A project report

On

“Working Capital Management and its Appraisal"

In
Sanmati Pressing Pvt. ltd.

By

SURYAWANSHI KUNAL BALDEV

Under the guidance of

PROF. UJWALA BAIRAGI

Submitted to

The University of Pune

In partial fulfillment of the requirement for the award of degree of

Master of Business Administration (M.B.A.) 2009-10

Through
MARATHWADA MITRA MANDAL’S
COLLEGE OF ENGINEERING PUNE
PUNE
 Acknowledgement

Words are indeed inadequate to convey my deep sense of gratitude to all

those who have helped me in completing this summer project to the best
of my ability. Being a part of this project has certainly been a unique
and a very productive experience on my part.

I would like to express my profound gratitude to Mr. Ramesh Jadhav

(External Guide, Finance Manager, Sanmati Pressing Pvt. Ltd.), under
whose guidance, gained deeper insights into the subject matter.

I express my heartfelt gratitude to Mr. SACHIN GANGE (Director) for

his support and guidance. He has provided me valuable advices and
guidance during my project.

I feel immense pleasure to express my sincere gratitude to MR.

Kulkurni (Assistant Manager, Finance), for giving me an opportunity to
work with Sanmati Pressing Pvt. Ltd. as a project trainee.

Special thanks goes to Mr.C.P.Panse (HOD) and my internal guide Ms.

UJWALA BAYRAGI who are responsible for helping me to complete
the writing of the report as the challenging research that lies behind it.

Last but not least I would like to thank all the employees of Sanmati
Pressing PVT.LTD. who have directly or indirectly helped me with their
moral support for the completion of my project.

SURYAWANSHI KUNAL B.
 INDEX

Sr.No. Particular Page

No.

1. Executive Summary

2. Introduction to subject

3. Research Methodology

4. Company Profile

5. Analysis & Interpretation Of Data

6. Findings

7. Suggestion and Conclusion

8. Annexure

9. Bibliography
EXECUTIVE SUMMARY
 EXECUTIVE SUMMARY

Sanmati Pressings Pvt. Ltd. was incorporated in 1996 by MR. L.D.

GANAGE. Since inception Sanmati Pressings is known for its

capability of manufacturing precision press components and sub-

assemblies for diesel engines.

Sanmati Pressings is the pioneer in India in manufacturing PTFE seal, a

high technology item which is a vital part of IC engine. Sanmati’s

success is based on its own precision tool making division, rigorous

research and unique innovation.

The topic of the project undertaken was "Working Capital Management

and its appraisal Sanmati Pressing Pvt. Ltd."

The idea behind selection of this project was mainly due to its nature

and importance in the overall financial management of organization.

The important of working capital management is reflected in the fact

that financial managers spend a great deal of time in managing current

assets and current liabilities. Arranging short term financial, negotiating

favourable credit term, controlling cash movement managing accounts

receivable and monitoring Investment in inventories consumes a great

deal of time of finance manager.

Working Capital means excess of current assets over current liabilities.

It refers to all aspects of the administration of both current liabilities.

The basic objective of working Capital Management is to manage the

firm's current assets and current liabilities in such a way that the

satisfactory level of working capital is maintained. Organizations are

spending corers of rupees on working capital requirement each year

disproportionately for buying large amount of current assets.

The need of working capital Arise from the cash/operating cycle of the

firm. Efficiency of operations accelerates the pace of cash cycle and

improves the working capital turnover resulting in reduced requirement

of working capital. A firm should have adequate working capital to

support its budgeted level of activity in terms of production/sales. It

should have neither more nor less working capital than required.

The finance manager also has to calculate the firm’s risk taking and debt
serving capacity for compounding the funds. The ratio analysis is done

to know the performance of the organization. The rationale of ratio

analysis lies in the fact that it makes related information comparable.

Comparison with related facts is, therefore, on the basis of ratio

analysis. Analysis of financial statements is of interest to lenders (short-

term as well as long-term), investors, security analysts, managers and

others. If properly analyzed and interpreted, financial statements can

provide valuable insights into a firm’s performance.

This project is based on analysis and interpretation. The researcher has

alternative solution and suggestions give to the organization. Lastly at

the end of report, contains annexure and bibliography. Annexure

contains the balance sheet and profit and loss accounts with help of this

researcher has done research work & bibliography give the information

about the books, magazines and websites used by the researcher to

complete the research work.

INTRODUCTION
 INTRODUCTION

“Working capital means the part of the total assets of the business
that change from one form to another form in the ordinary course
of business operations.”

Concept of working capital:-

The word working capital is made of two words 1.Working and 2.
Capital
The word working means day to day operation of the business, whereas
the word capital means monetary value of all assets of the business.

Working capital : -
Working capital may be regarded as the life blood of business. Working
capital is of major importance to internal and external analysis because
of its close relationship with the current day to-day operations of a
business. Every business needs funds for two purposes.

 Long term funds are required to create production facilities

through purchase of fixed assets such as plants, machineries,
lands, buildings & etc
  Short term funds are required for the purchase of raw materials,
payment of wages, and other day-to-day expenses. It is other wise
known as revolving or circulating capital.

It is nothing but the difference between current assets and current

liabilities.

Working Capital = Current Asset – Current Liability

Businesses use capital for construction, renovation, furniture, software,

equipment, or machinery. It is also commonly used to purchase
inventory, or to make payroll. Capital is also used often by businesses to
put a down payment down on a piece of commercial real estate.
Working capital is
essential for any business to succeed. It is becoming increasingly
important to have access to more working capital when we need it.

Concept of working capital

· Gross Working Capital = Total of Current Asset
· Net Working Capital = Excess of Current Asset over Current Liability

Current Liabilities Current Assets

· Cash in hand / at bank

· Bills Payable · Bills Receivable
· Sundry Creditors · Sundry Debtors
· Outstanding expenses · Short term loans
· Accrued expenses · Investors/ stock
· Bank Over draft · Temporary investment
· Prepaid expenses
· Accrued incomes
Working capital in terms of five components:

1. Cash and equivalents: - This most liquid form of working capital

requires constant supervision. A good cash budgeting and forecasting
system provides answers to key questions such as: Is the cash level
adequate to meet current expenses as they come due? What is the timing
relationship
between cash inflow and outflow? When will peak cash needs occur?
When and how much bank borrowing will be needed to meet any cash
shortfalls? When will repayment be expected and will the cash flow
cover it?

2. Accounts receivable: - Many businesses extend credit to their

customers. If you do, is the amount of accounts receivable reasonable
relative to sales? How rapidly are receivables being collected? Which
customers are slow to pay and what should be done about them?

3. Inventory: - Inventory is often as much as 50 percent of a firm's

current assets, so naturally it requires continual scrutiny. Is the
inventory level reasonable compared with sales and the nature of your
business? What's the rate of inventory turnover compared with other
companies in your type
Of business?

4. Accounts payable:- Financing by suppliers is common in small

business; it is one of the major sources of funds for entrepreneurs. Is the
amount of money owed suppliers reasonable relative to what you
purchase? What is your firm's payment policy doing to enhance or
detract from your
Credit rating?
5. Accrued expenses and taxes payable: - These are obligations of
your company at any given time and represent a future outflow of cash.

Two different concepts of working capital are:-

· Balance sheet or Traditional concept
· Operating cycle concept.

Balance sheet or Traditional concept:- It shows the position of the

firm at certain point of time. It is calculated in the basis of balance sheet
prepared at a specific date. In this method there are two type of working
capital:-
· Gross working capital
· Net working capital

Gross working capital:- It refers to the firm’s investment in current

assets. The sum of the current assets is the working capital of the
business. The sum of the current assets is a quantitative aspect of
working capital. Which emphasizes more on quantity than its quality,
but it fails to reveal the true
financial position of the firm because every increase in current liabilities
will decrease the gross working capital.

Net working capital:- It is the difference between current assets and

current liabilities or the excess of total current assets over total current
liabilities.

Working capital= current assets - current liabilities.

Net working capital: - It is also can defined as that part of a firm’s

current assets which is financed with long term funds. It may be either
positive or negative. When the current assets exceed the current
liability, the working capital is positive and vice versa.

OPERATING CYCLE
 The working capital requirement of a firm

depends, to a great extent upon the operating cycle of the firm. The

operating cycle is defined as the time duration starting from the

procurement of goods or raw materials and ending with the sales

realization. The length and nature of the operating cycle differs from

one firm to another depending upon the size and nature of the firm.

A company’s operating cycle typically

consists of three primary activities: purchasing resources, producing the

product and selling the product. These activities create funds flow that is

both unsynchronized and uncertain. This is unsynchronized because

cash disbursements usually take place before cash receipts. This is

uncertain because future sales and costs, which generate the respective

receipts and disbursements, cannot be forecasted with complete

accuracy.

The concept of operating cycle is useful in controlling as well as

forecasting working capital need. Longer the operating cycle the more

working capital funds the firm needs, while shorter operating cycle

period indicates that the locking up of funds in current

 Cash

Debtors/BR Raw Material

Sales Work-in Progress

Finished Goods

Thus the operating cycle of a firm consists of the time required for the

completion of the chronological sequence of the following:

a. Procurement of raw materials and services.

b. Conversion of raw materials into work-in-progress.

c. Conversion of work-in-progress into finished goods.

d. Sale of finished goods (cash or credit).

e. Conversion of receivables into cash.

The segments of the operating cycle include raw material storage

period, conversion period, finished goods storage period and average

collection period before getting back cash along with profit. The total

duration of all the segments mentioned above is known as gross

operating cycle period. When the average payment period of the

company to its suppliers is deducted from the gross operating cycle

period the resultant period is called the net operating cycle period or the

operating cycle period.

NEED FOR ADEQUATE WORKING CAPITAL:

The need and importance of adequate working capital for day to day

operation can hardly be underestimated. Every firm must maintain a

sound working capital position otherwise; its business activities may be

adversely affected. Thus every firm must have adequate working

capital.

The excess working capital, when the investment in working capital is

more than the required level, may result in

a). Unnecessary accumulation of inventories resulting in waste, theft,

damage etc.

b). Delay in collection of receivables resulting in more liberal credit

terms to customers than warranted by the market conditions.

c). Adverse influence on the performance of the management.

On the other hand, inadequate working capital situation is not good for

the firm. Such a situation may have following consequences:

The fixed asset may not be optimally used. Firm’s growth may stagnate.

Interruptions in production schedule may occur ultimately resulting in

lowering of the profit of the firm. The firm may not be able to take

benefit of an opportunity.

Firm goodwill in the market is affected if it is not in a position to meet

its liabilities on time.

Thus taking in to consideration financial manager must establish:

1 well defined working capital policy

2. Self decision of working capital management system.

Below are some type’s policies in working capital management.

1. Moderate policy, value of current asset increases in proportion with

sales level.

2. Conservative policy, value of current asset increases more rapidly

than sales level. Such a policy tends to reduce the risk of shortage of

working capital by increasing the safety component of current asset. The

conservative policy also reduces the risk of non-payment to liability.

3. Aggressive type of policy, sales level increases more in percentage

than increase in current assets.

This type of aggressive policy has many implications.

The risk of insolvency of the firm increases as it maintains low liquidity.

The firm is exposed to greater risk as it may not be able to face

unexpected changes in market

Reduced investment in current asset will result in increase in

profitability of the firm.

OBJECTIVES OF THE PROJECT:-

The objectives of the study are –

• To understand and study, in general, the management of

working capital.

• To analyze the distribution of gross working capital into

various components.

• To calculate the operating cycle period.

 • To analyze the liquidity position of the company by analyzing

the various ratios.

SCOPE OF STUDY:-

In every business organization its financial transactions are recorded in

a systematic manner, which are called ‘Financial Statements’ such as

Profit and Loss Account, Balance Sheet, etc.,. Financial Statements

shows the financial strength and weakness of the firm, hence, the

Financial Statements are prepared for the decision-making.

Management to be able to take proper decisions such financial statement

are necessary to be analyzed. The study was useful to understand the

Working Capital Management at Sanmati Pressing Pvt. Ltd. It was

useful in understanding all theoretical concepts, how they are practically

implemented. Also the various type of ratios were studied which helps

in analyzing the financial statements.

RESEARCH OBJECTIVES:

The main objectives of this research are: -

 To verify and to test the existing facts and theories.

 To gain familiarity with a phenomenon or to achieve new insights

into it,

 To establish generalization in various fields of knowledge.

 To bring to limelight information that could have never been brought

to the knowledge under normal course.

RESEARCH DESIGN AND

METHODOLOGY
 RESEARCH DESIGN AND METHODOLOGY

INTRODUCTION:

Management of working capital is a challenging task particularly in

developing countries like India. In developing countries generally, there

is shortage of funds, frequent changes in the monetary policy as an

instrument of controlling inflation, vast demands on bank funds, high

interest rates, shortage of goods and services luring both business

houses and consumers to hoard and maintain large inventories and

existence of parallel black economy. A large part of finance managers

are devoted in managing working capital to meet day-to-day needs of an

organization. His prime attention is devoted to maintain sufficient

liquidity in the form of cash, marketable securities, accounts receivables

and inventories to grease the operations of business adequately. But at

the same time he is to take care of the profitability of the organization.

Too much liquidity is a burden on profitability, as these are inversely

related to each other. It is to balance between these two conflicting

objectives of liquidity and profitability. For the organization it is a

continuous process.

METHODS OF DATA COLLECTION

Primary data: -

Personal interview was the main tool for the collection of primary data

and information. This study has brought in use very little primary data

in relation with the elements of working capital.

Secondary data: -

Since the study is based on the financial aspects of the company so the

annual report of the organization, Trial Balance, Income & Expenditure

accounts of the company brought in use. Besides the above data, the

company profile and theoretical aspects are taken from the secondary

sources.

LIMITATIONS

This project is not far from limitations. The limitation in this study is: -

A company generally cannot disclose its internal policies to outsiders. In

such case, it is very difficult to find out and gather complete and true

information in the forms of figures regarding financial matters.

Risk and Return in Working Capital

Another important aspect of working capital policy is to maintain and

provide sufficient liquidity to the firm. Having a large working capital

may reduce the liquidity risk faced by the firm, but it can have a

negative effect on the cash flows. Greater liquidity makes the firm

meeting its obligation, but simultaneously greater liquidity involves cost

also. Therefore, the net effect on the value of the firm should be used to

determine the optimum amount of working capital. Risk return trade off

in working capital management is trade off between the Firms liquidity

and its profitability. By investing large amounts in current assets, firm

can reduce risks of

1. Production stoppages and the lost sales from the inventory shortage

2. Inability to pay the creditors on time.

However if the firms increase in investment does not increase the

corresponding return, this mean that the firms return on investment

drops because profit is unchanged.

In addition to above, other things remain same, greater the firms

reliance on the short term debt in financing its current asset, greater the

risk of ill-liquidity. A firm can reduce its risk of ill-liquidity through the

use of long-term debt at the cost of reduction on its return on

investment. So the risk in this context is measured by the probability,

that firm will become technically insolvent by not paying current

liabilities as they occur, and profitability here means the reduction on

cost of maintaining the current assets. In other words, more liquid with

the firm; the less likely it is to become insolvent. Conversely, lower

levels of liquidity are associated with increasing levels of risk. So, the

relationship of working capital, liquidity and risk of the firm is that the

liquidity and risk move in opposite direction.

The Risk Return Syndrome Can Be Summed Up As Follows:

When liquidity increases, the risk of insolvency is reduced, but

profitability is also reduced. However when the liquidity is reduced, the

profitability increases but the risk of insolvency also increases. So

profitability and risk move in the same direction.

Moreover, the different elements of current assets should also be

appropriately balanced. Each element and its position in the total

working capital should be analyzed in the light of its characteristics. For

e.g. the total current assets may be sufficient to cover the current

liabilities but when the composition of current asset is analyzed, it may

be found that it is consisting mainly of the obsolete and slow moving

stock. This stock may not provide desired level of liquidity to pay off

the current liabilities. Similarly, higher level of cash and bank balance

may provide liquidity but affect the profitability because keeping cash

and bank balance is not profitable use of the resources.

The effect of working capital changes on the liquidity risk depend on a

number of factor such as:

A) Stand-by sources: A firm with stand-by source of external

financing is less exposed to liquidity risk than the firm, which does not
have such access, because the former can tap these sources if it needs to

cover the increasing current liabilities.

B) Economic conditions: Holding other factors constant, firms

typically experience larger changes in liquidity risk as a consequence of

working capital change when the economy is in recession than when in

boom.

C) Future uncertainty: To the extent that future operations of the firm

are predictable and stable, the firm can survive with lower investment in

working capital than could, otherwise similar firms which have more

uncertainty about the future operations.

CASH MANAGEMENT:

Financing of Current Assets:

Another important aspect of working capital management is to decide

the pattern of financing the current assets. Breaking down working

capital needs into permanent components over time provides a useful

by-product in terms of financing choice.

Permanent component is predictable as far as it is linked up to expected

change in sales or cost of goods sales over time, temporary component

is also predictable in general as it follows the same pattern every year.

So two components need to be financed accordingly for which the

different sources of funds can be grouped as follows:

1. Long term sources: e.g. share capital, retained earnings, debentures

and long term borrowings.

2. Short term sources: e.g. bank credits, public deposit, commercial

papers, factoring etc.

3. Transaction sources: e.g. credit allowed by suppliers and outstanding

labour and other expenses.

There are different approaches to take this decision relating to financing

mix of working capital as follows:

1. Hedging approach: In this approach financing maturity should

follow the cash flow characteristics of the assets being financed. The

general rule is that the length of the finance should match with the life

duration of assets. The financing mix as suggested by the hedging

approach is a desirable financing pattern. However, it may be noted that

the exact matching of maturity period of current assets and sources of

finance is not always possible to determine because of the uncertainties

involved.

2. Conservative approach: In this approach all or most of the working

capital needs are met by long-term sources and thus the firm avoids the

risk of uncertainty.

3. Aggressive approach: In this approach the firm decides to finance a

part of the permanent working capital by short-term sources.

COMPANY PROFILE
 COMPANY PROFILE

Sanmati Pressings Pvt. Ltd. was incorporated in 1996 by MR. L.D. GNAGE. Since

inception Sanmati Pressings is known for its capability of manufacturing precision press

components and sub-assemblies for diesel engines.

Sanmati Pressings is the pioneer in India in manufacturing PTFE seal, a high technology

item which is a vital part of IC engine. Sanmati’s success is based on its own precision

tool making division, rigorous research and unique innovation.

Sanmati supplies a large number of products like assay radiator frame, reinforcements,

chassis suspension parts, aux. water tank mtg. Bkts., shock absorber mtg.bkt., hand break

lever assays. Connectors, gaskets and many other diesel engine parts. SANMATI is a QS-

9000 / ISO9001 certified company since July 2006 by BVQI. The Company gives

emphasis on continuous improvement , use of different problem solving techniques and

employee involvement through Quality Circles, Suggestion Schemes etc.

 SANMATI Quality Policy

We at SANMATI shall strive to achieve continuous improvement in all areas of the

business through teamwork and is committed to provide consistent quality of product and

Customer satisfaction at every step which is achieved by involvement and participation of

every individual in the Organization.

SANMATI Working

• Strengths

• Manufacturing facilities

• Inspection and testing facility

• Design and development facility

• Communication

• Production management.

• QUALITY management

• Support to Vendors

• Customer Complaint Handling System

• Sanmati Pressings Employee profile

• Bankers

•
Strengths

• In house Tool manufacturing facility

• Expertise in dealing with different types of raw material

• State of the art Design facilities

• Qualified personnel in respective areas

• Young and dedicated team with average age of 35 years

• Approved for Self certification level by customers

• CMM Facility available

Manufacturing facilities

• Mechanical Press Tonnage: 50 Ton to 150 Ton.

• Shearing size thickness 3.0 mm & width up to 1150 mm.

• Lathe machine diameter up to 17”.

• On line Statistical Process Control.

• Preventive maintenance for Tools fixtures and dies.

• Area 806 Square meters.

Inspection and testing facility

 • Oil Seal Testing machines.

• Measurement facility up to 0.001 mm / 0.0001” L.C. available.

• Facility of concentricity checking of Seal O.D. It’s available all over

India.

• Coat thickness measurement facility available.

Design and development facility

• CAD Drafting & Designing facility available.

• AUTO CAD Release 2000.

• Well equipped Tool Room.

• Milling machine (HMT make) with DRO attachment

• Tool and Cutter grinder

• Surface Grinder

• 100 Ton Press for Tool try-out

• Skilled manpower

• Design skill for DFMEA, DOE, GD&T

 •

Support to Vendors

• Visits and audits by directors

• Focus on Quality and Continuous improvement

• Guidance on Quality System, Tools and dies

• Technical Support for product and process development

Customer Complaint Handling System

• Complaint Acknowledgement

• Field visit by SANMATI representative

• Field report and feedback to Customer

• Monthly analysis of Complaints

• Communication to all concerned

Sanmati Pressings Employee profile

• Employee strength ( as on 1st Jan. 2009)

• Workers = 53
 • Staff = 39

• Managers = 04

• Average age = 35

• Employee satisfaction/ development schemes = 07

PRODUCT DEVELOPMENT CYCLE

• CAD Data \ Drawing & APQP

• CAD \ CAM (Tebis, CATIA, UG)

• Die Manufacturing

• Die Assembly

• Out

• Sample Approval

• Pilot Batch

• PPAP

• Production

• Products
 ORGANISATIONAL CHART

MANAGING
DIRECTOR

GENERAL
MANAGER

SHARING PURCHA PRODUC DISPUTE A/C & QUALITY

MANAGER SE TIONMA MANAGER EXCISE MANAGER
MANAGE NAGER MANAGER

FINANCE
MANAGER

MANAGEMENT MANAGEMENT
TRAINEE TRAINEE
VENDER’S OF SANMATI PRESSING
GROWTH OF PROFIT BERFORE\AFTER TAX

Profit Before
8000000 Tax
7000000 Profit after
Tax
6000000
5000000
4000000
3000000
2000000
1000000
0
2006- 2007- 2008-
07 08 09
ANALYSIS AND INTERPRETATION OF

DATA
ANALYSIS AND INTERPRETATION OF DATA

Calculation of Working Capital

Introduction:

Working Capital refers to the capital required to meet day to day

operations. It is calculated by deducting current liabilities from current

assets.

(Figures in Rs. )

Particulars 2009 2008 2007

Current Assets, Loans and

Advances:

-Inventories 17,217,283 19,205,966 16,050,080

-Sundry Debtors 23,353,341 28,170,861 16,623,256

-Cash and Bank Balances 454,097 7,204 190,096

-Other Current Assets --------- ---------- ---------

-Loans and Advances 16,123,856 20,720,678 6,267,101

Gross Working Capital (a) 57,148,577 68,104,710 39130,533
Current Liabilities and

Provisions:

-Current Liabilities 37,484,568 39,481,470 17,167,043

-Provisions 476,030 2,931,500 35,030

TOTAL (b) 37,960,598 42,412,970 17,202,073
Net Working Capital (a-b) 19,187,980 25,691,740 21,928,461
(Source: Balance Sheet)

NET WORKING CAPITAL

Analyses through Chart

All fighers are in Rupees

 30000000
Net Working
25000000 Capital
20000000

15000000

10000000

5000000

0
2009 2008 2007

Calculations of Financial ratios:

Introduction:

Ratios are used as tool for financial analysis. They measure the

relationship among the tangible factors affecting the performance and

profitability of the company.

Ratio Formula Ratio used for

Financial Year ended

2009 2008 2007
Liquidity

Ratios:
Current Current Assets, Loans and

Ratio Advances 1.505 1.605 2.275

Current Liabilities and

 Provisions
Quick Liquid Assets 1.05 1.15 1.34

Ratio Current Liabilities and Bank

O/D
Activity

Ratios:
Inventory

Turnover COGS 2.60 2.80 2.90

Ratio Average Inventory

(times)
Inventory 365

Period Inventory Turnover Ratio 140 130 126

(days)
Debtors

Turnover Net Sales 5.42 6.26 6.09

Ratio Avg.Debtors

(times)
Debtors

Collection 365 67 58 60

Period Debtors Turnover Ratio

(days)
Creditors

Turnover Purchases 3.57 4.51 8.08

Ratio Avg.Creditors

(times)
Creditors

Payment 365 102 81 42

Period Creditors Turnover Ratio

(days)
Working

Capital Net Sales

Turnover Net Working Capital 6.60 6.86 4.16

Ratio
Sales to

Capital Sales 0.61 0.63 0.57

Employed Capital Employed

Ratio
Current

Assets to Current Assets 48.24 58.20 76.96

Total Total Assets % % %

Assets
Inventory Inventory 30.14 28.20 41.01

Ratio Current Assets % % %

 Profitabilit

y Ratios:
NET Profit NET Profit *100 00.99 02.55 00.05

Ratio Sales % % %
(Source: Balance Sheet & Income & Expenditure Account)
FINDINGS
FINDINGS

General Findings

• Despite the difficult conditions in the international market & the

impact of the recession the company suffers loos as compare to

last year.

Specific Findings

• Though the consumption of Raw Material cost of production and

cost of sales has decrees in 2009. This shows the improvement in

the collection policies of the company which includes discounting

of channel financing and aggressive collection policy.

• The operating cycle, Lock – In –Period working capital position

of the company is not favourable as compared to the earlier years.

SUGGESTIONS

General Suggestions:

 The company has to take steps to counter the rising input cost and

domestic competition through cost reduction, rationalization of

products and distribution channels, judicious inventory

management and research and development.

 It is seen that as the inventory carrying cost is reducing because

of the falling interest rates, the company may stock more if

desired.

Specific Suggestions

 The Raw Material storage period has increased from 46 days in

2007 to 55 days in 2009, which shows that more funds are

blocked in Raw Materials for more 9 days though increasing

production demands more flow of Raw Material.

 Use Just in time method.

 Not to give all payment of Raw Material but payment should be

 equally distribute among small suppliers also.

 Lack of advertisement.

CONCLUSION

• From the project we can say that working capital is blood vessel

of any organization.

• The factor like bills payable and receivables owe the power to

manage whole working capital of business.

• By doing this project I can say that every company is depends

upon its working capital rather than its fixed assets or fixed

liability.

• Ratio analysis is further most important part of working capital

which help one if understand the status of current assets and

 current liability.

• Finally I would say that, “Managing the working capital is

Managing your Business”

ANNEXURE
 ANNEXURE 1

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31st

MARCH

(figures in Rs.)
Particulars 2009 2008 2007
Income
Sales 126554721 176325350 101203210
Other Income 157100 126834 65936

total 126711821 176452184 101269146

Expenditure
Material Cost& Manufacturing Cost 112882525 157166469 91608527
Employment Costs 2090140 2474813 1695939
Administrative, Selling & General
Expenses 5907200 4221266 4679908
Finance Charges 2434077 4053911 2028779
Depreciation 1640305 1528628 1121009

Profit for the year before exceptional

items 1757574 7007097 134984
Add/less: Exceptional items 24530
Profit for the year before tax 1757574 7031627 134984
Provision for income tax
Current tax 441000 2480000 10500
Deferred tax (26113) 80553
Fringe benefit tax 88183 139122 76883
Profit for the year after tax 1254504 4493058 47601

ANNEXURE 2

FUND FLOW STATEMENT AS ON 31st MARCH

(Figures in Rs. )

Particulars 2009 2008 2007

Sources of Funds:

Shareholders’ Funds

Share Capital 3800000 5000000 380000

Reserves & Surplus 1157118 5650176 97386

Share application money 160000 2343650 2386761

Loan Funds

Secured Loans 22071832 19428630 23949135

 Unsecured Loans 328655 7245125

Deferred Tax Liability 50770 29783 76883

TOTAL 27568375 39637799 30212779

Application of Funds:

Fixed Assets

Gross Block 14564835 21251047 13042111

Less: Depreciation 6184434 7713071 4255179

Net Block 8380392 13537976 8186932

Capital WIP 408083

Technical Knowhow

Investments

Current Assets, Loans & Advances

Inventories 17217283 19205966 16050080

Sundry Debtors 23353341 28170861 16623255

Cash & Bank Bal. 454097 7204 190096

Other Current Assets

Loans & Advances 16123856 20720678 6267101

Less:

Current liabilities & Provisions

Current Liabilities 37484568 39481470 17167043

 Provisions

476030 2931500 35030

Net Current Assets

Miscellaneous Expenditure to the 19187980 25691740 21928460

extent not written off or adjusted

TOTAL

27568375 39637799 30212779

BIBLIOGRAPHY

BOOKS:

Khan M. Y. & Jain P. K., ‘Financial Management (Text & Problems)’,

Tata McGraw-Hill Publishing Co. Ltd., New Delhi, Third Edition.

Chandra Prasanna, ‘Financial Management (Theory & Practice)’, Tata

McGraw-Hill Publishing Co. Ltd., New Delhi, Fifth Edition.

Rustagi R. P., ‘Financial Management (Theory, Concepts and

Problems)’, Galgotia Publishing Co., New Delhi, Second Revised

Edition.

Bodhanwala R. J., ‘Taxmann’s Learning Financial Management

using Financial Modelling’, Taxmann Allied Services Pvt. Ltd., New

Delhi, July 2003 Edition.

Pandey I. M., ‘Financial Management’, Vikas Publishing House Pvt.

Ltd., New Delhi, Eighth Edition.

Annual Reports, Sanmati Pressing Pvt. Ltd., 2007 to 2009.

WEBSITES:

www.sanmatipressingpvtindia.com

NET WORKING CAPITAL

Analyses through Chart

All fighers are in Rupees

 30000000
Net Working
25000000 Capital
20000000

15000000

10000000

5000000

0
2009 2008 2007

Calculations of Financial ratios:

Introduction:

Ratios are used as tool for financial analysis. They measure the relationship among

the tangible factors affecting the performance and profitability of the company.

Ratio Formula Ratio used for Financial

Year ended
 2008 2007 2006
Liquidity

Ratios:
Current Ratio Current Assets, Loans and Advances

Current Liabilities and Provisions 1.605 1.505 2.275

Analyses through chart

All fighers are in Rupies

2.5

1.5

0.5

0
2009 2008 2007