A study on working capital management of

GUPIL PRINT PACK

Submitted to
CHITKARA BUSINESS SCHOOL
In partial fulfillment of the requirements for the award of degree of
Master of Business Administration
Submitted by: Supervised by:

KHUSHBOO DR DEVESH BATHLA

Roll.no.1920984506

CHITKARA BUSINESS SCHOOL

CHITKARA UNIVERSITY

2019-2021

i
 DECLARATION

I, " KHUSHBOO ”, hereby declare that the work

presented herein is genuine work done originally by me and has
not been published or submitted elsewhere. Any literature, data
or work done by others and cited in the report has been given
due acknowledgement and listed in the reference section.

KHUSHBOO

ROLL N0-192984506

Date: 31-12-2019

ii
 TO WHOM SO EVER IT MAY CONCERN

This is to certify that the project titled “A STUDY ON

WORKING CAPITAL MANAGEMENT OF GUPIL PRINT
PACK” carried out by Ms. KHUSHBOO, D/o MR VIKAS
NAGPAL has been accomplished under my guidance &
supervisions a duly registered MBA student of Chitkara
University. This project is being submitted by her in the partial
fulfillment of the requirements for the award of the Master of
Business Administration from Chitkara University.

Her dissertation represents her original work and is worthy of

consideration for the award of the degree of Master of Business
Administration.

MR. Parmod Arora

GUPIL PRINT PACK

iii
 ACKNOWLEDGEMENT
It is a matter of great satisfaction and pleasure to present this report on Working Capital
Management of GUPIL PRINT PACK. I take this opportunity to owe my thanks to all those
involved in my training.

Firstly I would like to thank GUPIL PRINT PACK for giving the opportunity to complete my
project in the organization. I put on record my sincere thanks to my college CHITKARA
BUSINESS SCHOOL, CHITKARA UNIVERSITY, PUNJAB for giving me such an opportunity.
I am extremely grateful to MR PARMOD ARORA for the encouragement, discussions and
critical assessment of the project.

It was a good experience for me to work with GUPIL PRINT PACK, a pioneer in the printing
industry. I am greatly obliged MR PARMOD ARORA my industry guide, MRS UMA ARORA
who have shared their expertise and knowledge with me without which the completion of project
would not have been possible.

I express my gratitude towards staff of GUPIL PRINT PACK, those who have helped me directly
or indirectly in completing the training.

iv
 EXECUTIVE SUMMARY

GUPIL PRINT PACK is a leading printing factory in karnal.

The major purpose of the study is to analyze the working capital management of Gupil print pack
by considering the annual report of three years. The financial statement explains the trend analyzes
and the ratio analyzes along with the comparative balance statements.

Working capital is one of the most difficult financial concepts to understand for the small-business
owner. In fact, the term means a lot of different things to a lot of different people. By definition,
working capital is the amount by which current assets exceed current liabilities. It involves the
relationship between a firm’s short term assets and its short term liabilities.

Funds needed for short term needs for the purpose like payment of wages and other day to day
expenses are known as working capital. The goal of working capital management is to ensure that
the firm is able to continue its operation and that it has sufficient cash flow to satisfy both maturing
short term debt and upcoming operational expenses. Working capital is primarily concerned with
inventories management, receivable management, cash management and payable management.

The study involved few personal interviews with the financial heads of the company and through
observation methods. Company annual reports were being evaluated and working capital
management was being analyzed from it. For the purpose of the study convenience sampling
technique has been used.

The study has shown that the working capital of the company has improved as the current asset is
more than that of the current liabilities.

v
 TABLE OF CONTENT

S. no Contents Page no.

1 Executive Summary v
2 Introduction To Organization 1-7
3 Functioning of department 8-11
4 Objective of different 12-14
department
5 Swot analysis of organization 15-17
6 Introduction to problem area 18-35
7 Need and objective 36-37
8 Research methodology 38-40
9 Analysis and interpretation 41-65
10 Findings and observation 66-67
11 Suggestion 68-69
12 Learning 70-71
13 Limitation 72-73
14 Reference 74

vi
 LIST OF TABES

s. no Contents Page no

1 Strength of organization 16

2 Weakness of organization 16

3 Opportunities of organization 17

4 Threats of organization 17

5 Need and objectives 37

6 Balance sheet of GPP as on 43

31st march 2019
7 Balance sheet of GPP as on 44
31st march 2018
8 Balance sheet of GPP as on 45
31st march 2017
9 Trend analysis of asset side 64

10 Trend analysis of liabilities side 65

vii
 LIST OF FIGURES

s. no Contents Page no.

1 Organization chart 5

2 Operating 28
manufacture cycle
3 Current ratio bar 53
graph
4 Liquid ratio bar 56
graph
5 Cash position ratio 58
bar graph
6 Inventory turnover 61
ratio bar graph
7 Working capital 63
ratio bar graph

viii
PART -1

1
INTRODUCTION
TO
THE
ORGANISATION

2
3
 INTRODUCTION TO THE ORGANISATION

GUPIL PRINT 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.

4
 YEAR OF ESTABLISHMENT

23/11/1992

 TOTAL INVESTMENT

Rs.70, 13,990

 ANNUAL TURNOVER

Rs. 2, 51, 84,000

 NO. OF EMPLOYEES

12

5
 ORGANIZATIONAL CHART

PROPRIETER

HUMAN MARKET AND

PRODUCTION FINANCE PURCHASE
RESOURCE SALES

PRODUCTION FINANCE MARKETING

MANAGER SUPERVISOR MANAGER

TEAM LEADER ACCOUNTANT SUPERVISOR

SUBORDINATES

6
 PRODUCTS AND SERVICES

 Multicolor Printing & Packaging,

 Fancy Sweet Boxes,
 Non-Wooven Multicolour Bags,
 Corrugated Boxes,
 Paper,
 Mill Board

7
 MARKET –
Domestic market is targeted few examples are
 Liberty shoes
 NCERT
 Carus Laboratories
 zee Laboratories
 Carlsberg
 Oswal Pumps
 Chetak Cookware
 Amazon India

 TARGET CUSTOMER BASE

 E-commerce suppliers,
 sweet boxes makers,
 food delivery startups,
 Submersible pump Manufacturers, etc.

 CERTIFICATES & AWARDS

Renowned Member of Haryana Chamber of Commerce and Industry (HCCI)

8
FUNCTIONING
OF
DEPARTMENTS

9
 FUNCTIONING OF THE DEPARTMENTS

There are total five departments in the firm, those are

 Purchase department
 Human resource department
 Production department
 Finance department
 Marketing and sales

 FUNCTIONING OF PURCHASE DEPARTMENT

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.

10
  FUNCTIONING OF HUMAN RESOURCE DEPARTMENT

Hr head is hiring and recruiting the prospective employees as per the need
of the firm.

They also provide them training too.

 FUNTIONING OF PRODUCTION DEPARTMENT

Production Department is the department which directly involves in

manufacturing products. Examples are the machining, finishing, and assembling
departments Production is the functional area responsible for turning inputs into
finished outputs through a series of production processes. The Production Manager is
responsible for making sure that raw materials are provided and made into finished
goods effectively. He must make sure that work is carried out smoothly, and must
supervise procedures for making work more efficient and more enjoyable.

 FUNCTIONING OF FINANCE DEPARTMENT

Following functions are performed by the finance department

 Bookkeeping and payables/receivables

 Financial reporting and control
 Tax and compliances
 Treasury and working capital management
 Capital management, etc

11
 FUNCTIONING OF MARKETING AND SALES
DEPARTMENT

Followings are the function

 Product, Pricing and Distribution Planning

 Sales Goal-Setting
 Customer Service and Sales

12
OBJECTIVES
OF
RESPECTIVE
DEPARTMENT

13
OBJECTIVES OF THE DIFFERENT DEPARTMENTS OF
THE FIRM
 PURCHASE DEPARTMENT
1. To arrange the supply of material, spare parts or semi finished goods
required by the organization to produce the desired products.
2. To procure all necessary material needed for production or daily
operation of the firm.

 FINANCE DEPARTMENT
1. Cash flow management
2. Develop an accurate budget
3. Procure funds from appropriate resource
4. Pay off debt
5. Record al financial transaction
6. Maintain all statutory financial record
7. Get account audited and certified by the statutory auditor.
 PRODUCTION DEPARTMENT
1. Produce goods of right quality and quantity at right time and right
manufacturing cost.
2. To make the optimum utilization of various input resources to achieve
its objective.
 HUMAN RESOURCE DEPARMENT
1. Successfully utilizing the human resource to achieve specific and
organizational goal.
2. Hiring prospective employees

14
  MARKETING AND SALES DEPARTMENT
1. Revenue
2. Profit margin
3. Customer retention
4. Customer acquisition
5. Cross sell and up sell
6. Leads
7. Cycle time

15
SWOT ANALYSIS OF GUPIL PRINT PACK

16
 STRENGTH
 Low cost
 Available for all
 Positive market growth
 Efficiency of manufacturing
process
 Easy to build custom model
 High product quality
 Time efficient
 Multi color print

WEAKNESS
 Expensive machines
 Printing hours are longer
 Create and solve problem
yourself
 Material selection limitation
 Required controlled
environment

17
 OPPORTUNITIES

 Customization of existing design

 Active material development
 Smart material
 Introduction of advanced machine
like high speed and resolution,
multi color print, printing of micro
details
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

18
PART- 2

19
INTRODUCTION
TO THE
PROBLEM AREA

20
 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.

21
  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

22
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.

Other types of assets are equally important i.e. Current Assets.

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.

23
 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.

 Length of Production Cycle:

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.

 Size and Growth of Business:

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

24
certain limit, the working capital requirements may be adversely affected by the
increasing size.

 Business I Trade Cycles:

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.

 Rate of Stock Turnover:

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.

25
  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.

 Earning Capacity and Dividend Policy:

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.

 Price Level Changes:

Changes in the price level also affect the working capital requirements. Generally rise
in prices leads to increase in working capital.

26
 WORKING CAPITAL CYCLE

Working capital cycle indicates the length of time between firms’s paying for
materials entering into stock and receiving the cash from sale of finished goods. In a
manufacturing firm, the duration of time required to complete the sequence of events
is called operating cycle.

In case of a manufacturing company, the operating cycle is the length of time

necessary to complete the following cycle of events –

1. Conversion of cash into raw materials

2. Conversion of raw materials into work-in-progress
3. Conversion of work-in-progress into finished goods
4. Conversion of finished goods into accounts receivables
5. Conversion of accounts receivable into cash

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.

27
Working capital cycle can be expressed as

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.

28
 OPERATING CYCLE OF MANUFACTURING BUSINESS

Realization Sales

Accounts Receivable

Cash Finishe Goods

Purchases
Production

Production

Raw Materials Work-in-progress

29
ON THE BASIS OF CONCEPT:

1. GROSS WORKING CAPITAL

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.

30
2. NET WORKING CAPITAL
The net working capital is an accounting concept which represents the excess of
current assets over current liabilities. Current assets consist of items such as cash, bank
balance, stock, debtors, bills receivables, etc. and current liabilities include items such
as bills payables, creditors, etc. Excess of current assets over current liabilities, thus,
indicates the liquid position of an enterprise.

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.

Thus, in the form of a simple formula:

Net Working Capital = Current Assets-Current Liabilities

ON THE BASIS OF TIME

(I) PERMANENT (OR FIXED) WORKING CAPITAL:

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

31
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.

Characteristics of permanent working capital:

(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.

(a) Regular Working Capital:

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.

32
(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.

33
(II) VARIABLE WORKING CAPITAL:

Variable working capital requires changes with the increase or decrease in the volume
of production or business.

Variable working capital can be classified as:

(a) Seasonal Working Capital:

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

34
 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 Goodwill: Sufficient amount of working capital enables a firm to make

prompt payments and makes and maintain the goodwill.

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 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.

Ø Ability to Face Crises: A concern can face the situation during the depression.

35
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.

Ø High Morale: Adequate working capital brings an environment of securities,

confidence, high morale which results in overall efficiency in a business.

36
 NEED
AND
OBJECTIVE

37
NEED AND OBJECTIVE OF STUDY

 To know about the optimum

maintainable cash balance.
 To study organization working capital
finance mix
 To find current assets and liabilities of
GUPIL PRINT PACK
 To access the working capital
requirement of the organization.
 To know about the length of operating
cycle.
 To study the financial position of
GUPIL PRINT PACK.
 To study the earning and payment of
organization.

38
 RESEARCH
METHODOLOGY

39
 RESEARCH METHODOLOGY

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

 Working capital of GUPIL PRINT APCK

Sampling Unit

 GUPIL PRINT PACK

Sampling Area

 KARNAL

Sampling Size

 Accounts of 3 years

Sampling Technique

 Convenience Sampling

40
Limitations of the study

 Department heads were busy so time for interaction was less.

 The entire financial position of the company cannot be disclosed.
 Company provides only secondary data, so certain type of bias is in study.
 Majority of the raw materials is purchased by the main head office. So more
detailed information cannot be received about these.

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.

41
 ANALYSIS AND
INTERPRETATION

42
BALANCE SHEET
OF
GUPIL PRINT PACK

43
 GUPIL PRINT PACK
BALANCE SHEET as on 31.03.2018
AMOUNT in AMOUNT in
LIABILITIES ASSETS
Rs Rs
CAPITAL 6469711.77 FIXED ASSETS 5521770.77

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

CASH IN HAND 217321.1

CASH AT BANK 9922.85

TOTAL 15081093.1 TOTAL 15081093.1

44
 GUPIL PRINT PACK
BALANCE SHEET as on 31.03.2017
AMOUNT AMOUNT in
LIABILITIES ASSETS
in Rs Rs
CAPITAL 5956264.09 FIXED ASSETS 5971366.13

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

CASH AT BANK 9922.85

TOTAL 13937058.05 TOTAL 13937058.05

45
 ANALYSIS AND INTERPRETATION

METHODS OF WORKING CAPITAL ANALYSIS

There are so many methods for analysis of financial statements used in companies.
Like-

 Comparative size statement

 Trend analysis
 Cash flow statement
 Ratio analysis etc

A detail description of these methods is as follows-

COMPARATIVE SIZE STATEMENT

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.

Benefits of this method to the company-

 To indicate the trends, these statements show the change in production, sales
and expenses.
 To make the data simple and more understandable

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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.

Procedure for calculating trends-

1. Previous year is taken as the base year

2. Figures of the base year are taken as 100
3. Trend % is calculated in relation to base year.

BENEFITS-

 It is beneficial to find out the long run changes

 It is helpful in future forecasting.

CASH FLOW STATEMENT

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.

BENEFITS FOR THE COMPANY-

 To prepare the cash budget

 To compare the cash budgets
 To show the position of the cash and cash equivalents.

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RATIO ANALYSIS

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.

BENEFITS TO THE COMPANY-

 Helpful in analysis of financial statements

 Helpful in comparative study
 Helpful in locating the weak spots of the company
 Helpful in forecasting
 Estimate about the trend of the business
 Fixation of ideal standards
 Effective control
 Study of financial soundness

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

Liquid assets = current assets – stock – prepaid expenses

 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

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  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.

 Stock turnover ratio = cost of goods sold / average stock

Cost of goods sold = net sales / gross profit,
Average stock = opening stock + closing stock / 2
 Debtors turnover ratio = net credit sales / average debtors + average
B/R
 Average collection period = debtors+ B/R Credit sales per day
Credit sales per day = net credit sales of the year /365
 Creditors turnover ratio = net credit purchases / average creditors +
avg. B/P
 Average payment period = creditors + B/P / credit purchase per day
 Fixed assets turnover ratio = cost of goods sold / net fixed assets
Net fixed assets = fixed assets – depreciation
 Working capital turnover ratio = net sales / working capital
Working capital = current assets – current liabilities

 Profitability ratios or Income ratios- the main objective of every business

concern is to earn profits. A business must be able to earn adequate profit in
relation to the risk and capital invested in it.

 Gross profit ratio = gross profit / net sales *100

Net sales = sales – sales return
 Net profit ratio = net profit / net sales * 100
Operating net profit = operating net profit / net sales * 100 or gross
profit – operating expenses

49
  Operating ratio = cost of goods sold + operating expenses / net sales *
100
Cost of goods sold = net sales – gross profit
Operating expenses = office and administration expenses + selling &
distribution expenses + discount + bad debts + interest on short term
loans
 Earnings per share(EPS) = net profit – dividend on preference share /
no. of equity shares
 Dividend per share (DPS) = dividend paid to equity shareholders / no.
of equity shares * 100
 Dividend payout ratio (DP) = DPS /EPS * 100

Here the following techniques are being used to analysis the working
capital management of GUPIL PRINT PACK:

 Ratio analysis
 Trend analysis

50
RATIO ANALYSIS OF GUPIL PRINT PACK

1. LIQUIDITY RATIO

A liquidity ratio is a financial ratio that indicates whether a company's current assets will be
sufficient to meet the company's obligations when they become due.

i. CURRENT RATIO – This ratio explains the relationship between current assets
and current liabilities of the business. The formula of calculating the ratio is:

CURRENT RATIO = CURRENT ASSETS

--------------------------
CURRENT LIABILITIES

CURRENT ASSETS = cash in hand + cash at bank + investments + bill

receivables + debtors + stock

CURRENT LIABILITIES = bank o/d + bills payables + creditors + provision

for taxation + proposed dividend + unclaimed dividend + outstanding
expenses + loan payables within one year

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 SIGNIFICANCE-

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

Current assets =Rs 6380171.92

Current liabilities= Rs 4423695.96

Current ratio= 1.44:1

Year 2018

Current assets= Rs 7829342.33

Current liabilities= Rs 6034443.33

Current ratio = 1.29:1

Year 2019

Current assets = Rs 10422631.452

Current liabilities = Rs 7263268.25

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 Current ratios= 1.43:1

1.5
CURRENT RATIO
1.45

1.4

1.35
current
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.

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 ii. LIQUID RATIO – This ratio explains the relationship between liquid assets and
current liabilities of the business. The formula of calculating the ratio is:

LIQUID RATIO = LIQUID ASSETS

--------------------------
CURRENT LIABILITIES

LIQUID ASSETS = current assets –closing stock

CURRENT LIABILITIES = bank o/d + bills payables + creditors + provision

for taxation + proposed dividend + unclaimed dividend + outstanding
expenses + loan payables within one year

SIGNIFICANCE-

An ideal liquid ratio is said to be 1: 1. If it is more it is considered to be better. The idea is

that for every rupee of current liabilities, there should be at least one rupee of
liquid assets. This ratio is better test of short term financial position of the
company than the current ratio, as it considers only those assets which and readily
converted into cash.

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Year 2017

Liquid assets = Rs 2204926.92

Current liabilities= Rs 4423695.96

Liquid ratio= 0.49:1

Year 2018

Liquid assets= Rs 3844574.12

Current liabilities= Rs 6034443.33

Liquid ratio = 0.63:1

Year 2019

Liquid assets = Rs 4786881.452

Current liabilities = Rs 7263268.25

Liquid ratios= 0.65:1

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 liquid ratio
0.7

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.

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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:

CPR = Financial Assets / Current Liabilities

YEAR 2017

Financial assets= Rs 1866811.39

Current liabilities= Rs 4423695.96

CPR= 0.42

YEAR 2018

Financial assets= Rs 1957223.95

Current liabilities= 6034443.33

CPR= 0.32

YEAR 2019

Financial assets= Rs 1640186.752

Current liabilities= Rs 7263268.25

CPR= 0.22

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 CPR
0.45

0.4

0.35

0.3

0.25
CPR
0.2

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.

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 2. TURNOVER RATIO

A turnover ratio represents the amount of assets or liabilities that a company

replaces in relation to its sales. The concept is useful for determining the
efficiency with which a business utilizes its assets. In most cases, a high asset
turnover ratio is considered good, since it implies that receivables are collected
quickly, fixed assets are heavily utilized, and little excess inventory is kept on
hand. This implies a minimal need for invested funds, and therefore a high return
on investment .

i. INVENTORY TURNOVER RATIO

The inventory turnover ratio is an efficiency ratio that shows how
effectively inventory is managed by comparing cost of goods sold with
average inventory for a period. This measures how many times average
inventory is “turned” or sold during a period.

FORMULAE: COST OF GOOD SOLD/ AVG

INVENTORY

COST OF GOOD SOLD = net sales –gross profit

AVERAGE INVENTORY =
OPENING STOCK+CLOSING STOCK /2

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SIGNIFICANCE: This ratio indicates whether stock has been
efficiently used or not it shows the speed with the stock is rotated into sales
or the number of times the stock is turned into sales during the year. The
higher the ratio the better it is, since it indicates that stock is selling
quickly. In a business where stock turnover ratio is high, goods can be sold
at a margin of profit and the profitability may be high.

CALCULATION OD INVENTORY TURNOVER RATIO

YEAR 2017

COST OF GOOD SOLD = Rs 12142929.17

AVERAGE INVENTORY= Rs 5171025.585
RATIO= 2.348 TIMES

YEAR 2018

COST OF GOOD SOLD = Rs 15904019.12

AVERAGE INVENTORY= Rs 408000.605
RATIO= 3.89 TIMES

YEAR 2019

COST OF GOOD SOLD = Rs 22717653.1

AVERAGE INVENTORY= Rs 4810259.105
RATIO= 4.72 TIMES

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 INVENTORY TURNOVER RATIO
5

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.

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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

SIGNIFICANCE-: a working capital turnover ratio shows efficient

use of working capital and quick turnover of current assets like stock and
debtor.
A working capital ratio of less than 10 is a strong indicator that there
will be liquidity problems in the future, while a ratio in the vicinity of
20 is considered to represent good short-term liquidity.

YEAR 2017
WORKING CAPITAL RATIO – 7.52

YEAR 2018
WORKING CAPITAL RATIO – 10.17

YEAR 2019
WORKING CAPITAL RATIO –7.97

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 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.

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 TREND ANALYSIS OF GUPIL PRINT PACK

TREND ANALYSIS OFASSET SIDE

ASSETS YR 2018 YR 2019 BASE(100) TREND %

In Rs In Rs

FIXED ASSETS 5521770.77 6323084.33 100 114.5%

SECURITIES 1729980 1583480 100 91.53%

CLOSING 3984768.21 5635750 100 141.4%

STOCK

DEBTORS 3460717.04 4319470.35 100 124.81%

RECEIVABLES 156613.13 410704.70 100 267.82%

CASH AND 227243.95 56706.752 100 24.95%

BANK

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 TREND ANALYSIS OF LIABILITIES SIDE

LIABILITIES YR 2018 YR 2019 BASE(100) TREND %

In Rs In Rs

CAPITAL 6469711.77 7013983.89 100 108.41%

SECURED 1854202.20 2097371.61 100 113.11%

LOAN

UNSECURED 2576938 4051938 100 157.23%

LOAN

CURRENT 4088843.13 5083616.64 100 124.32%

LIABILITIES

SUNDRY 91398 822280 100 90.03%

PAYABLES

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FINDINGS AND
OBSERVATION

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 FINDINGS AND OBSERVATION

1. Gupil print pack occupy the good position in the printing industry.
2. Net sales of the firm are fluctuating during the past 3 years.
3. Number of debtors has been increased over the time.
4. Short term financial position of the firm is not up to the mark.
5. The firm is able to pay its current liabilities with its cash and cash
equivalents but not instantly.

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SUGGESTION

68
 SUGGESTION

 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.

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LEARNINGS

70
 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.

71
LIMITATIONS

72
 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.

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 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

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