SUBMITTED BY

KURRA RANGA NAIK11502076

SECTION Q1529ROLL NO A21

Company: WAHID SANDHAR SUAGR Mill LTD

Presentation on Summer Training

“WORKING CAPITAL MANAGEMENT IN WAHID SANDHAR SUGARS LTD”

CONTENTS

INTRODUCATION COMPANY

OBJECTIVES OF THE STUDY

RESEARCH METHODOLOGY

DATA ANALYSIS/INTERPRETATION

SUGGECTIONS

CONCLUSION

WAHID SANDHAR SUGAR LTD. The Sugar Plant originally established in 1933 by Narang Group of Industries

which was later on taken over by Oswal Group in 1989.

The Plant was later on taken over by Wahid and Sandhar Group in the year 2000

Main Activities of Company The Company is mainly engaged in the business of manufacturing and sale of Sugar. At

present the capacity of the Plant is 5500 M.T. for crushing of sugar cane at Phagwara Sugarcane being the seasonal crop available only for 5 to 6 months.

List of Directors

S. Soukhbir Singh Sandhar S. S. Jaswinder Singh Bains s.s jarnail singh wahid s.s . sandeep singh ( chairman) (Vice-Chairman) ( Managing Director ) ( Director )

OBJECTIVES OF THE STUDYTo understand Planning and Management of Working Capital at Wahid Sandhar Sugar Ltd

To measure the financial soundness of the company by analyzing various ratios.

To determine the gross and net operating cycle of the unit

To know the future need of working capital in the running organization.

To suggest ways for better management and control of working capital at Wahid Sandhar Sugar Ltd

RESEARCH METHODOLOGY

Method of Data Primary Data as well as Secondary Data

Tools Used

Gross operating cycle and net operating cycle

Analysis through working capital ratios

Working capital managementWorking capital refers to that part of total capital which is used for carrying out the routine or regular business operations. In other words, it is the amount of funds used for financing the day-to-day operations

Working capital may be regarded as life blood of a business. Its effective provision can do much to ensure the success of a business while its inefficient management can lead not only to loss of profits but also to the ultimate downfall of the organization

CLASSIFICATION OF WORKING CAPITAL

Data AnalysisParticulars Year 2016

Rs in ‘000SalesCost of productionPurchasesAverage raw material stockAverage Working in progressAverage finished goods stockAverage creditorsAverage debtors

3000

2100

600

80

85

180

90

350

Data Analysis1. Raw material = Average raw material / Total raw material *365 = 80/600*365 =49 days

2. Working in progress = Working in progress / total cost of production 85/2100*365

=15 days

3. Finished goods = Average stock /total cost of production *365=180/2100 *365 =31 days

    

Data Analysis 4. Debtors = Average debtors / total creditors sales *365

= 350/3000 *365=43 days

 5. Creditors = Average creditors / total purchase *365

=90/600 *365=55 days

Net operating cycles = 49+15+31+43-55 = 138 days – 55 days = 83 days     

OPERATING CYCLE :

0204060

Gross net working capital

Days

Raw m

ateria

l stora

ge pe

riod

WIP Sto

rage P

eriod

Finish

ed Good

Stora

ge Per

iod

Debtor

collec

tion p

eriod

Credit

or Pa

ymen

t Peri

od

Operat

ing Cy

cle Pe

riod

020406080

Net oprtating cycle

Days

Calculation of Ratio

Gross Profit Ratio Net Profit Ratio05

1015202530

PROFIT RATIO

RATIO

Stock Turnover Ra-tio

Debror Turnover Ratio

Creditor Turnover Ratio

0

2

4

6

8

10

12 TURNOVER RATIO

Ratio (in time)

FINDINGS•The operating cycle of the company is 83 days.

• The company has raw material storage period is 49 days.

•Work in Progress storage period is 15 days.

•Finished goods storage period is 31 days.

•The debtor collection period is 43 days. It means sale are more on credit and company provide the 43 days allow to debtor or customer for make a payment.

•Creditor payment period is 55 days. It means company have purchase the goods on credit also and the supplier provide 55 days to the company for make a payment.

•So the operating cycle of the company is 83 days. The company operates 3 operating cycle in a year.

•The Gross Profit ratio is 25% of its sales it is good for the company.

•The net profit ratio is 20% of its sale and the company have only 5% indirect expenses.

•The stock turnover ratio is 3.07 times of its stock . so it helps to company to reduce the indirect expense. So there is no inventory ideal.

•The debtor turnover ratio is 10 so more goods are sold on credit and the debtor collection period is 43 days.

•The creditor turnover ratio is 6.67 so company is also buying the good on credit and the payment period is allowed by company is 55 days for make payment.

•So the payment period is less than the collection period so it helps to maintain the liquidity position of the company.

 

 

SUGGECTIONS

•For Wahid Sandhar sugar ltd the working capital management cycles is longer than the industry average however the following points should be above the indicial elements or working capital

•The stock of raw material is considerably higher than average. so there is a need for stock control produces to be reviewed

•The values of creditors is also above average the indicates that Wahid Sandhar sugar is delaying the payments of creditors beyond the credit period although this is an additions source of finance it may result in a higher cost of raw material or Loss of good will among the suppliers

CONCLUSION

Working capital management is of critical importance to all companies. Ensuring that sufficient liquid

resources are available to the company is a pre-requisite for corporate survival. Companies must strike a

balance between minimizing the risk of insolvency (by having sufficient working capital) with the need

to maximize the return on assets, which demands a far less conservative outlook.