A Summer Training Report


Working Capital Management


Submitted in partial fulfillment for the award of degree of

(SESSION 2005-2007)







Roll No


of the PDM College of

Engineering here by declared at the project entitled is an original work and the same has not been submitted to any other institute for the award of any other degree. The interim was presented to the supervisor on and the pre submission presentation was made on ____________. The feasible suggestions have been only incorporated in consultation with the supervisor.

Countersigned Signature of the Supervisor Forwarded By Director/Principal of the Institute Signature of the candidate




4 5 6 18 49 50 51 52 54 55

60 74 76 77 78



The satisfaction and euphoria that accompany the successful completion of any task would be, but incomplete without mentioning the people who made it possible, whose constant guidance encouraging crowned my effort with success.

I would like to begin with a special note of gratitude and heartfelt thanks to Mr. S. S. SHIVRAIN, General Manager, who gave me the opportunity to complete my summer project at PARLE BISCUITS PRIVATE LIMITED Bhadurgarh, Haryana. I am extremely grateful to the Deputy Manager of Finance Department Mr. JAIDEEP BHALA for his constant encouragement and valuable suggestions throughout my summer training and project for his cooperation extended to me. I am extremely indebted to Mr. PAWAN TYAGI, Mrs. SANTOSH NARWAL, Mr. S.N. VERMA, Mr. AKHIL RASTOGI, Mr. VINOD, Mr. AJAY SINGAL, Mr. PARMINDER SINGH, Mr. VIJENDER SINGH, and Mr. MANOJ for sharing their valuable time, comments and encouraging suggestions which guided and inspired me throughout the preparation of the project. I express my special thanks to Mr. K.G. CHACKO (OFFICE MANAGER), Mr. RAJIV SINGH (I.T. MANAGER), Mr. VIJAY KUMAR THAKUR (I.T. ASSTT. MANAGER), Mr. JANAK SHEKHAWAT (HR &P), Mr. SANJAY GOEL, Mr. VIDYA DHAR KASWAN (PURCHASE OFFICERS) for giving me their valuable opinions time to time.

At last but not the least, I am very thankful to all the staff members of I.T. department also. 4

is the market leader in biscuit industry. Ltd. Master of Business Administration is a two-year programme that inserts management knowledge in an individual to make that individual completely professional for which practical experience is must.PREFACE Practical work experience is the integral part of individual learning. Parle Biscuits Pvt. 5 . An individual who is learning managerial concepts has to undergo this practical experience for being a future executive. Bahadurgarh plant of PBPL offered me a project on Working Capital Management to understand the current position through dates provided by them.

survived and succeeded. in 1939. A decade later. to manufacture sweets and toffees. by adhering to high quality and improvising from time to time. The year was 1929 and the market was dominated by famous international brands that were imported freely. which later went on to become leading names for great taste and quality. 6 . Parle Products began manufacturing biscuits. Despite the odds and unequal competition.HISTORY OF COMPANY INTRODUCTION A long time ago. Parle Glucose and Parle Monaco were the first brands of biscuits to be introduced. a small factory was set up in the suburbs of MUMBAI city. in addition to sweets and toffees. Having already established a reputation for quality. when the British ruled India. the Parle brand name grew in strength with this diversification. this company called Parle Products.

when Parle began production in 1939. the shortage of wheat in those days. during the Second World War. we now have a wide range of biscuits mouthwatering confectioneries to offer. made Parle decide to concentrate on the more popular brands. That’s why. so that people could enjoy the price benefits. Thankfully today. there’s no dearth of ingredients and the demand for more premium brands is on the rise. Parle did offer a wide variety of brands. all domestic production was diverted to assist the Indian Soldiers in India and Far East. Apart from Glucose and Monaco biscuits.HOW PARLE FOUGHT TO MAKE BISCUITS AFFORDABLE TO ALL Biscuits were very much a luxury food in INDIA. However. Apart from this. 7 .

Ltd. Parle Product Pvt. It also has 2 manufacturing plants – 1) BAHADURGARH in Gurgaon (Haryana) 2) NEEMRANA in Alwar (Rajasthan) Apart these two plants Parle Biscuit Pvt. All these factories are located at strategic locations. Each factory has state-of-the-art machinery with automatic printing & packaging facilities. Ltd. 8 . which produce only biscuits. maintain 11 contract base manufacturing units on different locations. Ltd. All Parle products are manufactured under the most hygienic conditions. These plants and CMU’s produce sweets and confectionary products. Great care is exercised in the selection & quality control of raw materials. has also a subsidiary company. Every batch of biscuits & confectioneries are thoroughly checked by expert staff. Ltd. so as to ensure a constant output & easy distribution. using the most modern equipment. packaging materials & rigid quality standard are ensured at every stage of the manufacturing process.THE QUALITY COMMITMENT Parle Product Private Limited has 3 manufacturing plants – 1) VILE PARLE in Mumbai (Maharashtra) 2) BHUJ (Gujarat) 3) BANGLORE (Karnataka) Apart these plants Parle Product Pvt. This subsidiary company produces only biscuits. which is Parle Biscuit Pvt. maintain 20 contract base manufacturing units in all over INDIA.

is 1500 crores and the turnover of Parle Biscuit Pvt. Ltd. Additionally there are 40 depots and C&F agents supplying goods to the wide distribution network. Parle-G it’s first venture became an instant favorite amongst the masses. Most Parle offerings are in the low & midrange price segments. It topped charts worldwide by becoming the WORLD’S LARGEST BISCUIT SELLING BRAND as revealed by the US-BASED BAKERY MANUFACTURES ASSOCIATION in 2002. leading the glucose category with a huge market share of 65%. A two hundred strong dedicated field force services these wholesalers and retailers. Parle Has nearly 1500 wholesalers catering to 4. 9 . Parle biscuits and sweets are available to consumer even in the most remote places and in the smallest of villages with a population of just 500.THE MARKETING STRENGTH The extensive distribution network built over the years is a major strength for Parle Products. is 750 crores. Ltd. The value for money positioning helps generate large sales volumes for the products. The Parle marketing philosophy emphasizes catering to the masses.25. The turnover of Parle Product Pvt. We constantly endeavor at designing products that provide nutrition & fun to the common man. This is based on our cultivated understanding of the Indian consumer psyche.000 retail outlets directly or indirectly.

“Parle Products Limited will strive to provide consistently nutritious & quality food products to meet consumers’ satisfaction by using quality materials and by adopting appropriate processes.THE CUSTOMER CONFIDENCE The Parle name conjures up fond memories across the length and breadth of the country. Parle Biscuits & Confectioneries. To facilitate the above we will strive to continuously train our employee and to provide them an open and participative environment. Maximizing value to consumers and forging enduring customer relationships are the core endeavors at Parle. the people of India have been growing up on Parle biscuits & sweets. the Parle brands have found their way into the hearts and homes of the people of all over India & abroad. The consumer is the focus of all the activities of Parle. “ 10 . continue to spread happiness & joy among people of all ages. Our efforts are driven towards maximizing customers’ satisfaction and this is in synergy with our quality pledge. After all. Today. since 1929.

The popular brands Parle-G. 11 . onion and methi) are available in packets of various convenient sizes. THE PRICING STRATEGY This biscuit major has not bothered to raise the price of its flagship brand “ Parle-G” for the past 6-8 years and has always tried to provide its offerings at nearly 33% discount as compared to other competitive brands. Krackjack. Monaco and its variants (zeera. The marketing mix has evolved with the times… THE PRODUCT Parle biscuits have a range of variants in its product portfolio. New products like Hide & Seek are a foray into the premium segment.EMERGING TRENDS OF THE BRAND Since its inception in the 30’s Pale biscuits have prided itself in offering quality products that are affordable to the common man.

THE PROMOTION POLICY The consumer is the focus of all activities at Parle. Discounts. Parle-G ‘My Dream Comes True Contest’ was one of its biggest promotional ventures (2. From the depots. the biscuits are sold to wholesalers and further to retailers. Maximizing value to consumers and forging enduring customer relationships are the core endeavors at Parle. THE PLACE A well-entrenched distribution system (the company covers 12-15 lacks outlets across the country) with 40 depots at strategic points all over the country. gift offer schemes are other popular promotional offerings. 12 .5 crores) which gave contestants a chance to fulfill their dreams.

The manufacturing at Bahadurgarh unit started in 1982 for Parle-G with a single plant. Including General Manager 78 employees of Managerial and Officer class are working in this plant. is a subsidiary of Parle Product Pvt. But the accounts are finalized of Neemrana plant and 11 CMU’S at Bahadurgarh Plant. Ltd. Ltd. Number of permanent workers of thrice shifts is 680 and around 400 workers are there on contract basis.PARE BISCUTS PRIVATE LIMITED (BAHADURGARH) Parle Biscuit Pvt. In 1990’s Krackjack production began followed by Monaco and Nimkin. Location of the 11 CMU’S is as follows- • • 5 at Kanpur 1 at Gorakhpur 13 . Average Production capacity of Bahadurgarh unit per month is- 1) Parle-G 2) Krackjack 3) Monaco 3500 Metric Tonnes 1600 Metric Tonnes 800 Metric Tonnes The plant works in coordination with the Mumbai office. 11-contract base manufacturing units and 40 depots. Production is going on in this plant 24 hours in three shifts. It is planted in near about 16 acres of land. Neemrana (Rajasthan) Plant of PBPL.

• • • • • 1 at Patna 1 at Faizabad 1 at Raipur 1 at Varanasi 1 at Ajmer 14 .

P. The heads of the different departments report to the General Manager through direct communication. A retail shop at the Plant provides Parle Products at M.T. The working atmosphere is not stressful with enough work-flexibility given to staff and managers. rates.DEPARTMENTS IN PLANT • • • • • • • • • FINANCE HR & PERSONNEL QUALITY ASSURANCE PRODUCTION & PRINTING EXCISE & DESPATCH ENGINEERING I.R. The plant also has auditorium and viewing gallery. PURCHASE STORE The organization follows a flat structure with less hierarchal levels. 15 . which is used during the visit of school children.

Ltd.CREDIT POLICY OF PARLE BISCUITS PVT. According to their transportation facilities customers of Parle Biscuits Pvt. ask their demand of different products to depots. LTD. Ltd. Ltd. For fulfilling the demand of it’s customer’s timely Parle Biscuits Pvt. Parle Biscuits Pvt. Ltd. Before coming to the credit policy it’s necessary to be aware with the goods distribution policy of Parle Biscuits Pvt. Ltd. Finished goods are transferred from production plants to these depots. maintains 40 DEPOTS in all over INDIA. doesn’t has credit policy it deals in cash. Then it’s the responsibility of these depots to fulfill the demand of customers of Parle Biscuits Pvt. For the collection of it’s payment PBPL deals with 5 banks which are as follows: 1) UTI 2) STANDARD CHARTERED 3) HDFC 4) BANK OF PUNJAB 5) CORPORATION BANK 16 .

After 4 days just like the second category these parties send the draft of consignment amount directly to production plant. 2) Demand Draft Parties – In such cities where anyone of these 5 banks isn’t there customers of those come in this category.These are those parties to whom 4 days credit facility is provided but they also don’t have facility of any of those 5 banks in their city.After collecting the amount of sold goods it is deposited by the depots in any of these bank. Before receiving the finished goods customers send the draft of the consignment amount to production plants directly. 4) Credit Demand Draft Parties . 17 . Then consignment is sent to those customers by concerned depot. Ltd. After 4 days these parties send cheque of consignment amount to depot. Parle Biscuits Pvt. And then procedure just like first category is followed by depot. Depots fill the selling amount of the consignment in those cheques and then these cheques are deposited by the depots in the account of PBPL in any of these 5 banks. divided its customers in 4 categories- 1) Cheque Parties – Cheque parties are those who send their blank cheques to Depots before receiving the finished goods. 3) Credit Parties – Those parties to whom maximum 4 days credit facility is provided are called credit parties.

biscuits or confectionaries. Today. The Parle biscuits brands are: 1) 2) 3) 4) 5) 6) 7) 8) 9) Hide & Seek Choc Cream Elaichi Cream Orange Cream Pineapple Cream Marie Choice Cheesling Jeffs Monaco 10) Nimkin 11) Sixer 12) Glucose 13) Krackjack 14) Parle-G 18 . are market leaders in their category and have won acclaim at the Monde Selection. since 1971. Parle enjoys a 40% share of the total biscuits market and a 15% share of the total confectionary market in India. Parle has grown to become a multi-million US Dollar company. Many of the Parle products.Product Profile Over the years.

The Parle toffees brands are: 1) 2) 3) 4) 5) 6) 7) 8) 9) Funtoosh Mango Bite Orange Candy Poppins Roll-A-Cola Tangy Candy Boo Pippermint Rose Mint 10) M Choco 11) Melody 12) Dairy Toffee 13) Lux Toffee 14) Mayfair Toffee 15) Kismi 16) Mahakismi 17) Smoothies 18) Cafechino 19) Chox Bar 19 .

Sales don’t convert into cash instantly. There is a time lag between the sale of goods and receipt of cash. there is a need for working capital in the form of current assets to deal with the problem arising out of the lack of immediate realization of cash against goods sold. 20 . Therefore sufficient working capital is necessary to sustain sales activity. Therefore.Introduction of Topic WORKING CAPITAL AT A GLANCE  INTRODUCTION  TYPES  FEATURES  DETERMINANTS  COMPONENTS  WORKING CAPITAL CYCLE INTRODUCTION A successful sales program is necessary for earning profits by any business enterprise.

finished goods. A) Gross working capital . TYPES Working capital can be classified either on the basis of concept or on the basis periodicity of its requirement. 3) Working capital represents the minimum amount of investment in raw materials. stores and spares. Gross working capital = Total current assets 21 . 2) Working capital indicates circular flow of funds in the day-to-day activities of business. work-in progress. accounts receivables and cash balance.Gross working capital is represented by the total Current assets.FEATURES 1) Working capital is regarded as the excess of current assets over current liabilities. That’s why it is also called circulating capital. of 1) ON THE BASIS OF CONCEPT On the basis of concept working capital is of 2 types.

B) Net working capital . Net working capital = Current assets – Current liabilities 22 .Net working capital is the excess of current assets over current liabilities.

Such an amount cant be reduced if the firms wants to carry on business operations without interruption.Such capital is required to meet out the demands of busy periods occurring at stated intervals.2) ON THE BASIS OF REQUIREMENT On the basis of requirement working capital is also of 2 types. accounts receivables or cash balance etc. A) Permanent working capital . fire. unexpected competition. 23 . or initiating a big advertisement campaign require such capital.Such capital is required to meet out the extra-ordinary needs for contingencies.It is that amount of investment which should always be there in the fixes or minimum current assets like inventory. rising price tendencies. Events like strike. b) Seasonal working capital . It may also be subdivided into two parts. to carry out business smoothly.The excess the amount of working capital over permanent working capital is known as variable working capital. seasonal c) Special working capital . B) Variable working capital .

requirements of working capital will be comparatively large. The production policies are affected by so many factors availability of raw materials. 4) Length of period of manufacturing – The time which elapses between the commencement and end of the manufacturing process has an important bearing upon the requirements of working capital. 2) Production policies – if the production is evenly spread over the entire year. motion & fatigue studies etc. 3) Proportion of the cost of raw materials to total cost . Rail. work to be done through machine labour & hand labour. the firm has to arrange its working capital requirements accordingly. on the other hand. roads and other public utility services have large fixes investment so they have the lower requirements of current assets. whatever the productions policies are. generally require a large amount of working capital. working capital requirements are greater.In those industries where cost of proportion is a large proportion of total cost of the goods produced. because the inventories will be unnecessarily accumulated during of season period. labour. stocking facility etc & therefore. 24 . working capital is required to a greater extent during a specified season only. But if the production schedule favours a varying production plan as per the seasonal requirements.it depends on the type of the product to be manufactured. degree of rationalization of manufacturing procedures through times.DETERMINANTS 1) Nature of business – The effect of the general nature of the business on working capital requirements can’t be exaggerated. Industrial and manufacturing enterprises. The manufacturing cycle may be shorter for certain concerns & longer for others.


Terms of purchase - If suppliers allow continuous credit, payment can be postponed for some
time and can be made out of the sale proceeds of the goods produced. In such a case, the requirements of working capital will be reduced.


Dynamic Attitudes – As a company grows, it is logical to expect the large amount of working
capital will be required.

7) Business cycles – Requirement of working capital also varies with the business. When the price
level is up due to boom conditions, the inflationary conditions create demand for more working capital. During depression also a heavy amount of working capital is needed due to the inventories being locked unsold and book debts uncollected.


Requirement of cash - The working capital requirements of a company are also influenced by
the amount of cash required by it for various purposes. The greater the requirement of cash, the higher will be the working capital needs of the company.

9) Dividend policy of concern – If the management follows a conservative dividend policy the
needs of working capital can be met with the retained earnings. The relationship between dividend policy and working capital is well established and mostly companies declare dividend after a careful study of their cash requirements.

10) Other Factors -

Other factors, which affect the requirement of working capital, are lack of co-

operation in production and distribution policies, transport and communication facilities, the fiscal and tariff policies of the government etc.



Main components of working capital are as follows:

1) Cash – Cash is the most liquid and important component of working capital. Holding cash involves
cash in the sense that the present worth of cash held for a year is less than the value of cash on today. During inflationary situations as exist today the cost of holding includes the deterioration in the value of the cash due to inflation. Cash, therefore, results in enhanced liquidity, but lower profitability. Despite in the cost involved it is pertinent to hold cash because it facilitates the attainment of some important motives.

2) Marketable Securities – Though marketable securities provides a such lower yield that the
firm’s operation assets. They serve two useful functions. Firstly, they act as a substitute for cash, and secondly, are used as temporary investment. Where these securities are held in lieu of the cash balance, they act as a substitute for transactional or precautionary balances. Normally, these aren’t used as speculative balances, but only as a guard against the possible shortage of bank credit. Marketable securities (as temporary investment) may be held for one of the following reasons: • • • Seasonal or cyclical operations To meet known financial requirements. Construction of an additional plant. Immediately after the sale of long-term securities.


3) Account Receivable - Though accounts receivable are a vital investment of any business
organization, little analytical work as been done to determine credit policies. Maintaining account receivable has its cost implications in that the firm’s monetary resources are tied up. This is of greater significance in the inflationary economy, because of the depreciation in the value of money. Basically, this is a two-step account. When goods are shipped, inventories are reduced and accounts receivable is created. When payment is made, this account is reduced and the cash level increases. Accounts receivables are, therefore a function of the volume of credit sales and the average length of time between sales and collections.

4) Inventory – Inventories represent a substantial amount of a firm’s current assets. Management of
inventories should be efficiently carried out so that this investment doesn’t become too large, as it would result in blocked capital which could put to productive use elsewhere. On the other hand, having too small an inventory could result in loss of sale or loss of customer goodwill. An optimum level of inventory should therefore be maintained.



Working capital cycle indicates the length of time between a firm’s paying for materials entering into stock and receiving the cash from sale of finished goods. In a manufacturing firm, the duration of time required to complete the sequence of events is called operating cycle.

In case of a manufacturing company, the operating cycle is the length of time necessary to complete the following cycle of events: 1) Conversion of cash into raw materials 2) Conversion of raw materials into work-in-progress 3) Conversion of work-in-progress into finished goods 4) Conversion of finished goods into accounts receivable 5) Conversion of accounts receivable into cash

The above operating cycle is repeated again & again over the period depending upon the nature of the business & type of product etc. the duration of the operating cycle for the purpose of estimating working capital is equal to the sum of duration allowed by the suppliers. Working capital cycle can be expressed as:


Cost of Production per day W=Work in Progress Holding Period = Avg. Stock of Finished Goods Avg.R+W+F+D-C Where R=Raw Material Storage Period = Avg. Stock of Raw Material Avg. Trade Creditors Avg. Cost of Production per day F=Finished Goods Storage Period = Avg. Cost of Goods Sold per day D=Debtors Collection Period = Avg. Credit Purchases per day 29 . Credit Sales per day C=Credit Period Availed = Avg. Work in Progress Inventory Avg. Book Debts Avg.


84 = 7.84 = .22 _______________ Total length of Operating Cycle = 21.13 Debt collection period (Calculating in ratios) = 4.9 Stock in Process = 10.53 114.34 Days 31 .1 115.36 = 9.METHOD OF ASSESMENT OF WORKING CAPITAL Operating cycle No.12 114.088 Finished goods = 1054. of days Raw material = 916.

32 .

07 12 = 5652. Total EXPENSES Per month 60450.422 Rs.SALES per month 67829. 33 .77 12 = 5037.66 = 3583.45Rs.34 30 X 5037.66 Rs. WORKING CAPITAL REQUIRED = Total Length of X Operating Cycle Monthly Expenses __________________________________ 30 = 21.

34 .27Rs 1 Month’s Consumption = 36047. Raw Material – (Mentioned in P&L Account) Opening Stock + Purchases – Closing Stock 2003-04: Annual Consumption = 36047.Working Notes: 1.94Rs 2004-05: Annual Consumption = 38058.07/12 = 3171.27/12 = 3003.07Rs 1 Month’s Consumption = 38058.50 Rs.

31Rs.2.08/12 = 3442.5/12 = 3343. 1Month’s Stock In Process = 40125.Closing Stock 2003-04: Cost of Goods Sold = 40275.5 Rs.92 Rs. Stock In Process -Raw Material + Power + Labour + Repairs + Other Manufacturing Expenses + Depreciation + Opening Stock – Closing Stock 2003-04: Cost of Production = 40125. Finished Goods -Cost of Production + Opening Stock . 1Month’S Stock In Process = 41315.08 Rs.81Rs. 35 . 3. 2004-05 Cost of Production = 41315.

27Rs.85Rs. 1 Month’s Finished Goods = 41529.31/12 = 3356.1 Month’s Finished Goods = 40275.54Rs. 36 . 2004-05: Cost of Goods Sold = 41529.54/12 = 3460.

3) It is concerned with the decisions about the composition and level of current liabilities. 37 . liquidity and risk. 2) It is concerned with the decisions about the composition and level of current assets.THEORTICAL MANAGEMANT ASPECTS OF WORKING CAPITAL WORKING CAPITAL MANAGEMENT NATURE OF WORKING CAPITAL MANAGEMENT Working capital management is three dimensional in nature- 1) It is concerned with the formulation of policies with regard to profitability.

Policies regarding to Profitability Liquidity and Risk Composition of Level of Current Assets Composition of Level of Current Liabilities 38 .

DIMENSIONS OF WORKING CAPITAL GOAL OF WORKING CAPITAL MANAGEMENT Working capital management is concerned with the problems that arise in attempting to manage the current assets. Major current assets are cash. Interaction between current assets and current liabilities is the main theme 39 . and outstanding expenses. the current liabilities and the interrelationship that exists between them. at their inception. accounts receivable and inventory. bills payable. Current liabilities are accounts payable. to be paid in the ordinary course of business within a year. The term current assets refer to those assets which is the ordinary course of business can be converted into cash within one year. out of the current assets or earnings of the concern. bank overdraft. marketable securities. which are intended. Working capital is that portion of firm’s assets which is financed by long-term funds. Current liabilities are those liabilities.

Goal of working capital management is to manage the firm’s current assets and liabilities in such a way so that a satisfactory level of working capital is maintained. The second important segment of working capital management is deciding the optimum level of investment in various current assets.of the theory of working capital management. accounts receivables and inventory 40 . There are three important current assets cash.

LTD.INVENTORY MANMAGEMENT IN PARLE BISCUITS PVT. can be stored maximum only for 3 days. For inventory management in Bahadurgarh plant of PBPL certain things are considered which are completely practical- • As market generally fluctuates so if there is any perception of the increment in the price level of any commodity in future then that particular commodity is stored. • All the materials of the mixture. The position of inventory at the end of last two years is as follows- 41 . policies. govt. Because store of plant is designed like this that more than 3 days storage can’t be maintained in it. • Minimum levels of inventories are maintained in plant in wake of lead-time. which is used in making biscuits. and oneday safety stock for transportation problem. • Re-order levels of inventories are maintained in the plant in wake of per day consumption level of inventories and lead-time in days.

61.000 7.54.11. 21.33. 91.000 Finished Goods 2003-04 2004.46.000 9.000 8.5 Raw Materials 2003-04 2004-05 10.000 Packing Material 2003-04 2004-05 5.06.NAME OF THE COMMODITY YEAR AMOUNT (In Rs/-) Stores and spares 2003-04 2004-05 82.08.000 42 .000 57.52. 29.

CASH MANAGEMENT IN PARLE BISCUITS PVT. Ltd.00. So circulation of cash is smooth & fast. • Parle Biscuits Pvt. Cash management in Parle Biscuits Pvt. Ltd. • In case of strike or any contingency supply of demand is completed by another plant of Parle Biscuits Pvt. That’s why it doesn’t has any cash problem. • Salaries and Wages are distributed in Parle Biscuits Pvt. Ltd. Ltd. is as follows- Average daily collection of the Parle Biscuits Pvt. That’s why there isn’t any necessity of more cash. Ltd. • Authority for getting the benefit of any opportunity is given to Mumbai office of Parle Biscuits Pvt.000 salaries and wages are distributed in one month. and by 11 CMU’S. Supply doesn’t disturb. Like this all other daily transactions are completed by daily collection. Ltd. That decides the policy regarding to any market opportunity.00075. LTD. is very short only depots are there as a middleman between plant & open market. is 2 crores.00. • Biscuits come in FMCG product. • Distribution channel of Parle Biscuits Pvt. 50. doesn’t have any credit policy. 43 . It deals in cash. Ltd on monthly basis.

• Production cycle is short. The Net Working Capital remains unaffected when a transaction involves only non current accounts. through the statement of change in Working Capital. Ltd has less demand of cash. FUND FLOW ANALYSIS The statement of change in financial position. The transaction will cause Net Change of Working Capital only when one of the accounts affected is a current account (Current Liability) and account is non-current account (Long-term Assets or Long term Liability). Working Capital is defined as the difference between Current Assets and Current Liabilities. The Working Capital flow or fund arises when the net effect of transaction is to increase or decrease the amount of Working Capital. Working determines the liquidity of the firm. 44 . a firm will have some transactions that will change Net Working Capital and some that ill cause no change in Net Working Capital. • Now let us examine the Working Capital flow of Parle Biscuits Pvt. The concepts of Working Capital may be summarized as follows: • The Net Working Capital increases or decreases when a transaction involves a current account and a non-current asset account. That’s why Parle Biscuits Pvt. • • The Net Working Capital remains unaffected when a transaction involves only Current accounts. Ltd. Normally. prepared to determine only the sources and uses of working capital between dates of the two Balance Sheets is known as the Fund Flow Statement.

Thus. 45 . cash is not paid immediately for purchases but after an agreed period of time. According to trade practices. Commercial Papers and Internal Sources. Bank Credit. TRADE CREDIT Trade Credit refers to the credit extended by the supplier of goods and services in the normal course of transaction/business/sale of the firm. The need for financing arises mainly because the investment in Working Capital/Current Assets that is raw materials. RBI framework/regulation of bank credit/finance/advances. The main sources of Working Capital financing are Trade Credit. Factoring. deferral of payment (trade credit) represents a source of finance for credit purchases.FINANCING OF WORKING CAPITAL INTRODUCTION A firm has to decide how it is to be financed. work/stock-in-progress. finished goods and receivables typically fluctuates during the year.

it represents the most important source for financing of Current Assets.BANK CREDIT Bank Credit is the primary institutional source of Working Capital finance in India. Working Capital finance is provided by banks in five ways: 1) Cash Credits/Overdrafts 2) Loans 3) Purchase/Discount Bills 4) Letter of Credit 5) Working Capital term loans 46 . In fact.

47 .RESERVE BANK OF INDIA FRAMEWORK FOR /REGULATION OF BANK CREDIT In order to secure alignment of Bank Credit with planning priorities and measures to direct Bank Credit to priority sectors and enforce a measure of financial discipline among industrial borrowers. They buy at a price less than the commission and sell at the highest possible level. namely over borrowing and domination of cash credit system did not materially alter. It is issued on a discount on face value basis but it can also be issued in interest bearing form. which closely approximate their holding period. and investors can select those maturities. When Commercial Papers are issued by security dealers/dealers on behalf of their corporate customers. The companies announce current rates of Commercial Papers of various maturities. A Commercial Paper when issued by a company directly to the investor is called a Direct Paper. COMMERCIAL PAPERS Commercial Paper is a short-term unsecured negotiable instrument. they are called Dealer Paper. consisting of usance promissory notes with a fixed maturity. the basic character of Bank financing of Industry. However.

they appeared in the Indian financial scene only in the early nineties as a result of RBI initiatives. The first private sector factoring company.FACTORING Factoring provides resources to finance receivables as well as facilitates the collection of receivables. which provide such services: 1) SBI Factors and Commercial Services Ltd. 2) Canarabank Factors Ltd. 48 . Although such services constitute a critical segment of the financial services scenario in the developed countries. There are two bank-sponsored organizations. Foremost Factors Ltd. started operations since the beginning of 1997.

Parle Biscuits Pvt. Ltd. Ltd. reserves etc. LTD. doesn’t use any other source apart internal for financing it’s Working Capital 49 .INTERNAL SOURCES This is also another major source for financing of Working Capital. In Parle Biscuits Pvt. are enough to fulfill the demand of it’s Working Capital. Ltd financing of Working Capital is done through only internal sources. Internal Sources include profits. Profits and reserves of Parle Biscuits Pvt. FINANCING OF WORKING CAPITAL IN PARLE BISCUITS PVT.

MANAGERIAL USEFULNESS OF STUDY Today in the business line every man. how much capital it has at the end for the year and how that capital stands invested in various assets. With the help of working capital management we can calculated the liquidity position of the company. such as. how much is the amount of sales. what are his total expenses and what is the amount of profit earned or loss incurred during the year. the usefulness of study is included the signification of the working capital. A working capital is a part of finance. it is essential to keep a complete and systematic record of each and every business transaction entered into during the year. Besides. they are liable to pay and to whom they owe it. the properly maintained accounts are helpful in the assessment of Income-tax and Sales 50 . how much amount. how much is owed to them and by whom etc. Working capital management is manage the operating process in the organization & company. The working capital are calculated by the current assets and current liabilities which are related to annual report of the company. All the businessmen want to know how much they have gained or lost during the year. Furthermore. how much amount he has to take and from whom and how much amount he is liable to pay and to whom. want to know about his company financial condition. he can ascertain the financial position of his business. If the current assets are more than the current liabilities thus we can say that the liquidity position of the company is satisfactory. how much capital is invested in the business at the end (if the year. By keeping a complete and systematic record of every business dealing the businessman can know how much the amount of purchases is. In order to attain such information.

average collection ratio and quick ratio. These ratio are shows the liquidity position in the financial competition. Ltd. That is possible with the help of ratio analysis. Ltd. current ratio. 51 . I have used these ratio by the declaration of financial manager of Parle Biscuit Pvt. Ratio help to summaries the large quantities of financial data and to make qualitative judgment about the firm’s financial performance. These ratio are very useful to understand the topic because we can calculate the working capital by the help of these ratio. I have used the ratio which are networking capital ratio. The project is developed keeping in mind the security of working capital of the company.CONCEPT USED IN STUDY In this project I used working the ratio which are used for calculating for the financial conditions of Parle Biscuit Pvt.

Ltd. The main purpose or focus of the problem is to know that which product should be used in the company and why and how can it be effective for the company? The main focus of the problem is to find out output of the economical business. Since a special reference has been made towards Parle Biscuits Pvt. The study is also focused on satisfaction of the customer. our study will not give the true picture. Our study is focused on to know about the amount consolidation of the entire group and the international financial market. business has also become equally important and unless we know the methodology adopted by Parle Biscuits Pvt. the focus of our study is find the amount consolidation of the entire group. job satisfaction level of the employees and the effectives handling of accounts with computer & related software. In nutshell. Ltd.Focus of the Problem The main purpose of study the account process is to find the main reason or decision which can improve the business of the company. 52 .

53 . 1. Primary : To find out the operating and day to day financial functions which reflects how the company operates its operating cycle and manage financial flow in day to day business activity. that the role of analysis of working capital and its various components. so as to manage them effectively. Ltd. Most of the nations including developing countries like INDIA have placed adequate emphasis on self-reliance technology in confectionary industry. Now-a-days confectionary products are also a means to economic power. There has been a rapid and manifold increase in the activities of Parle Biscuits Pvt. These have been directed towards achieving of self-sufficiency in biscuit industry. This scenario likely to continue into the 21 st century. The problems in managing Working Capital particularly in the context of the risk-return trade off associated to very little scientific and rational analysis. In order to meet out the rising demand of biscuits in the country co-coordinated and consolidated efforts are required in the direction of exploration.OBJECTIVE OF PROJECT Right from the beginning and also in present scenario. since past. gets pronounced. It is against this backdrop that the present study seeks to make an attempt to critically analyze the effectiveness of Working Capital Management of Parle Biscuits Pvt. Ltd. and offer suggestions for improvement wherever necessary. It is precisely in such a background. Confectionary has carved for itself a strong place in the international market with around half of the global primary demand of confectionary products.

7. Secondary : 1. 6.2. Of Parle Biscuits Pvt. To analyze the liquidity position of the organization 3. To prepare report on study thus conducted. Ltd. To find out the weaknesses and to suggest various suggestions 5. Ltd. To study the performance of the Parle Biscuits Pvt. To know the functioning of the finance deppt. 2. To examine profitability position of the management 4. To know about certain innovations made in organization as compared to past. 54 .

On one side it will be good for the society and on the other side it will be beneficial for the company . Societal effects. 55 . Company is trying to expand its network in many countries. as the loans have good profits margins.Scope of the Work Company has opportunities of tapping new markets by their products. company has a good scope in the field of home loans and insurance sector.

I choose the project of Working Capital Management. He approved the project. In a lucid way I can summarize the steps of Research Methodology as1)Collection 2)Organization 3) Presentation 4)Interpretation 56 . Mr. I discussed the project with my instructor and coordinator Mr. profit & loss account of the respective years and other internal documents. Ltd. JAIDEEP BHALA in understanding the facts and figures provided a great help. Although is has been a difficult task but the availability of proper data and timely guidance given by Mr. BHALA made it possible for me to ask my queries from that person who can answer these best rather than anybody else in the company. My instructor Mr. After that a simple course of action has been followed for working on this project. JAIDEEP BHALA Deputy Manager of Finance Department. BHALA made it a little simpler to complete this project. All the figures are taken from their balance sheet. All the data are gathered from the respective annual report of Parle Biscuits Pvt.RESEARCH METHODOLOGY After knowing the job profile of every employee of finance department in Bahadurgarh plant of PBPL.

The sample represents the population. According to that data we can take a decision toward them and can make a choice regarding them. The research design selected by me was descriptive cum analytical as this the best suited to analyze the fact which already exist and choose the best one for welfare of the employees. 57 . Survey Population In Survey population we have to check all the employees working with us. This the necessary b’use sometimes the size of population makes it difficult to study each member of population.Research Design The research design involves taking the decision on type of data sources from which the data is to collected and the contact methods. The sample is part of population which is selected by using sampling procedures. By this survey we also came to know how they are surviving in real. Sample It is the process by which a part of population is selected to serve as reprentative of the population on which research is carried out.

METHODS OF DATA COLLECTION To deal with real life problems it is often found that data at hand are inadequate and hence it becomes necessary to collect data appropriate. 58 . As the project is on working capital information include was collected from the finance dept. for this purpose data collection was done through the primary as well as secondary data.

In a case of survey data can be collected by one or more of the following ways. 2. 59 . Communication In Communication data we uses the mode of communication which we uses oftenly. From where we can get the input according to our project.1. 1)COMMUNICATION METHOD 2)OBSERVATION METHOD All the data has been collected from the primary sources. We can collect this data for further use also. it can be collected through experiment or through survey. 1. As the data collection will be taken initially then we can get the best output. Because this data can be used during comparison from last ones. By collecting the data from this method is the direct interaction. Primary Data Primary data is the data collected specially for the specific purpose. Observation During the Data Collection first of all we have to see all the aspect related to data.

Secondary Data Secondary data consists of information that already exists somewhere and was collected for another purpose which may not be the same.2. Secondary Data used here - Various files Magazine and Books Performa’s and Websites I have used secondary data in the completion of this summer training report. 60 .

has been done. Ltd.76 6596.and Working Capital was 3.000 lacs Rs/.67 19.then % of Working Capital to sale was 3.84 but in the next year 2003-04 sales was 50. The Working Capital of the last two years is as follows – (Amount in Lacs Rs/-) YEAR SALES INVESTMENTS WORKING % CAPITAL OF % OF WORKING WORKING CAPITAL CAPITAL TO 2003-04 2004-05 68000 70000 33540. 61 . was 2500 lacs Rs/. So in year 2003-04 % of Working Capital to sales was 6.Data Analysis ANALYSIS OF WORKING CAPITAL MANAGEMENT In this chapter an analysis over the Working Capital of Parle Biscuits Pvt.000 lacs Rs/-. Ltd.70 7.000 lacs Rs/.19 27390.32 In year 2002-03 Working Capital of Parle Biscuits Pvt.while in the same period the sales was noticed 65.56 INVETSMENTS 19.16 5294. But before going further let us have a look on the current position of Working Capital.01 TO SALES 9.

so % of Working Capital to Investments was 12.000 lacs Rs/.5 and in year 2003-04 Investments were 15. 62 .000 lacs Rs/.so % of Working Capital to Investments was 20.In year 2002-03 Investments were 20.

76 Working Capital 6596.19 27390.01 2003-04 2004-05 1 2 Years 3 Amount in Lacks % OF WORKING CAPITAL TO SALES & INVESTMENTS 63 .16 5294.CALCULATION OF WORKING CAPITAL 80000 70000 60000 50000 Amount 40000 30000 20000 10000 0 SALE 70000 68000 INVESTMENT 33540.

25 20 15 10 5 0 1 Amount in Lacs % of Working Capital to Sales 9.32 19.56 % of Working Capital to Investment 19.7 7.67 2003-04 2004-05 2 RATIO ANALYSIS 64 .

Here are some of the calculated ratios of the financial year of Parle Biscuits Pvt. Ltd. used to make a qualitative judgment. Net Working Capital Ratio 65 . All the ratios are calculated in Lacs Rs/. Ratio helps to summaries the large quantities of financial data and to make qualitative judgment about the firm’s financial performance.It is a powerful tool of financial analysis. which can be turn. The point to note is that a ratio indicates a quantitative relationship.figures. A ratio is defined as “the indicated quotient of two mathematical expressions” and as “the relationship between two or more things”.

The important thing to say is that this organization has healthy Current Assets. The position of Net Working Capital in the year 2003-04 is better as compared with the year 2002-03.Net Working Capital Capital Employed 2003-04 2004-05 Net Working Capital Net Assets or Capital employed 6596.22: 1 . 66 .16 5294.56 Ratio .01 29340.48 35093.15: 1 The difference between Current Assets and Current Liabilities excluding short-term borrowings is called Net Working Capital or Net Current Assets.

1 0.Net Working Capital Ratio 0.15 0.05 0 2003-04 2004-05 Net Working Capital Ration 0.22 0.15 2003-04 2004-05 0.15 0.25 0.2 0.22 67 .

Current Ratio Current Assets Current Liabilities 2003.68 20090. As a conventional rule a current ratio 2: 1 or more is considered satisfactory. All obligations maturing within a year are included in current liabilities. 68 . a “cushion” of protection for creditors.52 1.33: 1 28602.81 1.4 2004-05 Current Assets Current Liabilities Ratio 26686.82 23308.23: 1 Current Assets include cash and those assets.e. which can be converted into cash within a year. The current ratio doesn’t represent margin of safety i.

28 1.23 2003-04 2004-05 69 .18 2003-04 2004-05 Current Ratio 1.3 1.24 1.32 1.34 1.22 1.26 1.33 1.2 1.1.

70 . Ltd doesn’t has credit policy and if is given then in rare cases.22 The average collection period shows the efficiency of debtors.000 4.Average Collection Ratio Debtors*360 Sales 2003-04 2004-05 Debtors*360 Sales Days 1217. It tells that Parle Biscuits Pvt.45 821.90*360 70.16*360 68000 6.

22 2003-04 2004-05 71 .45 4.7 6 5 4 3 2 1 0 2003-04 2004-05 Average collection ratio 6.

But if debtors are liquid like in this organization than even less than 1:1 can work out to be satisfactory. But it can’t be said tat a company having quick ratio of less than 1:1 isn’t financially sound.35 Current Liabilities Ratio 20090.4 Current Assets – Inventories 26686. The system is well under control an effective but still in some areas a little more concentration to be needed.68-2869. As debtors of this organization aren’t slow paying so that quick ratio is satisfactory.84 23308. 72 . The above made calculation of various ratios has told us about the various aspects of Working Capital of Parle Biscuits Pvt.98= 26077. Because it depends upon the nature of debtors.52 1.Quick Ratio or Acid Test Current Assets .18: 1 2004-05 28602.81 1. If the debtors are slow paying the quick ratio of more than 1:1 can become harmful.12: 1 Generally a quick ratio of 1:1 is considered to represent a satisfactory position.Inventories Current Liabilities 2003. Ltd.33= 23817.82 -2524.

18 1.14 1.12 1.09 2003-04 2004-05 Quick Ratio 1.15 1.17 1.1.18 1.16 1.1 1.19 1.13 1.12 2003-04 2004-05 SCHEDULE OF CHANGE IN WORKING CAPITAL 73 .11 1.

Particulars 2003-04 2004-05 Effect on Working capital Increase Decrease Current Assets Inventories Debtors Cash Accured Income Total 270934 172716 153228 816122 1413000 297238 1111814 1409052 3948 289272 188725 168070 868345 1514412 357239 1151815 1509054 5358 18338 16009 14842 52223 Current Liabilities C/L (Cr.C (A-B) Pos. Inc. in W.) Provisions Total W.C 60001 40001 101412 1410 100002 74 .

Means that no one can enter in the confidential data of the company and without permission the senior officer one can’t enter in the main programme whether he is Manager. FINDINGS It is very difficult to make the project or the analysis in such a way that can solve all the problems according to the requirements. 75 .The project is developed keeping in mind the security of Working Capital of the company. In this project it is being tried to give more and more facilities but in a short period of training time. as much as possible has been done. Employee or the Guest.

000 Lacks Rs/. Was 2500 Lacks Rs/. 2.000 Lacks Rs/. 4. Then % of working capital to sale was 3.000 Lacks Rs/. 5. As a Conventional rule a current ratio 2:1 or more is considered satisfactory the current ratio don’t represent margin of safety i.e. So % of working capital to investments was 12.In the year 2002-03 investment were 20.000 Lacks Rs/. The Position of Net Working Capital in the year 2003-04 is better as compared with the year 2002-03.1. And working capital was 3. a “cushion” of protection for creditors. While in the same period the sales was noticed 65. 76 .5 and in year 2003-04 investment were 15. 3. Ltd doesn’t has credit policy and if is given then in rare cases.000 Lacks Rs/. It can not be said that a Company having a quick ratio of less than 1:1 isn’t financially sound because it depends upon the nature of debtors. 6. But if debtors are liquid like in this organization than even less than 1:1 can work out to be satisfactory.In the year 2002-03 working capital of Parle Biscuit Pvt. So in year 200304 % of working capital to sales was 6. Ltd. it tells that Parle Biscuit Pvt. If the debtors are slow paying the quick ratio of more than 1:1 can become harmful.84 but in the next year 2003-04 sales was 50. The important thing to say is that this organization has healthy current assets. The average Collection period shows the efficiency of the debtors. So % of working capital to investments was 20.

77 .

• Organization has healthy current assets but it is need to more improved current assets and liquidity power. • Total Liabilities of outsiders should be deceased. • Expenditure should be decreased. • Net Profit need to be improved. • The organization is well under controlled and effective but still in some areas a little more concentration to be needed. • Overall Management should be improved. 78 .Recommendation • Total Current assets need to be increased.

• Limited Time : Although the staff of Parle Company Pvt. We were not able to devote as much time with their employees. • Lack of Comparative Data : Due to non availability of other industries in the same line we were not able to compare the data of one organization with other one. Ltd.Limitations of the Study The major limitations of my study are as under. 79 . was very efficient and highly co-operative and devoted enough of their valuable time to us. Inspire of these difficulties we still put our best efforts to try to do the full justice subject matter and in completion of the report. But because of time constant. • Secrecy: Some of the information was kept confidential and was not disclosed to any person who so ever.

80 . The study will definitely increase the morale of each employee and by studying this managers come to know that what effective measures can be taken to maintain the effective use of working capital in the organization and thus to achieve goals of the organizations. which is due to its efficient management.Clement Stone The study has its own importance in its own way.Conclusions “Success is achieved by those who try where there is nothing to loose by trying a great deal to gain if successful. Ltd. With the help of this study one can know about the struggle and success of Parle Biscuits Pvt. by all means try.” W. Efforts.

Jain Annual Reports 1) Parle Biscuits Pvt. Ltd. annual report 2001-02 2) Parle Biscuits Pvt. Ltd.BIBLIOGRAPHY Text Books D.Y.Khan & P.K.G. annual report 2002-03 3) Parle Biscuits Pvt.C.Gupta M. annual report 2003-04 Management Accounting Financial Management ANNEXURE Profit and Loss Account 81 .Sharma & K. Ltd.

Particulars Sales Less: Cost of Goods Sold Opening Stock Add: Raw Material Consumed Packing Material Consumed Payment to an Provisions for employees Store and Spare Parts Consumed Power and Fuel Conversion Charges Rates and Taxes Less: Closing Stocks Gross Profit Less : Operating Expenses Selling and Distribution expenses Repair and Maintenance Advertisement and Sales/ Marketing Expenses Communication Expenses Cash Discount Traveling and Convince Expenses General and Administrative Expenses Rent Printing and Stationary 2003-04 5282907 137107 3067148 723740 171429 43975 120505 257928 68721 136933 829287 44499 187875 2103 20440 6312 4636 2276 2004-05 5505061 136933 3268256 666587 126067 40306 142037 305061 78051 105061 846824 40507 250507 2209 25061 7051 2051 2051 Insurance Legal and Professional Financial Expenses Depreciation Miscellaneous Operating Profit 3531 3642 103900 5488 327846 3033 4050 95061 6057 396336 82 .

Add : Not Operating Income Income from Investment Other Incomes Less : Non Operating Expenses Net income before Tax Less : Tax@38.5% 426074 164038 564459 217317 87622 10606 146251 21872 Net Income 262036 347142 83 .

38 6.14 .11 4.86 8.7 7.62 15.21 1.96 100 84.3 15.07 3.25 3.18 7.3 84 . Expenses Total Operating Expenses Operating Profit Total Income Less : Other Expenses Income Before Tax Less : Provision for Tax Income after Tax 100 84.72 .15 .27 1.11 8.95 6.97 .5 6.Common Size Statement Profit and loss Account Particulars 2003-04 2004-05 Sales Less Cost of Good Sold Gross Profit Less : Operating Expenses Selling and Distribution Expenses General and Administration Expenses Financial Expenses Misc.2 3.10 9.05 10.20 1.

Expenditure Profit and Loss A/c(Dr. Advances a) Current assets Stock Debtors Cash b) Loans and Advances Misc. Balance) 270934 172716 153228 816122 289272 188725 1680707 868345 85 .Balance Sheet Particulars Liabilities Share Capital Reserves and Surplus Secured Loans Unsecured Loans Current Liabilities 2003-04 4950 1494788 and 297238 1111814 2908790 2003-04 556596 939194 Loans and 357239 1151815 3273856 2004-05 583761 1175683 2004-05 4950 1759852 Provisions a) Current Liabilities(Creditors) b) Provisions Contingent Liabilities Total Particulars Assets Fixed Assets Investment Current Assets.

Total 2908790 3273856 86 .

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