a study on cash management-karthi-088001614028
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A STUDY ON CASH MANAGEMENT
WITH SPECIAL REFERENCE TO RHYTHM
FASHION PRIVATE LIMITED, TIRUPUR,
TAMILNADU
PROJECT REPORT
Submitted by
K.KARTHI
Register No: 088001614028
in partial fulfillment for the award of the degree
Of
MASTER OF BUSINESS ADMINISTRATION
in
DEPARTMENT OF MANAGEMENT STUDIES
SSM COLLEGE OF ENGINEERING
KOMARAPALAYAM-638183
MAY 2010
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SSM COLLEGE OF ENGINEERING
KOMARAPALAYAM-638183
Department of Management studies
PROJECT WORK
PHASE II
MAY 2010
This is to certify that the project entitled
A STUDY ON CASH MANAGEMENT
WITH SPECIAL REFERENCE TO RHYTHM FASHION PRIVATE
LIMITED, TIRUPUR, TAMILNADU
is the bonafide record of project work done by
K.KARTHI
Register No: 088001614028
of MBA (DEPARTMENT OF MANAGEMENT STUDIES) during the
year 2009-2010.
--------------------- -------------------------
Project Guide Head of the Department
Submitted for the Project Viva-Voce examination held on__________
--------------------------- ----------------
Internal Examiner External Examiner
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DECLARATION
I affirm that the project work title A STUDY ON CASH MANAGEMENT
WITH SPECIAL REFERENCE TO RHYTHM FASHION PRIVATE LIMITED,
TIRUPUR, TAMILNADU being submitted in partial fulfillment for the award of
MASTER OF BUSINESS ADMINISTRATION is the original work carried out by
me. It has not formed the part of any other project work submitted for award of any
degree or diploma, either in this or any other University.
K.KARTHI
088001614028
I certify that the declaration made above by the candidate is true
Mrs. J. Esther Gnanapoo, MBA, M.Phil, Ph.D
Professor,
Department of MBA,
SSM College of Engineering.
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CONTENTS
Chapter
No
Description Page No.
List of Tables viList of Charts viiAbstract viii
1
Introduction
1.1 Introduction of the study
1.2 About the study
1.3 About the Industry
1.4 About the company
1 to 14
1
2
8
10
2
Main theme of the project
2.1 Objectives of the study
2.2 Scope of the study
2.3 Limitations of the study
2.4 Research Methodology
2.5 Review of Literature
15 to 20
15
15
16
16
193 Analysis & Interpretation 21 to 49
4
Findings, Recommendations and Conclusion
4.1 Findings
4.2 Recommendations
4.3 Conclusion
50 to 59
50
58
59AppendicesBibliography
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LIST OF TABLES
LIST OF CHARTS
Table
No.
Particulars PAGE
No.
3.1.1
Common size Balance Sheet statement from the year
2003-04 to 2009-10 22
3.1.2
Common size Profit and Loss account statement from
the year 2003-04 to 2009-10 25
3.2.1 Liquidity ratio from the year 2003-04 to 2009-10 35
3.2.2 Turn over ratio from the year 2003-04 to 2009-10 38
3.2.3
Average Payment & Average Receipts period from the
year 2003-04 to 2009-10 40
3.3 Cash flow statement from the year 2004-2009 433.4 Optimum cash balance from the year 2003-04 to 2009-
10
46
3.5 Correlation test from the year 2003-04 to 2009-10 49
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SYNOPSIS
The study deals with the CASH MANAGEMENT in RHYTHM
FASHION Private Ltd. Garments at Tirupur. This study highlights the concepts of
cash management, its components and the trend and the cash management based on
past six years data. This study also points out the problem faced by the company at the
time of maintaining a proper cash management level. This study also helps the
TableNo.
Particulars PAGENo.
3.1.2 Common size Receipts statement from the year 2003-
04 to 2009-10
28
3.1.2 Common size Payments statement from the year 2003-
04 to 2009-10
30
3.2.1
Liquidity ratio from the year 2003-04 to 2009-1036
3.2.2
Turn over ratio from the year 2003-04 to 2009-1039
3.2.3
Average Payment & Average Receipts period from the
year 2003-04 to 2009-1041
3.4 Optimum cash balance from the year 2003-04 to 2009-
10
47
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company to analyze the financial strength and weakness and to take proper corrective
measures.
The study was carried out using various tools such as common size
statement, Ratio analysis, cash flow statement, Correlation test and optimum cash
balance taking into account the past seven years from 2003-04 to 2009-10. The
duration of the study was seven years.
First chapter includes the introduction to the study, needs for the study of cash
management, Industry profile, company profile, objective of the study, Limitation of
the study, scope of the study and its significance in the introduction to cash
management. The company profile explains the various features of the company like itspresent status in the market, the history and product details.
The second chapter includes objectives, research methodology and analysis.
The study is conducted for some specific purpose termed as objectives. This chapter
contains the scope and limitations of the study. The research methodology part contains
the research design and the tools used for analysis. The research is of analytical type
with the secondary data as data type.
The analysis and interpretation part contains the five accounting and statistical
tools. The secondary data collected are analyzed using the above tools and meaningful
conclusions are drawn.
To analyses the cash management in the company, common size statement, cash
flow statement, optimum cash balance, ratio analysis and correlation test analysis has
been calculated.
The information was collected through both primary and secondary source. The
Primary datas are collected from personal interview secondary datas are collected
from the companys financial records, net etc.,
To study helpful to maintain effective cash management, useful to know about
the liquidity position of the firm, to know the current financial position of the company,
to suggest measures for improving the cash management of the firm effectively.
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payments, collect receivables and manage liquidity. Managing the channels of
collections, payments and accounting information efficiently becomes imperative
with growth in business transaction volumes.
Cash is the most important factor in financial management and current asset for
the operations of the business. Every activity in an enterprise revolves round the cash.
Sound financial management means knowing the firms cash flow, forecasting cash
needs, planning to borrow at the appropriate time and substantiating the firms payable
ability. The term cash includes coins, currency and cheque held by the firm and
balances in its bank accounts. Sometimes near-cash item also included.
Cash management refers to the flow of cash into and out of a business over aperiod of time. The outflow of cash is measured by the money you pay every month to
salaries, suppliers, and creditors. The inflows are the cash you receive from customers,
lenders, and investors.
Cash is the important current asset for the operation of the business. Cash is the
basic input needed to keep the business running on a continuous basis: it is also the
ultimate output expected to be realized by selling the service or product manufactured
by the firm. The firm should keep sufficient cash, neither more nor less. Cash shortage
will disrupt the firms manufacturing operation while excessive cash will simply
remind idle without contributing anything toward the firms profitability. Thus, a major
function of the financial manager is to maintain a sound cash position.
Cash is the money which a firm can disburse immediately without any
restriction. The term cash includes coins, currency and cheque held by the firm, and
balances in its bank accounts. Sometimes near-cash items, such as marketable securitiesor bank times deposits, are also includes in cash. The basic characteristic of near-cash
assets is that they can readily be converted into cash. Generally, when a firm has excess
cash, it in marketable securities. This kind of investment contributes some profit to the
firm.
Cash management with the managing of cash flow into and out of the firm, cash
flow within the firm, and cash balances held by the firm at a point of times by financing
deficit or investing surplus cash. Sales generated cash which has to be disbursed out.
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product or service of your business. Because it is generated internally, it is
under your control.
2. Investing Cash Flow (Internal)
Investing cash flow is generated internally from non-operating activities. This
component would include investments in plant and equipment or other
fixed assets, nonrecurring gains or losses, or other sources and uses of cash
outside of normal operations.
3. Financing Cash Flow (External)
Financing cash flow is the cash to and from external sources, such as lenders,
investors and shareholders. A new loan, the repayment of a loan, the
issuance of stock and the payment of dividend are some of the activities that
would be included in this section of the cash flow statement.
Cash flow shortages are a challenge for many small businesses. One way to
relieve the pressure for cash is through better management of company receivables.
Here are some ways to tighten control of your cash.
Cash Decision made by a firm are Determining when cash should be obtained,
sources from which cash can be obtained and determining whether marketable
securities are to be purchased.
1.2.1 GOOD CASH MANAGEMENT
Knowing when, where and how companys cash needs will occur. Knowing the
best sources for meeting additional cash needs. Being prepared to meet these needs
when they occur, by keeping good relationships with bankers and other creditors.
The starting point for good cash flow management is developing a cash flow
projection.
Facets of cash management
Cash planning :
Cash inflows and outflows should be planned to project cash surplus or deficit
for each period of planning Period.
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Managing the cash flows :
The flow of cash should be properly managed. The cash inflows should be
accelerated while, as far as possible, the cash outflows should be decelerated.
Optimum cash level :
The firm should decide about the appropriate level of cash balances. the cost of
excess cash and danger of cash deficiency should be matched to determine the optimum
level of cash balances.
Investing surplus cash :
The surplus cash balances should be properly invested to earn profits. The
firm should decide about the division of the such cash balance between alternative
short-term investment opportunities such as bank deposits, marketable securities or
interoperate lending.
1.2.2 CASH MANAGEMENT
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the 16th century cotton was grown in the warmer climes of America and Asia. When
the Romans ruled, wool, leather and linen were the materials used for making clothing
in Europe, while flax was the primary material used in the northern parts of Europe.
During this era, excess cloth was bought by the merchants who visited various
areas to procure these left-over pieces. A variety of processes and innovations were
implemented for the purpose of making clothing during this time. These processes were
dependent on the material being used, but there were three basic steps commonly
employed in making clothing. These steps included preparing material fibers for
the purpose of spinning, knitting and weaving.
During the Industrial Revolution, new machines such as spinning wheels and
handlooms came into the picture. Making clothing material quickly became an
organized industry as compared to the domesticated activity it had been associated
with before. A number of new innovations led to the industrialization of the textile
industry in Great Britain.
Clothing manufactured during the Industrial Revolution formed a big part of
the exports made by Great Britain. They accounted for almost 25% of the total
exports made at that time, doubling in the period between 1701 and 1770.The center of the cotton industry in Great Britain was Lancashire and the
amount exported from 1701 to 1770 had grown ten times. However, wool was the
major export item at this point of time.
In the Industrial Revolution era, a lot of effort was made to increase the speed
of the production through inventions such as the flying shuttle in 1733, the flyer-and-
bobbin system, and the Roller Spinning machine by John Wyatt and Lewis Paul in
1738.Today, modern techniques, electronics and innovation have led to a
competitive, low-priced textile industry offering almost any type of cloth or design a
person could desire. With its low cost labour base, China has come to dominate the
global textile industry
The history of development in World Textile industry was started in Britain
as the spinning and weaving machines were invented in that country.
High production of wool, cotton and silk over the world has boosted the
industry in recent years. Though the industry was started in UK, still in 19th Century
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Finance Requirement
In order to meet ever increasing yarn requirement and increase in price also, the
company keep stock to the turn of Rs.22 Lakes, to meet the market demand. To Cope
with this market the company need financial assistance of Rs.15 Lakes.Still the
growth of turnover is going very fast and achieved a turnover of Rs.8.07 core for the
period April-2006 to Dec-2009. This turnover was achieved without any finance from
any person or authorities such as Bank etc.,
DEMAND & SUPPLY POSITION:
The total demand for garments in the world market is ever growing one and the
share of India in this prime market is 2% and on the uptrend since India is having a
very good opportunity to develop this market especially after the phasing out of quakes
under WTO treaty.
To feed the export market, the company dealt in Raw material requirement part,
which is no doubt, ever increasing.
Expansion Plan
Expansion and modernization of Textile is presently on. The plan envisages
installation of raw materials and Continuous process facilities to produce large
production. Along with, expansion of all department , enhancing the capacity of yarn
Products produce with high quality with reasonable price and capture the market.
The Rhythm Fashion is the largest dealers in Tirupur and surrounding area.
Management and company plans
Today, modern techniques, electronics and innovation
has implement in concern, so our textile industry offering almost any type of
cloth or design a person could desire. With its low cost labour base, possible in
our concern because of new innovation.
The company has strong Research and Development center enabling it to
develop superior products matching customized needs.
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1.4.1 ORAGANISATION CHART
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CHAPTER II
MAIN THEME OF THE STUDY
2.1 MAIN OBJECTIVES OF THE STUDY
The main objectives of the study are,
1. To study the cash position and financial position of the company.
2. To know the liquidity position of the firm.
3. To analyze the cash sales, credit sales, cash payments and cash disbursements
made by the company.
4. To determine the cash inflows and outflows of the company.
5. To know about the optimum cash balance of the company.
2.2 SCOPE OF THE STUDY:
This Study on Cash Management with Special Reference to RHYTHM
FASHION Private Limited, Tripur, Tamil nadu, was for a Period of 7 years from the
year 2003 to 2009.
This study will help the firm in making some financial decisions for future
years.
This study will help the management to decide the cash position in order to
increase the profitability and the value of the firm.
The study clearly explains about at what areas they have to improve their
performance.
It helps in making some reference for its past performance.
2.3 LIMITATIONS OF THE STUDY
The data was obtained from the annual reports of the company so the
reliability of the study depends on the accuracy of information found in the annual
reports.
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Common size statement
Financial statement when read with read with absolute figures is not easily
understandable. They are even misleading. Each item of assets is converted into
percentage to total assets and each item of capital and liabilities is expressed to total
liabilities and capital fund.
Ratio Analysis
Ratio analysis is one of the powerful tools of financial
analysis. It indicates a quantitative relationship between the
figures and group of figures which are used for evaluation
and decision-making. An analysis of financial statement
ratios is imperative.
Cash flow statement
Cash flow statement can be defined as a statement
which summaries sources of cash inflows and uses of cash
outflows of the firm during a particular period of time say as
month or year.
Optimum cash balance
It is determination of optimum level of each of a company; Economic order
quantity is used in the standard inventory situation.
Correlation
Correlation analysis is the statistical tool that describes the degree to which the
variables linearly related to other variables. Two or more variables are said to be
correlated if change in the value of appears to be related as linked with change in the
other correlation.
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Multinational Companies in Bangladesh. Mohiuddin (1983) had conducted a study on
cash budget.
Islam and Rahman (1994) had article on "cash management Trends of theSelected Enterprises in Bangladesh". Optimum working capital enables a business to
have its credit standing and permits the debts payments on the date of its maturity and
helps to keep itself fairly in liquid position which enables the business to attract
borrowing from the banks. It also helps to
maintain all-round efficiency in operations. Of all aspects of financial management,working capital management is the vital one.
A study on cash management of Sakthivelu poly pack, Pollachi in 2003 was
done by Ms.S.Selvanayaki. The main objective was to present the conceptual
framework for working capital and to find out the working capital employed. It is
suggested that the ability of the firm to meet its short-term liabilities is normal and this
practice may be adopted in the future also.
Cash management analysis was done by S.Meena in Palai Andavar Cotton
And Synthetics Ltd., in1990. The main objective was to analyse the cash management
and to highlight the various changes that have been taken place in the management of
cash. Findings of the study were the growth in the cash of the concern and good
liquidity position.
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form. Such converted balance sheet is known as common size statement. Here we are
going to anglicizing the common size statement of profit and loss account and common
size statement of balance sheet.
TABLE 3.1.1 COMMON SIZE STATEMENT SHOWING BALANCE SHEET
FROM THE YEAR 2003-2009
(Rs. in
%)
Year2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
ASSETS
Building 4% 2% 2% 2% 2% 1% 1%
Land 16% 9% 7% 6% 5% 4% 4%
Plant & Machinery 28% 47% 45% 45% 48% 48% 48%
Furniture 2% 1% 1% 1% 1% 1% 1%
Investment 2% 1% 1% 1% 1% 1% 1%
Cash in Hand & Bank 5% 3% 2% 2% 2% 2% 2%
Int. rec. &acc. income 1% 1% 3% 3% 3% 2% 2%
Bills receivables 1% 1% 1% 1% 1% 1% 1%
Debtors 25% 22% 27% 30% 29% 31% 32%
Inventories 17% 12% 10% 10% 9% 9% 8%
TOTAL ASSETS 100% 100% 100% 100% 100% 100% 100%
LIABILITIES
Share capital 43% 31% 30% 26% 31% 32% 33%
Reserve & Surplus 13% 12% 12% 13% 15% 14% 13%
Loans & Advances 16% 24% 24% 26% 20% 17% 13%
Provision for Taxation 2% 2% 4% 6% 4% 4% 4%
Bills Payables 1% 1% 1% 1% 1% 2% 1%
Outstanding Exp. 0% 0% 0% 0% 0% 0% 0%
Creditors 14% 19% 20% 23% 23% 27% 30%
P & L account 10% 11% 9% 6% 6% 5% 7%
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TOTAL LIABILITES 100% 100% 100% 100% 100% 100% 100%
Interpretation:
From the above table it was interpreted that
Assets
Buildings cover a minor portion of total assets. It shows a decreasing trend from
the year 2003-04 to 2009-10, it was 4 % to 1%. From the year 2004-05 to 2007-
09 value was stable, it was 2%. From the2008-09 to 2009-10 value was stable, it
was 1%.
Land covers a small portion of total assets it shows a decreasing trend from the
year 2003-04 to 2009-10; it was 16% to 4%. From the year 2008-09 to 2009-10
value was stable, it was 4%.
Plant and Machinery covers major portion of the total assets. It shows an
increasing trend from the year 2003-04 to 2009-10, it was 28% to 48%. It
covers almost 50% of total assets.
Furniture and Investment covers a 1% of the total assets. It shows decreasing
trend from the year 2003-04 to 2009-10, it was 2% to 1%. From the year 2004-
05 to 2009-10 value was contend it 1%.
Cash in hand covers a tiny portion of the total assets. It shows a decreasing
trend from the year 2003-04 to 2009-10, it was 5% to 2%. From the year 2005-
06 to 2009 value was stable, it was 2%.
Interest received and accrued income covers a small portion of the total assets.
It shows an increasing trend from the year 2003-04 to 2009-10, it was 1% to
2%. From the year 2005-06 to 2007-08 shows increasing trend and also stable,
it was 3%. From the year 2008-09 to 2009-10 it shows decreasing trend and
value also constant, it was 2%
Bills receivable shows a stable trend from the year 2003-04 to 2009-10, it was
1% for all the years.
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Debtors covers a second major portion of the total assets. It shows an
increasing trend from the year 2003-04 to 2009-10, it was 25% to 32%.
An inventory shows a decreasing trend from the year 2003-04 to 2009, it was17% to 8%. Value was stable in the year 2005-06 to 2006-07, it was 10%. 9%
value stable in the year 2007-08 to 2009-10.
Liabilities
Share capital covers major portion of the total liabilities. It shows a decreasing
trend from the year 2003-04 to 2009-10, it was 43% to 33%. From the year
2003-04 to 2006-07 shows decreasing trend, it was 43% to 26%. From the year
2007-08 to 2009-10 it shows increasing trend, it was 31% to 33%.
Reserve and surplus shows a fluctuating trend. From the year 2003-04 to 2009-
10, it was 13% to 13%. From the year 2003-04 to 2004-05 it shows decreasing
trend it was 13% to 12%. Again it shows increasing trend in the year 2006-07 to
2007-08, it was 15%. Again it shows decreasing trend next years.
Loans and advances show a fluctuating trend. From the year 2003-04 to 2006-
07 shows increasing trend, it was 16% to 26%. From the year 2007-08 to 2009-
10 shows decreasing trend 20% to 13%.
Provision and taxation shows an increasing trend from the year 2003-04 to
2009-10, it was 2% to 4%. From the year 2006-07 to 2007-08 shows decreasing
trend it was 6% to 4%. From the year 2007-08 to 2009-10 value was constant it
was 4%.
Bills payable shows a stable value for all years. From the year 2003-04 to 2007-08 value stable, it was 1%. From the year 2007-08 to 2008-09 shows increasing
trend, it was 1% to 2%. Again it decreased 1% to remaining years.
Creditors covers a second major portion of the total liabilities. From the year
2003-04 to 2009-10 it shows increasing trend, it was 14% to 30%.
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Profit and loss of the concern shows a decreasing trend from the year 2003 to
2009 it was 10% to 7%. From the year 2006-07 to 2007-08 stable value was
6%.
3.1.2 COMMON SIZE STATEMENT SHOWING PROFIT AND LOSS
ACCOUNT FROM THE YEAR 2003-2009
(Rs. In
%)
Year2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10Particulars
Receipts
Cash sales 8% 9% 10% 8% 11% 10% 11%Credit sales 63% 72% 76% 80% 80% 81% 81%Closing stock 24% 16% 11% 10% 7% 7% 6%Interest received 3% 2% 1% 1% 1% 1% 1%Commission received 2% 1% 2% 1% 1% 1% 1%Total receipts 100% 100% 100% 100% 100% 100% 100%
Particulars
PaymentsCash purchase 2% 3% 4% 5% 4% 5% 5%Credit purchase 24% 37% 38% 40% 39% 39% 38%Opening stock consumed nil 13% 9% 8% 7% 6% 6%Raw material in store 26% 3% 14% 10% 5% 6% 6%Staff expenses 9% 11% 9% 6% 6% 10% 10%Power and fuel 12% 10% 9% 9% 8% 9% 8%Interest and bank charges 1% 0% 0% 0% 0% 0% 0%Administrative Exp. 8% 6% 4% 3% 3% 3% 3%Other expenses 1% 0% 0% 0% 0% 0% 0%
Depreciation 4% 4% 3% 3% 2% 2% 2%Tax paid 13% 13% 10% 16% 26% 20% 22%Total Expenses 100% 100% 100% 100% 100% 100% 100%
Net profit after tax
(from sales) 20% 18% 12% 6% 5% 5% 6%
Interpretation:
Receipts
Cash sales shows an increasing trend from the year 2003-04 to 2005-06, it was
8% to 10%. It shows a decreasing trend in the year 2005-06 to 2006-07, it was
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10% to 8%. From the year 2006-07 to 2007-08 it shows increasing trend it was
8% to 11%. In the year 2008-09 again shows it a decreasing trend to 10%.
From the year 2003-04 to 2009-10 shows an increasing trend it was 8% to 11%.
Credit sales shows an increasing trend from the year 2003-04 to 2009-10 it was
63% to 81%. A credit sale covers major portion of total receipts.
Closing stock shows a decreasing trend from the year 2003-04 to 2009-10 it was
24% to 6%. In the year 2007-08 to 2008-09 it posses a stable value of 7%.
Interest received shows decreasing trend from the year 2003-04 to 2009-10 it
was 3% to 1%. From the year 2005-06 to 2009-10 stable value it has 1%.
Commission received shows a decreasing value from the year 2003-04 to 2004-
05 it was 2% to 1%. Next year it shows an increasing trend it was 2%. Again it
was decreasing trend in the year 2006-07 it was 1%. From the year 2006-07 to
2009-10 value was stable it was 1%.
Payments
Cash purchase shows increasing trend from the year 2003-04 to 2009-10 it was2% to 5%. Decreasing trend from the year 2006-07 to 2007-08 it was 5% to
4%. Again it was increasing trend from the year 2007-08 to 2008-09 it was 4%
to 5%. Stable value from the year 2008-08 to 2009-10 it was 5%.
Credit purchase shows an increasing trend from the year 2003-04 to 2006-07, it
was 24% to 40%. Showing decreasing trend from the year 2007-08 to 2009-10
it was 39% to 38%.
Opening stock consumed shows a decreasing trend from the year 2003-04 to
2009-10 it was 13% to 6%. From the year 2008-09 to 2009-10 stable value it
was 6%.
Raw material in store shows a decreasing trend from the year 2003-04 to 2004-
05 it was 26%to 3%. Increasing trend in the year 2004-05 to 2005-06 it was 3%
to 14%. Again it shows a decreasing trend from the year 2005-06 to 2009-10 it
was 14% to 6%.
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Staff expenses shows an increasing trend from the year 2003-04 to 2004-05 it
was 9% to 11%. From the year 2005-06 to 2007-08 shows a decreasing trend it
was 9% to 6%. Again it was increasing trend from the year next two years also
stable vale from the year 2008-09 to 2009-10 it was 10%.
Power and fuel shows decreasing trend from the year 2003-04 to 2009-10 it was
12% to 8%.
Interest and bank charges and other expenses for the year 2003-04 1%.
Remaining years it was zero.
Administrative expenses show a decreasing trend from the year 2003-04 to2009-10 it was 8% to 3%. From the year 2006-07 to 2009-10 it was stable value
of 3%.
Depreciation shows decreasing trend from the year 2003-04 to 2009-10 it was
4% to 2%. From the year 2003-04 to 2004-05 value shows constant it was 4%.
From the year 2005-06 to 2006-07 stable value it was 3%. Remaining years
from 2007-08 to 2009-10 shows stable value of 2%.
Tax paid shows stable value from the year 2003-04 to 2004-05 it was 13%.
Decreasing trend from the year 2004-05 to 2005-06 it was 13% to 10%.
Increasing trend from the year 2005-06 to 2009-10 it was 10% to 22%.
Net profit from the sales shows decreasing trend from the year 2003-04 to 2008-
09 it was 20% to5%. It shows increasing trend from the year 2008-09 to 2009-
10 it was 5% to 6%.
3.1.2 CHART SHOWS COMMON SIZE STATEMENT RECEIPTS
FROM THE YEAR 2003-2009
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RECEIPTS 2009-10
Cash sales
11%
Credit sales
81%
Interest received
1%
Commision received
1%
Closing stock
6%
3.1.2 CHART SHOWS COMMON SIZE STATEMENT PAYMENTS FROM
THE YEAR 2003-2009
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PAYMENTS 2003-04
Rawmaterial instore
36%
Staff expenses
12%Power and fuel
16%
Interest and bank
charges
1%
Administrative Exp.
11%
Other expenxes
1%
Deperciation
5%
Tax paid
18%
PAYMENTS 2004-05
Cashpurchase
3%
Credit purchase
37%
Openigstock
consumed
13%
Rawmaterial in
store
3%
Staff expenses
11%
Power and fuel
10%
Interest and bank
charges
0%
Administrative Exp.
6%
Other expenxes
0%
Deperciation
4%
Tax paid
13%
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PAYMENTS 2005-06
Cash purchase
4%
Credit purchase
38%
Openig stock
consumed
9%
Rawmaterial in
store
14%
Staff expenses
9%
Tax paid
10%
Power and fuel
9%
Interest and bank
charges
0%
Administrative Exp.
4%
Other expenxes
0%
Deperciation
3%
PAYMENTS2006-07
Cashpurchase
5%
Credit purchase
40%
Tax paid
16%
Openigstock
consumed
8%
Rawmaterial in
store
10%
Staff expenses6%
Other expenxes
0%
Deperciation
3%
Interest and
bank charges
0%
Power andfuel
9%
Administrative
Exp.
3%
PAYMENTS 2007-08
Cash purchase
4%
Credit purchase
39%
Tax paid
26%
Rawmaterial in
store
5%
Openig stock
consumed
7%Staff expenses
6%
Power and fuel
8%
Interest and
bank charges
0%
Administrative
Exp.
3%
Other expenxes
0%
Deperciation
2%
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PAYMENTS 2008-09
Cash purchase
5%
Credit purchase
39%
Openig stock
consumed
6%
Rawmaterial in
store
6%
Staff expenses
10%
Interest and
bank charges
0%
Power and fuel
9%
Deperciation
2%Tax paid
20%
Other expenxes
0%
Administrative
Exp.
3%
PAYMENTS 2009-10
Cash purchase
5%
Credit purchase
38%
Openig stock
consumed
6%
Rawmaterial in
store
6%
Staff expenses
10%
Interest and
bank charges
0%
Power and fuel
8%
Deperciation
2%Tax paid
22%
Other expenxes
0%
Administrative
Exp.
3%
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3.2 RATIO ANALYSIS
Ratio is powerful tool of working capital management analysis. Ratio is the
numerical of arithmetical relationship between two figures. It is expressed when one
figure is dividend by others.
It summarizes large quantities of financial data and to make quality judgment
about firms financial performance. In financial analysis a ratio is used as a benchmark
for evaluating the financial position and performance of a firm. The absolute
accounting reports do not provide a meaningful understanding in the performance of
the firm. It helps in measuring firms liquidity and its ability to meet current obligations.
It reflects a quantitative relationship in forms of quality judgment.
In this study for assessing the performance of the working capital position, the
technique of ratio analysis has been used. The various ratios used in this study are
3.2.1 LIQUIDITY RATIOS
Current ratio
Current ratio is a measure of firms short terms solvency. It indicates the
availability if current assets in rupees for every one rupees of current liabilities.
Current Assets
Current ratio = -------------------------------------
Current Liabilities
Quick ratio
It establishes a relationship between liquid assets and current liabilities
where an assets can be converted into cash reasonably with out a lose of value.
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Current asset Inventories
Quick ratio = -------------------------------------------
Current liabilities
Absolute Liquidity Ratio (or) Cash position Ratio
It is a variation of quick ratio. When liquidity is highly restricted in
terms of cash and cash equivalents, this ratio calculated. Liquidity relationship
between cash and near cash items on the one hand and immediately obligation
on the others.
Absolute liquid asset (cash)
Absolute Liquidity Ratio = ----------------------------------------Liquid Liabilities
Current Asset to Liquidity Asset Ratio
It relationship between current asset and liquid assets purpose of this
ratio to know about the current asset to liquid assets level.
Current Asset
Current Asset to Liquidity Asset Ratio = ----------------------------
Liquid Asset
TABLE 3.2.1 LIQUIDITY RATIOS FROM THE YEAR 2003-04 TO 2009-10
(In
times)
Liquidity Ratio
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
Current asset ratio 1.979 1.245 1.441 1.532 1.481 1.317 1.188Quick ratio 2.118 1.305 1.439 1.379 1.359 1.187 1.13Absolute Liquidity Ratio 0.333 0.145 0.113 0.088 0.07 0.08 0.055Current Asset to Liquidity Asset
Ratio 1.588 1.511 1.441 1.393 1.355 1.322 1.284
Interpretation
From the above table was interpreted that
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Current ratio from the year 2003-04 to 2005-06 it shows decreasing trend it was
1.979 to 1.441. From the year 2005-06 to 2006-07 increasing trend it was 1.441
to 1.532. Again it was decreasing trend from the year 2006-07 to 2009-10 it was
shows from 1.532 to 1.188. This is less than standard norm of 2:1. Less than 2:1
ratio indicates concern is not a sound position.
Quick ratio shows a decreasing trend from the year 2003-04 to 2009-10 it was
2.118 to 1.13. Standard norms 1:1. More than 1:1 indicates sound financial
position. Here our firm quick ratio gives better picture of firms ability to meet
its short term debt out of short term assets. Companies were shows sound
financial position.
Liquidity ratio shows decreasing trend from the year 2003-04 to 2009-10 it was
0.333 to 0.055. This is less than standard norm of 0.75:1. It shows concern is
not a sound position.
Current asset to liquidity asset ratio was showing decreasing trend from the year
2003-04 to 2009-10 it was 1.588 to 1.284. Less than standard norms shows firm
hasnt enough cash on hand.
3.2.1 CHART SHOWS LIQUIDITY RATIOS FROM THE YEAR 2003-04 TO
2009-10
3.2.2 TURN OVER RATIO & ASSETS RATIO
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These ratios are very important for a concern to judge how well the disposal of
the concern is being used or to use the effectiveness with which a concern uses its
resources at its disposal. Higher the ratio better the profitability and use of capital.
Debtor Turnover Ratio
This ratio shows whether the debts are properly collected or not. A
business concern generally adopts different methods of sales. One of them is
selling in credit. Goods are sold in credit based on credit policy adopted by the
firm. The ratio calculated as follows
Net Sales
Debtor Turnover Ratio = ----------------------------- Average debtors
Creditors Turn Over Ratio
A Business concern usually purchases raw materials, services and goods
Credit the quantum of payable of a business concern depends upon its purchase
policy, the quality of purchases and suppliers credit policy. creditors turnover
ratio indicates the number of times the payables rotates in a year. The ratio is
calculated as follows:-Net Credit Purchase
Creditors Turn Over Ratio = ----------------------------------------------
Average creditors
Fixed Assets Turnover Ratio:-
The fixed assets turnover ratio is important in the case of manufacturing
concerns because sales are produced but also by amount invested in fixed assets.
The higher the ratio the better is the performance. On the other hand, a low ratio
indicates that fixed assets are not being efficiency utilized. The ratio reveals that
in the earliest years the fixed assets cab be efficiently utilized. But now a days
the fixed assets cannot properly utilized. So the fixed asset turnover ratio is
decreased every year.
Net Sales
Fixed Assets Turnover Ratio = ---------------------------------
Fixed assets
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Total Asset Turn Over Ratio
This ratio is calculated by dividing the net sales by the value of total
assets. A high ratio is an indicator of over trading of total assets while a lowratio is an indicator of over trading of total assets while a low ratio reveals idle
capacity, The traditional standard for the ratio is two times.
Net Sales
Total Asset Turn Over Ratio = ------------------------------
Total Assets
TABLE 3.2.2 TURNOVER RATIO FORM THE YEAR 2003-04 TO 2009-10
(In times)
Turn over ratio
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
Debtor Turnover Ratio 1.661 2.326 2.394 2.735 3.224 3.115 3.123
Creditors Turn Over Ratio 0.972 1.189 1.399 1.67 1.931 1.59 1.498
Fixed Assets Turnover Ratio 0.939 0.994 1.339 1.684 1.956 2.047 2.168Total Asset Turn Over Ratio 0.481 0.606 0.752 0.918 1.108 1.122 1.191
Interpretation:
From the above table was interpreted that
Debtor turnover ratio shows increasing trend from the year 2003-04 to 2007-08
it was 1.661 to 3.224. Then it shows decreasing trend from the year 2007-08 to
2008-09 it was 3.224 to 3.115. Thereafter again it was increasing trend from
2008-09 to 2009-10 it was 3.115 to 3.123 so during this period debtors level
was increased it has good for concern.
Creditor turnover ratio shows increasing trend from the year 2003-04 to 2007-
08 it was 0.972 to 1.932. Then it shows decreasing trend from the year 2007-08
to 2009-10 it was 1.59 to 1.498 so during this period creditors level was
increased it shows firm stock consuming level was appreciated.
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Fixed asset turnover ratio shows increasing trend from the 2003-04 to 2009-10
it was 0.939 to 2.168. So it shows net sales level was to be increased than
compare to fixed asset.
From the above table it has been inferred that Total asset turnover ratio shows
increasing trend from the 2003-04 to 2009-10 it was 0.481 to 1.191. So it shows
net sales level was to be increased than compare to total asset.
From the above table it has been inferred that fixed asset to current asset ratio
shows increasing trend from the 2003-04 to 2009-10 it was 0.481 to 1.191. So it
shows net sales level was to be increased than compare to total asset.
3.2.2 CHART SHOWS TURNOVER RATIO FORM THE YEAR 2003-04 TO
2009-10
TURN OVER RATIO FROM THE YEAR
2003-10
0
0.5
1
1.5
2
2.5
3
3.5
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
YEAR
RATI
Debtor Turnover Ratio
Creditors Turn Over
Ratio
Fixed Assets Turnover
Ratio
Total Asset Turn Over
Ratio
3.2.3 AVERAGE COLLECTION & PAYMENT PERIOD
Average Payment Period
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It relationship between account payable and net credit purchase
multiply with total number of month or total number of days in the year.
Account Payable
Average payment period = -----------------------------*12month
Net credit purchase
Average Collection Period
It relationship between account receivables and net credit sales its
multiply with total number of month or total number of days in the year
Account Receivables
Average collection period = ------------------------------ *12 monthNet credit sales
TABLE 3.2.3 AVERAGE COLLECTION & PAYMENT PERIOD FORM THE
YEAR 2003-04 TO 2009-10
(In months)
Avg. period2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
Avg. payment period (in
months) 8.4 10.1 8.6 7.2 6.2 7.5 8.01Avg. collection period (in
months) 7.2 5.2 5.01 4.4 3.72 3.9 3.8
Interpretation:
From the above table was interpreted that
Average payment period shows increasing trend from the 2003-04 to 2004-05 it
was 8.4 months to 10.1 months. Then it shows decreasing trend from the year
2004-05 to 2007-08 it was 10.1 months to 6.2 months. Thereafter again it was
shows increasing trend from the year 2007-08 to 2009-10 it was 6.2 months to
8.01 months. High payment period was 10.1 months. Low period month was 6.2
months. The shorter average payment period good for the concern.
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Purchase of Plant and Machine shows decreasing trend from the year 2004 to
2006 it was Rs.25786 to Rs.14548. Then it shows increasing trend from the year
2006 to 2007 it was Rs.14548 to Rs.21229. There after again it was decreasing
trend from the year 2007 to 2009 it was Rs.21229 to Rs.18462. It shows total
value of plant and machine increased every year.
Investment in cash shows increasing trend from the year 2004 to 2005 it was
Rs.324 to Rs.439. Then it shows Decreasing trend from the year 2005 to 2008 it
was Rs.439 to Rs179. There after again it was increasing trend from the year
2008 to 2009 it was Rs.179 to Rs.274. It shows total value of investment
increased every year.
Repayment of loan happened during the year 2007 and 2009 it was Rs.1472 and
Rs.4829.
Closing balance of the concern was increasing trend from the year 2004 to 2009
it was Rs.2245 to Rs.4583.
Opening balance of the concern was increasing trend from the year 2004 to
2009 it was Rs.1933 to Rs.5343.
Capital appreciation shows increasing trend from the year 2004 to 2005 it was
Rs.6780 to Rs.12210. Then it shows decreasing trend from the year 2005 to
2006 it was Rs.12210 to Rs.4000. There after again it was increasing trend from
the year 2006 to 2007 it was Rs.4000 to Rs.17835. decreasing trend from the
year 2007 to 2009 it was Rs.17835 to Rs.5343. It shows total value of capital
appreciation increased every year.
Loans and advances received decreasing trend from the year 2004 to 2006 it
was Rs.11941 to Rs.10001. For the year 2007 and 2009 loan was repaid. In the
year loan received it was Rs.802
Sale of machinery happened in the year 2005 it was Rs.50. Sale of furniture
happened in the year 2008 it was Rs.102.
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INTERPRETATION
Optimum cash balance increasing trend from the year 2003-04 to 2009-10 itwas Rs.189230 to Rs.772923 From year 2003-04 to 2009-10 cash balance is
increased frequently. Highest optimum cash balance in the year of 2008 it was
Rs.7, 72,923. Lowest optimum cash balance in the year of 2003. Over all
optimum cash balance shows increasing trend.
3.4 THE CHART SHOWS OPTIMUM CASH BALANCE FROM THE YEAR
2003-04 to 2009-10
Optimu m C ash B alance From the year
0
100000
200000
300000
400000
500000
600000
700000
800000
900000
1 2 3 4 5 6 7
ye a
Cash
balan
ce
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2003-04 to 2006-07 shows decreasing trend, it was 43% to 26%. From the year
2007-08 to 2009-10 it shows increasing trend, it was 31% to 33%.
Reserve and surplus shows fluctuating trend. From the year 2003-04 to 2009-10, it was 13% to 13%. From the year 2003-04 to 2004-05 it shows decreasing
trend it was 13% to 12%. Again it shows increasing trend in the year 2006-07 to
2007-08, it was 15%. Again it shows decreasing trend next years.
Loans and advances shows fluctuating trend. From the year 2003-04 to 2006-07
shows increasing trend, it was 16% to 26%. From the year 2007-08 to 2009-10
shows decreasing trend 20% to 13%.
Provision and taxation shows increasing trend from the year 2003-04 to 2009-
10, it was 2% to 4%. From the year 2006-07 to 2007-08 shows decreasing trend
it was 6% to 4%. From the year 2007-08 to 2009-10 value was constant it was
4%.
Bills payable shows stable value for all years. From the year 2003-04 to 2007-
08 value stable, it was 1%. From the year 2007-08 to 2008-09 shows increasing
trend, it was 1% to 2%. Again it decreased 1% to remaining years.
Creditors covers second major portion of the total liabilities. From the year
2003-04 to 2009-10 it shows increasing trend, it was 14% to 30%.
Profit and loss of the concern shows decreasing trend from the year 2003-04 to
2009-10 it was 10% to 7%. From the year 2006-07 to 2007-08 stable value it
was 6%.
Common size Receipts & Payments
Cash sales shows an increasing trend from the year 2003-04 to 2005-06, it was
8% to 10%. It was decreasing trend in the year 2005-06 to 2006-07, it was 10%
to 8%. From the year 2006-07 to 2007-08 it shows increasing trend it was 8% to
11%. Next year 2008-09 Again it shows decreasing trend it was 10%. From the
year 2003-04 to 2009-10 shows increasing trend it was 8% to 11%.
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Credit sales shows an increasing trend from the year 2003-04 to 2009-10 it was
63% to 81%. Credit sales cover a major portion of total receipts it was almost
above 62% for all years.
Closing stock shows a decreasing trend from the year 2003-04 to 2009-10 it was
24% to 6%. In the year 2007-08 to 2008-09 stable value it was 7%.
Interest received shows a decreasing trend from the year 2003-04 to 2009-10 it
was 2% to 1%. From the year 2005-06 to 2009-10 stable value it has 1%.
Commission received shows decreasing value from the year 2003-04 to 2004-
05 it was 2% to 1%. Next year it was shows increasing trend it was 2%. Again itwas decreasing trend in the year 2006-07 it was 1%. From the year 2006-07 to
2009-10 value was stable it was 1%.
Cash purchase shows increasing trend from the year 2003-04 to 2009-10 it was
2% to 5%. Decreasing trend from the year 2006-07 to 2007-08 it was 5% to
4%. Again it was increasing trend from the year 2007-08 to 2008-09 it was 4%
to 5%. Stable value from the year 2008-08 to 2009-10 it was 5%.
Credit purchase increasing trend from the year 2003-04 to 2006-07, it was 24%
to 40%. Showing decreasing trend from the year 2007-08 to 2009-10 it was
39% to 38%.
Opening stock consumed shows a decreasing trend from the year 2003-04 to
2009-10 it was 13% to 6%. From the year 2008-09 to 2009-10 stable value it
was 6%.
Raw material shows a decreasing trend from the year 2003-04 to 2004-05 it was
26%to 3%. Increasing trend in the year 2004-05 to 2005-06 it was 3% to 14%.
Again it was decreasing trend from the year 2005-06 to 2009-10 it was 14% to
6%.
Staff expenses increasing trend from the year 2003-04 to 2004-05 it was 9% to
11%. Decreasing trend from the year 2005-06 to 2007-08 it was 9% to 6%.
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Again it was increasing trend from the year next two years also stable vale from
the year 2008-09 to 2009-10 it was 10%.
Power and fuel shows decreasing trend from the year 2003-04 to 2009-10 it was12% to 8%.
Interest and bank charges and other expenses for the first year 1%. Remaining
years it was zero.
Administrative expenses shows decreasing trend from the year 2003-04 to
2009-10 it was 8% to 3%. From the year 2006-07 to 2009-10 it was stable value
of 3%.
Depreciation shows decreasing trend from the year 2003-04 to 2009-10 it was
4% to 2%. First two years value is to stable it was 4%. From the year 2005-06
to 2006-07 stable value it was 3%. Remaining years from 2007-08 to 2009-10 it
was stable value of 2%.
Tax paid shows stable value for first two years it was 13%. Decreasing trend
from the year 2004-05 to 2005-06 it was 13% to 10%. Increasing trend from theyear 2005-06 to 2009-10 it was 10% to 22%.
Net profit from the sales shows decreasing trend from the year 2003-04 to 2008-
09 it was 20% to5%. It was increasing trend from the year 2008-09 to 2009-10
it was 5% to 6%.
Ratio analysis
Current ratio from the year 2003-04 to 2005-06 it shows decreasing trend it was
1.979 to 1.441. From the year 2005-06 to 2006-07 increasing trend it was 1.441
to 1.532. Again it was decreasing trend from the year 2006-07 to 2009-10 it was
shows from 1.532 to 1.188. This is less than standard norm of 2:1. Less than 2:1
ratio indicates concern is not a sound position.
Quick ratio shows a decreasing trend from the year 2003-04 to 2009-10 it was
2.118 to 1.13. Standard norms 1:1. More than 1:1 indicates sound financialposition. Here our firm quick ratio gives better picture of firms ability to meet
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its short term debt out of short term assets. Quick ratio shows sound financial
position of a firm.
Liquidity ratio shows decreasing trend from the year 2003-04 to 2009-10 it was0.333 to 0.055. This is less than standard norm of 0.75:1. It shows concern has
not a sound position.
Current asset to liquidity asset ratio was showing decreasing trend from the year
2003-04 to 2009-10 it was 1.588 to 1.284. Less than standard norms shows firm
hasnt enough cash on hand.
Debtor turnover ratio shows increasing trend from the year 2003-04 to 2007-08it was 1.661 to 3.224. Then it shows decreasing trend from the year 2007-08 to
2008-09 it was 3.224 to 3.115. Thereafter again it was increasing trend from
2008-09 to 2009-10 it was 3.115 to 3.123 so during this period debtors level
was increased it has good for concern.
Creditor turnover ratio shows increasing trend from the year 2003-04 to 2007-
08 it was 0.972 to 1.932. Then it shows decreasing trend from the year 2007-08
to 2009-10 it was 1.59 to 1.498 so during this period creditors level wasincreased it shows firm stock consuming level was appreciated.
Fixed asset turnover ratio shows increasing trend from the 2003-04 to 2009-10
it was 0.939 to 2.168. So it shows net sales level was to be increased than
compare to fixed asset.
From the above table it has been inferred that Total asset turnover ratio shows
increasing trend from the 2003-04 to 2009-10 it was 0.481 to 1.191. So it showsnet sales level was to be increased than compare to total asset.
From the above table it has been inferred that fixed asset to current asset ratio
shows increasing trend from the 2003-04 to 2009-10 it was 0.481 to 1.191. So it
shows net sales level was to be increased than compare to total asset.
Average payment period shows increasing trend from the 2003-04 to 2004-05 it
was 8.4 months to 10.1 months. Then it shows decreasing trend from the year2004-05 to 2007-08 it was 10.1 months to 6.2 months. Thereafter again it was
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shows increasing trend from the year 2007-08 to 2009-10 it was 6.2 months to
8.01 months. High payment period was 10.1 months. Low period month was 6.2
months. The shorter average payment period good for the concern.
Average collection period shows decreasing trend from the 2003-04 to 2009-10
it was 7.2 month to 3.8 month. Collecting with in short period is good for
concern. Shorter average collection period better for the concern.
Cash flow statement
Cash Purchase of building shows increasing trend from the year 2004 to 2007 it
was Rs.117 to Rs.487. Then it shows Decreasing trend from the year 2007 to
2009 it was Rs.487 to Rs.304. It shows total value of building increased every
year.
Cash Purchase of machinery shows increasing trend from the year 2004 to 2006
it was Rs.842 to Rs.1156. Then it shows Decreasing trend from the year 2006 to
2009 it was Rs.839 to Rs.220. It shows total value of machinery increased every
year.
Cash purchase of Plant and Machine shows decreasing trend from the year 2004
to 2006 it was Rs.25786 to Rs.14548. Then it shows increasing trend from the
year 2006 to 2007 it was Rs.14548 to Rs.21229. There after again it was
decreasing trend from the year 2007 to 2009 it was Rs.21229 to Rs.18462. It
shows total value of plant and machine increased every year.
Cash Investment shows increasing trend from the year 2004 to 2005 it was
Rs.324 to Rs.439. Then it shows Decreasing trend from the year 2005 to 2008 it
was Rs.439 to Rs.179. There after again it was increasing trend from the year
2008 to 2009 it was Rs.179 to Rs.274. It shows total value of investment
increased every year.
Repayment of loan happened during the year 2007 and 2009 it was Rs.1472 and
Rs.4829.
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Closing balance of the concern was increasing trend from the year 2004 to 2009
it was Rs.2245 to Rs.4583.
Opening balance of the concern was increasing trend from the year 2004 to2009 it was Rs.1933 to Rs.5343.
Capital appreciation shows increasing trend from the year 2004 to 2005 it was
Rs.6780 to Rs.12210. Then it shows decreasing trend from the year 2005 to
2006 it was Rs.12210 to Rs.4000. There after again it was increasing trend from
the year 2006 to 2007 it was Rs.4000 to Rs.17835. decreasing trend from the
year 2007 to 2009 it was Rs. 17835 to Rs.5343. It shows total value of capital
appreciation increased every year.
Loans and advances received decreasing trend from the year 2004 to 2006 it
was Rs.11941 to Rs.10001. For the year 2007 and 2009 loan was repaid. In the
year loan received it was Rs.802
Sale of machinery happened in the year 2005 it was Rs.50. Sale of furniture
happened in the year 2008 it was Rs.102.
Sash from operation shows decreasing trend from the year 2004 to 2004 it was
Rs.8926 to Rs.2212. It was increasing trend from the year 2004 to 2009 it was
Rs.2212 to Rs.8161 it shows firm generating profit successfully.
Optimum cash balance
Optimum cash balance increasing trend from the year 2003-04 to 2009-10 it
was Rs.189230 to Rs.772923 From year 2003-04 to 2009-10 cash balance is
increased frequently. Highest optimum cash balance in the year of 2008 it wasRs.7, 72,923. Lowest optimum cash balance in the year of 2003. Over all
optimum cash balance shows increasing trend.
Correlation test
It found that receipts and payments. The overall payment of the concern higher
than overall receipts. The total payment of the concern was 502. The total
receipt of the concern was 149. Correlation was to be r=s0.55. The range of
correlation is should be in between of -1 to +1. When r lies between 0.5 to
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0.699 there is moderate degree of correlation. Here our calculated correlation
was moderate.
4.2 SUGGESTIONS
The firm should increase the investment in current asset as the current asset
ratio is not up to the mark. Steps to be take to increase the current assets of the
company to achieve of standard norms.
The concern should concentrate to appreciate the liquidity and absolute liquidity
cash position to meet the firm requirement.
It is necessary that a firm should have sufficient cash for paying its bills on the
due dates to take advantage of trade discounts offered by the suppliers and to
maintain its credit standing.
The company can make necessary steps to accelerate the cash collection. It can
be done by reducing the float involved in conversion of payments into cash.
The company should concentrate to repay the loans and dues to their concerned
parties and banks. Maintaining the decreasing trend of the loans and advance
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The company should make use of credit period to the fullest extent and should
pay only on due date.
Knowing when, where, and how company cash needs will occur, knowing whatthe best sources are for meeting additional cash needs and being prepared to
meet these needs when they occur, by keeping good relationships with bankers
and other creditors.
4.3 CONCLUSION
The study conducted at Rhythm EXPORTS entitled CASH
MANAGEMENT OF RHYTHM FASHION gives a view of analysis and
evaluation of liquidity position of the company. The project done at Rhythm
fashion Pvt. Ltd., Tirupur on Analysis of cash Management was very helpful andInformative. To improve the performance of the company needs to implement new
policies.
The cash management analysis refers to the management of individuals
current assets. Sufficiently liquidity is important and must be achieved and
maintained to provide that funds to pay-off obligation as they arise or mature. The
adequacy of cash and other current assets together with their efficient handling
virtually determine the survival or demise of the company.This analysis and statements are useful to the concern to maintain the
cash position control the shortage of cash and to know about the financial
performance of the company each year. This study useful to the concern to control
the cash flows.. Thus the overall performance of the company in the area of cash
management is satisfactory. The company should enhance its performance for
meeting challenges and exploiting opportunities in the future.
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APPENDIX
PROFIT & LOSS ACCOUNT
Particulars 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
INCOME
Sales 19243672 47528562 91683185 142877561 209776689 261527577 318976518
Closing stock 6612178 9068781 12291874 15343678 16221591 20049914 21143165
other income 1415519 1589562 3151172 3096682 4837415 4273388 5842365
Total Inc. 27271369 58186905 107126231 161317921 230835695 285850879 345962048
EXPENDITURE
Opening stock 6056729 6612178 9068781 12291874 15343678 16221591 20049914
Raw material consumed 4541183 19351928 40163522 68512121 95841518 118727512 139842981
Store consumed 1612878 1663191 13291688 14874347 10193836 17384948 20014462
Staff expenses 2048162 5469569 8753676 9436827 11696927 27256728 33352728
Power and fuel 2918597 4971911 8259668 12969527 18093418 24953921 27838122
Interest and bankcharges 201136 162233 172414 156581 222928 310518 353591
Administrative Exp. 1862182 2826924 3981419 5291171 6541599 7918672 9251728
Other expenses 145628 205529 293588 398878 476911 577210 683071
Depreciation 912621 1841562 2839455 3953472 5010979 6179518 7250472
Tax paid 3053928 6297129 9139411 24352929 56921039 53847528 69352470
Total exp. 23353044 49402154 95963622 152237727 220342833 273378146 327989539
Profit & Loss account 3918325 8784751 11162609 9080194 10492862 12472733 17972509
Total 27271369 58186905 107126231 161317921 230835695 285850879 345962048
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BALANCE SHEET FROM THE YEAR 2003-2009
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
ASSETSFIXED ASSETS
Building 1493916 1611128 1939247 2397389 2883911 2949898 3253436
Land 6226328 7068691 8224906 9063551 9384779 9623412 9843687
Plant & Machinery 11187981 36973668 55368164 69916671 91145451 110897892 129359498
Furniture 806791 1073768 1398813 1511665 1633497 1921782 2043667
Investment 783942 1107893 1546882 1967781 2210977 2389899 2663468
Total Fixes Assets 20498958 47835148 68478012 84857057 107258615 127782883 147163756
CURRENTASSETS
Cash in Hand &Bank 1933412 2244685 2897982 3246897 3126675 5343463 4583498
Interest received &acc. income 459623 1096174 3863781 4356065 4913189 5382160 5246873
Other Cur. asset 643978 1053819 869126 1484648 2119743 2237442 3048438
Debtors 9866471 17113588 33456178 46425518 55719462 72358177 86572571
Inventories 6612178 9068781 12291874 15343678 16221591 20049914 21143165
Total CurrentAssets 19515662 30577047 53378941 70856806 82100660 105371156 120594545
TOTAL ASSETS4001462
07841219
512185695
315571386
318935927
523315403
926775830
1
LIABILITIES
Share capital 17353933 24133789 36343510 40343521 58178143 73453921 88743288
Reserve & Surplus 5313511 9248139 14332412 20151622 29067818 32367142 33741522
Loans & Advances 6571820 18513153 29812133 39813411 38341568 39143110 34313628
Provision forTaxation 913466 1953918 4332415 9152626 8343528 8163518 9451119
Total Fixed Lib. 30152730 53848999 84820470 109461180 133931057 153127691 166249557
CURRENTLIABILITIES
Other cur. liabilities 502046 1038698 340422 1309067 2253189 3941528 4351928
Creditors 5441519 14739747 25533452 35863422 42682167 63612087 79184307
P & L account 3918325 8784751 11162609 9080194 10492862 12472733 17972509
Total current Lib. 9861890 24563196 37036483 46252683 55428218 80026348 101508744
TOTAL
LIABILITES
4001462
0
7841219
5
12185695
3
15571386
3
18935927
5
23315403
9
26775830
1
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BALANCE SHEET FROM THE YEAR 2003-04 to 2004-05
Particulars 2003-04 2004-05
ASSETS
FIXED ASSETS
Building 1493916 1611128
Land 6226328 7068691
Plant & Machinery 11187981 36973668
Furniture 806791 1073768
Investment 783942 1107893
Total Fixes Assets 20498958 47835148
CURRENT ASSETS
Cash in Hand & Bank 1933412 2244685
Interest received & acc. income 459623 1096174
Other Cur. asset 643978 1053819
Debtors 9866471 17113588
Inventories 6612178 9068781
Total Current Assets 19515662 30577047
TOTAL ASSETS 40014620 78412195
LIABILITIES
Share capital 17353933 24133789
Reserve & Surplus 5313511 9248139
Loans & Advances 6571820 18513153
Provision for Taxation 913466 1953918
Total Fixed Lib. 30152730 53848999
CURRENT LIABILITIES
Other cur. liabilities 502046 1038698
Creditors 5441519 14739747
P & L account 3918325 8784751
Total current Lib. 9861890 24563196
TOTAL LIABILITES 40014620 78412195
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BALANCE SHEET FROM THE YEAR 2004-05 to 2005-06
2004-05 2005-06
ASSETS
FIXED ASSETS
Building 1611128 1939247
Land 7068691 8224906
Plant & Machinery 36973668 55368164
Furniture 1073768 1398813
Investment 1107893 1546882
Total Fixes Assets 47835148 68478012
CURRENT ASSETS
Cash in Hand & Bank 2244685 2897982
Interest received & acc. income 1096174 3863781
Other Cur. asset 1053819 869126
Debtors 17113588 33456178
Inventories 9068781 12291874
Total Current Assets 30577047 53378941
TOTAL ASSETS 78412195 121856953
LIABILITIES
Share capital 24133789 36343510
Reserve & Surplus 9248139 14332412
Loans & Advances 18513153 29812133
Provision for Taxation 1953918 4332415
Total Fixed Lib. 53848999 84820470
CURRENT LIABILITIES
Other cur. liabilities 1038698 340422
Creditors 14739747 25533452
P & L account 8784751 11162609
Total current Lib. 24563196 37036483
TOTAL LIABILITES 78412195 121856953
BALANCE SHEET FROM THE YEAR 2005-06 to 2006-07
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Particulars 2005-06 2006-07
ASSETS
FIXED ASSETS
Building 1939247 2397389
Land 8224906 9063551
Plant & Machinery 55368164 69916671
Furniture 1398813 1511665
Investment 1546882 1967781
Total Fixes Assets 68478012 84857057
CURRENT ASSETS
Cash in Hand & Bank 2897982 3246897
Interest received & acc. income 3863781 4356065
Other Cur. asset 869126 1484648
Debtors 33456178 46425518
Inventories 12291874 15343678
Total Current Assets 53378941 70856806
TOTAL ASSETS 121856953 155713863
LIABILITIES
Share capital 36343510 40343521
Reserve & Surplus 14332412 20151622
Loans & Advances 29812133 39813411
Provision for Taxation 4332415 9152626
Total Fixed Lib. 84820470 109461180
CURRENT LIABILITIES
Other cur. liabilities 340422 1309067
Creditors 25533452 35863422
P & L account 11162609 9080194
Total current Lib. 37036483 46252683
TOTAL LIABILITES 121856953 155713863
BALANCE SHEET FROM THE YEAR 2006-07 to 2007-08
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ASSETS
FIXED ASSETS
Building 2397389 2883911Land 9063551 9384779
Plant & Machinery 69916671 91145451
Furniture 1511665 1633497
Investment 1967781 2210977
Total Fixes Assets 84857057 107258615
CURRENT ASSETS
Cash in Hand & Bank 3246897 3126675
Interest received & acc. income 4356065 4913189
Other Cur. asset 1484648 2119743
Debtors 46425518 55719462
Inventories 15343678 16221591
Total Current Assets 70856806 82100660
TOTAL ASSETS 155713863 189359275
LIABILITIES
Share capital 40343521 58178143
Reserve & Surplus 20151622 29067818Loans & Advances 39813411 38341568
Provision for Taxation 9152626 8343528
Total Fixed Lib. 109461180 133931057
CURRENT LIABILITIES
Other cur. liabilities 1309067 2253189
Creditors 35863422 42682167
P & L account 9080194 10492862
Total current Lib. 46252683 55428218
TOTAL LIABILITES 155713863 189359275
BALANCE SHEET FROM THE YEAR 2007-08 to 2008-09
Particulars 2007-08 2008-09
ASSETS
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Land 9623412 9843687
Plant & Machinery 110897892 129359498
Furniture 1921782 2043667
Investment 2389899 2663468
Total Fixes Assets 127782883 147163756
CURRENT ASSETS
Cash in Hand & Bank 5343463 4583498
Interest received & acc. income 5382160 5246873
Other Cur. asset 2237442 3048438
Debtors 72358177 86572571
Inventories 20049914 21143165
Total Current Assets 105371156 120594545
TOTAL ASSETS 233154039 267758301
LIABILITIES
Share capital 73453921 88743288
Reserve & Surplus 32367142 33741522
Loans & Advances 39143110 34313628
Provision for Taxation 8163518 9451119
Total Fixed Lib. 153127691 166249557
CURRENT LIABILITIES
Other cur. liabilities 3941528 4351928
Creditors 63612087 79184307
P & L account 12472733 17972509
Total current Lib. 80026348 101508744
TOTAL LIABILITES 233154039 267758301
BIBLIOGRAPHY
SL. No. Authors Name Book Name &
Publications
1. SHARMA R.K.
SHASHI K. GUPTA
Management Accounting Principles
and Practices, Kalyani Publishers,
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Seventh Revised Edition, 1996.
2. PANDEY I.M. Financial Management, Vikas
Publishing house Pvt Ltd.,
Eighth Edition, 1997.
3. KHAN M.Y.
JAIN P.K.
Financial Management Tata Mc
Graw Hill Publishing Company Ltd.,
New Delhi, 1997.
4. KOTHARI C.R. Research Methodology methods
Techniques,
Wishwa Prakashan, New Delhi,Second Edition.
5. PILLAI & BHAGAVATHI R.S.N. Management Accounting Sultan
chand & Sons, Second Edition, 2000.
6. PARASANNA CHANDRA FINANCIAL MANAGEMENT
Second Edition.
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