WORKING CAPITAL MANAGEMENT

The prime objective of any management is to make maximum profit. For attaining maximum profit which enables the organization to accomplish to other objectives of the business firms. Working capital management involves the administration of current assets of a firm namely cash, receivables, and inventory. Administration of fixed assets comes with in the preview of capital budgeting while the management of working capital is a continuing function which involves controlling of every day ebb and flow of financial resources circulating in the bunnies. There fore a business can not survive in the absence of satisfactory ratio between current assets and current liabilities Before going to deal with various aspects of working capital management it is better to under take definition and concepts of working capital. Definitions and concepts of working capital:Working capital is the excess of current assets over current liabilities _____ J. S. Mill Working capital refers to the firms investment in the short term assets like cash, account receivable and inventories _____Western and Brigham. Working capital management is also known as current assets management. Working capital management usually is considered to involve the administration of current assets namely cash and marketable serenities, receivables and inventories and the administration of current liabilities ___ James C. Van Horne Working capital concept can be categorized into two categories. Viz. 1. Net concept According to the gross concept working capital refers to sum total of all current assets ____ R. M. Srivastava

Gross working capital rupees to the firms investments in current assets.Net working capital rupees to the difference between current assets and current liabilities the net working capital indicates (a) liquidity position of the firm (b) suggests the extents to which working capital need may be financed by permanent sours of funds. Types of working capital Working capital is different types. The following are the important types of working capital. 1. Permanent or regular working capital Permanent or regular working capital is the minimum amount which should always be there in minimum current asset like inventory or cash balance in order to carry out the business smoothly. 2. Variable working capital The amount of working capital over and above the permanent working capital is known as variable working capital. The extra working capital need to support the changing production and sales activities is called the fluctuating or variable or temporary working capital. It may be further divided into two types namely (a) Seasonal working capital. (b) Special working capital. Seasonal working capital is a required to meet seasonal demands. Seasonal demands Special working capital is required for meeting the contingencies like fire accidents, strikes and advertisement campaign. Need for working capital The bunnies firm has to invest maximum funds on current assets for the success of sale activity. Current assets are need because when the sale is not converting into cash immediately. There is always an operating cycle involving in the conversion of sales into cash.

Operating Cycle

The times require to complete the sequence of events in the case of manufacturing firm is called operating cycle. Debtors Sales

Cash

Finessed Product

Raw materials Fig: 1.1. Operating Cycle of the Manufacturing firm

Working programs

The operating cycle consist of 3 phases. In the 1st phase cash gets converted into inventory. This includes purchase of raw material, conversion of raw material in to work-inprocess and working in program to finished product. In the 2nd phase the stock is converted into receivables it credit sales are made. In the 3rd phase the conversion of receivable into cash after certain period. the operating cycles of a non manufacturing firm is Accounts receivables

Cash

Stock finished good Fig: 1-2 operation cycle of non manufacturing firm

The operating cycle refers to the length of time necessary to complete the following cycle of events. Working Capital Working capital is the excess of current assets over current liabilities. Current Assets 1. Cash 2. Bank balance 3. Short term investment 4. Bills receivable 5. Trade debtors 6. Short term loans & advances 7. Inventories 8. Prepaid payments Current Liabilities 1. Bank over draft 2. Bills payable 3. Trade creditors 4. Provision for taxation 5. proposed dividends 6. Unclaimed dividends 7. Advance payments & unexposed discounts. 8. Occurred interest on unexpired discounts. 9. Outs trading expenses

Operational Definitions of the Concepts

Working Capital Working Capital may be regarded as that proportion of a firms total capital, which is employed in financing its day-to-day operations. It is the amount of funds, which a firm holds, in the form of current assets to meet its current liabilities. Net Working Capital (NWC) Net Working Capital is the difference between current assets and current liabilities Gross Working Capital (GWC) Gross working Capital refers to the firms total investment in current assets.

Current assets Current assets are those assets which can be converted into cash within an accounting year or within the operational cycle, without under going diminution in value of or disrupting operational cycle. They include cash, short-term securities debtors. Bill receivable and stock (inventory). Current liabilities Current liabilities are those of outsides that are expected to mature for payment with in an accounting year (or operating cycle). They include creditors. Bills payable and out standing expenses that are the short-term sources. Cash Cash is the money the firm can disburse immediately without any restriction. It includes coins, currency, cheque held by the firm and balance in bank accounts. Some times mere cash items such as marketable securities or bank time deposits are also included in cash. The basic characteristics of near cash assets are that they readily convertible into cash. Inventories Inventory refers to stock of goods or products of the company. It may be in the firm of raw material, work-in-progress and finished goods.

DESIGN OF THE STUDY

Working capital management is very significant aspect in the management of finance of any organization. By checking the level of working capital one can easily identify and profitability position of the firm and the decision regarding. 1. The level of working, which can be determined, by the level of current assets and current liabilities. 2. The composition of current assets and current liabilities 3. Financing of current assets and current liabilities are of at most importance and significant in the financial management of the business because it not only shows the financial efficiency of business but also it credit worthiness which has gained importance in these days of credit squeeze. This fact has been justified by many industries which have failed frequently due to faulty management of working capital, especially with regard to effect of various suggestions and regulations laid by tendon, chore Mara the committee is very necessary. It is this view that a case study has been made on working capital management in GV Films.

Objectives of the study

1. To study the various changes in working capital of GV Films. 2. To study the working capital management with regards to cash, and inventory of GV Films. 3. To study the liquidity position of GV Films 4. To study the creditors conversion period of GV Films.

Methodology
The data were collected from secondary sources.

The secondary data were obtained from the published annual reports of GV Films, from 20042005 to 2006-2007. The collecting the data were analyzed by changes in working capital, cash, inventory, liquidity ratio. The cash analysis is done by cash to networking capital ratio. The receivable analysis is done by debtors turnover ratio, average collection period and incremental investment in receivables. The inventory analysis is done by percentage of inventory to total current assets, inventory turnover ratio, holding period of inventory and changes in sales and inventory. The liquidity analysis is done by current ratio, quick ratio and absolute liquid ratio

Scope of the Study

Financial management is that the managerial activity which is concerned with the planning and controlling of the firms financial resources. Though it was a branch of economics till 1890 as a separate activity or discipline, it is of recent origin. Still it has no unique body of knowledge of its own and heavily on economics for its theoretical concepts even today. The present study aims at the following Highlighting the necessity of current and current liabilities. Explain the principle s of current assets, investment and financing. Focus on the proper mix of short term and long term financing for current assets. Emphasis the need and goal of establishing a sound credit policy. Explain the need for holding cash. Highlight the need for and a nature of inventory.

Limitations
The study will be only a provisional or based on the data collected from the published annual reports during 2004-2007.

Plan of analysis
Chapter 1 it gives an introduction in working capital management and also gives a brief theoretical background on working capital management. Chapter 2 It contains the design of the study including objectives of study, operational definition, methodology of study, tools for collecting data and plan of analysis Chapter 3 it contains a brief profile of the company given. Chapter-4 It gives an overview of the pattern of changes in working capital management in GV Films ltd., Chapter 5 It discusses the manner in which cash is managed in GV Films ltd., Chapter 6 It analyses the inventory management. Chapter 7 Findings and conclusion.

Profile of Film industry

The film industry consists of the technological and commercial institutions of filmmaking: i.e. film production companies, film studios, cinematography, film production, screenwriting, pre-production, post production, film festivals, distribution; and actors, film directors and other film personnel. Though the expense involved in making movies almost immediately led film production to concentrate under the auspices of standing production companies, advances in affordable film making equipment, and expansion of opportunities to acquire investment capital from outside the film industry itself, have allowed independent film production to evolve. The Birth of Film A two second experimental film, Round hay Garden Scene, filmed by Louis Le Prince in October 1888 in Leeds, Yorkshire, is generally recognized as the earliest surviving motion picture. William Kennedy Laurie Dickson, chief engineer with the Edison Laboratories, is credited with the invention of a practicable form of celluloid strip containing a sequence of images, the basis of a method of photographing and projecting moving images. Celluloid blocks were thinly sliced, the slice marks were then removed with heated pressure plates. After this, the celluloid strips were coated with a photosensitive gelatin emulsionIn 1893 at the Chicago World Fair Thomas Edison introduced to the public two pioneering inventions based on this innovation: the Kinetograph, the first practical moving picture camera, and the Kinetoscope. The latter was a cabinet in which a continuous loop of Dickson's celluloid film (powered by an electric motor) was backlit by an incandescent lamp and seen through a magnifying lens. The spectator neared an eye piece. Kinetoscope parlours were supplied with fifty-foot film snippets photographed by Dickson, in Edison's "Black Maria" studio. These sequences recorded mundane events s well as entertainment acts like acrobats, music hall performers and boxing demonstrations.

Rise of the feature film and film as art

The standard length of a film remained one reel, or about ten to fifteen minutes, through the first decade of the century, partly based on producers' assumptions about the attention spans of their still largely working class audiences. The Australian film The Story of the Kelly Gang (also screened as Ned Kelly and His Gang) is widely regarded as the world's first "feature length" film. Its 80 minute running time was unprecedented when it was released in 1906. In 1906 Dan Barry and Charles Tait of Melbourne produced and directed 'The Story of the Kelly Gang.' It wasnt until 1911 that countries other than Australia began to make feature films. By this time 16 full length feature films had been made in Australia. Soon Europe created multiple-reel period extravaganzas that were even longer. With international successes like Queen Elizabeth (France, 1912), (Italy, 1913) and Cabiria(Italy, 1914), the feature film began to replace the short as the cinema's central form. The Sound Era Experimentation with sound film technology, both for recording and playback, was virtually constant throughout the silent era, but the twin problems of accurate synchronization and sufficient amplification had been difficult to overcome (Eyman, 1997). In 1926, Hollywood studio Warner Bros. introduced the "Vita phone" system, producing short films of live entertainment acts and public figures and adding recorded sound effects and orchestral scores to some of its major features. During late 1927, Warners released The Jazz Singer, which was mostly silent but contained the first synchronized dialogue (and singing) in a feature film. It was a great success, as were follow-ups like Warners' The Lights of New York (1928), the first all-synchronized-sound feature. The early sound-on-disc processes such as Vitaphone were soon superseded by sound-on-film methods like Fox Movietone, DeForest Phonofilm, and RCA Photophone.The trend convinced the largely reluctant industrialists that "talking pictures", or "talkies," were the future.

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1970s: The 'New Hollywood' or Post-classical cinema The New Hollywood' and 'post-classical cinema' are terms used to describe the period following the decline of the studio system during the 1950s and 1960s and the end of the production code. During the 1970s, filmmakers increasingly depicted explicit sexual content and showed gunfight and battle scenes that included graphic images of bloody deaths. Post-classical cinema' is a term used to describe the changing methods of storytelling of the "New Hollywood" producers. The new methods of drama and characterization played upon audience expectations acquired during the classical/Golden Age period: story chronology may be scrambled, storylines may feature unsettling "twist endings", main characters may behave in a morally ambiguous fashion, and the lines between the antagonist and protagonist may be blurred. The beginnings of post-classical storytelling may be seen in 1940s and 1950s film noir movies, in films such as Rebel Without a Cause (1955), and in Hitchcock's Psycho. 1980s: sequels, blockbusters and videotape During the 1980s, audiences began increasingly watching movies on their home VCRs. In the early part of that decade, the movie studios tried legal action to ban home ownership of VCRs as a violation of copyright, which proved unsuccessful. Eventually, the sale and rental of movies on home video became a significant "second venue" for exhibition of films, and an additional source of revenue for the movie companies. The Lucas-Spielberg combine would dominate "Hollywood" cinema for much of the 1980s, and lead to much imitation. Two follow-ups to Star Wars, three to Jaws, and three Indiana Jones films helped to make sequels of successful films more of an expectation than ever before. Lucas also launched THX Ltd, a division of Lucasfilm in 1982 [2], while Spielberg enjoyed one of the decade's greatest successes in E.T. the same year. American independent cinema struggled more during the decade, although Martin Scorsese's Raging Bull (1980), After Hours (1985), and The King of Comedy (1983) helped to establish him as one of the most critically acclaimed American film makers of the era. Also during 1983 Scarface was released, was very profitable and resulted in even greater fame for its leading actor Al Pacino. Probably the most successful film commercially was vended during 1989:

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Tim Burton's version of Bob Kane's creation, Batman, exceeded box-office records. Jack Nicholson's portrayal of the demented Joker earned him $60,000,000 (the most money an actor has ever made from one film) and it brought Tim Burton and Michael Keaton great fame. British cinema was given a boost during the early 1980s by the arrival of David Puttnam's company Goldcrest Films. The films Chariots of Fire, Gandhi, The Killing Fields and A Room with a View appealed to a "middlebrow" audience which was increasingly being ignored by the major Hollywood studios. While the films of the 1970s had helped to define modern blockbuster motion pictures, the way "Hollywood" released its films would now change. Films, for the most part, would premiere in a wider number of theatres, although, to this day, some movies still premiere using the route of the limited/roadshow release system. Against some expectations, the rise of the multiplex cinema did not allow less mainstream films to be shown, but simply allowed the major blockbusters to be given an even greater number of screenings. However, films that had been overlooked in cinemas were increasingly being given a second chance on home video and later DVD 2000s The documentary film also rose as a commercial genre for perhaps the first time, with the success of films such as March of the Penguins and Michael Moore's Bowling for Columbine and Fahrenheit 9/11. A new genre was created with Martin Kunert and Eric Manes' Voices of Iraq, when 150 inexpensive DV cameras were distributed across Iraq, transforming ordinary people into collaborative filmmakers. The success of Gladiator lead to a revival of interest in epic cinema. Home theatre systems became increasingly sophisticated, as did some of the special edition DVDs designed to be shown on them. The Lord of the Rings trilogy was released on DVD in both the theatrical version and in a special extended version intended only for home cinema audiences. Future: Problems of digital distribution to be overcome -- higher compression, cheaper technology. Content security. Expiration of copyrights, enforcing copyright

PROFILE OF GV FILMS Ltd

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Introduction GV FILMS LIMITED burst into the Indian Film Market in the year 1989. The main object of the company was production and distribution of feature films in various languages. This is the first company in the movie business to get listed in the Indian bourses and having shareholders through the length and breadth of India. The Company was promoted by Mr. Venkateswaran, who was a Chartered Accountant by profession. The company's contribution to the South Indian Film Industry is enormous more particularly to the Tamil Film Industry which is the third biggest in India next to Hindi and Telugu Film Industry.

Management team
A. Venkataramani - Director A commerce graduate, promoted kaashyap Radiant Systems ltd and is Chairman& Managing Director. Having been part of the leading corporate in the country for over two decades he played a major role in team building and growth of the respective organizations. Marketing and people management is his forte. Has been in the media business having produced several teleserials and movies. His expertise and acumen will help the company to growth manifold. Raghu Raman Director A graduate in commerce. Prior to joining he was the Director in one world Media Network Infotainment Ltd., Chennai. Has experience over five years in handling administration, operation, HR and Finance.

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V. Ravee alias V. Ramasubramanian - CEO Has more than 25 years of experience in the media business including film making. Apart from being responsible for the overall operations of the company, he will be in charge of managing the multiplexes, production, and other activities if the company. K. Muthuswamy Executive Director Theatere Division Thanjavur He has more than five decades of administrative and managerial experience in managing theaters. Entertainment Industry in India comprises of Film Industry and Television Industry. The Indian entertainment industry is among the fastest growing sectors in the country. In the past two decades entertainment industry in India has witnessed explosive growth. In television alone, from a single state owned television network, Doordarshan in 1991, today there are over 300 national, regional and local channels being beamed across the country. Indian film industry is the largest film industry in the world, producing on an average, close to a thousand films a year in all languages. In terms of film production India exceeds Hollywood's production volume by over three times. Some of the fastest growing segments in the Indian entertainment industry include music, cable and satellite television, animation and FM. According to an estimate by FICCI and Ernst and Young Indian entertainment industry would worth more than Rs. 400,000 million in 2008. Several positive developments like the accordance of the 'industry' status to the film industry, satellite channel penetration, the retail boom in the channels for music sales (Music World & Planet M), the use of digital technology in all spheres of entertainment and the growth of multiplexes have contributed to the growth of this sector. Entertainment industry in India is presently in a consolidation phase as boundary lines between films, music and television are fast disappearing. Skills and resources are being pooled extensively. Besides adaptation to high-end digital technology, the entertainment industry is also witnessing rapid development of state-of-the-art studios and

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post production facilities. In terms of employment, an estimated 6 million people earn their livelihood from the entertainment industry and this number is all set to grow. Entertainment industry in India is projected to be one of the major economic driving forces of the country. In India, television is the major segment of entertainment industry. Presently, India has the third largest television market in the world behind only china and the USA. Today, television reaches about hundred million Indian households. India has the world's biggest movie industry in terms of the number of movies produced. Presently, the technology of film-making in India is perhaps the best among all developing countries. Indian film industry is now increasingly getting professional and a lot of production houses such as Yash Raj Productions, Dharma Productions Mukta Arts etc. are now working on corporate lines. The popularity of Indian entertainment industry goes well beyond the geographical frontiers of the country. Indian television channels and films are viewed and enjoyed across the entire South Asia. Across the Middle East, parts of South East Asia and Africa, large expatriate populations ensure that Indian TV channels and films are a regular part of their entertainment bouquet. In UK and North America (USA and Canada), Indian TV channels and films are increasingly finding a foothold beyond the expatriate pockets as the audience there has started to enjoy and identify with the contemporary Indian culture. Quite a few of Indian film stars are also getting good offers from Hollywood.

The future prospects of Indian entertainment industry look to be extremely good. As India's profile rises on the global stage outside interest in India's culture and entertainment industry is also bound to grow.

ANALYSIS OF DATA
Working capital analysis

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The goal of working capital management is to manage the firms current assets and current liabilities in such a way that a satisfactory level of working capital is maintained. This is so because if the firm cannot maintain a satisfactory level forced into bankruptcy. The current assets should be large enough to cover its current liabilities in order to ensure a reasonable margin of safety. Each of current assets must be managed efficiently in order to maintain the liquidity of the fir, while not keeping too high level of any of one of them. The interaction between assets and current liabilities is. Therefore the main them of working capital management. Accessing working capital management Working capital management is the life blood and controlling never center of business. No business can successfully run with out an adequate amount of working capital. To avoid the shortage of working capital at once, an estimate of working capital requirements should be made in advance so that arrangement can be made to procure adequate working capital. But estimation of working capital requirements is not an easy task and large number factors have to be taken into consideration while an estimate of working capital requirements Total cost incurred on material, wage and over heads The length of time for which raw material are to remain in store before they are issued for production. The length of production cycle or work in- progress is, the time taken for conversion of raw material in to finished goods. The length of sale cycle during which finished goods are to be kept waiting for sale. The average period of credit allowed to customer. The amount of cash required to pay day-to- day expense of the business. The average amount of each cash required making a advance payment, if any The average credit period expected to be allowed by suppliers. Time lag in the payment of wages and other expenses. From the total amount blocked in current assets estimated on the basis of the first even items given above, the total of current liabilities that is the last two items is deducted to find out the requirement of working capital. In order to provide for contingencies, some extra amount generally calculated as fixed percentage of working capital can be aided as a margin of study.

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Working capital management in GV Film ltd The working capital in GV Film ltd., nearly 60% of total capital employed. Hence working capital become an importance portion in the GV Films ltd., Factors of influencing the working capital requirements in GV Film ltd., Production Program It is production program films, TV Serials, and film distribution, customer affect the working capital requirements of GV Film ltd., thus the size of the working capital requirement is determined on the basis of the production program. Finance Availability of finance that is, the cash and bank credit affects the working capital requirements of GV Film Ltd., to considerable extent Period of Credit The period of credit allowed by the suppliers and purchases and period of credit allowed to customers on sale also have their own influence on working capital requirement of GV Film ltd., Sources of finance of Working capital The working capital requirements is estimated through the preparation of capital and revenue budgets. The main source form the GV Film finances is working capital needs are Realization cash Cash credit from bank Cash credit form financial institutions and trade credit

Analysis Changes in working capital in GV Films ltd.

Components of working capital in GV Films Limited. The Working capital in GV films consists of different components like inventory ,sundry debtors, cash and bank balance , current liabilities etc.,Which are show in the following table along with amount invested in each for the period of three years.

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The structure of working capitals is presented in the table for the purpose of effective analysis of current assets :current liabilities and net working capital have been calculated. Each component of current assets and current liabilities and expressed as proposition to total assets total liabilities. Table1.1 showing the components of working capital and %for 3 years of GV Film limited:
Particulars Current Assets Inventory Sundry Debtors Cash& Bank Loans Advance Total Current 2004-05 % (100) 2005-06 % (100) 2006-07 % (100)

1153292421 46478319 7089397 27015551 1233875688

93.47 3.77 0.57 2.19

309860757 131677934 42121418 60600377 544260486

56.93 24.20 7.74 11.13

310169940 223544213 680169326 567451340 4781334819

17.41 12.54 38.18 31.87

Assets Current Liabilities Sundry Creditor 38395687 Other liabilities and Advance 22528504 Dues to Director 12045875 Provision for 20000 Tax FBT FCCB interest provision Total Current liability Net W. Capital Trend of Net working Capital 72990066 1160885622 100.00%

52.60 30.87 16.50 0.03 -

28826350 34061252 4723206 4262280 71873088 472387398 40.69%

40.11 47.39 6.57 5.93 -

10030008 39094883 3458660 23047271 603287 4171464 80405572 1700929247 146.52%

12.47 48.62 4.30 28.66 .75 5.19

Source: published annual report of GV Films limited 2004 to 2007. Note: The trend of net working capital are calculated by Taking the year 2004 as bases as 100%. Analysis: The inventory are 93.47%of total current assets during 2004 - 2005 and 56.93%in 2005 - 2006 and 17.41% in 2006-2007.it shows the levels of inventory gradually increased 2004 05 and decreased from 2005-2006&2006-2007. The sundry debtors are 3.77 %, of total current assets during 2004-2005, 24.20% in 2005-2006and 12.54% 2006-2007. It shows that the Amount of sundry debtors has been decreased during the period 2004-2005.

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The cash and bank balance are 0.57% of total current assets in 2004 2005.and 7.74% in 2005-2006. And 38.18% in 2006-2007 it shows increased from every yearly. Loans and advance there is 2.19% of total current assets in 2004 2005 and 11.13% in 2005-2006 and 31.87% in 200-2007 here we can say that company was taking more loans and advances from the year 2006-2007. The sundry creditors are 52.69 of the total liabilities in 2004-2005 and 40.11% in 20052006 And 12.47% in 2006-2007. It shows a gradually decrease in creditors up to 2006-2007. Graph showing components of Working Capital of GV Film Ltd.,

Components of Working Capital

Percentage of Working Capital 200% 150% 100% 50% 0% 2004-05 2005-06 2006-07 Years
The above graph showing changes trend percentage of working capital of GV Film Ltd.

Series1

Showing the Statement of Change in working Capital 2004-2005 Working Capital Current Assets Inventories Sundry Debtors Cash &Bank Loans & Advance Total (A) Current Liabilities 2004 1150448946 37375924 8156347 18993763 1214974980 2005 1153292421 46478319 7089397 27015551 1233875688 Increase 2843475 9102395 8021788 Decrease 1066950 -

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Current Liabilities Total (B) AB Net Increase Working Capital

in

57132621 57132621 1157842359 3043262 1160885321

72990067 72990067 1160885621

--

15857446 3043262

1160885621

19967658

19967658

Source
Published annul reports of GV Films ltd., 2004-2005 Analysis Above table shows statement of changing working capital during 2004-2005 which has net increase working capital in Rs.3043262.

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Showing the Statement of Change in working Capital 2005-2006 Working Capital Current Assets Inventories Sundry Debtors Cash &Bank Loans & Advance Total (A) Current Liabilities Current Liabilities Total (B) AB Net Decrease in Working Capital 1160885621 1160885621 843431664 843431664 2005 1153292421 46478319 7089397 27015551 1233875688 72990067 72990067 1160885621 2006 309860757 131677934 42121418 60600377 544260486 71873088 71873088 472387398 688498223 Increase 85199615 35032021 33584826 1116979 688498223 Decrease 843431664 -

Source
Published annul reports of GV Films ltd., 2005-2006 Analysis Above table shows statement of changing working capital during 2005-2006 which has net decrease working capital in Rs. 688498223.

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Showing the Statement of Change in working Capital 2006-2007 Working Capital Current Assets Inventories Sundry Debtors Cash &Bank Loans & Advance Total (A) Current Liabilities Current Liabilities Total (B) AB Net Increase in Working Capital 1700929247 1700929247 1237074333 1237074333 2006 309860757 131677934 42121418 60600377 544260486 71873088 71873088 472387398 1228541849 2007 310169940 223444213 680169326 567451340 1781334819 80405572 80105572 1700929247 Increase 309183 91866279 638047908 506850963 Decrease 8532484

Source Published annul reports of GV Films ltd., 2006-2007 Analysis Above table shows statement of changing working capital during 2006-2007 which has net increase working capital in Rs. 1228541849.

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CASH MANAGEMENT
Cash is an important component of current assets and is most essential for business operations. Cash is the basic input needed to keep the business running on a continues basis. It is also the ultimate output expected to be realized by selling the service and product manufactured by the firm. Cash is both the beginning and the end of the working capital cycles i.e. cash, inventories, receivables and cash ____R.K.Mishra, Its effective management is the key determinates of sufficient working capital management. Cash in the business enterprise may be compared to the blood of the human body. Blood gives life the strength to the human body, and cash imports life and strength, profit and solvency to the business organization. ____ P.V. Kulakarni, Motives for holding cash: There are four motives for main training cash balances. 1. Transaction motive 2. Precautionary motive 3. Speculative motive 4. Compensating motive Objectives of cash management: The basic objectives of cash management are as follows. 1. To meet the payments schedule. 2. Minimizing funds committed to cash balances. Functions of cash management: 1. Cash planning 2. Managing the cash flows 3. Determining optimum cash balance 4. Investing idle cash. Cash Management in GV Films Limited

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CASH MANAGEMENT IN GV FILM LTD Sources of Cash The main sources through with GV Films gets Cash are the collection from debtors, advances on Sales and other sources. Payment of Cash The companies main item of expenditure are wages , salaries, bonus , Expenditure salaries , expenditure on development, sales tax, income tax, excise duty , payment to creditors , interest on borrowing. All the payment to creditors is make through cheque and cash even expenses are paid , wages salaries exiles duties is paid monthly . Showing cash to Networking capital of GV Films 2004-05 (Amount in Rs) 7089397 1160885621 0.61 2005-06 (Amount in Rs) 42121418 472387398 8.9 2006-07 (Amount in Rs) 680169326 1700929247 39.98

Particulars Cash & Bank Balance Net Working Capital Cash to NWC Ratio (Times) Sources

Published annual reports of GV Films ltd 2004-2007. Analysis Table 2.1 portrays the size of cash and bank balance in GV Films from 2004-2005 to 2006-2007 as a percentage of net working capital. The cash and bank balance were 0.61(times) of net working capital during 2004-2005, 8.9 (times) during 20052006,39.98 (times) during 2006-2007.

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Graph Showing Cash to Net Working Capital Ratio

Cash to NWC
45 40 35 30 25 20 15 10 5 0 2004-05 2005-06 Years 2006-07

Cash to NWC

Series1

Interpretations This ratio indicates the proportion of cash and bank balance maintained by GV Films. It is assumes per amount importance of the level of cash balance decides the liquidity Profitability, aspects of the company. The lower the cash to networking capital the grater may be the profitability of the concern and vice-versa. It any company holds too low cash and bank balances in the relation to net working capital , it implies the ability of firm to meet day to day requirement of cash in the present study cash to current ration of GV Films ltd., reveals it was 0.61 in 2004-2005and it was increased to 8.9% in 2005-2006 and 39.98 % in 2006-2007respectively. Practice of holding cash balance in relation to net working capital indicates good cash management in sales

INVENTORY MANAGEMENT

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Inventory management involves the control of assets being produced for the purposes of sale in the normal courses of the companys operation. Inventories include raw material, work-in-process and finished good inventory. The main goal of effective inventory management is to minimize the total costs direct and indirect that are associated with holding inventories. How ever the importance of inventory management to the company depends upon the extent of investment in inventory. Meaning The term inventory refers to the stock file of the product which a firm is offering for sale and the components that male the product. Nature of inventories Inventories are stock of the product a company is manufacturing for sale and components that make up the product. The various forms in which inventories exist in a manufacturing company. 1. Raw materials Raw materials are basic inputs that are converted in to finished product. productions. 2. Work-in-process Work in process inventories are semi manufactured products. products that need more work before they become finished products for sale. 3. Finished goods Finished goods inventories are those completely manufactured products which are ready for sale. Stocks of raw materials and work-in-process facilitate production, while stock of finished goods is required for smooth maturing operation. Thus inventories serve as a link between the production and consumption of goods. They represent Raw materials inventories are those units which have been purchased and stored for future

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A firm also maintains a fourth kind of inventory or stores and spares. This category includes those products which are accessories to the main products produced for the purpose of sale. Ex: bolts, nuts, clamps, screws etc. Purpose of Inventories The purpose of holding inventories is to allow the firm to separate the processes of purchasing, manufacturing and marketing of its primary products. The goal is to achieve efficiencies in are as where costs are involved and to achieve sales at competitive prices in the market place. The main purposes are 1. Avoiding lost sales 2. Gaining quantity discount 3. Reducing order cost 4. Achieving efficient production rum. Avoid losses of sales Purchasing Gain Quantity discounts Firms holding Inventories Producing Reduce Order Costs Selling Achieve efficient production

Fig;-Purpose of inventory

Objectives of Inventory management

The main objectives of inventory management as follows 1. Ensure a continuous supply of raw materials to facilitate uninterrupted production.

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2. Maintain sufficient stocks of raw materials in periods of short supply and anticipate price changes. 3. Maintain sufficient finished goods inventory for smooth sales operation, and efficient customer service. 4. Minimize the carrying cost and time. 5. Control investment in inventories and keep it at an optimum level. Inventory control A firm needs an inventory control system to effectively mange its inventory. Inventory control is concerned with the acquisition storage, handling and use of inventories so as to ensure the availability of inventory when ever needed provide adequate cushion for contingency and derive maximum economy and minimize wastage and losses R. K. Ghosh and G. S. Gupta, Objectives of Inventory control To minimize the possibility of delay in production through regular supply of raw materials, stores and spares, tools and other equipment and when required. 1. To avoid unnecessary capital locker up in inventories. 2. To exercise economies in ordering, the obtaining and storing of materials Ordering system of inventories In managing inventories, the firms objective should be in Constance with the share holder wealth maximization principle. optimum level of inventory. To mange inventories efficiency, answers should be sought to the following two questions like a. How much should be ordered b. When should it be ordered There are three important systems of ordering materials they are 1. Economic order quantity (EOQ) Or To achieve this, the firm should determine the

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2. Fixed period order system or periodic re ordering system or periodic review system. 3. Single order and scheduled part-deliveries system. Methods of valuing material issues The stock of given material will, there fore consist of purchases made at different times at different prices, which poses a problems as to what should be the price when the material is issued. There are many methods of pricing material issues the important A. cost price methods I. First in first out ii. Lost in first out iii. Average cost iv. Inflated price v. Specific price vi. Base stock vii. Highest in first out B. Market price method I. Replacement Price II. Realizable Value C. Standard price methods I. Current standard price ii. Basic standard price Role of inventory in working capital management Inventories are components of current assets. Some characteristics are important in the broad context of working capital management including. 1. A current assets 2. Level of liquidity 3. Liquidity lags 4. Circulating activity

INVENTORY TOTAL CURRENT ASSTES Particular Inventories Total current assets 2004-2005 1153292421 1233875688 2005-2006 309860757 544260486 2006-2007 310169940 1781334819

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% Of inventory to total current assets Sources

93.46

56.93

17.41

Published annual reports on GV Film ltd., from 2004-2007 Analysis Inventory to total current assets as the percentage of the total current assets in the year 20042005 93.46, in the year 2005-2006 56.93%, in the year 2006-2007 17.41%.

Interpretation The total inventory as a percentage of the total current assets as 93.46% in the year 2004-2005 it has gown down to 17.41%, in the year 2006-2007 This percentage of inventories to current assets indicates that the inefficiency of inventory management in GV Films limited ., gown down from 2005-2006. Since there is decreased in the percentage indicates the efficiency of inventory management has decreased Inventory Turnover Ratio Inventory turnover Ratio indicates the efficiency of the firm in producing and selling in products Sales Inventory turnover Ratio = --------------------------------Average inventory

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Showing inventory Turnover Ratio of GV Films Ltd., Particular Sales Average Inventory Inventory Turnover Ratio Sources Published the annual report on GV Film ltd from 2004-2007 Analysis The table shows calculated inventory turnover ratio , it has 2.51% in the year 2004-2005 , in the year 2005-2006 0 .25%, in the year 2006-2007 2.50%.
In e t r T r o e R tio v no y u n v r a
5 Times 4 3 2 1 0 2 0 -0 04 5 20- 6 0 50 Ya e rs 2 0 -0 06 7

2004-2005 28850521 1151870684 2.51

2005-2006 187986374 731576589 0.25

2006-2007 426563766 170438875 2.50

Interpretation Inventory Turnover ratio measures the velocity and to ;measure the efficiency of the company selling it s products. In the year 2004-2005 it was 2.51%, and 0.25% in the year 2005-2006 decreased .the firm has not to maintain efficient management of Inventory. Showing Holding Period of Inventory Years 2004_2005 2005-2006 2006-2007 Inventory Turnover Ratio 2.51 0.25 2.50 Number of Days 360 360 360 Numberofdays for Inventory 143 Days 120 Days 144 Days

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Sources Published annual report of GV Films ltd., from 2004-2006 Analysis In the year 2004-2005 the holding period was 143 days, 120 days in 2005 2006, 144 days 2006-2007.

Holding Period of Inventory

400 350 300 250 200 150 100 50 0 2004-05 2005-06 Years
The above graph showing changes in the holding period of inventories GV Films ltd., Interpretation Shows the inventory holding period of through out under the study in the 2005-2006 the inventory was sold with in 120 days it is less period compared to other years. Changes in Sales and Inventory: Particular Sales Inventory Changes in Sales Change in Inventory 2004-2005 28850521 1153292421 100% 100% 2005-2006 187986374 309860757 65.81% 2.68% 2006-2007 426563766 310169940 147.8% 26.89%

Days

2006-07

Sources
Published annual report on GV Films ltd.,2004-2007.

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Note: the percentage in sales and inventory or calculated by taking the year 2005 as basis as 100%. Analysis Depicts the change in sales and inventory over the period under the study, change in inventory was decreased by2.68% in 2005-2006 26.89% and 2006-2008 respectively.

The above graph showing changes in sales and inventory of GV Films ltd., Interpretation The study of inventory and change in sales , inventory was not improved and sales are improved. This is because, the sales as increased in the year 2006-2007.

DISCUSSES THE LIQUIDITY OF GV FILMS LTD.,

Introduction The liquidity position of GV Films is analyzed by calculating current ratio , quick ration, absolute quick ratio Current ratio

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Current ratio to measure the firms short term solvency of indicates the availability of current assets in rupees for every one of current liability. A ratio grater than means that the firm as more current assets the current liability Current Assets Current Ratio = Current Liability Showing of Current Ratio of GV Film ltd: Particular Current Assets Current Liability Current Ratio 2004-2005 1233875688 72990067 16.90 2005-2006 544260486 71873088 7.57 2006-2007 1781334819 80405572 22.15

Source
Published annual report of GV Film ltd., from 2004-2007. The calculated current ration indicates the proportion of current assets to current liabilities in all years is below then the standard ratio. Analysis The calculated current ratios are 16.90 in 2004-2005, 7.57%in 2005- 2006,22.15%in 2006-2007 since the ratio is grater than its standard in all the year the shot term financial position of the company is very good.

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The above graph showing current ration of GV Films ltd.

Interpretation Shows that the firm calculated current ration is grater than standard ratio (2:1) in all years from 2004-2005 to 2006-2007. current ratio indicates sufficient level of investment in current assets in all years.

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Liquidity Ratio
Liquidity ration indicate that a relationship between quick or liquid assets and current liabilities. An assets is liquid if it can be converted in to cash immediately of reasonable soon with out a loose of values. Quick (or) Liquid Assets Liquidity Ratio= -------------------------------------Current liabilities Liquid or Quick Assets = Current Assets (Inventory + Prepaid Exp) Showing of Liquidity Ratio of GV Films Ltd., Particular Liquid Assets Current Liabilities Liquid Ratio Source Published annul report of GV Films ltd., 2004-2007 Analysis The calculated liquidity ratio is 1.10% in 2004-2005 ,3.26% in 2005-2006, in 18.29% 20062007 . 2004-2005 80583267 72990067 1.10 2005-2006 234399729 71873088 3.26 2006-2007 1471164879 80405572 18.29

The above graph showing liquidity position of GV Films ltd., Interpretation The liquid ratio 1.10% in 2004-2005,3.26% in 2005-2006, 18.29% in 200-2007 the company liquid ratio is good, it maintain sufficient amount of liquid assets.

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Absolute liquid Ratio Since cash is most liquid asset a financial analysis may examine the ration of cash and its equivalent to current liabilities . trade investment on marketable secularity are equivalent to cash. There for may be including in computation of its ratio. Absolute liquid Asset Absolute liquid Ratio = -----------------------------Current liabilities Showing of Absolute liquid Ratio of GV Films Ltd., Particulars Absolute Liquid Assets Current Liabilities Absolute Liquid Ratio 2004-2005 S7089397 72990067 0.097 2005-2006 42121418 71873088 0.58 2006-2007 680169326 80405572 8.45

Source
Published annual reports of GV Films ltd.,2004-2007. Absolute liquid ratio market cash in hand and at bank and marketable security or temporary investment. The acceptable norm i.e. rate 10/- worth absolute liquid asset or considered adequate to pay 20 Rs Worth . current liabilities in time as all creditors or not expected to demand cash at same time and then as may also be realized from debtors and inventorys Analysis This calculated absolute liquid ratio are 0.097 in 2004-2005, 0.58in 2005-2006 ,8.45in 2006-2007.

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The above graph showing absolute liquidity position of GV films ltd., Interpretation In the all the years firm calculated cash ratio is higher than the acceptable standard ratio with indicated the firm has been maintain sufficient level cash to meet its data to day obligation.

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FINDINGS
The following of the findings of the GV Films Ltd with regards to working capital management 2004-2007. The investment in inventory gradually decreases from 93.47 % to 17.41 % during 2004-07. The amount of sundry debtor has been increased from 3.77% of total current assets to 24.20% during 2005-06 there was a decrease in 2006-07, 12.54% declined in current assets. Sundry Creditors have been decreased during the period under study from 52.60% to 12.47% of the total current liabilities The net increase in working capital during the year 2004-2005 is Rs: 3043262. The net decrease in working capital during the year 2005-2006 is Rs:688498223 The net increase in working capital during the year 2006-2007 is Rs: 1228541849. The calculated current ratio 16.90 in 2004-2005, 7.57 in 2005-2006, 22.15 in 20062007. The liquid ratio is 1.10 in2004-2005, 3.26 in 2005-2006, 18.29 in 2006-2007. Except 2004-07 the liquid ratio was more than standard ratio, therefore liquidity position of the origination is satisfactory. Cash and bank balance vary between 0.6 (times) and 8.9 (times) in 39.98(times) in GV Films how ever the parties of holding cash balance in relation in net working capital indicate good cash management in GV Film Ltd. The total investment in inventory has been decreased from 2004-2007,it indicates poor performance in inventory management this is due to low investment in raw materials and low production.

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SUGGESTIONS
The cash ratio is of the company is not satisfactory through the period of under study, because in all the year cash ratio is below the standard. Hence it is suggested to improve cash and bank balance to meet day to day obligations. It is suggested to make investment in inventories and to improve the performance in inventory management.

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