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A Project Report On Working Capital Of Nirma Ltd.

No PREFACE ACKNOWLEDGEMENT E X I C UT I VE S UM M E R Y 1 General Information Hi s t o r y An d De v e l o p m e n t Bo a r d Of Di r e c t o r s 2 Working Capital In t r o d u c t i o n Ty p e s Of Wo r k i n g C ap i t a l Fa c t o r s In f l u e n c i n g Wor ki n g Ca pi t a l Cash Management In t r o d u c t i o n Mo n i t o r i n g Co l l e c t i o n An d Re c e i va b l e Credit Management Cr e d i t Po l i c y Va r i a b l e s Cr e d i t Gr a n t i n g De c i s i o n C. A . F i n a n c i a l Ne e d Of Wo r k i n g C ap i t a l Li m i t a t i o n Fi n d i n g s Conclusion Bibliography Annexure Pa r t i c u l a r s I II III P a ge No


Nirma is one of the few names - which is instantly recognized as a true Indian brand, which took on mighty multinationals and rewrote the marketing rules to win the heart of princess, i.e. the consumer. Nirma, the proverbial Rags to Riches saga of Dr. Karsanbhai Patel, is a classic example of the success of Indian entrepreneurship in the face of stiff competition. Starting as a one-man operation in 1969, today, it has about 14, 000 employee-base and annual turnover is above Rs. 25, 00 crores. India is a one of the largest consumer economy, with burgeoning middle class pie. In such a widespread, diverse marketplace, Nirma aptly concentrated all its efforts towards creating and building a strong consumer preference towards its value-for-money products. It was way back in 60s and 70s, where the domestic detergent market had only premium segment, with very few players and was dominated by MNCs. It was 1969, when Karsanbhai Patel started door-todoor selling of his detergent powder, priced at an astonishing Rs. 3 per kg, when the available cheapest brand in the market was Rs. 13 per kg. It was really an innovative, quality product with indigenous process, packaging and low-profiled marketing, which changed the habit of Indian housewives for washing their clothes. In a short span, Nirma created an entirely new market segment in domestic marketplace, which is, eventually the largest consumer pocket and quickly emerged as dominating market player a position it has never since relinquished. Rewriting the marketing rules, Nirma became a one of the widely discussed success stories between the four-walls of the B-school classrooms across the world. The performance of Nirma during the decade of 1980s has been labelled as Marketing Miracle of an era. During this period, the brand surged well ahead its nearest rival Surf, which was well-established detergent product by Hindustan Lever. It was a severing battering for MNC as it recorded a sharp drop in its market share. Nirma literally captured the market share by offering value-based marketing mix of four Ps, i.e. a perfect match of product, price, place and promotion.

Now, the year 2008 sees Nirmas annual sales touch 800,000 tones, making it one of the largest volume sales with a single brand name in the world. Looking at the FMCG synergies, Nirma stepped into toilet soaps relatively late in 1990 but this did not deter it to achieve a volume of 100,000 per annum. This makes Nirma the largest detergent and the second largest toilet soap brand in India with market share of 38% and 20% respectively. It has been persistent effort of Nirma to make consumer products available to masses at an affordable price. Hence, it takes utmost care to provide finest products at the most affordable prices. To leverage this effort, Nirma has gone for massive backward integration along with expansion and modernization of the manufacturing facilities. The focal objective behind modernisation plan is of up gradation with resource-savvy technology to optimise capabilities. Nirmas six production facilities, located at different places, are well equipped with state-of-art technologies. To ensure regular supply of major raw materials, Nirma had opted for backward integration strategies. These strategic moves allowed Nirma to manage effective and efficient supply-chain. Nirma has always been practiced value-for-money plank. Nirma plans to extend the same philosophy in categories as commodity food products, personal care products and packaged food. Distinct market vision and robust infrastructure allowed Nirma to have cost leadership. Apart from this, lean distribution network, umbrella branding and low profile media promotions allowed it to offer quality products, at affordable prices. In present scenario, an inspiring 59-year-old persona, Dr. Karsanbhai K. Patel, leads Nirma, playing role of key strategic decisionmaker, whereas his next generation has already skilled management capabilities. Shri Rakesh K Patel a qualified management graduate, is spearheading the procurement, production and logistic functions, whereas Shri Hiren K Patel a qualified Chemical engineer and management graduate, heads the marketing and finance functions of the organisation. Shri Kalpesh Patel, Executive Director, leads the professional organisational structure.


The man behind the success of Nirma phenomenon Dr. Karsanbhai Patel is a recipient of various awards and accolades. He has been bestowed with various awards like

Udyog Ratna by Federation of Association of Small-Scale Industries of Gujarat, New Delhi. Outstanding Industrialist of Eighties by Gujarat Chamber of Commerce and Industry, Ahmedabad (in 1990). Gujarat Businessman Award in 1998 by Gujarat Chamber of Commerce and Industry, Ahmedabad. Excellence in Corporate Governance Award by Rotary International District 2000. A&M Hall of Fame.

Shri Karsanbhai has been awarded an Honorary Doctorate by Florida Atlantic University, Florida, USA in the year 2001 in recognition of his exceptional accomplishments as a philanthropist and businessman. This world has also recognised his ability, acumen and wisdom and in recognition of the services rendered by him in his various capacities. Dr. Karsanbhai Patel has also served as a Chairman for two terms to the Government of Indias Development Council for soaps and detergents, as a Member of Bureau of Indian Standards Committee for Soaps and Detergent Industries and President of Gujarat Detergent Manufacturers Association. In scorching heat of 1969, a son of small-time farmer was trying to mix Soda Ash and few other intermediaries, to make a detergent produce. He was a qualified Science graduate and was working as junior chemist in Government laboratory. As a moonlighting activity, he was making detergents in the 100 Sq. Ft. back yard of his home, using bare hands and bucket. Once the mixture is ready, he used to pack them in polythene bag and was selling door-to-door Gradually, the product became well accepted in the consumer community, and the rest is known to one and all This is a success saga of a first generation entrepreneur, on his way to create history in the Indian marketplace - that was Dr. Karsanbhai Patel.

In a short span, he captured the domestic market, with a quality product. He swiftly crafted low-to-medium consumer pockets a whole new consumer segment for detergent category. He took on mighty multi-nationals and rewrote the marketing rules. In true sense, he spearheaded the market revolution by offering innovative, value-for-money products, and changed the cloth-washing habit of Indian housewives - the revolution called Nirma. From initial days, Nirma believed in value-for-money equation, in creating and maintaining long-lasting relationships. It has always remained committed to offer better products, at better value, for better living

Name of Unit:Nirma limited. Address of the Unit:Nirma limited, Mandaly, National Highway, Mehsana :- 384002 Registration office:Nirma House, Ashram road, Ahmedabad :- 38000 Board of directors:Dr.K.K.Patel Shri Rakesh.K.Patel, Vice chairman Shri Shrenikbhai K.Patel Shri Pankaj R. Patel Shri Rajendra D. Shah Shri A.P.Sarwan Shri Chinubhai R. Shah Shri Kalpesh A.Patel Shri Hiren K.Patel, Executive director Auditors:Himanshu Shah & co. Charterd Accountants Ahmedabad. Company secretary:-

Shri Paresh Sheth Bankers:State bank of India. Dena bank.


This is an independent intergovernmental, science and technology based organization, in the United Nations family, that serves as the global focal point for unclear co-operation. Assists its member states, in the context of social and economic goals, in planning for and using unclear science and technology for various peaceful purposes, including the generation of electricity, and facilitates the transfer of such technology and knowledge in a sustainable manner to developing member states. Develops nuclear safety standards, promotes the achievement and maintenance of high level of safety in application of nuclear energy, as well as the protection of human health and the environment against ionizing radiation. This customer-centric philosophy has been well emphasised at Nirma through:

Continuously exploring & developing new products & processes. Laying emphasis on cost effectiveness. Maintaining effective Quality Management System. Complying with safety, environment and social obligations. Imparting training to all involved on a continuous basis. Teamwork and active participation all around. Demonstrating belongingness and exemplary behaviour towards organisation, its goals and objectives.


BATHING SOAPS:1 2 3 4 5 6 7 8 9 10 11 DETERGENT CAKE:1 2 3 4 5 DETERGENT POWDER:1 Nirma detergent powder 2 Super Nirma detergent powder 3 Nirma popular detergent powder 4 Blue Nirma detergent powder OTHER PRODUCTS:1 Nirma beauty shampoo 2 Nirma shikakai 3 Nirma toothpaste 4 Lodised Nirma free flow salt Nirma popular detergent cake Nirma detergent cake Super Nirma detergent cake Nirma Green detergent cake Nirma Blue detergent cake Nirma Beauty soap Nirma bath soap Nirma Premium soap Nirma Lime soap Nima Rose Nima Winner Nima Sandal Nima Herbal Nima Herbalina Nima Lime Nima Jasmine

Policy is to meet consumers expectation and win their confidence with superior quality. BETTER PRODUCTS, BETTER VALUE, BETTER LIVING.


Manufacturing and supplying consistent quality of Product to customer by follow up of right first time. Ensure total commitment for customer satisfaction and continue to fulfill their requirements by ensuring quality at all level. Increase our export turnover.

Personnel department is mainly concerned to achieve its objectives. It is basically concerned with principle of having right person at a right time on a right place. Personnel department is also known as Human resources management Mr. Anil Bhargav is the general manager of the personnel department. The central Principle of the personnel department and NIRMA LIMITED is that the manpower is a heart. So management provides proper satisfaction. There is an approach with the employees.

SHIFTS:The company is having three shifts at mandali. 1. 8.00 a.m. to 4.00 p.m. 2. 4.00 p.m. to 12.00 p.m. 3. 12.00 a.m. to 8.00 a.m.

TOTAL WORK FORCE:Total 4500 Technical 1050 Drivers & Cleaners 180 Others 3500 Male 3000 Female 500

The importance of working capital in any industry needs no special emphasis.Working capital refers to that portion of total fund, which finances the day-to-daywork ingexpenses during the operating cycle. Management of working is one of the mostimportant functions of corporate management. The efficient working capital management is the most crucial factor in maintaining liquidity and profitability of the concerned business organization.Fundamentally there are two concepts of working capital and they are.... 1. Gross working capital. 2. Net working capital. Gross working capital: It refers to the firms investment in total current or circulating assets which can be converted into cash within an accounting year and include cash short-term security, debtors, bills receivables and stock investment. Net working capital: It as only the difference between current assets and current liabilities.Net working capital can be positive or negative, a positive net working capital will arise when current assets exceeds current liabilities. A negative net working capital occurs when current liabilities are in excess of current assets. Net working capital = current assets current liabilities To be specific neither under stocking nor overstocking of raw materials carefulmaintenance and tradeoff between credit receiving period from sundry creditors andcredit allowed to sundry debtors (generally credit period from sundry should be morethan credit period allowed to sundry debtors). a) Optimum investment in current assets. b) Financing of current assets.

A conservative management prefers to minimize risk by holding a higher level ofworking capital while liberal management assumes greater and greater risk by reducingthe level. In this regards the management assumes should establish acceptable norms andeffective policies for each of the components of working capital. We know a firm, whichadequately plans its cash, inventory, sundry debtors, will have fewer problems of controlthan one, which operates without effective policies in these areas. Working capitalmanagement is the most important area of the overall financial management of a firm. If company does not have sufficient liquidity, it may not be in a position to meet itscommitments and thereby may loose its credit worthiness. In the management of working capital two characteristics of current assets must beborne in mind. 1) Short life span. 2) Swift transformation into other asset forms. Current assets have a short life span. Cash balances may be held idle for a weekor two, accounts receivable may have a life span of 30 to 60 days, and inventories may be held for 30 days to 100 days. The life span of current assets depends upon the time required in the activities of procurement, production, sales and collection and the degree of synchronization among them.


There are basically two types of working capital are in business: - Permanent working capital that Permanently blocked in business and variable working capital which varies with the riquirement of business.

Working capital

Permanent W.C.

Variable W.C.

Initial W.C.

Regular W.C.

Seasonal W.C.

Special W.C.


It is the type of W.C. which is permenently locked up in current assets, some cash is required to maintain stocks of RM & FG at their normal level & also for paying wages and salaries regularly, permanent W.C. is of two kinds. (a) Initial working capital In the initial period of its operation, a company must have enough money to pay certain expenses before the business yields cash receipts. In the initial years, bank may not grant loans of overdrft, sales may have to be made on credit and it may be necessory to make payment to the creditor's immidiately. Hence the turns will have tobe supplied by the owners themselves in the initial years. (b) Regular working capital It is the W.C. which is required to continue the regular operations. It is required to maintain regular stocks of raw material & W.I.P. and also of the finish goods that must be maintained permanently at a defined level. Regular W,C. is the excess of current assets over current liabilities. It provides insurance and smooth operations of the business.


It is the part of W.C. which is required to meet the seasonal needs as well as special needs of the business. It is therefore, subdevided into two parts. (a) Seasonal working capital Some business enterprise required additional working capital during a particular season. For example the sugar mills have to purchase sugarcane in a particular season and have to employ additional labour to processit. They must meet this requirement by provinding additional funds for a temporary period. (b) Special working capital In all enterprise, some unforeseen events do occur when extra funds are needed to tide over such situation some of this events are :- sudden increase in demand for the final product (when a war breaks out, for example) downward movement of prices and sales during depression necessitating extra working funds, considerable rise in prices of R.M so more funds will be needed to maintain their stocks at a normal level and strikes or natural calamities which also force the management to provide additional funds. - "Higher levels of working capital decrease the risk and decrease the profitability too. While lower levels of working capital increase the risk but have the potentiality of increasing the profitability also An increase in the ratio of current assets to total assets will result in decline in the profitability of the firm."

Net Working Capital for 2007-08 and 2006-07.

Particulars (A) Current Assets: Inventories Sundry Debtors Cash and Bank Balance Loans and Advances Total (B) Current Liabilities: Current Liabilities Provisions Sundry creditor for expensive Agent current account Total Net Working Capital (A-B)

2007-08 635.16 216.37 72.65 500.86 1425.04 195.46 129.68 325.14

2006-07 486.01 233.39 62.77 550.50 1332.67 214.60 125.23 339.83



Net Working Capital for 2007 and 2008. PARTICULAR NET W.C 2007-08 1099.90 2006-07 992.84

1100 1050 1000 950 900 2007-08 2006-07 NET W.C

The working capital of the company has increased in 2007-08 as compared to 2006-07, as it increased its production compared to 2006-07 which is 1099.90.


There are number of factors which determine the amount of working capital requirement in the business.


The nature of business is an important factor in deciding the amount of working capital for example the amount of working capital is generally more in trading concerns & in service units as compared to the manufacturing units. The retail trading units have also to invest large funds in the working capital. In some manufacturing companies also the working capital hold a significant place. On the other hand, public utilities require less working capital as compared to public utilities. Nirma having regular supply of raw materials reduces the working capital requirements.


The longer a period a manufacturing cycle takes the larger is the amount of working capital is required, because the fund get locked up in production process for a longer period of time. It is in view of this that when alternative method of production is available, the method with the shortest manufacturing cycle should be selected. The choice is made is taken to see that the manufacturing cycle is completed within a specific period. Any delay in production is bound to increase the requirement of working capital.

Nirma having a high stock turnover, so that reduces the working capital requirements.


Business fluctuations are of two types: seasonal fluctuation which arises out of seasonal changes in demand for the product and cyclical fluctuation which occur due to ups and down of economic activities in the country as a whole. If demand for the product is seasonal production will have to be increased during the season & it will have to be reduced during the offseason correspondingly, there will be fluctuation in the requirement of working capital. The cyclical fluctuations are made up of prosperity and depression. The sales & prices increase during prosperity necessitating more working capital in the form of inventories and book-debts.

If the policy of constant production is adopted, there are two possible effects. Policy helps in reducing working capital requirement to the lowest level. But it demand for the product is seasonal, this policy rises the of inventory during off-season and thereby increases the working capital requirement. Nirma has a continuous production, so that working capital requirement is high.

In the present day's circumstances, almost units have to sell goods on credit. The nature of credit policy is an important consideration in the deciding the amount of working capital requirement. The larger the volume of credit sales, the collection of payment takes, the greater will be the requirement of working capital. Nirma having extending less credit requires less working capital.


The amount of credit that a firm can obtain as the length of the credit period significantly attests the working capital requirement. The greater the prospects of getting credit the smaller will be its requirement of working capital because it can easily purchase R.M. & other requirement on credit.


Working capital requirement increase as companys sales increases it is difficult to precisely determine the relationship between volume of sales and working capital requirement a growing firm may need to invest funds in F.A. in order to sustain its growing production and sales. Other things being more working capital then other advance planning of working capital for growing concern.


The level of profit also determines the level of working capital requirement. The availability of internal funds for working capital requirement is determined not merely by profit margin butalso on the manner of apropriation for taxation, dividends, reserves & depreciation.


The increasing shifts in the level make function of financial manager more difficult. He should anticipate the effect of price level changes on working capital requirement of the firm. Generally rising price level will require a firm to maintain higher amount of working capital. However companies, which can immediately revise their product prices with rising price level, will not face any problem.


The operation efficiency of the firm relates to the optimum utilisation of resources at the rate of minimum cost. The firm will be effectively contributing to its working capital. If it is efficient in controlling operating cost. Better utilisation of resources improves profitability and thus helps in releasing the pressure on working capital. Nirma follows conservative dividend policy. Dividend can be paid from the retained

earnings.Nirma having moderate lead time requires moderate working capital.


To access the impact of working capital. To examine the combined effect of the ratios relating to working capitalmanagement. To determined the working capital leverage for examining the sensitivity of ROI to changes in the level of gross working capital of Nirma. To compare the liquidity position of the company. To know the working capital requirements. To give suggestions to improve the efficiency of working capital and liquidity management of Nirma.


The study in an attempt to make appraisal of working capital of the Nirma Ltd. The study will analyze the working capital management position subjected to intensive analysis with the reference to the internal appraisal of the Nirma Ltd. The study of the Nirma Ltd has been undertaken with certain objectives by highlighting the features, functions, and working capital as well as statuary regulations governing the company. This study can be applied for similar manufacturing companies. To access the impact of working capital and profitability of the company. To combined effect of the ratios relating to working capital management of the company. To determined the working capital leverage for examining the sensitivity of ROI to changes in the level of gross working capital of Nirma. To know the working capital requirements, to compare the liquidity position of the company taken place.

Operating cycle is the time duration required to convert sales, after the conversion of resources into ninventories into cash. The operating cycle of a firm begins with the acquisition of raw material and ends theb collection of receivable.It may be devided into four stages. 1. 2. 3. 4. Raw material and stares storage stage. Work in process stage. Finished good inventory stage. Debtors collection stage.

These stages affect cash flows which most of the times are neither sychronized (because cash outflows usually occurs before cash inflows.) not certain (because sales and collection which generates cash inflows, are not forested accurately.) The firm is there fore required to invest in current assets for a smooth and uninterrupted functioning and to material and pay expenses. Cash is also held to meet any future exigencies. Stocks of R.M. and W.I.P are kept to ensure smooth production. Stocks of finish goods to meet the demand of customers on continuous basis and sometimes sudden demand. Book debt i.e. ALC receivables are created because goods are sold for credit for marketing and competitive reasons. The length of manufacturing cycle is the total of... 1. ICP-Inventory Conversion Period. 2. BDCP-Book Debt Conversion Period. The ICP is the total of time required for producing and selling the product and consists of... a) RMCP = RM Conversion Period. b) WCP = WIP Conversion Period.

c) FGCP =

FG Conversion Period.

The BDCP (receivable Conversion Period) is the time required to collect standing amount from customers. The total ICP & BDCP is also known as GOC - gross up cycle. The firm may acquire resources on credit & temporary postpone payments, payables which the firm can defer are spontaneous sources of capital to finance investment in C.A. thus the payable deferral period ( PDP) is the length of time that the firm is able to defer payments various resources purchases. The difference between GOC & PDP is net operating cycle. NOC is also known as cash conversion cycle.











2007-08 (Crores)

2006-07 (Crores)

2005-06 (Crores)

Opening stock + purchase - closing stock Material consumed + Employees cost + Depreciation +Manufacturing exp. Work cost + Opening stock of W.I.P. - Closing stock of W.I.P. +Admin. Exp. Cost of production + Opening stock of F.G. - Opening stock of F.G. Cost of good sold + Selling & Distribution Exp. Cost of sales

207.32 1112.43 235.51 1084.24 81.65 1826.96 362.04 3354.89 35.44 40.58 10.4 3360.15 113.02 133.84 3339.33 442.26 3781.59

129.83 1176.07 207.32 1098.58 65.10 1604.99 349.54 3118.21 28.64 35.44 8.5 3119.91 52.30 113.02 3059.19 445.58 3504.77

140.09 896.39 130.00 906.48 43.80 983.35 312.32 2245.95 36.67 28.64 2.2 2256.18 37.29 52.30 2241.17 191.61 2432.78

Inventory conversion period = RMCP + WIPCP + FGCP Calculation of RMCP:Particular R.M. Inventory R.M. Consuption 2007-08 (crores) 2006-07(crores) 2005-06(crores) 235.51 207.32 130 1084.24 1098.58 906.48


Raw Material Inventory -----------------------------------------Raw Material Consuption 2007-08 2006-07


Particular RMCP

2005-06 130 = ----------- x360 906.48

235.51 207.32 = ----------- x 360 = ------------ x 360 1084.24 1098.58

78 days

= 68 days

= 52 days

The RM consumption period is 78 days in the year 2007-08 and in the year 2006-07 it is 68 days and in 2005-06 it is 52 days. This has happen because consumption of RM has increased in 2007-08 compared to the year 2006-07 and 2005-06.So the overall RMCP has increased in the year 2007-08.

Calculation of WIPCP:Particular WIP Inventory Cost of produ. 2007-08 (crores) 2006-07(crores) 2005-06(crores) 40.58 35.44 28.64 3360.15 3119.91 2256.18 WIP Inventory -----------------------------------------Cost of production 2007-08 = = 2006-07



Particular WIPCP

2005-06 28.64 = ----------- x360 2256.18 = 5 days

40.58 35.44 ----------- x 360 = ------------ x 360 3360.15 3009.91 4 days = 4 days

The WIP conversion period is 4 days in the year 2007-08 and in the year 2006-07 it is 4 days and in 2005-06 it is 5 days. The cost of production of 2005-06 is more so the WIPCP is more in that year.

Calculation of FGCP:Particular 2007-08 (crores) 2006-07(crores) 2005-06(crores) FG Inventory 133.84 113.02 52.30 Cost of Goodsold 3339.33 3059.19 2241.17


FG Inventory -----------------------------------------Cost of good sold 2007-08 2006-07


Particular WIPCP = =

2005-06 52.30 = ----------- x360 2241.17 = 8 days

133.84 113.02 ----------- x 360 = ------------ x 360 3339.33 3059.19 14 days = 13 days

The FG conversion period is 14 days in the year 2007-08 and in the year 2006-07 it is 13 days and in 2005-06 it is 8 days.

Particular ICP


2007-08 = 78 + 4 +14 = 96 days 2006-07 = 68 + 4 + 13 = 85 days 2005-06 = 52 + 5 + 8 = 65 days

Book Debt Conversion Period:Particular Debtors Sales Debt Particular = 2007-08 (crores) 2006-07(crores) 2005-06(crores) 216.37 233.39 221.52 2650.78 2541.05 2244.11 Debtors ---------------------x 360 Sales 2007-08 2006-07 2005-06


= =

216.37 ----------- x 360 2650.78 29 days

233.39 = ------------ x 360 2541.05 = 33 days

221.52 = ----------- x360 2244.11 = 35 days

Payables Deferral Period:Particular Creditors Purchase 2007-08 (crores) 2006-07(crores) 2005-06(crores) 165.31 137.37 87.59 1112.43 1176.07 896.39 Creditors ---------------------x Purchase 2007-08 2006-07 165.31 ----------- x 360 1112.43 53 days

PDP Particular PDP

360 2005-06 87.59 = ----------- x360 896.39 = 35 days

= =

137.37 = ------------ x 360 1176.07 = 42 days

Calculation of gross operating cycle (GOC):GOC

Particular GOC =

2007-08 96 + 29 2006-07 = 85 + 33 = 118 days 2005-06 = 65 + 36 = 101 days

= 125 days

Calculation of net operating cycle (NOC):NOC is the difference between gross operating cycle and payables defferal period.



Particular NOC

2007-08 = 125 - 53

2006-07 = 118 -42

2005-06 = 101 - 35

= 72 days = 76 days = 66 days The NOC in Nirma Limited is days in current year i.e. 2007-08 and 76 days in previous year i.e. 2006-07 and it is 66days in the year 2005-06.

CURRENT RATIO = CURRENT ASSETS CURRENT LIABILITIES = 1425.04 325.14 = 4.38:1 It shows the relationship between current assets and current liabilities. The idol ratio of any company is 2:1 but here it is 4.38:1which is good for the company. QUICK RATIO: QUICK RATIO = CASH AND BANK CURRENT LIABILITIES = 72.65 325.14 = 0.22:1 Here for any company the stated idol ratio is 1:1 but here we can observe that the ratio is 0.22:1 which is not good for the company. NET WORKING CAPITAL RATIO: NET WORKING CAPITAL RATIO = NET WORKING CAPITAL

NET ASSETS = 1099.90 3271.47 = 0.34:1 from the above condition we can observe that need of working capital is not sufficient to carry out the business operation and the ratio is 0.34:1.


The other important question in resect of working capital is how to raise it. It is raising from short term sources of partly from long term sources. Sources term which working capital can be raised:An important decision to working capital relating to working capital management is the sources from which working capital is to be raised. Generally it is belived that funds for acquring fixed assets should be raised from long term sources and short term sources should be utilised for raising working capital. It is classified into permenent working capital, long term sources should also be utilised. Thus both the types of sources may be utilised for finincing both fixed assets and current assets. There are different approaches for determining the proportion in which short term and long term sources should be used to fixed assets and current assets. 1. Matching approach or Heading approach. 2. Conservative approach. 3. Aggresive approach.

1. Matching approach
The maturity of the sources of the funds is matched with the life of the assets. Funds for acquring an asset having on estimated life of 5 years should be raised by 1.5 year loan from bank. The goods are expected to be sold within 30 days. Then a bill payable obtains finance for 30 days. Under this approach, funds for acquiring fixed assets should be acquired with long term funds like long term loans or issue of debenture or equity shares. In traditional language, it can be said thatfixed assets & permenent current assets should be financed by long term funds should be used.The following figures makes it clear. The figure shows that for financing fixed assets and permenent current assets, as and when necessary short term borrowing would be paid off with surplus cash for expansion and developement, when

permanent financing is needed, it should be acquired from long term sources only.

2. Conservative approach
This approach depends upon long term funds to a great extent. It suggests that in addition to fixed assets & permanent assets, even a part of variable current assets should also be financed from long term sources. The short term sources are used only to meet the peak seasonal requirement. During off season, the surplus fund is kept invested in marketable securities. The conservative approach indicating that for financing fixed assets, permanent current assets stand for a part of variable current aseets, funds are raised from long term sources only for meeting peak period demand, short term funds are raised.The elements of risk is the minimum in this policy, because the maturity of long term liability can be made from it repayment. But the policy is expensive and reduces profitability.

3. Aggresive approach
This policy depends more on short term funds. More short term funds are used particulerly for variable current assets and a part of even permanent current assets. The funds are raised from short term sources. The aggresive approach reduces the long term funds and so it is less expensive, more profitable but has more element of risk.


1. SHARE AND DEBENTURES:The funds for working capital can be raised through the issue of shares to meet the initial requirement or to expand business or to make up the sudden and unexpected decline in working capital. The funds for working capital can also be obtained through the issue of debenturs. The retain profit can also be used as working capital.

This company used equity shares for raising funds. The equity shares of Nirma Limited are 82.36 crores. 2. RETAINED EARNINGS:A part of the sales revenue is used to meet cost of production.Only the net sales process is available for working capital, the amount of revenue that would be available for this purpose of P & L Account. The working capital can be raised also by providing for depreciation. Because to the extent, depreciation is provided, profit is retained with the compny and it can be used as working capital. 3. COMMERCIAL BANKS:Commercial banks are important sources if working capital for the business.They provides current finance and short term funds to the business enterprises. Mejority of the Indian enterprise rely on commercial bank to meet their working capital needs. The nirma Limited borrows funds from State Bank of India & Dena bank for working capital. This bank provides the cash credit facility.

4. TRADE CREDITORS:Trade creditors provide working capital to industries indirectly. The supplier provides RM or Equipement on credit. The businessmen will not have to make payments immediately in cash. They make payment after a definite period of time that may be on a month or two month or more.So that extent the pressure of working capital requirement is lessened, thus to the extent trade credit is available, the requirement of working capital in industrial rule because the period of credit depends on this relationship. 5. PUBLIC DEPOSITS:The deposits are important source of working capital for the business units. Under this system, people deposit their savings with the business units for duration for minimum six months to maximum three

years. The rate of interest to be paid on these deposits varies form 10 to 15 percent per year. This system was popular in the textile industry of Mumbai & Ahmedabad as also in the tea plantation of Assam & Bengal in the 19 th century. In the last two years however, this system has spread to almost all industries in India and most of the companies rely on public deposits to meet the long term and short term capital requirement and easy methods of lower than the bank loans. 6. INDIGENOUS BANKERS:Indigenous bankers provide very short term finance to the business units. Most of their loans are for the period of a weak or a month. If they have enough resources they may provide cash credit for a period if one year also. Personal relationship between the money tenders and borrowers plays a decisive role in this system of financing.

MEANING The term inventory includes raw materials, work-in- progress, finished goods, packaging, spare parts and others to meet an unexpected demand or distribution in the future. Inventory can be used to refer to the stock on hand at a particular time of raw material, goods in process of manufacture, finished products, merchandise purchased for resale, and the like, tangible assets which can be seen, measured and counted. NEED In the era of industrialization and globalization inventories cover a very wide range. The range of inventory has become larger and more diversified. There are three motives for holding inventories. a) Transaction Motive emphasizes on facilitating smooth production and sales operations. b) Precautionary Motive protects against risk of unpredictable changes in demand and supply forces and other factors. c) Speculative Motive influences the decision of movement of inventory levels to take the advantage of price fluctuation. ROLE OF INVENTORY IN WORKING CAPITAL MANAGEMENT Inventories are component of firms working capital and represent a current asset. The following are some characteristics of inventory which are important in working capital management.

1). Current Asset: Inventories will be converted to cash in the current operating cycle which is normally one year. 2) Level of Liquidity: Inventories are viewed as source of near cash. The liquidity aspect of inventory becomes highly important to the manager of working capital in the case of economic slowdown and changes in the market trend. The inventories are to be considered as the least liquid of current assets. 3). Circulating Activity: Inventories are in a rotating pattern with other current assets. They get converted in to receivables which generate cash and invested again in inventory to continue operating cycle. INVENTORY MANAGEMENT AND CONTROL Inventory management is given such an importance because of high costs involved in inventory. It is also treated as synonym with Materials management. Inventory management involves the development and administration of policies, systems and procedures, which will minimize total costs relative to inventory decisions and related functions such as customer service requirements and production scheduling. Inventory control holds narrower sense and pertains primarily to the administration of established policies, systems and procedures. BENEFITS OF INVENTORY MANAGEMENT AND CONTROL:1). Inventory control ensures an adequate supply of materials and stores minimizes stock outs operations. and storages and avoids costly interruptions in

2). It keeps down investment in inventories, inventory carrying costs and obsolescence losses to the minimum. 3). It facilitates purchasing economies through the measurement of requirements on the basis of recorded experience. 4). It eliminates duplication in ordering or in replenishing stocks by centralizing the source from which purchase requisition emanate. 5). It provides a check against the loss of materials through carelessness or pilferage. INVENTORY MANAGEMENT CYCLE:SALES PROJECTION








Marketing Department The cycle starts with the sales projection, which is done by the marketing department every month for its existing and new products. It is done after considering the following factors like demand of the product, financial aspects, economic environment, sales of previous month and current month, marketing feasibility etc. After considering all these factors, marketing department conveys the sales projection to the PPMC department. PPMC Department The PPMC stands for Production Planning and Material Control which refers to the planning of production, acquisition, quality control etc. The need for this department exists in order to produce specific medicines, for which raw material has to be acquired well in advance. It calculates the requirement of the raw material on the basis of the sales projection done and places an order to the purchasing department. Purchase Department Purchase department places an order to the existing suppliers on the basis of the credit terms as well as timely delivery of the raw material. If the department thinks to deal with the new suppliers whose credit terms are more favorable to the existing ones then it first takes the permission from the top management and places a small order to them and if satisfied, they gradually increase the quantum of the order.

Testing After receiving the order from the purchase department, the supplier dispatches the material to the store department of the company. Now the testing process is conceded on the raw material in order to check whether the raw material is as per the quality prescribed by the company at the time of placing an order. Quality Assurance The company follows Batch Production Process where unique batch number and lot number is assigned to each raw material so that, if any problem occurs during the production or any later stage then, the fault can be easily detected. Quality Assurance department is used to check the quality when the production is going on so that the wastage of material and energy is avoided. Quality control department is used to examine weather the quality of finished product is as per the standards or not. After quality assurance and quality control, the product is sent to the packing department and from there to the bond room. Inventory Control Techniques:Inventory control techniques represent the operational aspect of inventory management and help to realize the objectives of the inventory management and control. Several techniques of inventory are in used and it depends on the convenience of the firm to adopt any of the techniques. The techniques used by the company are:

1. ABC Analysis Inference:

ABC analysis is one of the widely used techniques for control of

inventory. ABC analysis stands for Always Better Control analysis. The objective of ABC control is to vary the expenses associated with maintaining appropriate control according to the potential savings associated with a proper level of such control. It is always possible and necessary to separate vital few from trivial many of the stock items for effective inventory control. Separating vital few from trivial many is what is precisely done in ABC analysis.
This approach calls for classifying inventories in to three broad

categories, A B and C. Company Policy: The inventory classification is done on yearly basis. The company classifies the inventory into three broad categories on the basis of its annual volume and value: o Category A High value and Low volume o Category B - Moderate value and Moderate volume o Category C Low value and High volume 2. VED Classification Inference:
VED stands for Vital Essential Desirable.

In VED classification, the inventory is classified on the basis of the criticality of the inventories.

It is done to determine the effect of criticality of an item on production and other services. Company Policy: The company classifies the inventory into three broad classifications: o V classification Imported goods which are vital for production, for which large stocking is maintained. o E classification Nationally available goods which are essential for the production, for which moderate stock is maintained. o D classification Locally available goods, for which minimum stock is maintained. KEY TERMS:@ Safety Stock Inference: Safety stock is maintained by company in order to seek protection against stock out. Since inventory-carrying costs are proportional to the level of inventories carried, it rarely makes sense to seek total protection against stock out. In view of trade off between stock out cost and inventory carrying cost, the optimum level of safety stock is usually much less than the level of safety stock required achieving total protection against stock out. Company Policy: The company maintains its safety stock on the basis of different products profile. Thus, the company holds different safety stock level for different products.

The company has a policy to keep a safety stock level of 30 days. The company projects current months requirements along with the safety stock level of 15 days i.e. the company projects the inventories needed for 45 days. In case of existing products the company holds a meeting before 2 months of the requirement of the inventory, and projects the need of inventory for 45 days including 15 days of safety stock. While in case of new products the company holds a meeting before 4 months of starting the production, and projects the need of inventory for 45 days including 15 days of safety stock. @ Re-Order Level Inference:
The re-order level for replenishment of stock occurs when the level of

inventory drops down to the minimum level.

There are two points that determine the re-order level: the procurement

or delivery time stock i.e. the inventory needed during the lead time and the safety stock, which is the minimum level of inventory that is held as a protection against shortages. Company Policy: The company maintains a re-order level of 40 items, which are used as

expiates to other items.

The Re-order level of the remaining items is very difficult to maintain as

there is so much volatility in consumption pattern of these items. @ Stock Out Inference:

Stock out occurs when there is shortage of raw material. Shortage of raw material occurs mainly due to suppliers incapability to provide raw material. Suppliers usually do not take the risk of not providing the required raw material on time because a supplier himself has to maintain good relations with the company. Company Policy: Situation of stock out also does not occur because the company while placing an order with the supplier keeps a buff of 5 to 15 days extra.
For Example- If the company wants raw material within a span of 50

days then it will place an order for the raw material with the supplier to be delivered within 40 days. Here, it keeps a buff of 10 days so that it can arrange for the raw material from some other supplier if the previous supplier fails to provide the required raw material. But if there is any stock out in the company under undue circumstances then company does reproduction planning. @ Bulk Purchases Inference: Bulk Purchases are the purchases made by the company in large quantities than Required. Company often makes bulk purchases in order to avail the benefits of quantity discount. Company Profile:

The company has a policy to purchase in a bulk even if there is requirement of small amount of raw material. Thus due to this bulk purchase, there is always some stock in the warehouse. Now if there is increase in the price by the supplier then the company evaluates the terms and conditions of other suppliers and negotiates with them. The company then chooses that supplier whose terms and conditions are the most favorable to the company. @ Goods in Transit Inference: Goods are said to be in transit when they have been dispatched by the supplier but have not yet reached the companys warehouse. Company Policy: If the company does not require those materials immediately or it does not have enough funds for the payment of custom duty then the company keeps those raw materials at the port without the payment of custom duty. These raw materials are known as goods in transit. When the company pays custom duty the materials are dispatched from the port to the warehouse and they are also known as goods in transit. KEY FACTS:Domestic Business: The company follows the policy of make-to-stock for its domestic

business. Here the company produces the finished goods and keeps them in the warehouse, so that it can deliver them as and when an order is received.

The company reviews on the 20th day of every month whether the

inventory level of finished goods has reached 166% of the opening stock or not.
In case of high demand, if there is a time-lag in distribution channel, then

there are high chances of loss of sales. Now in order to reduce the effect of loss of sales, the company is planning to implement Hub-and-Spoke model.
Hub-and-spoke model refers to the model wherein the company sets hubs

at specific locations carrying a predetermined level of finished goods, in order to fulfill the requirements of C & S agents within the earliest possible time. Export Business: The company follows the policy of make-to-order for its exports

business. Here the company after receiving an order starts the production and delivers the order within the span of 60 days. If it fails to do so, then the company has to pay the penalty.
In US market, the company is following combination of make-to-order

and make-to-stock system on the basis of following three levels:

o Level 1 - This level is used for capacity planning. At this level

every year Production projection is to be made for three years.

o Level 2 This level includes month wise forecasting so that

stock of raw Material and packing material can be maintained. (Make-to-stock)

o Level 3 This level includes final order which is to be executed.

If there is any shortage of stock at 3 rd level then, the company will use

buffer stock.

Introduction:Credit policy is an essential marketing tool, acting as a bridge for the movement of goods through production and distribution stages to customers. A firm grants trade credit to protect its sales from the competitors and to attract the potential customers to buy its products at favorable terms. Finished goods sold on credit get converted in to receivable which when realized, generate cash. The customers from whom receivable or book debts have to be collected in the future are called Trade Debtors or simply as Debtors and represent the firms claim or asset. Receivable constitutes a substantial portion of current assets. Impact of Credit Policy:The term credit policy includes the policy of a company in respect of the credit standards adopted, the period over which credit is extended to customers, any incentives in the form of cash discount offered, as also the period over which the discount can be utilized by the customers and the collection effort made by the company. Thus, the various variables associated with credit policy are:-

Credit Standards are the criteria to decide the types of customers to

whom goods could be sold on credit Liberal credit standards tend to push sales but it is accompanied by higher incidence of bad debt loss, a larger investment in investment, and a higher cost of collection.
Credit Period refers to the length of time allowed to customers to pay for

their purchases. Lengthening of credit period pushes sales up by inducing existing customers to purchase more and attracting additional customers, at the same time increasing receivables investment and incidence of bad debt loss. A shortening of credit period will tend to lower sales as customers decrease; reduce investment in receivables, and reduce the incidence of bad debt loss. So company should try to trade off between these two.
Cash Discount is offered by the firm to induce prompt payments. Credit

terms reflect the percentage of discount and the period during which it is available. Liberalizing the cash discount policy may mean that the discount percentage is increased and/ or the discount period is lengthened. Such an action tends to enhance sales, reduce the average collection period, and increase the cost of discount.
Collection Efforts of a company is decided by the collection policy. The

objective of collection policy is to achieve timely collection of receivables. The collection program consists of the following. o Monitoring the state of receivables. o Dispatch of letters to customers whose due date is approaching. o Telegraphic and telephonic advice to customers around the due date. o Threat of legal action to overdue accounts.

o Legal action against overdue accounts. Credit Evaluation:In assessing credit risks, two types of errors can be occurred. Both the errors are costly. Type I error A good customer is misclassified as a poor credit risk. Type II error A bad customer is misclassified as a good credit risk. Type I error leads to loss of profit on sales and Type II error results in bad debt losses on credit sales made to risky customers. Three broad approaches are used for credit evaluation, viz., traditional credit analysis, numerical credit scoring, and discriminate analysis. Receivable Management deals with two important aspects: 1. Credit Control Policy 2. Collection Policy CREDIT CONTROL POLICY:Order Execution: Order from Outstation Parties: Orders are executed after receipt of

blank undated order &

account payee cheque in the name of the company.

Orders from Local Parties: Billing is done on receipt of seal & signed

Supply is made on receipt of cheque from the party. In case of supply against demand draft, supply is made on physical receipt of the demand draft which is to be entered in the computer before executing the order.

For new parties, order value exceeding Rs.50, 000/- should not be entertained for first three orders. However extra credit limit can be sanctioned by H.O. Any addition/ alteration/ Over writing in the order should be counter signed by the stockiest and should not be executed until the receipt of confirmation for correction from the stockiest. Whenever any new product is launched very small quantity should be supplied to the stockiest if extra cheque of the stockiest is available with the C&F agent. C&F agent can execute the order within the limit of Rs. 5,000 for any initial supply. For temperature sensitive products separate invoice should be prepared and goods are supplied through courier in proper cold chain. C&F agent should check the order thoroughly for any mistake as far as quality, product, packing, strength, etc. are concerned. In case of any doubt regarding the order, C&F agent should seek confirmation from the stockiest. C&F agent should ensure to stop supply of the stockiest who had returned the saleable unpaid goods of more than Rs.5, 000/-. Supply of such stockiest will be possible only after written approval from H.O. In case of inter state sales C&F agent collects C form from the stockiest and F form for inter branch transfer. Dispatch of goods: All dispatches should be completed within 48 hours from the date of execution.

In case of local parties, all supplies to be made strictly on Cheque on

Delivery (COD) basis. If the stockiest does not give cheque, C&F agent should not deliver the goods and bring back the goods to his godown and prepare a credit note for goods return.
C&F agents should ensure that on 5th of every month, not a single claim is

pending for settlement with them for the goods received by them. C&F agents should not deliver the goods to outstation parties directly from his premises. It must go through transport channels only. Temperature sensitive products should be supplied through courier with proper cold chain. C&F agent should collect the L.R. (Lorry Receipt) copy at the time of delivery of goods and thoroughly verify the number of cartons, delivery address, etc and ensure that the L.R. is in the name of the party. Payment Advice:On receipt of Lorry Receipt (LR), C&F agents should prepare Payment Advice within 24 hours and ensure the following: Make entry of LR no, LR date and transporters name through the option of Payment Intimation and select the relevant invoice and adjust the credit notes & debit notes. For local parties, payment advice should be prepared and dispatch date should be entered in the column of LR date to arrive at correct due date of the supply.
C&F agent should mention the cheque number on payment intimation,

which will be used for depositing and collection of dues for the supply mentioned, so that party can arrange funds on presentation of the cheque.

C&F agent should send payment intimation along with relevant documents like invoice, credit notes, debit notes and lorry receipt (consignee copy) to the stockiest within 24 hours from the date of dispatch of goods. Collection policy: Collection should be credited only in the name of the party from whom payment is received and in the concerned division. No collection entry should be done without physical receipt of Cheque / Demand Draft/ Pay Order from the stockiest. Cheque / DDs should be deposited with the bank without any delay. PIF should be computer generated and acknowledgement of courier should be taken on PIF copy. All the cheque should be deposited in Bank as per deposition schedule. C&F agent should not collect in Cash in lieu of Cheque / Demand Draft / Pay Order from any stockiest /field staff. On the day of receipt of Demand Draft, PIF should be prepared and draft should be deposited with the bank immediately. As all the cheque return entries are made from H.O., C&F agent is requested to take the print out of dishonored cheque entry everyday and provide such instruction to the party and concerned field manager for the early recovery of the dues. Necessary intimation to divisional heads should also be sent. Settlement of Claims: Credit Notes for return of Saleable and Non-Saleable goods should be prepared within 48 hours from the date of receipt of goods.

Credit Notes for Scheme/Rate difference should be prepared only after

getting H.O. approval. No manual Credit Note shall be issued. If any manual Credit Notes for Octroi, Sales-Tax, Freight or any other reasons is to be given, it should be prepared only after getting the written the H.O. approval. Non saleable goods should be sent to the head office after packing the same in the bigger shipper boxes on monthly basis. Non saleable goods should not be destroyed at C&F premises. Under no circumstances short expiry stock should be converted in to sample. Such stocks should be return to H.O. for necessary correction. C&F agents are not permitted to do stamping / applying stickers on any product at C&F location. C&F agent should collect the good s return by the stockiest from the transporters within 48 hours from the date of receipts of Lorry receipt. C&F agent should check the quantity and condition of the goods received from the party / transporter. If cartons of the stockiest is found in damage condition, C&F agent should take open delivery of the goods and if any shortages found, necessary shortage certificate should be obtain from the transporter. Such shortage certificate should be handed over to the party for claiming the same with the transporter. If any difference is observed between physical receipt of the goods and partys delivery challan, such difference should be brought to the notice of the party and field managers in writing. In case of return of Temperature Sensitive products, C&F agents should advice all stockiest to return the goods under proper cold chain. If it is observed that goods return by stockiest does not have proper cold chain,

no claim for such return shall be settled. For such claims the party shall be informed suitably. Appointment of Stockiest:The following are the policies for appointment of a new stockiest: Application should be in prescribed format for appointment of stockiest along with justification of appointment of the stockiest. Profile must be approved by marketing head/ SBU head. Recommendation of C&F agent is essential. Credit worthiness Certificate from partys bank and the annual reports for last three years should be enclosed with the application.
NOC (No Objection Certificate) from the local association, if

applicable, is must. The following further points will be checked before appointment: o Numbers of defaulting parties in Head Quarter. o Outstanding, if any, in other divisions. If partys past records are not up to the mark, then appointment should not be made. o If there are overdue outstanding in that Head Quarter, appointment should not be made until recovery of overdue outstanding. Special cases if any can be considered by H.O. o Credit limit of particular Head Quarter including new party should not be more than 2 times the Head Quarter target. First supply should be made only against advance

demand draft and allow initial credit limit up to Rs.50, 000/-.

No stockiest appointment will be made after 20th of the Credit Limit:-

month without prior approval of Chief Finance Officer. A criterion for fixing the Credit Limit is two times on average collection received in last two months. If request is received for increase in Credit Limit, then the following data should be checked: Necessity of increase in Credit Limit (any pending order, etc.) Head Quarter Credit Limit is within the limit of two times of Head Quarter Target. Credit Limit should not be increased by exceeding this limit of that Head Quarter. Under no circumstances interchange of Credit Limit from one party to another party is allowed. In case of requirement of extra Credit Limit, Credit Limit up to 20% will be increased by finance department, if partys track record like cheque return, goods return and average business is satisfactory. If the requirement of Credit Limit exceeds by 50% of norms, Head of the Marketing & Finance will jointly approve such Credit Limit. Request for increase in Credit Limit in excess of 50%, will be approved by CFO. For requirement of any extra Credit Limit it is necessary that there should not be any over due outstanding in the concerned Head Quarter. If any outstanding is written-off for any particular party, the same party will be blacklisted for all divisions. Credit Days:Credit days are allowed as under: Local Stockiest - 1 to 7 days as per the agreed norms. Outstation party - 21 days.

Unrealized Cheque: Every month a report is to be received from the bank towards unrealized cheque. If cheque is not realized even after 60 days, the party has to be put under hold and Marketing Department to be informed to collect Bank Certificate from partys bank for clearance of cheque in prescribed format. If party fails to give certificate till 90 days, dishonor entry should be passed and marketing Department should be informed accordingly.

Introduction:Cash is the important current asset for the operations of the business. Cash is the basic input needed to keep the business running on a continuous basis; it is also the ultimate output expected to be realized by selling the service or product manufactured by the firm. The firm should keep sufficient cash, neither more nor less. Cash shortage will disrupt the firms manufacturing operations while excessive cash will simply remain idle, without contributing anything towards the firms profitability. Thus a major function of financial manager is to maintain a sound cash position. Cash is the money which a firm can disburse immediately without any restriction. The term cash includes coins, currency and cheque held by the firm, and balances in its bank accounts. Sometimes near-cash items, such as marketable securities or bank time deposits, are also included in cash. The basic characteristic of near-cash assets is that they can readily be converted into cash. Generally, when a firm has excess cash, it invests it in marketable securities. This kind of investment contributes some profit to the firm.

Meaning of Cash:There are two ways of viewing the term Cash. In a narrow sense it includes actual cash in the form of notes and coins and bank drafts held by a firm and the deposits withdraw able on demand. And in a broader sense, it includes even marketable securities which can be immediately sold or convertible into cash. Facets of Cash Management:Cash Management is concerned with the managing of: (i) Cash flows into and out of the firm, (ii) Cash flows within the firm, and (iii) Cash balances held by the firm at a point of time by financing deficit or investing surplus cash. It can be represented by a Cash Management Cycle. Sales generate cash which has to be disbursed out. The surplus cash has to be invested while deficit has to be borrowed. Cash Management seeks to accomplish this cycle at a minimum cost. At the same time, it also seeks to achieve liquidity and control. Cash Management assumes more importance than other current assets because cash is the most significant and least productive assets that a firm holds. It is significant because it is used to pay the firms obligations. However, cash is unproductive. Unlike fixed assets or inventories, it does not produce goods for sale. Therefore, the aim of cash management is to maintain adequate control over cash position to keep the firm sufficiently liquid and to use excess cash in some profitable way. The firm should evolve strategies regarding the following four facets of cash management: Cash Planning:

Cash inflows and outflows should be planned to project cash surplus or deficit for each period of the planning period. Cash budget should be prepared for this purpose. Managing the Cash Flows: The flow of cash should be properly managed. The cash inflows should be accelerated while, as far as possible, the cash outflows should be decelerated. Optimum Cash Level: The firm should decide about the appropriate level of cash balances. The cost of excess cash and danger of cash deficiency should be matched to determine the optimum level of cash balances. Investing Surplus Cash: The surplus cash balances should be properly invested to earn profits. The firm should decide about the division of such cash balance between alternative short-term investment opportunities such as Bank Deposits, Marketable securities or intercorporate lending Cash Management Cycle:-

Business Operations

Cash Collections

Deficit Information and Control Cash Payments Surplus

Borrow Invest

Collection System:There are two types of collection systems: FCS (Fast Collection System): The bank credits the amount of local cheque within 7 days of delivery; such system provided by the bank is called Fast Collection System. CCS ( Cheque Collection System): The bank collects the cheque from different locations across the country and credits the amount within 21 days of the lorry receipt date; such system provided by the bank is called Cheque Collection System.

Nirma ltd. defines its corporate goals for every financial year and on the basis of corporate goals every individual unit define there area of contribution that will add value to enhance overall corporate goals.

From my research on this on going project, which is part of the

company strategic decision it is concluded that is a very important part of any industry in order to survive it self in the market as well as in this competitive world. Cost reduction implemented in Nirma ltd in ahmedabad is being part of each and every department and is being well implemented. Not only has that it also shown great result in the company finance position as well as to remain survive in this competitive world. It result unnecessary accumulation of inventories. This change of inventory wise handing waste and losses increase. It is an indicator of defective credit policy and stack collection period consequently higher incidence of bad debts result which adversely affected profit. . It stagnates growth it become difficult for the firm to under take profitability measures. Pausity of W/C funds renters the unable to avail are attractive credit opportunities.

CONCLUSION The financial department is a mature, classical management system where a clear accountability framework can be set up to form a well-defined accountability system. It does not call for reckless innovation. It contributes to the company differently from other departments, whose contribution is represented by their performance. But its contribution is best seen in its responsibility. Finance Department of a company is an important part as it helps measure the objectives of the company in financial terms. Ratio Analysis has helped me to determine the significance and meaning of financial statement data, thereby making me understand how forecast is made of the prospects for future earnings, ability to pay interest and debt maturities, profitability and sound dividend policy. Industry analysis has helped me to learn how to make comparison between different companies and then understand at which benchmark company has to reach in terms of achieving its Vision and Mission. Working Capital Management has helped me to develop my skills on how the company frame policies in relation to inventory, debtors, how the company handles the cash and what are the long sources of finance used by the company. This project has helped me learn small activities of the finance department, but these activities when combined together portray an image of the financial health of the company. This project has also given me immense learning which will be fruitful to me in future. It has given me learning about how to take decisions when data is not enough, even though I have to improve upon it a lot.

BIBLIOGRAPHY T.S.Grewals, Analysis of Financial Statements, (New Delhi: Sultan Chand Educational Publishers, 2001) P C Tulsian, Accountancy, (New Delhi: Tata McGraw Hill, 2002)

J.C. Varshney, Financial & Management Accounting, (1st Ed., New Delhi: Wisdom Publications,2007) Vishwanath S.R., Corporate Finance, Theory and Practice (2nd Ed., New Delhi: Sage Publications Inc., 2007).