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REPORT ON WORKING CAPITAL MANAGEMENT

A report submitted in partial fulfillment of the requirement of Master of Business Administration Programme of VAAGDEVI INSTITUTE OF MANAGEMENT SCIENCES.

Submited By :

KODARI RANJITH M.B.A. 3th Sem Roll NO : 11B08.


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Some one has told Practices makes the man Perfect, so that the Practical Knowledge is fundamental theme. It is a step to bridge the gap between the theoretical study of management and its practical application. It is more applicable in the field of the management especially a professional course like M.B.A. VAAGDEVI INSTITUTE OF MANAGEMENT SCINCES has prescribed 6 to 8 week project report training during the 3rd Sem. as a part of M.B.A programmers my training at the Reliance Industries Limited is to comply with this requirements also.. s I have carried out my report work at Power Build Limited in Vidyanagar. By seeking the things more ensure to gress and get clean idea about the working of Financial Department. The project report on Working Capital Of Company, which provide perfect direction of invest the money. The data collections were by annual report of the different companies, magazines related to the cement association and discussion with concerned employees and experts. I as a student have put my best efforts to understand the functioning of Financial Department as mentioned. My Report is prepared on the basis of information given by the company. At the end findings and suggestions are reported. I hope this serves the Purpose.
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Industrial Training is not only part of our syllabus, but it is the Golden Opportunity for our knowledge enrichment with the great Pleasure here. I make the opportunity to express any gratitude. Words are indeed inadequate to convey my deep sense of gratitude to all those who have helped me in completing this summer project to the best of my ability. Being a part of this project has certainly been a unique and a very productive experience on my part. I am really thankful to, SHRIBHASH DATTA for making all kinds of arrangements to carry the project successfully and for guiding and helping me to solve all kinds of quarries regarding the project work. His systematic way of working and incomparable guidance has inspired the pace of the project to a great extent. I would also like to thank my mentor and project coordinator, a for assigning me a project of such a great learning experience and acquainting me with real life project financing and appraisal. . Last but not least I would like to thank all the employees of Power Build Ltd. who have directly or indirectly helped me with their moral support for the completion of my project.

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SR. NO
1. 2. 3. 4. 5. 6. 7. 8.

PARTICULAR
INTRODUCTION OF FINANCIAL MANAGEMENT. CONCEPTUAL FRAMEWORK OF WORKING CAPITAL MANAGEMENT. LITTERARURE REVIEW. RESEARCH METHODOLOGY. ABOUT THE GEAR INDUSTRY. INFORMATION ABOUT THE POWER BUILD LIMITED. ANALYSIS OF OPERATING CYCLE OF POWER BUILD LIMITED. ANALYSIS OF WORKING CAPITAL MANAGEMENT OF POWER BUILD LIMITED FINDINGS. CONCLUSION. BIBLIOGRAPHY. ANNEXURES

PAGE NO
6. 20. 51. 56. 65. 75. 91. 98.

9. 10. 11. 12.

122. 123. 125. 127.

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Finance is regarded as the life blood of a business enterprise. This is because of in the modern money-oriented economy. Finance is one of the basic foundations of all kinds of economic activities. In General finance may be defined as the provision of money at the time it is wanted. However, as a management function it has a special meaning. Finance function may be defined as the procurement of funds and their effective utilization

DEFINITIONS
Business finance is that business activity which is concerned with the acquisition and conversation of capital funds in meeting financial needs and overall objectives of a business enterprise. Business finance can be broadly defined as the activity concerned with planning, raising, controlling, and administrative of funds used in the business. Financial Management means the entire gamut of management of finance both its sources and uses of the enterprise. According to SOLOMAN Financial management is concerned with the efficient use of an important economic resource namely Capital Funds. According to PHILLIPPATUS Financial Management is concerned with long-term and short-term credits for the firm. Thus, Financial Management is Primarily concerned with the proper management of funds.
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OBJECTIVE OF FINANCE
Traditionally, the basic Objectives of financial management are the maintenance of liquid assets and maximization of the Profitability of the firm. Maintenance of liquid assets means that the firm has adequate cash in hand to meet its obligations at all times. The firms investment and financing decisions are unavoidable and continuous. In order to make them rationally, the firm must have a goal. It is generally agreed in theory that the financial goal of the firm should be the maximization of owners economic welfare. Owners economic welfare could be maximized by maximizing the shareholders wealth as reflected in the market value of shares.

Profit Maximization

Profit Maximization means maximizing the rupee income of firms. Firms produce goods and services. They may function in a market economy, or in a government controlled economy. In a market economy, prices of goods and services are determined in competitive markets. Firms in a market economy are expected to produce goods and services desired by society as efficiently as possible. Price system is the most important organ of a market economy indicating what goods and services society wants. Goods and services in great demand command higher prices. This results in higher profit for firms; more of such goods and services are produced. Higher profit opportunities attract other firms to produce such goods and services. Ultimately, with intensifying competition an equilibrium price is reached at which demand and supply match. In the case of goods and services which are not required by society, their prices and profits fall.
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In the economic theory, the behavior of a firm is analyzed in terms of profit maximization. While maximizing profit, a firm either produces maximum output for a given amount of output, or uses minimum input for producing a given output.

Objections to Profit Maximization


The Profit Maximization objection has, however, been criticized in recent years. It is argued that profit maximization assumes perfect competition, and in the face of imperfect modern markets, It cannot be a legitimate objective of the firm. In the new business environment, profit maximization is regarded as unrealistic, difficult, inappropriate and immoral. Time value of money: The profit maximization objective does not make a distinction between returns received in different time periods. It gives no consideration to the time value of money, and it values benefits received today and benefits received after a period as the same. Uncertainty of returns: The streams of benefits may possess different degree of certainty. Two firms may have same total expected earnings, but if the earnings of one firm fluctuate considerably as compared to the other, it will be more risky.

Shareholders Wealth Maximization (SWM)


The objective of shareholders wealth maximization is an appropriate and operationally feasible criterion to choose among the alternative financial actions. It provides an unambiguous measure of what financial management should seek to maximize in making investment and financing decisions on behalf of shareholders. The objectives of shareholders wealth maximization take care of the questions of the timing and risk of the expected benefits. These problems are handled by selecting an appropriate rate for discounting the expected flow of future benefits.
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Scope of Financial Management

Financial Management as an academic discipline has undergone significant changes over years as regards its scope and coverage. As such the role of finance manager has also undergo fundamental changes over the years. The Traditional approaches, which were popular in the early part of this century, limited the role of financial management to rising and administering of funds needed by the corporate enterprises to meet their financial needs.

It broadly covered the following three aspects:-

1. Arrangement of funds from financial institutions. 2. Arrangement of funds through financial instruments viz, shares, bonds, etc. 3. Looking after the legal & accounting relationship between a corporation & its sources of funds. In the later fifties it started to be severely criticized and later abandoned on account of the following reasons. Outsider-looking-in approach Ignored routine problems. Ignored non-corporate enterprises. Ignored working capital financing. No emphasis on allocation of funds.

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The Traditional Approach outlived its utility due to changed Business Situations in sixties made large quantum of information available to the financial manager, based on which he could make sound decisions. The scope of financial management increased with the introduction of capital budgeting techniques. The Modern Approach is an analytical way of looking at the financial problems of a firm. These decisions, which can also be termed as functions outlining the scope of finance management, are being discussed below. Funds requirements decision. Financing Decisions. Investment Decisions. Dividend Decisions.

Needs of Financial Management:The important of financial management cannot be overemphasized. In every organization, where funds are involved, sound financial management is necessary. Sound financial management is essential in both profit and non-profit organizations. The financial management helps in monitoring the effective deployment of funds in fixed assets and in working capital. The finance manager estimates the total requirements of funds, both in the short period and the long period. The finance manager assesses the financial positions of the company through the working out of the returns on capital, debt-equity ration, cost of capital from each sources, etc. and comparison of the capital structure with that of similar companies.

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Financial Management also helps in ascertaining how the company would perform in future. Sound Financial Management is indispensable for any organization. It helps in profit planning, capital spending measuring costs, controlling Inventories, accounts receivable, etc. Financial Management essentially helps in optimizing the output from a given input of the funds.

Techniques of Financial Management


Financial Management is concerned with raising financial resources and their effective utilization towards achieving the organizations goals. This requires applications of appropriate financial methods or tools. The term Financial Method or Financial Tools refers to any logical methods or techniques to be employed for the purpose of accomplishing the following two goals; Measuring the effectiveness of firms actions and decisions. Measuring the validity of the decisions regarding accepting to or rejecting future projects. Cost of capital Financial leverage or trading on equity. Capital Budgeting Appraisal methods. ABC analysis, Cash management models, aging schedule of inventories, Debtors turn-over ratio, etc. Ratio Analysis. Fund Flow Analysis and Cash Flow Analysis.
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Principles and Functions


A firm should give proper attention to the structure and organization of its finance department. It financial data are missing or inaccurate, the firm may not be in a position to identify the serious problems conforming the firm in time for necessary corrective action. The role of different finance executives should be clearly defined in order to avoid conflict and overlapping of functions. Organization of the finance function differs from company to company depending on their respective needs and the financial philosophy. The titles used to design the key finance official are also different, viz., Vice-President (Finance), Chief Executives (Finance), General Manager (Finance), etc. An Illustrative organization chart of finance function of management in a large organization is given below: The below chart shows that the Vice-President (Finance) exercise His functions through his two deputies known as: 1. Controller or Comptroller 2. Treasurer. The Controller is concerned with the management and control of The firms assets. His duties include providing information for formulating the accounting and financial policies, preparation of financial reports, direction of internal auditing, budgeting, inventory control, taxes, etc.

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Board of Directors

President

Vice-President Marketing

Vice-President Production Product Controller

Vice-President Finance

Vice-President Personnel

Treasurer

Planning & Budgeting

General Accounting

Internal Control

Tax Administration nnon

Appraisal & Reporting

Provision of Finance

Investment

Banking & Custody

Credit & Collection

While the treasurer is mainly concerned with managing the firms funds, his duties include the following; Forecasting the financial needs, Administering the flow of cash, Managing credit Floating needs, Administering maintaining relationship with financial institutes and Protecting funds and securities.
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Functions of Controller Planning and Control: To establish and administer, as per of Management, a plan for the control of operations. . Reporting and interpreting: To compare actual performance with operating plans and standards, and to report and interpret the result of operation to all levels of management and to the owners of business. Tax administration: to establish and administer tax policies and procedures. Government reporting: to supervise or co-ordinate the preparation of report to government agencies. Protection of assets: To ensure protection of business assets through internal control, internal auditing and assuming proper insurance coverage. Economic appraisal: To appraise economic and social forces and government influences and interpret their effect upon business.

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Function of Treasurer Provision of finance: To establish and execute programmes for the provision of the finance required by the business. Investor relations: To establish and maintain an adequate market for the companys securities and to maintain adequate contact with the investment community. Short-term Financing: To maintain adequate sources for the companys current borrowings from the money market. Banking and custody: To maintain banking arrangement to receive, have custody of and disburse the companys money and securities and to be responsible for the financial aspects of real estate transactions. Credit and Collections: To direct the granting of credit and the collection of accounts receivables of the company. Investments: To invest the companys funds as required and to establish and coordinate policies for investment in pension and other similar trusts. Insurance: To provide insurance coverage as may be required. Some important function performed b the finance department of Power Build Ltd. Are as under; 1. 2. 3. 4. 5. 6. 7. 8. Managing new projects & reports. Managing working capital. Taxation work. Managing provident fund scheme. Handling of bank transaction. Sales tax records. Managing E.S.I scheme. Management of inventory.

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Finance Function: Investment Decision: Investment decision or capital budgeting decision invoices, the decision of allocation of capital or commitment of funds to long-term assets which yield benefits in future. Meaning prospective profitability of new investments. Uncertain future Cash Budget involves risk. Investment proposals would be evaluated in terms of both expected return & risk. Dividend Decision: Distribute all profit. Or retain them of distribute a portion & retain the balance. Dividend stability bonus shares and cash dividends. Optimum dividend policy. Financing Decision: It is the second important Function. When, where and how to acquire funds. Mix of debt & equity- capital structure. Central issue- to determine the proportion of equity & debt. Liquidity Decision: Current assets Management. A proper trade-off- P&L. Conflict Profitability/Liquidity managing cash. Affects firms profitability, liquidity and risk.
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Finance Planning
In Power Build Ltd. General manager of finance is responsible for this function. They try to raise the funds at the minimum cost and they are used in the profitability and best manner. Some factors are to be kept in mind while deciding financial planning is as follows: Cost of Capital Cash flow ability of the company Flexibility Size of the company In Power Build Ltd. Finance department keeps the monthly records of: Cash inflow and cash outflow. Capital expenditure proposals. Various demands of revenue and costs. Financial plan.

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Organization Structure of Financial Department


Assistant General Manager

Finance Controller

A/C Manger

Management of Costing and Commercial

Executive in A/C

Costing Officer

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CONCEPTUAL FRAMEWORK OF WORKING CAPITAL MANAGEMENT

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INTRODUCTION:Working Capital Management is concerned with the problems that arise in attempting to manage the Current Assets, the Current Liabilities and the interrelationship that exists between them. The term Current Assets refers to those Assets which in the ordinary course of Business can be, or will be, converted in to cash within one year without undergoing a diminution in value and without disturbing the operations of the firm. The basic Current Liabilities are accounts payable, bills payable, bank overdraft and outstanding expenses. The Goal of Working Capital Management is to manage the firms Current Assets and Liabilities in such a way that a satisfactory level of work capital is maintained. This is so because if the firm cannot maintain a satisfactory level of working capital, it is likely to become insolvent and may even be forced in to bankruptcy.

Definitions and Meaning of Working Capital Management


Before knowing about working capital management, we must get to know what working capital is.

Working Capital:Working Capital is the Capital which necessary for the smooth working of the organization. This capital is required for the short term uses and for day to day expenses.

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WORKING CAPITAL MANAGEMENT:To manage the Working Capital from different sources is called Working Capital Management.

MEANING OF WORKING CAPITAL Capital required for a business can be classified under two main categories, via. o Fixed Capital o Working Capital Every business needs funds for two purposes for its establishment And to carry out its day-to-day operations. Long term funds are required to create production facilities through purchase of fixed assets such as plant and machinery, land, building, furniture, etc. Investments in these assets represent that part of firms capital, which is blocked on permanent of fixed basis and is called fixed capital. Funds are also needed for short-term purposes for the purchase of raw-material, payment of wages and other day-to-day expenses etc. These funds are known as Working Capital. In simple words, Working Capital refers to that part of the firms Capital which is required for financing short-term or Current assets such as cash, marketable securities, debtors and inventories. Funds, thus Invested in current assets keep revolving fast and are being constantly converted in to cash and this cash flow out again in exchange for other current assets. Hence, it is also known as revolving or circulating capital or short term capital.

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CONCEPT OF WORKING CAPITAL There are Two Concepts of Working Capital, Gross Working Capital Net Working Capital GROSS WORKING CAPITAL:The Gross Working Capital is the Capital invested in the total current assets of the enterprises. Current assets are those, assets which can convert in to cash within a short period normally one accounting year.

Constitutes of Current Assets: Cash in Hand and Cash at Bank Bills Receivables Sundry Debtors Short term Loans and Advances Inventories of stocks as; Raw Material Work in Process Stores and Spares Finished Goods Temporary Invest of surplus funds Prepaid Expenses Accrued Incomes Marketable Securities.

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NET WORKING CAPITAL:Net Working Capital Refers to the difference between current assets and current liabilities. Current assets are those claims of outsiders which are expected to mature for payment within an accounting year and include creditors (account payable), bills payable, and outstanding expenses. Net working capital can be positive or negative. A positions net working capital will arise when current assets exceed current liabilities. A negative net working capital occurs when current liabilities are in excess of current assets. Net working capital is that portion of a firms current assets which is financed by long-term funds.

Constitutes of Current Liabilities: Accrued or Outstanding expenses Short term loans, advances and deposits Dividend payable Bank Overdraft Provision for taxation, if it does not amount to application of profit. Bills Payable Sundry Creditors.

Net working capital is a qualitative concept. It indicates the Liquidity positions of the firm and suggest the extent to which working capital needs may be financed by permanent sources of funds. Current assets should be sufficiently in excess of current liabilities to constitutes a margin or buffer for maturing obligations within the ordinary operating cycle of business.

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Net working capital also covers the questions of judicious mix of longterm and short-term funds for financing. The Gross working capital concept is financial or going concern concept where as net working capital is an accounting concept of working capital, both the concepts have their own merits. The Gross working capital is sometimes preferred to the concept of working capital for the following reasons; 1. 2. 3. 4. It enables the enterprise to provide correct amount of working capital at correct time. Every management is more interested in total current assets with which it has to operate then the source from where it is made available. It take into consideration of the fact every increase in the funds of the enterprise would increase its working capital. This concept is also useful in determining the rate of return on investments in working capital. The net working capital concept, however, is also important for following reasons; It is Qualitative concepts, which indicates the firms ability to meet to its operating expenses and short term liabilities. It indicates the margin of protection available to the short term creditors. It is an indicator of the financial soundness of enterprise. It suggests the need of financing a part of working capital requirement out of the permanent sources of funds.

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Classification of Working Capital

On the basis of Time On the Basis of Concepts

1. Permenant or Fixed Working Capital 2. Temporary or Variable Working Capital


1. Gross Working Capital 2. Net Working Capital

Working Capital may be classified in to Two ways:, o On the basis of concepts o On the basis of Time. On the basis of concepts working capital can be classified as Gross working capital and Net working capital. On the basis of Time, Working Capital may be classified as, o Permanent or Fixed Working Capital. o Temporary or Variable Working Capital.

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Permanent or Fixed Working Capital:Permanent or Fixed Working Capital is minimum amount which is required to ensure effective utilization of fixed facilities and for maintaining the circulation of current assets. Every firm has to maintain a minimum, work- in- process, finished goods and cash balances. This minimum level of Current Assets is called permanent or fixed working capital as this part of working is permanently blocked in Current Assets. As the business grow the requirements of working capital also increase due to increase in current assets.

DOLLAR

Permanent current

TIME
Temporary or Variable Working Capital:Temporary or Variable Working capital is the amount of working Capital which is required to meet the seasonal demands and some Special exigencies variable working capital can further be classified as

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Seasonal need of the enterprise is called seasonal working capital. Special working capital is that part of working capital which is required to meet special exigencies such as launching of extensive marketing for conducting research, etc. Suppliers of temporary working capital can expect its return during off season when it is not required by the firm. Hence, temporary working capital is generally financed from short-term sources of finance such as bank credit. The diagram given below illustrates the difference between permanent and temporary working capital.

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Temporary Working Capital different from Permanent Working Capital in the sense that is required for short periods and cannot be permanently employed gainfully in the business. The amount of working capital and amount of current assets that varies with seasonal requirements.

NEED FOR WORKING CAPITAL


The basic objective of financial management is to maximize share holders wealth. This is possible only when the company earns sufficient profit. The amount of such profit largely depends up on the magnitude of sales. However sales do not convert in to cash instantaneously. There is always a time gap between the sales of goods and receipts of cash. Working capital is required for this period in order to sustain the sales activity. In case adequate working capital is not available for this period, the company will not be in a position to sustain the sales since it may not be in a position to purchase raw materials, pay wages and other expenses required for manufacturing the goods to be sold. Every business needs some amounts of working capital. The need for working capital arises due to the time gap between production and realization of cash from sales. There is an operating cycle involved in sales and realization of cash. There are time gaps in purchase of raw material and production; production and sales; and realization of cash. Thus working capital is needed for the following purposes: o For the purpose of raw material, components and spares. o To pay wages and salaries o To incur day-to-day expenses and overload costs such as office expenses. o To meet the selling costs as packing, advertising, etc. o To provide credit facilities to the customer.
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o To maintain the inventories of the raw material, work-in-progress, stores and spares and finished stock. The requirement of the working capital goes on increasing with the growth and expensing of the business till it gains maturity. At maturity the amount of working capital required is called normal working capital.

OPERATING CYCLE:-

From the above, it is clear that Working capital is required because of the time gap between the sales and their actual realization in cash. This time gap is technically termed as Operating Cycle of the business. In case of a manufacturing company, the operating cycle is the length of time necessary to complete the following cycle of events: a. Conversation of cash into raw materials(RM); b. Conversation of RM into work-in-process(WIP); c. Conversation of WIP into Finished goods; d. Conversation of finished goods into accounts receivables; e. Conversation of accounts receivable into cash. This Cycle will be repeated again and again. In the case of a Trading firm, the operating cycle includes the length of time required to convert, (1) Cash into inventories,
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(2) Inventories into accounts receivables, and (3) Accounts receivable into cash.

In the case of a Financing firm, the operating cycle includes the length of time taken for; (1) Conversion of cash into debtors, and

(2) Conversion of debtors into cash.

The operation cycle of manufacturing business can be shown as in The following charts:

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FINISHED GOODS

ACCOUNTS RECEIVABLE

WORK-INPROCESS

CASH

RAW MATERIALS

Operating Cycle of a Manufacturing Business.

Each of the components of the operating cycle can be calculated as follows:-

R= Average stock of raw materials and stores Average raw materials and stores consumptions per day W=Average work-in-progress inventory Average cost of production per day D=Average book debts Average credit sales per day C=Average trade creditors
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Average credit purchases per day

After computing the period of one operating cycle, the total number of operating cycles that can be computed during a year can be computed by dividing 365 days with number of operating days in a cycle. The total expenditure in the year when year when divided by the number of operating cycles in a year will give the average amount of the working capital requirement.

IMPORTANCE OR ADVANTAGE OF ADEQUATE WORKING CAPITAL Solvency of business: Adequate working capital helps in maintaining the solvency of the business by providing uninterrupted of production. Goodwill: Sufficient amount of working capital enables a firm to make prompt payments and makes and maintain the goodwill. Easy loans: Adequate working capital leads to high solvency and credit standing can arrange loans from banks and other on easy and favorable terms. Cash Discounts: Adequate working capital also enables a concern to avail cash discounts on the purchases and hence reduces cost.

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Regular Supply of Raw Material: Sufficient working capital ensures regular supply of raw material and continuous production. Regular Payment of Salaries, Wages and Other Day TO Day Commitments: It leads to the satisfaction of the employees and raises the morale of its employees, increases their efficiency, reduces wastage and costs and enhances production and profits. Exploitation of Favorable Market Conditions: If a firm is having adequate working capital then it can exploit the favorable market conditions such as purchasing its requirements in bulk when the prices are lower and holdings its inventories for higher prices. Ability to Face Crises: A concern can face the situation during the depression. Quick And Regular Return On Investments: Sufficient working capital enables a concern to pay quick and regular of dividends to its investors and gains confidence of the investors and can raise more funds in future. High Morale: Adequate working capital brings an environment of securities, confidence, high morale which results in overall efficiency in a business.

EXCESS OR INADEQUATE WORKING CAPITAL

Every business concern should have adequate amount of working capital to run its business operations. It should have neither redundant or excess working capital nor inadequate nor shortages of working capital. Both excess as well as short working capital positions are bad for any business. However, it is the inadequate working capital which is more dangerous from the point of view of the firm.

DISADVANTAGES OR EXCESSIVE WORKING CAPITAL:

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1. Excessive working capital means ideal funds which earn no profit for the firm and business cannot earn the required rate of return on its investments. 2. Redundant working capital leads to unnecessary purchasing and accumulation of inventories. 3. Excessive working capital implies excessive debtors and defective credit policy which causes higher incidence of bad debts. 4. It may reduce the overall efficiency of the business. 5. If a firm is having excessive working capital then the relations with banks and other financial institution may not be maintained. 6. Due to lower rate of return n investments, the values of shares may also fall. 7. The redundant working capital gives rise to speculative transactions.

MANAGEMENT OF WORKING CAPITAL:

It has already been indicated earlier that the term Working Capital (net) generally stands for excess of current assets and current liabilities. Working capital management therefore refers to the administration of both current assets and current liabilities. In other words, Working Capital Management is concerned with the problems that arise in attempting to manage the current assets, the current liabilities and the interrelationship that exist between them.

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The basic objectives of Working Capital Management is to manage the firms current assets and current liabilities in such a way that the satisfactory level of working capital is maintained, i.e., it is neither inadequate nor excessive. The current assets should be sufficient enough to cover current liabilities in order to maintain a reasonable safety margin. Moreover, different components of working capital are to be properly balanced.

In the absence of such a situation, the financial position in respect of the firms liquidity may no be satisfactory in spite of satisfactory liquidity ratio. For example if the proportion of inventories is very high in the total current assets because of slow moving or obsolete inventory, this cannot provide the cushion of liquidity. Similarly, if the proportion of the accounts receivable is very high in the title current assets on accounts of the firms inability to recover money from its debtors, the firms liquidity ratio will be deceptive. Similarly, if a firm is maintaining a higher cash and bank balance, it also means that the firm is not making profitable use of its resources.

Working Capital management policies have a great effect on firms profitability, liquidity and its structural health. A Finance manager should therefore, chalk out appropriate working capital management policies in respect of each of the components of working capital management policies in respects of each of the components of working capital so as to ensure higher profitability, proper liquidity and sound structural health of the organization.

Additional capital is required to have uninterrupted business operations, the amount will be locked up in the current assets like accounts receivables, stocks etc. this actually happens due to the Cash Cycle or Operation Cycle. By the time the cash is converted back to cash [cash to
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stock to sales to accounts receivables to cash]. The firm needs extra funds and hence the need for working capital. If this is not provided, the business operation will be affected to a greater extent and hence this part of finance has to be managed well.

Estimating of the amount of different components of working capital The Procedure for estimating each of the constitutes and the information required for the purpose is explained below. 1. Inventories:The term Inventories includes stock of raw-material, work-inprocess and finished goods. a. Stock of Raw material:- The average amount of raw-material to be kept in stock will depend upon the quantity of raw-materials required for production during a particular period and the average time taken in obtaining a fresh delivery. Suitable adjustment may have to be made to provide for contingencies.
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b. Work-in-process: The cost of work-in-process includes raw-material, wages and overheads. c. Finished Goods:- The period for which the finished goods have to remain in the warehouses before sales is an important factor for determining the amount locked up in finished goods. 2. Sundry Debtors:The amount of funds locked-up in sundry debtors will be Computed on the basis of credit sales and the time lag in Connecting payment. 3. Sundry Creditors:The lag in payment to suppliers of raw-materials, goods etc. And the likely credit purchases to be made during the period will Help in estimating the amount of creditors. 4. Outstanding Expenses:The time lag in payment of wages and other expenses will Help in estimating the amount of creditors. 5. Cash and Bank Balance :The amount of money to be kept as cash in hand or cash at Bank can be estimated on the basis of past experience.

WORKING CAPITAL FORCAST


Estimating of future working capital based on current assets and current liabilities. The estimation of future working capital can be made if the amount of current assets and current liabilities can be estimated as follows: The various constituents of current assets and current liabilities have a direct being on the computation of working capital and the operating cycle. The holding period of various constituents of operating cycle may either contract or expand the net operating cycle periods; lower capital and viceversa.
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DETERMINENT OF WORKING CAPITAL


Working capital requirements always very from industry to industry, firm to firm etc. The following factors influence the working capital requirement of the firm. Nature of the business. Sales and Demand condition Technology & Manufacturing policy Credit policy and Production policy Availability of the credit Operating Efficiency Price level changes Seasonality of operation Market Condition Size of the organization Operating Process cycle. Inventories Types of Raw-material require and their procurement sources Safety stock and lead time Marketing of the companys goodwill etc. APPROACHES FOR DETERMINING THE FINANCING MIX:There are three basic approaches for determining the working capital financing mix.

(i)

The Hedging Approach

According to this approach, the maturity of source of funds should match the nature of assets to be financed. The approach is, therefore, termed as Matching approach.
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It divides requirements of total working capital funds into two categories. a) Permanent working capital, i.e., funds required for purchase of core current assets. Such funds do not vary over time. b) Temporary or seasonal working capital, i.e., funds which fluctuate over time. The permanent working capital requirements should be financed by long-term funds while the seasonal working capital requirements should be financed out of short-term funds.

(ii) The Conservative Approach According to this approach all requirements of funds should be met from long-term sources. The short-term sources should be used only for emergency requirements. The conservative approach is less risky, but more costly as compared to the hedging approach. In other words conservative approach is low profit-low risk (or high cost, high net working capital) while hedging approach results in high profithigh risk (or low cost, low net working capital). (ii) Trade-off Between Hedging and Conservative Approach

The hedging and conservative approaches are both on two extremes.

Neither of them can therefore help in efficient working capital management. A trade-off between these two can give satisfactory results. The level of such trade-off will differ from case to case depending upon perception of the risk by the persons involved in financial decision-making. However, one way of determining the level of trade-off is by finding the average of the minimum and the maximum requirements of working capital
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during a period. The average working capital so obtained may be financed by long-term funds and the balance by short-term funds.

Management of different components of working capital

Working capital management involves management of different components of working capital such as cash, inventories, accounts receivable, creditors, etc.

*MANAGEMENT OF CASH
It is the duty of the finance manager to provide adequate cash to all segments of the organization. He also has to ensure that no funds are blocked in idle cash since this will involve cost in terms of interest to the business. A sound cash management scheme, therefore, maintains the balance between the twin objectives of liquidity and cost. Meaning of cash

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The term cash with reference to cash management is used in two senses. In a narrower sense it includes coins, currency notes, cheques, bank drafts held by a firm with it and the demand deposits held by it in banks. In a broader sense it also includes near-cash assets such as, marketable securities and time deposits with banks. Such securities or deposits can immediately be sold or converted into cash if the circumstances require. The term cash management is generally used for management of both cash and near-cash assets. Motives for holding cash A distinguishing feature of cash as an asset, irrespective of the firm in which it is held, is that it does not earn any substantial return for the business. In spite of this fact cash is held by the firm with following motives. 1. Transaction motive A firm enters into a variety of business transactions resulting in both inflows and outflows. In order to meet the business obligation in such a situation, it is necessary to maintain adequate cash balance. Thus, cash balance is kept by the firms with the motive of meeting routine business payments. 2. Precautionary motive A firm keeps cash balance to meet unexpected cash needs arising out of unexpected contingencies such as floods, strikes, presentment of bills for payment earlier than the expected date, unexpected slowing down of collection of accounts receivable, sharp increase in prices of raw materials, etc. The more is the possibility of such contingencies more is the cash kept by the firm for meeting them. 3. Speculative motive

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A firm also keeps cash balance to take advantage of unexpected opportunities, typically outside the normal course of the business. Such motive is, therefore, of purely a speculative nature. For example, A firm may like to take advantage of an opportunity of purchasing raw materials at the reduced price on payment of immediate cash or delay purchase of raw materials in anticipation of decline in prices.

4. Compensation motive Banks provide certain services to their clients free of charge. They, therefore, usually require clients to keep minimum cash balance with them, which help them to earn interest and thus compensate them for the free services so provided. Business firms normally do not enter into speculative activities and, therefore, out of the four motives of holding cash balances, the two most important motives are the compensation motive.

Objectives of cash management There are two basic objectives of cash management: 1. To meet the cash disbursement needs as per the payment schedule; 2. To minimize the amount locked up as cash balances.

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1. Meeting cash disbursements

The first basic objective of cash management is to meet the payments Schedule. In other words, the firm should have sufficient cash to meet the various requirements of the firm at different periods of times. The business has to make payment for purchase of raw materials, wages, taxes, purchases of plant, etc. The business activity may come to a grinding halt if the payment schedule is not maintained. Cash has, therefore, been aptly described as the oil to lubricate the ever-turning wheels of the business, without it the process grinds to a stop.

3. Minimizing funds locked up as cash balances

The second basic objective of cash management is to minimize the amount locked up as cash balances. In the process of minimizing the cash balances, the finance manager is confronted with two conflicting aspects. A higher cash balance ensures proper payment with all its advantages. But this will result in a large balance of cash remaining idle. Low level of cash balance may result in failure of the firm to meet the payment schedule.

*MANAGEMENT OF INVENTORIES

Inventories are good held for eventual sale by a firm. Inventories are thus one of the major elements, which help the firm in obtaining the desired level of sales.

Kinds of inventories Inventories can be classified into three categories.


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(i) Raw materials: These are goods, which have not yet been committed to production in a manufacturing firm. They may consist of basic raw materials or finished components. (ii) Work-in-progress: This includes those materials, which have been committed to production process but have not yet been completed. (iii) Finished goods: These are completed products awaiting sale. They are the final output of the production process in a manufacturing firm. In case of wholesalers and retailers, they are generally referred to as merchandise inventory.

The levels of the above three kinds of inventories differ depending upon the nature of the business.

Benefits of holding inventories Holding of inventories helps a firm in separating the process of purchasing, producing and selling. In case a firm does not hold sufficient stock of raw materials, finished goods, etc., the purchasing would take place only when the firm receives the order from a customer. It may result in delay in executing the order because of difficulties in obtaining/ procuring raw materials, finished goods, etc. thus inventories provide cushion so that the purchasing, production and sales functions can proceed at optimum speed.

The specific benefits of holding inventories can be put as follows:


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(i) Avoiding losses of sales If a firm maintains adequate inventories it can avoid losses on account of losing the customers for non-supply of goods in time.

(ii) Reducing ordering cost The variable cost associated with individual orders, e.g., typing, checking, approving and mailing the order, etc., can be reduced if a firm places a few large orders than numerous small orders.

(iii) Achieving efficient production runs Maintenance of large inventories helps a firm in reducing the set-up cost associated with each production run.

Risks and costs associated with inventories Holding of inventories exposes the firm to a number of risks and costs. Risk of holding inventories can be put as follows: (i) Price decline This may be due to increase in the market supply of the product, introduction of a new competitive product, price cutting by the competitors, etc. (ii) Product deterioration
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This may due to holding a product for too long a period or improper storage conditions. (iii) Obsolescence This may be due to change in customers taste, new production technique, improvements in the product design, specifications, etc.

The costs of holding inventories are as follows:


(i) Materials cost This includes the cost of purchasing the goods, transportation and handling charges less any discount allowed by the supplier of the goods. (ii) Ordering cost This includes the variable cost associated with placing an order for the goods. The fewer the orders, the lower will be the ordering costs for the firm. (iii) Carrying cost This includes the expenses for storing the goods. It comprises storage costs, insurance costs, spoilage costs, cost of funds tied up in inventories, etc. Management of inventory

Inventories often constitute a major element of the total working capital and hence it has been correctly observed, good inventory management is good financial management.

Inventory management covers a large number of issues including fixation of minimum and maximum levels; determining the size of the inventory to be carried; deciding about the issue price policy; setting up
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receipt and inspection procedure; determining the economic order quantity; providing proper storage facilities, keeping check on obsolescence and setting up effective information system with regard to the inventories.

However, management inventories involve two basic problems:

(i)

Maintaining a sufficiently large size of inventory for efficient and smooth production and sales operations; Maintaining a minimum investment in inventories to minimize the direct-indirect costs associated with holding inventories to maximize the profitability.

(ii)

Inventories should neither be excessive nor inadequate. If inventories are kept at a high level, higher interest and storage costs would be incurred. On the other hand, a low level of inventories may result in frequent interruption in the production schedule resulting in underutilization of capacity and lower sales. The objective of inventory management is, therefore, to determine and maintain the optimum level of investment in inventories, which help in achieving the following objectives: (i) Ensuring a continuous supply of materials to production department facilitating uninterrupted production. Maintaining sufficient stock of raw material in periods of short supply.

(ii)

(iii) Maintaining sufficient stock of finished goods for smooth sales operations. (iv) Minimizing the carrying costs.
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(v)

Keeping investment in inventories at the optimum level.

Techniques of inventory management Effective inventory requires an effective control over inventories. Inventory control refers to a system which ensures supply of required quantity and quality of inventories at the required time and the same time prevent unnecessary investment in inventories. The techniques of inventory control/ management are as follows: 1. Determination of Economic Order Quantity (EOQ) Determination of the quantity for which the order should be placed is one of the important problems concerned with efficient inventory management. Economic Order Quantity refers to the size of the order, which gives maximum economy in purchasing any item of raw material or finished product. It is fixed mainly taking into account the following costs.

(i) Ordering costs: It is the cost of placing an order and securing the supplies. It varies from time to time depending upon the number of orders placed and the number of items ordered. The more frequently the orders are placed, and fewer the quantities purchased on each order, the greater will be the ordering costs and vice versa. (ii) Inventory carrying cost: It is the cost of keeping items in stock. It includes interest on investment, obsolescence losses, store-keeping cost, insurance premium, etc. The larger the value of inventory, the higher will be the inventory carrying cost and vice versa.
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The former cost may be referred as the cost of acquiring while the latter as the cost of holding inventory. The cost of acquiring decreases while the cost of holding increases with every increase in the quantity of purchase lot. A balance is, therefore, struck between the two opposing factors and the economic ordering quantity is determined at a level for which aggregate of two costs is the minimum.

Formula: Q= 2U x S Where, Q = Economic Ordering Quantity U = Quantity (units) purchased in a year (month) P = Cost of placing an order S = Annual (monthly) cost of storage of one unit. P

2. Determination of optimum production quantity The EOQ model can be extended to production runs to determine the optimum production quantity. The two costs involved in this process are: (i) (ii) Set up costs; Inventory carrying cost.

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The set up cost is of the nature of fixed cost and is to be incurred at the time of commencement of each production run. Larger the size of the production run, lower will be the set-up cost per unit. However, the carrying cost will increase with increase in the size of the production run. Thus, there is an inverse relationship between the set-up cost and inventory carrying cost. The optimum production size is at that level where the total of the set-up cost and the inventory carrying cost is the minimum. In other words, at this level the two costs will be equal. The formula for EOQ can also be used for determining the optimum production quantity as given below:

E = 2U x P S Where, E = Optimum production quantity, U = Annual (monthly) output

P = Set-up cost for each production run S = Cost of carrying inventory per annum (per month)

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LITERATURE REVIEW

Phillippatus has given a more elaborate definition of the term Financial Management. According to him Financial Management is concerned with the managerial decisions that result in the acquisition and financing of longterm and short-term credits for the firm. As such as it deals with the situation that requires selection of specific assets, the selection of specific liability as
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well as the problem of size and growth of an enterprise. The analysis of these decisions is based on the expected inflows and outflows of funds and their effects up on managerial objectives.

Thus, Financial Management is mainly concerned with the proper management of funds. Above information I collected from the book Financial Management- Principles & Practice By Dr. S.N.Maheshwari. The revised and enlarged second edition of the book under review is exhaustive in every sense and covers a large spectrum of financial management. Financial Management- Principles & Practice book is written by Dr. S.N.Maheshwari, and this book is published by sultan chand & sons from New Delhi. Dr. S.N.Maheshwari is director of Delhi Institute of Advanced Studies, Delhi. According to them Finance is one of the most primarily requisitions of a business and the modern management obliviously depends largely on the theory and practice are copiously illustrated with all sorts of anticipated problems. The whole season is divided in seven sections namely, Foundations of finance; Financial analysis; Cost analysis; Funds Management; Miscellaneous; Advanced unsolved problem. All relevant topics are analyzed in a very lucid and understandable language requires no further clarification. - The Management Accountant May 1992. Having introduced the subject the author moves on to the various financial tools available such as ration analysis, cash flow analysis, fund flow analysis etc. and their uses in financial management. His approaches to the tool of analysis and their application prove his mastery over the subjects. - Economic and Social Sciences Review, Vol. 1 no 2.

About three decades ago, the scope of financial management was confined to the raising of funds, whenever needed, and little significance used
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to be attached to financial decision-making and problem solving. As a consequences, the traditional finance texts were structured around this them and contained description of the instruments and institutions of raising funds and of the major events such as promotions, reorganization, readjustment, merger, consolidation etc. when funds were raised.

In the mid-fifties, the emphasis shifted to the judicious utilization of funds. The modern thinking in financial management across a far greater importance to management decision-making and policy.

Today, financial managers do not perform the passive role of score keepers of financial data and information and arranging funds, whenever directed to do so. Rather they occupy key positions in top management areas and play a dynamic role in solving complex management problems. They are now responsible for shaping the fortunes of the enterprise and are involved in the most vital management decision of allocation of capital. It is their duties to ensure that the funds are raised most economically and used in the most efficient and effective manner. Because of this change in emphasis, the descriptive treatment of the subject of financial management is being replaced by grouping analytical content and sound theoretical underpinnings.

Above description and researches explained by I.M.Pandey, in Financial Management in its eight edition. Like in its previous editions high lights the modern approach to financial decision-making. They discusses the theories, concepts, assumptions, and mechanics underlying financial decisions, viz. investment, financing, dividends, and working capital management. It also discusses sources and instruments of short-term and long-term financers, mergers and acquisitions, international financial management and the interface between financial and corporate policies.
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According to Weston and Brigham, in their edition Managerial Finance, 5th edition. P.153 and Smith, K.Vs edition Management of Working Capital, P.5, Working Capital Management is concerned with the problems that arise in attempting to manage the current assets, the current liabilities and the interrelationships that exists between them.

According to them , The basic objectives of working capital management is to manage the firms current assets and current liabilities in such a way that the satisfactory level of working capital is maintained, i.e., it is neither inadequate nor excessive. The current assets should be sufficient enough to cover current liabilities in order to maintain a reasonable safety margin. Moreover, different components of working capital are to be properly balanced.

They also mentioned that working capital management policies have a great effect on firms, profitability, liquidity and its structural health. A Finance Manager should, therefore, checkout appropriate working capital management policies in respect of each of the components of working capital so as to ensure higher profitability, proper liquidity and sound structural heath of the organization.

According to Horne, James.C.Van in his edition Financial Management & Policy, 3rd edition P.433. Inventories are good held for eventual sale by a firm. Inventories are thus one of the major elements which help the firm in obtaining the desired level of sales. Inventories can be classified in to three categories. 1. Raw-Materials 2. Work-in-Process.
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3. Finished Goods.

According to him the level of the above three kinds of inventories Differ depending up on the nature if the business. For Example, manufacturers will have levels of while a retailer or a wholesaler will have a high level of inventories of finished goods but will have no inventories or work-in-process. More over, depending up on the nature of the business, inventories may be durable or nondurable, valuable or in expensive, perishable or non perishable etc.

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Meaning of Research:Research in Common parlance refers to a search for knowledge. One can also define research as a scientific and systematic search for pertinent information on a specific investigation. The advanced learner dictionary of current English lays down the meaning of research as a careful investigation or inquiry especially through search for new facts in any branch of knowledge. Redman and Mory define research as a systematized effort to gain new knowledge.
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According to cliford Woody research formulating hypothesis or suggested solutions; collecting; organization and evaluating data; making deductions and reaching conclusions; and all last carefully test the conclusions to determine whether they fit the formulating hypothesis. D.Slesinger and M.stephenson in the encyclopedia of social sciences defines research as the manipulation of things, concepts or symbols for the purpose of generalizing to extend, correct or verify knowledge, whether that knowledge aids in construction of theory or in the practice of an art. Research is, thus an original contribution to the existing stock of knowledge making for its advancement. Research is the pursuit of truth with the help of study, observation, comparison and experiment. In short, the search for knowledge through objective and systematic method of finding solution to a problem is research. The systematic approach concerning generalization and the formulation of a theory is also research. However, this is not an exhaustive list of factors motivating People to undertake research studies. Many more factors such as directives of government, employment conditions, curiosity about new things, desire to understood causal relationship, social thinking and awakening, and the like may as well motivate (or at times compel) people to perform research operations.

Types of Research

The basic types of research are as follows;

1. Descriptive VS. Analytical Descriptive research includes survey and fact findings enquiries of different kinds. The main characteristic of this method is that the researcher
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has no control over the variables; he can only report what has happened or what is happening.

2. Applied VS. Fundamental Research can either be applied research or fundamental research. Applied research aims at findings a solution for an immediate problem facing a society or an industrial organization, where as fundamental research is mainly concerned with generalization and with the formulation of a theory.

3. Quantitative VS. Qualitative research Quantitative research is based on the measurement of quantity or amount. Qualitative research the other hand, is concerned with qualitative phenomenon.

4. Conceptual VS. Empirical Conceptual research is that related to some abstract ideas or theory. On the other hand, empirical research relies on experience or observation alone, often without due regard for system and theory.

Significance of Research
All progress is born of inquiry. Doubt is often better than overconfidence, for it leads to inquiry, and inquiry leads to invention is a famous hudson maxim in context of which the significance of research can well be understood. Increased amounts of research make progress possible. Research includes scientific and inductive thinking and it promotes the development of logical habits of thinking & organization.
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The role of research in several fields of applied economics, whether related to business or to the economy as a whole, has greatly increased in modern times.

Research provides the basis for nearly all government policies in our economic system. Research has its special significance in solving various operational and planning problems of business and industry. Operation research and market research, along with motivational research, are considered crucial and their results assist, in more than one way, in taking business decisions.

Research is equally important for social scientific in studying social relationship and in seeking answers to various social problems. Research is social science is concerned both with knowledge for its own sake and with knowledge for what it can contribute to practical concerns.

In addition to what has been stated above, the significance of research can also be understood keeping in view the following points; To those students who are to write a masters or PH.D thesis, research may mean a careerism or a way to attain a high positions in the social structure; To professional in research methodology, research may mean a source of livelihood.

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To philosophers and thinkers, research may mean the outlets for new ideas and insights. To literary men and women, research may mean the development of new styles and creative work; To analysis and intellectuals, research may mean the generalization of new theories. Thus, research is the fountain of knowledge for the sake of Knowledge and an important source of providing guidelines for solving different business, governmental and social problems. It is a sort of formal training which enables one to understand the new developments in ones field in a better way.

Research Methodology
Research Methodology is a way to systematically solve the research problems. It may be understood as a science of studying how research is done scientifically. In it we study the various steps that are generally adopted by a researcher in studying his research problems along with the logic behind them. It is necessary for the researcher to know not only how the research methods/ techniques but also the methodology.

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Research Methodology has many dimensions and research methods do constitute a part of the research methodology. The scope of research methodology is wider than that of research methods.

Whether may be the types of research works and studies, one thing that is important is that they all meet on the common ground of scientific method employed by them? One expects scientific research to satisfy the following criteria; The purpose of the research should be clearly defined and common concepts be used. The procedure design of the research should be carefully planned to yield results that are objective as possible. The researcher should repeat with complete frankness, flaws in procedural design and estimate their effects up on the findings. Conclusion should be confined to those justified by the data of the research and limited to those for which the data provide an adequate basis.

Objectives of Research
Primary Objectives: The main objective of the research is to find out the working capital. Secondary Objectives:
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To study the inventory management control techniques and its actual implication in the company. To know the importance of cash flow statement in cash management. To study on receivable management.

Sources of Data
1. Primary Data The Primary Data during the project was obtained form the company officials. The information has been collected by way of interactions with employees in the organization 2. Secondary Data The secondary data has been collected form the annual reports of the company form 2005-06 to 2009-10. Secondary data has also been collected from Power Build Limiteds website and other records maintained in the company.

Tools for analysis


The tools for analysis in working capital are ratio bar diagrams, line graphs etc.

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Objectives of the Study


The main objective of the study is to evaluate working capital position in PBL. To study liquidity position of PBL. To evaluate the performance of individual components of working capital management of PBL. The project is aimed to learn and gain knowledge of day to day working of the organization and how the decisions are taken.

To suggest ways and means to improve the working capital management of PBL.

AIM OF THE STUDY The main aim of the study is to enhance the knowledge of capital structure and working capital management. By this study company can get idea whether it needs changes in its capital structure of to give idea about its strength and weakness. By this Study I Want:PATEL DHRUVAL D Page 63

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To get idea of effect of capital structure. To know financial and liquidity position of the company by using analysis. To get idea of P&L Account and Balance sheet of the company.

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ABOUT THE INDUSTRIES

The Indian Gear Industries is dependent on the Automobile, Engineering industry and machine tool industry for its production. Gears and Gear transmission are developed according to the design/drawing/specifications supplied by the end user industry. This also depends upon the availability of Gear cutting machines, Finishing machines, to process the component.

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In industrially advanced countries, automated CNC Gear Cutting/ Finishing machines and CAD are increasingly being used in the production of Gears, resulting in consistent quality and high degree of flexibility in production.

In India, the Gear manufacturers are very well aware of the world Developments and technology competence in Indian industry is quite comparable to other advanced countries within the restraints of capital investment. Some of the companies are having foreign collaboration for the manufacture of gears.

Generally the Gear manufacturers are equipped with conventional type of imported plant and machinery, testing equipments from Germany, Switzerland, USA, Japan etc. and some of them have CNC Gear Cutting machines.

WHAT ARE GEARs? Gear is very important part of a machine and it is most demanding and playing important usage within various industries like marine, industries, automotive industries, coal mine industries, Steel plant industries, Paper Industries, Agriculture and Fertilizer industries and many more. In these heavy industries these gears are using in so many wide application. Gears are used in conveyors, Elevators, kilns, cranes, lubrication systems, lifting to rotating.
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Mainly gears play an important part in movement these gears can increase and decrease rotation speed and increase o decrease of power and torque. For increasing and reducing the torque a big gear coupled with smaller gear, for reducing speed and increasing torque a small gear turning with larger gear, these gears are also used for enhancements for positioning machines and systems.

Original Gears Manufacturers is not an easy job, where several type of gears manufacturers for several industries. Gears used in various industries including heavy machinery gears are categorized into several types. According to industries, gears are also custom designed and fabricated.

Gears are very old machinery type, first time over 3000 years ago primitive gears manufacturers used to transmit rotary motion. Slowly gradually this is part of every machine for managing motor speed and transmission generation. Now days consumer electronics have driven plastic gearing, plastic gears are lubricant free, reliable and quiet operation. To understand the importance of Gears would be in helping oneself to know how from the times of the primeval human kind to our present industrial age, the gear has evolved as prime tool of industrialization. Gears have been used for ages. Gears have become a critical mechanical element required for operating a device requiring transfer of motion along with power for rotation. Today Gears are applied in every sphere where there is any need for power transfer. It would not be any exaggeration to say that today Gears and its allied sectors from one of the key constitutes of the Global economy.

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The Gear market for convenience is often dividend in to four major divisions. They are automotive, industrial, marine and lastly the aerospace. Combined together, it is estimated that the global gear market is worth more than $45 billion.

It is the automotive sector that forms the single largest group when it comes to gear applications. In fact the automotive sector is almost three times the size of other three sectors added together. By ranking, industrial gears is second following automotive sector.

Traditional it is the European countries, North America, and some regions of Asia that continues to be the market leaders. But things are changing very fast. The centre is now shifting to previously unknown region like China, India, and East Europe.

Key Trends and Drivers at the Gear Industry:Already the industrial sectors are changing at a rate than one can imagine at the fore front of such a change is the new state-of-the art technology. The coming two decades would be very vital for the Gear Industry. It will impose serious challenges along with tremendous opportunities. The need of the hour is innovative solutions. Expectations of the customer would be driven by improved performance, cheaper cost, light
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weight, better efficiency, minimal noise, and rapid development. Unless the gear manufacturers do not respond swiftly to such challenges, they would be in no time be sidelined. They must understand the issues in broader context. As under the increasing trends of globalization national boundaries are fading. The catch phrase for defining success would be Compete and Collaborate.

The following points highlight the major trends and drivers of the Gear Industry; Market Trends Transportation markets Need for skilled human resources Product Trends Time compression and Supply chain integration Environmental Impacts Global Pressure Collaborations

The Gear Industry is a huge, competitive market that has shown steady growth rate of around 4% p.a worldwide sales of Gears are pegged at U.S $93 Billion annually.

Gear manufacturing is today a multi billion industry. As the demands of this industry is growing manufacturer are now increasingly seeking machining tools and technology that can meet with the tough challenges. As in this increasingly globalised world order manufacturers need suppliers that have global resources for delivering state-of-the art machines, tools etc. Gears are now produced in near net shape, with a cut in production as well as labour costs and elimination or rejection of wastes. These are also impacting the gear manufacturers to have greater freedom in the choice of materials.
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The Gear manufacturing process is a complex step right from selecting the right material to finally doing the finishing process for getting an optimum quality gear. Gear blanks in the beginning are first roughed out and completely stress relieved this is done to minimize the distortion that has taken place after carburizing. The blanks subsequently then undergoes the finishing process. Then the gear cutting process takes place giving allowance on the tooth flank for grinding. The subsequently Grinding and other steps take place.

Gears are Power transmission elements. It is the Gears that decide the torque, speed and direction of rotation of all the driven machine elements. Broadly speaking, Gear types may be grouped into five major categories. They are Spur, Helical, Bevel, Hypoid, and Worm. A lot of intricacies are there in the different types of gears. Actually The choice of gear type is not a very easy process. It is dependent on a number of considerations. Factors that go into it are physical space and shaft arrangement, gear ratio, load, accuracy and quality level.

TECHNOLOGY GAP

The areas where technology import is still required are: Design and manufacture of shaving cutters, plunge shaving cutters, involutes spline/special profile full form plug and ring gauges. Hard gear finishing.
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Automated unmanned manufacturing and material handling. Cold and warm forging technology for automotive application. On line method of inspecting gears.

Capital Equipments
There is insufficient availability of following equipments: Gear shaving and rounding machines. Roof-copping and profile gear grinding machines. Gear involutes and leads testing machines.

Raw Materials and Components


Indigenous raw materials lack in consistency. Vacuum degassed alloy steel with controlled oxygen level and steels with lead addition is not available. Good quality bearings and oil seals for industrial gear box applications are not available in the country.

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R & D FACILITIES

R&D work carried out in the country has been as under: Technology absorption and indigenization of design & development. Development of cutting tools, shaving and tandem shaping cutters. Design evaluation/modification of gear boxes in the existing vehicles.

FACILITIES IN NATIONAL INSTITUTIONS

The country has three main such institutions. Central Manufacturing Technology Institute (CMTI) has facilities for design and inspection of gears and is capable of providing technological support for manufacturing process, heat treatment and inspection of gears. CMTI has developed ground (DIN Class 6) as well as commercial (DIN Class 8) gears in the past. At Automotive Research Association of India (ARAI), the following facilities are available: Computer aided gear design Dynamic analysis of the gear box design for the matching shafts, bearings and housings. Design of gear box housing for low noise.
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Endurance testing of gear boxes, Indian Institute of Technology, Bombay (IIT) has facilities for Computer aided design of gears.

INTERNATIONAL SCENE

In advanced countries, there is an increasing trend in the use of CNC machines for the development of Gears. This ensures high speed production and repetitive accuracy. Gleason, Klingelnberg,Hurth and Oerlikon are some of the leading manufacturers who excel in Gear cutting/finishing machines, testing & measuring instruments.

There have been numerous developments in the areas of manufacturing process, material, design and quality control. Some important developments are Hard Gear Finishing using CNC machines, Cold Rolling of Gears, Powder Metallurgy process, CAD for optimization, Minimum Weight Gears, Acoustic Intensity instruments for noise measurement etc.

The gear industry is over 30 years old. The manufacturers are well equipped, with modern gear cutting facilities as well as testing equipments imported from world renowned manufacturers e.g. Gleason, Fellow, Magg, Oerlikon, Reishauer, Hurth, Klingelnberg, Pfauter, Liebherr etc, The industry has also latest inbuilt facilities to manufacture gear cutting tools for captive requirement as well as for outside sale. CAD is employed for the design of gear cutting tools. In view of the growing concern on vehicle noise pollution, improved gears need to be developed for vehicle transmissions. Research and Development is one of the activities in improvement of the existing product. The R&D units of gear manufacturers must constantly review their
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performance against international developments and make suitable modifications/changes justified on techno-economic ground. Gear manufacturers must specially concentrate in the following areas: Design & development of Cutting Tool Quality improvement Reduced noise level Improved process of manufacture Reduced frictional loss. Some improvements adopted by manufacturers in developed countries are given on next page which should be considered by Indian manufacturers: i. ii. iii. iv. v. vi. Automated manufacturing & material handling Automatic Cycle Annealing Process Online inspection method Hard shaving Technology Powder Metallurgy Process Design and manufacturing of Gear cutting Tools

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Company info Todays global group is the one of the ISO certification service provider. It is a consultancy service agency for ISO certifications, Education Solutions, Brand Management Solutions and Trademark Registration services. But it mostly concentrates on ISO certification services. Todays Global Group is one of the fastest growing leading Orqanization. It is registered by Government and certified by international organization for standardization consisting of highly experienced professionals, helping organizations attain excellence and world class competitiveness through the application of efficient practices and procedures approved by reputed companies in the world . The organization is mainly focusing on ISOPATEL DHRUVAL D Page 75

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certification services, educational- services and financial - services to achieve customer and stake holder satisfaction and grow into high growth trajectory by building trust worthy relationship and long standing network . Today's Quality Management solutions have highly experienced people to provide quality services to our clients, in Various regions of India and across globally. over 10 years of experience global group has a team of energetic, dynamic, competent and qualified professionals having rich industrial experience, practical exposure in offering niche services as required .The team of professionals established Today's Quality Management solutions with a clear focus on customer loyalty, consistent interpretation, and value added services. We believe in customer focused, competent, efficient, value added and affordable service provider. Today's Quality Management solutions is targeting for Manufacturing and Services Industries and look for the interest of Large, Medium and small Scale Industries in private sector as well as Govt. Sector, like emerging service sectors.

Mission To mold a holistic personality accomplished in emotional, moral, intellectual, social and mental capabilities besides including a capacity for critical and lateral thinking. Vision To impart quality and to equip the young generation with all those skills and competencies needed to cope with the fast changing phase of modern life. Goal To adhere to the reputation of being able to channel our human resources and guide the transformation process of every individual's dream into a reality.

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INTRODUCTION Power Build Limited was a part of Elecon group of Industries and use established in 1972. It manufactures the wide range of General Motors and Truck Loaders. It is one of the pioneers and first manufacture of Automobile Bag feeder and weighting machine. Power Build Limited is situated on Anand-Sojitra road, Vallabh Vidyanagar.

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It also manufactures the product like Gear Motors, Truck loaders and automatic bag feeder machine. It is the first Indian Company to introduce Electric Weighting and Metal Detecting System. Power Build Limited is a Company representing a fine blend of specialized skill and high technologies serving almost all industries.

HISTORY OF ORGANISATION

Power Build Ltd. was registered under Indian Companies Act, 1956 and was incorporated on 15/4/1972, 3 decades ago. PBL manufactures mechanical power transmission equipments and mechanized material handling equipment like Gear motors, Truck loaders, Metal detector belt
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weighed, etc. using the latest technology under the supervision of experienced engineers with the use of most modern Industry.

PBL started manufacturing helical gear motors under technical collaboration from German manufacturer Rudolf Macho KG in 1972. Having established a name in the market for helical geared motors & to meet the growing demand, the company introduced geared motors with the combination of Helical and worm gears as well as Helical and Bevel gears.

The company added various products to meet with growing demand of the Indian industrial market. These products includes automatic sleighing and bag feeder machines, automatic truck and wagon loaders, and weigh feeder and micro processor based belt weighed and weigh feeder, etc. The company is well accepted in the market during the year company entered in to a foreign collaboration with Dr. Hans Bolkes gmbhunel co-op. of the West Germany for manufacturing of the Electronic Belt, Weigh Feeder, Metal Detector etc. in 1986, the company collaboration with the Ramsty Engle Controls Pvt. Australia. PBL has workshop area exceeding 10000 sq. meters. Equipped with the latest mazak and excel CNC and NC Machines, tools, quality control and testing equipment for production of reliable material handling power transmission equipment. It is performing in tandem with work force of 97 employees working in various departments. First 500 numbers manufacturing milestone achieved in the month of august 2007.

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It has also join hands with M/S. Boublen of France for manufacturing magnetic equipment. The company entered in to a technical Agreement with Roaol Lenuir, France. Power Build has covered majority of the core sectors through its supplier of highly sophisticated equipment becoming ample testimony of the symbolic mark of Power Builds unbeatable technology. Nation wide sales and services at short notice. PBL is registered with registrar of the Gujarat, Ahmadabad. This is a representing affine blend of specialized skills & high technology serving almost all industries. The Company constitutes its Growth the concentrate and consolidates its position as the most trusted and accepted supplier of quality products by obtaining technical know-how from industrially. Developed countries and also in house development of new products. With a view to have more concentrated and effective capturing of the already competitive geared motor market, the company introduced new geared , very efficient and compact drive solutions in the form of M , C , F , and k series geared motors which are assembled from a family of modular kits, thus maximizing availability in October, 2007.

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Company info Todays global group is the one of the ISO certification service provider. It is a consultancy service agency for ISO certifications, Education Solutions, Brand Management Solutions and Trademark Registration services. But it mostly concentrates on ISO certification services. Todays Global Group is one of the fastest growing leading Orqanization. It is registered by Government and certified by international organization for standardization consisting of highly experienced professionals, helping organizations attain excellence and world class competitiveness through the application of efficient practices and procedures approved by reputed companies in the world . The organization is mainly focusing on ISOcertification services, educational- services and financial - services to achieve customer and stake holder satisfaction and grow into high growth trajectory by building trust worthy relationship and long standing network . Today's Quality Management solutions have highly experienced people to provide quality services to our clients, in Various regions of India and across globally. over 10 years of experience global group has a team of energetic, dynamic, competent and qualified professionals having rich industrial experience, practical exposure in offering niche services as required .The team of professionals established Today's Quality Management solutions with a clear focus on customer loyalty, consistent interpretation, and value added services. We believe in customer focused, competent, efficient, value added and affordable service provider. Today's Quality Management solutions is targeting for Manufacturing and Services Industries and look for the interest of Large, Medium and small Scale Industries in private sector as well as Govt. Sector, like emerging service sectors.

Mission

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To mold a holistic personality accomplished in emotional, moral, intellectual, social and mental capabilities besides including a capacity for critical and lateral thinking. Vision To impart quality and to equip the young generation with all those skills and competencies needed to cope with the fast changing phase of modern life. Goal To adhere to the reputation of being able to channel our human resources and guide the transformation process of every individual's dream into a reality.

GENERAL INFORMATION
Company Profile:Power Build Ltd., Company has a big contribution to the Industry. It has a number o the top position of a company in material handling equipment and has good gear decision too. The company continues its growth to concentrate and consolidate its position as the most trusted and accepted supplier of quality products b obtaining technical know-how from industrially developed countries and also in huge development of new products through continuous research and
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development. The company made drastic improvement in its manufacturing process and material with innovative design technology. Power Build Ltd., manufactures a wide spectrum of products for every application using the latest stage of the art technology. Under the supervision of experience engineers the most modern machinery including one machine of latest generator and maintaining uncompromising quality control right from the incoming raw materials till finished product level the work. Power Build Ltd., Company has large clientele including NXL, Bhel etc and many other bear a testimony of PBL quality under why more and more user insist on Power Build Products. Power Build Ltd., Company received the order from their customer per as their order company received the big order. This order depends for the customer.

The Raw material is needed and collected some of the raw material or components used in the company itself and those which are not product are been purchase from outside. The production process starts and in the workshop. After the process is over testing of that the buyer is carrying out manufacturing goods of customers can respect the goods are painted to make it good looking. Then it is packed and the customers executives the goods as per the requirement.

Name of the Organization : POWER BUILD LIMITED Form of Organization


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: Public Limited Company.


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Year of Establishment Company Registered No Registered Office

: 15th April, 1972. : 2065. : Power Build Limited Anand - Sojitra Road, Vallabh Vidyanagar, Pin Code 388 120. Gujarat. : 15th April, 1972.

Date of Incorporation as Joining stock Company Bankers Statutory Auditors Chairman Whole time Director Directors

: State Bank of India, Anand. : J.D. Zatakia & Co. Chartered Accountants, Mumbai. : Shri P.B. Patel. : D.M. Patel : Shri P.C. Amin Smt. K.A. Patel : Medium Scale Industry. : AABCP 2462 K XM 001 : POST BOX NO. 28, Vitthal Udhyognagar 388 121,
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Size of the Unit ICC NO. Correspondence Address

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Vallabh Vidyanagar. Gujarat, INDIA.

MISSION OF THE COMPANY


PBL is in the business of design and manufacturing Power transmission and material handling products. Our Products are known for their reliability, performance and competitiveness. In Pursuit of our mission, we shall: Upgrade our products to match global benchmarks from time to time. Use Latest technology and efficient methods in manufacturing.
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Provide efficient service and support to our customers at all times. By continually remained focused on our Customers needs and expectations. Ensure operations remain cost effective and profitable. Bring high growth in our business and an over increasing market share. Bring high growth in our business and an ever increasing market share. Continuously upgrade our knowledge with multidimensional skills. Always remain environment - friendly. PBL has a role towards the success of Vision and Mission of PBL and draws inspiration and energy from the opportunity received through active participation.

VISION OF THE COMPANY


PBL, a pioneer, continues to be the leader in Power Transmission Products. We provide solutions to the customer by ensuring high quality of products and services. We are known and trusted as a reliable organization always an working for customers delight. The high spirited PBL family has the dynamism and expertise to innovate and improve products suiting to the ever-changing global needs.

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Continuous training and up gradation of skills enable us in creating an environment of harmony and joy. We are proud of our contribution to the society and towards protection of the environment.

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Series M inline geared motors and reducers provide a very efficient and compact drive solution to meet most requirements up to 90KW with maximum output torque capacity 11,000 Nm.Units are available with ratios coverage of 1.4:1 to 70:1 in double reduction, up to 250:1 in triple reduction and up to 16200:1 in combined units. RIGHT ANGLED HELICAL WORM GEARED MOTORS SERIES C

combined

Series C right angle helical worm geared motors and reducers provide a highly efficient and compact solution to meet most requirements up to 45 kw with maximum output torque capacity of 10,000 Nm. Units are available with ratios coverage of 8:1 to 250:1 in double reduction, up to 900:1 in triple reduction and up to 16000:1 in units.

IN-LINE SHAFT MOUNTED GEARED MOTORS SERIES F Series F in-line shaft mounted geared motors offer ratios from 5:1 to 100:1 in double reduction form and in combined units form up to 20,000:1.Motors are available up to 45 kw giving a maximum output torque
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of 7200Nm.The series F geared motors are primarily designed as a shaft mounted unit incorporating an integral torque reaction bracket. The units are also available with bolt-on feet or output flanges and output shafts of single and double extension. All variants are available either motorized or with output shaft assembly. RIGHT ANGLED HELICAL BEVEL GEARED MOTORS SERIES K

Series K right angle drive helical bevel geared motors offer ratios from 8:1 to 160:1 in three stages or up to 10000:1 in five stages . Motors are available up to 90kw and output torque capacity up to 12,300 Nm. The Series K geared motor is designed with integral cast feet base or end mounting and can be offered with single or double extended output shafts. Units are also available shaft mounted or with output flanges and are available for mounting horizontally or vertically. The units can also be offered with a bolt on torque reaction bracket and all variants are available either motorized or with an input shaft assembly . HELICAL GEARED MOTOR SERIES P PBL P Series Helical gearbox and electric motor are built as one unit to give coaxial and compact constructions. Helical Gear Reducers have co-axial input and output shaft that can be driven by any prime mover. Gearboxes can be supplied with input shaft for connecting to prime mover. Motor Mount Gearboxes ensures easy fitment of any make of

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Motors with B5 mounting as per IEC frame. These are available in 2 & 3 reductions and in 4, 5, & 6 reductions for extremely low output speeds. These are available in foot, flange, foot-cum-flange and agitator type construction

Manufacturing Range: Geared Motors & Reducers - Power: 0.33 HP to 125 HP * Output Speed: 0.4 to 585 RPM * Reduction ratio: up to 3385 Motor Mount Gearboxes - Power: 0.33 HP to 40 HP * output Speed : 0.4 to 585 RPM. Al-Nu WORM GEARED MOTOR

PBL manufactures worm Geared Motors & Reducers with hollow input shafts and aluminum alloy casings. The units are supplied with factory filled lubricants avoiding frequent oil changes, the worm Geared Motors & reducers are available in 635, 805 & 1005 models with rations ranging from 5:1 to 70:1

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SUPER A SERIES HELICAL GEARED MOTOR PBL also manufactures state-of-the-art Helical Geared Motors, Motor Mount Reducers and Inline Gear Reducers with solid and hollow input shafts, under the license agreement with a renowned Japanese manufacturer Seiki Kogyosho Limited (SKK) (now taken over by Sumitomo Heavy Industries). Foot/flange mounted Geared Motors, solid input shaft inline Gear Reducers and Motor Mount Reducers with Hollow Input Shaft are available in the range of 0.4 kw to 11.0 kw and having ratio from 5:1 to 200:1. The units are suitable to accommodate IEC frame 3phase, 4 pole AC induction motors. ELECTRIC HOIST

PBL electric hoists are designed in accordance with international standards and also as per Rules for design of serial lifting equipment issued by Federation of European Hoist Manufactures (FEM). Present manufacturing range includes hoists up to 16 tons lifting capacity. PBL hoists incorporate fan cooled crane duty brake motors with class F insulation, specially designed rope guide manufactured from polyethylene or cast iron and hoist barrel with machine-cut grooves made from seamless tubes with high tensile strength. Gearbox or motor can be removed independently. PBL Hoists are suitable for monorail and trolley drive - either for straight beam or curved beam - and double girder.
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LOOSE GEARS PBL manufactures helical and spur gears strictly to customers requirement. Accuracy class attainable generally conforms to DIN-6 and even up to DIN 3 / 4, for precision gears up to diameter 400 mm. Helical gear wheels and pinions with internal as well as external splines (both straight & involutes) can be offered. Hardened and ground spur/helical gears manufactured by PBL are used in printing machines, plastic extrusion machines, textile machines, air compressors, packing machines and gear pumps. HELICAL & SPUR GEAR PINIONS

Various hardened & ground spur & helical gears manufactured by PBL used in printing machines, plastic extrusion machines, textile machines and helical gear reducers.

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WORM SHAFT WITH WORM WHEEL

HALICAL GEARS & PINIONS

Hardened & ground spur & Helical gears manufactured by PBL, used in Gear compressor, packing machine & gear pumps.

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Permanent current assets

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Calculation of Operating Cycle


1. AVERAGE STOCK OF RAW-MATERIALS : : Opening Balance + Closing Balance 2 110729139 + 76764336 2 190493475 2 95426737.50

= =

2. AVERAGE CONSUMPTION OF RAW-MATERIAL : : Consumption of Raw-Materials 365 30329276 365 83094

= =

3. AVERAGE WORK IN PROCESS :: Opening Balance + Closing Balance 2 13605428 + 18748238 2 = 16176833.
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= =
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4. COST OF PRODUCTION :: Opening Balance of W.I.T = Consumption of Raw-Material = Manufacturing & Other Exps. = 18748239 30329276 13605428 462476689

+ +

5. AVERAGE COST OF PRODUCTION :: Total Cost of Production 365 452191069 365 1238839.6

= =

6. AVERAGE FINISHED GOODS OF INVENTORY :: Opening Balance + Closing Balance 2 14027500 + 12802867 2 26830367 2 13415183.50

= =

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7. COST OF GOOD SOLD :: Opening Balance of F.G Cost of Production = = 14027500 462476689 490504189 12802867 469701322 8. AVERAGE COST OF GOODS SOLD :: Cost of Goods Sold 365 463701322 365 1270414.58

Closing Balance of F.G

= =

9. AVERAGE DEBTORS :: Opening Debtors + Closing Debtors 2 319636536 + 200099457 2 25, 98, 67,996.50 519735993 = 2

= =

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10.

AVERAGE CREDIT SALES PER DAY :: Credit Sales 365 842469422 365 2308135

= = 11.

AVERAGE CREDITORS :: Opening Creditors + Closing Creditors 2 214627812 + 167241721 2 381869533 2 190934766.50

= = 12.

AVERAGE CREDIT PURCHASE PER DAY:: Total Purchase 365 379889893 365

1040794

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CALCULATION OF OPERATING CYCLE OF PBL


(A) RAW-MATERIAL & STORAGE PERIOD :: Average Stock of Raw-Material Average Consumption of Raw-Material 95246738.50 83099 1146.25

= = (B)

WORK IN PROCESS PERIOD :: Average Work In Process Average Cost of Production 16176833 1238879.60 13.05

= = (C)

FINISHED GOOD Average F.G Inventory Average Cost of Good Sold 13415183.50 1276414.58 10.55
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= =
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(D)

DEBTORS COLLECTION PERIOD :: Average Debtors Average Credit Sales per Day 259867996.50 230815 112.58

= = (E)

CREDIT PAYMENT PERIOD :: Average Creditor Average Credit Purchase per Day 190934766.50 1040794 183.45

= =

OPERATING CYCLE = =

A+B+C+D-E

1146.25 + 13.05 + 10.55 + 112.58 183.45 1098.98

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TIME

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COMPONENTS OF CURRENT ASSETS

Particular

2005-06

2006-07

2007-08

2008-09

2009-10

Inventory 196,251,789 197,109,338 195,200,404 144,280,244 107,397,264 Sundry Debtors Cash and Bank Balance Loan and Advance Total
289,742,587 343,500,324 485,745,281 319,636,536 200,099,457 11,577,485 14,923,294 68,43,149 12,987,384 15,124,924

68,367,490

76,146,979

113,502,521 134,736,151 147,665,674

565,939,351 631,679,935 801,351,355 609,640,315 470,287,319

60

50

40

Inventory 2006-07

30

2007-08 2008-09

20

2009-10

10

0 Inventory Sundry Debtors Cash & Bank Bal Loan & Advance

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INTERPRETATION:The trend percentage of current assets shows that there was an increase in the year 2007-08 over 2009-10. This increase occurs due to increase in the debtors, inventory, loan and Advances. The increase in the indices is mainly attributable to substantial increases in Loan and Advances in the gross working capital of the concern.

COMPONENT OF CURRENT LIABILITIES:


Particular Sundry Creditors Advanced received against order Other Creditors Provisions Total 2005-06 2006-07 2007-08 2008-09 2009-10

245,568,817 267,987,965 278,585,783 214,627,812 167,241,721 11,973,275 13,264,643 60,233,112 14,063,744 2,485,705

16,752,125 29,835,347

18,936,778 31,633,975

21,816,066 60,737,481

19,559,396 98,257,346

17,334,921 119,900,631

304,129,564 325,823,091 421,372,397 346,508,298 300,747,378

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30 25 20 2005-06 15 10 5 0 Sundry Creditors Adv. Received aga. Order Other Creditors Provisions 2006-07 2007-08 2008-09 2009-10

INTERPRETATION:: From the percentage of Current Liabilities, as compared with 2006-07, in 2007-08 the current liabilities ration is high in all components. This is not good position of company but in 2008-09 and 2009-10 company improve its position. All components are less expects the provision.

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WORKING CAPITAL MANAGEMENT RELATED RATIO 1. 2. 3. 4. Working Capital Turn Over Ratio. Current Ratio. Liquid Ration. Current Assets Turn Over Ratio. WORKING CAPITAL TURN OVER RATIO::

(1)

A firm may also like to relate net working capital to sales. It May thus compute net working turnover by dividing sales by net Working capital turnover Sales Working Capital T/O Ratio = Net Working Capital Years 2005-06 = 504212645 178410522 812039240 305856844 1034232621 379978958 1148956523 263132017 842469422 162814347 = 2.82 times

2006-07

= 2.65 times

2007-08

= 2.72 times

2008-09

= 4.36 times

2009-10

= 5.17 times

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YEAR

2005-06 2006-07 2007-08

WORKING CAPITAL T/O RATION 2.82 2.65 2.72

YEAR

2008-09 2009-10

WORKING CAPITAL T/O RATION 4.36 5.17

Working Capital T/O Ration


6 5 4 3 Working Capital T/O Ration 2 1 0 2005-06 2006-07 2007-08 2008-09 2009-10

INTERPRETATION:: The Working Capital turnover ratio is equal to net sales divided By Net working capital. The term net working capital means the excess of current assets over current liabilities. In the figure 2009-10s working capital is more than the previous year (2008-09). The differences of working capital turnover ratios is 5.17. Thus we are show that the working capital turnover ratio is increase in 2009-10.
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(2)

CURRENT RATIO ::

This is most widely used ratio which shows the proportion of Current Assets to Current Liabilities. It is obtained by dividing current Assets by current liabilities. Current Assets Current Liabilities

Current Ratio = Years 2005-06 =

408467432 230056910 6316679935 325823091 80135155 421372397 609640315 346508298 470287319 307472978

= 1.78:1

2006-07

= 1.94:1

2007-08

= 1.90:1

2008-09

= 1.75:1

2009-10

= 1.53:1

YEAR 2005-06 2006-07 2007-08


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CURRENT RATIO 1.78 1.94 1.90

YEAR 2008-09 2009-10

CURRENT RATIO 1.75 1.53


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CURRENT RATIO
2.5

1.5 CURRENT RATIO 1

0.5

0 2005-06 2006-07 2007-08 2008-09 2009-10

INTERPRETATION:: The Current Ratio is another test of a companys financial strength. The current ratio method is a model for measuring the liquidity of a company by calculating the ratio between all current assets and all current liabilities. In following year of Current Ratio is decrease. The 2009-10s ratio is 1.53:1 is very low than previous year 2008-09s 1.75:1.

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(3)

LIQUID RATIO ::

It is a ratio of liquid assets to current liabilities. The true liability refers to the ability of a firm to pay its short term obligations as and when they become due. Liquid Assets Current Liabilities

Liquid Ratio = Years 2005-06 =

155776496 230056910 146748361 329823091 168532754 421372397 177356292 346508298 9275213 307472978 LIQUID RATIO 0.67 0.44 0.39 YEAR 2008-09 2009-10

= 0.67

2006-07

= 0.44

2007-08

= 0.39

2008-09

= 0.51

2009-10

= 0.30

YEAR 2005-06 2006-07 2007-08


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LIQUID RATIO 0.51 0.30

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LIQUID RATIO
0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2005-06 2006-07 2007-08 2008-09 2009-10 LIQUID RATIO

INTERPRETATION:: A Ratio used for assessing the liquidity of a company. Here liquidity assets divided by total liabilities the ratio of companys liquid assets such as cash and securities divided by total liabilities. The liquid ratio is higher in the 2005-06 is 0.59 and 2008-09 is 0.51 in 2009-10 is 0.30.

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(4)

CURRENT ASSETS TURN OVER RATIO ::

Current Assets turn over ratio shows the firms ability in generation sales from all financial sources committed to current assets. This ratio expresses the relationships between Current Assets and net Sales or Cost of good sold. Sales Current Assets T/O Ratio = Current Assets Years 2005-06 = 504212645 408467432 812039240 631679935 1034232621 801351355 1148956523 609640315 84249422 470287319 CURRENT ASSETS T/O RATIO 1.23 1.29 1.29 YEAR = 1.23 times

2006-07

= 1.29 times

2007-08

= 1.29 times

2008-09

= 1.88 times

2009-10

= 1.79 times

YEAR

2005-06 2006-07 2007-08


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2008-09 2009-10

CURRENT ASSETS T/O RATIO 1.88 1.79


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CURRENT ASSETS T/ORATIO


2 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2005-06 2006-07 2007-08 2008-09 2009-10 CURRENT ASSETS T/ORATIO

INTERPRETATION:: The Current Assets Turn over ratio measures the efficiency of a firm in managing and utilizing its assets. The higher the turn over the more efficient is the organization. The current assets turnover of PBL ranged from 1 times to 2 times. The current assets turnover ratio reflects the efficiency and capacity of working capital.

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INVENTORY RELATED RATIO: 1. Inventory Turnover Ratio. 2. Inventory Handling Period. INVENTORY TURNOVER RATIO :It is a valuable measure of the velocity with which then inventory is used in the business enterprise. It indicates the effectiveness and efficiency of the inventory control programmes. It shows how speedily the inventory is turned into account receivables into sales. To higher the ratio, the more efficiency of the inventory is said to be. Cost of Good Sold Average Inventory (1)

Inventory T/O Ratio Years 2005-06 =

6726160686 177107115 773727096 197209338 966184024 195260404 1064909428 142280244 463701322 134151835

= 3.79

2006-07

= 3.92

2007-08

= 4.94

2008-09

= 7.48

2009-10

= 3.45

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YEAR

2005-06 2006-07 2007-08

CURRENT ASSETS T/O RATIO 3.79 3.92 4.94

YEAR

2008-09 2009-10

CURRENT ASSETS T/O RATIO 7.48 3.45

Inventory T/O Ratio


8 7 6 5 4 3 2 1 0 2005-06 2006-07 2007-08 2008-09 2009-10 Inventory T/O Ratio

INTERPRETATION: A Ratio showing how many times a companys inventory is sold and replaced over a period. The equation for inventory turnover equals the cost of good sold divided by the average inventory. Here in case of PBL the have 7.48 times in the year 2008-09. Then it decrease to 3.45 in the year 2009-10.

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(2)

INVENTORY HANDLING PERIOD : :

The ratio estimates how many times the inventory turnover In a year. This numbers tells how much cash/goods are tired up Waiting for the process and is a critical measure of process reliability And effectiveness. 365 Inventory Handling Period = Inventory T/O Ratio Years 2005-06 = 365 3.79 365 3.92 365 4.94 365 7.48 365 3.45 CURRENT ASSETS T/O RATIO 96.30 93.11 73.88 YEAR = 96.30

2006-07

= 93.11

2007-08

= 73.88

2008-09

= 48.79

2009-10

= 105.79

YEAR

2005-06 2006-07 2007-08


PATEL DHRUVAL D

2008-09 2009-10

CURRENT ASSETS T/O RATIO 48.79 105.79


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Inventory Handling Period


120 100 80 60 40 20 0 2005-06 2006-07 2007-08 2008-09 2009-10

Inventory Handling Period

INTERPRETATION: The average inventory period is also referred to as days of Inventory. The number of days of inventory is also known as average inventory period and inventory handling period. A high number of days in inventory indicate that there is a lack of demand for the product being sold.

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STATEMENT OF INVENTORY OF PBL Particular 2005-06 RawMaterial SemiFinished goods Finished goods Total 2006-07 2007-08 2008-09 2009-10

483,176,843 522,290,509 613,002,538 638,726,606 79,764,336 28,735,184 32,298,144 48,513,891 48,077,701 13,605,428

6,788,058

7,925,016

20,713,764

6,437,474

14,027,500

518,700,085 561,913,669 682,230,193 693,241,781 107,397,264

STATEMENT OF RECEIVABLE IN PBL


Particular

2005-06

2006-07

2007-08 59491533

2008-09 59427527

2009-10 56715402

18732049 44085225 Sundry debtors exceeding 6 months 204531482 299415099 Others Total

426253748 260209009 143384055 314636536 200099457

223263531 3435500324 48745281

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RECEIVABLE RELATED RATIO:

DEBTORS TURNOVER RATIO : Debtors turnover ratio indicates net credit sales and average Accounts receivables of the year. This ratio is also known as Debtors velocity. Net Credit Sales Debtors Turn over Ratio = Average Debtors Years 2005-06 = 504212645 164200345.05 821039240 343500324 1034232621 485745281 1148956523 319636536 84246922 259867996. DEBTORS T/O RATIO 3.79 3.92 4.94 YEAR 2008-09 2009-10 = 3.07: 1

(1)

2006-07

= 2.39:1

2007-08

= 2.12:1

2008-09

= 3.59:1

2009-10

= 3.24:1

YEAR 2005-06 2006-07 2007-08


PATEL DHRUVAL D

DEBTORS T/O RATIO 7.48 3.45


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Debtors Turnover Ratio


4 3.5 3 2.5 2 1.5 1 0.5 0 2005-06 2006-07 2007-08 2008-09 2009-10 Debtors Turnover Ratio

INTERPRETATION: Debtors turnover ratio indicates the velocity of debt collection of a firm. In simple words it indicates the numbers of time average debtors are turned over during a year. In the year of 2008-09 ratio is 3.59 is highest and then 2009-10 ratio is 3.24 is lower then 2008-09.

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(2)

RECEIVABLE TURNOVER RATIO :

It shows numbers of days of credit allowed to customers. The Credit policy of PBL is not so liberal. Debtors = Sales

Receivable Turn over Ratio Years 2005-06 =

X 360

164200345.05 504212645 343500324 821039240 485745281 103432621 319636536 114895623 200099457 842469422

X 360

= 119 days

2006-07

X 360

= 150 days

2007-08

X 360

= 169 days

2008-09

X 360

= 97 days

2009-10

X 360

= 85 days

YEAR 2005-06 2006-07 2007-08


PATEL DHRUVAL D

DEBTORS T/O RATIO 119 days 150 days 169 days

YEAR 2008-09 2009-10

DEBTORS T/O RATIO 97 days 85 days

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REPORT ON WORKING CAPITAL MANAGEMENT

Receivable T/O Ratio


180 160 140 120 100 80 60 40 20 0 2005-06 2006-07 2007-08 2008-09 2009-10 Receivable T/O Ratio

INTERPRETATION: Receivable Turnover Ratio is one of the accounting activity ratios, a financial ratio. This ratio is measuring the number of times, on average receivable are collected during the period. This may effects on operating cycle also so as per diagram; from 2006-07 to 2009-10 company improve, in 2009-10 only 85 days of receivables.

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CASH MANAGEMENT IN PBL


In PBL top management takes decision regarding cash management. Cash Management is the most important criteria of any business firm. All the cash transaction finance is completed by the account for finance department cash is important current assets for the operation of the business. STATEMENT OF CASH IN PBL Particular Cash Hand 2005-06 2006-07 419 2007-08 Nil 2008-09 Nil 2009-10 Nil

on 84,209

11,398,566 12,173,988 3,943,149 9,555,798 10,956,511 Balance with Schedule bank 1,657,245 2,748,815 2,900,000 3,431,586 4,168,413 Balance with Schedule bank (Short term Deposited) 13,140,020 14,923,294 6,843,149 12,987,384 151,249,224 Total

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CASH MANAGEMENT RELATED RATIO CASH RATIO: The cash ratio method is a formula for measuring the liabilities of a company by calculating the ratio between all cash and cash equivalent assets and all current liabilities. Cash + Marketable Security Receivable Turn over Rati = Current Liabilities X 100 Years 2005-06 = 6081099 230056910 14923294 325823091 6843149 421372397 12987384 346508298 15124924 307142978 X 100 = 2.64%

2006-07

X 100

= 4.58%

2007-08

X 100

= 1.62%

2008-09

X 100

= 3.74%

2009-10

X 100

= 4.92%

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YEAR 2005-06 2006-07 2007-08

CASH RATIO 2.64% 4.58% 1.62%

YEAR 2008-09 2009-10

CASH RATIO 3.74% 4.92%

Cash Ratio
6 5 4 3 2 1 0 2005-06 2006-07 2007-08 2008-09 2009-10

Cash Ratio

INTERPRETATION: Total value of Cash and Marketable Securities divided by current liabilities. This cash ratio measures the extent to which a corporation or other entity can quickly liquidate assets and cover short-term liability, and therefore is of interest to short-term credits.

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Power Build Limited is an engineering company situated at AnandSojitra Road. The major findings of Power Build Limited, have been summarized below; It is clear that the Working Capital level has been increased significantly over the least year. The reason behind this is increased in current assets that in is Inventory, Sundry Debtors, Cash and Bank Balance. The liquidity ratio has been increased instead of reducing it. The company is having very good Debtors Turnover ration. Company had only issued equity for the long- term. So it is not having any types of fixed, burden of the payment of interest charges. Company has taken a loan for their Working Capital need which shows the Financial Leverages.

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CONCLUSION
Power Build Limited is a core company in manufacturing of Gears and Gears Motors and material handling equipment. The company has latest technology and large number of machines which NC System. During the three decades of its existence, PBL has designed and implemented severally landmark projects in India as well as abroad. The projects analysis indicates that PBL is managing the all resources in better way. The trend of working capital, current assets and current liabilities are in favorable slops. The turnover of the Inventory and Debtors has improved over years, all these shows the goods or effective Working Capital Management of the company. As far as my project is concerned, I find it very useful to analyze and study different dimensions of Working Capital of PBL. By studying the Financial Department of the company, I conclude that the unit is well established and running smoothly not only Finance Department of the company are working effectively with full adopted all the modern techniques in their Finance Department. It has a prosperous future. I am very happy that I had an opportunity to undergo training at Power Build Limited. Last but not the least, I heartily wish my best luck to PBL for the continuous process and prosperous future.

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Bibliography

The Reference Books


Financial Management Financial Management Research Methodology Power Build Ltds last 5 year annual reports

Author
S.N.Maheshwari I.M.Pandey C.R.Kothari

Websites:-

www.pbl.co.in www.netguru.com www.scribd.com www.nse.com www.bse.com www.investopedia.com www.tutor24.net


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