A Project Report On

³THE STUDY OF WORKING CAPITAL MANAGEMENT´ Prepared at:

ATUL LIMITED

Project Report On
A member of Lalbhai Group

(Aromatics Division)

The Study of Working Capital Management Of Atul Ltd

A member of Lalbhai Group

Our Mission
³We are a chemical company committed to creating wealth for all our stakeholders. We will strive for leadership in our chosen products and markets by providing high quality products and services to our customers. We will seek profitable growth by innovative application of science and technology. We will pursue excellence in all that we undertake and take steps to continuously improve. We will take responsible care of the environment around us and improve the quality of life in the communities we operate in.´

Samveg Lalbhai is the MD and Jagdish L Shah is the Executive Director. Arvind Mills Ltd Mr S S Lalbhai Mr J L Shah Mr N N Wadia Chairman Bombay Dyeing & Manufacturing Co Ltd Mr G S Patel Independent Former NonChairman Unit executive Trust of India Director Independent Nonexecutive Director Former Chairman & CEO ICI Companies in India Dr S S Baijal Mr B S Mehta Independent Partner Bansi NonS Mehta & Co executive Director Independent Former NonChairman & executive Managing Mr H S Shah . Board of Directors Name Status Occupation Mr A N Lalbhai Nonexecutive Chairman Managing Director & CEO Executive Director Independent Nonexecutive Director Chairman. Sunil S Lalbhai is the MD & CEO.Board of Directors The Board of Directors of Atul Ltd consists of eminent industrialists and professionals who¶s Chairman is Arvind Lalbhai.

. Mumbai Former Chairman Hindustan Lever Ltd Mr S M Datta Mr K Aparajithan Mr R A Shah (Alternate Director) .Director Director Indian Petrochemicals Corporation Ltd Mr S A Lalbhai Managing Director Independent Nonexecutive Director Independent Nonexecutive Director Independent Nonexecutive Director Sr Partner of M/s Crawford Bayley & Co.

INDEX Sr. No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Description Chemical industry Outlook Over view of Atul Ltd Over vie w of Aromatic Division Human Resource Department Production Department Marketing Department Finance Department Quality Department Objective Of The Study Working capital Management Inventory Management Cash Management Receivable Management Working Capital Finance Findings Recommendation Bibliography .

18 Balance Sheet .

The sector is a cyclical. The key success factors pertaining to the industry are economies of scale. The textile industry is currently buoyant and the market is growing steadily. product quality and reliability and development of new products and application processes. Several bilateral Free Trade Agreements (FTAs) with various ASEAN countries have been concluded or are under negotiations. when compared to that of China and Japan where it is higher at 85-90%. acid. the automobile and electronic sectors are witnessing growth and this affords an opportunity for the newer intermediaries' business segment and Indian epoxy market is also growing rapidly. The industry in India is fragmented with few large companies. capital-intensive where pricing power of the players is under constant threat. The Indian Chemical industry is today totally self-sufficient with a majority of its inputs manufactured locally. in particular demand for polyester and cotton determines the demand for certain types of Chemicals.Chemical Industry Outlook ‡ The Indian Chemical Industry has grown at a CAGR of 8% during the period from 2001 to 2005. . vat and direct dyes. India is currently producing all varieties of synthetic Chemicals and intermediates and has a small presence in the natural Chemical.600 chemical manufacturers & capacity utilization of Indian plants is lower at 70%. However. The subcontinent has emerged as a global supplier of Chemicals and dye intermediates. There are over 6. ‡ ‡ ‡ Industry analysis The Chemical industry constitutes an important segment of the chemical industry in India. The market for Chemical is dependent on textiles. There is a shift in the usage of polyester and polyester blended fabrics and as a result demand for disperse dyes are at a peak. The bulk chemicals business segment continues to be cyclic in nature. particularly for reactive. These are aimed at phasing out trade barriers to create a regime of free trade and this may increase the pricing pressure on the Indian Chemical Industry.

Thailand. Japan. Hong Kong. the growth of disperse. Italy. The adoption of technology will increase the quality of products and production. IDI and Metrochem. Jaysynth Dyechem. Turkey. Colortex. Clariant India. The major players in the organized sector are Atul Products. Opportunities:- ‡ Constant technology up gradation to provide v alue added products: Technology is the key to manufacturing and the Indian industry is fragmented with very few players handling the organized sector that is expected to grow. Indonesia and HongKong. By 2010. Ciba Speciality. Colour Chem.Market Size and Major Players The market size of the Indian Chemical industry is INR141 billion including the exports of INR52 billion in 2004-05. The per capita consumption in India is very low 50gm compared to the world average of 400 gm. players operating in the field must adopt economies of scale to compete with other countries. By 2010. Indonesia. Switzerland. The developed countries production share in the market has reduced from 65% to 50% and is expected to further reduce in the future. Spain. cotton and polyester consume more dye compared to the other fabrics and in turn. Netherlands. Textile. the exports are expected to reach INR121 billion. Japan and Taiwan. ‡ Improve economies of scale: Due to five decades of expertise in the Chemicals industry. Meghmani Organics. direct and reactive dyes is expected to increase due to the usage of these intermediates in cotton and polyester. Singapore. Germany. India currently produces 1. The exports doubled from INR26 billion 20000'l to INR52 billion in 2004-05. ‡ Enhanced quality of products at reduced prices: The Indian manufacturers have to concentrate on the quality of products at competitive prices in order to compete with leading countries like China.000 tonnes and 75% of the production is exported to 15 countries like: the USA. Korea. the contribution of India in the Global Chemical market is expected to reach 810% with an increase of 20% per annum.30. UK. ‡ ‡ ‡ ‡ Product and service differentiation Develop world class Infrastructure International trade procedures to be implemented Build Indian brand image overseas . The Indian companies account for 6% of the world dye production. Sudarshan Chemicals. BASF.

‡ Developed countries are looking at outsourcing dyes from developing countries due to more and more production facilities are being shifted to Asian countries like India and China. The key success factors pertaining to the industry are: ± ‡ Economies of Scale ‡ Products quality and reliability ‡ Development of new products and application processes .

polymers. agriculture. paints etc. Pharmaceuticals. agro chemicals. incorporated in the year 1947 by Mr. construction. intermediates. Aromatics.Background of the company Atul Limited. At present. Bulk Chemicals & Intermediates. Pharmaceuticals. bulk drugs and specialty chemicals. It is one of the oldest chemical company in the country. Kasturbhai Lalbhai in technical collaboration with American Cyanamid of USA. Pharmaceuticals & Intermediates. textiles. Colours. tyre. fragrance & flavours. and Polymers. 'Aromatics. is engaged in manufacturing of Chemicals. The Company has mainly six activities viz. aerospace. Agrochemicals. the company is manufacturing more than 300 products which are mainly used in various industries viz. The plant of AL is located at Atul in an area of 1243 acres. functioning independently as profit center. paper. .

‡ ‡ ‡ . belongs to the Lalbhai Group. It has commenced manufacturing Chemicals with higher margins including vat. It has built its brand name through consistent quality of products. which has helped the company to sustain itself through several business cycles. Mr. is a pioneer in the Chemicals industry and has over five decades of experience in the chemicals industry. It plans to focus on formulations in agrochemicals where the margins are even better. reactive and disperse dyes. Chemicals now contribute only 33% to the turnover of the company. Sunil S Lalbhai. The Company has focused on R&D in order to develop new products and applications and has diversified its product portfolio away from Chemicals over the years. The company is managed by a team of professionals headed by Mr. The company has acquired technology for manufacturing phosgene-based agrochemicals where the margins are high. which enables it to reduce its cost of production. It has set up a wide marketing network and has set up subsidiaries in foreign countries in order to export to those countries. The company is well placed in terms of technology as it has absorbed the technology from the world leaders through its joint ventures. The company has successfully absorbed technical know-how through its various joint ventures and has been able to carry on the respective businesses profitably ‡ ‡ ‡ Business Model and Competitive Analysis ‡ Atul Ltd. The promoters are professional and are forward looking and are likely to lead the company to achieve the budgeted results. The company is now in the process of moving up the value chain in each of its business lines. The senior management includes four Presidents holding professional degrees in chemical engineering. The Company has integrated facilities with in-house generation of power. The management has been able to proactively change the product mix of the company over years and have been able to sustain the growth of the company during the lean periods that the chemical industry has passed through during the last decade. reliable delivery schedules. who is the Managing Director & CEO of the company.Executive Summary Management ‡ Atul Ltd. Sunil Lalbhai has been associated with the chemical industry for over two decades and has guided the company through the structural changes that the chemical industry has undergone during this period. good technical service support and post sales service.

‡ Product Obsolescence The company has established a state-of-the-art R&D center and is progressively increasing its R&D budget. The Company has shown significant improvement in operating profit during FY06 mainly driven by improved performance of Aromatics and Bulk Chemicals and intermediates division mainly due to growth in volume and better efficiencies. Prices of some of these chemicals are cyclical and remain low for long periods.Financial Analysis ‡ The net sales of the company have grown at a CAGR of around 11 % over the last three years. the company has shown consistency in its performance and is likely to maintain the improvement trend in the coming years. the profitability of Agrochemicals and Colours division showed decline mainly due to high costs and pressure on selling prices respectively. The company through product diversifications and increased dependence on R&D proposes to mitigate the product obsolescence risk. The performance of Polymers improved due to introduction of value added products. As per first 9 months financial for FY07. . The company is also hedging its USD by cross currency swaps to reduce further losses on account of Rupee appreciation. ‡ Exports. Company is renegotiating with its overseas buyers based in Europe for future sales to be billed in Euro instead of USD. After a downturn in performance in 2003-04. The Company constantly keeps taking up improvement projects to mitigate the impact of such movements in prices. The company had already introduced various new products in the market and is in the process of expanding the capacities of those products and introducing some more specialized products. which constitute more than 50% of the company's turnover has the inherent risk of fluctuations in the exchange rates. the operating margins of the company are in line with the estimates as well as the industry average and are likely to follow the same trend. ‡ Risks and Mitigates ‡ The Company is in the business of Chemicals. However. with exports growing at a CAGR of around 13% over the same period.

Dapsone. where the margins are higher than the other types of dyes like azo and sulphur dyes. Resorcinol. etc to reduce its dependence on the colours division which was earlier major contributor to the turnover of the company. who is the Managing Director & CEO of the company. The senior management has initiated a number of steps to improve profitability. Mr. DDS. The company has started manufacturing Vat dyes. Sunil S Lalbhai. Sunil Lalbhai has been associated with the chemical industry for over two decades and has guided the company through the structural changes that the chemical industry has undergone during this period. The promoters are professional and are forward looking and are likely to lead the company to achieve the budgeted results. The company has successfully absorbed technical know-how through its various joint ventures and has been able to carry on the respective businesses profitably even after the overseas partners sold their stake to AL and have exited these JVs.Management Analysis The company is managed by a team of professionals headed by Mr. The senior management includes four Presidents holding professional degrees in chemical engineering. The company introduced various new products viz. . They have been able to proactively change the product mix of the company over years and have been able to sustain the growth of the company during the lean periods that the chemical industry has passed through during the last decade. The management is focused on the chemical business and it appears to have a good understanding of the business and has successfully carried out the demerger and consolidation of various businesses during the last few years.

a medical centre. Atul Ltd is self-sufficient in its requirement of electricity achieved through three state-of-the-art captive power plants. The Company is also in the process of renewing its fifty year water agreement with the government of Gujarat. The Company has already built over 1000 houses. 2 schools. . a sports complex.Infrastructure at Atul Atul Ltd has made significant contributions to the development of infrastructure in Atul and nearby villages. an open air theatre and a community centre.

Development efforts to minimize the generation or to recycle / reuse the effluent are a continuous process at Atul Limited. NPC also has given the detailed design of the site. . At Atul Complex. Only after exhausting all these options.Captive Power Generation:Atul Complex is self sufficient in meeting continuous and uninterrupted steam demand for all its chemical manufacturing processes and it also meets more than 95% of electricity demand for its housing colonies. This CETP designed by Degremont (India) Ltd. The site was selected on the basis of a technical Environment Impact Assessment (EIA) study done by National Productivity Council (NPC). On the basis of this technical EIA and the design. has a capacity to treat 20. site for TSDF was approved by the state level committee and Gujarat Pollution Control Board..000 m3/day. there are three captive power plants consisting of coal/oil fired boilers and turbo generator sets having capacity ranging from 2 MW to 18 MW. The industrial effluent is discharged through a 4 km underground pipeline for ultimate disposal into the estuarine zone of river Par. the wastewater is taken to Central Effluent Treatment Plant (CETP). Over and above this. Effluent Treatment:The industrial effluent is fully treated in a well-designed state of art effluent treatment plant. diesel generator sets have been installed so as to facilitate the start up from total black out All boilers and power generation sets have been designed to meet the stringent pollution norms as fixed by Gujarat Pollution Control Board. Treatment Storage Disposal Facility (TSDF):Atul has developed a site for disposal of solid wastes by land filling. The domestic effluent is treated and disposed off in a Septic Tank / Soak Pit system.

Snapshot of Facilities The dimensions of the infrastructure facilities at Atul Ltd's manufacturing sites at Atul and Ankleshwar are given below.4 1 32 Effluent Treatment Plants Incinerators Captive Power Plant (installed capacity) Electricity Consumption Steam Generation (installed capacity) Water Storage Housing Cubic Metres/Day Numbers Megawatts Million Units/Month Metric Ton/hour 30000 4 29 13 217 Cubic Metres 2 1450 million Houses 1100 36 . Description Units of Measurement Atul Site Ankleswar Site Land Area Effluent Drainage System Acres Kilometres 1250 65 33 GIDC drainage system 2500 NIL 2.

Several new methods of analysis (Wet Chemistry. Close to 30 processes were improved with respect to raw material and utility usage. Atul spends close to 1% of its sales value on Research & Development. The central Research & Development group provides common facilities like pilot plant. technical library etc. During 2004-05 goods worth Rs 100 crores of sales values were manufactured based on processes developed in our Research & Development laboratories. We subscribe to several Indian and international journals and magazines. Hyderabad. Colors. Pune. and CSMCRI. Our entire Research & Development team consists of Doctorates and Graduates. every business unit (Agrochemicals. During 2004-05. Bhavnagar with the primary purpose of technology transfer and sponsored research programmes. and Polymers) has its own Research & Development team. NCL. GC) were developed. batch cycle time and waste reduction. and which cater to demands of global and domestic customers. Bulk Chemicals and Intermediates. the Research & Development team developed approximately 70 processes and the Company commercialized ~ 40 processes. HPLC and GC. We have established links with certain CSIR laboratories like IICT. atomic absorption spectrophotometer. Aromatics. We are well equipped with analytical instruments such as HPTLC. safe and environmentally friendly.Research & Development The primary thrust of Atul¶s Research & Development efforts is to develop products and processes that are efficient. In order to respond quickly to market demands. GCMS. Process and product improvement are also key activities of the R&D group. DSC. Pharmaceutical Intermediates. HPLC. certain analytical instruments. .

p-Cresyl acetate p-Cresyl methyl ether p-Methoxyacetophenone Manganese sulfate Manganese carbonate Sodium Sulfite Dye intermediates Bulk drugs. bulk drugs. about 350 km north of Mumbai. p-Anisyl alcohol p-Anisyl acetate. cosmetics (sunscreen lotions). These products are used in the manufacture of flavors. Through collaborations with universities and research institutes. scientific research. supplying its products to diverse industries.000 tpa and the company is planning to increase it to 15. Cosmetics Electroplating Flavour & Fragrances Agrochemicalsm. The state-ofthe-art cost-effective processes. Resins p-Cresidine p-Anisic aldehyde.Aromatic Division:Aromatics the erstwhile Gujarat Aromatics Ltd. The Division's manufacturing site is located at Ankleshwar in Gujarat. Aromatic has strengthened its global competitiveness through process innovation and has developed new tools to gauge customers¶ needs. o-Cresol Application Antioxidants.. It is one of the largest manufacturers of Cresols and their derivatives in India. A brief summary of various products and their respective applications is as follows: Product. Bulk drugs. bulk drugs and antioxidants. flavours and fragrances. The Para-cresol capacity at AL is 10. Animal feed Ceramics Paper .000 tpa. was taken over by AL in 1985 and was formed as aromatics division of AL. fragrances. The world requirement for Para-cresols and its derivatives is 50. ingenious technology and detailed market knowledge form the basis for the Division¶s success. including cosmetics. a company under financial stress. Aromatics Division is one of the world¶s largest manufacturers of Para anisic aldehyde. Group p-Cresol. the Division gets access to new knowledge and technology constantly. dye intermediates. and plant and animal micro-nutrients. Agrochemicals.000 tpa and AL already has 20% share of it. The Division has always laid great emphasis on innovation. Para cresol and Para anisic alcohol.

Departments in Atul Company¶s Aromati Di ision are as follows:- HRD Dept Quality Dept Marketing Dept Production Dept Finance Dept .

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organization. Men are a heart of unit and make organization living. Personnel management is an art of getting thing work done through other people.´ It is the most important area of any business organization. planning while maintaining involves performance appraisal. manpower. Obtaining involves such activities as recruitment selection. men will manage your work. The management of man is very important in any organization. The success of any organization depends upon workers and therefore it is considered as mind your men and men will the other entire thing. employee¶s grievance. Personnel department works like a ³Heart in the body of organization. hours. working conditions and relation among labor and manager. Personnel department is an internal part of an organization. To provide training & development to enhance promotional. directing and controlling the function of producing. Personnel management generally deals with planning. employees status factor with respect to wages. behavioral and human skills. maintaining development and utilizing work force of the business enterprise to help for achievement of the objectives. It is very important branch of knowledge most of the progressive organization having separate department appointing the expert as a personnel manager. . Management means to get work done through the people personnel management totally covers this definition because enterprise runs by the people as it is righting says that manage your men. it is not possible for an existence of any business organization without personnel department. we can find the priority of personnel department.Human Resource Department In the modern world. Objectives y y y y y To manage the personnel effectively To ensure motivated and committed workforce for the organization To maintain harmonious relation between the employee and the organization To provide effective services to other departments. The success of unit mainly depends on the personnel functioning in the organization. In any firm. etc.

S.KULKARNI (V.ORGANOGRAM OF PERSONAL DEPARTMENT M.P HR) JAYESH PATEL (LAOUR WELFARE) S. KOKLE (G.M) TRN & DEVLOP ASHITOSH JANI (RECRUITMENT & SELECTION) MONISHA SINGH (Performance SANJAY SONI (HR MANAGER AEROMATIC DIVISION) JAYESH PATEL (ASST MNG HR) .P.

etc. For the attendance of temporary and trainee workers the company has attendance taking card which is operated manually. Superannuation. The TKO is situated at the main gate of the company and is responsible for maintaining the Muster Roll ovary department and for every shift. two for attendance recording and one for special purpose. date of joining. the chances of mistakes are less or nil as compared to manual work. Gratuity and clearance form. distribution of uniform. ³In Coming and Out going´ by each and every staff workers. blood group and a code for punching. staff members and management members except the managing director. The card is detailed with employee name. where each permanent employee is given Punch Card. employee number. Medical Loans etc. Advantages of attendance Recording System: y y y As the system is fully computerized. .TIME KEEPING OFFICE (TKO):ATUL LTD. shoes. The TKO maintains various records like: y y y y y y y y y Level Record Promotion Record Registration & Recruitment Record Overtime Record Employee history Record Absenteeism Record Early Going and Late Coming Report Positive/negative Report All types of forms like advance Salary leave Travel Allowance. Serves as a basis of fixing wages and salaries. The special purpose activity includes record of PF. Has a very effective time keeping system. which needs to be punched while. The attendance recording system (ARS) is fully computerized. High rate of absenteeism on the part of workers can be known at the correct time and reported to concerned department. The TKO consists of three staff members.

ill heath etc of the employees are predicted before hand and planning regarding manpower is done. as this is the time to remind that only hard work without achieving corresponding results cannot improve the balance sheet of the company. appraise also has a point of view . old age.HUMAN RESOURCE PLANNING: (HRP) ³Manpower planning is process of determining and ensuring that the organization will have an adequate number of qualified personnel.´ THE COMPANY FOLLOWS TWO APPROCHES OF HRP (1) Top down approach In case of Top down Approach the Top Management makes the study of Human Resource Planning mostly for the expansion of business. but the Bottom up Approach is given more importance than the Top Down. Such plans can be -Short Term: for next 2 years -Medium Term: between 2 to 5 year -Long Term: more than 5 year¶s (2) Bottom up Approach Over here the lower level people gives feedback to the top level. The lower level discusses with the top level regarding the manpower plans and the top level tries to fill up the vacancies. Over here uncertainty for the business like retirement. PERFORMANCE APPRAISAL:Performance appraisal is the process of evaluating the employee¶s performance on the jobs in the terms of the requirements of the job. Both this method re used in ATUL LTD. nor can it contribute towards the company¶s GUIDELINES suggested for the success of review meeting (meeting conducted before performance appraisal Programme) y Fix the meeting in advance y Create a relaxed friendly atmosphere y Be prepared to listen. ATUL LTD goes for an effective performance Appraisal system.

2) CRITICAL INCIDENTS:The Company uses critical incidents Method where the workers performance is appraised in terms of some events that occur in the performance of the Rate¶s job. The appraiser keeps a records and increments. have patience Keep contents of meeting Confidential Do not promise any promotion. results consistently far exceed goals in spite of difficult environmental factors. But is missed out in the appraisal form.y y y Avoid interruption and arguments. scope for higher (satisfactory) contribution G results meet required achievements levels and on few occasions even exceed them. The appraiser while rating the same The appraiser while rating uses the following rating criteria: RATING INDICATORS:In results do not meet the goals at all and are below acceptable standards (Improvement needed) S results fall slightly below basic goals. (Good) VG results fully meet and at several times exceed sets goals and that appraise had to counter difficulties in (very good) achieving the goals/actions E In general. financial incentives or any rewards The right framework to the whole process of appraisal is the corrective implementation of Performance Management System (PMS) and the Individual Development Meetings (IDM¶s) the company uses both traditional as well as the modern methods of Appraising. In the company. TRADITIONAL METHOD:1) Forced distribution method The rating provides by the Appraiser to the Appraise is based on the major contribution and the appraiser. MANAGEMENT BY OBJECTIVE METHOD:- . but not are in unacceptable category. the (excellent) appraise always operates at high performance level. the baring is on the major contribution and the quality of the same.

code and insurance Policy if they bring 9 or below 9 employees. Then a good amount of Discussion takes place between the management and the Officials regarding the Objective setup before and also the ways and methods of measuring employees. Performance Appraisal leads to y Grade change y Monetary reward and even y Double increments. with the will of both the parties. They are given a P. he would be charged penalty or terminated. GENERAL SERVICES:It includes:Postal Services Ticket Reservation Reception etc Courier Services. Lastly. This method minimized the External control and maximizes Internal Motivation. This discussion leads to adoption of either the received or the same or completely changed objectives.For appraising the High Officials. the management first sets the overall objectives of the company and later they communicate those goals to the Officials. But license is needed for bringing more than 9 employees. COLONY MAINTENANCE:- . the company uses the MBO technique. CANTEEN ADMINSTRATION:Labor Contractors are Private authorities who bring labor on temporary basis. Even though the Contractor Administration 12% is contributed by the employee and other12% by the Contractor which is reimbursed y the company later. from which 10% is profit and 15% is the Labor liability. Over here. If a contractor brings more than 9 employees without any license. This is Joint Goal Setting between the Manager and the Subordinate. the employees would try to achieve their objectives within the given period and also feedback to the manger about their Goal Progress. The Contractors are benefited as they get 25% of the wage from the company as commission.F.

If he finds that his point needs to be taken into consideration. INTERNAL CUSTORMER SATISFACTION:According to ATUL LTD employees are the first customer of the company. For the fire and security department employees fire proof uniforms are given Company provides different types of Shoes to its workers and office staff. then further action may be taken. The personnel department gives a form to the employees for their feedback with respect to 1) 2) 3) 4) 5) Job Satisfaction Working Condition Housing Facilities Wages & Salary (timing of payment) Other Facilities like Parking. then the Personnel manager personally meets that particular employee and discuss regarding the matter. Safely etc. Medical. Internal customers refer to the employees of the company. The Major Facilities in this Colony are recreational facilities for families and library. ATUL LTD gives more emphasis on internal Customer Satisfaction. It is the First Company in South Gujarat. Schools.Housing Facility is given to all the permanent employees of the company on the basis of their position in the organization. If the employees are not satisfied. the transport and traveling section is working under he personnel Department. parks etc for children. if the employees of the company are dissatisfied. The name of the single Trade Union Prevailing in this company is the ³Cibatul Kamghar sangh. There are no single day strike observed in the Company since its first day WELFARE ACTIVITIES:Uniform & shoes ATIL LTD provided to its employees every year. But sometimes they resist to ideas suggested by the Company when they are against the worker interest. In this company it is generally observed that the problems and grievances are solved through mutual understanding. It will adversely affect the productively. for the protection of workers feet against hazardous and flammable chemicals. and if they are satisfied. everything will go on the right path. In ATUL LTD. INDUSTRIAL RELATIONS:Industrial relation continues to be harmonies with the company sharpening its focus on productivity and discipline. Form the above form. who looks after this concept. The rates of the Houses are provided at a subsidized amount and the usually deducted from the Salary of the employees. The function of this department are as under :y Transport facilities like Rail & Air booking . Canteen.´ This Union always gives constructive ideas to the management whenever they need for.

Guest House Accommodation. Transportation of goods within the Factory Premises. Emergency Transport facility in case of disaster or accident either in the factory premises or in the colonies.y y y y Hotel Booking Transport Facility. . Lunch and Dinner Arrangement for the visitors and guest.

Unit HR Final Interviews Corp.Info. Div.Salary matching .Medical tests .HR Shortlisted . HR Induction Standard Induction policy for all level y Ensure all benefits are delivered y In constant contact till confirmation . on policies . / Unit HR & Corp. HR Corp. Ref. HR (Sr / Sensitive positions) Div.Offer letter Not Accepted Offer Accepted . Standard Drafts / Policies Shortlisted Not Shortlisted Interviews Up to Div. / Unit HR with consultation to Corp.Recruitment Process MPP Approved Establishment Form JD/JS Skill Set Guidelines/ Standard Drafts/ Moderation Not Shortlisted Advertisements / Consultants/ Web Site/ Emp.Appointment letter Joining formalities Joining Check List Responsibility of.

Transfer .Placement Consultant -Employment Exchange . It believes in Merit basis promotion rather than seniority. the senior Employee is given the first chance of promotion.RECRUITMENT:³Recruitment is the process of searching for prospective employees and stimulating them to apply for the job in the organization´. TRANSFER POLICY:As the Company has two units ATUL LTD PPSITE and ATUL LTD at East. COMPANY¶S SOURCES OF RECRUITMENT:y y INTERNAL SOURCES . . so transfer is a good source of filling vacancies with employees from overstaff units/departments/shifts to another.Labor Contractors . Promotions ± The Company believes in promotion as the best source. It believes in the policy of ³First Preference to Existing Employees´. but it is a bit rigid. But when the seniors are really capable as compared to the new employee. so as to motivate the employees and reduce the cost.Advertising Agencies -Web site -Consultant INTERNAL SOURCES:The Company gives more emphasis on the Internal Sources rather than External.Promotion EXTERNAL SOURCES -Campus Recruitment . The two sources of Internal Recruitment used by the company are -Transfer ± ³Transfer involves the shifting of an employee from one job to another. one department to another or one shift to another.

according to their performance. Whenever a particular employee remains in a particular grade for a state period of time. Placement Consultant are privatized and saves the Company¶s time in receiving and screening of applications. One of them is SEARCH Consultant.Terminated . . technical knowledge and fresh talents.Extended Promotion . he is promoted to a job of higher grade.Probation . The company has compulsion to give notification of vacancies to this exchange. EMPLOYMENT EXCHANGE:Employment Exchange¶s run by the Government is regarded as a good source of recruitment for Unskilled and Skilled Operative jobs.PROMOTION POLICY:y y y y The Company encourages automatic promotion at all the levels of the Organization. EXTERNAL SOURCES:- Campus Recruitment:The main External Source of Recruitment for this company is through Educational Institutions. but the Company need not compulsorily provide that job to the employee. To fill up the vacancies form within the Company as far as possible (only eligible employees). According to them this source not only brings new blood in the Organization. . In certain cases when a particular employee has some outstanding skills which is required for higher level post is to be promoted. Thus the Employment Exchange brings the Employer in contact with the job seeker. but also innovative ideas. but under certain circumstances. Professional and Managerial Personnel. who is been sent by the Employment Exchange. The students are first taken as Management trainees and later they are grouped into 4. the Company goes for Placement. on basis of Performance Appraisal System. Promotion other than the grade promotion takes place only when a higher level post is vacant.Permanent at job . There are many Placement Consultants for this company.Placement Consultants For Recruiting technical.

he is induced by giving a friendly welcome Induction is done according to the ISO 9001 policy. Fellow Employees etc) WAGE & SALARY STRUCTURE:Wages and salary system is also managed by this Department. A staff member form the Personnel Department or the personnel manager himself takes the new employee to the Concerned department and introduce him to his new environment (Rule and Regulations. which is reflected by the Healthy wage and Salary structure designed over here. but a slight change takes place depending upon the type of job. it goes for Advertising Agency. It includes the following concepts. NOTE: The pattern of Interview remains the same for all the employees. The company gives last preference to this source because it brings in flood of response and many a times from quite unsuitable candidates. The Employees satisfaction is the top priority of the company. INDUCTION After an employee is selected for this Company. There . The company follows the Minimum Wage Rate Policy. Shifts and Working Hours ± Timing at ATUL LTD (AEROMATIC DIVISION) for General Shift is 8:00 hrs to 17:00 hrs on all working days. Lunch time is from 12:00 to 13:00 hrs. before giving the Appointment Letter the Interviewee is taken to the Managing Director and if the Managing Director finds the Candidate suitable. The norms and procedure regarding labor Contractor are to be followed by the Contractor as mentioned in the Contract Administration. Superiors. In case of Higher Level Jobs. But in practical use they pay more than the rate fixed in the above policy. the Candidate is first interviewed by the personnel Manager and later by the Concerned Department Head to check his technical knowledge. fixed by the Government. he is appointed or else is discarded. In case of Technical Field. (As above) ADVERTISING AGENCY:When the Company is unable to get suitable Candidates from the above Sources.LABOR CONTRACTOR:The company finds a Labor Contractor. who brings worker on temporary basis.

Most of the employees remain absent because of some Social or Physical Reasons. Special Leave. TRAINNING PROCESS:- . Accumulated Sick Leave can be encased at the time of retirement and death only. Casual Leave-9 days Casual leave is available per annum and credited on 1st Jan every Year. Unauthorized Absence etc. Since casual leave benefit cannot be carried to the next year. which can be up to a maximum 72 days. the Weekly Off is on Sunday. shift Leave Structure ± Weekly off ± In an Employee is at the Office. Paid Holiday ± The Employee are entitled to 8 paid Holidays during the Calendar Year. The Absenteeism rate is around 2%. Such Leave will normally believe without pay. however this leave benefit will be available on pro-rate basis. however this leave benefit will be available on pro-rata basis. Privilege leave ± Privilege Leave is available @ 30 days per Calendar Year which is credited @ 2. During the first year of Employment. Employee turnover and absenteeism Rate:± The Employee Turnover Rate in ATUL LTD (Aeromatic division) is around 3%.5 per month is credited after completion of one month. the Weekly Off is on Saturday and Sunday.the Managing director under exceptional circumstance will have the discretion to grant any additional leave. Sick Leave ± 9 days sick leaves are available per annum and credited on 1 January every year. If at Branch Office. There are three other shifts for workers. But as the Company goes for Round the Clock Production. During the first year of Employment. termed as Special Leave to Individual. unless it is for the benefit of the company.are no shifts for Management Cadre. which the Management declares in the month of January. Compensatory leave. Other leaves ± Maternity leave. 1. leave after Resignation. at the end of the Calendar Year the outstanding Leave balance will automatically be encased and included in the salary of the subsequent month.

7 man days of training and development programme of all the employee is compulsory Training Process:1. Training Policy:1. In house training includes training by supervision.Types of Training:The company goes for house training for both external and internal training. training details and time schedules for each and every employee is nominated by his immediate superior. Evaluation:The concerned department head evaluates the performance of the Trainees in terms of effective or not effective. Nomination:The names. As a result he is the best person to suggest the names of trainee. Training Program:Over here the planned training programs are actually being implemented in the company Feed back:Feed back about the program is given by the Trainee to the personal department by filling up Questionnaire which gives us the idea whether the training program was excellent. Training Calendar:The Training Calendar is prepared at the end of the year. Staff Workers etc and also on the basis of are of Training like Basic Programme. Each department head is very much familiar with the strength and weaknesses of the Employee of his office department. The Training Need Identification process is carried out in October and November every year. ISO Training etc. whereas Lectures and Seminars are the part of External Training. 2. The company mostly prepares to go for off the job (external training). The departmental heads has to give details regarding increasing the jobs of each employee and if needed they need to be trained regarding increasing productivity and skill. satisfactory. reducing accident. 6. 5. or poor. 3. . average. staff. Bifurcations are made according to the management Trainees. The Company Surveys into each and every department. good. 4.

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Major emphasis is on the creation of goods. The job of production management is to weave together those factors (man. method. Production management is associated with two broad areas of activity. in the amount end by the cost. Producing goods is an interact & complex process Goods on the shelves. Production management deals with decision-making Related to production processes. so that resulting goods or services is produced according to the expectations.INTRODUCTION Production is the creation of the goods & services. machine & money in manufacturing goods. . Where as in Atul Aeromatic division the production process is undertaken very carefully as they produce chemicals which has to meet the exact configuration which the customers need as the slightest variation in the combination would bring a greater change in the final product which would not match the standards of the customer requirements so the production or the manufacturing process at Atul is undertaken with extra caution as the chemical they produce cant very even 0. In a narrow sense it means planning.01 % than the requirement of the customers or the whole batch would be rejected and which would be a great loss to the company. scheduling & controlling the flow of materials to a plant. the design & control of the product system´. material. Thus in a broader sense production management concerned with co-ordination of management men. ready to sell do not just happened they are the end results of much careful thought & planning. and machinery) for those sole purposes of economical delivery of quality goods to customer. material. Manufacturing production is the systematic step-by-step conversation of raw materials through creation of form utility in goods.

PRODUCT PROFILE:Key Products Name:y y y y y y Para Cresol 99% Para Anisic Aldehyde Para Anisyl Alcohol Para Cresidine Ortho Cresol Para Cresyl Methyl Ether Perfumery Grades Name:y y y y Para Anisic Aldehyde Para Anisyl Alcohol Para Cresyl Methyl Ether Para Cresol Inorganics Name:y Manganese Sulphate Powder y Sodium Sulphite y Liquid Sulphur Dioxide .

PRODUCTION PROCESS:The ATUL (Aeromatic division) has to mainly offer in the market, the major of use of the product are Aroma products, Drugs, Dyes intermediate, Antioxidents, manufacturing of soaps etc. 1. PARA CRESOL 99
Para cresol plant is the main plant in this division as it not only covers the major part of their sales percentage compared to the other products The capacity of the plant is 11000 Mt/tones and 900 Mt/tones also serves as the major raw material for the other products like Para cresidine and which is also used as the raw material for the production of Para Anisic Aldehyde and Para Anisic Acid .

2. PARA ANISIC ALDEHYDE
The plant of PAA also has the latest technology of the plant of the production process the capacity of the plant is 500 Mt/tones per month

3. PARA ANISIC ACID
During the process of production of para anisic aldehyde during the washing process the waste is extracted from PAA and when the waste is treated by the distillatation process than the Para anisic acid is obtained through the process.

4. PARA CRESIDINE
The plant present at Atul for PC has the capacity of 45 Mt. tones per month, its geneally used for manufacturing of Dyes.

5. ORTHO CRESOL
OC is generally obtained by the cresol mixture, by the process of decolorizing of the orthophenol obtained through the floronation process and the product obtained is ortho cresol.

MANGANESE SULPHATE POWDER SODIUM SULPHITE LIQUID SULPHUR DIOXIDE
These are the bi products which are obtained while the the various chemicals stated above. production process of

The production site of ATUL (Aeromatic division) is at GIDC Ankleshwar, the plant work 24 hours in shift it has been employed with more than 250 workers totaling both the employees the permanent employees and also the daily contract workers. The major demand or the challenging market for ATUL (aeromatic division) Is the forign market, from the total sale of aeromatc division atul the 70% is from the export business. As the company enjoys monopoly production in the India there are no competitiors in the domestic market The major competitiors in the forign market are the manufacturers from China, as they are able to produce the same product at cheaper rate sometime s due to the various factors like Political influence, cost of raw material, etc.

THE PRODUCTION PROCESS CHART
PARA CRESOL 99 AND ORTHOCRESOL

RAWMATERIAL TOLUENE,SO3,SO2, SULPHONATION BY CAUSTIC SODA FUSION PROCESS

SEPRATION PROCESS

BI-PRODUCT MAGNESIUM SULPHATE

BI-PRODUCT SODIUM SULPHATE

ACIDFICATION DISTILLATION CRESOL MIXTURE SEPERATION ORTHO CRESOL PARA CRESOL-99

PARA ANISIC ALDEHYDE & PARA ANISIC ACID RAW MATERIAL PARA CRESYL METHYL ETHER METHILATION OXIDATION WASHING BI ±PRODUCT BY CAUSTIC WASH AND BY DISTILATION PURE PARA ANISIC ACID DISTILATION PROCESS PARA ANISIC ALDEHYDE .

PARA CRESIDINE NITRATION METIALATION REDUCTION DISTILATION PARA CRESIDINE .

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If out side of state. Marketing has become one of the important criteria for a company product or services to sell in state. 6. They keep in touch continuously with their sales representative or argent. Dispatching goods to customer. So as marketing gained momentum in the development of new markets and new avenues of selling a wide range of goods and services that has changed and development to meet the consumer need at right time. Receiving inquiry from the customer. 8. Concern production department for special requirement. Receiving order from the customer. FUNCTIONS:There are two types of function in sales and marketing department. facilitating and consummating exchange. Sending quotation to the customer. . The marketing mix covering products. ROUTINE FUNCTION:1. The marketing has developed many activities to satisfy the needs wants of a group of customers. After world war 2nd. They consult the customer and ask about the µC¶ from. 11. credit note. Finance. 4. 12. They prepare advertisement about the product and give it into the different business media. 7. Management constitutes the primary sources in marketing. side draft. It is change of products and the transaction is to satisfy that human needs and wants. Prepare schedule for the production department. bank letter. 9. 3. the development in the field of science and technology. 10. Entering into 21st century. Human effort. They send reminder to the customer. social and political. This department has a job of preparing invoices. price.INTRODUCTION The marketing has changed greater in the present day world. promotion and distribution (place) strategies will be implemented to accomplish the object of customer satisfaction and profitability. 2. Marketing is a set of human activities directed. 5. sales certificate etc. economical and other relative regions have changed tremendously and brought new dimensions in marketing. Receiving payments and maintain payment details. national and international level.

Selecting the pricing objective. Estimating cost. PRICING:Price is the only element in the marketing mix that creates sale revenue. the other elements are cost. Analyzing competitions costs prices and offers. They always try to provide letter service to the customer. The company is also using differential price strategy that involves ago. Impact of global market. This department gives suggestion to make improvement in systems to the management whenever required. Problem formulation Data collection Marketing sample Data evaluation . As the company is engaged in the Chemical business it needs the market research. The company sets its price from the given points. They perform personnel follow up to production department for preparing order in time. 4. Selecting price method. Company is using the most commonly used strategy and i. 3.SPECIFIC FUNCTION:- 1. Selecting the final price. which covers the following points. They understand the special requirement of the customers and try their level best to satisfy them. Determining demand. They are using the produces. 5. MARKETING RESEARCH:In the worlds of Phillip Kotler ³marketing research is a systematic problem analysis model building feat finding for the purpose of improve decision marking and control in the marketing of goods and services. They established personnel contacts with their customers as well as agents. the skimming pricing strategy. Indifferenciating its price arose different market segment.e. 2.

Circular 12. Advertisement INQUIRY LETTER:The purpose of inquiry for buyer is to find out the cheapest and best source of purchase of goods required. discount rate. quantity. Mode and terms of payment. Payment Details 11. Transport receipt 6. quality. Bank letter 8. Order 4. Quotation signed by the proprietor in charge.Interpreting data Report preparation The main object behind this is that it finds out for company. Place and time of delivery. Method of transport. Packing and forwarding changes. name. Side draft 10. DOCUMENTS:1. Invoice 7. Changes of sales tax. Inquiry received by this department is kept in inquiry register. Where are his customers? What they willing to pay for it? what is the Impact and use of technology? They are researching leaps it¶s use in reducing and minimizing all marketing costs particularly selling advertising and distribution cost. octroi. Quotation 3. delivery period and other terms and conditions. Schedule 5. . price. Inquiry letter 2. Inquiry contains products. freight and insurance. µC¶ form 9. QUOTATION:The main purpose of the quotation is to give ideas to customer about the under mentioned matters.

There are three types of order: 1. . If customer has ³C´ Form he bound to pay 4% as a Sales tax & in other situation he has to pay sales tax as per the product. 2. Transport receipt & invoice is attached with the bank letter. Second copy is for transport. which is kept in record of this department. Order received by this department is records in order register. which is. New order Repeated order Regular order SCHEDULE:This department transfers information about the order to the production department in schedule. TRANSPORT RECEIPT:The transport corporation prepares transport receipt. fax. They also indicate the time limit for the production department.ORDER:Customer sends orders either through phone. The manager of the company signs schedule. INVOICE:Invoice is prepared at the time of dispatching of goods. (2) Consignor copy. E-media or through letter. ³C´ FORM:³C´ Form is a government-approved form for registration of customers firm. Third is for excise records. 3. The mode of payment is described in it. The two copy of this receipt are prepared (1) Consignee copy. BANK LETTER:This department to the bank drafts bank letters. This department prepares three copies of invoice. sends to the customer with goods. Original copy is sent to the customer.

PAYMENT DETAILS:In payments details this is a record of incoming payment for particular time period. This is than feedback to the company. response and feedback. it is valid up to the mentioned time. It gives the brief idea about the company & product.e. mode of payment received. message. which is very much helpful in competitive market. . COMMUNICATON:The marketing communication process has five major competent i.SIDE DRAFT:The sales & marketing department & sends prepare side draft to the customer. CIRCULAR:Circular is mainly send to the customer for marketing purpose. Which sends message through advertisement. In payment details customer¶s name. sender. Circular contains the information about the new changes made by the company or by the government. ADVERTISEMENT:The main purpose of advertisement is providing information to the customer & improves the sale. After acceptance from customer. It means customer is bound to pay to bank after this time limit. The sender is itself the Hi-tech. This advertisement reaches the message to the receiver or audience about the product by buying the Hi-tech. amount of payment & customer¶s account number are mentioned. receiver. Advertisement is published into the different media at the particular time limit.

THE MARKETING COMMUNICATION PROCESS: .

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Personnel.FINANCE DEPARTMENT SUMMERY Introduction Organization Relationship with order departments particularly Marketing. Production Costing / Control system Treasury operation Computerized system of accounts MIS reports generation Accounting policies Study of final account of the organization .

A firm constantly enters into transaction with out siders. so that it can know where it stands & where it will go in future. A person not having knowledge of finance my not be able to the exact suitable return on his investment. 3. profit & loss account and balance sheets. account and finance walk parallel but as compare to account finance is a waste subject. To post them ledger and data store in to computer. Balance sheet indicates financial position of the enterprise. one showing how much profit has been earn or loss suffered and other sowing assets & liabilities and a proprietor¶s interest in the firm. To prepare final account. . in part at least. It indicates the earning capacity of the enterprise. A business house must necessary keep a systematic record of what happens from day to day. A systematic record of the daily invents of a business leading to presentation of a complete financial picture is known as accounting. A person trained in Finance is able to take financial decision wisely and quickly which gives better return on investment and have a better chance to survive and compete. ³The Art of recording. A person not trained in finance management of a company may face N number of problems which may affect the day to day functioning of his company. In other words accounting defined as. A transaction may be defined as an action & reaction having monitory implication of one firm in relation to another firm. Recording of transaction in journal or its subsidiary books. Trading account is a part of profit & loss account. The financial picture mostly have two parts. In broad sense financial accounting system refers to: 1. classifying & summarizing in a manner and it terms of money transaction and events which are. 2. of a financial character & interpreting the result thereof´. Financial account includes trading account.INTRODUCTION Finance plays a major role in determining the position of a company.

2. This department makes necessary recommendation for change in system and in procedure to the management. They checked whether the income tax department has given a correct order for payment of tax in advance. They note the entries in the sales return book on the basis of credit note & the entire of stock register. ledger. 3. trial balance. Accounting is to communicate the result obtained from arranging of data to interested parties like proprietors. They prepare the daybook. Accounting has to design such a system of accounting as will protect its assets from an unjustified and unwanted use. Communicating the result. So that I can¶t write about finance department.M. 8. They fill up the sales and income tax return per month. This department examines the challan in respect of payment. 5. 4. 10. They collect the ³C Form´ from the customer this department also allocates the total salary to the personnel department per month. 3. This department collects the vouchers from the various departments. 9. Protecting proprietors of the business. Company said nothing write about its finance company. 6. 4. This department handles the income tax and sales tax cases. SPECIFIC FUNCTION 1. 5. They ensure that the funds are raised economically and used in the most efficient manner. This department makes casting and posting from sales return register to ledger. 2. manufacturing and profit & loss account and the final balance sheet . 7. This department handles the all transaction with bank. .FUNCTION Functions of accounting department are as under: ROUTINE FUNCTIONS 1. This department submits monthly report to G.

M .M Behani) Manager (Accounts) (M.Shah) Raghu Desai Chetan Joshi Antana Matha .D.Orgaonogram of Finance Department President (Dr Hariharan) GM Finance Manager (Costing) (S. Gupta) (Ashok Modi) (H .

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ULTRA VIOLET testing. V.Prajapati (chemist) these are some of the person who are responsible for the quality check activity in Atul Aeromatic division These process are done according to the ISO standards which can be explained in steps as the Quality check process are mainly done between these three process .K. melting point etc. Mr. K. HYPER PERFORMANCE LIQUID COMOTOGRAPH. . 3. In-process check : As Aeromatic plants should produce the chemicals in exact specification required by the customers so before very lot is been produced their contents are been checked before the next batch is been processed so that their products can meet the exact requirement. Sharad Desai (asst manager).INTRODUCTION The Quality Control department at ATUL (Aeromatic Division) is at Ankleshwar production site where they have to check and certify the various aspects in the chemical produced and also verify the chemicals which are brought into the plant as the raw materials.B. Some of the experiments which is undertaken for the Quality check are . Dispatch process: The goods before they are been dispatch to the customers are been verified once again that the dispatch goods are the same goods which are meeting the requirement of the customers and are if checked ok then a Certificate of Analysis is attached to the vouchers through which the customers could know the goods are of exact specification as they ordered. weight balance . LOVI BALL testing. Mr. Mr. Raw material check: All the raw material entering into the Aeromatic plant are been checked randomly from their lot sizes before they are allowed to be stored. GAS COMOTOGRAPY SPECIFICATION its for purity. 1. The raw materials checked are if according to the specification which are required by the company then they allow them to enter the plant or let them store it or else they are been send back to the suppliers. 2.Srivastav (QC dept manager).

PART .2 .

Working capital Management Introduction:Working capital management involves the relationship between a firm¶s short term asset and its long term liabilities. The goal of working capital management is to ensure that the firm is able to continue its operations and that it has the ability to both maturing short term debt and upcoming operations expenses. Net working capital . and reduction in C. for financing the conversion of raw material into finish goods. Objectives:The basic objectives of working capital management are:y Optimist the level of investment in C.A. Gross working capital 2. Definition: ³The management of short term asset and short run resource is said to be working capital management or current asset management ¶¶ There are two concept of working capital 1. Even companies with cash surpluses need to manage working capital to ensure that those surpluses are invested in ways that will generate suitable return for investors. accounts receivables and payable and cash. Working capital is consent with making sure we have exactly the right amount of money and lines of credit available to the business at a time. Meaning:Working capital refers to the cash a business requires for day-to-day operations or more specifically. The management of working capital involves managing inventories.L. The better the company manage its working capital.A.A and should note is not more then the cost of capital employed to finance the C. the less the company needs to borrow. which the company sells for payment. y It should maintain the marginal ratio in C.

bills receivables and inventory. Gross working capital It refers to the firm¶s investment in current assets. Current assets are needed because sales do not get converted into cash instantaneously. Every firm aims at maximizing the worth of its shareholders. It is a qualitative concept. It indicates the liquidity policy of the firm and suggests the extent to which working capital needs to be financed by permanent source of funds. debtors. Current assets are the assets which can be converted into cash within an accounting year or operating cycle and it includes cash. to the need of the business firm. bills payable and outstanding expenses.1. Inadequate amount of working capital can threaten the solvency of the firm because of its inability to meets its current obligations. WC=CA-CL Where. Symbolically working capital is denoted as. It focuses on two aspect of current asset management : y How to optimize investment in current assets ? y How should current asset be financed ? Investment in current asset should be judge adequately. The firm has to invest enough fund in current assets for generating sales. NET WORKING CAPITAL:It refers to the difference between current asset and current liabilities. DETERMINATION OF WORKING CAPITAL:- . Excessive investment in current assets should be avoided because it impairs the firm¶s profitability. not more not less. short-term securities. a firm should earn sufficient return from its operation. In its strive to do so. CA=Current Asset CL=Current Liability NEED FOR WORKING CAPITAL:Mainly the working capital is needed for day-to-day activities of a firm. as idle firm investment earn nothing. Current liabilities are those claims of outsiders which are expected to mature for payment within the current year and include creditor s. Current asset should be sufficiently in excess of current liabilities to constitute a buffer or margin for maturing obligations within the ordinary operating cycle of a business.

During the slack season. The variation in business condition may be in two direction.e. When peek period arrive the firm has to operate at cull capacity to meet demand. Recession condition 4) Production policy: The quantity of working capital is also determined by praduction policy. 5) Credit policy: . the firm have to maintain there working force physical facilities without adequate production and sales. To sustain such activities the need for capital is obvious. which in turn cause a shift in working capital position. The total working capital required is determined by a wide variety of factors.Any firm should nither have too much nor too little working capital. 3) Business cycle: The working capital Requirements are also determined by the nature of business cycle. The proportion of current asset measures the relative requirements of working capital of various industries. 2) Production cycle: Another factor. y Upward phase i. These factors are: 1) General Nature of Business: The working capital requirement of an enterprise is basically related to the nature of business. The two factors are: y The cash nature of business i. There for the production policy has to be made on individual setting of each enterprise and the magnitude and dimension of the working capital problem will accordingly vary. y Sales of services rather then commodities. cash sale. It covers the time span between the procurement of raw material and completion of manufacturing process leading to the production of finish goods.e. The term production cycle involves the time involved in manufacturing of goods. which has a bearing on working capital is the production cycle.e. the larger will be the tied-up fund and therefore the larger is the working capital needed and vice-versa. In some business the demand for product is seasonal. Business fluctuation lead to cyclical and seasonal changes. The larger the time span. Boom condition y Downward phase i.

1. PLANNING OF WORKING CAPITAL AT . PLANING OF WORKING CAPITAL:What do you mean by planning of working capital? Planning of working capital means fixing a proportional amount of funds for the entire period to carry business of the firm smoothly and effectively. Basically the planning of working capital is done to achieve the goal of the firm. right from the procurement of raw material to sale of finish goods. It is difficult to determine precisely the relationship between the growth in the volume of business of a company and the increase in working capital. 6) Growth with expansion: As the company grows it is logical to expect that a larger amount of working capital is required. It has also to see that the working capital that has planned is sufficient to meet the liabilities of the firm. 2. Credit policy influence the requirement of the working capital in two ways. Credit terms available to the firms from its creditors.The credit policy relating to sales and purchase also affect the working capital. Thus before planning working capital one has to be vary well acquainted with the firm position. Thus planning of working capital has to be done vary carefully by analyzing each and every small and big thing of firms. Thus planning of working capital plays a very critical role or it¶s the pare that has to be performed by the accounts department of the firm because they are the person who are responsible for handling the finance of the firm. INTRADUCTION TO PLANING OF WORKING CAPITAL:- Basically planning of working capital aims at smooth and efficient flow of the regular operating cycle i. Other things being equal growing industry require more working capital then those that are static. Through credit terms granted by the firm to its customers/buyers of goods. Thus working capital requirement of the business are affected by the terms of purchase and sales and the role given to credit by the company in its dealing with creditor and debtors. Planning of working capital is done according to the need and necessity of the firm. companies strategies would be different from one another. Planning of working capital differ firm one organization to another because the rules and regulations.e.

On the basis of yearly planning. Monthly. working capital planning is done by the finance Manager. repair and maintenance and other direct and indirect expenses. on every evening he makes the financial requirement of the next day and assign the execution of those works to the Accountant and officers. Then the company makes a working capital planning for the immediate week. This data is given by Production Manager to the Finance Manager Monthly estimated money receivable from debtors. Then the company makes the monthly working capital planning. The working capital planning is done on four occasions ie. power bill . Monthly estimated salary. Yearly. These data is given by the Managing Director and Directors. Up to this level the working capital planning is done by the finance manager. This data is given by Production Manager to the Finance Manager. Then. Monthly projected sales. Accordingly monthly working capital planning is also changed. This is done to meet the working capital requirement of the coming month. the yearly working capital requirement is reviewed and modified. This data is given by Accountants to the Finance Manager. Yearly projected sales The data is given by Managing Director and Marketing Manager to the Finance Manager. If there are much deviation in the financial requirements during the year due to unexpected receipt of goods purchase orders and increase in sales or change in credit terms. Expansion plan of management.ATUL LTD. Weekly and Daily basis. Monthly estimated money payables to creditors. This data is given by Accountants to the Finance Manager. This data is given by marketing manager to the Finance Manager Monthly estimated purchase. First the total working capital requirement is assessed on yearly basis. . In Atul Ltd. the company approaches its bankers for increase or modifications in the working capital facilities. The data required for planning in Atul Ltd Are as follows.

The company fulfills its need for working capital from its internal factors such as receivables from the debtors.PROCUREMENT PROCIDIRE OF WORKING CAPITAL:The company requires certain amount of capital for day-to-day transaction. The other sources from which company acquire working capital are: y y y y Bank loan Cash credit Borrowing from financial institution Trade credit . advances etc.

The various phases of operating cycle can be depicted as given bellow.OPERATING CYCLE The operating cycle is also known as cast to cash cycle. . is duration required to convert sales after the conversion of resources into inventories. into cash. Cash Collection Purchases Accounts Receivab le Raw material Inventory Sales Work in progress Inventory Finished goods Inventory Sound financial management of a company involves matching the sources and uses of cash so that the obligations come due as assets and mature into cash.

Net Operating Cycle Gross Operating Cycle (I ) Payable Deferral Period (II) Inventory Consumption Period (1) Debtor Consumption Period (2) Raw material Consumption Period (A) Work in Progress Consumption Period (B) Finish Good Consumption Period (C) .

34826.37 Raw material consumption = Raw material inventory X 360 Period Raw material consumed = 3790.57 . 42163. 25144.18 = 39.2957 2004-2005 Raw material inventory .37 = 39.71 X 360 42163. 2690. 3790.23 Raw material consumed .51 Raw material consumed .Rs.51 X 360 25144.17 2002-2003 Raw material inventory .71 Raw material consumed ± Rs.23 X 360 34826.71 Raw material consumed.208 2001-2002 Raw material inventory .Rs. 2738.CALCULATION OF OPERATING CYCLE OF ATUL LIMITED 1) Inventory consumption period :A) Raw material consumption period :Raw material consumption = Raw material inventory X 360 Period Raw material consumed 2005-2006 Raw material inventory -Rs.41 Raw material consumption = Raw material inventory X 360 Period Raw material consumed = 2690. 22752.41 = 42.71 X 360 22752.Rs. 4016.Rs.12 Raw material consumption = Raw material inventory X 360 Period Raw material consumed = 4016.Rs.Rs.18 Raw material consumption = Raw material inventory X 360 Period Raw material consumed = 2738.12 = 34.

835 Work in Progress Conversion = Work in progress inventory X 360 Period cost of production = 6221.20 Cost of production .03 X 360 61931.Rs. 72681.73661 C) Finish goods consumption period : - .826 = 29.57 Cost of production -Rs.57 X 360 52600. 61931. 6221.755 Work in Progress Conversion = Work in progress inventory X 360 Period cost of production = 5782.755 = 39.Rs. 5782. 6965.Rs. 51454.69 2003-2004 Work in progress inventory ±Rs.03 Cost of production .172 Work in Progress Conversion = Work in progress inventory X 360 Period cost of production = 6965.835 = 30. 5107.57 2002-2003 Work in progress inventory ±Rs.20 X 360 72681.826 Work in Progress Conversion = Work in progress inventory X 360 Period cost of production = 5107. 52600.84 X 360 51454.84 Cost of production .B) Work in Progress Conversion Period :Work in Progress Conversion = Work in progress inventory X 360 Period cost of production 2005-2006 Work in progress inventory ±Rs.814 2004-2005 Work in progress inventory ± Rs.172 = 48.

04 Cost of goods sold .Rs.43 Cost of goods sold .99 2004-2005 Finish goods inventory ± Rs.Finish goods consumption = Finish goods inventory X 360 Period Cost of goods sold 2005-2006 Finish goods inventory ± Rs.24 1) Inventory consumption period = Raw material consumption period + Work in Progress Conversion Period + Finish goods consumption period . 69134. 6955. 6226. 61843.69 Finish goods consumption = Finish goods inventory X 360 Period Cost of goods sold = 4928.69 = 29.80 = 27.43 X 360 61843.04 X 360 69134.65 Finish goods consumption = Finish goods inventory X 360 Period Cost of goods sold =6226.73 2002-2003 Finish goods inventory ± Rs.80 Finish goods consumption = Finish goods inventory X 360 Period Cost of goods sold = 5187.65 = 36. 80768. 5187.05 X 360 59663.59 = 30.Rs.05 Cost of goods sold .Rs.05 Cost of goods sold .RS.05 X 360 80768.59 Finish goods consumption = Finish goods inventory X 360 Period Cost of goods sold = 6955. 4928.01 2003-2004 Finish goods inventory ±Rs. 59663.

814 + 30.01 = 95.57 + 29.69 + 27.2005-2006 Inventory consumption period = A + B + C = 34.73 = 108.508 Days 2002-2003 Inventory consumption period = A + B + C = 42.0997 Days 2004-2005 Inventory consumption period = A + B + C = 39.7366 + 36.99 = 96.2003.208 + 39.87 Days 2003-2004 Inventory consumption period = A + B + C = 39.2004.17 + 29.57 + 48.2957 + 30.20022006 2005 2004 2003 Yesr Raw Material consumption period Work in Progress Finish Goods Consumption Period Inventory Consumption Period 2) Debtors conversion period :Debtors conversion period = Debtors X 360 No of Days .24 = 127.5466 Days Inventory Consumption Preiod 140 120 100 80 60 40 20 0 2005.

Rs.398 = 96 Days (Approximate) 2004-2005 Debtors .Credit sales 2005-2006 Debtors .20 Debtors conversion period = Debtors X 360 Credit sales = 22236.69 = 112.62 Debtors conversion period = Debtors X 360 Credit sales = 17497.81 = 113 Days (Approximate) 2002-2003 Debtors . 59397. 69938.66 Credit sales .13 Credit sales .Rs.69 Debtors conversion period = Debtors X 360 Credit sales = 18613.Rs. 20263.Rs. 17497.Rs.82 X 360 83043.20 = 96.Rs.Rs. 22236.69 = 104. 64436. 83043.30 = 104 Days (Approximate) 2003-2004 Debtors .Rs.755 =98 Days (Approximate) i) Gross operating cycle = Inventory conversion period + Debtors conversion period . 18613.13 X 360 69938.29 Credit sales .66 X 360 59397.29 X 360 64436.82 Credit sales .62 = 97.69 Debtors conversion period = Debtors X 360 Credit sales = 20263.

11 .3016 ii) Payable Deferral Period = Creditors X 360 Credit purchase 2005-2006 Creditors = 13885.56 X 360 42391.318 2002-2003 Gross operating cycle = Inventory conversion period + Debtors conversion period = 127.2005-2006 Gross operating cycle = Inventory conversion period + Debtors conversion period = 96.755 = 225.4977 2004-2005 Gross operating cycle = Inventory conversion period + Debtors conversion period = 95.87 + 104.508 + 112.34 X 360 36030.17 2003-2004 Gross operating cycle = Inventory conversion period + Debtors conversion period = 108.81 = 221.64 Payable Deferral Period = Creditors X 360 Credit purchase = 13885.34 = 117.52 = 133.5466 + 97.92 2004-2005 Creditors = 13371.0997 + 96.20 Credit purchase= 24974.52 Payable Deferral Period = Creditors X 360 Credit purchase = 13371.30 = 200.60 2003-2004 Creditors =11288.34 Credit purchase= 36030.398 = 192.56 Credit purchase= 42391.

99 Credit purchase= 25205.9195 = 310.9195 Net Operating cycle= Gross Operating Cycle+ Payable Deferral Period = 192.38 Payable Deferral Period = Creditors X 360 Credit purchase = 11583.718 = 384.318 Payable Deferral Period= 162.45 Net Operating cycle= Gross Operating Cycle+ Payable Deferral Period .11 = 162.49 + 117.40 2004-2005 Gross operating cycle= 200.60 Net Operating cycle= Gross Operating Cycle+ Payable Deferral Period = 200.7185 2002-2003 Creditors = 11583.318+ 162.17+ 133.45 Net Operating cycle= Gross Operating Cycle+ Payable Deferral Period 2005-2006 Gross operating cycle= 192.Payable Deferral Period = Creditors X 360 Credit purchase = 11288.38 = 165.3016 Payable Deferral Period= 165.49 Payable Deferral Period= 117.718 Net Operating cycle= Gross Operating Cycle+ Payable Deferral Period = 221.60 = 333.036 2002-2003 Gross operating cycle= 225.20 X 360 24974.17 Payable Deferral Period= 133.99 X 360 25205.77 2003-2004 Gross operating cycle= 221.

3016 + 165.= 225. (Rs in Lacs) Sources of Funds 2005-06 2004-05 2003-04 2002-03 20 05 -2 20 006 04 -2 20 005 03 -2 20 004 02 -2 00 3 Year .7516 Net Operating Cycle 500 400 300 200 100 0 No of Days Net Operating Cycle Calculation of Net Working Capital of ATUL LTD.45 = 390.

47 2285.66 Net Working Capital(A-B) 30048.66 44331.41 17497.76 16318.98 Estimated Current Liability Liabilities Provisions 17440.06 18370.04 75.33 12268.69 15809.62 (A) Total Current Asset 45694.78 7453.18 20.82 13431.24 28582.58 22236.01 Net Working capital 31000 30000 29000 28000 27000 26000 25000 Amt in Lacs Net Working capital 20 05 -2 20 006 04 -2 20 005 03 -2 20 004 02 -2 00 3 Year .Estimates of Current Asset Inventories Sundry Debtors.24 6252.08 15227.68 14553.92 50824.41 18613.76 20775.32 43810.61 26754.93 3334.19 (B) Total Current Liability 18940.31 7671.80 6259.88 135.98 32078.82 1379.11 1425.15 20819.66 1069. Unsecured Cash & Bank Balance Others Loan &advances 20927.16 138.30 17122.35 1796.26 3130.29 874.

The term inventory refers to the stock pile of products as firm is offering for sales and the component that make up the products . The work in progress inventory consist of items that are purchased by the firm from others and are converted into finished goods through manufacturing process. inventory are 60% of current asset in Public limited companies in India. Because of the large size of the inventory maintained by the firms. The inventory of such goods consists items that have been produced but are yet to be sold. Finish goods represent final of completed products available for sole. a considerable amount of fund is required to be committed to them. Work in progress inventories consist of items currently being used in production process. . It is therefore absolutely imperative to manage inventory efficiently and effectively in order to avoid unnecessary investment. Raw Material Work in progress Finished goods The Raw material inventories contain the items that are purchased by the firm from others and are converted into finished goods through manufacturing process. On an average.INVENTRY MANAGEMENT Inventory constitutes the most important part of current asset. They are normally semi-finished goods that are at various stage of production in multi stage production process.

To meet the demand of the product by efficiently organizing the production and sales operation. Speculative Motive:It influences the decision to increase or reduce inventory level to take advantage of price fluctuation. 3. Precautionary motive:It necessitates holding of inventories to guard against the risk of unpredictable changes in demand and supply forces and others.OBJECTIVES OF INVENTRY MANAGEMENT The basic responsibility of the financial manager is to make sure that the firms cash flows are managed efficiently. Managing inventories involve tying up of the company¶s funds and incurrence of storage and handling coat. NEED TO HOLDING INVENTORY The managing inventory arises only when the company hold inventories. About 40% to 60% of the cost of product contains material cost. 2. Transaction motives:It emphasizes the need to maintain inventories to facilitate smooth production and sales operation. . Inventory in Indian industries constitute more than 60% of current assets. Efficient management of inventory should ultimately result in the maximization of the owner¶s wealth. The objectives of inventory management consist of two counterbalancing parts: 1. 1. To minimize investments in inventory 2. SIGNIFICANCE OF INVENTRY Inventory constitutes in every business concern the most significant pert of working capital current asset.

HOLDING COST It include the following cost y Cost of blocking y Cost of insurance y Storage cost y Cost of obsolence y Determination cost 3. STOCK OUT COST It include the following cost y Lost sales y Back lagging y Penalty cost y Loss of goods . ORDERING COST It include the following costs.INVENTRY RELATED COST An inventory system consist of the following cost 1. y Ordering cost y Handling of issued transaction y Cost of administration 2.

. 4.FACTORS DETERMINING LEVEL OF INVENTRY 1. Demand of finish goods: If the demand of finish good is high then the level of inventory is also high. If there is continuous production process. So that the company can meet the demand. then the requirement of the raw material will be high and vice-versa. Production process: The level of inventory also depends on production process. Type and nature of business: The nature and quantity required for raw material different from firm to firm. 2. then the level of inventory will be high in company. 5. Anticipated sales volume: If anticipated sales volume is high then the level of inventory is also high. 3. Price level variation / availability of funds: If the price of raw material decrease and if company is capable to buy in bulk. Because it is depending on type of firm.

Inventory management technology ABC ANALYSIS: It is also known as selective inventory management technique. ³A´ class items are very costly. So regularly received by the up level supervisors and are issued by only authorized person signature. In inventory the comprehensive classification of item being carried inventory in terms of deciding value stand financial control of inventory. ³B´ class items are less supervised in comparison of ³A´ class items and cheap or not very cheap or not very costly. It is the analyses tabulation and classification of characteristics of item being carried out. . ³C´ class items are vary supervised and are known as regularly consumption items and are very cheap.

Sodium Sulphate and many more other products there are as many as 42 product.Main Raw materials of Atul Ltd y y y y y y y y y y y y y Toluene Phenol Sulfur Methanol Others Imported Indigenous Dyestuffs Intermediates Manganese Sulphate Oleum 25% Sulpheuric Acid 98% Oleum 65% Packaging Materials of Atul Ltd. Atul Ltd manufactures many products the product manufacture by Atul Ltd are Cresol . Toluidines . Drums y Plastic Bags y Fiber Drums Finish Goods of Atul Ltd. . Sodium Sulphite .S. y M.

36 5107.03 9472.12 6221.53 52.20 41948. fu re ac el ka . Water Packagi g Material ¢ ¢ ¢ ¡  42163.27 Inventory at Atul Ltd 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 Amt in Lacs Series1 at er ia Pr l og Fi re ni ss sh G oo ds P ow er Sto P .Invent Management in At l Lt Rs in lakh Invent ies Raw mat ial Work-i -progress Fi ish goods Store Power.W gi at ng er M at er ia l in Component R aw W or k M . Fuel.

50 B 3.Classification Of Inventory In Atul Ltd.97 33826.01 45.027 A 29.53 45.71 1412.63 C 1.42 A 3.822 C 1.87 1035.20 137709.20 54470.53 1412.73 (Rs in Lacs) 2846.67 3040.71 2846.97 723.67 13616.45 16834. Raw materials Raw materials Toluene Phenol Sulfur Methanol Other Imported Indigenous Dyestuffs Intermediates Manganese Sulphate Units MT MT MT MT MT MT MT MT MT MT 326 1147 336 221782.01 1579.22 A 19.75 Total 86674.58 16834.53 %of Category total cost 39.62 15646.53 ABC Analysis of Raw Material Raw Material Other Indigenous Imported Phenol Toluene Intermediates Sulfur Methanol Dyestuff Manganese Sulphate Units MT MT MT MT MT MT MT MT MT MT Total Amount 33826.28 B 1.07 Qty 9498 5558 26931 6621 Rate 30002.67 25328.89 5246.99 3040.75 86674.87 1035.58 25328.19 C 0.99 1579.0528 C 100 .45 723.834 C 0.

Finally other product having lower value lies in C category. So they have A category. Raw materials Analyses (Rs in Lacs) 1% 2% 0% 3% 4% 2% 1% Toluene Phenol Sulfur Methanol Other Imported 39% Indigenous Dyestuffs 19% Intermediates Manganese Sulphate 29% . Imported and other Raw Material is higher and has blocked other raw material. Phenol and Toluene lies in B category.The value of Indigenous.

57 26.07 88.09 11.79 60.92 16.98 .07 % of Total Coat Category 8 1 7 B C B .57 26.91 1.Anisyl alchohol p-Cresidin Anisole Dyes & Dye imtermediates (a&b) Caustic/Chlorine Chemicals Pharmaceuticals Sulpha Drug & intermediates Bulk Drugs & Drug intermediat PHIM UF/MF/PF dicyandiamide resines Epoxy resins Hardener & auxilialiaries Farmaldehyde Polyminoamide resins & their intermediates Sulphanilic Acid Sulpha bulk drugs for export other Ancamine MT 392 552 135 38 9 8 727 819 2280 1 5 13 14 2 250 129 114 15 1 85 3 Rs in Lacs 334.74 189.70 14.10 2.05 1270.78 10.12 280.18 193.16 78.11 Class of Goods Cresol Sodium Sulphite p-Anisaldehyde MT 392 552 135 Rs in Lacs 334.32 8.38 80.75 212.16 24.55 327.12 280.34 804.FINISH GOODS Class of Goods Cresol Sodium Sulphite p-Anisaldehyde p.

p.32 8.74 189.91 1.11 0 0 2 2 0 8 5 0 1 0 5 5 0 ABC Analysis of Finish Goods .78 10.75 212.70 14.34 804.92 16.10 31 1 5 13 14 2 250 129 114 15 1 85 2.16 78.98 .05 2 0 0 20 1 C C C A C A C C C C C B C C C C C C C 2280 1270.16 24.55 327.09 3 11.79 60.38 80.18 193.Anisyl alchohol p-Cresidin Anisole Dyes & Dye imtermediates (a&b) Caustic/Chlorine Chemicals Pharmaceuticals Sulpha Drug & intermediates Bulk Drugs & Drug intermediat PHIM UF/MF/PF dicyandiamide resines Epoxy resins Hardener & auxilialiaries Farmaldehyde Polyminoamide resins & their intermediates Sulphanilic Acid Sulpha bulk drugs for export other Ancamine 38 9 8 727 819 88.

An yl a hohol is lc p-Cres idin An ole is Dyes& Dye imtermedia (a tes &b) Ca tic us /Chlorin e Chemic ls a Pha c rma eutic ls a SulphaDrug & in termedia tes Bulk Drugs& Drug in termedia t PHIM UF/MF/PF dic n mide res es ya dia in Epoxy res s in Ha er & a rden uxilia ries lia Fa ldehyde rma Polymin mide res s& their in oa in termedia tes Sulpha ilicAc n id Sulphabulk drugsfor export other An a e c min .Rs in Lacs 5% 0% 1% 0% 5% 8% 0% 2% 2% 0% 1% 0% 31% 20% 5% 0% 8% 2% 0% 0% 1% 7% Finish Goods Cres ol Sodium Sulphite p-An a is ldehyde p.

Fuel And Water (2005-06) (2004-05) Amount Packaging Material .37 5107.20 41948. Analysis of inventory holding in Atul Ltd.39 Inventory Analysis 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 Raw material Work in progress Finish Goods Store Inventory Power. At Atul Ltd FIFO method is used.16 7684. Inventories Raw material Work in progress Finish Goods Store Power.03 36244. Level of inventory at Atul Ltd. ie FIRST IN FIRST OUT.27 (2004-05) 34826.12 6221. Minimum level=15day¶s Minimum level represents the beyond which the stock is hand is not allowed to Fall.80 5728.36 5107. Maximum level= 2month¶s Maximum level represents the beyond which the stock is hand is not allowed to exceed. Fuel And Water Packaging Material (2005-06) 42163.55 52.03 9472.69 45.Method of inventory valuation in Atul Ltd.

The firm should keep sufficient cash. Cash shortage will disrupt the firm¶s manufacturing operations while excessive cash will simply remain idle. Apart from the fact that it is the most liquid currency assets. Cash flow within the firm. Cash balance held by the firm at a point of time by financing deficit or investing surplus cash. Motives for holding cash The term cash with reference to cash management is used in two senses. This underlines the significance of cash management. Cash is the basic input needed to keep the business running on a continuous basis.CASH MANAGEMENT Cash management is one of the key area of working capital management. which the firm carries on in the ordinary business. it means currency which is accepted as cash. neither more nor less. financial charges like taxes. cash is the common denominator to which all the current assets be reduced because the other major liquid assets that is receivables and inventory get converted into cash. . operating expenses. In a normal sense. without contributing any thing towards the firms profitability. The four primary motives for maintaining cash balances y y y y Transaction motive Precautionary motive Speculative motive Compensating motive 1. wages. Thus the major function of the Finance manager is to maintain sound cash position. Cash in the important current asset for the operations of business. The broad view of cash also include near cash assets cash balance in bank. Transaction motive: Transaction motive refers to the holding of cash to meet cash requirement to finance the transaction. Cash is the money which the firm can utilize immediately without any restriction. Example : cash payment to be made for purchase. Cash management is concerned with the management of :Cash flow into and out of the firm.

Such balances are ³Compensating Balance. 4.´ Objectives for cash management The basic objectives of cash management are.³The requirement of cash balance to meet routine cash needs is known as the transaction motive and such motive refers to the holding of cash to meet anticipated obligation whose timing is not perfectly synchronized with cash receipts. Many time cash is required in order to overcome some unforced requirements. To minimize funds committed to cash balances. Usually there is always same minimum balance maintained for this purpose. an optimum cash balance should be maintained taking into account the profitability. . Cash budget is helping the firm to manage it cash position. The liquidity provided by cash holding is at the expenses of profit by forcing alternative investment opportunities. The company should explore such circumstances. Many times the opportunity may be available due to a fall or rise in raw material price. While cash serves this function it evolves in an opportunity cast. Precautionary motive: The cash balances held in reserve for random and unforeseen fluctuations in cash flow are called as Precautionary motive. 1. 3. Cash management technique There are some specific technique and processes for speedy collection of receivables from costumers and slowing disbursements. the bank themselves can use the amount to earn a return. Hence. y y y Speed cash collections Prompt payment by costumer Early conversion of payment into cash Cash management techniques at ATUL LTD The firm prepares cash budget to determine the net cash inflow or outflow so that the firm is enabled to arrange for finances. Since this balance cannot be utilize by the firm for transactions purposes. To meet the cash disbursement needs 2. Compensating motive: Usually the clients are required to maintain a minimum balance of cash at bank.´ 2. Speculative motive: It refers to the desire of the firm to take advantage of opportunity which present themselves at unexpected moments and which are typically outside the normal cause of business.

For these reason now day¶s companies have started to raise the payment period to it creditor. Collection cost 2.RECEIVABLE MANAGEMENT The term receivable is defined as ³Debt owned to the firm by customer arising from sales of goods or service in the ordinary course of business´ When a firm makes an ordinary sale of goods on services and does not receive payment. They have to be finance there by involving the cost there is a time leg between the sales of goods to and payment by the costumer. Raw material and other things on credit for manufacturing of final product. 4. Firm now days also enjoy the benefit of Negative Working capital. the firm grants trade credit and creates account receivable. 2. which could be collected in the future. Such costs are called delinquency cost. Capital cost: The increase level in assets. Delinquency cost: This cost arises out of the failure of the costumer to meet there ob ligation when payment on credit period. Here they enjoy the benefit of gating various Products. Negative Working capital adds to a larger benefit then expected by the creditor. Here this benefit received by the firm is on the basis of good will and bargaining strength of the company. Delinquency cont 4. Default cost 1. Receivable management is also trade credit management. . Major costs: The major categories of costs associated with the extension of credit and account receivables are. Collection cost: Collection cost are administration cost incurred in collecting the receivable from the customers to whom credit sales have been made. Capital cost 3. Default cost: Finally the firm may not be able to recover the over-dues because of the inability of cost associated with credit sales and account receivables. 1. 3.

Through credit terms granted by the firm to its customer buyers of good. In order to avoid loss of sales the firm has to resort to grant credit facilities. To increase profit Increase in sales result in high profit for the firm not only because of increase in volume of sales but also because the firm charges a higher margin of profit on credit sales as compared to cash sales. To meet competition A firm has to resort to granting credit its competitors were granting credit facilities. it will generally be in a position to sell more goods then if it insisted on cash payment. Credit terms available to the firm from its creditors. To achieve growth in sales If the firm sells goods on credit. . This is because many costumers are either not prepared or not in a position to pay in cash when they purchase the goods. 2. credit policy is a framework to determine weather to extend credit to a costumer and how much credit to be extended to the costumer. Receivable management at ATUL LTD At ATUL LED Receivable form approximately 35% of current assets. The. 1. 2. The broad dimensions of credit policy of a firm are credit standards and credit analysis. The credit policy varies from 15 days to 90 days depending on costumers. Hence the company accords high importance to the management of receivables.Credit policy The credit policy related to sales and purchase also affect working capital. Credit policy at ATUL LTD The firm is granting credit to its customers for the following reasons: 1. The credit policy influences the requirement of working capital in two ways. 3.

the Marketing Manager and Finance manager follow up the debtors filling in the category. moderate risk and normal risk. The terms of credit in case of fast growing companies are fixed on the basis of the latest date available. the Marketing Manager and Finance Manager follow up the debtors falling in the category. Medium value receivables are managed by the subordinate of the Marketing manager and Finance manager. On the basis of the future prospects of the costumers the receivables are classified into fast growing companies. In case of steady growing companies. study growing companies and stagnant companies. In case of stagnant companies. receivable which are due and due date of each bill. the company categorizes the receivable into high risk.On every 15 days and last day of the month the company prepares the receivables list this list show the total receivable. High risk category is directly managed by the directors of the company. The accounts department co-ordinates with the marketing department for collection of receivables. Medium value and low value. the subordinate of the Marketing Manager and Finance manager follow up the debtors filling in the category. Low value receivables are managed by the clerks in the Accounting department. High value receivables are managed by the Finance manager. In case of moderate risk receivables. On the basis of risk involved. In case of high risk receivables the company the adequate insurance through Export Credit Guarantee Corporation of India in case of exports and in the case of domestic sales the company fixed credit period with the baking of post dates cheques or assurance from receivable sources. the subordinates of the Marketing Manager and Finance Manager follow up the debtors falling in this category. In case of normal business risk receivables. Director of the company manage this category. This list is prepared by the accounting department. . The total receivable is classified on the basis of: y y y Amount involved Risk involved Future business relations On the basis of amount involved the receivable are classified into High value.

Working capital finance
Bank finance for working capital Banks are the main institutional source of working capital finance in India. After trade credit, bank credit is the most important source of financing working capital requirements of the firm in India. A bank considers a firm¶s sales and production plans and the desired level of current assets in determining its working capital requirement. Forms of bank finance 1. Overdraft Under the overdraft facility, the borrower is allowed to withdraw funds in excess of balance in his current account up to certain specified limit during the specified period. Though the overdrawn is repayable on demand, they generally continue for a longer period by annual renewal of the limits. 2. Cash credit Cash credit facility is similar to the overdraft management. The barrower is allowed to withdraw funds up to certain sanctioned credit limit. He does not require the entire amount at once. He can periodically withdraw to the extent of his requirement and repay by depositing surplus funds in his cash credit account. Interest is payable on the amount actually utilized by the borrower. 3. Bills Purchasing or Discounting Under the purchase or discounting of bills, a borrower can obtain credit from bank against its bills. The bank purchase or discount the borrower bills, bank holds bills as security for credit. When bill is discounted, the borrower is paid the discount amount bill i.e The full amount of the bill minus the discount charged by the bank. The bank collects the full amount on maturity. 4. Working capital loan A borrower may sometime require temporary working capital in excess of sanctioned credit limit to meet unforeseen expenses. Banks provide such accommodation through demand lone account. The borrower is required to pay higher rate of interest about the normal rate of interest on such additional credit.

FINDINGS
Raw material stock as on 31/3/06 show the raw material holding period is 34 days as compare to 39 days on 31/3/05 , 31/3/04 , 42 days on 31/3/03 .During the year the average holding time was 30 days but due the year ending the company had export order which were to be executed by the first half of April-07 . Due to the decrease in inventory consumption period, the gross operating cycle period has also decrease. y The net working capital requirement of the company has increased in 2005-06 y The Firm CA and CL has increase in 2005-06 and the ratio of CA is higher then increase CL .the increase in CA is decrease to increase in inventory. (Compared to 2004- 2005, 2003-2004.)

Inventory Management
The values of imported, indigenous and other raw material are high and these raw materials has block 19.42%, 29.22%. 39.03%.Hence it has been category as A. The reason of high value of this raw material is as they are imported and the availability of raw material is not regular. The value of finish products of Dye and Dye intermediates (a&b), chemicals are highest in finish goods inventory and these finish goods have blocked 51% of the total value of finished goods inventory. Hence it has been categorized in A category. The reason of high stock value of this finish Goods is that this material is scheduled to be dispatched in Second week of April. Hence it is seen as a higher value finish goods inventory as on 30 March 2006.

Cash Management
The company¶s maintain a cash balance of Rs.150 Lacs. In order to meet the daily requirements of miscellaneous cash purchases and for emergences like accident. The company prepares the cash budget and forecast its requirements. If there is any deficit then it borrows and if there is any surplus then it repays.

Working capital
The company finance its working capital through its internal accruals. It is also making use of financial instruments like Overdraft, Cash credit, Bill Purchase, Export packing credit foreign bill Purchase/Discount. It makes use of such instrument in order to be safe due to export dealing of vary high values.

RECOMMENDATION
Working Capital
The Company has high internal accruals. Hence it Should not go for working capital loan. It should try to reduce it inventory consumption period and Debtors collection period. It should try to reduce it Current Asset.

Inventory Management
The Company should implement inventory management technique efficiently as there working capital amount is mostly blocked in inventory and above 50% of the amount is blocked in Inventory. If inventory holding is reduce there will be more Working Capital.

Receivable Management
The Company has to maintain against schedule in order to keep a proper track of the receivables. This schedule helps in finding out the payment which have gone beyond the credit limit. It would also help the management in taking proper action to recover the payments. The company should also maintain Collective Experience Matrix which will show how efficient the collection in collecting the receivables. In the diagram it there in an increase in the debtors then it shows the inefficiency of the collection department.

Cash Management
The company has got high interest accruals. Hence it should not borrow and finance its activities from interest accrual. More over the company can also think of investment in order to earn income on idle cash.

Financial Management .Vikas Publication Pvt.Atul.BIBLIOGRAPHY y Khan and Jain. M. y I. Ltd. Pandey. Eighth Edition . Financial Management Fourth Edition. Financial Management Third Edition.com y Company¶s Annual Report . Atulnet. y Prasanna Chandra.com y www. y www.

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