Professional Documents
Culture Documents
6TH Sem Projeck Report Jantu
6TH Sem Projeck Report Jantu
“WORKING CAPITAL”
BY
(KARAN SAIKIA)
(G-172100226)
ACKNOWLEDGEMENT
1
This project report is a result of endless effort & immense degree of toil by many
great minds.
I would like to thank all those people who graciously helped me by sharing their
valuable time, experience & knowledge Mr. Mukul Chinchalkar who have
thank the above mentioned persons for their continuous support & guidance
during the project, with out their help my project would have been a distant
dream.
I would like to dedicate this work to my revered institute Doon College of Agri.
Science & Technology where I am getting the shape of future business manager.
Management) D.C.A.S.T for their guidance on the ground of which I have acquired
who financed this project and have been a moral support to me during this project.
2
I MR KARAN SAIKIA hereby declare that the term paper entitled
3
1
5 to 14
Introduction
2
Introduction of topic 15 to 38
3
38
Objectives of study
4
40 to 62
Research methodology
5
46 to 62
Data analysis
6
63
Finding
7
Suggestion 64
8
Limitation of the study 65
9
Conclusion
10
Bibliography 66 to 67
11
69
Annexure
4
INTRODUCTION
HISTORY
The UEF
5
The United Engineering Foundation Inc. (UEF) is the successor organization to the
United Engineering Society (UES) which was founded in 1904 with the generous
The members of the UEF are the American Institute of Chemical Engineers (AIChE),
VISION: To advance the engineering arts and sciences for the welfare of humanity.
MISSION: To support engineering and education by, among other means, making grants.
The original objective of the UES was to provide a united home for the major engineering
societies of the day. The Engineering Societies Building at 29 West 39th Street in New
York City, the first such home, was completed in 1906 and was followed by the United
Engineering Center at 345 E. 47th Street in 1960. In 1998, the societies (ASCE , AIME,
basis until 1915 when the Engineering Societies Library (ESL) was formed. ESL grew over
60,000 requests for service and information per year, and delivering more than one million
photocopy pages per year. ESL was proud of its service to engineering, but began to realize
in the early 1990’s that even greater service could be provided in the future by a merger
with one or more of the major US technical libraries. The search for such a partner led to
6
Linda Hall Library of Kansas City — a research library of science, engineering, and
technology equal in size to ESL and with far greater resources. The two collections were
merged in Kansas City and a modernized information center run jointly by ESL and LHL
was housed in the United Engineering Center until its closure in 1998. All services
Historical Timeline
Having recently been awarded a commendation from the 100 Year Association, the United
Engineering Foundation has a long and treasured history of enhancing the engineering
profession. Learn more about its past through this timeline feature.
The United Engineering Foundation Inc. (UEF) is the successor organization to the
United Engineering Society (UES) which was founded in 1904 with the generous
7
The members of the UEF are the American Institute of Chemical Engineers (AIChE),
VISION: To advance the engineering arts and sciences for the welfare of humanity.
MISSION: To support engineering and education by, among other means, making grants.
The original objective of the UES was to provide a united home for the major engineering
societies of the day. The Engineering Societies Building at 29 West 39th Street in New
York City, the first such home, was completed in 1906 and was followed by the United
Engineering Center at 345 E. 47th Street in 1960. In 1998, the societies (ASCE , AIME,
basis until 1915 when the Engineering Societies Library (ESL) was formed. ESL grew over
60,000 requests for service and information per year, and delivering more than one million
photocopy pages per year. ESL was proud of its service to engineering, but began to realize
in the early 1990’s that even greater service could be provided in the future by a merger
with one or more of the major US technical libraries. The search for such a partner led to
Linda Hall Library of Kansas City — a research library of science, engineering, and
technology equal in size to ESL and with far greater resources. The two collections were
merged in Kansas City and a modernized information center run jointly by ESL and LHL
8
was housed in the United
United Engineering is home to state of the art CNC plasma cutting equipment. We are able
to satisfy all your cutting requirements with unbeatable accuracy and efficiency. From
large scale commercial cutting to a custom BBQ plate for the backyard deck, no job is too
9
As part of our service United Engineering is able to offer trade-qualified staff for all
site works. Our team includes Fabricators, Welders, Fitters and a range of ancillary
staff as required. This means better quality work and more knowledge on site. Our
reliable mobile welding service happily complete large and small jobs.
United Engineering offer wide variety of different milling operations and machines,
on scales from small individual parts to large, heavy-duty milling operations. We also
Labour hire
labour hire for short term, long term or seasonal jobs with your choice of a variety of
equipment. This means you hire our contractors to work on your site, under your
direction. We take the sting out of engaging Fabricators, Welders, Fitters, Assistants
and Truck Drivers. With a United Engineering labour hire solution, you can be
assured you will be getting top notch staff, available at short notice.
We have a wide range of steel available for purchase, including mild, stainless and
United Engineering is a full-service fabrication and machine shop and has been
servicing the industry since 1921. Key to our success is our experience, the size and
versatility of our operations, and our direct access to water that allows for the
10
facilities and the tools to build and ship large-scale fabrication projects via barge
anywhere.
Authority, we utilize the runway outside of business hours to move our fabrications to
barge loading facilities on Patricia Bay. Our 7,500 square foot Victoria, BC operation
on the upper harbour includes access to Point Hope Maritime’s docking facility and
marine turntable. Once loaded, the Salish Sea and Pacific Ocean are the marine
highways. Our clients value our horsepower, breadth of expertise and trusted
projects represent a significant part of our operation today, we never forget where we
came from and take great pride in supporting the business needs of our local clientele.
world in which everyone can freely share in the sum of all knowledge. It is supported
by the Wikimedia Foundation and based on a model of openly editable content. The
collaborative websites, from the Hawaiian word wiki, meaning "quick") and
encyclopedia. Wikipedia's articles provide links designed to guide the user to related
without pay. Anyone with internet access can write and make changes to Wikipedia
vandalism.
11
Since its creation on January 15, 2001, Wikipedia has grown into the world's largest
currently has more than 54 million articles in more than 300 languages, including
6,147,486 articles in English with 127,156 active contributors in the past month.
The fundamental principles by which Wikipedia operates are the five pillars. The
Wikipedia community has developed many policies and guidelines to improve the
contributing.
Anyone is allowed to add or edit words, references, images and other media here.
What is contributed is more important than who contributes it. To remain, the content
must be free of copyright restrictions and contentious material about living people. It
must fit within Wikipedia's policies, including being verifiable against a published
reliable source. Editors' opinions and beliefs and unreviewed research will not remain.
Contributions cannot damage Wikipedia because the software allows easy reversal of
mistakes and many experienced editors are watching to ensure that edits are
improvements. Begin by simply clicking the Edit button at the top of any editable
page!
important ways. It is continually created and updated, with articles on new events
appearing within minutes, rather than months or years. Because everybody can help
improve it, Wikipedia has become more comprehensive than any other encyclopedia.
misinformation and other errors. Over time, articles tend to become more
comprehensive and balanced. However, because anyone can click "edit" at any time
and add content, any article may contain undetected misinformation, errors, or
12
vandalism. Readers who are aware of this can obtain valid information, avoid recently
article. Engineering Center until its closure in 1998. All services previously available
Company Details:
Mobile: 09826077201
Email: solidconvey@indiatimes.com
We are specialists and provide expertise and have the appropriate equipment to
United Engineering can deliver a strategy to help your business optimise its
equipment through regular maintenance. Our trade-qualified staff are able to install,
13
troubleshoot and repair industrial machinery in a range of settings.
Our team of highly trained, experienced, specialised welders can meet all specified
job requirements. We can fabricate and install custom industrial components. Our
CNC plasma and flame profile cutting of mild & stainless steels
14
INTRODUCTION
OF
TOPIC
WORKING CAPITAL
15
Working capital management is concerned with the problems arise in
attempting to manage the current assets, the current liabilities and the inter
relationship that exist between them. The term current assets refers to those
assets which in ordinary course of business can be, or, will be, turned in to cash
disrupting the operation of the firm. The major current assets are cash,
of business, within a year, out of the current assets or earnings of the concern.
The basic current liabilities are account payable, bill payable, bank over-draft,
The goal of working capital management is to manage the firm’s current assets
and current liabilities in such way that the satisfactory level of working capital
is mentioned. The current should be large enough to cover its current liabilities
16
information search costs, or production and technology constraints. The unit
cost of production would not vary with the quantity produced. Borrowing and
lending rates shall be same. Capital, labour, and product market shall be
perfectly competitive and would reflect all available information, thus in such
quality and availability of own products and those of suppliers. There are
costly to obtain and is not equally distributed. There are spreads between the
borrowings and lending rates for investments and financing's of equal risks.
Similarly each organization is faced with its own limits on the production
capacity and technologies it can employ there are fixed as well as variable
costs associated with production goods. In other words, the markets in which
17
inventory, current assets. Similarly an organization may be faced with an
uncertainty regarding the level of its future cash flows and insufficient amount
of cash may incur substantial costs. This may necessitate the holding of reserve
The net working capital of business is its current assets less its current liabilities.
Work in Progress
Finished Goods
Trade Debtors
Prepayments
Cash Balances
Trade Creditors
Accruals
Taxation Payable
18
Dividends Payable
Every business needs adequate liquid resources in order to maintain day to day cash
flows. It needs enough cash to by wages and salaries as they fall due and to pay
creditors if it is to keep its workforce and ensure its supplies. Maintaining adequate
business in the long term as well. Even a profitable business may fail if it does not
have adequate cash flows to meet its liabilities as tyhey fall a due. Therefore when
business make investment decisions they must not only consider the financial outlay
involved with acquiring the new machine or the new building etc, but must also take
account of the additional current assets that are usually involved with any expansion
of activity .
Increased sales usually mean that the level of debtor will increase. A general
increase in the firm’s scales of operation tends to imply a need for greater level of
cash.
The need for working capital gross or current assets cannot be over emphasized.
19
As already observed, the objective of financial decision making is to maximize
profits can be earned will naturally depend upon the magnitude of the sales
among other things but sales can not convert into cash. There is a need for
working capital in the form of current assets to deal with the problem arising
is refers to operating or cash cycle. If the company has certain amount of cash,
it will be required for purchasing the raw material may be available on credit
basis. Then the company has to spend some amount for labour and factory
finished goods. These finished goods convert in to sales on credit basis in the
form of sundry debtors. Sundry debtors are converting into cash after expiry of
credit period. Thus some amount of cash is blocked in raw materials, WIP,
finished goods, and sundry debtors and day to day cash requirements. However
some part of current assets may be financed by the current liabilities also. The
amount required to be invested in this current assets is always higher than the
funds available from current liabilities. This is the precise reason why the needs
20
Type of working capital
The operating cycle creates the need for current assets (working capital).
However the need does not come to an end after the cycle is completed to
The need for current assets arises, as already observed, because of the cash
nece)ssary on continues and uninterrupted basis. For all practical purpose, this
requirement will have to be met permanent as with other fixed assets. This
Any amount over and above the permanent level of working capital is
21
Determinants of working capital The amount of working capital is depends
1. 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 that too on cash basis. As such, no founds are
blocked in piling inventories and also no funds are blocked in receivables. E.g.
public utility services like railways, infrastructure oriented project etc. there
requirement of working capital is less. On the other hand, there are some
businesses like trading activity, where requirement of fixed capital is less but
In some business like machine tools industry, the time gap between the
acquisition of raw material till the end of final production of finished products
itself is quit high. As such amount may be blocked either in raw material or
22
3. Size and growth of business
In very small company the working capital requirement is quit high due to high
overhead, higher buying and selling cost etc. as such medium size business
positively has edge over the small companies. But if the business start growing
after certain limit, the working capital requirements may adversely affect by the
increasing size.
If the company is the operating in the time of boom, the working capital
requirement may be more as the company may like to buy more raw material,
may increase the production and sales to take the benefit of favorable market,
due to increase in the sales, there may more and more amount of funds blocked
in stock and debtors etc. similarly in the case of depressions also, working
capital may be high as the sales terms of value and quantity may be reducing,
there may be unnecessary piling up of stack without getting sold, the receivable
23
Some time due to competition or custom, it may be necessary for the company
to extend more and more credit to customers, as result which more and more
capital requirement. On the other hand, in the case of purchase, if the credit is
6. Profitability
The profitability of the business may be vary in each and every individual case,
which is in turn its depend on numerous factors, but high profitability will
because the profits to the extend that they earned in cash may be used to meet
7) Operating efficiency
may reduce the strain on working capital; it may ensure proper utilization of
24
MEANING OF WORKING CAPITAL:
categories:
Fixed Capital
Working Capital
Every business needs funds for two purposes for its establishments and to
carry out day to day operations. Long term funds are required to create
permanent or fixed basis and is called fixed capital. Funds are also
needed for short term purposes for the purchasing of raw materials,
payments of wages and other day to day expenses etc. These funds are
part of the firm’s capital which is required for financing short term or
25
Operating Cycle or circular flow concept
There are two interpretation of working capital under the balance sheet
concept:
The term working capital refers to the Gross working capital and
represents the amount of funds invested in current assets . Thus, the gross
enterprises. Current assets are those assets which are converted into cash
assets is:
Bills Receivable
Sundry Debtors
26
Raw Materials
Work in Process
Finished Goods
Prepaid Expenses
Accrued Incomes
The term working capital refers to the net working capital. Net working
When the current assets exceed the current liabilities, the working capital
is positive and the negative working capital results when the current
liabilities are more than the current assets. Current liabilities are those
27
Bills Payable
Dividends Payable
Bank Overdraft
profits
Working Capital refers to that part of firm’s 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 being
constantly converted into cash and these cash flows out again in exchange for other
current assets. Hence it is also known as revolving or circulating capital. The circular
flow concept of working capital is based upon this operating or working capital cycle
of a firm. The cycle starts with the purchase of raw material and other resources
28
And ends with the realization of cash from the sales of finished goods. It involves
purchase of raw material and stores, its conversion into stocks of finished goods
through work in progress with progressive increment of labor and service cost,
conversion of finished stocks into sales, debtors and receivables and ultimately
realization of cash and this cycle continuous again from cash to purchase of raw
materials and so on. The speed/ time of duration required to complete one cycle
determines the requirements of working capital longer the period of cycle, larger is
current Liabilities. Working capital has ordinarily been defined as the excess of
current assets over current liabilities. Working capital is heart of the business If
it is weak business cannot proper and survives. It is therefore said the fate of
decision. A good way to judge a company`s cash flow prospects is to look at its
29
nor inadequate. Excessive working capital cuisses for idle funds lying with the
firm without earning any profit, where as inadequate working capital shows
the company doesn’t have sufficient funds for financing its daily needs
working
ensure that a short term debt and upcoming operational expenses. The better
a company managers its working capital, the less the company needs to
borrow. Even companies with cash surpluses need to manage working capital
to ensure those surpluses are invested in ways that will generate suitable
30
· Pay wages and salaries when they fall due.
current Liabilities. Working capital has ordinarily been defined as the excess of
current assets over current liabilities. Working capital is heart of the business If
it is weak business cannot proper and survives. It is therefore said the fate of
decision. A good way to judge a company`s cash flow prospects is to look at its
nor inadequate. Excessive working capital cuisses for idle funds lying with the
firm without earning any profit, where as inadequate working capital shows
31
the company doesn’t have sufficient funds for financing its daily needs
working
ensure that a short term debt and upcoming operational expenses. The better
a company managers its working capital, the less the company needs to
borrow. Even companies with cash surpluses need to manage working capital
to ensure those surpluses are invested in ways that will generate suitable
32
PERMANENT OR FIXED WORKING CAPITAL:
working capital and special working capital. The capital required to meet
capital.
CAPITAL:
33
Working capital is the life blood and nerve centre of a business . just a
Goodwill
Easy Loans
Cash discounts
Ability of crisis
High morals
34
needs some amount of working capital. The need of working capital
arises due to the time gap between production and realization of cash
realization of cash. There are time gaps in purchase of raw materials and
And sales, and realization of cash, thus , working capital is needed for the
following purposes:
REQUIRMENT:
35
characteristics of their operations, the length of production cycle , the rate
capital requirements.
enterprise.
from time to time and other may follow the principles of demand
36
increase considerably during the busy season and decrease during
the
chosen project category then one shall need to offer sops like
available then one need not maintain a large stock of the same
37
PRICE LEVEL CHANGES : Generally raising price level
investments.
goods. If the manufacturing cycle involves a longer period the need for
working capital retains it form for a certain period and that holding period
OBJECTIVE OF STUDY
38
Study of the working capital management is important because unless the
company can not earn profits and increase its turnover. With this primary
objective of the study, the following further objectives are framed for a depth
analysis.
liabilities.
39
RESEARCH METHODOLOGY
RESEARCH METHODOLOGY
40
Research methodology is a way to systematically solve the research problem. It
It is important for research to know not only the research method but also know
Methods comprise the procedures used for generating, collecting and evaluating
data. All this means that it is necessary for the researcher to design his
methodology for his problem as the same may differ from problem to problem.
Data collection is important step in any project and success of any project will
be largely depend upon now much accurate you will be able to collect and how
much time, money and effort will be required to collect that necessary data, this
Data collection plays an important role in research work. Without proper data
41
1. Primary data collection
1) Primary data
The primary data is that data which is collected fresh or first hand, and for first
time which is original in nature. Primary data can collect through personal
The secondary data are those which have already collected and stored.
Secondary data easily get those secondary data from records, journals, annual
reports of the company etc. It will save the time, money and efforts to collect
the data. Secondary data also made available through trade magazines, balance
head of account department, head of SQC department and other concerned staff
member of finance department. But primary data collection had limitations such
42
supported by various books and internet sides. The data collection was aimed at
Project is based on
STATEMENT OF PROJECT
OBJECTIVE OF RESEARCH
liabilities.
COLLECTION OF DATA:
43
Annual reports of last three years
www.solidconeyor@indiatimes.com
Ratio analysis
ASSUMPTIONS
44
All purchases have been taken as credit purchases and all sales
In the absence of relevant data the data from internet site is taken
45
DATA ANALYSIS
1. WORKING CAPITAL:
46
WORKING CAPITAL TURNOVER RATIO = COST OF SALES
AVG. WORKING
CAPTIAL
(Rs.
in Crores)
YEARS SALES AVG.WORKIN W.C
G TURNOVER
CAPITAL RATIOS
2007-08 4689.210 228.33 20.53
47
required minimum funds have been locked up in inventory. Inventory turnover ratio
(I.T.R) indicates the number of times been turned over during the period and
evaluates the efficiency with which a firm is able to manage its inventory.
AVG.STOCK AT COST
48
INTERPRETATION:
Standard inventory turnover is different in different organization depending on their
nature. An increase in inventory turnover ratio can be visualized from the above data,
the maximum being achieved in the year 2007-08. Conversion of stocks into sales is
almost totally dependent on Food Corporation of India in Markfed.
49
3. CURRENT RATIO
Current ratio may be defined as the relationship between current assets and current
liabilities. This ratio could also be seen as a measure of working capital- the
difference between current assets and current liabilities. This ratio could also be seen
as a measure of working capital-the difference between current assets and current
liabilities. A company with a lot of working capital will be in a better position to
expand and improve its operations.
CURRENT LIABILITIES
(Rs.
in Crores)
YEARS CURRENT CURRENT CURRENT
50
INTERPRETATION:
A relatively high current ratio is an indication that the firm is liquid and has ability to
pay its current obligation in time as and when they become due Markfed followed a
constant trend in its current ratio in these years. But the ratio does not satisfy the
standard norm of 30.01:1. However, backed by government guarantee and good track
record Markfed can avail longer credit period.
51
Although receivables, debtors and bills receivables are generally more liquid than
inventories. Yet there may be doubts regarding their realization into cash immediately
or in time. Hence, some authorities are of opinion that the absolute liquid ratio should
also be calculated together with current and acid test ratio so as to exclude even
receivable from the current assets and find out the absolute liquid assets.
CURRENT LIABILITIES
(Rs. in
52
INTERPRETATION:
The absolute liquid ratio of Markfed is too low than the standard norm. But Markfed
has enough borrowing powers to pay off its liabilities.
53
2010-11 9057.91 1364.80 6.63
(Rs. in Crores)
INTERPRETATION:
The higher the value of debtors turnover ratio, the more efficient is the management
of debtors. It is clear from the above data the turnover ratio started a decreasing trend
from the year 2010-11.
54
TOTAL CURRENT ASSETS
Current assets are cash and other assets expected to be converted to cash or consumed
either in a year or in the operating cycle (whichever is longer), without disturbing the
normal operations of a business.
(Rs. in Crores)
YEARS 2007-08 2008-09 2009-10 2010-11 2011-12
55
INTERPRETATION:
The total current assets of the Markfed organization have increase than the previous
year. The current assets are Rs.10526.35 in 2011-12 but in 2010-11 the current assets
were Rs.9662.59. The current assets are dependents on the nature of the organization.
Current liabilities are the debts a company owes which must be paid within one year.
They are the opposite of current assets. Current liabilities includes things such as
short term loans, accounts payable, dividends and interest payable, bonds payable,
consumer deposits, and reserves for federal taxes.
(Rs. in Crores)
YEARS 2007-08 2008-09 2009-10 2010-11 2011-12
56
INTERPRTATION:
The total current liabilities have increased than the previous year. In 2011-12 the
current liabilities are Rs.10616.96 and in 2010-11 the liabilities were Rs.9488.73.
57
CREDITORS TURNOVER RATIO :
Creditors turnover ratio is an accounting liquidity metric that evaluates how fast a
company pays off its creditors (suppliers).
(Rs. in
Crores)
YEAR NET AVERAGE CREDITORS
PURCHASES CREDITORS TURNOVER
RATIO
2007-08 4615.46 97.03 47.56
58
INTERPRETATION:
It is clear that creditor turnover ratio changing over the years. It was 47.56 times in
the year 2007-08. It increased to 5.061.37 times in the year 2008-09. There was
subsequent increase in the year of 2010, 2011 and 2012 with 70.31, 100.4 and 64.82
times respectively.
59
9. NET WORKING CAPITAL:
(Rs
. in Crores)
YEAR CURRENT CURRENT NET WORKING
60
INTERPRETATION:
It is clear that net working capital changes over the years. It was 198.79 crores in the
year 2008-09. It has decreased to 184.24 crores in the year 2009 or further decreased
in the year 2010. There was subsequent decrease in the year 2012 and have become
negative i.e. (90.61).
61
FINDING
need the hint regarding the future happiness rather than those in the
past.
The external analyst has to depend upon the past which may not
62
SUGGESTION
63
LIMITATIONS
64
CONCLUSION
Every business concern should have adequate working capital to run its
Both excess as well as short working capital positions are bad for any
business.
means the concern will get dramatic improvement in their sales volume
organization.
Every concern should adopt some new tread management strategies that
65
Good management of working capital is part of good finance
maximum return.
66
BIBLOGRAPHY
R.K. Sharma.
67
ANNEXURE:-
Balance sheets from the year 2008 to 2012:
68