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This project deals with the study of working capital management in HEG Ltd., Mandideep, Bhopal. It is one of the basic functions of financial management, which is important part of every organization. Working capital management is concerned with short-term financial management of the organization. This reflects the importance of finance of any organization. The objective of this project is to precede clear and understandable analysis of working capital management of the organization.

MANIT, Bhopal


I take this opportunity to place on record my grateful thanks and sincere gratitude to all those who gave me valuable advice and inputs for my study. My study could have been completed if I had not been able to get the reference material from the company. I am thankful to Mr. Manoj Lahoti, DGM (Finance), Mr. Ravi Tripathi, Manager (Finance), Ms. Ruchi Saxena, Executive HR and Mr. B. Bhanu Murti Sr. Assistant for their kind guidance and suggestions. Last but not the least, I would like to express my thanks to my family members, my faculties and friends who inspired me to put in best efforts for the research/project work.

Jose T George

MANIT, Bhopal


I hereby declare that the project report entitled "Working Capital Management" in HEG Ltd., Mandideep is the outcome of my own work and the some has not been submitted to any university for the award of any degree or any professional diploma.

Date: 30th Jun., 2010 Jose T George MBA IInd Sem.

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Working Capital Cycle Types of Working Capital Steps involved in preparation of cash flow statement

14 15 20

3. 4.

Graphical representation of position of inventory in HEG 40 Graphical representation of cash & bank balance in HEG 42 Graphical representation of position of loans & advances in 44 Graphical representation of position of sundry creditors 46 Graphical representation of provision for bad debt at HEG 48 Graphical representation of current asset v/s working 49 Graphical representation of current liability v/s working 50



HEG ltd
7. 8.




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1. 2. 3. 4. 5. 6. 7. 8. 9. Calculation of Working Capital in HEG ltd Statement showing change in Working Capital Position of inventories Position of cash & bank balance Position of loans & advances Position of current liabilities Position of provision for bad debt Current assets v/s Working Capital Current liability v/s Working Capital 36 37 39 41 43 45 47 49 50

MANIT, Bhopal



Part – 1
• •

Introduction Company profile 25



Part – 2 • Data Analysis & Interpretation 33


Part – 3 • Research Methodology 51


Part – 4 • Conclusion 54

Bibliography & Annexure Abbreviations Glossary

56 57 58

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Part – 1
• • • Introduction Company Profile Limitation of the study

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Working capital may best be defined as current assets minus current liabilities. Gross working capital is total current assets, which are represented mainly by cash and government securities account receivable and inventories of raw materials, goods in process and finished goods. Increase in the level of inventories and receivables throughout the production process use of cash. The amount by which current assets exceed current liabilities is significant in finance management for two reasons. First, the amount of working capital represents the extent to which current assets are financed from long-term sources. If the current assets of a firm are Rs.100000 and its current liabilities Rs.40000, the remaining Rs.60000 has been financed from other than current sources. Second, working capital represents a margin of safety foe short term creditors. Current assets are likely to yield a higher percentage of their book value on liquidation then to fixed assets.

"Working capital is the life blood and controlling nerve system of a business." Working capital means the part of the current assets of the business that change from one form to another form in the ordinary course of business operation. The word working capital is made of two words – • Working and

The word working means day to day operation of the business, whereas the work capital means monetary value of all assets of the business.

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According to Shubin
"Working capital is the amount of funds necessary to cover the cost of operating the enterprise."

According to Genestenbery
"Circulating capital means current assets of a company that are changed in the ordinary course of business from on form to another; as for example from cash to inventories, inventories to receivables, receivables into cash."

Objectives of the working capital
• •

To ensure optimum investment in current assets. To ensure adequate flow of funds for current operations. To speed up the flow of funds or to minimize the stagnation of

funds. • To strike a balance between the twin objective of liquidity and

profitability in the use of funds.

Concept of working capital
Commonly two concepts of working capital found in the existing literature of finance –

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• •

Gross working capital (Quantitative Concept) Net working capital (Qualitative Concept)

The total current assets are termed as the gross working capital or circulating capital. Total current assets include; cash marketable securities, accounts receivables, inventory prepaid expense, advance payment of tax; etc.

The excess of current assets over current liabilities represents net working capital.

Components of working capital
The main components of working capital is – • • Current assets Current liabilities

Current assets are those assets that in the ordinary course of business can be or will be turned into cash with in an accounting period with out undergoing diminution in value and without disrupting the operations.

Current Assets –
• Cash

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• • • • •

Marketable securities Inventories Sundry debtors One year fixed deposits with banks, and Prepaid expenses

Current liabilities are those liabilities intended to be paid in the ordinary course of business with a reasonable period out of the current assets or revenue of the business.

Current Liabilities –
• • • • • Sundry creditors Loans and advances Bank overdrafts Short term borrowings, and Taxes and proposed dividends

Importance or Advantages of adequate working capital
Working capital is the life blood and nerve center of a business. Just as circulation of blood is essential in the human body for maintaining life, working capital is very essential to maintain the smooth running of the business. No business can run successfully without an adequate amount of working capital.

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The main advantages of maintaining adequate amount of working capital are as follows – 1. Solvency of the business – Adequate working capital helps in maintaining solvency of the business by providing uninterrupted flow of production. 2. Goodwill – Sufficient working capital enables a business concern to make prompt payments and hence helps in creating and maintaining goodwill. 3. Easy loans – A concern having adequate working capital, high solvency and good credit standing can arrange loans from banks and others from easy and favorable terms. 4. Cash discounts – Adequate working capital also enables a concern to avoid cash discount on the purchase and hence it reduces cost. 5. Regular supply of raw materials – Sufficient working capital ensures regular supply of raw materials and continuous production. 6. High morale – Adequacy of working capital creates an environment of security, confidence, high morale and creates efficiency of the business. 7. Ability to face crisis – Adequate working capital enables a concern to face business crises in emergencies such as depressions because during such periods, generally there is much pressure on working capital. 8. Excess or inadequate working capital – Every business concern should have adequate working capital it run its business operations. It should have either redundant or excess working capital her inadequate of working capital. Both excess and short working positions

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are bad for any business. However out of the two it is the inadequacy of working capital, which is more dangerous from a point of view of the firm.

Factors determining the working capital requirement
• • • • • • • • • • • • • Nature or character of business Size of business / scale of operations Production policy Manufacturing process / length of production cycle Seasonal variations Rate of stock turnover Credit policy Business cycles Rate of growth of business Earning capacity and dividend policy Price level changes Other factors Working capital cycles

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Working Capital Cycle

Debtors (Receivables)


Finished Goods

Raw Materials


Fig 1

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Types of working capital
Types of working capital

On the basis of B's concept

On the basis of time

Gross Working Capital

Net Working Capital

Regular Working Capital

Temporary Working Capital

Seasonal Working Capital

Specific Working Capital

Fig 2

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Where is working capital analysis most critical
On the on hand, working capital is always significant. This is especially true from the tenders or creditors perspective, where the main concern is defensiveness; can the company meets its short-term obligations, such as paying vendor bills.

Sources of working capital
There are three main sources of working capital management – 1.

Short term financing – Generally current assets should be

financed by only short term financial sources. Short-term finance is obtained for a period of less than one year. The sources of short-term finance are loans from banks, public deposits, commercial papers, factoring of receivables, bills discounting, retention of profits, etc. 2.

Long-term financing – Net current assets or permanent current

assets or working capital are supposed to be financed by long-term sources of finance. Long-term finance is raised for a period of more than five year. Long-term finance sources include ordinary share capital, preference share capital, debentures and long-term loans from bankers and suppresses. 3.

Spontaneous financing – It refers to the automatic sources of

short-term funds arising in the normal course of a business. The source includes trade credit and outstanding expenses.

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Sources of additional working capital
Sources of additional working capital include the following – • • • • • • Existing cash reserves Profit (when you secure it as cash) Payables (credit from suppliers) New equity or loans from share holders Band overdrafts or lines of credit Long-term loans Working capital has a direct impact on cash flow in a business. Since cash flow is a name of the game for all business owners. A good understanding of working capital is imperative to make any venture successful.

Statement of cash flow (SCF)
• • Provide a foundation to predict future cash flow. Ability to forecast cash needs and cash availability to purchase capital

assets, repay non-current debt and other non current sheet items is essential. • Owners and creditors assume that is a business generates positive cash

flows in the past, it will in the future. • Serves as a basis for the evaluation of management's performances

regarding cash management.

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Allows the identification of cash inflows and cash outflows with in

operation activities, investing activities and financing activities. • To prepare an SCF, the reported accrual net income (or loss) in converted

from an accrual basis by evaluating the balance sheet accounts that have changed during and operating period.

Evaluation of net cash flow
• It is possible for an operation to have positive net income and produce a

negative cash flow, or to show a net loss and have a positive cash flow. • Operating Section (of on set) – Adjusts and reconciles the net income or

net loss for and operating period to the net cash flow from operations.

Methods to determine net cash flows

Direct Method – Uses cash receipts from operations and cash

disbursements to create the income statement on a cash basis. •

Indirect Method – Start with net income and adjust it for charge in

current asset and current liability accounts, generally eastern and more commonly used method.

Segmenting cash flow analysis
Segmenting into three types of activity –

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• • •

Operative activity Investing activity Financing activity

Involve the primary objective of the business, the production of sales revenue inflows from the exchange of goods, merchandise and services creating sales revenue inflows for cash or credits.

Involve transactions that affect non current accounts, long-term purchases.

Transactions that course changes to ownership equity and the payment of borrowing on long-term debt.

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Steps in the preparation of cash flow statements

Prepare non-current account to identify the cash flow

Cash inflows

Cash outflows

Sales of assets or investments, raising of financial resources

Purchase of assets or investments, redemption of financial resources

Balancing figure

Fig 3

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Management of sundry debtors
The finance manager has an operating responsibility for the management of investment in receivables. In addition to his role of supervising the administration of credit, the finance manager is in a particular, strategic position to contribute to top management decisions relating to the best credit policies of the firm. In the beginning the finance manager plays an important role in the determination of credit period and deciding the criteria for selection of credit applications. The basic objectives of management of sundry debtors is to optimize the return on investment on the asset. It is obvious that if there are large amount tied up in sundry debtors, working capital requirements and consequently interest charges will be high. Also, in such a case, the bad debts and the cost of collection of debts would be high. On the other hand, if the investment in sundry debtors is low, the sales may be restricted, since the competitors may offer more liberal credit terms. Therefore, management of sundry debtors is an important issue and requires proper policies and efficient execution of such policies. There are basically three aspects of management of sundry debtors. Firstly, the credit policy is to be determined. This involves a trade of between the profit on additional sales that arise due to credit beings extended on the one hand on cost of carrying those debtors and bad debts losses on the other. The second aspects of management of sundry debtors is credit analysis where by the finance manager determines as to how risky is to advance credit to a particular party. The third aspect is follows up of debtors and credit collection. Thus, management of sundry debtors involves both laying down credit policies and execution of such policies. The objectives for which credit is granted can be: • Increasing Sales and Market shares

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Increasing Profit Due to Higher sales and Higher margins on Credit

sales • Meeting competition

The credit policy of a firm involves decisions relating to length of the credit period, cash discount and other special items.

The credit period is also dependent on the custom in the industry and the practice followed by various competitors. The availability of funds and credit risks involves also determined the credit period.

A cash discount is a reduction in payment offered to customers to induce them to repay credit obligation within a specified period of time, which will be less than normal credit period. If the customer does note avail the offer he must make payment within the normal credit period.

Efficient and timely collection of debtors ensure that the bad debt losses are reduced to the minimum and the average collection period is shorter. If a firm expends more resources on collection of debts, it is likely to have smaller bad debts. Thus, a firm must work out the optimum amount that it should spend on collection of debtors. This involves a trade off between the level of expenditure on the one hand decrease in debt losses and investment in debtors on the other. On the other hand, it has to keep the amount of the outstanding in check. Hence, it has to work in a very smoothen manner and diplomatically.

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In this receivables are classified according to their age. The Ageing Schedule provides an effective method of comparing the liquidity of receivables with the liquidity of receivables in the past and also comparing liquidity of receivables of one firm with that of other firms.

Inventories constitute a major element of working capital. It is, therefore, important that investment in inventory is properly controlled. The objectives of inventory management are, to a great extent, similar to the objectives of cash management. Inventory management covers a large number of problems including fixation of minimum and maximum levels, determining the size of inventory to be carried. deciding about the issues. Receipts and inspection procedures. Determining the economic order quantity, proper storage facilities, keeping cheque over obsolescence and ensuring control over movement of inventories. Important that the financial aspects of inventories is carefully examined.

Aids to inventory management
Management of inventory can be achieved through the use of one or more of the following techniques: 1.

Minimum/Maximum levels – The simplest and the oldest form of

inventory management consist of fixation of minimum and maximum levels of various inventory items. These levels would obviously take into account the factors like: • Importance of each item to the production! sales process,

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• • 2.

Availability of alternative sources of supply/ substitutions, The lead-time involved in the procurement of items.

Re-ordering levels – There ordering level is meant to alert the

inventory controller to a fall in the level of stocks where immediate action is required to be taken for procurement of the items. 3.

Economic order quantity – The E.O.Q is an important concept in the

purchase of raw materials and in the storage of finished goods and in transit inventories, generally, to determine the optimal order quantity of a particular item of inventory, we should be given its forecasted usage, ordering costs and carrying cost. Ordering can mean either purchase of the item or its production. The E.O.Q. formula helps in ascertaining the economic order EOQ = 2AO/C A= total usage in units for a period. 0= 0 for ordering cost per order. C= c for per units carrying costs per period. 4.

Perpetual inventory system – The perpetual inventory system is a

method of controlling stock items by recording balances in the stores after each receipt and issue. 5.

ABC Analysis or selective techniques – In case of manufacturing

company like HEG, the number of items of raw material run into thousands. From the point of view of monitoring information for control. It becomes extremely difficult to consider one of these items. In this case ABC analysis becomes useful and enables the management to concentrate attention and keep a close watch on a relatively less number of

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items, which account for a high percentage of annual usage value of all items of inventory. In this analysis items are categorized into ABC. Category on the basis of their usage value. The more costly items classified as 'A' this represent larger investment items but are low in number. In BHEL 'A' category items amount to 60% of investment in inventory items. Inventory items of average usage value are put in 'B' category and these accounts for 30% of total investment in inventory. Low usage value items are put in 'e' category. It represents 10% of total investment in inventory. The 'A' category items require greater degree of control and accurate planning 'B' category requires moderate control. As 'e' category represents low usage value. Much importance is not paid on its control. Also the planning and control cost incurred for this category will be greater than their total cost. The advantages of this system are – • • Ensures closer control on costly items. Helps in developing scientific method of controlling inventories

clerical costs are reduced and stock is maintained at optimum level. • Helps in achieving the main objective of control at level.

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Founded in 1961, the LNJ Bhilwara Group is today, is a Rs. 2049 crore with a strong global presence lead by the Founder & Chairman – Emeritus, Mr. L.N.Jhunjhunwala the business. Group is one of the largest firms in the India corporate world with over 20000 employees and 17 production units positioned at strategic locations across the country with its headquarter in Noida (New Delhi). The group is a well-diversified conglomerate. It actively seeks growth and profitability by investing in a variety of systematically identified businesses making it a multi-product conglomerate with interests in a range of industries such as textiles, graphite electrodes, power generation, power consultancy services, sponge iron and its enabled services. In its four decade of long existence, the group has come to be identified with quality and technology. The LNJ Group believes in the philosophy of "Quality how & forever" & makes no bones that it is "Proud to be Indian; privileged to be Global." This is borne out by the fact that 7 of its companies have ISO 9000 certification & 45% of the group's turnover comes from exports. The journey can be well appreciated from the milestones given below: • • 1970 – Established. 1972-73 – Incorporation of the company with an intension to set up a

10000 MT capacity plant. • • 1976-77 – Full scale commercial production started. 1978-79 – Installed full 10000 MT capacity; Dispatched 4857 MT to the

market (domestic). • • 1981-82 – Exports to graphite electrodes started by HEG. 1984-85 – Modernization done to manufacture, UHP grade (Ultra High

Power) electrode.

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• own. • capacity. •

1991-92 – Collaboration quashed with seers; HEG decided to go on its

1994-95 – Expansion cum modernization completed to reach 21000 MT

1996-97 – Expansion cum modernization (including technological

upgradation) undertaken to reach 24000 MT capacity with captive power; 13.5 MW Tawa Hydet Power plant & 128 MW Durg HWRS Power plant commissioned. • 2001-02 – Expansion cum modernization completed to reach 32000 MT

(100% OHP) capacity. As it would emerge, HEG Ltd. setup as a 10000 MT plant manufactures HP grade electrodes for the domestic market is now a 32000 MT UHP plant selling 80% in the export market & competing on equal footing with the leading manufactures (MNGS) in the world. The critical success factor has been: • • • Self Reliance for Technology State of the art manufacturing facilities Dynamism to anticipate & adopt to the volatile market situations

An Introduction of HEG
HEG a premier company of the LNJ Bhilwara Group is Asia's leading graphite electrode manufacturer and India's largest graphite electrodes exporter established in 1977 in technical and financial collaboration with society Des Electrodes ET MANIT, Bhopal 27

refroctaires savoie (SFRS), a subsidiary of pectinery of finance. HEG has the largest integrated graphite plant in South Asia & Middle East, located in Mandideep near Bhopal (M.P.) with a capacity of around 52000 MT per annum. HEG's graphite division has facilities for production of graphite electrodes and graphite specialties. The company also operates o sponge iron plant, a steel Billent's plant and a 12.8 MW waste heat recovery system power plant with a rated capacity of 25 MW of Mandideep.

Graphite Electrodes
Graphite electrodes find their biggest industrial use in Electric Arc Furnaces (EAF) used in steel plants to melt steel scrap produce steel. Steel production volumes through the EAF therefore drive the demand for graphite electrodes route, which is fast growing. The manufacture of graphite electrodes is a technology intensive process that involves heat treating non graphite carbon to temperatures upto 3000oC, with quality of output being a key success factor. HEG is one of the few players that cater to the graphite electrodes market worldwide, supplying its products to leading steel makers globally. In 1985, we pioneered exports of graphite electrodes in the country. Today, export is one of HEG's key drivers contributing to around 70% of revenues. We export to over 25 countries including highly competitive markets such as USA, Canada, Germany, France, Italy, Australia and South Korea.

Awards & Achievements
• Awarded ISO 9001 (2000) and later ISO 14001 certification by "BVQI".

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Awarded "Rajiv Gandhi National Quality 2001 Award for Quality" by

Bureau of Indian Standards, Government of India. • HEG Ltd. has bagged the prestigious National Export Award instituted by

the Ministry of Commerce, Government of India, for outstanding export performance for the year 1997-98. • • HEG Rishabhdev bagged the National Export Award. HEG has also won the country's top export award instituted by the

Chemical & Allied Products Export Cernical (CAPEXIL) for outstanding exports for the past 17 consecutive year for 2001-02 HEG awarded the highest export award. • • HEG has the largest Graphite Electrode manufacturing plant in South Asia. HEG has been regularly exporting electrodes since 1980 and today exports

more than 80% of its production. • HEG's graphite electrodes are exported to 25 countries around the world,

including developed countries like USA, Canada, Germany, France, Italy, South Korea, Australia, etc. A award for our commitment to world winning quality and performance.

Mission and Vision Statement

Mission statement of HEG
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"To become a leading international player in graphite electrodes and related business by leveraging our core competence and there by enhancing value to our customers, shareholders, employees and society."

Vision statement of HEG "A vibrant globally acknowledged top league player in graphite electrodes and allied businesses with commitment to growth, innovation, quality and customer focus."

About the HEG Ltd.
• • Established – 1970. Set-up – 1977. 30

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Diversified companies – Graphite electrode, textiles, sponge iron and

hydro-power. • • • • Turnover – 2007-08 Rs. 2049 crores. Location – HEG Ltd. Mandideep near Bhopal (M.P.) India. Size of unit – 100 acres. Company status – Largest manufactures and exporter of graphite

electrodes in South Asia. • • • ISO 9002 Accredited Company since 1996. 80% of the product is exported to 25 countries across the world. Excellent quality products established in highly demand steel works


Production capacity
52000 MT per annum.

Board of Directors
L.N. Jhunjhunwala Ravi Jhunjhunwala Shekhar Agarwal V. K. Mehta Chairman – Emeritus Chairman & Managing Director Vice-Chairman Director

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D. N. Davar K. N. Memani Kamal Gupta P. Murari R.C. Surana Riju Jhunjhunwala N. Mohan Raj N. Mehta Manvinder Singh Ajmani Ashish Sabharwal

Director Director Director Director Executive Director & CEO Executive Director Nominee Director – LIC Alternate to V.K. Mehta Chief Financial Officer Company Secretary

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Part – II
• Data Analysis & Interpretation

What does working capital mean?
A measure of both a company's efficiency and its short-term financial health. The working capital is calculated as – Working capital = Current assets – Current liabilities

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Positive working capital means that the company is able to pay off its short-term liabilities. Negative working capital means that a company currently is unable to meet its short-term liabilities with its current assets. (Cash, account receivable and inventory) Also known as "Net working capital" or "Working capital ratio."

Investopedia explains working capital
If a company's current assets do not exceed its current liabilities then it may run into trouble paying back creditors in the short-term. The worst case scenario is bankruptcy. A deriding working capital ratio over a long-term period could also be a red flag that warrants further analysis. For example, it could be that the company's sales volumes are decreasing and as a result, its accounts receivables number continues to get smaller and smaller. Working capital also gives investors an idea of the company’s underlying operational efficiency money that is tied up in inventory or money that customer still owes to the company cannot be used to pay off any of the company's obligations. So if a company is not operating in the most efficient manner (slow collection), it will show up as an increase in the working capital. Comparing the working capital from one period to another can see that this slow collection may signal an underlying problem in the company's operations.

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Calculation of working capital for HEG Ltd.
A. Curr ent Assets • Inventory
• Sundry MANIT, Bhopal 35

Year 2009

Year 2008

Year 2007




debtors • Cash Bank &

32854.30 638.30 16269.09

28835.42 4319.00 21204.71

20313.15 10325.01 12441.10

• Loans & Advances Total of Current Assets B. Current Liabilities • Sundry creditors • Provision for bad debts Total Current Liabilities of




8953.65 5042.84 13996.49

8888.52 3548.24 12436.76

7459.40 4050.37 11509.77

Net Working Capital (A - B)




(Rs in lac) Table 1

Statement showing change in working capital for HEG Ltd.
Particulars Year 2008 Year 2009 Change in working capital
Increase Decrease

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1. Current Assets • Inventory • Sundry debtors • Cash & Bank • Loans & Advances Total of Current Assets 2. Current Liabilities • Sundry creditors • Provision for bad debts Total of Current Liabilities Net Working Capital

27337.87 28835.42 4319.00 21204.71 81697.00

40972.41 32854.30 638.30 16269.09 90734.11

13634.54 4018.88 3680.70 4935.62

8888.52 3548.24 12436.76 69260.24

8953.65 5042.84 13996.49 76737.62

65.13 1494.60

Increase Total

10596.83 19213.1519213.15

(Rs in lac) Table 2

Increase in current assets Decrease in current assets Increase in current liabilities Increase in working capital Decrease in working capital Decrease in working capital Increase in working capital

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Decrease in current liabilities




Inventory is total amount of goods and materials content store of factory of any given time. Inventory means stock of three things – • Raw materials

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• •

Semi finished goods Finished goods

Position of inventory in HEG Ltd. (Rs. in lac) Particulars Year 2009 Inventories Stock in trade Work in process Raw materials Stores spares/Loose tools Total & 6603.20 15766.71 16097.60 2504.89 1909.15 14840.69 8541.00 2047.03 3229.86 11004.58 11249.58 2604.73 Year 2008 Year 2007

40972.41 Table 3



Calculation through Chart

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50000 40000 30000 20000 10000 0 2009 2008 2007



Position of Inventory in HEG

Fig 4 Interpretation –
By analyzing the 3 year data we see that the inventories are increased year by year. By this growth we can say that the company is growing very rapidly in cement sector. But in 2008 inventories are low than 2007. A company uses inventory when they have demand in market. That is the biggest reason for increase in inventories. From this point of view, we can say that the liquidity of fairly is blocked in inventories but to stock is very good due to uncertainty of availability of raw material in time.



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Cash is called the most liquid asset and vital current assets. It is an important component of working capital. In a narrow sense, cash includes notes, bank draft, cheque, etc. While in a broader sense it includes near cash assets such as marketable securities and time deposits with bank.

Position of cash & bank in HEG Ltd. (Rs. in lac) Particulars Cash & bank Year 2009 638.30 Year 2008 4319.00 Table 4 Year 2007 10325.01

Calculation through Chart

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12000 10000 8000 6000 4000 2000 0
638.3 4319 10325.01

Cash & Bank




Fig 5 Interpretation –
If we analyze the above table and chart, we find that it follow decreasing trend. Lathery company's cash is decreasing but this is very good sign for the company because they are not holding cash in hand but using the cash for better project. Company is utilizing the fixed cash for exploding the project that is good for growth.



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Loans & advances may refer to amount given to different parties, company and employees for a specific period of time and in return they will be liable to make timely repayment of that amount in addition to interest on that loan.

Position of loans and advances in HEG Ltd. (Rs. in lac) Particulars Year 2009 Loan advances & 16269.09 Year 2008 21204.71 Year 2007 12441.10

Table 5

Calculation through Chart

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15000 10000 5000 0


Loans & Advances




Fig 6

Interpretation –
If we analyze the table and chart, we can see that it follows an uneven trend.

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Current liabilities are any liabilities that are incurred by the firm on a short-term basis or current liabilities that has to be paid by the firm within one year.

Position of current liabilities in HEG Ltd. (Rs. In lac) Particulars Year 2009 Sundry creditors 8953.65 Year 2008 8888.52 Year 2007 7459.40

Table 6

Calculation through Chart

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9000 8000 7000 6000 5000 4000 3000 2000 1000 0


8888.52 7459.4

Sundry creditors




Fig 7

Interpretation –
If we analyze the above table and chart, we can see that it follow an increasing trend. The important component of current liabilities is sundry creditors and other liabilities.



Provisions are liabilities estimated to allow for events or transactions that have taken place but are not legally due and payable until some time in the future.

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Position of provision for bad debts in HEG Ltd. (Rs. in lac) Particulars Year 2009 Provision for bad debts 5042.84 Year 2008 3548.24 Year 2007 4050.37

Table 7

Calculation through Chart

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6000 5000 4000 3000 2000 1000 0 2009 2008 2007
5042.84 4050.37 3548.24

Provision for bad debts

Fig 8

Interpretation – If we analyze the above table and chart, we can see that provision shoes an uneven trend.

Current Assets V/s Working Capital (Rs. in lac)
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Particulars Current Assets Working Capital

Year 2009 90734.11 76737.62 Table 8

Year 2008 81697.00 69260.24

Year 2007 71168.04 59658.24

Calculation through chart

100000 90000 80000 70000 60000 50000 40000 30000 20000 10000 0

90734.11 76737.62 81697 69260.24 71168.04 59658.24

Current Assets Working Capital




Fig 9

Current Liabilities V/s Working Capital (Rs. in lac)

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Year 2009

Year 2008 12436.76

Year 2007 11509.77

Current Liabilities Working Capital


76737.62 Table 9



Calculation through chart

80000 70000 60000 50000 40000 30000 20000 10000 0

76737.6 69260.24


Current Liabilities Working Capital







Fig 10

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Part – III
• Research Methodology


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Research may be defined as a documented prose work. Documented prose work means organized analysis of the subject based on borrowed materials with suitable acknowledgment and consultation in the admin body of the paper. Research in management is particularly important to find out different phenomena. Research is the systematic approach towards purposeful investigation. This needs formulating a hypothesis collection of data on relevant variables, analyzing and interpreting the results and reaching conclusions either in the form of a solution or contains generalizations.

Research design
The next job is of data collection for data to be useful. Our observation needs to be organized so that we can get some patterns and come to logical conclusion. There are two types of data used for preset research work• • Primary data Secondary data

Primary data is one which collected by the investigator himself for the purpose of a specific enquiry of study. Such data is original in character and is generated by surveys conducted by individuals or research institutions.

When an investigator uses the data which has already been collected by others is secondary data. Such data can be obtained from journals, reports, government publications, publications of professionals and research organizations and so on.

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Part – IV
• Conclusion

Working capital is one of the important aspects of operational efficiency of business. Working capital plays a very important role for increase in any

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operational efficiency in any organization. Both the current assets and current liabilities are very much influencing working capital of organization. After large discussion and analysis position of HEG, it is cleared that working capital management is at sound position. Working capital is not measures by only current liabilities; there is also other factor that largely influenced. Working capital e.g. operating cycle nature of product, etc. In current assets there are two important factors i.e. debtors and inventory; which are largely effected position of working capital.

For the competition of this project following book are used and help from other resources has been taken.

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Books –
• Bhat Sudhindera, 2007 Financial Management, Excel Books. (A-45

Naraina, Phase I, New Delhi-110028) • • Pandikumar MP 2007 Management Accounting Excel Book. Bhalla, V.K. (2001): "Working Capital Management – Text & Cases",

Anmol Publications, New Delhi. • Pandey, I.M.: "Financial Management" Vikas Publishing House, New

Delhi. • Sharma, R.K. & Gupta, Shashi K. (2003) "Management Accounting"

Kalyani Publishers, New Delhi.

Journals –
• • Internet (Google) Annual Report of last year 2008-09,2007-08

Websites –
• •

AC AGM – – Alternative Current Annual General Meeting

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Bhilwara Processors Ltd. Bhiwara Synthetics Ltd. Chemical and Allied Products Export Council Promotion


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Electric Arc Furnace European Union Federation of India Chambers of Commerce and Industry


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High Power Hindustan Electrode Graphite Human Resource Institute of Chartered Accountants of India Multi National Company Metric Tonne Madhya Pradesh Research & Development Society Et Refreactory Savioe


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Accounting is the process of recording, classifying and summarizing in a significant manner of transaction which is financial in nature and finally interpreting the result.

Balance Sheet
This is the fundamental statement of the firm which explores the firm's financial status through the resources mobilized and investments applied i.e. liabilities and assets respectively.

Cash Balance
It includes both cash in hand and cash at bank. It is classified into both operating and closing balances.

Cash Flow
Change is the cash position of the firm.

Cash Inflow
Cash receipts of the enterprise through various ways and means.

Cash Outflow
Cash payments i.e. going out of the enterprise through various ways and means.

Current Assets
Assets which are in the form of cash equivalent to cash or easily convertible into cash.

Current Liabilities
Short-term financial resources of the firm.

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Desired Profit
It is a profit level desired by the firm to earn at the given level of sales volume.

Fund means working capital of the company.

Flow means changes occurring in between two different time periods.

Stock of raw material, stock of work in progress, stock of finished goods, stock of spares of company.

Marginal Cost
Change occurred in the cost of operation due to change in the level of production.

Net Income Profit after Tax
This is an accounting statement which matches the administrative selling and distribution expenses with the gross profit after tax.

Working Capital
It refers to the funds which a company must possess to finance its day-to-day operation. Working capital = Current assets – Current liabilities

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MANIT, Bhopal