Professional Documents
Culture Documents
Reprt PRT 2
Reprt PRT 2
1
INTRODUCTION TO
THE ORGANISATION
2
INTRODUCTION TO THE ORGANISATION
GUPIL RINT PACK is a proprietorship concern. With over 25 years of experience in the
Offset printing & packaging line, Mr. Parmod Arora is the Sole Proprietor of M/s Gupil Print
Pack. A name well known for provide unmatched quality and service .They are the
Manufacturer of Multicolor Printing & Packaging Boxes, Fancy Sweet Boxes, Non-Woven
Multicolour Bags Corrugated Boxes and service provider of Multicolor printing jobs on paper
& non-woven. They constantly thrive to update our technology and services to keep pace with
the global trend and satisfy our customers.
VISION
Constantly evolve and update our technology and services to be one of the leading offset printers in
India.
MISSION
To provide unmatched quality Printing and Packaging services to our present and prospective
customers.
3
YEAR OF ESTABLISHMENT
23/11/1992
TOTAL INVESTMENT
Rs.70, 13,990
ANNUAL TURNOVER
NO. OF EMPLOYEES
12
4
ORGANIZATIONAL CHART
MANAGING
DIRECTOR
SUBORDINATES
5
PRODUCTS AND SERVICES
Multicolor Printing & Packaging,
Fancy Sweet Boxes,
Non-Wooven Multicolour Bags,
Corrugated Boxes,
Paper,
Mill board
MARKET –
Domestic market is targeted few examples are
Liberty shoes
NCERT
Carus Laboratories
zee Laboratories
Carlsberg
Oswal Pumps
Chetak Cookware
Amazon India
Purchase department
Human resource department
Production department
Finance department
Marketing and sales
The purchasing department heads up the firm’s procurement process. It is responsible for
buying all the goods, equipment, materials and services the firm needs to manufacture
items and offer goods for sale – and to do so in a timely and organized manner so
production doesn't falter.
Within that broad remit, here the purchasing department is performing a number of tasks,
such as:
Figuring out what specific items the business needs, when and in what quantities.
Finding reputable and cost-effective suppliers.
Negotiating prices and delivery terms.
Coordinating deliveries with the warehouse and logistics team.
Extracting the best value from supplier contracts.
FUNCTIONING OF HUMAN RESOURCE DEPARTMENT
Hr head is hiring and recruiting the prospective employees as per the need of the
firm.
WEAKNESS
Expensive machines
Printing hours are longer
Quality differ with the printer
used
Create and solve problem
yourself
Material selection limitation
Required controlled
environment
OPPORTUNITIES
THREATS
Machine compatibility and
upgrade
Public safety
Impact on environment
Intellectual property right
Competitive industry, need to be
constantly improving
Threat to traditional work force
PART- 2
INTRODUCTION TO
THE PROBLEM
AREA
WORKING CAPITAL MANAGEMENT
INTRODUCTION
Management is an art of anticipating and preparing for risks, uncertainties and overcoming
obstacles. An essential precondition for sound and consistent assets management is establishing
the sound and consistent assets management policies covering fixed as well as current assets. In
modern financial management, efficient allocation of funds has a great scope, in finance and
profit planning, for the most effective utilization of enterprise resources, the fixed and current
assets have to be combined in optimum proportions.
Working capital in simple terms means the amount of funds that a company requires for
financing its day-to-day operations. Finance manager should develop sound techniques of
managing current assets.
What is working capital management?
Working capital management is a business strategy designed to ensure that a company operates
efficiently by monitoring and using its current assets and liabilities to the best effect. The
primary purpose of working capital management is to enable the company to maintain sufficient
cash flow to meet its short-term operating costs and short-term debt obligations.
Symbolically, it means,
Working capital = Current Assets- Current Liabilities.
Current assets include anything that can be easily converted into cash within 12 months.
These are the company's highly liquid assets. Some current assets include cash, accounts
receivable, inventory, and short-term investments
Current liabilities are any obligations due within the following 12 months. These include
operating expenses and long-term debt payments.
In accounting,” Working capital is the difference between the inflow and outflow of funds. In
other words, it is the net cash inflow. It is defined as the excess of current assets over current
liabilities and provisions. In other words, it is net current assets or net working capital.
Working capital represents the total of all current assets. In other words it is the Gross working
capital, it is also known as Circulating capital or Current capital for current assets are rotating in
their nature.
A study of working capital is of major importance to internal and external analysis because of its
close relationship with the day-to-day operations of a business. Working Capital is the portion of
the assets of a business which are used on or related to current operations, and represented at any
one time by the operating cycle of such items as against receivables, inventories of raw
materials, stores, work in process and finished goods, merchandise, notes or bill receivables and
cash.
Working capital comprises current assets which are distinct from other assets. In the first
instance, current assets consist of these assets which are of short duration.
Working capital may be regarded as the life blood of a business. Its effective provision can do
much to ensure the success of a business while its inefficient management can lead not only to
loss of profits but also to the ultimate downfall of what otherwise might be considered as a
promising concern.
The funds required and acquired by a business may be invested to two types of assets:
1. Fixed Assets.
2. Current Assets
Fixed assets are those which yield the returns in the due course of time. The various decisions
like in which fixed assets funds should be invested and how much should be invested in the fixed
assets etc. are in the form of capital budgeting decisions. This can be said to be fixed capital
management.
These types of assets are required to ensure smooth and fluent business operations and can be
said to be life blood of the business. There are two concepts of working capital — gross and net.
Gross working capital refers to gross current assets. Net working capital refers to the difference
between current assets and current liabilities. The term current assets refers to those assets held
by the business which can be converted into cash within a short period of time of say one year,
without reduction in value. The main types of current assets are stock, receivables and cash. The
term current liabilities refer to those liabilities, which are to be paid off during the course of
business, within a short period of time say one year. They are expected to be paid out of current
assets or earnings of the business. The current liabilities mainly consist of sundry creditors, bill
payable, bank overdraft or cash credit, outstanding expenses etc.
FACTORS EFFECTING WORKING CAPITAL:
The amount of working capital required depends upon a number of factors which can be stated as
below
Nature of Business:
Some businesses are such, due to their very nature, that their requirement of fixed capital is more
rather than working capital. These businesses sell services and not the commodities and not the
commodities and that too on cash basis. As such, no funds are blocked in piling inventories and
also no funds are blocked in receivables. E.g. Public utility services like railways, electricity
boards, infrastructure oriented projects etc. Their requirement of working capital is less. On the
other hand, there are some business like trading activity, where the requirement of fixed capital
is less but more money is blocked in inventories and debtors. Their requirement of the working
capital is more.
In some business like machine tool industry, the time gap between the acquisitions of raw
material till the end of final production of finished product itself is quite high. As such more
amounts may be blocked either in raw materials, or work in progress or finished goods or even in
debtors. Naturally, their needs of working capital are higher. On the other hand, if the production
cycle is shorter, the requirement of working capital is also less.
In very small companies the working capital requirements are quite high overheads, higher
buying and selling costs etc. As such, the medium sized companies positively have an edge over
the small companies. But if the business starts growing after a certain limit, the working capital
requirements may be adversely affected by the increasing size.
If the company is operating in the period of boom, the working capital requirements may be
more as the company may like to buy more raw material, may increase the production and sales
to take the benefits of favorable markets, due to the increased sales, there may be more and more
amount of funds blocked in stock and debtors etc. Similarly, in case of depression also, the
working capital requirements may be high as the sales in terms of value and quantity may be
reducing, there may be unnecessary piling up of stocks without getting sold, the receivables may
not be recovered in time etc.
There is an inverse co-relationship between the question of working capital and the velocity or
speed with which the sales are affected. A firm having a high rate of stock turnover will needs
lower amt. of working capital as compared to a firm having a low rate of turnover.
Credit Policy:
The firm’s credit policy directly affects the working capital requirement. If the firm
has liberal credit policy, hence the more credit period will be provided to the debtors so this
will lead to more working capital requirement. With the liberal credit policy
operating cycle length increases and vice versa.
Production Policy:
If the policy is to keep production steady by accumulating inventories it will require higher
working capital.
Seasonal Variations:
In certain industries like raw material is not available throughout the year. They have to buy raw
material in bulk during the season to ensure an uninterrupted flow and process them during the
year. Generally, during the busy season, a firm requires larger working capital than in slack
season.
Some firms have more earning capacity than other due to quality of their products, monopoly
conditions, etc. Such firms may generate cash profits from operations and contribute to their
working capital. The dividend policy also affects the requirement of working capital. A firm
maintaining a steady high rate of cash dividend irrespective of its profits needs working capital
than the firm that retains larger part of its profits and does not pay so high rate of cash dividend.
Changes in the price level also affect the working capital requirements. Generally rise in prices
leads to increase in working capital.
In case of a manufacturing company, the operating cycle is the length of time necessary to
complete the following cycle of events –
The above operating cycle is repeated again and again over the period depending upon the nature
of the business and type of product etc. the duration of the operating cycle for the purpose of
estimating working capital is equal to the sum of duration allowed by the suppliers.
R+W+F+D+C
Where,
R - Raw material storage period = avg. stock of raw material / avg. cost of production per day
W – Work in progress holding period = avg. work in progress inventory / avg. cost of production
per day
F – Finished goods storage period = avg. stock of finished goods / avg. cost of goods sold per
day
D – Debtors collection period = avg. book debts / avg. credit sales per day
C – Credit period availed = avg. trade creditors avg. credit purchases per day.
Realization Sales
Accounts Receivable
Purchases Production
Production
The concept of gross working capital refers to the total value of current assets. In other words,
gross working capital is the total amount available for financing of current assets. However, it
does not reveal the true financial position of an enterprise. How? A borrowing will increase
current assets and, thus, will increase gross working capital but, at the same time, it will increase
current liabilities also.
So as a result, the net working capital will remain the same. This concept is usually supported by
the business community as it raises their assets (current) and is in their advantage to borrow the
funds from external sources such as banks and the financial institutions.
The ratio of 2:1 between current assets and current liabilities is considered as optimum or sound.
What this ratio implies is that the firm/ enterprise have sufficient liquidity to meet operating
expenses and current liabilities. It is important to mention that net working capital will not
increase with every increase in gross working capital. Importantly, net working capital will
increase only when there is increase in current assets without corresponding increase in current
liabilities.
This capital is permanently locked up in the current assets to carry out the business smoothly.
This investment in current assets is of the permanent nature and will increase as the size of
business expands.
Permanent working capital is that minimum amount of investment in raw materials, work-in-
process inventory, finished goods, stores and spares, accounts receivable and cash balance which
a firm is required to have in order to carry on a desirable level of business activity.
Such an amount cannot be reduced if the firm wants to carry on the business operations without
interruption. It is that minimum amount which is absolutely essential throughout the year on a
continuous basis for maintaining the circulation of current assets.
Minimum cash is required for making payment of wages, salaries, and other expenses; minimum
stock is required to maintain regular supplies and minimum investment in debtors is essential on
account of credit sales according to the period of credit allowed to the customers. Since the
requirement of permanent or hard core working capital is on a permanent basis, such working
capital should be financed out of long-term funds.
(1) The size of permanent working capital grows with the growth of business.
(2) It keeps on changing its form from one current asset to another.
(3) As long as the firm is a going concern, working capital cannot be substantially reduced.
It is the minimum amount of liquid capital needed to keep up the circulation of the capital from
cash to inventories, to receivable and again to cash. This would include sufficient minimum bank
balance to discount all bills, maintain adequate supply of raw materials etc.
(b) Reserve Margin or Cushion Working Capital:
It is the excess over the needs or regular working capital that should be kept in reserve for
contingencies that may arise at any time. These contingencies include rising prices, strikes,
special operations such as experiments with new products etc.
Variable working capital requires changes with the increase or decrease in the volume of
production or business.
The working capital required meeting the seasonal needs of the industry or business is known as
seasonal working capital. For example, if an enterprise is marketing woolen garments, it needs
more money for that purpose during winter months than in summer season. Similar is the case
with a factory/business engaged in the production or marketing or coolers, refrigerators or air-
conditioners. They are all Seasonal products.
(b) Special Working Capital:
Special working capital is that part of the variable working capital which is meant for meeting
the special business operations such as extensive marketing campaigns, experiments with
products or methods of production, etc.
The distinction between fixed and variable working capital is of great significance particularly in
raising the funds for an enterprise. Fixed working capital should be raised in the same way as
fixed capital is procured. Variable working capital is procured out of short-term borrowings from
the bank or from the public
IMPORTANCE OR ADVANTAGE OF ADEQUATE WORKING CAPITAL
Ø Solvency of the business: Adequate working capital helps in maintaining the solvency of
the business by providing uninterrupted of production.
Ø Easy loans: Adequate working capital leads to high solvency and credit standing can
arrange loans from banks and other on easy and favorable terms.
Ø Cash Discounts: Adequate working capital also enables a concern to avail cash
discounts on the purchases and hence reduces cost.
Ø Regular Supply of Raw Material: Sufficient working capital ensures regular supply of
raw material and continuous production.
Ø 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.
Ø Ability to Face Crises: A concern can face the situation during the depression.
Ø 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.
As in organizations, working capital constitute a major portion of its resources, a thorough study
of its working capital management has been done broadly covering: Receivables Management,
Cash Management, and Inventory Management.
Target
Sampling Unit
Sampling Area
KARNAL
Sampling Size
Accounts of 3 years
Sampling Technique
Convenience Sampling
Limitations of the study
SOURCES OF INFORMATION
1. Primary Data
The personal interview with senior officials and various members of finance and accounts
department and also with other departments and collected the data.
2. Secondary Data
The secondary data is collected from the Employees Working in Company’s Finance
Department.
ANALYSIS AND
INTERPRETATION
GUPIL PRINT PACK
BALANCE SHEET as at 31.03.2019
LIABILITIES AMOUNT ASSETS AMOUNT
CAPITAL 7013989.89 FIXED ASSETS 6323084.33
SECURED
LOANS (BANK 2097371.61 SECURITIES 1583480
O/D)
UNSECURED
4051938 CLOSING ASSETS 5635750
LOANS
SUNDRY
5083616.64 SUNDRY DEBTORS 4319470.35
CREDITORS
SUNDRY SUNDRY
82280 410704.7
PAYABLES RECEIVABLES
SECURED
LOANS (BANK 185420.2 SECURITIES 1729980
O/D)
UNSECURED
2576938 CLOSING ASSETS 3984768.21
LOANS
SUNDRY
4088843.13 SUNDRY DEBTORS 3460717.04
CREDITORS
SUNDRY SUNDRY
91398 156613.13
PAYABLES RECEIVABLES
SECURED
LOANS (BANK 2916826.96 SECURITIES 1584980
O/D)
UNSECURED
3527098 INVESTMENTS 6040000
LOANS
SUNDRY
1278501 CLOSING ASSETS 4175245
CREDITORS
SUNDRY
58,368 SUNDRY DEBTORS 1254815.53
PAYABLES
SUNDRY
64820
RECEIVABLES
CASH IN HAND 271908.54
There are so many methods for analysis of financial statements used in companies.
Like-
When two or more than two years figures are compared to each other we call them
comparative size statements in order to estimate the future progress of the business,
it is necessary to look at the performance of the company. These statements show
the absolute figures and also show the change from one year to another.
To indicate the trends, these statements show the change in production, sales
and expenses.
To make the data simple and more understandable
TREND ANALYSIS
To analyze many years’ financial statements, this method is used. This indicates
the direction on movement over the long time and help in the financial statements.
Benefits-
Cash flow statements are the statements of changes in the financial position
prepared on the basis of funds defined in cash or cash equivalents. In short cash
flow statement summaries the cash inflows and outflows of the firm during a
particular period of time.
Ratio analysis is the process of the determining and presenting the relationship of
the items and group of items in the statements. Ratio can assist management in its
basic functions of forecasting, planning, coordination, control and communication.
Types of ratio-
Liquidity Ratio- they indicate the firm’s ability to meet its current obligation
out of current resources.
Current ratio = current assets / current liabilities
Quick ratio = liquid assets / current liabilities
Leverage or Capital Structure Ratio- this ratio discloses the firm’s ability to
meet the interest costs regularly and long term solvency of the firm.
Debt equity ratio = long term loans / shareholders funds or net worth
Debt to total fund ratio = long term loans / shareholder funds + long
term loan
Proprietary ratio = shareholders fund / shareholders fund + long term
loan
Activity ratio or Turnover ratio- they indicate the rapidity with which the
resources available to the concern are being used to produce sales.
Here the following techniques are being used to analysis the working
capital management of GUPIL PRINT PACK:
Ratio analysis
Trend analysis
RATIO ANALYSIS OF GUPIL PRINT PACK
1. LIQUIDITY RATIO
i. CURRENT RATIO – This ratio explains the relationship between current assets
and current liabilities of the business. The formula of calculating the ratio
is:
This ratio is used to assess the firm’s ability to meet its short term liabilities on time.
According to accounting principle , a current ratio of 2:1 is supposed to be an ideal ratio
the higher the ratio ,the better it is because , because the firm will be able to pay its current
liabilities more easily.
Year 2017
Year 2018
Current assets=7829342.33
Current liabilities=6034443.33
Year 2019
1.4
1.35
curren
t ratio
1.3
1.25
1.2
2017 2018 2019
INTERPRETATION
As we know that ideal current ratio of a firm for any firm is 2 : 1 which denotes
that the current assets of a business should at least be twice of its current liabilities
current ratio of this firm is 1.44 in yr 2017 ,1.29 in yr 2018 and 1.43 in yr 2019.
Therefore, this can be said that the short term financial position of the firm is not
up to the mark. The firm might face problem while paying its current liabilities on
time.
ii. LIQUID RATIO – This ratio explains the relationship between liquid assets and
current liabilities of the business. The formula of calculating the ratio is:
SIGNIFICANCE-
Year 2018
Liquid assets=3844574.12
Current liabilities=6034443.33
Year 2019
0.6
0.5
0.4
liquid ratio
0.3
0.2
0.1
0
2017 2018 2019
INTERPRETATION
An ideal ratio is said to be 1:1. Liquid ratio of the company is 0.49 in yr 2017, 0.63
in yr 2018, 0.65 in year 2019. As we can see liquid ratio since last 3 year is less
than one which mean the firm is not in position to pay its current liabilities to
instantly.
CASH POSITION RATIO
CPR - Cash Position Ratio is expressed as the ratio of financial assets and current
liabilities. The recommended value is between 0.2 - 0.5.
CPR -Cash Position Ratio is expressed as the ratio of financial assets and current
liabilities.
Calculation:
YEAR 2017
CPR= 0.42
YEAR 2018
CPR= 0.32
YEAR 2019
Current liabilities=7263268.25
CPR= 0.22
CPR
0.45
0.4
0.35
0.3
0.25
0.2 CPR
0.15
0.1
0.05
0
2017 2018 2019
INTERPRETATION
The recommended ratio is between 0.2 - 0.5. CPR of firm is 0.42 in yr 2017, 0.32
in yr 2018 and 0.22 in 2019 .Therefore CPR of firm is satisfactory. This mean firm
is able to pay its current liabilities with only cash and cash equivalents.
2. TURNOVER RATIO
AVERAGE INVENTORY =
OPENING STOCK+CLOSING STOCK /2
YEAR 2017
YEAR 2018
YEAR 2019
4.5
3.5
2.5
2 INVENTORY
TURNOVER
1.5
RATIO
1
0.5
0
2017 2018 2019
INTERPRETATION
Inventory of 2.38 in year 2017, 3.89 in year 2018 and 4.72 in years 2019
implies that on an average the money blocked in inventory gets converted
into sales within 153 days, 94 days and 77 days respectively. Higher the
ratio, lesser will be the days and vice versa.
ii. WORKING CAPITAL RATIO
The working capital ratio is a measure of liquidity, revealing whether
a business can pay its obligations. The ratio is the relative proportion
of an entity's current assets to its current liabilities, and shows the
ability of a business to pay for its current liabilities with its current
assets.
FORMULAE=NET SALES/ WORKING CAPITAL
WORKING CAPITAL= CURRENT ASSETS – CURRENT
LIABILITIES
YEAR 2017
WORKING CAPITAL RATIO – 7.52
YEAR 2018
WORKING CAPITAL RATIO – 10.17
YEAR 2019
WORKING CAPITAL RATIO –7.97
WORKING CAPITAL RATIO
12
10
6
WORKING
4 CAPITAL
RATIO
0
2017 201 2019
INTERPRETATION
This ratio indicates that how efficiency working capital has been utilized
in making sales. In other words it shows the number of times working
capital has been rotated in producing sales such as 7.52 times in 2017,
10.17 in 2018 and 7.97 in 2019. A high working capital turnover ratio
shows efficient use of working capital and quick turnover of current
assets.
STOCK
BANK
TREND ANALYSIS OF LIABILITIES SIDE
LOAN
LOAN
LIABILITIES
PAYABLES
FINDINGS AND
OBSERVATION
FINDINGS AND OBSERVATION
1. Gupil print pack does not occupy the good position in the printing
industry.
2. Net sales of the firm are fluctuating during the past 3 years.
6. The firm is able to pay its current liabilities with its cash and cash
In gupil print pack collection period is very high which may result in
bad debt for company.
Gupil print pack need to reduce payment period so that company can
pay debts in time and creditworthiness is not spoiled.
No purchase should be made till the old stock is disposed off.
In order to increase the profitability of the companies it is suggested to
control the cost of goods sold and operating expenses.
The company should try to adopt cost reduction to get over this critical
situation.
The company should try to improve working capital turnover ratio by
efficient utilization of working capital.
The company should try to use more proprietors fund in current assets,
so that they can improve current assets to proprietors fund.
By using proprietors fund properly, the company can increase return on
capital employed.
LEARNINGS
LEARNING
Internship has helped a lot to understand the practical side of job, which is different from
the textbook theories. It has also helped me to improve my communication skills.
Customer handling was one of the important learning that I gained from my internship.
From the customer point of view, it is easy. But not so when in the position of a staff or
employee. Was also able to maintain a good relationship with the employees on and off
the shop floor. I did my internship on ‘working capital management’. It helped me to
know how the analysis is being done by comparing the Balance Sheets of 3 subsequent
years.
During the period of internship, I was supposed to thoroughly go through the financial
statements of the company and understand the aspects and concepts involved in it. In the
meanwhile, I also contributed in the sales department and helped in the billing session,
which gave me a very different experience.
Having done my internship in the finance sector my interest for it has increased which
will help me in my coming semesters.
It is very well said that “Finance always need a theory backup”. One needs to really know
what finance is all about and how much it is important for the company’s smooth
functioning.
LIMITATIONS
LIMITATION
The study and analysis is based on the figures available in the balance
sheet of the organization.
Only some figures which are used by different departments will be made
available as they are confidential and cannot be provided by the
organization.
The availability of time was limited for the analysis of the huge project.
BIBLOGRAPHY
https://www.investopedia.com/terms/w/workingcapitalmanagement.asp
https://www.edupristine.com/blog/working-capital-management
https://www.businessmanagementideas.com/working-capital/working-capital-
meaning-classification-and-factors-firms/10525
http://www.yourarticlelibrary.com/economics/capital-formation/concept-of-
working-capital-gross-and-net-working-capital-with-examples/41060