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ANALYSIS OF WORKING CAPITAL

DISSERTION ON “ ANALYSIS OF WORKING CAPITAL MANAGEMENT ” CARRIED OUT AT RSWM LTD. BANSWARA (RAJ.) UNDER THE GUIDANCE OF Sh. MANAK JAIN

SUBMITTED FOR THE EVALUATION UNDER INTERNSHIP

By : RAJ TIWARI MBA (IInd Year) 3rd Semester

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AUTHENTICATION CERTIFICATE
This is to certify that the Internship Dissertation (MT 603), titled “ANALYSIS OF WORKING CAPITAL MANAGEMENT” is a bonafide work carried out by me at “RSWM LTD., BANSWARA”. The matter embodied in the dissertation report has not been submitted earlier for award of any degree or diploma to the best of my knowledge and belief.

(-----------) Date : -

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TRAINING ORGANISATION CERTIFICATE

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and to keep that same workforce changing with the environment is a real challenge for any company. Any company is called as an organization. Banswara unit explains a lot of sagas related to its production. The modern thinking in the financial management gives greater importance to the management decision making and problem solving.. RSWM LTD. To keep this organization evergreen was not so easy. and little significance was attached to the financial decision making and problem solving. (A unit of LNJ Group). with many whirlpools also company proved the theory of survival of fittest. 6 . exploring a big scale & vibrant company is not so easy but I tried my level best to grab all the opportunities to know this industry with the help of its employees who shared their experiences with me. with the production the value of workforce also. molded in one pot and to walk with so many diversity at one place and show them single path of goal and productivity is really not very easy job.\ ANALYSIS OF WORKING CAPITAL PREFACE This MBA curriculum has been architecture with the view of enabling the students to have an opportunity of bringing their theoretical knowledge to practice. The concepts reinforce in the classroom would be better expose if it could be actually observe being practiced complying with this objective the summer training is designed to develop the student’s skills in analyzing and interpreting practical problems through the application of theoretical concepts and techniques of management. As we say the world is changing. The subject matter of financial management has been changing at a rapid pace. To train & manage workforce with a future goal is really very much planned and effectively organized than only it is possible to stand in market where global scenario is flat and highly competitive and with full of substitutes. The financial sector is always the core of an economy’s growth. but a real organization is really hard to organize efficiently & effectively. To know this company. the scope of financial management was circumscribed to the raising of funds whenever needed. I got a very good opportunity through summer training. The power of machines or capital are not only enough for organization to run. About three decades ago. Banswara is known for its excellent survival from past 50 years. but thousand minds of different taste and culture.

AGM (Finance & Accounts) for giving me a challenging project in the area. I also acknowledge from the deep of my heart. If I were to sit down to map out all the contributors who have given time and shared their views to make this project possible. I owe gratitude to several people who helped me in my course of project. Ashok Sodhani. I would also like to thank all the employees and staff member of the organization. without their blessing and support nothing would be possible and I would not have reached up till here. I am highly thankful to my guide and company mentor. which helped me to get such a valuable experience of working in the corporate world. who knowingly or unknowingly helped me throughout this project and also treated me as a part of them for providing me a wonderful experience while working with them. in which I aspired to build my core competency. my gratitude to my college mentor ---------------------who gave me the related information as and when the need arose. Mr. Application and Needs of Working Capital in Current Business Scenario for RSWM Limited. 7 . I express my gratitude to all of them.\ ANALYSIS OF WORKING CAPITAL ACKNOWLEDGEMENT Gratitude is hardest of emotions to express and often does not find adequate words to convey all that we fell. Last but not the least I can’t forget to thank God and my Parents. I would also like to express my gratitude towards Mr. guidance. I would end up mapping out the long list. valuable tips regarding company’s practices in the field of Source. I would also thank to-------------------------. No single contribution alone lead to the success of endeavor and the same is true for this project study.for making such curriculum of industrial training integrated in their 2 years program. Deputy Manager (Finance & Accounts) who took time from his busy schedule for providing information. Manak Jain.

Banswara. Cash Management 2. on the basis of the analysis and the conclusions draw a SWOT analysis has been done and recommendations given. at the same time. liquidity and activity point of view. 8 . Here I have mainly focus on the utilization of resources done by them and how they control their debt time to time with hardly any bed debt for any unit till dated with their firm policies and business tactics. application of funds done by Rswm Ltd. It shows how company’s finance & accounts department takes their decisions and run company efficiently and with handsome profit. Therefore. Working Capital Finance 4. Banswara. By considering the importance of the working capital. there are certain areas where the company is lagging and is required to take some effective steps. Inventory Management 5. this report covers the following area. for the fulfillment of my purpose “bridging the gap between theory and practical”. 1. Finally. Sources and Application of Working Capital Beside this the ratio given at the end of report reveals some facts about the financial position of the company and performance during last five years. Working capital is a considered as a life . practical knowledge is crucial for having an insight into the implementation of theory in corporate world. With the privilege of an opportunity provided to me by RSWM Ltd. This report is study of various part of working capital like sources. Receivables (UGAI) Management 3. However. But. a financial analysis of working capital of RSWM realizes that the company has been able to manage its working capital efficiently thereby strengthening its short term financial position.blood for any organization and the optimum utilization of its necessary from the profitability. in their daily practice. I undertook forty-five days summer training at finance department of RSWM Ltd.\ ANALYSIS OF WORKING CAPITAL EXECUTIVE SUMMARY Books are the treasures of knowledge and a theoretical base is pivotal for understanding the realities of practical field.

4 Objectives of the study 1.2 Working Capital & Management 2. 1. CHAPTER II 2.5 Needs Of & Resources Of Finance For WC 2.3 Issues & Factors Influencing for Working Capital 2.\ ANALYSIS OF WORKING CAPITAL TABLE OF CONTENTS Sr.4 Assessment For The Sources & Application For WC 2.6 Fund Flow Statement 9 . Banswara 1. 1..1 Industry Scenario CHAPTER I 1.1 Introduction of Working Capital 2.2 Introduction of RSWM Group 1. TOPIC Page No. No.5 Methodology & Limitations 2.3 Brief Introduction Of RSWM Ltd.

3.2 Bibliography 3.\ ANALYSIS OF WORKING CAPITAL 2.1 Conclusion 3.10 Estimation For Needs Of Working Capital 2.9 Ratio Analysis & Interpretation 2.7 Uses of Working Capital In Business 2.8 Data Analysis of Working Capital Statements 2.3 Annexure CHAPTER III Chapter – 1 10 .11 Importance Of MIS System (ERP) For Accounting 3.

\ ANALYSIS OF WORKING CAPITAL COMPANY PROFILE Figure 1 11 .

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INDIAN TEXTILE INDUSTRY
The Indian Textile sector has its roots going back several thousand years. Over the last 50 years the textile industry is one of the largest in the world with a massive raw material and textile-manufacturing base. Textile accounts for 14% of India’s industrial production and around 30% of its export earnings. Around 35 million people are directly employed in the textile manufacturing activities. The textile policy of 2000 aims at achieving the target of textile and apparel exports of US $ 25 billion by 2010 of which the share of garments will be US $ 25 billion. The main markets for Indian Textile and apparels are USA, UAE, UK, Germany, France, Italy, Russia, Canada, Bangladesh and Japan. At present India has the second largest spinning capacity and ranks among the world’s largest producers of cotton, cotton yarn, and manmade fibers and filament yarns; it also has a large domestic, fabric supply. There has been a structural shift taking place in the global textiles industry with capacities moving from high cost developed economies to the developing countries. The end of the quota restrictions with the dismantling of Multi fiber agreement in 2005 further accentuated this trend. This has added further growth opportunities for cost efficient Indian Players who have the scale and produce quality products. Because of the lifting up of the import restrictions of the multi-fiber arrangement (MFA) since 1st January, 2005 under the world Trade Organization (WTO) Agreement on textile and clothing, the market has become competitive on closer look however; it sounds an opportunity because better material will be possible with the traditional inputs so far available with the Indian Market. There will be opportunities as well as challenges for the Indian textile industry in the post-mfa era. But India has natural advantages, which can be capitalized on strong raw material base-cotton, man-made fibers, jute silk, large production capacity (spinning-21% of world capacity and weaving-33% of world capacity.) The industry expects investment of Rs. 140000 crore in this sector in the post-MFA phase. A vision 2010 for textile formulated by the government after intensive interaction with the industry and export promotions councils to capitalize on the upbeat mood aims to increase India’s share in world textile trade from the current 4% to 8% by 2010 and to achieve export value of US $ 50 billion by 2010. Vision 2010 for textiles envisages growth in Indian textile economy from the current US $ 37 billion to $ 85 billion by 2010; creation of 12 million new jobs in the textile sector; and modernization and consolidation for creating a globally competitive textile industry. The future of textile industry in India will be amazing if we continuously improve over quality and give proper attention towards research and development and we can take lead of the world textile market. We have to accept the fact that no organization is too large or too powerful to be “unsinkable”. In a rapidly changing business environment companies which do not change disappear without a trace. Change and adaption is must for growth and prosperity. The fierce competition in the market realities dictate: “Perform or parish”. Thus realizing the need of the hour various groups and individual shifted their focus of business rather than continuing in the same manner. One amongst them was Shri Laxmi Niwas Jhunjhunwala the founder of LNJ Bhilwara Group.

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INTRODUCTION OF THE COMPANY

Date Name of commencement of the concern commercial Business Locations : Regd. Office  Corporate Office

of

1961

RSWM Ltd.

Kharigram, P>O> Gulabpura-311021, Distt. Bhilwara, Rajasthan. Bhilwara Towers,A-12, sector-1, Noida-201301 (U.P.)

 Works

 Kharigram, P.O. Gulabpura-301021, Distt. Rajasthan.  Lodha, P.O. Banswara-327001, Rajasthan.  Mordi, Banswara-327001, Rajasthan.  Mandpam, Bhilwara-311001, Rajasthan.  Rishabhdev-33802, Distt. Udaipur, Rajasthan.  Ringas, Distt. Sikar, Rajasthan.  Bidadi, Banglore, Karnataka. Public Limited Company 17/10/1960

Bhilwara,

Constitution Date of Incorporation Lines of Manufacture

Manufacturing of synthetic, blended, grey/dyed yarn, cotton mélange yarn, and cotton blended yarn and fabric under the brand ‘Mayur’. Now also entered into Garment Business.

RSWM Ltd. (RSWM), the leading company of the LNJ Bhilwara Group, is principally engaged in the manufacturing of synthetic, blended, mélange and specialty yarns, fabric and garments Business.

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RSWM Limited, the flagship Company of LNJ Bhilwara Group, is a professionally managed, progressive and growth-oriented and one of the largest textile manufacturer in the country, primarily producing synthetic, blended, mélange, cotton & specialty yarn, fabric and denim. RSWM was established in 1960, an IS/ISO 9001:2001 and SA 8000:2008 accredited Company, has 8 state-of-the-art manufacturing plants which moved from strength to strength and today, it operates about 3,60,000 spindles, having 1,00,000 MTA yarn capacity. It is equipped with in-house fabric weaving and processing facilities of about 35.6 MMA for fabric and denim fabric. RSWM is self - reliant in Captive Power Generation of 46 MW that feeds all its integrated units spread across the state of Rajasthan. Modern technologies and world class skills have enabled the Company to produce the finest quality adhering to stringent international norms. The main competitive strength of the Company is its innovative product range that includes specialty, functional, technical and eco-friendly yarn and fabric along with basic and commodity products. The Company recently has shifted its focus to produce more and more natural textiles in order to meet the emerging needs of the market. RSWM exports a complete range of yarn and fabric to over 70 countries worldwide, giving the Company a large, visible presence across Europe, South Africa, North America, Australia, South Korea, Belgium, Singapore, Italy, Egypt and the Gulf countries. The Company holds the prestigious ‘Three Star Export House’ status and has received Export Awards from the Synthetic and Rayon Textiles Export Promotion Council consecutively for several years. The Company is a recipient of the “Rajiv Gandhi National Quality Award” received from the Bureau of Indian Standards for the years 2006 and 2007. RSWM has also received "Niryat Shree" - Certificate of Excellence (Non-SSI) award for the category of textile and textile products. RSWM’s one of the leading brand `Mayur Suitings’ enjoys a high brand equity in its target segment in the country.

Foundations that inspire
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Jhunjhunwala. DIRECTOR (NOMINEE EXIM BANK) REGISTERED OFFICE :KHARIGRAM.LADDHA. DIRECTOR MR. CHOUDHARY.GULABPURA. Following distinct business strategies. NOIDA.Chairman Emeritus Mission With unique insight into consumer behavior. Board of Directors 1 2 3 4 5 6 7 8 9 10 MR.EMERITUS MR. LAKSHMI NIWAS JHUNJHUNWALA CHAIRMAN .N. D. RAVI JHUNJHUNWALA. N. It is committed to introduce innovative products in the industry which will set new standards. the company will continue its tradition of manufacturing the finest products. we strive to offer the best.P.CHURIWAL. A. J. A-12. P. SUSHIL JHUNJHUNWALA. I see it as an institution that is committed to seeking excellence. EXECUTIVE DIRECTOR & CFO DR. CHAIRMAN MR. SHEKAR AGRAWAL." BY L. MANAGING DIRECTOR & CEO MR. PRABHAKAR DALAL.) THE LOGIC OF THE LOGO 15 . RAJASTHAN CORPORATE OFFICE :BHILWARA TOWERS. (U. A. DIRECTOR MR. DIRECTOR MR.C.DAVAR. the LNJ Bhilwara Group is not a business house. BHILWARA. SECTOR-1. Vision RSWM envisages itself as a trend setter of the textile industry.K. VICE-CHAIRMAN MR. KAMAL GUPTA. DIRECTOR MR.\ ANALYSIS OF WORKING CAPITAL "To me.O.N.

\ ANALYSIS OF WORKING CAPITAL The LNJ Bhilwara Group proudly presents the all new face of RSWM Limited (Formerly Rajasthan Spinning & Weaving Mills Limited). With every change come new hopes.. along with unity and reliability. The color Black connotes the strong heritage the Company enjoys. new aspirations. along with a continued commitment to performance. All this demands a change in persona and thinking. which include :MAYUR SUITINGS BSL SUITINGS LA ITALIA FASHIONS BUDDY DAVIS GEOFFREY HAMMONDS SUPERFINE SUITINGS LEISUREWEAR. The fine. COMPITITORS OF RSWM 1 2 3 4 5 6 MUDRA GRASIM RAYMOND SYNTAX INDORMA MARAL 16 . excellence. international SSI font used symbolizes compactness. Curve shape is symbolic of superlative quality. new achievements. With it come new responsibilities and a wider dimension. along with unity and strong bonds. superlative quality and the diverse expansion in the product range. new benchmarks. SOME WELL KNOWN BRANDS The group boasts of some well-known brands.. These products are manufactured at various units spread across the country. purity in nature and global (infact cosmic) stature. while the color Gold reflects passion.

RAJASTHAN. The unit has the capabilities to produce spun gray yarn out of any kind of fiber and blend it with synthetic. M. It is a 100% Grey Yarn Spinning unit producing Cotton blended gray yarns and Polyester fibers. The unit can and does manufacture any yarn delivering it in accordance with the customer's deadlines. The unit's strength is its new product development. Italy and Korea. regenerated cellulosic. protein and cotton fiber. Germany.P. UK. natural.\ ANALYSIS OF WORKING CAPITAL ABOUT RSWM BANSWARA Established in 1989. The Banswara Unit has the exclusive rights for spinning Tensel Fiber into yarn in India and is a modern textile-spinning unit employing state-of-the-art technology from Switzerland.. The Banswara unit is the only one of its kind in India and the Company's largest manufacturing facility. MAHARASTRA PRASUPATI Products :The Banswara Unit manufactures the following product range: Grey Yarn Specialty Yarn Functional Yarn Brand Specialties Regular Products Cotton 100% - 17 . The unit has recently been expanded to strengthen its product portfolio and giving it a greater product mix. Raw Material Purchase :POLYESTER VISCOSE COTTON ACRYLIC RELIANCE GRASIM GUJARAT.

SUP. SR. MGR ENGINEER SHIFT OFFICER ASTT. MANAGER SPNG GENERAL MANAGER CPPC SR.\ ANALYSIS OF WORKING CAPITAL ORGANISATION STRUCTURE CHAIRMAN .EMERITUS CHAIRMAN VICE CHAIRMAN & MANAGING DIRECTOR EXECUTIVE DIRECTOR COO GENERAL MANAGER COMI. DGM HRD SR. SUPERVISOR 18 .MASTER MGR DY. SR. MANAGER P&A&L SR.MGR DSM SR.OFFI. SHIFT OFFICER LABOUR OFFICER ASSTT.LABOUR OFFICER SHIFT OFFICER F.MGR SR.NFD SR.MGR ASTT.MGR MGR DS.ASTT. MGR SR.MGR FM ASTT. MANAGER PROD. GENERAL MANAGER ENGG GENERAL MANAGER NPD GENERAL MANAGER TECH. SR.ENG DY.MGR ASTT.MGR DY.SUP.

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INTRODUCTION OF LNJ BHILWARA GROUP

The LNJ Bhilwara Group, founded in 1961, has today grown into a strong global presence worth Rs. 2049 crores. The Group has been nurtured into a successful growth track by the able guidance of the Founder and Chairman-Emeritus, Mr. L. N. Jhunjhunwala. Currently, the LNJ Bhilwara Group stands as one of the largest firms on the corporate horizon in India with over 20,000 employees and 21 production units positioned at strategic locations across the country. The Group’s export earnings comprise of 46% of the Group’s turnover. The LNJ Bhilwara Group is a well-diversified conglomerate. It has been actively seeking growth and profitability by investing in a variety of systematically identified businesses making it a multi-product conglomerate with interests in a range of industries such as textiles, graphite electrodes, power generation, power engineering consultancy services, steel and IT enabled services. Textiles :The pioneering textile division of the Group is not only a key player in the industry but also has many firsts to its credit. The textile division has the sole distinction of producing a unique fire retardant yarn called Trevira CS (now known as Lenzing, Austria). It is also the sole licensee for the highly specialized yarn called Tensel. The Group has time and again been acknowledged for its world-class quality products in the domestic market such as Mayur Suitings, BSL Suitings, La Italia Fashions and Geoffrey Hammond superfine suitings. At the same time, their services to several leading global brands for knitted garments have been recognized with the units garnering top export awards in different fields for several years in a row. Graphite Electrodes :The LNJ Bhilwara Group also has the largest integrated graphite electrodes manufacturing plant in South-east Asia with a reputed clientele comprising of major steel plants in the world. Graphite exports constitute 70% of total sales volume. An evidence of their success can be seen in the fact that HEG, an integral part of the Group, is all set to undertake a Rs. 450 crore expansion plan to tap opportunities in the export market. The expansion of the Mandideep plant would double the capacity from 30,000 TPA to 60,000 TPA. 20

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Power Sector :Following the success of its earlier hydro-electric power project of 15 MW at Tawa Nagar (MP) in 1997, the Group has commissioned, India’s first IPP Hydro-electric Malana Power Project of 86 MW in a record time of 30 months at Kullu (HP), in July, 2001 and is set to commence work on 200 MW AllainDuhangan Hydro Electric Project at Manali (HP). Little wonder then, that the LNJ Bhilwara Group of companies have been awarded IS/ISO 9001:2000 & ISO 14001 certification for setting exemplary standards in quality.

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Blended & Grey Yarn Synthetic & Blended Dyed Yarn Apparels Process House HEG Ltd. Regenerated Cellulosic & Cotton-Blended Grey Yarn Cotton Mélange Yarn. Blended. Gulabpura Banswara Mandpam Rishabhdev Ringas Bangalore Mordi (Banswara) Synthetic. Cotton-Blended Mélange & Dyed Yarn Synthetic. Mandideep Durg Durg Tawa Graphite Electrodes Steel Waste Heat Recovery Power Hydro Electric Power Maral Overseas Ltd. 22 .\ ANALYSIS OF WORKING CAPITAL Nationwide Network Figure 2 RSWM Ltd. Regenerated Cellulosic. Dyed Yarn & Fabric Synthetic.

Tops Fiber Dyeing Malana Power Company Ltd. Mandpam: Yarn. Readymade Garments & Accessories Bhilwara Spinners Ltd. Malana Hydro Electric Power (Kullu) AD Hydro Power Ltd. Ltd.\ ANALYSIS OF WORKING CAPITAL Maral Sarovar Jammu Noida Cotton Yarn. Blended Grey & Dyed yarn Bhilwara Melba De Witte Pvt. Cotton Knitwear & Sweaters Knit wears BSL Ltd. Ltd. Manali Allian-Duhangan Hydro Electric Power Indo-Canadian Consultancy Services Ltd. Bhilwara Synthetic. Mordi (Banswara) Specialized Automotive Fabric. Cotton-Knitted (100% EOU) Fabric & Cotton Knitwear Cotton-Knitted Fabric. Bhopal IT-Enabled Services Corporate Office Noida National Capital Region and Delhi Regional / Marketing Offices Mumbai Kolkata Bangalore Delhi Ludhiana AWARDS 23 . Furnishing Fabric Bhilwara Processors Ltd. Noida Power Engineering Services Bhilwara Scribe Pvt. Worsted & Synthetic Fabric. Mandpam Processing of Synthetic & Worsted Fabric.

for outstanding export performance for the year 1997-98.  HEG has been regularly exporting electrodes since 1981 and today exports more than 80% of its production.  HEG's graphite electrodes are exported to 25 countries around the world.  Awarded 'Rajiv Gandhi National Quality Commendation Award 2001 for Quality" by the Bureau of Indian Standards.a reward for our commitment to World winning Quality and Performance. including developed countries like USA.  HEG has also won the country's top export award instituted by the Chemical & Allied Products Export Promotion Council (CAPEXIL) for outstanding exports for 18 consecutive years. Canada. Government of India. Graphite Electrode  Awarded ISO 9001:2008 & ISO 14001:2004 Certifications. France. Textiles: 24 . Germany. For 2001-02. Italy.  HEG Ltd bagged the prestigious National Export Award instituted by the Ministry of Commerce.  HEG has the largest Integrated Graphite Electrodes manufacturing plant in South Asia and the Middle East. HEG was awarded the “Highest” Export Award. . Australia etc. Government of India. It is also the second largest in the world.\ ANALYSIS OF WORKING CAPITAL The LNJ Bhilwara Group not only has several firsts to its credit but also recognition for its commitment to quality and excellence with several national awards and certifications. South Korea.

and the SRTEPC Excellence award for highest production in export of 100% Polyester Spun Yarn An advanced machinery repertoire from world leaders ensures flawless quality and more versatility at each and every stage. Rajiv Gandhi National Quality Awards Commendation certificate in Large Scale Textile Industry to Banswara and Kharigram unit in year 2006 and year 2007 respectively. Jaipur RSWM’s Rishabhdev unit bagged National Export Award. by respecting the environment and ethical values for our Banswara unit. for Banswara unit. Certificate of Global recycle standards (GRS) for producing selling the recycled cotton and Blended yarn with and without recycled manmade fibers. Certificate of SA-8000 speaks that all the material produced by the RSWM Ltd. RSWM is the winner of SRTEPC Highest Export Award for polyester / viscose yarn exports for the last 13 years RSWM bagged ‘The 2007 Excellence Award for Financial Performance and Analysis’ instituted by Rajasthan Chamber of Commerce & Industries. The coveted ISO 9001-2000 Quality Management System Certification was received in January 1997. Our Banswara plant certified for producing and selling Organic Cotton yarn from "Control Union Certification" (formerly known as SKAL) Certificate of "Global Organic Textile Standard" (GOTS) for producing and selling 100% Organic Cotton yarn to our Banswara plant.\ ANALYSIS OF WORKING CAPITAL • • • • • • • • • • • • • • RSWM. 25 . Banswara unit has been awarded Ist Prize for the'' State Energy Conservation Award 2010 '' for the Energy Conservation Measures taken during 2010. Certificate of "Organic Exchange" (OE) for producing and selling Blended yarns with Organic Cotton to our Banswara plant. Having Oekotex standard 100 certificate for most of the products Power : • Malana Power bagged “Greentech Environment Excellence’ Award. Certificate of Fair Trade from Fair Trade Labelling Organization for producing selling 100% Fair trade cotton and its Blended yarn. which speaks volumes about the Company's.

WEAKNESS :26 .  Regular seminars and meeting are conducted in entire department in order to find their loopholes and solution for the same. Bhilwara. Delhi.  Modern machinery with latest techniques. one of the biggest earners. Strong sales depots & marketing offices at Mumbai.  Experienced & enthusiastic marketing team.  Not depended for power & water RSWM Banswara has its own power generation plant & presently there are about 20000 surplus units of power is available.  Wide product range & flexibility in production according to requirement of market. Delhi.  The most important thing is that they have good and healthy working atmosphere in company and they provide ample no.  The company has a great share in exports.  Better packaging. The daily requirement of power for weaving project is only 93111 units per day. Ahemadabad and Indore. Ludhiana. Water is also available in plenty at company’s own campus & presently company has adequate water storage capacity.  Won SRTEPC highest export award for PV yarn exports it was also accorded “golden trading house status”. great share in exports one of the biggest earners). carriage and transportation system with all modern equipments and good after sales services.  Quality conscious approach as per ISO product & TQM gulabpura unit was the first India composite textile unit to be certified with ISO 9002 1st September 1993.\ ANALYSIS OF WORKING CAPITAL SWOT ANALYSIS STRENGTH : Demand of blended yarn will increase as the production of cotton is (limited attraction of PV is replacing cotton.  Brand Reputation Global Marketing – LNJ Bhilwara group is famous in textiles in all over the world. ISO certificate is necessary to penetrate in the export market specially in the European in US market.  Well-equipped R&D SQC lab. Mumbai. RSWM Banswara manufacturers various type of yarn of different counts & blends. and Indore & Rishabdev.  All the units are connected through V-SAT Gulabpura. of opportunities for everyone to satisfy their job desire.

 Being highly labor intensive unit. India can become a major player in the textile export market at a global market at a global level given the declining share of south-east Asian countries in this niche market & rising wages in ASEAN region. HR department is always under pressure and many times fails to meet expectations of various departments and employees.  Efficiency can increase with the help of IT & ERP.e. This is especially important with respect to China.8% therefore. another advantage that India could have is that for countries which are not the member of WTO.  The company can rush into retail business and support from government like TUFF Schemes i. Rajasthan spinning & weaving mills Ltd.\ ANALYSIS OF WORKING CAPITAL  Banswara is not connected through railway line & condition of roads is also poor so there is an infrastructure problem. It can capture a large market share if it provides quality product as reasonable price. imposing countries will have obligation to proceed with removal of quota restriction.  Market share of India is world trade of textile is only 2.  Locations of depots (Consuming Centers) are far away from factory. wiping out their competitive edge. 27 . OPPORTUNITIES : After starting weaving project.  Strategic alliances: Tie-ups with global manufacturers & brands for technology & market.  To develop & improve working environment of processing by using Eco-Friendly methods. who accounts for 32% of world trade in textile. 5% interest rebates to enhance investment in the textile industry.  Many process steps and process are more sensitive to normal process variations and small error causes the big amount of wastage of material. Hence transportation cost and time duration is increases in inventories.  Skill labor is not available at Banswara and Purchase Raw Material from one type of organization only and bigger process cycle causes higher stock of raw materials. as people in domestic market are gradually moving towards ready-made garments.  RSWM may be innovating new product using different types of yarn & fiber like lyre & tennel. the world trade in textile & clothing will be fully liberalized.  Increased export demand is expected from planning out of capacities in developed world.  Post-MFA as on January-1. Taiwan. 2005. Banswara may further go for forward integration in garments sector. but are still not a member of WTO.  Tilt towards ready-made.

The reason for that is supply is more than demand. Finally.e.  Changing trend in textile Indus try. Definitive views about the entire gamut of working capital management were formed. On the basis of preliminary discussions and referring to document Projects were prepared and final reports were analyzed through ratio analysis.  Government policies are the main hurdles of division’s performance. competition in quality. changing requirement as people now preferring ready-made garments.\ ANALYSIS OF WORKING CAPITAL THREATS : Today textile industry is planning through in unpredicted recession.  Polyester Viscose is a substitute of cotton & is made from wood pulp & its supply is also limited. that is increasing free trade & competition.  Cheap imports textiles from China.  Removal of quotas after – 2005 increasing more quality awareness i. 28 . The various issues connected with working capital management were understood.

29 . For this purpose data were collected from the past financial statements of the company. It tends to find out the effectiveness in the management of Working capital at RSWM LTD.  SCOPE OF PROJECT Scope of project is to determine the short-term debt paying capacity of the firm through a financial analysis of Working capital. Each and every business concern should have adequate funds to meet out day-to-day expenses and to finance current assets. Proper management of working capital is necessary to maintain both liquidity and profitability.\ ANALYSIS OF WORKING CAPITAL PROJECT INTRODUCTION Working capital is as import in business firm as blood in a human life. It is the process of planning and controlling the level and mix of the current assets of the firm as well as financing these assets. The goal of working capital management is to manage the firm’s current assets and current liabilities in such a way that a satisfactory level of working capital is maintained. debtors. receivables and inventories.

\ ANALYSIS OF WORKING CAPITAL RESEARCH METHODOLOGY & LIMITATIONS AND PROBLEMS FACED 30 .

 Research Tools The figures of RSWM’s balance sheets are taken for last five years i. no questionnaire requires being prepared during the study and the selection of the sampling was an easy task compare to other research work. from F.  Sampling As discussing above.  Sampling Design The topic of the discussion is varied from person to person based on their position in the organization and experience of working in the organization.\ ANALYSIS OF WORKING CAPITAL  General Information The research work carried out here was actually a study work conducted at Rajasthan Spinning and Weaving Mills Ltd. The manager is asked to provide information about the policy formation feasibility of its implementation where persons at officer or Sr.Y. officer level are asked to provide information about the current assets and current liabilities. 2006 .07 to 2010 – 11. The various data collected through method of discussion and no questionnaire was designed for the purpose of the study. They are used for calculating the ratio and also for interpreting the financial position of the organization during that period of time. The information about the design of sampling is given as under.e. The annual reports of Rajasthan Spinning and Weaving Mills Ltd are also used as a research tool for various other needs. 31 . Starting from the officer level (very bottom level) to the general manager almost all 10 staff members were asked the different question related to the Working Capital Management and department’s policy about it. Banswara in finance & accounting department on the topic of the Working Capital Management.

Information has been taken from the books and audited records of RAJASTHAN SPINNING AND WEAVING MILLS LTD I have collected information from RSWM annual reports and different manuals referred by them. Various web sites were also considered and taken data from there along with network of RSWM LTD. officials and employees working in RSWM LTD.\ ANALYSIS OF WORKING CAPITAL PRIMARY DATA  The primary data has been collected from experts. I have referred books related to working capital management.   32 . BHILWARA). (A UNIT OF LNJ GROUP. SECONDARY DATA   For secondary data.

\ ANALYSIS OF WORKING CAPITAL LIMITATIONS AND PROBLEMS FACED  Various information regarding unit is not shared in the report due to maintaining secrecy of the company and following their terms and regulation. Hence there was time constraint too. regulation and policies. Unfamiliarity with culture and department of the company was also becoming a hurdle for producing efficient output for trainee. Various information regarding unit was also not shared with trainee by company due to their rules. Working Capital is wider concept and it requires more time for learning each and every aspect of it.     33 . Trainee had less time for practicing regarding the learning of ERP at the time of training.

\ ANALYSIS OF WORKING CAPITAL INTRODUCTON OF WORKING CAPITAL 34 .

to needs of the business firm. bills payable and outstanding expenses. arrangement should be made quickly. debtors. Net Working Capital : .It refers to the difference between current assets and current liabilities. Investment in current assets should be just adequate. Another aspect of the gross working capital points in the need of arranging funds to finance current assets. A positive working capital will arise when current assets excess current liabilities and vice – versa. Current liabilities are those claims of outsiders. Similarly. Whenever needs for working capital arise due to do the increasing level of business activity or for any other reason. if suddenly some surplus fund arises.Simply called as working capital. Current assets are the assets which can be converted into cash within an accounting year (or operating cycle) and include cash. as idle investment earns nothing. The management should be too prompt to initiate an action and current imbalances. This may cause excess or shortage of working capital frequently. bills receivables and stock (Inventory).\ ANALYSIS OF WORKING CAPITAL There are two concepts of working capital  Gross Working Capital  Net Working Capital Gross Working Capital : . then they should 35 . which are expected to mature to payment within an accounting year and include creditors. Excessive investment in current assets should be avoided because it impairs firm’s profitability. inadequate amount of working capital can threaten the solvency of the firm because of its inability to meet its current obligations. It should be realizing that the working capital needs of the firm might be fluctuating with changing business activity. The concept of working capital – gross and net – are not exclusive. refers to the firm’s investment in current assets. Focusing on Management of Current Assets The gross working capital concepts focuses attention on two aspects of current assets management: (A) How to optimize investment in current assets? (B) How should current assets be financed? The considered of the level of investment in current assets should avoid to danger points – excessive and inadequate investment in current assets. Short-term securities. rather they have equal significance from management view point. Net working capital can be positive and negative. not more than less. On the other hand.

\ ANALYSIS OF WORKING CAPITAL not be allowed to remain idle. Focusing on Liquidity Management Net working capital. Excessive liquidity is also bad. debentures. Net working capital concept also covers the question of judicious mix of long-term and short-term funds for financing current assets. preference capital or retained earnings. There is no special rule as to how current assets should be financed. A negative working capital means a negative liquidity. For every firm. short-term creditors always like a company to maintain current assets at a higher level than current liabilities. begin the difference between current assets and current liabilities. 36 . therefore decide the extent to which current assets should be financed with equity capital or borrowed capital. Therefore. prompt and timely action should be taken by management to improve and current the imbalance in the liquidity position of the firm. It may be due to mismanagement of current assets therefore. there is a minimum amount of net working capital. the quality of current assets should be considered in determinate the level of current assets vice-versa current liabilities. The data and problems of each company should be analyzed to determine the amount of working capital. However. Thus financial manager should have knowledge of source of working capital fund as well as investment avenues where idle fund may be temporarily invested. Current assets should be sufficiently in excess of current liabilities to constitute a margin or buffer to maturing obligations within the ordinary operation cycle of a business. In order to protect their interest. is a qualitative concept. In summary. Management must. working capital for any firm. and may prove to be harmful for the company. long-term debts. A weak liquidity position poses a threat to solvency of the company and makes it unsafe and unsound. it may be emphasized that both gross and net concepts of working capital are equally important for the efficient management of working capital. which is permanent. but should be invested in short term securities. a portion of the working capital should be financed with permanent sources of funds such as owner’s capital. There is no precious way to determine the exact amount of gross. It (A) indicates the liquidity position of the firm and (B) Suggest the extent to which working capital needs may be finance by permanent sources of funds. or net.

\ ANALYSIS OF WORKING CAPITAL WORKING CAPITAL AND MANAGEMENT 37 .

Decision regarding the utilization of the current assets is made in accordance with the policy of company. The divisional management of RSWM Ltd. Working capital management or short term financial management is concerned with decision relating to current assets and current liabilities. While long.e.term capital. The operating cycle can be said to be at eh heart of the need for working capital. Receivable Cash Inventory 38 . Managers spent about 70% in managing for the short. WCM = Current Assets (CA) – Current Liabilities (CL) The key difference between long-term finance management and short-term financial management is in term of timing cash.term which is critical to the firm. WCM is management for the short.\ ANALYSIS OF WORKING CAPITAL Working capital is concerned with management of current asset. more than one to five years or even more while short term financial decision typically involve cash flows within a year or within the operating cycle of the firm.term financial decision like buying capital equipments or issuing debentures involves cash flows over extended period of time i. manages the working capital within the board frame work laid by and with consultation of Corporation Finance Division (CFD). It is an important and integral part of financial management as short term survival is prerequisite for long term success.

funding may be required for significant additions to the productive capacity of the business or to make acquisitions. 39 . In short term. If dividends are too high. FINANCIAL DECISION-MAKING :A key financing decision is whether profits earned by the business should be retained rather than distributed to shareholders via dividends. There are three key elements to the process of financial management: FINANCIAL PLANNING :Management need to ensure that enough funding is available at the right time to meet the needs of the business. In the medium and long term. the business may be starved of funding to reinvest in growing revenues and profits further.\ ANALYSIS OF WORKING CAPITAL The management of the finances of a business / organization is done in order to achieve financial objective. FINANCIAL CONTROL :Financial control is a critically important activity to help the business ensure that the business is meeting its objectives. funding may be needed to invest in equipment and stocks. pay employees and fund sales made on credit. the key objectives of financial management would be to:  Create wealth for business  Generate cash and  Provide an adequate return on investments bearing in mind the risks that the business is taking and the resources invested. Taking a commercial business as the most common organizational structure.

\ ANALYSIS OF WORKING CAPITAL ORGANIZATION STRUCTURE OF FINANCE DEPARTMENT Chief Financial Officer Chief Operating Officer Commercial Head Accounts Head Sr. Manager Accounts Deputy Manager Cash Deputy Manager Creditors Deputy Manager Bank Officer Deputy Manager Debtors Officer Officer Officer Officer Officer AREA WISE SALES OFFICE 40 .

\ ANALYSIS OF WORKING CAPITAL BANSWARA UNIT Mumbai Amritsar Delhi Indore Bangalore ISSUES & FACTORS INFLUENCING FOR WORKING CAPITAL 41 .

and that current liabilities are paid in time. which make it an important function of the financial manager. debtors (receivable) and stock (inventories) and creditors (payables). He must that right sources are trapped to finance current assets. marketable securities. The financial manager must determine levels and composition of current assets. There are many aspects of working capital management. Growth :. Time :.working capital management has great significance for all firms but it is very critical for small firms.\ ANALYSIS OF WORKING CAPITAL ISSUES IN WORKING CAPITAL Working Capital refers to the administration of all components of working capital-cash. Investment :.working capital represents a large portion of the total investment in assets. 42 . Critically :.the need for working capital is directly related to the firm’s growth.working capital management requires much of the financial manager time.

an enterprise involved in production would require more working capital than a service sector enterprise. Demand factor is not considered here as Yarn is sold by its marketing department. Therefore. RSWM follows continuous production policy. and others may follow the principle of 'demand-based production' in which production is based on the demand during that particular phase of time. because of which it requires lot of funds to be blocked in raw materials for the production of Yarn. Accordingly. Manufacturing/Production Policy :Each enterprise in the manufacturing sector has its own production policy. the same would be short in an enterprise involved in providing services. Nature of Enterprise :The nature and the working capital requirements of an enterprise are interlinked. The main factors are :1. The cycle of operations at RSWM is quite long and thus it needs large amount of working capital. The amount required also varies as per the nature. The plants are operated 24 hours in different shifts. While a manufacturing industry has a long cycle of operation of the working capital. an analysis of relevant factor should be made in order to determine total investment in working capital. the working capital requirements vary for both of them. some follow the policy of uniform production even if the demand varies from time to time.\ ANALYSIS OF WORKING CAPITAL FACTORS INFLUENCING WORKING CAPITAL There is not set of rules or formula to determine the working capital requirement of the firms. the investment in raw material inventories is very high 43 . RSWM is a manufacturing organization. As the production continues for 24 hours. 2. 48% of total funds are invested in raw materials.

it does not have to consider seasonal factors for its working capital requirements. thereby reducing the working capital investment in raw material stock. if there is no competition or less competition in the market then the working capital requirements will be low. for which the working capital requirement will be high. As RSWM has policy of continuous production. then one shall need to offer sops like credit. while in winters the sales are negligible. Ice creams and cold drinks have a great demand during summers. On the other hand.\ ANALYSIS OF WORKING CAPITAL as interruption in production causes increase in cost of production because of high set up cost of plants even need of raw material for power plant is always in demand for the same. First RSWM follows continues production policy so the raw materials are used in very large quantum and second the raw materials like Cotton. So there is not much competition in this industry for example: . has the monopoly for Viscose in the whole industry and Reliance has the monopoly for Polyester. The working capital needs of such businesses may increase considerably during the busy season and decrease during the slack season. Polyester (Reliance). Operations :The requirement of working capital fluctuates for seasonal business. Viscose (Grasim) for manufacturing 44 . 3. Market Condition :If there is high competition in the chosen product category.Grasim Ind. 5. 4. Its working capital does not vary with seasons. immediate delivery of goods etc. Otherwise. RSWM have to depend on market conditions as Polyester. thereby calling for substantial investment in the same raw materials are very important aspect for arriving at working capital requirements at RSWM because of two reasons mainly. Viscose and Cotton are always considered essential for textile and for various manufacturing unit. Availability of Raw Material :If raw material is readily available then one need not maintain a large stock of the same. if raw material is not readily available then a large inventory/stock needs to be maintained.

If the manufacturing cycle involves a longer period. The factors discussed above influence the quantum of working capital in the business. Price Level Changes :Generally. Manufacturing Cycle :The manufacturing cycle starts with the purchase of raw material and is completed with the production of finished goods. Most of the materials are imported for outside India which involves risk of exchange rate fluctuations thus it needs high amount of working capital. Normally. As business grows and expands. Therefore it is very necessary for RSWM to invest sufficient amount in working capital. RSWM has expanded its operations through investing in many other important projects which compel them to invest immensely in working capital. 6. With increasing prices. the need for working capital would be more.\ ANALYSIS OF WORKING CAPITAL of Yarn. the need for increased working capital funds precedes growth in business activities. 8. At times. At times. the same level of current assets needs enhanced investment. business needs to estimate the requirement of working capital. It takes around 7 to 8 days to complete one process of converting raw material into final product. rising price level requires a higher investment in the working capital. it needs a larger amount of working capital. business needs to estimate the requirement of working capital in advance for proper control and management. These raw materials are available in the lead time of maximum 4 days in each case thereby large inventory stock is not needed to maintain but the market prices are very much fluctuating therefore when the prices are favorable then raw material is purchased in adequate quantity. Growth and Expansion :Growth and expansion in the volume of business results is enhancement of working capital requirement. The 45 . The price level changes in raw materials hit very hard to RSWM as the major investments are being done in raw materials. Manufacturing cycle affects a lot on working capital requirements at RSWM as the cycle takes lot of time to convert raw material into finished goods. Because of high growth it needs large amount of working capital as the operations are handled at very large scale. 7. RSWM has grown incredibly since its inception.

Business Fluctuation :The Operating Efficiency of the firm relates to the optimum utilization of resources at minimum costs.e. has major account and deals it’s transaction with State Bank of Bikaner and Jaipur and Punjab National Bank.e. The RSWM division allows different credit periods to its customers depending on the type of yarn and from which depo it is purchased i.7 days b) Ludhiana.e. Better utilization of resources improves profitability and thus helps in releasing the pressure on working capital.10 days and for COTTON YARN it is 20 days. 9. around 18 %. If the payment is not made. 12.\ ANALYSIS OF WORKING CAPITAL assessment of working capital requirement is made keeping these factors in view.a) Bhilwara. the high rate of interest is charged i. The company for the improvement of working capital ratio also allows the cash discount of 1% if the payment is received in advance or the cheque is deposited in bank on the next day of dispatch. Technology :In Yarn Division. Banking Facility :The RSWM Division mainly uses the banking facility of RTGS i.15 days c) except Bhilwara and Ludhiana. 46 . RSWM Ltd. for SYNTHETIC YARN it is as follows:. 10. But for special customer they provide credit of around 3 months too. Real Time Gross Settlement for the payment of suppliers. Credit Policy :The credit policy of the firm affects working capital by influencing the level of the book debts. the technology used for production process is labor intensive in the manufacturing of yarn which also involves heavy machinery due to which requirement if working capital is high. Each constituent of working capital retains its form for a certain period and that holding period is determined by the factors discussed above. 11.

\ ANALYSIS OF WORKING CAPITAL ASSESMENT FOR THE SOURCES AND APPLICATION FOR WORKING CAPITAL 47 .

Business. Simultaneously. re-order level and ordering quantity so that the inventory cost is reduced and its management becomes efficient. should fix the minimum safety stock level. which the company generally holds. in other words we can say goods in process or semi finished goods. and on the basis of the Co. (DEBTORS)  CASH MANAGEMENT  PAYABLES. stock out costs should also be minimized. The level of inventory should be such that the total cost of ordering and holding inventory is the least. They represent the products that need more work before they become finished goods for sale.\ ANALYSIS OF WORKING CAPITAL The assessment of the working capital in the RSWM’s unit is done by the CFD with the consultation with the management staff of the Co. There are main four components which plays vital role for it which are as follows : INVENTORY  RECIEVABLE. Following are the types of inventory.’s previous year experience. 48 . This helps to maintain efficiently fund for operation of the organization. 2 Goods in Production Process :These are the goods or inventories. (CREDITORS) INVENTORY Inventory includes all types of stocks. therefore. Raw materials are the basic input of the production which is converted into finished goods after manufacturing process. inventory needs to be managed effectively. For effective working capital management. (UGAI). 1 Raw Material :- A raw material is the goods. which are under the production process. (VENDORS). which are required to produce the product of the firm.

which are provided to the employees to the firm. 4 Stock Of Stores Materials :Stock of store materials includes spare and tools. These materials do not directly enter into production but they are essential for production process.\ ANALYSIS OF WORKING CAPITAL 3 Finished Goods :Finished goods inventory are those which are completely manufactured and ready for sale. Spares means the parts of the machinery and tools are equipment. 1. 49 . Precautionary motive :Precautionary motive necessitates holding of inventories to guard against the risk of unpredictable changes in demand and supplies forces and other factors. NEEDS FOR HOLDING INVENTORY :Mainly there are two motives of holding inventories. while stock of finished goods is required for smooth marketing operations. Transaction motive :A transaction motive emphasizes the need to maintain inventories to facilitate smooth production operation 2. Stock of raw material or work in progress facilitates production.

Fast Moving Goods :.Fast moving goods are those. Non Moving Goods :.Slow moving goods are those. which are used between three to six months. slow moving goods and non moving goods.000/“C” category goods :.In ABC analysis. Most of the firms are adopting this technique. B. it is the most effective way of the inventory management. and C.10.to Rs.Non moving goods are those. which costs between Rs. which are used within three months.In FSN technique all goods are categorizes into three categories. Fast moving goods.10. ABC ANALYSIS : .000/2. The norms of FSN analysis at RSWM are mentioned below.“C” category goods involves goods which costs below Rs.\ ANALYSIS OF WORKING CAPITAL TECHNIQUES OF INVENTORY MANAGEMENT :1.“B” category goods are those. “B” category goods :. Slow Moving Goods :. The rules of the FSN analysis may vary according to company’s norms. the entire goods in stores are divided into three categories A. which are used since in above six months 50 .000/. FSN ANALYSIS :. That is why ABC is also known as ALWAYS BETTER CONTROL.50. How the goods are divided into three categories is mentioned below: “A” category goods : .A category goods are high value goods. which incurred maximum cost of the total inventory cost.

\ ANALYSIS OF WORKING CAPITAL FUND FLOW STATEMENT 51 .

arising from changes in working capital items and from financing and investing activities of the enterprise. which may only involve non . 52 . prepared to determine only the sources and uses of working capital between dates of two balance sheets. management can prepare the estimates of the working capital flows. The net working capital remains unaffected when a transaction involves only non-current accounts. The concept of working capital flow may be summarized as follows:  The net working capital increases or decreases when a transaction involves a current account and a noncurrent account. Fund Flow Statement :The statement of changes in financial position. A projected statement of changes in working capital is immensely useful in the firm’s long-range planning. A statement reporting the changes in working capital is useful in addition to the financial statements.current items. is known as the funds flow statement. With this insight.\ ANALYSIS OF WORKING CAPITAL Meaning of Fund :Funds may means of changes in financial resources. As historical analysis. the statement of changes in working capital reveals to management the way in which working capital was obtained.   The net working capital remains unaffected when a transaction involves only current accounts. The working capital flow of fund arises when the net effect of a transaction is to increase or decrease the amount of working capital.

18 947.51 12972.33 -2.67 729.53 1281. In Lakhs) Liabilities Share capital Share Warrants Reserves and Surplus Differed Tax Liabilities Secured Loans Unsecured Loans Inter Unit Balance Current liabilities and Provisions Working Capital Loans From Banks Assets : Fixed assets ( Net Block) Capital WIP Other Current Assets Inventories Debtors Cash and Bank Loans and Advances Export Incentive Receivable Interest Accrued on Investments 2009-10 0 0 6628.68 0 2010-11 0 0 9842.95 2009-10 11172.65 18.3 7.43 -4435.\ ANALYSIS OF WORKING CAPITAL Statement of Changes in Financial Position from 31/3/2010 to 31/3/2011 (Rs.66 0 11914.66 418.84 3021.29 0 -2427.29 difference 250.13 2520.62 -6645.27 5383.85 58.18 6515.02 0 Source/Application Source Source Source Application Source Source Application Source Source Source/Application Application Application Application Application Application Source Application Application Source FUND FLOW STATEMENT ON WORKING CAPITAL BASIS (All Figures in Rs.81 2210.57 1671.78 512.52 -135.34 3493.4 435.22 688.98 15.34 2855.74 553. Crores) 53 .14 2863.29 112.95 0 9486.24 2010-11 11422.25 6858.7 0 difference 0 0 3214.91 1183.76 6114.44 171.33 310.23 1274.

1 54 .23 6858.91 135.66 Inter Unit Balance -6645.78 512.29 -2427.62 1183.\ ANALYSIS OF WORKING CAPITAL Sources Share capital Reserves and Surplus Secured loans Unsecured Loans Current liabilities & provisions Working Capital Loans From Banks Cash and Bank Other Current Assets Amount 0 3214.29 Application Fixed assets Inventories Capital WIP Debtors Loans and Advance Export Incentive Receivable Amount 250.02 2.1 Total 5188.13 1274.84 3021.52 2520.85 58.25 Total 5188.33 418.

6858.23. 30% Reservesand Surplus.84. -36% Debtors. 58.62.13.91. 0. 3021.02. 32% Share capital.33. 250. -25% Current liabilities & provisions. 2520. 512. 37% APPL A IC TIONOFF UND S 55 . 3214. 0% S OURC OFF ES UND S Export Incentive Receivable. 3% Loansand Advance.\ ANALYSIS OF WORKING CAPITAL Unsecured Loans. 1183.52. 1% Secured loans. 1274.29. 2% Inter Unit Balance. 1% Inventories.78. 14% Capital WIP. 2427.29. 7% Fixed assets.85. 12% WorkingCapital Loans FromBanks. 6645. 418.

machinery. 56 . 7. patents. 2. like goodwill. copyrights etc. To reduce one’s liabilities by paying them from making working capital profit. Purchase of long-term investments like shares. like land. 6. Purchase of intangible fixed assets. 8. plant. bond / debentures etc. 11. Payment of other liabilities which are hidden but their payment plays crucial role in production cycle and also in working capital cycle. 5. Purchase of non-current assets:    3. Payment of cash dividend. Payment of taxes and various other expenses. equipment etc. To keep control on providing credit to its debtor or customer. building. Provide more R&D options and wider scope as resources are more available in terms of money for company. Repayment of long-term debt (debentures or bonds) and short-term debt (bank borrowing).\ ANALYSIS OF WORKING CAPITAL USE OF WORKING CAPITAL IN BUSINESS The typical uses of working capital are as follows: 1. 9. 4. Redemption of redeemable preference shares. Purchase of tangible fixed assets. Adjusted net loss from operations. 10. To keep control on operational expenses and to know the requirement of capital for inventory.

\ ANALYSIS OF WORKING CAPITAL DATA ANALYSIS OF WORKING CAPITAL STATEMENTS 57 .

71 4605.98 279.62 2372.85 61.83 75.94 31/03/2006 31/03/2007 (Rs.78 2.98 14. Along with the comparison the reasons for the changes in working capital is also given here under.14 955.59 121. in Lakhs) Increase Decrease 58 .\ ANALYSIS OF WORKING CAPITAL ANALYSIS OF THE WORKING CAPITAL STATEMENT :The working capital statement for the last six financial years and the comparison between two successive years are given in details as under.05 935.03 0.15 242. Loan & Advance: Inventories Sundry Debtors Cash & Bank Balance Loan & Advances Other Current Assets Export Incentive Receivables Inter Unit Balances TOTAL (A) Less:.62 4868.39 1677.07 611.04 385.99 263.18 1092.87 156.32 3 55.55 246.83 643.82 2279.64 12.19 56.36 68.07 10023.61 105.2 92.69 -80.Current Liabilities & Provisions: Sundry Creditors Interest accrued but not due on Loans Security Deposits Advances from customer 64.76 177.79 69.56 1033. Working Capital Statement comparison for the year 2005-06 and 2006-2007 Particulars Current Assets.7 162 9679.

72 72.72 5669.21 733.41 4354.  The current liabilities decrease in the latter year by Rs.31 Lacs. Hence it caused a less application of funds for RSWM working capital. 1018. Though company is giving more credit to its customer as per needs of its segment through its various units but efficient credit policy has made payments faster.72 1264.89 1155.84 1876.97 1876.29 4636.05 33.4 3480.98 0 4651.B) Increase in Working Capital Total 767.66 1202.11 246. 344. 2006 and 31st March.\ ANALYSIS OF WORKING CAPITAL Other Liabilities Working Capital Loans From Banks Provisions TOTAL(B) Working Capital (A .27 673.  The current assets decrease in the latter year by Rs.11 ANALYSIS & INTERPRETATION :From the working capital statement comparison for the year ended on 31 st March.11 1876. 2007 given above some of the fact revealed are as under.1 5028. The reasons behind the decrease in current assets are as follows :-  Decrease in debtors due to high competition in the market. 59 .7 72.47 Lacs.

643.  Increase in creditors for RSWM are due to expansion of various plants or units and hence requirement of such plants or units increased in terms of raw materials and various other services. Hence to fulfill such needs.  The reasons for the decrease in current liabilities are given as. Hence RSWM had to made more availability of fund for such application occurred in working capital. more materials were purchased and creditors also provided good deal by giving more credit days for making better relations with RSWM units respectively.71 Lacs and also become source of fund for working capital.20 Lacs is to meet the demand and requirements of its customers and also the increased capacity of various units respectively for RSWM.263. 60 . Decrease in Export Incentive Receivable by Rs.94 Lacs.  Decrease in Cash and bank balance was due to the fund used for expansion and renovation of various units and due to such reasons cash balance decreased and it was used more by Rs. on the export sales. 61. FMS.99 Lacs due to decline in government schemes of DEPB.\ ANALYSIS OF WORKING CAPITAL  Increase in inventory of Rs. etc. Therefore amount increased by Rs 56.

177.  RSWM has taken working capital loans from banks. But this year such loan decreased by Rs.82 2279.4 31/03/2007 31/03/2008 (All the Figures in Lakhs) Increase Decrease .19 Lacs in latter year. Loan & Advances: Inventories Sundry Debtors 4868. Such advance also generate source of fund for working capital and it provides more liquidity to company needs of short – term fund. Working Capital Statement comparison for the year 2006-07 and 2007-08 Particulars Current Assets. Due to all the above affect the net working capital increased by Rs. Such funds work as sources for working capital and they are one kind of short – term loans.72 Lacs as they were paid off and in spite of being source they became as more application of fund for working capital. Banswara unit of RSWM has taken more advance of Rs.\ ANALYSIS OF WORKING CAPITAL  To make deal final and for guarantee purpose advance are taken from customer’s by various units of RSWM.98 4487. 673.42 2788. 1155.93 508.84 Lacs.95 61 381.

26 615.46 1025.27 2986.32 3.52 8014.69 1718.22 5563.31 69.25 196. 62 .53 ANALYSIS & INTERPRETATION :From the working capital statement comparison for the year ended on 31 st March.94 13577.58 121.53 4704.53 1102.68 Lacs.78 733. 3898.95 60.36 68.98 0 4651.26 4704.15 76.66 112.27 4704.7 162 9679.1 995.65 4.\ ANALYSIS OF WORKING CAPITAL Cash & Bank Balance Loan & Advances Other Current Assets Export Incentive Receivables Inter Unit Balances TOTAL (A) Less:.16 45.1 5028.05 935.68 64.94 4514.94 4506.13 76.  The current assets increase in the latter year by Rs.03 0.05 51.13 728.72 988.56 1033.23 3941.83 3.5 1.47 4103. 2007 and 31st March.04 385.89 134.4 3480.15 17.55 246.22 190.B) Increase in Working Capital Total 14.Current Liabilities & Provisions: Sundry Creditors Interest accrued but not due on Loans Security Deposits Advances from customer Other Liabilities Working Capital Loans From Banks Provisions TOTAL(B) Working Capital (A .21 188.53 1. 2008 given above some of the facts revealed are as under.

\ ANALYSIS OF WORKING CAPITAL  The current liabilities increase in the latter year by Rs.e.42 Lacs. 63 . 912. The reasons behind the increase in current assets are as follows :-  Decrease in inventory by Rs.  Increase in Inter unit Balances i.  Increase in debtors due to sluggishness in demand of the product at all levels of the system such as decrease in demand of cotton lead to decrease in demand of yarn at the manufacturing level leads to increase in debtors to avoid more storage of goods in the store by the amount Rs.94 Lacs.40 Lacs is may be due to more risk taking capacity of the firm in terms of investing in raw materials. 3941. 508.95 Lacs. 381. RSWM’s Banswara Unit receive funds from the Head Office for the annual working requirement in the unit which has proved as the source of working capital for the company and has affected the company’s working capital by Rs.

26 Lacs. 69. Hence the generation was of Rs.  RSWM also accepted more amounts of money as working capital loans from banks as a short – term loans for its various units.\ ANALYSIS OF WORKING CAPITAL The reasons for increase in current liabilities are as follows :-  Decrease in creditors is due to premature payment done by organization to increase their business liquidity and to sustain in the recession era which a good manager of an organization do in order to make their suppliers sustain in the market so as they can also sustain and grow the RSWM’s diversified business portfolio by Rs. Such loans are always useful for any business as the generate sources of fund at very less expense. 1025.15 Lacs more in latter year. 64 . Due to all above affect the net working capital increased by Rs.5 Lacs. 2986.

07 66.26 464.Current Liabilities & Provisions: Sundry Creditors Interest accrued but not due on Loans Security Deposits Advances from customer Other Liabilities Working Capital Loans From Banks 31/03/2008 4487.21 95.47 4103.30 0.25 196.75 3614.01 1695.3 678.08 1271.93 17.13 147.20 794.13 728.16 2324.\ ANALYSIS OF WORKING CAPITAL Working Capital Statement comparison for the year 2007-08 and 2008-09 (All the figures are in Rs.2 1075.1 995.7 522.72 988.39 134.53 1.2 1328.86 10.94 13577.5 0.83 3159. Loan & Advance: Inventories Sundry Debtors Cash & Bank Balance Loan & Advances Other Current Assets Export Incentive Receivables Inter Unit Balances TOTAL (A) Less:.56 51.47 87.02 465.94 4506.82 6258. Lakhs) 31/03/2009 Increase Decrease Particulars Current Assets.42 2788.68 64.07 7.89 134.12 8394.12 1.03 65 .72 489.47 1075.97 2811.77 22.17 317.

52 8014. 66 .33 2771. The reasons behind the decrease in current assets are as follows :-  Decrease in debtors is due to global recessionary trend in the market which has affected all the units and business of RSWM. 36 Lacs.37 211.86 Lacs. 1484.77 2771.31 103.59 4078. 464. Being a diversified business portfolio company tried to maintain its customer and market share but due to the pressure on immediate customers export sales faced a steep downfall and hence it brought decrease in debtor’s amount by Rs.\ ANALYSIS OF WORKING CAPITAL Provisions TOTAL(B) Working Capital (A .93 4315.  Decrease in inventory due to less demand of products in various field has caused the reduction of Rs. 2008 and 31st March.B) Decrease in Working Capital Total 76.59 Lacs.26 Lacs from previous year and it worked as a source for working capital.3 3698. 2009 given above some of the facts revealed are as under:  The current assets decrease in the latter year by Rs.54 1696. 5183.53 2771.53 ANALYSIS & INTERPRETATION :From the working capital statement comparison for the year ended on 31 st March.22 5563.53 27. 1328.  The current liabilities decrease in the latter year by Rs.74 6470.

 RSWM has taken working capital loans from banks.\ ANALYSIS OF WORKING CAPITAL  Increase in loans & advances due to need seen by RSWM’s various units for making advance payments for taxes and creditors as market was as demanding from previous year. 1695.e.12 Lacs as they were paid off and in spite of being source they became as more application of fund for working capital Due to above all affect net working capital decreased by Rs.20 Lacs and also decreased their source of working capital in huge amount. Such funds work as sources for working capital and they are one kind of short – term loans. 3698.  Heavy decline in Inter Unit Balance i. But this year such loan decreased by Rs. funds received from head office by Rs.82 Lacs resulted in application of working capital which resulted in decrease in current assets. 67 . 3614. 95. The reasons behind the decrease in current liabilities are as follows :-  Increase in creditors due to recessionary trend in the market thus the market being not so demanding creditors have also provided more credit days for various items in order to retain the same and which caused the addition of Rs. Hence the amount made used by them was Rs.77 Lacs and it also increased the sources of working capital for various units of RSWM. 1075.77 Lacs.

Loan & Advance: Inventories Sundry Debtors Cash & Bank Balance Loan & Advances Other Current Assets Export Incentive Receivables Inter Unit Balances TOTAL (A) Less:.58 11.76 435.65 18.53 1721.08 1271.14 2863.25 960.45 5237.12 8394.9 10.16 2324.4 688.86 .07 465.04 2954.68 2210.07 7.95 990.33 310.69 30.48 6114.98 539.26 678.\ ANALYSIS OF WORKING CAPITAL Working Capital Statement comparison for the year 2008-09 to 2009-10 (All the figures are in Lakhs) Particulars 31/03/2009 31/03/2010 Increase Decrease Current Assets.72 489.57 12641.Current Liabilities & Provisions: 68 3159.

05 Lacs.29 7476.59 4078.75 331.40 858.55 297.46 29.47 87.85 2106.20 0.  The current liabilities increase in the latter year by Rs.44 ANALYSIS & INTERPRETATION From the working capital statement comparison for the year ended 31st March.44 0.42 3493.44 5267.97 2811.03 149.3 0.45 682.2 794.9 22.13 5165.24 29.39 134.49 5267.36 Lacs.\ ANALYSIS OF WORKING CAPITAL Sundry Creditors Interest accrued but not due on Loans Security Deposits Advances from customer Other Liabilities Working Capital Loans From Banks 147.B) Increase in Working Capital Total 1115.93 4315.44 109. The reasons behind the increase in current assets are as follows :-  As the market was getting over from the recession era especially in the second half of 2009 the purchase of raw material increased to a huge amount to meet the increasing demand especially in the export market 69 . 4247.95 74.75 3160. 2009 and 31st March.36 197. 2010 given above some of the facts revealed are as under  The current assets increase in the latter year by Rs. 1086.2 63.94 Provisions TOTAL(B) Working Capital (A .01 103.69 5267.

86 Lacs and also increased their source of working capital in huge amount.9 Lacs. increase in exports.  Due to competition in the market RSWM have given more credit to its debtors around Rs.  Increase in Inter unit Balances i. 1721. 2954. 539.58 Lacs. The reasons behind increase in current liabilities are as follows :-  Due to the upward trend in market the production has been increased as there was rebound in consumption. Thus the investment in inventory was increased by Rs. Synthetic Yarn etc.58 Lacs for various products like Cotton Yarn. increase in finished goods realization. 70 . the creditors are substantially increased by Rs.45 Lacs.  Decrease in loans & advances due to no need seen by RSWM’s various units for making advance payments for taxes and creditors as market was not as demanding from previous year. 149.\ ANALYSIS OF WORKING CAPITAL as the pressure was called-off from the immediate customers. 960.e. Hence the amount made free by them was Rs. RSWM’s Banswara Unit receive funds from the Head Office for the annual working requirement in the unit which has proved as the source of working capital for the company and has affected the company’s working capital by Rs. etc.

It is also one kind of short – term loan taken from market.20 Lacs and Rs. 3160. Due to this effect the rise of Rs. Working Capital Statement comparison for the year 2010-11 and 2011-12 Particulars Current Assets. Lakhs) 31/03/2011 Increase Decrease . Loan & Advance: 71 31/03/2010 (All Figures are in Rs. Due to above all affect net working capital increased by Rs.94 Lacs respectively in current liabilities has occurred and it worked as source of working capital for RSWM’s various units.69 Lacs. creditors and outsiders and “Working Capital Loans” form Banks. 682.\ ANALYSIS OF WORKING CAPITAL  RSWM’s various units had accepted money in form of “Advances from customer” from various customers. 197.

67 729.42 10314.98 15.76 3021.13 2520.24 134.2 0.82 297.05 326.78 135. 2010 and 31st March.26 6783.68 2210.34 16166.42 ANALYSIS & INTERPRETATION :From the working capital statement comparison for the year ended on 31 st March.10 225.45 4210.18 6515.3 455.02 6645.42 3493.44 109.33 2.29 7476.4 688.\ ANALYSIS OF WORKING CAPITAL Inventories Sundry Debtors Cash & Bank Balance Loan & Advances Other Current Assets Export Incentive Receivables Inter Unit Balances TOTAL (A) Less:.58 9370. 2011 given above some of the facts revealed are as under: 72 .29 10994.13 5165.27 5383.76 435.65 18.66 115.03 1.91 10309.7 -4435.24 854.14 2863.25 512.16 556.95 74.42 5.69 10314.11 679.24 1314.66 418.42 6796.51 947.18 553.Current Liabilities & Provisions: Sundry Creditors Interest accrued but not due on Loans Security Deposits Advances from customer Other Liabilities Working Capital Loans From Banks Provisions TOTAL(B) Working Capital (A .4 858.33 310.53 12972.75 331.B) Decrease in Working Capital Total 6114.97 6858.83 0.29 60.16 10314.55 5.57 12641.

6858.66 Lacs in latter year and it worked as application of fund in working capital. Due it the increase in amount is of Rs.91 Lacs.33 Lacs. 2.78 Lacs for RSWM’s Banswara unit. 418. 73 . 6645.13 Lacs which was a high application of funds requiring high working capital. The reasons behind the decrease in current assets are given as :-  Increase in debtors due to competition for RSWM’s various units and financial crises was over so more customers lead to increased demand in market which resulted in increase debts in less credit period. etc. funds from head office was not sufficient for meeting the requirements and therefore more funds was required which was not available so the Inter Unit Balance was got heavily decreased by Rs. 4205.  Decrease in cash balance was for the above reasons and also due to less credit available for company in market for its credit due economy meltdown and bad position of market along with it various unit’s modernization for better performances. 3525.  The current liabilities increase in the latter year by Rs.44 Lacs. It has worked as more of application in working capital.13 Lacs.  Increase in loans and advance given in order to take benefit of various tax policies and made payments for various licenses renewal and also for acquiring new ones which made effect of Rs.  Increase in inventories is due to low prices of raw material in market and increased market demand leads to heavy production of final goods resulted in heavy investment in inventories of around Rs. Hence due to this effect cash balance reduced by Rs. 2520.  Due to high application of funds in inventories.\ ANALYSIS OF WORKING CAPITAL  The current assets increase in the latter year by Rs. debtors.

76 Lacs. This has caused more days of credit and increased the amount by Rs. RSWM has increased its other liabilities by Rs.29 Lacs more in latter year to meet its daily requirements of working capital. 455. 60.45 Lacs. 74 .  Seeing demand and production the provisions for taxed has also decreased by Rs. Such loans are always useful for any business as the generate sources of fund at very less expense. Hence it caused an effect of source of working capital. 3021. Such effect has worked as useful source of working capital for the company.  Due to addition in production and keeping the market scenario in mind. Hence the generation was of Rs. 679.83 Lacs for RSWM’s Banswara unit.\ ANALYSIS OF WORKING CAPITAL The reasons for the increase in current liabilities are given as :-  Increase in creditors because of sustaining their customer’s in this low demand market.556. Due to all the above affect the net working capital decreased by Rs.  RSWM also accepted more amounts of money as working capital loans from banks as a short – term loans for its various units.69 Lacs.

93 2035.08 6902.42 6796.58 9370.32 144.14 7765.18 6515.59 48.67 729.48 633.49 31/03/2011 31/03/2012 Increase Decrease 75 .11 4138.82 406.7 -4435.71 390.85 5.98 15.52 133.97 7156.27 5383.83 -1475.89 162.72 12972.18 553.58 153.8 529. Loan & Advance: Inventories Sundry Debtors Cash & Bank Balance Loan & Advances Other Current Assets Export Incentive Receivables Inter Unit Balances TOTAL (A) Less:.18 6.05 326.55 324.82 91.87 -2960.25 8938.71 3004.64 32.69 540.47 172.24 1314.16 1245.38 4761.Current Liabilities & Provisions: Sundry Creditors Interest accrued but not due on Loans Security Deposits Advances from customer Other Liabilities Working Capital Loans From Banks Provisions TOTAL(B) Working Capital (A .67 1104.09 5816.34 16166.87 4523.03 1.92 1169.51 947.\ ANALYSIS OF WORKING CAPITAL Working Capital Statement comparison for the year 2010-11 and 2011-12 Particulars Current Assets.24 134.34 -375.76 498.B) Decrease in Working Capital 854.10 225.31 1991.

\ ANALYSIS OF WORKING CAPITAL Total RATIO ANALYSIS AND INTERPRETATION 76 .

So. and Current Assets Turnover Ratio. 2007-08.  Structural Ratio :. Creditors Payment Period. It also gives the knowledge how this ratio’s are helpful for decision making and to know the strength and stability on a company not only for RSWM but for any company. Cash Ratio also plays vital role in decision making and also indicates the strength of company financial wise and it also shows how efficient company is.It consists of Current Ratio and Quick Ratio.\ ANALYSIS OF WORKING CAPITAL Ratio analysis helps in finding out the company’s position in the industry in which it is working. Debtor Turnover Ratio. 2010-11 i. 77 . 2009-10. 2008-09. (RSWM LTD.e. Here the purpose of finding and analyzing ratio is to compare the activities of company during different financial years and to know the efficiencies of finance department of the company and its management. for 5 years are calculated and compared here under. They are divided into three categories which are as follows :  Liquidity Ratio :. Working capital Ratio helps in meeting or indicating the ability of a business concern in meeting its current obligation as well as its efficiency in managing the current assets for generation of sales.It consists of Current Assets to total net Assets.)” for the financial years 2006-07. Ratio’s like Return on Investment. Debtors Collection period. Efficiency Ratio :. for the financial analysts keeping record of the ratio and tracking them lighten their way of taking decision. It also helps in identifying the strengths and weakness of the organization when compared with other organization of the same industry. The Various ratios and there analysis for the “RSWM LTD. Return on Equity.It consists of Working Capital to Sales. Inventory Turnover Ratio. Composition of Current Assets.

93 2.15 4651.73 Current Liabilities B Ratio (a/b) 3 2 1 2. Mathematically it is given as.73 c i a R t n e r u C 0 2006 .09 Y rs ea 2009 .06 2.83 5563.29 2. Current Ratio = Year Current Assets A Current Assets Current Liabilities 31/03/2008 9679.10 2010 -11 ANALYSIS & INTERPRETATION :- 78 .44 31/03/2010 8394.1 2. It indicates the availability of current assets in rupees for every one rupees of current liability.45 1.08 31/03/2009 13577.53 5165.08 2.06 31/03/2011 12641. Current ratio is defined as a ratio of the current assets to the current liabilities.42 1.48 4078.52 2.\ ANALYSIS OF WORKING CAPITAL CURRENT RATIO :The current ratio is a measure of the firm’s short-terms solvency.97 9370.45 31/03/2012 16166.07 2007 -08 2008 .44 C urrentR atio 2.

61 4651. & C.79 9370. up till 2010-11 analyses for last five years.03 2006 . Hence RSWM Ltd.5 1 1.93 1.73:1 and which has reduced from previous year and has reached below min.41 5165.45:1 in 2009-10 financial year.34 Years Quick Assets A Current Liabilities B Ratio (a/b) QuickRatioC hart 2 1.11 2008 .42 0.1 1.73 4078. it shows the relationship between C.52 1. Mathematically it is given by Quick Ratio = Current Assets – Inventories Current Liabilities 31/03/2007 4809.\ ANALYSIS OF WORKING CAPITAL As mentioned above. required should be 1.34 2010 .33:1 for banks.08 t a R k i c u Q 0. QUICK RATIO :Quick ratio establishes the relationship between quick assets and current liabilities.62 31/03/2009 5219. was 2.26 0. level which is a matter of concern.5 0 1. Generally it is used as a measure of company’s ability to meet its current obligation. according to measure the ideal ratio is of 2:1 and min.10 79 .29 1. Currently the ratio is of 1.A.28 31/03/2010 6519.28 1.26 31/03/2011 3183.L.03 31/03/2008 9023. has to keep close watch on their current ratio and will have to try to maintain their efficiency in working capital management as well as of company among its shareholders.62 1.07 2007 . Here we can see that ratio is fluctuating every year and gone down below 2:1 in the year 2010-11 and the max.09 Yea rs 2009 .99 5563.

10 2010 . which is known as ‘gearing’.83 Total Debt Shareholder's Equity Ratio (a/b) B D to E ebt quityR atio 10 5 0 2.02 3.25 4.\ ANALYSIS OF WORKING CAPITAL ANALYSIS & INTERPRETATION :It can be seen that quick ratio is also fluctuating with year changing.05 3231. RSWM was inefficient in the year 2010-11 and doesn’t have sufficient fund to meet its current liability in this year. DEBT TO EQUITY RATIO :It is the ratio which indicates the relationship between loan funds and net worth or share holder funds of the company.42 c a R y i u q E o t b e D 80 .80 16173.11 7. Currently the ratio is of 0.34 5059.34:1 which is a matter of concern and in order to maintain it to above ideal ratio inventory should be decreased or increased in a appropriate ratio.8 2009 .35 5576. The highest ratio of 1.07 3.18 15587. Mathematically it is given as Debt to Equity Ratio = Year A Loan Funds Share holder fund 31/03/2008 31/03/2009 17736. The ideal ratio is considered of 1:1.62:1 in 2007-08 financial year in last five years.83 2006 .11 2179.97 31/03/2010 31/03/2011 15521.18 2007 -08 3.26 3.53 2. This ratio also helps the stockholder in taking the decision of investment. which is a part of working capital management. This ratio helps in controlling debt.43 3926.42 31/03/2007 14342.64 7.97 2008 -09 Yea rs 4.

53 2.11 81 . This ratio would be of more interest to the contributories of longterm finance to the firm.87 2179.\ ANALYSIS OF WORKING CAPITAL ANALYSIS & INTERPRETATION :By seeing the above facts and figure it can be said that by time spend the ratio have jumped from 2. All the ratio of the respective year was very much high in comparison to the accepted norm of 2:1 which shows company high dependency on debt which is not good and to be taken care of in the coming years.43 2 0 2. bonds etc.50 3926.22 5576.23 2009 .23 9657.01 2007 . RSWM’s long-term solvency is more satisfactory.26 2.08 c t a R T L i E D 2. Mathematically it is given by Long-term debt to Equity = Long-term Debt Net Worth 31/03/2008 31/03/2009 11186.42 and it has shifted company from low gearing to high gearing and it can reap the benefit of trading on equity.02 2.36 5059. debenture.25 3. It gives the idea about long term debt like long-term loans.43 Year A B 31/03/2007 10861.01 11214.15 Long Term Debt Shareholder's Equity Ratio (a/b) L -termD to EquityR ong ebt atio 6 4 4.86 31/03/2010 31/03/2011 10434. as the ratio gives a factual idea of the assets available to meet long-term liabilities. LONG-TERM DEBT TO EQUITY RATIO :It is ratio of long-term debt to the net worth.02 3231.86 2008 -09 Y rs ea 3.10 2010 .15 2006 .07 2.83 to 7.64 4.

67 2010 .23.44 1.76 Ratio (a/b) 1. TOTAL ASSETS TURNOVER RATIO :It shows the part of the total asset turnover ratio in single financial year.09 40427.84 55755.43 and it has increased from last year of 3.78 2007 .11 ANALYSIS & INTERPRETATION :82 s c i t a R A T . In earlier years the ratio was low and latter on it increased sharply.08 1.10 1.5 1 1.48 1.\ ANALYSIS OF WORKING CAPITAL ANALYSIS & INTERPRETATION :This ratio also has same trend as debt to equity ratio had. Mathematically it is given by Total Asset Turnover Ratio = Net Sales Total Assets 31/03/2008 31/03/2009 31/03/2010 31/03/2011 Year Net Sales 31/03/2007 a b 36303.76 39792.08 20096.57 2006 -07 1.78 35393.48 33306.02 1.84 2009 .51 21610.76 2008 . Hence by seeing the above figures it can be said the RSWM is sound and secured along with better position in terms of financial conditions. Though graph is showing fluctuation in ratio’s every year as the current position is of 4.57 T otal AssetsT urnov R er atio 2 1. It focuses on the effectiveness and efficiency of management in taking decision and using available resources.67 Total Assets 23114.58 1.91 22754.09 Y rs ea 1.

10 2010 .\ ANALYSIS OF WORKING CAPITAL From the years 2007-08 to 2009-10 it was over trading of total assets in RSWM and finance department needs to control the same according to the ideal ratio but in the financial year it came to 1.09 31/03/2010 5327. depreciation and tax. Interest Year a B 31/03/2007 4637.09 2008 -09 Y rs ea 2009 . Dep.56 31/03/2009 2218.17 0 2006 -07 4. This shows the caliber and efficiency of Finance department of the company and there concern for the needs working capital. & Tax.18 2. TIME INTEREST EARNED RATIO :The amount of interest paid by the company should be compared with the operating profit before interest.86 4.62 5.26 1393.82 8.55 1077.13 7.48 PBDIT Interest Ratio (a/b) InterestC eringRatio ov 10 5 5. Mathematically it is given as Time Interest Earned Ratio = PBI.56 897.24 1063.84 in the previous year.48 c a R g i v o C s r e t n I 83 .67 from 1.17 31/03/2008 4918.01 31/03/2011 10419.11 8. It shows how many times interest charges are covered by funds that are available for payment of interest.43 664.01 7.56 2007 -08 2.

00% 90.09 Y rs ea 91.00% 80.47 92.00% 70.46 31/03/2011 13.09 but again it was conservative using debt in further years due to recession year of 2008-09 when company suffered heavy losses.53 31/03/2008 6.26% 2010 .11 ANALYSIS & INTERPRETATION :RSWM has highest operating expense in the year 2008-09 i.\ ANALYSIS OF WORKING CAPITAL ANALYSIS & INTERPRETATION :By seeing the above figures it can be said that RSWM was conservative in using debt in 2006-07 and 2007-08. Mathematically it is given as Operating Expense Ratio = 100%. 100.84 31/03/2009 -0.54 91.07 93.e.16 93.55 100. and transportation for various materials and also low market demand.46% 2009 -10 s x E g n i t a r e p O 86. It is calculated in average. OPERATING EXPENSE RATIO :Operating profit is after deducting operating expenses from the gross profit.53% 2006 . It means amount of operating profit for sales worth one rupee. raw materials.00% 100. An interest cover of more than 7 times is regarded as safe which was up till 2007-08 and then again in 2009-10 and 2010-11. Cover of 2 times is min for any company considered by financial institutions.55 31/03/2010 8.08 100.55% due to increase in price of fuel.55% 2008 .74 86. But the fiancé department has 84 .26 Net Profit Ratio (in %) Ratio O peratingEx nseR pe atio 110.84% 2007 . But in 2008 – 09 it started to use debt and the ratio come down up to 2.00% s c i t a R 92. The operating profit ratio is given by the between operating profit and net sales.Net Profit Ratio Year A 31/03/2007 7.

09 -0.16 31/03/2009 -195.00% 10.76 40427.26% in the year 2010-11 which is at its lowest in the last five years and except the year 2008-09 the ratio for other years was not more than 95% which is also good.54% 6.54 31/03/2011 7663. NET PROFIT RATIO :Similar to gross profit ratio.80 35393.00% 2006 -07 -5.\ ANALYSIS OF WORKING CAPITAL showed the efficiency in controlling the expenses of the unit and dropping down the ratio to 86.41 39792.00% 7.00% 85 .09 7.55 31/03/2010 3397.11 13.42% 8.74 Net Profit after taxes Net Sales Ratio (a/b*100) NetP rofitRatio 15.51 8.08 -0.48 13.10 2010 . the net profit ratio will show the amount of net profit for the sales worth amount of 1 rupee.00% 5. The net profit ratio shows the profitability of the organization.74% s c a R i f o r P t e N 0. Mathematically it is given as Net Profit Ratio Year A B = Net Profit after Taxes Net Sales 31/03/2007 2711.47 31/03/2008 2489.16% 2007 -08 2008 .91 6.72 36303.31 55755.55% Y rs ea 2009 .

61 2.39 v o n r u t s A d e x i F 2010 -11 86 .09 2.56 2009 -10 4.67 31/03/2008 40427.55% which was due to hike in the prices of fuel and raw materials and recession era in the global market.90 31/03/2010 39792. It gives the amount of net sales in rupee of fixed assets.74% in the year 2010-11 which was due to high demand of RSWM products in market and efficient management of working capital requirements.91 13280.13 3.56 31/03/2011 55755.9 2008 -09 Y rs ea 3.67 2006 .48 12704.52 3. FIXED ASSETS TURNOVER RATIO :It shows the relationship between the fixed assets and the net sales.08 12191.09 13597.51 11179.39 Net Sales Net Fixed Assets Ratio (a/b) F edAssetsT ix urnov R er atio 6 s c i t a R 4 2 0 2.07 3. But the company then improved its performance and rose its profits up to 13.04 2007 -08 2.04 31/03/2009 35393. Mathematically it is given as Fixed Assets Turnover Ratio = Net Sales Fixed Assets Year A B 31/03/2007 36303.\ ANALYSIS OF WORKING CAPITAL ANALYSIS & INTERPRETATION :It can be analyzed from above chart that net profit had a decline trend till the year 2008-09 where it has been at its lowest point of -0.27 4.

no downfall have been recorded in last five years except a small deflection in the year 2008-09.77 2008 -09 Yea rs 1.78 35626.14 20096.76 1.68 Year a b 31/03/2007 36776.56 33306.68 2010 -11 A o n r u t e R h s a C 87 .02 1.78 2007 -08 1.\ ANALYSIS OF WORKING CAPITAL ANALYSIS & INTERPRETATION :It can be seen from the figures that management of RSWM has tried to improve every year for the better usage of fixed assets.5 s c i t a R 1 1.58 1.72 22754.39:1 and in last five years graph is on up trend for Banswara Unit. Mathematically it is given as Cash Return on Assets Ratio = Cash from Operating Activities Total Assets 31/03/2008 31/03/2009 40516.77 31/03/2010 31/03/2011 39946. It can be seen that the graph have shown upward sign only.59 Cash from operating activities Total Assets Ratio (a/b) C R ash eturnonAssetsR atio 2 1. Currently the ratio is of 4. Hence it shows the efficiency of finance department of RSWM.85 56002.48 1. CASH RETURN ON ASSETS RATIO :It is quite similar to the above ratio.44 1.85 2009 -10 1.00 23114. The only change is that here the cash from the operating activities are compared with the total assets of organization.01 21610. The effectiveness is measurement of cash management compares to the total assets of the company.59 2006 -07 1. Here cash from operating activities is net profit + deprecation.

25 31/03/2011 7663. Mathematically it is give as.25 31/03/2010 3397. RETURN ON EQUITY (%) :The return on equity shows the amount of net profit with respect to the net worth of the company. Here net worth contains the total amount of share holder’s fund i.86% s c i a r u t e R y q E o n 20.95 77.66 51. It can be seen that it has gone down from 1. It may due to inefficiency of growth business performance as per their investment.00% 0.89 Net PAT Net Worth Ratio (a/b*100) Returnon EquityRatio 100. It should be in increasing trend and for this total assets should be increased in proportion with cash from operating activities.00% 88 .00% 40.00% 60.87% 2007 .87 31/03/2009 -195.41 6628.25 34. equity share capital + reserves and surplus.86 Year A B 31/03/2007 2711.22 -5.08 2008 -09 -5.00% -20.31 9842.e.02 30.10 2010 . This ratio helps in comparing the performance of the company for two or more financial year and also shows strength of the company in returns to its share holder.00% 80.80 3730.00% 38.25% 30.\ ANALYSIS OF WORKING CAPITAL ANALYSIS & INTERPRETATION :Graphs of Cash return on assets ratio of RSWM have steeply fallen down in the financial year 2008 – 09 and 2010-11.89% 2006 -07 51.76 8066.11 77.25% Y rs ea 2009 .68 and there is constant downfall no sign of improvement is seen. Return on Equity Ratio = Net PAT Net Worth 31/03/2008 2489.85 to 1.72 7771.

37 31/03/2010 4062.\ ANALYSIS OF WORKING CAPITAL ANALYSIS & INTERPRETATION :Well it can be seen that RSWM’s performance has fallen down in the period of 2006-07 to 2008-09.10% 2006 .09 20096.00% s c i t a R 27.74% 2007 .10 PBIT Total Assets Ratio (a/b*100) R eturnonInv estm R ent atio 30.00% 0.80% 2009 .11 10. for various units.80 31/03/2011 9056.00% 20.48 18.23 21610.86% in the past five years which shows the efficiency of the departments.37% 2008 .09 Yea rs 18.19% 17.08 4.02 15. Even market conditions have affected the business of RSWM too.58 27. Mathematically it is given as Return on Investment Ratio = PBIT * 100 Total Assets 31/03/2008 3581. RETURN ON INVESTMENTS (%) :The return on investment shows the amount of net profit earned by the company with respect to total amount invested as assets.19 Year A B 31/03/2007 3951.07 15.08 22754. increase in various cost of raw materials. fuel cost etc.44 33306.74 31/03/2009 878.44 4. transportation. It is also known as ROACE. Though RSWM’s didn’t had good performance in those last three financial years but on the basis of good support and faith of share holders and ability of stability to survive in worse to worse conditions with the support of HEAD OFFICE the company managed well to increase the ratio from -5. as growth business requires heavy capital investments and then to they are not able to perform well due to economy crisis. It shows the profitability of the company and measures effectiveness of decision making of the finance manager and also shows stability of the company.25% to 77.00% m s v I o n r u t e R 89 .76 17.89 23114.10 2010 . The reasons are changes in government policies.

48 6796.24 5.04 35393. They have 90 .31 5.54 8. They have managed things were effectively for every unit.94% from the previous year’s profit due to improved market condition. poor condition of market and economy has also played a vital role for such poor performance. along with unfavorable government policies. But the condition now improved a lot and RSWM has managed to bring up its profits by 122. RSWM has used working capital as per their needs and almost accurate estimation and never blocked the fund unnecessarily. It also shows how efficiently firm or finance manager of a company is using capital or resources effectively for meeting the requirement of working capital.20 Year A B 31/03/2007 36303. Working Capital Turnover Ratio = Net Sales Working Capital 31/03/2010 31/03/2011 39792. It shows how much concern of finance department has for working capital.\ ANALYSIS OF WORKING CAPITAL ANALYSIS & INTERPRETATION :It is seen that profits of RSWM have decreased in the years 2007-08 and 2008-09.20 Net Sales Net Working Capital Ratio (a/b) ANALYSIS & INTERPRETATION :From the above figures and graph it can be said that RSWM’s various units finance managers and their departments have shown their efficiency and their work from time to time.22 31/03/2008 31/03/2009 40427.91 8014. WORKING CAPITAL TURNOVER RATIO :This ratio indicates the extent of working capital turned over in achieving sales of the firm. low prices of raw material. efficiency to top management and all other coordinating departments etc. labor. transport etc.55 8. Reduction in profit margin of RSWM’s so that it can sale its product at more cheaper and competitive rate in market from others to sustain its customers.08 4315.09 5028. though working capital turnover ratio graph has shown fluctuating figures from year to year. The reasons are highly competitive market with high cost of materials.51 7476.05 7.32 55755.

48 27 Average Debtors Sales Ratio (a/b*365) D ebtorsC ollectionP eriod 30 25 20 23 2006 -07 23 2007 .82 55755.86 39792.51 24 31/03/2011 4123. the funds are blocked in debtors for a firm sells goods for cash and credit. This represents the number of days. DEBTOR’S COLLECTION PERIOD :Debtor’s collection period indicates days required to collect amount of credit sales from debtors.08 26 2008 -09 Y rs ea 27 24 2009 .08 26 31/03/2010 2593. Credit is used as a marketing tool by a number of companies.10 2010 -11 ANALYSIS & INTERPRETATION :RSWM’s has extended its collection period more in terms of days as per the need of market in recent trends.09 23 31/03/2009 2556.50 35393.41 36303. So a firm must manage its credit policy well. From above it can be seen that as the year passed days also increased and RSWM’s needs of working capital also increased due to blocking money for around 27 days from 23 days previously. then to they have very low bad debts. Finance & Accounts department has worked very crucially on the extension of debtor’s collection 91 a R n i c l C s r o t b e D .46 40427.91 23 * 365 Year A B 31/03/2007 2326. Hence it shows their strength and stability for usage and allocation of funds for its diversified business portfolio.\ ANALYSIS OF WORKING CAPITAL never gone below 2:1 ratio up till date from last 5 years. Debtors Collection Period = Debtors Sales 31/03/2008 2534.

68 22600.11 which shows the creditability of RSWM’s in market and its strong position financial wise.) CREDITOR’S DEFERRAL PERIOD :Creditor’s deferral period indicates the duration for which the suppliers provide credit facility.07 1 2007 -08 2 2008 -09 Y rs ea 3 2009 .28 28482.39 3 31/03/2011 575.5 days which represents its strong liquidity position to pay its obligations within 10 days for various units of RSWM.94 1 99. Purchase is equal to Raw Material Consumption + Closing Stock of Raw Material-Opening Stock of Raw Material.As the figure of credit sales was not available. This duration should be long enough so that company can convert the raw material into finished goods and sell it in the market. (Note : . Hence the days are:- Creditors Collection Period = Creditors Purchase * 365 Year A B 31/03/2007 92.46 2 31/03/2010 222.25 28680.10 5 2010 -11 ANALYSIS & INTERPRETATION :The average deferral period of creditors is 2. This ratio has gone down up till 3 days in 2008-09 year. Hence the application of funds for working capital is mainly done on this part along with inventories.\ ANALYSIS OF WORKING CAPITAL period along with marketing department.42 21675. In this year it is 5 days currently in 2010 . Such credit from creditor’s works as a use full source of working capital 92 .62 44131.51 5 Average Creditors Purchase Ratio (a/b*365) C reditorsC ollectionP riod e 10 5 s c i t a R 0 n c l s o t i d e r C 1 2006 . The average collection period or UGAI period is of 30 days given by RSWM’s various units to its premium and major customers.65 1 31/03/2008 31/03/2009 86. Because the main source of revenue for any organization is its sales. The fluctuation is due to changes in trends of market and creditor’s policy for giving credit and per agreement dead. it has been assumed here that all the sales are credit sales.

The raw material required for various products are fetched from domestic market which require min. which work 24 *7 for whole year.28 3398.09 Yea rs 34 2009 . it has been assumed here that total purchases are credit purchase. cotton yarn. (Note : . RSWM has high intensive manufacturing units like synthetic yarn. Average stock is equal to opening stock + closing stock divided by 2 for that year.11 ANALYSIS & INTERPRETATION :It can be said that RSWM on an average has inventory turnover within 75 days.\ ANALYSIS OF WORKING CAPITAL for RSWM and it reduce burden for that year.10 67 2010 . etc. They always try to minimize its days and always try to block its fund as less as it can be possible 93 u T y r o t e v n I .07 26 2007 -08 38 2008 .40 3640. It also reflects the reputation of RSWM’s various units holds in market as creditors provide more service by lending more days of credit to make more healthy terms and relation with RSWM’s units for having business.83 4489.46 9055.56 50 31/03/2010 36851.) INVENTORY TURNOVER RATIO :The Inventory Turnover ratio indicates the movement of average stock holding of each item of material in relation of its consumption during accounting period.21 34 31/03/2011 49385. Calculated days are as follows :- Inventory Turnover Ratio = Average Stock * Cost of Material 31/03/2008 38425.5 days after giving order for procurement.10 2710.08 67 Cost of Goods Sold Average Stock Ratio (b/a*365) Inv ntoryT rnov r D y e u e as 100 c i t a R 50 0 50 2006 .49 38 365 Year a b 31/03/2007 33098.As the figure of credit purchase was not available.13 26 31/03/2009 35386.

They work accordingly so that they never get shortfall of materials and do not suffer loss by shutting down plants or various units due to such reasons. ESTIMATION FOR NEEDS OF WORKING CAPITAL 94 .\ ANALYSIS OF WORKING CAPITAL and to minimize the application of funds for working capital.

However. If over the years the relationship may be taken as a base for determining the working capital for future.\ ANALYSIS OF WORKING CAPITAL The most appropriate method of calculated the working capital needs of a firm is the concept of operating cycle. Ratio of fixed investment :To estimate working capital requirements as a percentage of fixed investment. a number of other methods may be used to determine working capital needs in practice. We shall illustrate here all these approaches which have been successfully applied in practice. In this method working capital is determined on the basis of past experience. Regression analysis method :It is useful statistical technique applied for forecasting working capital relationship between sales and working capital and its various components in the past years. Ratio or Percentage of sales :It is a traditional and simple method of determining the level of working capital and its components. The method of least squares is used in this regard. Current assets holding period :To determine working capital requirements on the basis of average holding period of current assets and related them to costs based on the company’s experience in the previous years. This method is essentially based on the operating cycle concept. 95 .

Conversion of work in progress to finished goods. It plays an important part in determining WC requirements: longer the period of this cycle. Realization of cash from debtors after the credit period allowed to them. larger is the requirement of WC. Sale of Finished goods.\ ANALYSIS OF WORKING CAPITAL Working Capital Operating Cycle The WC Cycle starts with the purchase of raw materials and ends with the realization of cash from the sale of finished products. Operating Cycle Cash Receivables + Cost Raw Material + Cost Finished Goods + Cost Stock in Process + Cost 96 . Manufacture of the product: • • 3) 4) Conversion of raw material to work in progress. Various phase involved in WC operating cycle are as follows: 1) Acquisition of resources: It companies of • 2) Purchase of raw materials: Payment of raw material to raw-material suppliers after the credit period allowed by them.

2) Cash Cycle :.\ ANALYSIS OF WORKING CAPITAL 1) Accounts Payable period :. Finished goods storage period. In other it is the credit period allowed to the organization by raw material suppliers. The total duration of the entire segment mentioned above is known as gross operating period. Cash Cycle = WC Operating Cycle – Accounts Payable Period 3) Inventory Period :. OPERATING CYCLE CONCEPTS There are two concepts of operating cycle :1) 2) Gross operating cycle period Net operating period.This is the period from the day of acquisition of raw material to the payment of raw materials. Conversion period. Operating Cycle = Inventory Period + Accounts Receivable Period. Average Collection period. 5) Operating Cycle :.The time that elapses between the purchase of raw materials and the collection of cash for sales is referred to as operating cycle. 97 .The period beginning from day of dispatch of finished goods to the buyer and ending on the day of realization of cash against sales.The period from the day of payment for raw material purchased till the realization of cash against sales. 4) Accounts Receivable Period :. GROSS OPERATING CYCLE PERIOD :The successive segments of the operating cycle are :1) 2) 3) 4) Raw material storage period.The period is beginning from the day of receipt of raw materials in the factory till the day of dispatch of finished goods.

the operating cycle period increases. It becomes obvious that the shorter the duration of operating cycle period.I In case the company sells its products for cash then the segment of average collection period will disappear from the gross operating cycle period and to that extent the total duration of the cycle gets reduced.  CASE . The operating cycle approach is quite useful in : Managing  Controlling and  Forecasting working capital. NET OPERATING CYCLE PERIOD :When the average payment period of the company to its suppliers is deducted from the gross operating cycle period the resultant period is called net operating cycle period or simply operating cycle.\ ANALYSIS OF WORKING CAPITAL  CASE . 98 . the faster will be the transformation of current assets into cash.II In case advance payments are to be made for procuring materials.

the operating cycle process can be expressed as follows :Operating cycle = R + W + F + D – C Where.) Debtors collection period (5.\ ANALYSIS OF WORKING CAPITAL EVENTS OF OPERATING CYCLE The operating cycle (working capital cycle) consists of the following event. less the credit period allowed by the suppliers. Conversion of work-in-progress into finished stock. D = Debtors collection period C = Credit payment period. Conversion of raw materials into work-in-progress. F = Finished goods storage period.) Credit payment period = = = = = Average stock of raw material Average cost of production per day Average W-I-P inventory Average cost of production per day Average stock of finished goods Average cost of goods sold per day Average book debts Average sales per day Average trade creditors Average purchase per day 99 . which continues throughout the life of business.) Finished goods storage period (4. W = Work-in-Progress period.) Raw Material (2. R = Raw material and stores storage period. 1) 2) 3) 4) 5) Conversion of cash into raw materials. The duration of the operating cycle for the purpose of estimating working capital is equal to the sum of the duration of each of above said events. Conversion of finished stocks into accounts receivables through sale and Conversion of accounts receivables into cash. The various components of operating cycle may be calculated as :(1.) Work-in Progress holding period (3. In the form of an equation.

66 7 134.51 21796 59.60 45 2010-11 4241.24 49046.78 659.33 840.\ ANALYSIS OF WORKING CAPITAL OPERATIONG CYCLE ANALYSIS OF RSWM BANSWARA S.04 581.33 7 89.04 52 2008-09 2899.78 677.42 9937.01 7 S.58 83.62 1020.63 29895.56 Closing Balance of Raw Material 3510.25 2009-10 634.44 655.71 1093.76 647.17 598. Particulars 3 Finished Goods Storage Period (F) Opening Balance of Finished Goods Closing Balance of Finished Goods Average Stock of Finished Goods (a) Cost of Sales/ Goods Average Cost of Goods Sales/day (b) F= a/b (Days) 2006-07 922. No.44 Average W –I –P Inventory (a) 473.895 33194 90.17 660.14 7 2009-10 541.42 3019.4 Raw Material Consumed p. 20290.66 Average Cost of Production/day (b) 75.475 44169.72 39 2009-10 1798.495 29980 82.4 751.00 1798.37 8 100 .12 Closing Balance of W – I – P 529.24 2899.42 7089.06 Average Raw Material Consumed/day 55. No.42 34031.90 7 2008-09 655.a.3 93.93 2008-09 720.95 34065.24 9 93.29 W= a/b (Days) 6 2007-08 529.72 24310. Particulars 2006-07 1 Raw Material & Stores Storage Period (R) Opening Balance of Raw Material 2984.59 (b) R= a/b (Days) 58 2007-08 3510.76 1526.24 76 S.5 650.92 2007-08 581.94 7 2010-11 660. No.00 3204.01 2348.27 35647.62 22281 61.3 121.64 32847.62 600.72 30383.5 634.47 2010-11 659.2 81.78 Cost of Production 27482.82 541.24 Average Stock of Raw Material (a) 3247.82 592. Particulars 2006-07 2 Work – in – Progress Holding Period (W) Opening Balance of W – I – P 418.8 66.01 4241.99 8 97.4 720.

3 297.53 86.65 3 120.98 4123. No.07 2556.91 2008-09 2788.93 2534.38 2 73.51 2010-11 2863.68 22600.65 2593. No.46 2009-10 147.2 222.91 5 S.93 2324.32 121.83 2279.86 39792.70 2008-09 51.08 2009-10 2324.98 2788.46 40427.\ ANALYSIS OF WORKING CAPITAL S.92 1 2007-08 121.03 92.07 2863.46 23 2007-08 2279.03 575. No.76 23 96. Particulars 5 Creditors Payment Period (C) Opening Creditors Closing Creditors Average Creditors (a) Total Purchases Average Credit Purchases /day (b) C= a/b (Days) 2006-07 64.65 5383. Particulars * Operating Cycle Analysis Raw Material & Stores Storage Period (R) Work – in – Progress Holding Period (W) Finished Goods Storage Period (F) Debtors Collection Period (D) Creditors Payment Period (C) Operating Cycle Period (R+W+F+DC) in Days 2006-07 58 6 9 23 1 99 2007-08 52 7 7 23 1 91 2008-09 39 7 8 26 2 82 2009-10 45 7 7 24 3 85 2010-11 76 7 8 27 5 123 101 .09 99.75 27 S.98 2326.3 99.42 1 59. Particulars 4 Debtors Collection Period (D) Opening Debtors Closing Debtors Average Debtors (a) Sales Average Sales/day (b) D= a/b (Days) 2006-07 2372.97 26 109.48 110.38 2010-11 297.02 24 152.65 61.25 26882.42 21675.51 68.2 854.82 55755.53 147.62 44131.405 36303.03 51.28 24972.5 35393.

etc. Hence it can be said that RSWM uses percentage or ratio of Sales method generally for estimation of working capital for its various units.\ ANALYSIS OF WORKING CAPITAL ESTIMATION OF WORKING CAPITAL REQUIREMENT AT RSWM LTD. The other current assets and current liabilities are taken from its monthly balance sheet and are shown with 10% variation for next quarter’s estimations. Some important aspects of working capital like sales and debtors are considered here as these matters are to be taken care of by RSWM BANSWARA office itself. BANSWARA UNIT sends its working capital estimation to RSWM’s office situated in Kharigram (Bhilwara) on quarterly basis. the main aspect to be focused on is the funds blocked in raw materials. While estimating its working capital needs. etc. Then the firm deducts the funds of creditors for raw materials. BANSWARA UNIT Working capital requirement estimation is dealt with proper care and cautions. Working capital blocked in raw materials is estimated on the basis of the production budget for the year. The minimum quantity needed is then multiplied to its rates and thus the unit arrives at its working capital requirement for its production. The main aspect of working capital in BANSWARA UNIT is its raw materials used in production of Grey Yarn like Synthetic Yarn and Cotton Yarn. Bhilwara unit. Then the lead time for every raw material is decided. 102 . Working capital requirement fixation is done with respect RSWM various units like Banswara unit. From production budget it comes to know what quantity of raw materials will be needed to meet production targets. Then RSWM’s office collects working capital estimations of its every unit and merges them and then provides funds to individual units. Thus the unit comes to know for how many days they will have to hold inventory of raw materials.

66 148.80 100 % 4.04 3140.41 -5100.67 654.38 2992.18 3% -8% 29 % 1676.48 Estimation at 5% Growth 58543.77 Lakhs in upcoming year for RSWM Ltd.88 5653.25 Estimation at 10% Growth 61331.72 -4657. Suppose entry passed by Banswara depot or center will have effect on main units account as it is linked to it and not on Banswara’s account only.58 Based on 2010-11 Actual Sales 201011 55755.34 16166.88 -4435.57 -4878. BANSWARA (All the Figures in Lakhs) % of Sales Particulars Sales Current Assets Inventories Sundry Debtors Cash & Bank Balance and Other Current Assets Loan & Advances and Export Incentive Receivable Inter Unit Balances Total CA (A) Current Liab & Provisions Liabilities Provisions Total CL (B) W/C (A-B) 23 % 10 % 1% 569. are inter linked with each other and the single entry passed at one place can be seen at various places and has its effect on whole account nor on that particular section.64 18592.97 597.87 17783.63 141. 1996.27 5383.03 Estimation at 15% Growth 64118.56 1928.80 Lakhs the estimated requirement of working capital will increase by Rs.70 14642.31 2997.94 13977.79 2856.8% 0. It saves time and 103 .18 14269. ERP plays vital role in today’s high tech world.64 1760. 64118.56 Hence when sales are of Rs.50 5922.10 1844.98 13620.46 15308.38 14918.11 16975.97 3128.60 134.11 6191. Banswara All the departments or various section of RSWM LTD.69 154.18 13311.\ ANALYSIS OF WORKING CAPITAL CALCULTION OF PERCENTAGE OR RATIO OF SALES METHOD FOR RSWM LTD.02 12972.58 2855.77 3283.32 626.2% 5% 24 % 2720.

The single database permits information to be extracted for any cost centre or profit centre while enabling easy solution for management review and actions. It was a great pleasure and very value able learning asset which I got from this training was to work in ERP environment. It can be said that Single access to ERP enables information to be drilled down across the cost centers as well as viewed across the business segments. This ERP system really has an edge on TALLY and it is really faster than TALLY. ERP has more advanced features and operating options which deal with the day to day needs. Learning of ERP in this training has added advantage for my initial stage of career as it will provide me upper hand from other candidates for having experience and knowledge of working in ERP. I learnt and operated ERP and also made various report by taking help of it. it is friendly user and at a time multiple users can post entries and data in it from various or different locations and ERP clubs and generate the accurate and perfect data presentation required by operator.\ ANALYSIS OF WORKING CAPITAL wastage of various stationary. 104 . I also used TALLY and found the difference in both. Top management can view the data easily and at any point.

105 . etc.\ ANALYSIS OF WORKING CAPITAL CONCLUSION From the above report. I can conclude that at present peoples and connected companies are 99% satisfied with RSWM Ltd. Cotton Yarn. Dyed Yarn. Graphite Electrodes. They are well known in market for their business like Grey Yarn.

g. I also got value able tips and guidance about how to use ERP for increasing one’s performance. Being the part and unit of LNJ GROUP also follows the main company norms and terms for calculation for accounting of its working capital. However a negative change in working capital indicates lower funds to pay off short term liabilities (current liabilities) which may have bad repercussions to the future of the company. I also got a big opportunity to work in ERP environment. A positive change in working capital indicates that the business has paid out cash for e. Hence an increase in working capital will have a negative effect on the business’s cash holding. RSWM Ltd. paying creditors etc. Managing Working Capital is one of the pioneer’s and role-playing part of the company. It is essential for a person to know about the sources. purchase & marketing are involved in this procedure indirectly. Predetermined norms are applied wherever they are applicable. accuracy and speed towards work. application and needs of working capital for business in real life if one will going to specialize in the field of finance and going to work for a company or as entrepreneur.\ ANALYSIS OF WORKING CAPITAL Any change in working capital will have an effect on business’s cash flows. Each & every component of working capital is dealt with expertise and experience of the finance & accounting department. 106 . in purchasing or converting inventory. Here I was able to relate what I had read in the books and learnt in class rooms. manages its working capital very efficiently for its business. Mainly working capital management is the function of finance department but many other departments like production. Thus the effort from all the departments of various units helps company to manage its working capital in a systematic manner. The procedure is very simple for estimating working capital requirement. Hence this training helped me a lot to know the importance and function of working capital and its component.

M. Pandey Ravi .\ ANALYSIS OF WORKING CAPITAL BIBLIOGRAPHY Text References :Financial Management Financial Management I.M. Kishor 107 .

in www.com 108 . for the years: RSWM: 2006 – 07.in www.rswm. 2007 – 08.\ ANALYSIS OF WORKING CAPITAL Management Accounting and Financial Analysis Board of Studies.scribd. 2009 – 10. The Institute of Charted Accountants of India Journals :Annual Reports of RSWM Ltd.lnjbhilwara. 2010 – 11 Revised Marketing Policy Web References :www. 2008 – 09.

59 720.\ ANALYSIS OF WORKING CAPITAL ANNEXURE Particulars Inventories Finished Goods Stores & Spares (All figures are in Rs.04 256.5 187.45 09-10 659.4 238.74 581.76 500.78 178. Lakhs) 05-06 06-07 07-08 922.71 475.84 109 .15 08-09 634.42 10-11 1526.

19 0 15.93 0 2788.15 4868.02 0.\ ANALYSIS OF WORKING CAPITAL Raw Materials Work – in – progress Waste / Scrap TOTAL Sundry Debtors Due for period not exceeding six months Others Total Cash & Bank Balances Cash in Hand With Scheduled banks in Savings Accounts With Scheduled banks in Current Accounts.33 11.07 0 2324.14 2863.75 3159.8 0 18.85 2372.05 0 0 0 237.4 0 75.8 0 17.16 2324.24 1.01 541.87 0 385.56 418. Margin Money depot Drafts in Hand/Collection and Remit Fixed Deposits others Dividend Accounts TOTAL Loans & Advances i) Loans and Advances recoverable in Cash for value to be received or pending ii) Advances against Supply Less: Provision for Doubtful Advance TOTAL Provision Proposed Dividend on Equity Shares Provision for Dividend on Preference Shares Tax on Dividend 2984.93 10.12 24.06 2899 655.98 0 5383.56 0 310.98 70.98 5.98 0.26 0 0 0 1093.17 6.76 70.26 0 279.68 0 279.36 2.05 0.82 24.02 6.33 46.44 9.17 3510.24 529.18 0 0 0 110 .98 4241.16 4605.4 0 0 0 667.42 660.22 208.67 61.12 0 14.04 1.46 9937.95 4487.62 0.18 0.23 1798.26 0 0 0 263.18 0 0 0 355.42 2788.7 0.92 6114.8 0 13.65 0 2863.62 2371.65 6.82 2273.55 6.9 0.18 5.25 41.42 1020.62 51.04 29.83 4.84 7.18 0.19 0 1271.27 5383.07 3.96 0 729.07 5.23 1.43 2279.04 178.92 7.98 7.97 12972.58 5.

22 103.58 Source on www.com & www.in OR All figures from RSWM Ltd.13 0 74.59 74.72 0 72.lnjbhilwara.59 0 103.58 0 134. Annual reports and balance sheets.72 0 0 0 76.rswm.22 0 76. 111 .\ ANALYSIS OF WORKING CAPITAL Retirement Benefits Provision for Tax TOTAL 72.13 134.

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