arbaz final

8/21/2019 Arbaz Final

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A

PROJECT REPORT

On

“WORKING CAPITAL MANAGEMENT”

AT

“PRIVI ORGANICS LTD. , MAHAD”

MIDC (RAIGAD).

SUBMITTED TO

“UNIVERSITY OF PUNE”

IN PARTIAL FULFILLMETNT OF

“MASTER OF BUSINESS ADMINISTRATION”

BY

MR. ARBAZ MOHAMMED SHAFI CHILWAN

M.B.A. (FINANCE)

POONA INSTITUTE OF MANAGEMENT SCIENCE AND

ENTERPRENEURSHIP, (PIMSE).

2!"#!$

http://www.privi.com/default.asp


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DECLARATION

I, the undersigned, hereby declare that the Pr!ect Re"rt entitled #WORKING

CAPITAL MANAGEMENT OF PRIVI ORGANICS LTD., MAHAD,(MIDC)

RAIGAD$ %ritten and sub&itted by &e t Uni'ersity O( Pune, in "artial (ul(ill&ent

( the re)uire&ents (r the a%ard ( degree ( Master O( *usiness Ad&inistratin

under the guidance ( Pr(+ RIA-AT PEER.A/E -IR is &y riginal %r0 and the

cnclusins dra%n therein are based n the &aterial cllected by &ysel(+

P%&' P*+ S-+&*/ 01 S*+

D& M/. A/3&4 C5*%6&+


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ACKNOWLEDGEMENT

It is a &atter ( great satis(actin and "leasure t "resent this re"rt n #1r0ing

Ca"ital Manage&ent$ ( 2Pri'i Organics ltd+ I ta0e this ""rtunity t %e &y than0s

t all thse in'l'ed in &y training+

This "r!ect re"rt culd nt ha'e been c&"leted %ithut the guidance ( Pr(+

Riyasat Peer3ade sir+ Their ti&ely hel" 4 encurage&ent hel"ed &e t c&"lete this

"r!ect success(ully+

I than0 Mr+*harath -heth 5ga%le (r gi'ing &e ""rtunity t %r0 at PRI6I

OR5ANIC- LT/+ COMMPN, as a accuntant and (inance trainee+

I als than0 t PA1AR -IR 78R MANA5ER9 (r gi'ing &e the ""rtunity t %r0

at "ri'y rganics ltd+ C&"any+

I e:"ress &y gratitude t%ards sta(( ( PRI6I OR5ANIC- LT/+ thse %h ha'e

hel"ed &e directly r indirectly in c&"leting the training+

M/. ARBAZ MOHAMMED SHAFI CHILWAN


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INDE7

Cha"ter

N+

Particulars Page+ N+

I Intrductin T -tudy

II C&"any Pr(ile

III Theretical *ac0grund

I6 Research Methdlgy

6 /ata Analysis and Inter"retatin

6I Findings, -uggestins, Cnclusin

*ibligra"hy


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E7ECUTIVE SUMMARY+

My Pr!ect is 5 8*9 01 60/:+- '&;&%


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C8APTER< I

INTRO/UCTION

TO

-TU/


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INTRODUTION TO RESEARCH

1r0ing ca"ital re)uire&ent is the shrt


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OB?ECTIVES OF THE STUDY

>9 T e'aluate c&"any?s "er(r&ance relating t (inancial state&ent analysis+

;9 T 0n% the li)uidity "sitin ( the c&"any %ith the hel" ( current rati+

@9 T (ind ut the utility ( (inancial rati in credit analysis 4 deter&ining the

(inancial ca"acity ( the (ir&+

9 T (ind ut the "erating cycle ( the c&"any+

B9 T study the %r0ing ca"ital c&"nents such as recei'ables accunts,

cash &anage&ent, In'entry "sitin+


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SCOPE OF THE STUDY

*th "ri&ary and -ecndary data has been be used (r the study+ Pri&ary data %as

cllected thrugh direct interactin %ith the c&"any?s accunts de"art&ent (r the

study such as recei'able &anage&ent, in'entry &anage&ent, &anage&ent ( cash

etc+

And I cllected the data (r& the secndary surces c&"rising Annual Re"rts ( the

(ir&, and ((ice &anuals ( the de"art&ent

A"art (r& cnducting this research %r0 n the basis ( these in(r&atin, 'arius

techni)ues ( (inancial &anage&ent e+g+, state&ent ( changes in %r0ing ca"ital,

cst sheet, "erating cycle ( (ir& and rati analysis etc+ %ere used in the "resent

study+ T "resent a brad 'ie% s (ar the "ur"se ( the analysis and t &a0e it easy t

understand the "rble&=cnce"t ( a (e% gra"hs and tables shall als be "resented+ In

each cha"ter, the analysis has been c&"ared %ith actual &anage&ent "ractices ( the

c&"any under study+


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LIMITATIONS OF THE STUDY

E'ery "r!ect has its %n li&itatins, s has urs+ *ut %e ha'e t %r0 irres"ecti'e (

these li&itatins and (ind ur %ay, s that %e can achie'e the re)uired ai&+

-&e ( the li&itatins ( ur "r!ect are <

• As ur "r!ect is based n the data recrded by the c&"any, %e (ace the

li&itatin ( e:tracting that "articular data because ur access is li&ited (r

the sa0e ( cn(idential in(r&atin ( the c&"any+

• The gru"ing ( di((erent ite&s in the balance sheet als created hindrances

(r us, as it is 'ery di((icult t identi(y %hich ite& is clubbed %ith %hich head+

*ut than0s t accunts "ersnal %h &ade it easy t understand these

clubbing

• This "r!ect is based n three year annual re"rts+ Findings and suggestins

are based n such li&ited data+ The trend ( last three year &ay r &ay nt

re(lect the real %r0ing ca"ital "sitin ( the c&"any+

• The -tudy is li&ited nly t %r0ing ca"ital &anage&ent as"ect ( the ;/>

0/-&+'8 ;>. %. '0


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C8APTER II

COMPAN

PROFILE


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OVERVIEW

P/> O/-&+'8 is ne ( IndiaDs leading &anu(acturer, su""lier and e:"rter ( ar&a

che&icals+

Pri'i started &anu(acturing ar&a che&icals in the year >; %ith nly t% "rducts,

%hich it gradually e:"anded t a range ( 'er B "rducts tday, ha'ing a ca"acity (

'er !@@ 0+8 ;/ &++*; certi(icatin (ll%ed %ith I-O >>; certi(icatin (r its

En'irn&ental Manage&ent -yste& 7EM-9+

Pri'i Organics has recently been als cn(erred %ith *- O8-A- >>;K

standard Certi(icatin Accredited by NA*C* 7Occu"atinal 8ealth 4 -a(ety

Assess&ent -eries9 (r all Manu(acturing Units in Mahad (r& *ureau 6eritas+

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COMPANY VISION

T0


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inn'ating (r the internatinal

&ar0et, thereby "rtraying

India?s "tential as a &ar0et

leader in Ar&a Che&icals+

Our &issin shall al%ays be t

(ul(ill cust&erDs needs (irst


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BOARD OF DIRECTOR

+

M/ S&&+ S&+*


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8is 'isin, "erse'erance, &ti'atin and e:tensi'e 0n%ledge ( glbal ar&a

che&ical &ar0ets has hel"ed PRI6I t reach the current "sitin+

At "resent he has strng relatinshi"s acrss the &anage&ent le'el ( PRI6IDs

cust&ers, su""liers and ther sta0e hlders+

Mr Mahesh *abani is a C&&erce 5raduate and a sel( &ade entre"reneur and has

"eratinal &anagerial e:"erience ( 'er @ years+

8e is ser'ing as /irectr n bards ( *abani In'est&ent 4 Trading P't+ Ltd, -atguru

Enter"rises P't+ Ltd, Pri'i *itechnlgy P't+ Ltd, Mney&art -ecurities P't+ Ltd,

Minar Ogranics P't+ Ltd, -atellite Technlgies P't+ Ltd

M/ D B R&0 E'*> D/'0/

Mr+ / * Ra is ne ( the (under ( Pri'i and has been assciated %ith the c&"any

since >;+ Mr Ra has been n the *ard ( /irectrs since >; and is a 1hle<

ti&e /irectr designated as E:ecuti'e /irectr since ;+ Mr / * Ra 'erseas

"eratin, "ersnnel and ra% &aterial surcing+

Mr Ra has %r0ed diligently in cn'erting the 'isin ( the c&"any t realty and

has handled "r!ects right (r& cnce"tin t c&"letin+ 8e has been instru&ental in "utting u" the &anu(acturing (acilities in a s%i(t and cst e((ecti'e &anner and

chartering the gr%th ( the C&"any+ 8is 'ast e:"erience, in de"th 0n%ledge in

che&icals and engineering has hel"ed PRI6I t attain the current "sitin+

8e is in'l'ed in the "eratins ( the c&"any and institutinali3ing 'arius "rcess

in the &anage&ent ( the c&"any+ 8e has tra'elled e:tensi'ely acrss the glbe and

has been in'l'ed in surcing ( ra% &aterials+

8e has cntributed signi(icantly in PRI6IDs gr%th and in creatin ( (r&idable

rgani3atin structure ( PRI6I+

Mr / * Ra is a "st graduate in Engineering %ith 'er @@ years e:"erience+ 8e is

/irectr n bards ( Minar Organics P't+ Ltd, 6i'ira Che&icals P't+ Ltd+, and

-atellite Technlgies P't+ Li&ited+

M/ A/&+ ? A>&+ D/'0/


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Mr Ar!an J Ad'ani has been assciated %ith PRI6I (r& ;B and has been a

'isinary %ith 'ast e:"erience ste&ing ut ( his assciatin (r& being Chair&an,

N&inee /irectr and Me&ber ( 5'erning Cuncils ( &any leading

c&"anies=Institutins+

Mr+ Ad'ani is a Che&ical Engineer and hlds degrees in *usiness Manage&ent and

/e'el"&ent *an0 Manage&ent 71est 5er&any9+ 8e has been assciated %ith a

large nu&ber ( c&"anies (r Pr!ect A""raisal, I&"le&entatin, Technlgy

Finance, 6enture Ca"ital and Turnarund -trategies+ 8e has de'el"ed and

i&"le&ented "rgra&s (r technlgy c


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in'estr and /irectr in 'arius c&"anies+

Mr *udhrani %ith his 'ast 0n%ledge ( glbal (inancial &ar0ets has "layed a &a!r

rle in (r&ulating (inancial "lan and (inancial strategies and has "ersnal

relatinshi"s %ith the (inancial %rld has (ten bene(ited the c&"any+

O'er the years Mr *udhrani has been assciated %ith 'arius c&"anies %here he has

"rt(li in'est&ents r direct e)uity in'est&ent+

8e has in'ested acrss the glbe "articularly in e&erging &ar0ets and (r&idable

0n%ledge ( glbal (inancial &ar0ets and glbal c&&dity &ar0ets

Mr Ra!esh *udhrani hlds a degree in *achelr ( -cience Ma!r in Finance 4

Accunting (r& *stn -chl ( Manage&ent+ 8e graduated (r& his class,

-u&&a Cu& Laude+

Mr *udhrani is a /irectr n the bard ( *udhrani Finance Ltd, Reit Asset

Manage&ent India Ltd and &any ther C&"anies+

+


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NEWS AND VIEWS

• En'irn&ent Clearance 5rant (r Manu(acture ( Al"ha Pinene, *eta Pinene,

Li&nene and by"rducts by -ecretary, En'irn&ent /e"art&ent,

Mantralaya, Mu&bai


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• -tandard Chartered PE in'ests Rs+ BCr in Pri'i Organics+

• -PIRIT OF ENTREPRENEUR-8IP -&elling -uccess+

• Pri'iDs ini 7B+>9

OUR STRENGTH

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E'0+0


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S*;;%9 C5&+

Cntinuity ( )uality "rducts and ser'ices is Pri'iDs hall&ar0+ 1e ha'e de'el"ed

strng and lng lasting relatins %ith all 'endrs s as t 0ee" ur su""ly chain

unceasing+ One ( the as"ects "inting t%ards this is ur %ell


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PRIVI PRODUCTS

Prducts

Al"ha /a&ascne Al"ha Inne Al"ha Inne Al"ha Inne B

A&ber Fleur A&ber 5a&&a *eta Inne Citrnellal

Citrnellyl

Acetate

Citrnellyl Nitrile /elta /a&ascne /ihydr&yrcenl

Flrascne 5a&&a Methyl

Inne

5a&&anlene

K

5eranyl Acetate

Indian -andal

Cre

Inne > Methyl Inne Mugenl

Ni&berl OT*C8A PT*C8A -andal Fleur

-andal Fleur

Lae'

-andal Tuch Tetrahydr(lrl Tetrahydrgeranil

Tetrahydrgeranyl

Acetate

Tetrahydr&yrcenl Ti&ber Frte Ti&ber Tuch

6iletne Ceur

Future Prducts

• /elta 4 5a&&a Lactnes

• Car'ne / 4 L

• Menthne (r& *y"rduct /i"entene 4 Carene

• Castr il deri'ati'es>

• 5rignard che&istry based "rducts

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INNOVATION

• Pri'iDs "rd

in the R4/ %it

The R4/ tech

"rcesses, %hic

e((luent, sa(ety

Pri'iDs R4/ la

-cienti(ic and I

The research ce

bet%een lab, "il

Pri'i lays great

)uality standar

• Acetals

• *ayer

• Cnden

•

Crac0in• Cyclisa

• /ar3ens

• /ecarb

• /ehydr

• Michael re

• O:idatins

• Prins reacti

• Rearrang&

• Reductins

• -try synth• 6ils&ayer

• 1l(


25/73

INFRASTRUCTURE

Pri'i Organics is e)ui""ed %ith t% stateKB &s t the suth ( Mu&bai, %hich is %ithin a dri'e ( three hurs a""r:i&ately+

*uilt indigenusly %ith in


26/73

(acilityG it en!ys the status ( EOU+

I+1/&8/*'*/ + 3/1

• Ttal area Q;BB -) Mts

• O"ti&u& Prductin Ca"acity ( F5 >BB MT

• Plt under ac)uisitin @; -) Mts

• Ttal Reactin Ca"acity ;K+; L

• Ttal /istillatin Ca"acity @@+; L=/ay

• *lending Ca"acity ; L

• -tea& generatin K Tns=8ur

• Cnnected P%er Q 6A

• /5 *ac0


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• 5rignard ty"e cndensatin

• -hrt


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S*8&+&3%9 0>/>6

Pri'i Organics, being an en'irn&ent


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SUSTAINABILITY ENVIRONMENT

Pri'i Organics C&&itted t%ards Creating a B/&5 E&89 = L> E&89E+>/0+


30/73

t its internal %r0(rce 7&anage&ent and e&"lyees9, e:ternal assciates

7sharehlders, cust&ers,

su""liers, the c&&unity and regulatry agencies9 and all ur sta0ehlders+

T5 ISO !$!2$ +&3%8 P/> 0

• Identi(y 4 cntrl the en'irn&ental i&"act ( its acti'ities, "rducts r

ser'ices

• I&"r'e its en'irn&ental "er(r&ance cntinually

• I&"le&ent a syste&atic a""rach t setting en'irn&ental b!ecti'es and

targets, t achie'ing

• these and t de&nstrating that they ha'e been achie'ed

Pri'i being an en'irn&entally cnscius cr"rate, ha'e ta0en se'eral &easures t

&aintain har&ny

%ith nature %here en'irn&ent, health ( e&"lyees and "e"le in the 'icinity and

their sa(ety, get

&a:i&u& bene(its thrugh 'arius ste"s such as

•

The aerbic and anaerbic treat&ent "lants are already "eratinal %hile %eare e&bar0ing n

• setting u" a re'erse s&sis "lant (r recycling ( %ater+

• Cntinuus &easures are ta0en t i&"r'e energy cnsu&"tin+ Pri'i has

a""inted Ah&edabad

• Energy Cnser'atin Cuncil t cnduct Energy Audit in all its

Manu(acturing units and O((ices+

• Pri'i (ll%s stringent sa(ety nr&s at bth its &anu(acturing units+ In

recgnitin t this, Unit


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HUMAN CAITAL

Pri'i is 0n%n (r its Culture ( &anage&ent, actin and inn'atin+

Our belie( in creating 'alue thrugh inn'atin has success(ully trans(r&ed Pri'i int ne

(

IndiaDs leading &anu(acturer 4 su""lier ( Ar&a Che&icals+ At Pri'i, %e cntinuusly

stri'e t harness the "%er ( intellectual &inds and challenge cn'entinal thin0ing by

"ushing

the bundaries ( science and art+

E&"ly&ent at Pri'i is synny&us %ith change and gr%th+ 1e ((er e:citing andchallenging

careers %ithin a sti&ulating 0n%ledge


32/73

C8APTER< III

RE-EARC8

MET8O/OLO5


33/73

RESEARCH METHODOLOGY

P/


34/73

C8APTER< I6

T8EROETICAL

*AC5ROUN/


35/73

WORKING CAPITAL MANAGEMENT#

INTRODUCTION#

1r0ing Ca"ital is the 0ey di((erence bet%een the lng ter& (inancial &anage&ent

and shrt ter& (inancial &anage&ent in ter&s ( the ti&ing ( cash+ Lng ter&

(inance in'l'es the cash (l% 'er the e:tended "erid ( ti&e i+e+ B t >B years,

%hile shrt ter& (inancial decisins in'l'e cash (l% %ithin a year r %ithin

"erating cycle+ 1r0ing ca"ital &anage&ent is a shrt ter& (inancial &anage&ent+

1r0ing ca"ital &anage&ent is cncerned %ith the "rble&s that arise in atte&"ting

t &anage the current assets, the current liabilities 4 the inter relatinshi" that e:ists

bet%een the&+ The current assets re(er t thse assets %hich can be easily cn'erted

int cash in rdinary curse ( business, %ithut disru"ting the "eratins ( the (ir&+

WHAT IS WORKING CAPITAL#

1r0ing ca"ital re(ers t the in'est&ent by the c&"any in shrt ter&s assets

such as cash, &ar0etable securities+ Net current assets r net %r0ing ca"ital re(ers t

the current assets less current liabilities+ -y&blically, it &eans,

N C*//+ A888 C*//+ A888 # C*//+ L&3%8.

DEFINITIONS OF WORKING CAPITAL#

1r0ing ca"ital is de(ined as #e:cess ( Current assets 'er Current liabilities$+ It is

that "art ( ca"ital %hich is re)uired (r the daily %r0ing ( the business+ It is the

ca"ital %ith %hich the business is %r0ed 'er+

#1r0ing ca"ital is the a&unt ( (unds necessary t c'er the cst ( "erating the

enter"rise+$


36/73

1r0ing ca"ital is als called as #Circulating Ca"ital$

1r0ing Ca"ital i+e+ Circulating Ca"ital &eans #the current assets ( the c&"any that

are changed in the rdinary curse ( business (r& ne int anther as (r e:a&"le

(r& cash t in'entries, (r& in'entries t recei'ables 4 (r& recei'ables int

cash$+

#G/8+3/-

CONCEPT OF WORKING CAPITAL#

There are ; cnce"ts

!) G/088 W0/:+- C&;&%

2) N W0/:+- C&;&%

!) G/088 W0/:+- C&;&%#

It re"resents the a&unt ( (unds in'ested in current assets+ Thus, the grss %r0ing

ca"ital is the ca"ital in'ested in the ttal current assets ( the enter"rise+ Current

assets are thse assets %hich in the rdinary curse ( business can be cn'erted int

cash %ithin a shrt "erid ( nr&ally ne accunting year+

E&


37/73

E&


38/73

T


39/73

W0/:+- '&;&% 8 8-+1'&+' 3'&*8 01

>+ Ade)uate %r0ing ca"ital is re)uired t cntinue uninterru"ted

business "eratins+

;+ It is essential t run the day t day business "eratins+

@+ 5reater 'lu&e ( %r0ing ca"ital re)uired in'esting in current assets

(r the success ( sales acti'ities+

+ T ensure the &a:i&i3ing the %ealth ( a (ir&+

B+ T increase the rate ( return n in'est&ent+

Q+ T &eet the shrt


40/73

%ill need ra% &aterials+ -&e ra% &aterials %ill be a'ailable n credit but, cash %ill

be "aid ut (r the ther "art i&&ediately+ Then it has t "ay labur csts 4 incurs

(actry 'erheads+ These three c&bined tgether %ill cnstitute %r0 in "rgress+

A(ter the "rductin cycle is c&"lete, %r0 in "rgress %ill get cn'erted int

sundry debtrs+

-undry debtrs %ill be reali3ed in cash a(ter the e:"iry ( the credit "erid+

This cash can be again used (r (inancing ra% &aterial, %r0 in "rgress etc+ thus

there is c&"lete cycle (r& cash t cash %herein cash gets cn'erted int ra%

&aterial, %r0 in "rgress, (inished gds and (inally int cash again+ -hrt ter&

(unds are re)uired t &eet the re)uire&ents ( (unds during this ti&e "erid+ This

ti&e "erid is de"endent u"n the length ( ti&e %ithin %hich the riginal cash gets

cn'erted int cash again+ The cycle is als 0n%n as "erating cycle r cash cycle+

1r0ing ca"ital cycle can be deter&ined by adding the nu&ber ( days re)uired (r

each stage in the cycle+ Fr e:a&"le, c&"any hlds ra% &aterial n a'erage (r Q

days, it gets credit (r& the su""lier (r >B days, (inished gds are held (r @ days

4 @ days credit is e:tended t debtrs+ The ttal days are >;, i+e+, Q < >B S >B S >B

S @ S @ days is the ttal ( %r0ing ca"ital+

Thus the %r0ing ca"ital cycle hel"s in the (recast, cntrl 4 &anage&ent (

%r0ing ca"ital+ It indicates the ttal ti&e lag 4 the relati'e signi(icance ( its

cnstituent "arts+ The duratin &ay 'ary de"ending u"n the business "licies+ In

SUNDRY

DEBTORS

(RECEIVAVL

ES)

CASH

FINISHED

GOODS

RAW

MATERIAL

WORK#IN#

PROCESS


41/73

light ( the (acts discusses ab'e %e can bradly classi(y the "erating cycle ( a (ir&

int three "hases 'i3+

>9 Ac)uisitin ( resurces+

;9 Manu(acture ( the "rduct and

@9 -ales ( the "rduct 7cash = credit9+

First and secnd "hase ( the "erating cycle result in cash ut(l%s, and

be "redicted %ith reliability nce the "rductin targets and cst ( in"uts

are 0n%n+

8%e'er, the third "hase results in cash in(l%s %hich are nt certain because

sales and cllectin %hich gi'e rise t cash in(l%s are di((icult t (recast accurately+

O;/&+- '9'% '0+888 01 5 10%%06+-<

Cn'ersin ( cash int ra%


42/73

OPERATING CYCLE FOR MANUFACTURING FIRM#

CASH

TRADE

CREDITORS

TRADE

DEBTORSTA7ATION

FI7ED

ASSETS

SHAREHO

LDER

SELLING

E7PENCES

&

LEASE

PAYMENT

LOAN

CREDIT

&

WORK#IN#PROGRESS

RAW MATERIALS

STOCK FINISHED GOODS

STOCK

WAGES =

OVERHEADSSALE


43/73

The (ir& is there(re, re)uired t in'est in current assets (r s&th and uninterru"ted

(unctining+

RMCP < Ra% Material Cn'ersin Perid

1IPCP < 1r0 in Prgress Cn'ersin Perid

F5CP < Finished 5ds Cn'ersin Perid

ICP < In'entry Cn'ersin Perid

RCP < Recei'ables Cn'ersin Perid

Payables 7P/P9 < Payables /e(erral Perid

NOC < Net O"erating Cycle

5OC < 5rss O"erating Cycle

8ere, the length ( 5OC is the su& ( ICP and RCP+

ICP is the ttal ti&e needed (r "rducing and selling the "rducts+ 8ence it is the

su& ttal ( RMCP, 1IPCP and F5CP+ On the ther hand, RCP is the ttal ti&e

re)uired t cllect the utstanding a&unt (r& cust&ers+ Usually, (ir& ac)uires

resurces n credit basis+ P/P is the result ( such an incidence and it re"resents the

length ( ti&e the (ir& is able t de(er "ay&ents n 'arius resurces "urchased+

The di((erence bet%een 5OC and P/P is 0n% as Net O"erating Cycle and i( /e"reciatin is e:cluded (r& the e:"enses in c&"utatin ( "erating cycle, the

NOC als re"resents the cash cllectin (r& sale and cash "ay&ents (r resurces

ac)uired by the (ir& and during such ti&e inter'al bet%een cash cllectin (r& sale

and cash "ay&ents (r resurces ac)uired by the (ir& and during such ti&e inter'al

'er %hich additinal (unds called %r0ing ca"ital shuld be btained in rder t

carry ut the (ir&s "eratins+ In shrt, the %r0ing ca"ital "sitin is directly

"r"rtinal t the Net O"erating Cycle+


44/73


45/73

D/8#

It is b'ius that, as business e:"ands, it re)uires &re %r0ing ca"ital in ter&s (

sale r (i:ed assets+ In the case ( gr%th, there %ill be an all rund increase in

in'est&ent+ That is t say, %ith the increase in (i:ed assets (r increasing sales the

re)uire&ent ( %r0ing ca"ital %ill be e:"anded nt nly (r (inancing increased


46/73

'lu&e ( ra% &aterials but als t (inance &aintenance ( in'entry stc0 and

grant credit t cust&ers+

@) B*8+88 C9'% F%*'*&0+8#

*usiness (luctuatins lead t cyclical and seasnal change in "rductin and sales

and a((ect the %r0ing ca"ital re)uire&ent+ Mst (ir&s e:"erience seasnal and

cyclical (luctuatin in the de&and (r their "rducts and ser'ices+ These business

'ariatins a((ect s"ecially the te&"rary %r0ing ca"ital re)uire&ents ( the (ir&+

) S*;;%9 C0+0+8#

The in'entry ( ra% &aterials, s"ares and stres de"ends n the cnditin (

su""ly+ I( the su""ly is "r&"t and ade)uate the (ir& can &anage %ith s&all

in'entry hence the (ir& can &anage %ith s&all in'entry hence the l%er

re)uire&ents ( %r0ing ca"ital+ I( the su""ly is un"redictable and carry the

in'entry (r lnger "erid+ This "licy is (ll%ed %hen the ra% &aterial is

a'ailable nly seasnally+

) T'5+0%0-'&% D>%0;


47/73

CASH MANAGEMENT

I+/0*'0+#

Cash is an i&"rtant c&"nent ( current assets and is &st essential

(r business "eratins+ Cash is the basic in"ut needed t 0ee" the business

running n a cntinuus basis+ It is als the ulti&ate ut"ut e:"ected t be

reali3ed by selling the ser'ice and "rduct &anu(actured by the (ir&+

Cash is bth the beginning and the end ( the %r0ing ca"ital cycle i+e+ cash,

in'entries, recei'ables and cash+ 1hile the &anage&ent ( all the (ir&s

shuld stri'e hard t secure larger cash at the &anage&ent ( all the (ir&s

shuld stri'e hard t secure larger cash at the end ( the %r0ing ca"ital cycle

than %hat had been in'ested intG it at its beginning, they &ust als &a0e it a

best "ssible &ini&u&+ This is re)uired t "ti&ally utili3e the cash and t

a'id the situatin ( idle cash balances+

Its e((ecti'e &anage&ent is the 0ey deter&inanant ( su((icient

%r0ing ca"ital+ In the 0ey deter&inant ( su((icient %r0ing ca"ital+ Cash in

the business enter"rise &ay be c&"ared t the bld ( the hu&an bdyG

bld gi'es li(e and strength "r(its and sl'ency t the business

rgani3atin+ 8ence, e'ery enter"rise has t hld t hld necessary cash (r is

e:istence+

In a business (ir&, ulti&ately, a transactin results in either an in(l%

r ut(l% ( cash+ In an e((icient &anaged business, static cash balance

situatin generally des nt e:it+ A (ir& shuld 0ee" su((icient cash, neither

&re nr less+ Cash shrtage %ill disru"t the (ir&s &anu(acturing "eratinG

%hile e:cessi'e cash %ill si&"ly re&ain idle+ There(re, (r its s&th

running and &a:i&u& in a business is ( "ara&unt i&"rtance+

M0> F0/ H0%+- C&85#

7i9 The transactin &ti'eG

7ii9 The "recautinary &ti'eG and

7iii9 The s"eculati'e &ti'eG these &ti'e are e:"lained as under


48/73

() T5 T/&+8&'0+ M0>#

The transactin &ti'e re)uires a (ir& t hld cash t cnduct its business in

the rdinary curse+ The (ir& needs cash "ri&arily t &a0e "ay&ent (r

"urchases, %ages, "erating e:"enses, ta:es etc+ A (ir& needs a "l ( cash

because its recei"ts and "ay&ent are nt "er(ectly synchrni3ed+ A "l (

cash is als 0n%n as 2transactin balance?+

() T5 P/'&*0+&/9 M0>#

The "recautin &ti'e is t hld cash t &eet any cntingencies in (uture+ It

"r'ides a cushin r bu((er t %ithstand s&e une:"ected e&ergency+ The

"recautinary a&unt ( cash de"ends u"n the "redictability ( cash (l%s+

I( cash (l%s can be "redicted %ith accuracy, less cash %ill be &aintained

against an e&ergency+ On ther hand, un"redicted the cash (l%s, the larger

the need (r such balances+

() T5 S;'*%&> M0>

The (inancial &anager %uld li0e t ta0e ad'antage ( une:"lited

""rtunities+ -&e reser'e ( &ney is al%ays essential t enable the (ir& t

ta0e ad'antaged ( cash %hen such ""rtunities arise+

F*+'0+8 01 C&85 M&+&-


49/73

') D/8+- I% C&85#

The idle cash r "recautinary cash shuld be "r"erly and "r(itably

in'ested+ The (ir& shuld decide abut the di'isin ( cash balances

bet%een &ar0etable securities and securities and ban0 de"sits+


50/73

R'>&3% M&+&-&3%8 M&+&-


51/73

The "ur"se ( credit &anage&ent is nt sales &a:i&i3atin+ *ut e((icient

and e((ecti'e credit &anage&ent des hel" t e:"and sales and can "r'e t be

an e((ecti'e credit &anage&ent des hel" t e:"and sales and can i&"r'e t

be an e((ecti'e tl ( &ar0eting, thus, the b!ecti'e ( recei'ables

&anage&ent is t "r&te sales and "r(its until that "int is reached %here the

return n in'est&ent in (urther (unding ( recei'ables is less than the cst (

(unds raised t (inance that additinal credit+


52/73

P&9&3% M&+&-


53/73

C&85 D8'0*+#

A cash discunt is a reductin in "rice based n "ay&ent %ithin a

s"eci(ied "erid+ The cst ( nt ta0ing cash discunts (ten e:ceed the rate

( interest at %hich the buyer can brr%, s it is i&"rtant that a (ir& be

cautins in its use ( trade credit as a surce ( (inancing< it culd be )uite

e:"ensi'e+ I( the (ir& brr% and ta0es the b0 is reduced+ The e((ecti'e

length ( credit is thus in(luenced by the si3e ( discunt ((ered+

() T5 P&9


54/73

'er the year+ The buyer btains the gds (r sale, but it is nt bligated t

"ay until the arri'al ( the "ea0


55/73

INVENTORY MANAGEMENT

Managing in'entry is a !uggling act+ E:cessi'e stc0s can "lace a hea'y

burden n the cash resurces ( a business+ Insu((icient stc0s can result in lst

sales, delays (r cust&ers etc+

The 0ey is t 0n% h% )uic0ly yur 'erall stc0 is &'ing r, "ut anther

%ay, h% lng each ite& ( stc0 sit n shel'es be(re being sld+ Ob'iusly,

a'erage stc0


56/73

• A""ly tight cntrls t the signi(icant (e% ite&s and si&"li(y cntrls

(r the tri'ial &any+

• -ell (( utdated r sl% &'ing &erchandise < it gets &re di((icult t

sell the lnger yu 0ee" it+

• Cnsider ha'ing "art ( yur "rduct utsurced t anther

&anu(acturer rather than &a0e it yursel(+

Re'ie% yur security "rcedures t ensure that n stc0 Vis ging ut the bac0

drV

8igher than necessary stc0 le'els tie u" cash and cst &re in insurance,

acc&&datin csts and interest charges+


57/73

C8APTER 6

/ATA

ANAL-I-

AN/

INTERPRETATION+


58/73

STATEMENT OF CHANGES IN WORKING CAPITAL

(2 #!)

PARTICULARS 2 # 2 # AMOUNT

(R8.)

AMOUNT

(R8.)

INCREASE DECREASE

CURRENT

ASSETS,LOANS

= ADVANCES

S0': I+ T/&

Ra% Material >;@,K+B >>,B;+ < B+B

1 I P BB,+ B@,>;+ < >,K+ Finished 5ds Q;>+B ;,Q+ < @Q>+B

S*+/9 D30/8 >,@;,>@K+;B >,KK,>+K @;,KB+K; <

L0&+8 =

A>&+'8

Ad' < E&"lyees >@,+ ;@@,;@+ @,@+ <

Ad' < Marshal

Engineers

,BB+ >,>K>,;B+ ;;Q,K+

Ta: /educted At

-urce

,@;+ ;,B@+ < ;,B;+

Ad'ance Ta: >B,+ >B,+ < <

Fringe *ene(it Ta: B,+ Q,;+ @B,@+ <

Fringe *ene(it Ta:

7 A++ ; 9

>>,B@@+;@ K,K+ < @,BQ+;@

M6AT Recei'able >,>+; Q,>+; < @>,+

Cash In 8and B,Q>+B ,@B>+B < >,B>+

*an0 O(

Maharashtra < CA

< >>,+ >>,+ <

T0&% ( A ) ",$","@.2! ",22,2@!.

CURRENT

LIABILITIES =

PROVISIONS

-undry Creditrs !,!$@,.@ !,!@,!2. @,;+>

Ad'ances Fr&

/ebtrs

@B,+ @B,+


59/73

O*8&++-

E;+88

Light *ill Payable >,Q+ < >,Q+ <

Tele"hne

E:"enses Payable

K,QB+ < K,QB+ <

A=C 1riting

Charges Payable

>,B+ >,B+ < <

-alaries 4 1ages

Payable

>,@@Q+ >@,@Q+ < @,K+

EW < 5ratia

Payable

>>@,K+ < >>@,K+ <

-er'ice Ta:

Payable

@,B+> ,B>+BQ < >@,B>+KB

T/- Payable ;;,>B+ < ;;,>B+ <

6AT Audit /uty

Payable

>Q,B+ >Q,B+ < <

Audit Fees Payable >,B+ @Q,K+ < ;;,;B+

Pr(essinal Fees

Payable

>,;;+ >,;;+ < <

C-T Payable < ;,;Q+ < ;,;Q+

6AT Payable < ,KQ+ < ,KQ+

/uties 4 Ta:es >,@+ < >,@+ <

T0&% ( B ) !,@,$@. !,$2,"2$.22

W0/:+- C&;&%

( A # B )

!,!",."@ 2,"2,2.$

I+'/&8 I+

W0/:+- C&;&%

!@,".!" !@,".!"

2,"2,2.$ 2,"2,2.$ !,2",@!.2! !,2",@!.2!


60/73

MANUFACTURING = TRADING ACCOUNT

FOR THE YEAR ENDING ON "!"2

PARTIC

ULARS

F0/ 5 Y&/ E+ F0/ 5 Y&/ E+

"!"2 "!"2

AB+>@

Interstate -ales >,,@;@+ >,K@;,>;+

Labur Charges

Recei'ed

;,>B,K;+ ;,K@K,K+

Rund O(( >+Q !!,$,!. @@+ !2,$,@!!.

CLOSING

STOCK

Ra% Material >>,B;+ >;@,K+B

1 I P B@,>;+ BB,+

Finished 5ds ;,Q+ 2@,. Q,;>+B 2@,$.

TOTAL A !2,2!2,@!. !",2!,!.


61/73

E7PENDITURE

OPENING

STOCK

Ra% Material >;@,K+B >;,+ 1 I P BB,+ Q,K@>+;

Finished 5ds Q,;>+B 2@,$. >;Q,K+ "!,.

PURCHASES

Ra% Material

>,QB,K@+Q >,QK,KKK+;

Ra% Material

>;+B

BK,KK+K> >@,>K+

Cnsu&able

-tres

>K,Q>+ ,>B>+K

Cnsu&able

-tres

;,K+ ;@B,B+Q

Cnsu&able

-tres >;+B

,BK+ @@,Q+

Oil 4 Lubricants

>;+B

>,;B+B QQ,+

Ele 4 Maint+ # @,@+

Ele 4 Maint+

>;+B

B,B@+@B >@,Q>+

Labur Charges

Paid

>,K;;,>B>+; $,!",!. >,,@+; $,"$,!@.

DIRECT

E7PENSES

-alary 4 1ages >,Q,@K+ >,@B,@@Q+

Octri Charges ,QQ;+ ,@B@+

Electrical

Maint+4 Re"airs

KK,+ ;>K,>Q+

Electricity

Charges

>@B,;+ >@,K>+

Factry

E:"enses

< K,>>+

Machine

Maintenance

;,;+ ,K+

Pac0ing 4

Fr%arding

;,;Q+ ,Q;K+


62/73

Prductin

Incenti'es

< >B,KB+

Trans"rt

Charges

,K@Q+K >,K>@+

Oil 4 Lubricants ,>K+ 2,$@,222. < 2,!"$,@".TOTAL B ,","".!@ ,2@,$.

GROSS

PROFIT ( A #

B )

@,"$,2@!.@" ,",2@".

PROFIT = LOSS ACCOUNT

FOR THE YEAR ENDING ON "!8 MARCH, 2


63/73

PARTICULARS F0/ 5 Y&/ E+ F0/ 5 Y&/ E+

"!"2 "!"2

A;,;+

Re"airs 4 Maint+<

6ehicle

BK,;K+ <

Re"airs 4 Maint+<

Others

@,;B+ >;,QB+

-ciety Maint+

Charges

< >,B+

1r0ers Insurance >B,B+ K,>+

Accunts 1riting

Charges

>,+ >,B+

Freign E:"enses < @K,@Q+

6AT Audit Fees < >Q,B+

Audit Fees ;B,+ >,B+ E:gratia Paid < ,+

Labur 1el(are

E:"enses

>@B,Q+ >KB,BK>+K@

Legal Fees < @@,@+

/esigning Charges ;,+ <

Lss On -ale O( TATA

IN/I5O Q>K

< Q,>B+

Lss On -ale O( TATA

IN/I5O Q

< >,BB+

ey Man Insurance ,BQ+ ,>K;+


64/73

E&"lyee Pr'ided

Fund

7 E+P+F+9

Q,KB+ QK,BB>+

5eneral Insurance ,;B+ B,K+

Petrl 4 /iesel B;,Q@Q+ @@,>+ Pstage 4 Telegra& @>,@;+ @B,;+

Printing 4 -tatinery ;@,+ @,QK+

Interest On T/- K,;+ <

Ins"ectin Charges >@,;K+ <

Pr(essinal Fees >,B+ >Q,Q>;+

O((ice E:"enses ;@,;+ QK,KK;+

Tele"hne E:"enses KB,;;;+> >@;,QQ+K>

Tra'elling 4

Cn'eyance

,>B;+ ",$2.!$ B,Q@+ 2,2$2,$.$$

SELLING

E7PENSES

/iscunt B,B+B ;,K;+>

-ales Pr&tin

E:"enses

;,;@+ >K,+

Entertain&ent

E:"enses

,>+ K,@K>+

Ad'ertise&ent ,B+ 2$,$2.@ Q,+ @,$".!

FINANCIAL

E7PENSES

*an0 C&&issin 4

Charges

>,@K+ @K,K+

Interest T Others < >B+

Interest t *an0 K,;+;@ ,2.!2 ;,Q+Q $!,22.

DEPERCIATION ON

Land 4 *uilding QB@+@K KQB@+@K Plant 4 Machinery >;KBK+Q KQ@

O((ice E)ui"&ent >;+@ QBQQ

6ehicles ;B;> >K>>;@+ @;BKK+ >@BQBQ+B

TOTAL B ",$,!.! $,!!,$".


65/73

BALANCE SHEET

AS AT "!8 MARCH, 2

A8 A "!"2 A8 A "!"2

PARTICU

LARS

A,,@+;

Plant 4

Machinery

K,;;B,+B K,>,KK+QB


66/73

O((ice

E)ui"&ent

;;,>K+Q >K@,B;+>B

6ehicles ;,>,K>K+ !2,$22,".@ ;,@Q,>@+ !2,,!.

INVESTMENTS Janse'a *an0 <

-hares

;,Q+ ;,Q+

6ish'esh%ar

-ah+ *an0 <

-hares

K,B+ K,B+

Janse'a *an0 <

R/

;,B>>+ @,+

Ru"ee *an0

-hares

,>+ ,>+

Janse'a *an0 <

F/

@B,@>K+ ,. < $,!".

CURRENT

ASSETS

LOANS =

ADVANCES

S0': I+ T/&

Ra% Material >>,B;+ >;@,K+B

1 I P B@,>;+ BB,+

Finished 5ds ;,Q+ Q;>+B

S*+/9 D30/8 >,KK,>+K >,@;,>@K+;B

L0&+8 =

A>&+'8

Ad' <

E&"lyees

;@@,;@+ >@,+

Ad' < Marshal

Engineers

>,>K>,;B+ ,BB+

Ta: /educted At

-urce

;,B@+ ,@;+

Ad'ance Ta: >B,+ >B,+

Fringe *ene(it

Ta:

Q,;+ B,+

Fringe *ene(itTa:

K,K+ >>,B@@+;@


67/73

7A++ ;9

M6AT

Recei'able

Q,>+; >,>+;

Cash In 8and ,@B>+B B,Q>+B

*an0 O(

Maharashtra

CA

>>,+ ",22,2@!. < ",$","@.2!

LESS#

CURRENT

LIABILITIES =

PROVISIONS

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Charges Payable

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-alaries 4

1ages Payable

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-er'ice Ta:

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Audit Fees

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Pr(essinal

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/uties 4 Ta:es < ",!$!.@ >,@+ "",@."


68/73

NET CURRENT

ASSETS

2,"2,2.$ !,!",."@

T0&%

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C8APTER 6I

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69/73

-U55E-TION-,

AN/

CONCLU-ION


70/73

FINDINGS

+

>9 -tandard current rati is ;> and (r industry it is ;+BQ+in this year+ This sh%s that

"ri'i rganics ltd+ c&"any?s ratis are satis(actry+

;9 Li)uid rati is &re than ne s, it is satis(actry+

@9 As there are &re nu&ber ( debtrs the a'erage cllectin "erid ( debtrs als

increased+ The decrease in the debtr turn'er rati sh%s that there are &re

recei'ables (r& debtrs+ *ecause ( the recessin, it is 'ery di((icult (r a c&"any

t cllect the debtrs henceG there is less rec'ery (r& debtrs+

9 In'entry turn'er rati is i&"r'ing (r& ;Q


71/73

SUGGESTIONS

-uggestins can be used by a (ir& (r the better&ent a(ter study and analysis (

"r!ect re"rt n #%r0ing ca"ital &anage&ent$+ I %uld li0e t suggest<

>9 It can be said that the 'erall (inancial "sitin ( the c&"any is sund but it is

re)uired t i&"r'e (r& the "int ( 'ie% ( "r(itability

;9 C&"any shuld &ini&i3e their lng


72/73

CONCLUSION

The title ( the "r!ect is #1r0ing Ca"ital Manage&ent$ %hich is carried ut

in Pri'i Organics P't+ Ltd+ The b!ecti'es ( the "r!ect %ere "ri&ary and secndaryi+e+ t analy3e the (inancial state&ent ( the c&"any thrugh rati ( the c&"any, t

(ind ut the %r0ing Ca"ital ( the c&"any, the net "erating cycle ( the c&"any+

In this study an atte&"t is &ade t "r'ide an idea abut the %ay in %hich a decisin

can be ta0en t decide in the (ield ( (inance (r better "rgress+

There is a negati'e "erating cycle in the c&"any %hich &eans that they are

ding business %ith ther?s &ney+ The %r0ing ca"ital &anage&ent ( the C&"any

is being e((ecti'ely dne as they ha'e a "r"er &anage&ent and cntrl 'er the

1CM+


73/73

BIBLIOGRAPHY

>9 Princi"les O( Financial Manage&ent -atish M+ Ina&dar E'erest

Publishing 8use, Pune+Third Editin ;Q+

;9 Annual re"rts ( Pri'i Organics P't+ Ltd+

@9 Financial Manage&ent

arbaz final

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