1.

INTRODUCTION

Working capital plays a key role in a business enterprise just as the role of art in the human body. It acts as grease to run the wheels of fixed assets. It’s effective provisions can ensure the success of a business while it’s in effective management can lead not only to loss but also to the ultimate downfall of what otherwise might be considered as a promising concern. In other words, efficiency of a business enterprise depends largely on its ability to manage it’s working capital.

ABOUT THE TOPIC MEANING
The term working capital refers to that portion of an organization capital which is required in the short run to finance current assets. Such as cash, bank balance, debtors and Inventories the value of the assets keeps changing over a period of time.

DEFINITION
According to the institute of chartered Accountants of India defines, “Working capital means the funds available for day-to-day operations of an enterprise”. According to Shubin defines working capital as, “capital required for purchase of Raw Materials and for meeting day-to-day expenditure on sales, wages, rents and advertising, etc”. Working capital is also known as ‘revolving or circulating capital’ or ‘Fluctuating capital’ or ‘short-term capital. According to Ramamurthy “ working capital refers to the funds, which a company must possess to finance it’s day to day operations. It’s concerned with the management of the firms current assets and current liability.

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1.1 CONCEPT OF WORKING CAPITAL

According to I.M. Pandey, there are two concepts of working capital.

1. GROSS WORKING CAPITAL
The total current assets are termed as the gross working capital or circulating capital. total current assets include the firms investment, in which can be converted in to cash with in an accounting year and include cash, short-term securities, debtors, (accounts receivable or book debts) bills receivable and stock (inventory).

2. NET WORKING CAPITAL
Net working capital refers to the difference between current assets and current liabilities. Current liabilities are those claims of outsiders which are expected to mature for payment within an accounting year and include creditors, bills payable and outstanding expenses.

A net working capital concept indicate or measures the liquidity and also suggests the extent to which working capital needs may be financed by the permanent sources of funds. Net working capital refers to the portion of firms current assets, which financed with long – term funds.

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TYPES OF WORKING CAPITAL

1. PERMANENT WORKING CAPITAL
Permanent working capital is the minimum investment kept in the form of inventory of raw material, work – in – process, finished goods, stores & spares and book debts to facilitate and interrupted operation in the firm. Though this investment is table in short run, it certainly various in long run depending upon the expansion program under taken by a firm. It may increase or decrease over a period of time. The minimum level of current assets maintained in a firm is usually known as permanent or regular working capital Permanent working capital may be of two kinds.

a. Initial working capital
Immediately after a company’s formation, for sometime a company will need relatively large working funds to discharge its liabilities on account of purchase of raw materials, payment of wages, salaries, so this is referred to as initial working capital.

b. Regular or Normal Working Capital
It is represented by excess of current assets over current liabilities and has always to be maintained by a company. A business will always have to maintain minimum levels of stocks of different items-raw materials, consumables, semimanufactured and manufactured goods only then the circulatory process of cash being converted in to stores of raw materials/goods and back in to cash, can continue without hindrance and generate a surplus in the hands of the company every time and this capital is called as regular working capital.

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2. TEMPROARY OR VARIABLE WORKING CAPITAL
A firm is required to maintain an additional current assets temporarily over and above permanent working capital to satisfy cyclical demands. Any additional working capital apart from permanent working capital required to support the changing production and sales activities is refer to as temporary or variable working capital. in other words, an amount over and above the permanent level of working capital is temporary, fluctuating or variable working capital. There are two types.

a.

Seasonal working capital
It is required to meet the financial needs of seasonal periods. Thus it is used to

buy raw materials, which are available only during a particular season.

b.

Special working capital
It is required to meet situation, which cannot be foreseen and therefore no

advance preparation can be made to face them as they arise. For instance there may be an abrupt increase in demand for the goods and services produced by a company. It may succeed in securing a big contract or a large order for the execution of which large order for the execution of which large investment have to be made in current Assets. So the capitals required for such circumstance are called as special working capital.

3. Balance sheet working capital:
The balance sheet working capital is one, which is calculated from the items appearing in the balance sheet.

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NEED FOR WORKING CAPITAL
The need for working capital cannot be over emphasized. Every business concern requires some amount of working capital. The need for working capital arises due to the time gap between production and realization of cash. Thus the working capital is needed for the following. 1. For purchase of raw material and others stores for conversion into finished goods. 2. To pay wages and salaries to workers and managerial staff. 3. To pay Expenses on account of running maintenance and servicing of plant and machinery. 4. To pay rates and taxes such as import and custom duties. 5. To pay general administration we expenses such as salaries to office staff, rent, interest, electricity and telephone bills. 6. To pay expenses on sales, such as expenses on packing, advertisements and publicity, salaries and commission to salesman, descant and commission to dealers, railway freight, loading charges and so on. Though these are the general needs of working capital of a concern but the amount needed as working capital in a new business concern depends primarily on its size and ambitions of its promoters. The amount of working capital needs goes on increasing with the growth and expansion of business till it attains maturity. At maturity the amount of working capital needed is called normal working capital.

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it can at least be guidance for the future course of business actions and certainly not a exact forecast of events to take place at later dates.  The study made by using working capital ratios. Ratios are made by only clues and the clues are not substituted for original figures.LIMITATIONS OF THE STUDY  This study was made on the basis of past financial statements. So the suggestions given on the basis of ratios are difficult to implement in practice. past can never be hundred percent representative of future. 6 .

FACTORS INFLUENCING WORKING CAPITAL There are not set rules to determine working capital requirement of firm. A large number of factors influence working capital needs of a firm.  Nature and Size of Business  Demand  Availability of raw materials  Production Policy  Price level changes  Credit Policy  Availability of Credit  Efficiency and performance  Rapidity of turnover  Length of the period manufacture  Terms of purchase 7 . The following are the description of factors which generally influence the working capital requirements.

Longer the production cycle. growth industries required more working capital than those the static. it is logical to expect that a larger amount of working capital in required. It is very difficult to determine the relationship between the growth in the volume of business of a company and increase in its working capital required. Manufacturing firms have large production cycle firms require less working capital. Longer the production cycle. What kind of production policy should be followed in above cases? There are goods are two options to such companies. GROWTH AND EXPANSION As company grows. either they confine their production only to period when goods are purchased or they follow a steady production policy throughout the year and produce goods at a level to meet peak demand. It covers the time span between the procurement of raw material and the completion of the manufacturing process leading to the production of finished goods. it is very difficult to determine the relationship between the growth in the volume of business of a company and increase in its working capital required. it is continuous or seasonal demand for products. 8 . PRODUCTION POLICY Production policy means whether. the higher will be the working capital requirement and vice versa. Other things being equal. the higher will be the working capital requirement and vice versa.PRODUCTION CYCLE PROCESS The term production or manufacturing cycle refers to the time involved in the manufacturing of goods.

It can therefore. A firm enjoying banks credit facilities. Similarly. upward phase are when boom conditions prevail. A high net profit margin contributes towards the working capital pool. whenever it requires. Other firms may earn low profits. A firm enjoying bank credit facilities can secure funds to finance its working capital requirement very easily. the need for working capital will be very less. 9 . the availability of credit from banks also influences the working capital needs of the firm. perform its business activities with less working capital than a firm without such credit facility. if it avails liberal credit facilities. since there is no growth in sales. A firms with high profit level requires less working capital and vice versa. in this case more working capital is required to cover the lag between the increased sales and receipt of cash as well as to finance purchase of additional material.PROFIT LEVEL Firms may differ in their capacity to generate profit from business. due to quality product or good marketing management or monopoly power in the market and earn a high profit margin. The variations in the business conditions may be in two directions. BUSINESS CYCLE The amount of working capital requirements of a firm varies with every movements of business cycle. Upward phase & downward phase. The downward phase. some firms enjoy a dominant position. in this case. The net profit is a source of working capital to the extent that it has been earned in cash. AVAILIBILITY OF CREDIT The need for working capital in a firm will be less.

ADVANTAGES OF MANAGING ADEQUATE WORKING CAPITAL Working capital is the lifeblood and nerve centre of business. 1. reduces wastages and costs and enhances production and profits. 6. Solvency of the business: Adequate working capital helps in maintaining solvency of the business by providing uninterrupted flow of production. and creates overall efficiency in a business. 2. 7. High morale: Adequacy of working capital creates an environment of security confidence. wages & other day-to-day Commitments: A company which has ample working capital can make regular payment of salaries. working capital is very essential maintain the smooth running of a business. high morale. Just as circulation of blood is essential in the human body for maintaining life. Regular payments of salaries. Cash Discounts: Adequate working capital also unable a concern to avail cash discounts on the purchase and hence it reduces cost. 5. 3. 10 . wages and other day-to-day commitments which arises the morale of its employees. increases efficiency. Easy loans: A concern having adequate working capital high solvency and good credit standing can arrange loans from banks & others on easy and favorable terms. Good will: Sufficient working capital enables a business concern to make prompt payments and hence helps in creation and maintaining good will. Regular supply of raw materials: Sufficient working capital ensures regular supply of raw materials and continuous production. 4.

 It is an indication of defective credit policy and slack collection period.  Tendencies of accumulation inventories to make speculative profits will grow. Consequently higher incidence of bad debts results. chances of Inventory mishandling. This may tend to make dividend policy liberal and difficult to cope with at a future date when the firm is unable to make speculative profits. Thus.THE DANGERS OF EXCESSIVE WORKING CAPITAL ARE:  It results in unnecessary accumulation of inventories. theft and business losses increase. which degenerates the managerial efficiency. waste. which adversely affects not only profits but the working capital funds also. 11 .  Excessive working capital makes management co placement.

2. we have to maintain more working capital which increases net working capital or the current ratio.1 OBJECTIVES OF THE STUDY  To ensure optimum investments in current assets  To find out relationship between working capital and liquidity position of the company.. if we hold more cash there is less risk of insolvency and also profitability is low on the other hand.  To analysis the working capital trends. 12 . The more liquid the firm. not to become insolvent.  Working capital is mainly managed to attain a trade off between risk and profitability i. To ensure adequate flow of funds for current operation. less chance is there for it to become insolvent that is in other words less risk ( insolvent means unable to pay its obligations promptly).e.  If we want to avoid risk i.. If we do not cash more cash it leads to insolvency and more profitability.e.

we must be ready to take more risk. The scope of working capital management is reflected in the fact that financial managers spend most of their time in managing current assets and current liabilities. 13 . Both are directly related.2 SCOPE OF THE STUDY This study is makes me necessary to analysis the company liquidity position as well as the financial position. If we want to reduce the risk the profitability also decreases. Thus working capital management involves trade off between risk and profitability. 2. Adequate working capital needs to be maintained in order to discharge day to day liabilities and protect the business from adverse effects in times of calamities and emergencies. If we want more profitability.

official staff of department.3 RESEARCH METHODOLOGY METHOD OF DATA COLLECTION Both primary and secondary data were collected by researcher.2. SECONDARY DATA Only secondary data have been collected from the annual records of RR Shipping Private Limited. PRIMARY DATA Primary data consist of information from the discussion with the heads of the departments. 14 . Personal interview also with general manager (finance) has been done. Personal interviews with the personnel of finance department and their related field employees were done.

This study was made with the main objective of making a retrospective study of the financial transaction made by the company.RESEARCH AREA The Research Area aimed to find out the position of working capital of the company. Funds flow statement 15 . For this purpose. various related areas have been studied.  Ratio Analysis  Working capital management 1. TOOLS USED The following tools were adopted to analysis the working capital of RR SHIPPING PVT LTD. Statement of changes in working capital 2.

2. This includes their name. Research topic name. GOPALAKRISHNAN (1991) 16 . to determine. To analyze the financial liquidity position of the company. name of University.4 REVIEW OF LITERATURE PAST RESEARCH REPORTS AND FINDINGS This chapter consists of some of the earlier work on working capital management which has been done by various researchers. the company can consider the option of making this major client and equity holders in the company so that the problem of lack of funds can be made light. the structure and utilization of working capital and its various components. his objectives and methodology and his major findings and suggestions are referred. Since over 99 per cent of the company is shipped to one single buyer in Germany. WASSER HARNINGS (1998) Wasser Harning (1998) studied to conduct risk-return analysis of working capital position.

DR. INDRASANA REDDY AND K. which in turn has affected the capacity utilization of machine and louse quality production. management risk and industry risk. Credits rating assessments of the company for the year 1994-95 taking into the consideration the financial risk. The company has not been able to maintain the desired stock level due to liquidity problems.P.Gopalakrishnan (1991) analyzed the performance of the company for at-least 10 years with regard to the liquidity and profitability and management of working capital.The study reveals that a major part of working capital is blocked in inventories in trade. This study was based on the data and information obtained from the annual report of the Hindustan Company Limited 1989-90 to 1993-94. BHARATHI (1996) Bharathi (1996) studied the working capital management is concerned with the management of current assets and current liabilities and the inter relationship that exists between them. His main objective of the study is to determine the amount of working capital employed by the company. This 17 . Somaswar Rao in 1990. The study ascertains the reason for light liquidity on low profitability.P. SOMEASWAR RAO (1990) A study was conducted on “Hindustan Cables Limited by Dr. Analysis of the effectiveness of cash management to determine the schedule of changes in working capital and cash flow statements. Analysis of working capital management by the company for the period 1994-95 analyses the reason for the variation in working capital movements using ratios. Indrasana Reddy and K.

. According to sec. 18 . amount to Rs. To analyze the working capital management for the hotel during the period 1992-96 and also the analysis of financial performance of hotel. So it is strongly recommended that the company explorers this type of financing as it does not require attaching any of the assets of the company as security. INDIRANI (1997) Indirani (1997) determined the amount of working capital employed by hotel. Mr. The working capital management is not up to expected level. 1 crore. It needs to be improved by effective utilization and control of current assets. 58 of the Companies Act (1956) a company can accept public deposits amounting to 25 per cent of its net worth which is the case of Vantage Leather (India) Ltd..study reveals that the liquidity position of HCL is satisfactory as its current ratio and quick ratios remained above the standard norms through out the period of study. Madras. The researcher’s main objectives of his project study is to determine the amount of working capital employed by the company and analysis the working capital management by the company for the specified period of 4 years (1985-88) to assess the implementation of Tandon committee norms in regard to working capital management by the company. WASSWA HANNINGTON (1998) Wasswa Hannington (1998) has studied working capital management at Vantage Leathers (India) Ltd. Suresh of Annamalai University during the year 1989. SURESH ANNAMALAI UNIVERSITY (1989) Analysis of working capital management at Chettinadu Cement Corporation Limited in Chennai has done by Mr.

Working Capital = Current Assets – Current Liabilities 3. the preparation of a funds flow statement consists of two parts: 1. statement (or) schedule of changes in working capital 2. Hence. The company can increase its capital base by going for public issue and part of this fund can be used for financing its current assets. the funds flow statement is prepared by comparing two balance sheets and with help of such other information’s derived from the accounts has may be needed broadly speaking. To analysis the financial performance on the company and also to prepare fund flow statement. Statement of sources and application of funds. STATEMENT OF SOURCES AND APPLICATIONS OF FUNDS This statement may be presented in two parts as sources and application of fund. ANALYSIS AND INTERPRETATION FUNDS FLOW STATEMENT Funds flow statement is method by which we study changes in the financial position of a business enterprise between beginning and ending financial statement data. R (1999) studied the working capital employed in the company. SOURCES OF FUND 19 .R (1999) Viswanathan.VISWANATHAN.R.

All non current assets and non current liabilities. profits and losses. Funds from operation  Sales of fixed assets  Increase of shares  Insurance of shares  Decrease in working capital APPLICATION OF FUND  Purchase of fixed assets  Payment of loan  Payment of dividend  Increase in working capital  Funds from lose WORKIG CAPITAL STATEMENT (OR) SCHEDULE OF CHANGES IN WORKING CAPITAL The statement of changes in working capital is concerned with the current assets and current liabilities alone. as their shown in the balance sheets of the current year and the previous year. additional information available are completely ignored. 20 .

42 54730.29 Less Current Liabilities Current Liabilities Provisions Total current liabilities 11436.74 18638.86 12644.02 19.33 56937.92 1207.90 20774.78 16138.98 14191.1 1967.99 1732.08 1709.The following is the “principles” for preparation of working capital statement.05 21 .05 17327.81 4702.91 balance Loan advances Total Current Assets 2399.91 666.23 1940.84 2136.97 1188.08 21708. Increase in current asset - Increase working capital Decrease in current assets - Decrease working capital Increase in current liability - Decrease working capital Decrease in current liability - Increase working capital STATEMENT SHOWING SCHEDULE OF CHANGES IN WORKING CAPITAL (2004 – 2005) Particulars Current Asset Inventories Sundry debtors Cash and bank 2004 2005 Increase Decrease 12481.

51 39610.29 385.05 1214.51-39610.30 6838.08 16411.08 2399.96 42085.30 STATEMENT SHOWING SCHEDULE OF CHANGES IN WORKING CAPITAL (2005 – 2006) Particulars Current Asset Inventories Sundry debtors Cash and bank 2005 2006 Increase Decrease 14191.17 2220.21) = 2475.05 17327.62 balance Loan advances Total Current Assets 2714.32 22 .68 1573.21 Result: Increase in Working Capital (42085.Working capital (CA CL) Decrease in 2475.97 1188.96 6838.61 2250.37 16498.02 14924.33 569372.69 19457.17 3821.74 18638.91 315.91 14816.71 53400.30 working capital Total 2475.23 Less Current Liabilities Current Liabilities Provisions Total current liabilities 16138.48 21708.

21 capital (CA CL) Decrease in 2707.78 6457.17 2714.78 working capital Total 2707.71 Less Current Liabilities Current Liabilities Provisions 14924.91 14816.39 2092.85 6457.82 7708.21 168.85 36902.68 1573.22 2244.21-36902.91 17213.37 24567.43 Result: Increase in Working Capital (39610.43) = 2707.46 9642.71 23 .83 519.Working 39610.78 STATEMENT SHOWING SCHEDULE OF CHANGES IN WORKING CAPITAL (2006 – 2007) Particulars Current Asset Inventories Sundry debtors Cash and bank 2006 2007 Increase Decrease 16411.96 10749.55 19457.16 balance Loan advances Total Current Assets 4400.69 27161.91 7107.

02 7077.Total current liabilities Working 16498.08 Result: Increase in Working Capital (36902.05 26660.41 working capital Total 7077.22 36902.43 capital (CA CL) Decrease in 29825.41 18994.43-29835.41 24 .08 18994.02) = 7077.

85 2767.81 balance Loan advances Total Current Assets 17163.80 56452.STATEMENT SHOWING SCHEDULE OF CHANGES IN WORKING CAPITAL (2007 – 2008) Particulars Current Asset Inventories Sundry debtors Cash and bank 2007 2008 Increase Decrease 27161.93 3828.96 4416.19 29791.84 37439.74 20499.62 1302.69 8795.98 20499.02) = 7077.93 579.64 2092.41 25 .57 2671.12 Less Current Liabilities Current Liabilities Provisions Total current liabilities Working 29791.44 9011.83 26660.69 14395.69 24517.82 770.19 capital (CA -CL) Decrease in 9292.21 12731.15 Result: Increase in Working Capital (36902.99 64676.22 33313.21 working capital Total 29791.97 588.74 12731.19 9292.43-29835.05 10277.

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08 14395.93 579.23 88581.50 capital (CA CL) Decrease in 664.05 Less Current Liabilities Current Liabilities Provisions Total current liabilities Working 28690.43 working capital Total 28690.55 53686.43 27 .99 64676.40 8795.69 67748.39 59226.15 Result: Increase in Working Capital (28690-29354) = 664.01 5540.23 9205.93 3828.80 31746.80 29354.43 31746.57 2671.63 30308.11 664.70 1244.50 30019.44 9011.68 33313.99 6554.76 balance Loan advances Total Current Assets 5072.98 35985.STATEMENT SHOWING SCHEDULE OF CHANGES IN WORKING CAPITAL (2007 – 2008) Particulars Current Asset Inventories Sundry debtors Cash and bank 2008 2009 Increase Decrease 37439.80 193.30 7841.

67 14873.90 639.66 3998.FUNDS FLOW STATEMENT FOR 2004 (RS.33 Amount Amount TOTAL SOURCES 14873.30 10705.13 Applications of fund : Purchase fixed assets Investment Capital work in progress Payment of secured loan Payment of deferred tax liabilities Miscellaneous expenditure TOTAL APPLICATIONS 360.33 8328.49 1246.13 FUNDS FLOW STATEMENT FOR 2005 28 .89 2475.In lakhs) PARTICULARS Sources of fund : Funds from operation Decrease in working capital Unsecured loan 1691.

08 7710.55 Total Applications (B) 15527.85 Amount Amount Total Sources (A) 15527.50 951 1285.49 Applications of fund : Purchase fixed assets Payment of unsecured loan Payment of deferred tax liabilities 1166.(Rs.78 559. In lakhs) PARTICULARS Sources of fund : Funds from operation Decrease in working capital Capital work in progress Increase Unsecured loan Investment Miscellaneous expenditure 2313.33 2707.94 13716 644. In lakhs) PARTICULARS 29 Amount Amount .49 FUNDS FLOW STATEMENT FOR 2006 (Rs.

Sources of fund : Funds from operation Decrease in working capital Investment Miscellaneous expenditure 2694.41 56.6 Applications of fund : Purchase fixed assets 666.06 Total Applications (B) 10718.63 7077.30 890.51 1055.51 582.6 30 .09 7843.27 Total Sources (A) 10718.25 Capital work in progress Payment of secured loan Payment of unsecured loan Payment of deferred tax liabilities 571.

29 4468.53 556.85 Amount Amount Total Sources (A) 16737. In lakhs) PARTICULARS Sources of fund : Funds from operation Decrease in working capital Miscellaneous expenditure 6435.3 Applications of fund : Purchase fixed assets Payment of unsecured loan Capital work in progress Payment of secured loan Payment of deferred tax liabilities 2034.3 Total Applications (B) FUNDS FLOW STATEMENT FOR 2008 31 .5 16737.2 978.21 1009.8 558.23 9292.FUNDS FLOW STATEMENT FOR 2007 (Rs.

09 4474.7 Total Applications (B) 19065. Movements of cash are of vital important to the management.43 631.5 CASH FLOW STATEMENT ‘Cash Flow’ includes cash inflows and out flows – cash receipts and cash payment – during a period.5 Applications of fund : Purchase fixed assets Payment of secured loan Increase working capital Payment of deferred tax liabilities Share capital 9506. The short 32 .84 Amount Amount Total Sources (A) 19065.(Rs. In lakhs) PARTICULARS Sources of fund : Funds from operation Decrease in working capital Miscellaneous expenditure 15312.3 1609.95 664.29 3788.8 2383.

A cash flow statement is a statement which portrays the changes in the cash position between two accounting periods.term liquidity and short term solvency. INCREASE IN CURRENT LIABILITY - INCREASE CASH DECREASE IN CURRENT LIABILITY - DECREASE CASH INCREASE IN CURRENT ASSET - DECREASE CASH DECREASE IN CURRENT ASSET - INCREASE CASH CASH FLOW STATEMENT 2004 PARTICULARS Amount Amount 33 . Positions of a firm are dependent on its cash flows. The detailed analysis provided in such a statement provides a clear insight to the management about the different sources of cash flows and the different uses or applications for which cash is needed.

33 4534.90 639.Sources of cash : Opening cash Unsecured loan Cash from operation 1732.67 2399.98 10705.82 Total sources 16973.13 CASH FLOW STATEMENT 2005 PARTICULARS Amount Amount 34 .33 8328.08 Total Applications 16973..49 1246.66 3998.13 Applications of fund : Purchase fixed assets Investment Capital work in progress Payment of secured loan Payment of deferred tax liabilities Closing stock 360.

57 Total Applications 2399.94 13716 644.16 559.50 951 1285.Sources of cash : Opening balance Cash from operation Capital work in progress Increase Unsecured loan Investment Miscellaneous expenditure 1732.85 Total Sources Applications of cash : Purchase fixed assets Payment of unsecured loan Payment of deferred tax liabilities closing stock 1166.57 CASH FLOW STATEMENT 2006 PARTICULARS Amount Amount 35 .55 17866.98 5627.08 17866.08 7710.

25 571.09 7843.27 Total cash available (A) 15119.51 CASH FLOW STATEMENT FOR 2007 PARTICULARS Amount Amount 36 .51 582.06 Total Applications (B) 15119.25 56.69 11458.51 1055.Sources of cash : Opening balance Cash from operation Investment Miscellaneous expenditure 2714.51 Applications of cash : Purchase fixed assets Capital work in progress Payment of secured loan Payment of unsecured loan Payment of deferred tax liabilities 666.30 890.

8 558.84 15711.21 Applications of cash : Purchase fixed assets Payment of unsecured loan Capital work in progress Payment of secured loan Payment of deferred tax liabilities Closing stock 2034.91 Total Applications (B) 21138.Sources of cash : Opening balance Cash from operation Miscellaneous expenditure 4416.85 Total cash available (A) 21138.21 CASH FLOW STATEMENT 2008 37 .5 4400.2 978.52 1009.53 556.29 4468.

95 664.29 3788.09 4474.96 Total cash available (A) 24138.43 631.21 Applications of cash : Purchase fixed assets Payment of secured loan Increase working capital Payment of deferred tax liabilities Share capital 9506. A number of method or devices are used to 38 .70 Total Applications (B) 24138.49 DATA ANALYSIS AND INTERPRETATION The analysis and interpretation of financial statement is used to determine the financial position and results of operation as well.69 1609.84 18699.PARTICULARS Sources of cash : Opening balance Miscellaneous expenditure Cash from operatiom Amount Amount 3828.

Therefore. Ratio helps to summarize large quantities of financial data and to make qualitative judgment about the firms financial performance. The absolute accounting figures reported in the financial statement do not provide a meaningful understanding 0f a performance and financial position of a firm. is known as a financial ratio. a ratio is use as a bench mark for evaluating the financial position and performance of a firm. The following of the tools used in the study.study the relationship between different statement. RATIO ANALYSIS INTRODUCTION Ratio analysis is a powerful tool of analysis. The following are the important categories 1) Liquidity Ratio 39 . An effort is made to those devices which clearly analysis the position of the enterprise. An accounting figure conveys meaning when it is related to some other relevant information. The relationship between two accounting figures expressed mathematically. the only importance is given to working capital management of the company. In financial analysis.

in order to highlight the relative strength of the concerns in meeting their current obligations to maintain sound liquidity and to pin point the difficulties if any in it. It shows a firm’s ability to cover its current liabilities with its 40 . These ratios are used to measure the firm’s ability to meet short-term obligations. then liquidity ratios are calculated. The important liquidity ratios are: CURRENT RATIO:This is the most widely used ratio.• • • Current ratio Quick ratio Cash ratio Liquidity Ratios: If it is decided to study the liquidity position of the concerns. It is the ratio of current assets to current liabilities.

2009 41 .48 64676.94 2.08 CURRENT LIABILITIES 12644. In lakhs) YEAR 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 CURRENT ASSETS 54730.29 56485.05 88581.78 54730.50 59226.29 56937.25 1. It is expressed as follows: Current Assets Current Ratio = Current Liabilities CURRENT RATIO FOR THE FIVE YEARS 2004 .24 28690.current assets. This is also known as Working Capital Ratio.40 RATIO 4.2009 (Rs.32 1.49 CURRENT RATIO FOR THE FIVE YEARS 2004 .04 0.23 53400.

5 2 1.94 Series1 20042005 20052006 20062007 Year 20072008 20082009 QUICK RATIO: 42 .32 Ratio 2.04 0.5 4.49 1.5 0 4.25 1.5 3 2.5 1 0.5 4 3.

39 42745.61 TOTAL CURRENT LIABILITIES 12644.78 17327.2009 43 .2009 (Rs.34 2. It is calculated as under.22 28690.05 26660.49 36988.42 27236. Liquid Assets are those assets. which are readily converted into cash.24 1.46 2. This is also known as Liquid Ratio and Acid Test Ratio.07 LIQUIDITY RATIO FOR THE FIVE YEARS 2004 .It shows a firm’s ability to met current Liabilities with its most liquid (quick) Assets.02 16498.09 0.50 RATIO 3. In lakhs) YEAR 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 LIQUID ASSETS 42248.57 29323.94 10. LiquidRatio = Liquid Assets CurrentLiabilities LIQUIDITY RATIO FOR THE FIVE YEARS 2004 .

5 0 20042005 20052006 20062007 Year 20072008 20082009 1.94 3.5 1 0.5 3 2.09 0.24 Series1 CASH RATIO: - 44 .34 2.5 Ratio 2 1.4 3.46 2.

SecuritiesCashRatio = CashandBank Balance + Short − termmarketable CurrentLiabilities CASH RATIO FOR THE FIVE YEARS 2004 . a financial analyst may examine cash ratio and it’s equivalent to current liabilities. they may be included in the computation of cash ratio. Trade investment or marketable securities are equivalent of cash.Cash is most liquid Asset. therefore. In lakhs) 45 .2009 (Rs. This Ratio also known as Absolute and Super Quick Ratio.

13 0.55 RATIO 0.78 17327.2007.16 0.12 Ratio 0.20082005 2006 2007 2008 2009 Ye a r 46 .08 2714.18 0.14 0.13 0.69 4400.91 3828.13 0.68 CASH RATIO FOR THE FIVE YEARS 2004 .YEAR 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 CASH AND BANK BALANCE 1732.02 16498.2006.10 0.98 2399.22 35985.16 0.13 0.02 0 0.1 Series1 2004.16 0.2009 0.2005.08 0.05 26660.16 0.06 0.04 0.16 0.69 TOTAL CURRENT LIABILITIES 12644.1 0.

The total Liability is 9292.  An increased in Working capital in-term of Fixed assets ratio accompanied by the increase in company’s net profit indicates that the business is expanding.FINDINGS  The Current Ratio of the company which measures the liquidity position was always above or equal to one.  Total Liabilities have increased year by year except in 2007-08. Even though the standard ratio is 2:1.  In the total assets the major portion belongs to current assets. In the current assets major share is form inventories. the concern can not be said to be in financial crisis.21 SUGGESTIONS 47 . So it is better for the company to adopt good inventory control system. The ratio is through not very sound to the satisfactory.

 So far the company maintained adequate amount of Net Working Capital. To keep the same in future tool.  The company’s marketing activities are not sufficient. so that the required quantum of inventories will be properly estimated. 48 . So the company should take extra efforts for sales promotional and marketing activities.  The company should prepare sales budget periodically.  The company can adopt cost audit program to know it’s the size of inventory is adequate / excessive when comparing with production program. It will create rapidness in Turnover.  Company should take steps to dispose of the non-performing assets so that the return on capital employed is adequate to its short term or long-term borrowings. Keeping in view the size of the company and its turnover there is a need to improve the working of the company with consequential improvement in internal generations. the company can adopt different techniques of forecasting the working capital  To conclude. to have batter resources and to avoid liquidity crunch the company should raise capital by the way of issuing shares or borrowing long term loans from financial institutions.

CONCLUSION Successful management of the working capital in any concern will ensure the success of a business. 49 . the level of profit is increasing in nature. In the analysis of working capital management. According to the RR SHIPPING PVT LTD. working capital management is good condition. However to show better business result. the profit for the company is good. the management may concentrate on keeping the working capital is more scientific method.

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