Comparative Analysis of Working Capital Management of Agro Tech Foods Ltd. & Britannia Industries Ltd.

Comparison of Current ratio & Cash ratio:Current Ratio: Agro Tech Foods Ltd. Year 2010 2011 2012 Curren 1.88606 2.21246 2.38681 t Ratio 4 8 Britannia Industries Ltd. 2010 2011 2012 1.10479 1.23640 0.80283 5 4 3

The current ratio of Agro Tech Foods Ltd. has increased from 2010-2012 on account of decrease in current liabilities in which creditors have been decreasing. The current ratio of Britannia Industries Ltd. is first increasing due to increase in cash balance and after that it is decreasing due to current maturities of long term debt (bonus debentures have been mentioned under current liabilities). Cash Ratio: Agro Tech Foods Ltd. Britannia Industries Ltd. Year 2010 2011 2012 2010 2011 2012 Cash 0.91388 0.53802 0.66551 0.07481 0.11540 0.05024 ratio 8 3 9 3 3 8

The cash ratio of Agro Tech. Foods Ltd. had declined considerably in 2011; idle cash has been used for employee benefits, advance payments to suppliers and paying advance income tax. Both cash and loans and advances are current assets. So there is not much change in the current ratio. The cash ratio of Britannia Industries Ltd. is increasing in first year due to increase in cash and bank balances but after that it has decreased due to dividend paid by the company to its shareholders. Inventory Turnover and Inventory Period: Agro Tech Foods Ltd. Britannia Industries Ltd. Year 2010 2011 2012 2010 2011 2012

Invent ory turnov er Invent ory period

9.88

9.12

8.09 8.13

9.29

9.07

36.9266 7

39.9904 1

45.1012 8

44.87

39.25

40.22

The inventory turnover of Agro Tech Foods Ltd. had decreased due to decrease in sales caused by an increase in competition. This lead to piling up of inventory causing an increase in the inventory period as the company is holding inventory for a longer time due to slackening demand. Inventory turnover of Britannia Industries Ltd. is increasing due to increase of sales which leads to depletion of products and reduction of inventory which causes inventory period to decrease.

Accounts Receivable Turnover and Accounts Receivable Period: Agro Tech Foods Ltd. Britannia Industries Ltd. Year 2010 2011 2012 2010 2011 2012 Account 38.48 27.17 20.13 51.29 59.61 56.3 Receivab le turnover Account 9.483063 13.44029 18.132 7.11 6.12 6.48 Receivab le period The account receivable turnover of Agro Tech Foods Ltd. has decreased considerably due to stagnant sales, the amount receivable from debtors have doubled due to increased sales on credit. Further in 2012 the account receivable turnover has declined due to decrease in sales. Accounts Receivables of Britannia Industries Ltd. turnover has been increasing due to tremendous increase of sales and debtors are decreasing which causes accounts receivables to decrease, but after turnover is decreasing due to increase in debtors. Accounts Payable Period: Agro Tech Foods Ltd. Britannia Industries Ltd. Year 2010 2011 2012 2010 2011 2012 Accoun 52.8220 46.6850 37.0780 22.84 26.31 33.84 t 3 7 6 Payabl e period The account payable period of Agro Tech Foods Ltd. has decreased considerably because company is paying advance to the suppliers for raw materials. The idle cash with the company has been used to satisfy the suppliers and maintain the relationships. Accounts payable period of Britannia Industries Ltd. has been increasing as company is keeping cash with itself (as cash is increasing from 42 to 76 crores).

Operating Cycle and Cash Cycle: Agro Tech Foods Ltd. Year 2010 2011 2012 2010 Operatin 46.40974 53.4307 63.23327 51.98 g Cycle Cash -6.41229 6.74563 26.15521 29.14 Cycle

Britannia Industries Ltd. 2011 2012 45.37 46.7 19.06 12.86

The operating cycle of Agro Tech Foods Ltd. has increased due to increased inventory period and account receivable period. This simply means the companys goods are tied up more in inventory and sales are tied up in receivable. It is not a good sign for the company as it increases the cash cycle and payments will be made late to the creditors (suppliers of raw material). The company had a negative cash cycle in 2010 which meant company bought on credit but had small inventory and accounts receivable periods. In the next two years the cash cycle has increased due to increase in operating cycle which is an after effect of sales, but at the same time company has reduced the trade payables drastically using its cash at hand. This signifies the companys belief of having stable cash flows. For Britannia Industries Ltd., Operating cycle is decreasing as sales have been increasing which causes inventory period to decrease and accounts receivables to decrease as debtors are decreasing. The Cash cycle has been decreasing as it is good for the company which means it has more available cash with it (because company payables are increasing).