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Documents - Pub Project Report JK Paper LTD
Documents - Pub Project Report JK Paper LTD
PROJECT REPORT
ON
“WORKING CAPITAL MANAGEMENT”
Undertaken at
Unit: CPM
Fort: Songadh
Submitted by :- JIGNESH L GAMIT
MBA
The project report on JK Paper Ltd. has been prepared as per the topic
“Working Capital Management of JK Paper Ltd.” prescribed by Mandvi
education society, to me.
Thus, it is our moral and obligatory duty to take part of our studies with great
enthusiasm and seriousness and give them due importance.
Last but not the least I received all required information and co-operation from
the Accounts Department and HR Department. I hope that this report will meet
the educational requirement.
sustained toil and most important of all his guidance. I am greatly thankful to
company.
SR CHAPTER PG
NO. NO.
PREFACE 03
ACKNOWLEDGEMENT 04
1 COMPANY PROFILE 07
2 INTRODUCTION 10
3 PRODUCT PROFILE 19
4 ORGANIZATIONAL STRUCTURE 21
5 RESEARCH METHODOLOGY 55
6 LITERATURE REVIEW 59
7 THEORITICAL BACKGROUND (WCM) 62
9 FINDINGS 95
10 SUGGESTION 98
11 CONCLUSION 99
12 BIBLOGRAPHY 100
JK PAPER LTD.
UNIT: CPM
INTRODUCTION
TO
ORGANISATION & MILL
• COMPANY PROFILE
JK GROUP
The name ‘JK Organization’, which today is one of the leading Private Sector
Groups in India, was founded over 100 years ago. JK owes its name as an
industrial entity and was conceived by two great visionaries Late Lala Juggilal
Singhania & his son Lala Kamlapat Singhania. They dreamt of an Industrial
India and founded JK Organi
zation,
as their contribution towards realization of that dream. For J.K. Organization
it's been a century of multi-business, multi-product and multi-location
business operation. The companies in the Group have a diverse portfolio,
including Automotive Tyres & Tubes, Paper & Pulp, Cement, V-Belts, Oil Seals,
Power Transmission Systems, Hybrid Seeds, Woolen Textiles, Readymade
Apparels, Sugar, Food & Dairy Products, Cosmetics, etc.
With its operations spread in almost every state of India, the Group employs
over 30,000 people.
JK Paper has two large integrated paper manufacturing plants – JK Paper Mills
in the Eastern part in the state of Orissa with 1, 25,000 TPA coated , uncoated
and pulp manufacturing capacity ; and Central Pulp Mills in the Western part
in Gujarat state with 55,000 TPA paper and pulp manufacturing capacity and
60,000 TPA packaging Board manufacturing capacity. Both Mills manufacture
premium grade writing and printing papers, largely branded. Both plants are
ISO 9001 – 2001, OHSAS - 18001 and ISO 14001 certified and operate around
120% capacity utilization.
• First Mill in India to get ISO 9001 and ISO 14001 certification.
• Adjudged first ‘Greenest Paper Mill’ in India in 1999.
• Most modern and largest pulp mill in India.
JKPM was commissioned in the year 1962 with an integrated pulp and paper
plant with 15000 TPA installed capacity for manufacturing high quality writing
and printing papers. Over the years the production capacity has been
enhanced to a level of 1,27,000 TPA with the addition of 4 more
Central
Pulp Mills, Songadh
On the western coast of India, i.e. at Fort Songadh in the State of Gujarat is
located Central Pulp Mills, the other Unit of JK Paper Ltd. It is also an
integrated pulp and paper plant with a capacity of 55,000 TPA. It has two
paper machines and manufactures premium grade papers in writing and
printing paper segment.
During 1992, JK acquired CPM which was a sick unit, but JK Group turned it
around. CPM was commissioned in year 1962 and commercial production for
JK Paper was started in year 1993. In the Year 2003, the unit was accredited
to ISO 14001 Environment Management Systems and ISO 9001 Quality
management Systems by DNV, Netherlands and in the year 2006 OHSAS
18001.
• Mission
• Core Values
Objectives
• Goal
To be among top 3 paper manufacturers by achieving breakthrough in
PQCDSM.
This system is of JD Edward Enterprise and the server of the system is in the
Delhi at the Corporate Office of JK Paper. ERP system was implemented from
1st July, 2005 in other businesses of JK Organization.
• Quality Policy
• Zero Breakdowns
• Zero Defects
• Achievements
2010-11: Greentech Safety Gold Award – 2011
Greentech Environment Gold Award - 2010
2003-04: Best Paper Mill of the Year Award from Indian Paper Manufacturers
Association
2002-03: ISO 14001 Certification from DET NORSKE VERITAS (DNV)
ISO 9001:2000 Certification from DET NORSKE VERITAS (DNV)
1996-97: Award for Energy Conservation (Large Mills) from Indian Paper
Manufacturers Association, New Delhi.
• JK Copier Plus
• Sparkle Copier
• JK Easy Copier
Ideal for Photocopying.
•SS Maplitho
• JK Savannah
MICR (Magnetic Ink Circumstance Register) paper is the high quality papers, used
for making Cheque books and Demand Drafts.
• List of Departments
• Production Department
• Bamboo Yard
• Chipper House
• Pulp Mill
• Finishing House
• Works Office
• HRD Centre
• Personnel Department
• Accounts Department
• Stores
• Purchase
• Other Departments
• Transport h. Laboratory
• Administration j. Civil
• Turbine l. Plantation
JK Paper believes that the most significant resource is its human resource and
JK Paper Ltd. success depends very much on quality of their Human Resource.
Human Resource comprise the aggregate of employee attributes including
knowledge, skill, experience and health, which are presently and potentially
available to the organization for the achievement of its goal and objectives
along with serving best to the society and its stakeholders.
• Personnel Department
• Administration Department
Organization Chart :
• Welfare Roles
• Social Responsibilities
• Legislations
• Recruitment
• Sources Of Recruitment
• Internal Sources
• External Sources
• Selection
• VRS Scheme
• Performance Appraisal
• Vision :-
• Mission :-
Asst. Executive
(HRD – TPM)
Organization Chart :
• Transportation Facilities
• Medical Assistance
• Communication Facilities
• Postage Facility
• Executive Hostel
Production is the process concerned with the conversion of inputs (raw materials,
machinery, information, manpower and other factors of production) in to output (semi
finished and finished goods and services) with the help of certain process (planning,
scheduling and controlling). Manufacturing of goods is highly complex process. The
company makes the best use of man, materials and machinery for that sole purpose of
economical delivery of quality goods to customers.
Production Management is concerned with decision making related to manufacturing
process. It makes the best utilization of raw materials available and does necessary
processing on it and converts it into utility. Production Management is concerned with
planning, organizing, controlling and co-ordination of manufacturing process, so that
expectations cost of production and selling cost of resulting goods and services can be
reduced.
JK Paper Ltd., India’s largest producer of Branded papers is a leading player in the
Printing and Writing segment. Both the plants of JK Paper are ISO 9001–2001 and ISO
14001 certified and operate at around 120% capacity utilization. The aggregate annual
output is over 180,000 tons per year of Paper and Pulp, using contemporary technology.
Over the last decade the constant endeavour of JK Paper has been to upgrade its
manufacturing processes at grass-root levels to help create customer value. Be it the
most modern Pulp Mill or an automatic cut-size line for branded products, it has been a
saga of continuous process development with an eye on the customer.
JK Paper Ltd. has always leveraged technology for constant product upgradation and
has been a pioneer in many arenas, of the paper industry. Some of the
landmarks which JK Paper achieved much before the rest of the Indian paper
companies are:
These pioneering moves have given JK Paper pride of place as the change leader,
ushering in a phase of complete makeover in the Indian paper market. On the pathway
of moving focus from commodity to branded and high value categories, JK Paper Ltd.
has undergone major technical upgradation in the machines and processes for
manufacturing paper.
JK Paper has setup state-of-the-art Packaging Board Plant at its Central Pulp Mills Unit,
Songadh at a substantial Rs.235 crore investment. This plant of 60,000 TPA capacity is
equipped with the most modern technology sourced from global leaders like Voith of
Germany and several other leading names in the paper board machinery sector. Once
again, technology is the key driver to revolutionize packaging in India.
Organization Chart (Production Process)
• Production Process (Flow Chart) :
• CHIPPER HOUSE
• CHIPS SCREENING
• CHIPS WASHING
• DIGESTER
• WASHING & BLEACHING OF PULP
• STOCK PREPARATION
• PAPER MACHINE
• FINISHING
Now-a-days the importance of marketing department in every sector is
increasing. Every business organization uses marketing to promote their
product.
JK Paper has only Sales & stock department at their production units. And
marketing department of the company operates from Delhi which heads four
zonal offices; Mumbai (West Zone), Delhi (North Zone), Chennai (South Zone),
Kolkata (East Zone).
• Marketing Network :
• Countries in which JK Paper Exports :
• Distribution Channel
• Excise duty : 8%
• CST : 3%
Organization Chart
• Bill Passing
• Payment approval
• Payment Advice
• Payment Release
The top management is sent a one page report daily which contain,
• Production Data
• Stock Position
• Information regarding sales
• Vision
• Mission
To endeavor, to locate best suppliers in the market and create long term
relationship to meet future challenges in dynamic global environment.
• Lubricants
• Optimum inventory
• Proper Storage
• Inventory Control
• Receipt of material
• Issue of materials
• Chemicals
• Machine clothing
• Packaging materials
• Lubricants
• Review of high value stock items on day to day basis for regulating the suppliers
as per the available stock
• To satisfy the external information regarding quantity and quality of the raw
materials supplied by them and arrange timely payment to suppliers and
transporters.
• Organization Chart :
• Checking of Workers
• Instant access to fire fighting equipments to take timely action to extinguish fire.
The present study was undertaken during six weeks from 1 st June - 15th
July.
• Research Design :
Although the data description is factual, accurate and systematic, the research
cannot describe what caused a situation. Therefore descriptive research cannot
be used to create a casual relationship, where one variable affects another. In
other words, descriptive research can be said to have a low requirement for
internal validity.
Secondary data are those which have already been collected by someone
else and which have already been passed through the statistical process. The
Secondary data consist of reality available compendices already complied
statistical statements. Secondary data consist of not only published records
and reports but also unpublished records.
Here I have done the analysis on the basis of secondary data, which includes :
• To determine the gross operating and net operating cycle of the unit.
• The study is conducted at “JK Paper Ltd., Songadh” for 6 weeks duration.
The study of working capital management is purely based on secondary
data and all the information is available within the company itself in the
form of records.
• To get proper understanding of concepts, I have done the study of balance
sheet, profit/ loss A/c’s, cash accounts.
• I have also conducted the interview with employees of accounts
department.
• So scope of the study limited up to the availability of official records and
information provided by the employees.
• The study is supposed to be related to the period of last four years.
• Analysis through working capital ratios.
• Limitation of Study :
• Generally the company does not allow the finance project to have any study
or research work. Therefore getting a project work in the company itself
was very difficult.
• The time span of the project was very short 6 weeks, which was a major
constraint, so study and analysis on this topic within limited period was
not sufficient.
• The organizations do not disclose all the data which is an obstacle for the
detail study.
• Due to the busy schedule, some of the staff members were not in a position
to spare time for guiding the topic or giving any information.
• As the organization policies were very strict regarding using actual figures
due to which approximately values were used for analysis. Hence the result
also reveals approximate values.
• Maximum secondary data is used.
• The research done by Herrfeldt B., “How to understand Working Capital
Management” describe that “Cash is king” so say the money managers who
share the responsibility of running this country’s businesses. And with
banks demanding more from there prospective borrowers, greater emphasis
has been placed on those accountable for so-called working capital
management. Working capital management refers to the management of
current or short – term assets and short – term liabilities. In essence, the
purpose of that function is to make certain that the company has enough
assets to operate its business.
• The research done by, Samiloglu F. and Demirgunes K., “Effect of Working
Capital Management on firm Profitability : Evidence of Turkey” (2008)
describe that the effect of working capital management on firm profitability.
In accordance with this aim, to consider statistical significance relationship
between firm profitability and the component of cash conversion cycle at
length a sample consisting of Istanbul Stock Exchange (ISE) listed
manufacture firms for the period of 1998-2007 has been analyzed under
multiple regression models. Empirical findings the study show that
accounts receivable period, inventory period and leverage affect firms
profitability negatively; while growth (in sales) affects on firm profitability
positively.
• Michael J Peel, Nicholas Wilson (2008), very little research has been
conducted on the capital budgeting and working capital practices of small
firms. The result of survey indicates that a relatively high proportion of
small firm in the sample claimed to use quantitative capital budgeting and
working capital technique and to review various aspect of the companies’
working capital. In addition, the firms which claim to use quantitative
capital budgeting and working capital technique and to review various
aspects of their companies’ working capital. In addition, the firms which
claim to use more sophisticated discounted cash flows capital budgeting
techniques, or which had been active in terms of reducing stock level
• The research done by, Gass D., “How to improve Working Capital
Management” (2006) “ Cash is the lifeblood of the business” is an often
repeated maxim amongst financial manager. Working capital management
refers to the management of current or short-term assets and short-term
liabilities. Component of short-term assets include inventories, loans and
advance, debtors, investment and cash & bank balances. Short-term
liabilities include creditors, trade advances, borrowing and provisions. The
major emphasis is, however, on short-term assets, since short-term
liabilities arise in the context of short-term assets. It is important that
companies minimize risk by prudent working capital management.
Meaning And Nature of Working Capital Management :
A business which is fully equipped with all types of fixed assets required is
bound to collapse without (i) Adequate supply of raw material processing, (ii)
Cash to pay for wages, power and other costs, (iii) Creating a stock of finished
goods to feed the market demand regularly and (iv) The ability to grant credit to
its customers. All these require working capital. Working capital is thus like
the lifeblood of business.
Working capital cycle involves conversions and rotation of various component
of the working capital. Initial cash is converted into raw material.
Subsequently, with the usage of fixed assets resulting in value addition, the
raw material get converted into working in progress and then into finished
goods. When sold on credit, the finished goods assume the form of debtor who
give the business cash on due date. Thus the ‘cash’ assume its original
CREDITORS
CASH
Value Addition
Value Addition
FINISHED GOODS
WORK IN PROCESS
form again at the end of one such working capital cycle but in the course it
passes through various other forms of current assets too. This is how various
components of current assets keep on changing their forms due to value
addition. As a result they rotate and business operation continues. Thus the
working capital cycle involves rotation of various constitute of working capital.
The need for current assets arises because of operating cycle. The
operating cycle is continuous process and therefore the need for current
assets is felt constantly. But the magnitude of current assets needed is not
always the same. It increases and decreases over time. However there is
always a minimum level of current assets, which are continuously required,
by firm to carry or its business operations is called permanent or fixed
working capital. This minimum level of working capital is necessary on the
regular basis even if the management of working capital is done efficiently in
the organization.
As this type of working capital is minimum necessary for the business at
all points of time, it is financed by the long-term sources.
The amount over and above the permanent level of working capital is
temporary, fluctuating or variable working capital. The need for such type of
working arises because of fluctuations in production and sales. The
additional requirement may be during more active season when the volume
of production and sales more goes up necessitating extra blockage of funds
temporarily in current assets like Bank Balance, inventory, debtors, etc.
The temporary working capital is the additional funds required. Whose
volume is different at different points of time and hence it is financed by
short-term sources.
Both concepts are depicted in the following figure: -
W.
C.
Time
W.
C.
Time
Working Capital Assembly :
YEAR
Current Assets
Operating cycle refers to the time period which starts from raw material
purchases and ends with realization of receivable. So it is total time gap
between raw material purchases to total debtors’ collection. This is also known
as working capital cycle. Operating cycle is therefore expressed in terms of
months or weeks or days. The highest the operating cycle period, higher the
working capital requirement. It comprises raw material conversion period,
WIP conversion period, FG conversion period and debtors’ conversion period
and creditors period. The basic reasons for calculating operating cycle is to
find out the means for reducing the duration of operating cycle because if
duration of operating cycle will be less than the working capital requirement
will be less.
OC = R + W + F + D – C
Where,
Cost of
988.45 938.45 504.88 620.98
Production
4
11
4
3
Interpretation :-
It indicate the work – in – process inventory (can say semi – finished good)
converted into finished goods. It’s also contain the production cost holding by
it. Here, we can say that for the year 2009-10 due to low work – in – process
inventory. Work – in – process conversion period is low even though the cost of
production is too high compare to others.
• Finished Goods Conversion Period
= Finished Goods Inventory
----------------------------------- × 360
Cost of Goods Sold
Particular 2009-2010 2008-2009 2007-2008 2006-2007
13
16
13
10
Interpretation :-
It indicates the finished goods inventory converted in to sold or distributed to
the end user. It’s also containing the production cost holding by it. If finished
goods conversion period is lower, the efficiency of company is higher.
In case of this company for the year 2009-10 finished goods conversion period
is 10 days which is lower than the previous year 2008-09, it indicates good
efficiency of the company.
41
53
Interpretation :-
This conversion period measures the quality of debtors. A short collection
period implies without delay in payment by debtors. It reduces the chances of
bad debts. Similarly, a longer collection period implies too liberal and
inefficient credit collection performance. It is difficult to provide a standard
collection period of debtors.
Here, we can say that for the year 2009-10, debtors’ conversion period is low as
compare to previous years. So companies’ management is efficient in collection
on cash and they have not more provision for bad debts.
Purchase
64
86
38
48
Interpretation :-
2008-2009 41 4 13 30 88 days
2008-2009 88 38 50 days
Net operating cycle also represents the cash conversion cycle. It is net time
interval product and cash payment for resources acquired by the firm. It also
represents the time interval over which additional funds, called working
capital, should be obtained in order to carry out the firms operations. The firm
has to negotiate working capital from sources such as commercial banks. If net
operating cycle of a firm increase, it means further need for negotiable working
capital.
As we can see in the year 2009-10 Net Operating Cycle period is 61 days which
is highest in the above taken data because gross operating cycle as well as
payable deferral period is high in 2009-10 compare to previous year. Here,
initially net operating cycle of a firm increase as compare to previous year, so
which gives bad indication.
The ratio analysis provides guides and clues especially in sporting trends
towards better or poorer performance and in finding out significant deviation
for any average or relatively applicable standards.
The following are the important ratios to measure the efficiency of
working capital: -
• Current Ratio: -
It is most common measure for measuring liquidity. It is also called
“Working Capital Ratio.” It expresses relationship between current assets &
current liabilities. High current ratio indicates firm is liquid and has the ability
to pay its current obligation in time and when they become due.
A ratios equal or near to the rule of thumb of 2:1 i.e. current assets double
the current liabilities is considered to be satisfactory.
Current Assets
Current Ratio = ----------------------
Current Liabilities
Interpretation:-
Higher the current ratio, the larger is the amount of rupees available per rupee
of current liabilities, the more is the firm’s ability to meet current obligation
and greater is safety of fund of short term creditors.
From the above calculation we can say that current ratio of 2009-10 is 2.171 :
1 which is comparatively lower than the previous year. It indicates the
company is quite not satisfactory with their current affair as compare to
previous years.
Interpretation :-
The difference current assets and current liabilities excluding short – term
bank borrowing is called net working capital or net current assets. Net current
assets are sometimes used as a measure of a firm’s liquidity. It is considered
that the firm having the large networking capital has the greatest ability to
meet its current obligation.
As shown in the calculation net working capital of 2009-10 is low as compares
to previous year because firm had used its cash & bank balance to meet its
current obligation. Here we can say that as compare to previous net working
capital is low which is good for the company.
• Liquid Ratios
This ratio is also known as quick ratios or acid test ratios. It is more
rigorous test of liquidity than the current ratios. It is based on those current
assets which are highly liquid. Inventory and prepaid expenses are excluded
because they are deemed to be least liquid component of current assets. A
high quick ratios indicate that the firm is liquid and has the ability to meet
its current assets in time and on the other hand low ratios represent
liquidity position is not good.
1.626
1.682
1.985
1.483
Interpretation :-
Usually high liquid ratios an indication that the firm is liquid and has the
ability to meet its current or liquid liabilities in time and on the other hand a
low liquidity ratio represents that the firm's liquidity position is not good.
According to rule of thumb, it should be 1:1. The liquid ratios present an
uneven change over the past four year. It was 1.626 in 2006-07 and increased
to 1.985 in 2008-09 and then to 1.483 in 2009-10.
The decrement in ratios is not satisfactory, however the ratios 1.483 in 2009-
10 is more than the rule of thumb but the ratios of four year is quite more than
the rule of thumb.
4.491
3.161
4.737
6.019
Interpretation :-
Working capital turnover ratio measures the firm’s efficiency that how a firm
manages and utilize its working capital as we can see from the above
calculation of year 2009-10 has a higher working capital turnover ratio which
is higher than the previous year 2008-09. So we can say that in 2009-10
working capital efficiency is more than the previous year 2008-09. The ratio of
the company is satisfactory.
6.77
10.65
7.09
4.78
Interpretation :-
Stock turnover ratio measures how quickly inventory is sold. It is a test of
efficient inventory management. To judge whether the ratio of a firm is
satisfactory or not, higher ratio shows efficient use of inventory.
As we can see from the graph that in the year 2009-10 ratio is 10.65 : 1 which
is higher than all previous years, so we can say that inventory is converted into
finished goods highest in this year which indicate the highest efficient use of
the inventory.
Interpretation :-
The analysis of the debtor’s turnover ratio supplements the information
regarding the liquidity of one item of current asset of the firm. The ratio
measure how rapidly debts are collected. A higher ratio is indicator of shorter
time lag between credit sales and cash sales.
As we can see in the year 2009-10 debtors’ turnover ratio is highest that is
8.60 : 1 which is higher than 2008-09. So we can say that company has not
faced problem in collecting the money in this year of 2009-10. So this ratio is
good for the converting credit sales into cash sales for the company.
Inventory constitute major portion of current asset of public Ltd. Companies in
India .The manufacturing companies hold inventories in the form of Raw
material, work-in-process and finished goods.
• There are at least three motives for holding inventories :
• To facilitate smooth production and sales operation (Transaction
motive)
• To guard against the risk of unpredictable changes in usage rate and
delivery time (Precautionary Motive)
• To take advantage of price fluctuations. (Speculative Motive)
Ratio analysis has been used for making evaluation of Inventory management
performance. As the raw material used in the company is pig iron, proper
planning and handling is required for the purpose of achieving the right quality
of output.
The ratios for last four years have been worked out and compared. The various
figures are given in the table.
INVENTORY MANAGEMENT
Ratio (%)
a) Inventory to
Gross Working 0.30 0.43 0.38 0.36
Capital (1/2)
b) Inventory
8.15 5.18 3.23 4.50
Turnover (3/1)
c) Inventory
Conversion Period 45 Days 70 Days 113 Days 81 Days
(365/b) days
Interpretation :-
Inventory conversion period means, time taken to convert raw material into
finished goods to goods sold. It indicates how effectively and efficiently an
inventory is controlled. Lesser the inventory conversion period more efficient
and effective use of inventory.
Here we can see that for the year 2009-10 inventory conversion period is 45
days which is less than the rest of year. As we can see from the graph for the
year 2008-09 inventory conversion period is 70 days which is highest among
the collected data. So we can say that they are able to substantially reduce the
inventory holding period from 70 to 45 days i.e. 25 days. It may happen
because the average inventory holding period has been decrease and also the
cost of goods sold increase.
When firm sell goods for cash, payments are received immediately and
therefore no receivables are created. However when a firm sells goods or
services on credit, payments are received only at a future date and receivables
are created. It is an essential marketing tool in modern business trade.
Credit creates receivables, which the firm is expected to collect in near future.
A firm grants credit to its customers so that its sales are its customers so that
its sales are not lost to competitors.
Account receivable constitutes a significant portion of the total current assets
of the business after inventories. The receivables arising out of credit has three
characteristics.
• It involves an element of risk, which should be carefully analyzed.
• It is based on economic value. To the buyer, the economic value goods or
services pass immediately at the time of sale, white the seller expects an
equivalent value to be received later on.
• It implies futurity. The customers from whom receivables have to collected
in future are called debtors and represents the firm’s claim or asset.
Receivable Management
41
53
30
29
4.81
8.14
8.60
Interpretation :-
The collection period represents the average number of days for which a firm
has to wait before its debtors are converted into cash. A short collection period
implies without delay in payment by debtors. It reduces the chances of bad
debts. Similarly, a longer collection period implies too liberal and inefficient
credit collection performance. It is difficult to provide a standard collection
period of debtors. If it is longer than those terms, than this indicates some
insufficiency in the procedures for collection debts.
Here we can say that for the year 2009-10 the debtors’ collection period is quite
low as compare to previous years. So companies’ management is efficient in
collection on cash within their decided well specified period and company has
sufficient control over receivable management.
Cash in the important current assets for the operations of the business.
Cash is the basic input needed to keep the business running on continues
basis, it is also the ultimate output expected to be realized by selling the
service or product manufactured by the firm. The firm should keep sufficient
cash, neither more or less. Cash shortage will disrupt the firm’s manufacturing
operation while excessive cash will simply remain idle, without contributing
anything towards firm’s profitability. Thus, a major function of the financial
managers is to maintain a sound financial position.
Cash management involves following four factors: -
• Ascertainment of the minimum cash balance and controlling the levels of
cash.
• Controlling cash in flows
• Controlling cash outflows
• Optimum utilization of surplus cash.
Cash is required to meet a firm’s transactions and precautionary needs.
A firm needs cash to make payment for acquisition of resources and services
for the normal conduct of business. It keeps additional funds to meet any
emergency situation. Some firms maintain cash for taking advantages of
speculative changes in price of input and output.
CASH MANAGEMENT
Rs. In Lac (0.1 Million)
ITEM 2009-10 2008-09 2007-08 2006-07
Interpretation :-
In current assets cash is the most significant and the least productive asset
that a firm holds. It is significant because it is used to pay the firms’ obligation.
Here we can see that the year 2009-10 cash turnover is 46 days which is low
as compare to previous year. The company has to extend its creditors credit
policy period so they can able to payable the bills.
• From the study I come to know there is net decrease in working capital.
• It was observed that sources and application are managed in J K Paper Ltd.
YEAR
2009-10 2008-09 2007-08 2006-07
Raw material conversion period 67 days 41 days 111 days 66 days
Work in progress conversion
Period 3 days 4 days 11 days 4 days
Finished goods conversion
period 10 days 13 days 16 days 13 days
Gross Operating cycle 109 days 88 days 191 days 125 days
Net Operating Cycle 61 days 50 days 105 days 61 days
• RATIO ANALYSIS :-
YEAR
• INVENTORY MANAGEMENT :-
YEAR
• RECEIVABLE MANAGEMENT :-
YEAR
• CASH MANAGEMENT :-
YEAR
From the working capital management, I have found that it is very difficult task
to manage working capital in such big organization.
• From the data available we can see that there is very big fluctuation in net
working capital and for that JK Paper Ltd., have to improve the method of
maintaining working capital.
• JK Paper Ltd., strongly follows the credit policy and so that they are able to
recover their receivable which is good sign.
• In case of JK Paper Ltd., while analysis of data from last four financial
years, it arrived that the company have more than double current assets
compare to current liabilities.
• After the analysis I have come to the conclusion that the current assets
should be managed efficiently.
• In case of JK Paper Ltd., they need to change their credit policy because in
this case we can see that the average creditors’ credit period (Bills Payable)
is 48 days which they need to negotiate with over creditors’ to increase the
credit period.
• So that they can increase working capital and get in smooth running of the
business.
• So either they can increase the period of creditors’ credit period or decrease
the debtors’ credit period, they can shorten collection period.
• The Gross working capital is increasing over the years 2009-10 but the
major proportion of current assets comprise of inventories. The company
should try to reduce investment in inventory.
• Here, company should increase its credit period by this they can
able to pay the bills to their creditors properly.
• From the above data we can say that there is decrease in net
working capital which company has to improve.