabilities as compare. to li-ui. assets an. also the number o, .ebtors o, the company is increasing3 +his is better ,rom management6s point o, iew3 As more o, amount is not blocke. in the .ebts an. no chances o, ba. .ebt will increase +

88

CA'> FLO2 'A#E#MEN# FOR #>E YEAR EN-ING HA$ount in lacsE

AS at K5.:K.55 ,A(T!"D+A(S A Cas1 FloB Fro$ Op!ratin) Acti"iti!s Aet profit #efore Ta > % traordinary item A* ust$!nt ,or % &epreciation )iscellaneous %pps. -ritten 'ff ,rofitHloss on Sale of fi ed Assets !nterest % p. !nterest !ncome. Op!ratin) Pro,it b!,or! 2or.in) Capital C1an)!s "hange !n Sundry &ebtor "hange in !nventories "hange in +oan > Advances "hange in Sundry "reditors "hange in 'ther "urrent +iabilities > ,rovisions Cas1 G!n!rat!* Fro$ Op!ration+ !ncome Ta ,aid Cas1 FloB B!,or! E0traor*inary It!$s ,roceeds from any e traordinary items N!t Cas1 Fro$ Op!ratin) Acti"iti!s AS at K5.:K.5: AS at K5.:K.:6 AS at K5.:K.:7 AS at K5.:K.:L

57:+:= KL8.K8 : : 6:8.8K -?.88 3<47+=6 -5L7K.85 -585.95 557.97 ?8:.L9 76.65 77;+67 -59:.K5 4<;+=7 -:.L7 4<:+49

;54+77 ?6L.78 : : 67L.9B -B.:L 4373+:; LK7.5 -855.K6 -855.L9 8::.L9 565.L9 457<+:9 -?:L.56 4774+95 -?.5K 477=+76

77:+=5 56:.B8 : 55.L 785.?9 -?.95 37;;+39 -58L6.:9 56K.6K -??K.:8 866.?7 -?B.5 796+3: -559.:K 66;+37 -5:.? 64:+<7

L?5.79 57?.BB KB.6 -5.L? 9K5.K5 -5.6? 375<+=; -K?7.BL K5?.8K -9.L6 -8L8.8 -BK.69 <94+:9 ?BB.5B 5;5+5 -8.85 5;4+3<

L58.B7 599.BB : : 8B.?8 -K.?8 34;6+67 ?6B.B 559L.8K KL9.L5 5KK5.56 59K.:K <6:+;4 ?8L.88 5<=+6; -:.8K 5;<+<9

89

B Cas1 FloB Fro$ In"!stin) Acti"iti!s ,urchase of 4i ed Assets ,roceeds from Sale 'f 4i ed Assets !ncreaseHdecrease in !nvestments Technology &evelopment % p. !nterest (eceived N!t Cas1 Fro$ In"!stin) Acti"iti!s C Cas1 FloB Fro$ Financin) Acti"iti!s ,roceeds from Term +oan #orrowings !ncrease in Dnsecured +oan (epayment of Term +oans ,roceeds from -orking "apital #orrowings !nterest ,aid &ividend and dividend Ta ,aid N!t Cas1 &s!* In Financin) Acti"iti!s N!t Incr!as! In Cas1 A Cas1 ECui"al!nt HALBLCE Cas1 A Cas1 ECui"al!nt at t1! b!)innin) o, P!rio* Cas1 A Cas1 ECui"al!nt at t1! En* o, P!rio*

-?75.59 : -K?9.:: : ?.88 85=6+:3

-588K.B9 5?B -5:: : B.:L 83733+9<

-BB8.L8 8B 89 58L.B ?.9 8746+57

-88B.98 5L7.68 -K?B.?K -578.86 5.6? ::5+7

-5?9?.?7 : ? : K.?8 8347:+=7

569:.:: : -L7K.B: L6.95 -6:8.8K : 673+7; 69+=4 673+=7 6:5+=9

5??6.L? : -7K7.KL -978.56 -67L.9B : 833;=+7 83393+95 7<4+9< 673+=7

5::: : -8KK.KB LB7.?7 -785.?9 -B:.78 764+;6 66:+36 399+75 7<4+9<

59L:.B5 : -5?7B.:B 85?.68 -9K5.K5 -B:.78 3=9+67 33+37 377+63 399+79

7L9 -K? -?89.?6 9:7.BB -8:B.?8 -9B.7? 566+63 :5+44 5;+=< 377+63

90

#abl!833 Cas1 ,loB 'tat!$!nt ,or t1! y!ar !n*in)

'&MMARY OF FIN-ING'

91

 The creditors of the company has increased from 6646 lacs to 6<<7 lacs while the current liabilities of the company has increased which means that company has adopted a good reali.ation policy. The increased current liabilities are about 6<;=+:; #o 7:99+<; lacs in 3ust a span of 4ive years. The current ratio of the company in last five years has remain almost same from 3%3 to 3%3 which reveals that company is moving from aggressive working capital strategy to conservative working capital strategy. The company is able to reduce its inventory holding period continuously in last five years which means that company is able to convert its finished product into sales within shorter span. !t was 367 *ays in year 4==584==: > now it has reduced to 3=6 *ays in 4=3=84=33+ The inventory is increased to Rs 6:+=9 lacs from Rs 6=+4< in 3ust a span of five years. The current assets of the company have increased from 5994+49 to 3=35=+<; in the span of five years. The latest working capital turnover ratio indicates the efficiency of utili.ation of fund as it is 7+ The proportion of working capital in the stock was high in year 4==;8=< but in 4==<83= it has reduced after the span of time in 4=3=833 it again increased. The inventory holding period has reduced from 5= to 54 days which shows that inventory is turning into finished goods very quickly and the company has reduced the locking of funds in inventories. The inventory turnover ratio has increased from 5+=: to 9+;7 within a span of five years. This shows that company is able to manage inventory efficiently.

'&GGE'#ION'

92

5. Analysis of financial statements and working capital of organi.ation reveals many strong and weak points of the organi.ation /"#+. ?. As far as the current ratio of the organi.ation is concerned, it is %qual in the all years. . Although the current ratio of the company should be 4%3 is considered to be good but this ratio is not too good for the organi.ation in which cash, inventory > debtors play a significant role but here in /"#+ department all the financial activities and funds allocations are dealt at the corporate office of /"#+, which is situated at ,DA/A#. &ebtors are also very nominal as /"#+ sales constitute ;:N appro imately. *ence the organi.ation should try to manage its inventory in best possible manner. #y decreasing inventory and reduce the un-necessary lock up of funds in inventory the organi.ation can improve its current ratio. So the company should try to improve this ratio through increase in sales or reduce the un-necessary lock up of funds in current assets. K. There is a increase in current liabilities about Rs+ 7:99+<; lacs in a span of five years which is not good for the credit of company so the organi.ation should try to reduce the current liabilities through speedy payment to creditors and reduce the un-necessary provisions. 8. There is a big fluctuation in working capital turnover ratio. This ratio was 5 in =58=: and 9 in =:8=; it suddenly went up to : in 4==<83= in working capital turnover ratio and this ratio come down to 7 in 4=3=833. This was because the sales did not increase in the same ratio as working capital increased. So the company should manage the working capital and should properly estimate for an amount of sales how much working is needed so that the un-necessary lock up of funds in working capital may not occur. 9. The amount of cash balance has increased from Rs+ 377+63 lacks to Rs+6:5+=9 lacs within the span of 9 y!ar. And moreover debtors have also decreased at a

93

slow rate. !t2s very good for the company .but the company should made such policies so that cash can be reali.ed quickly from debtors and thus maintains its liquidity. B. 4inally, ! wish that organi.ation should improve more and more in the coming years and reach the ma imum heights of development.

CONCL&'ION
94

After successful completion of the study ! reached to the conclusion that the working capital is the burning topic for any manufacturing company. The important activity for any company is to managing day-to-day e penditure and arranging the funds for those activities otherwise other department of the company not be able to work properly. "ompany requires additional and e tra funds due to its nature of business. *ero motors are the big manufacturing firm and in such a big manufacturing firm mostly sales and purchases are on credit basis, means debtors and

creditors are large in number So after this study ! come to know that how the company avail working capital and for how many days company require funds. Also ! come to know about the trends in financing of working capital by banks and about the ma imum permissible bank finance to the company by the banks, in which company using the ?nd method of Tendon committee.

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